-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FDsumCQsjrNBeyGH05b0VyruYSo0c73M2th2FCIP76WWndOTfklmON/SmZzEVDXK 16ByTLiOmIBMnRfUzjFqiA== 0000893220-07-000390.txt : 20070216 0000893220-07-000390.hdr.sgml : 20070216 20070216172923 ACCESSION NUMBER: 0000893220-07-000390 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20070216 DATE AS OF CHANGE: 20070216 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: QUEST DIAGNOSTICS INC CENTRAL INDEX KEY: 0001022079 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEDICAL LABORATORIES [8071] IRS NUMBER: 161387862 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-50905 FILM NUMBER: 07632641 BUSINESS ADDRESS: STREET 1: ONE MALCOLM AVE CITY: TETERBORO STATE: NJ ZIP: 07608 BUSINESS PHONE: 2013935000 MAIL ADDRESS: STREET 1: ONE MALCOLM AVE CITY: TETERBORO STATE: NJ ZIP: 07601 FORMER COMPANY: FORMER CONFORMED NAME: CORNING CLINICAL LABORATORIES INC DATE OF NAME CHANGE: 19960903 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: GLAXOSMITHKLINE PLC CENTRAL INDEX KEY: 0001131399 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 980 GREAT WEST ROAD CITY: BRENTFORD MIDDLESEX STATE: X0 ZIP: TW8 9GS BUSINESS PHONE: 011442080475000 MAIL ADDRESS: STREET 1: 980 GREAT WEST ROAD CITY: BRENTFORD MIDDLESEX STATE: X0 ZIP: TW8 9GS SC 13D/A 1 w30546sc13dza.txt SC 13D AMENDMENT #6 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 6) QUEST DIAGNOSTICS INCORPORATED (Name of Issuer) --------------------------------------------------------------------- Common Stock, $.01 Par Value (Title of Class of Securities) --------------------------------------------------------------------- 74834L 10 0 (CUSIP NUMBER) --------------------------------------------------------------------- Donald F. Parman, GlaxoSmithKline One Franklin Plaza Philadelphia, Pennsylvania 19102 Telephone 215-751-7633 (Name, address and telephone number of person authorized to receive notices and communications) --------------------------------------------------------------------- February 15, 2007 (Date of Event That Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. /___/ NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Section 240.13d-7 for other parties to whom copies are to be sent. * The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter the disclosures provided in a prior cover page. This Amendment No. 6 amends and supplements the Statement of Schedule 13D electronically filed with the Securities and Exchange Commission (the "Commission") on August 25, 1999 (the "Initial Statement"), and subsequent amendments filed electronically with the Commission on May 14, 2001, May 22, 2002, June 29, 2004, December 15, 2004 and June 14, 2006. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). The undersigned hereby further amends and supplements Items 2 and 5 of the Initial Statement to include the following information (capitalized terms used herein without definition shall have the meaning as set forth in the Initial Statement). --------------------------------------------------------------------- 1 CUSIP No. 74834L 10 0 1 Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only). GlaxoSmithKline plc 98-0101920 - -------------------------------------------------------------------------------- 2 Check the Appropriate Box if a Member of a Group a / / b / / - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 Source of Funds OO - -------------------------------------------------------------------------------- 5 Check box if disclosure of legal proceedings is required pursuant to Item 2(d) or 2(e) / / - -------------------------------------------------------------------------------- 6 Citizenship or Place of Organization England and Wales - -------------------------------------------------------------------------------- Number of Shares Beneficially Owned by Each Reporting Person With: 7. Sole Voting Power: 0 8. Shared Voting Power: 36,504,308 9. Sole Dispositive Power: 0 10. Shared Dispositive Power: 36,504,308 - -------------------------------------------------------------------------------- 11 Aggregate Amount Beneficially Owned by Each Reporting Person 36,504,308 - -------------------------------------------------------------------------------- 12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares / / - -------------------------------------------------------------------------------- 2 CUSIP No. 74834L 10 0 13 Percent of Class Represented by Amount in Row (11) 18.7% - -------------------------------------------------------------------------------- 14 Type of Reporting Person CO - -------------------------------------------------------------------------------- 3 CUSIP No. 74834L 10 0 Item 1. Security and Issuer - -------------------------------------------------------------------------------- Item 2. Identity and Background (a) (b) (c) Set forth in Schedule I to this Amendment ("Schedule I") are the name, business address and present principal occupation or employment of each executive officer and director of the Company. (d) During the last five years, there have been no criminal proceedings against the Company or, to the best knowledge of the Company, any of the other persons with respect to whom information is given in response to this Item 2. (e) During the last five years, neither the Company nor, to the best knowledge of the Company, any of the other persons with respect to whom information is given in response to this Item 2 has been a party to any civil proceeding of a judicial or administrative body of competent jurisdiction resulting in a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to federal or state securities laws or finding any violation with respect to such laws. (f) The citizenship of each executive officer and director of the Company is set forth in Schedule I. - -------------------------------------------------------------------------------- Item 3. Source and Amount of Funds or Other Consideration - -------------------------------------------------------------------------------- Item 4. Purpose of Transaction - -------------------------------------------------------------------------------- Item 5. Interest in Securities of the Issuer (a) Registered Name No. of Shares Percent SmithKline Beecham Corporation 36,504,308 18.7%
(b) (c) (d) (e) Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer SKB and Lehman Brothers Finance S.A. ("Lehman") have entered into an ISDA Master Agreement (including the Schedule and Credit Support Annex thereto), dated as of May 21, 2002, as amended as of May 22, 2002 and February 15, 2007 (collectively, the "ISDA Master Agreement"). On February 15, 2007, SKB and Lehman entered into five transactions (each, a "Transaction") governed by the 4 CUSIP No. 74834L 10 0 ISDA Master Agreement (the confirmations evidencing the Transactions, along with the ISDA Master Agreement, the "Agreement") relating to a total of 10,000,000 shares of Common Stock of the Issuer (the "Shares"). SKB has agreed to sell to Lehman, for settlement ranging from February 27, 2013 to July 13, 2015, a number of Shares to be determined based on a formula, which has been structured to provide SKB a hedge against depreciation in the value of the Shares while participating in a portion of the upside of the Shares. SKB has the right to cash settle the Transactions by paying an amount in cash equal to the value of the Shares it would otherwise be obligated to deliver. The number of Shares to be delivered will be determined based on a formula as follows. If the price of the Shares determined near the settlement date of a Transaction (the "Final Price") is at or below a specified Depreciation Floor ($52.5720 as defined in each Transaction), SKB will be obligated to deliver all the Shares underlying that particular Transaction. If the Final Price is above the specified Depreciation Floor and at or below a specified Appreciation Cap (ranging from $77.8696 to $84.1783 as defined in each Transaction), SKB will be obligated to deliver a number of Shares equal to the number of Shares underlying that particular Transaction multiplied by the Depreciation Floor divided by the Final Price. If the Final Price is above the specified Appreciation Cap, SKB will be obligated to deliver a number of Shares equal to the number of Shares underlying that particular Transaction multiplied by (i) 1.0 minus (ii) (a) the Appreciation Cap minus the Depreciation Floor divided by (b) the Final Price. Under the Agreement, SKB has pledged to Lehman 10,000,000 Shares. Absent default or SKB's consent, Lehman is not entitled to dispose of nor vote the pledged Shares. In addition, SKB has the right to substitute other collateral. Item 7. Material to be Filed as Exhibits Item 7 is amended by adding the following exhibits thereto.
Exhibit No. Description ----------- ----------- 11 Second Amendment Agreement to the ISDA Master Agreement, dated as of February 15, 2007, between SmithKline Beecham Corporation and Lehman Brothers Finance S.A. 12 Confirmation between SmithKline Beecham Corporation and Lehman Brother Finance S.A., dated February 15, 2007 with Averaging Dates (as defined in this Confirmation) from February 22, 2013 to March 7, 2013. 13 Confirmation between SmithKline Beecham Corporation and Lehman Brother Finance S.A., dated February 15, 2007 with Averaging Dates (as defined in this Confirmation) from September 24, 2013 to October 7, 2013. 14 Confirmation between SmithKline Beecham Corporation and Lehman Brother Finance S.A., dated February 15, 2007 with Averaging Dates (as defined in this Confirmation) from April 24, 2014 to May 7, 2014. 15 Confirmation between SmithKline Beecham Corporation and Lehman Brother Finance S.A., dated February 15, 2007 with Averaging Dates (as defined in this Confirmation) from November 25, 2014 to December 8, 2014. 16 Confirmation between SmithKline Beecham Corporation and Lehman Brother Finance S.A., dated February 15, 2007 with Averaging Dates (as defined in this Confirmation) from June 25, 2015 to July 8, 2015.
SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. 5 CUSIP No. 74834L 10 0 Date: February 16, 2007 GLAXOSMITHKLINE PLC By: /s/ Donald F. Parman -------------------- Donald F. Parman Authorized Representative SCHEDULE I
Name Business Address Principal Occupation or Employment Citizenship ---- ---------------- ---------------------------------- ----------- BOARD OF DIRECTORS Dr. Jean-Pierre Garnier One Franklin Plaza Chief Executive Officer French/USA Philadelphia, PA 19102 Julian Heslop 980 Great West Road Chief Financial Officer British Brentford Middlesex, England TW8 9GS Dr. Moncef Slaoui 709 Swedeland Road Executive Director Belgian King of Prussia, PA Chairman Research and Development 19046 Sir Christopher Gent 980 Great West Road Company Director British Brentford Middlesex, England TW8 9GS Dr. Stephanie Burns 980 Great West Road Company Director USA Brentford Middlesex, England TW8 9GS Lawrence Culp 980 Great West Road Company Director USA Brentford Middlesex, England TW8 9GS Sir Crispin Davis 980 Great West Road Company Director British Brentford Middlesex, England TW8 9GS Sir Deryck Maughan 980 Great West Road Company Director British Brentford Middlesex, England TW8 9GS
6 CUSIP No. 74834L 10 0 Dr. Daniel Podolsky 980 Great West Road Company Director USA Brentford Middlesex, England TW8 9GS Sir Ian Prosser 980 Great West Road Company Director British Brentford Middlesex, England TW8 9GS Dr. Ronaldo Schmitz 980 Great West Road Company Director British Brentford Middlesex, England TW8 9GS Tom de Swaan 980 Great West Road Company Director Dutch Brentford Middlesex, England TW8 9GS Sir Robert Wilson 980 Great West Road Company Director British Brentford Middlesex, England TW8 9GS CORPORATE EXECUTIVE TEAM Dr. Jean-Pierre Garnier One Franklin Plaza Chief Executive Officer French/USA Philadelphia, PA 19102 Julian Heslop 980 Great West Road Chief Financial Officer British Brentford Middlesex, England TW8 9GS Rupert M. Bondy 980 Great West Road Senior Vice President & General British Brentford Counsel Middlesex, England TW8 9GS John Clarke One Franklin Plaza President Consumer Healthcare New Zealand Philadelphia, PA 19102 Marc Dunoyer GSK Building President French 6-15, Sendagaya Pharmaceuticals Japan 4 chome, Shibuya-ku, Tokyo 151-8566 Russell Greig 980 Great West Road Pharmaceuticals International British Brentford Middlesex, England TW8 9GS Duncan Learmouth 980 Great West Road Senior Vice President British Brentford Corporate Communication Middlesex, England Community Partnership TW8 9GS
7 CUSIP No. 74834L 10 0 William C. Louv One Franklin Plaza Chief Information Officer USA Philadelphia, PA 19102 Daniel J. Phelan One Franklin Plaza Senior Vice President USA Philadelphia, PA 19102 Human Resources David Pulman Five Moore Drive President British PO Box 13398 Global Manufacturing & Supply Research Triangle Park North Carolina 27709 Dr. Moncef Slaoui 709 Swedeland Road Executive Director Belgian King of Prussia, PA Chairman Research and Development 19046 David Stout One Franklin Plaza President USA Philadelphia, PA 19102 Pharmaceutical Operations Christopher Viehbacher Five Moore Drive President German/Canadian PO Box 13398 US Pharmaceutical Research Triangle Park North Carolina 27709 Andrew Witty 980 Great West Road President British Brentford Pharmaceuticals Europe Middlesex, England TW8 9GS Simon Bicknell 980 Great West Road Company Secretary British Brentford Middlesex, England TW8 9GS
8 EX-11 2 w30546exv11.txt 2ND AMENDMENT AGREEMENT TO THE ISDA MASTER AGREEMENT EXHIBIT 11 SECOND AMENDMENT AGREEMENT SECOND AMENDMENT AGREEMENT (the "Amendment") dated as of February 2, 2007 - between LEHMAN BROTHERS FINANCE S.A. ("Party A") and SMITHKLINE BEECHAM CORPORATION ("Party B"). WITNESSETH WHEREAS, Party A and Party B have entered into an ISDA Master Agreement dated as of May 21, 2002, amended as of May 22, 2002 (collectively, the "Master Agreement") and WHEREAS, Party A and Party B wish to amend the Master Agreement and to have the Master Agreement, as amended herein, govern the rights and obligations of Party A and Party B with respect to each and every Transaction which is (a) outstanding on the date hereof, and (b) entered into on or after the date hereof, NOW, THEREFORE, in consideration of the mutual agreements herein contained, Party A and Party B hereby acknowledge and agree as follows: 1. Certain Definitions. Unless otherwise defined herein, capitalized terms used herein have the meanings specified in or pursuant to the Master Agreement. 2. Amendments. 2a. The opening paragraph in the Schedule to the Master Agreement entitled "Scope of Agreement" is hereby deleted in its entirety and replaced with the following: "Party A and Party B have entered into confirmations dated 21 May 2002 and dated February 15, 2007 (the "CONFIRMATIONS") that are expressed to be governed, subject to, and determined in accordance with the terms and conditions set out in this Agreement. Such Confirmations constitute the sole Confirmations for the purposes of this Agreement and have the benefit of the Credit Support Documents set out in Part 4(f) to this Agreement. Party A and Party B intend that, subject to any agreement to the contrary, such Confirmations shall evidence the sole Transactions (the "TRANSACTIONS") with respect to this Agreement." 2b. The definition of "Threshold Amount" in Part 1(c) of the Schedule to the Master Agreement is hereby deleted in its entirety and replaced with the following: ""THRESHOLD AMOUNT" means USD 100 million (or its equivalent in any other currency) in the case of Party A, and USD 100 million (or its equivalent in any other currency) in the case of Party B." 3. Except as specifically amended hereby, all of the terms and conditions of the Master Agreement shall continue to be in full force and effect and shall be binding upon the parties in accordance with their respective terms. 4. Each of the parties hereby represents and warrants that: (a) the representation and warranties contained in the Master Agreement are true on and as of the date hereof as if made by the party on and as of said date, and (b) the execution, delivery and performance of this Amendment are within the party's corporate power and have been duly authorized by all necessary corporate action, and this Amendment constitutes the legal, valid and binding obligation of the party in accordance with its terms. 5. This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. 6. This Amendment shall be construed in accordance with and be governed by the laws of the State of New York (without reference to choice of law doctrine). IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their respective officers or authorized representatives as of the day and year first above written. LEHMAN BROTHERS FINANCE S.A. SMITHKLINE BEECHAM CORPORATION Party A Party B /s/ Barbara Grob /s/ Donald F. Parman - ------------------------------------- ---------------------------------------- Name: Barbara Grob Name: Donald F. Parman ------------------------------- ------------------------------- Title: Authorised Signatory Title: Vice President ------------------------------ ------------------------------ Date: February 15, 2007 Date: February 15, 2007 ------------------------------- ------------------------------- /s/ Markus Bormann - ------------------------------------- Name: Markus Bormann ------------------------------- Title: Director ------------------------------ Date: February 15, 2007 ------------------------------- EX-12 3 w30546exv12.txt CONFIRMATION /DATES FEBRUARY 22, 2013 THROUGH MARCH 7, 2013 EXHIBIT 12 LEHMAN BROTHERS February 15, 2007 TRANSACTION SmithKline Beecham Corporation One Franklin Plaza 200 N. 16th Street Philadelphia, PA 19102 Attn: Donald Parman, fax 215-751-5349 CC: Subesh Williams, Global Deal Id: 2883066 Effort Id: [_____] Dear Sir or Madam: The purpose of this letter agreement (this "Confirmation") is to confirm the terms and conditions of the Transaction entered into between Lehman Brothers Finance S.A. ("Party A") and SmithKline Beecham Corporation ("Party B") on the Trade Date specified below (the "Transaction"). This letter agreement constitutes a "Confirmation" as referred to in the ISDA Master Agreement specified below. This Confirmation supplements, forms part of, and is subject to, the ISDA Master Agreement dated as of May 21, 2002, as amended and supplemented from time to time (the "Agreement"), between Party A and Party B. All provisions contained in the Agreement shall govern this Confirmation except as expressly modified below. The definitions and provisions contained in the 1996 ISDA Equity Derivatives Definitions (the "Equity Definitions") and the 2000 ISDA Definitions (the "Swap Definitions", and together with the Equity Definitions, the "Definitions"), in each case as published by the International Swaps and Derivatives Association, Inc. ("ISDA") are incorporated into this Confirmation. References herein to "Transaction" shall be deemed references to "Swap Transaction" for purposes of the Swap Definitions and "Share Swap Transaction" for purposes of the Equity Definitions. In the event of any inconsistency between the Equity Definitions and the Swap Definitions, the Equity Definitions will govern. In the event of any inconsistency between either set of Definitions and this Confirmation, this Confirmation will govern. Party A and Party B each represents that entering into the Transaction is within its capacity, is duly authorized and does not violate any laws of its jurisdiction of organization or residence or the terms of any agreement to which it is a party. Party A and Party B each represents that (a) it is not relying on the other party in connection with its decision to enter into this Transaction, and neither party is acting as an advisor to or fiduciary of the other party in connection with this Transaction regardless of whether the other party provides it with market information or its views; (b) it understands the risks of the Transaction and any legal, regulatory, tax, accounting and economic consequences resulting therefrom; and (c) it has determined based upon its own judgment and upon any advice received from its own professional advisors as it has deemed necessary to consult that entering into the Transaction is appropriate for such party in light of its financial capabilities and objectives. Party A and Party B each represents that upon due execution and delivery of this Confirmation, it will constitute a legally valid and binding obligation, enforceable against it in accordance with its terms, subject to applicable principles of bankruptcy and creditors' rights generally and to equitable principles of general application. LEHMAN BROTHERS FINANCE S.A. TALSTRASSE 82 - P.O. BOX 2828 - CH-8021 ZURICH - SWITZERLAND TELEPHONE (41-1) 287 88 42 - TELEFAX (41-1) 287 88 25 - TELEX 812096 LBFS CH The terms of the Transaction to which this Confirmation relates are as follows: Agent: Lehman Brothers Inc. ("LBI") is acting as agent on behalf of Party A and Party B for this Transaction. LBI has no obligations, by guarantee, endorsement or otherwise, with respect to the performance of this Transaction by either party. (A) GENERAL TERMS Trade Date: February 15, 2007 Effective Date: Three (3) Exchange Business Days next following the Trade Date Valuation Date: Each Averaging Date Valuation Time: 4:00 p.m. (local time in New York) Shares: The common stock of Quest Diagnostics Incorporated (the "Issuer") Ticker: DGX Exchange: New York Stock Exchange Related Exchange(s): Any exchange on which options or futures on the Shares are traded. Number of Shares: 2,000,000 Initial Price: USD 52.5720 Depreciation Floor: USD 52.5720 Appreciation Cap: USD 77.8696 Final Price: To the extent Physical Settlement is applicable, Final Price shall be the closing price per Share quoted by the Exchange on each Averaging Date at the Valuation Time, without regard to extended or after hours trading. To the extent Cash Settlement is applicable, Final Price shall be the arithmetic average of the Relevant Prices, and "Relevant Price" shall be the closing price per Share quoted by the Exchange on each Averaging Date at the Valuation Time, without regard to extended or after hours trading. Averaging Dates: February 22, 2013, February 25, 2013, February 26, 2013, February 27, 2013, February 28, 2013, March 1, 2013, March 4, 2013, March 5, 2013, March 6, 2013, March 7, 2013 Averaging Date Market Modified Postponement Disruption: Delivery Adjustment: (a) If the Final Price is less than or equal to the Depreciation Floor, then the Delivery Adjustment equals 1.0 (b) If the Final Price is greater than the Depreciation Floor, but less than or equal to the Appreciation Cap, then the Delivery Adjustment equals a fraction, the numerator of which is the Depreciation Floor and the denominator of which is the Final Price
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883066 Page 2 of 12 (c) If the Final Price is greater than the Appreciation Cap, then the Delivery Adjustment equals 1.0 minus ((the Appreciation Cap minus the Depreciation Floor) divided by the Final Price). (B) PARTY A'S PAYMENT OF PURCHASE PRICE Purchase Price: USD 105,144,000 Payment Date: To the extent Physical Settlement is applicable, Party A will pay the Purchase Price divided by the Number of Averaging Dates to Party B on each Delivery Date. To the extent Cash Settlement is applicable, Party A will pay the Purchase Price to Party B on the Cash Settlement Payment Date. (C) PARTY B'S DELIVERY OBLIGATIONS Settlement Amount: On each Averaging Date, the relevant Delivery Adjustment multiplied by the relevant Number of Shares for the relevant Averaging Date, provided that if such calculation results in any fractional Share, the Settlement Amount shall be rounded up to the next whole number of Shares and Party A shall pay the cash value thereof to Party B. Cash Settlement Amount: The Delivery Adjustment multiplied by the Number of Shares multiplied by the Final Price Delivery Date: Three (3) Exchange Business Days next following each Averaging Date Settlement Option: Party B may elect Physical or Cash Settlement (with respect to all or a portion of the Number of Shares) by delivering a written notice of such election to Party A on or prior to the Election Date. If Party B elects Physical or Cash Settlement with respect to a portion of the Number of Shares, (i) Party B will be deemed to elect the other Settlement Option with respect to the remainder of the Number of Shares, (ii) the Number of Shares for each settlement option shall be deemed to be the portion with respect to which such election was made and (iii) the Purchase Price shall be allocated between the settlement options proportionally to the Number of Shares for each settlement option. If Party B does not provide such notice, Physical Settlement shall apply if the Posted Collateral on the Election Date consists of a number of freely-tradable Shares equal to the Number of Shares in book entry form; otherwise, Cash Settlement shall apply. Election Date: The fifth (5th) Exchange Business Day prior to the first Averaging Date Physical Settlement: To the extent Physical Settlement applies, the Transaction shall expire in equal proportions of Shares on each Averaging Date, with the Delivery Date for each such Averaging Date occurring three (3) Exchange Business Days after each such Averaging Date. On each such Delivery Date Party B will deliver a number of freely-tradable Shares in book-entry form equal to the Settlement Amount to Party A, free and clear of any Encumbrances or Transfer Restrictions. Party B acknowledges and understands that any such delivery may require Party B to provide an opinion of counsel and other documentation in a
