UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant toss.240.14a-12
Moore Medical Corp.
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, par value $0.01 per share
--------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
3,356,809*
--------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
$12.00 per share in cash
--------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$40,281,708
--------------------------------------------------------------------------
(5) Total fee paid:
$8,056.34
--------------------------------------------------------------------------
* Includes 3,200,009 shares issued and outstanding as of January 30,
2004, plus 156,800 shares reserved for issuance upon exercise of
outstanding options.
[_] Fee paid previously with preliminary materials
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or Schedule and the date of its filing.
(1) Amount Previously Paid:
--------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
--------------------------------------------------------------------------
(3) Filing Party:
--------------------------------------------------------------------------
(4) Date Filed:
--------------------------------------------------------------------------
PRELIMINARY PROXY STATEMENT: DATED FEBRUARY 5, 2004
[MOORE LOGO]
389 John Downey Drive
P.O. Box 1500
New Britain, CT 06050
Tel: (860) 826-3600
[____________] [__], 2004
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders to be held
on [______] [__], 2004, at 10:00 a.m., local time, at 389 John Downey Drive,
P.O. Box 1500, New Britain, CT 06050. At the special meeting, we will ask you to
consider and vote upon a proposal to adopt the Agreement and Plan of Merger,
dated as of January 19, 2004, among McKesson Corporation ("McKesson"), Madison
Acquisitions Inc., a wholly-owned subsidiary of McKesson, and Moore Medical
Corp. ("Moore"), and approve the merger contemplated by that agreement.
If the merger agreement is adopted and the merger is completed, Moore will
become a wholly-owned subsidiary of McKesson and you will receive $12.00 in cash
for each share of your Moore common stock and associated preferred stock
purchase rights.
Our Board of Directors has carefully considered the merger agreement and has
determined that the terms of the merger agreement are fair to and in the best
interests of our stockholders. Your Board of Directors has approved and declared
advisable the merger agreement and recommends that you vote in favor of adoption
of the merger agreement and approval of the merger.
Your vote is very important. We cannot complete the merger unless the merger
agreement is adopted by holders of a majority of our outstanding shares. Whether
or not you plan to attend the special meeting, we urge you to complete, sign,
date and return the enclosed proxy card to ensure that your shares are
represented at the special meeting.
This booklet provides you with detailed information about the proposed
transaction and related matters. We urge you to read these documents carefully,
including the appendices. In making your decision, you should carefully consider
all of the information in the proxy statement, including the risk factors
related to the merger that are described under the heading "Risk Factors" on
page 12 of the proxy statement. If you have any questions about the merger,
please call [__________________], toll-free at 1-800-[___________].
On behalf of your Board of Directors, I thank you for your support and
appreciate your consideration of this matter.
Sincerely,
Linda M. Autore
President and Chief Executive Officer
This Proxy Statement is being first mailed to Moore stockholders on or about
[______] [__], 2004.
[MOORE LOGO]
389 John Downey Drive
P.O. Box 1500
New Britain, CT 06050
Tel: (860) 826-3600
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
A Special Meeting of the stockholders of Moore Medical Corp. will be held
at Moore's corporate headquarters at 389 John Downey Drive, P.O. Box 1500,
New Britain, Connecticut, on [____________] [__], 2004, at 10:00 A.M., for
the following purpose:
1. To consider and vote upon a proposal to adopt the Agreement
and Plan of Merger, dated as of January 19, 2004, among
McKesson Corporation, Madison Acquisitions Inc., a
wholly-owned subsidiary of McKesson, and Moore Medical Corp.,
and approve the merger contemplated by that agreement. A copy
of the merger agreement is attached as Annex A to the proxy
statement accompanying this notice; and
2. To consider and act upon any other matter which may properly
come before the meeting or any adjournments thereof.
Only stockholders of record at the close of business on [_________], 2004
will be entitled to vote at the Special Meeting, or any adjournments or
postponements thereof. As of that date, there were [______________] shares of
common stock outstanding. Each share of common stock is entitled to one vote on
each matter properly brought before the meeting. A list of stockholders eligible
to vote at the Special Meeting will be available for inspection at the Special
Meeting and during business hours from [___________], 2004 to the date of the
Special Meeting at Moore's corporate headquarters.
If a quorum is not present at the meeting, or a quorum is present but
sufficient votes to approve a proposal are not received, the persons named as
proxies may propose one or more adjournments of the meeting to permit further
solicitation of proxies. Any such adjournment will require the affirmative vote
of a majority of the common stock represented at the meeting in person or by
proxy. The persons named as proxies will vote those proxies that they are
entitled to vote FOR the proposal in favor of an adjournment of the meeting and
will vote those proxies required to be voted AGAINST the proposal against such
adjournment.
Your board of directors recommends that you vote to adopt the merger
agreement and approve the merger.
By Order of the Board of Directors
Joseph Greenberger
Corporate Secretary
389 John Downey Drive
P.O. Box 1500
New Britain, Connecticut 06050
[_____________] [__], 2004
-- IMPORTANT --
Whether you expect to attend the Special Meeting or not, your proxy vote
is important. To assure your representation at the meeting, please sign and date
the enclosed proxy card and return it promptly in the enclosed envelope, which
requires no additional postage if mailed in the United States or Canada. In this
way, if you are unable to attend in person, your shares can still be voted at
the special meeting. If you attend the Special Meeting and wish to vote in
person, you may withdraw your proxy card and do so.
TABLE OF CONTENTS
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS.....................................ii
SUMMARY........................................................................1
The Parties.................................................................1
The Merger..................................................................2
What Moore Stockholders Will Receive........................................2
Recommendation of the Board of Directors....................................2
Reasons for the Merger......................................................2
Stockholder Vote Required...................................................2
The Special Meeting.........................................................2
Moore Market Price Information..............................................3
Opinion of Financial Advisor................................................3
Material Federal Income Tax Consequences of the Merger......................4
Regulatory Approvals........................................................4
Interests of Certain Persons in the Merger..................................4
Dissenters' Appraisal Rights................................................4
Conditions to the Completion of the Merger..................................5
Non-Solicitation Covenant...................................................6
Termination of Merger Agreement.............................................6
Termination Fee.............................................................7
Procedures for Receipt of Merger Consideration..............................8
QUESTIONS AND ANSWERS ABOUT THE MERGER.........................................9
RISK FACTORS..................................................................12
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS.....................14
INFORMATION ABOUT THE SPECIAL MEETING AND VOTING..............................15
Matters Relating to the Meeting............................................15
Vote Required..............................................................16
How to Vote................................................................16
Other Business; Adjournments...............................................17
THE MERGER....................................................................18
Background of the Merger...................................................18
Reasons for the Merger; Recommendation of the Board of Directors...........23
Opinion of Lehman Brothers Inc.............................................25
Material Federal Income Tax Consequences of the Merger.....................32
Regulatory Matters Relating to the Merger..................................33
Appraisal Rights of Stockholders...........................................34
INTERESTS OF CERTAIN PERSONS IN THE MERGER....................................38
Employment and Severance Agreements........................................38
Change in Control Agreements...............................................39
-i-
Directors' And Officers' Indemnification and Insurance.....................40
OWNERSHIP OF VOTING STOCK BY MANAGEMENT.......................................42
OWNERSHIP OF VOTING STOCK BY CERTAIN BENEFICIAL OWNERS........................43
THE MERGER AGREEMENT..........................................................44
General....................................................................44
Consideration to be Received in the Merger.................................44
Treatment of Stock Options.................................................44
Exchange of Certificates in the Merger.....................................45
Covenants..................................................................45
Employee Matters...........................................................49
Other Covenants and Agreements.............................................49
Representations and Warranties.............................................50
Conditions.................................................................52
Termination of Merger Agreement............................................53
Termination Fee............................................................54
Amendments and Waivers.....................................................54
Expenses...................................................................55
ADDITIONAL INFORMATION FOR STOCKHOLDERS.......................................56
Future Moore Stockholder Proposals.........................................56
Where You Can Find More Information........................................56
ANNEXES
Annex A Agreement and Plan of Merger
Annex B Opinion of Lehman Brothers Inc.
Annex C Text of 262 of Delaware General Corporation Law
-ii-
SUMMARY
This summary, together with the question and answer section, highlights
important information discussed in greater detail elsewhere in this proxy
statement. This summary may not contain all of the information you should
consider before voting on the merger agreement. To more fully understand the
merger, you should read carefully this entire proxy statement and all of its
annexes before voting on whether to adopt the merger agreement and approve the
merger. You can also refer to "Where You Can Find More Information" on page 57
for additional information about us.
The Parties
Moore Medical Corp
389 John Downey Drive
P.O. Box 1500
New Britain, CT 06050
Tel: (860) 826-3600
Moore Medical Corp. ("Moore", "us", "we" or "our") is an Internet-enabled,
multi-channel marketer and distributor of medical, surgical and pharmaceutical
products to approximately 100,000 health care practices and facilities in
non-hospital settings nationwide, including: physicians, emergency medical
technicians, schools, correctional institutions, municipalities,
occupational/industrial health doctors and nurses, and other specialty practice
communities. We market to and serve our customers through direct mail,
industry-specialized telephone support staff, field sales representatives,
customer community affiliates and the Internet. Our direct marketing and
distribution business has been in operation for 55 years. We operate principally
from three distribution facilities located in the United States.
McKesson Corporation
One Post Street
San Francisco, California 94104
Tel: (415) 983-8300
McKesson Corporation is a Fortune 20 corporation providing supply, information
and care management products and services designed to reduce costs and improve
quality across the healthcare industry. McKesson conducts its business through
three segments. Through its Pharmaceutical Solutions segment, it is a leading
distributor of ethical and proprietary drugs, and health and beauty care
products throughout North America. McKesson is also a leading provider of
patient and payor services in the United States. McKesson's Medical-Surgical
Solutions segment distributes medical-surgical supplies and equipment, and
provides logistics and related services within the United States. McKesson's
Information Solutions segment delivers enterprise-wide patient care, clinical,
financial, supply chain, managed care and strategic management software
solutions, as well as outsourcing and other services, to healthcare
organizations throughout North America, certain European countries and the
United Kingdom.
-1-
The Merger
Under the terms of the proposed merger, Madison Acquisitions Inc. (the "Merger
Sub"), a wholly-owned subsidiary of McKesson formed for the purpose of the
merger, will merge with and into Moore, and all of our outstanding shares and
associated preferred stock purchase rights will be converted into the right to
receive $12.00 in cash, without interest. As a result, Moore will become a
direct wholly-owned subsidiary of McKesson.
The merger agreement is attached as Annex A to this proxy statement. We
encourage you to read the merger agreement carefully in its entirety as it is
the legal document that governs the merger. For a summary of the merger
agreement, see "The Merger Agreement" on page 45.
For a description of events leading to the approval of the merger agreement by
our board of directors you should refer to "Background of the Merger" on page
18.
What Moore Stockholders Will Receive
As a result of the merger, you will be entitled to receive $12.00 in cash,
without interest, for each share of our common stock and associated preferred
stock purchase rights you own. See "The Merger Agreement" on page 45.
Recommendation of the Board of Directors
Your board of directors believes the merger is advisable, fair to you and in
your best interests and recommends that you vote FOR the adoption of the merger
agreement and approval of the merger. See "Reasons for the Merger;
Recommendation of the Board of Directors" on page 23.
Reasons for the Merger
For a description of the reasons behind the board of directors' determination
that the merger is in the best interests of our stockholders, you should refer
to "Reasons for the Merger; Recommendation of the Board of Directors" on page
23.
Stockholder Vote Required
Approval of the merger requires the affirmative vote of the holders of at least
a majority of our outstanding shares of common stock.
The Special Meeting
o Date, Time and Place (page 15). The special meeting will be held on
[______] [__], 2004, at 10:00 a.m., local time, at 389 John Downey
Drive, P.O. Box 1500, New Britain, Connecticut.
o Record Date (page 15). The record date for determining the holders
of shares of our outstanding common stock entitled to vote at the
special meeting is [______] [__], 2004. On the record date,
[_________________] shares of our common stock were outstanding and
entitled to vote on the proposal to adopt the merger agreement and
approve the merger.
-2-
o Proxies (page 16). Shares of common stock represented by properly
executed proxies received at or prior to the special meeting that
have not been revoked will be voted at the special meeting in
accordance with the instructions indicated on the proxies. If you
properly execute your proxy but do not give instructions on how to
vote your shares, your shares will be voted "FOR" the adoption of
the merger agreement. Your proxy may be revoked at any time before
it is voted.
o Procedure for Voting (page 16). You may vote in either of two ways:
o by completing and returning the enclosed proxy card, or
o by appearing at the special meeting.
o Revocation of Proxies (page 16). If you complete and return the
enclosed proxy card but wish to revoke it, you must either file with
our Secretary a written, later-dated notice of revocation, send a
later-dated proxy card relating to the same shares to us or our
proxy solicitor at or before the special meeting or attend the
special meeting and vote in person. Your attendance at the meeting
will not, by itself, revoke your proxy.
For more detailed information concerning the special meeting, see "Information
About the Special Meeting and Voting" on page 15.
Moore Market Price Information
Our common stock is quoted on the American Stock Exchange under the symbol
"MMD". On January 16, 2004, the last full trading day before the public
announcement of the proposed merger, the closing sales price of our common stock
price was $10.45. On [___________] [__], 2004, the most recent practicable date
prior to the mailing of this document, the closing sales price of our common
stock price was $[_________].
Opinion of Financial Advisor
In connection with the merger, our board of directors received the opinion of
Lehman Brothers Inc. that the merger consideration is fair from a financial
point of view to our stockholders. This opinion, which is attached as Annex B,
sets forth the assumptions made, matters considered and limitations on the
review undertaken in connection with the opinion. We encourage you to read this
opinion in its entirety. See "Opinion of Lehman Brothers Inc." on page 26.
The Lehman Brothers opinion is directed to our board of directors and is not a
recommendation to our stockholders with respect to any matter relating to the
merger. The opinion speaks only as of its date and Lehman Brothers is under no
obligation to confirm its opinion as of a later date.
-3-
Material Federal Income Tax Consequences of the Merger
The receipt of cash by our stockholders will generally be a taxable transaction
for U.S. Federal income tax purposes. Generally speaking, each stockholder will
recognize gain or loss equal to the difference, if any, between the amount of
cash received and such stockholder's adjusted tax basis in its Moore common
stock immediately prior to the merger. A holder's gain or loss will generally be
capital gain or loss, and will generally be long-term capital gain or loss if
our common stock exchanged in the merger had been held for more than one year at
the time of the merger. See "Material Federal Income Tax Consequences of the
Merger" on page 32.
The federal income tax consequences described above may not apply to some
holders of our common stock, including some holders specifically referred to in
"Material Federal Income Tax Consequences of the Merger". Your tax consequences
will depend upon your own personal situation. Accordingly, we strongly urge you
to consult your tax advisor for a full understanding of the particular tax
consequences of the merger to you.
Regulatory Approvals
Completion of the merger will not occur until receipt of all material regulatory
approvals, including the receipt of new controlled substance registration
certificates from the United States Department of Justice, Drug Enforcement
Administration, and wholesaler drug permits from the states of Connecticut,
California and Florida. See "Regulatory Matters Relating to the Merger" on page
34.
Interests of Certain Persons in the Merger
In considering whether to vote in favor of the adoption of the merger agreement
and approval of the merger, you should be aware that a number of our officers
and directors may have interests in the merger that may be different from, or in
addition to, their interests as Moore stockholders. These interests include
accelerated stock option vesting and benefits under change in control
arrangements. See "Interests of Certain Persons in the Merger" on page 39.
Dissenters' Appraisal Rights
If you do not wish to accept the merger consideration of $12.00 for each share
of your Moore common stock, then, if you:
o make a written demand for appraisal of your shares prior to the vote
at the special meeting,
o do not vote in favor of the merger,
o continuously hold your shares of record through the date of the
merger, and
o otherwise comply with the procedures described in "Appraisal Rights
of Stockholders,"
-4-
you will have the right under Delaware law to seek a judicial appraisal of your
shares to determine their "fair value." A proxy received by us which is properly
executed but does not contain voting instructions will, unless revoked, be voted
in favor of the adoption of the merger agreement. Therefore, if you vote by
proxy and wish to exercise appraisal rights, you must vote against the merger
agreement or abstain from voting on the merger agreement. For a more detailed
discussion of your appraisal rights, see "Appraisal Rights of Stockholders" on
page 34.
Conditions to the Completion of the Merger
The consummation of the merger depends upon the following conditions:
o Approval is obtained from our stockholders;
o All required governmental consents and filings shall have been made
or obtained;
o No governmental entity shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order that is in effect and has the
effect of making the merger illegal or otherwise prohibiting the
consummation of the merger;
o No pending or overtly threatened suit, action or proceeding asserted
by any governmental entity challenging or seeking to restrain or
prohibit the consummation of the merger, the effect of which
restraint or prohibition if obtained would cause the condition set
forth in the immediately preceding bullet point to not be satisfied;
o All of our representations and warranties shall be true and correct
except where the failure to be true and correct would not be
reasonably likely to have a material adverse effect on us;
o We shall have performed in all material respects all material
obligations required to be performed by us under the merger
agreement;
o Since the date of the merger agreement, there shall not have
occurred any change or event (whether alone or together with other
changes or events occurring since the date of the merger agreement)
that has had, or is reasonably likely to have, a material adverse
effect on us;
o There shall not be any suit, action or proceeding pending or
threatened (in writing or otherwise directly communicated to us) by
a governmental entity seeking to require McKesson or any of its
subsidiaries to dispose of any assets that are material to McKesson
and its subsidiaries, taken as a whole;
o All representations and warranties of McKesson and Merger Sub shall
be true and correct except where the failure to be true and correct
would not be reasonably likely to
-5-
materially adversely affect the ability of McKesson to effect the
merger in accordance with the merger agreement; and
o Each of McKesson and Merger Sub shall have performed in all material
respects all material obligations required to be performed by it
under the merger agreement.
See "The Merger Agreement" on page 45.
Non-Solicitation Covenant
We have agreed with McKesson that we will not solicit, encourage or
initiate any "acquisition proposals" (as that term is defined on page 48) from a
party other than McKesson. Nevertheless, our board of directors may, in response
to any proposal from a third party that our board of directors determines to be
reasonably likely to lead to a "superior offer" (as that term is defined on page
48), participate in discussions or negotiations regarding such proposal.
Termination of Merger Agreement
The merger agreement may be terminated:
o by mutual consent;
o by either party if (a) the merger is not consummated by June 30,
2004, (b) stockholder approval is not obtained, or (c) any law,
ordinance, regulation, code, rule, judgement, order, decree or
arbitration award of any governmental entity permanently
restraining, enjoining or otherwise prohibiting the merger shall
become final and non-appealable;
o by us,
o if (a) at any time prior to obtaining stockholder approval, if
our board properly exercises its right to change its
recommendation of the merger or (b) prior to the effective
time of the merger, McKesson or Merger Sub has materially
breached any representation, warranty or covenant contained in
the merger agreement or if any representation or warranty of
McKesson or Merger Sub would be untrue if made on any day
prior to the effective time of the merger and such breach or
untruth is not cured by McKesson or Merger Sub within 20 days
of notice thereof;
o by McKesson,
o if at any time prior to the time when the approval of our
stockholders has been obtained, (a) our board withdraws or
amends or modifies in a manner adverse to McKesson its
approval or recommendation of the merger agreement, (b) we
fail to include in the proxy statement the recommendation of
our board in favor of the adoption and approval of the merger
agreement and of the merger, (c) our board approves or
recommends an acquisition proposal not made by McKesson or (d)
there
-6-
has been a material breach by us of our obligations to call
the stockholders meeting and not solicit offers from third
parties;
o if at any time prior to the time when the approval of our
stockholders has been obtained, (a) it has been made known to
our stockholders that a third party has made or is considering
an acquisition proposal and thereafter our board fails to
reaffirm its recommendation in favor of the merger agreement
and of the merger within 10 business days after McKesson so
requests in writing, or (b) a third party commences a tender
or exchange offer for our securities and our board shall not
have sent to our stockholders, within 10 business days, a
statement recommending rejection of such tender or exchange
offer, provided that prior to terminating the merger agreement
pursuant to this section, McKesson must give us 24 hours'
prior written notice; or
o if at any time prior to the effective time of the merger,
whether before or after the time when the approval of our
stockholders has been obtained, we have materially breached
any representation, warranty or covenant contained in the
merger agreement or if any representation or warranty of our
company would be untrue if made on any day prior to the
effective time of the merger and such breach or untruth is not
cured by us within 20 days of notice thereof.
Termination Fee
The merger agreement provides for the payment by us to McKesson of a
termination fee as follows:
o if the merger agreement is terminated by (a) us after our board
complies with the terms and conditions of the merger agreement and
withdraws or withholds its recommendation for the merger agreement
and the merger due to our receipt of a superior offer or (b)
McKesson for the reasons contained in the first and second
sub-bullet points under the fourth bullet point under "Termination
of Merger Agreement" above, then Moore shall promptly (but in no
event later than 2 business days after termination) pay to McKesson
the lesser of its aggregate costs and expenses incurred in
connection with the merger or $500,000; provided, that if within 12
months of termination any person other than McKesson and its
affiliates consummates an "acquisition of the company" (as defined
below), then we are obligated to pay McKesson a termination fee
equal to $1,200,000 less any amount paid as provided above; or
o if the merger agreement is terminated by us or McKesson because
(a)(i) an acquisition proposal has been made and is made known to
our stockholders generally or publicly announced and stockholder
approval of the merger is not obtained at the special meeting or
(ii) if we materially and willfully breach any covenant contained in
the merger agreement and (b) if within 12 months of termination any
person other than McKesson and its affiliates consummates an
"acquisition of the company," then we are obligated to pay McKesson
a termination fee of $1,200,000 on or before the consummation of
such acquisition of the company.
-7-
An "acquisition of the company" means any of the following transactions
involving Moore: (i) a merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving our
company pursuant to which our stockholders immediately preceding such
transaction hold less than 50% of the aggregate equity interests in the
surviving or resulting entity of such transaction or any direct or indirect
parent thereof, (ii) a sale or other disposition by us of assets representing in
excess of 50% of the aggregate fair market value of our business immediately
prior to such sale, or (iii) the acquisition by any person or group (including
by way of a tender offer or an exchange offer or issuance by the party or such
person or group), directly or indirectly, of beneficial ownership or a right to
acquire beneficial ownership of shares representing in excess of 50% of the
voting power of the then outstanding shares of our capital stock.
Procedures for Receipt of Merger Consideration
You should NOT send your share certificates to us or to the proxy solicitor now.
Shortly after the merger is completed, the exchange agent appointed by McKesson
will send you written instructions explaining how to exchange your Moore common
stock certificates for the merger consideration.
-8-
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: What is the proposed transaction?
A: Under the terms of the proposed merger agreement with McKesson, Merger Sub
will be merged with and into us, with Moore emerging as the surviving
corporation and a wholly-owned subsidiary of McKesson. After the merger is
completed our common stock will cease to be traded on the American Stock
Exchange.
Q: What will I receive if the merger is completed?
A: You will have the right to receive $12.00 in cash, without interest, for
each share of your Moore common stock and associated preferred stock
purchase rights.
Q: Does the Board of Directors recommend adoption of the merger agreement?
A: Yes. After careful consideration, your board of directors recommends that
the stockholders vote in favor of adoption of the merger agreement and
approval of the merger.
Q: Will I receive any stock as a result of the merger?
A: No. You will not have any further ownership of Moore, and you will not
receive any McKesson stock, if the merger is consummated.
Q: What will happen to Moore stock options as a result of the merger?
A: The holders of all of our outstanding vested or unvested and unexercised
stock options will receive a cash amount equal to the product of the
excess of the $12.00 per share price paid by McKesson for each outstanding
share of our common stock over the exercise price of the relevant stock
options, multiplied by the number of underlying shares of our common stock
with respect to which the stock options had not been exercised prior to
the effective time of the merger. As of January 30, 2004, there were
156,800 shares of our common stock subject to issuance upon exercise of
the options granted under our stock option plans.
Q: What happens if the merger is not completed?
A: If the merger is not completed, both companies will continue to operate as
independent companies. We may be required to pay a termination fee to
McKesson if the merger is not completed for certain reasons.
Q: When do you expect the merger to be completed?
A: We are working to complete the merger in the second quarter of 2004.
However, it is possible that factors outside our control could cause the
merger to be completed at a later time. We hope to complete the merger as
soon as reasonably practicable. In addition,
-9-
subject to certain exceptions, either we or McKesson may terminate the
merger agreement if the merger is not completed by June 30, 2004.
Q: What is the vote required to adopt the merger agreement and approve the
merger?
A: Under Delaware law and our certificate of incorporation, the standard
required to adopt the merger agreement and approve the merger is the
affirmative vote of a majority of the outstanding shares of Moore common
stock. This means that the affirmative vote of at least [____________]
shares of our common stock is required for adoption of the merger
agreement.
Q: When and where is the special stockholder meeting?
A: The special meeting of Moore stockholders will take place on [__________]
[__], 2004 at our headquarters at 389 John Downey Drive, P.O. Box 1500,
New Britain, Connecticut, at 10:00 a.m. local time.
Q: What do I need to do now?
A: After you carefully read this document, mail your signed proxy card in the
enclosed return envelope as soon as possible, so that your shares may be
represented at the special meeting. In order to assure that your vote is
obtained, please vote your proxy as instructed on the proxy card even if
you currently plan to attend the special meeting in person.
Q: Can I change my vote after I have mailed my proxy card?
A: Yes. You can change your vote at any time before your proxy is voted at
the special meeting. You can do this in one of three ways:
o timely delivery of a valid, later-dated proxy;
o written notice to our Secretary before the meeting that you have
revoked your proxy; or
o voting by ballot at the special meeting.
Q: What happens if I do not return a proxy card?
A: Failure to return your proxy card will have the same effect as voting
against the merger, unless you attend and vote in person at the special
meeting.
Q: If my shares are held in "street name" by my broker, will my broker vote
my shares for me?
A: No. If you do not provide your broker with instructions on how to vote
your "street name" shares, your broker will not be permitted to vote them
on the adoption of the
-10-
merger agreement. If you do not give voting instructions to your broker,
you will, in effect, be voting against the merger unless you appear in
person at the special meeting with a legal, valid proxy from the record
holder. You should therefore be sure to provide your broker with
instructions on how to vote your shares. Please check the voting form used
by your broker to see if it offers telephone or Internet voting.
Q: Should I send in my stock certificates now?
A: No. If the merger is completed, McKesson will send you written
instructions for exchanging your Moore common stock certificates for cash.
Q: Am I entitled to appraisal rights?
A: Yes. If you make a written demand for appraisal of your shares prior to
the vote at the special meeting, do not vote in favor of the adoption of
the merger agreement, continue to hold your shares of record through the
date of the merger and otherwise follow the procedural requirements of the
Delaware General Corporation Law, you will be entitled to have your shares
appraised by the Delaware Court of Chancery and receive the fair value of
your shares in cash, as determined by the Court.
Q: Who can help me answer my questions about the special meeting or the
merger?
A: If you have questions about the special meeting or the merger, including
the procedures for voting your shares, you should contact:
[Name]
[Address]
[Address]
[Telephone]
(800) [___]-[______]
-11-
RISK FACTORS
You should carefully consider the following factors and the other information in
this proxy statement before voting on the proposal to adopt the merger agreement
and approve the merger.
We cannot assure you that the merger will provide you with greater value than if
Moore continues as an independent public company.
Upon completion of the merger, our stockholders will have the right to receive
$12.00, without interest, for each outstanding share of our common stock held by
such stockholder. The closing price per share of our common stock on the
American Stock Exchange on January 16, 2004, the last trading day before we
entered into the merger agreement with McKesson, was $10.45. During the 12-month
period ending on January 30, 2004, the most recent date prior to the mailing of
this proxy statement, the closing price of our common stock varied from a low of
$5.61 to a high of $14.97 and ended that period at $14.63. We are unable to
predict with certainty our future prospects or the market price of our common
stock. Therefore, we cannot assure you that the merger will provide greater
value to you than you would have if Moore continued as an independent public
company.
Failure to complete the merger could have a negative impact on the market price
of our common stock and on our business.
If the merger is not completed, the price of our common stock may decline to the
extent that the current market price reflects a market assumption that the
merger will be completed. In addition, our business and operations may be harmed
to the extent that customers, suppliers and others believe that we cannot
compete effectively in the marketplace without the merger. We also will be
required to pay significant costs incurred in connection with the merger,
whether or not the merger is completed. Moreover, under specified circumstances
we may be required to reimburse McKesson for its costs and expenses up to
$500,000 in connection with a termination of the merger agreement, whether or
not we complete a business combination with a third party.
The "no solicitation" restrictions and the termination fee provisions in the
merger agreement may discourage other companies from trying to acquire Moore.
While the merger agreement is in effect, subject to specified exceptions, we are
prohibited from entering into or soliciting, initiating or encouraging any
inquiries or proposals that may lead to a proposal or offer for a merger or
other business combination transaction with any person other than McKesson. In
addition, in the merger agreement, we agreed to pay a termination fee to
McKesson in specified circumstances, including circumstances where a third party
acquires or seeks to acquire Moore. These provisions could discourage other
parties from trying to acquire our company even though those other parties might
be willing to offer greater value to our stockholders than McKesson has offered
in the merger agreement.
-12-
Our directors and officers have potential conflicts of interest that may have
influenced their decision to support the merger.
You should be aware of potential conflicts of interest, and the benefits
available to directors and officers of Moore, when considering the board's
recommendation of the merger. The directors and officers of Moore have interests
in the merger that are in addition to, or different from, their interests as
Moore stockholders. The Moore board was aware of these conflicts of interest
when it approved the merger. These interests relate to:
o Receipt of certain benefits under change in control agreements; and
o Rights to directors' and officers' insurance coverage and to
indemnification with respect to acts and omissions in their
capacities as directors and officers of Moore.
See "Interests of Certain Persons in the Merger" on page 39.
-13-
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Proxy Statement contains statements about future events and
expectations that constitute forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
are based on management's beliefs, assumptions and expectations about our
company and our industry, taking into account the information that is currently
available to management. These statements are not statements of historical fact.
Forward-looking statements involve risks and uncertainties. Forward-looking
statements include the information in this document, specifically, regarding:
o projections o the economy
o efficiencies/cost avoidance o future economic performance
o cost savings o conditions to, and the
timetable for, completing
the merger
o income and margins o future acquisitions
o future earnings per share o management's plans
o growth o business portfolios
o economies of scale
Although we believe that the expectations reflected in such
forward-looking statements are based on reasonable assumptions, we can give no
assurance that our expectations will be achieved. We qualify any forward-looking
statements entirely by these cautionary factors, and readers are cautioned not
to place undue reliance on forward-looking statements.
The words "believe," "may," "will," "could," "should," "would,"
"anticipate," "estimate," "expect," "intend," "project," "objective," "seek,"
"strive," "might," "seeks," "likely result," "build," "grow," "plan," "goal",
"expand," "position," or similar words, or the negatives of these words, or
similar terminology, identify forward-looking statements.
The forward-looking statements contained in this report only speak as of
the date of this Proxy Statement. We disclaim any obligation or undertaking to
provide any updates or revisions to any forward-looking statements to reflect
any change in management's expectations or any change in events, conditions or
circumstances on which the forward-looking statements are based.
-14-
INFORMATION ABOUT THE SPECIAL MEETING AND VOTING
We are furnishing this proxy statement to our stockholders as part of the
solicitation of proxies by our board of directors for use at the special meeting
of our stockholders. We are first mailing this proxy statement and accompanying
form of proxy to Moore stockholders on or about [____________] [__], 2004.
Matters Relating to the Meeting
Time and Place: 10:00 a.m. local time, on [__________] [__],
2004, at 389 John Downey Drive, P.O. Box
1500, New Britain, Connecticut 06050.
The Purpose of Meeting: To vote on a proposal to adopt the merger
agreement and approve the merger as
described in "The Merger."
Record Date: The record date for shares entitled to vote
is [_________] [__], 2004.
Outstanding Shares Held on
Record Date: As of [___________] [_], 2004, there were
approximately [_________________] shares of
our common stock outstanding.
Shares Entitled to Vote: Shares entitled to vote are the shares of
our common stock held at the close of
business on the record date, [__________]
[___], 2004.
Each share of our common stock that you own
on the record date entitles you to one vote.
Shares held by us in our treasury are not
voted.
Quorum Requirement: A quorum of stockholders is necessary to
hold a valid meeting.
The presence in person or by proxy at the
special meeting of holders of a majority of
the outstanding shares of our common stock
entitled to vote at the meeting constitutes
a quorum. Abstentions and broker "non-votes"
count as present for establishing a quorum.
Shares held by us in our treasury do not
count toward a quorum.
