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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: August 6, 1996
Customedix Corporation
(Exact name of registrant as specified in its charter)
Delaware 1-7081 22-1844840
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification
incorporation) Number)
53 North Plains Industrial Road, Wallingford, Connecticut 06492
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:
(203) 284-9079
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ITEM 5. OTHER EVENTS.
On July 25, 1996, a Stipulation of Settlement (the "Stipulation") was
filed with the Court of Chancery of the State of Delaware (the "Court") in
connection with four related lawsuits filed against Customedix Corporation and
members of its Board of Directors, which lawsuits have been consolidated under
the caption In Re Customedix Corporation Shareholders Litigation (C.A. No.
14812). The Court has entered a scheduling order setting the date and time of a
settlement hearing at August 27, 1996, at 11:00 a.m. Attached as exhibits hereto
are a copy of the Stipulation and the exhibits thereto.
ITEM 7. EXHIBITS.
The following exhibit is filed as a part of this Current Report on Form
8-K.
Exhibit No. Description
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Exhibit 99.1 Stipulation of Settlement, dated July 25, 1996, in
the action captioned In Re Customedix Corporation
Shareholders Litigation, together with (i) the
Scheduling Order, (ii) the Notice of Pendency of Class
Action, Proposed Settlement of Class Action and
Settlement Hearing and (iii) the proposed Order and
Final Judgment
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
August 6, 1996 CUSTOMEDIX CORPORATION
By: /s/ Barry L. Kosowsky
Name: Barry L. Kosowsky
Title: Secretary
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EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
99.1 Stipulation of Settlement, dated July 25, 1996, in the action
captioned In Re Customedix Corporation Shareholders
Litigation, together with (i) the Scheduling Order, (ii) the
Notice of Pendency of Class Action, Proposed Settlement of
Class Action and Settlement Hearing and (iii) the proposed
Order and Final Judgment
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EXHIBIT 99.1
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
IN RE CUSTOMEDIX CORPORATION ) Consolidated
SHAREHOLDERS LITIGATION ) C.A. No. 14812
STIPULATION OF SETTLEMENT
The parties to the above-captioned action (the "Consolidated
Action"), by and through their respective attorneys, have entered into the
following Stipulation of Settlement (the "Stipulation") subject to the approval
of the Court of Chancery of the State of Delaware in and for New Castle County
(the "Court"):
WHEREAS,
A. Customedix Corporation ("Customedix" or the "Company") is a
Delaware corporation with its principal executive offices in Wallingford,
Connecticut. Customedix is engaged in two principal industry segments: dental
health care products and medical health care products.
B. Dr. Gordon S. Cohen is the Company's Chief Executive
Officer and Chairman of its Board of Directors.
C. CUS Acquisition, Inc. (the "Buyer") is a Delaware
corporation that will be wholly-owned by Dr. Cohen and a partnership comprised
of trusts established for the benefit of Dr. Cohen and certain members of Dr.
Cohen's family (the "Partnership"). The Buyer was recently organized for the
purpose of effecting a merger with the Company.
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The Buyer will own approximately 51.07% of the issued and outstanding shares of
common stock of Customedix prior to the consummation of the Merger (as
hereinafter defined).
D. Martin L. Schulman, William T. Fitch, Elry C. Bird, Robert
S. Cooper, David H. Leigh and Robert N. Thomas, together with Dr. Cohen
(collectively, the "Individual Defendants"), have constituted the Customedix
Board of Directors (the "Board") from February 5, 1996 until present. On May 13,
1996, Adraine J. Tom also became a Director of the Company.
E. At a regularly scheduled meeting of the Board held on
February 5, 1996, Dr. Cohen delivered to the Company a proposal to acquire all
of the common shares of Customedix ("Common Stock") held by stockholders, other
than Dr. Cohen and the Partnership, in a negotiated cash merger for $1.9375 per
share in cash (the "Original Proposal").
F. In response to the Original Proposal, the Board appointed a
special committee consisting of Messrs. Fitch and Thomas, each an independent,
non-employee director of the Company (the "Original Special Committee"). The
Original Special Committee was charged with, among other things, representing
the interests of the unaffiliated stockholders of the Company and taking any and
all actions necessary or advisable in connection with the evaluation and, if
appropriate, the approval of the Original Proposal. Following the February 5,
1996 Board meeting, the Original Special Committee formally engaged Brody and
Ober, P.C., as legal counsel, and Tucker Anthony Incorporated ("Tucker
Anthony"), as financial advisor, with respect to the Original Proposal and
related matters. After such appointment and prior to May 3, 1996, the Original
Special Committee
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met on several occasions with its advisors.
G. On February 6, 1996, four putative class action complaints
were filed in the Delaware Court of Chancery, which suits are styled as follows:
Katz v. Cohen, et. al., C. A. No. 14812; Manillo v. Cohen, et. al., C.A. No.
14813; Thomas Torre v. Cohen, et. al., C.A. No. 14814; and Sylvia Torre v.
Cohen, et. al., C.A. No. 14818 (collectively, the "Complaints"). The Complaints
generally allege that the course of conduct taken by Dr. Cohen in proposing, and
by the Company and the other directors in responding to, the Original Proposal
was in violation of the Board's fiduciary duty to the Company's stockholders.
The Complaints all seek (i) to enjoin the Original Proposal, or, in the
alternative, (ii) damages.
H. On May 3, 1996, the Original Special Committee and its
counsel met with representatives of the Buyer and its counsel to negotiate the
terms of the Original Proposal. At that meeting, the Buyer suggested that
negotiations over the proposed price might be more productive if the Buyer
understood the information on which the Original Special Committee was relying
as well as the analysis of that information by the Original Special Committee
and/or Tucker Anthony. The Original Special Committee distributed to the Buyer
and its counsel the information prepared by Tucker Anthony and on which Tucker
Anthony was relying in rendering advice to the Original Special Committee (the
"Tucker Anthony Materials"). The parties agreed that they would engage in
further discussion after the Buyer had an opportunity to review the Tucker
Anthony Materials, and that a representative of Tucker Anthony should be present
during such discussion.
I. On May 8, 1996, the Original Special Committee,
representatives of
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the Buyer, their respective counsel and representatives of Tucker Anthony met to
discuss the Tucker Anthony Materials and to negotiate a price in connection with
the Original Proposal. After considerable discussion, both parties remained far
apart on pricing with Tucker Anthony's representative indicating that he
believed the Tucker Anthony Committee which would have to approve an opinion as
to the fairness of the price would certainly support a price of $3.25 per share,
probably support a price of $3.00 per share and perhaps a price as low as $2.90
per share. The Buyer indicated that it could not reach a price within the range
suggested by the representative of Tucker Anthony, and the representative of
Tucker Anthony indicated that he did not believe it would be worthwhile to seek
to have Tucker Anthony consider rendering an opinion as to the fairness of a
price lower than that range. The meeting concluded without an agreement on
price.
J. Following the meeting, the Tucker Anthony representative
advised the chairman of the Special Committee and counsel to the Special
Committee that if Dr. Cohen wished to submit a price to Tucker Anthony for
consideration, Tucker Anthony would advise the Special Committee as to its view
of the fairness of such price. However, such advice would require payment by the
Company of the $40,000 additional fee due to Tucker Anthony upon rendering of an
opinion. Dr. Cohen refused to accept Tucker Anthony's condition for its
consideration of an increased offer.
K. Later on May 8, Dr. Cohen advised the Company that he was
withdrawing the offer under the Original Proposal.
L. On June 3, 1996, the Court entered an order consolidating
the Complaints for all purposes under the caption In Re Customedix Corporation
Shareholder
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Litigation, Cons. C.A. No. 14812 (the "Consolidated Action").
M. Also on June 3, 1996, counsel for Dr. Cohen engaged in
settlement discussions with counsel for plaintiffs in the Consolidated Action.
In connection with those discussions, on June 3, 1996, Dr. Cohen's attorneys
informed the plaintiffs' attorneys that Dr. Cohen was willing to consider
another merger proposal, provided the parties to the litigation could reach an
agreement-in-principle to settle such litigation. After further arm's-length
negotiations, the parties to the litigation, by their respective attorneys,
entered into a Memorandum of Understanding on June 3, 1996, setting forth such
an agreement-in-principle (the "MOU").
N. The MOU provided that Dr. Cohen and the Partnership agreed
to make a merger proposal to the Company pursuant to which, subject to the
approval of a merger agreement by Dr. Cohen, the Board and the stockholders of
the Company, and further subject to the approval of the settlement by the Court,
the Buyer would be merged with and into the Company, and each share of Common
Stock (other than shares (i) held in the treasury of the Company, (ii) owned by
the Buyer and (iii) held by stockholders who had not voted in favor of the
Merger and who had otherwise properly exercised their rights for appraisal of
such shares in accordance with Section 262 of the DGCL) would be converted into
the right to receive, upon surrender of the certificate evidencing such share,
$2.375 per share (the "Merger Consideration"), thereby increasing the
consideration to be received by Customedix common stockholders under the Merger
by $0.4375 per share (the "Merger Proposal").