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883066 Page 3 of 12 form acceptable to the Issuer and the transfer agent for the Shares to ensure the conversion of such Shares into book-entry form in advance of any delivery. Cash Settlement: To the extent Cash Settlement applies, Party B will pay the Cash Settlement Amount to Party A on the Cash Settlement Payment Date. Cash Settlement Payment Date: Three Exchange Business Days next following the final Averaging Date Collateral: If Party B elects to Transfer (and Transfers) the Independent Amount to Party A (which Independent Amount shall constitute Eligible Collateral with respect to Party B), Party A's Exposure under this Transaction shall be zero and Party B's Credit Support Amount (as Secured Party) shall be calculated without subtracting the Independent Amounts referred to in clause (iii) of the definition thereof; otherwise, Party A's Exposure under this Transaction shall be calculated as provided in the Credit Support Annex. At any time Party B may revoke such election by Transferring to Party A under the Credit Support Annex the then Delivery Amount (determined ignoring the Independent Amount and with Party A's Exposure under this Transaction being calculated as provided in the Credit Support Annex), in which case Party A shall promptly Transfer the Independent Amount to Party B. Party B acknowledges and understands that any revocation of its election to Transfer the Independent Amount may result in such Shares becoming subject to transfer restrictions under the Securities Act of 1933, as amended (the "1933 Act"), if such Shares have previously been converted into book-entry form. "Independent Amount" means, with respect to Party B for this Transaction, a number of Shares free and clear of any Encumbrances or Transfer Restrictions (other than transfer restrictions arising under the 1933 Act and other than under the Stockholders Agreement, dated as of August 16, 1999, between SmithKline Beecham PLC and the Issuer (the "Stockholders Agreement")) equal to the Number of Shares. The Independent Amount shall include all Distributions with respect to all Posted Collateral (other than cash dividends which are not Extraordinary Dividends). Notwithstanding any provision to the contrary in the Credit Support Annex, the Independent Amount shall be delivered by Party B without regard to the Minimum Transfer Amount and, except as provided above, Party A shall have no obligation to return the Independent Amount to Party B until all of Party B's obligations with respect to this Transaction have been satisfied. Party B agrees to provide three stock powers executed in blank with respect to each certificate evidencing any Shares delivered as Posted Collateral and to update such stock powers as necessary. Party A may use any Shares constituting Posted Collateral and the Independent Amount pursuant to Section 6(c) of the Credit Support Annex only upon Party B's consent. Party A agrees that if it uses any Shares pursuant to Section 6(c) of the Credit Support Annex, it will provide additional collateral to Party B, the terms of which shall be consistent with market practice for stock loans of U.S. liquid equity securities unless the parties agree otherwise. Party B acknowledges and understands that any such use may require Party B to provide an opinion of counsel and other documentation in a form acceptable to the
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883066 Page 4 of 12 Issuer and the transfer agent for the Shares to ensure the conversion of such Shares into book-entry form prior to such use. Party A agrees to cooperate in good faith with respect to the conversion of Shares into book-entry form. Party A agrees that LBI will hold any Shares constituting Posted Collateral in connection with this Transaction, that Party B is the beneficial owner of such Shares, and that, if such Shares are being held by LBI in book-entry form and are not being used by Party A pursuant to Section 6(c) of the Credit Support Annex, LBI will comply with its obligations under applicable law and regulation (including the rules of the New York Stock Exchange and the National Association of Securities Dealers) to forward to the beneficial owner all proxy and other materials properly furnished to it by the Issuer, in accordance with its standard business practices. ADJUSTMENTS: Method of Adjustment: Calculation Agent Adjustment Extraordinary Dividends: For purposes of this Transaction and the definition of a "Potential Adjustment Event" (without limiting the generality of clause (iii) of Section 9.1(e) of the Equity Definitions), an "Extraordinary Dividend" shall mean, as calculated by the Calculation Agent, (i) any cash dividend or distribution declared with respect to the Shares at a time when the Issuer has not previously declared or paid dividends or distributions on such Shares for the prior four quarterly periods; (ii) any increase or decrease by more than 5% (determined on an annualized basis) in the then current quarterly dividend or (iii) any other "special" cash or non-cash dividend on or distribution with respect to the Shares which is, by its terms or declared intent, declared and paid outside the normal operations or normal dividend procedures of the Issuer. EXTRAORDINARY EVENTS: Consequences of Merger Events: (a) Share-for-Share: Alternative Obligation (b) Share-for-Other: Cancellation and Payment (c) Share-for-Combined: Alternative Obligation with respect to the New Shares and Cancellation and Payment with respect to the Other Consideration Alternative Obligation: The applicable definition of "Alternative Obligation" in subsections 9.3(b)and (d) of the Equity Definitions shall be amended by adding the following at the end of each such subsection: "including any one or more of the Initial Price, Final Price, Relevant Price, Number of Shares, Appreciation Cap, Depreciation Floor, Delivery Adjustment and any other variable relevant to the exercise, settlement or payment terms of each such Transaction. In addition, the Calculation Agent will determine if the change in the volatility of the New Shares (as compared with the Shares) affects the theoretical value of any such Transaction, and if so, shall in a commercially reasonable manner make an adjustment to the Appreciation Cap to reflect such change in theoretical value. Any adjustment made pursuant to this paragraph will be effective as of the date determined by the Calculation Agent on or following the Merger Date.
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883066 Page 5 of 12 NATIONALIZATION, INSOLVENCY, HEDGING DISRUPTION EVENT, BORROW LOSS OR INCREASE IN BORROW COSTS: Cancellation and Payment Definitions: The definition of "Merger Event" in Section 9.2(a) of the Equity Definitions shall be amended by deleting subsection 9.2(a)(iii) in its entirety and replacing it with the following: "(iii) other takeover offer for the Shares that results in a transfer of or an irrevocable commitment to transfer 25% or more of all the outstanding Shares (other than the Shares owned or controlled by the offeror)" For purposes of the definition of "Cancellation and Payment" in Sections 9.3(c)(ii), 9.3(d)(ii) and 9.6, this Transaction shall be deemed to be a Share Option Transaction. The amount payable upon Cancellation and Payment will be the amount agreed upon promptly by the parties after the Merger Date or the date of the occurrence of the Nationalization, Insolvency, Hedging Disruption Event, Increase in Borrow Costs or Borrow Loss, as the case may be. In the absence of such agreement, the amount payable will be determined by the Calculation Agent in a commercially reasonable manner (without the requirement of soliciting dealer quotations) as the fair value of the Transaction with terms that would preserve the economic equivalent of any payment or delivery (assuming satisfaction of each applicable condition precedent) by the parties in respect of the relevant Transaction that would have been required after that date but for the occurrence of the Nationalization, Insolvency, Hedging Disruption Event, Increase in Borrow Costs, Borrow Loss or Merger Event, as applicable. The Calculation Agent will determine the amount payable on the basis of the factors identified in subparagraphs (i), (ii) and (iii) in Section 9.7(b) and such other factors as it deems appropriate in a commercially reasonable manner. Additional Extraordinary Events: "Hedging Disruption Event" means that the Shares cease to be listed on or quoted by the Exchange, the Nasdaq Global Select Market, the Nasdaq Global Market or the American Stock Exchange for any reason (other than a Merger Event). If an Increase in Borrow Costs occurs, then by the Valuation Time on the day such event occurs, Party B shall: (a) (i) permit Party A to use the Shares posted as Posted Collateral and the Independent Amount pursuant to Section 6(c) of the Credit Support Annex and (ii) ensure that such Shares are freely tradable and have been converted into book-entry form; or (b) agree to adjustments to the terms of this Transaction to reflect the Total Borrow Cost, which adjustments will be determined by the Calculation Agent in a commercially reasonable manner; or (c) agree to pay the Total Borrow Cost. If Party B does not agree to (a), (b) or (c) by the Valuation Time on the day on which the Increase in Borrow Costs occurs, Cancellation and Payment shall immediately be applicable.
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883066 Page 6 of 12 If a Borrow Loss occurs, the Calculation Agent shall notify Party A and Party B and Cancellation and Payment shall immediately be applicable unless, by the later of the Valuation Time on the day on which the Borrow Loss occurs or three hours after such notification, (i) Party B permits Party A to use the Shares posted as Posted Collateral and the Independent Amount pursuant to Section 6(c) of the Credit Support Annex and (ii) such Shares are freely tradable and have been converted into book-entry form. Party B acknowledges and understands that any use of the Shares posted as Posted Collateral pursuant to Section 6(c) of the Credit Support Annex may require Party B to provide an opinion of counsel and other documentation in a form acceptable to the Issuer and the transfer agent for the Shares to ensure the conversion of such Shares into book-entry form prior to the occurrence of the Borrow Loss or the Increase in Borrow Costs, as applicable. If Party A is permitted to use the Shares posted as Posted Collateral pursuant to Section 6(c) of the Credit Support Annex, Party A shall adjust the terms of this Transaction in a commercially reasonable manner to reflect its lower borrowing costs for the period that Party A is permitted to use the Shares (which borrowing costs will reflect the interest rate earned by Party A on any collateral posted to Party B in connection with such use). The Calculation Agent shall notify both parties as soon as the average rebate earned by Party A on collateral posted for any Shares borrowed in connection with this Transaction is at or below 1% (determined on an annualized basis). "Borrow Cost" means the difference between the actual rebate earned by Party A on collateral posted for any Shares borrowed in connection with this Transaction and the General Collateral Rate, multiplied by the closing price per Share quoted by the Exchange at the Valuation Time on the preceding Exchange Business Day, multiplied by the Hedge Delta on the preceding Exchange Business Day, calculated on an actual/360 basis, as determined by the Calculation Agent in a commercially reasonable manner. "Borrow Loss" means that it becomes impracticable for Party A to borrow Shares equal to its desired Hedge Delta on any day, as determined by the Calculation Agent in a commercially reasonable manner. "General Collateral Rate" means the general collateral rebate rate earned by market participants in general on collateral posted for U.S. liquid equity securities as determined by the Calculation Agent in a commercially reasonable manner. The Calculation Agent will provide evidence of the General Collateral Rate to either party upon request. "Hedge Delta" means the number of Shares borrowed by Party A in connection with this Transaction, as determined by the Calculation Agent in a commercially reasonable manner.
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883066 Page 7 of 12 "Increase in Borrow Costs" means that the actual rebate earned by Party A on collateral posted for any Shares borrowed in connection with this Transaction is at or below zero for ten (10) days or longer, as determined by the Calculation Agent in a commercially reasonable manner. "Total Borrow Cost" means the Borrow Cost for every day from the day on which the Increase in Borrow Costs occurs until the final Delivery Date, the Cash Settlement Payment Date or the effective date for any Elected Termination, as applicable. Announcement Event: If an Announcement Event occurs, the Calculation Agent will determine the economic effect of any change in volatility and/or liquidity relevant to the Shares or to the Transaction caused by the Announcement Event on the theoretical value of the Transaction from the Announcement Date to the Valuation Date. If such economic effect is (i) material and (ii) has continued, or is continuing, for a period of 30 days from the Announcement Event, on the Valuation Date the Calculation Agent shall in a commercially reasonable manner make an adjustment to the Appreciation Cap to reflect such change in theoretical value; provided that such adjustment shall not exceed USD 2.00 (as adjusted pursuant to "Method of Adjustment" above). "ANNOUNCEMENT EVENT" shall mean the occurrence of the Announcement Date of a Share-for-Other Merger Event or a Share-for-Combined Merger Event where Other Consideration represents more than 50% of the total value of the Combined Consideration. Change in Law: "Change in Law" means that, on or after the Trade Date (A) due to the adoption of or any change in any applicable law or regulation, or (B) due to the promulgation of or any change in the interpretation by any court, tribunal or regulatory authority with component jurisdiction of any applicable law or regulation, a party to such Transaction determines in good faith that it has become illegal to hold, acquire or dispose of Shares relating to this Transaction. Upon the occurrence of a Change in Law event either party may elect to terminate this Transaction upon at least two Exchange Business Days' notice to the other party specifying the date of such termination (or such lesser notice as any be required to comply with the Change of Law), in which event the Transaction will terminate and the Calculation Agent will determine any amount payable by one party to the other.
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883066 Page 8 of 12 Bankruptcy Code: Without limiting any other protections under the Bankruptcy Code (Title 11 of the United States Code) (the "Bankruptcy Code"), the Parties hereto intend for: (a) This Transaction and the Agreement to be a "swap agreement" as defined in the Bankruptcy Code, and the parties hereto to be entitled to the protections afforded by, among other Sections, Section 560 of the Bankruptcy Code. (b) A party's right to liquidate this Transaction and to exercise any other remedies upon the occurrence of any Event of Default or Termination Event under the Agreement or this Transaction to constitute a "contractual right" as described in Section 560 of the Bankruptcy Code. (c) Any cash, securities or other property provided as performance assurance, credit support or collateral with respect to this Transaction or the Agreement to constitute "transfers" under a "swap agreement" as defined in the Bankruptcy Code. (d) All payments for, under or in connection with this Transaction or the Agreement, all payments for any securities or other assets and the transfer of such securities or other assets to constitute "transfers" under a "swap agreement" as defined in the Bankruptcy Code. Party B Representations: In addition to the representations set forth in the Agreement, Party B further represents that; (a) Neither Party A nor any of its affiliates has advised Party B with respect to any legal, regulatory, tax, accounting or economic consequences arising from this Transaction, and neither Party A nor any of its affiliates is acting as agent (other than LBI as dual agent if specified above), or advisor for Party B in connection with this Transaction. (b) Party B is not in possession of any material non-public information concerning the business, operations or prospects of the Issuer and was not in possession of any such information at the time of placing any order with respect to the Transaction. "Material" information for these purposes is any information to which an investor would reasonably attach importance in reaching a decision to buy, sell or hold any securities of the Issuer(s). (c) Party B is the legal and beneficial owner of the Shares, free and clear of any Encumbrances or any Transfer Restrictions (other than transfer restrictions arising under the 1933 Act and other than under the Stockholder's Agreement), and, upon the transfer of the Shares to Party A in settlement of this Transaction (except to the extent that Party B elects the Cash Settlement option, if any) Party A will acquire good and marketable title and will be the beneficial owner of the Shares, free and clear of any Encumbrances or any Transfer Restrictions. "Encumbrance" means any pledge, hypothecation, assignment,
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883066 Page 9 of 12 encumbrance, charge, claim, security interest, option, preference, priority or other preferential arrangement of any kind or nature whatsoever, or other charge, claim or other encumbrance (other than an Encumbrance routinely imposed on all securities in the relevant Clearance System). "Transfer Restriction" means, with respect to any security or other property, any condition to or restriction on the ability of the holder thereof to sell, assign or otherwise transfer such security or other property or to enforce the provisions thereof or of any document related thereto, whether set forth in such security or other property itself or in any document related thereto, including, without limitation, (i) any requirement that any sale, assignment or other transfer or enforcement of such security or other property be consented to or approved by any person, including, without limitation, the Issuer or any other obligor thereon, (ii) any limitations on the type or status, financial or otherwise, of any purchaser, pledgee, assignee or transferee of such security or other property, (iii) any requirement for the delivery of any certificate, consent, agreement, opinion of counsel, notice or any other document of any person to be given to the Issuer, any other obligor on or any registrar or transfer agent for, such security or other property, and (iv) any registration or qualification requirement or prospectus delivery requirement for such security or other property pursuant to any federal, state or foreign securities law (including, without limitation, any such requirement arising as a result of Rule 144 or Rule 145 under the 1933 Act). (d) As of the date hereof (without giving effect to the transactions contemplated hereby) Party B is the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934 (the "1934 Act")) of 36,504,308 Shares, which constitutes approximately 18.7% of the outstanding Shares of the Issuer (as at February 15, 2007). Party B is currently, and in the past has been, in compliance with any applicable reporting and other obligations under Section 13 and Section 16 of the 1934 Act. Party B shall comply with all applicable reporting and other requirements of Section 13 and Section 16 of the 1934 Act (and the rules and regulations promulgated thereunder) relating to this Transaction. Party B will provide Party A with a draft of any amendments to its Schedule 13D which relate to the Transaction and will give Party A a reasonable opportunity to comment on the draft. Party B shall promptly file all amendments to its Schedule 13D in a form reasonably acceptable to Party A. (e) Party B's entry into this Transaction, any sale of Shares hereunder, the pledge of any Eligible Collateral hereunder and Party A's exercise of all rights and remedies hereunder with respect to such Eligible Collateral complies with and is not in any way limited by (i) any trading or "blackout" policies of the Issuer or (ii) any other conditions or restrictions imposed by the Issuer on the sale, transfer, loan, pledge, disposition or other use by its employees of any Eligible Collateral or Shares. (f) Party B acquired the Shares and paid for the Shares in full more
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883066 Page 10 of 12 than one year prior to the Trade Date. Party B did not acquire the Shares in contemplation of, or in a transaction that was contingent upon, entering into this Transaction. (g) Neither Party B nor any person who would be considered to be the same "person" (as such term is used in Rule 144(a)(2) under the 1933 Act, has sold any Shares or hedged (through swaps, options, short sales or otherwise) any long position in the Shares during the preceding three (3) months prior to the Trade Date. For purposes of this paragraph, "Shares" shall be deemed to include securities convertible into or exchangeable or exercisable for Shares and any other security or instrument that would be subject to aggregation under paragraphs (a)(2) and (e) of Rule 144 under the 1933 Act. (h) Party B has not made, and will not make, any payment in connection with the offering or sale of the Shares to any person other than Party A. (i) Party B has not solicited or arranged for the solicitation of, and will not solicit or arrange for the solicitation of, orders to buy Shares in anticipation of or in connection with any proposed sale of the Shares. (j) The Shares constituting Posted Collateral are currently eligible for public resale by Party B pursuant to Rule 144 under the 1933 Act. Party B acknowledges and agrees that (i) the entering into of this Confirmation will constitute a sale for purposes of Rule 144, (ii) Party B has not taken and will not take any action that would cause the sale made pursuant to this Confirmation to fail to meet all applicable requirements of Rule 144, including without limitation, the volume limitations of Rule 144(e). MUTUAL REPRESENTATION: Party A and Party B each represent that the Number of Shares will not exceed the greater of (i) 1% of the outstanding Shares as shown by the most recent report or statement published by the Issuer, or (ii) the average reported weekly volume of trading in the Shares during the four calendar weeks preceding the Trade Date. COVENANTS: (a) Party B will transmit three signed copies of a Form 144 for filing with the Securities and Exchange Commission (the "SEC"), the Exchange and the Issuer concurrently with the execution of this Confirmation. (b) Party B will send to Party A via facsimile a copy of each Form 144 and each filing under Section 13 or 16 of the Exchange Act, if any, relating to this Transaction concurrently with filing or transmission for filing, as the case may be, of such form to or with the SEC. (c) Party A covenants that, through its affiliate Lehman Brothers Inc., it will introduce into the public market a number of Shares equal to the Number of Shares in a manner consistent with the manner-of-sale conditions described in 144(f) and (g) under the 1933 Act.
