<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
----------------
SYSTEMED INC.
(NAME OF SUBJECT COMPANY)
S ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
MERCK-MEDCO MANAGED CARE, INC.
AND AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
MERCK & CO., INC.
(BIDDERS)
COMMON STOCK, $0.001 PAR VALUE
(TITLE OF CLASS OF SECURITIES)
871 8531
(CUSIP NUMBER OF CLASS OF SECURITIES)
BERT WEINSTEIN, ESQ.
100 SUMMIT AVENUE
MONTVALE, NEW JERSEY 07645
(201) 358-5400
----------------
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)
Copies to:
GARY COOPERSTEIN, ESQ.
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
ONE NEW YORK PLAZA
NEW YORK, NEW YORK 10004-1980
(212) 859-8128
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CALCULATION OF FILING FEE
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<TABLE>
<CAPTION>
TRANSACTION VALUATION* AMOUNT OF FILING FEE
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<S> <C>
$66,974,319 $13,394.86
</TABLE>
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* For the purpose of calculating the fee only, this amount assumes the
purchase of 22,324,773 shares of Common Stock of Systemed Inc. at $3.00 per
share. Such number of shares includes all outstanding shares as of April 17,
1996.
[_Check]box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
AMOUNT PREVIOUSLY PAID: FILING PARTY:
FORM OR REGISTRATION NO.: DATE FILED:
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- -------------------------------------------------------------------------------
<PAGE>
This Statement relates to a tender offer by S Acquisition Corp., a Delaware
corporation (the "Offeror"), and a wholly owned subsidiary of Merck-Medco
Managed Care, Inc., a Delaware corporation ("Medco"), and an indirect wholly
owned subsidiary of Merck & Co., Inc., a New Jersey corporation ("Merck",
together with Medco, the "Parent"), to purchase all outstanding shares of
common stock, par value $0.001 per share (the "Shares"), of Systemed Inc., a
Delaware corporation (the "Company"), at a purchase price of $3.00 per Share,
net to the seller in cash, without interest, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated June 11, 1996 (the "Offer
to Purchase"), and in the related Letter of Transmittal (which together
constitute the "Offer"), copies of which are filed as Exhibits (a)(1) and
(a)(2) hereto, respectively, and which are incorporated herein by reference.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Systemed Inc. The address of the
principal executive offices of the Company is set forth in Section 8 ("Certain
Information Concerning the Company") of the Offer to Purchase and is
incorporated herein by reference.
(b) The exact title of the class of equity securities being sought in the
Offer is the common stock, par value $0.001 per share, of the Company. The
information set forth in the Introduction to the Offer to Purchase is
incorporated herein by reference.
(c) The information set forth in Section 6 ("Price Range of Shares;
Dividends") of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a) through (d), (g) The information set forth in the Introduction and
Section 9 ("Certain Information Concerning the Parent and the Offeror") of the
Offer to Purchase, and in Annex I thereto, is incorporated herein by
reference.
(e) and (f) None of the Offeror, Medco or Merck, nor, to the best of their
knowledge, any of the persons listed in Annex I of the Offer to Purchase, has
during the last five years (i) been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) been a party to
a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any
violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) None.
(b) The information set forth in the Introduction and Section 11
("Background of the Offer; Past Contacts, Transactions or Negotiations with
the Company") and Section 8 ("Certain Information Concerning the Company") of
the Offer to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in Section 10 ("Source and Amount of Funds")
of the Offer to Purchase is incorporated herein by reference.
(b) Not applicable.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a) through (e) The information set forth in the Introduction, Section 11
("Background of the Offer; Past Contacts, Transactions or Negotiations with
the Company") and Section 12 ("Purpose of the Offer and the
2
<PAGE>
Merger; Plans for the Company") and Section 13 ("The Merger Agreement") of the
Offer to Purchase is incorporated herein by reference. Except as set forth in
Sections 12 and 13 of the Offer to Purchase, neither the Parent nor the
Offeror have any present plans or proposals that would result in an
extraordinary corporate transaction, such as a merger, reorganization,
liquidation or sale or transfer of a material amount of assets involving the
Company, or any other material changes in the Company's capitalization,
dividend policy, corporate structure or business or composition of its
management or personnel.
(f) and (g) The information set forth in Section 7 ("Certain Effects of the
Transaction") of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) and (b) The information set forth in the Introduction, Section 9
("Certain Information Concerning the Parent and the Offeror") and Section 13
("The Merger Agreement") of the Offer to Purchase is incorporated herein by
reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction and Section 11 ("Background of
the Offer; Past Contacts, Transactions or Negotiations with the Company") of
the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and in Section 17 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9 ("Certain Information Concerning the
Parent and the Offeror") of the Offer to Purchase is incorporated herein by
reference.
The incorporation by reference herein of the above-mentioned financial
information does not constitute an admission that such information is material
to a decision by a security holder of the Company as whether to sell, tender
or hold Shares being sought in the Offer.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in Section 11 ("Background of the Offer; Past
Contacts, Transactions or Negotiations with the Company") and Section 12
("Purpose of the Offer and the Merger; Plans for the Company") of the Offer to
Purchase is incorporated herein by reference.
(b) and (c) The information set forth in Section 16 ("Certain Regulatory and
Legal Matters") of the Offer to Purchase is incorporated herein by reference.
(d) The information set forth in Section 7 ("Certain Effects of the
Transaction") is incorporated herein by reference.
(e) None.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal is incorporated herein by reference in its entirety.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase, dated June 11, 1996.
3
<PAGE>
(a)(2) Letter of Transmittal.
(a)(3) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
(a)(4) Letter from Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees to Clients.
(a)(5) Notice of Guaranteed Delivery.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Summary Advertisement, dated June 11, 1996.
(a)(8) Press Release issued by the Parent and the Company on April 29, 1996.
(a)(9) Press Release issued by the Parent and the Company on June 11, 1996.
(a)(10) Amended and Restated Agreement and Plan of Merger, dated as of June
10, 1996, among Merck, Medco, the Offeror and the Company.
(b) None.
(c) None.
(d) None.
(e) Not applicable.
(f) None.
4
<PAGE>
SIGNATURE
AFTER DUE INQUIRY AND TO THE BEST OF ITS KNOWLEDGE AND BELIEF, EACH OF THE
UNDERSIGNED CERTIFIES THAT THE INFORMATION SET FORTH IN THIS STATEMENT IS TRUE,
COMPLETE AND CORRECT.
Dated: June 11, 1996
S Acquisition Corp.
/s/ Bert I. Weinstein
By: _________________________________
Name: Bert I. Weinstein
Title: Vice President
Merck-Medco Managed Care, Inc.
/s/ Bert I. Weinstein
By: _________________________________
Name: Bert I. Weinstein
Title: Senior Vice President and
Co-General Counsel
Merck & Co., Inc.
/s/ Mary M. McDonald
By: _________________________________
Name: Mary M. McDonald
Title: Senior Vice President and
General Counsel
5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE NO.
------- ----------- --------
<C> <S> <C>
(a)(1)-- Offer to Purchase, dated June 11, 1996.
(a)(2)-- Letter of Transmittal.
(a)(3)-- Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a)(4)-- Letter from Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees to Clients.
(a)(5)-- Notice of Guaranteed Delivery.
(a)(6)-- Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(7)-- Summary Advertisement, dated June 11, 1996.
(a)(8)-- Press Release issued by the Parent and the Company on
April 29, 1996.
(a)(9)-- Press Release issued by the Parent and the Company on
June 11, 1996.
(a)(10)-- Amended and Restated Agreement and Plan of Merger, dated
as of June 10, 1996, among Merck, Medco, the Offeror and
the Company.
(b) -- None.
(d) -- None.
(e) -- Not applicable.
(f) -- None.
</TABLE>
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
SYSTEMED INC.
AT
$3.00 NET PER SHARE
BY
S ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
MERCK-MEDCO MANAGED CARE, INC.
AND AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
MERCK & CO., INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 11:59 P.M.,
NEW YORK CITY TIME, ON TUESDAY, JULY 9, 1996,
UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (i) THERE BEING VALIDLY
TENDERED BY THE EXPIRATION DATE AND NOT WITHDRAWN THAT NUMBER OF SHARES OF
COMMON STOCK OF SYSTEMED INC. WHICH WOULD REPRESENT AT LEAST A MAJORITY OF THE
OUTSTANDING SHARES ON A FULLY DILUTED BASIS AND (ii) SATISFACTION OF CERTAIN
OTHER TERMS AND CONDITIONS. SEE SECTION 15.
THE OFFER IS BEING MADE PURSUANT TO THE AMENDED AND RESTATED AGREEMENT AND
PLAN OF MERGER DATED AS OF JUNE 10, 1996, AMONG MERCK & CO., INC., MERCK-MEDCO
MANAGED CARE, INC., S ACQUISITION CORP. AND SYSTEMED INC.
THE BOARD OF DIRECTORS OF SYSTEMED INC. HAS UNANIMOUSLY APPROVED THE OFFER,
THE MERGER AND THE MERGER AGREEMENT, HAS DETERMINED THAT THE TERMS OF EACH OF
THE OFFER AND THE MERGER AND THE TERMS OF THE MERGER AGREEMENT ARE FAIR TO AND
IN THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT THE
COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES IN THE OFFER.
IMPORTANT
Any stockholder desiring to tender Shares of common stock should either (i)
complete and sign the Letter of Transmittal or a facsimile thereof in
accordance with the instructions in the Letter of Transmittal and deliver the
Letter of Transmittal with the Shares and all other required documents to the
Depositary, or follow the procedure for book-entry transfer set forth in
Section 3 or (ii) request his broker, dealer, commercial bank, trust company
or other nominee to effect the transaction for him. A stockholder having
Shares registered in the name of a broker, dealer, commercial bank, trust
company or other nominee must contact such person if he desires to tender his
Shares.
Any stockholder who desires to tender Shares and cannot deliver such Shares
and all other required documents to the Depositary by the expiration of the
Offer must tender such Shares pursuant to the guaranteed delivery procedure
set forth in Section 3.
Questions and requests for assistance or additional copies of this Offer to
Purchase and the Letter of Transmittal may be directed to the Information
Agent at its address and telephone number set forth on the back cover of this
Offer to Purchase.
----------------
June 11, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION............................................................. 1
1.TERMS OF THE OFFER.................................................... 2
2.ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES......................... 4
3.PROCEDURE FOR TENDERING SHARES........................................ 4
4.WITHDRAWAL RIGHTS..................................................... 6
5.CERTAIN FEDERAL INCOME TAX CONSEQUENCES............................... 7
6.PRICE RANGE OF SHARES; DIVIDENDS...................................... 8
7.CERTAIN EFFECT OF THE TRANSACTION..................................... 8
8.CERTAIN INFORMATION CONCERNING THE COMPANY............................ 9
9.CERTAIN INFORMATION CONCERNING THE PARENT AND THE OFFEROR............. 11
10.SOURCE AND AMOUNT OF FUNDS............................................ 12
11.BACKGROUND OF THE OFFER; PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS
WITH THE COMPANY.................................................... 12
12.PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY............ 13
13.THE MERGER AGREEMENT.................................................. 15
14.DIVIDENDS AND DISTRIBUTIONS........................................... 22
15.CERTAIN CONDITIONS OF THE OFFER....................................... 23
16.CERTAIN REGULATORY AND LEGAL MATTERS.................................. 24
17.FEES AND EXPENSES..................................................... 26
18.MISCELLANEOUS......................................................... 26
ANNEX 1. CERTAIN INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE
OFFICERS OF MERCK, MEDCO AND THE OFFEROR......................... A-1
</TABLE>
<PAGE>
TO THE HOLDERS OF COMMON STOCK OF
SYSTEMED INC.
INTRODUCTION
S Acquisition Corp., a Delaware corporation (the "Offeror"), and a wholly
owned subsidiary of Merck-Medco Managed Care, Inc., a Delaware corporation
("Medco"), and an indirect wholly owned subsidiary of Merck & Co., Inc., a New
Jersey corporation ("Merck," together with Medco, the "Parent"), hereby offers
to purchase all outstanding shares of Common Stock, par value $0.001 per share
(the "Shares"), of Systemed Inc., a Delaware corporation (the "Company"), at a
purchase price of $3.00 per Share, net to the seller in cash, without
interest, upon the terms and subject to the conditions set forth in this Offer
to Purchase and in the related Letter of Transmittal (which together
constitute the "Offer"). Tendering holders of Shares will not be obligated to
pay brokerage fees or commissions or, except as set forth in the Letter of
Transmittal, transfer taxes on the purchase of Shares by the Offeror pursuant
to the Offer. The Offeror will pay all charges and expenses of Norwest Bank
Minnesota, N.A. (the "Depositary") and D.F. King & Co., Inc. (the "Information
Agent"), in connection with the Offer.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER,
THE MERGER (AS HEREINAFTER DEFINED) AND THE MERGER AGREEMENT (AS HEREINAFTER
DEFINED), HAS DETERMINED THAT THE TERMS OF EACH OF THE OFFER, THE MERGER AND
THE MERGER AGREEMENT ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY'S
STOCKHOLDERS, AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER
AND TENDER THEIR SHARES IN THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE HAVING BEEN VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES WHICH WOULD REPRESENT AT LEAST A MAJORITY OF THE SHARES OUTSTANDING ON
A FULLY DILUTED BASIS (THE "MINIMUM CONDITION"). THE OFFER IS ALSO SUBJECT TO
OTHER TERMS AND CONDITIONS. SEE SECTION 15.
MORGAN, STANLEY & CO. INCORPORATED, THE COMPANY'S FINANCIAL ADVISOR, HAS
DELIVERED TO THE COMPANY'S BOARD OF DIRECTORS ITS WRITTEN OPINION THAT THE
CONSIDERATION TO BE RECEIVED BY THE STOCKHOLDERS OF THE COMPANY PURSUANT TO
THE OFFER AND THE MERGER IS FAIR TO SUCH STOCKHOLDERS FROM A FINANCIAL POINT
OF VIEW. A COPY OF SUCH OPINION IS CONTAINED IN THE COMPANY'S STATEMENT ON
SCHEDULE 14D-9 WHICH IS BEING DISTRIBUTED TO THE COMPANY'S STOCKHOLDERS.
The Offer is being made pursuant to the Amended and Restated Agreement and
Plan of Merger, dated as of June 10, 1996 (the "Merger Agreement"), among
Merck, Medco, the Offeror and the Company. The Merger Agreement provides that,
among other things, as soon as practicable after the purchase of Shares
pursuant to the Offer and the satisfaction of the other conditions set forth
in the Merger Agreement and in accordance with the relevant provisions of the
General Corporation Law of the State of Delaware ("DGCL"), the Offeror will be
merged with and into the Company (the "Merger"). See Section 12. Following
consummation of the Merger, the Company will continue as the surviving
corporation (the "Surviving Corporation") and will be a wholly owned
subsidiary of Medco and an indirect wholly owned subsidiary of Merck. At the
effective time of the Merger (the "Effective Time"), each issued and
outstanding Share (other than Shares owned by the Company as treasury stock,
Shares owned by any subsidiary of the Company, Shares owned by the Parent or
the Offeror or any subsidiary thereof, or Shares with respect to which
appraisal rights are properly exercised under Delaware law ("Dissenting
Shares")), will be converted into and represent the right to receive $3.00 (or
any higher price that may be paid for each Share pursuant to the Offer) in
cash, without interest thereon (the "Offer Price"). See Section 5 for a
description of certain tax consequences of the Offer and the Merger.
<PAGE>
The Company has advised the Offeror that as of April 17, 1996, there were
(a) 22,324,773 Shares issued and outstanding and (b) 5,264,301 shares reserved
for issuance in connection with (i) the Company's employee stock options
("Stock Options"), (ii) the Company's 8% Convertible Preferred Stock, par
value $0.001 per share (the "Convertible Preferred Stock"), (iii) the
Company's 10% Senior Secured Convertible Notes due 2002 (the "Convertible
Notes") and (iv) the warrants to purchase Shares (the "Warrants"). As of the
date hereof, neither the Offeror nor the Parent beneficially owns any Shares.
If the Offeror acquires at least 13,794,538 Shares in the Offer or otherwise,
it will control a majority of the outstanding Shares on a fully diluted basis
and will be able to approve the Merger without the vote of any other
stockholder. In the event the Offeror acquires 90% or more of the outstanding
Shares through the Offer or otherwise, and redeems or defeases the Convertible
Preferred Stock, the Offeror and the Parent would be able to effect the Merger
pursuant to the short form merger provisions of the DGCL, without prior notice
to, or any action by, any other stockholder of the Company.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any extension or
amendment), the Offeror will accept for payment and pay for all Shares validly
tendered prior to the Expiration Date and not theretofore withdrawn in
accordance with Section 4. The term "Expiration Date" means 11:59 p.m., New
York City time, on Tuesday, July 9, 1996, unless the Offeror shall have
extended the period of time for which the Offer is open, in which event the
term "Expiration Date" shall mean the latest time and date at which the Offer,
as so extended by the Offeror, shall expire.