O. The MOU was subject to various conditions including the
completion
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of discovery sufficient to enable plaintiffs' counsel to determine the fairness
of the Settlement; the execution of a Stipulation of Settlement; consummation of
a merger pursuant to the Merger Proposal; and final approval by the Court of
Chancery of the Settlement.
P. On June 4, 1996, Dr. Cohen delivered the Merger Proposal to
the Company. In response to the Merger Proposal, the Board reconstituted the
Special Committee (the "Special Committee"), consisting of the Original Special
Committee and Adraine J. Tom, another independent, non-employee director of the
Company. The Special Committee was charged, among other things, to represent the
interests of the unaffiliated stockholders of the Company and take any and all
actions necessary or advisable in connection with the evaluation and, if
appropriate, the approval of the Merger Proposal. The Special Committee
indicated that it intended to continue to engage Brody and Ober, P.C., as legal
counsel. As a result of the discussions with Tucker Anthony on May 8, 1996, and
given the terms and conditions of the MOU and the role of plaintiffs' counsel in
connection therewith, neither Tucker Anthony nor any other financial advisor was
retained to deliver an opinion with respect to the fairness of the Merger
Consideration.
Q. After its appointment, the Special Committee held several
telephonic meetings with its legal advisors to evaluate the Merger Proposal and
the MOU, and the Special Committee and the Buyer, through their legal advisors,
held discussions regarding, and agreed upon certain revisions to, the Agreement
and Plan of Merger, dated as of June 10, 1996 (the "Merger Agreement"), pursuant
to which the Buyer will be merged with and into the Company (the "Merger").
Under the Merger Agreement, the obligations of the
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Buyer and the Company are subject to several conditions, including the approval
of the Settlement by the Delaware Court of Chancery.
R. On June 10, 1996, the Special Committee met and unanimously
determined that the Merger Proposal was fair to, and in the best interests of,
the stockholders of the Company (other than Dr. Cohen and the Partnership), and
unanimously voted to recommend that the Board accept the Merger Proposal and
approve the Merger Agreement and the Merger. After considering the
recommendations of the Special Committee, the independent directors of the Board
unanimously approved the Merger Proposal and the Merger Agreement. Thereafter,
the full Board likewise unanimously approved the Merger Proposal and the Merger
Agreement, and the Merger Agreement was executed immediately thereafter.
S. Pursuant to the MOU, plaintiffs' counsel reviewed
defendants' document production in the litigation, conducted the depositions of
Adraine Tom (a member of the Special Committee) and Dr. Gordon Cohen (the
originator of the Merger Proposal), and reviewed preliminary stockholder
disclosure materials relating to the Merger Proposal, including a preliminary
draft of the proxy statement filed with the Securities and Exchange Commission
on July 2, 1996 with respect to the Merger (the "Proxy Statement"). The Proxy
Statement is expected to be mailed to the Company's stockholders on or about
August 15, 1996. The special meeting of the Company's stockholders to consider
the Merger Agreement is expected to be held on or about September 19, 1996.
T. In light of the events, negotiations and agreements
described above, analysis of applicable law, and based on the discovery taken in
the Consolidated Action,
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and after consultation with their financial expert Howard, Lawson & Co., counsel
for plaintiffs have concluded that the terms and conditions of the settlement
provided for in this Stipulation (the "Settlement") are fair, reasonable, and
adequate to the plaintiffs and the class of stockholders represented in the
Consolidated Action.
U. Plaintiffs enter into the Stipulation after taking into
account (i) the financial benefits to the members of the Class (as defined
below) from the Merger Proposal and the Merger Agreement, (ii) the risk of
continued litigation, (iii) the desirability of permitting the Settlement to be
consummated as provided by the terms of this Stipulation, and (iv) the
conclusion of counsel for plaintiffs that the terms and conditions of the
Settlement are fair, reasonable, adequate to the Customedix stockholders
represented in the Consolidated Action. Plaintiffs and plaintiffs' counsel have
agreed to the terms of the Settlement because, in their view, the Settlement
achieves plaintiffs' objectives in the litigation, which were to assure that
Customedix stockholders received fair value in exchange for their stock, and to
provide independent representation for Customedix stockholder interests.
V. Customedix and the Individual Defendants consider the
Merger Agreement and its terms to have satisfied all of the claims asserted in
the Complaints.
W. Defendants have denied and continue to deny vigorously any
liability with respect to all claims alleged in any of the Complaints, or any
other claims arising out of the transactions described above. While maintaining
their innocence of any fault or wrongdoing, and relying on the provision hereof
that this Stipulation shall in no event be construed as or deemed to be evidence
of an admission or concession on the part of
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defendants or any Released Person (as defined below) of any fault or liability
whatsoever, and without conceding any infirmity in their defenses against the
claims alleged in the Complaints, defendants consider it desirable that the
Consolidated Action be settled and dismissed, subject to the terms and
conditions herein, because the Settlement will (i) halt the substantial expense,
inconvenience and distraction of continued litigation of plaintiffs' claims;
(ii) finally put to rest those claims; and (iii) dispel any uncertainty that may
exist as a result of this litigation.
NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED, subject to
the approval of the Court, pursuant to Court of Chancery Rule 23, that any and
all claims, rights, demands, actions, causes of action, suits, damages, losses,
obligations, judgments, matters and issues of any kind or nature whatsoever,
whether known or unknown, foreseen, unforeseen or unforeseeable, asserted or
unasserted, contingent or absolute, suspected or unsuspected, disclosed or
undisclosed, hidden or concealed, matured or unmatured, material or immaterial,
which have been, could have been, or in the future can or might be asserted in
the Consolidated Action or in any court, tribunal or proceeding (including, but
not limited to, any claims arising under state or federal law relating to any
alleged fraud, breach of any duty, negligence, violations of federal securities
laws or otherwise) (collectively "Claims") by or on behalf of plaintiffs in the
Consolidated Action and/or any member of the Class (as defined below), whether
individual, class, derivative, representative, legal, equitable or any other
type or in any other capacity, which have arisen, arise now, or hereafter arise
out of or relate in any manner whatsoever, directly or indirectly, to the
allegations, facts, events, transactions, occurrences, acts, statements,
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representations, misrepresentations, omissions, or any other matter, thing or
cause whatsoever, or any series thereof, involved, embraced, set forth,
referenced in, or otherwise referred or related to, in any way, directly or
indirectly, any of the Complaints, the Merger Agreement, the Original Proposal,
the Merger Proposal, the Merger, any agreements or disclosures relating to the
Original Proposal, the Merger Proposal, the Merger Agreement or the Merger,
including but not limited to the Proxy Statement, or this Stipulation excepting
only such rights created under this Stipulation (collectively the "Settled
Claims") against any of the defendants in the Consolidated Action, their
families, parent entities, affiliates, associates or subsidiaries, and each of
their present or former officers, directors, stockholders, agents, employees,
attorneys, representatives, advisors, investment advisors, investment bankers,
commercial bankers, financial advisors, trustees, general and limited partners
and partnerships, heirs, executors, personal representatives, estates,
administrators, predecessors, successors, assigns, and any other person or
entity acting for or on behalf of any defendant (collectively, the "Released
Persons") are hereby fully, finally, and forever compromised, extinguished,
dismissed, discharged and released with prejudice subject only to compliance
with the following terms and conditions set forth herein (the "Settlement");
provided however, that the Settled Claims shall not include an action to enforce
compliance with the terms of the Settlement or to prosecute properly perfected
appraisal rights relating to the Merger pursuant to 8 Del. C.
Section 262.
THE SETTLEMENT
1. In consideration for the full settlement, satisfaction,
compromise and
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release of the Settled Claims, the Buyer presented Customedix with a Merger
Proposal, which was approved by the Company's Board of Directors, and which,
subject to the approval of the Company's shareholders, will result in the
acquisition by the Buyer of each outstanding share of Customedix common stock
held by stockholders other than the Buyer, Dr. Cohen or the Partnership for
$2.375 per share in cash, thereby increasing the consideration to be received by
Customedix common stockholders under the Merger by $0.4375 per share. Further,
counsel for plaintiffs reviewed and had the opportunity to comment upon
preliminary stockholder disclosure materials relating to the Merger Proposal.
The increased consideration in the Merger Proposal, together with plaintiffs'
review of related disclosure documents, furnishes consideration for plaintiffs'
agreement to release and forever discharge each of the defendants from the
Settled Claims.