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883066 Page 11 of 12 (d) Each party acknowledges and agrees that upon execution of this Confirmation, this Confirmation shall constitute a "binding commitment" within the meaning of the interpretive letter from the SEC to Goldman, Sachs & Co. dated December 20, 1999. Elected Termination: Party B may elect to terminate this Transaction upon mutually agreed upon terms. The Calculation Agent will calculate any amounts owing upon such early termination in a commercially reasonable manner. Upon request, the Calculation Agent will provide the assumptions it used to calculate any amounts owing. Payments on Early Termination: Party A and Party B agree that for this Transaction, for purposes of Section 6(e) of the Agreement, Loss and the Second Method will apply. Additional Provision: Party B hereby identifies the Shares initially pledged as Posted Collateral under this Transaction as a position with respect to personal property that is an offsetting position with respect to Party B's rights and obligations hereunder and that is part of a "straddle" with such rights and obligations within the meaning of section 1092 of the Internal Revenue Code of 1986, as amended, and Party A acknowledges that Party B has identified the Shares for that purpose. Calculation Agent: Lehman Brothers Inc., whose adjustments, determinations and calculations shall be made in a commercially reasonable manner.
THIS TRANSACTION HAS BEEN ENTERED INTO FOR INVESTMENT AND HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR ANY OTHER UNITED STATES FEDERAL OR STATE SECURITIES LAWS; THIS TRANSACTION MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF APPROPRIATE REGISTRATION UNDER SUCH SECURITIES LAWS EXCEPT IN A TRANSACTION EXEMPT FROM OR NOT SUBJECT TO THE REGISTRATION REQUIREMENTS OF SUCH SECURITIES LAWS. Please confirm your agreement with the foregoing by executing this Confirmation and returning it to us at facsimile number 646-885-9546, Attention: Documentation. Yours sincerely, Confirmed as of the date first above written: LEHMAN BROTHERS FINANCE S.A. SMITHKLINE BEECHAM CORPORATION By: /s/ Markus Bormann By: /s/ Donald F. Parman --------------------------------- ------------------------------------- Name: Markus Bormann Name: Donald F. Parman ------------------------------- ---------------------------------- Title: Director Title: Vice President ------------------------------ --------------------------------- By: /s/ Barbara Grob --------------------------------- Name: Barbara Grob ------------------------------- Title: Authorised Signatory ------------------------------ Execution time will be furnished upon Counterparty's written request. Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883066 Page 12 of 12 EX-13 4 w30546exv13.txt CONFIRMATION /DATES SEPTEMBER 24, 2013 THROUGH OCTOBER 7, 2013 EXHIBIT 13 LEHMAN BROTHERS February 15, 2007 TRANSACTION SmithKline Beecham Corporation One Franklin Plaza 200 N. 16th Street Philadelphia, PA 19102 Attn: Donald Parman, fax 215-751-5349 CC: Subesh Williams, Global Deal Id: 2883068 Effort Id: [_____] Dear Sir or Madam: The purpose of this letter agreement (this "Confirmation") is to confirm the terms and conditions of the Transaction entered into between Lehman Brothers Finance S.A. ("Party A") and SmithKline Beecham Corporation ("Party B") on the Trade Date specified below (the "Transaction"). This letter agreement constitutes a "Confirmation" as referred to in the ISDA Master Agreement specified below. This Confirmation supplements, forms part of, and is subject to, the ISDA Master Agreement dated as of May 21, 2002, as amended and supplemented from time to time (the "Agreement"), between Party A and Party B. All provisions contained in the Agreement shall govern this Confirmation except as expressly modified below. The definitions and provisions contained in the 1996 ISDA Equity Derivatives Definitions (the "Equity Definitions") and the 2000 ISDA Definitions (the "Swap Definitions", and together with the Equity Definitions, the "Definitions"), in each case as published by the International Swaps and Derivatives Association, Inc. ("ISDA") are incorporated into this Confirmation. References herein to "Transaction" shall be deemed references to "Swap Transaction" for purposes of the Swap Definitions and "Share Swap Transaction" for purposes of the Equity Definitions. In the event of any inconsistency between the Equity Definitions and the Swap Definitions, the Equity Definitions will govern. In the event of any inconsistency between either set of Definitions and this Confirmation, this Confirmation will govern. Party A and Party B each represents that entering into the Transaction is within its capacity, is duly authorized and does not violate any laws of its jurisdiction of organization or residence or the terms of any agreement to which it is a party. Party A and Party B each represents that (a) it is not relying on the other party in connection with its decision to enter into this Transaction, and neither party is acting as an advisor to or fiduciary of the other party in connection with this Transaction regardless of whether the other party provides it with market information or its views; (b) it understands the risks of the Transaction and any legal, regulatory, tax, accounting and economic consequences resulting therefrom; and (c) it has determined based upon its own judgment and upon any advice received from its own professional advisors as it has deemed necessary to consult that entering into the Transaction is appropriate for such party in light of its financial capabilities and objectives. Party A and Party B each represents that upon due execution and delivery of this Confirmation, it will constitute a legally valid and binding obligation, enforceable against it in accordance with its terms, subject to applicable principles of bankruptcy and creditors' rights generally and to equitable principles of general application. LEHMAN BROTHERS FINANCE S.A. TALSTRASSE 82 - P.O. BOX 2828 - CH-8021 ZURICH - SWITZERLAND TELEPHONE (41-1) 287 88 42 - TELEFAX (41-1) 287 88 25 - TELEX 812096 LBFS CH The terms of the Transaction to which this Confirmation relates are as follows: Agent: Lehman Brothers Inc. ("LBI") is acting as agent on behalf of Party A and Party B for this Transaction. LBI has no obligations, by guarantee, endorsement or otherwise, with respect to the performance of this Transaction by either party. (A) GENERAL TERMS Trade Date: February 15, 2007 Effective Date: Three (3) Exchange Business Days next following the Trade Date Valuation Date: Each Averaging Date Valuation Time: 4:00 p.m. (local time in New York) Shares: The common stock of Quest Diagnostics Incorporated (the "Issuer") Ticker: DGX Exchange: New York Stock Exchange Related Exchange(s): Any exchange on which options or futures on the Shares are traded. Number of Shares: 2,000,000 Initial Price: USD 52.5720 Depreciation Floor: USD 52.5720 Appreciation Cap: USD 79.4468 Final Price: To the extent Physical Settlement is applicable, Final Price shall be the closing price per Share quoted by the Exchange on each Averaging Date at the Valuation Time, without regard to extended or after hours trading. To the extent Cash Settlement is applicable, Final Price shall be the arithmetic average of the Relevant Prices, and "Relevant Price" shall be the closing price per Share quoted by the Exchange on each Averaging Date at the Valuation Time, without regard to extended or after hours trading. Averaging Dates: September 24, 2013, September 25, 2013, September 26, 2013, September 27, 2013, September 30, 2013, October 1, 2013, October 2, 2013, October 3, 2013, October 4, 2013, October 7, 2013 Averaging Date Market Disruption: Modified Postponement Delivery Adjustment: (a) If the Final Price is less than or equal to the Depreciation Floor, then the Delivery Adjustment equals 1.0 (b) If the Final Price is greater than the Depreciation Floor, but less than or equal to the Appreciation Cap, then the Delivery Adjustment equals a fraction, the numerator of which is the Depreciation Floor and the denominator of which is the Final Price
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883068 Page 2 of 12 (c) If the Final Price is greater than the Appreciation Cap, then the Delivery Adjustment equals 1.0 minus ((the Appreciation Cap minus the Depreciation Floor) divided by the Final Price). (B) PARTY A'S PAYMENT OF PURCHASE PRICE Purchase Price: USD 105,144,000 Payment Date: To the extent Physical Settlement is applicable, Party A will pay the Purchase Price divided by the Number of Averaging Dates to Party B on each Delivery Date. To the extent Cash Settlement is applicable, Party A will pay the Purchase Price to Party B on the Cash Settlement Payment Date. (C) PARTY B'S DELIVERY OBLIGATIONS Settlement Amount: On each Averaging Date, the relevant Delivery Adjustment multiplied by the relevant Number of Shares for the relevant Averaging Date, provided that if such calculation results in any fractional Share, the Settlement Amount shall be rounded up to the next whole number of Shares and Party A shall pay the cash value thereof to Party B. Cash Settlement Amount: The Delivery Adjustment multiplied by the Number of Shares multiplied by the Final Price Delivery Date: Three (3) Exchange Business Days next following each Averaging Date Settlement Option: Party B may elect Physical or Cash Settlement (with respect to all or a portion of the Number of Shares) by delivering a written notice of such election to Party A on or prior to the Election Date. If Party B elects Physical or Cash Settlement with respect to a portion of the Number of Shares, (i) Party B will be deemed to elect the other Settlement Option with respect to the remainder of the Number of Shares, (ii) the Number of Shares for each settlement option shall be deemed to be the portion with respect to which such election was made and (iii) the Purchase Price shall be allocated between the settlement options proportionally to the Number of Shares for each settlement option. If Party B does not provide such notice, Physical Settlement shall apply if the Posted Collateral on the Election Date consists of a number of freely-tradable Shares equal to the Number of Shares in book entry form; otherwise, Cash Settlement shall apply. Election Date: The fifth (5th) Exchange Business Day prior to the first Averaging Date Physical Settlement: To the extent Physical Settlement applies, the Transaction shall expire in equal proportions of Shares on each Averaging Date, with the Delivery Date for each such Averaging Date occurring three (3) Exchange Business Days after each such Averaging Date. On each such Delivery Date Party B will deliver a number of freely-tradable Shares in book-entry form equal to the Settlement Amount to Party A, free and clear of any Encumbrances or Transfer Restrictions. Party B acknowledges and understands that any such delivery may require Party B to provide an opinion of counsel and other documentation in a
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883068 Page 3 of 12 form acceptable to the Issuer and the transfer agent for the Shares to ensure the conversion of such Shares into book-entry form in advance of any delivery. Cash Settlement: To the extent Cash Settlement applies, Party B will pay the Cash Settlement Amount to Party A on the Cash Settlement Payment Date. Cash Settlement Payment Date: Three Exchange Business Days next following the final Averaging Date Collateral: If Party B elects to Transfer (and Transfers) the Independent Amount to Party A (which Independent Amount shall constitute Eligible Collateral with respect to Party B), Party A's Exposure under this Transaction shall be zero and Party B's Credit Support Amount (as Secured Party) shall be calculated without subtracting the Independent Amounts referred to in clause (iii) of the definition thereof; otherwise, Party A's Exposure under this Transaction shall be calculated as provided in the Credit Support Annex. At any time Party B may revoke such election by Transferring to Party A under the Credit Support Annex the then Delivery Amount (determined ignoring the Independent Amount and with Party A's Exposure under this Transaction being calculated as provided in the Credit Support Annex), in which case Party A shall promptly Transfer the Independent Amount to Party B. Party B acknowledges and understands that any revocation of its election to Transfer the Independent Amount may result in such Shares becoming subject to transfer restrictions under the Securities Act of 1933, as amended (the "1933 Act"), if such Shares have previously been converted into book-entry form. "Independent Amount" means, with respect to Party B for this Transaction, a number of Shares free and clear of any Encumbrances or Transfer Restrictions (other than transfer restrictions arising under the 1933 Act and other than under the Stockholders Agreement, dated as of August 16, 1999, between SmithKline Beecham PLC and the Issuer (the "Stockholders Agreement")) equal to the Number of Shares. The Independent Amount shall include all Distributions with respect to all Posted Collateral (other than cash dividends which are not Extraordinary Dividends). Notwithstanding any provision to the contrary in the Credit Support Annex, the Independent Amount shall be delivered by Party B without regard to the Minimum Transfer Amount and, except as provided above, Party A shall have no obligation to return the Independent Amount to Party B until all of Party B's obligations with respect to this Transaction have been satisfied. Party B agrees to provide three stock powers executed in blank with respect to each certificate evidencing any Shares delivered as Posted Collateral and to update such stock powers as necessary. Party A may use any Shares constituting Posted Collateral and the Independent Amount pursuant to Section 6(c) of the Credit Support Annex only upon Party B's consent. Party A agrees that if it uses any Shares pursuant to Section 6(c) of the Credit Support Annex, it will provide additional collateral to Party B, the terms of which shall be consistent with market practice for stock loans of U.S. liquid equity securities unless the parties agree otherwise. Party B acknowledges and understands that any such use may require Party B to provide an opinion of counsel and other documentation in a form acceptable to the
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883068 Page 4 of 12 Issuer and the transfer agent for the Shares to ensure the conversion of such Shares into book-entry form prior to such use. Party A agrees to cooperate in good faith with respect to the conversion of Shares into book-entry form. Party A agrees that LBI will hold any Shares constituting Posted Collateral in connection with this Transaction, that Party B is the beneficial owner of such Shares, and that, if such Shares are being held by LBI in book-entry form and are not being used by Party A pursuant to Section 6(c) of the Credit Support Annex, LBI will comply with its obligations under applicable law and regulation (including the rules of the New York Stock Exchange and the National Association of Securities Dealers) to forward to the beneficial owner all proxy and other materials properly furnished to it by the Issuer, in accordance with its standard business practices. ADJUSTMENTS: Method of Adjustment: Calculation Agent Adjustment Extraordinary Dividends: For purposes of this Transaction and the definition of a "Potential Adjustment Event" (without limiting the generality of clause (iii) of Section 9.1(e) of the Equity Definitions), an "Extraordinary Dividend" shall mean, as calculated by the Calculation Agent, (i) any cash dividend or distribution declared with respect to the Shares at a time when the Issuer has not previously declared or paid dividends or distributions on such Shares for the prior four quarterly periods; (ii) any increase or decrease by more than 5% (determined on an annualized basis) in the then current quarterly dividend or (iii) any other "special" cash or non-cash dividend on or distribution with respect to the Shares which is, by its terms or declared intent, declared and paid outside the normal operations or normal dividend procedures of the Issuer. EXTRAORDINARY EVENTS: Consequences of Merger Events: (a) Share-for-Share: Alternative Obligation (b) Share-for-Other: Cancellation and Payment (c) Share-for-Combined: Alternative Obligation with respect to the New Shares and Cancellation and Payment with respect to the Other Consideration Alternative Obligation: The applicable definition of "Alternative Obligation" in subsections 9.3(b)and (d) of the Equity Definitions shall be amended by adding the following at the end of each such subsection: "including any one or more of the Initial Price, Final Price, Relevant Price, Number of Shares, Appreciation Cap, Depreciation Floor, Delivery Adjustment and any other variable relevant to the exercise, settlement or payment terms of each such Transaction. In addition, the Calculation Agent will determine if the change in the volatility of the New Shares (as compared with the Shares) affects the theoretical value of any such Transaction, and if so, shall in a commercially reasonable manner make an adjustment to the Appreciation Cap to reflect such change in theoretical value. Any adjustment made pursuant to this paragraph will be effective as of the date determined by the Calculation Agent on or following the Merger Date.
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883068 Page 5 of 12 NATIONALIZATION, INSOLVENCY, HEDGING DISRUPTION EVENT, BORROW LOSS OR INCREASE IN BORROW COSTS: Cancellation and Payment Definitions: The definition of "Merger Event" in Section 9.2(a) of the Equity Definitions shall be amended by deleting subsection 9.2(a)(iii) in its entirety and replacing it with the following: "(iii) other takeover offer for the Shares that results in a transfer of or an irrevocable commitment to transfer 25% or more of all the outstanding Shares (other than the Shares owned or controlled by the offeror)" For purposes of the definition of "Cancellation and Payment" in Sections 9.3(c)(ii), 9.3(d)(ii) and 9.6, this Transaction shall be deemed to be a Share Option Transaction. The amount payable upon Cancellation and Payment will be the amount agreed upon promptly by the parties after the Merger Date or the date of the occurrence of the Nationalization, Insolvency, Hedging Disruption Event, Increase in Borrow Costs or Borrow Loss, as the case may be. In the absence of such agreement, the amount payable will be determined by the Calculation Agent in a commercially reasonable manner (without the requirement of soliciting dealer quotations) as the fair value of the Transaction with terms that would preserve the economic equivalent of any payment or delivery (assuming satisfaction of each applicable condition precedent) by the parties in respect of the relevant Transaction that would have been required after that date but for the occurrence of the Nationalization, Insolvency, Hedging Disruption Event, Increase in Borrow Costs, Borrow Loss or Merger Event, as applicable. The Calculation Agent will determine the amount payable on the basis of the factors identified in subparagraphs (i), (ii) and (iii) in Section 9.7(b) and such other factors as it deems appropriate in a commercially reasonable manner. Additional Extraordinary Events: "Hedging Disruption Event" means that the Shares cease to be listed on or quoted by the Exchange, the Nasdaq Global Select Market, the Nasdaq Global Market or the American Stock Exchange for any reason (other than a Merger Event). If an Increase in Borrow Costs occurs, then by the Valuation Time on the day such event occurs, Party B shall: (a) (i) permit Party A to use the Shares posted as Posted Collateral and the Independent Amount pursuant to Section 6(c) of the Credit Support Annex and (ii) ensure that such Shares are freely tradable and have been converted into book-entry form; or (b) agree to adjustments to the terms of this Transaction to reflect the Total Borrow Cost, which adjustments will be determined by the Calculation Agent in a commercially reasonable manner; or (c) agree to pay the Total Borrow Cost. If Party B does not agree to (a), (b) or (c) by the Valuation Time on the day on which the Increase in Borrow Costs occurs, Cancellation and Payment shall immediately be applicable.