If the Offeror shall decide, in its sole discretion, to increase the
consideration offered in the Offer to holders of Shares and if, at the time
that notice of such increase is first published, sent or given to holders of
Shares in the manner specified below, the Offer is scheduled to expire at any
time earlier than the expiration of a period ending on the tenth business day
from, and including, the date that such notice is first so published, sent or
given, then the Offer will be extended until the expiration of such period of
ten business days. For purposes of the Offer, a "business day" means any day
other than a Saturday, Sunday or a federal holiday, and consists of the time
period from 12:01 a.m. through 12:00 Midnight, New York City time.
THE OFFER IS CONDITIONED UPON SATISFACTION OF THE MINIMUM CONDITION. SEE
SECTION 13. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS. SEE
SECTION 15. The Offeror reserves the right (but shall not be obligated), in
accordance with applicable rules and regulations of the United States
Securities and Exchange Commission (the "Commission"), subject to the
limitations set forth in the Merger Agreement and described below, to waive or
reduce the Minimum Condition or to waive any other condition of the Offer. If
the Minimum Condition or any of the other conditions set forth in Section 15
have not been satisfied by 11:59 p.m., New York City time, on Tuesday, July 9,
1996 (or any other time then set as the Expiration Date), the Offeror may,
subject to the terms of the Merger Agreement as described below, elect to (1)
extend the Offer and, subject to applicable withdrawal rights, retain all
tendered Shares until the expiration of the Offer, as extended, (2) subject to
complying with applicable rules and regulations of the Commission, accept for
payment all Shares so tendered and not extend the Offer or (3) terminate the
Offer and not accept for payment any Shares and return all tendered Shares to
tendering stockholders. Under the terms of the Merger Agreement, the Offeror
may not (except as described in the next sentence), without prior written
consent of the Company, decrease the price per Share to be paid pursuant to
the Offer, change the form of consideration payable in the Offer, decrease the
number of Shares sought pursuant to the Offer, change or impose additional
conditions to the Offer or otherwise amend the Offer in any manner adverse to
the Company's stockholders. Notwithstanding the foregoing, the Offeror may,
without the consent of the Company, extend the Offer (i) if, at the then
scheduled Expiration Date, any of the conditions to the Offeror's obligation
to accept for payment and pay for Shares shall not be satisfied or waived,
until such time as such conditions are satisfied or waived; (ii) for an
aggregate period of not more than ten business days
2
<PAGE>
beyond the initial Expiration Date if all conditions have been satisfied but
less than 90% of the outstanding Shares have been validly tendered and not
withdrawn (not including Shares covered by notices of guaranteed delivery);
and (iii) for any period required by any rule, regulation, interpretation or
position of the Commission or the staff applicable to the Offer. Assuming the
prior satisfaction or waiver of the conditions of the Offer and subject to
clauses (ii) and (iii) of the preceding sentence, the Offeror shall, and
Parent shall cause the Offeror to, accept for payment and pay for Shares
validly tendered and not withdrawn pursuant to the Offer as soon as legally
permitted after the commencement thereof.
Subject to the limitations set forth in the Merger Agreement and described
above, the Offeror reserves the right (but will not be obligated), at any time
or from time to time in its sole discretion, to extend the period during which
the Offer is open by giving oral or written notice of such extension to the
Depositary and by making a public announcement of such extension. There can be
no assurance that the Offeror will exercise its right to extend the Offer.
Subject to the applicable rules and regulations of the Commission and
subject to the limitations set forth in the Merger Agreement, the Offeror also
expressly reserves the right, at any time and from time to time, in its sole
discretion, (i) to delay payment for any Shares regardless of whether such
Shares were theretofore accepted for payment, or to terminate the Offer and
not to accept for payment or pay for any Shares not theretofore accepted for
payment or paid for, upon the occurrence of any of the conditions set forth in
Section 15, by giving oral or written notice of such delay or termination to
the Depositary and (ii) at any time or from time to time, to amend the Offer
in any respect. The Offeror's right to delay payment for any Shares or not to
pay for any Shares theretofore accepted for payment is subject to the
applicable rules and regulations of the Commission, including Rule 14e-1(c) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), relating
to the Offeror's obligation to pay for or return tendered Shares promptly
after the termination or withdrawal of the Offer.
Any extension of the period during which the Offer is open, delay in
acceptance for payment or payment, termination or amendment of the Offer will
be followed, as promptly as practicable, by public announcement thereof, such
announcement in the case of an extension to be issued not later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date in accordance with the public announcement
requirements of Rules 14d-4(c) and 14e-1(d) under the Exchange Act. Without
limiting the obligation of the Offeror under such rule or the manner in which
the Offeror may choose to make any public announcement, the Offeror currently
intends to make announcements by issuing a press release to the Dow Jones News
Service and making any appropriate filing with the Commission.
If the Offeror makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer (including a waiver of the Minimum Condition), the Offeror will
disseminate additional tender offer materials and extend the Offer if and to
the extent required by Rules 14d-4(c), 14d-6(d) and 14(e)-1 under the Exchange
Act or otherwise. The minimum period during which a tender offer must remain
open following material changes in the terms of the offer or the information
concerning the offer, other than a change in price or a change in percentage
of securities sought, will depend upon the facts and circumstances, including
the relative materiality of the terms or information changes. With respect to
a change in price or a change in percentage of securities sought, a minimum
ten business day period is generally required to allow for adequate
dissemination to stockholders and investor response.
The Company has provided the Offeror with the Company's list of stockholders
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the Letter of Transmittal will
be mailed to record holders of the Shares and will be furnished to brokers,
dealers, commercial banks, trust companies and similar persons whose names, or
the names of whose nominees, appear on the list of stockholders or, if
applicable, who are listed as participants in a clearing agency's security
position listing for subsequent transmittal to beneficial owners of Shares.
3
<PAGE>
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Offeror will accept for payment and will pay for, all
Shares validly tendered prior to the Expiration Date and not theretofore
withdrawn in accordance with Section 4 promptly after the later to occur of
(a) the Expiration Date and (b) subject to compliance with Rule 14e-1(c) under
the Exchange Act, the satisfaction or waiver of the conditions set forth in
Section 15. Subject to compliance with Rule 14e-1(c) under the Exchange Act,
the Offeror expressly reserves the right to delay payment for Shares in order
to comply in whole or in part with any applicable law. See Sections 1 and 16.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) certificates
for such Shares or timely confirmation (a "Book-Entry Confirmation") of a
book-entry transfer of such Shares into the Depositary's account at The
Depository Trust Company or the Philadelphia Depository Trust Company
(collectively, the "Book-Entry Transfer Facilities"), pursuant to the
procedures set forth in Section 3, (ii) a properly completed and duly executed
Letter of Transmittal (or a manually signed facsimile thereof) with all
required signature guarantees or, in the case of a book-entry transfer, an
Agent's Message (as defined below) and (iii) any other documents required by
the Letter of Transmittal.
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Offeror may enforce such agreement against the participant.
For purposes of the Offer, the Offeror will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not withdrawn as,
if and when the Offeror gives oral or written notice to the Depositary of the
Offeror's acceptance of such Shares for payment. In all cases, payment for
Shares purchased pursuant to the Offer will be made by deposit of the purchase
price with the Depositary, which will act as agent for tendering stockholders
for the purpose of receiving payment from the Offeror and transmitting such
payment to tendering stockholders. If, for any reason whatsoever, acceptance
for payment of any Shares tendered pursuant to the Offer is delayed, or the
Offeror is unable to accept for payment Shares tendered pursuant to the Offer,
then, without prejudice to the Offeror's rights under Section 1, the
Depositary may, nevertheless, on behalf of the Offeror, retain tendered
Shares, and such Shares may not be withdrawn, except to the extent that the
tendering stockholders are entitled to withdrawal rights as described in
Section 4 below and as otherwise required by Rule 14e-1(c) under the Exchange
Act. Under no circumstances will interest be paid by the Offeror because of
any delay in making such payment.
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, or if certificates are submitted
for more Shares than are tendered, certificates for such unpurchased or
untendered Shares will be returned, without expense to the tendering
stockholder (or, in the case of Shares delivered by book-entry transfer to a
Book-Entry Transfer Facility, such Shares will be credited to an account
maintained within such Book-Entry Transfer Facility), as promptly as
practicable after the expiration, termination or withdrawal of the Offer.
If, prior to the Expiration Date, the Offeror increases the price being paid
for Shares accepted for payment pursuant to the Offer, such increased
consideration will be paid to all stockholders whose Shares are purchased
pursuant to the Offer.
3. PROCEDURE FOR TENDERING SHARES.
Valid Tenders. For Shares to be validly tendered pursuant to the Offer, a
properly completed and duly executed Letter of Transmittal (or a manually
signed facsimile thereof), with any required signature guarantees, or, in the
case of a book-entry transfer, an Agent's Message, and any other required
documents, must be received by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase prior to the
4
<PAGE>
Expiration Date, or the tendering stockholder must comply with the guaranteed
delivery procedure set forth below. In addition, either (i) certificates
representing such Shares must be received by the Depositary or such Shares
must be tendered pursuant to the procedure for book-entry transfer set forth
below, and a Book-Entry Confirmation must be received by the Depositary, in
each case prior to the Expiration Date or (ii) the guaranteed delivery
procedure set forth below must be complied with. No alternative, conditional
or contingent tenders will be accepted. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY
TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S
PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Book-Entry Transfer. The Depositary will make a request to establish an
account with respect to the Shares at each Book-Entry Transfer Facility for
purposes of the Offer within two business days after the date of this Offer to
Purchase. Any financial institution that is a participant in a Book-Entry
Transfer Facility's system may make book-entry delivery of Shares by causing a
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at a Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedures for transfer. Although delivery of Shares may
be effected through book-entry at a Book-Entry Transfer Facility prior to the
Expiration Date, (i) the Letter of Transmittal (or a manually signed facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message in connection with a book-entry transfer,
and any other required documents, must, in any case, be transmitted to and
received by the Depositary at one of its addresses set forth on the back cover
of this Offer to Purchase or (ii) the guaranteed delivery procedures described
below must be complied with.
Signature Guarantee. Signatures on the Letter of Transmittal must be
guaranteed by a member in good standing of the Securities Transfer Agents
Medallion Program, or by any other bank, broker, dealer, credit union, savings
association or other entity which is an "eligible guarantor institution," as
such term is defined in Rule 17Ad-15 under the Exchange Act (each of the
foregoing being referred to as an "Eligible Institution" and, collectively, as
"Eligible Institutions"), unless the Shares tendered thereby are tendered (i)
by a registered holder of Shares who has not completed either the box labeled
"Special Delivery Instructions" or the box labeled "Special Payment
Instructions" on the Letter of Transmittal or (ii) for the account of any
Eligible Institution. If the certificates evidencing Shares are registered in
the name of a person or persons other than the signer of the Letter of
Transmittal, or if payment is to be made, or delivered to, or certificates for
unpurchased Shares are to be issued or returned to, a person other than the
registered owner or owners, then the tendered certificates must be endorsed or
accompanied by duly executed stock powers, in either case signed exactly as
the name or names of the registered owner or owners appear on the
certificates, with the signatures on the certificates or stock powers
guaranteed by an Eligible Institution as provided in the Letter of
Transmittal. See Instructions 1 and 5 to the Letter of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates for Shares are not immediately
available or time will not permit all required documents to reach the
Depositary prior to the Expiration Date or the procedure for book-entry
transfer cannot be completed on a timely basis, such Shares may nevertheless
be tendered if all of the following guaranteed delivery procedures are duly
complied with:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Offeror herewith, is
received by the Depositary, as provided below, prior to the Expiration
Date; and
(iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation), together with a properly completed
and duly executed Letter of Transmittal (or a manually signed facsimile
thereof), and any required signature guarantees, or, in the case of a book-
entry transfer, an Agent's Message, and any other documents required by the
Letter of Transmittal are received by the Depositary within three
NASDAQ/National Market System trading days after the date of such Notice of
Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, telex, facsimile transmission or mail to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in the
Notice of Guaranteed Delivery.
5
<PAGE>
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY
IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED,
IS RECOMMENDED.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (i) certificates for such Shares or a Book-Entry
Confirmation, (ii) a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile thereof), with all required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message and (iii) any other documents required by the Letter of Transmittal.
BACKUP FEDERAL INCOME TAX WITHHOLDING. TO PREVENT BACKUP FEDERAL INCOME TAX
WITHHOLDING WITH RESPECT TO PAYMENT OF THE PURCHASE PRICE OF SHARES PURCHASED
PURSUANT TO THE OFFER, EACH STOCKHOLDER MUST PROVIDE THE DEPOSITARY WITH HIS
CORRECT TAXPAYER IDENTIFICATION NUMBER ("TIN") AND CERTIFY THAT HE IS NOT
SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE
FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL. SEE INSTRUCTION 8 SET FORTH IN
THE LETTER OF TRANSMITTAL.
Determination of Validity. All questions as to the form of documents and the
validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Shares will be determined by the Offeror, in its sole
discretion, and its determination will be final and binding on all parties.
The Offeror reserves the absolute right to reject any or all tenders of any
Shares that are determined by it not to be in proper form or the acceptance of
or payment for which may, in the opinion of the Offeror, be unlawful. The
Offeror also reserves the absolute right to waive any of the conditions of the
Offer, subject to the limitations set forth in the Merger Agreement, or any
defect or irregularity in the tender of any Shares. The Offeror's
interpretation of the terms and conditions of the Offer (including the Letter
of Transmittal and the Instructions to the Letter of Transmittal) will be
final and binding on all parties. No tender of Shares will be deemed to have
been validly made until all defects and irregularities have been cured or
waived. None of the Offeror, the Parent, the Depositary, the Information Agent
or any other person will be under any duty to give notification of any defects
or irregularities in tenders or incur any liability for failure to give any
such notification.
Other Requirements. By executing the Letter of Transmittal as set forth
above, a tendering stockholder irrevocably appoints designees of the Offeror
as such stockholder's proxies, each with full power of substitution, in the
manner set forth in the Letter of Transmittal, to the full extent of such
stockholder's right with respect to the Shares tendered by such stockholder
and accepted for payment by the Offeror (and any and all other Shares or other
securities or rights issued or issuable in respect of such Shares on or after
June 10, 1996). All such proxies shall be considered coupled with an interest
in the tendered Shares. This appointment is effective when, and only to the
extent that, the Offeror accepts for payment the Shares deposited with the
Depositary. Upon acceptance for payment, all prior proxies given by the
stockholder with respect to such Shares or other securities or rights will,
without further action, be revoked and no subsequent proxies may be given or
written consent executed (and, if given or executed, will not be deemed
effective). The designees of the Offeror will, with respect to the Shares and
other securities or rights, be empowered to exercise all voting and other
rights of such stockholder as they in their sole judgment deem proper in
respect of any annual or special meeting of the Company's stockholders, or any
adjournment or postponement thereof. The Offeror reserves the right to require
that, in order for Shares to be deemed validly tendered, immediately upon the
Offeror's payment for such Shares, the Offeror must be able to exercise full
voting and other rights with respect to such Shares and the other securities
or rights issued or issuable in respect of such Shares, including voting at
any meeting of stockholders (whether annual or special or whether or not
adjourned) in respect of such Shares.
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, tenders of Shares made
pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer
may be withdrawn at any time prior to the Expiration Date and, unless
theretofore accepted for payment pursuant to the Offer, may also be withdrawn
at any time after Friday,
6
<PAGE>
August 9, 1996. If purchase of or payment for Shares is delayed for any reason
or if the Offeror is unable to purchase or pay for Shares for any reason,
then, without prejudice to the Offeror's rights under the Offer, tendered
Shares may be retained by the Depositary on behalf of the Offeror and may not
be withdrawn except to the extent that tendering stockholders are entitled to
withdrawal rights as set forth in this Section 4, subject to Rule 14e-1(c)
under the Exchange Act, which provides that no person who makes a tender offer
shall fail to pay the consideration offered or return the securities deposited
by or on behalf of security holders promptly after the termination or
withdrawal of the Offer.
For a withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase.
Any notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and the name in
which the certificates representing such Shares are registered, if different
from that of the person who tendered the Shares. If certificates for Shares to
be withdrawn have been delivered or otherwise identified to the Depositary,
then, prior to the physical release of such certificates, the serial numbers
shown on such certificates must be submitted to the Depositary and, unless
such Shares have been tendered by an Eligible Institution, the signatures on
the notice of withdrawal must be guaranteed by an Eligible Institution. If
Shares have been tendered pursuant to the procedure for book-entry transfer
set forth in Section 3, any notice of withdrawal must also specify the name
and number of the account at the applicable Book-Entry Transfer Facility to be
credited with the withdrawn Shares. All questions as to the form and validity
(including time of receipt) of notices of withdrawal will be determined by the
Offeror, in its sole discretion, and its determination will be final and
binding on all parties. None of the Offeror, the Parent, the Depositary, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification.