SUBMISSION AND APPLICATION TO COURT
2. Within ten (10) days after the execution of the
Stipulation, the parties hereto shall jointly apply to the Court for an order in
the form attached hereto as Exhibit A (the "Scheduling Order"), which shall
include provisions that:
a. Provide for the certification of the Consolidated
Action, for settlement purposes only, as a class action pursuant to Chancery
Court Rules 23(b)(1) and (b)(2), consisting of all record and beneficial owners
of shares of Customedix stock from and including February 5, 1996 through and
including the date of consummation of the Merger as contemplated by the Merger
Agreement, including their successors in interest, predecessors, legal
representatives, trustees, heirs, assigns or transferees, immediate and remote,
and excluding defendants and their affiliates (the "Class"), and certifying the
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plaintiffs and their counsel as representative parties for the Class;
b. Provide that the plaintiffs, on whose behalf the
Stipulation has been executed, shall serve as representative parties for the
Class;
c. Direct that a settlement hearing (the "Settlement
Hearing") be held to determine whether the Court should (i) approve the
Settlement pursuant to Court of Chancery Rule 23(e) as fair, reasonable, and
adequate, (ii) enter an Order and Final Judgment dismissing the Consolidated
Action with prejudice and on the merits, each party to bear its own costs
(except as provided herein) and extinguish, release and enjoin prosecution of
any and all Settled Claims, (iii) approve any application of counsel for
plaintiffs for an allowance of fees and reimbursement of expenses in accordance
with paragraph 10 of this Stipulation, and (iv) hear such other matters as the
Court may deem necessary and appropriate; and
d. Provide that a copy of the Notice of Pendency of
Class Action, Proposed Settlement of Class Action and Settlement Hearing (the
"Notice"), substantially in the form attached hereto as Exhibit B, is approved
and that the mailing and provision of the Notice or a summary thereof
substantially in the manner set forth in the Scheduling Order constitutes the
best notice practicable under the circumstances, meets the requirements of
applicable law and due process, is due and sufficient notice of all matters
relating to the Settlement, and fully satisfies the requirements of due process
and of Court of Chancery Rule 23.
NOTICE
3. All costs incurred in identifying and notifying by mail the
members
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of the Class of the Settlement, including the printing and copying of the
Notice, will be paid by Customedix.
FINAL ORDER AND JUDGMENT
4. If the Settlement (including any modification thereto made
with the consent of the parties as provided for herein) is approved by the
Court, the parties shall promptly request the Court to enter an Order and Final
Judgment substantially in the form attached hereto as Exhibit C, which among
other things:
a. Approves the Settlement, adjudges the terms
thereof to be fair, reasonable, and adequate, directs consummation of the
Settlement in accordance with the terms and conditions of the Stipulation and
reserves jurisdiction to supervise the consummation of such Settlement;
b. Determines that the requirements of Rule 23 of the
Court of Chancery Rules and due process have been satisfied in connection with
Notice to the Class and formally certifies the Class pursuant to Court of
Chancery Rules 23(b)(1) and 23(b)(2);
c. Dismisses the Consolidated Action with prejudice
on the merits as to all Released Persons, extinguishing, discharging and
releasing any and all Settled Claims as against each plaintiff and each Class
member, without costs except as herein provided, said dismissal subject only to
compliance by the parties and Class members with the terms of this Stipulation
and any Order of the Court concerning this Stipulation, and permanently
enjoining plaintiffs and all members of the Class from asserting, commencing,
prosecuting or continuing either directly, individually,
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representatively, derivatively or in any other capacity any of the Settled
Claims; and
d. Without affecting the finality of the Order and
Final Judgment, reserves the Court's jurisdiction over all of the parties and
the Class members for the administration of the terms of this Settlement and
Stipulation.
FINALITY OF SETTLEMENT
5. The Settlement shall be considered final ("Final" or
"Finally Approved") for purposes of this Stipulation upon the later of:
a. the entry of the Order and Final Judgment
approving the Settlement and the expiration of any applicable appeal period for
the appeal of the Order and Final Judgment without an appeal having been filed
or, if an appeal is taken, upon entry of an order affirming the Order and Final
Judgment appealed from and the expiration of any applicable period for the
reconsideration, rehearing or appeal of such affirmance without any motion for
reconsideration or rehearing or further appeal having been filed; or
b. the consummation of the Merger in accordance with
the terms of the Merger Agreement.
RIGHT TO WITHDRAW FROM THE SETTLEMENT
6. Each of the parties shall have the option to withdraw from
and terminate the Settlement in the event that: (i) either the Scheduling Order
or the Order and Final Judgment referred to above are not entered substantially
in the forms specified herein, including such modifications thereto as may be
ordered by the Court with the consent of the parties; (ii) the Settlement is not
approved by the Court or is disapproved or substantially modified upon appeal;
or (iii) the Merger Agreement is not consummated in
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accordance with its terms. Defendants shall have the option to withdraw from and
terminate the Settlement in the event that, prior to the time the Settlement
becomes Final, any action is pending in any state or federal court which raises
any Settled Claims against any of the Released Persons.
7. In the event the Settlement proposed herein is not approved
by the Court, or the Court approves the Settlement but such approval is reversed
or vacated on appeal, reconsideration or otherwise and such order reversing or
vacating the Settlement becomes final by lapse of time or otherwise, or if any
of the conditions to such Settlement are not fulfilled, then the Settlement
proposed herein shall be of no further force and effect, and this Stipulation
and all negotiations, proceedings and statements relating thereto and any
amendment thereof shall be null and void and without prejudice to any party
hereto, and each party shall be restored to his, her or its respective position
as it existed prior to the execution of this Stipulation.
8. In order to exercise any option a party may have to
withdraw from and terminate this Settlement, a party must provide, within five
(5) days of the event giving rise to such option, written notice of such
withdrawal and the grounds therefor to all signatories to this Stipulation.
DEFENDANTS' DENIAL OF LIABILITY
9. The defendants specifically disclaim any liability
whatsoever relating to any of the Settled Claims, expressly deny having engaged
in any wrongful or illegal activity, or having violated or threatened to violate
any law or regulation or duty and expressly deny that any person or entity has
suffered any harm or damages as a result of
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the Settled Claims. The Court has made no finding that defendants engaged in any
wrongdoing or wrongful conduct or otherwise acted improperly or in violation of
any law or regulation or duty in any respect. The defendants believe they have
acted with the utmost care, candor and honesty, and have at all times acted in
the best interests of the Customedix stockholders. Without conceding any
infirmity in their defenses against the Settled Claims, the defendants are
agreeing to the Settlement solely to avoid the substantial burden, expense,
distraction and inconvenience of continued litigation.
ATTORNEYS' FEES
10. Class Counsel may apply to the Court at any time before
the entry of the Final Judgment for an award of attorneys' fees, expenses and
costs (including expert's fees and expenses) in an aggregate amount not to
exceed $200,000. Defendants will not object to plaintiffs' fee application
provided that such application does not exceed the foregoing amount. Any fee
award to plaintiffs' attorneys shall be paid exclusively by Customedix for the
benefit of the Individual Defendants in the event the Settlement becomes Final.
The fairness, reasonableness and adequacy of the Settlement may be considered
and ruled upon by the Court independently of any award of attorneys' fees and
expenses. Defendants retain the right to oppose any other application for fees
or disbursements by plaintiffs, plaintiffs' counsel or any other person. No
counsel for plaintiffs who have appeared in this action shall apply to any Court
for any fees or disbursements except as provided for in this Paragraph.
11. Subject to the terms and conditions of this Stipulation,
such fees and expenses shall not become payable until the later of (a) the date
on which the Order and
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Final Judgment approving the Settlement becomes Final as set forth in paragraph
5 above or (b) three (3) days from the date when the order of the Court granting
the application of plaintiffs' counsel for an award of fees and expenses has
become final and no longer subject to further appeal or review, whether by
exhaustion of any possible appeal, lapse of time or otherwise. Except as
expressly provided herein defendants shall bear no other expenses, costs,
damages, or fees alleged or incurred by the named plaintiffs, or any member of
the Class, or by any of their attorneys, experts, advisors, agents or
representatives.
AUTHORITY
12. Each of the attorneys executing the Stipulation on behalf
of one or more of the parties hereto warrants and represents that he or she has
been duly authorized and empowered to execute this Stipulation on behalf of his
or her respective client or clients.
STIPULATION NOT AN ADMISSION
13. The provisions contained in the Stipulation and all
negotiations, statements and proceedings in connection therewith shall not be
deemed a presumption, a concession or an admission by any defendant of any
fault, liability or wrongdoing as to any fact or claim alleged or asserted in
the Consolidated Action or any other actions or proceedings and shall not be
interpreted, construed, deemed, invoked, offered or received in evidence or
otherwise used by any person in these or any other actions or proceedings,
whether civil, criminal or administrative, except in a proceeding to enforce the
terms or conditions of this Stipulation.
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COUNTERPARTS
14. This Stipulation may be executed in any number of actual
or telecopied counterparts and by each of the different parties thereto on
several counterparts, each of which when so executed and delivered shall be an
original. The executed signature page(s) from each actual or telecopied
counterpart may be joined together and attached to one such original and shall
constitute one and the same instrument.
WAIVER
15. The waiver by any party of any breach of this Stipulation
shall not be deemed or construed as a waiver of any other breach, whether prior,
subsequent, or contemporaneous, of this Stipulation.
ENTIRE AGREEMENT; AMENDMENTS
16. This Stipulation constitutes the entire agreement among
the parties with respect to the subject matter hereof, and may not be amended,
or any of its provisions waived, except by a writing executed by all of the
parties hereto.
17. This Stipulation, upon becoming operative, shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors, assigns, heirs, executors and administrators and upon any
corporation, partnership or entity into or with which any party may merge or
consolidate.
18. All of the exhibits hereto are incorporated herein by
reference as if set forth herein verbatim, and the terms of all exhibits are
expressly made part of this Stipulation.
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GOVERNING LAW
19. This Stipulation shall be construed and enforced in
accordance with the laws of the State of Delaware, without regard to conflict of
law principles.