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883068 Page 6 of 12 If a Borrow Loss occurs, the Calculation Agent shall notify Party A and Party B and Cancellation and Payment shall immediately be applicable unless, by the later of the Valuation Time on the day on which the Borrow Loss occurs or three hours after such notification, (i) Party B permits Party A to use the Shares posted as Posted Collateral and the Independent Amount pursuant to Section 6(c) of the Credit Support Annex and (ii) such Shares are freely tradable and have been converted into book-entry form. Party B acknowledges and understands that any use of the Shares posted as Posted Collateral pursuant to Section 6(c) of the Credit Support Annex may require Party B to provide an opinion of counsel and other documentation in a form acceptable to the Issuer and the transfer agent for the Shares to ensure the conversion of such Shares into book-entry form prior to the occurrence of the Borrow Loss or the Increase in Borrow Costs, as applicable. If Party A is permitted to use the Shares posted as Posted Collateral pursuant to Section 6(c) of the Credit Support Annex, Party A shall adjust the terms of this Transaction in a commercially reasonable manner to reflect its lower borrowing costs for the period that Party A is permitted to use the Shares (which borrowing costs will reflect the interest rate earned by Party A on any collateral posted to Party B in connection with such use). The Calculation Agent shall notify both parties as soon as the average rebate earned by Party A on collateral posted for any Shares borrowed in connection with this Transaction is at or below 1% (determined on an annualized basis). "Borrow Cost" means the difference between the actual rebate earned by Party A on collateral posted for any Shares borrowed in connection with this Transaction and the General Collateral Rate, multiplied by the closing price per Share quoted by the Exchange at the Valuation Time on the preceding Exchange Business Day, multiplied by the Hedge Delta on the preceding Exchange Business Day, calculated on an actual/360 basis, as determined by the Calculation Agent in a commercially reasonable manner. "Borrow Loss" means that it becomes impracticable for Party A to borrow Shares equal to its desired Hedge Delta on any day, as determined by the Calculation Agent in a commercially reasonable manner. "General Collateral Rate" means the general collateral rebate rate earned by market participants in general on collateral posted for U.S. liquid equity securities as determined by the Calculation Agent in a commercially reasonable manner. The Calculation Agent will provide evidence of the General Collateral Rate to either party upon request. "Hedge Delta" means the number of Shares borrowed by Party A in connection with this Transaction, as determined by the Calculation Agent in a commercially reasonable manner.
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883068 Page 7 of 12 "Increase in Borrow Costs" means that the actual rebate earned by Party A on collateral posted for any Shares borrowed in connection with this Transaction is at or below zero for ten (10) days or longer, as determined by the Calculation Agent in a commercially reasonable manner. "Total Borrow Cost" means the Borrow Cost for every day from the day on which the Increase in Borrow Costs occurs until the final Delivery Date, the Cash Settlement Payment Date or the effective date for any Elected Termination, as applicable. Announcement Event: If an Announcement Event occurs, the Calculation Agent will determine the economic effect of any change in volatility and/or liquidity relevant to the Shares or to the Transaction caused by the Announcement Event on the theoretical value of the Transaction from the Announcement Date to the Valuation Date. If such economic effect is (i) material and (ii) has continued, or is continuing, for a period of 30 days from the Announcement Event, on the Valuation Date the Calculation Agent shall in a commercially reasonable manner make an adjustment to the Appreciation Cap to reflect such change in theoretical value; provided that such adjustment shall not exceed USD 2.00 (as adjusted pursuant to "Method of Adjustment" above). "ANNOUNCEMENT EVENT" shall mean the occurrence of the Announcement Date of a Share-for-Other Merger Event or a Share-for-Combined Merger Event where Other Consideration represents more than 50% of the total value of the Combined Consideration. Change in Law: "Change in Law" means that, on or after the Trade Date (A) due to the adoption of or any change in any applicable law or regulation, or (B) due to the promulgation of or any change in the interpretation by any court, tribunal or regulatory authority with component jurisdiction of any applicable law or regulation, a party to such Transaction determines in good faith that it has become illegal to hold, acquire or dispose of Shares relating to this Transaction. Upon the occurrence of a Change in Law event either party may elect to terminate this Transaction upon at least two Exchange Business Days' notice to the other party specifying the date of such termination (or such lesser notice as any be required to comply with the Change of Law), in which event the Transaction will terminate and the Calculation Agent will determine any amount payable by one party to the other.
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883068 Page 8 of 12 Bankruptcy Code: Without limiting any other protections under the Bankruptcy Code (Title 11 of the United States Code) (the "Bankruptcy Code"), the Parties hereto intend for: (a) This Transaction and the Agreement to be a "swap agreement" as defined in the Bankruptcy Code, and the parties hereto to be entitled to the protections afforded by, among other Sections, Section 560 of the Bankruptcy Code. (b) A party's right to liquidate this Transaction and to exercise any other remedies upon the occurrence of any Event of Default or Termination Event under the Agreement or this Transaction to constitute a "contractual right" as described in Section 560 of the Bankruptcy Code. (c) Any cash, securities or other property provided as performance assurance, credit support or collateral with respect to this Transaction or the Agreement to constitute "transfers" under a "swap agreement" as defined in the Bankruptcy Code. (d) All payments for, under or in connection with this Transaction or the Agreement, all payments for any securities or other assets and the transfer of such securities or other assets to constitute "transfers" under a "swap agreement" as defined in the Bankruptcy Code. Party B Representations: In addition to the representations set forth in the Agreement, Party B further represents that; (a) Neither Party A nor any of its affiliates has advised Party B with respect to any legal, regulatory, tax, accounting or economic consequences arising from this Transaction, and neither Party A nor any of its affiliates is acting as agent (other than LBI as dual agent if specified above), or advisor for Party B in connection with this Transaction. (b) Party B is not in possession of any material non-public information concerning the business, operations or prospects of the Issuer and was not in possession of any such information at the time of placing any order with respect to the Transaction. "Material" information for these purposes is any information to which an investor would reasonably attach importance in reaching a decision to buy, sell or hold any securities of the Issuer(s). (c) Party B is the legal and beneficial owner of the Shares, free and clear of any Encumbrances or any Transfer Restrictions (other than transfer restrictions arising under the 1933 Act and other than under the Stockholder's Agreement), and, upon the transfer of the Shares to Party A in settlement of this Transaction (except to the extent that Party B elects the Cash Settlement option, if any) Party A will acquire good and marketable title and will be the beneficial owner of the Shares, free and clear of any Encumbrances or any Transfer Restrictions. "Encumbrance" means any pledge, hypothecation, assignment,
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883068 Page 9 of 12 encumbrance, charge, claim, security interest, option, preference, priority or other preferential arrangement of any kind or nature whatsoever, or other charge, claim or other encumbrance (other than an Encumbrance routinely imposed on all securities in the relevant Clearance System). "Transfer Restriction" means, with respect to any security or other property, any condition to or restriction on the ability of the holder thereof to sell, assign or otherwise transfer such security or other property or to enforce the provisions thereof or of any document related thereto, whether set forth in such security or other property itself or in any document related thereto, including, without limitation, (i) any requirement that any sale, assignment or other transfer or enforcement of such security or other property be consented to or approved by any person, including, without limitation, the Issuer or any other obligor thereon, (ii) any limitations on the type or status, financial or otherwise, of any purchaser, pledgee, assignee or transferee of such security or other property, (iii) any requirement for the delivery of any certificate, consent, agreement, opinion of counsel, notice or any other document of any person to be given to the Issuer, any other obligor on or any registrar or transfer agent for, such security or other property, and (iv) any registration or qualification requirement or prospectus delivery requirement for such security or other property pursuant to any federal, state or foreign securities law (including, without limitation, any such requirement arising as a result of Rule 144 or Rule 145 under the 1933 Act). (d) As of the date hereof (without giving effect to the transactions contemplated hereby) Party B is the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934 (the "1934 Act")) of 36,504,308 Shares, which constitutes approximately 18.7% of the outstanding Shares of the Issuer (as at February 15, 2007). Party B is currently, and in the past has been, in compliance with any applicable reporting and other obligations under Section 13 and Section 16 of the 1934 Act. Party B shall comply with all applicable reporting and other requirements of Section 13 and Section 16 of the 1934 Act (and the rules and regulations promulgated thereunder) relating to this Transaction. Party B will provide Party A with a draft of any amendments to its Schedule 13D which relate to the Transaction and will give Party A a reasonable opportunity to comment on the draft. Party B shall promptly file all amendments to its Schedule 13D in a form reasonably acceptable to Party A. (e) Party B's entry into this Transaction, any sale of Shares hereunder, the pledge of any Eligible Collateral hereunder and Party A's exercise of all rights and remedies hereunder with respect to such Eligible Collateral complies with and is not in any way limited by (i) any trading or "blackout" policies of the Issuer or (ii) any other conditions or restrictions imposed by the Issuer on the sale, transfer, loan, pledge, disposition or other use by its employees of any Eligible Collateral or Shares. (f) Party B acquired the Shares and paid for the Shares in full more
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883068 Page 10 of 12 than one year prior to the Trade Date. Party B did not acquire the Shares in contemplation of, or in a transaction that was contingent upon, entering into this Transaction. (g) Neither Party B nor any person who would be considered to be the same "person" (as such term is used in Rule 144(a)(2) under the 1933 Act, has sold any Shares or hedged (through swaps, options, short sales or otherwise) any long position in the Shares during the preceding three (3) months prior to the Trade Date. For purposes of this paragraph, "Shares" shall be deemed to include securities convertible into or exchangeable or exercisable for Shares and any other security or instrument that would be subject to aggregation under paragraphs (a)(2) and (e) of Rule 144 under the 1933 Act. (h) Party B has not made, and will not make, any payment in connection with the offering or sale of the Shares to any person other than Party A. (i) Party B has not solicited or arranged for the solicitation of, and will not solicit or arrange for the solicitation of, orders to buy Shares in anticipation of or in connection with any proposed sale of the Shares. (j) The Shares constituting Posted Collateral are currently eligible for public resale by Party B pursuant to Rule 144 under the 1933 Act. Party B acknowledges and agrees that (i) the entering into of this Confirmation will constitute a sale for purposes of Rule 144, (ii) Party B has not taken and will not take any action that would cause the sale made pursuant to this Confirmation to fail to meet all applicable requirements of Rule 144, including without limitation, the volume limitations of Rule 144(e). MUTUAL REPRESENTATION: Party A and Party B each represent that the Number of Shares will not exceed the greater of (i) 1% of the outstanding Shares as shown by the most recent report or statement published by the Issuer, or (ii) the average reported weekly volume of trading in the Shares during the four calendar weeks preceding the Trade Date. COVENANTS: (a) Party B will transmit three signed copies of a Form 144 for filing with the Securities and Exchange Commission (the "SEC"), the Exchange and the Issuer concurrently with the execution of this Confirmation. (b) Party B will send to Party A via facsimile a copy of each Form 144 and each filing under Section 13 or 16 of the Exchange Act, if any, relating to this Transaction concurrently with filing or transmission for filing, as the case may be, of such form to or with the SEC. (c) Party A covenants that, through its affiliate Lehman Brothers Inc., it will introduce into the public market a number of Shares equal to the Number of Shares in a manner consistent with the manner-of-sale conditions described in 144(f) and (g) under the 1933 Act.
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883068 Page 11 of 12 (d) Each party acknowledges and agrees that upon execution of this Confirmation, this Confirmation shall constitute a "binding commitment" within the meaning of the interpretive letter from the SEC to Goldman, Sachs & Co. dated December 20, 1999. Elected Termination: Party B may elect to terminate this Transaction upon mutually agreed upon terms. The Calculation Agent will calculate any amounts owing upon such early termination in a commercially reasonable manner. Upon request, the Calculation Agent will provide the assumptions it used to calculate any amounts owing. Payments on Early Termination: Party A and Party B agree that for this Transaction, for purposes of Section 6(e) of the Agreement, Loss and the Second Method will apply. Additional Provision: Party B hereby identifies the Shares initially pledged as Posted Collateral under this Transaction as a position with respect to personal property that is an offsetting position with respect to Party B's rights and obligations hereunder and that is part of a "straddle" with such rights and obligations within the meaning of section 1092 of the Internal Revenue Code of 1986, as amended, and Party A acknowledges that Party B has identified the Shares for that purpose. Calculation Agent: Lehman Brothers Inc., whose adjustments, determinations and calculations shall be made in a commercially reasonable manner.
THIS TRANSACTION HAS BEEN ENTERED INTO FOR INVESTMENT AND HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR ANY OTHER UNITED STATES FEDERAL OR STATE SECURITIES LAWS; THIS TRANSACTION MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF APPROPRIATE REGISTRATION UNDER SUCH SECURITIES LAWS EXCEPT IN A TRANSACTION EXEMPT FROM OR NOT SUBJECT TO THE REGISTRATION REQUIREMENTS OF SUCH SECURITIES LAWS. Please confirm your agreement with the foregoing by executing this Confirmation and returning it to us at facsimile number 646-885-9546, Attention: Documentation. Yours sincerely, Confirmed as of the date first above written: LEHMAN BROTHERS FINANCE S.A. SMITHKLINE BEECHAM CORPORATION By: /s/ Markus Bormann By: /s/ Donald F. Parman --------------------------------- ------------------------------------ Name: Markus Bormann Name: Donald F. Parman ------------------------------- ---------------------------------- Title: Director Title: Vice President ------------------------------ --------------------------------- By: /s/ Barbara Grob --------------------------------- Name: Barbara Grob ------------------------------- Title: Authorised Signatory ------------------------------ Execution time will be furnished upon Counterparty's written request. Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883068 Page 12 of 12 EX-14 5 w30546exv14.txt CONFIRMATION /DATES APRIL 24, 2014 THROUGH MAY 7, 2014 EXHIBIT 14 LEHMAN BROTHERS February 15, 2007 TRANSACTION SmithKline Beecham Corporation One Franklin Plaza 200 N. 16th Street Philadelphia, PA 19102 Attn: Donald Parman, fax 215-751-5349 CC: Subesh Williams, Global Deal Id: 2883069 Effort Id: [_____] Dear Sir or Madam: The purpose of this letter agreement (this "Confirmation") is to confirm the terms and conditions of the Transaction entered into between Lehman Brothers Finance S.A. ("Party A") and SmithKline Beecham Corporation ("Party B") on the Trade Date specified below (the "Transaction"). This letter agreement constitutes a "Confirmation" as referred to in the ISDA Master Agreement specified below. This Confirmation supplements, forms part of, and is subject to, the ISDA Master Agreement dated as of May 21, 2002, as amended and supplemented from time to time (the "Agreement"), between Party A and Party B. All provisions contained in the Agreement shall govern this Confirmation except as expressly modified below. The definitions and provisions contained in the 1996 ISDA Equity Derivatives Definitions (the "Equity Definitions") and the 2000 ISDA Definitions (the "Swap Definitions", and together with the Equity Definitions, the "Definitions"), in each case as published by the International Swaps and Derivatives Association, Inc. ("ISDA") are incorporated into this Confirmation. References herein to "Transaction" shall be deemed references to "Swap Transaction" for purposes of the Swap Definitions and "Share Swap Transaction" for purposes of the Equity Definitions. In the event of any inconsistency between the Equity Definitions and the Swap Definitions, the Equity Definitions will govern. In the event of any inconsistency between either set of Definitions and this Confirmation, this Confirmation will govern. Party A and Party B each represents that entering into the Transaction is within its capacity, is duly authorized and does not violate any laws of its jurisdiction of organization or residence or the terms of any agreement to which it is a party. Party A and Party B each represents that (a) it is not relying on the other party in connection with its decision to enter into this Transaction, and neither party is acting as an advisor to or fiduciary of the other party in connection with this Transaction regardless of whether the other party provides it with market information or its views; (b) it understands the risks of the Transaction and any legal, regulatory, tax, accounting and economic consequences resulting therefrom; and (c) it has determined based upon its own judgment and upon any advice received from its own professional advisors as it has deemed necessary to consult that entering into the Transaction is appropriate for such party in light of its financial capabilities and objectives. Party A and Party B each represents that upon due execution and delivery of this Confirmation, it will constitute a legally valid and binding obligation, enforceable against it in accordance with its terms, subject to applicable principles of bankruptcy and creditors' rights generally and to equitable principles of general application. LEHMAN BROTHERS FINANCE S.A. TALSTRASSE 82 - P.O. BOX 2828 - CH-8021 ZURICH - SWITZERLAND TELEPHONE (41-1) 287 88 42 - TELEFAX (41-1) 287 88 25 - TELEX 812096 LBFS CH The terms of the Transaction to which this Confirmation relates are as follows: Agent: Lehman Brothers Inc. ("LBI") is acting as agent on behalf of Party A and Party B for this Transaction. LBI has no obligations, by guarantee, endorsement or otherwise, with respect to the performance of this Transaction by either party. (A) GENERAL TERMS Trade Date: February 15, 2007 Effective Date: Three (3) Exchange Business Days next following the Trade Date Valuation Date: Each Averaging Date Valuation Time: 4:00 p.m. (local time in New York) Shares: The common stock of Quest Diagnostics Incorporated (the "Issuer") Ticker: DGX Exchange: New York Stock Exchange Related Exchange(s): Any exchange on which options or futures on the Shares are traded. Number of Shares: 2,000,000 Initial Price: USD 52.5720 Depreciation Floor: USD 52.5720 Appreciation Cap: USD 81.0240 Final Price: To the extent Physical Settlement is applicable, Final Price shall be the closing price per Share quoted by the Exchange on each Averaging Date at the Valuation Time, without regard to extended or after hours trading. To the extent Cash Settlement is applicable, Final Price shall be the arithmetic average of the Relevant Prices, and "Relevant Price" shall be the closing price per Share quoted by the Exchange on each Averaging Date at the Valuation Time, without regard to extended or after hours trading. Averaging Dates: April 24, 2014, April 25, 2014, April 28, 2014, April 29, 2014, April 30, 2014, May 01, 2014, May 02, 2014, May 05, 2014, May 06, 2014, May 07, 2014 Averaging Date Market Disruption: Modified Postponement Delivery Adjustment: (a) If the Final Price is less than or equal to the Depreciation Floor, then the Delivery Adjustment equals 1.0 (b) If the Final Price is greater than the Depreciation Floor, but less than or equal to the Appreciation Cap, then the Delivery Adjustment equals a fraction, the numerator of which is the Depreciation Floor and the denominator of which is the Final Price
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883069 Page 2 of 12 (c) If the Final Price is greater than the Appreciation Cap, then the Delivery Adjustment equals 1.0 minus ((the Appreciation Cap minus the Depreciation Floor) divided by the Final Price). (B) PARTY A'S PAYMENT OF PURCHASE PRICE Purchase Price: USD 105,144,000 Payment Date: To the extent Physical Settlement is applicable, Party A will pay the Purchase Price divided by the Number of Averaging Dates to Party B on each Delivery Date. To the extent Cash Settlement is applicable, Party A will pay the Purchase Price to Party B on the Cash Settlement Payment Date. (C) PARTY B'S DELIVERY OBLIGATIONS Settlement Amount: On each Averaging Date, the relevant Delivery Adjustment multiplied by the relevant Number of Shares for the relevant Averaging Date, provided that if such calculation results in any fractional Share, the Settlement Amount shall be rounded up to the next whole number of Shares and Party A shall pay the cash value thereof to Party B. Cash Settlement Amount: The Delivery Adjustment multiplied by the Number of Shares multiplied by the Final Price Delivery Date: Three (3) Exchange Business Days next following each Averaging Date Settlement Option: Party B may elect Physical or Cash Settlement (with respect to all or a portion of the Number of Shares) by delivering a written notice of such election to Party A on or prior to the Election Date. If Party B elects Physical or Cash Settlement with respect to a portion of the Number of Shares, (i) Party B will be deemed to elect the other Settlement Option with respect to the remainder of the Number of Shares, (ii) the Number of Shares for each settlement option shall be deemed to be the portion with respect to which such election was made and (iii) the Purchase Price shall be allocated between the settlement options proportionally to the Number of Shares for each settlement option. If Party B does not provide such notice, Physical Settlement shall apply if the Posted Collateral on the Election Date consists of a number of freely-tradable Shares equal to the Number of Shares in book entry form; otherwise, Cash Settlement shall apply. Election Date: The fifth (5th) Exchange Business Day prior to the first Averaging Date Physical Settlement: To the extent Physical Settlement applies, the Transaction shall expire in equal proportions of Shares on each Averaging Date, with the Delivery Date for each such Averaging Date occurring three (3) Exchange Business Days after each such Averaging Date. On each such Delivery Date Party B will deliver a number of freely-tradable Shares in book-entry form equal to the Settlement Amount to Party A, free and clear of any Encumbrances or Transfer Restrictions. Party B acknowledges and understands that any such delivery may require Party B to provide an opinion of counsel and other documentation in a
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883069 Page 3 of 12 form acceptable to the Issuer and the transfer agent for the Shares to ensure the conversion of such Shares into book-entry form in advance of any delivery. Cash Settlement: To the extent Cash Settlement applies, Party B will pay the Cash Settlement Amount to Party A on the Cash Settlement Payment Date. Cash Settlement Payment Date: Three Exchange Business Days next following the final Averaging Date Collateral: If Party B elects to Transfer (and Transfers) the Independent Amount to Party A (which Independent Amount shall constitute Eligible Collateral with respect to Party B), Party A's Exposure under this Transaction shall be zero and Party B's Credit Support Amount (as Secured Party) shall be calculated without subtracting the Independent Amounts referred to in clause (iii) of the definition thereof; otherwise, Party A's Exposure under this Transaction shall be calculated as provided in the Credit Support Annex. At any time Party B may revoke such election by Transferring to Party A under the Credit Support Annex the then Delivery Amount (determined ignoring the Independent Amount and with Party A's Exposure under this Transaction being calculated as provided in the Credit Support Annex), in which case Party A shall promptly Transfer the Independent Amount to Party B. Party B acknowledges and understands that any revocation of its election to Transfer the Independent Amount may result in such Shares becoming subject to transfer restrictions under the Securities Act of 1933, as amended (the "1933 Act"), if such Shares have previously been converted into book-entry form. "Independent Amount" means, with respect to Party B for this Transaction, a number of Shares free and clear of any Encumbrances or Transfer Restrictions (other than transfer restrictions arising under the 1933 Act and other than under the Stockholders Agreement, dated as of August 16, 1999, between SmithKline Beecham PLC and the Issuer (the "Stockholders Agreement")) equal to the Number of Shares. The Independent Amount shall include all Distributions with respect to all Posted Collateral (other than cash dividends which are not Extraordinary Dividends). Notwithstanding any provision to the contrary in the Credit Support Annex, the Independent Amount shall be delivered by Party B without regard to the Minimum Transfer Amount and, except as provided above, Party A shall have no obligation to return the Independent Amount to Party B until all of Party B's obligations with respect to this Transaction have been satisfied. Party B agrees to provide three stock powers executed in blank with respect to each certificate evidencing any Shares delivered as Posted Collateral and to update such stock powers as necessary. Party A may use any Shares constituting Posted Collateral and the Independent Amount pursuant to Section 6(c) of the Credit Support Annex only upon Party B's consent. Party A agrees that if it uses any Shares pursuant to Section 6(c) of the Credit Support Annex, it will provide additional collateral to Party B, the terms of which shall be consistent with market practice for stock loans of U.S. liquid equity securities unless the parties agree otherwise. Party B acknowledges and understands that any such use may require Party B to provide an opinion of counsel and other documentation in a form acceptable to the
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883069 Page 4 of 12 Issuer and the transfer agent for the Shares to ensure the conversion of such Shares into book-entry form prior to such use. Party A agrees to cooperate in good faith with respect to the conversion of Shares into book-entry form. Party A agrees that LBI will hold any Shares constituting Posted Collateral in connection with this Transaction, that Party B is the beneficial owner of such Shares, and that, if such Shares are being held by LBI in book-entry form and are not being used by Party A pursuant to Section 6(c) of the Credit Support Annex, LBI will comply with its obligations under applicable law and regulation (including the rules of the New York Stock Exchange and the National Association of Securities Dealers) to forward to the beneficial owner all proxy and other materials properly furnished to it by the Issuer, in accordance with its standard business practices. ADJUSTMENTS: Method of Adjustment: Calculation Agent Adjustment Extraordinary Dividends: For purposes of this Transaction and the definition of a "Potential Adjustment Event" (without limiting the generality of clause (iii) of Section 9.1(e) of the Equity Definitions), an "Extraordinary Dividend" shall mean, as calculated by the Calculation Agent, (i) any cash dividend or distribution declared with respect to the Shares at a time when the Issuer has not previously declared or paid dividends or distributions on such Shares for the prior four quarterly periods; (ii) any increase or decrease by more than 5% (determined on an annualized basis) in the then current quarterly dividend or (iii) any other "special" cash or non-cash dividend on or distribution with respect to the Shares which is, by its terms or declared intent, declared and paid outside the normal operations or normal dividend procedures of the Issuer. EXTRAORDINARY EVENTS: Consequences of Merger Events: (a) Share-for-Share: Alternative Obligation (b) Share-for-Other: Cancellation and Payment (c) Share-for-Combined: Alternative Obligation with respect to the New Shares and Cancellation and Payment with respect to the Other Consideration Alternative Obligation: The applicable definition of "Alternative Obligation" in subsections 9.3(b)and (d) of the Equity Definitions shall be amended by adding the following at the end of each such subsection: "including any one or more of the Initial Price, Final Price, Relevant Price, Number of Shares, Appreciation Cap, Depreciation Floor, Delivery Adjustment and any other variable relevant to the exercise, settlement or payment terms of each such Transaction. In addition, the Calculation Agent will determine if the change in the volatility of the New Shares (as compared with the Shares) affects the theoretical value of any such Transaction, and if so, shall in a commercially reasonable manner make an adjustment to the Appreciation Cap to reflect such change in theoretical value. Any adjustment made pursuant to this paragraph will be effective as of the date determined by the Calculation Agent on or following the Merger Date.