Any Shares properly withdrawn will be deemed not validly tendered for
purposes of the Offer, but may be re-tendered at any subsequent time prior to
the Expiration Date by following any of the procedures described in Section 3.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The following is a summary of the principal federal income tax consequences
of the Offer and the Merger to holders whose Shares are purchased pursuant to
the Offer or whose Shares are converted to cash in the Merger (including
pursuant to the exercise of appraisal rights). The discussion applies only to
holders of Shares in whose hands Shares are capital assets, and may not apply
to Shares received pursuant to the exercise of employee stock options or
otherwise as compensation, or to holders of Shares who are in special tax
situations (such as insurance companies, tax-exempt organizations or non-U.S.
persons).
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW ARE INCLUDED FOR GENERAL
INFORMATIONAL PURPOSES ONLY AND ARE BASED UPON CURRENT LAW. BECAUSE INDIVIDUAL
CIRCUMSTANCES MAY DIFFER, EACH HOLDER OF SHARES SHOULD CONSULT SUCH HOLDER'S
OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED BELOW TO
SUCH STOCKHOLDER AND THE PARTICULAR TAX EFFECTS OF THE OFFER AND THE MERGER,
INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER INCOME TAX
LAWS.
The receipt of cash for Shares pursuant to the Offer or the Merger
(including pursuant to the exercise of appraisal rights) will be a taxable
transaction for federal income tax purposes (and also may be a taxable
transaction under applicable state, local and other income tax laws). In
general, for federal income tax purposes, a holder of Shares will recognize
gain or loss equal to the difference between his adjusted tax basis in the
Shares sold pursuant to the Offer or converted to cash in the Merger and the
amount of cash received therefor. Gain or loss must be determined separately
for each block of Shares (i.e., Shares acquired at the same cost in a single
transaction) sold pursuant to the Offer or converted to cash in the Merger.
Such gain or loss will be capital gain or loss (other than, with respect to
the exercise of appraisal rights, amounts, if any, which are or are deemed to
be interest for federal income tax purposes, which amounts will be taxed as
ordinary income) and will be long-term gain or loss if, on the date of sale
(or, if applicable, the date of the Merger), the Shares were held for more
than one year.
7
<PAGE>
Payments in connection with the Offer or the Merger may be subject to "backup
withholding" at a rate of 31%. Backup withholding generally applies if the
stockholder (a) fails to furnish his social security number or TIN, (b)
furnishes an incorrect TIN, (c) fails to properly include a reportable interest
or dividend payment on his federal income tax return, or (d) under certain
circumstances, fails to provide a certified statement, signed under penalties
of perjury, that the TIN provided is his correct number and that he is not
subject to backup withholding. Backup withholding is not an additional tax but
merely an advance payment, which may be refunded to the extent it results in an
overpayment of tax. Certain persons generally are entitled to exemption from
backup withholding, including corporations and financial institutions. Certain
penalties apply for failure to furnish correct information and for failure to
include reportable payments in income. Each stockholder should consult with his
own tax advisor as to his qualification for exemption from backup withholding
and the procedure for obtaining such exemption. Tendering stockholders may be
able to prevent backup withholding by completing the Substitute Form W-9
included in the Letter of Transmittal. See Section 3.
6. PRICE RANGE OF SHARES; DIVIDENDS.
The Shares are quoted on the NASDAQ National Market System (the "NASD") under
the symbol "SYSM." The following table sets forth for the periods indicated the
high and low sales prices per Share on the NASD based on published financial
sources.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
CALENDAR 1994:
First Quarter................................................ $6.125 $3.875
Second Quarter............................................... 6.75 4.875
Third Quarter................................................ 9.00 5.25
Fourth Quarter............................................... 9.25 5.00
CALENDAR 1995:
First Quarter................................................ $ 8.00 $ 6.00
Second Quarter............................................... 7.50 6.125
Third Quarter................................................ 7.25 5.75
Fourth Quarter............................................... 6.875 3.875
CALENDAR 1996:
First Quarter................................................ $ 5.75 $ 2.75
Second Quarter............................................... 3.625 2.50
(through June 7, 1996)
</TABLE>
On April 26, 1996, the last full day of trading prior to the public
announcement of the execution of the Merger Agreement, the closing price per
Share as reported on the NASD was $3.125. On June 10, 1996, the last full day
of trading prior to the commencement of the Offer, the closing price per Share
as reported on the NASD was $2.875.
Stockholders are urged to obtain current market quotations for the Shares.
The Company has not paid any cash dividends on the Shares.
7. CERTAIN EFFECT OF THE TRANSACTION.
The purchase of the Shares by the Offeror pursuant to the Offer will reduce
the number of Shares that might otherwise trade publicly and will reduce the
number of holders of Shares, which will adversely affect the liquidity and
market value of the remaining Shares held by stockholders other than the
Offeror. The Company has advised the Offeror that, as of May 31, 1996, there
were approximately 4,258 stockholders of record and, as of March 26, 1996,
there were approximately 7,200 beneficial owners of the Shares.
8
<PAGE>
The extent of the public market for the Shares and, according to published
guidelines of The NASDAQ Stock Market, Inc., the continued trading of the
Shares on the NASD after purchase of the Shares pursuant to the Offer, will
depend upon the number of stockholders remaining at such time, the interest in
maintaining a market in the Shares on the part of securities firms, the
possible termination of registration of the Shares under the Exchange Act and
other factors. If, as a result of the purchase of the Shares pursuant to the
Offer or otherwise, listing of the Shares on the NASD is discontinued, the
market for Shares could be adversely affected.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application by the Company to the
Commission if there are fewer than 300 record holders of Shares. It is the
intention of the Offeror to seek to cause an application for such termination
to be made as soon after consummation of the Offer as the requirements for
termination of registration of the Shares are met. If such registration were
terminated, the Company would no longer legally be required to disclose
publicly in proxy materials distributed to stockholders the information which
it now must provide under the Exchange Act or to make public disclosure of
financial and other information in annual, quarterly and other reports
required to be filed with the Commission under the Exchange Act; the
requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions would no longer be applicable to the Company; and the
officers, directors and 10% stockholders of the Company would no longer be
subject to the "short-swing" insider trading reporting and profit recovery
provisions of the Exchange Act. Furthermore, if such registration were
terminated, persons holding "restricted securities" of the Company may be
deprived of their ability to dispose of such securities under Rule 144
promulgated under the Securities Act of 1933, as amended.
If registration of the Shares is not terminated prior to the Merger, then
the Shares will cease to be quoted on the NASD and the registration of the
Shares under the Exchange Act will be terminated following the Merger. The
Shares are currently "margin securities" under the regulations of the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board"), which
has the effect, among other things, of allowing brokers to extend credit on
the collateral of the Shares. Depending upon factors similar to those
described above regarding listing and market quotations, it is possible that,
following the Offer, the Shares would no longer constitute "margin securities"
for the purposes of the margin regulations of the Federal Reserve Board and
therefore could no longer be used as collateral for loans made by brokers. If
registration of Shares under the Exchange Act were terminated, the Shares
would no longer be "margin securities".
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
The Company is a Delaware corporation with its principal executive offices
located at 970 West 190th Street, Suite 400, Torrance, California. The Company
derives substantially all of its business from activities in the pharmacy
benefits industry, through its mail service pharmacy and retail pharmacy
claims processing subsidiaries. The Company's Quarterly Report on Form 10-Q
disclosed that, during the annual renewal process used by many of the
Company's customers, the Company learned that certain accounts would not be
renewing their contracts with the Company for 1996 primarily due to
competitive pricing conditions in the pharmacy benefits management
marketplace. The effect of this is a negative impact to current and future
quarterly revenues of approximately $6 to $8 million for the current fiscal
year. Except as otherwise set forth herein, the information concerning the
Company contained in this Offer to Purchase, including financial information,
has been furnished by the Company or has been taken from or based upon
publicly available documents and records on file with the Commission and other
public sources. Although neither the Offeror nor the Parent has any knowledge
that would indicate that statements contained herein based upon such documents
are untrue, none of the Offeror, Merck or Medco assume any responsibility for
the accuracy or completeness of the information concerning the Company,
furnished by the Company, or contained in such documents and records or for
any failure by the Company to disclose events which may have occurred or may
affect the significance or accuracy of any such information but which are
unknown to the Offeror and the Parent.
Set forth below is certain summary consolidated financial data with respect
to the Company excerpted or derived from financial information contained in
the Company's Annual Report on Form 10-K for the year ended December 31, 1995
and the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31,
9
<PAGE>
1996. More comprehensive financial information is included in such reports and
other documents filed by the Company with the Commission, and the following
summary is qualified in its entirety by reference to such reports and such
other documents and all the financial information (including any related
notes) contained therein. Such reports and other documents should be available
for inspection and copies thereof should be obtainable in the manner set forth
below.
SYSTEMED INC.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
3 MONTHS
ENDED MARCH AS OF AND FOR THE
31, 1996 YEAR ENDED DECEMBER 31,
----------- -----------------------
1995 1994
----------- -----------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Net Operating Revenues................. $33,192 $ 152,384 $ 141,965
Operating income (loss)................ (2,777) 4,598 3,648
Provision for (benefit from) income
taxes................................. (284) 299 342
Net income............................. (2,558) 4,290 3,079
Net earnings (loss) per share.......... (0.12) 0.19 0.14
BALANCE SHEET DATA
Working Capital........................ $26,321 $ 27,912 $ 26,577
Total assets........................... 54,206 57,970 53,331
Long-term debt......................... 6,300 6,300 6,320
Stockholders' equity................... 37,298 39,888 33,575
</TABLE>
The Parent has received from the Company certain non-public information from
the Company. The non-public information included, among other things, certain
financial forecasts for the year 1996, which are set forth below.
FOR THE YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1996 1ST QUARTER 1996 2ND QUARTER 1996 3RD QUARTER 1996 4TH QUARTER 1996
-------- ---------------- ---------------- ---------------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Sales................... $152,082 $32,781 $33,244 $42,033 $44,024
Cost of Sales........... 129,769 28,187 28,452 36,089 37,041
Income (loss) before
Taxes.................. 2,335 (774) (88) 1,083 2,112
Net Income (loss)....... 2,101 (696) (79) 975 1,901
</TABLE>
In the preparation of the forecasts the Company's management chose not to
include several prospective accounts that could significantly improve upon the
1996 results as currently shown. For example, additional mail service revenues
from contracts with prospective customers for which the Company believed it
was in contention, could boost the revenues by another $38-$40 million in
1996. The Company has subsequently advised the Parent that it does not believe
that it will obtain the contracts required to generate a substantial portion
of these revenues. Also, further penetration of existing accounts and the
addition of new accounts not already shown as prospects in the 1996 budget
could add another $5-$7 million in revenues. None of these assumptions give
effect to the Offer, the Merger or the financing thereof or the potential
combined operations of the Parent and the Company after consummation of such
transactions.
10
<PAGE>
THE COMPANY HAS ADVISED THE OFFEROR THAT IT DOES NOT AS A MATTER OF COURSE
DISCLOSE FORECASTS AS TO FUTURE REVENUES OR EARNINGS, AND THAT THE FORECASTS
SET FORTH ABOVE WERE NOT INTENDED TO FORECAST LIKELY OR ANTICIPATED OPERATING
RESULTS, BUT INSTEAD WERE MERELY ONE SCENARIO INTENDED TO REPRESENT INTERNAL
GOALS AND ILLUSTRATE CAPITAL NEEDS AND OTHER ELEMENTS NECESSARY BASED ON A
FINANCIAL MODEL TO ACHIEVE SUCH GOALS. THE FORECASTS SET FORTH ABOVE WERE NOT
PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR COMPLIANCE WITH PUBLISHED
GUIDELINES OF THE COMMISSION OR THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC
ACCOUNTANTS FOR PROSPECTIVE FINANCIAL INFORMATION. THE FORECASTED INFORMATION
IS INCLUDED HEREIN SOLELY BECAUSE SUCH INFORMATION WAS FURNISHED TO THE PARENT
OR THE OFFEROR. ACCORDINGLY, THE INCLUSION OF THE FORECASTS IN THIS OFFER TO
PURCHASE SHOULD NOT BE REGARDED AS AN INDICATION THAT THE PARENT, THE OFFEROR,
THE COMPANY OR THEIR RESPECTIVE FINANCIAL ADVISORS OR THEIR RESPECTIVE
OFFICERS AND DIRECTORS CONSIDER SUCH INFORMATION TO BE ACCURATE OR RELIABLE,
AND NONE OF SUCH PERSONS ASSUMES ANY RESPONSIBILITY FOR THE ACCURACY THEREFOR.
SUCH FORECASTS WERE PREPARED FOR INTERNAL USE AND CAPITAL BUDGETING AND OTHER
MANAGEMENT DECISION-MAKING PURPOSES AND ARE SUBJECTIVE IN MANY RESPECTS AND
THUS SUSCEPTIBLE TO VARIOUS INTERPRETATIONS AND PERIODIC REVISION BASED UPON
ACTUAL EXPERIENCE AND BUSINESS DEVELOPMENT. IN ADDITION, BECAUSE THE ESTIMATES
AND ASSUMPTIONS UNDERLYING SUCH FORECASTS ARE INHERENTLY SUBJECT TO
SIGNIFICANT ECONOMIC AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES, WHICH
ARE DIFFICULT OR IMPOSSIBLE TO PREDICT ACCURATELY AND ARE BEYOND THE CONTROL
OF THE COMPANY AND/OR THE PARENT AND THE OFFEROR, THERE CAN BE NO ASSURANCE
THAT SUCH FORECASTS WILL BE REALIZED. ACCORDINGLY, IT IS EXPECTED THAT THERE
WILL BE DIFFERENCES BETWEEN ACTUAL AND FORECASTED RESULTS, AND ACTUAL RESULTS
MAY BE MATERIALLY HIGHER OR LOWER THAN THOSE SET FORTH ABOVE. FOR EXAMPLE, IN
THE FIRST QUARTER OF 1996, THE COMPANY HAD AN ACTUAL NET LOSS OF $2,558,000 AS
AGAINST A PROJECTED NET LOSS OF $696,000.
The Company is subject to the informational requirements of the Exchange Act
and in accordance therewith files periodic reports, proxy statements and other
information with the Commission relating to its business, financial condition
and other matters. The Company is required to disclose in such proxy
statements certain information, as of particular dates, concerning the
Company's directors and officers, their remuneration, stock options granted to
them, the principal holders of the Company's securities and any material
interests of such persons in transactions with the Company. Such reports,
proxy statements and other information may be inspected at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, New York
10048 and Citicorp Center, 500 West Madison Street (Suite 400), Chicago,
Illinois 60661. Such material should also be available for inspection at the
offices of The National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington D.C. 20006-1506.
9. CERTAIN INFORMATION CONCERNING THE PARENT AND THE OFFEROR.
The Offeror is a Delaware corporation and a wholly owned subsidiary of
Medco, a Delaware corporation which is a wholly owned subsidiary of Merck,
which is a New Jersey corporation. To date, the Offeror has not conducted any
business other than that incident to its formation, the execution and delivery
of the Merger Agreement and the commencement of the Offer.
The principal executive offices of the Offeror and the Parent are located at
P.O. Box 100, Whitehouse Station, NJ 08889-0100.
Merck is a leading research-driven pharmaceutical company that discovers,
develops, manufactures and markets a broad range of human and animal health
products and services. Merck's industry segment is the Human and Animal Health
Products and Services segment, which includes Medco.
Set forth below is certain selected historical consolidated financial
information with respect to Merck excerpted or derived from financial
information contained in Merck's Annual Report on Form 10-K for the year ended
December 31, 1995 and Merck's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1996. More comprehensive financial information is included in
such reports and other documents filed by the Parent with the Commission, and
the following summary is qualified in its entirety by reference to such
reports and such other documents and all the financial information (including
any related notes) contained therein.
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MERCK & CO., INC.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
3 MONTHS AS OF AND FOR THE
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, -------------------------
1996 1995 1994
---------- ------------ ------------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
OPERATING RESULTS
Sales.................................. $ 4,530.4 $ 16,681.1 $ 14,969.8
Earnings before income taxes........... 1,239.0 4,797.2 4,415.2
Taxes on Income........................ 375.2 1,462.0 1,418.2
Net Income............................. 863.8 3,335.2 2,997.0
Earnings per common share.............. 0.70 2.70 2.38
FINANCIAL POSITION
Total Current Assets................... $ 8,610.9 8,617.5 6,921.7
Total assets........................... 23,983.9 23,831.8 21,856.6
Long-term debt......................... 1,516.2 1,372.8 1,145.9
Stockholders' equity................... 11,663.4 11,735.7 11,139.0
</TABLE>
Merck is subject to the informational requirements of the Exchange Act and
in accordance therewith files periodic reports and other information with the
Commission relating to its business, financial condition and other matters.