BEST EFFORTS
20. The parties hereto and their attorneys agree to cooperate
fully with one another in seeking the Court's approval of this Stipulation and
the Settlement and to use their best efforts to effect the confirmation of this
Stipulation and the Settlement.
21. If any claims which are or would be subject to the release
and dismissal contemplated by the Settlement are asserted against any person in
any court prior to Final Approval of the Settlement, the plaintiffs and their
counsel shall join, where possible, in any motion to dismiss or stay such
proceedings and shall otherwise use their best efforts to effect a withdrawal or
dismissal of the claims.
NON-ASSIGNMENT OF CLAIMS
22. Plaintiffs and their counsel represent and warrant that
(i) plaintiffs are members of the Class, and (ii) none of the plaintiffs' claims
or causes of action in the Consolidated Action have been assigned, encumbered or
in any manner transferred in whole or in part.
<PAGE> 20
Of Counsel: ___________________
Norman M. Monhait
John G. Day
Robert M. Kornreich Rosenthal, Monhait, Gross &
Wolf Popper Ross Wolf & Jones, LLP Goddess, P.A.
845 Third Avenue 919 Market Street, Suite 1401
New York, NY 10022 Mellon Bank Center
(212) 759-4600 P. O. Box 1070
Co-Lead Counsel for Plaintiffs Wilmington, Delaware 19899
(302) 656-4433
Faruqi & Faruqi, L.L.P. Delaware Liaison Counsel
415 Madison Avenue for Plaintiffs
New York, NY 10017
Co-Lead Counsel for Plaintiffs
Wechsler Harwood Halebian & Feffer,
L.L.P.
805 Third Avenue, 7th Floor
New York, NY 10022
Co-Lead Counsel for Plaintiffs
Of Counsel: _________________
Kevin G. Abrams
John Sanders Srinivas M. Raju
Levett, Rockwood & Sanders Richards, Layton & Finger
Professional Corporation One Rodney Square
33 Riverside Avenue P.O. Box 551
P.O. Box 5116 Wilmington, Delaware 19899
Westport, CT 06881 (302) 651-7720
(203) 222-0885 Attorneys for Dr. Gordon S. Cohen
___________________
Stephen E. Jenkins
Of Counsel: Ashby & Geddes
One Rodney Square, Suite 302
James M. Thorburn P.O. 1150
Brody and Ober, P.C. Wilmington, DE 19899
135 Rennell Drive (302) 654-1888
P.O. Box 579 Attorneys for Remaining Defendants
Southport, CT 06490-5572
(203) 259-7405
Dated: July 26, 1996
<PAGE> 21
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
)
IN RE CUSTOMEDIX CORPORATION ) Consolidated
SHAREHOLDERS LITIGATION ) Civil Action No. 14812
)
ORDER PURSUANT TO CHANCERY COURT RULE 23
The parties to the above-captioned action (the "Consolidated Action")
having applied pursuant to Chancery Court Rule 23(e) for an Order to approve the
proposed settlement of the Consolidated Action in accordance with the
Stipulation of Settlement entered into by the parties, dated as of July 26, 1996
(the "Stipulation"), and for the dismissal of the Consolidated Action with
prejudice upon the terms and conditions set forth in the Stipulation (the
"Settlement"), and the Stipulation contemplating certification by this Court
(the "Court") of a class in the Consolidated Action, solely for purposes of
settlement, and the Court having read and considered the Stipulation and
accompanying documents, and all parties having consented to the entry of this
Order,
NOW, this ___ day of _______________, 1996, upon application of
plaintiffs and defendants, IT IS HEREBY ORDERED as follows:
1. The Court adopts and incorporates the definitions in the Stipulation
for purposes of this Order.
<PAGE> 22
2. Solely for purposes of the Settlement, (a) the Consolidated Action
shall be maintained as a class action pursuant to Chancery Court Rules 23(b)(1)
and (b)(2), on behalf of a class composed of all record and beneficial owners of
shares of Customedix stock from and including February 5, 1996 through and
including the date of consummation of the Merger involving Customedix
Corporation ("Customedix" or the "Company") as contemplated by the Merger
Agreement, including their successors-in-interest, predecessors, legal
representatives, trustees, heirs, assigns or transferees, immediate and remote,
and excluding defendants and their affiliates (the "Class"); (b) it is found
that plaintiffs are adequately represented by counsel and that plaintiffs will
fairly and adequately protect the interests of the Class; and (c) the law firms
of Wolf Popper Ross Wolf & Jones, L.L.P.; Faruqi & Faruqi, L.L.P.; and Wechsler
Harwood Halebian & Feffer LLP are certified as co-lead counsel for the Class
("Class Counsel").
3. The Court has found preliminarily that (a) the Class is so numerous
that joinder of all members is impracticable, (b) there are questions of law or
fact common to the Class, (c) the claims of the representative parties are
typical of the claims or defenses of the Class, and (d) the representative
parties will fairly and adequately protect the interests of the Class. The Court
has further found that (a) the prosecution of separate actions by or against
individual members of the Class would create a risk of (i) inconsistent or
varying adjudications which would establish incompatible standards of conduct
for the parties opposing the Class or (ii) adjudications which would as a
practical matter be dispositive of the interests of the other Class members not
parties to the
<PAGE> 23
adjudications or substantially impair or impede the ability of other Class
members to protect their interests or (b) the parties opposing the Class have
acted or refused to act on grounds generally applicable to the Class, thereby
making appropriate final injunctive relief or corresponding declaratory relief
with respect to the Class as a whole.
4. A hearing shall be held on August 26, 1996, at 11:00 a.m.
in the Court of Chancery in the Daniel L. Herrmann Courthouse, 10th & King
Streets, Wilmington, Delaware (the "Settlement Hearing") (a) to determine
whether the proposed Settlement on the terms and conditions set forth in the
Stipulation is fair, reasonable, and adequate, (b) to determine whether the
Stipulation and the Settlement should be approved by the Court and an Order and
Final Judgment as provided in the Stipulation entered thereon, and (c) to hear
and determine any objections to the Settlement. At the Settlement Hearing, Class
Counsel may apply for an award of attorneys' fees and expenses as set forth in
Paragraphs 10-11 of the Stipulation, which application shall be heard by the
Court at the Settlement Hearing or at such time thereafter as the Court in its
discretion deems appropriate.
5. The Court reserves the right to adjourn the Settlement Hearing,
including consideration of the application for attorneys' fees and costs,
without further notice other than by announcement at the Settlement Hearing or
any adjournment thereof.
6. The Court reserves the right to approve the Settlement at or after
the Settlement Hearing with such modifications as may be consented to by the
parties to the Stipulation and without further notice to the stockholders of
Customedix. The Court further reserves the right to enter its Order and Final
Judgment dismissing the
<PAGE> 24
Consolidated Action as to all defendants with prejudice as against the
plaintiffs, all members of the Class, and each of them, and their respective
representatives, trustees, successors, heirs and assigns, and order the payment
of attorneys' fees, all without further notice to the Class.
7. The Court approves of the form, content and method of the Notice of
Proposed Settlement of Class Action specified herein as the best notice
practicable, constituting due and sufficient notice of the Settlement Hearing to
all persons entitled to receive such notice. Customedix shall, on or before the
date of the Settlement Hearing directed herein, file proof of mailing of the
Notice as directed herein.
8. Within three (3) business days of the date of this Order, Customedix
shall mail, by first-class mail, postage prepaid, a Notice of Pendency of Class
Action, Proposed Settlement of Class Action and Settlement Hearing (the
"Notice") substantially in the form attached to the Stipulation as Exhibit B,
which shall have attached to it a copy of the proposed Order and Final Judgment
(Exhibit C to the Stipulation) to all record owners of Customedix stock from and
including February 5, 1996 through and including July 26, 1996. Customedix also
shall include a copy of the Notice when Customedix mails the Proxy Statement to
each holder of Customedix stock as of the record date for the Merger. On or
immediately after the days on which (i) the Court enters the Order and Final
Judgment and (ii) the Order and Final Judgment becomes Final, Customedix shall
file a Form 8-K with the Securities and Exchange Commission and issue a press
release summarizing the effect of the action occurring that day. The expenses of
such notices shall be paid in accordance with the Stipulation.
<PAGE> 25
9. Brokerage firms and other persons or entities who are members of the
Class in their capacity as record owners, but not as beneficial owners, are
requested to send promptly to the beneficial owners the Notice and to maintain a
list of beneficial owners. Customedix shall make available additional copies of
the Notice to any record holder requesting such for the purpose of distribution
to the beneficial owners.