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883069 Page 5 of 12 NATIONALIZATION, INSOLVENCY, HEDGING DISRUPTION EVENT, BORROW LOSS OR INCREASE IN BORROW COSTS: Cancellation and Payment Definitions: The definition of "Merger Event" in Section 9.2(a) of the Equity Definitions shall be amended by deleting subsection 9.2(a)(iii) in its entirety and replacing it with the following: "(iii) other takeover offer for the Shares that results in a transfer of or an irrevocable commitment to transfer 25% or more of all the outstanding Shares (other than the Shares owned or controlled by the offeror)" For purposes of the definition of "Cancellation and Payment" in Sections 9.3(c)(ii), 9.3(d)(ii) and 9.6, this Transaction shall be deemed to be a Share Option Transaction. The amount payable upon Cancellation and Payment will be the amount agreed upon promptly by the parties after the Merger Date or the date of the occurrence of the Nationalization, Insolvency, Hedging Disruption Event, Increase in Borrow Costs or Borrow Loss, as the case may be. In the absence of such agreement, the amount payable will be determined by the Calculation Agent in a commercially reasonable manner (without the requirement of soliciting dealer quotations) as the fair value of the Transaction with terms that would preserve the economic equivalent of any payment or delivery (assuming satisfaction of each applicable condition precedent) by the parties in respect of the relevant Transaction that would have been required after that date but for the occurrence of the Nationalization, Insolvency, Hedging Disruption Event, Increase in Borrow Costs, Borrow Loss or Merger Event, as applicable. The Calculation Agent will determine the amount payable on the basis of the factors identified in subparagraphs (i), (ii) and (iii) in Section 9.7(b) and such other factors as it deems appropriate in a commercially reasonable manner. Additional Extraordinary Events: "Hedging Disruption Event" means that the Shares cease to be listed on or quoted by the Exchange, the Nasdaq Global Select Market, the Nasdaq Global Market or the American Stock Exchange for any reason (other than a Merger Event). If an Increase in Borrow Costs occurs, then by the Valuation Time on the day such event occurs, Party B shall: (a) (i) permit Party A to use the Shares posted as Posted Collateral and the Independent Amount pursuant to Section 6(c) of the Credit Support Annex and (ii) ensure that such Shares are freely tradable and have been converted into book-entry form; or (b) agree to adjustments to the terms of this Transaction to reflect the Total Borrow Cost, which adjustments will be determined by the Calculation Agent in a commercially reasonable manner; or (c) agree to pay the Total Borrow Cost. If Party B does not agree to (a), (b) or (c) by the Valuation Time on the day on which the Increase in Borrow Costs occurs, Cancellation and Payment shall immediately be applicable.
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883069 Page 6 of 12 If a Borrow Loss occurs, the Calculation Agent shall notify Party A and Party B and Cancellation and Payment shall immediately be applicable unless, by the later of the Valuation Time on the day on which the Borrow Loss occurs or three hours after such notification, (i) Party B permits Party A to use the Shares posted as Posted Collateral and the Independent Amount pursuant to Section 6(c) of the Credit Support Annex and (ii) such Shares are freely tradable and have been converted into book-entry form. Party B acknowledges and understands that any use of the Shares posted as Posted Collateral pursuant to Section 6(c) of the Credit Support Annex may require Party B to provide an opinion of counsel and other documentation in a form acceptable to the Issuer and the transfer agent for the Shares to ensure the conversion of such Shares into book-entry form prior to the occurrence of the Borrow Loss or the Increase in Borrow Costs, as applicable. If Party A is permitted to use the Shares posted as Posted Collateral pursuant to Section 6(c) of the Credit Support Annex, Party A shall adjust the terms of this Transaction in a commercially reasonable manner to reflect its lower borrowing costs for the period that Party A is permitted to use the Shares (which borrowing costs will reflect the interest rate earned by Party A on any collateral posted to Party B in connection with such use). The Calculation Agent shall notify both parties as soon as the average rebate earned by Party A on collateral posted for any Shares borrowed in connection with this Transaction is at or below 1% (determined on an annualized basis). "Borrow Cost" means the difference between the actual rebate earned by Party A on collateral posted for any Shares borrowed in connection with this Transaction and the General Collateral Rate, multiplied by the closing price per Share quoted by the Exchange at the Valuation Time on the preceding Exchange Business Day, multiplied by the Hedge Delta on the preceding Exchange Business Day, calculated on an actual/360 basis, as determined by the Calculation Agent in a commercially reasonable manner. "Borrow Loss" means that it becomes impracticable for Party A to borrow Shares equal to its desired Hedge Delta on any day, as determined by the Calculation Agent in a commercially reasonable manner. "General Collateral Rate" means the general collateral rebate rate earned by market participants in general on collateral posted for U.S. liquid equity securities as determined by the Calculation Agent in a commercially reasonable manner. The Calculation Agent will provide evidence of the General Collateral Rate to either party upon request. "Hedge Delta" means the number of Shares borrowed by Party A in connection with this Transaction, as determined by the Calculation Agent in a commercially reasonable manner.
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883069 Page 7 of 12 "Increase in Borrow Costs" means that the actual rebate earned by Party A on collateral posted for any Shares borrowed in connection with this Transaction is at or below zero for ten (10) days or longer, as determined by the Calculation Agent in a commercially reasonable manner. "Total Borrow Cost" means the Borrow Cost for every day from the day on which the Increase in Borrow Costs occurs until the final Delivery Date, the Cash Settlement Payment Date or the effective date for any Elected Termination, as applicable. Announcement Event: If an Announcement Event occurs, the Calculation Agent will determine the economic effect of any change in volatility and/or liquidity relevant to the Shares or to the Transaction caused by the Announcement Event on the theoretical value of the Transaction from the Announcement Date to the Valuation Date. If such economic effect is (i) material and (ii) has continued, or is continuing, for a period of 30 days from the Announcement Event, on the Valuation Date the Calculation Agent shall in a commercially reasonable manner make an adjustment to the Appreciation Cap to reflect such change in theoretical value; provided that such adjustment shall not exceed USD 2.00 (as adjusted pursuant to "Method of Adjustment" above). "ANNOUNCEMENT EVENT" shall mean the occurrence of the Announcement Date of a Share-for-Other Merger Event or a Share-for-Combined Merger Event where Other Consideration represents more than 50% of the total value of the Combined Consideration. Change in Law: "Change in Law" means that, on or after the Trade Date (A) due to the adoption of or any change in any applicable law or regulation, or (B) due to the promulgation of or any change in the interpretation by any court, tribunal or regulatory authority with component jurisdiction of any applicable law or regulation, a party to such Transaction determines in good faith that it has become illegal to hold, acquire or dispose of Shares relating to this Transaction. Upon the occurrence of a Change in Law event either party may elect to terminate this Transaction upon at least two Exchange Business Days' notice to the other party specifying the date of such termination (or such lesser notice as any be required to comply with the Change of Law), in which event the Transaction will terminate and the Calculation Agent will determine any amount payable by one party to the other.
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883069 Page 8 of 12 Bankruptcy Code: Without limiting any other protections under the Bankruptcy Code (Title 11 of the United States Code) (the "Bankruptcy Code"), the Parties hereto intend for: (a) This Transaction and the Agreement to be a "swap agreement" as defined in the Bankruptcy Code, and the parties hereto to be entitled to the protections afforded by, among other Sections, Section 560 of the Bankruptcy Code. (b) A party's right to liquidate this Transaction and to exercise any other remedies upon the occurrence of any Event of Default or Termination Event under the Agreement or this Transaction to constitute a "contractual right" as described in Section 560 of the Bankruptcy Code. (c) Any cash, securities or other property provided as performance assurance, credit support or collateral with respect to this Transaction or the Agreement to constitute "transfers" under a "swap agreement" as defined in the Bankruptcy Code. (d) All payments for, under or in connection with this Transaction or the Agreement, all payments for any securities or other assets and the transfer of such securities or other assets to constitute "transfers" under a "swap agreement" as defined in the Bankruptcy Code. Party B Representations: In addition to the representations set forth in the Agreement, Party B further represents that; (a) Neither Party A nor any of its affiliates has advised Party B with respect to any legal, regulatory, tax, accounting or economic consequences arising from this Transaction, and neither Party A nor any of its affiliates is acting as agent (other than LBI as dual agent if specified above), or advisor for Party B in connection with this Transaction. (b) Party B is not in possession of any material non-public information concerning the business, operations or prospects of the Issuer and was not in possession of any such information at the time of placing any order with respect to the Transaction. "Material" information for these purposes is any information to which an investor would reasonably attach importance in reaching a decision to buy, sell or hold any securities of the Issuer(s). (c) Party B is the legal and beneficial owner of the Shares, free and clear of any Encumbrances or any Transfer Restrictions (other than transfer restrictions arising under the 1933 Act and other than under the Stockholder's Agreement), and, upon the transfer of the Shares to Party A in settlement of this Transaction (except to the extent that Party B elects the Cash Settlement option, if any) Party A will acquire good and marketable title and will be the beneficial owner of the Shares, free and clear of any Encumbrances or any Transfer Restrictions. "Encumbrance" means any pledge, hypothecation, assignment,
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883069 Page 9 of 12 encumbrance, charge, claim, security interest, option, preference, priority or other preferential arrangement of any kind or nature whatsoever, or other charge, claim or other encumbrance (other than an Encumbrance routinely imposed on all securities in the relevant Clearance System). "Transfer Restriction" means, with respect to any security or other property, any condition to or restriction on the ability of the holder thereof to sell, assign or otherwise transfer such security or other property or to enforce the provisions thereof or of any document related thereto, whether set forth in such security or other property itself or in any document related thereto, including, without limitation, (i) any requirement that any sale, assignment or other transfer or enforcement of such security or other property be consented to or approved by any person, including, without limitation, the Issuer or any other obligor thereon, (ii) any limitations on the type or status, financial or otherwise, of any purchaser, pledgee, assignee or transferee of such security or other property, (iii) any requirement for the delivery of any certificate, consent, agreement, opinion of counsel, notice or any other document of any person to be given to the Issuer, any other obligor on or any registrar or transfer agent for, such security or other property, and (iv) any registration or qualification requirement or prospectus delivery requirement for such security or other property pursuant to any federal, state or foreign securities law (including, without limitation, any such requirement arising as a result of Rule 144 or Rule 145 under the 1933 Act). (d) As of the date hereof (without giving effect to the transactions contemplated hereby) Party B is the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934 (the "1934 Act")) of 36,504,308 Shares, which constitutes approximately 18.7% of the outstanding Shares of the Issuer (as at February 15, 2007). Party B is currently, and in the past has been, in compliance with any applicable reporting and other obligations under Section 13 and Section 16 of the 1934 Act. Party B shall comply with all applicable reporting and other requirements of Section 13 and Section 16 of the 1934 Act (and the rules and regulations promulgated thereunder) relating to this Transaction. Party B will provide Party A with a draft of any amendments to its Schedule 13D which relate to the Transaction and will give Party A a reasonable opportunity to comment on the draft. Party B shall promptly file all amendments to its Schedule 13D in a form reasonably acceptable to Party A. (e) Party B's entry into this Transaction, any sale of Shares hereunder, the pledge of any Eligible Collateral hereunder and Party A's exercise of all rights and remedies hereunder with respect to such Eligible Collateral complies with and is not in any way limited by (i) any trading or "blackout" policies of the Issuer or (ii) any other conditions or restrictions imposed by the Issuer on the sale, transfer, loan, pledge, disposition or other use by its employees of any Eligible Collateral or Shares. (f) Party B acquired the Shares and paid for the Shares in full more
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883069 Page 10 of 12 than one year prior to the Trade Date. Party B did not acquire the Shares in contemplation of, or in a transaction that was contingent upon, entering into this Transaction. (g) Neither Party B nor any person who would be considered to be the same "person" (as such term is used in Rule 144(a)(2) under the 1933 Act, has sold any Shares or hedged (through swaps, options, short sales or otherwise) any long position in the Shares during the preceding three (3) months prior to the Trade Date. For purposes of this paragraph, "Shares" shall be deemed to include securities convertible into or exchangeable or exercisable for Shares and any other security or instrument that would be subject to aggregation under paragraphs (a)(2) and (e) of Rule 144 under the 1933 Act. (h) Party B has not made, and will not make, any payment in connection with the offering or sale of the Shares to any person other than Party A. (i) Party B has not solicited or arranged for the solicitation of, and will not solicit or arrange for the solicitation of, orders to buy Shares in anticipation of or in connection with any proposed sale of the Shares. (j) The Shares constituting Posted Collateral are currently eligible for public resale by Party B pursuant to Rule 144 under the 1933 Act. Party B acknowledges and agrees that (i) the entering into of this Confirmation will constitute a sale for purposes of Rule 144, (ii) Party B has not taken and will not take any action that would cause the sale made pursuant to this Confirmation to fail to meet all applicable requirements of Rule 144, including without limitation, the volume limitations of Rule 144(e). MUTUAL REPRESENTATION: Party A and Party B each represent that the Number of Shares will not exceed the greater of (i) 1% of the outstanding Shares as shown by the most recent report or statement published by the Issuer, or (ii) the average reported weekly volume of trading in the Shares during the four calendar weeks preceding the Trade Date. COVENANTS: (a) Party B will transmit three signed copies of a Form 144 for filing with the Securities and Exchange Commission (the "SEC"), the Exchange and the Issuer concurrently with the execution of this Confirmation. (b) Party B will send to Party A via facsimile a copy of each Form 144 and each filing under Section 13 or 16 of the Exchange Act, if any, relating to this Transaction concurrently with filing or transmission for filing, as the case may be, of such form to or with the SEC. (c) Party A covenants that, through its affiliate Lehman Brothers Inc., it will introduce into the public market a number of Shares equal to the Number of Shares in a manner consistent with the manner-of-sale conditions described in 144(f) and (g) under the 1933 Act.