Such reports and other information are available for inspection and copying at
the offices of the Commission in the same manner as set forth with respect to
the Company in Section 8.
Except as described in this Offer to Purchase, none of the Offeror, the
Parent, nor, to the best knowledge of the Offeror and the Parent, any of the
persons listed in Annex I to this Offer to Purchase owns or has any right to
acquire any Shares and none of them has effected any transaction in the Shares
during the past 60 days.
10. SOURCE AND AMOUNT OF FUNDS.
If all Shares (including Shares issuable upon the exercise of Stock Options
outstanding as of the date of this Offer to Purchase) are validly tendered and
purchased by the Offeror, the aggregate purchase price and all estimated fees
and expenses will be approximately $75 million. The Offeror will obtain all of
such funds through the Parent, which will obtain such funds from working
capital.
11. BACKGROUND OF THE OFFER; PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH
THE COMPANY.
Background of the Transaction
In mid-1995, representatives of Medco contacted Mr. Sam Westover, the
President and Chief Executive Officer of the Company, concerning a potential
acquisition of the Company by Medco. The parties engaged in preliminary
discussions and executed a confidentiality agreement in July of 1995.
Thereafter the Company provided certain information to Medco. However, the
discussions never advanced beyond the preliminary stage. In the Fall of 1995,
Medco again had discussions with the Company concerning the possible
acquisition of the Company. However, these further discussions again did not
advance beyond the preliminary stage.
In late February of 1996, Medco indicated interest in acquiring the Company
for a price in the $3.00 per Share price range. At that time, the closing
sales price of the Shares on the NASD was $5 1/8 per Share and the Company
advised Medco that it was not interested in continuing discussions at that
time. Between late February and early April, the sale price of the Shares
dropped from $5 1/8 per Share to $2 3/8 per Share.
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In early April of 1996, representatives of Medco again contacted the Company
to inquire whether the Company was interested in an acquisition proposal in
the $3.00 per share range. The Company again advised Medco that it was not
interested in continuing discussions at that time. Sometime thereafter, Medco
again contacted the Company to inquire whether the Company had reconsidered
the proposal made by Medco in early April. Thereafter, the Company provided
information to Medco, and representatives of the Company and Medco continued
to have informal contacts. Medco provided a draft Merger Agreement to the
Company on April 18, 1996, and representatives of the Company and Medco and
their respective legal and financial advisors proceeded to negotiate the terms
of the definitive Merger Agreement. Negotiations took place during late April
between the Company and its counsel and Medco and its counsel. On April 28,
1996, the initial Merger Agreement was executed.
On May 24, 1996, Merck was granted early termination of the waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act")
and Medco and the Company considered whether the transaction could be
consummated more quickly if the form of the acquisition was changed from a
merger to a tender offer. On June 10, 1996, the Amended and Restated Merger
Agreement was executed and the Offeror commenced the Offer.
12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY.
The purpose of the Offer, the Merger and the Merger Agreement is to enable
the Parent to acquire control of, and the entire equity interest in, the
Company. Upon consummation of the Merger, the Company will become a direct
wholly owned subsidiary of Medco and an indirect wholly owned subsidiary of
Merck. The Offer is being made pursuant to the Merger Agreement.
Under the DGCL and the Company's Certificate of Incorporation, the approval
of the Board of Directors of the Company, and the affirmative vote of the
holders of a majority of the outstanding Shares and Convertible Preferred
Stock, voting together as a single class are required to approve and adopt the
Merger Agreement and the transactions contemplated thereby, including the
Merger. Section 203 of the DGCL prevents certain "business combinations" with
an "interested stockholder" (generally, any person who owns or has the right
to acquire 15% or more of a corporation's outstanding voting stock) for a
period of three years following the date such person became an interested
stockholder unless, among other things, prior to the date the interested
stockholder became such the board of directors of the corporation approved
either the business combination or the transaction in which the interested
stockholder became such.
The Board of Directors of the Company has unanimously approved the Offer,
the Merger and the Merger Agreement and the transactions contemplated thereby
including for the purposes of Section 203 of the DGCL, and, unless the Merger
is consummated pursuant to the short-form merger provisions under the DGCL
described below (in which event no further corporate action is required), the
only remaining required corporate action of the Company is the approval and
adoption of the Merger Agreement and the transactions contemplated thereby by
the affirmative vote of the holders of a majority of the Shares and the
Convertible Preferred Stock, voting together as a single class.
In the Merger Agreement, the Company has agreed to take all action necessary
to convene a meeting of its stockholders as promptly as practicable after the
consummation of the Offer for the purpose of considering and taking action on
the Merger Agreement and the transactions contemplated thereby, if such action
is required by the DGCL. The Parent has agreed that, subject to applicable
law, all Shares owned by the Offeror or any other subsidiary of the Parent
will be voted in favor of the Merger Agreement and the transactions
contemplated thereby (subject to the right of the Parent and the Offeror to
vote such Shares as they may elect in the event of a Competing Transaction (as
hereinafter defined)).
Short Form Merger. Under the DGCL, if the Offeror acquires at least 90% of
the outstanding Shares and the outstanding Convertible Preferred Stock is
either redeemed or defeased, the Offeror will be able to approve the Merger
without a vote of the Company's stockholders. In such event, the Offeror
anticipates that it will take
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all necessary and appropriate action to cause the Merger to become effective
as soon as reasonably practicable after such acquisition without a meeting of
the Company's stockholders. If the conditions to the Offeror's obligation to
purchase Shares in the Offer are satisfied prior to 90% of the outstanding
Shares (excluding shares covered by Notices of Guaranteed Delivery) being
tendered into the Offer, the Offeror may, subject to certain limitations set
forth in the Merger Agreement, delay its purchase of the Shares tendered to it
in the Offer. See Section 1. If the Offeror does not otherwise acquire at
least 90% of the outstanding Shares pursuant to the Offer or otherwise, a
significantly longer period of time may be required to effect the Merger,
because a vote of the Company's stockholders would be required under the DGCL.
Pursuant to the Merger Agreement, the Company has agreed to take all action
necessary under the DGCL and its Certificate of Incorporation and Bylaws to
convene a meeting of its stockholders promptly following consummation of the
Offer to consider and vote on the Merger, if a stockholders' vote is required.
If the Offeror owns a majority of the outstanding Shares, approval of the
Merger can be obtained without the affirmative vote of any other stockholder
of the Company.
Appraisal Rights. No appraisal rights are available in connection with the
Offer. However, if the Merger is consummated, stockholders of the Company will
have certain rights under the DGCL to dissent and demand appraisal of, and to
receive payment in cash of the fair value of, their Shares. Such rights to
dissent, if the statutory procedures are complied with, could lead to a
judicial determination of the fair value of the Shares, (excluding any element
of value arising from the accomplishment or expectation of the Merger),
required to be paid in cash to such dissenting holders for their Shares. In
addition, such dissenting stockholders would be entitled to receive payment of
a fair rate of interest from the date of consummation of the Merger on the
amount determined to be the fair value of their Shares. In determining the
fair value of the Shares, a Delaware court would be required to take into
account all relevant factors. Accordingly, such determination could be based
upon considerations other than, or in addition to, the market value of the
Shares, including, among other things, asset values and earning capacity. In
Weinberger v. UOP, Inc., the Delaware Supreme Court stated, among other
things, 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 in an appraisal proceeding. Therefore, the value
so determined in any appraisal proceeding could be different from the price
being paid in the Offer.
In addition, several decisions by Delaware courts have held that, in certain
circumstances, a controlling stockholder of a company involved in a merger has
a fiduciary duty to other stockholders which requires that the merger be fair
to such other stockholders. In determining whether a merger is fair to
minority stockholders, Delaware courts have considered, among other things,
the type and amount of consideration to be received by the stockholders and
whether there was fair dealing among the parties. The Delaware Supreme Court
stated in Weinberger and Rabkin v. Philip A. Hunt Chemical Corp. that although
the remedy ordinarily available to minority stockholders in a cash-out merger
is the right to appraisal described above, a damages remedy or injunctive
relief may be available if a merger is found to be the product of procedural
unfairness, including fraud, misrepresentation or other misconduct.
Severance and Other Arrangements. Certain executive officers of the Company
have severance and other arrangements with the Company which may be triggered
by consummation of the Merger.
Under the terms of a Change of Control Severance Agreement (the "Severance
Agreement") dated September 29, 1995, between the Company and Mr. Westover in
the event of an Involuntary Termination of Mr. Westover's employment within
three years of the Merger, Mr. Westover will be entitled to receive a payment
equal to two times his Annual Base Compensation. Annual Base Compensation is
the greater of (i) annual base salary and target bonus on the date of the
Merger, and (ii) annual base salary and target bonus on the date of
Involuntary Termination. Involuntary Termination is defined to include
termination of employment by: (a) discharge by the Company for any reason
other than for cause; or (b) resignation within six months of (1) a reduction
in the annual base salary or target bonus immediately prior to the Effective
Time, (2) any significant reduction in the nature or scope of duties or
responsibilities from those applicable immediately prior to the Effective
Time, or (3) a change in the location of the principal place of employment by
more than 20 miles. As a result of the Merger, the Company would be a wholly
owned subsidiary of Medco and rather than an independent
14
<PAGE>
publicly-held company. Accordingly, there was some uncertainty as to whether
the Merger would automatically result in a significant reduction in the nature
or scope of Mr. Westover's duties, which would give him the right to terminate
his employment and receive payments under the Severance Agreement. Since it was
important to Medco to retain Mr. Westover's services for at least six months
after the Effective Time, the Company and Mr. Westover, at Medco's request,
entered into an amendment to the Severance Agreement dated as of April 27,
1996, pursuant to which Mr. Westover would no longer be entitled to receive
severance payments if he terminated his employment because of a significant
reduction in the nature or scope of his duties after the Merger, but would be
entitled to such payments if he terminated his employment for any reason within
6 months after the date which is six months after Effective Time.
The Company executed employment letters with each of Mr. Kenneth Kay, Senior
Vice President, Finance and Administration and Chief Financial Officer of the
Company, Mr. Paul Hayase, Vice President, General Counsel and Human Resources,
and Secretary of the Company and Mr. Robert Nishimura, Senior Vice President,
Chief Information Officer of Systemed Pharmacy, Inc., upon their employment
with the Company in July 1994, August 1995 and September 1995, respectively.
These letters state that, should the Company be acquired at a price less than
$8.00 per Share, each such officer will receive a payment equal to the
difference between the acquisition price per Share and $8.00 multiplied by the
number of unexercised and unexpired Stock Options initially granted to him. Mr.
Kay has also entered into a Change of Control Severance Agreement on
substantially the same terms as Mr. Westover's agreement, although Mr. Kay's
agreement has not been amended like Mr. Westover's.
Each of the directors of the Company (other than Mr. Westover, who is not
eligible to receive such options) has agreed to forego certain options he was
otherwise entitled to receive in 1996 under the Company's 1993 Nonemployee
Director Stock Option Plan. The Company has paid to each director (other than
Mr. Westover) an additional $5,000 in cash in consideration of such director's
devoting and having devoted a substantial amount of additional time as a
director in connection with the Merger and the Offer. The Company has advised
the Parent that, during the past year, the Board of Directors has held at least
fifteen additional meetings to analyze the strategic alternatives available to
the Company, including the Merger and the Offer.
Plans for the Company. Except as otherwise set forth in this Offer to
Purchase, it is expected that, initially following the Merger, the business and
operations of the Company will be continued by the Surviving Corporation
substantially as they are currently being conducted, other than with respect to
the Company's operations in Costa Rica, Peru and Panama which must be sold
prior to consummation of the Offer.
The Parent will continue to evaluate the business and operations of the
Company during the pendency of the Offer and after the consummation of the
Offer and the Merger, and will take such actions as it deems appropriate under
the circumstances then existing. The Parent intends to conduct a comprehensive
review of the Company's business, operations, capitalization and management
with a view to optimizing exploitation of the Company's potential in
conjunction with the Parent's business.
Except as indicated in this Offer to Purchase, the Parent does not have any
present plans or proposals which relate to or would result in an extraordinary
corporate transaction, such as a merger, reorganization or liquidation,
involving the Company or any of its subsidiaries, a sale or transfer of a
material amount of assets of the Company or any of its subsidiaries or any
material change in the Company's capitalization or dividend policy or any other
material changes in the Company's corporate structure or business, or the
composition of the Company's Board of Directors or management.
13. THE MERGER AGREEMENT.
The following is a summary of the material terms of the Merger Agreement,
copies of which are filed as exhibits to the Schedule 14D-1. Such summary is
not a complete description of this agreement and is qualified in its entirety
by reference to the complete text of the Merger Agreement.
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<PAGE>
The Merger Agreement
The Offer. The Offeror commenced the Offer in accordance with the terms of
the Merger Agreement. Subject to the terms and conditions of the Merger
Agreement, the Parent, the Offeror and the Company are required to use all
reasonable efforts to take all action as may be necessary, proper or
appropriate in order to promptly consummate and make effective the
transactions contemplated by the Merger Agreement.
Company Actions. Pursuant to the Merger Agreement, the Company has agreed
that on the date of the commencement of the Offer it will file with the
Commission and mail to its stockholders a Solicitation/Recommendation
Statement on Schedule 14D-9 containing the recommendation of the Board of
Directors of the Company that the Company's stockholders accept the Offer and
approve the Merger and the Merger Agreement.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions of the Merger Agreement, and in accordance with the DGCL,
the Offeror shall be merged with and into the Company at the Effective Time.
Following the Merger, the separate corporate existence of the Offeror shall
cease and the Company shall continue as the Surviving Corporation and shall
succeed to and assume all the rights and obligations of the Offeror in
accordance with the DGCL. The Certificate of Incorporation and Bylaws of the
Surviving Corporation shall be identical to the Certificate of Incorporation
and Bylaws of the Offeror. The directors of the Offeror immediately prior to
the Effective Time shall be the directors of the Surviving Corporation as of
the Effective Time and the officers of the Company immediately prior to the
Effective Time shall be the officers of the Surviving Corporation as of the
Effective Time.
Conversion of Securities. At the Effective Time, each Share issued and
outstanding immediately prior thereto shall be canceled and extinguished and
each Share (other than Shares held by the Company as treasury stock, Shares
owned by any subsidiary of the Company, Shares owned by the Parent or any
subsidiary thereof and Dissenting Shares, as defined below) shall, by virtue
of the Merger and without any action on the part of the Parent, the Offeror,
the Company or the holders of the Shares, be converted into and represent the
right to receive the Offer Price. Each share of the common stock of the
Offeror issued and outstanding immediately prior to the Effective Time shall,
at the Effective Time, by virtue of the Merger and without any action on the
part of the Offeror, the Company or the holders of Shares, be converted into
and shall thereafter evidence 23,000 (or such other number as Parent may
elect) validly issued and outstanding shares of common stock of the Surviving
Corporation.
Dissenting Shares. If required by the DGCL, Shares which are held by holders
who have properly exercised appraisal rights with respect thereto in
accordance with Section 262 of the DGCL will not be exchangeable for the right
to receive the Offer Price, and holders of such Shares will be entitled to
receive payment of the appraised value of such Shares unless such holders fail
to perfect or withdraw or lose their right to appraisal and payment under the
DGCL.
Merger Without a Meeting of Stockholders. In the event that the Offeror
shall acquire at least 90% of the outstanding Shares and redeems or defeases
the Convertible Preferred Stock, the parties agree to take all necessary and
appropriate actions to cause the Merger to become effective without a meeting
of stockholders of the Company, in accordance with Section 253 of the DGCL.
Representations and Warranties. In the Merger Agreement, the Company has
made customary representations and warranties to the Offeror, including, but
not limited to, representations and warranties relating to the Company's
organization and qualification, capitalization, its authority to enter into
the Merger Agreement and carry out the related transactions, filings made by
the Company with the Commission under the Securities Act of 1933 or the
Exchange Act (including financial statements included in the documents filed
by the Company under these acts), required consents and approvals, compliance
with applicable laws, employee benefit plans, litigation, material liabilities
of the Company and its subsidiaries, the payment of taxes, and the absence of
certain material adverse changes or events.
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The Offeror and the Parent have also made customary representations and
warranties to the Company, including, but not limited to, representations and
warranties relating to the Offeror's and the Parent's organization and
qualification, authority to enter into the Merger Agreement and required
consents and approvals.