10. Any member of the Class who objects to the Stipulation, the
Settlement, the class action determination, the judgment to be entered herein,
and/or the application for attorneys' fees and expenses, or who otherwise wishes
to be heard, may appear in person or by his attorney at the Settlement Hearing
and present any evidence or argument that may be proper and relevant; provided,
however, that no person other than plaintiffs, counsel for the plaintiffs,
defendants and counsel for defendants in the Consolidated Action shall be heard,
and no papers, briefs, pleadings or other documents submitted by any such person
shall be received and considered by the Court (unless the Court in its
discretion shall thereafter otherwise direct, upon application of such person
and for good cause shown), unless no later than ten (10) days prior to the
Settlement Hearing directed herein, the following documents are served and filed
in the manner provided below: (i) written notice of the intention to appear;
(ii) proof of membership in the Class; (iii) a detailed statement of such
persons' specific objections to any matter before the Court; and (iv) the
grounds for such objections and any reasons why such person desires to appear
and to be heard, as well as all documents and writings which such person desires
the Court to consider, shall be filed by such person with the Register in
Chancery and, on or before such filing, shall be served upon the following
counsel of record:
<PAGE> 26
Joseph A. Rosenthal, Esq.
Rosenthal Monhait Gross & Goddess
919 Market Street, Suite 1401
Mellon Bank Center
Wilmington, DE 19801
Delaware Liaison Counsel for Plaintiffs
Kevin G. Abrams, Esq.
Richards, Layton & Finger
One Rodney Square
P.O. Box 551
Wilmington, Delaware 19899
Attorneys for Dr. Gordon S. Cohen
Stephen E. Jenkins, Esq.
Ashby & Geddes
One Rodney Square, Suite 302
P.O. Box 1150
Wilmington, Delaware 19899
Attorneys for Certain Defendants
11. Any person who fails to object in the manner prescribed above shall
be deemed to have waived such objection and shall be forever barred from raising
such objection in the Consolidated Action or any other action or proceeding.
12. Pending final determination of whether the Stipulation should be
approved, plaintiffs and all members of the Class, or any of them, are barred
and enjoined from commencing or prosecuting any action asserting any claims,
either directly, representatively, derivatively or in any other capacity,
against any Released Person herein which are Settled Claims as defined in the
Stipulation.
13. If the Settlement provided for in the Stipulation shall be approved
by the
<PAGE> 27
Court following the Settlement Hearing, an Order and Final Judgment shall be
entered as described in the Stipulation.
14. If the Settlement is not approved by the Court or is terminated or
shall not become effective for any reason whatsoever, the Consolidated Action
shall proceed, completely without prejudice to any party as to any matter of law
or fact, as if the Stipulation had not been made and had not been submitted to
the Court (including the certification of the Class pursuant to this Order), and
neither the Stipulation nor any provision contained in the Stipulation nor any
action undertaken pursuant thereto nor the negotiation thereof by any party
shall be deemed an admission or offered or received in evidence at any
proceeding in the Consolidated Action or any other action or proceeding.
__________________________________
Vice Chancellor
<PAGE> 28
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
IN RE CUSTOMEDIX CORPORATION Consolidated
SHAREHOLDERS LITIGATION Civil Action No. 14812
NOTICE OF PENDENCY OF CLASS ACTION, PROPOSED
SETTLEMENT OF CLASS ACTION AND SETTLEMENT HEARING
TO: ALL RECORD AND BENEFICIAL OWNERS OF SHARES OF CUSTOMEDIX
CORPORATION ("CUSTOMEDIX" OR THE "COMPANY") STOCK, FROM AND
INCLUDING FEBRUARY 5, 1996 THROUGH AND INCLUDING THE DATE OF
CONSUMMATION OF THE MERGER AS CONTEMPLATED BY THE MERGER
AGREEMENT, INCLUDING THEIR SUCCESSORS-IN-INTEREST, PREDECESSORS,
LEGAL REPRESENTATIVES, TRUSTEES, HEIRS, ASSIGNS OR TRANSFEREES,
IMMEDIATE AND REMOTE, AND EXCLUDING DEFENDANTS AND THEIR
AFFILIATES.
PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY. YOUR
RIGHTS WILL BE AFFECTED BY THE LEGAL PROCEEDINGS IN THIS
LITIGATION. IF YOU WERE NOT THE BENEFICIAL HOLDER OF CUSTOMEDIX
STOCK, BUT HELD CUSTOMEDIX STOCK FOR A BENEFICIAL HOLDER, PLEASE
TRANSMIT THIS DOCUMENT TO SUCH BENEFICIAL HOLDER.
1. This notice to all record and beneficial owners of shares of Customedix
stock from and including February 5, 1996 through and including the date of
consummation of the Merger as contemplated by the Merger Agreement, including
their successors-in-interest, predecessors, legal representatives, trustees,
heirs, assigns or transferees, immediate and remote, and excluding defendants
and their affiliates (the "Class"), is given pursuant to Rule 23 of the Rules of
the Court of Chancery of the State of Delaware and pursuant to an Order of the
Court of Chancery of the State of Delaware in and for New Castle County (the
"Court") entered in the above-captioned action (the "Consolidated Action").
SETTLEMENT HEARING
2. Members of the Class have an interest in these proceedings and are
hereby notified that a hearing will be held before the Court of Chancery, Daniel
L. Herrmann Courthouse, 10th & King Streets, Wilmington, Delaware 19801 on
August 27, 1996, at 11:00 a.m. (the "Settlement Hearing"), to determine whether
(i) a Stipulation of Settlement dated July 25, 1996 (the "Stipulation"), and the
terms and conditions of the settlement proposed in the Stipulation (the
"Settlement"), are fair, reasonable and adequate; (ii) a class should be
certified in the Consolidated Action; (iii) final judgment should be entered (in
the form attached hereto) dismissing the Consolidated Action as to all
defendants named herein and their affiliates and with prejudice as against the
plaintiffs and all members of the Class (the "Order and Final Judgment"); (iv)
any objections to the Settlement have merit; and (v) if the Court approves the
Stipulation and the Settlement and enters the Order and Final Judgment, it
should award attorneys' fees and expenses to plaintiffs' attorneys in the amount
described herein.
3. The Court has reserved the right to adjourn the Settlement Hearing,
including consideration of the application for attorneys' fees and expenses, by
oral announcement at such hearing or any adjournment thereof, and without
further notice of any kind. The Court also has reserved the right to approve the
Stipulation and the Settlement, with or without modifications, to enter its
final judgment dismissing the Consolidated Action as to all defendants named
therein and their affiliates and with prejudice as against the
<PAGE> 29
plaintiffs and all members of the Class, and to order the payment of attorneys'
fees and expenses, without further notice of any kind.
THE FACTUAL BACKGROUND
4. Customedix Corporation ("Customedix" or the "Company") is a Delaware
corporation with its principal executive offices in Wallingford, Connecticut.
Customedix is engaged in two principal industry segments: dental health care
products and medical health care products.
5. Dr. Gordon S. Cohen is the Company's Chief Executive Officer and
Chairman of its Board of Directors.
6. CUS Acquisition, Inc. (the "Buyer") is a Delaware corporation that will
be wholly-owned by Dr. Cohen and a partnership comprised of trusts established
for the benefit of Dr. Cohen and certain members of Dr. Cohen's family (the
"Partnership"). The Buyer was recently organized for the purpose of effecting a
merger with the Company. The Buyer will own approximately 51.07% of the issued
and outstanding shares of common stock of Customedix prior to the consummation
of the Merger (as hereinafter defined).
7. Martin L. Schulman, William T. Fitch, Elry C. Bird, Robert S. Cooper,
David H. Leigh and Robert N. Thomas, together with Dr. Cohen (collectively, the
"Individual Defendants"), have constituted the Customedix Board of Directors
(the "Board") from February 5, 1996 until present. On May 13, 1996, Adraine J.
Tom also became a Director of the Company.
8. At a regularly scheduled meeting of the Board held on February 5, 1996,
Dr. Cohen delivered to the Company a proposal to acquire all of the common
shares of Customedix ("Common Stock") held by stockholders, other than Dr. Cohen
and the Partnership, in a negotiated cash merger for $1.9375 per share in cash
(the "Original Proposal").
9. In response to the Original Proposal, the Board appointed a special
committee consisting of Messrs. Fitch and Thomas, each an independent,
non-employee director of the Company (the "Original Special Committee"). The
Original Special Committee was charged with, among other things, representing
the interests of the unaffiliated stockholders of the Company and taking any and
all actions necessary or advisable in connection with the evaluation and, if
appropriate, the approval of the Original Proposal. Following the February 5,
1996 Board meeting, the Original Special Committee formally engaged Brody and
Ober, P.C., as legal counsel, and Tucker Anthony Incorporated ("Tucker
Anthony"), as financial advisor, with respect to the Original Proposal and
related matters. After such appointment and prior to May 3, 1996, the Original
Special Committee met on several occasions with its advisors.
10. On February 6, 1996, four putative class action complaints were filed
in the Delaware Court of Chancery, which suits are styled as follows: Katz v.
Cohen, et. al., C. A. No. 14812; Manillo v. Cohen, et. al., C.A. No. 14813;
Thomas Torre v. Cohen, et. al., C.A. No. 14814; and Sylvia Torre v. Cohen, et.
al., C.A. No. 14818 (collectively, the "Complaints"). The Complaints generally
allege that the course of conduct taken by Dr. Cohen in proposing, and by the
Company and the other directors in responding to, the Original Proposal was in
violation of the Board's fiduciary duty to the Company's stockholders. The
Complaints all seek (i) to enjoin the Original Proposal, or, in the alternative,
(ii) damages.