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883069 Page 11 of 12 (d) Each party acknowledges and agrees that upon execution of this Confirmation, this Confirmation shall constitute a "binding commitment" within the meaning of the interpretive letter from the SEC to Goldman, Sachs & Co. dated December 20, 1999. Elected Termination: Party B may elect to terminate this Transaction upon mutually agreed upon terms. The Calculation Agent will calculate any amounts owing upon such early termination in a commercially reasonable manner. Upon request, the Calculation Agent will provide the assumptions it used to calculate any amounts owing. Payments on Early Termination: Party A and Party B agree that for this Transaction, for purposes of Section 6(e) of the Agreement, Loss and the Second Method will apply. Additional Provision: Party B hereby identifies the Shares initially pledged as Posted Collateral under this Transaction as a position with respect to personal property that is an offsetting position with respect to Party B's rights and obligations hereunder and that is part of a "straddle" with such rights and obligations within the meaning of section 1092 of the Internal Revenue Code of 1986, as amended, and Party A acknowledges that Party B has identified the Shares for that purpose. Calculation Agent: Lehman Brothers Inc., whose adjustments, determinations and calculations shall be made in a commercially reasonable manner.
THIS TRANSACTION HAS BEEN ENTERED INTO FOR INVESTMENT AND HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR ANY OTHER UNITED STATES FEDERAL OR STATE SECURITIES LAWS; THIS TRANSACTION MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF APPROPRIATE REGISTRATION UNDER SUCH SECURITIES LAWS EXCEPT IN A TRANSACTION EXEMPT FROM OR NOT SUBJECT TO THE REGISTRATION REQUIREMENTS OF SUCH SECURITIES LAWS. Please confirm your agreement with the foregoing by executing this Confirmation and returning it to us at facsimile number 646-885-9546, Attention: Documentation. Yours sincerely, Confirmed as of the date first above written: LEHMAN BROTHERS FINANCE S.A. SMITHKLINE BEECHAM CORPORATION By: /s/ Markus Bormann By: /s/ Donald F. Parman --------------------------------- ------------------------------------ Name: Markus Bormann Name: Donald F. Parman ------------------------------- ---------------------------------- Title: Director Title: Vice President ------------------------------ --------------------------------- By: /s/ Barbara Grob --------------------------------- Name: Barbara Grob ------------------------------- Title: Authorised Signatory ------------------------------ Execution time will be furnished upon Counterparty's written request. Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883069 Page 12 of 12 EX-15 6 w30546exv15.txt CONFIRMATION /DATES NOVEMBER 25, 2014 THROUGH DECEMBER 8, 2014 EXHIBIT 15 LEHMAN BROTHERS February 15, 2007 TRANSACTION SmithKline Beecham Corporation One Franklin Plaza 200 N. 16th Street Philadelphia, PA 19102 Attn: Donald Parman, fax 215-751-5349 CC: Subesh Williams, Global Deal Id: 2883070 Effort Id: [_____] Dear Sir or Madam: The purpose of this letter agreement (this "Confirmation") is to confirm the terms and conditions of the Transaction entered into between Lehman Brothers Finance S.A. ("Party A") and SmithKline Beecham Corporation ("Party B") on the Trade Date specified below (the "Transaction"). This letter agreement constitutes a "Confirmation" as referred to in the ISDA Master Agreement specified below. This Confirmation supplements, forms part of, and is subject to, the ISDA Master Agreement dated as of May 21, 2002, as amended and supplemented from time to time (the "Agreement"), between Party A and Party B. All provisions contained in the Agreement shall govern this Confirmation except as expressly modified below. The definitions and provisions contained in the 1996 ISDA Equity Derivatives Definitions (the "Equity Definitions") and the 2000 ISDA Definitions (the "Swap Definitions", and together with the Equity Definitions, the "Definitions"), in each case as published by the International Swaps and Derivatives Association, Inc. ("ISDA") are incorporated into this Confirmation. References herein to "Transaction" shall be deemed references to "Swap Transaction" for purposes of the Swap Definitions and "Share Swap Transaction" for purposes of the Equity Definitions. In the event of any inconsistency between the Equity Definitions and the Swap Definitions, the Equity Definitions will govern. In the event of any inconsistency between either set of Definitions and this Confirmation, this Confirmation will govern. Party A and Party B each represents that entering into the Transaction is within its capacity, is duly authorized and does not violate any laws of its jurisdiction of organization or residence or the terms of any agreement to which it is a party. Party A and Party B each represents that (a) it is not relying on the other party in connection with its decision to enter into this Transaction, and neither party is acting as an advisor to or fiduciary of the other party in connection with this Transaction regardless of whether the other party provides it with market information or its views; (b) it understands the risks of the Transaction and any legal, regulatory, tax, accounting and economic consequences resulting therefrom; and (c) it has determined based upon its own judgment and upon any advice received from its own professional advisors as it has deemed necessary to consult that entering into the Transaction is appropriate for such party in light of its financial capabilities and objectives. Party A and Party B each represents that upon due execution and delivery of this Confirmation, it will constitute a legally valid and binding obligation, enforceable against it in accordance with its terms, subject to applicable principles of bankruptcy and creditors' rights generally and to equitable principles of general application. LEHMAN BROTHERS FINANCE S.A. TALSTRASSE 82 - P.O. BOX 2828 - CH-8021 ZURICH - SWITZERLAND TELEPHONE (41-1) 287 88 42 - TELEFAX (41-1) 287 88 25 - TELEX 812096 LBFS CH The terms of the Transaction to which this Confirmation relates are as follows: Agent: Lehman Brothers Inc. ("LBI") is acting as agent on behalf of Party A and Party B for this Transaction. LBI has no obligations, by guarantee, endorsement or otherwise, with respect to the performance of this Transaction by either party. (A) GENERAL TERMS Trade Date: February 15, 2007 Effective Date: Three (3) Exchange Business Days next following the Trade Date Valuation Date: Each Averaging Date Valuation Time: 4:00 p.m. (local time in New York) Shares: The common stock of Quest Diagnostics Incorporated (the "Issuer") Ticker: DGX Exchange: New York Stock Exchange Related Exchange(s): Any exchange on which options or futures on the Shares are traded. Number of Shares: 2,000,000 Initial Price: USD 52.5720 Depreciation Floor: USD 52.5720 Appreciation Cap: USD 82.6011 Final Price: To the extent Physical Settlement is applicable, Final Price shall be the closing price per Share quoted by the Exchange on each Averaging Date at the Valuation Time, without regard to extended or after hours trading. To the extent Cash Settlement is applicable, Final Price shall be the arithmetic average of the Relevant Prices, and "Relevant Price" shall be the closing price per Share quoted by the Exchange on each Averaging Date at the Valuation Time, without regard to extended or after hours trading. Averaging Dates: November 25, 2014, November 26, 2014, November 27, 2014, November 28, 2014, December 01, 2014, December 02, 2014, December 03, 2014, December 04, 2014, December 05, 2014, December 08, 2014 Averaging Date Market Disruption: Modified Postponement Delivery Adjustment: (a) If the Final Price is less than or equal to the Depreciation Floor, then the Delivery Adjustment equals 1.0 (b) If the Final Price is greater than the Depreciation Floor, but less than or equal to the Appreciation Cap, then the Delivery Adjustment equals a fraction, the numerator of which is the Depreciation Floor and the denominator of which is the Final Price
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883070 Page 2 of 12 (c) If the Final Price is greater than the Appreciation Cap, then the Delivery Adjustment equals 1.0 minus ((the Appreciation Cap minus the Depreciation Floor) divided by the Final Price). (B) PARTY A'S PAYMENT OF PURCHASE PRICE Purchase Price: USD 105,144,000 Payment Date: To the extent Physical Settlement is applicable, Party A will pay the Purchase Price divided by the Number of Averaging Dates to Party B on each Delivery Date. To the extent Cash Settlement is applicable, Party A will pay the Purchase Price to Party B on the Cash Settlement Payment Date. (C) PARTY B'S DELIVERY OBLIGATIONS Settlement Amount: On each Averaging Date, the relevant Delivery Adjustment multiplied by the relevant Number of Shares for the relevant Averaging Date, provided that if such calculation results in any fractional Share, the Settlement Amount shall be rounded up to the next whole number of Shares and Party A shall pay the cash value thereof to Party B. Cash Settlement Amount: The Delivery Adjustment multiplied by the Number of Shares multiplied by the Final Price Delivery Date: Three (3) Exchange Business Days next following each Averaging Date Settlement Option: Party B may elect Physical or Cash Settlement (with respect to all or a portion of the Number of Shares) by delivering a written notice of such election to Party A on or prior to the Election Date. If Party B elects Physical or Cash Settlement with respect to a portion of the Number of Shares, (i) Party B will be deemed to elect the other Settlement Option with respect to the remainder of the Number of Shares, (ii) the Number of Shares for each settlement option shall be deemed to be the portion with respect to which such election was made and (iii) the Purchase Price shall be allocated between the settlement options proportionally to the Number of Shares for each settlement option. If Party B does not provide such notice, Physical Settlement shall apply if the Posted Collateral on the Election Date consists of a number of freely-tradable Shares equal to the Number of Shares in book entry form; otherwise, Cash Settlement shall apply. Election Date: The fifth (5th) Exchange Business Day prior to the first Averaging Date Physical Settlement: To the extent Physical Settlement applies, the Transaction shall expire in equal proportions of Shares on each Averaging Date, with the Delivery Date for each such Averaging Date occurring three (3) Exchange Business Days after each such Averaging Date. On each such Delivery Date Party B will deliver a number of freely-tradable Shares in book-entry form equal to the Settlement Amount to Party A, free and clear of any Encumbrances or Transfer Restrictions. Party B acknowledges and understands that any such delivery may require
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883070 Page 3 of 12 Party B to provide an opinion of counsel and other documentation in a form acceptable to the Issuer and the transfer agent for the Shares to ensure the conversion of such Shares into book-entry form in advance of any delivery. Cash Settlement: To the extent Cash Settlement applies, Party B will pay the Cash Settlement Amount to Party A on the Cash Settlement Payment Date. Cash Settlement Payment Date: Three Exchange Business Days next following the final Averaging Date Collateral: If Party B elects to Transfer (and Transfers) the Independent Amount to Party A (which Independent Amount shall constitute Eligible Collateral with respect to Party B), Party A's Exposure under this Transaction shall be zero and Party B's Credit Support Amount (as Secured Party) shall be calculated without subtracting the Independent Amounts referred to in clause (iii) of the definition thereof; otherwise, Party A's Exposure under this Transaction shall be calculated as provided in the Credit Support Annex. At any time Party B may revoke such election by Transferring to Party A under the Credit Support Annex the then Delivery Amount (determined ignoring the Independent Amount and with Party A's Exposure under this Transaction being calculated as provided in the Credit Support Annex), in which case Party A shall promptly Transfer the Independent Amount to Party B. Party B acknowledges and understands that any revocation of its election to Transfer the Independent Amount may result in such Shares becoming subject to transfer restrictions under the Securities Act of 1933, as amended (the "1933 Act"), if such Shares have previously been converted into book-entry form. "Independent Amount" means, with respect to Party B for this Transaction, a number of Shares free and clear of any Encumbrances or Transfer Restrictions (other than transfer restrictions arising under the 1933 Act and other than under the Stockholders Agreement, dated as of August 16, 1999, between SmithKline Beecham PLC and the Issuer (the "Stockholders Agreement")) equal to the Number of Shares. The Independent Amount shall include all Distributions with respect to all Posted Collateral (other than cash dividends which are not Extraordinary Dividends). Notwithstanding any provision to the contrary in the Credit Support Annex, the Independent Amount shall be delivered by Party B without regard to the Minimum Transfer Amount and, except as provided above, Party A shall have no obligation to return the Independent Amount to Party B until all of Party B's obligations with respect to this Transaction have been satisfied. Party B agrees to provide three stock powers executed in blank with respect to each certificate evidencing any Shares delivered as Posted Collateral and to update such stock powers as necessary. Party A may use any Shares constituting Posted Collateral and the Independent Amount pursuant to Section 6(c) of the Credit Support Annex only upon Party B's consent. Party A agrees that if it uses any Shares pursuant to Section 6(c) of the Credit Support Annex, it will provide additional collateral to Party B, the terms of which shall be consistent with market practice for stock loans of U.S. liquid equity securities unless the parties agree otherwise. Party B acknowledges and understands that any such use may require Party B to provide an
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883070 Page 4 of 12 opinion of counsel and other documentation in a form acceptable to the Issuer and the transfer agent for the Shares to ensure the conversion of such Shares into book-entry form prior to such use. Party A agrees to cooperate in good faith with respect to the conversion of Shares into book-entry form. Party A agrees that LBI will hold any Shares constituting Posted Collateral in connection with this Transaction, that Party B is the beneficial owner of such Shares, and that, if such Shares are being held by LBI in book-entry form and are not being used by Party A pursuant to Section 6(c) of the Credit Support Annex, LBI will comply with its obligations under applicable law and regulation (including the rules of the New York Stock Exchange and the National Association of Securities Dealers) to forward to the beneficial owner all proxy and other materials properly furnished to it by the Issuer, in accordance with its standard business practices. ADJUSTMENTS: Method of Adjustment: Calculation Agent Adjustment Extraordinary Dividends: For purposes of this Transaction and the definition of a "Potential Adjustment Event" (without limiting the generality of clause (iii) of Section 9.1(e) of the Equity Definitions), an "Extraordinary Dividend" shall mean, as calculated by the Calculation Agent, (i) any cash dividend or distribution declared with respect to the Shares at a time when the Issuer has not previously declared or paid dividends or distributions on such Shares for the prior four quarterly periods; (ii) any increase or decrease by more than 5% (determined on an annualized basis) in the then current quarterly dividend or (iii) any other "special" cash or non-cash dividend on or distribution with respect to the Shares which is, by its terms or declared intent, declared and paid outside the normal operations or normal dividend procedures of the Issuer. EXTRAORDINARY EVENTS: Consequences of Merger Events: (a) Share-for-Share: Alternative Obligation (b) Share-for-Other: Cancellation and Payment (c) Share-for-Combined: Alternative Obligation with respect to the New Shares and Cancellation and Payment with respect to the Other Consideration Alternative Obligation: The applicable definition of "Alternative Obligation" in subsections 9.3(b)and (d) of the Equity Definitions shall be amended by adding the following at the end of each such subsection: "including any one or more of the Initial Price, Final Price, Relevant Price, Number of Shares, Appreciation Cap, Depreciation Floor, Delivery Adjustment and any other variable relevant to the exercise, settlement or payment terms of each such Transaction. In addition, the Calculation Agent will determine if the change in the volatility of the New Shares (as compared with the Shares) affects the theoretical value of any such Transaction, and if so, shall in a commercially reasonable manner make an adjustment to the Appreciation Cap to reflect such change in theoretical value. Any adjustment made pursuant to this paragraph will be effective as of the date determined by the Calculation Agent on or following the Merger Date.
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883070 Page 5 of 12 NATIONALIZATION, INSOLVENCY, Cancellation and Payment HEDGING DISRUPTION EVENT, BORROW LOSS OR INCREASE IN BORROW COSTS: Definitions: The definition of "Merger Event" in Section 9.2(a) of the Equity Definitions shall be amended by deleting subsection 9.2(a)(iii) in its entirety and replacing it with the following: "(iii) other takeover offer for the Shares that results in a transfer of or an irrevocable commitment to transfer 25% or more of all the outstanding Shares (other than the Shares owned or controlled by the offeror)" For purposes of the definition of "Cancellation and Payment" in Sections 9.3(c)(ii), 9.3(d)(ii) and 9.6, this Transaction shall be deemed to be a Share Option Transaction. The amount payable upon Cancellation and Payment will be the amount agreed upon promptly by the parties after the Merger Date or the date of the occurrence of the Nationalization, Insolvency, Hedging Disruption Event, Increase in Borrow Costs or Borrow Loss, as the case may be. In the absence of such agreement, the amount payable will be determined by the Calculation Agent in a commercially reasonable manner (without the requirement of soliciting dealer quotations) as the fair value of the Transaction with terms that would preserve the economic equivalent of any payment or delivery (assuming satisfaction of each applicable condition precedent) by the parties in respect of the relevant Transaction that would have been required after that date but for the occurrence of the Nationalization, Insolvency, Hedging Disruption Event, Increase in Borrow Costs, Borrow Loss or Merger Event, as applicable. The Calculation Agent will determine the amount payable on the basis of the factors identified in subparagraphs (i), (ii) and (iii) in Section 9.7(b) and such other factors as it deems appropriate in a commercially reasonable manner. Additional Extraordinary Events: "Hedging Disruption Event" means that the Shares cease to be listed on or quoted by the Exchange, the Nasdaq Global Select Market, the Nasdaq Global Market or the American Stock Exchange for any reason (other than a Merger Event). If an Increase in Borrow Costs occurs, then by the Valuation Time on the day such event occurs, Party B shall: (a) (i) permit Party A to use the Shares posted as Posted Collateral and the Independent Amount pursuant to Section 6(c) of the Credit Support Annex and (ii) ensure that such Shares are freely tradable and have been converted into book-entry form; or (b) agree to adjustments to the terms of this Transaction to reflect the Total Borrow Cost, which adjustments will be determined by the Calculation Agent in a commercially reasonable manner; or (c) agree to pay the Total Borrow Cost. If Party B does not agree to (a), (b) or (c) by the Valuation Time on the day on which the Increase in Borrow Costs occurs, Cancellation and Payment shall immediately be applicable.
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883070 Page 6 of 12 If a Borrow Loss occurs, the Calculation Agent shall notify Party A and Party B and Cancellation and Payment shall immediately be applicable unless, by the later of the Valuation Time on the day on which the Borrow Loss occurs or three hours after such notification, (i) Party B permits Party A to use the Shares posted as Posted Collateral and the Independent Amount pursuant to Section 6(c) of the Credit Support Annex and (ii) such Shares are freely tradable and have been converted into book-entry form. Party B acknowledges and understands that any use of the Shares posted as Posted Collateral pursuant to Section 6(c) of the Credit Support Annex may require Party B to provide an opinion of counsel and other documentation in a form acceptable to the Issuer and the transfer agent for the Shares to ensure the conversion of such Shares into book-entry form prior to the occurrence of the Borrow Loss or the Increase in Borrow Costs, as applicable. If Party A is permitted to use the Shares posted as Posted Collateral pursuant to Section 6(c) of the Credit Support Annex, Party A shall adjust the terms of this Transaction in a commercially reasonable manner to reflect its lower borrowing costs for the period that Party A is permitted to use the Shares (which borrowing costs will reflect the interest rate earned by Party A on any collateral posted to Party B in connection with such use). The Calculation Agent shall notify both parties as soon as the average rebate earned by Party A on collateral posted for any Shares borrowed in connection with this Transaction is at or below 1% (determined on an annualized basis). "Borrow Cost" means the difference between the actual rebate earned by Party A on collateral posted for any Shares borrowed in connection with this Transaction and the General Collateral Rate, multiplied by the closing price per Share quoted by the Exchange at the Valuation Time on the preceding Exchange Business Day, multiplied by the Hedge Delta on the preceding Exchange Business Day, calculated on an actual/360 basis, as determined by the Calculation Agent in a commercially reasonable manner. "Borrow Loss" means that it becomes impracticable for Party A to borrow Shares equal to its desired Hedge Delta on any day, as determined by the Calculation Agent in a commercially reasonable manner. "General Collateral Rate" means the general collateral rebate rate earned by market participants in general on collateral posted for U.S. liquid equity securities as determined by the Calculation Agent in a commercially reasonable manner. The Calculation Agent will provide evidence of the General Collateral Rate to either party upon request. "Hedge Delta" means the number of Shares borrowed by Party A in connection with this Transaction, as determined by the Calculation Agent in a commercially reasonable manner.