Covenants Relating to the Conduct of Business. The Company has covenanted
that prior to the Effective Time, except as specifically disclosed to the
Parent or as contemplated by any other provision of the Merger Agreement,
unless the Parent has consented in writing thereto, the Company (and its
subsidiaries):
(a) shall operate its business to the extent commercially reasonable only
in the usual and ordinary course consistent with past practices;
(b) shall use its commercially reasonable efforts to preserve
substantially intact its business organization, maintain its rights and
franchises, retain the services of its respective officers and key
employees and maintain its relationships with its respective customers and
suppliers;
(c) shall use its commercially reasonable efforts to maintain and keep
its properties and assets in as good repair and condition as at present,
ordinary wear and tear excepted, and maintain inventories in quantities
consistent with its customary business practice;
(d) shall use its commercially reasonable efforts to keep in full force
and effect insurance and bonds comparable in amount and scope of coverage
to that currently maintained;
(e) shall not (i) increase the compensation payable to or to become
payable to any director or executive officer, except for increases in
salary or wages payable or to become payable in the ordinary course of
business and consistent with past practice; (ii) grant any severance or
termination pay (other than pursuant to the normal severance policy or
practice of the Company or its subsidiaries as in effect on the date of the
Merger Agreement or employment or severance agreements in effect on the
date of the Merger Agreement) to, or enter into any employment or severance
agreement with, any director, officer or employee, provided that the
Company may adopt a retention bonus program (the "Retention Plan") that
provides for the payment of a retention bonus of up to three month's base
salary to such employees of the Company (other than senior management) as
may be determined by the Company with the consent of the Parent which shall
not be unreasonably withheld subject to (a) an employee's receipt of a
retention bonus being conditioned on such employee either being terminated
by the Company without cause following the Effective Time or remaining as
an employee of the Company for not less than six months following the
Effective Time and (b) the aggregate amount of all retention bonuses
payable to all employees not exceeding $500,000 or (iii) establish, adopt,
enter into or amend any employee benefit plan or arrangement except as may
be required by applicable law or existing contracts;
(f) shall not declare or pay any dividend on, or make any other
distribution in respect of, outstanding shares of capital stock, except for
dividends by a subsidiary of the Company to the Company or another
subsidiary of the Company;
(g) shall not (i) redeem, purchase or otherwise acquire any shares of its
or any of its subsidiaries' capital stock or any securities or obligations
convertible into or exchangeable for any shares of its or its subsidiaries'
capital stock (other than any such acquisition directly from any wholly
owned subsidiary of the Company in exchange for capital contributions or
loans to such subsidiary), or any options, warrants or conversion or other
rights to acquire any shares of its or its subsidiaries' capital stock or
any such securities or obligations (except in connection with the exercise
of outstanding Stock Options and Warrants in accordance with their terms or
in connection with the conversion of Convertible Notes and Convertible
Preferred Stock in accordance with their terms); (ii) effect any
reorganization or recapitalization; or (iii) split, combine or reclassify
any of its or its respective subsidiaries' capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in
lieu of or in substitution for, shares of its or its respective
subsidiaries' capital stock;
(h) shall not (i) except as declared by the Company, issue, deliver,
award, grant or sell, or authorize or propose the issuance, delivery,
award, grant or sale (including the grant of any security interests, liens,
claims, pledges, limitations in voting rights, charges or other
encumbrances) of, any shares of any class of
17
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its or its subsidiaries' capital stock (including shares held in treasury),
any securities convertible into or exercisable or exchangeable for any such
shares, or any rights, warrants or options to acquire, any such shares
(except for the issuance of shares upon the exercise of outstanding Stock
Options, Warrants or the conversion of Convertible Notes and the
Convertible Preferred Stock in accordance with their terms); or (ii) amend
or otherwise modify the terms of any such rights, warrants or options the
effect of which shall be to make such terms more favorable to the holders
thereof;
(i) shall not acquire or agree to acquire, by merging or consolidating
with, by purchasing an equity interest in or a portion of the assets of, or
by any other manner, any business or any corporation, partnership,
association or other business organization or division (other than a wholly
owned subsidiary) thereof, or otherwise acquire or agree to acquire any
assets of any other person (other than the purchase of assets from
suppliers or vendors (i) for resale or use by or for customers which assets
do not constitute capital items, (ii) that consist of office supplies or
materials not constituting capital items or (iii) in an amount not to
exceed $250,000 in the aggregate (or such greater amount as may be
consented to by the Parent which consent shall not be unreasonably
withheld), in each case, in the ordinary course of business and consistent
with past practice);
(j) shall not sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, or agree to sell, lease, exchange, mortgage, pledge,
transfer or otherwise dispose of, any of its assets, except for the sale of
the Company's operations in Costa Rica, Peru and Panama or for dispositions
of inventories and of assets in the ordinary course of business and
consistent with past practice;
(k) shall not initiate, solicit or encourage (including by way of
furnishing information or assistance), 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 Competing Transaction, or
enter into discussions or negotiate with any person or entity in
furtherance of such inquiries or to obtain a Competing Transaction, or
agree to or endorse any Competing Transaction, or authorize or permit any
of the officers, directors or employees of the Company or any of its
subsidiaries or any investment banker, financial advisor, attorney,
accountant or other representative retained by the Company or any of the
Company's subsidiaries to take any such action and the Company shall
promptly notify the Parent of all relevant terms of any such inquiries and
proposals received by the Company or any of its subsidiaries or by any such
officer, director, investment banker, financial advisor or attorney,
relating to any of such matters and if such inquiry or proposal is in
writing, the Company shall deliver or cause to be delivered to the Parent a
copy of such inquiry or proposal; provided, however, that nothing contained
in this subsection (k) shall prohibit the Board of Directors of the Company
from (i) furnishing information to, or entering into discussions or
negotiations with, any persons or entity in connection with an unsolicited
bona fide proposal by such person or entity to acquire the Company pursuant
to a merger, consolidation, share exchange, business combination or other
similar transaction or to acquire all or substantially all of the assets of
the Company or any of its significant subsidiaries, if, and only to the
extent that (A) the Board of Directors of the Company, after consultation
with independent legal counsel (which may include its regularly engaged
independent legal counsel), determines in good faith that such action is
required for the Board of Directors of the Company to comply with its
fiduciary duties to stockholders imposed by DGCL and (B) the Company (x)
promptly provides notice to the Parent to the effect that it is furnishing
information to, or entering into discussions or negotiations with, such
person or entity and (y) receives a customary confidentiality agreement
from such person or entity; or (ii) complying with Rule 14e-2 promulgated
under the Exchange Act with regard to a Competing Transaction. "Competing
Transaction" means any of the following involving the Company or any of its
subsidiaries: (i) any merger, consolidation, share exchange, business
combination or other similar transaction (other than the transactions
contemplated by this Agreement); (ii) any sale, lease, exchange, mortgage,
pledge, transfer or other disposition of 15% or more of the assets of the
Company and its subsidiaries, taken as a whole, in a single transaction or
series of transactions, other than in the ordinary course of business;
(iii) any tender offer or exchange offer (other than the Offer) for 15% or
more of the outstanding shares of capital stock of the Company or the
filing of a registration statement under the Securities Act in connection
therewith; (iv) any person (other than the Parent or its subsidiaries)
shall have acquired beneficial ownership or the right to acquire beneficial
ownership of, or any "group" (as such term
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is defined under Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of, 15%
or more of the then outstanding shares of capital stock of the Company
(other than through the vesting of Stock Options granted prior to the date
of the Merger Agreement or acquisitions in arbitrage transactions); or (v)
any public announcement of a proposal, plan or intention to do any of the
foregoing;
(l) shall not propose or adopt any amendments to its Certificate of
Incorporation or By-Laws that would have an adverse impact on the
consummation of the transactions contemplated by the Merger Agreement;
(m) shall not (A) change any of its methods of accounting in effect at
December 31, 1995, or (B) make or rescind any express or deemed election
relating to taxes, settle or compromise any claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or controversy
relating to taxes, or change any of its methods of reporting income or
deductions for federal income tax purposes from those employed in the
preparation of the federal income tax returns for the taxable year ending
December 31, 1995, except, in the case of clause (A) or clause (B), as may
be required by law or generally accepted accounting principles;
(n) shall not incur any obligation for borrowed money or purchase money
indebtedness, whether or not evidenced by a note, bond, debenture or
similar instrument;
(o) shall not enter into or amend (i) any material contract with any
supplier that is not terminable or cancelable by the Company or its
subsidiary party thereto upon notice of 90 days or less without penalty or
increased cost; or (ii) any contract which restricts the Company and/or its
subsidiaries from doing business anywhere in the world or from engaging in
or competing in any line of business or with any person; or
(p) shall not agree in writing or otherwise to do any of the foregoing.
Stock Options. As soon as practicable following the date of Merger
Agreement, the Board of Directors of the Company shall adopt such resolutions
or take such other actions as may be required to provide that, at the
Effective Time, each Stock Option outstanding immediately prior to the
Effective Time of the Merger shall:
(a) if such Stock Option is vested before or as a consequence of the
Merger and exercisable and the holder of such Stock Option shall have
elected by written notice to Parent prior to the date five (5) business
days prior to the Effective Time to receive the payment contemplated by
this clause (a), be canceled in exchange for a payment from the Surviving
Corporation (subject to any applicable withholding taxes) equal to the
excess of the amount in cash, without interest, equal to the price per
Share paid pursuant to the Offer (the "Merger Consideration") over the
exercise price per share of the Shares subject to such Stock Option,
payable in cash immediately following the Effective Time of the Merger;
provided, however, that with respect to any person subject to Section 16(a)
of the Exchange Act any such amount to be paid shall be paid as soon as
practicable after the first date payment can be made without liability for
such person under Section 16(b) of the Exchange Act; or
(b) with respect to any Stock Option not canceled pursuant to clause (a)
above, be deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under such Stock Option, the number of shares
of common stock, no par value per share, of Merck ("Merck Common Stock")
equal to the product of (1) the number of Shares issuable upon exercise of
such Option and (2) the Merger Consideration divided by the average of the
closing sales prices of Merck Common Stock on the New York Stock Exchange
for the ten (10) consecutive days immediately prior to and including the
day preceding the Effective Time, at a price per share equal to (1) the
aggregate exercise price for the Shares otherwise purchasable pursuant to
such Stock Option divided by (2) the number of shares of Merck Common Stock
issuable per Share upon exercise of such Option set forth above, provided,
however, that in the case of any option to which Sections 422 and 423 of
the Code applies by reason of its qualification under any of Sections 422-
424 of the Code, Merck shall use reasonable efforts to cause the option
price, the number of shares purchasable pursuant to such option and the
terms and conditions of exercise of such option to be determined in order
to comply with Section 424(a) of the Code.
Pursuant to the Merger Agreement, Merck has agreed to (i) reserve for
issuance the number of shares of Merck Common Stock that will become issuable
upon the exercise of such Stock Options pursuant to the Merger
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Agreement and (ii) at the Effective Time, execute a document evidencing the
assumption by Merck of the Company's obligations with respect thereto. Merck
has agreed to file a registration statement on Form S-8 (or any successor
form), or another appropriate form with respect to the shares of Merck Common
Stock subject to such options as soon as practicable after the Effective Time
and to use its best efforts to maintain the effectiveness of such registration
statement or registration statements (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as such options
remain outstanding.
Indemnification. The Merger Agreement provides that, from and after the
Effective Time, the Company (as the surviving corporation in the Merger) will
indemnify, defend and hold harmless each person who is at the date of the
Merger Agreement, or had been at any time prior to such date, an officer or
director of the Company (each, an "Indemnified Party") against all losses,
expenses, claims, damages, liabilities or amounts paid in settlement in
connection with any claim, action, suit, proceeding or investigation based in
whole or in part on the fact that such Indemnified Party is or was a director
or officer of the Company, and arising out of actions or omissions occurring
at or prior to the Effective Time (including the Merger), to the fullest
extent a corporation is permitted to indemnify its own directors and officers
under DGCL. The Company's indemnification obligations are guaranteed under the
Merger Agreement by Medco and Merck. The Merger Agreement also requires Parent
to cause the Company's current directors' and officers' liability insurance
policies (or comparable policies) to remain in effect for three years after
the Effective Time.
Employee Benefits. From and after the Effective Time, subject to applicable
law, the Parent shall cause the Surviving Corporation to honor all employment
agreements, individual severance arrangements, the Retention Plan and the
Company's existing severance policy for any employee who is terminated by the
Company without cause within six months following the Effective Time;
provided, however, that nothing in the Merger Agreement shall preclude any
change effected on a prospective basis.
Board Representation. The Merger Agreement provides that, promptly upon the
purchase of Shares pursuant to the Offer, the Offeror shall be entitled to
designate such number of directors, rounded up to the next whole number, on
the Board of Directors of the Company as will give the Offeror, subject to
compliance with Section l4(f) of the Exchange Act and the rules and
regulations promulgated thereunder, representation on the Board of Directors
equal to the product of (a) the total number of directors on the Board of
Directors and (b) the percentage that the number of Shares purchased by the
Offeror bears to the number of Shares outstanding, and the Company shall, upon
request by the Offeror, promptly increase the size of the Board of Directors
and/or exercise its reasonable best efforts to secure the resignations of such
number of directors as is necessary to enable the Offeror's designees to be
elected to the Board of Directors and shall cause the Offeror's designees to
be so elected. The Company shall take, at its expense, all action required
pursuant to Section 14(f) and Rule 14f-1 in order to fulfill its obligations
under this provision and shall include in the Schedule 14D-9 or otherwise
timely mail to its stockholders such information with respect to the Company
and its officers and directors as is required by Section 14(f) and Rule 14f-l
in order to fulfill its obligations under this provision. The Parent will
supply to the Company in writing and be solely responsible for any information
with respect to itself and its or the Offeror's nominees, officers, directors
and affiliates required by Section 14(f) and Rule 14f-l. In the event that the
Offeror's designees are elected to the Board of Directors of the Company,
until the Effective Time, the Board of Directors of the Company shall have at
least one director who is a director on the date of the Merger Agreement (the
"Company Director"). In such event, if the Company Director is unable to serve
for any reason whatsoever, the other directors shall designate a person to
fill such vacancy who shall not be a designee, stockholder or affiliate of the
Parent or the Offeror and such person shall be deemed to be a Company Director
for purposes of the Merger Agreement. Notwithstanding anything in the Merger
Agreement to the contrary, in the event that the Offeror's designees are
elected to the Board of Directors of the Company, after the acceptance for
payment of Shares pursuant to the Offer and prior to the Effective Time, the
affirmative vote of the Company Director shall be required to (a) amend or
terminate the Merger Agreement by the Company, (b) exercise or waive any of
the Company's rights, benefits or remedies under the Merger Agreement, (c)
extend the time for performance of the Parent's and the Offeror's respective
obligations under the Merger Agreement, (d) take any other action by the Board
of Directors of the Company under or in connection with the Merger Agreement,
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(e) amend, repeal or otherwise modify the provisions with respect to
indemnification set forth in the Company's Certificate of Incorporation or By-
Laws in a manner that would adversely affect the rights thereunder of
individuals who at any time prior to the Effective Time were directors or
officers of the Company at or prior to the Effective Time (including, without
limitation, the transactions contemplated by the Merger Agreement) unless such
notification is required by law or (f) cancel the Company's current directors'
and officers' liability insurance policies (or comparable policies).
Conditions Precedent. The respective obligations of each party to effect the
Merger shall be subject to the fulfillment at or prior to the Effective Time
of the following conditions: (a) the Offeror shall have purchased pursuant to
the Offer a number of Shares which satisfies the Minimum Condition; (b) the
Merger Agreement and the Merger shall have been approved and adopted by the
requisite vote of stockholders of the Company; (c) no governmental or
regulatory authority, domestic or foreign ("Governmental Entity") or federal
or state court 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 is in effect and which has the effect of making the
transactions contemplated by this Agreement illegal or otherwise prohibiting
consummation of the transactions contemplated by this Agreement; and (d) the
applicable waiting period under the HSR Act shall have expired or been
terminated. The Offer is also subject to other terms and conditions. See
Section 15.