A broker non-vote occurs on an item when a
broker is not permitted to vote on that item
without instruction from the beneficial
owner of the shares and no instruction is
given.
Shares Beneficially Owned by
our Directors and Executive
Officers as of January 30,
2004: 746,313 shares of our common stock, which
represent approximately 23% of the
outstanding shares of our common stock as of
January 30, 2004:
-15-
Vote Required
Adoption of the merger agreement and approval of the merger requires the
affirmative vote of at least a majority of the outstanding shares of our common
stock. Abstentions and broker non-votes have the same effect as a vote against
the adoption of the merger agreement.
How to Vote
You may vote in person at the meeting or by proxy. We recommend you vote
by proxy even if you plan to attend the special meeting. You can always change
your vote at the meeting.
Voting instructions are included on your proxy card. If you properly give
your proxy and submit it to us in time to vote, one of the individuals named as
your proxy will vote your shares as you have directed. You may vote for or
against the proposal or abstain from voting.
How to Vote by Proxy. Mark your proxy, date and sign it, and return it to
[______________] in the postage-paid envelope provided. If the envelope is
missing, please address your completed proxy card to Moore Medical Corp., 389
John Downey Drive, P.O. Box 1500, New Britain, Connecticut 06050, Attention:
John M. Zinzarella, Chief Financial Officer.
If you submit your proxy but do not make a specific choice, your proxy
will follow the board of directors' recommendation and vote your shares "FOR"
the adoption of the merger agreement and approval of the merger.
Revoking Your Proxy. You may revoke your proxy at any time before it is
voted by:
o timely delivery of a valid, later-dated proxy;
o written notice to our Secretary before the special meeting that you
have revoked your proxy; or
o voting by ballot at the special meeting.
Voting in Person. If you plan to attend the special meeting and wish to
vote in person, we will give you a ballot at the meeting. However, if your
shares are held in the name of your broker, bank or other nominee, you must
bring an account statement or letter from the nominee indicating that you are
the beneficial owner of the shares on [__________] [__], 2004, the record date
for voting.
Proxy Solicitation. We will pay our own costs of soliciting proxies,
except that we are sharing equally with McKesson the expense of printing and
mailing this proxy statement. In addition to this mailing, proxies may be
solicited by our directors, officers or employees in person or by telephone or
electronic transmission.
We have retained [__________________], to assist us in the distribution
and solicitation of proxies. We will pay [______________], a fee of
approximately $[__________], plus reasonable expenses for these services.
-16-
The extent to which these proxy soliciting efforts will be necessary
depends entirely upon how promptly proxies are submitted. You should send in
your proxy without delay by mail. We also reimburse brokers and other nominees
for their expenses in sending these materials to you and getting your voting
instructions.
Do not send in any stock certificates with your proxy cards. A letter of
transmittal with instructions for surrendering your Moore stock certificates
will be mailed to you as soon as practicable after the completion of the merger.
Other Business; Adjournments
Any adjournment may be made from time to time by approval of the holders
of shares representing a majority of the votes present in person or by proxy at
the meeting, whether or not a quorum exists, without further notice other than
by an announcement made at the meeting, unless our board of directors fixes a
new record date for the adjourned meeting.
We may also adjourn or postpone the meeting to the extent necessary to
ensure that any necessary supplement or amendment to this proxy statement is
provided to our stockholders in advance of a vote on the merger and the merger
agreement.
If a quorum is not present at the meeting, or a quorum is present but
sufficient votes to approve a proposal are not received, the persons named as
proxies may propose one or more adjournments of the meeting to permit further
solicitation of proxies. Any such adjournment will require the affirmative vote
of a majority of the common stock represented at the meeting in person or by
proxy. The persons named as proxies will vote those proxies that they are
entitled to vote FOR the proposal in favor of an adjournment of the meeting and
will vote those proxies required to be voted AGAINST the proposal against such
adjournment.
-17-
THE MERGER
Background of the Merger
Our board of directors has periodically assessed strategic options in
light of increasing competition in the health care product supply and
distribution industry with the objective of enhancing stockholder value. Among
other things, our board has assessed our prospects for growth given our relative
small size in the industry and inherent competitive disadvantage in purchasing
and distribution in an increasingly consolidating market, and determined that
alternative strategies for maximizing stockholder value should be explored. On
August 16, 2003, we engaged Lehman Brothers Inc. to act as financial advisor
with respect to strategies to maximize stockholder value, including a possible
sale of Moore.
On August 28, 2003, as a result of an earlier telephone call from a
representative of McKesson to one of our directors, a representative of McKesson
met with Linda M. Autore, our President and Chief Executive Officer, to discuss
McKesson's interest in a possible business combination between us and McKesson.
On September 17, 2003, certain members of our board met with our financial
advisors to discuss several alternatives for maximizing stockholder value,
including a possible sale of the company. In light of the uncertainty and
disruption that would be created for our employees, customers and suppliers if a
broad solicitation of potential buyers was conducted and based upon historical
conversations between our senior management with various potential buyers,
including McKesson, the board concluded that McKesson would be the buyer most
likely to offer the greatest value for us and therefore instructed Lehman
Brothers to contact McKesson regarding its interest in acquiring our company.
Following the meeting of September 17, 2003, Lehman Brothers approached
McKesson on our behalf regarding McKesson's interest in pursuing an acquisition
of Moore. McKesson indicated an interest in discussing an acquisition of our
company.
On October 7, 2003, we entered into a confidentiality agreement with
McKesson.
On October 9, 2003, representatives of our company met in Chicago,
Illinois with representatives of McKesson and discussed the possibility of a
business combination between McKesson and Moore. McKesson verbally indicated
that it would like to explore an acquisition of Moore and offered a price of
$9.00 per share in cash, subject to the completion of a due diligence review of
Moore. At the meeting, our representatives explained that the $9.00 proposal was
inadequate.
On October 14, 2003, McKesson delivered a letter to us proposing to
acquire our company at a price of $11.50 per share in cash, subject to the
completion of a due diligence review of our company and our entering into an
exclusivity agreement. Our board met and instructed management and its financial
advisors to advise McKesson that the $11.50 proposal was inadequate and that
Moore would not enter into an exclusivity agreement. Our financial advisor
thereafter continued to negotiate with McKesson's management regarding the price
McKesson would offer to acquire our company.
-18-
On October 20, 2003, McKesson verbally offered to acquire our company at
$12.00 per share in cash, subject to the completion of a due diligence review of
Moore. In addition, McKesson expressly stated that if we entered into
negotiations with any third party regarding the acquisition of our company,
McKesson would rescind its offer and negotiations would be discontinued.
On October 22, 2003, our board met via teleconference to consider
McKesson's proposal. During the meeting, representatives of Lehman Brothers
presented a preliminary analysis of the financial terms of McKesson's proposal.
Based on these discussions, the board concluded that it would be in the best
interests of our stockholders to authorize Moore management and Lehman Brothers
to continue their negotiations with McKesson and to permit McKesson to conduct a
due diligence review of our company.
On October 29, 2003, McKesson commenced its due diligence review of us.
Between November 3, 2003 and November 18, 2003, we provided McKesson
representatives access to due diligence materials requested by McKesson and our
management made itself available to answer due diligence questions from
McKesson's representatives. During this time, our management team made
presentations regarding our business to McKesson's representatives. Thereafter,
additional due diligence materials were provided to McKesson.
On November 5, 2003, our legal counsel, Cadwalader, Wickersham & Taft LLP,
delivered a draft merger agreement to McKesson, and its legal counsel, Pillsbury
Winthrop LLP.
On November 5, 2003, SJ Strategic Investments LLC delivered a letter to us
indicating that it was interested in acquiring our company and requesting that
we enter into an exclusivity agreement with SJ Strategic Investments. SJ
Strategic Investments indicated that it was proposing to purchase all of our
outstanding common stock at $10.00 per share in cash, subject to satisfactory
completion of due diligence, board approval and execution of mutually acceptable
definitive documentation. On November 10, 2003, we responded that we had no
interest in pursuing a transaction with SJ Strategic Investments at that time.
On November 11, 2003, Ms. Autore received a telephone call from a company
("Company #1") indicating an interest in acquiring our company. Such indication
of interest did not include any statement regarding the price that company was
prepared to offer.
On November 13, 2003, SJ Strategic Investments delivered a letter to us in
which it again expressed an interest in acquiring us on the same terms specified
in its letter dated November 5, 2003.
On November 14, 2003, our board met to discuss the status of McKesson's
due diligence review, as well as the proposal made by SJ Strategic Investments
and the expression of interest by Company #1. After discussions with management
and with our legal and financial advisors, the board instructed management and
its advisors to continue to respond to McKesson's diligence requests and to
notify McKesson that we had received such expressions of interest.
On November 18, 2003, we wrote to SJ Strategic Investments acknowledging
receipt of the November 13, 2003 letter. On November 20, 2003, we received a
letter from SJ Strategic Investments in which SJ Strategic Investments
reiterated its offer of $10.00 per share in cash
-19-
subject to satisfactory completion of due diligence, board approval and
execution of mutually acceptable definitive documentation.
In mid-November, 2003, Ms. Autore received telephone calls on behalf of
two other third parties ("Company #2" and "Company #3") each indicating an
interest in discussing an acquisition of our company. Neither company specified
a price at which it would be interested in acquiring us.
On November 18, 2003, McKesson delivered a draft merger agreement to us.
On November 21, 2003, our board met to receive an update on the
indications of interest received from third parties. The board also discussed
with our legal and financial advisors the draft merger agreement we received
from McKesson. The board considered the advantages and disadvantages of
continuing negotiations solely with McKesson, taking into account the
indications of interest received from others and McKesson's stated position that
it would discontinue negotiations and rescind its $12.00 offer if we entered
into discussions with any third party. After discussions with our legal and
financial advisors, the board instructed management and its advisors to continue
negotiations with McKesson and notify McKesson that if an agreement was not
reached by December 2, 2003, we would pursue strategic alternatives with third
parties at that time.
On November 26, 2003, our board met to discuss the status of negotiations
with McKesson. Our legal and financial advisors reported that McKesson was
considering our position on several issues raised by McKesson's proposed merger
agreement. They also reported that McKesson had further due diligence requests.
In addition, management reported on recent communications with SJ Strategic
Investments and other third parties that had expressed an interest in discussing
an acquisition of our company. After discussion, the board instructed management
and our advisors to provide McKesson with such additional data as may be
reasonably requested by it to complete its due diligence review of us.
In late November, 2003, Ms. Autore received a telephone call on behalf of
Company #1 indicating an interest in discussing an acquisition of our company.
On December 2, 2003, our board met to discuss the status of negotiations
with McKesson. Management reported on the status of McKesson's due diligence
review. Our legal advisors reported that while some progress had been made with
respect to the merger agreement, several significant issues remained unresolved
and that negotiations over the terms of the merger agreement continued to be
difficult and protracted.
On December 8 and 9, 2003, a representative of McKesson met with a
representative of Lehman Brothers to negotiate unresolved issues in the merger
agreement. McKesson also made additional due diligence inquiries of us.
On December 15, 2003, SJ Strategic Investments delivered a letter to us
indicating that it was interested in acquiring our company and that it was
prepared to offer $12.50 per share in cash, subject to a due diligence review of
our company and negotiation of a definitive agreement.
-20-
On December 15, 2003, Company #2 delivered a letter to us in which it
again expressed an interest in acquiring us. In the letter, Company #2 stated
that it would be prepared to offer a cash amount that would represent a premium
to our stock's 50 day moving average but did not indicate a specific price that
it was prepared to offer. The proposal was subject to customary conditions,
including, among other things, satisfactory completion of due diligence.
On December 19, 2003, our board met to discuss the status of negotiations
with McKesson and the additional indications of interest received from third
parties, including the December 15, 2003 letter in which SJ Strategic
Investments made a preliminary and conditional proposal to acquire our company
at a price of $12.50 per share in cash. Our legal advisors indicated that the
open issues in the merger agreement were narrowed. In light of the progress that
had been made with McKesson and the uncertainty surrounding whether SJ Strategic
Investments would make a binding and unconditional offer at $12.50 per share
following a due diligence review of an unspecified period of time, the board
instructed management and its advisors to continue negotiations with McKesson
over the year-end holidays to determine if a definitive agreement could be
reached.
On January 5, 2004, our board met to discuss the status of negotiations
with McKesson and the additional indications of interest received from third
parties. After a full discussion of the issues, the board instructed management
and its advisors to continue negotiations with McKesson and determine whether a
definitive agreement could be reached by January 8, 2004, and if such agreement
was not reached by January 8, 2004, the board instructed management to issue a
press release announcing that we had engaged Lehman Brothers to explore
strategic alternatives to maximize stockholder value, including the possible
sale of our company.
Negotiations continued with McKesson over the terms of the merger
agreement and on January 8, 2004 our legal and financial advisors advised
management that they believed it was reasonably likely that a definitive
agreement could be reached with McKesson.
Between January 8 and January 17, 2004, our legal and financial advisors
continued to negotiate the terms of the merger agreement with McKesson's
representatives.
On January 14, 2004, at the request of SJ Strategic Investments,
representatives of Moore met with representatives of SJ Strategic Investments at
our headquarters for a tour of our facilities. While SJ Strategic Investments
indicated that it was waiting for a response to its proposal, there was no
negotiation or discussion of such proposal.
On January 16, 2004, the McKesson board of directors met and approved the
transaction with Moore. On that same day, one of our directors received a
telephone call and an email from an individual acting as broker on behalf of
Company #2. That individual expressed Company #2's interest in discussing an
acquisition of us and indicated that Company #2 would be willing to offer at
least $11.50 per share in cash for each outstanding share of our common stock,
subject to the same conditions as set forth in their letter to Moore dated
December 15, 2003.
Over the weekend of January 17, 2004, counsel for McKesson and Moore
negotiated the final terms of the merger agreement.
-21-
On January 19, 2004, our board met to discuss the proposed merger
agreement with McKesson. Lehman Brothers presented detailed analysis of the
proposed transaction and rendered its oral opinion, subsequently confirmed in
writing, that, as of such date, the consideration proposed to be paid to our
stockholders in the merger was fair, from a financial point of view, to such
stockholders. At the meeting, after considering the presentation by Lehman
Brothers, the expressions of interest from SJ Strategic Investments and
Companies #1, #2 and #3, the other factors described below under "Reasons for
the Merger," including the board's ability to accept a better offer after the
execution of the proposed merger agreement with McKesson if one emerged, and
McKesson's stated position that it would discontinue negotiations and rescind
its $12.00 offer if we entered into discussions with any third party, the board
concluded that an executed, all-cash transaction with McKesson at $12.00 per
share that would likely close in early 2004 would be in the best interests of
our stockholders. The board therefore approved the proposed merger with
McKesson. Following the board meeting on January 19, 2004, we and McKesson
executed the merger agreement.
Prior to the opening of business on January 20, 2004, McKesson and Moore
issued a joint press release announcing the signing of the merger agreement. On
that same day, we filed a Current Report on Form 8-K with the Securities and
Exchange Commission disclosing that McKesson had agreed to acquire us and
attaching a copy of the merger agreement as an exhibit thereto.
On January 21, 2004, SJ Strategic Investments delivered a letter to us
stating that it was increasing its offer to purchase all of the outstanding
shares of our common stock at a price of $15.00 per share, subject to a due
diligence review of our company and a requirement that our board amend our
rights plan such that it would be rendered inapplicable to SJ Strategic
Investments. In a Schedule 13D filing with the Securities and Exchange
Commission dated January 21, 2004, SJ Strategic Investments reported that it had
purchased 300,000 shares of our common stock on January 20, 2004 at an average
price of $11.991 per share and that its total holdings of our common stock
numbered 312,400, or 9.8% of the outstanding shares of common stock.
On January 22, 2004, our board met to discuss the offer from SJ Strategic
Investments contained in the January 21, 2004 letter. After discussions with our
financial and legal advisors, our board determined that such offer is reasonably
likely to result in a superior offer and, pursuant to the terms of the merger
agreement, instructed our legal advisors to advise McKesson in writing to this
effect.
On January 26, 2004, another third party ("Company #4") delivered a letter
to us in which it expressed an interest in entering into a business combination
with us in which our stockholders would hold less than 50% of the equity
interests in the surviving or resulting entity. That company indicated that it
was prepared to make an offer of its stock with a purported value of between
$13.00 and $14.00 per share of our common stock, subject to the completion of a
due diligence review, the receipt of all required approvals and the execution of
all transaction agreements. Company #4 has a market capitalization of less than
$50 million.
On January 27, 2004, we entered into a confidentiality agreement with SJ
Strategic Investments. On January 29, 2004, SJ Strategic Investments commenced
its due diligence
-22-
review of our company. We are providing SJ Strategic Investments with access to
confidential information in accordance with the terms of the merger agreement
with McKesson.
On February 2, 2004, our board met to discuss, among other things, the
letter received from Company #4 on January 26, 2004. After consulting with our
financial and legal advisors, our board determined that, based upon such letter,
Company #4's proposal is not reasonably likely to result in an offer that is
superior to the McKesson transaction.
Reasons for the Merger; Recommendation of the Board of Directors
At its meeting on January 19, 2004, our board of directors:
o determined that the merger agreement and the merger with McKesson
are advisable and fair to, and in the best interests of, Moore and
its stockholders;
o approved the merger agreement with McKesson;
o directed that the proposed transaction be submitted for
consideration by our stockholders; and
o recommended that our stockholders vote FOR adoption of the merger
agreement and approval of the merger.
In the course of reaching its decision to approve the merger agreement,
the board of directors consulted with our management, as well as our legal
counsel and financial advisors, and considered the following material factors,
among others:
o Our board's determination that a sale would provide greater
stockholder value than continuing to execute our strategy as an
independent company, in light of the following:
o our more limited prospects for growth as a result of our
relative small size in the industry and inherent competitive
disadvantage in purchasing and distribution in an increasingly
consolidating market; and
o that the costs and expenses necessary to maintain our
infrastructure and remain a public company limits our
profitability.
o The consideration to be received by our stockholders under the
merger agreement represents a premium of 54.4 percent over the
average closing price for our common stock for the 30 days ending
January 16, 2004 and a premium of 62.4 percent over the average
closing price for our common stock for the 60 days ending January
16, 2004.
o The recent and historical stock price performance of our common
stock.
-23-
o The negotiations which took place between us and McKesson with
respect to the merger consideration and the belief by the board that
the merger consideration was the highest price that McKesson would
agree to pay.
o The analyses, presentations and opinion of Lehman Brothers to the
effect that, as of the date of the opinion and subject to the
matters set out in its opinion, the merger consideration was fair
from a financial point of view to our stockholders.
o That the merger consideration would be all cash.
o The uncertainty surrounding the unsolicited third party offers
received by us and the board's determination that the potential
benefit to our stockholders of negotiating with such third parties
did not outweigh the significant and reasonably foreseeable downside
risks to our stockholders if we had entered into negotiations with
third parties and, as a result, McKesson had rescinded its offer and
discontinued negotiations as it stated it would and, as such, our
stockholders were not given the opportunity to realize the value
contemplated by the merger with McKesson. In particular:
o there could be no guarantee that any such third party would
make a bona fide, unconditional offer (following an
unspecified period of time to conduct a due diligence review
of our company) to acquire us at a price superior to
McKesson's offer; and
o prior to the execution of the merger agreement, Moore had not
received an offer from a third party that the board had
determined offered greater value to our stockholders.
o The terms of the merger agreement, including:
o the fact that McKesson's obligations under the merger
agreement are not conditioned on its obtaining financing; and
o our board's ability, should we receive a superior third party
offer, to furnish information to and conduct negotiations with
a third party and, subject to the termination fee
requirements, enter into an agreement relating thereto.
o Our board's view that the amount of the termination fee, and the
circumstances under which such fee would be payable to McKesson
pursuant to the merger agreement, are reasonable considering that:
o McKesson was only willing to make its proposal on the express
condition that we agree to such a termination fee upon the
terms set forth in the merger agreement; and
-24-
o our board believed that the amount of the termination fee
would not be likely to deter potentially interested third
parties from pursuing a strategic transaction with us.
o The availability of appraisal rights under the Delaware General
Corporation Law to stockholders who dissent from the merger, which
provides stockholders who dispute the adequacy of the merger
consideration with an opportunity to have a court determine the fair
value of their shares.
o The high likelihood that the proposed transaction would be
consummated, in light of the fact that there are no unusual
requirements or conditions to the merger and McKesson has the
financial resources to consummate the merger expeditiously.
In view of the variety of factors and the amount of information
considered, our board of directors did not find it practicable to and did not
quantify, rank or otherwise assign relative weights to the specific factors it
considered in reaching its decision. The determination was made after
consideration of all of the factors as a whole. In addition, individual members
of our board of directors may have given different weights to different factors.
YOUR BOARD OF DIRECTORS HAS APPROVED THE MERGER AGREEMENT AND THE MERGER AND
BELIEVES THAT THE TERMS OF THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF,
MOORE AND ITS STOCKHOLDERS. YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE MERGER.
Opinion of Lehman Brothers Inc.
On January 19, 2004, Lehman Brothers rendered its opinion to our board of
directors that as of such date and, based upon and subject to matters stated in
its opinion, from a financial point of view, the consideration to be offered to
our stockholders in the merger is fair to such stockholders. For purposes of the
Lehman Brothers opinion, the consideration to be offered in the merger was
defined as $12.00 per share in cash.
The full text of Lehman Brothers' opinion, dated January 19, 2004, is
attached as Annex B to this proxy statement. Stockholders should read such
opinion for a discussion of the assumptions made, procedures followed, factors
considered and limitations upon the review undertaken by Lehman Brothers in
rendering its opinion. The following is a summary of the Lehman Brothers opinion
and the methodology that Lehman Brothers used to render its fairness opinion.
Lehman Brothers' advisory services and opinion were provided for the use
and benefit of our board of directors in connection with its consideration of
the merger. The Lehman Brothers opinion is not intended to be and does not
constitute a recommendation to any of our stockholders as to how they should
vote in connection with the merger. Lehman Brothers was not requested to opine
as to, and the Lehman Brothers opinion does not address, our underlying business
decision to proceed with or effect the merger.
-25-
In arriving at its opinion, Lehman Brothers reviewed and analyzed:
o the merger agreement, and the specific terms of the merger;
o publicly available information concerning us that Lehman Brothers
believed to be relevant to its analyses, including our Annual Report
on Form 10-K for the fiscal year ended December 28, 2002 and our
Quarterly Reports on Form 10-Q for the quarters ended March 29, June
28 and September 27, 2003;
o financial and operating information with respect to our business,
operations and prospects furnished to Lehman Brothers by us,
including financial projections for the company prepared by our
management;
o a trading history of our stock from January 16, 2001 to January 16,
2004 and a comparison of that trading history with those of other
companies that Lehman Brothers deemed relevant;
o a comparison of the historical financial results and present
financial condition of Moore with those of other companies that
Lehman Brothers deemed relevant;
o a comparison of the financial terms of the merger with the financial
terms of certain other transactions that Lehman Brothers deemed
relevant; and
o unsolicited indications of interest received from third parties
through January 19, 2004 regarding a possible acquisition of Moore.
In addition, Lehman Brothers discussed with management our business,
operations, assets, financial conditions and prospects, and undertook such other
studies, analyses and investigations as Lehman Brothers deemed appropriate.
In arriving at its opinion, Lehman Brothers assumed and relied upon the
accuracy and completeness of the financial and other information used by it
without assuming any responsibility for independent verification of such
information and further relied upon the assurances of our management that they
are not aware of any facts or circumstances that would make such information
inaccurate or misleading. With respect to the financial projections of our
company that were furnished to Lehman Brothers by us, with our consent, Lehman
Brothers assumed that such projections were reasonably prepared on a basis
reflecting the best currently available estimates and judgments of our
management as to the future financial performance of our company and Lehman
Brothers relied upon such projections in performing its analysis. However, for
purposes of Lehman Brothers' analysis, Lehman Brothers also considered somewhat
more conservative assumptions and estimates that resulted in certain adjustments
to our projections. Lehman Brothers discussed these adjusted projections with
our management and they agreed with the appropriateness of the use of such
adjusted projections, as well as the projections provided by our management, in
performing its analysis. In arriving at its opinion, Lehman Brothers conducted
only a limited physical inspection of our properties and facilities.
-26-
Lehman Brothers did not make or obtain any evaluations or appraisals of our
assets or liabilities. The Lehman Brothers opinion was necessarily based upon
market, economic and other conditions as they existed on, and could be evaluated
as of, the date of Lehman Brothers' opinion.
Although Lehman Brothers evaluated the fairness, from a financial point of
view, of the consideration to be offered to our stockholders in the merger,
Lehman Brothers was not requested to, and did not, recommend the specific
consideration to be received by our stockholders in the merger, the
consideration for which was determined through negotiations with us and
McKesson. No other limitation was imposed on Lehman Brothers with respect to the
investigations made or procedures followed by Lehman Brothers in rendering its
opinion.
In connection with rendering its opinion, Lehman Brothers performed
certain financial, comparative and other analyses as summarized below. Lehman
Brothers noted that no company or transaction used in its analyses as a
comparison is identical to the contemplated merger. In arriving at its opinion,
Lehman Brothers did not ascribe a specific range of value to our company, but
rather made its determination as to the fairness, from a financial point of
view, to our stockholders of the consideration to be offered to such
stockholders in the merger on the basis of financial and comparative analyses.
The preparation of a fairness opinion involves various determinations as to the
most appropriate and relevant methods of financial and comparative analysis and
the application of those methods to the particular circumstances. Therefore,
such an opinion is not readily susceptible to partial analysis or summary
description. Furthermore, in arriving at its opinion, Lehman Brothers did not
attribute any particular weight to any analysis or factor considered by it, but
rather made qualitative judgments as to the significance and relevance of each
analysis and factor. Accordingly, Lehman Brothers believes that its analyses
must be considered as a whole and that considering any portion of such analyses
and factors, without considering all analyses and factors as a whole, could
create a misleading or incomplete view of the process underlying its opinion. In
its analyses, Lehman Brothers made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which are beyond our control. None of Moore, Lehman Brothers or any other person
assumes responsibility if future results are materially different from those
discussed. Any estimates contained in these analyses were not necessarily
indicative of actual values or predictive of future results or values, which may
be significantly more or less favorable than those set forth therein. In
addition, analyses relating to the value of businesses do not purport to be
appraisals or to reflect the prices at which businesses actually may be sold.
The following is a summary of the material financial analyses performed by
Lehman Brothers in connection with providing its opinion to our board of
directors. Certain of the summaries of financial analyses include information
presented in tabular format. In order to fully understand the financial analyses
performed by Lehman Brothers, the tables must be read together with the text of
each summary. The tables alone do not constitute a complete description of the
financial analyses. Accordingly, the analyses listed in the tables and described
below must be considered as a whole. Considering any portion of such analyses or
factors, without considering all analyses and factors, could create a misleading
or incomplete view of the process underlying the Lehman Brothers opinion.
-27-
Stock Trading History
Lehman Brothers considered historical data with regard to the trading
price of our shares for the period from January 16, 2001 to January 16, 2004 and
the relative stock price performances during this same period of the Russell
2000 Index and an index of distributors of medical and surgical products created
by Lehman Brothers for the purpose of analyzing the merger (the med/surg
composite). The med/surg composite included Fisher Scientific International,
Inc., Henry Schein, Inc., Owens & Minor, Inc., Patterson Dental Company and PSS
World Medical, Inc. Lehman Brothers noted that during this time period, the
share price of Moore increased 83.7%, the med/surg composite increased 87.3% and
the Russell 2000 Index increased 20.0%. Lehman Brothers noted that the share
price of our company increased 18.5% for the period from January 16, 2001 to
January 7, 2004. On January 8, 2004, the American Stock Exchange ("AMEX")
inadvertently halted the trading of our stock. Following the resumption of
trading on that day, there was a significant increase in the trading volume as
well as the trading price of our common stock. Lehman Brothers also noted that
the consideration to be offered in the merger of $12.00 per share was in excess
of our share price from January 16, 2001 to January 16, 2004.
Premiums Paid Analysis
Lehman Brothers analyzed the $12.00 per share offered to our stockholders
to derive premiums over our stock price on January 16, 2004 (the last trading
day prior to the delivery of the Lehman Brothers opinion), January 7, 2004 (the
day prior to the inadvertent halt of trading of Moore stock on the AMEX),
October 20, 2003 (the day McKesson proposed $12.00 per share in cash as
consideration), as well as the average closing stock price for Moore for the
thirty day, sixty day, ninety day, one hundred and eighty day and one year
periods ending January 16, 2004. The results of this analysis are set forth
below.
Implied Premium
January 16, 2004 ............................................ 14.8%
Day prior to AMEX halt (January 7, 2004) .................... 68.8%
Day of McKesson proposal (October 20, 2003) ................. 98.3%
30-day average .............................................. 54.4%
60-day average .............................................. 62.4%
90-day average .............................................. 65.8%
180-day average ............................................. 76.7%
1-year average .............................................. 73.9%
52-week high (January 16, 2004) ............................. 14.8%
Lehman Brothers also reviewed the one-day, one-week and four-week premiums
for 153 all-cash transactions valued between $25 million and $75 million
announced since January 1, 2001. For the one-day premiums, Lehman Brothers
calculated the premium using the closing stock prices on January 16, 2004,
January 7, 2004 and October 20, 2003. Lehman Brothers noted the 47% increase in
the share price of Moore from January 7, 2004 (the day prior to the inadvertent
halt of trading of Moore stock on the AMEX) through January 16, 2004 (the last
trading day prior to the delivery of the Lehman Brothers opinion).
Lehman Brothers noted that the one-day (for the periods prior to January
8, 2004), one-week and four week premiums were in excess of the mean and median
of the 153 transactions reviewed. Lehman Brothers concluded that such analysis
was supportive of its opinion as to the
-28-
fairness, from a financial point of view, of the consideration to be offered to
our stockholders in the merger.
One Day One Week Four Week
Implied Merger:
January 16, 2004 ......................... 14.8% 41.3% 70.2%
January 7, 2004 .......................... 68.8% -- --
October 20, 2003 ......................... 98.3% -- --
153 All-cash
Transactions:
Mean ..................................... 48.8% 52.2% 59.8%
Median ................................... 37.8% 40.8% 45.4%
Analysis of Moore
Comparable Company Analysis. In order to assess how the public market
values shares of publicly traded companies similar to our company, Lehman
Brothers reviewed and compared specific financial and operating data relating to
Moore and a group of publicly traded distributors of medical and surgical
products that Lehman Brothers deemed relevant, which included Fisher Scientific
International, Inc., Henry Schein, Inc., Owens & Minor, Inc., Patterson Dental
Company and PSS World Medical, Inc.
Using publicly available information and information for our company
provided by our management, Lehman Brothers calculated and analyzed each of the
company's January 16, 2004 stock price to its estimated calendar year (CY) 2004
earnings per share (commonly referred to as a price earnings ratio, or P/E) and
each company's enterprise value to certain historical financial criteria,
including the latest twelve months (LTM) earnings before interest, taxes,
depreciation and amortization (EBITDA) and estimated CY 2003 EBITDA. The
enterprise value of each company was obtained by adding its short and long-term
debt to the sum of the market value of its diluted common equity, the value of
any preferred stock (at liquidation value), the book value of any minority
interest and the value of any material debt-equivalent liabilities and
subtracting any cash or cash equivalents.
Enterprise Value as a
multiple of:
LTM EBITDA CY 2003E EBITDA CY 2004 P/E
Medical & Surgical
Distributors:
Mean ............................ 14.6x 14.0x 19.5x
Median .......................... 12.6x 12.2x 19.3x
Moore:
Current (January 16, 2004) ...... 15.3x 16.3x 25.9x
Implied Transaction ............. 17.5x 18.6x 29.8x
Because of the inherent differences between the business, operations and
prospects of Moore and the business, operations and prospects of the companies
included in the comparable companies analysis, Lehman Brothers believed that it
was inappropriate to, and therefore did not, rely solely on the quantitative
results of the comparable company analysis and accordingly also made qualitative
judgments concerning differences between the financial and operating
-29-
characteristics and prospects of Moore and the companies included in the
comparable company analysis that would affect the public trading values of each.
Among these differences, Lehman Brothers noted that the comparable companies
were substantially larger than us in terms of revenues, profits, employees and
distribution infrastructure.
Lehman Brothers noted that the implied transaction multiples for our
company were in excess of the mean and median of the comparable companies as of
January 16, 2004, the last trading day prior to the delivery of the Lehman
Brothers opinion. Lehman Brothers concluded that such analysis was supportive of
its opinion as to the fairness, from a financial point of view, of the
consideration to be offered to our stockholders in the merger.
Comparable Transaction Analysis. Lehman Brothers reviewed ten announced
acquisitions of companies in the healthcare distribution industry that Lehman
Brothers deemed comparable to the merger. Set forth below are the announcement
date and parties to those transactions:
Announcement Acquirer Target
January 9, 2004 Henry Schein, Inc. Euro Dental Holding GmbH
and demedis GmbH
August 18, 2003 Patterson Dental Company AbilityOne Products Corp.