11. On May 3, 1996, the Original Special Committee and its counsel met with
representatives of the Buyer and its counsel to negotiate the terms of the
Original Proposal. At that meeting, the Buyer suggested that negotiations over
the proposed price might be more productive if the Buyer understood the
information on which the Original Special Committee was relying as well as the
analysis of that information by the Original Special Committee and/or Tucker
Anthony. The Original Special Committee distributed to the Buyer and its counsel
the information prepared by Tucker Anthony and on which Tucker Anthony was
relying in rendering advice to the Original Special Committee (the "Tucker
Anthony Materials"). The parties agreed that they would engage in further
discussion after the Buyer had an opportunity to review the Tucker Anthony
Materials, and that a representative of Tucker Anthony should be present during
such discussion.
2
<PAGE> 30
12. On May 8, 1996, the Original Special Committee, representatives of the
Buyer, their respective counsel and representatives of Tucker Anthony met to
discuss the Tucker Anthony Materials and to negotiate a price in connection with
the Original Proposal. After considerable discussion, both parties remained far
apart on pricing with Tucker Anthony's representative indicating that he
believed the Tucker Anthony Committee which would have to approve an opinion as
to the fairness of the price would certainly support a price of $3.25 per share,
probably support a price of $3.00 per share and perhaps a price as low as $2.90
per share. The Buyer indicated that it could not reach a price within the range
suggested by the representative of Tucker Anthony, and the representative of
Tucker Anthony indicated that he did not believe it would be worthwhile to seek
to have Tucker Anthony consider rendering an opinion as to the fairness of a
price lower than that range. The meeting concluded without an agreement on
price.
13. Following the meeting, the Tucker Anthony representative advised the
chairman of the Special Committee and counsel to the Special Committee that if
Dr. Cohen wished to submit a price to Tucker Anthony for consideration, Tucker
Anthony would advise the Special Committee as to its view of the fairness of
such price. However, such advice would require payment by the Company of the
$40,000 additional fee due to Tucker Anthony upon rendering of an opinion. Dr.
Cohen refused to accept Tucker Anthony's condition for its consideration of an
increased offer.
14. Later on May 8, Dr. Cohen advised the Company that he was withdrawing
the offer under the Original Proposal.
15. On June 3, 1996, the Court entered an order consolidating the
Complaints for all purposes under the caption In Re Customedix Corporation
Shareholder Litigation, Cons. C.A. No. 14812 (the "Consolidated Action").
16. Also on June 3, 1996, counsel for Dr. Cohen engaged in settlement
discussions with counsel for plaintiffs in the Consolidated Action. In
connection with those discussions, on June 3, 1996, Dr. Cohen's attorneys
informed the plaintiffs' attorneys that Dr. Cohen was willing to consider
another merger proposal, provided the parties to the litigation could reach an
agreement-in-principle to settle such litigation. After further arm's-length
negotiations, the parties to the litigation, by their respective attorneys,
entered into a Memorandum of Understanding on June 3, 1996, setting forth such
an agreement-in-principle (the "MOU").
17. The MOU provided that Dr. Cohen and the Partnership agreed to make a
merger proposal to the Company pursuant to which, subject to the approval of a
merger agreement by Dr. Cohen, the Board and the stockholders of the Company,
and further subject to the approval of the settlement by the Court, the Buyer
would be merged with and into the Company, and each share of Common Stock (other
than shares (i) held in the treasury of the Company, (ii) owned by the Buyer and
(iii) held by stockholders who had not voted in favor of the Merger and who had
otherwise properly exercised their rights for appraisal of such shares in
accordance with Section 262 of the DGCL) would be converted into the right to
receive, upon surrender of the certificate evidencing such share, $2.375 per
share (the "Merger Consideration"), thereby increasing the consideration to be
received by Customedix common stockholders under the Merger by $0.4375 per share
(the "Merger Proposal").
18. The MOU was subject to various conditions including the completion of
discovery sufficient to enable plaintiffs' counsel to determine the fairness of
the Settlement; the execution of a Stipulation of Settlement; consummation of a
merger pursuant to the Merger Proposal; and Final Approval by the Court of
Chancery of the Settlement.
19. On June 4, 1996, Dr. Cohen delivered the Merger Proposal to the
Company. In response to the Merger Proposal, the Board reconstituted the Special
Committee (the "Special Committee"), consisting of the Original Special
Committee and Adraine J. Tom, another independent, non-employee director of the
Company. The Special Committee was charged, among other things, to represent the
interests of the unaffiliated stockholders of the Company and take any and all
actions necessary or advisable in connection with the evaluation and, if
appropriate, the approval of the Merger Proposal. The Special Committee
indicated that it intended to continue to engage Brody and Ober, P.C., as legal
counsel. As a result of the discussions with Tucker Anthony on May 8, 1996, and
given the terms and conditions of the MOU and the role of
3
<PAGE> 31
plaintiffs' counsel in connection therewith, neither Tucker Anthony nor any
other financial advisor was retained to deliver an opinion with respect to the
fairness of the Merger Consideration.
20. After its appointment, the Special Committee held several telephonic
meetings with its legal advisors to evaluate the Merger Proposal and the MOU,
and the Special Committee and the Buyer, through their legal advisors, held
discussions regarding, and agreed upon certain revisions to, the Agreement and
Plan of Merger, dated as of June 10, 1996 (the "Merger Agreement"), pursuant to
which the Buyer will be merged with and into the Company (the "Merger"). Under
the Merger Agreement, the obligations of the Buyer and the Company are subject
to several conditions, including the approval of the Settlement by the Delaware
Court of Chancery.
21. On June 10, 1996, the Special Committee met and unanimously determined
that the Merger Proposal was fair to, and in the best interests of, the
stockholders of the Company (other than Dr. Cohen and the Partnership), and
unanimously voted to recommend that the Board accept the Merger Proposal and
approve the Merger Agreement and the Merger. After considering the
recommendations of the Special Committee, the independent directors of the Board
unanimously approved the Merger Proposal and the Merger Agreement. Thereafter,
the full Board likewise unanimously approved the Merger Proposal and the Merger
Agreement, and the Merger Agreement was executed immediately thereafter.
22. Pursuant to the MOU, plaintiffs' counsel reviewed defendants' document
production in the litigation, conducted the depositions of Adraine Tom (a member
of the Special Committee) and Dr. Gordon Cohen (the originator of the Merger
Proposal), and reviewed preliminary stockholder disclosure materials relating to
the Merger Proposal, including a preliminary draft of the proxy statement filed
with the Securities and Exchange Commission on July 2, 1996 with respect to the
Merger (the "Proxy Statement"). The Proxy Statement is expected to be mailed to
the Company's stockholders on or about August 15, 1996. The special meeting of
the Company's stockholders to consider the Merger Agreement is expected to be
held on or about September 19, 1996.
23. In light of the events, negotiations and agreements described above,
analysis of applicable law, and based on the discovery taken in the Consolidated
Action, and after consultation with their financial expert Howard, Lawson & Co.,
counsel for plaintiffs have concluded that the terms and conditions of the
Settlement provided for in the Stipulation are fair, reasonable, and adequate to
the plaintiffs and the class of stockholders represented in the Consolidated
Action.
24. Plaintiffs enter into the Stipulation after taking into account (i) the
financial benefits to the members of the Class (as defined below) from the
Merger Proposal and the Merger Agreement, (ii) the risk of continued litigation,
(iii) the desirability of permitting the Settlement to be consummated as
provided by the terms of this Stipulation, and (iv) the conclusion of counsel
for plaintiffs that the terms and conditions of the Settlement are fair,
reasonable and adequate to the Customedix stockholders represented in the
Consolidated Action. Plaintiffs and plaintiffs' counsel have agreed to the terms
of the Settlement because, in their view, the Settlement achieves plaintiffs'
objectives in the litigation, which were to assure that Customedix stockholders
received fair value in exchange for their stock, and to provide independent
representation for Customedix stockholder interests.
25. Customedix and the Individual Defendants consider the Merger Agreement
and its terms to have satisfied all of the claims asserted in the Complaints.
26. Defendants have denied and continue to deny vigorously any liability
with respect to all claims alleged in any of the Complaints, or any other claims
arising out of the transactions described above. While maintaining their
innocence of any fault or wrongdoing, and relying on the provision hereof that
this Stipulation shall in no event be construed as or deemed to be evidence of
an admission or concession on the part of defendants or any Released Person (as
defined below) of any fault or liability whatsoever, and without conceding any
infirmity in their defenses against the claims alleged in the Complaints,
defendants consider it desirable that the Consolidated Action be settled and
dismissed, subject to the terms and conditions herein, because the Settlement
will (i) halt the substantial expense, inconvenience and distraction of
continued
4
<PAGE> 32
litigation of plaintiffs' claims; (ii) finally put to rest those claims; and
(iii) dispel any uncertainty that may exist as a result of this litigation.
SUMMARY OF THE SETTLEMENT
27. In consideration of the benefits afforded the Class, as summarized
herein, the parties to the Consolidated Action have agreed to settle the
Consolidated Action upon the terms described below.