Termination. The Merger Agreement provides that it may be terminated and the
Merger may be abandoned at any time prior to the Effective Time,
notwithstanding the approval of the stockholders entitled to vote thereon:
(a) by mutual consent of Parent and the Company;
(b) by Parent, upon a breach of any representation, warranty, covenant or
agreement on the part of the Company set forth in the Merger Agreement,
such that the conditions set forth in Section 7.02(a) or 7.02(b) of the
Merger Agreement regarding compliance with representations, warranties and
covenants would not be satisfied;
(c) by the Company, upon breach of any representation, warranty, covenant
or agreement on the part of Parent set forth the Merger Agreement, such
that the conditions set forth in Section 7.03(a) or 7.03(b) of the Merger
Agreement regarding compliance with representations, warranties and
covenants would not be satisfied;
(d) by either Parent or the Company, if there shall be any order which is
final and nonappealable preventing the consummation of the Merger;
(e) by either Parent or the Company if the Offer shall have expired or
been terminated in accordance with its terms as the result of the failure
of any of the conditions set forth in Section 15 without the Offeror having
purchased any Shares pursuant to the Offer;
(f) by either Parent or the Company, if the Merger shall not have been
consummated before September 30, 1996;
(g) by either Parent or the Company, if the Merger Agreement shall fail
to receive the requisite vote for approval and adoption by the stockholders
of the Company;
(h) by Parent, if (i) the Board of Directors of the Company withdraws,
modifies or changes its recommendation of the Merger Agreement, the Offer
or the Merger in a manner adverse to Parent or Offeror or shall have
resolved to do any of the foregoing or the Board of Directors of the
Company shall have recommended to the stockholders of the Company any
competing transaction or resolved to do so; (ii) if the Board of Directors
of the Company shall have recommended to the shareholders of the Company a
Competing Transaction; or (iii) a tender offer or exchange offer (other
than the Offer) for 50% or more of the outstanding shares of capital stock
of the Company is commenced, and the Board of Directors of the Company
recommends that shareholders tender their shares into such tender or
exchange offer or; (iv) any person (other than Parent or its subsidiaries)
shall have acquired beneficial ownership or the right to acquire beneficial
ownership of, or any "group" (as such term is defined under Section 13(d)
of the Exchange Act
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and the rules and regulations promulgated thereunder), shall have been
formed which beneficially owns, or has the right to acquire beneficial
ownership of more than 30% of the then outstanding shares of capital stock
of the Company; and
(i) by the Company (i) if the Board of Directors of the Company
determines in good faith after consultation with independent legal counsel
(which may include the Company's regularly engaged legal counsel) that it
is required by DGCL to enter into a definitive agreement for a Competing
Transaction which the Board has determined is financially superior to the
transactions contemplated by the Merger Agreement and is reasonably likely
to be consummated; (ii) the Offer shall not have been timely commenced in
accordance with the Merger Agreement; or (iii) the Offer shall have expired
or have been terminated without any Shares being purchased thereunder or if
no Shares shall have been purchased thereunder by September 30, 1996,
unless failure to so purchase Shares has been caused by or results from a
breach by the Company of the Merger Agreement.
Effect of Termination and Abandonment. (a) In the event of a termination of
the Merger Agreement (A) by the Company pursuant to subsection (i) of clause
(h) contained in Termination above or (B) for any reason other than a breach
by Parent or the Offeror and, with respect to a termination under clause (B)
only, (i) the Board of Directors of the Company shall have withdrawn its
recommendation of (or encouraged stockholders not to approve) the Offer or the
Merger or shall have recommended (or encouraged stockholders to support) any
Competing Transaction, or shall have resolved to do any of the foregoing (and
such withdrawal, recommendation or encouragement is not the result of a
material breach by Parent or the Offeror of any representation, warranty or
obligation under the Merger Agreement), (ii) prior to such termination, the
Company shall have received any proposal for a Competing Transaction which the
Board of Directors has determined is more favorable to the Company's
stockholders than the transactions contemplated by the Merger Agreement, or
(iii)(A) at any time prior to the termination of the Merger Agreement (I) the
stockholders of the Company shall have failed to approve the Merger Agreement
at the Company's stockholders' meeting, (II) any person (other than Parent or
any of its subsidiaries) shall have publicly announced any proposal for a
Competing Transaction and (B) at any time on or prior to one year after the
date of the Merger Agreement, any person (other than Parent or any of its
subsidiaries) shall either (I) become the beneficial owner of 50% or more of
the outstanding Shares or (II) consummate a Competing Transaction, then the
Company shall promptly, but in no event later than two business days after the
first of such events set forth in (A) or (B) to occur, (x) pay Parent the sum
of $2,000,000 in cash and (y) reimburse Parent for all documented out-of-
pocket costs and expenses (including, without limitation, all documented
legal, investment banking, printing and related fees and expenses) incurred by
Parent or the Offeror or on their behalf in connection with the Merger
Agreement or the transactions contemplated thereby, up to a maximum of
$250,000 and the Company and its subsidiaries and affiliates shall have no
other liabilities or obligations (and the Parent and the Offeror shall have no
other claim or right against the Company or any of its subsidiaries of
affiliates) in connection with the Merger Agreement and the transactions
contemplated thereby.
(b) In the event that Offeror fails to purchase Shares in the Offer on
account of the failure of the conditions set forth in subsection (ii) of the
introductory paragraph of Section 15, and paragraphs (a) or (b) of Section 15,
the Parent shall reimburse the Company for all documented out of pocket
expenses incurred by the Company or on its behalf in connection with the
Merger Agreement or the transactions contemplated thereby, up to a maximum of
$500,000, and the Parent shall also pay the Company $500,000 in cash and the
Parent and its subsidiaries and affiliates shall have no other liabilities or
obligations (and the Company shall have no other claim or right against the
Parent or any of its subsidiaries or affiliates) in connection with the Merger
Agreement and the transactions contemplated thereby.
14. DIVIDENDS AND DISTRIBUTIONS.
The Merger Agreement provides that the Company will not, among other things,
prior to the Effective Time (i) declare, set aside or pay any dividend or make
any other distribution or payment with respect to any shares of its capital
stock, (ii) directly or indirectly redeem, purchase, or otherwise acquire any
shares of capital stock of the Company or capital stock of any of its
subsidiaries or make any commitment for any such action or (iii) split,
combine or reclassify any of its capital stock.
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15. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other term of the Offer or the Merger Agreement, the
Offeror shall not be required to accept for payment or pay for, subject to any
applicable rules and regulations of the Commission, including Rule 14e-1(c) of
the Exchange Act, any Shares not theretofore accepted for payment or paid for
and may terminate the Offer unless (i) there shall have been validly tendered
and not withdrawn prior to the expiration of the Offer that number of Shares
which would represent at least a majority of the outstanding Shares on a fully
diluted basis and (ii) any waiting period under the HSR Act applicable to the
purchase of Shares pursuant to the Offer shall have been expired or been
terminated. Furthermore, notwithstanding any other term of the Offer or the
Merger Agreement, the Offeror shall not be required to accept for payment or,
subject as aforesaid, to pay for any Shares not theretofore accepted for
payment or paid for, and may terminate or amend the Offer if, immediately
prior to the acceptance of such Shares for payment or the payment therefor,
any of the following conditions exist or shall occur and remain in effect:
(a) any action, suit, or proceeding by any Governmental Entity shall be
threatened or pending (i) challenging the consummation of any of the
transactions contemplated by the Merger Agreement, (ii) seeking rescission
of the transactions contemplated by the Merger Agreement following
consummation or seeking to cause the Parent to hold the Surviving
Corporation or its assets separate, (iii) seeking relief which would
adversely effect the right of Parent to own the Shares and to control the
Surviving Corporation and its subsidiaries, or (iv) seeking relief which
would adversely effect the right of any of the Surviving Corporation and
its subsidiaries to own its assets and to operate its businesses (and no
such order, decree, injunction, judgment, ruling or charge with respect to
the matters set forth in this clause (a) shall be in effect);
(b) there shall have been enacted, entered, enforced or deemed applicable
to the Offer or the Merger, by any state, federal or foreign government or
governmental authority or by any court, domestic or foreign, any statute,
rule, regulation, judgment, decree, order or injunction, that prohibits or
makes illegal the making or consummation of the Offer or the Merger;
(c) the Company and the Offeror shall have reached an agreement or
understanding that the Offer or the Merger Agreement be terminated or the
Merger Agreement shall have been terminated in accordance with its terms;
(d) except where the inaccuracies of any representations and warranties
of the Company would not, in the aggregate of all such inaccuracies, result
in a change or have an effect that, individually or when taken together
with all other such changes or effects, would be, or would be reasonably
likely to be, materially adverse to the financial condition, assets,
liabilities, business or operations of the Company and its subsidiaries,
taken as a whole (a "Company Material Adverse Effect"), any of the
representations and warranties of the Company set forth in the Merger
Agreement, shall not have been true and correct in all respects when made
or shall thereafter have ceased to be true and correct as if made as of
such later time (other than representations and warranties made as of a
specific date which shall remain true and correct as of such date except
where the failure to be so true and correct would not have a Company
Material Adverse Effect);
(e) the Company shall not have performed or complied with any agreement
in covenants required by the Merger Agreement to be performed or complied
with by it on or prior to the Expiration Date, except where the failure to
so comply would not have a Company Material Adverse Effect. The Company
shall have not performed or complied with its obligations to sell or shut
down its operations in Costa Rica, Peru and Panama;
(f) any consent, approval or authorization legally required to be
obtained to consummate the Merger shall not have been obtained from or made
with all required Governmental Entities;
(g) the Company's Board of Directors shall have withdrawn, modified or
changed its recommendation of the Offer in any manner adverse to the Parent
or the Offeror, or shall have recommended acceptance of any Competing
Transaction or shall have resolved to do any of the foregoing; or
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(h) a tender offer or exchange offer (other than the Offer) for 50% or
more of the outstanding shares of capital stock of the Company is commenced
and the Board of Directors of the Company recommends that shareholders
tender their shares into such tender or exchange offer;
which, in the reasonable judgment of Parent and the Offeror, in any case, and
regardless of the circumstances (including any action or inaction by Parent or
the Offeror or any of their affiliates other than any action or inaction
constituting a material breach by Parent or the Offeror of their obligations
under the Merger Agreement) giving rise to any such condition, makes it
inadvisable to proceed with the Offer or with such acceptance for payment,
purchase of, or payment for the Shares.
The foregoing conditions are for the sole benefit of the Offeror and may be
asserted by the Offeror regardless of the circumstances giving rise to any
such condition and may be waived by the Offeror, in whole or in part, at any
time and from time to time, in the sole discretion of the Offeror. The failure
by the Offeror at any time to exercise any of the foregoing rights will not be
deemed a waiver of any right, the waiver of such right with respect to any
particular facts or circumstances shall not be deemed a waiver with respect to
any other facts or circumstances, and each right will be deemed an ongoing
right which may be asserted at any time and from time to time.
Should the Offer be terminated pursuant to the foregoing provisions, all
tendered Shares not theretofore accepted for payment shall forthwith be
returned by the Depositary to the tendering stockholders.
16. CERTAIN REGULATORY AND LEGAL MATTERS.
Except as set forth in this Section, the Offeror is not aware of any
approval or other action by any governmental or administrative agency which
would be required for the acquisition or ownership of Shares by the Offeror as
contemplated herein. Should any such approval or other action be required, it
will be sought, but the Offeror has no current intention to delay the purchase
of Shares tendered pursuant to the Offer pending the outcome of any such
matter, subject, however, to the Offeror's right to decline to purchase Shares
if any of the conditions specified in Section 15 shall have occurred. There
can be no assurance that any such approval or other action, if needed, would
be obtained or would be obtained without substantial conditions, or that
adverse consequences might not result to the Company's business or that
certain parts of the Company's business might not have to be disposed of if
any such approvals were not obtained or other action taken.
Antitrust. Under the provisions of the HSR Act applicable to the Offer, the
acquisition of Shares under the Offer may be consummated following the
expiration or early termination of the applicable waiting period under the HSR
Act. Early termination of the waiting period under the HSR Act was granted on
May 24, 1996.
The Department of Justice, Antitrust Division (the "Antitrust Division") and
the Federal Trade Commission ("FTC") frequently scrutinize the legality under
the antitrust laws of transactions such as the Offeror's proposed acquisition
of the Company. At any time before or after the Offeror's acquisition of
Shares pursuant to the Offer, the Antitrust Division or the FTC could take
such action under the antitrust laws as either deems necessary or desirable in
the public interest, including seeking to enjoin the purchase of Shares
pursuant to the Offer or the consummation of the Merger or seeking the
divestiture of Shares acquired by the Offeror or the divestiture of
substantial assets of the Company or its subsidiaries or the Parent or its
subsidiaries. Private parties may also bring legal action under the antitrust
laws under certain circumstances. There can be no assurance that a challenge
to the Offer on antitrust grounds will not be made, or, if such a challenge is
made, of the result thereof. See Section 15.
State Takeover Laws. The Company is incorporated under the laws of the State
of Delaware. In general, Section 203 of the DGCL prevents an "interested
stockholder" (including a person who owns or has the right to acquire 15% or
more of a corporation's outstanding voting stock) from engaging in a "business
combination" (defined to include mergers and certain other transactions) with
a Delaware corporation for a period of three years following the date such
person became an interested stockholder unless, among other things, the
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corporation's board of directors approves such business combination or the
transaction in which the interested stockholder becomes such prior to the date
the interested stockholder becomes such. The Board of Directors of the Company
has approved the Offer, the Merger and the Merger Agreement for the purposes
of Section 203 of the DGCL.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, stockholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects in such states. In Edgar v. MITE Corp., the Supreme Court of
the United States invalidated on constitutional grounds the Illinois Business
Takeover statute, which, as a matter of state securities law, made takeovers
of corporations meeting certain requirements more difficult. However in 1987,
in CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the
State of Indiana may, as a matter of corporate law and, in particular, with
respect to those aspects of corporate law concerning corporate governance,
constitutionally disqualify a potential acquirer from voting on the affairs of
a target corporation without the prior approval of the remaining presenting
stockholders. The state law before the Supreme Court was by its terms
applicable only to corporations that had a substantial number of stockholders
in the state and were incorporated there.
The Company, directly or through subsidiaries, conducts business in a number
of states, some of which have enacted takeover laws. Except as described above
with respect to Section 203 of the DGCL, the Offeror has not attempted to
comply with any such laws. Should any person seek to apply any state takeover
law, the Offeror will take such action as then appears desirable, which may
include challenging the validity or applicability of any such statute in
appropriate court proceedings. In the event it is asserted that one or more
state takeover laws is applicable to the Offer or the Merger, and an
appropriate court does not determine that it is inapplicable or invalid as
applied to the Offer, the Offeror might be required to file certain
information with, or receive approvals from, the relevant state authorities.
In addition, if enjoined, the Offeror might be unable to accept for payment
any Shares tendered pursuant to the Offer, or be delayed in continuing or
consummating the Offer and the Merger. In such case, the Offeror may not be
obligated to accept for payment any Shares tendered. See Section 15.
Appraisal Rights. Holders of the Shares do not have appraisal rights as
result of the Offer. However, if the Merger is consummated, holders of the
Shares at the Effective Time of the Merger will have certain rights pursuant
to the provisions of Section 262 of the DGCL to dissent and demand appraisal
of their Shares. Under Section 262, dissenting stockholders who comply with
the applicable statutory procedures will be entitled to receive a judicial
determination of the fair value of their Shares (exclusive of any element of
value arising from the accomplishment or expectation of the Merger) and to
receive payment of such fair value in cash, together with a fair rate of
interest, if any. Any such judicial determination of the fair value of the
Shares could be based upon factors other than, or in addition to, the price
per share to be paid in the Merger or the market value of the Shares. The
value so determined could be more or less than the price per share to be paid
in the Merger.
Going Private Transactions. The Commission has adopted Rule 13e-3 under the
Exchange Act which is applicable to certain "going private" transactions and
which may under certain circumstances be applicable to the Merger or any other
merger involving the Company. However, Rule 13e-3 would be inapplicable if (a)
the Shares are deregistered under the Exchange Act prior to the merger or (b)
any such merger is consummated within one year after the purchase of the
Shares pursuant to the Offer and such merger provides for stockholders to
receive cash for their Shares in an amount at least equal to the amount paid
per Share in the Offer. If applicable, Rule 13e-3 requires, among other
things, that certain financial information concerning the fairness of the
proposed transaction and the consideration offered to minority stockholders in
such transaction be filed with the Commission and disclosed to stockholders
prior to the consummation of the transaction.
Legal Proceedings. In April and May, 1996, three purported shareholder class
action lawsuits, two in the Los Angeles Superior Court of the State of
California and one in the Court of Chancery of the State of Delaware, were
filed with respect to the Merger. The actions name as defendants the Company
and the members of its board of directors, and the Delaware action also names
Merck as a defendant. The actions allege that the
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Company's board of directors violated its fiduciary duties in entering into
the Merger Agreement, in that, among other things, the consideration offered
was below the fair value of the stock and its trading price prior to the
announcement of the Merger, and the directors failed to take appropriate steps
to assure that they were receiving the highest possible price for the Shares.
The actions seek to enjoin the Merger, and also seek damages in an unspecified
amount. The Company has indicated that it believes the actions to be without
merit. On June 7, a settlement agreement was entered into in the three
actions. In the agreement, which is subject to court approval, it is
recognized that proceeding with the Offer, rather than by merger, will give
the Company's shareholders an opportunity to receive the proposed
consideration earlier than was previously contemplated. The agreement also
gives plaintiffs' counsel in the actions the opportunity to comment on, and
propose changes to, the relevant disclosure documents relating to the Offer;
provides for the release of all claims arising from any facts that have been
alleged or could be alleged relating to the proposed acquisition; and provides
that the defendants agree to pay, and will not oppose, an award of attorneys'
fees and expenses to plaintiffs' counsel of an aggregate amount not to exceed
$175,000, if approved by the court. The Offeror is not aware of any other
pending or overtly threatened legal proceedings which would affect the Offer
or the Merger. If any such matters were to arise, the Merger Agreement
provides that, under certain circumstances, the Offeror could decline to
accept for payment or pay for any Shares tendered in the Offer. See Section
15.