July 9, 2002 Staples, Inc. Medical Arts Press, Inc.
July 9, 2001 Patterson Dental Company JA Webster, Inc.
June 22, 2000 Fisher Scientific PSS World Medical, Inc.
International, Inc.
December 17, 1997 Invacare Corporation Suburban Ostomy Supply Co., Inc.
December 15, 1997 PSS World Medical, Inc. Gulf South Medical Supply, Inc.
August 4, 1997 Henry Schein, Inc. Sullivan Dental Products, Inc.
March 10, 1997 Henry Schein, Inc. Micro Bio-Medics, Inc.
January 28, 1997 McKesson Corporation General Medical, Inc.
Lehman Brothers considered the transaction values as a multiple of LTM
(prior to the acquisition) EBITDA. Lehman Brothers' compared these results to
the transaction value as a multiple of LTM EBITDA implied by the merger. Lehman
Brothers deemed the multiple of LTM EBITDA to be a particularly relevant
benchmark, because multiples of EBITDA are the most consistent and available of
the set of metrics across the comparable set of transactions, and because it is
easily calculated using the same methodology for each comparable transaction.
Lehman Brothers noted that the implied transaction LTM EBITDA multiple of 18.6x
was in excess of the mean and median of the ten comparable transactions. Lehman
Brothers concluded that such analysis was supportive of its opinion as to the
fairness, from a financial point of view, of the consideration to be offered to
our stockholders in the merger.
Transaction value as a
multiple of LTM EBITDA
Comparable Transactions:
Mean ................................................ 14.0x
Median .............................................. 13.2x
Implied Transaction ................................. 18.6x(1)
----------
(1) Utilizes fiscal 2003 estimated for the LTM period.
Discounted Cash Flow Analysis. Lehman Brothers performed a discounted cash
flow analysis on the projected financial information of our company for the
fiscal years 2004 through 2008. For the purpose of its analysis, Lehman Brothers
analyzed financial projections furnished
-30-
to Lehman Brothers by our management, as well as a somewhat more conservative
set of projections for the fiscal years 2005 through 2008. Lehman Brothers also
performed a sensitivity analysis that assumed constant growth rates and margins
for the fiscal years 2005 through 2008.
Lehman Brothers discounted to present value the projected stream of
unlevered net income (earnings before interest and after taxes) for the fiscal
years 2004 through 2008 as adjusted for: (1) certain projected non-cash items
(such as depreciation and amortization); (2) capital expenditures; and (3)
investments in working capital. To estimate the residual value of our company at
the end of the forecast period, or terminal value, Lehman Brothers applied a
range of 4.0% to 6.0% perpetuity growth rates to projected fiscal 2008 free cash
flow. In performing its analysis, Lehman Brothers employed after-tax discount
rates of 14.0% to 18.0%.
Based on the discount rates and perpetual growth rates, Lehman Brothers
calculated the implied equity value per share for Moore.
High Low
Unadjusted Projections ........................................ $14.41 $7.63
Projections
Adjusted Projections ........................................ $13.97 $7.37
Sensitivity Analysis ........................................ $9.39 $5.34
Lehman Brothers noted that the merger consideration of $12.00 per share
was in the range of the implied equity values per share as based upon the
unadjusted projections and the adjusted projections, and was in excess of the
implied equity value per share based upon the sensitivity analysis. Lehman
Brothers concluded that such analysis was supportive of its opinion as to the
fairness, from a financial point of view, of the consideration to be offered to
our stockholders in the merger.
Miscellaneous
Lehman Brothers is an internationally recognized investment banking firm
and, as part of its investment banking activities, is regularly engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. Our board of directors selected
Lehman Brothers because of its expertise, reputation and familiarity with our
company and the healthcare distribution industry generally, and because its
investment banking professionals have substantial experience in transactions
comparable to this transaction.
As compensation for its services in connection with the merger, we have
agreed to pay Lehman Brothers a fee based on the value, at closing, of the
consideration paid by McKesson, which based on the merger consideration
approximates $1 million, $100,000 of which was paid to Lehman Brothers on
October 15, 2003 as a retainer and $500,000 of which was payable to Lehman
Brothers upon delivery of its opinion. In addition, we have agreed to reimburse
Lehman Brothers for reasonable out-of-pocket expenses incurred in connection
with its engagement and to indemnify Lehman Brothers for certain liabilities
that may arise out of its engagement by us and the rendering of the Lehman
Brothers opinion.
-31-
In the ordinary course of its business, Lehman Brothers may actively trade
in the securities of Moore and McKesson for its own account and for the accounts
of its customers and, accordingly, may at any time hold a long or short position
in such securities. In addition, in the past, Lehman Brothers has performed
various investment banking services for McKesson for which it received customary
compensation and in the ordinary course of business, an affiliate of Lehman
Brothers, is a lender to McKesson.
Material Federal Income Tax Consequences of the Merger
The following general discussion summarizes the material United States
federal income tax consequences of the merger to our stockholders that hold
their Moore common stock as a capital asset. It does not address all aspects of
federal income taxation that may be relevant to a holder of our common stock in
light of that stockholder's particular circumstances or to a stockholder subject
to special rules, such as:
o a stockholder that is not a citizen or resident of the United
States;
o a financial institution or insurance company;
o a mutual fund;
o a tax-exempt organization;
o a dealer or broker in securities or foreign currencies;
o a trader in securities that elects to apply a mark-to-market method
of accounting;
o a stockholder that holds its Moore common stock as part of a hedge,
appreciated financial position, straddle or conversion transaction;
or
o a stockholder that acquired its Moore common stock pursuant to the
exercise of options or otherwise as compensation.
The tax treatment of a partner in a partnership that holds our common
stock will generally depend on the status of the partner and the activities of
the partnership. A partner in a partnership that holds our common stock should
consult his, her or its tax advisor regarding the particular tax consequences to
the partner.
The following discussion is based on the Internal Revenue Code of 1986, as
amended, final, temporary and proposed Treasury regulations promulgated
thereunder, judicial decisions and administrative rulings, each as in effect as
of the date hereof and all of which are subject to change, possibly with
retroactive effect. The consequences under state, local and foreign tax laws are
not addressed. STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO
DETERMINE THE PARTICULAR TAX CONSEQUENCES TO THEM
-32-
(INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME AND
OTHER TAX LAWS) OF THE MERGER.
Our stockholders' receipt of cash pursuant to the merger (including
pursuant to the exercise of dissenter's rights of appraisal) will be a taxable
transaction for U.S. federal income tax purposes. A Moore stockholder will
generally recognize taxable gain or loss for U.S. federal income tax purposes
equal to the difference between the amount of cash received by the stockholder
and the stockholder's aggregate adjusted tax basis in its Moore common stock.
Gain or loss will be calculated separately for each block of Moore common stock
converted into cash in the merger.
Gain or loss recognized by a Moore stockholder will be capital gain or
loss, and will be long-term capital gain or loss if the stockholder's holding
period for its shares of our common stock exceeds one year. In general,
noncorporate stockholders will be eligible for a reduced U.S. federal income tax
rate on long-term capital gains. Stockholders will also be subject to limits on
the deductibility of any recognized capital losses.
Certain holders of our common stock may be subject to backup withholding.
Backup withholding generally applies if the holder (i) fails to furnish its
social security number or other taxpayer identification number ("TIN"), (ii)
furnishes an incorrect TIN, (iii) fails properly to report interest or
dividends, or (iv) under certain circumstances, fails to provide a certified
statement, signed under penalty of perjury, that the TIN provided is correct and
that the holder is not subject to backup withholding. Backup withholding is not
an additional tax but merely an advance payment of tax, which may be refunded to
the extent it results in an overpayment of tax. Certain persons are exempt from
backup withholding, including, in certain circumstances, corporations and
financial institutions.
THE FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO A PARTICULAR HOLDER IN LIGHT OF HIS, HER OR ITS
PARTICULAR CIRCUMSTANCES AND INCOME TAX SITUATION. TAX MATTERS ARE COMPLEX AND
MAY VARY DEPENDING ON YOUR PARTICULAR CIRCUMSTANCES. THEREFORE, WE URGE YOU TO
CONSULT YOUR OWN TAX ADVISORS CONCERNING THE PARTICULAR TAX CONSEQUENCES TO YOU
OF THIS MERGER, INCLUDING THE APPLICATION OF ANY FEDERAL, STATE, LOCAL AND
FOREIGN TAX LAWS.
Regulatory Matters Relating to the Merger
Although no filing with respect to the merger is required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, the Antitrust Division of
the Department of Justice or the Federal Trade Commission could challenge the
merger on antitrust grounds. Accordingly, at any time before or after the
completion of the merger, either the Antitrust Division of the Department of
Justice or the Federal Trade Commission could take action under the antitrust
laws. Certain other persons could take action under the antitrust laws,
including seeking to enjoin the merger. Additionally, at any time before or
after the completion of the merger, any state could take action
-33-
under the antitrust laws. A challenge to the merger could be made and if a
challenge is made there is no assurance that we would prevail.
Prior to completion of the merger, we are required to receive new
controlled substance registration certificates from the United States Department
of Justice, Drug Enforcement Administration and wholesaler drug permits from the
states of Connecticut, California and Florida.
We are not aware of any other material governmental or regulatory approval
required for completion of the merger, other than compliance with the applicable
corporate law of Delaware.
Appraisal Rights of Stockholders
If the merger is consummated, stockholders who do not vote "FOR" the
adoption of the merger agreement, who hold shares of common stock of record on
the date of making a written demand for appraisal as described below, who
continuously hold shares of common stock through the closing of the merger, and
who otherwise comply fully with Section 262 of the Delaware General Corporation
Law ("Section 262"), will be entitled to a judicial determination of the fair
value of their shares of common stock exclusive of any element of value arising
from the accomplishment or expectation of the merger in accordance with the
provisions of Section 262 and to receive from us payment of such fair value in
cash together with a fair rate of interest, if any, as determined by such court.
A proxy returned to us that does not contain voting instructions will, unless
revoked, be voted in favor of the merger agreement. Therefore, a stockholder who
votes by proxy and who wishes to exercise appraisal rights must vote against the
merger agreement or abstain from voting on the merger agreement.
Under Section 262, not less than 20 calendar days prior to the special
meeting, we must notify each of the holders of our stock who was such on the
record date for the meeting that such appraisal rights are available and include
in each such notice a copy of Section 262. This proxy statement constitutes such
notice to the holders of record of our common stock.
The following is a summary of the procedures to be followed under Section
262, the full text of which is attached as Annex C to this proxy statement. The
following discussion is not a complete statement of the law relating to
appraisal rights and is qualified in its entirety by reference to Annex C.
Stockholders should read carefully the full text of Section 262 because failure
to follow any Section 262 procedure may result in the loss of appraisal rights.
Any stockholder who desires to exercise appraisal rights should carefully review
Section 262 before electing or attempting to exercise appraisal rights.
Holders of record of shares of common stock who desire to exercise
appraisal rights must not vote in favor of the merger or consent to the merger
in writing (including by returning a signed proxy card without indicating any
voting instructions as to the proposal) and must deliver a separate written
demand for appraisal of such shares to us prior to the taking of the vote on the
merger agreement. A holder of shares of common stock wishing to exercise
appraisal rights must hold of record such shares on the date the written demand
for appraisal is made and must continue to hold such shares of record through
the effective time of the merger. The demand for
-34-
appraisal will be sufficient if it reasonably informs us of the identity of the
stockholder and that the stockholder intends to demand an appraisal of the fair
value of shares of common stock.
If the shares are owned of record in a fiduciary capacity, such as by a
trustee, guardian or custodian, the demand must be executed by or for the record
owner, and if the shares are owned of record by more than one person, as in a
joint tenancy or tenancy in common, the demand must be made by or for all owners
of record. An authorized agent, including an agent for two or more joint owners,
may execute the demand for appraisal for a holder of record provided the agent
identifies the record owner or owners and expressly discloses in such demand
that the agent is acting as agent for the record owner or owners of such shares.
A record holder, such as a broker, who holds shares of common stock as a
nominee for beneficial owners, some or all of whom desire to demand appraisal,
must exercise appraisal rights on behalf of such beneficial owners with respect
to the shares held for such beneficial owners. In such case, the written demand
for appraisal should set forth the number of shares covered by such demand.
Unless a demand for appraisal specifies a number of shares, the demand will be
presumed to be applicable to all shares outstanding in the name of such record
owner. If a stockholder holds shares of common stock through a broker which in
turn holds the shares through a central securities depository nominee such as
Cede & Co., a demand for appraisal of such shares must be made by or on behalf
of the depository nominee and must identify the depository nominee as record
holder. BENEFICIAL OWNERS WHO ARE NOT RECORD OWNERS AND WHO INTEND TO EXERCISE
APPRAISAL RIGHTS SHOULD INSTRUCT THE RECORD OWNER TO COMPLY STRICTLY WITH THE
STATUTORY REQUIREMENTS WITH RESPECT TO THE DELIVERY OF WRITTEN DEMAND FOR
APPRAISAL. A DEMAND FOR APPRAISAL SUBMITTED BY A BENEFICIAL OWNER WHO IS NOT THE
RECORD OWNER WILL NOT BE HONORED.
A proxy or vote against the adoption of the merger agreement will not
constitute a demand for appraisal. Stockholders should not expect to receive any
additional notice with respect to the deadline for demanding appraisal rights.
Any holder of record of common stock must deliver the written demand for
appraisal prior to the taking of the vote on the merger agreement. All demands
for appraisal should be addressed to Moore Medical Corp., 389 John Downey Drive,
P.O. Box 1500, New Britain, Connecticut, 06050, Attention: Secretary.
If the merger agreement is adopted, then within 10 days after the
effective date of the merger, the surviving corporation will provide notice of
the effective date of the merger to all stockholders who have complied with
Section 262 and who have not voted in favor of or consented to the merger.
A stockholder may withdraw a demand for appraisal in writing within 60
days after the effective time of the merger and accept the terms of the merger.
Thereafter, approval of the surviving corporation will be needed for such a
withdrawal. In all events, if a petition for appraisal has been filed in the
Delaware Court of Chancery, a stockholder may not withdraw without the approval
of the Court.
-35-
Within 120 days after the effective date of the merger, in compliance with
Section 262, any stockholder who has properly demanded an appraisal and who has
not withdrawn his or her demand as provided above and the surviving corporation
each has the right to file in the Delaware Court of Chancery a petition, with a
copy served on the surviving corporation in the case of a petition filed by a
dissenting stockholder, demanding a determination of the fair value of the
shares held by all dissenting stockholders. If, within the 120-day period
following the effective time of the merger, no petition shall have been filed as
provided above, all rights to appraisal will cease and all dissenting
stockholders who owned shares of common stock will become entitled to receive
the merger consideration for each share of common stock held, without interest.
Any dissenting stockholder is entitled, within the 120-day period
following the effective time of the merger and upon written request to the
surviving corporation, to receive from the surviving corporation a statement
setting forth:
o the aggregate number of shares of common stock not voted in favor of
the merger and with respect to which demands for appraisal have been
received, and
o the aggregate number of dissenting stockholders.
Such statement must be mailed within ten days after a written request for
such statement has been received by the surviving corporation, or within ten
days after the expiration of the period for delivery of demands for appraisal,
as described above, whichever is later.
Upon the filing of a petition, the Delaware court is empowered to
determine which dissenting stockholders have complied with the provisions of
Section 262 and are entitled to an appraisal of their shares. The Delaware court
may require that dissenting stockholders submit their share certificates for
notation thereon of the pendency of the appraisal proceedings and the Delaware
court may dismiss the proceedings as to any dissenting stockholder who does not
comply with such requirement.
After determining the stockholders entitled to appraisal, the Delaware
court will appraise shares of common stock owned by the dissenting stockholders,
determining the fair value of such shares exclusive of any element of value
arising from the accomplishment or expectation of the merger. In determining the
fair value, the Delaware court is to take into account all relevant factors. In
Weinberger v. UOP, Inc., the Delaware Supreme Court discussed the factors that
could be considered in determining fair value in an appraisal proceeding,
stating that "proof of value by any techniques or methods which are generally
considered acceptable in the financial community and otherwise admissible in
court" should be considered and that "[f]air" price obviously requires
consideration of all relevant factors involving the value of a company. The
Delaware Supreme Court has stated, that in making this determination of fair
value, the Delaware courts must consider market value, asset value, dividends,
earnings prospects, the nature of the enterprise and any other factors which
could be ascertained as of the date of the merger and which "throw any light on
future prospects of the merged corporation."
The Delaware Supreme Court noted that Section 262 provides that fair value
is to be determined "exclusive of any element of value arising from the
accomplishment or expectation
-36-
of the merger." In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court
stated that such exclusion is a "narrow exclusion [that] does not encompass
known elements of value" but which applies only to the speculative elements of
value arising from such accomplishment or expectation. In Weinberger, the
Delaware Supreme Court held that "elements of future value, including the nature
of the enterprise, which are known or susceptible of proof as of the date of the
merger and not the product of speculation, may be considered."
Stockholders considering seeking appraisal should consider that the fair
value of their shares determined by the Delaware court under Section 262 could
be more than, the same as, or less than, the consideration payable pursuant to
the merger agreement.
The Delaware court may also:
o determine a fair rate of interest, if any, to be paid to dissenting
stockholders in addition to the fair value of the shares,
o determine the costs of the proceeding and assess such costs against
the parties as the Delaware court deems equitable (however, costs do
not include attorneys' and expert witnesses' fees), and
o upon application of a dissenting stockholder, order all or a portion
of the expenses incurred by any dissenting stockholder in connection
with the appraisal proceeding, including, without limitation,
reasonable attorneys' fees and fees and expenses of experts, to be
charged pro rata against the value of all shares entitled to
appraisal.
No appraisal proceedings in the Delaware court will be dismissed as to any
dissenting stockholder without the approval of the Delaware court, and this
approval may be conditioned upon terms which the Delaware court deems just.
Failure to take any required step in connection with appraisal rights may
result in the loss of such rights. Any stockholder who loses such rights will
only be entitled to receive the consideration offered in the merger without
interest.
-37-
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendations of our board of directors with respect
to the merger, stockholders should be aware that some of our officers have
interests in the merger that may be different from, or in addition to, the
interests of our stockholders. Our board of directors was aware of these
interests and considered them, among other matters, in making their
recommendation.
We have entered into employment agreements with certain of our executive
officers that may require the making of a severance payment following a change
of control of our company. In addition, our board has approved the payment of
service bonuses and retention awards to certain of our employees as described
below.
Employment and Severance Agreements
We entered into an amended and restated employment agreement with Linda M.
Autore on October 25, 2002. The agreement provides for Ms. Autore to serve as
our President and Chief Executive Officer at an initial base salary of $295,550
per annum and the grant of options to purchase 27,000 shares of common stock
with a 5-year term and an exercise price of $10.25. This agreement provides that
in the event of a termination of Ms. Autore's employment by us following a
"Change of Control" or without "Cause" or by Ms. Autore following a "Change of
Position" within 12 months of a "Change of Control", she is entitled to receive
100% of her base salary. This agreement also provides that 50% of all
non-exercisable stock options will accelerate and become exercisable in the
event Ms. Autore becomes entitled to a severance payment as set forth in the
immediately preceding sentence. Notwithstanding the foregoing, Ms. Autore is
terminable by us for "Cause". We entered into an executive subscription
agreement, dated January 11, 2001, relating to the purchase of 50,000 shares of
our common stock and a promissory note relating to a loan of $281,250 that would
enable Ms. Autore to purchase such shares. The loan carries an interest rate of
6.0% per annum, payable annually, and matured on January 11, 2004. Ms. Autore
has borrowed funds sufficient to satisfy her obligations under the loan from a
third party financial institution and repaid us in full.
We entered into an amended and restated employment agreement with John M.
Zinzarella on February 10, 2003. The agreement provides for Mr. Zinzarella to
serve as our CFO/Vice President Finance at an initial base salary of $185,000
per annum. This agreement provides that in the event of a termination of Mr.
Zinzarella's employment by us following a "Change of Control" or without
"Cause", he is entitled to receive 100% of his base salary. This agreement also
provides that in the event Mr. Zinzarella terminates his employment with us
following a "Change of Position" within 12 months of a "Change of Control", he
is entitled to receive 75% of his base salary. Notwithstanding the foregoing,
Mr. Zinzarella is terminable by us for "Cause".
We entered into an amended and restated employment agreement with Jon
Garrity on October 25, 2002. The agreement provides for Mr. Garrity to serve as
our Senior Vice President of Supply Chain at an initial base salary of $200,000
per annum. This agreement provides that in the event of a termination of Mr.
Garrity's employment by us following a "Change of Control" or without "Cause",
he is entitled to receive 100% of his base salary. This agreement also
-38-
provides that in the event Mr. Garrity terminates his employment with us
following a "Change of Position" within 12 months of a "Change of Control", he
is entitled to receive 75% of his base salary. Notwithstanding the foregoing,
Mr. Garrity is terminable by us for "Cause".
We entered into an amended and restated employment agreement with Mark
Florence on August 15, 2003. The agreement provides for Mr. Florence to serve as
our Vice President/General Manager, Primary Care at an initial base salary of
$180,000 per annum. This agreement provides that in the event of a termination
of Mr. Florence's employment by us following a "Change of Control" or without
"Cause", he is entitled to receive 100% of his base salary. This agreement also
provides that in the event Mr. Florence terminates his employment with us
following a "Change of Position" within 12 months of a "Change of Control", he
is entitled to receive 75% of his base salary. Notwithstanding the foregoing,
Mr. Florence is terminable by us for "Cause".
Change in Control Agreements
Our board of directors renewed the Moore Medical Corp. 2001-2002 Change of
Control and Position Payment Plan by adopting the Moore Medical Corp. 2003-2004
Change of Control and Position Payment Plan by unanimous written consent on
November 25, 2003 following the approval of such plan's renewal by the
Compensation Committee of the board on October 21, 2003. The plan sets forth the
definitions of "Change of Control" and "Change of Position" as used in the
employment agreements described above under "--Employment and Severance
Agreements with Executive Officers". The plan also sets forth when any required
payments are to be made to the related executive officers.
Ron Flormann, Geoff Boytos, Tim Kardish and Patrick Early are participants
under the Moore Medical Corp. 2003-2004 Change of Control and Position Payment
Plan. Each of them is entitled to receive a severance payment in an amount equal
to 75% of his base salary in the event there is a "Change of Control" followed
within 12 months by a termination of the employee's employment by us without
"Cause" or by the employee due to a "Change of Position".
By action of the Compensation Committee of our board of directors on
October 21, 2003 and as ratified by our board of directors by unanimous written
consent on November 25, 2003, we are committed to make additional service bonus
and retention award payments to certain of our employees. Linda M. Autore, John
M. Zinzarella and Todd Baldanzi are each entitled to receive a bonus for
managing the sale process, such bonus to be paid at the completion of the sale
process whether or not it leads to a transaction, in the amount of $20,000,
$20,000 and $10,000, respectively. In addition, the following of our employees
are entitled to receive the indicated amounts as a retention bonus, such amounts
to be paid no later than 10 business days following the earlier of (i) 90
calendar days following a "Change of Control" or (ii) the date of the employee's
termination by us following a "Change of Control" without cause or by the
employee due to a "Change of Position":
Name of Employee Amount of Retention Bonus
------------------ -------------------------
Linda M. Autore $295,000
John M. Zinzarella $100,000
-39-
Mark Florence $30,000
Patrick Early $30,000
Geoff Boytos $30,000
Ron Flormann $30,000
Tim Bidwell $25,000
David Lafferty $25,000
Vionnta Rivers $25,000
Lori Steinberg $25,000
Todd Baldanzi $15,000
Gary Savage $10,000
Trina Lang $10,000
Equity-Based Awards. Pursuant to the terms of our equity-based
compensation plans, all unvested options to purchase our stock held by our
employees, including executive officers, will become vested and exercisable upon
approval of the merger with McKesson by our stockholders at the special meeting.
As of January 30, 2004, the number of vested and unvested options held by
our executive officers that will become vested in this manner is as follows:
Number of
Number of Unvested Weighted Avg.
Moore Executive Officers Vested Options Options Exercise Price
---------------------------------- -------------- --------- --------------
Linda M. Autore 35,250 6,750 $10.05
Jon Garrity 5,000 5,000 $7.20
John M. Zinzarella 5,750 10,750 $7.82
All Moore executive officers
as a group (3 persons) 46,000 22,500 $9.10
Directors' And Officers' Indemnification and Insurance
McKesson has agreed that it will indemnify to the fullest extent permitted
by applicable law all of our past and present directors and officers against any
costs, claims, judgments, fines, losses, damages, liabilities or expenses
(including reasonable attorney's fees) incurred in connection with any
threatened or pending claim, action, suit, investigation or proceeding (whether
civil, criminal, administrative or investigative) arising out of matters
existing or occurring at or prior to the effective time of the merger. McKesson
also agreed to advance expenses to each party entitled to such indemnification
to the fullest extent permitted by applicable law, so long as such party
provides an undertaking to repay such advances in the event it is ultimately
determined that such expenses cannot be reimbursed or indemnified under
applicable law to the extent such undertaking is required under applicable law.
In addition, for a period of 6 years after the effective time of the merger,
McKesson will indemnify each person who is a beneficiary of the provisions of
Article NINTH of our certificate of incorporation as in effect as of January 19,
2004 for acts or omissions occurring at or prior to the effective time of
-40-
the merger to the same extent that such person is so entitled under said Article
NINTH as in effect on such date.
McKesson is also obligated, for six years after the merger, to maintain in
effect our current directors' and officers' liability insurance (but the annual
premiums for such insurance may not exceed 200% of the last annual premium paid
for our directors' and officers' liability insurance prior to January 19, 2004)
covering acts or omissions occurring prior to the effective time of the merger.
-41-
OWNERSHIP OF VOTING STOCK BY MANAGEMENT
The following table gives information concerning the beneficial ownership
of our common stock as of January 30, 2004, by each director, the chief
executive officer and each of our most highly compensated executive officers,
and all directors and executive officers of Moore as a group.
Total Shares
Beneficially Direct Right to Percent of
Name of Beneficial Owner Owned(1)(2) Ownership Acquire(3) Class(4)
Linda M. Autore
President and Chief
Executive Officer, Director .... 100,000 58,000 42,000 2.9%
Jon Garrity
Senior Vice President of
Supply Chain and Customer
Support ........................ 6,300 1,300 5,000 *(5)
John M. Zinzarella
Vice President of Finance,
Treasurer and Chief
Financial Officer .............. 5,750 0 5,750 *(5)
Christopher W. Brody
Director ....................... 210,000(6) 160,000 0 6.6%
Peter A. Derow
Director ....................... 16,000 10,000 6,000 *(5)
Steven Kotler
Director ....................... 155,520 155,520 0 4.7%
Robert H. Steele
Chairman of the Board .......... 64,800 64,800 0 2.6%
Wilmer J. Thomas, Jr .............
Director ....................... 186,943(7) 0 0 5.9%
Dan K. Wassong
Director ....................... 1,000 1,000 0 *(5)
All current directors and
executive officers as a
group (9 persons) .............. 746,313 637,563 58,750 22.9%
(1) The information as to beneficial ownership is based on statements
furnished to Moore by its executive officers and directors. Each executive
officer and director has sole voting and sole investment power with
respect to his respective shares listed above.
(2) Includes shares listed under the captions "Direct Ownership" and "Right to
Acquire."
(3) Individuals have the right to acquire these shares within 60 days of
January 30, 2004, by the exercise of stock options or through purchases
under Moore's Employee Stock Purchase Plan.
(4) For the purposes of this table, "Percent of Class" held by each individual
has been calculated based on a total class equal to the sum of (i)
3,200,009 shares of common stock issued and outstanding on January 30,
2004, plus (ii) for such individual the number of shares of common stock
subject to stock options presently exercisable, or exercisable within 60
days after January 30, 2004, held by that individual, and which percent is
rounded to the nearest tenth of a percent.
(5) Owns less than 1% of the outstanding Common Stock.
(6) Includes 50,000 shares of common stock held by Vantage Venture Partners,
LP as to which voting power is exercised solely by Mr. Brody in his
capacity as Chairman and sole member of its general partner, Vantage
Partners, LLC.
(7) Includes 186,943 shares of common stock held by the Thomas Charitable
Foundation as to which voting power is held jointly by Mr. Thomas in his
capacity as co-trustee and two other co-trustees.
-42-
OWNERSHIP OF VOTING STOCK BY CERTAIN BENEFICIAL OWNERS
The following table sets forth information with respect to the only person
who, to the best of our knowledge, beneficially owned more than five percent of
our common stock as of January 30, 2004. Unless otherwise indicated below, the
person included in the table has sole voting and investment power with respect
to all shares included therein.
Percent of Common
Name and Address of Beneficial Owner Number of Shares Stock Outstanding
Heartland Advisors, Inc.
789 North Water Street, Milwaukee, WI 53202 ........ 449,400 14.1%
SJ Strategic Investments LLC/ John M. Gregory/
Joan P. Gregory/ Susan Gregory/ James M. Gregory
340 Edgemont Avenue, Suite 500, Bristol, TN
37620 .............................................. 312,400 9.8%
Bruce J. Haber/ Royce Kanofsky/ FHS Enterprises LLC
65 The Oaks, Roslyn, NY 11576/ 1665 Warwick
Road, Hewlett, NY 11557/ 145 Huguenot Street,
Suite 402, New Rochelle, NY 10801 .................. 214,550 6.7%
Vantage Venture Partners, LP/ Christopher W. Brody
610 Fifth Avenue, 7th Floor, New York, NY 10020 .... 210,000 6.6%
TowerView LLC
500 Park Avenue, New York, NY 10022 ................ 193,500 6.0%
Dimensional Fund Advisors, Inc. ......................
1299 Ocean Avenue, 11th Floor, Santa Monica,
CA 90401 ........................................... 191,100 6.0%
Thomas Charitable Foundation
272 Undermountain Road, Salisbury, CT 06068 ........ 186,943* 5.9%*
* Wilmer J. Thomas, Jr., a director of Moore, is the trustee of Thomas
Charitable Foundation.
-43-
THE MERGER AGREEMENT
The following is a summary of the material terms of the merger agreement. This
summary does not purport to describe all the terms of the merger agreement and
is qualified by the complete merger agreement which is attached as Annex A to
this proxy statement and incorporated by reference. Our stockholders are urged
to read the merger agreement carefully and in its entirety.
General
Under the merger agreement, a wholly-owned subsidiary of McKesson will
merge with and into Moore, with Moore continuing as the surviving corporation
and a wholly-owned subsidiary of McKesson. Each share of our common stock and
associated preferred stock purchase right will be converted into the right to
receive $12.00 in cash, without interest.
Closing Matters
Closing. Unless the parties agree otherwise, the closing of the merger
will take place two business days after all closing conditions have been
satisfied or waived, unless another time or date is agreed to in writing by the
parties. See "The Merger Agreement - Conditions" below for a more complete
description of the conditions that must be satisfied prior to closing.
Effective Time. As soon as practicable after the closing of the merger, we
will file a certificate of merger in such form as is required by and executed
and acknowledged in accordance with the relevant provisions of the Delaware
General Corporation Law. The merger will become effective when the certificate
of merger is filed with the Delaware Secretary of State or at such later time as
may be stated in the certificate of merger.
Consideration to be Received in the Merger
The merger agreement provides that each share of our common stock issued
and outstanding immediately prior to the effective time of the merger, together
with the associated rights issued under our stockholder rights plan, will be
cancelled and converted into the right to receive $12.00 in cash, without
interest.
In addition, any shares of our common stock owned by McKesson or Moore or
any of their respective subsidiaries will be automatically canceled, and will
not be exchanged for any consideration.
Treatment of Stock Options
The merger agreement provides that, at the effective time of the merger,
each outstanding and unexercised option or right to purchase shares of our
common stock granted under our stock plans, vested or unvested, will be canceled
and the holder thereof will receive a cash payment equal to the product of (x)
the excess, if any, of the merger consideration over the exercise price of such
Moore stock option and (y) the number of underlying shares of our common stock
with respect to which the stock option had not been exercised prior to the
effective time of the merger.
-44-
Our stock option plans will terminate as of the effective time of the
merger.
Exchange of Certificates in the Merger
Before the closing of the merger, McKesson will appoint a bank or trust
company to act as paying agent to handle the exchange of Moore stock
certificates for the payment of cash. As soon as practicable after the effective
time of the merger, the exchange agent will send a letter of transmittal, which
is to be used to exchange Moore stock certificates for the payment of cash, to
each former Moore stockholder. The letter of transmittal will contain
instructions explaining the procedure for surrendering Moore stock certificates.
You should not return certificates with the enclosed proxy card.