28. In consideration for the full settlement, satisfaction, compromise and
release of the Settled Claims (as defined below), and in furtherance of the
Merger Proposal and the Merger Agreement, the Buyer has proposed a merger, and
the Board has approved the Buyer's Merger Proposal, which will convert all of
the outstanding shares of Customedix not owned by the Buyer, Dr. Cohen or the
Partnership into the right to receive $2.375 per share in cash. Further, counsel
for plaintiffs reviewed and commented on preliminary shareholder disclosure
materials relating to the Merger Proposal. The increased consideration in the
Merger Proposal, together with plaintiffs' review of related disclosure
documents, furnishes consideration for plaintiffs' agreement to release and
forever discharge each of the defendants from the Settled Claims.
29. If the Stipulation and the Settlement are approved by the Court, the
Court will enter an Order and Final Judgment which, among other things, will
provide that: the Consolidated Action and any and all claims, rights, demands,
actions, causes of action, suits, damages, losses, obligations, judgments,
matters and issues of any kind or nature whatsoever, whether known or unknown,
foreseen, unforeseen or unforeseeable, asserted or unasserted, contingent or
absolute, suspected or unsuspected, disclosed or undisclosed, hidden or
concealed, matured or unmatured, material or immaterial, which have been, could
have been, or in the future can or might be asserted in the Consolidated Action
or in any court, tribunal or proceeding (including, but not limited to, any
claims arising under state or federal law relating to any alleged fraud, breach
of any duty, negligence, violations of federal securities laws or otherwise)
(collectively "Claims") by or on behalf of plaintiffs in the Consolidated Action
and/or any member of the Class, whether individual, class, derivative,
representative, legal, equitable or any other type or in any other capacity,
which have arisen, arise now, or hereafter arise out of or relate in any manner
whatsoever, directly or indirectly, to the allegations, facts, events,
transactions, occurrences, acts, statements, representations,
misrepresentations, omissions, or any other matter, thing or cause whatsoever,
or any series thereof, involved, embraced, set forth, referenced in, or
otherwise referred or related to, in any way, directly or indirectly, the
Consolidated Action, any of the Complaints, the Merger Agreement, the Original
Proposal, the Merger Proposal, the Merger, any agreements or disclosures
relating to the Original Proposal, the Merger Proposal, the Merger Agreement or
the Merger, including but not limited to the Proxy Statement, or the
Stipulation, excepting only such rights created under the Stipulation
(collectively, the "Settled Claims"), against any of the defendants in the
Consolidated Action, their families, parent entities, affiliates, associates or
subsidiaries, and each of their present or former officers, directors,
stockholders, agents, employees, attorneys, representatives, advisors,
investment advisors, investment bankers, commercial bankers, financial advisors,
trustees, general and limited partners and partnerships, heirs, executors,
personal representatives, estates, administrators, predecessors, successors,
assigns, and any other person or entity acting for or on behalf of any of the
defendants (collectively, the "Released Persons") are hereby fully, finally, and
forever compromised, extinguished, dismissed, discharged and released with
prejudice, and all members of the Class shall be forever barred from prosecuting
a class action or any other action arising out of or relating in any way to the
Settled Claims against any of the Released Persons; provided however, that the
Settled Claims shall not include an action to enforce compliance with the terms
of the Settlement or to prosecute properly perfected appraisal rights relating
to the Merger pursuant to 8 Del. C. sec. 262. A copy of the proposed form of the
Order and Final Judgment, to be entered by the Court upon the approval of the
settlement, is attached hereto.
30. THE COURT HAS NOT FINALLY DETERMINED THE MERITS OF THE CLAIMS MADE BY
PLAINTIFFS AGAINST, OR THE DEFENSES OF, THE DEFENDANTS. THIS NOTICE DOES NOT
IMPLY THAT THERE HAS BEEN OR WOULD BE ANY FINDING OF VIOLATION OF THE LAW OR
THAT RELIEF IN ANY FORM OR RECOVERY IN ANY AMOUNT COULD BE HAD IF THE
CONSOLIDATED ACTION WERE NOT SETTLED.
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<PAGE> 33
DISMISSAL AND RELEASE
31. It is the intent of the parties to the Consolidated Action that the
proposed Settlement shall extinguish for all time all rights, claims and causes
of action that are or relate to the Settled Claims against any of the Released
Persons.
32. The Settlement shall be considered final ("Final," "Final Approval" or
"Finally Approved") and become effective upon the later of:
i. the entry of the Order and Final Judgment approving the Settlement
and the expiration of any applicable appeal period for the appeal of the
Order and Final Judgment without an appeal having been filed or, if an
appeal is taken, upon entry of an order affirming the Order and Final
Judgment appealed from and the expiration of any applicable period for the
reconsideration, rehearing or appeal of such affirmance without any motion
for reconsideration or rehearing or further appeal having been filed; or
ii. the consummation of the Merger in accordance with the terms of the
Merger Agreement.
33. In the event that the Settlement does not become Final, then the
Settlement shall be of no further force and effect and each party shall be
restored to his, her or its respective position prior to entering into the
Stipulation, except that all costs incurred in connection with notifying the
Class of the proposed Settlement shall be the obligation of Customedix. Under
the Stipulation, the parties have various rights to withdraw from and terminate
the Settlement, including the failure of the parties to consummate the Merger in
accordance with the Merger Agreement.
34. If the Settlement is approved by the Court, the Consolidated Action
will be dismissed on the merits with respect to all defendants and with
prejudice against plaintiffs and all members of the Class. The Stipulation
provides that the Settlement is a full compromise, settlement and release of all
claims, known or unknown, which have been or which could have been asserted by
plaintiffs or any other member of the Class against any of the Released Persons
arising now or hereafter from or relating to matters alleged in the Consolidated
Action, the Complaints, the Merger Agreement, the Original Proposal, the Merger
Proposal, the Merger, any agreements or disclosures relating to the Original
Proposal, the Merger Proposal, the Merger Agreement or the Merger, including but
not limited to the Proxy Statement, or the Stipulation. Under the terms of the
Stipulation, such release and dismissal will bar the institution or prosecution
by plaintiffs or any member of the Class, of any other action asserting any
Settled Claim against any of the Released Persons.
ATTORNEYS' FEES
35. Class counsel has agreed with the attorneys for defendants to apply to
the Court for an award of attorneys' fees and expenses (including expert's fees
and expenses) to class counsel in an aggregate amount not to exceed $200,000.
The defendants will not oppose any such fee application provided that it does
not exceed the foregoing amount. Any fee award to class counsel shall be paid
exclusively by Customedix for the benefit of the Individual Defendants in the
event the Settlement becomes Final. The fairness, reasonableness and adequacy of
the Settlement may be considered and ruled upon by the Court independently of
any award of attorneys' fees and expenses. Defendants retain the right to oppose
any other application for fees or disbursements by plaintiffs, plaintiffs'
counsel or any other person. No counsel for plaintiffs who have appeared in this
action may apply to any Court for any fees or disbursements except as provided
for in this Paragraph.
CLASS CERTIFICATION
36. On July 31, 1996, the Court entered an order (the "Scheduling Order")
determining preliminarily and solely for purposes of the Settlement, that the
Consolidated Action may be maintained as a class action by plaintiffs as
representative of the Class, and naming the law firms of Wolf Popper Ross Wolf &
Jones, L.L.P.; Wechsler Harwood Halebian & Feffer, LLP; and Faruqi & Faruqi,
L.L.P. as counsel for the Class ("Class Counsel"), pursuant to Chancery Court
Rules 23(b)(1) and (b)(2). The Scheduling Order also determined that, for
purposes of the Settlement, the claims of plaintiffs are typical of the Class,
plaintiffs will fairly and adequately protect the interests of the Class, and
the named plaintiffs are adequately represented by counsel.
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<PAGE> 34
The Court will consider these issues further at the Settlement Hearing. Any
communications by Class members with plaintiffs and Class Counsel may be
directed to:
Joseph A. Rosenthal, Esq.
Rosenthal Monhait Gross & Goddess
919 Market Street, Suite 1401
Mellon Bank Center
Wilmington, DE 19801
Delaware Liaison Counsel for Plaintiffs
RIGHT TO APPEAR AT SETTLEMENT HEARING
37. Any Class member who objects to the Stipulation, the Settlement, the
class action determination, the Order and Final Judgment to be entered herein,
and/or the application for attorneys' fees and expenses, or who otherwise wishes
to be heard, may appear in person or by his attorney at the Settlement Hearing
and present any evidence or argument that may be proper and relevant; provided,
however, that no person other than the named plaintiffs, defendants and their
counsel in this action shall be heard, and no papers, briefs, pleadings or other
documents submitted by any such person shall be received or considered by the
Court (unless the Court in its discretion shall thereafter otherwise direct,
upon application of such person and for good cause shown), unless no later than
August 17, 1996, a date ten (10) days prior to the Settlement Hearing, (i) a
written notice of the intention to appear; (ii) proof of membership in the
Class; (iii) a detailed statement of such person's objections to any matter
before the Court, and (iv) the grounds therefor or the reasons why such person
desires to appear and to be heard, as well as all documents and writings which
such person desires the Court to consider, shall be filed by such person with
the Register in Chancery and, on or before such filing, shall be served by hand
or first class mail, postage prepaid, upon the following counsel of record:
Joseph A. Rosenthal, Esq.