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883070 Page 7 of 12 "Increase in Borrow Costs" means that the actual rebate earned by Party A on collateral posted for any Shares borrowed in connection with this Transaction is at or below zero for ten (10) days or longer, as determined by the Calculation Agent in a commercially reasonable manner. "Total Borrow Cost" means the Borrow Cost for every day from the day on which the Increase in Borrow Costs occurs until the final Delivery Date, the Cash Settlement Payment Date or the effective date for any Elected Termination, as applicable. Announcement Event: If an Announcement Event occurs, the Calculation Agent will determine the economic effect of any change in volatility and/or liquidity relevant to the Shares or to the Transaction caused by the Announcement Event on the theoretical value of the Transaction from the Announcement Date to the Valuation Date. If such economic effect is (i) material and (ii) has continued, or is continuing, for a period of 30 days from the Announcement Event, on the Valuation Date the Calculation Agent shall in a commercially reasonable manner make an adjustment to the Appreciation Cap to reflect such change in theoretical value; provided that such adjustment shall not exceed USD 2.00 (as adjusted pursuant to "Method of Adjustment" above). "ANNOUNCEMENT EVENT" shall mean the occurrence of the Announcement Date of a Share-for-Other Merger Event or a Share-for-Combined Merger Event where Other Consideration represents more than 50% of the total value of the Combined Consideration. Change in Law: "Change in Law" means that, on or after the Trade Date (A) due to the adoption of or any change in any applicable law or regulation, or (B) due to the promulgation of or any change in the interpretation by any court, tribunal or regulatory authority with component jurisdiction of any applicable law or regulation, a party to such Transaction determines in good faith that it has become illegal to hold, acquire or dispose of Shares relating to this Transaction. Upon the occurrence of a Change in Law event either party may elect to terminate this Transaction upon at least two Exchange Business Days' notice to the other party specifying the date of such termination (or such lesser notice as any be required to comply with the Change of Law), in which event the Transaction will terminate and the Calculation Agent will determine any amount payable by one party to the other.
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883070 Page 8 of 12 Bankruptcy Code: Without limiting any other protections under the Bankruptcy Code (Title 11 of the United States Code) (the "Bankruptcy Code"), the Parties hereto intend for: (a) This Transaction and the Agreement to be a "swap agreement" as defined in the Bankruptcy Code, and the parties hereto to be entitled to the protections afforded by, among other Sections, Section 560 of the Bankruptcy Code. (b) A party's right to liquidate this Transaction and to exercise any other remedies upon the occurrence of any Event of Default or Termination Event under the Agreement or this Transaction to constitute a "contractual right" as described in Section 560 of the Bankruptcy Code. (c) Any cash, securities or other property provided as performance assurance, credit support or collateral with respect to this Transaction or the Agreement to constitute "transfers" under a "swap agreement" as defined in the Bankruptcy Code. (d) All payments for, under or in connection with this Transaction or the Agreement, all payments for any securities or other assets and the transfer of such securities or other assets to constitute "transfers" under a "swap agreement" as defined in the Bankruptcy Code. Party B Representations: In addition to the representations set forth in the Agreement, Party B further represents that; (a) Neither Party A nor any of its affiliates has advised Party B with respect to any legal, regulatory, tax, accounting or economic consequences arising from this Transaction, and neither Party A nor any of its affiliates is acting as agent (other than LBI as dual agent if specified above), or advisor for Party B in connection with this Transaction. (b) Party B is not in possession of any material non-public information concerning the business, operations or prospects of the Issuer and was not in possession of any such information at the time of placing any order with respect to the Transaction. "Material" information for these purposes is any information to which an investor would reasonably attach importance in reaching a decision to buy, sell or hold any securities of the Issuer(s). (c) Party B is the legal and beneficial owner of the Shares, free and clear of any Encumbrances or any Transfer Restrictions (other than transfer restrictions arising under the 1933 Act and other than under the Stockholder's Agreement), and, upon the transfer of the Shares to Party A in settlement of this Transaction (except to the extent that Party B elects the Cash Settlement option, if any) Party A will acquire good and marketable title and will be the beneficial owner of the Shares, free and clear of any Encumbrances or any Transfer Restrictions. "Encumbrance" means any pledge, hypothecation, assignment,
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883070 Page 9 of 12 encumbrance, charge, claim, security interest, option, preference, priority or other preferential arrangement of any kind or nature whatsoever, or other charge, claim or other encumbrance (other than an Encumbrance routinely imposed on all securities in the relevant Clearance System). "Transfer Restriction" means, with respect to any security or other property, any condition to or restriction on the ability of the holder thereof to sell, assign or otherwise transfer such security or other property or to enforce the provisions thereof or of any document related thereto, whether set forth in such security or other property itself or in any document related thereto, including, without limitation, (i) any requirement that any sale, assignment or other transfer or enforcement of such security or other property be consented to or approved by any person, including, without limitation, the Issuer or any other obligor thereon, (ii) any limitations on the type or status, financial or otherwise, of any purchaser, pledgee, assignee or transferee of such security or other property, (iii) any requirement for the delivery of any certificate, consent, agreement, opinion of counsel, notice or any other document of any person to be given to the Issuer, any other obligor on or any registrar or transfer agent for, such security or other property, and (iv) any registration or qualification requirement or prospectus delivery requirement for such security or other property pursuant to any federal, state or foreign securities law (including, without limitation, any such requirement arising as a result of Rule 144 or Rule 145 under the 1933 Act). (d) As of the date hereof (without giving effect to the transactions contemplated hereby) Party B is the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934 (the "1934 Act")) of 36,504,308 Shares, which constitutes approximately 18.7% of the outstanding Shares of the Issuer (as at February 15, 2007). Party B is currently, and in the past has been, in compliance with any applicable reporting and other obligations under Section 13 and Section 16 of the 1934 Act. Party B shall comply with all applicable reporting and other requirements of Section 13 and Section 16 of the 1934 Act (and the rules and regulations promulgated thereunder) relating to this Transaction. Party B will provide Party A with a draft of any amendments to its Schedule 13D which relate to the Transaction and will give Party A a reasonable opportunity to comment on the draft. Party B shall promptly file all amendments to its Schedule 13D in a form reasonably acceptable to Party A. (e) Party B's entry into this Transaction, any sale of Shares hereunder, the pledge of any Eligible Collateral hereunder and Party A's exercise of all rights and remedies hereunder with respect to such Eligible Collateral complies with and is not in any way limited by (i) any trading or "blackout" policies of the Issuer or (ii) any other conditions or restrictions imposed by the Issuer on the sale, transfer, loan, pledge, disposition or other use by its employees of any Eligible Collateral or Shares. (f) Party B acquired the Shares and paid for the Shares in full more
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883070 Page 10 of 12 than one year prior to the Trade Date. Party B did not acquire the Shares in contemplation of, or in a transaction that was contingent upon, entering into this Transaction. (g) Neither Party B nor any person who would be considered to be the same "person" (as such term is used in Rule 144(a)(2) under the 1933 Act, has sold any Shares or hedged (through swaps, options, short sales or otherwise) any long position in the Shares during the preceding three (3) months prior to the Trade Date. For purposes of this paragraph, "Shares" shall be deemed to include securities convertible into or exchangeable or exercisable for Shares and any other security or instrument that would be subject to aggregation under paragraphs (a)(2) and (e) of Rule 144 under the 1933 Act. (h) Party B has not made, and will not make, any payment in connection with the offering or sale of the Shares to any person other than Party A. (i) Party B has not solicited or arranged for the solicitation of, and will not solicit or arrange for the solicitation of, orders to buy Shares in anticipation of or in connection with any proposed sale of the Shares. (j) The Shares constituting Posted Collateral are currently eligible for public resale by Party B pursuant to Rule 144 under the 1933 Act. Party B acknowledges and agrees that (i) the entering into of this Confirmation will constitute a sale for purposes of Rule 144, (ii) Party B has not taken and will not take any action that would cause the sale made pursuant to this Confirmation to fail to meet all applicable requirements of Rule 144, including without limitation, the volume limitations of Rule 144(e). MUTUAL REPRESENTATION: Party A and Party B each represent that the Number of Shares will not exceed the greater of (i) 1% of the outstanding Shares as shown by the most recent report or statement published by the Issuer, or (ii) the average reported weekly volume of trading in the Shares during the four calendar weeks preceding the Trade Date. COVENANTS: (a) Party B will transmit three signed copies of a Form 144 for filing with the Securities and Exchange Commission (the "SEC"), the Exchange and the Issuer concurrently with the execution of this Confirmation. (b) Party B will send to Party A via facsimile a copy of each Form 144 and each filing under Section 13 or 16 of the Exchange Act, if any, relating to this Transaction concurrently with filing or transmission for filing, as the case may be, of such form to or with the SEC. (c) Party A covenants that, through its affiliate Lehman Brothers Inc., it will introduce into the public market a number of Shares equal to the Number of Shares in a manner consistent with the manner-of-sale conditions described in 144(f) and (g) under the 1933 Act.
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883070 Page 11 of 12 (d) Each party acknowledges and agrees that upon execution of this Confirmation, this Confirmation shall constitute a "binding commitment" within the meaning of the interpretive letter from the SEC to Goldman, Sachs & Co. dated December 20, 1999. Elected Termination: Party B may elect to terminate this Transaction upon mutually agreed upon terms. The Calculation Agent will calculate any amounts owing upon such early termination in a commercially reasonable manner. Upon request, the Calculation Agent will provide the assumptions it used to calculate any amounts owing. Payments on Early Termination: Party A and Party B agree that for this Transaction, for purposes of Section 6(e) of the Agreement, Loss and the Second Method will apply. Additional Provision: Party B hereby identifies the Shares initially pledged as Posted Collateral under this Transaction as a position with respect to personal property that is an offsetting position with respect to Party B's rights and obligations hereunder and that is part of a "straddle" with such rights and obligations within the meaning of section 1092 of the Internal Revenue Code of 1986, as amended, and Party A acknowledges that Party B has identified the Shares for that purpose. Calculation Agent: Lehman Brothers Inc., whose adjustments, determinations and calculations shall be made in a commercially reasonable manner.
THIS TRANSACTION HAS BEEN ENTERED INTO FOR INVESTMENT AND HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR ANY OTHER UNITED STATES FEDERAL OR STATE SECURITIES LAWS; THIS TRANSACTION MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF APPROPRIATE REGISTRATION UNDER SUCH SECURITIES LAWS EXCEPT IN A TRANSACTION EXEMPT FROM OR NOT SUBJECT TO THE REGISTRATION REQUIREMENTS OF SUCH SECURITIES LAWS. Please confirm your agreement with the foregoing by executing this Confirmation and returning it to us at facsimile number 646-885-9546, Attention: Documentation. Yours sincerely, Confirmed as of the date first above written: LEHMAN BROTHERS FINANCE S.A. SMITHKLINE BEECHAM CORPORATION By: /s/ Markus Bormann By: /s/ Donald F. Parman --------------------------------- ------------------------------------ Name: Markus Bormann Name: Donald F. Parman ------------------------------- ---------------------------------- Title: Director Title: Vice President ------------------------------ --------------------------------- By: /s/ Barbara Grob --------------------------------- Name: Barbara Grob ------------------------------- Title: Authorised Signatory ------------------------------ Execution time will be furnished upon Counterparty's written request. Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883070 Page 12 of 12 EX-16 7 w30546exv16.txt CONFIRMATION /DATES JUNE 25, 2015 THROUGH JULY 8, 2015 EXHIBIT 16 LEHMAN BROTHERS February 15, 2007 TRANSACTION SmithKline Beecham Corporation One Franklin Plaza 200 N. 16th Street Philadelphia, PA 19102 Attn: Donald Parman, fax 215-751-5349 CC: Subesh Williams, Global Deal Id: 2883071 Effort Id: [_____] Dear Sir or Madam: The purpose of this letter agreement (this "Confirmation") is to confirm the terms and conditions of the Transaction entered into between Lehman Brothers Finance S.A. ("Party A") and SmithKline Beecham Corporation ("Party B") on the Trade Date specified below (the "Transaction"). This letter agreement constitutes a "Confirmation" as referred to in the ISDA Master Agreement specified below. This Confirmation supplements, forms part of, and is subject to, the ISDA Master Agreement dated as of May 21, 2002, as amended and supplemented from time to time (the "Agreement"), between Party A and Party B. All provisions contained in the Agreement shall govern this Confirmation except as expressly modified below. The definitions and provisions contained in the 1996 ISDA Equity Derivatives Definitions (the "Equity Definitions") and the 2000 ISDA Definitions (the "Swap Definitions", and together with the Equity Definitions, the "Definitions"), in each case as published by the International Swaps and Derivatives Association, Inc. ("ISDA") are incorporated into this Confirmation. References herein to "Transaction" shall be deemed references to "Swap Transaction" for purposes of the Swap Definitions and "Share Swap Transaction" for purposes of the Equity Definitions. In the event of any inconsistency between the Equity Definitions and the Swap Definitions, the Equity Definitions will govern. In the event of any inconsistency between either set of Definitions and this Confirmation, this Confirmation will govern. Party A and Party B each represents that entering into the Transaction is within its capacity, is duly authorized and does not violate any laws of its jurisdiction of organization or residence or the terms of any agreement to which it is a party. Party A and Party B each represents that (a) it is not relying on the other party in connection with its decision to enter into this Transaction, and neither party is acting as an advisor to or fiduciary of the other party in connection with this Transaction regardless of whether the other party provides it with market information or its views; (b) it understands the risks of the Transaction and any legal, regulatory, tax, accounting and economic consequences resulting therefrom; and (c) it has determined based upon its own judgment and upon any advice received from its own professional advisors as it has deemed necessary to consult that entering into the Transaction is appropriate for such party in light of its financial capabilities and objectives. Party A and Party B each represents that upon due execution and delivery of this Confirmation, it will constitute a legally valid and binding obligation, enforceable against it in accordance with its terms, subject to applicable principles of bankruptcy and creditors' rights generally and to equitable principles of general application. LEHMAN BROTHERS FINANCE S.A. TALSTRASSE 82 - P.O. BOX 2828 - CH-8021 ZURICH - SWITZERLAND TELEPHONE (41-1) 287 88 42 - TELEFAX (41-1) 287 88 25 - TELEX 812096 LBFS CH The terms of the Transaction to which this Confirmation relates are as follows: Agent: Lehman Brothers Inc. ("LBI") is acting as agent on behalf of Party A and Party B for this Transaction. LBI has no obligations, by guarantee, endorsement or otherwise, with respect to the performance of this Transaction by either party. (A) GENERAL TERMS Trade Date: February 15, 2007 Effective Date: Three (3) Exchange Business Days next following the Trade Date Valuation Date: Each Averaging Date Valuation Time: 4:00 p.m. (local time in New York) Shares: The common stock of Quest Diagnostics Incorporated (the "Issuer") Ticker: DGX Exchange: New York Stock Exchange Related Exchange(s): Any exchange on which options or futures on the Shares are traded. Number of Shares: 2,000,000 Initial Price: USD 52.5720 Depreciation Floor: USD 52.5720 Appreciation Cap: USD 84.1783 Final Price: To the extent Physical Settlement is applicable, Final Price shall be the closing price per Share quoted by the Exchange on each Averaging Date at the Valuation Time, without regard to extended or after hours trading. To the extent Cash Settlement is applicable, Final Price shall be the arithmetic average of the Relevant Prices, and "Relevant Price" shall be the closing price per Share quoted by the Exchange on each Averaging Date at the Valuation Time, without regard to extended or after hours trading. Averaging Dates: June 25, 2015, June 26, 2015, June 29, 2015, June 30, 2015, July 01, 2015, July 02, 2015, July 03, 2015, July 06, 2015, July 07, 2015, July 08, 2015 Averaging Date Market Disruption: Modified Postponement Delivery Adjustment: (a) If the Final Price is less than or equal to the Depreciation Floor, then the Delivery Adjustment equals 1.0 (b) If the Final Price is greater than the Depreciation Floor, but less than or equal to the Appreciation Cap, then the Delivery Adjustment equals a fraction, the numerator of which is the Depreciation Floor and the denominator of which is the Final Price
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883071 Page 2 of 12 (c) If the Final Price is greater than the Appreciation Cap, then the Delivery Adjustment equals 1.0 minus ((the Appreciation Cap minus the Depreciation Floor) divided by the Final Price). (B) PARTY A'S PAYMENT OF PURCHASE PRICE Purchase Price: USD 105,144,000 Payment Date: To the extent Physical Settlement is applicable, Party A will pay the Purchase Price divided by the Number of Averaging Dates to Party B on each Delivery Date. To the extent Cash Settlement is applicable, Party A will pay the Purchase Price to Party B on the Cash Settlement Payment Date. (C) PARTY B'S DELIVERY OBLIGATIONS Settlement Amount: On each Averaging Date, the relevant Delivery Adjustment multiplied by the relevant Number of Shares for the relevant Averaging Date, provided that if such calculation results in any fractional Share, the Settlement Amount shall be rounded up to the next whole number of Shares and Party A shall pay the cash value thereof to Party B. Cash Settlement Amount: The Delivery Adjustment multiplied by the Number of Shares multiplied by the Final Price Delivery Date: Three (3) Exchange Business Days next following each Averaging Date Settlement Option: Party B may elect Physical or Cash Settlement (with respect to all or a portion of the Number of Shares) by delivering a written notice of such election to Party A on or prior to the Election Date. If Party B elects Physical or Cash Settlement with respect to a portion of the Number of Shares, (i) Party B will be deemed to elect the other Settlement Option with respect to the remainder of the Number of Shares, (ii) the Number of Shares for each settlement option shall be deemed to be the portion with respect to which such election was made and (iii) the Purchase Price shall be allocated between the settlement options proportionally to the Number of Shares for each settlement option. If Party B does not provide such notice, Physical Settlement shall apply if the Posted Collateral on the Election Date consists of a number of freely-tradable Shares equal to the Number of Shares in book entry form; otherwise, Cash Settlement shall apply. Election Date: The fifth (5th) Exchange Business Day prior to the first Averaging Date Physical Settlement: To the extent Physical Settlement applies, the Transaction shall expire in equal proportions of Shares on each Averaging Date, with the Delivery Date for each such Averaging Date occurring three (3) Exchange Business Days after each such Averaging Date. On each such Delivery Date Party B will deliver a number of freely-tradable Shares in book-entry form equal to the Settlement Amount to Party A, free and clear of any Encumbrances or Transfer Restrictions. Party B acknowledges and understands that any such delivery may require Party B to provide an opinion of counsel and other documentation in a
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883071 Page 3 of 12 form acceptable to the Issuer and the transfer agent for the Shares to ensure the conversion of such Shares into book-entry form in advance of any delivery. Cash Settlement: To the extent Cash Settlement applies, Party B will pay the Cash Settlement Amount to Party A on the Cash Settlement Payment Date. Cash Settlement Payment Date: Three Exchange Business Days next following the final Averaging Date Collateral: If Party B elects to Transfer (and Transfers) the Independent Amount to Party A (which Independent Amount shall constitute Eligible Collateral with respect to Party B), Party A's Exposure under this Transaction shall be zero and Party B's Credit Support Amount (as Secured Party) shall be calculated without subtracting the Independent Amounts referred to in clause (iii) of the definition thereof; otherwise, Party A's Exposure under this Transaction shall be calculated as provided in the Credit Support Annex. At any time Party B may revoke such election by Transferring to Party A under the Credit Support Annex the then Delivery Amount (determined ignoring the Independent Amount and with Party A's Exposure under this Transaction being calculated as provided in the Credit Support Annex), in which case Party A shall promptly Transfer the Independent Amount to Party B. Party B acknowledges and understands that any revocation of its election to Transfer the Independent Amount may result in such Shares becoming subject to transfer restrictions under the Securities Act of 1933, as amended (the "1933 Act"), if such Shares have previously been converted into book-entry form. "Independent Amount" means, with respect to Party B for this Transaction, a number of Shares free and clear of any Encumbrances or Transfer Restrictions (other than transfer restrictions arising under the 1933 Act and other than under the Stockholders Agreement, dated as of August 16, 1999, between SmithKline Beecham PLC and the Issuer (the "Stockholders Agreement")) equal to the Number of Shares. The Independent Amount shall include all Distributions with respect to all Posted Collateral (other than cash dividends which are not Extraordinary Dividends). Notwithstanding any provision to the contrary in the Credit Support Annex, the Independent Amount shall be delivered by Party B without regard to the Minimum Transfer Amount and, except as provided above, Party A shall have no obligation to return the Independent Amount to Party B until all of Party B's obligations with respect to this Transaction have been satisfied. Party B agrees to provide three stock powers executed in blank with respect to each certificate evidencing any Shares delivered as Posted Collateral and to update such stock powers as necessary. Party A may use any Shares constituting Posted Collateral and the Independent Amount pursuant to Section 6(c) of the Credit Support Annex only upon Party B's consent. Party A agrees that if it uses any Shares pursuant to Section 6(c) of the Credit Support Annex, it will provide additional collateral to Party B, the terms of which shall be consistent with market practice for stock loans of U.S. liquid equity securities unless the parties agree otherwise. Party B acknowledges and understands that any such use may require Party B to provide an opinion of counsel and other documentation in a form acceptable to the
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883071 Page 4 of 12 Issuer and the transfer agent for the Shares to ensure the conversion of such Shares into book-entry form prior to such use. Party A agrees to cooperate in good faith with respect to the conversion of Shares into book-entry form. Party A agrees that LBI will hold any Shares constituting Posted Collateral in connection with this Transaction, that Party B is the beneficial owner of such Shares, and that, if such Shares are being held by LBI in book-entry form and are not being used by Party A pursuant to Section 6(c) of the Credit Support Annex, LBI will comply with its obligations under applicable law and regulation (including the rules of the New York Stock Exchange and the National Association of Securities Dealers) to forward to the beneficial owner all proxy and other materials properly furnished to it by the Issuer, in accordance with its standard business practices. ADJUSTMENTS: Method of Adjustment: Calculation Agent Adjustment Extraordinary Dividends: For purposes of this Transaction and the definition of a "Potential Adjustment Event" (without limiting the generality of clause (iii) of Section 9.1(e) of the Equity Definitions), an "Extraordinary Dividend" shall mean, as calculated by the Calculation Agent, (i) any cash dividend or distribution declared with respect to the Shares at a time when the Issuer has not previously declared or paid dividends or distributions on such Shares for the prior four quarterly periods; (ii) any increase or decrease by more than 5% (determined on an annualized basis) in the then current quarterly dividend or (iii) any other "special" cash or non-cash dividend on or distribution with respect to the Shares which is, by its terms or declared intent, declared and paid outside the normal operations or normal dividend procedures of the Issuer. EXTRAORDINARY EVENTS: Consequences of Merger Events: (a) Share-for-Share: Alternative Obligation (b) Share-for-Other: Cancellation and Payment (c) Share-for-Combined: Alternative Obligation with respect to the New Shares and Cancellation and Payment with respect to the Other Consideration Alternative Obligation: The applicable definition of "Alternative Obligation" in subsections 9.3(b)and (d) of the Equity Definitions shall be amended by adding the following at the end of each such subsection: "including any one or more of the Initial Price, Final Price, Relevant Price, Number of Shares, Appreciation Cap, Depreciation Floor, Delivery Adjustment and any other variable relevant to the exercise, settlement or payment terms of each such Transaction. In addition, the Calculation Agent will determine if the change in the volatility of the New Shares (as compared with the Shares) affects the theoretical value of any such Transaction, and if so, shall in a commercially reasonable manner make an adjustment to the Appreciation Cap to reflect such change in theoretical value. Any adjustment made pursuant to this paragraph will be effective as of the date determined by the Calculation Agent on or following the Merger Date.