Moore stockholders who surrender their stock certificates, together with a
properly completed letter of transmittal, will receive $12.00 in cash per share
of our common stock, without interest.
Covenants
We have undertaken certain covenants in the merger agreement concerning
the conduct of its business between the date the merger agreement was signed and
the completion of the merger. The following summarizes the more significant of
these covenants:
Our Board of Directors' Covenant to Recommend. We shall, through our
board, recommend that our stockholders vote in favor of the adoption and
approval of the merger agreement and approval of the merger and that such
recommendation shall be included in this proxy statement except as provided
below.
No Solicitation. We have agreed that neither us nor any of our
subsidiaries nor any of our officers and directors or of our subsidiaries shall
(and we shall use our best efforts to cause our employees, agents and
representatives not to), directly or indirectly (i) solicit, initiate,
encourage, knowingly facilitate or induce any inquiry with respect to, or the
making, submission or announcement of, any "acquisition proposal" of the type
described below, (ii) participate in any discussions or negotiations regarding,
or furnish to any person any nonpublic information in connection with, or take
any other action to facilitate any inquiries or the making of any proposal that
constitutes or may reasonably be expected to lead to, any acquisition proposal,
(iii) engage in discussions with any person with respect to any acquisition
proposal, except as to the existence of these provisions, (iv) approve, endorse
or recommend any acquisition proposal or (v) enter into any letter of intent or
similar document or any contract, agreement or commitment contemplating or
otherwise relating to an acquisition proposal.
We were required to immediately cease any and all existing activities,
discussions and negotiations with third parties conducted up to the time the
merger agreement was signed with respect to an acquisition proposal.
As promptly as practicable after receipt of any acquisition proposal (and
in any event within 48 hours of such receipt) or any request for nonpublic
information or inquiry which it reasonably believes would lead to an acquisition
proposal, we shall provide McKesson with oral and written notice of the material
terms and conditions of such acquisition proposal, request or inquiry, and
-45-
the identity of the person or group making any such acquisition proposal,
request or inquiry. We shall provide McKesson as promptly as practicable, oral
and written notice of any changes in the proposed material terms and conditions
or the status of any such acquisition proposal, request or inquiry.
In the event that we receive an unsolicited, written acquisition proposal
from a third party that our board has concluded (following consultation with our
outside legal counsel and our financial advisor), is, or is reasonably likely to
result in, a superior offer, we may then take the following actions:
o Furnish nonpublic information to the third party making such
acquisition proposal, provided that (A) we receive from the third
party an executed confidentiality agreement containing customary
limitations on the use and disclosure of all nonpublic written and
oral information furnished to such third party on its behalf, the
terms of which are substantially similar to the terms contained in
the confidentiality agreement executed by McKesson and us and (B)
substantially contemporaneously with furnishing any such nonpublic
information to such third party, we furnish such nonpublic
information to McKesson (to the extent such nonpublic information
has not been previously so furnished); and
o Participate in negotiations and discussions with the third party
with respect to the acquisition proposal.
In response to the receipt of a superior offer, our board may withhold,
withdraw, amend or modify its recommendation of the merger agreement and the
merger and may indicate that it is doing so because it has received a superior
offer and, in the case of our receipt of a superior offer that is a tender or
exchange offer made directly to our stockholders, recommend that our
stockholders accept such tender or exchange offer if:
o the stockholders meeting has not occurred,
o Moore
o provides McKesson with written notice that expressly states
that
o it has received a superior offer,
o the material terms and conditions of the superior offer
and the identity of the person or group making the
superior offer, and
o it intends to effect a change in recommendation and the
manner in which it intends to do so,
o considers any counterproposal to the superior offer that
McKesson may make during the 3 day period after McKesson's
receipt of such notice and
-46-
determines in the sole judgment of our board (following
consultation with its outside legal counsel and its financial
advisor) that such superior offer is more favorable, from a
financial point of view, to our stockholders (in their
capacities as stockholders) than the McKesson counterproposal,
and
o We shall not have breached in any material respect the no
solicitation provisions described above or the provisions of the
merger agreement requiring us to call a stockholders meeting.
An "acquisition proposal" means any offer or proposal relating to any
transaction (other than the transaction contemplated by the merger agreement) or
series of related transactions involving: (A) any purchase from us or
acquisition by any person or "group" (as defined under Section 13(d) of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder) of more than a 15% interest in the total outstanding voting
securities of our company or any tender offer or exchange offer that if
consummated would result in any person or group beneficially owning 15% or more
of the total outstanding voting securities of our company or any merger,
consolidation, business combination or similar transaction involving our
company, (B) any sale of all or substantially all of our assets (including our
subsidiaries taken as a whole), or (C) any liquidation or dissolution of our
company.
A "superior offer" means an unsolicited, written offer made by a third
party to acquire, directly or indirectly, pursuant to a tender offer, exchange
offer, merger, consolidation or other business combination, or asset purchase,
all or substantially all of our assets or a majority of the total of our
outstanding voting securities and as a result of which our stockholders
immediately preceding such transaction would hold less than 50% of the equity
interests in the surviving or resulting entity of such transaction or any direct
or indirect parent or subsidiary thereof, on terms that our board has concluded
(following consultation with our outside legal counsel and its financial
adviser) (A) to be more favorable, from a financial point of view, to our
stockholders (in their capacities as stockholders) than the terms of the merger
(or any counterproposal as described above) and (B) the conditions to the
consummation of which are reasonably capable of being satisfied.
Operations of Moore Pending Closing. We have undertaken a separate
covenant that places restrictions on ourselves and our subsidiaries until the
effective time of the merger. In general, we and our subsidiaries are required
to conduct ourselves in the ordinary and usual course consistent with past
practice and in a manner not representing a new strategic direction for us and
our subsidiaries and to use all commercially reasonable efforts to preserve
intact their business organization and relationships with third parties.
In addition to this covenant, we have certain other interim covenants,
including:
o a requirement that we not amend our governing documents or our
rights agreement;
o a requirement that we not adopt a plan or agreement of liquidation,
dissolution, merger, consolidation, restructuring, recapitalization
or other material reorganization;
-47-
o restrictions with respect to the issuance or pledge of securities
and options;
o a requirement that we not pay or declare any dividends or change our
capital stock;
o restrictions with respect to the redemption or repurchase of our
capital stock or any of our subsidiaries;
o restrictions with respect to the amendment of the terms of any stock
options;
o restrictions with respect to capital expenditures;
o a requirement that we not increase the compensation or benefits of
any directors, officers or employees, enter into or amend any
compensation or benefit plan or hire any new employee at the level
of director or above;
o restrictions with respect to acquisitions, dispositions or
indebtedness;
o a requirement that we not pay, discharge or satisfy any claims,
suits, liabilities or obligations or waive any benefits of any
agreement;
o restrictions on entering into any license with respect to any
intellectual property owned by us and the entering into of any
independent contractor agreements;
o restrictions on affiliated transactions;
o a requirement that we not change our accounting methods or make tax
elections or settle any material tax liability;
o restrictions with respect to entering into or amending any material
contracts;
o a requirement that we not enter into any joint ventures or
partnerships;
o a requirement that we not enter into any noncompetition agreements;
o restrictions on entering into any contracts that would be breached
by our compliance with the terms of the merger agreement;
o restrictions on taking any action that would cause any of our
representations and warranties to not be true and correct; and
o a requirement that we will not and will not permit any of our
subsidiaries to agree or commit to do any of the foregoing actions.
-48-
Reasonable Efforts Covenant. We and McKesson have agreed to use all
commercially reasonable efforts to take all actions and do all things advisable,
proper or necessary under the merger agreement and applicable laws to consummate
the merger and the other transactions contemplated by the merger agreement.
Employee Matters
McKesson is required to provide benefits to our employees that are
comparable in the aggregate to those provided by McKesson to similarly situated
employees. McKesson is also required to take into account an employee's service
with our company for purposes of determining severance, vacation and other paid
time off entitlements under McKesson's benefit plans.
Other Covenants and Agreements
Meeting of Stockholders. We have agreed to call a stockholder meeting as
soon as practicable following the execution of the merger agreement to approve
the merger and the transactions contemplated by the merger agreement. Our board
is required to recommend approval of the merger agreement by our stockholders,
except in some cases in which a superior offer has been made, as discussed on
pp. 46-48.
Insurance and Indemnification. McKesson has agreed that it will indemnify
to the fullest extent permitted by applicable law all of our past and present
directors and officers against any costs, claims, judgments, fines, losses,
damages, liabilities or expenses (including reasonable attorney's fees) incurred
in connection with any threatened or pending claim, action, suit, investigation
or proceeding (whether civil, criminal, administrative or investigative) arising
out of matters existing or occurring at or prior to the effective time of the
merger. McKesson also agreed to advance expenses to each party entitled to such
indemnification to the fullest extent permitted by applicable law, so long as
such party provides an undertaking to repay such advances in the event it is
ultimately determined that such expenses cannot be reimbursed or indemnified
under applicable law to the extent such undertaking is required under applicable
law. In addition, for a period of 6 years after the effective time of the
merger, McKesson will indemnify each person who is a beneficiary of the
provisions of Article NINTH of our certificate of incorporation as in effect as
of January 19, 2004 for acts or omissions occurring at or prior to the effective
time of the merger to the same extent that such person is so entitled under said
Article NINTH as in effect on such date.
McKesson and the surviving corporation are required to maintain for a
period of six years after the effective time of the merger directors' and
officers' liability insurance on terms no less favorable than those applicable
to our current directors and officers as of the date of the merger agreement,
provided that in no event shall McKesson or the surviving corporation be
required to expend in any one year an amount in excess of 200% of the annual
premiums currently paid by us for such insurance, and, provided further that if
the annual premiums of such insurance coverage exceed such amount, McKesson or
the surviving corporation shall obtain a policy with at least the greatest
coverage available for a cost not exceeding such amount.
-49-
Other Covenants. The merger agreement contains covenants relating to the
cooperation between us and McKesson in the preparation of this proxy statement
and other governmental filings. The merger agreement also contains additional
agreements relating to, among other things, public announcements, mutual notice
of certain matters and access to information.
Representations and Warranties
The merger agreement contains extensive representations and warranties by
us, including:
o organization, good standing and qualification;
o subsidiaries;
o capital structure;
o corporate authority; approval and fairness;
o governmental filings; no violations;
o SEC filings; financial statements;
o certain liabilities;
o SEC correspondence;
o financial and disclosure controls;
o information supplied;
o accounting or audit irregularities;
o accounts receivable;
o absence of certain changes;
o litigation;
o employee benefits;
o compliance with laws; permits;
o company products;
-50-
o takeover statutes;
o environmental matters;
o intellectual property;
o contracts;
o distributors, suppliers and customers;
o taxes;
o labor matters;
o rights agreement;
o real property;
o insurance;
o title to assets;
o opinion of financial advisor;
o brokers and finders; and
o transactions with affiliates.
The merger agreement contains limited representations and warranties by
McKesson, including:
o organization, good standing and qualification;
o corporate authority; approval and fairness;
o governmental filings; no violations;
o information supplied;
o interim operations of Sub;
o funds; and
-51-
o brokers.
Conditions
The conditions to the consummation of the merger are:
o Approval is obtained from our stockholders;
o All required governmental consents and filings shall have been made
or obtained;
o No governmental entity shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order that is in effect and has the
effect of making the merger illegal or otherwise prohibiting the
consummation of the merger;
o No pending or overtly threatened suit, action or proceeding asserted
by any governmental entity challenging or seeking to restrain or
prohibit the consummation of the merger, the effect of which
restraint or prohibition if obtained would cause the condition set
forth in the immediately preceding bullet point to not be satisfied;
o All of our representations and warranties shall be true and correct
except where the failure to be true and correct would not be
reasonably likely to have a material adverse effect on our company;
o We shall have performed in all material respects all material
obligations required to be performed by it under the merger
agreement;
o Since the date of the merger agreement, there shall not have
occurred any change or event (whether alone or together with other
changes or events occurring since the date of the merger agreement)
that has had, or is reasonably likely to have, a material adverse
effect on our company;
o There shall not be any suit, action or proceeding pending or
threatened (in writing or otherwise directly communicated to us) by
a governmental entity seeking to require McKesson or any of its
subsidiaries to dispose of any assets that are material to McKesson
and its subsidiaries, taken as a whole;
o All representations and warranties of McKesson and Merger Sub shall
be true and correct except where the failure to be true and correct
would not be reasonably likely to materially adversely affect the
ability of McKesson to effect the merger in accordance with the
merger agreement; and
o Each of McKesson and Merger Sub shall have performed in all material
respects all material obligations required to be performed by it
under the merger agreement.
-52-
Termination of Merger Agreement
The merger agreement may be terminated:
o by mutual consent;
o by either party if (a) the merger is not consummated by June 30,
2004, (b) stockholder approval is not obtained, or (c) any law,
ordinance, regulation, code, rule, judgement, order, decree or
arbitration award of any governmental entity permanently
restraining, enjoining or otherwise prohibiting the merger shall
become final and non-appealable;
o by us, if (a) at any time prior to obtaining stockholder approval,
if our board properly exercises its right to change its
recommendation of the transaction or (b) prior to the effective time
of the merger, McKesson or Merger Sub has materially breached any
representation, warranty or covenant contained in the merger
agreement or if any representation or warranty of McKesson or Merger
Sub would be untrue if made on any day prior to the effective time
of the merger and such breach or untruth is not cured by McKesson or
Merger Sub within 20 days of notice thereof;
o by McKesson,
o if at any time prior to the time when the approval of our
stockholders has been obtained, (a) our board withdraws or
amends or modifies in a manner adverse to McKesson its
approval or recommendation of the merger agreement, (b) we
fail to include in the proxy statement the recommendation of
our board in favor of the adoption and approval of the merger
agreement and of the merger, (c) our board approves or
recommends an acquisition proposal not made by McKesson or (d)
there has been a material breach by us of our obligations to
call the stockholders meeting and not solicit offers from
third parties;
o if at any time prior to the time when the approval of our
stockholders has been obtained, (a) it has been made known to
our stockholders that a third party has made or is considering
an acquisition proposal and thereafter our board fails to
reaffirm its recommendation in favor of the merger agreement
and of the merger within 10 business days after McKesson so
requests in writing, or (b) a third party commences a tender
or exchange offer for our securities and our board shall not
have sent to our stockholders, within 10 business days, a
statement recommending rejection of such tender or exchange
offer, provided that prior to terminating the merger agreement
pursuant to this section, McKesson must give us 24 hours prior
written notice; or
o if at any time prior to the effective time of the merger,
whether before or after the time when the approval of our
stockholders has been obtained, we have materially breached
any representation, warranty or covenant contained in the
merger agreement or if any representation or warranty of Moore
would be untrue if made
-53-
on any day prior to the effective time of the merger and such
breach or untruth is not cured by us within 20 days of notice
thereof.
Termination Fee
The merger agreement provides for the payment by us to McKesson of a
termination fee as follows:
o if the merger agreement is terminated by (a) us after our board
complies with the terms and conditions of the merger agreement and
withdraws or withholds its recommendation for the merger agreement
and the merger due to our receipt of a superior offer or (b)
McKesson for the reasons contained in the first and second
sub-bullet points under the fourth bullet point under "Termination
of Merger Agreement" above, then we shall promptly (but in no event
later than 2 business days after termination) pay to McKesson the
lesser of its aggregate costs and expenses or $500,000; provided,
that if within 12 months of termination any person other than
McKesson and its affiliates consummates an "acquisition of the
company" (as defined below), then we shall pay to McKesson a
termination fee equal to $1,200,000 less any amount paid as provided
above; or
o if the merger agreement is terminated by either us or McKesson
because (a) (i) an acquisition proposal has been made and is made
known to our stockholders generally or publicly announced and
stockholder approval of the merger is not obtained at the special
meeting or (ii) if we materially and willfully breach any covenant
contained in the merger agreement and (b) if within twelve months of
termination any person other than McKesson and its affiliates
consummates an "acquisition of the company", then we shall pay to
McKesson a termination fee of $1,200,000 on or before the
consummation of such acquisition of the company.
An "acquisition of the company" means any of the following transactions
involving our company: (i) a merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving our
company pursuant to which our stockholders immediately preceding such
transaction hold less than 50% of the aggregate equity interests in the
surviving or resulting entity of such transaction or any direct or indirect
parent thereof, (ii) a sale or other disposition by us of assets representing in
excess of 50% of the aggregate fair market value of our business immediately
prior to such sale, or (iii) the acquisition by any person or group (including
by way of a tender offer or an exchange offer or issuance by the party or such
person or group), directly or indirectly, of beneficial ownership or a right to
acquire beneficial ownership of shares representing in excess of 50% of the
voting power of the then outstanding shares of our capital stock.
Amendments and Waivers
The merger agreement may be amended by the parties at any time, by written
agreement of executed and delivered by duly authorized officers of the
respective parties. A condition to a party's obligation to close the merger may
be waived by such party.
-54-
Expenses
Whether or not the merger is consummated, all costs and expenses incurred
in connection with the merger shall be paid by the party incurring the expense,
except the expense of printing and mailing this proxy statement and the expenses
of the paying agent shall be shared equally by us and McKesson.
-55-
ADDITIONAL INFORMATION FOR STOCKHOLDERS
Future Moore Stockholder Proposals
Proposals of stockholders intended to be presented, pursuant to Rule 14a-8
under the Securities Exchange Act of 1934, as amended, at the 2004 Annual
Meeting of Stockholders of Moore, which is currently scheduled to be held on
[_______________], 2004, must be received by us at our principal executive
offices by [_______________], 2004, if they are to be included in our proxy
statement and proxy relating to such meeting. Any proposals received after such
date will be considered untimely.
Where You Can Find More Information
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any reports, statements or other information we file at the Securities and
Exchange Commission's Public Reference Room, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the Securities and Exchange Commission's regional offices
located at 233 Broadway, New York, New York 10279; 801 Brickell Ave., Suite
1800, Miami, Florida 33131; 175 W. Jackson Boulevard, Suite 900, Chicago,
Illinois 60604; 1801 California Street, Suite 4800, Denver, Colorado 80202-2648
or 5670 Wilshire Boulevard, Suite 1100, Los Angeles, California 90036-3648.
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further
information on the public reference rooms. Our Securities and Exchange
Commission filings are also available to the public from commercial document
retrieval services and at the website maintained by the Securities and Exchange
Commission at http://www.sec.gov.
You can also inspect reports, proxy statements and other information about
Moore at the offices of the American Stock Exchange, 86 Trinity Place, New York,
New York 10006.
WE HAVE AUTHORIZED NO ONE TO GIVE YOU ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ABOUT THE MERGER OR OUR COMPANY THAT DIFFERS FROM OR ADDS TO THE
INFORMATION CONTAINED IN THIS DOCUMENT OR IN THE DOCUMENTS MOORE HAS PUBLICLY
FILED WITH THE SEC. THEREFORE, IF ANYONE SHOULD GIVE YOU ANY DIFFERENT OR
ADDITIONAL INFORMATION, YOU SHOULD NOT RELY ON IT.
THE INFORMATION CONTAINED IN THIS DOCUMENT SPEAKS ONLY AS OF THE DATE
INDICATED ON THE COVER OF THIS DOCUMENT UNLESS THE INFORMATION SPECIFICALLY
INDICATES THAT ANOTHER DATE APPLIES.
With respect to the information contained in this document, we have
supplied the information concerning our company, and McKesson has supplied the
information concerning McKesson.
-56-
Annex A
AGREEMENT AND PLAN OF MERGER
Among
MCKESSON CORPORATION,
MOORE MEDICAL CORP.
and
MADISON ACQUISITIONS INC.
Dated as of January 19, 2004
TABLE OF CONTENTS
Page
----
ARTICLE I The Merger; Closing; Effective Time..................................1
1.1 The Merger.........................................................1
1.2 Closing............................................................1
1.3 Effective Time.....................................................1
ARTICLE II Certificate of Incorporation and Bylaws of the Surviving
Corporation........................................................2
2.1 The Certificate of Incorporation...................................2
2.2 The Bylaws.........................................................2
ARTICLE III Certain Governance Matters.........................................2
3.1 Directors of the Surviving Corporation.............................2
3.2 Officers of the Surviving Corporation..............................2
ARTICLE IV Effect of the Merger on Capital Stock; Exchange of Certificates.....2
4.1 Effect on Capital Stock............................................2
4.2 Exchange of Certificates...........................................4
ARTICLE V Representations and Warranties.......................................5
5.1 Representations and Warranties of the Company......................5
5.2 Representations and Warranties of Parent and Merger Sub...........25
ARTICLE VI Covenants..........................................................26
6.1 Conduct of the Company............................................26
6.2 Proxy Statement; Stockholders' Meeting............................29
6.3 Acquisition Proposals.............................................30
6.4 Filings; Other Actions; Notification..............................32
6.5 Stockholder Litigation............................................34
6.6 Access............................................................34
6.7 Publicity.........................................................35
6.8 Equity Awards.....................................................35
6.9 Expenses..........................................................36
6.10 Indemnification; Directors' and Officers' Insurance...............36
6.11 Takeover Statute..................................................38
6.12 Transfer Taxes....................................................38
6.13 Employee Benefits.................................................38
ARTICLE VII Conditions........................................................39
7.1 Conditions to Each Party's Obligation to Effect the Merger........39
7.2 Conditions to Obligations of Parent and Merger Sub................40
7.3 Conditions to Obligation of the Company...........................40
ARTICLE VIII Termination......................................................41
8.1 Termination by Mutual Consent.....................................41
8.2 Termination by Either Parent or the Company.......................41
8.3 Termination by the Company........................................41
8.4 Termination by Parent.............................................42
8.5 Effect of Termination and Abandonment.............................43
-i-
ARTICLE IX Miscellaneous and General..........................................44
9.1 Survival..........................................................44
9.2 Modification or Amendment.........................................44
9.3 Waiver of Conditions..............................................44
9.4 Counterparts......................................................44
9.5 Governing Law and Venue; Waiver of Jury Trial.....................44
9.6 Notices...........................................................45
9.7 Definitions.......................................................46
9.8 Entire Agreement..................................................50
9.9 No Third Party Beneficiaries......................................50
9.10 Obligations of Parent and of the Company..........................50
9.11 Severability......................................................50
9.12 Interpretation....................................................50
9.13 Assignment........................................................51
9.14 Captions..........................................................51
EXHIBIT A Restated Certificate of Incorporation of the Surviving Corporation
-ii-
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement"),
dated as of January 19, 2004, is made and entered into by and among MCKESSON
CORPORATION, a Delaware corporation ("Parent"), MOORE MEDICAL CORP., a Delaware
corporation (the "Company"), and MADISON ACQUISITIONS INC., a Delaware
corporation and a wholly-owned subsidiary of Parent ("Merger Sub").
RECITALS
WHEREAS, the respective boards of directors of each of Parent, Merger Sub
and the Company have approved and declared advisable this Agreement and the
merger of Merger Sub with and into the Company on the terms and subject to the
conditions set forth in this Agreement (the "Merger") and have determined that
the Merger and the other transactions contemplated by this Agreement are fair
to, and in the best interest of, their respective stockholders:
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER; CLOSING; EFFECTIVE TIME
1.1 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, at the Effective Time (as defined in Section 1.3) Merger Sub
shall be merged with and into the Company pursuant to a statutory merger
effected pursuant to Section 251 of the General Corporation Law of the State of
Delaware, as amended (the "DGCL"), and the separate corporate existence of
Merger Sub shall thereupon cease. The Company shall be the surviving corporation
in the Merger (sometimes hereinafter referred to as the "Surviving Corporation")
and shall continue to be governed by the laws of the State of Delaware, and the
separate corporate existence of the Company with all its rights, privileges,
immunities, powers and franchises shall continue unaffected by the Merger,
except as set forth in Articles II and III. The Merger shall have the effects
specified in the DGCL.
1.2 Closing. Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") shall take place (i) at the offices of
Pillsbury Winthrop LLP, 50 Fremont Street, San Francisco, California at 10:00
A.M. on the second business day after the fulfillment or waiver of the
conditions set forth in Article VII (other than those conditions that by their
nature are to be satisfied at the Closing, but subject to the fulfillment or
waiver of those conditions) in accordance with this Agreement or (ii) at such
other place and time and/or on such other date as the Company and Parent may
agree in writing (the "Closing Date").
1.3 Effective Time. Subject to the provisions of this Agreement and as
soon as practicable following the Closing, the Company will cause a Certificate
of Merger (the "Certificate of Merger") to be executed, acknowledged and filed
with the Secretary of State of the State of Delaware as provided in Section 251
of the DGCL. The Merger shall become effective at the time when the Certificate
of Merger has been duly filed with the Secretary of
1
State of Delaware or, if agreed to by Parent and the Company, such later time or
date as may be set forth in the Certificate of Merger in accordance with the
DGCL (the "Effective Time").
ARTICLE II
CERTIFICATE OF INCORPORATION AND BYLAWS
OF THE SURVIVING CORPORATION
2.1 The Certificate of Incorporation. The certificate of incorporation of
the Company as in effect immediately prior to the Effective Time shall be
amended and restated in the Merger to read in its entirety as set forth in
Exhibit A, and as so amended shall be the restated certificate of incorporation
of the Surviving Corporation (the "Charter").
2.2 The Bylaws. The bylaws of Merger Sub as in effect immediately prior to
the Effective Time shall be the bylaws of the Surviving Corporation (the
"Bylaws"), until thereafter amended as provided therein or by applicable law.
ARTICLE III
CERTAIN GOVERNANCE MATTERS
3.1 Directors of the Surviving Corporation. The directors of Merger Sub
immediately prior to the Effective Time shall, from and after the Effective
Time, be the directors of the Surviving Corporation until their successors have
been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Charter and Bylaws.
3.2 Officers of the Surviving Corporation. The officers of the Merger Sub
immediately prior to the Effective Time shall, from and after the Effective
Time, be the officers of the Surviving Corporation until their successors have
been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Charter and Bylaws.
ARTICLE IV
EFFECT OF THE MERGER ON CAPITAL STOCK; EXCHANGE OF CERTIFICATES
4.1 Effect on Capital Stock. At the Effective Time, as a result of the
Merger and without any action on the part of the holder of any capital stock of
the Company or any capital stock of Merger Sub, the following shall occur:
(a) Merger Consideration.
(i) Each share of common stock, par value $0.01 per share, of the
Company (each a "Share" or, collectively, the "Shares") that is issued and
outstanding immediately prior to the Effective Time (other than Excluded Shares
and the Appraisal Shares, as defined below),
2
together with the associated Rights (as defined in Section 5.1(c)), shall be
converted into the right to receive $12.00 in cash, without interest (the
"Merger Consideration").
(ii) At the Effective Time, all Shares that are issued and
outstanding immediately prior to the Effective Time shall cease to be
outstanding and shall be canceled and retired and shall cease to exist, and each
certificate (a "Certificate") formerly representing any of such Shares and the
associated Rights (other than Excluded Shares and Appraisal Shares) shall
thereafter represent only the right to receive the Merger Consideration. The
right of any holder of a Certificate to receive the Merger Consideration shall
be subject to and reduced by the amount of any withholding that is required
under applicable tax law.
(b) Cancellation of Excluded Shares. At the Effective Time, each Excluded
Share that is issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the holder
thereof, cease to be outstanding, shall be canceled and retired without payment
of any consideration therefor and shall cease to exist.
(c) Merger Sub. At the Effective Time, each share of common stock, par
value $0.01 per share, of Merger Sub that is issued and outstanding immediately
prior to the Effective Time shall be converted into one fully-paid and
non-assessable share of common stock of the Surviving Corporation.
(d) Appraisal Rights. Notwithstanding anything in this Agreement to the
contrary, Shares issued and outstanding immediately prior to the Effective Time
that are held by any holder who is entitled to demand and properly demands
appraisal of such Shares (the "Appraisal Shares") pursuant to, and who complies
in all respects with, the provisions of Section 262 of the DGCL ("Section 262")
shall not be converted into the right to receive the Merger Consideration as
provided in Section 4.1(a), but instead such holder shall be entitled to payment
of the fair value of such Appraisal Shares in accordance with the provisions of
Section 262. At the Effective Time, all Appraisal Shares shall no longer be
outstanding, shall automatically be canceled and shall cease to exist, and each
holder of Appraisal Shares shall cease to have any rights with respect thereto,
except the right to receive the fair value of such Appraisal Shares in
accordance with the provisions of Section 262. Notwithstanding the foregoing, if
any such holder shall fail to perfect or otherwise shall waive, withdraw or lose
the right to appraisal under Section 262, or a court of competent jurisdiction
shall determine that such holder is not entitled to the relief provided by
Section 262, then the right of such holder to be paid the fair value of such
holder's Appraisal Shares under Section 262 shall cease and such Appraisal
Shares shall be deemed to have been converted at the Effective Time into, and
shall have become, the right to receive the Merger Consideration as provided in
Section 4.1(a), without interest. The Company shall serve prompt notice to
Parent of any demands for appraisal of any Shares, and Parent shall have the
right to participate in and direct all negotiations and proceedings with respect
to such demands. Prior to the Effective Time, the Company shall not, without the
prior written consent of Parent, voluntarily make any payment with respect to,
or settle or offer to settle, any such demands, or agree to do any of the
foregoing.
3
4.2 Exchange of Certificates.
(a) Paying Agent. Prior to the Effective Time, Parent shall appoint a bank
or trust company reasonably acceptable to the Company to act as paying agent
(the "Paying Agent") for the payment of the Merger Consideration. At the
Effective Time, Parent shall deposit, or cause the Surviving Corporation to
deposit, with the Paying Agent, for the benefit of the holders of Certificates,
cash in an amount sufficient to pay the aggregate Merger Consideration required
to be paid pursuant to Section 4.1(a) (such cash being hereinafter referred to
as the "Exchange Fund"). The Exchange Fund shall not be used for any other
purpose.
(b) Exchange Procedures. As soon as practicable after the Effective Time,
Parent shall cause the Paying Agent to mail to each holder of record of a
Certificate (i) a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificate shall
pass, only upon proper delivery of the Certificate to the Paying Agent and which
shall be in customary form) and (ii) instructions for use in effecting the
surrender of the Certificate in exchange for the Merger Consideration. Each
holder of record of a Certificate shall, upon surrender to the Paying Agent of
such Certificate, together with such letter of transmittal, duly executed, and
such other documents as may reasonably be required by the Paying Agent, be
entitled to receive in exchange therefor the Merger Consideration which the
number of Shares (and the associated Rights) previously represented by such
Certificate shall have been converted into the right to receive pursuant to
Section 4.1(a), and the Certificate so surrendered shall forthwith be canceled.
In the event of a transfer of ownership of Shares which is not registered in the
transfer records of the Company, payment of the Merger Consideration may be made
to a person other than the person in whose name the Certificate so surrendered
is registered if such Certificate shall be properly endorsed or otherwise be in
proper form for transfer and the person requesting such payment shall pay any
transfer or other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of such Certificate
or establish to the reasonable satisfaction of Parent that such tax has been
paid or is not applicable. Until surrendered as contemplated by this Section
4.2(b), each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the Merger Consideration
which the holder thereof has the right to receive in respect of such Certificate
pursuant to this Article IV. No interest shall be paid or will accrue on any
cash payable to holders of Certificates pursuant to the provisions of this
Article IV.
(c) No Further Ownership Rights in Shares. All cash paid upon the
surrender of Certificates in accordance with the terms of this Article IV shall
be deemed to have been paid in full satisfaction of all rights pertaining to the
Shares (and associated Rights) formerly represented by such Certificates. At the
close of business on the day on which the Effective Time occurs, the stock
transfer books of the Company shall be closed, and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the Shares that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, any Certificate is presented to
the Surviving Corporation for transfer, it shall be canceled against delivery of
cash to the holder thereof as provided in this Article IV.
(d) Termination of the Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of the Certificates for six months
after the Effective Time shall be delivered to Parent, upon demand, and any
holders of the Certificates who have not
4
theretofore complied with this Article IV shall thereafter look only to Parent
for, and Parent shall remain liable for, payment of their claim for the Merger
Consideration.
(e) No Liability. None of Parent, Merger Sub, the Company, the Surviving
Corporation or the Paying Agent shall be liable to any Person in respect of any
cash from the Exchange Fund properly delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law. If any Certificate
shall not have been surrendered immediately prior to the date on which any
Merger Consideration would otherwise escheat to or become the property of any
Governmental Entity, any such Merger Consideration shall, to the extent
permitted by applicable law, become the property of Parent, free and clear of
all claims or interest of any Person previously entitled thereto.
(f) Investment of Exchange Fund. The Paying Agent shall invest the cash in
the Exchange Fund as directed by Parent. Any interest and other income resulting
from such investments shall be paid to and be income of Parent.
(g) Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by Parent, the
posting by such person of a bond in such reasonable amount as Parent may direct
as indemnity against any claim that may be made against it with respect to such
Certificate, the Paying Agent shall deliver in exchange for such lost, stolen or
destroyed Certificate the applicable Merger Consideration with respect thereto.