Rosenthal Monhait Gross & Goddess
919 Market Street, Suite 1401
Mellon Bank Center
Wilmington, DE 19801
Delaware Liaison Counsel for Plaintiffs
Kevin G. Abrams, Esq.
Richards, Layton & Finger
One Rodney Square
P.O. Box 551
Wilmington, Delaware 19899
Attorneys for Dr. Gordon S. Cohen
Stephen E. Jenkins, Esq.
Ashby & Geddes
One Rodney Square, Suite 302
P.O. Box 1150
Wilmington, Delaware 19899
Attorneys for Certain Defendants
Any person who fails to object in the manner prescribed above shall be
deemed to have waived such objection and shall be forever barred from raising
such objection in this or any other action or proceeding.
INTERIM INJUNCTION
38. Pending final determination of whether the Stipulation should be
approved, the plaintiffs and all members of the Class, and each of them, and any
of their respective representatives, trustees, successors, heirs
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<PAGE> 35
and assigns shall not commence or prosecute any action either directly or in any
other capacity which asserts Settled Claims against any of the Released Persons.
SCOPE OF THIS NOTICE AND FURTHER INFORMATION
39. This Notice does not purport to be a comprehensive description of the
Consolidated Action, the allegations or transactions related thereto, the MOU,
the terms of the Settlement or the Settlement Hearing. For a more detailed
statement of the matters involved in this litigation, you may inspect the
pleadings, the Stipulation, the Orders entered by the Chancery Court and other
papers filed in the litigation, unless sealed, at the Office of the Register in
Chancery of the Court of Chancery of the State of Delaware, Daniel L. Herrmann
Courthouse, 10th & King Streets, New Castle County, Wilmington, Delaware, during
regular business hours of each business day. DO NOT WRITE OR TELEPHONE THE
COURT.
NOTICE TO PERSONS OR ENTITIES HOLDING
RECORD OWNERSHIP ON BEHALF OF OTHERS
40. Brokerage firms, banks and other persons or entities who are members of
the Class in their capacities as record owners, but not as beneficial owners,
are requested to send this Notice promptly to beneficial owners. Additional
copies of this notice for transmittal to beneficial owners are available on
request directed to Customedix Corporation, 53 North Plains Industrial Road,
Wallingford, CT 06492, Attention: Secretary.
ENTERED BY ORDER OF THE COURT:
PRISCILLA B. RAKESTRAW
-----------------------------------
Register in Chancery
Dated: July 31, 1996
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<PAGE> 36
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
<TABLE>
<S> <C>
IN RE CUSTOMEDIX CORPORATION Consolidated
SHAREHOLDERS LITIGATION Civil Action No. 14812
</TABLE>
A hearing having been held before this Court (the "Court") on ,
1996, pursuant to the Court's Order of July 31, 1996, (the "Scheduling Order"),
upon a Stipulation of Settlement, dated July 25, 1996 (the "Stipulation"), of
the above-captioned action (the "Consolidated Action"), which is incorporated
herein by reference; it appearing that due notice of said hearing has been given
in accordance with the aforesaid Scheduling Order; the respective parties having
appeared by their attorneys of record; the Court having heard and considered
evidence in support of the proposed Settlement (as defined in the Stipulation);
the attorneys for the respective parties having been heard; an opportunity to be
heard having been given to all other persons requesting to be heard in
accordance with the Scheduling Order; the Court having determined that notice to
the Class (as defined below) preliminarily certified, pursuant to the aforesaid
Scheduling Order, was adequate and sufficient; and the entire matter of the
proposed Settlement having been heard and considered by the Court;
IT IS HEREBY ORDERED, ADJUDGED AND DECREED this day of ,
1996, that:
1. The form and manner of notice given to the members of the Class, as
provided in the Scheduling Order, is hereby determined to have been the best
notice practicable under the circumstances and to have been given in full
compliance with the requirements of due process and of Court of Chancery Rule
23.
2. Based on the record of the Consolidated Action, each of the provisions
of Court of Chancery Rule 23(a) has been satisfied and the Consolidated Action
has been properly maintained according to the provisions of Court of Chancery
Rules 23(b)(1) and (b)(2). Specifically, this Court finds that (1) the Class
contemplated in the Consolidated Action is so numerous that joinder of all
members is impracticable, (2) there are questions of law or fact common to the
Class, (3) the claims of the representative plaintiffs are typical of the claims
of the Class, and (4) the representative plaintiffs have fairly and adequately
protected the interests of the Class. This Court further finds that (a) the
prosecution of separate actions by or against individual members of the Class
would create a risk of (i) inconsistent or varying adjudications which would
establish incompatible standards of conduct for the parties opposing the Class
or (ii) adjudications which would as a practical matter be dispositive of the
interests of the other Class members not parties to the adjudications or
substantially impair or impede the ability of other Class members to protect
their interests or (b) the parties opposing the Class have acted or refused to
act on grounds generally applicable to the Class, thereby making appropriate
final injunctive relief or corresponding declaratory relief with respect to the
Class as a whole. The Consolidated Action is certified as a class action,
pursuant to Court of Chancery Rules 23(b)(1) and (b)(2), on behalf of a class
composed of all record and beneficial owners of shares of Customedix Corporation
("Customedix" or the "Company") stock from and including February 5, 1996
through and including the date of consummation of the Merger as contemplated by
the Merger Agreement, including their successors-in-interest, predecessors,
legal representatives, trustees, heirs, assigns or transferees, immediate and
remote, and excluding defendants and their affiliates (the "Class"); and the law
firms of Wolf Popper Ross Wolf & Jones, L.L.P.; Wechsler Harwood Halebian &
Feffer LLP; and Faruqi and Faruqi, L.L.P. are certified as co-lead counsel for
the Class ("Class Counsel").
3. The Stipulation and the Settlement are approved as fair, reasonable, and
adequate and shall be consummated in accordance with their terms and conditions.
4. The Consolidated Action is dismissed with prejudice against plaintiffs
and each member of the Class on the merits, each party to bear its own costs,
except as provided in the Stipulation, and any and all claims, rights, demands,
actions, causes of action, suits, damages, losses, obligations, judgments,
matters and issues, of
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<PAGE> 37
any kind or nature whatsoever, whether known or unknown, foreseen, unforeseen or
unforeseeable, asserted or unasserted, contingent or absolute, suspected or
unsuspected, disclosed or undisclosed, hidden or concealed, matured or
unmatured, material or immaterial, which have been, could have been, or in the
future can or might be asserted in the Consolidated Action or in any court,
tribunal or proceeding (including, but not limited to, any claims arising under
state or federal law relating to any alleged fraud, breach of any duty,
negligence, violations of federal securities laws or otherwise) (collectively
"Claims"), by or on behalf of plaintiffs in the Consolidated Action and/or any
member of the Class, whether individual, class, derivative, representative,
legal, equitable or any other type or in any other capacity, which have arisen,
arise now, or hereafter arise out of or relate in any manner whatsoever,
directly or indirectly, to the allegations, facts, events, transactions,
occurrences, acts, statements, representations, misrepresentations, omissions,
or any other matter, thing or cause whatsoever, or any series thereof, involved,
embraced, set forth, referenced in, or otherwise referred or related to, in any
way, directly or indirectly, the Consolidated Action, any of the Complaints, the
Merger Agreement, the Original Proposal, the Merger Proposal, the Merger, any
agreements or disclosures relating to the Original Proposal, the Merger
Proposal, the Merger Agreement or the Merger, including but not limited to the
Proxy Statement, or the Stipulation (as defined in the Stipulation), excepting
only such rights created under the Stipulation (collectively, the "Settled
Claims") against any of the defendants in the Consolidated Action, their
families, parent entities, affiliates, associates or subsidiaries, or each of
their present or former officers, directors, stockholders, agents, employees,
attorneys, representatives, advisors, investment advisors, investment bankers,
commercial bankers, financial advisors, trustees, general and limited partners
and partnerships, heirs, executors, personal representatives, estates,
administrators, predecessors, successors, assigns, and any other person or
entity acting on behalf of any defendant (collectively, the "Released Persons")
are hereby fully, finally, and forever compromised, extinguished, dismissed,
discharged and released with prejudice; provided however, that the Settled
Claims shall not include an action to enforce compliance with the terms of the
Settlement or to prosecute properly perfected appraisal rights relating to the
Merger pursuant to 8 Del. C. sec. 262.
5. The plaintiffs, Class Counsel and all members of the Class, either
directly, individually, derivatively, representatively or in any other capacity,
are permanently barred and enjoined from instigating, instituting, commencing,
asserting, prosecuting, continuing or participating in any way in the
maintenance of any of the Settled Claims in any court or tribunal of this or any
other jurisdiction against any Released Person.
6. The attorneys for the plaintiffs and the Class are awarded attorneys'
fees and reimbursement of expenses in the aggregate amount of $ , which
sum the Court finds to be fair and reasonable, to be paid exclusively by
Customedix for the benefit of the Individual Defendants in accordance with the
terms of the Stipulation.
7. Without affecting the finality of this Order and Final Judgment in any
way, this Court reserves jurisdiction of all matters relating to the
administration and consummation of the Settlement.
-----------------------------------
Vice Chancellor
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