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883071 Page 5 of 12 NATIONALIZATION, INSOLVENCY, HEDGING DISRUPTION EVENT, BORROW LOSS OR INCREASE IN BORROW COSTS: Cancellation and Payment Definitions: The definition of "Merger Event" in Section 9.2(a) of the Equity Definitions shall be amended by deleting subsection 9.2(a)(iii) in its entirety and replacing it with the following: "(iii) other takeover offer for the Shares that results in a transfer of or an irrevocable commitment to transfer 25% or more of all the outstanding Shares (other than the Shares owned or controlled by the offeror)" For purposes of the definition of "Cancellation and Payment" in Sections 9.3(c)(ii), 9.3(d)(ii) and 9.6, this Transaction shall be deemed to be a Share Option Transaction. The amount payable upon Cancellation and Payment will be the amount agreed upon promptly by the parties after the Merger Date or the date of the occurrence of the Nationalization, Insolvency, Hedging Disruption Event, Increase in Borrow Costs or Borrow Loss, as the case may be. In the absence of such agreement, the amount payable will be determined by the Calculation Agent in a commercially reasonable manner (without the requirement of soliciting dealer quotations) as the fair value of the Transaction with terms that would preserve the economic equivalent of any payment or delivery (assuming satisfaction of each applicable condition precedent) by the parties in respect of the relevant Transaction that would have been required after that date but for the occurrence of the Nationalization, Insolvency, Hedging Disruption Event, Increase in Borrow Costs, Borrow Loss or Merger Event, as applicable. The Calculation Agent will determine the amount payable on the basis of the factors identified in subparagraphs (i), (ii) and (iii) in Section 9.7(b) and such other factors as it deems appropriate in a commercially reasonable manner. Additional Extraordinary Events: "Hedging Disruption Event" means that the Shares cease to be listed on or quoted by the Exchange, the Nasdaq Global Select Market, the Nasdaq Global Market or the American Stock Exchange for any reason (other than a Merger Event). If an Increase in Borrow Costs occurs, then by the Valuation Time on the day such event occurs, Party B shall: (a) (i) permit Party A to use the Shares posted as Posted Collateral and the Independent Amount pursuant to Section 6(c) of the Credit Support Annex and (ii) ensure that such Shares are freely tradable and have been converted into book-entry form; or (b) agree to adjustments to the terms of this Transaction to reflect the Total Borrow Cost, which adjustments will be determined by the Calculation Agent in a commercially reasonable manner; or (c) agree to pay the Total Borrow Cost. If Party B does not agree to (a), (b) or (c) by the Valuation Time on the day on which the Increase in Borrow Costs occurs, Cancellation and Payment shall immediately be applicable.
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883071 Page 6 of 12 If a Borrow Loss occurs, the Calculation Agent shall notify Party A and Party B and Cancellation and Payment shall immediately be applicable unless, by the later of the Valuation Time on the day on which the Borrow Loss occurs or three hours after such notification, (i) Party B permits Party A to use the Shares posted as Posted Collateral and the Independent Amount pursuant to Section 6(c) of the Credit Support Annex and (ii) such Shares are freely tradable and have been converted into book-entry form. Party B acknowledges and understands that any use of the Shares posted as Posted Collateral pursuant to Section 6(c) of the Credit Support Annex may require Party B to provide an opinion of counsel and other documentation in a form acceptable to the Issuer and the transfer agent for the Shares to ensure the conversion of such Shares into book-entry form prior to the occurrence of the Borrow Loss or the Increase in Borrow Costs, as applicable. If Party A is permitted to use the Shares posted as Posted Collateral pursuant to Section 6(c) of the Credit Support Annex, Party A shall adjust the terms of this Transaction in a commercially reasonable manner to reflect its lower borrowing costs for the period that Party A is permitted to use the Shares (which borrowing costs will reflect the interest rate earned by Party A on any collateral posted to Party B in connection with such use). The Calculation Agent shall notify both parties as soon as the average rebate earned by Party A on collateral posted for any Shares borrowed in connection with this Transaction is at or below 1% (determined on an annualized basis). "Borrow Cost" means the difference between the actual rebate earned by Party A on collateral posted for any Shares borrowed in connection with this Transaction and the General Collateral Rate, multiplied by the closing price per Share quoted by the Exchange at the Valuation Time on the preceding Exchange Business Day, multiplied by the Hedge Delta on the preceding Exchange Business Day, calculated on an actual/360 basis, as determined by the Calculation Agent in a commercially reasonable manner. "Borrow Loss" means that it becomes impracticable for Party A to borrow Shares equal to its desired Hedge Delta on any day, as determined by the Calculation Agent in a commercially reasonable manner. "General Collateral Rate" means the general collateral rebate rate earned by market participants in general on collateral posted for U.S. liquid equity securities as determined by the Calculation Agent in a commercially reasonable manner. The Calculation Agent will provide evidence of the General Collateral Rate to either party upon request. "Hedge Delta" means the number of Shares borrowed by Party A in connection with this Transaction, as determined by the Calculation Agent in a commercially reasonable manner.
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883071 Page 7 of 12 "Increase in Borrow Costs" means that the actual rebate earned by Party A on collateral posted for any Shares borrowed in connection with this Transaction is at or below zero for ten (10) days or longer, as determined by the Calculation Agent in a commercially reasonable manner. "Total Borrow Cost" means the Borrow Cost for every day from the day on which the Increase in Borrow Costs occurs until the final Delivery Date, the Cash Settlement Payment Date or the effective date for any Elected Termination, as applicable. Announcement Event: If an Announcement Event occurs, the Calculation Agent will determine the economic effect of any change in volatility and/or liquidity relevant to the Shares or to the Transaction caused by the Announcement Event on the theoretical value of the Transaction from the Announcement Date to the Valuation Date. If such economic effect is (i) material and (ii) has continued, or is continuing, for a period of 30 days from the Announcement Event, on the Valuation Date the Calculation Agent shall in a commercially reasonable manner make an adjustment to the Appreciation Cap to reflect such change in theoretical value; provided that such adjustment shall not exceed USD 2.00 (as adjusted pursuant to "Method of Adjustment" above). "ANNOUNCEMENT EVENT" shall mean the occurrence of the Announcement Date of a Share-for-Other Merger Event or a Share-for-Combined Merger Event where Other Consideration represents more than 50% of the total value of the Combined Consideration. Change in Law: "Change in Law" means that, on or after the Trade Date (A) due to the adoption of or any change in any applicable law or regulation, or (B) due to the promulgation of or any change in the interpretation by any court, tribunal or regulatory authority with component jurisdiction of any applicable law or regulation, a party to such Transaction determines in good faith that it has become illegal to hold, acquire or dispose of Shares relating to this Transaction. Upon the occurrence of a Change in Law event either party may elect to terminate this Transaction upon at least two Exchange Business Days' notice to the other party specifying the date of such termination (or such lesser notice as any be required to comply with the Change of Law), in which event the Transaction will terminate and the Calculation Agent will determine any amount payable by one party to the other.
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883071 Page 8 of 12 Bankruptcy Code: Without limiting any other protections under the Bankruptcy Code (Title 11 of the United States Code) (the "Bankruptcy Code"), the Parties hereto intend for: (a) This Transaction and the Agreement to be a "swap agreement" as defined in the Bankruptcy Code, and the parties hereto to be entitled to the protections afforded by, among other Sections, Section 560 of the Bankruptcy Code. (b) A party's right to liquidate this Transaction and to exercise any other remedies upon the occurrence of any Event of Default or Termination Event under the Agreement or this Transaction to constitute a "contractual right" as described in Section 560 of the Bankruptcy Code. (c) Any cash, securities or other property provided as performance assurance, credit support or collateral with respect to this Transaction or the Agreement to constitute "transfers" under a "swap agreement" as defined in the Bankruptcy Code. (d) All payments for, under or in connection with this Transaction or the Agreement, all payments for any securities or other assets and the transfer of such securities or other assets to constitute "transfers" under a "swap agreement" as defined in the Bankruptcy Code. Party B Representations: In addition to the representations set forth in the Agreement, Party B further represents that; (a) Neither Party A nor any of its affiliates has advised Party B with respect to any legal, regulatory, tax, accounting or economic consequences arising from this Transaction, and neither Party A nor any of its affiliates is acting as agent (other than LBI as dual agent if specified above), or advisor for Party B in connection with this Transaction. (b) Party B is not in possession of any material non-public information concerning the business, operations or prospects of the Issuer and was not in possession of any such information at the time of placing any order with respect to the Transaction. "Material" information for these purposes is any information to which an investor would reasonably attach importance in reaching a decision to buy, sell or hold any securities of the Issuer(s). (c) Party B is the legal and beneficial owner of the Shares, free and clear of any Encumbrances or any Transfer Restrictions (other than transfer restrictions arising under the 1933 Act and other than under the Stockholder's Agreement), and, upon the transfer of the Shares to Party A in settlement of this Transaction (except to the extent that Party B elects the Cash Settlement option, if any) Party A will acquire good and marketable title and will be the beneficial owner of the Shares, free and clear of any Encumbrances or any Transfer Restrictions. "Encumbrance" means any pledge, hypothecation, assignment,
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883071 Page 9 of 12 encumbrance, charge, claim, security interest, option, preference, priority or other preferential arrangement of any kind or nature whatsoever, or other charge, claim or other encumbrance (other than an Encumbrance routinely imposed on all securities in the relevant Clearance System). "Transfer Restriction" means, with respect to any security or other property, any condition to or restriction on the ability of the holder thereof to sell, assign or otherwise transfer such security or other property or to enforce the provisions thereof or of any document related thereto, whether set forth in such security or other property itself or in any document related thereto, including, without limitation, (i) any requirement that any sale, assignment or other transfer or enforcement of such security or other property be consented to or approved by any person, including, without limitation, the Issuer or any other obligor thereon, (ii) any limitations on the type or status, financial or otherwise, of any purchaser, pledgee, assignee or transferee of such security or other property, (iii) any requirement for the delivery of any certificate, consent, agreement, opinion of counsel, notice or any other document of any person to be given to the Issuer, any other obligor on or any registrar or transfer agent for, such security or other property, and (iv) any registration or qualification requirement or prospectus delivery requirement for such security or other property pursuant to any federal, state or foreign securities law (including, without limitation, any such requirement arising as a result of Rule 144 or Rule 145 under the 1933 Act). (d) As of the date hereof (without giving effect to the transactions contemplated hereby) Party B is the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934 (the "1934 Act")) of 36,504,308 Shares, which constitutes approximately 18.7% of the outstanding Shares of the Issuer (as at February 15, 2007). Party B is currently, and in the past has been, in compliance with any applicable reporting and other obligations under Section 13 and Section 16 of the 1934 Act. Party B shall comply with all applicable reporting and other requirements of Section 13 and Section 16 of the 1934 Act (and the rules and regulations promulgated thereunder) relating to this Transaction. Party B will provide Party A with a draft of any amendments to its Schedule 13D which relate to the Transaction and will give Party A a reasonable opportunity to comment on the draft. Party B shall promptly file all amendments to its Schedule 13D in a form reasonably acceptable to Party A. (e) Party B's entry into this Transaction, any sale of Shares hereunder, the pledge of any Eligible Collateral hereunder and Party A's exercise of all rights and remedies hereunder with respect to such Eligible Collateral complies with and is not in any way limited by (i) any trading or "blackout" policies of the Issuer or (ii) any other conditions or restrictions imposed by the Issuer on the sale, transfer, loan, pledge, disposition or other use by its employees of any Eligible Collateral or Shares. (f) Party B acquired the Shares and paid for the Shares in full more
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883071 Page 10 of 12 than one year prior to the Trade Date. Party B did not acquire the Shares in contemplation of, or in a transaction that was contingent upon, entering into this Transaction. (g) Neither Party B nor any person who would be considered to be the same "person" (as such term is used in Rule 144(a)(2) under the 1933 Act, has sold any Shares or hedged (through swaps, options, short sales or otherwise) any long position in the Shares during the preceding three (3) months prior to the Trade Date. For purposes of this paragraph, "Shares" shall be deemed to include securities convertible into or exchangeable or exercisable for Shares and any other security or instrument that would be subject to aggregation under paragraphs (a)(2) and (e) of Rule 144 under the 1933 Act. (h) Party B has not made, and will not make, any payment in connection with the offering or sale of the Shares to any person other than Party A. (i) Party B has not solicited or arranged for the solicitation of, and will not solicit or arrange for the solicitation of, orders to buy Shares in anticipation of or in connection with any proposed sale of the Shares. (j) The Shares constituting Posted Collateral are currently eligible for public resale by Party B pursuant to Rule 144 under the 1933 Act. Party B acknowledges and agrees that (i) the entering into of this Confirmation will constitute a sale for purposes of Rule 144, (ii) Party B has not taken and will not take any action that would cause the sale made pursuant to this Confirmation to fail to meet all applicable requirements of Rule 144, including without limitation, the volume limitations of Rule 144(e). MUTUAL REPRESENTATION: Party A and Party B each represent that the Number of Shares will not exceed the greater of (i) 1% of the outstanding Shares as shown by the most recent report or statement published by the Issuer, or (ii) the average reported weekly volume of trading in the Shares during the four calendar weeks preceding the Trade Date. COVENANTS: (a) Party B will transmit three signed copies of a Form 144 for filing with the Securities and Exchange Commission (the "SEC"), the Exchange and the Issuer concurrently with the execution of this Confirmation. (b) Party B will send to Party A via facsimile a copy of each Form 144 and each filing under Section 13 or 16 of the Exchange Act, if any, relating to this Transaction concurrently with filing or transmission for filing, as the case may be, of such form to or with the SEC. (c) Party A covenants that, through its affiliate Lehman Brothers Inc., it will introduce into the public market a number of Shares equal to the Number of Shares in a manner consistent with the manner-of-sale conditions described in 144(f) and (g) under the 1933 Act.
Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883071 Page 11 of 12 (d) Each party acknowledges and agrees that upon execution of this Confirmation, this Confirmation shall constitute a "binding commitment" within the meaning of the interpretive letter from the SEC to Goldman, Sachs & Co. dated December 20, 1999. Elected Termination: Party B may elect to terminate this Transaction upon mutually agreed upon terms. The Calculation Agent will calculate any amounts owing upon such early termination in a commercially reasonable manner. Upon request, the Calculation Agent will provide the assumptions it used to calculate any amounts owing. Payments on Early Termination: Party A and Party B agree that for this Transaction, for purposes of Section 6(e) of the Agreement, Loss and the Second Method will apply. Additional Provision: Party B hereby identifies the Shares initially pledged as Posted Collateral under this Transaction as a position with respect to personal property that is an offsetting position with respect to Party B's rights and obligations hereunder and that is part of a "straddle" with such rights and obligations within the meaning of section 1092 of the Internal Revenue Code of 1986, as amended, and Party A acknowledges that Party B has identified the Shares for that purpose. Calculation Agent: Lehman Brothers Inc., whose adjustments, determinations and calculations shall be made in a commercially reasonable manner.
THIS TRANSACTION HAS BEEN ENTERED INTO FOR INVESTMENT AND HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR ANY OTHER UNITED STATES FEDERAL OR STATE SECURITIES LAWS; THIS TRANSACTION MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF APPROPRIATE REGISTRATION UNDER SUCH SECURITIES LAWS EXCEPT IN A TRANSACTION EXEMPT FROM OR NOT SUBJECT TO THE REGISTRATION REQUIREMENTS OF SUCH SECURITIES LAWS. Please confirm your agreement with the foregoing by executing this Confirmation and returning it to us at facsimile number 646-885-9546, Attention: Documentation. Confirmed as of the date first above Yours sincerely, written: LEHMAN BROTHERS FINANCE S.A. SMITHKLINE BEECHAM CORPORATION By: /s/ Markus Bormann By: /s/ Donald F. Parman --------------------------------- --------------------------------- Name: Markus Bormann Name: Donald F. Parman ------------------------------- ------------------------------- Title: Director Title: Vice President ------------------------------ ------------------------------ By: /s/ Barbara Grob --------------------------------- Name: Barbara Grob ------------------------------- Title: Authorised Signatory ------------------------------ Execution time will be furnished upon Counterparty's written request. Risk ID: N[_____] / Effort ID: [_____] / Global Deal ID: 2883071 Page 12 of 12 -----END PRIVACY-ENHANCED MESSAGE-----