(h) Withholding Rights. Parent, the Surviving Corporation or the Paying
Agent shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of Shares (and associated
Rights) such amounts as Parent, the Surviving Corporation or the Paying Agent is
required to deduct and withhold with respect to the making of such payment under
the Internal Revenue Code of 1986, as amended (the "Code"), or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld and
paid over to the appropriate taxing authority by Parent, the Surviving
Corporation or the Paying Agent, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the Shares (and
associated Rights) in respect of which such deduction and withholding was made
by Parent, the Surviving Corporation or the Paying Agent.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of the Company. Except as set forth in
the corresponding sections or subsections of the disclosure letter, dated the
date hereof, delivered by the Company to Parent (the "Company Disclosure
Letter"), the Company hereby represents and warrants to Parent and Merger Sub
that:
(a) Organization, Good Standing and Qualification. Each of the Company and
its Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of organization and has
all requisite corporate or similar power and authority to own and operate its
properties and assets and to carry on its business as presently
5
conducted and is qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where the ownership or operation of its
properties or conduct of its business requires such qualification, except where,
in any case, the failure to be so qualified or in good standing, when taken
together with all other such failures, is not reasonably likely to have a
Material Adverse Effect. The Company has made available to Parent a complete and
accurate copy of its and its Subsidiaries' certificates of incorporation and
bylaws, or other governing documents as applicable, each as amended to date.
Such certificates of incorporation and bylaws, or other governing documents, so
delivered are in full force and effect. Section 5.1(a) of the Company Disclosure
Letter contains a complete and accurate list of each jurisdiction where the
Company is qualified or licensed to do business. The Company has made available
to Parent complete and accurate copies of the minutes of all meetings of the
stockholders of the Company and each of its Subsidiaries, the Board of Directors
of the Company and each of its Subsidiaries and the committees of each of such
Board of Directors, in each case held since January 1, 2000.
(b) Subsidiaries. Section 5.1(b) of the Company Disclosure Letter lists
each of the Subsidiaries of the Company and, for each such Subsidiary, the state
of incorporation or formation and, as of the date hereof, each jurisdiction in
which such Subsidiary is qualified or licensed to do business. Except for the
capital stock of, or voting securities or equity interests in, its Subsidiaries,
the Company does not own, directly or indirectly, any capital stock of, or other
voting securities or equity interests in, any corporation, partnership, joint
venture, association or other entity.
(c) Capital Structure. The authorized capital stock of the Company
consists of 10,000,000 Shares, of which 3,200,009 Shares are issued and
outstanding as of the date of this Agreement, and 1,000,000 shares of preferred
stock, par value $1.00 per share (the "Preferred Shares"), of which none are
outstanding. All of the outstanding Shares have been duly authorized and are
validly issued, fully paid and nonassessable. The Company has no Shares or
Preferred Shares reserved for or subject to issuance, except (A) 70,000
Preferred Shares, designated Series I Junior Preferred Stock, subject to
issuance upon exercise of the rights (the "Rights") issued pursuant to the
Rights Agreement, dated as of November 18, 1998 (the "Company Rights
Agreement"), between the Company and American Stock Transfer & Trust Co., as
Rights Agent, and (B) 755,000 Shares reserved for issuance under the Company's
stock option or other equity-based compensation plans identified in Section
5.1(c) of the Company Disclosure Letter (collectively, the "Company Stock Option
Plans"), of which options to acquire not more than 176,800 Shares are
outstanding as of the date of this Agreement. Section 5.1(c) of the Company
Disclosure Letter sets forth a correct and complete list of each outstanding
option to purchase Shares under the Company Stock Option Plans, as hereinafter
defined (each a "Company Option"), as of the date hereof, including the holder,
date of grant, exercise price, vesting status and number of Shares subject
thereto. All issued and outstanding shares of capital stock or other securities
of each of the Company's Subsidiaries are duly authorized, validly issued, fully
paid and nonassessable and owned by the Company or a direct or indirect wholly
owned Subsidiary of the Company, free and clear of any lien, pledge, security
interest, claim or other encumbrance. Except as set forth above or as disclosed
in Section 5.1(c) of the Company Disclosure Letter, there are no shares of
capital stock of the Company authorized, issued or outstanding, and except as
set forth above, there are no preemptive rights nor any outstanding
subscriptions, options, warrants, rights, convertible securities or other
agreements or commitments of any character (including any restriction on the
right to vote, sell or otherwise
6
transfer) to which the Company or any of its Subsidiaries is a party or may be
bound relating to the issued or unissued capital stock or other securities of
the Company or any of its Subsidiaries. Neither the Company nor any of its
Subsidiaries has outstanding any bonds, debentures, notes or other obligations
the holders of which have the right to vote (or convertible into or exercisable
for securities having the right to vote) with the stockholders of the Company or
any of its Subsidiaries on any matter ("Company Voting Debt"). Except for Shares
(or options to purchase Shares) issued pursuant to the Company Stock Option
Plans, neither the Surviving Corporation nor Parent nor their respective
affiliates has or will, at or after the Effective Time, have any current or
future obligation to issue, transfer or sell any shares or securities of the
Surviving Corporation, Parent or any of their respective affiliates pursuant to
any Compensation and Benefit Plan (as defined in Section 5.1(o)(i)).
(d) Corporate Authority; Approval and Fairness. The Company has all
requisite corporate power and authority and has taken all corporate action
necessary in order to execute, deliver and perform its obligations under this
Agreement and to consummate the Merger, subject only to approval and adoption of
this Agreement by the holders of a majority of the outstanding Shares (the
"Stockholder Approval") and the filing of the Certificate of Merger pursuant to
the DGCL. This Agreement has been duly executed and delivered by the Company and
is a legal, valid and binding agreement of the Company enforceable against the
Company in accordance with its terms, except (A) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally and (B) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies. The Board of Directors of the Company, at a
meeting duly called and held, duly adopted resolutions (i) approving and
declaring advisable this Agreement, the Merger and the other transactions
contemplated by this Agreement, (ii) declaring that it is in the best interests
of the stockholders of the Company that the Company enter into this Agreement
and consummate the Merger and the other transactions contemplated by this
Agreement on the terms and subject to the conditions set forth herein, (iii)
directing that the adoption and approval of this Agreement be submitted as
promptly as practicable to a vote at a meeting of the stockholders of the
Company and (iv) recommending that the stockholders of the Company adopt and
approve this Agreement, which resolutions, as of the date of this Agreement,
have not been subsequently rescinded, modified or withdrawn in any way.
(e) Governmental Filings; No Violations.
(i) Other than the filings and/or notices (A) contemplated by
Section 1.3, (B) with the Securities and Exchange Commission (the "SEC") of (1)
a proxy statement relating to the adoption and approval by the stockholders of
the Company of this Agreement (as amended or supplemented from time to time, the
"Proxy Statement") and (2) such reports under the Exchange Act as may be
required in connection with this Agreement and the transactions contemplated by
this Agreement and (C) required to be made by the Company or any of its
Subsidiaries under applicable state securities or blue sky laws or the rules and
regulations of the American Stock Exchange in connection with the Merger or any
of the transactions contemplated by this Agreement, no notices, reports or other
filings are required to be made with, nor are any consents, registrations,
approvals, permits or authorizations required to be obtained by the Company or
any of its Subsidiaries from, any national, state, municipal, local or foreign
government, any instrumentality, subdivision, court, administrative agency,
board or
7
commission or other governmental authority or instrumentality, or any
quasi-governmental or private body exercising any regulatory or governmental or
quasi-governmental authority (a "Governmental Entity"), in connection with the
execution and delivery of this Agreement by the Company and the consummation by
the Company of the Merger and the other transactions contemplated hereby, except
those that the failure to make or obtain are not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on it or prevent
or materially delay the Company's ability to consummate the transactions
contemplated by this Agreement.
(ii) The execution, delivery and performance of this Agreement does
not, and the consummation of the Merger and the other transactions contemplated
hereby will not, constitute or result in (A) a breach or violation of, or a
default (with or without notice, lapse of time or both) under, the Company's
certificate of incorporation or bylaws or other governing documents or the
comparable governing instruments of any of its Subsidiaries, (B) except as set
forth in Section 5.1(e) of the Company Disclosure Letter, (with or without
notice, lapse of time or both) a breach or violation of, or a default under, the
acceleration of any obligations under, or the creation of a lien, pledge,
security interest or other encumbrance on any assets of the Company or any of
its Subsidiaries pursuant to, any Contract that is binding upon the Company or
any of its Subsidiaries or any Law or governmental or non-governmental permit or
license to which the Company or its Subsidiaries is subject or (C) any change in
the material rights or obligations of any party under any of the Company's or
any of its Subsidiaries' Contracts, except, in the case of clause (B) or (C)
above, for any breach, violation, default, acceleration, creation or change
that, individually or in the aggregate, is not reasonably likely to (1) have a
Material Adverse Effect on the Company, or (2) prevent or materially delay the
Company's ability to consummate the Merger or any of the other transactions
contemplated by this Agreement.
(f) SEC Filings; Financial Statements. The Company has on a timely basis
filed all forms, reports and documents (including reports filed on SEC Form 8-K)
required to be filed by it with the SEC since December 31, 2000, has on a timely
basis filed all applicable Form 11-K reports and Form S-8 registration
statements required to be filed by it with the SEC for all Company Compensation
and Benefit Plans including Company Stock Option Plans, and has delivered or
made available to Parent, in the form filed with the SEC, (i) its annual reports
on Form 10-K (and all amendments thereto) for the fiscal years ended December
31, 2000, 2001 and 2002, respectively, (ii) its quarterly reports on Form 10-Q
for each of the first three quarters in each of the fiscal years of the Company
referred to in clause (i) above, (iii) all proxy statements relating to the
Company's meetings of stockholders (whether annual or special) held since
December 31, 2000, (iv) all certificates and statements required by (x) Rule
13a-14 under the Exchange Act or (y) 18 U.S.C. Section 1350 (Section 906 of the
Sarbanes-Oxley Act of 2002) with respect to any report referred to in clause (i)
or (ii) above, and (v) all other forms, reports and other registration
statements filed by the Company with the SEC since December 31, 2000 (the forms,
reports and other documents referred to in clauses (i), (ii), (iii), (iv) and
(v) above being, collectively, the "Company SEC Reports"). The Company SEC
Reports were, and any Company SEC Reports filed with the SEC subsequent to the
date hereof will be, prepared in all material respects in accordance with either
the requirements of the Securities Act or the Exchange Act, as the case may be,
and the rules and regulations promulgated thereunder. As of their respective
dates, the Company SEC Reports did not, and any Company SEC Report filed with
the SEC subsequent to the date hereof will not, contain any untrue statement of
a
8
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. No Subsidiary of the
Company is required to file any form, report or other document with the SEC. As
used in this Section 5.1(f), the term "file" shall be broadly construed to
include any manner in which a document or information is furnished, supplied or
otherwise made available to the SEC.
Each of the consolidated financial statements (including, in each case,
any notes thereto) included in or incorporated by reference into the Company SEC
Reports was, and any Company SEC Report filed with the SEC subsequent to the
date hereof will be, (i) prepared from and in accordance with the books and
records of the Company and its Subsidiaries, (ii) in compliance in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC, and (iii) prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods indicated (except as may be indicated in the notes
thereto) and each fairly presents, in all material respects, the consolidated
financial position, results of operations and cash flows of the Company and its
consolidated Subsidiaries as at the respective dates thereof and for the
respective periods indicated therein (subject, in the case of unaudited
statements, to normal and recurring year-end adjustments that will not be
material in amount or effect).
(g) Certain Liabilities. Except as disclosed in Section 5.1(g) of the
Company Disclosure Letter or disclosed in the Company SEC Reports filed prior to
the date hereof, including the consolidated balance sheet of the Company and its
consolidated Subsidiaries as at December 31, 2002 (the "Company Audit Date"),
and the notes thereto (the "December 2002 Balance Sheet"), neither the Company
nor any Subsidiary has any material liabilities or obligations of any nature
(whether known or unknown, accrued, absolute, contingent or otherwise).
(h) SEC Correspondence. The Company has made available to Parent all
comment letters, if any, received by the Company from the SEC or the staff
thereof since December 31, 2000 and all responses to such comment letters filed
by or on behalf of the Company. The Company has furnished or made available to
Parent complete and accurate copies of all material amendments and modifications
that have not been filed by the Company with the SEC to all agreements,
documents and other instruments that previously had been filed by the Company
with the SEC as exhibits to the Company SEC Reports and are currently in effect.
(i) Financial and Disclosure Controls. The Company and its Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's authorization, and (iv) the recorded accountability
for assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences The Company
maintains disclosure controls and procedures as defined by Rule 13a-15 under the
Exchange Act that are reasonably effective to ensure that all material
information concerning the Company and its Subsidiaries is made known on a
timely basis to the individuals responsible for the preparation of the Company's
filings with the SEC and other
9
public disclosure documents. Section 5.1(i) of the Company Disclosure Letter
lists, and the Company has made available to Parent complete and accurate copies
of, all written descriptions of, and all policies, manuals and other documents
promulgating, such internal accounting controls and such disclosure controls and
procedures.
(j) Information Supplied. None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in the Proxy
Statement will, at the date it is first mailed to the stockholders of the
Company and at the time of the Stockholders' Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they are made, not misleading, except
that no representation or warranty is made by the Company with respect to
statements made or incorporated by reference therein based on information
supplied by or on behalf of Parent or Merger Sub for inclusion or incorporation
by reference in the Proxy Statement. The Proxy Statement will comply as to form
in all material respects with the requirements of the Exchange Act and the rules
and regulations thereunder.
(k) Accounting or Audit Irregularities. From the Company Audit Date to the
date hereof, neither the Company nor any Subsidiary nor, to the Company's
knowledge, any director, executive officer or auditor of the Company or any
Subsidiary, has actual knowledge of any material complaint, allegation,
assertion or claim, whether made in writing or made orally, regarding the
accounting or auditing practices, procedures, methodologies or methods of the
Company or any of its Subsidiaries or their respective internal accounting
controls, including any complaint, allegation, assertion or claim that the
Company or any of its Subsidiaries has engaged in questionable accounting or
auditing practices. No attorney representing the Company or any of its
Subsidiaries, whether or not employed by the Company or any of its Subsidiaries,
has reported evidence of a material violation of securities laws, breach of
fiduciary duty or similar violation by the Company or any of its officers,
directors, employees or agents to the Company's Board of Directors or any
committee thereof or to any director or executive officer of the Company. From
the Company Audit Date to the date hereof, there have been no internal
investigations regarding accounting or revenue recognition discussed with,
reviewed by or initiated at the direction of the chief executive officer, chief
financial officer, general counsel or similar legal officer, the Company's Board
of Directors or any committee thereof.
(l) Accounts Receivable. All accounts receivable of the Company and its
Subsidiaries reflected on the December 2002 Balance Sheet or arising thereafter
have arisen from bona fide transactions in the ordinary course of business
consistent with past practices and in accordance with SEC regulations and GAAP
applied on a consistent basis. The Company's reserve for contractual allowances
and doubtful accounts has been prepared in accordance with GAAP applied on a
consistent basis. Since the Company Audit Date, neither the Company nor any of
its Subsidiaries has modified or changed in any material respect its sales
practices or methods including, without limitation, such practices or methods in
accordance with which the Company or any of its Subsidiaries sell goods, fill
orders or record sales.
(m) Absence of Certain Changes. Except as disclosed in the Company SEC
Reports filed prior to the date hereof or in Section 5.1(m) of the Company
Disclosure Letter, as of the
10
date hereof there has not been any material adverse change in the condition
(financial or otherwise), assets, business or results of operations of the
Company or any of its Subsidiaries, taken as a whole, since the Company Audit
Date. Except as disclosed in the Company SEC Reports filed prior to the date
hereof or in Section 5.1(m) of the Company Disclosure Letter, since the Company
Audit Date the Company and its Subsidiaries have conducted their respective
businesses only in, and have not engaged in any transaction other than according
to, the ordinary and usual course of such businesses and there has not been (i)
as of the date hereof, any material damage, destruction or other casualty loss
with respect to any material asset or property owned, leased or otherwise used
by the Company or any of its Subsidiaries, whether or not covered by insurance;
(ii) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) in respect of the Company's
capital stock or repurchase, redemption or other reacquisition of any shares of
capital stock or other securities of the Company; (iii) any change in its
accounting principles, practices or methods; (iv) any change in any material tax
election or any settlement or compromise of any tax liability or (v) any
agreement or commitment to take any of the actions referred to in clauses (ii)
through (iv) above. Since the Company Audit Date, except as disclosed in Section
5.1(m)(vi) of the Company Disclosure Letter there has not been any increase in
the compensation payable or that could become payable by the Company or any of
its Subsidiaries to (x) any officers of the Company or any of its Subsidiaries
or (y) any key employees of the Company or any of its Subsidiaries in each case
whose annual cash compensation is $100,000 or more, or any amendment of any of
its Compensation and Benefit Plans.
(n) Litigation. There is no civil, criminal or administrative suit,
action, proceeding, investigation, review or inquiry pending or, to the
Company's knowledge, threatened against or affecting the Company or any of its
Subsidiaries or any of their properties or rights, except for those that would
not be reasonably likely, either individually or in the aggregate, to have a
Material Adverse Effect on the Company or prevent or materially delay the
ability of the Company to consummate the transactions contemplated by this
Agreement. Except as set forth in Section 5.1(n) of the Company Disclosure
Letter, there is no judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against, or, to the knowledge of
the Company, investigation by any Governmental Entity involving, the Company or
any of its Subsidiaries.
(o) Employee Benefits.
(i) A copy of each bonus, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership, stock
bonus, stock purchase, restricted stock, stock option, employment, termination,
severance, change of control, compensation, medical, health or other welfare
plan, agreement, policy or arrangement that covers employees, directors, former
employees or former directors of the Company and its Subsidiaries (the
"Compensation and Benefit Plans") has been made available to Parent prior to the
date hereof. For each Compensation and Benefit Plan, copies of the following
documents (to the extent applicable) have also been made available to Parent
prior to the date hereof: (A) any amendments since the last restatement of the
plan; (B) any trust agreement or other funding agreement; (C) the most recent
Form 5500 annual report, including all attachments; (D) the most recent annual
actuarial valuation report; and (E) the most recent IRS determination letter,
and any outstanding request for such a letter. The Compensation and Benefit
Plans existing as of the date hereof are listed in
11
Section 5.1(o)(i) of the Company Disclosure Letter and any "change of control"
or similar provisions therein which will be affected by the Merger are
specifically identified in Section 5.1(o)(i) of the Company Disclosure Letter.
(ii) All of the Company's Compensation and Benefit Plans are in
substantial compliance with all applicable state, local and federal laws
including but not limited to the Code, the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), the Health Insurance Portability and
Accountability Act and the Family and Medical Leave Act. Each Compensation and
Benefit Plan that is an "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA (a "Pension Plan"), that is intended to be qualified under
Section 401(a) of the Code and is not a standardized prototype plan has received
a favorable determination letter from the Internal Revenue Service (the "IRS"),
has applied for such letter in a timely fashion, or has a remaining period of
time within which to apply for such a letter, and it is not aware of any
circumstances likely to result in revocation of any such favorable determination
letter or any material costs under the Internal Revenue Service's Employee Plans
Compliance Resolution System. There is no pending or, to the Company's
knowledge, threatened claims or litigation relating to the Compensation and
Benefit Plans. Neither the Company nor any of its Subsidiaries has engaged in a
transaction with respect to any Compensation and Benefit Plan that, assuming the
taxable period of such transaction expired as of the date hereof, would subject
it or any of its Subsidiaries to fiduciary liability payment of additional
benefits or a material tax or penalty imposed pursuant to either Section 4975 of
the Code or Section 502 of ERISA.
(iii) As of the date hereof, except as set forth in Section
5.1(o)(iii) of the Company Disclosure Letter, the Company does not maintain or
contribute to an employee pension benefit plan subject to Title IV of ERISA or
Section 412 of the Code.
(iv) Except as set forth in Section 5.1(o)(iv) of the Company
Disclosure Letter, neither the Company nor its Subsidiaries have any obligations
for retiree health and life benefits under any Compensation and Benefit Plan.
Except as set forth in Section 5.1(o)(iv) of the Company Disclosure Letter, the
Company or its Subsidiaries may amend or terminate any such plan under the terms
of such plan at any time without incurring any material liability thereunder.
Except as set forth in Section 5.1(o)(iv), the Company and its Subsidiaries do
not have any obligation to provide group continuation coverage to former
employees or their dependents as required by Section 600 et seq. of ERISA and
Section 4980B of the Code.
(v) Except as set forth in Section 5.1(o)(v) of the Company
Disclosure Letter, neither the execution of this Agreement by the Company,
stockholders approval of this Agreement or the Merger nor the consummation of
the Merger and the other transactions contemplated by this Agreement will (x)
entitle any employees of the Company or any of its Subsidiaries to severance
pay, (y) except as contemplated by Section 6.8 hereof, accelerate the time of
payment or vesting or trigger any payment of compensation or benefits or
forgiveness of indebtedness under, increase the amount payable or trigger any
other material obligation pursuant to, any of the Compensation and Benefit Plans
or (z) result in any breach or violation of, or a default under, any of the
Compensation and Benefit Plans.
(vi) Except as set forth in Section 5.1(o)(vi) of the Company
Disclosure Letter, all annual reports required to be filed under any Laws
applicable to the Compensation and
12
Benefits Plans have been timely filed with the respective governmental agency
with which such reports are required to be filed, including, without limitation
Form 5500 and Form 11-K.
(vii) To the Company's knowledge, all Compensation and Benefit Plans
covering current or former non-U.S. employees or former employees of the Company
or any of its Subsidiaries comply in all material respects with applicable Laws.
Except as set forth in Section 5.1(o)(vii) of the Company Disclosure Letter, the
Company and its Subsidiaries have no material unfunded liabilities with respect
to any Pension Plan that covers such non-U.S. employees.
(viii) Each field sales representative and telesales representative
employed by the Company has entered into a Non-Competition/Non-Disclosure
agreement containing terms substantially similar to the terms set forth in
Section 5.01(o)(viii)(a) of the Company Disclosure Letter. Each customer support
representative employed by the Company has entered into a
Non-Disclosure/Non-Solicitation agreement containing terms substantially similar
to the terms set forth in Section 5.1(o)(viii)(b) of the Company Disclosure
Letter.
(ix) Except as provided in Section 5.1(o)(ix) of the Company
Disclosure Letter, neither the Company nor any of its Subsidiaries nor its
Consolidated Group is a party to any agreement, plan, contract or arrangement
that would result, separately or in the aggregate, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code.
(p) Compliance with Laws; Permits.
(i) The businesses of each of the Company and its Subsidiaries are
and have been conducted in substantial compliance with all laws, ordinances,
regulations, codes, rules, judgments, orders (whether temporary, preliminary or
permanent), decrees, arbitration awards, licenses and permits of any
Governmental Entity (collectively, "Laws") applicable thereto, except for
violations that, individually or in the aggregate, are not reasonably likely to
have a Material Adverse Effect on the Company or to prevent or materially delay
the Company's ability to consummate the transactions contemplated by this
Agreement.
(ii) To the Company's knowledge, no action, demand, requirement,
investigation or review by any Governmental Entity with respect to the Company
or any of its Subsidiaries or affecting any of their properties or assets is
pending or threatened, nor has any Governmental Entity indicated an intention to
conduct the same. To the Company's knowledge, no Governmental Entity has made
any allegation, and the Company has not received notice that a Governmental
Entity is investigating any allegation, with respect to any violation of any Law
by the Company or any Subsidiary which, assuming such allegation were true,
would be reasonably likely to have a Material Adverse Effect on the Company.
(iii) Each of the Company and its Subsidiaries has in effect all
material approvals, authorizations, certificates, filings, franchises, licenses,
notices and permits of or with all Governmental Entities (collectively,
"Permits"), including all Permits necessary for the receipt, storage, marketing,
sale or supply of medical devices and other healthcare products, cosmetics,
nutritionals, over-the-counter products, and drugs and related services provided
by the
13
Company under the Laws of any Governmental Entity, including, but not limited
to, the Federal Food, Drug and Cosmetic Act of 1938, as amended (the "FDCA") and
the Other Regulatory Laws, and the regulations of the Federal Food and Drug
Administration (the "FDA"), the Drug Enforcement Agency (the "DEA") and any
other Governmental Entity promulgating or enforcing rules or regulations under
such Laws, necessary for it to own, lease or operate its properties and other
assets and to carry on its business and operations as presently conducted. All
material Permits are set forth in Section 5.1(p)(iii) of the Company Disclosure
Letter. There has occurred no default under, or violation of, any such Permit,
and each such Permit is in full force and effect. To the knowledge of the
Company, the Company is in good standing under the Permits. Since January 1,
2000, neither the Company nor any Subsidiary has received any notice from any
Governmental Entity that it is or has been in violation of or in default under
any Laws. The Company has kept all required records and has filed with the FDA,
the DEA and all other Governmental Entities, as applicable, all required
notices, supplemental applications and annual or other reports, including
adverse reaction reports, with respect to the Company and its Subsidiaries and
each Company Product.
(iv) To the Company's knowledge, neither the Company nor any of its
Subsidiaries nor any of its directors, employees or agents have engaged in or is
being investigated for any activities which are prohibited under any of (a)
Section 3729 of Title 31 of the United States Code, (b) Section 1320a-7a or
1320a-7b of Title 42 of the United States Code, or (c) Section 1395nn of Title
42 of the United States Code, or the regulations promulgated thereunder, or any
similar or related state or local statutes or regulations, or which are
prohibited by rules of professional conduct, in any case which has had or is
reasonably likely to have a Material Adverse Effect on the Company, including,
but not limited to, the following: (i) knowingly presenting or causing to be
presented a false claim for payment, (ii) knowingly making or using a false
record in order to receive payment for a claim, (iii) knowingly and willfully
making or causing to be made a false statement or representation of a material
fact in any application for any benefit or payment, (iv) knowingly and willfully
making or causing to be made any false statement or representation of a material
fact for use in determining rights to any benefit or payment, (v) any failure by
a claimant to disclose knowledge of the occurrence of any event affecting the
initial or continued right to any benefit or payment on its own behalf or on
behalf of another, with the intent to fraudulently secure such benefit or
payment, (vi) knowingly and willfully soliciting or receiving any remuneration
directly or indirectly, overtly or covertly, in cash or in kind, or offering to
pay or receive such remuneration (A) in return for referring an individual to a
person for the furnishing or arranging for the furnishing of any item or service
for which payment may be made in whole or in part by a Federal health care
program or (B) in return for purchasing, leasing or ordering or arranging for,
or recommending, purchasing, leasing or ordering any good, facility, service or
item for which payment may be made in whole or in part by a Federal health care
program, or (vii) referring an individual for "designated health services" to a
person or entity with which the referring physician has a financial
relationship, as defined in Section 1395nn of Title 42 of the United States Code
and the regulations promulgated thereunder.
(v) To the Company's knowledge, neither the Company, nor any
physician employee of the Company, has a financial relationship, ownership
interest in or compensation arrangement with any entity (other than the Company)
to which the Company or the physician employee makes any referral of or relating
to health care and none of the executive officers of
14
the Company has any reason to believe that any such financial relationship,
ownership interest or compensation arrangement exists. For purposes of this
representation, the phrase "financial relationship", "ownership interest",
"compensation arrangement", and "referral" shall have the meaning stated in
Section 1395nn of Title 42 of the United States Code and the regulations
promulgated thereunder.
(vi) To the Company's knowledge, neither the Company nor any of its
Subsidiaries nor any person, including but not limited to persons who (a) have a
direct or indirect ownership interest in the Company, (b) are an owner of a
whole or part interest in any mortgage, deed of trust, note or other obligation
secured by the Company, (c) are an officer or director of the Company, (d) are
an agent of the Company, or (e) are a managing employee of the Company, have
ever been and are not currently excluded from participating in any Federal
health care program. To the Company's knowledge, neither the Company nor any of
its Subsidiaries nor any of its directors, employees or agents have ever
executed or negotiated a corporate integrity agreement with any Governmental
Entity.
(q) Company Products. Except as set forth in Section 5.1(q) of the Company
Disclosure Letter, to the knowledge of the Company, there are no statements,
citations or decisions by any Governmental Entity (including, without
limitation, the FDA) stating that any of the Company Products is defective or
unsafe or fails to meet any standards promulgated by any such Governmental
Entity. Except as set forth in Section 5.1(q) of the Company Disclosure Letter,
the Company has not received any written complaints of any significant injury or
significant harm to any person as a result of the Company Products and, to the
knowledge of the Company, there is no (i) fact relating to any of the Company
Products that may impose upon the Company or any of its Subsidiaries a duty to
recall any of such products or a duty to warn customers of a defect in any of
such products, (ii) latent or overt design, manufacturing or other defect in any
of such products or (iii) material liability for warranty claims or returns with
respect to any of such products not fully reflected on the December 2002 Balance
Sheet. Section 5.1(q) of the Company Disclosure Letter sets forth a description
of all product warranty claims with respect to the Company Products during the
three years immediately preceding the date hereof. Except as set forth in
Section 5.1(q) of the Company Disclosure Letter, to the knowledge of the
Company, the Company Products conform in all material respects with all
applicable Laws and all requests of all Governmental Entities.
Since December 31, 2000, there have been no recalls, field notifications,
or seizures ordered with respect to any of the Company Products, and neither the
Company nor any Subsidiary has independently engaged in such recalls or field
notifications. No Governmental Entity (including the FDA) has commenced or, to
the Company's knowledge, threatened to commence, (i) any action to withdraw any
Permits or (ii) any requests to recall any of the products of the Company or any
Subsidiary, or commenced or to the Company's knowledge, threatened to initiate,
any action to enjoin production or sale of any Company Product or any
Subsidiary, nor has the Company or any Subsidiary received any written notice to
such effect.
(r) Takeover Statutes. The Company's Board of Directors has taken all
necessary action to approve the transactions contemplated by this Agreement such
that the restrictions under Section 203 of the DGCL shall not apply to such
transactions. No "fair price," "moratorium," "control share acquisition" or
other similar anti-takeover statute or regulation
15
(each, a "Takeover Statute") is applicable to the Company, the Shares, the
Merger Consideration, the Merger, this Agreement or the other transactions
contemplated by this Agreement.
(s) Environmental Matters. Except as disclosed in Section 5.1(s) of the
Company Disclosure Letter: (i) the Company and its Subsidiaries have complied in
all material respects with all applicable Environmental Laws; (ii) to the
knowledge of the Company, neither the Company nor any of its Subsidiaries have
any material liability under any Environmental Law for any Hazardous Substance
disposal or contamination on the properties currently owned or operated by the
Company or any of its Subsidiaries; (iii) to the knowledge of the Company,
neither the Company nor any of its Subsidiaries have any material liability
under any Environmental Law for any Hazardous Substance disposal or
contamination on the properties formerly owned or operated by the Company or any
of its Subsidiaries; (iv) to the knowledge of the Company, neither the Company
nor any of its Subsidiaries have any material liability under any Environmental
Law for any Hazardous Substance disposal or contamination on any third party
property; (v) to the knowledge of the Company, neither the Company nor any of
its Subsidiaries is in violation of or has any material liability under any
Environmental Law for any release or threat of release of any Hazardous
Substance; (vi) since December 31, 2000, neither the Company nor any of its
Subsidiaries has received any written notice, demand, letter, claim or request
for information alleging that it or any of its Subsidiaries may be in violation
of or liable under any Environmental Law in any material respect; (vii) neither
the Company nor any of its Subsidiaries is subject to any orders, decrees,
injunctions or other arrangements with any Governmental Entity or is an
indemnitor of any third party indemnitee for any liability under any
Environmental Law or relating to Hazardous Substances; (viii) to the Company's
knowledge, there are no circumstances or conditions involving the Company or any
of its Subsidiaries that would reasonably be expected to result in any material
claims, liability, investigations, costs or restrictions on the ownership, use,
or transfer of any of the property pursuant to any Environmental Law; (ix) to
the knowledge of the Company, none of the properties the Company or any of its
Subsidiaries owns, leases or otherwise occupies contain any underground storage
tanks, asbestos-containing material, lead-based paint, or polychlorinated
biphenyls in violation of any Environmental Law caused by the Company or its
Subsidiaries or that would reasonably be expected to result in liability to the
Company or its Subsidiaries under any Environmental Law; and (x) to the
knowledge of the Company, neither the Company nor any of its Subsidiaries has
engaged in any activities involving the generation, use, handling or disposal of
any Hazardous Substances in violation of any Environmental Law or that would
reasonably be expected to result in any material liability under any
Environmental Law.