17. FEES AND EXPENSES.
Neither the Offeror nor the Parent, nor any officer, director, stockholder,
agent or other representative of the Offeror or the Parent, will pay any fees
or commissions to any broker, dealer or other person (other than the
Information Agent and the Depositary) for soliciting tenders of Shares
pursuant to the Offer. Brokers, dealers, commercial banks and trust companies
and other nominees will, upon request, be reimbursed by the Offeror for
customary mailing and handling expenses incurred by them in forwarding
materials to their customers.
The Offeror has retained D.F. King & Co., Inc. as Information Agent and
Norwest Bank Minnesota, N.A. as Depositary in connection with the Offer. The
Information Agent and the Depositary will receive reasonable and customary
compensation for their services hereunder and reimbursement for their
reasonable out-of-pocket expenses. The Information Agent and the Depositary
will also be indemnified by the Offeror against certain liabilities in
connection with the Offer.
18. MISCELLANEOUS.
The Offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of Shares residing in any jurisdiction in which the making
or acceptance thereof would not be in compliance with the securities, blue sky
or other laws of such jurisdiction. In any jurisdiction where the securities,
blue sky or other laws require the Offer to be made by a licensed broker or
dealer, the Offer shall be deemed to be made on behalf of the Offeror by one
or more registered brokers or dealers licensed under the laws of such
jurisdiction.
No person has been authorized to give any information or make any
representation on behalf of the Offeror other than as contained in this Offer
to Purchase or in the Letter of Transmittal, and, if any such information or
representation is given or made, it should not be relied upon as having been
authorized by the Offeror.
The Offeror and the Parent have filed with the Commission the Schedule 14D-
1, pursuant to Section 14(d)(1) of the Exchange Act and Rule 14d-1 promulgated
thereunder, furnishing certain information with respect to the Offer. Such
Schedule 14D-1 and any amendments thereto, including exhibits, may be examined
and copies may be obtained at the same places and in the same manner as set
forth with respect to the Company in Section 8 (except that they will not be
available at the regional offices of the Commission).
S ACQUISITION CORP.
June 11, 1996
26
<PAGE>
ANNEX I
CERTAIN INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE
OFFICERS OF MERCK, MEDCO AND THE OFFEROR
1. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARENT. Set forth below is the
name, age, current business address, citizenship, present principal occupation
or employment and five-year employment history of each director and executive
officer of Merck. Unless otherwise indicated, each person identified below has
been employed by Merck for the last five years, and each such person's
business address is P.O. Box 100, Whitehouse Station, N.J. Directors are
indicated with an asterisk. All persons listed below are citizens of the
United States unless otherwise indicated.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
MATERIAL OCCUPATIONS, POSITIONS, OFFICES OR
NAME EMPLOYMENT HELD DURING THE LAST FIVE YEARS
---- ----------------------------------------------
*H. Brewster Atwater, Jr. ......... Director; Retired; Chairman of the Board
and Chief Executive Officer, General
Mills, Inc. (consumer foods and
restaurants) for more than five years.
*Sir Derek Birkin.................. Director; Chairman of the Board, The RTZ
Corporation PLC (international mining
company) since June 1991; Chief Executive
and Deputy Chairman from April 1985 to
May 1991. Sir Derek is a British citizen.
*Lawrence A. Bossidy............... Director; Chairman of the Board (since
January 1992) and Chief Executive Officer
(since July 1991), Allied Signal, Inc.
(aerospace, Automotive products and
engineered materials technology); Vice
Chairman, General Electric Company from
January 1984 to July 1991.
*William G. Bowen, Ph.D. .......... Director; President, The Andrew W. Mellon
Foundation (philanthropic foundation) for
more than five years.
*Johnnetta B. Cole, Ph.D. ......... Director; President, Spelman College for
more than five years.
*Carolyne K. Davis, Ph.D. ......... Director; International Health Care
Consultant for more than five years.
*Lloyd C. Elam, M.D. .............. Director; Professor of Psychiatry,
Meharry Medical College for more than
five years.
*Charles E. Exley, Jr. ............ Director; Retired; Chairman of the Board
and Chief Executive Officer, NCR
Corporation (business information
processing systems) from January 1988 to
September 1991.
*Raymond V. Gilmartin.............. November, 1994--Chairman of the Board,
President and Chief Executive Officer;
June, 1994--President and Chief Executive
Officer; Prior to June, 1994, Mr.
Gilmartin was President and Chief
Executive Officer (1989 to 1992) and
Chairman, President and Chief Executive
Officer (1992 to 1994) of Becton
Dickinson and Company (medical supplies
and devices and diagnostic systems).
A-1
<PAGE>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
MATERIAL OCCUPATIONS, POSITIONS, OFFICES OR
NAME EMPLOYMENT HELD DURING THE LAST FIVE YEARS
---- ----------------------------------------------
*William N. Kelley, M.D. .......... Director; Chief Executive Officer,
University of Pennsylvania Medical Center
and Health System and Executive Vice
President, Dean of the School of Medicine
and Robert G. Dunlop Professor of
Medicine, Biochemistry and Biophysics,
University of Pennsylvania, for more than
five years.
*Samuel O. Thier, M.D. ............ Director; President, Massachusetts
General Hospital since May 1994;
President, Brandeis University from
October 1991 to May 1994; President,
National Academy of Sciences, Institute
of Medicine from November 1985 to
September 1991.
*Dennis Weatherstone............... Director; Retired; Chairman of the Board,
J.P. Morgan & Co. Incorporated and Morgan
Guaranty Trust Company of New York
(banking and other financial services)
for more than five years. Mr.
Weatherstone is also a British citizen.
David W. Anstice................... September, 1994--President, Human Health-
U.S./Canada--responsible for the
Company's prescription drug business in
the United States and Canada, worldwide
coordination of marketing policies and
medical and scientific affairs; January,
1994--President, Human Health-Europe;
January, 1993--Senior Vice President,
Merck Human Health Division (MHHD)-
Europe; April, 1991--Senior Vice
President, MHHD and President, U.S. Human
Health; July, 1989--Vice President,
Marketing, Merck Sharp & Dohme Division.
Mr. Anstice is an Australian citizen.
Celia A. Colbert................... November, 1993--Secretary and Assistant
General Counsel; September, 1993--
Secretary; February, 1993--Secretary, New
Products Committee; October, 1992--
Counsel, Corporate Staff; May, 1991--
Associate Counsel, Corporate Staff;
November, 1988--Senior Attorney,
Corporate Staff.
Clifford S. Cramer................. July, 1993--Vice President, Planning and
Development--responsible for strategic
planning and external growth activities;
April, 1990--Executive Director,
Corporate Development.
Caroline Dorsa..................... January, 1994--Treasurer; July, 1993--
Executive Director, Customer Marketing,
U.S. Human Health (USHH); June, 1992--
Executive Director, Pricing and Strategic
Planning, USHH; April, 1990--Executive
Director, Financial Evaluation and
Analysis.
R. Gordon Douglas Jr. ............. January, 1994--President, Merck
Vaccines--responsible for all functional
areas, including development, manufacture
and marketing, of the vaccines business;
April, 1991--President, Merck Vaccine
Division; October, 1989--Senior Vice
President, Medical & Scientific Affairs.
A-2
<PAGE>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
MATERIAL OCCUPATIONS, POSITIONS, OFFICES OR
NAME EMPLOYMENT HELD DURING THE LAST FIVE YEARS
---- ----------------------------------------------
Kenneth C. Frazier................. April, 1994--Vice President, Public
Affairs; May, 1992--Vice President,
General Counsel and Secretary,
Astra/Merck Group; Prior to May, 1992,
Mr. Frazier was a partner at the law firm
Drinker, Biddle & Reath for more than
five years.
Bernard J. Kelly................... December, 1993--President, Merck
Manufacturing Division (MMD); August,
1993--Senior Vice President, Operations,
MMD; September, 1991--Senior Vice
President, Administration, Planning and
Quality, MMD; September, 1989--Vice
President, Business Affairs, Merck AgVet
Division.
Judy C. Lewent..................... September, 1994--Senior Vice President
and Chief Financial Officer--responsible
for financial and public affairs
functions, The Merck Company Foundation,
internal auditing and the Company's joint
venture relationships; December, 1993--
Senior Vice President and Chief Financial
Officer--responsible for financial and
public affairs functions and The Merck
Company Foundation; June, 1993--Senior
Vice President, Chief Financial Officer
and Controller; January, 1993--Senior
Vice President and Chief Financial
Officer; April, 1990--Vice President,
Finance and Chief Financial Officer
Henri Lipmanowicz.................. January, 1995--President, Human Health--
Intercontinental Region and Japan--
responsible for the Company's
prescription drug operations in the Near
East, the Far East, Eastern Europe,
Africa, Latin America, Australia, New
Zealand and Japan; January, 1994--
President, Human Health--Merck
Intercontinental Region (MIR)/Japan;
June, 1991--Senior Vice President, MIR,
Merck Human Health Division; April,
1989--Vice President, Mid-Europe, Merck
Sharp & Dohme International Division. Mr.
Lipmanowicz is a French citizen.
Per G. H. Lofberg.................. January, 1994--President, Merck-Medco
Managed Care, Inc.; April, 1991--Senior
Executive Vice President, Strategic
Planning and Marketing, Medco Containment
Services, Inc.; Prior to April, 1991, Mr.
Lofberg was an executive officer of Medco
for more than five years. Mr. Lofberg is
a Swedish citizen.
Mary M. McDonald................... January, 1993--Senior Vice President and
General Counsel; April, 1991--Vice
President and General Counsel; May,
1990--Assistant General Counsel and
Counsel, Merck Sharp & Dohme
International Division.
Peter E. Nugent....................
September, 1993--Vice President,
Controller; July, 1989--Vice President,
Corporate Taxes.
A-3
<PAGE>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
MATERIAL OCCUPATIONS, POSITIONS, OFFICES OR
NAME EMPLOYMENT HELD DURING THE LAST FIVE YEARS
---- ----------------------------------------------
John M. Preston.................... April, 1993--President, Merck AgVet
Division; July, 1992--Executive Vice
President, Merck AgVet Division;
September, 1991--Vice President, Business
Affairs, MSD AGVET Division; February,
1991--Executive Director, Technical
Services, MSD AGVET Division.
Edward M. Scolnick................. September, 1994--Executive Vice
President, Science and Technology and
President, Merck Research Laboratories
(MRL)--responsible for worldwide research
function and activities of Merck
Manufacturing Division, computer
resources and corporate licensing;
December, 1993--Executive Vice President,
Science and Technology, MRL--responsible
for worldwide research function and
activities of Merck Manufacturing
Division and computer resources; January,
1993--Executive Vice President and
President, MRL--responsible for worldwide
research function and activities of Merck
AgVet Division and computer resources;
April, 1991--Senior Vice President and
President, MRL--responsible for worldwide
research function and activities of Merck
Frosst Canada, Inc.; May, 1985--
President, Merck Sharp & Dohme Research
Laboratories Division.
Bennett M. Shapiro................. September, 1990--Executive Vice
President, Worldwide Basic Research,
Merck Research Laboratories
Deborah K. Smith................... May 1996--Senior Vice President Human
Resources; Senior Vice President, Human
Resources; Bausch & Lomb Incorporated
(April 1995-May 1996) Corporate Vice
President, Global Human Resources
Initiatives, Xerox Corporation (1994-
1995); Vice President, Human Resources
and Support Services, Development and
Manufacturing Group and Corporate
Strategic Services, Xerox Corporation
(1986-1994).
Per Wold-Olsen..................... September, 1994--President, Human Health-
Europe--responsible for the Company's
European prescription drug business;
January, 1994, Senior Vice President,
Worldwide Human Health Marketing;
September, 1991--Senior Vice President,
Human Health Marketing, Merck Human
Health Division (MHHD); June, 1991--Vice
President, Human Health Marketing, MHHD;
January, 1990--Regional Director--
Scandinavia and Vice President, MSD
Europe. Mr. Wold-Olsen is a Norwegian
citizen.
A-4
<PAGE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF MEDCO. Unless otherwise indicated,
each person identified below has been employed by Merck or Medco for the last
five years and all information concerning the current business address, present
principal occupation or employment and five-year employment history for each
person is the same as the information given above. All persons listed below are
citizens of the United States unless otherwise indicated.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
MATERIAL OCCUPATIONS, POSITIONS, OFFICES OR
NAME EMPLOYMENT HELD DURING THE LAST FIVE YEARS
---- ----------------------------------------------
Michael G. Atieh................... Director; April 19, 1994--Senior Vice
President--Sales; January 1994--Vice
President, Public Affairs of Merck; April
1990--Treasurer of Merck.
Judy C. Lewent..................... Director.
Per G. H. Lofberg (Swedish Director, President and Chief Executive
citizen).......................... Officer.
Mary M. McDonald................... Director.
Peter E. Nugent.................... Director.
Bert I. Weinstein.................. Director; April 1995--Senior Vice
President and Co-General Counsel; April
1991--General Counsel of Merck.
Thomas Apker....................... Senior Vice President; Mr. Apker has
served in various executive positions
with Merck-Medco for more than the past 5
years.
Simon X. Benito.................... January 1994--Executive Vice President;
for more than 5 years prior to that Mr.
Benito was senior executive of Merck.
Caroline Dorsa..................... Treasurer.
Wayne G. Gattinella................ January 1992--Senior Vice President;
prior to that Mr. Gattinella was Vice
President--Consumer Marketing for MCI.
Carl I. Kanter..................... May 1992--Senior Vice President and Co-
General Counsel; for more than five years
prior thereto, Mr. Kanter was a senior
partner of the law firm of Strook &
Strook & Lavan (7 Hanover Square, New
York, NY).
Margaret McGlynn................... August 1995--Senior Vice President;
October 1994--Senior Vice President U.S.
Human Health Managed Care at Merck; Jan.
1996--Senior Vice President Business
Planning at Medco; Jan 1993--Vice
President Business Management at Merck;
May 1991--Executive Director Customer
Marketing at Merck.
Joann A. Reed......................
Senior Vice President; Ms. Reed has
served in various executive positions
with Medco for more than the past 5
years.
A-5
<PAGE>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
MATERIAL OCCUPATIONS, POSITIONS, OFFICES OR
NAME EMPLOYMENT HELD DURING THE LAST FIVE YEARS
---- ----------------------------------------------
Richard Schatzberg................. Executive Vice President; Mr. Schatzberg
has served in various executive positions
with Medco for more than the past 5
years.
Isaac Shulman...................... Senior Vice President; Mr. Shulman has
served in various executive positions
with Medco for more than the past 5
years.
Joseph V. Valesio.................. Executive Vice President; Mr. Valesio has
served in various executive positions
with Medco for more than the past 5
years.
3. DIRECTORS AND EXECUTIVE OFFICERS OF THE OFFEROR. Unless otherwise
indicated, each person identified below has been employed by the Parent for
the last five years and all information concerning the current business
address, present principal occupation or employment and five-year employment
history for each person is the same as the information given above. Directors
are indicated with an asterisk. All persons listed below are citizens of the
United States unless otherwise indicated.
*Per G. H. Lofberg (Swedish President and Chief Executive Officer.
citizen)
Karl I. Kanter Vice President and Treasurer.
Bert I. Weinstein Vice President and Secretary.
A-6
<PAGE>
Facsimile copies of the Letter of Transmittal will be accepted. The Letter
of Transmittal and certificates for Shares and any other required documents
should be sent or delivered by each stockholder of the Company or his broker,
dealer, commercial bank, trust company or other nominee to the Depositary at
one of the addresses set forth below:
THE DEPOSITARY FOR THE OFFER IS:
NORWEST BANK MINNESOTA, N.A.
----------------
Facsimile Transmission:
(612) 450-4163
Confirm by Telephone:
(612) 450-4064
By Mail: By Hand: By Overnight Courier:
Norwest Shareowner Norwest Shareowner Services Norwest Shareowner
Services 161 North Concord Exchange Services
P.O. Box 64858 2nd Floor 161 North Concord
St. Paul, MN 55164-0858 South St. Paul, MN 55075 Exchange
or South St. Paul, MN 55075
Norwest Trust Company of
New York
3 New York Plaza
15th Floor
New York, NY 10004
Any questions or requests for assistance or additional copies of the Offer
to Purchase and the Letter of Transmittal and Notice of Guaranteed Delivery
may be directed to the Information Agent at its telephone number and location
listed below. Stockholders may also contact their broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Toll Free (800) 549-6864
Banks and Brokerage Firms, please call:
(212) 269-5550
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
SYSTEMED INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED JUNE 11, 1996
BY
S ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
MERCK-MEDCO MANAGED CARE, INC.