As used herein, the term "Environmental Law" means any federal, state,
local or foreign law, regulation, treaty, order, decree, permit, authorization,
policy, opinion, common law or agency requirement applicable to the Company or
any of its Subsidiaries relating to: (A) the protection, investigation or
restoration of the environment, health and safety, or natural resources or
exposure to any harmful or hazardous material, (B) the handling, use, presence,
disposal, release or threatened release of any chemical substance or waste water
or (C) noise, odor, wetlands, pollution, contamination or any injury or threat
of injury to persons or property.
As used herein, the term "Hazardous Substance" means any substance that
is: (A) listed, classified or regulated in any concentration pursuant to any
Environmental Law; (B) any petroleum product or by-product, asbestos-containing
material, lead-containing paint or
16
plumbing, polychlorinated biphenyls, radioactive materials or radon; or (C) any
other substance which may be the subject of regulatory action by any
Governmental Entity pursuant to any Environmental Law.
(t) Intellectual Property.
(i) As used in this Section 5.1(t):
"Intellectual Property Rights" means, collectively, means any or all
of the following and all rights in, arising out of, or associated therewith: (i)
all United States, international and foreign patents and applications therefor
and all reissues, divisions, renewals, extensions, provisionals, continuations
and continuations-in-part thereof; (ii) all inventions (whether patentable or
not), invention disclosures, improvements, trade secrets, proprietary
information, know how, technology, technical data and customer lists, and all
documentation relating to any of the foregoing; (iii) all copyrights, copyrights
registrations and applications therefor, and all other rights corresponding
thereto throughout the world; (iv) all industrial designs and any registrations
and applications therefor throughout the world; (v) all mask works and any
registrations and applications therefor throughout the world (vi) all trade
names, logos, URLs, common law trademarks and service marks, trademark and
service mark registrations and applications therefor throughout the world; (vii)
all databases and data collections and all rights therein throughout the world;
(viii) all moral and economic rights of authors and inventors, however
denominated, throughout the world, and (ix) any similar or equivalent rights to
any of the foregoing anywhere in the world.
"Commercial Software Licenses" means commercially available end-user
computer software licenses for software that is used in the ordinary course of
the Company's or any of its Subsidiaries' business, where either (i) the total
fees for such software license typically do not exceed $5,000 per license per
calendar year or (ii) the software is licensed under shrinkwrap, clickwrap or
other non-negotiated standard license terms, provided that such software
described in the foregoing clauses (i) and (ii) is not a material component of
any product or service marketed or commercially exploited by the Company or any
of its Subsidiaries that generated 1% or more of the Company's consolidated
gross revenues (as determined in accordance with GAAP) during its last completed
fiscal year.
"Third Party IP License" means a license or other similar agreement
under which the Company or any of its Subsidiaries is granted rights in or under
Intellectual Property Rights, or in software; provided that the term "Third
Party IP License" shall not include any Commercial Software Licenses.
"Material Third Party IP License" means a Third Party IP License of
the Company or any of its Subsidiaries, but only if either (A) the total fees,
royalties or other payments that the Company or any of its Subsidiaries is
required to pay for such Third Party IP License exceeds $25,000 per year or
$100,000 in total, or (B) the licensed subject matter of such Third Party IP
License is a material component of any product or service marketed or
commercially exploited by the Company or any of its Subsidiaries that generated
1% or more of the Company's consolidated gross revenues (as determined in
accordance with GAAP) during its last completed fiscal year.
17
(ii) Section 5.1(t)(ii) of the Company Disclosure Letter lists all
patents, registered trademarks, service marks, trade names, logos, copyrights
and mask works, and all pending applications for patents or for the registration
of trademarks, service marks, trade names, logos, copyrights and mask works that
are owned or registered in the name of the Company or in the name of any of its
Subsidiaries and used in the business of the Company or any of its Subsidiaries
as currently conducted (collectively "Registered IP Rights"). All of such
Registered IP Rights, if any, have been duly registered in, filed in, applied
for or issued by the United States Patent and Trademark Office, the United
States Register of Copyrights, or the appropriate corresponding offices of other
jurisdictions, and have been properly maintained and renewed in all material
respects in accordance with all applicable provisions of law and administrative
regulations in the United States and each such other applicable jurisdiction,
except for those Registered IP Rights the failure of which to have so duly
registered, filed, applied for or issued would not have a Material Adverse
Effect on the Company.
(iii) Excluding Commercial Software Licenses, the Company or one or
more of its Subsidiaries owns and/or has all license or other rights necessary
to use, all patents, trademarks, service marks, trade names, logos, copyrights,
mask works (whether or not registered), trade secrets and software used in and
necessary to conduct the Company's business and the businesses of its
Subsidiaries as such businesses are currently conducted (collectively, the
Company's "Required IP Rights"). None of the Company's Required IP Rights that
is owned by the Company is co-owned with any other Person.
(iv) Neither the Company nor any of its Subsidiaries is bound by any
agreements, including without limitation any license agreements, that have
granted to any third party any purchase option, right of first refusal, a
consensual security interest, or exclusive rights in any material Required IP
Rights that are owned by the Company or any of its Subsidiaries.
(v) Section 5.1(t)(v) of the Company Disclosure Letter includes a
complete and accurate list of all Material Third Party IP Licenses. The Company
and its Subsidiaries are in compliance in all material respects with all Third
Party Licenses, and are not in default of any Third Party IP Licenses, all of
which are in full force and effect.
(vi) Neither the Company nor any of its Subsidiaries is and will not
be as a result of the execution, delivery or performance of this Agreement or
the consummation of the Merger or the other transactions contemplated hereby, in
material breach, violation or default of any Material Third Party IP License.
The Company's rights to its Required IP Rights will not be materially adversely
affected by the execution, delivery or performance of this Agreement or the
consummation of the Merger or the other transactions contemplated hereby.
(vii) To the Company's knowledge, there are no claims, suits or
demands pending against the Company or any of its Subsidiaries by any other
Person pertaining to any of the Company's rights in or with respect to the
Required IP Rights, and no proceedings have been instituted, are pending or, to
its knowledge, threatened against the Company or any of its Subsidiaries which
challenge its rights or the rights of any of its Subsidiaries in or with respect
to any of its Required IP Rights. Neither the Company nor its any of its
Subsidiaries have received any requests or demands by third parties for the
licensing of such third party's Intellectual Property Rights. Section
5.1(t)(vii) of the Company Disclosure Letter contains a complete and
18
accurate list of any pending challenges or adversarial proceedings before any
patent or trademark authority to which the Company or any Subsidiary is a party
(including any pending applications for reexamination of a patent), a
description of the subject matter of each proceeding, and the current status of
each proceeding, including, without limitation, interferences, priority
contests, opposition, and protests.
(viii) The marketing, distribution or sale of any product currently
marketed, distributed or sold by the Company or any of its Subsidiaries in the
countries where the Company or its Subsidiaries have conducted such activities,
does not, to the Company's knowledge, infringe or misappropriate the
Intellectual Property Rights, software (including source code and object code),
or proprietary non-public technology of any third party.
(ix) The Company and each of its Subsidiaries has taken all
reasonable steps required and customary in accordance with sound business
practice to establish, preserve and protect its ownership of all material
copyright, trade secret and other proprietary rights with respect to its
products and technology. The Company and each of its Subsidiaries has required
all employees and independent contractors having knowledge of non-public
information of the Company and each of its Subsidiaries to execute agreements
under which such persons are required to maintain the confidentiality of such
information and appropriately restricting the use thereof. The Company does not
have knowledge of any infringement by others (including any of its employees or
former employees) of any Intellectual Property Rights of the Company or any of
its Subsidiaries.
(x) Each person who, in any capacity (including, without limitation,
current and former consultants, independent contractors, officers, directors and
employees) has had access to the software, propriety technology or trade secrets
related to any of its currently offered products or services that the Company
purports to own and to embodiments of such software, propriety technology or
trade secrets from which such person could potentially misappropriate
information or technology of any material value has entered into a written
agreement suitable to vest sole and exclusive right, title and interest in and
to all inventions, creations, developments, and works in the Company (including,
without limitation, intellectual property rights contained therein) to the
Company.
(u) Contracts. Except as set forth in Section 5.1(u) of the Company
Disclosure Letter and other than those Contracts identified on the Exhibit index
of the Company's Annual Report on Form 10-K for the year ended December 31, 2002
(the "Filed Contracts"), there are no Contracts that are material contracts with
respect to the Company and its Subsidiaries (together with the Contracts set
forth in Section 5.1(u) of the Company Disclosure Letter and the Filed
Contracts, the "Material Contracts"). Except as set forth in the corresponding
subsection of Section 5.1(u) of the Company Disclosure Letter, neither the
Company nor any of its Subsidiaries is a party to, and none of their respective
properties or other assets is subject to any:
(i) covenant not to compete or other covenant (i) limiting or
restricting the development, manufacture, marketing, distribution or sale of any
of the Company Products or any future line extension of such products into other
forms or (ii) limiting or restricting the ability of the Company or any of its
Subsidiaries to enter into any market or line of business or to compete with any
other Person, or any other covenant restricting or prohibiting the Company or
19
any of its Subsidiaries or Affiliates from transacting business or dealing in
any manner with any other Person;
(ii) Contract with any Affiliate of the Company or any of its
Subsidiaries or any director, officer, stockholder or employee of the Company or
any of its Subsidiaries;
(iii) advertising Contracts requiring aggregate expenditures or fees
in excess of $100,000 in any twelve-month period;
(iv) continuing Contract for the future purchase or price of raw
materials, supplies or equipment which involves or would reasonably be expected
to involve the payment by the Company or any of its Subsidiaries of more than
$100,000 in any twelve month period or which contain minimum purchase conditions
or requirements or other terms that restrict or limit the purchasing
relationships of the Company and its Subsidiaries;
(v) management, employment, service, consulting, bonus, incentive
compensation, severance or other similar type of Contract;
(vi) Contract relating in whole or in part to the Intellectual
Property Rights of the Company or any of its Subsidiaries (including any
Contract under which the Company or any of its Subsidiaries is licensee or
licensor of any such Intellectual Property Rights);
(vii) mortgage, pledge, security agreement, deed of trust, loan
agreement, credit agreement, indenture, conditional sale or title retention
agreement, equipment financing obligation or other instrument, in any case,
involving amounts in excess of $100,000 or granting a lien, pledge, security
interest, claim or other encumbrance upon any of the properties or assets of the
Company or any of its Subsidiaries;
(viii) collective bargaining agreement or other Contract with any
labor union or association representing employees;
(ix) Contract regarding the release, transportation or disposal of
Hazardous Substances, or the clean-up, abatement or other action relating to
Hazardous Substances or Environmental Laws;
(x) Contract establishing or creating any partnership, joint
venture, limited liability company, limited liability partnership or similar
entity;
(xi) Contracts to make any capital expenditures or capital additions
or improvements with aggregate commitments in excess of $100,000 in any
twelve-month period or in excess of $100,000 in the aggregate over the term of
any such Contract;
(xii) Contract relating to the storage or warehousing of any
inventory or products of the Company or any of its Subsidiaries, or the charter
or purchase of transportation or shipping services;
(xiii) guarantees or other Contracts in respect of any indebtedness
of any Person;
20
(xiv) Contract providing for the indemnification of any current or
former director, officer or employee of the Company or any of its Subsidiaries;
(xv) any other material Contract (other than Filed Contracts) to
which the Company or any of its Subsidiaries is a party or by which any of them
or any of their properties or other assets are bound.
Each Material Contract that requires or may require the consent or waiver
of a third party prior to consummation of the transactions contemplated by this
Agreement in order to avoid a material breach or violation of, or default under,
such Material Contract is identified and marked by an asterisk on Section 5.1(u)
of the Company Disclosure Letter. Each Material Contract is a valid and binding
obligation of the Company or its Subsidiary, in full force and effect and
enforceable in accordance with its terms. Neither the Company nor any of its
Subsidiaries nor, to the Company's knowledge, any other party to any Material
Contract, is in material violation of or in material default under any Material
Contract, nor, to the Company's knowledge, except as set forth on Section 5.1(u)
of the Company Disclosure Letter, has any event occurred or circumstance or
condition exists, that (with or without notice or lapse of time) would
reasonably be expected to (i) result in a material violation of or material
default under any Material Contract, (ii) give any party the right to cancel or
terminate or modify any Material Contract or (iii) give any party the right to
seek material damages or other material remedies. Except as set forth in Section
5.1(u) of the Company Disclosure Letter, there have been no oral or written
modifications, amendments or waivers with respect to of any of the terms of any
of the Material Contracts.
(v) Distributors, Suppliers and Customers. No (i) supplier of Company
Products that supplied more than $1,000,000 of products to the Company or its
Subsidiaries during the year ended December 31, 2003, or (ii) distributor or
customer (who has a contract with the Company) who accounted for more than
$100,000 of the Company's sales of Company Products or services during the year
ended December 31, 2003, has cancelled or otherwise terminated, or, to the
knowledge of the Company, threatened to cancel or otherwise terminate, its
relationship with the Company or any of its Subsidiaries. Section 5.1(v) of the
Company Disclosure Letter identifies each supplier that meets the criteria in
clause (i) above and the Company has previously delivered to Parent a complete
and accurate schedule listing each of the ten largest distributors or customers
that meet the criteria in clause (ii) above. As of the date hereof, to the
knowledge of the Company, the relationships of the Company with the
distributors, suppliers and customers identified in Section 5.1(v) of the
Company Disclosure Letter are reasonably good relationships.
(w) Taxes.
Except as set forth in Section 5.1(w) of the Company Disclosure Letter:
(i) The Company and each of its Subsidiaries, and any consolidated,
combined, affiliated or unitary group for tax purposes of which the Company or
any of its Subsidiaries is or has been a member during any taxable year for
which the applicable statute of limitations has not closed (collectively, its
"Consolidated Group"), have timely filed all material Tax Returns required to be
filed by the Company in the manner provided by law. All such Tax Returns are
true, correct and complete in all material respects. The Company and each of its
21
Subsidiaries and its Consolidated Group have timely paid all material Taxes due
or required to be withheld from amounts owing to any employee, creditor or third
party or have provided adequate reserves in their financial statements for any
material Taxes that have not been paid, whether or not shown as being due on any
Tax Returns. For purposes of this Section 5.1(w) only, the term "material" shall
mean any Taxes (including any penalties and interest) which, in the aggregate,
exceed $60,000.
(ii) (1) No claim for material unpaid Taxes has become a lien or
encumbrance of any kind against the property of the Company or any of its
Subsidiaries or its Consolidated Group or is being asserted against the Company
or any of its Subsidiaries or its Consolidated Group, except for liens for
current Taxes not yet due; (2) no audit, examination, investigation, deficiency
or refund litigation or other proceeding in respect of Taxes of the Company, its
Subsidiaries or its Consolidated Group has been proposed, assessed or asserted
in writing by a Tax authority; (3) neither the Company nor any of its
Subsidiaries nor its Consolidated Group is a party to, is bound by, or has any
obligation under, or potential liability with regards to, any Tax sharing
agreement or has any potential liability or obligation for any Taxes of any
Person other than itself whether as a transferee or successor or otherwise; (4)
no extension or waiver of the statute of limitations on the assessment of any
Taxes has been granted by the Company or any of its Subsidiaries or its
Consolidated Group and is currently in effect; (5) neither the Company nor any
of its Subsidiaries nor its Consolidated Group has any material deferred
intercompany gain or loss arising as a result of a deferred intercompany
transaction within the meaning of Treasury Regulation Section 1.1502-13 (or
similar provision under state, local or foreign law) or any excess loss accounts
within the meaning of Treasury Regulation Section 1.1502-19; (6) neither the
Company nor any of its Subsidiaries nor its Consolidated Group is nor has been a
United States real property holding corporation (as defined in Section 897(c)(2)
of the Code) during the applicable period specified in Section 897(c)(1)(ii) of
the Code; (7) neither the Company nor any of its Subsidiaries nor its
Consolidated Group has agreed to include, or is required to include, in income
for any year beginning after the Effective Time, any material adjustment under
either Section 481(a) or 482 of the Code (or an analogous provision of state,
local or foreign law) by reason of a change in accounting method or otherwise;
and (8) neither the Company nor any of its Subsidiaries has distributed stock of
another entity, or has had its stock distributed by another entity, within the
past three (3) years, in a transaction that purported or was intended to be
governed in whole or in part by Section 355 of the Code.
(iii) "Tax" or "Taxes" means any taxes of any kind, including but
not limited to those on or measured by or referred to as income, gross receipts,
capital, sales, use, ad valorem, franchise, profits, license, withholding,
employment, payroll, premium, value added, property or windfall profits taxes,
environmental transfer taxes, customs, duties or similar fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any Governmental Entity,
domestic or foreign.
(iv) "Tax Return" means any return, declaration, report, statement
or information return required to be filed with any Governmental Entity with
respect to Taxes.
(x) Labor Matters. The Company has previously delivered to Parent a
complete and accurate schedule showing, with respect to salaried employees, the
name, current annual compensation rate (including bonus and commissions), title,
current base salary rate, accrued
22
bonus, accrued sick leave, accrued vacation benefits and accrued severance pay
of each present employee of the Company and each of its Subsidiaries. Neither
the Company nor any of its Subsidiaries is a party to or otherwise bound by any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor organization, nor is the Company or any of its
Subsidiaries the subject of any proceeding asserting that the Company or any of
its Subsidiaries has committed an unfair labor practice or is seeking to compel
the Company or any Subsidiary to bargain with any labor union or labor
organization nor is there pending or, to the Company's knowledge, threatened,
any labor strike, dispute, walkout, work stoppage, slowdown or lockout involving
the Company or any of its Subsidiaries. Each of the Company and its Subsidiaries
is in compliance in all material respects with all applicable Laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours and occupational safety and health. Except as disclosed in
Section 5.1(x) of the Company Disclosure Letter, there is no action, suit or
legal, administrative, arbitration, grievance or other proceeding pending or, to
the Company's knowledge, threatened, or, to the Company's knowledge, any
investigation pending or threatened against the Company or any Subsidiary
relating to the Company's employment practices or any of the applicable Laws
described in this Section 5.1(x).
(y) Rights Agreements. The Board of Directors of the Company has taken all
action necessary to render the Rights and the Company Rights Agreement
inapplicable to the Merger, the execution and delivery of this Agreement and the
consummation of the consummation of the other transactions contemplated hereby
and a copy of the amendment to the Company Rights Agreement effecting such
change has been provided to Permit.
(z) Real Property. Neither the Company nor any of its Subsidiaries owns
or, to the knowledge of the Company, has ever owned any real property. Section
5.1(z) of the Company Disclosure Letter sets forth a complete and accurate list
of all real property leased, subleased, licensed, operated or occupied by the
Company or any of its Subsidiaries (collectively the "Company Leases") and the
location of the premises. The premises subject to the Company Leases are
hereinafter referred to as "Company Leased Property." Except as set forth in
Section 5.1(z) of the Company Disclosure Letter, neither the Company, nor any of
its Subsidiaries nor, to the Company's knowledge, any other party is in default
under any of the Company Leases (nor, to the knowledge of the Company, does
there exist any condition which, upon the passage of time or the giving of
notice or both, would cause a default). Except as set forth in Section 5.1(z) of
the Company Disclosure Letter, no Company Leased Property is occupied by a third
party other than the Company or one of its Subsidiaries, and, to the Company's
knowledge, no third party has a right to occupy such property other than the
Company. The Company has provided to Parent complete and accurate copies of all
the Company Leases, including all amendments thereto; no term or condition of
any of the Company Leases has been modified, amended or waived except as shown
in such copies; and there are no other material agreements or arrangements
relating to the Company's or its Subsidiaries' use or occupancy of any of the
Company Leased Property. The Company has not transferred, mortgaged or assigned
any interest in any of the Company Leases. To the Company's knowledge, there is
no pending or threatened condemnation or similar proceeding affecting any
Company Leased Property or any portion thereof. The Company Leased Property is
in good operating condition and repair and is suitable for the conduct of
business as presently conducted therein.
23
(aa) Insurance. Section 5.1(aa) of the Company Disclosure Letter contains
a complete and accurate list of all policies of fire, liability, workers'
compensation, title and other forms of insurance owned, held by or applicable to
the Company or any of its Subsidiaries (or their assets or business) as of the
date hereof, and the Company has heretofore made available to Parent a complete
and accurate copy of all such policies. All such policies are in full force and
effect, all premiums with respect thereto covering all periods up to and
including the Closing Date have been paid, and no notice of cancellation or
termination has been received with respect to any such policy. Such policies are
sufficient for compliance by the Company and its Subsidiaries with all Contracts
to which the Company or any of its Subsidiaries is a party, and each of the
Company and its Subsidiaries has complied in all material respects with the
provisions of each such policy under which it is an insured party. The Company
has not been refused any insurance with respect to its assets or operations by
any insurance carrier to which it has applied for any such insurance or with
which it has carried insurance, during the last three (3) years. There are no
pending or, to the knowledge of the Company, threatened material claims under
any insurance policy.
(bb) Title to Assets. The Company and its Subsidiaries own, and have good
and valid title to, all assets purported to be owned by them, including: (a) all
assets reflected on the December 2002 Balance Sheet (except for assets sold or
otherwise disposed of in the ordinary course of business consistent with past
practice since December 31, 2002); and (b) all other assets reflected in the
books and records of the Company and its Subsidiaries as being owned by the
Company and its Subsidiaries. Except for the liens, pledges, security interests,
claims or other encumbrances set forth in Section 5.1(bb) of the Company
Disclosure Letter, all of said assets are owned by the Company and its
Subsidiaries free and clear of any liens, pledges, security interests, claims or
other encumbrances, except for (i) any lien, pledge, security interest, claim or
other encumbrance for current taxes not yet due and payable and (ii) minor
liens, pledges, security interests, claims or other encumbrances that have
arisen in the ordinary course of business consistent with past practice and that
do not (in any case or in the aggregate) materially detract from the value of
the assets subject thereto or materially impair the operations of the Company or
any of its Subsidiaries ("Permitted Liens").
(cc) [Reserved]
(dd) Opinion of Financial Advisor. The Company has received the oral
opinion of Lehman Brothers Inc. to the effect that, as of the date hereof, the
Merger Consideration is fair from a financial point of view to the holders of
the Shares (other than Parent and its Affiliates). An executed copy of the
written opinion confirming such oral opinion will be delivered to Parent
promptly after delivery thereof to the Company.
(ee) Brokers and Finders. Neither the Company nor any of the Company's
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in connection
with the Merger or the other transactions contemplated by this Agreement, except
that the Company has engaged Lehman Brothers Inc. as its financial advisor, the
arrangements with which have been disclosed to Parent prior to the date hereof.
24
(ff) Transactions with Affiliates. Except as set forth in Section 5.1(ff)
of the Company Disclosure Letter, since December 31, 2000, neither the Company
nor any of its Subsidiaries has purchased goods or services from, or sold goods
or services to, or otherwise engaged in any transaction with, any Person (i)
that is an Affiliate of the Company or (ii) with respect to which any Affiliate
of the Company, or any member of the immediate family of any such Affiliate,
owns more than 10% of the voting equity of such Person. All such transactions
have been conducted on terms at least as favorable to the Company or its
applicable Subsidiary as could have been obtained from third parties.
5.2 Representations and Warranties of Parent and Merger Sub. Parent and
Merger Sub hereby represent and warrant to the Company that:
(a) Organization, Good Standing and Qualification. Each of Parent and
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of organization and has
all requisite corporate power and authority to own and operate its properties
and assets and to carry on its business as presently conducted. Parent has made
available to the Company a complete and correct copy of its and Merger Sub's
certificate of incorporation and bylaws, each as amended to date. Such
certificates of incorporation and bylaws are in full force and effect.
(b) Corporate Authority; Approval and Fairness. Each of Parent and Merger
Sub has all requisite corporate power and authority and has taken all corporate
action necessary in order to execute, deliver and perform its obligations under
this Agreement and to consummate the Merger. This Agreement has been duly
executed and delivered by each of Parent and Merger Sub and is a legal, valid
and binding agreement of each enforceable against each in accordance with its
terms, except (A) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally and (B) as limited by laws relating
to the availability of specific performance, injunctive relief or other
equitable remedies.
(c) Governmental Filings; No Violations. Other than the filings and/or
notices (A) contemplated by Section 1.3, (B) such reports under the Exchange Act
as may be required in connection with this Agreement and the transactions
contemplated by this Agreement, and (C) otherwise required to be made by Parent,
or Merger Sub under applicable state securities or blue sky laws or the rules
and regulations of the American Stock Exchange in connection with the Merger or
any of the transactions contemplated by this Agreement, no notices, reports or
other filings are required to be made with, nor are any consents, registrations,
approvals, permits or authorizations required to be obtained by Parent or Merger
Sub from, any Governmental Entity, in connection with the execution and delivery
of this Agreement by Parent and Merger Sub and the consummation by Parent and
Merger Sub of the Merger and the other transactions contemplated hereby, except
those that the failure to make or obtain are not, individually or in the
aggregate, reasonably likely to prevent or materially delay Parent's or Merger
Sub's ability to consummate the transactions contemplated by this Agreement.
The execution, delivery and performance of this Agreement does not, and
the consummation of the Merger and the other transactions contemplated hereby
will not, constitute or result in (A) a breach or violation of, or a default
(with or without notice, lapse of time or
25
both) under, either Parent's or Merger Sub's certificate of incorporation or
bylaws, (B) (with or without notice, lapse of time or both) a breach or
violation of, or a default under, the acceleration of any obligations under, or
the creation of a lien, pledge, security interest or other encumbrance on any
assets of Parent or Merger Sub pursuant to, any Contract that is binding upon
Parent or Merger Sub or any Law or governmental or non-governmental permit or
license to which Parent or Merger Sub is subject or (C) any change in the rights
or obligations of any party under any of Parent's or Merger Sub's Contracts,
except, in the case of clause (B) or (C) above, for any breach, violation,
default, acceleration, creation or change that, individually or in the
aggregate, is not reasonably likely to prevent or materially delay its ability
to consummate the Merger or any of the other transactions contemplated by this
Agreement.
(d) Information Supplied. None of the information supplied or to be
supplied by or on behalf of Parent or Merger Sub specifically for inclusion or
incorporation by reference in the Proxy Statement will, at the date it is first
mailed to the stockholders of the Company and at the time of the Stockholders'
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
(e) Interim Operations of Merger Sub. Merger Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby, has engaged in no
other business activities and has conducted its operations only as contemplated
hereby.
(f) Funds. Parent has or will have funds sufficient cash to pay the
aggregate Merger Consideration.
(g) Brokers. None of Parent, Merger Sub or any of their respective
officers, directors or employees has employed any broker or finder or incurred
any liability for any broker or finder in connection with the transactions
contemplated herein.
ARTICLE VI
COVENANTS
6.1 Conduct of the Company. From the date of this Agreement until the
Effective Time, the Company shall, and shall cause its Subsidiaries to, conduct
their respective businesses in the ordinary and usual course consistent with
past practice and in a manner not representing a new strategic direction for the
Company and its Subsidiaries and shall, and shall cause its Subsidiaries to, use
all commercially reasonable efforts to preserve intact their business
organizations and relationships with third parties. Without limiting the
generality of the foregoing, except with the prior written consent of Parent,
which shall not be unreasonably withheld, or as set forth in the corresponding
subsections of Section 6.1 of the Company Disclosure Letter, except as
specifically required by this Agreement or applicable Law, from the date hereof
until the Effective Time the Company will not, and will not permit any of its
Subsidiaries to:
(a) adopt or propose any change in its certificate of incorporation or
by-laws, or amend, modify or terminate the Company Rights Agreement, except that
the Company shall
26
be permitted to make any amendments to the Company Rights Agreement that may be
necessary in order to ensure that its representations in Section 5.1(y) are true
and correct and to provide that the Rights issued under such Company Rights
Agreement terminate immediately prior to the Effective Time;
(b) adopt a plan or agreement of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
material reorganization of the Company or any of its Subsidiaries;
(c) issue, sell, transfer, pledge, dispose of or encumber any shares of,
or securities convertible into or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of capital stock of any
class or series of the Company or its Subsidiaries or any Company Voting Debt
other than issuances pursuant to the exercise of convertible securities or
warrants outstanding on the date hereof or issuances pursuant to stock based
awards or options that are outstanding on the date hereof and are reflected in
clause (B) of Section 5.1(c);
(d) (i) split, combine, subdivide or reclassify its outstanding shares of
capital stock, or (ii) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to its capital
stock other than dividends paid by any wholly-owned Subsidiary of the Company to
the Company or any wholly-owned Subsidiary of the Company;
(e) redeem, purchase or otherwise acquire directly or indirectly any of
the Company's or any Subsidiary's capital stock except purchases or redemptions
of capital stock of any wholly-owned Subsidiary of the Company;
(f) except as provided by Section 6.8 of this Agreement, amend the terms
of any Company Options, including, but not limited to, amendments to accelerate
or otherwise change the vesting or period of exercisability of Company Options
or restricted stock, or reprice Company Options or authorize cash payments in
exchange for any Company Options granted under any Company Stock Option Plans;
(g) make or commit to make any capital expenditure in excess of $500,000
through April 30, 2004, or make or commit to make any capital expenditure in
excess of $500,000 after April 30, 2004;
(h) (i) increase the compensation or benefits of any director, officer or
employee, except as required under any existing agreement or commitment and
provided that such required increase (including identity of employee) is
specifically disclosed on Section 6.1(h) of the Company Disclosure Letter; (ii)
enter into (or adopt) any new, or amend any existing, Compensation and Benefit
Plan; or (iii) hire any new employee at the level of director or above or with
an annual base salary in excess of $100,000 or promote any level to director or
manager or above;
(i) acquire (by merger, consolidation, acquisition of stock or assets or
otherwise) any equity interest in or any material portion of the assets of, or
by any other manner acquire any business or any Person or division thereof
except (x) purchases of inventory in the ordinary
27
course of business or (y) pursuant to purchase orders entered into in the
ordinary course of business which do not require payments in excess of $500,000
per annum;
(j) sell, lease, encumber (including by the grant of any option thereon)
or otherwise dispose of any material assets or property except pursuant to
existing contracts or commitments or with respect to the sale of Company
Products in the ordinary course of business consistent with past practice;
(k) (i) incur or assume any indebtedness, except indebtedness under the
Company's current line of credit in an amount that, when aggregated with all
then existing indebtedness of the Company, does not exceed $3,500,000; (ii)
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other person
other than its Subsidiaries in the ordinary course of business; or (iii) make or
cancel, or waive any rights with respect to, any loans, advances or capital
contributions to, or investments in, any other person;
(l) pay, discharge or satisfy any claims, suits, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business consistent with past practice of liabilities reflected or
reserved against in the December 2002 Balance Sheet, or incurred subsequent to
such date in the ordinary course of business consistent with past practice (and,
in any case, only if the amount involved is less than $500,000);
(m) (i) enter into any license or other Contract with respect to the
Intellectual Property Rights owned by the Company other than in the ordinary
course of business or (ii) enter into any consulting or independent contracting
arrangement under which the Company may be obligated to make payments in excess
of $100,000 in the aggregate or that extend for a period longer than one year
and may not be terminated by the Company without penalty upon thirty (or less)
days notice;
(n) directly or indirectly, engage in any transaction with, or enter into
any Contract with, any director, officer, holder of 5% or more the outstanding
Shares or Affiliate of the Company or any individual known to the Company to be
a family member of any such Person except for transactions solely between the
Company and any wholly-owned Subsidiary of the Company or solely between
wholly-owned Subsidiaries of the Company;
(o) change any method of accounting or accounting practice used by it
except any change required by reason of a concurrent change in GAAP;
(p) amend, modify or otherwise change the terms of any existing Contract
to accelerate the payments due to the Company or its Subsidiaries thereunder;
(q) enter into any joint venture, partnership or other similar
arrangement;
(r) (i) make or change any Tax election, (ii) settle any Tax audit or
(iii) file any amended Tax Return or (iv) consent to any extension or waiver of
the limitation period applicable to any Tax claim or assessment relating to the
Company or any of its Subsidiaries,
28
in each case, that is reasonably likely to result in a Tax liability that is
material to the Company and its Subsidiaries, taken as a whole;
(s) enter into any Contract that limits the ability of the Company or any
Subsidiary of the Company, or would limit the ability of Parent or any
Subsidiary of Parent after the Effective Time, to compete in or conduct any line
of business or compete with any Person in any geographic area or during any
period;
(t) except in the ordinary course of business, enter into any material
Contract, modify, amend or terminate any material term of any material Contract
or waive, release or assign any material rights or claims thereunder;
(u) enter into any Contract to the extent consummation of the transactions
contemplated by this Agreement or compliance by the Company with the provisions
of this Agreement would reasonably be expected to conflict with, or result in a
violation or breach of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of, or result in, termination, cancellation
or acceleration of any material obligation or to the loss of a material benefit
under, or result in the creation of any lien, pledge, security interest, claim
or other encumbrance in or upon any of the material properties or other assets
of the Company or any of its Subsidiaries under, or give rise to any increased,
additional, accelerated, or guaranteed right or entitlements of any third party
under, or result in any material alteration of, any provision of such Contract;
(v) take any action that would reasonably be expected to cause any of the
representations and warranties of the Company contained in this Agreement or the
Company Disclosure Letter not to be true and correct as of the date of such
action or as of the Closing or otherwise prevent, materially delay or materially
impede the consummation of the Merger; and
(w) agree or commit to do any of the foregoing.
6.2 Proxy Statement; Stockholders' Meeting.
(a) As promptly as practicable following the date of this Agreement, the
Company shall prepare and file with the SEC the Proxy Statement, and the Company
shall use all reasonable efforts to respond as promptly as practicable to any
comments of the SEC with respect thereto and to cause the Proxy Statement to be
mailed to the stockholders of the Company as promptly as practicable following
the date of this Agreement. The Company shall promptly notify Parent upon the
receipt of any comments from the SEC or the staff of the SEC or any request from
the SEC or the staff of the SEC for amendments or supplements to the Proxy
Statement and shall provide Parent with copies of all correspondence between the
Company and its Representatives, on the one hand, and the SEC and the staff of
the SEC, on the other hand, relating to the Proxy Statement. Notwithstanding the
foregoing, prior to filing or mailing the Proxy Statement (or any amendment or
supplement thereto) or responding to any comments of the SEC or the staff of the
SEC with respect thereto, the Company (i) shall provide Parent an opportunity to
review and comment on such document or response and (ii) shall include in such
document or response all comments reasonably proposed by Parent
29
Whenever any event occurs which is required to be set forth in an amendment or
supplement to the Proxy Statement, the Company or Parent, as the case may be,
will promptly inform the other of such occurrence and cooperate in filing with
the SEC and/or mailing to stockholders of the Company such amendment or
supplement.
(b) The Company shall, as soon as practicable following the date of this
Agreement, establish a record date for, duly call, give notice of, convene and
hold a meeting of its stockholders (the "Stockholders' Meeting") solely for the
purpose of obtaining the Stockholder Approval. Subject to Section 6.3 below, the
Company shall, through its Board of Directors, recommend that the Company's
stockholders vote in favor of the adoption and approval of this Agreement and
approval of the Merger and shall include such recommendation in the Proxy
Statement. Subject to Section 6.3(d), the Company will use all reasonable
efforts to solicit from its stockholders proxies in favor of the adoption and
approval of this Agreement and approval of the Merger, and will take all other
action necessary or advisable under applicable Law to secure Stockholder
Approval. Notwithstanding anything to the contrary contained in this Agreement,
the Company may adjourn or postpone the Stockholders' Meeting to the extent
necessary to ensure that any necessary supplement or amendment to the Proxy
Statement is provided to its stockholders in advance of a vote on the Merger and
this Agreement or, if as of the time for which the Stockholders' Meeting is
originally scheduled (as set forth in the Proxy Statement) there are
insufficient Shares represented (either in person or by proxy) to constitute a
quorum necessary to conduct the business of such Stockholders' Meeting.
6.3 Acquisition Proposals.
(a) No Solicitation. The Company agrees that neither it nor any of its
Subsidiaries nor any of the officers and directors of the Company or its
Subsidiaries shall, and that it shall use its best efforts to cause its and its
Subsidiaries' employees, agents and representatives (including any investment
banker, attorney or accountant retained by it or any of its Subsidiaries) not to
(and shall not authorize any of them to) directly or indirectly: (i) solicit,
initiate, encourage, knowingly facilitate or induce any inquiry with respect to,
or the making, submission or announcement of, any Acquisition Proposal (as
defined in Section 6.3(f)), (ii) participate in any discussions or negotiations
regarding, or furnish to any Person any nonpublic information in connection
with, or take any other action to facilitate any inquiries or the making of any
proposal that constitutes or may reasonably be expected to lead to, any
Acquisition Proposal, (iii) engage in discussions with any Person with respect
to any Acquisition Proposal, except as to the existence of these provisions,
(iv) approve, endorse or recommend any Acquisition Proposal, or (v) enter into
any letter of intent or similar document or any contract, agreement or
commitment contemplating or otherwise relating to any Acquisition Proposal or
transaction contemplated thereby. The Company and its Subsidiaries will
immediately cease any and all existing activities, discussions or negotiations
with any third parties conducted heretofore with respect to any Acquisition
Proposal.
(b) Notification of Unsolicited Acquisition Proposals. As promptly as
practicable after receipt of any Acquisition Proposal (and in any event within
forty-eight (48) hours of such receipt) or any request for nonpublic information
or inquiry which it reasonably believes would lead to an Acquisition Proposal,
the Company shall provide Parent with oral and written notice
30
of the material terms and conditions of such Acquisition Proposal, request or
inquiry, and the identity of the Person or group making any such Acquisition
Proposal, request or inquiry. The Company shall provide Parent as promptly as
practicable, oral and written notice of any changes in the proposed material
terms and conditions or the status of any such Acquisition Proposal, request or
inquiry.
(c) Superior Offers. Notwithstanding anything to the contrary contained in
Section 6.3(a), in the event that the Company receives an unsolicited, written
Acquisition Proposal from a third party that its Board of Directors has
concluded (following consultation with its outside legal counsel and its
financial advisor), is, or is reasonably likely to result in, a Superior Offer
(as defined in Section 6.3(f)), the Company may then take the following actions:
(i) Furnish nonpublic information to the third party making such
Acquisition Proposal, provided that (A) the Company receives from the third
party an executed confidentiality agreement containing customary limitations on
the use and disclosure of all nonpublic written and oral information furnished
to such third party on its behalf, the terms of which are substantially similar
to the terms contained in the Confidentiality Agreement (as defined in Section
6.6) and (B) substantially contemporaneously with furnishing any such nonpublic
information to such third party, the Company furnishes such nonpublic
information to Parent (to the extent such nonpublic information has not been
previously so furnished); and
(ii) Participate in negotiations and discussions with the third
party with respect to the Acquisition Proposal.
(d) Changes of Recommendation. In response to the receipt of a Superior
Offer, the Board of Directors of the Company may withhold, withdraw, amend or
modify its recommendation in favor of this Agreement and the Merger and may
indicate that it is doing so because it has received a Superior Offer and, in
the case of the Company's receipt of a Superior Offer that is a tender or
exchange offer made directly to its stockholders, recommend that its
stockholders accept the tender or exchange offer (any of the foregoing actions,
whether by the Board of Directors of the Company or a committee thereof, a
"Change of Recommendation"), if all of the following conditions in clauses (i)
through (iii) are met:
(i) The Stockholders' Meeting has not occurred;
(ii) The Company shall have (A) provided Parent with written notice
which shall state expressly (1) that it has received a Superior Offer, (2) the
material terms and conditions of the Superior Offer and the identity of the
Person or group making the Superior Offer, and (3) that it intends to effect a
Change of Recommendation and the manner in which it intends to do so, and (B)
considered any counterproposal to the Superior Offer that Parent may make during
the three-day period after Parent's receipt of the written notice referred to in
clause (A) (no Change of Recommendation being permissible hereunder prior to the
end of such three-day period) and (C) determined in the sole judgment of its
Board of Directors (following consultation with its outside legal counsel and
its financial advisor), that such Superior Offer is more favorable, from a
financial point of view, to the Company's stockholders (in their capacities as
stockholders) than such counterproposal; and
31
(iii) The Company shall not have breached in any material respect
any of the provisions set forth in Section 6.2 or this Section 6.3.
(e) Compliance with Tender Offer Rules. Nothing contained in this
Agreement shall prohibit the Company or its Board of Directors from taking and
disclosing to its stockholders a position contemplated by Rules 14d-9 and
14e-2(a) promulgated under the Exchange Act; provided that the Company shall not
effect a Change of Recommendation unless specifically permitted pursuant to the
terms of Section 6.3(d).
(f) Certain Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
(i) "Acquisition Proposal" shall mean any offer or proposal relating
to any transaction (other than the transaction contemplated by this Agreement)
or series of related transactions involving: (A) any purchase from the Company
or acquisition by any Person or "group" (as defined under Section 13(d) of the
Exchange Act and the rules and regulations thereunder) of more than a fifteen
percent (15%) interest in the total outstanding voting securities of the Company
or any tender offer or exchange offer that if consummated would result in any
Person or group beneficially owning fifteen percent (15%) or more of the total
outstanding voting securities of the Company or any merger, consolidation,
business combination or similar transaction involving the Company, (B) any sale
of all or substantially all of the assets of the Company (including its
Subsidiaries taken as a whole), or (C) any liquidation or dissolution of the
Company; and
(ii) "Superior Offer" shall mean an unsolicited, written offer made
by a third party to acquire, directly or indirectly, pursuant to a tender offer,
exchange offer, merger, consolidation or other business combination, or asset
purchase, all or substantially all of the assets of the Company or a majority of
the total outstanding voting securities of the Company and as a result of which
the stockholders of the Company immediately preceding such transaction would
hold less than fifty percent (50%) of the equity interests in the surviving or
resulting entity of such transaction or any direct or indirect parent or
subsidiary thereof, on terms that the Board of Directors of the Company has
concluded (following consultation with its outside legal counsel and its
financial adviser) (A) to be more favorable, from a financial point of view, to
the Company's stockholders (in their capacities as stockholders) than the terms
of the Merger (or any counterproposal referred to in Section 6.3(d)(ii)(B)) and
(B) the conditions to the consummation of which are reasonably capable of being
satisfied.
6.4 Filings; Other Actions; Notification.
(a) Each of the Company and Parent shall cooperate with the other and use
(and shall cause their respective Subsidiaries to use) all commercially
reasonable efforts to take or cause to be taken all actions, and do or cause to
be done all things, necessary, proper or advisable under this Agreement and
applicable Laws to consummate and make effective the Merger and the other
transactions contemplated by this Agreement as soon as practicable, including
preparing and filing as promptly as practicable all documentation to effect all
necessary applications, notices, petitions, filings and other documents and to
obtain as promptly as practicable all permits, consents, approvals and
authorizations necessary or advisable to be
32
obtained from any third party and/or any Governmental Entity in order to
consummate the Merger or any of the other transactions contemplated by this
Agreement; provided, however, that neither the foregoing nor anything else in
this Agreement shall require Parent to take or to permit the Company to take any
action or agree to take any action that would involve the disposition of any
assets that are material to Parent and its Subsidiaries, taken as a whole.
Subject to applicable Laws relating to the exchange of information, Parent and
the Company shall have the right to review in advance, and to the extent
practicable each will consult the other on, all the information relating to
Parent or the Company, as the case may be, and any of their respective
Subsidiaries, that appear in any filing made with, or written materials
submitted to, any third party and/or any Governmental Entity in connection with
the Merger and the other transactions contemplated by this Agreement. In
exercising the foregoing right, each of the Company and Parent shall act
reasonably and as promptly as practicable.
(b) The Company and Parent each shall, upon request by the other, furnish
the other with all information concerning itself, its Subsidiaries, directors,
officers and stockholders and such other matters as may be reasonably necessary
or advisable in connection with the Proxy Statement, or any other statement,
filing, notice or application made by or on behalf of Parent, the Company or any
of their respective Subsidiaries to any third party and/or any Governmental
Entity in connection with the Merger and the transactions contemplated by this
Agreement.
(c) The Company and Parent each shall keep the other apprised of the
status of matters relating to completion of the transactions contemplated
hereby, including promptly furnishing the other with copies of notices or other
communications received by Parent or the Company, as the case may be, or by any
of their respective Subsidiaries, from any third party and/or any Governmental
Entity with respect to the Merger and the other transactions contemplated by
this Agreement. The Company and Parent each shall give prompt notice to the
other upon becoming aware of, including a reasonably detailed statement of the
relevant facts relating to: (i) the occurrence or nonoccurrence of any event the
occurrence or nonoccurrence of which would reasonably be likely to cause any
representation or warranty of such party contained in this Agreement or the
Company Disclosure Letter to be untrue or inaccurate such that the condition set
forth in Section 7.2(a) or Section 7.3(a), as applicable, would not be satisfied
as of the date of such event or as of the Closing Date; (ii) the occurrence of
any event that, were it to have occurred prior to the date hereof, would have
caused the representation of the Company set forth in Section 5.1(k) to be
untrue, (iii) any material failure of the Company or Parent, as the case may be,
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder; or (iv) the occurrence or nonoccurrence of
any event the occurrence or nonoccurrence of which would reasonably be likely to
cause any condition to the obligations of any party to effect the transactions
contemplated hereby not to be satisfied. The Company shall give prompt notice to
Parent upon becoming aware of any change since the date hereof that has had, or
is reasonably likely to have, a Material Adverse Effect on the Company. The
parties hereto agree that the delivery of any notice pursuant to this Section
6.4(c) shall not cure such breach or noncompliance or limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
33
6.5 Stockholder Litigation. The Company shall give Parent the opportunity
to participate in the defense or settlement of any stockholder litigation
against the Company and/or its directors relating to the transactions
contemplated by this Agreement, and no such settlement shall be agreed to
without Parent's prior written consent, such consent not to be unreasonably
withheld or delayed.
6.6 Access. Upon reasonable notice, the Company shall (and shall cause its
Subsidiaries to) afford Parent's officers, employees, counsel, accountants and
other authorized representatives ("Representatives") reasonable access, during
normal business hours throughout the period prior to the Effective Time, to the
Company's executive officers, accountants, properties, books, contracts and
records and, during such period, shall (and shall cause its Subsidiaries to)
furnish promptly to the Representatives all information concerning its business,
properties, results of operations and personnel as may reasonably be requested,
provided that no investigation pursuant to this Section shall affect or be
deemed to modify any representation or warranty made by the Company, and
provided further, however, that the Company may restrict the foregoing access to
the extent that (A) in the reasonable judgment of the Company, any law, treaty,
rule or regulation of any Governmental Entity applicable to the Company requires
the Company or its subsidiaries to restrict or prohibit access to any such
properties or information, (B) in the reasonable judgment of the Company, the
information is subject to confidentiality obligations to a third party, (C) such
disclosure would result in disclosure of any trade secrets of third parties, or
(D) disclosure of any such information or document could result in the loss of
attorney client privilege; provided, however, that with respect to this clause
(D), the Company and/or its counsel shall use their reasonable efforts to enter
into such joint defense agreements or other arrangements, as appropriate, so as
to avoid the loss of attorney client privilege. All requests for information and
access made pursuant to this Section shall be directed to an executive officer
of the Company or such Person as may be designated by its officers. The parties
will hold any such information which is nonpublic in confidence pursuant to the
terms of the confidentiality agreement, dated October 3, 2003, between the
Company and Parent (the "Confidentiality Agreement"). Nothing in this Section
6.6 will modify or alter the provisions of the Confidentiality Agreement;
provided, however, that, notwithstanding anything to the contrary contained
herein or in the Confidentiality Agreement, any confidentiality obligations set
forth herein or in any other agreement to which the parties hereto are parties
or by which they are bound, including the Confidentiality Agreement, as they
relate to the transactions contemplated by this Agreement shall not apply to the
purported or claimed Federal, state, or local income tax treatment of the
transactions (the "Tax Treatment") or to any fact that may be relevant to
understanding the purported or claimed Federal, state, or local income tax
treatment of the transactions (the "Tax Structure"), and each party hereto (and
any employee, representative, or agent of any party hereto) may disclose to any
and all persons, without limitation of any kind, the Tax Treatment and Tax
Structure of the transactions contemplated by this Agreement and any materials
of any kind (including any tax opinions or other tax analyses) that relate to
the Tax Treatment or Tax Structure. In addition, each party hereto acknowledges
that it has no proprietary or exclusive rights to any tax matter or tax idea
related to the transactions contemplated by this Agreement. The preceding
sentence is intended to ensure that the transactions contemplated by this
Agreement shall not be treated as having been offered under conditions of
confidentiality for purposes of Treasury Regulation Section 1.6011-4(b)(3) or
any successor provision of the Treasury Regulations promulgated under Section
6011 of the Code, or
34
any similar state or local provisions, and shall be construed in a manner
consistent with such purpose.
6.7 Publicity. The initial press release concerning the Merger shall be a
joint press release and thereafter (except with respect to any press release or
public announcement relating to a Change of Recommendation) the Company and
Parent shall consult with each other prior to issuing any press releases or
otherwise making public announcements with respect to the Merger and the other
transactions contemplated by this Agreement and prior to making any filings with
any third party and/or any Governmental Entity (including any national
securities exchange) with respect thereto, except as may be required by
applicable Law or by obligations pursuant to any listing agreement with or rules
of any national securities exchange. Nothing contained in this Agreement shall
prohibit the Company or Parent from publicly disclosing this Agreement to the
extent such disclosure is required under applicable Law or by obligations
pursuant to any listing agreement with, or any rules of, any national securities
exchange, provided, that the Company may not disclose a Change of Recommendation
except as permitted by Section 6.3.
6.8 Equity Awards.
(a) The Company shall amend, or cause to be amended, each Company Stock
Option Plan to provide that, or take such other reasonable actions so that, at
the Effective Time, each holder of a Company Option that is vested or unvested
and unexercised shall receive a "Cash Amount" (less any applicable withholding
taxes) equal to the product of (x) the amount (if any) by which the Merger
Consideration exceeds the exercise price per Share of the Company Option and (y)
the number of underlying Shares with respect to which the Company Option had not
been exercised prior to the Effective Time. The Company shall use all
commercially reasonable efforts to amend the Company Stock Option Plans to
provide that each Company Option shall terminate as of the Effective Time upon
the making of such payments.
(b) The Company shall provide notice to participants in the Company Stock
Option Plans that the Company proposes to merge into another corporation; that
the participant under the plans or program may exercise his vested and
unexercised Company Options in full with respect to Shares not theretofore
purchased by him prior to the Effective Time; and that the Company Stock Option
Plans have been amended to provide that to the extent such a participant does
not exercise such Company Options prior to the Effective Time, such Options
shall terminate at the Effective Time and to the extent that such participant
holds vested and unexercised Company Options at the Effective Time, such
participant shall receive, in settlement of each Company Option held by the
participant, the "Cash Amount" described in the preceding paragraph.
(c) Except as may be otherwise agreed to by Parent and the Company, the
Company Stock Option Plans shall terminate as of the Effective Time.
(d) Prior to the Effective Time, the Company shall take all such steps as
may be required and permitted to cause the transactions contemplated by this
Agreement, including dispositions of Shares, Company Options and any other
derivative securities with respect to the Shares, by each individual who is or
will be subject to the reporting requirements of
35
Section 16(a) of the Exchange Act with respect to the Company, to be exempt
under Rule 16b-3 promulgated under the Exchange Act.
(e) Notwithstanding anything to the contrary herein, if it is determined
that compliance with any of the foregoing would cause any individual subject to
Section 16 of the Exchange Act to become subject to the profit recovery
provisions thereof, any Company Options held by such individual will be canceled
or purchased, as the case may be, at the Effective Time or at such later time as
may be necessary to avoid application of such profit recovery provisions and
such individual will be entitled to receive from the Company or the Surviving
Corporation an amount in cash or other consideration satisfactory to the
Surviving Corporation and such individual equal to the excess, if any, of the
Merger Consideration over the per share exercise price of such Company Option,
multiplied by the number of underlying shares subject thereto (less any
applicable withholding taxes), and the parties hereto will cooperate and take
any and all necessary actions so as to achieve the intent of the foregoing
without giving rise to such profit recovery.
6.9 Expenses. Except as otherwise provided in Section 8.5(b), whether or
not the Merger is consummated, all costs and expenses incurred in connection
with this Agreement and the Merger and the other transactions contemplated by
this Agreement shall be paid by the party incurring such expense, except that
expenses incurred in connection with printing and mailing the Proxy Statement
and expenses of the Paying Agent shall be shared equally by the Company and
Parent.
6.10 Indemnification; Directors' and Officers' Insurance.
(a) From and after the Effective Time, Parent and the Surviving
Corporation, jointly and severally, shall indemnify, defend and hold harmless
each present and former director and officer of the Company and its Subsidiaries
and each present or former employee, officer or director of the Company who
serve or have served at the Company's request as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise (in
any such case when acting in such capacity) determined as of the Effective Time
(the "Indemnified Parties" and each an "Indemnified Party"), against any costs
or expenses (including but not limited to reasonable attorneys' fees),
judgments, fines, losses, claims, damages or liabilities (collectively, "Costs")
incurred in connection with any threatened or pending claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of matters existing or occurring at or prior to the
Effective Time (including, without limitation, for acts or omissions occurring
in connection with the approval of this Agreement and the consummation of the
transactions contemplated hereby), whether asserted or claimed prior to, at or
after the Effective Time, to the fullest extent that the Company is permitted
under applicable law and the Company's certificate of incorporation to indemnify
such Indemnified Party (and Parent shall also advance expenses to each
Indemnified Party as incurred (promptly following Parent's receipt of a written
request from the Indemnified Party, together with a statement containing
reasonable detail of such expenses) to the fullest extent permitted under
applicable law, provided the Indemnified Party to whom expenses are advanced
provides an undertaking to repay such advances if it is ultimately determined
that such expenses can not be reimbursed or indemnified under applicable law to
the extent such undertaking is required by applicable law). For a period of
36
six years after the Effective Time, Parent and the Surviving Corporation (or any
successor to the Surviving Corporation), jointly and severally, shall indemnify
each person who is a beneficiary of the provisions of Article NINTH of the
Company's certificate of incorporation as in effect on the date hereof for acts
or omissions occurring at or prior to the Effective Time to the same extent that
such person is so entitled under said Article NINTH as in effect on the date
hereof.
(b) Any Indemnified Party wishing to claim indemnification under the first
sentence of paragraph (a) of this Section 6.10, upon receiving written
notification of any such claim, action, suit, proceeding or investigation, shall
promptly notify Parent thereof, but the failure to so notify shall not relieve
Parent of any liability it may have to such Indemnified Party except if, and
only to the extent that, such failure materially and irreversibly prejudices
Parent. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) Parent
shall pay the fees and expenses of counsel selected by the Indemnified Party and
reasonably acceptable to Parent, promptly after statements therefor are
received, and otherwise advance to such Indemnified Party upon request
reimbursement of documented expenses reasonably incurred, (ii) Parent will
cooperate in the defense of any such matter, and (iii) any determination
required to be made with respect to whether an Indemnified Party's conduct
complies with the standards set forth under applicable Law shall be made by the
written opinion of independent counsel selected by the Parent and reasonably
approved by the Indemnified Party, which counsel shall not have, at the time of
such determination, otherwise performed services for the Surviving Corporation,
Parent or their respective affiliates during the preceding three years;
provided, however, that (A) Parent shall be obligated pursuant to this Section
6.10(b) to pay for only one firm of counsel for all Indemnified Parties in any
jurisdiction, except to the extent there is, in the opinion of counsel to an
Indemnified Party, under applicable standards of professional conduct, a
conflict on any significant issue between the positions of such Indemnified
Party and any other Indemnified Party or Indemnified Parties, in which case each
Indemnified Party with a conflicting position on a significant issue shall be
entitled to retain separate counsel mutually satisfactory to Parent and such
Indemnified Party, (B) the Indemnified Parties shall cooperate in the defense of
any such matter and (C) Parent shall not be liable for any settlement effected
without its prior written consent (which consent may not be unreasonably
withheld or delayed).
(c) For a period of six years after the Effective Time, Parent will cause
the Surviving Corporation to maintain with one or more reputable third party
insurers directors' and officers' liability insurance in respect of claims
arising from acts or omissions occurring at or prior to the Effective Time
covering those persons who are covered by the Company's directors' and officers'
liability insurance policy as of the date hereof on terms no less favorable than
those applicable to the current directors and officers of the Company as of the
date hereof; provided, however, that in no event will the Surviving Corporation
be required to expend in any one year in excess of two hundred percent (200%) of
the annual premium currently paid by the Company for such coverage (and to the
extent the annual premium would exceed two hundred percent (200%) of the annual
premium currently paid by the Company for such coverage, the Surviving
Corporation shall cause to be maintained the maximum amount of coverage as is
available for such two hundred percent (200%) of such annual premium).
37
(d) The provisions of this Section 6.10 are intended to be for the benefit
of, and shall be enforceable by, each of the Indemnified Parties and their heirs
and estates and such provisions may not be terminated or amended in any manner
adverse to the interests of such Indemnified Parties without their prior
consent. Nothing in this Section 6.10 shall limit in any way any other rights to
indemnification or advancement or expenses that any current or former director,
officer, employee or agent of the Company may have by virtue of the certificate
of incorporation of the Company or under applicable law. Parent agrees that all
rights to indemnification for acts or omissions occurring prior to the Effective
Time now existing in favor of the Indemnified Parties, including, without
limitation, as provided in its certificate of incorporation, shall survive the
Merger, shall become the obligation of Parent and shall continue in full force
and effect in accordance with their terms.
(e) In the event the Parent or the Surviving Corporation or any of their
respective successors or assigns (i) consolidates with or merges into any other
Person and shall not be the continuing or surviving corporation of such
consolidation or merger, or (ii) transfers all or substantially all of its
properties to any Person, then, and in each case, proper provision shall be made
so that the successors and assigns of the Company and the Surviving Corporation,
as the case may be, shall assume the obligations set forth in this Section 6.10.
(f) After the Effective Time, Parent shall indemnify any Indemnified Party
against all reasonable costs and expenses (including reasonable attorneys' fees
and expenses) and Parent shall also advance expenses to such Indemnified Party
as incurred (subject to the conditions set forth in Section 6.10(a) with respect
to the advancement of expenses), relating to the enforcement of such Indemnified
Party's rights under this Section 6.10 or under the certificate of
incorporation, but Parent shall be obligated to so indemnify only to the extent
that such Indemnified Party is ultimately determined to be entitled to
indemnification hereunder or thereunder.
6.11 Takeover Statute.
If any Takeover Statute is or may become applicable to the Merger or the
other transactions contemplated by this Agreement, each of Parent and the
Company and their respective Board of Directors shall grant such approvals and
take such lawful actions as are necessary so that such transactions may be
consummated as promptly as practicable on the terms contemplated by this
Agreement or by the Merger and otherwise act to eliminate or minimize the
effects of such statute or regulation on such transactions.
6.12 Transfer Taxes
All stock transfer, real estate transfer, documentary, stamp, recording
and other similar Taxes (including interest, penalties and additions to any such
Taxes) ("Transfer Taxes") incurred in connection with the transactions
contemplated hereby shall be paid by either Merger Sub or the Surviving
Corporation, and the Company shall cooperate with Merger Sub and Parent in
preparing, executing and timely filing any Tax Returns with respect to such
Transfer Taxes.
6.13 Employee Benefits.
38
(a) Parent agrees that the employees of the Company and its Subsidiaries
("Company Employees") will be provided with benefits under employee benefit
plans (other than equity incentive plans) that are comparable in the aggregate
to those provided by Parent and its Subsidiaries to similarly situated employees
of Parent and its Subsidiaries.
(b) Following the Effective Time, Parent shall cause service performed by
Company Employees for the Company and its Subsidiaries (and any predecessor
entities) to be taken into account for purposes of eligibility and vesting, and
for purposes of determining severance, vacation and other paid time off
entitlements, under the benefit plans of Parent and its Subsidiaries in which
Company Employees participate to the extent such service was credited by the
Company and its Subsidiaries under similar Benefit Plans. Notwithstanding the
foregoing, nothing in this Section 6.13(b) shall be construed to require
crediting of service that would result in (i) duplication of benefits, (ii)
service credit for benefit accruals under a defined benefit pension plan or for
employer contributions under a defined contribution pension plan, or (iii)
service credit under a newly established plan for which prior service is not
taken into account.
(c) From and after the Effective Time, Parent shall (i) cause to be waived
any pre-existing condition limitations under welfare benefit plans, policies or
practices of Parent or its Subsidiaries in which Company Employees participate
and (ii) cause to be credited any deductibles and out-of-pocket expenses
incurred by such employees and their beneficiaries and dependents during the
portion of the calendar year prior to participation in the benefit plans
provided by Parent and its Subsidiaries.
ARTICLE VII
CONDITIONS
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver at or prior to the Closing of each of the following
conditions:
(a) Stockholder Approval. The Stockholder Approval shall have been
obtained.
(b) Regulatory Consents. All Required Governmental Consents and Filings
shall have been made or obtained (as the case may be).
(c) No Order. No Governmental Entity of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which (i) is in effect and (ii) has the effect of
making the Merger illegal or otherwise prohibiting consummation of the Merger.
(d) No Governmental Restriction. There shall not be any pending or overtly
threatened suit, action or proceeding asserted by any Governmental Entity
challenging or seeking to restrain or prohibit the consummation of the Merger or
any of the other transactions
39
contemplated by this Agreement, the effect of which restraint or prohibition if
obtained would cause the condition set forth in Section 7.1(c) to not be
satisfied.
7.2 Conditions to Obligations of Parent and Merger Sub. The obligations of
Parent and Merger Sub to effect the Merger are also subject to the satisfaction
or waiver by Parent prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and warranties of
the Company set forth in this Agreement and the Company Disclosure Letter, when
read without any exception or qualification as to materiality or Material
Adverse Effect, shall be true and correct as of the date hereof and as of the
Closing Date, as if such representations and warranties were made as of the date
hereof and as of the Closing Date (except as to any such representation or
warranty which speaks as of a specific date, which must be true and correct as
of such specific date) except where the failure to be so true and correct would
not, individually or in the aggregate with all such failures, be reasonably
likely to have a Material Adverse Effect, and Parent shall have received a
certificate signed on behalf of the Company by the chief executive officer and
chief financial officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all material obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and Parent
shall have received a certificate signed on behalf of the Company by the chief
executive officer and chief financial officer of the Company to such effect.
(c) Absence of Certain Changes. Since the date of this Agreement, there
shall not have occurred any change or event (whether alone or together with
other changes or events occurring since the date of this Agreement) that has
had, or is reasonably likely to have, a Material Adverse Effect on the Company.
(d) Litigation Matters. There shall not be any suit, action or proceeding
pending or threatened (in writing or otherwise directly communicated to the
Company) by a Governmental Entity seeking to require Parent or any of its
Subsidiaries to take any action that Parent is not required to take pursuant to
the proviso in Section 6.4(a).
7.3 Conditions to Obligation of the Company. The obligation of the Company
to effect the Merger is also subject to the satisfaction or waiver by the
Company prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and warranties of
Parent and Merger Sub set forth in this Agreement, when read without any
exception or qualification as to materiality or Material Adverse Effect, shall
be true and correct as of the date hereof and as of the Closing Date, as if such
representations and warranties were made as of the date hereof and as of the
Closing Date (except as to any such representation or warranty which speaks as
of a specific date, which must be true and correct as of such specific date)
except where the failure to be so true and correct would not, individually or in
the aggregate with all such failures, be reasonably likely to materially
adversely affect the ability of Parent to effect the Merger in accordance with
this Agreement, and the Company shall have received a certificate signed on
40
behalf of Parent and Merger Sub by the chief executive officer and chief
financial officer of Parent to such effect.
(b) Performance of Obligations of Parent and Merger Sub. Each of Parent
and Merger Sub shall have performed in all material respects all material
obligations required to be performed by it under this Agreement at or prior to
the Closing Date, and the Company shall have received a certificate signed on
behalf of Parent and Merger Sub by the chief executive officer and chief
financial officer of Parent to such effect.
ARTICLE VIII
TERMINATION
8.1 Termination by Mutual Consent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the approval by stockholders of the Company and Parent referred
to in Section 7.1(a) is obtained, by mutual written consent of the Company,
Parent and Merger Sub, by action of their respective boards of directors.
8.2 Termination by Either Parent or the Company. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time by action of the Board of Directors of either Parent or the Company if (a)
the Merger shall not have been consummated by June 30, 2004 (the "Termination
Date"), (b) the Stockholder Approval shall not have been obtained at a meeting
duly convened therefor or at any adjournment or postponement thereof, or (c) any
Law permanently restraining, enjoining or otherwise prohibiting the Merger shall
become final and non-appealable (whether before or after the approval by the
stockholders of the Company); provided, that the right to terminate this
Agreement pursuant to this Section 8.2 shall not be available to any party that
has breached in any material respect its obligations under this Agreement in any
manner that shall have been a principal cause of the failure referred to in said
clause.
8.3 Termination by the Company. This Agreement may be terminated and the
Merger may be abandoned by the Company, by action of the Board of Directors of
the Company:
(a) at any time prior to the time when Stockholder Approval has been
obtained if at the time of such termination all of the conditions set forth in
clauses (ii) and (iii) of Section 6.3(d) are met; or
(b) at any time prior to the Effective Time, whether before or after the
time when Stockholder Approval has been obtained, if there has been a material
breach by Parent or Merger Sub of any representation, warranty or covenant of
Parent or Merger Sub set forth in this Agreement or if any representation or
warranty of Parent or Merger Sub would be untrue if made on any date prior to
the Effective Time, in either case such that the conditions set forth in Section
7.3(a) or Section 7.3(b) would not be satisfied as of the time of such breach or
as of the time such representation or warranty would be untrue; provided that if
such breach by Parent or Merger Sub or inaccuracy in its respective
representation or warranty is curable
41
through the exercise of all commercially reasonable efforts, then the Company
may not terminate this Agreement under this Section 8.3(b) prior to the date
which is twenty (20) calendar days after written notice of such breach or
inaccuracy is given by the Company to Parent.
8.4 Termination by Parent. This Agreement may be terminated and the Merger
may be abandoned by the Parent, by action of the Board of Directors of Parent:
(a) at any time prior to the time when Stockholder Approval has been
obtained if (i) the Board of Directors of the Company shall have withdrawn or
shall have amended or modified in a manner adverse to Parent its approval or
recommendation of this Agreement, (ii) the Company shall have failed to include
in the Proxy Statement the recommendation of the Company's Board of Directors in
favor of the adoption and approval of this Agreement and the approval of the
Merger, (iii) the Company's Board of Directors or any committee thereof shall
have approved or recommended any Acquisition Proposal not made by Parent or any
of its Affiliates or (iv) there has been a material breach by the Company of any
of its obligations under Section 6.2 or Section 6.3;
(b) at any time prior to the time when Stockholder Approval has been
obtained if (i) it has been made known to the stockholders of the Company that
any Person (other than Parent or any of its Affiliates) has made or is
considering an Acquisition Proposal and thereafter the Company's Board of
Directors fails to reaffirm (publicly, if so requested) its recommendation in
favor of the adoption and approval of this Agreement and the approval of the
Merger within ten (10) business days after Parent requests in writing that such
recommendation be reaffirmed (it being understood that such reaffirmation shall
not affect the Company's right to thereafter effect a Change of Recommendation
in accordance with the provisions of Section 6.3(d)), or (ii) a tender or
exchange offer relating to the Company's securities shall have been commenced by
a Person unaffiliated with Parent and the Company shall not have sent to its
securityholders pursuant to Rule 14e-2 promulgated under the Securities Act,
within ten (10) business days after such tender or exchange offer is first
published, sent or given, a statement disclosing that the Company's Board of
Directors recommends rejection of such tender or exchange offer; provided,
however, that prior to any termination pursuant to this Section 8.4(b), Parent
shall have given the Company 24 hours prior written notice; or
(c) at any time prior to the Effective Time, whether before or after the
time when Stockholder Approval has been obtained, if there has been a material
breach by the Company of any representation, warranty or covenant of the Company
set forth in this Agreement (other than Section 6.2 or Section 6.3) or the
Company Disclosure Letter or if any such representation or warranty of the
Company would be untrue if made on any date prior to the Effective Time, in
either case such that the conditions set forth in Section 7.2(a) or Section
7.2(b) would not be satisfied as of the time of such breach or as of the time
such representation or warranty shall have become untrue; provided that if such
breach by the Company or inaccuracy in its representation or warranty is curable
through the exercise of all commercially reasonable efforts, then Parent may not
terminate this Agreement under this Section 8.4(b) prior to the date which is
twenty (20) calendar days after written notice of such breach or inaccuracy is
given by Parent to the Company.
42
8.5 Effect of Termination and Abandonment.
(a) Any proper termination of this Agreement under Section 8.2, 8.3 or 8.4
above will be effective immediately upon the delivery of written notice of
termination by the terminating party to the other parties hereto. In the event
of termination of this Agreement pursuant to this Article VIII, this Agreement
(other than as set forth in Section 9.1) shall become void and of no effect with
no liability of any party hereto (or any of its directors, officers, employees,
agents, legal and financial advisors or other representatives); provided,
however, no such termination shall relieve any party hereto of any liability or
damages resulting from any breach of this Agreement.
(b) In the event that (i) a bona fide Acquisition Proposal shall have been
made to the Company and made known to stockholders of the Company generally or
has been made directly to stockholders of the Company generally or any Person
shall have publicly announced an intention (whether or not conditional) to make
a bona fide Acquisition Proposal regarding the Company and such Acquisition
Proposal or announced intention shall not have been withdrawn prior to the
Stockholders' Meeting of the Company and thereafter this Agreement is terminated
by either Parent or the Company, as applicable, pursuant to Section 8.2(b) or,
following a willful and material breach by the Company of any covenant set forth
in this Agreement, Section 8.4(c), and (ii) within twelve months following any
such termination any Person (other than Parent or any of its Affiliates) shall
consummate an Acquisition of the Company, then the Company shall pay to Parent
by wire transfer of same-day funds, prior to or upon the date of consummation of
such Acquisition of the Company, a termination fee of $1,200,000. In the event
that this Agreement is terminated by Parent pursuant to Section 8.4(a) or
Section 8.4(b), or by the Company pursuant to Section 8.3(a), then the Company
shall promptly, but in no event later than two (2) business days after the date
of such termination, pay to Parent by wire transfer of same-day funds an amount
equal to the lesser of (x) Parent's and its Affiliates' aggregate costs and
expenses (other than wages and salaries and employee benefits paid to employees
of Parent or its Subsidiaries) incurred in connection with their evaluation of
the transactions contemplated hereby, the negotiation and execution of this
Agreement and Parent's and its Affiliates' performance hereunder and (y) Five
Hundred Thousand Dollars ($500,000); provided that if within twelve months
following any termination of this Agreement pursuant to Section 8.4(a) or
Section 8.3(a) (but not Section 8.4(b)) any Person (other than Parent or any of
its Affiliates) shall consummate an Acquisition of the Company, then the Company
shall pay to Parent by wire transfer of same-day funds, prior to or upon the
date of consummation of such Acquisition of the Company, a termination fee equal
to $1,200,000 less any amount theretofore paid to Parent pursuant to this
sentence. The term "Acquisition of the Company" for purposes of this Section
8.5(b) means any of the following transactions involving the Company: (i) a
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company pursuant to which the
stockholders of the Company immediately preceding such transaction hold less
than fifty percent (50%) of the aggregate equity interests in the surviving or
resulting entity of such transaction or any direct or indirect parent thereof,
(ii) a sale or other disposition by the Company of assets representing in excess
of fifty percent (50%) of the aggregate fair market value of the Company's
business immediately prior to such sale, or (iii) the acquisition by any Person
or group (including by way of a tender offer or an exchange offer or issuance by
the party or such Person or group), directly or indirectly, of beneficial
43
ownership or a right to acquire beneficial ownership of shares representing in
excess of fifty percent (50%) of the voting power of the then-outstanding shares
of capital stock of the Company. The Company acknowledges that the agreements
contained in this Section 8.5(b) are an integral part of the transactions
contemplated by this Agreement and that, without these agreements, Parent and
Merger Sub would not enter into this Agreement; accordingly, if the Company
fails to pay promptly the amount due pursuant to this Section 8.5(b), and, in
order to obtain such payment, Parent or Merger Sub commences a suit which
results in a judgment against the Company for the amounts set forth in this
Section 8.5(b), the Company shall pay to Parent or Merger Sub its reasonable
costs and expenses (including reasonable attorneys' fees) in connection with
such suit, together with interest on the amount of the fee at the prime lending
rate of Citibank, N.A. in effect on the date such payment was required to be
made.
ARTICLE IX
MISCELLANEOUS AND GENERAL
9.1 Survival. This Article IX, Article IV and the agreements of the
Company, Parent and Merger Sub contained in Sections 6.8 (Equity Awards), 6.9
(Expenses) and 6.10 (Indemnification; Directors' and Officers' Insurance) shall
survive the consummation of the Merger. This Article IX, the agreements of the
Company, Parent and Merger Sub contained in Section 6.9 (Expenses) and Section
8.5 (Effect of Termination and Abandonment) shall survive the termination of
this Agreement. All other representations, warranties, agreements and covenants
in this Agreement shall not survive the consummation of the Merger or the
termination of this Agreement.
9.2 Modification or Amendment. Subject to the provisions of the applicable
law, at any time prior to the Effective Time, the parties hereto may modify or
amend this Agreement, by written agreement executed and delivered by duly
authorized officers of the respective parties.
9.3 Waiver of Conditions. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law.
9.4 Counterparts. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.
9.5 Governing Law and Venue; Waiver of Jury Trial.
(a) This Agreement shall be deemed to be made in and in all respects shall
be interpreted, construed and governed by and in accordance with the law of the
state of Delaware without regard to the conflict of law principles thereof. The
parties hereby irrevocably submit to the exclusive jurisdiction of the courts of
the State of Delaware and the Federal courts of the United States of America
located in the State of Delaware solely in respect of the interpretation and
enforcement of the provisions of this Agreement and of the documents referred to
in this Agreement, and in respect of the transactions contemplated hereby, and
hereby waive, and agree not to assert, as a defense in any action, suit or
44
proceeding for the interpretation or enforcement hereof or of any such document,
that it is not subject thereto or that such action, suit or proceeding may not
be brought or is not maintainable in said courts or that the venue thereof may
not be appropriate or that this Agreement or any such document may not be
enforced in or by such courts, and the parties hereto irrevocably agree that all
claims with respect to such action or proceeding shall be heard and determined
in such a Delaware State or Federal court. The parties hereby consent to and
grant any such court jurisdiction over the person of such parties and over the
subject matter of such dispute and agree that mailing of process or other papers
in connection with any such action or proceeding in the manner provided in
Section 9.6 or in such other manner as may be permitted by law, shall be valid
and sufficient service thereof.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT,
OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES
THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH
PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 9.5.
9.6 Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the others shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, or by
facsimile:
if to Parent or Merger Sub, to:
McKesson Corporation
One Post Street
San Francisco, CA 943104
Attention: General Counsel
Fax: (415) 983- 8826
45
with a copy to:
Pillsbury Winthrop LLP
50 Fremont Street
San Francisco, CA 94105
Attention: Blair W. White, Esq.
Fax: (415) 983-1200
if to the Company, to:
Moore Medical Corp.
389 John Downey Drive
New Britain, CT 06050
Attention: Chief Executive Officer
Fax: (860) 225-4440
with a copy to:
Cadwalader, Wickersham & Taft LLP
100 Maiden Lane
New York, NY 10038
Attention: Dennis J. Block, Esq.
Fax: (212) 504-6666
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
9.7 Definitions. For purposes of this Agreement:
(a) "Affiliate" of any Person means another Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first Person;
(b) "Company Products" means any product or drug produced, manufactured,
marketed or distributed by the Company or any of its Subsidiaries.
(c) "Contract" means and includes any agreement, lease, contract, note,
mortgage, indenture or other legally binding obligation or commitment, written
or oral;
(d) "Exchange Act" means the Securities Exchange Act of 1934, as amended;
(e) "Excluded Shares" means, collectively, (i) Shares owned by Parent or
any direct or indirect Subsidiary of Parent, and (ii) Shares that are owned by
the Company or any direct or indirect Subsidiary of the Company (and in each
case not held on behalf of third parties);
46
(f) "knowledge of the Company," "Company's knowledge," and like phrases
mean the actual knowledge of those persons who are as of the date hereof or
become after the date hereof and prior to the Effective Time executive officers
of the Company as such term is defined in Rule 16a-1(f) under the Exchange Act,
which include Linda M. Autore, Jon Garrity and John M. Zinzarella as of the date
hereof.
(g) "Material Adverse Effect" means any change, event, circumstance, set
of facts or effect (whether alone or together with other changes, events,
circumstances, sets of facts or effects) that, with respect to any Person, is
materially adverse to the condition (financial or otherwise), assets, business
or results of operations of such Person and its Subsidiaries, taken as a whole;
provided, however, that (i) none of the following shall be considered when
determining whether there has been a Material Adverse Effect: any effect that
results from (A) changes affecting generally the industry or industries in which
such Person or any of its Subsidiaries participates or the U.S. economy as a
whole, unless such change shall disproportionately adversely affect such Person
or any of its Subsidiaries (B) changes in GAAP or (C) legislative or regulatory
changes, and (ii) neither of the following, in and of itself, shall constitute a
Material Adverse Effect: (A) any failure on the part of the Company to meet
analysts published revenues or earnings predictions for the Company for any
period ending (or which revenues or earnings are released) on or after the date
of this Agreement or (B) any change in the price of shares of Company Common
Stock on or after the date of this Agreement;
(h) "Other Regulatory Laws" means the FDA Modernization Act of 1997, the
Federal Food and Drug Act of 1906, the Public Health Service Act, the Federal
Trade Commission Act, the Trademark Act of 1946, the Fair Packaging and Labeling
Act, the Drug Price Competition and Patent Term Restoration Act of 1984, the
Controlled Substances Act, the Controlled Substances Import and Export Act, the
1962 Drug Amendments, the Child Protection Act, the Animal Drug Amendments of
1968, the Radiation Control for Health Safety Act, the Drug Listing Act, the
Orphan Drug Act, the Drug Price Competition and Patent Term Restoration Act, the
Generic Animal Drug and Patent Term Restoration Act, the Prescription Drug
Marketing Act of 1987, the Safe Medical Devices Act of 1990, the Generic Drug
Enforcement Act of 1992, the Prescription Drug User Fee Act of 1992, the
Nutrition Labeling and Education Act of 1990, the Dietary Supplement Health and
Education Act of 1994, the Fiscal Year 2001 Agriculture Appropriations - Drug
Import Provisions, Best Pharmaceuticals for Children Act, the Bioterrorism Act
and any state Laws similar or related to any of the foregoing.
(i) "Person" or "person" means an individual, corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization or other entity;
(j) "Required Governmental Consents and Filings" means, to the extent
required to have been obtained or made prior to the Effective Time, the filings
contemplated by Section 5.1(e)(i)(A), Section 5.1(e)(i)(B), Section
5.1(e)(i)(C), Section 5.2(c)(i)(A), Section 5.2(c)(i)(B) and Section
5.2(c)(i)(C).
(k) "Securities Act" means the Securities Act of 1933, as amended; and
47
(l) "Subsidiary" of any person means another person, an amount of the
voting securities, other voting rights or voting partnership interests of which
is sufficient to elect at least a majority of its board of directors or other
governing body (or, if there are no such voting interests, 50% or more of the
equity interests of which) is owned directly or indirectly by such first person.
(m) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
---- -------
Acquisition of the Company 8.5(b)
Acquisition Proposal............................ 6.3(f)(i).
Affiliate....................................... 9.7
Agreement....................................... Preamble
Appraisal Shares................................ 4.1(d)
Bylaws.......................................... 2.2
Cash Amount..................................... 6.8(a)
Certificate..................................... 4.1(a)(ii)
Certificate of Merger........................... 1.3
Change of Recommendation........................ 6.3(d)
Charter......................................... 2.1
Closing......................................... 1.2
Closing Date.................................... 1.2
Code............................................ 4.2(h)
Comfort Letter.................................. 7.2(e)
Commercial Software Licenses.................... 5.1(t)(i)
Company......................................... Preamble
Company Audit Date.............................. 5.1(g)
Company Disclosure Letter....................... 5.1
Company Employees............................... 6.13(a)
Company Leased Property......................... 5.1(z)
Company Leases.................................. 5.1(z)
Company Option.................................. 5.1(c)
Company Products................................ 9.7
Company Rights Agreement........................ 5.1(c)
Company SEC Reports............................. 5.1(f)
Company Stock Option Plans...................... 5.1(c)
Company Voting Debt............................. 5.1(c)
Compensation and Benefit Plans.................. 5.1(o)(i)
Confidentiality Agreement....................... 6.6
Consolidated Group.............................. 5.1(w)(i)
Contract........................................ 9.7
Costs........................................... 6.10(a)
December 2002 Balance Sheet..................... 5.1(g)
DGCL............................................ 1.1
Effective Time.................................. 1.3
Environmental Law............................... 5.1(s)
48
Term Section
---- -------
ERISA........................................... 5.1(o)(ii)
Exchange Act.................................... 9.7
Exchange Fund................................... 4.2(a)
Excluded Shares 9.7
FDA............................................. 5.1(p)(ii)
FDCA............................................ 5.1(p)(ii)
Filed Contracts................................. 5.1(u)
GAAP............................................ 5.1(f)
Governmental Consents........................... 7.1(b)
Governmental Entity............................. 5.1(e)(i)
Hazardous Substance............................. 5.1(s)
Indemnified Party............................... 6.10(a)
Intellectual Property Rights.................... 5.1(t)(i)
knowledge of the Company........................ 9.7
IRS............................................. 5.1(o)(ii)
Laws............................................ 5.1(p)(i)
Material Adverse Effect......................... 9.7
Material Contracts.............................. 5.1(u)
Material Third Party IP License................. 5.1(t)(i)
Merger Consideration............................ 4.1(a)(i)
Merger Preamble
Merger Sub...................................... Preamble
Nine-Month Financials........................... 7.2(e)
Other Regulatory Laws .......................... 9.7
Parent.......................................... Preamble
Paying Agent.................................... 4.2(a)
Pension Plan.................................... 5.1(o)(ii)
Permits......................................... 5.1(p)(ii)
Permitted Liens................................. 5.1(bb)
Person 9.7
Preferred Shares................................ 5.1(c)
Proxy Statement................................. 5.1(e)(i)
Registered IP Rights............................ 5.1(t)(ii)
Representatives................................. 6.6
Required IP Rights.............................. 5.1(t)(iii)
Rights.......................................... 5.1(c)
Securities Act 9.7
SEC............................................. 5.1(e)(i)
Section 262..................................... 4.1(d)
Shares.......................................... 4.1(a)(i)
Stockholder Approval 5.1(d)
Stockholders' Meeting........................... 6.2(b)
Subsidiary 9.7
Superior Offer.................................. 6.3(f)(ii)
Surviving Corporation........................... 1.1
49
Term Section
---- -------
Takeover Statute................................ 5.1(r)
Tax............................................. 5.1(w)(iii)
Tax Return...................................... 5.1(w)(iv)
Tax Structure................................... 6.6
Tax Treatment................................... 6.6
Termination Date................................ 8.2
Termination Fee................................. 8.5(b)
Third Party IP License.......................... 5.1(t)(i)
Transfer Taxes.................................. 6.12
9.8. Entire Agreement. This Agreement (including any exhibits hereto),
the Disclosure Letters hereto and the Confidentiality Agreement constitute the
entire agreement, and supersede all other prior agreements, understandings,
representations and warranties both written and oral, among the parties, with
respect to the subject matter hereof.
9.9. No Third Party Beneficiaries. Except as provided in Section 6.10
(Indemnification; Directors' and Officers' Insurance), this Agreement is not
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder.
9.10. Obligations of Parent and of the Company. Whenever this Agreement
requires a Subsidiary of Parent to take any action, such requirement shall be
deemed to include an undertaking on the part of Parent to cause such Subsidiary
to take such action. Whenever this Agreement requires a Subsidiary of the
Company to take any action, such requirement shall be deemed to include an
undertaking on the part of the Company to cause such Subsidiary to take such
action and, after the Effective Time, on the part of the Surviving Corporation
to cause such Subsidiary to take such action.
9.11. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability or the other provisions hereof. If any
provision of this Agreement, or the application thereof to any Person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
9.12. Interpretation. The table of contents and headings herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
Where a reference in this Agreement is made to a Section, Schedule or Exhibit,
such reference shall be to a Section of or Schedule or Exhibit to this Agreement
unless otherwise indicated. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
50
9.13. Assignment. This Agreement shall not be assignable by operation of
law or otherwise; provided, however, that Parent may designate, by written
notice to the Company, another wholly-owned direct Subsidiary of Parent to be a
constituent corporation in lieu of Merger Sub, in the event of which, all
references herein to Merger Sub shall be deemed references to such other
Subsidiary of Parent and provided that all representations and warranties made
herein with respect to Merger Sub as of the date of this Agreement shall be
deemed representations and warranties made with respect to such other Subsidiary
of Parent as of the date of such designation. Any purported assignment made in
contravention of this Agreement shall be null and void.
9.14. Captions. The Article, Section and paragraph captions herein are for
convenience of reference only and do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
[Remainder of Page Intentionally Left Blank]
51
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
duly authorized officers of the parties hereto as of the date hereof.
PARENT
By: /s/ Marc E. Owen
----------------------------------------
Name: Marc E. Owen
Title: Senior Vice President,
Corporate Strategy and Business
Development
MOORE MEDICAL CORP.
By: /s/ Linda M. Autore
----------------------------------------
Name: Linda M. Autore
Title: President and Chief Executive
Officer
MADISON ACQUISITIONS INC.
By: /s/ Marc E. Owen
----------------------------------------
Name: Marc E. Owen
Title: Senior Vice President
1
EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
OF
MOORE MEDICAL CORP.
ARTICLE I
The name of the corporation is MOORE MEDICAL CORP.
ARTICLE II
The address of the corporation's registered office in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle,
19801. The name of its registered agent at such address is The Corporation Trust
Company.
ARTICLE III
The purpose of the corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware.
ARTICLE IV
The number of shares of stock that the corporation shall have authority to
issue is 1,000 shares of Common Stock, par value $.01 per share.
ARTICLE V
The Board of Directors is expressly authorized to make and alter the
Bylaws of the corporation, without any action on the part of the stockholders;
but the Bylaws made by the directors and the powers so conferred may be altered
or repealed by the directors or the stockholders.
ARTICLE VI
Elections of directors need not be by written ballot unless the Bylaws of
the corporation shall so provide.
ARTICLE VII
A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (1) for any breach of the director's
duty of loyalty to the corporation or its stockholders; (2) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (3) under Section 174 of the General Corporation Law of the
State of Delaware; or (4) for any transaction from which the director derived an
improper personal benefit.
A-1
If the General Corporation Law of the State of Delaware hereafter is
amended to further eliminate or limit the liability of directors, then the
liability of a director of the corporation, in addition to the limitation on
personal liability provided herein, shall be limited to the fullest extent
permitted by the amended General Corporation Law of the State of Delaware.
A-2
Annex B
[LEHMAN BROTHERS LETTERHEAD]
January 19, 2004
Board of Directors
Moore Medical Corp.
389 John Downey Drive
New Britain, CT 06050
Members of the Board:
We understand that Moore Medical Corp. (the "Company") intends to enter
into an agreement with McKesson Corporation ("McKesson") pursuant to which the
Company will be merged with and into a wholly owned subsidiary of McKesson
("MergerSub" and such merger, the "Proposed Transaction"). We further understand
that upon the effectiveness of such merger, each share of Company common stock
that is outstanding immediately prior to the effective time of the merger will
be converted into the right to receive $12.00 per share in cash. The terms and
conditions of the Proposed Transaction are set forth in more detail in the
Agreement and Plan of Merger dated January 19, 2004 among the Company, McKesson
and MergerSub (the "Agreement").
We have been requested by the Board of Directors of the Company to render
our opinion with respect to the fairness, from a financial point of view, to the
Company's stockholders of the consideration to be offered to such stockholders
in the Proposed Transaction. We have not been requested to opine as to, and our
opinion does not in any manner address, the Company's underlying business
decision to proceed with or effect the Proposed Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) the Agreement and
the specific terms of the Proposed Transaction, (2) publicly available
information concerning the Company that we believe to be relevant to our
analysis, including the Company's Annual Report on Form 10-K for the fiscal year
ended December 28, 2002 and the Company's Quarterly Reports on Form 10-Q for the
quarters ended March 29, June 28 and September 27, 2003, (3) financial and
operating information with respect to the business, operations and prospects of
the Company furnished to us by the Company, including financial projections for
the Company prepared by the management of the Company (the "Company
Projections"), (4) a trading history of the Company's common stock from January
16, 2001 to the present and a comparison of that trading history with those of
other companies that we deemed relevant, (5) a comparison of the historical
financial results and present financial condition of the Company with those of
other companies that we deemed relevant, (6) a comparison of the financial terms
of the Proposed Transaction with the financial terms of certain other
transactions that we deemed relevant and (7) unsolicited indications of interest
received from third parties to date regarding a possible acquisition of the
Company. In addition, we have had discussions with the management of the Company
concerning its business, operations, assets, financial condition and prospects
and have undertaken such other studies, analyses and investigations as we deemed
appropriate.
In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of the financial and other information used by us without
assuming any
responsibility for independent verification of such information and have further
relied upon the assurances of management of the Company that they are not aware
of any facts or circumstances that would make such information inaccurate or
misleading. With respect to the Company Projections, upon advice of the Company,
we have assumed that such projections have been reasonably prepared on a basis
reflecting the best currently available estimates and judgments of the
management of the Company as to the future financial performance of the Company
and we have relied upon such projections in performing our analysis. However,
for purposes of our analysis, we also have considered certain somewhat more
conservative assumptions and estimates which resulted in certain adjustments to
the Company Projections. We have discussed these adjusted projections with the
management of the Company and they have agreed with the appropriateness of the
use of such adjusted projections, as well as the Company Projections, in
performing our analysis. In arriving at our opinion, we have conducted only a
limited physical inspection of the properties and facilities of the Company and
have not made or obtained any evaluations or appraisals of the assets or
liabilities of the Company. In addition, we have not been authorized to, and
have not, solicited any indications of interest or proposals from any third
party with respect to the purchase of all or a part of the Company's business.
Our opinion necessarily is based upon market, economic and other conditions as
they exist on, and can be evaluated as of, the date of this letter.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the consideration to be
offered to the Company's stockholders in the Proposed Transaction is fair to
such stockholders.
We have acted as financial advisor to the Company in connection with the
Proposed Transaction and will receive a fee for our services, a portion of which
is payable upon delivery of this opinion and the remainder of which is
contingent upon the consummation of the Proposed Transaction. In addition, the
Company has agreed to indemnify us for certain liabilities that may arise out of
the rendering of this opinion. We also have performed various investment banking
services for McKesson in the past and have received customary fees for such
services. In the ordinary course of our business, we actively trade in the
securities of the Company and McKesson for our own account and for the accounts
of our customers and, accordingly, may at any time hold a long or short position
in such securities.
This opinion is for the use and benefit of the Board of Directors of the
Company and is rendered to the Board of Directors in connection with its
consideration of the Proposed Transaction. This opinion is not intended to be
and does not constitute a recommendation to any stockholder of the Company as to
how such stockholder should vote with respect to the Proposed Transaction.
Very truly yours,
/s/ Lehman Brothers
LEHMAN BROTHERS
Annex C
Delaware General Corporations Law
8 Del. C. s. 262 (2004).
Section 262. Appraisal rights
(a) Any stockholder of a corporation of this State who holds shares of stock on
the date of the making of a demand pursuant to subsection (d) of this section
with respect to such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise complied with
subsection (d) of this section and who has neither voted in favor of the merger
or consolidation nor consented thereto in writing pursuant to s. 228 of this
title shall be entitled to an appraisal by the Court of Chancery of the fair
value of the stockholder's shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or series of
stock of a constituent corporation in a merger or consolidation to be effected
pursuant to s. 251 (other than a merger effected pursuant to s. 251(g) of this
title), s. 252, s. 254, s. 257, s. 258, s. 263 or s. 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of s. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights under
this section shall be available for the shares of any class or series of stock
of a constituent corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to ss. 251, 252, 254, 257, 258,
263 and 264 of this title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from such merger or
consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in respect
thereof, which shares of stock (or depository receipts in respect thereof) or
depository receipts at the effective
date of the merger or consolidation will be either listed on a national
securities exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities Dealers,
Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts described
in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and cash in lieu
of fractional shares or fractional depository receipts described in the
foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation party to
a merger effected under s. 253 of this title is not owned by the parent
corporation immediately prior to the merger, appraisal rights shall be available
for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsection (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of
such stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of such
stockholder's shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such stockholder's shares. A proxy or
vote against the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written demand
as herein provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become effective;
or
(2) If the merger or consolidation was approved pursuant to s. 228 or s. 253
of this title, then either a constituent corporation before the effective date
of the merger or consolidation or the surviving or resulting corporation within
10 days thereafter shall notify each of the holders of
any class or series of stock of such constituent corporation who are entitled to
appraisal rights of the approval of the merger or consolidation and that
appraisal rights are available for any or all shares of such class or series of
stock of such constituent corporation, and shall include in such notice a copy
of this section. Such notice may, and, if given on or after the effective date
of the merger or consolidation, shall, also notify such stockholders of the
effective date of the merger or consolidation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of such notice,
demand in writing from the surviving or resulting corporation the appraisal of
such holder's shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder's shares. If such notice
did not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constitutent corporation shall send a second
notice before the effective date of the merger or consolidation notifying each
of the holders of any class or series of stock of such constitutent corporation
that are entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send such a
second notice to all such holders on or within 10 days after such effective
date; provided, however, that if such second notice is sent more than 20 days
following the sending of the first notice, such second notice need only be sent
to each stockholder who is entitled to appraisal rights and who has demanded
appraisal of such holder's shares in accordance with this subsection. An
affidavit of the secretary or assistant secretary or of the transfer agent of
the corporation that is required to give either notice that such notice has been
given shall, in the absence of fraud, be prima facie evidence of the facts
stated therein. For purposes of determining the stockholders entitled to receive
either notice, each constitutent corporation may fix, in advance, a record date
that shall be not more than 10 days prior to the date the notice is given,
provided, that if the notice is given on or after the effective date of the
merger or consolidation, the record date shall be such effective date. If no
record date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the day on
which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation, the
surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made
upon the surviving or resulting corporation, which shall within 20 days after
such service file in the office of the Register in Chancery in which the
petition was filed a duly verified list containing the names and addresses of
all stockholders who have demanded payment for their shares and with whom
agreements as to the value of their shares have not been reached by the
surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the stockholders
who have complied with this section and who have become entitled to appraisal
rights. The Court may require the stockholders who have demanded an appraisal
for their shares and who hold stock represented by certificates to submit their
certificates of stock to the Register in Chancery for notation thereon of the
pendency of the appraisal proceedings; and if any stockholder fails to comply
with such direction, the Court may dismiss the proceedings as to such
stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court shall
appraise the shares, determining their fair value exclusive of any element of
value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares, together
with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed upon
the parties as the Court deems equitable in the circumstances. Upon application
of a stockholder, the Court may order all or a portion of the expenses incurred
by any stockholder in connection with the appraisal proceeding, including,
without limitation, reasonable attorney's fees and the fees and expenses of
experts, to be charged pro rata against the value of all the shares entitled to
an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the shares of
such objecting stockholders would have been converted had they assented to the
merger or consolidation shall have the status of authorized and unissued shares
of the surviving or resulting corporation.
FORM OF PROXY CARD
MOORE MEDICAL CORP.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
THE UNDERSIGNED HEREBY APPOINTS LINDA M. AUTORE AND JOHN M. ZINZARELLA,
AND EACH OF THEM, AS PROXIES, EACH WITH THE POWER TO APPOINT THEIR SUBSTITUTE,
AND HEREBY AUTHORIZES THEM TO REPRESENT AND TO VOTE AS DESIGNATED BELOW ALL THE
SHARES OF COMMON STOCK OF MOORE MEDICAL CORP., HELD OF RECORD BY THE UNDERSIGNED
ON [_____________] [__], 2004 AT THE SPECIAL MEETING OF STOCKHOLDERS TO BE HELD
AT MOORE'S CORPORATE HEADQUARTERS AT 389 JOHN DOWNEY DRIVE, P.O. BOX 1500, NEW
BRITAIN, CONNECTICUT, ON [________] [__], 2004 AT 10:00 A.M., AND AT ANY
ADJOURNMENT OR POSTPONEMENT THEREOF.
Change of Address
_______________________
_______________________
_______________________
--------------------------------------------------------------------------------
TRIANGLE FOLD AND DETACH HERE TRIANGLE
PLEASE MARK YOUR VOTES AS INDICATED IN THIS EXAMPLE [X]
PLEASE VOTE BY RETURNING THE ATTACHED PROXY CARD
Proposal to adopt the Agreement and Plan of Merger, dated as of January
19, 2004, among McKesson Corporation, Madison Acquisitions Inc. and Moore
Medical Corp., and approve the merger contemplated by that agreement.
FOR AGAINST ABSTAIN
[_] [_] [_]
[_] CHECK IF YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON.
Vote, sign and date this Proxy and return it promptly in the enclosed envelope.
No postage is required if mailed in the United States.
[_] CHANGE OF ADDRESS ON REVERSE SIDE
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED OR IF NO CONTRARY
DIRECTION IS INDICATED WILL BE VOTED AS MANAGEMENT RECOMMENDS ON THESE AND ANY
OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT(S) OR
POSTPONEMENT(S) THEREOF. PLEASE SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE
ENVELOPE PROVIDED.
Signature __________________________________ Dated _______________
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
If time warrants, improperly signed cards will be returned for correction.
--------------------------------------------------------------------------------
TRIANGLE FOLD AND DETACH HERE TRIANGLE