AND AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
MERCK & CO., INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 11:59 P.M., NEW YORK CITY TIME,
ON TUESDAY, JULY 9, 1996, UNLESS THE OFFER IS EXTENDED.
THE DEPOSITARY:
NORWEST BANK MINNESOTA, N.A.
Facsimile Transmission:
(612) 450-4163
Confirm by Telephone:
(612) 450-4064
By Mail: By Hand: By Overnight Courier:
Norwest Shareowner Norwest Shareowner Services Norwest Shareowner
Services 161 North Concord Exchange Services
P.O. Box 64858 2nd Floor 161 North Concord
St. Paul, MN 55164- South St. Paul, MN 55075 Exchange
0858 or South St. Paul, MN
Norwest Trust Company of 55075
New York
3 New York Plaza
15th Floor
New York, NY 10004
---------------
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA A FACSIMILE OTHER THAN AS SET FORTH ABOVE, DOES NOT
CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL IN THE
APPROPRIATE SPACE THEREFOR PROVIDED BELOW AND COMPLETE THE SUBSTITUTE FORM W-9
SET FORTH BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
<PAGE>
This Letter of Transmittal is to be completed by stockholders of Systemed
Inc. if certificates are to be forwarded herewith or, unless an Agent's
Message (as defined in the Offer to Purchase) is utilized, if delivery of
Shares (as defined below) is to be made by book-entry transfer to the
Depositary's account at The Depository Trust Company or the Philadelphia
Depository Trust Company (hereinafter collectively referred to as the "Book-
Entry Transfer Facilities") pursuant to the procedures set forth in Section 3
of the Offer to Purchase (as defined below).
Stockholders whose certificates for Shares are not immediately available or
who cannot deliver their Shares and all other documents required hereby to the
Depositary by the Expiration Date (as defined in the Offer to Purchase), or
who cannot comply with the book-entry transfer procedures on a timely basis,
may nevertheless tender their Shares pursuant to the guaranteed delivery
procedure set forth in Section 3 of the Offer to Purchase. See Instruction 2.
DESCRIPTION OF SHARES TENDERED
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARES TENDERED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL LIST IF NECESSARY)
- --------------------------------------------------------------------------------------------------
NUMBER OF
SHARE SHARES NUMBER
CERTIFICATE REPRESENTED BY OF SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C>
-----------------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
TOTAL SHARES
</TABLE>
- -------------------------------------------------------------------------------
* Need not be completed by stockholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares
represented by any certificates delivered to the Depositary are being
tendered. See Instruction 4.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
[_] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO
THE DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution__________________________________________________
Account No. ________________________________________________________________ at
[_]The Depository Trust Company
[_]Philadelphia Depository Trust Company
Transaction Code No. __________________________________________________________
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Tendering Stockholder(s)____________________________________________
Date of Execution of Notice of Guaranteed Delivery_____________________________
Window Ticket Number (if any)__________________________________________________
Name of Institution which Guaranteed Delivery__________________________________
If delivery is by book-entry transfer__________________________________________
Name of Tendering Institution_______________________________________________
Account No. _____________________________________________________________ at
[_]The Depository Trust Company
[_]Philadelphia Depository Trust Company
Transaction Code No. _______________________________________________________
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to S Acquisition Corp., a Delaware
corporation (the "Offeror"), and a wholly owned subsidiary of Merck-Medco
Managed Care, Inc., a Delaware corporation ("Medco"), and an indirect wholly
owned subsidiary of Merck & Co., Inc., a New Jersey corporation ("Merck",
together with Medco, the "Parent"), the above-described shares of common
stock, $0.001 par value per share (the "Shares"), of Systemed Inc., a Delaware
corporation (the "Company"), pursuant to the Offeror's offer to purchase all
of the outstanding Shares at a purchase price of $3.00 per Share, net to the
seller in cash, without interest, upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated June 11, 1996 (the "Offer to
Purchase"), receipt of which is hereby acknowledged, and in this Letter of
Transmittal (which together with the Offer to Purchase constitute the
"Offer"). The Offer is being made in connection with the Amended and Restated
Agreement and Plan of Merger, dated as of June 10, 1996, among Merck, Medco,
the Offeror and the Company.
Subject to and effective upon acceptance for payment of and payment for the
Shares tendered herewith, the undersigned hereby sells, assigns and transfers
to or upon the order of the Offeror all right, title and interest in and to
all the Shares that are being tendered hereby (and any and all other Shares or
other securities issued or issuable in respect thereof on or after June 10,
1996) and appoints the Depositary the true and lawful agent and attorney-in-
fact of the undersigned with respect to such Shares (and all such other Shares
or securities), with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to (a) deliver
certificates for such Shares (and all such other Shares or securities), or
transfer ownership of such Shares (and all such other Shares or securities) on
the account books maintained by any of the Book-Entry Transfer Facilities,
together, in any such case, with all accompanying evidences of transfer and
authenticity, to or upon the order of the Offeror, (b) present such Shares
(and all such other Shares or securities) for transfer on the books of the
Company and (c) receive all benefits and otherwise exercise all rights of
beneficial ownership of such Shares (and all such other Shares or securities),
all in accordance with the terms of the Offer.
The undersigned hereby irrevocably appoints representatives of the Offeror
as the attorneys and proxies of the undersigned, each with full power of
substitution, to exercise all voting and other rights of the undersigned in
such manner as each such attorney and proxy or his substitute shall in his
sole judgment deem proper, with respect to all of the Shares tendered hereby
which have been accepted for payment by the Offeror prior to the time of any
vote or other action (and any and all other Shares or other securities or
rights issued or issuable in respect of such Shares on or after June 10,
1996), at any meeting of stockholders of the Company (whether annual or
special and whether or not an adjourned meeting) or otherwise. This proxy is
irrevocable and is granted in consideration of, and is effective upon, the
acceptance for payment of such Shares by the Offeror in accordance with the
terms of the Offer. Such acceptance for payment shall revoke any other proxy
or written consent granted by the undersigned at any time with respect to such
Shares (and all such other Shares or other securities or rights), and no
subsequent proxies will be given or written consents will be executed by the
undersigned (and if given or executed, will not be deemed effective).
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby (and any and all other Shares or other securities or rights issued or
issuable in respect of such Shares on or after June 10, 1996) and that when
the same are accepted for payment by the Offeror, the Offeror will acquire
good and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claims.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Depositary or the Offeror to be necessary or desirable
to complete the sale, assignment and transfer of the Shares tendered hereby
(and all such other Shares or other securities or rights).
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned. Except as stated in the Offer, this
tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute an agreement between the undersigned and
the Offeror upon the terms and subject to the conditions of the Offer.
Unless otherwise indicated under "Special Payment Instructions," please
issue the check for the purchase price of any Shares purchased, and return any
Shares not tendered or not purchased, in the name(s) of the undersigned (and,
in the case of Shares tendered by book-entry transfer, by credit to the
account at the Book-Entry Transfer Facility designated above). Similarly,
unless otherwise indicated under "Special Delivery Instructions," please mail
the check for the purchase price of any Shares purchased and return any
certificates for Shares not tendered or not purchased (and accompanying
documents, as appropriate) to the undersigned at the address shown below the
undersigned's signature(s). In the event that both "Special Payment
Instructions" and "Special Delivery Instructions" are completed, please issue
the check for the purchase price of any Shares purchased and return any Shares
not tendered or not purchased in the name(s) of, and mail said check and any
certificates to, the person(s) so indicated. The undersigned recognizes that
the Offeror has no obligation, pursuant to the "Special Payment Instructions,"
to transfer any Shares from the name of the registered holder(s) thereof if
the Offeror does not accept for payment any of the Shares so tendered.
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS (SEE SPECIAL DELIVERY INSTRUCTIONS
INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the To be completed ONLY if the
check for the purchase price of check for the purchase price of
Shares purchased or certificates Shares purchased or certificates
for Shares not tendered or not for Shares not tendered or not
purchased are to be issued in the purchased are to be mailed to
name of someone other than the someone other than the under-
undersigned, or if Shares ten- signed or to the undersigned at
dered by book-entry transfer that an address other than that shown
are not purchased are to be re- below the undersigned's signa-
turned by credit to an account at ture(s).
one of the Book-Entry Transfer
Facilities other than that desig-
nated above.
Mail check and/or certificates
to:
Name______________________________
Issue check and/or certificates (PLEASE PRINT)
to: Address __________________________
__________________________________
Name _____________________________ (ZIP CODE)
(PLEASE PRINT) __________________________________
Address __________________________ (TAXPAYER IDENTIFICATION NO.)
__________________________________
(ZIP CODE)
__________________________________
(TAXPAYER IDENTIFICATION NO.)
(See Substitute Form W-9)
[_] Credit unpurchased Shares
tendered by book-entry transfer
to the account set forth below:
Name of Account Party ____________
Account No. ______________________
at
[_] The Depository Trust Company
[_] Philadelphia Depository Trust Company
<PAGE>
SIGN HERE
(Complete Substitute Form W-9 below)
____________________________________________________________________________
____________________________________________________________________________
(Signature(s) of Owner(s)
____________________________________________________________________________
Name(s) ____________________________________________________________________
____________________________________________________________________________
Capacity (full title) ______________________________________________________
Address ____________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(Include Zip Code)
____________________________________________________________________________
Area Code and Telephone Number _____________________________________________
Taxpayer Identification Number _____________________________________________
Dated: ______________________________________________________________ , 1996
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
stock certificate(s) or on a security position listing or by the person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, agent, officer of a corporation
or other person acting in a fiduciary or representative capacity, please
set forth full title and see Instruction 5).
GUARANTEE OF SIGNATURE(S)
(See Instructions 1 and 5)
FOR USE BY FINANCIAL INSTITUTIONS ONLY. PLACE MEDALLION GUARANTEE IN SPACE
BELOW.
Authorized Signature(s) ____________________________________________________
Name _______________________________________________________________________
Name of Firm _______________________________________________________________
Address ____________________________________________________________________
____________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number _____________________________________________
Dated: ______________________________________________________________ , 1996
<PAGE>
PAYOR'S NAME: NORWEST BANK MINNESOTA, N.A.
PART I--PLEASE PROVIDE YOUR PART III--Social
TIN IN THE BOX AT THE RIGHT Security Number or
AND CERTIFY BY SIGNING AND Employer
DATING BELOW. Identification Number
SUBSTITUTE
FORM W-9
DEPARTMENT OF
THE TREASURY ----------------------
INTERNAL (If awaiting TIN
REVENUE write "Applied For")
SERVICE --------------------------------------------------------
PART II--For Payees exempt from backup withholding,
see the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9
and complete as instructed therein.
PAYOR'S REQUEST
FOR TAXPAYER
IDENTIFICATION NUMBER
("TIN")
Certification--Under penalties of perjury, I certify
that:
(1) The number shown on this form is my correct TIN
(or I am waiting for a number to be issued to
me); and
(2) I am not subject to backup withholding either
because I have not been notified by the Internal
Revenue Service (IRS) that I am subject to backup
withholding as a result of a failure to report
all interest or dividends, or the IRS has
notified me that I am no longer subject to backup
withholding.
CERTIFICATION INSTRUCTIONS--You must cross out Item
(2) above if you have been notified by the IRS that
you are subject to backup withholding because of
underreporting interest or dividends on your tax
return. However, if after being notified by the IRS
that you were subject to backup withholding, you
received another notification from the IRS that you
were no longer subject to backup withholding, do not
cross out item (2). (Also see instructions in the
enclosed Guidelines).
--------------------------------------------------------
SIGNATURE: _____________________________ DATE: ______
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING YOUR TIN.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a TIN has not been issued to
me, and either (1) I have mailed or delivered an application to receive a
TIN to the appropriate IRS Center or Social Security Administration Office
or (2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a TIN by the time of payment, 31% of
all payments pursuant to the Offer made to me thereafter will be withheld
until I provide a number.
Signature: ______________________________________________ Date: ____________
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. Except as otherwise provided below, signatures
on all Letters of Transmittal must be guaranteed by a firm that is a bank,
broker, dealer, credit union, savings association or other entity which is a
member in good standing of the Securities Transfer Agents Medallion Program or
by any other bank, broker, dealer, credit union, savings association or other
entity which is an "eligible guarantor institution," as such term is defined
in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (each of
the foregoing constituting an "Eligible Institution"), unless the Shares
tendered thereby are tendered (i) by a registered holder of Shares who has not
completed either the box labeled "Special Payment Instructions" or the box
labeled "Special Delivery Instructions" on the Letter of Transmittal or (ii)
for the account of an Eligible Institution. See Instruction 5. If the
certificates are registered in the name of a person or persons other than the
signer of this Letter of Transmittal, or if payment is to be made or delivered
to, or certificates evidencing unpurchased Shares are to be issued or returned
to, a person other than the registered owner or owners, then the tendered
certificates must be endorsed or accompanied by duly executed stock powers, in
either case signed exactly as the name or names of the registered owner or
owners appear on the certificates or stock powers, with the signatures on the
certificates or stock powers guaranteed by an Eligible Institution as provided
herein. See Instruction 5.
2. Delivery of Letter of Transmittal and Shares. This Letter of Transmittal
is to be used either if certificates are to be forwarded herewith or, unless
an Agent's Message (as defined in the Offer to Purchase) is utilized, if the
delivery of Shares is to be made by book-entry transfer pursuant to the
procedures set forth in Section 3 of the Offer to Purchase. Certificates for
all physically delivered Shares, or a confirmation of a book-entry transfer
into the Depositary's account at one of the Book-Entry Transfer Facilities of
all Shares delivered electronically, as well as a properly completed and duly
executed Letter of Transmittal (or a manually signed facsimile thereof) and
any other documents required by this Letter of Transmittal, or an Agent's
Message in the case of a book entry delivery, must be received by the
Depositary at one of its addresses set forth on the front page of this Letter
of Transmittal by the Expiration Date. Stockholders who cannot deliver their
Shares and all other required documents to the Depositary by the Expiration
Date must tender their Shares pursuant to the guaranteed delivery procedure
set forth in Section 3 of the Offer to Purchase. Pursuant to such procedure:
(a) such tender must be made by or through an Eligible Institution; (b) a
properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by the Offeror, must be received by the
Depositary prior to the Expiration Date; and (c) the certificates for all
tendered Shares, in proper form for tender, or a confirmation of a book-entry
transfer into the Depositary's account at one of the Book-Entry Transfer
Facilities of all Shares delivered electronically, as well as a properly
completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof), and any other documents required by this Letter of
Transmittal, must be received by the Depositary within three NASDAQ/National
Market System trading days after the date of execution of such Notice of
Guaranteed Delivery, all as provided in Section 3 of the Offer to Purchase.
The method of delivery of Shares, the Letter of Transmittal and all other
required documents, including delivery through a Book-Entry Transfer Facility,
is at the option and risk of the tendering stockholder. If delivery is by
mail, registered mail with return receipt requested, properly insured, is
recommended.
No alternative, conditional or contingent tenders will be accepted, and no
fractional Shares will be purchased. By executing this Letter of Transmittal
(or a manually signed facsimile thereof), the tendering stockholder waives any
right to receive any notice of the acceptance for payment of the Shares.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
schedule attached thereto.
4. Partial Tenders (not applicable to stockholders who tender by book-entry
transfer). If fewer than all the Shares represented by any certificate
delivered to the Depositary are to be tendered, fill in the number of Shares
which are to be tendered in the box entitled "Number of Shares Tendered." In
such case, a new certificate for the remainder of the Shares represented by
the old certificate will be sent to the person(s) signing this Letter of
Transmittal, unless otherwise provided in the appropriate box on this Letter
of Transmittal, as promptly as practicable following the expiration or
termination of the Offer. All Shares represented by certificates delivered to
the Depositary will be deemed to have been tendered unless otherwise
indicated.
5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written
on the face of the certificates without alteration, enlargement or any change
whatsoever.
If any of the Shares tendered hereby are held of record by two or more
persons, all such persons must sign this Letter of Transmittal.
<PAGE>
If any of the Shares tendered hereby are registered in different names on
different certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of certificates or separate stock
powers are required unless payment of the purchase price is to be made, or
Shares not tendered or not purchased are to be returned, in the name of any
person other than the registered holder(s). Signatures on any such
certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the certificate must be
endorsed or accompanied by, appropriate stock powers, in either case, signed
exactly as the name(s) of the registered holder(s) appear(s) on the
certificates for such Shares. Signature(s) on any such certificates or stock
powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal or any certificate or stock power is signed by
a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and proper evidence satisfactory
to the Offeror of the authority, of such person so to act must be submitted.
6. Stock Transfer Taxes. The Offeror will pay any stock transfer taxes with
respect to the sale and transfer of any Shares to it or its order pursuant to
the Offer. If, however, payment of the purchase price is to be made to, or
Shares not tendered or not purchased are to be returned in the name of, any
person other than the registered holder(s), then the amount of any stock
transfer taxes (whether imposed on the registered holder(s), such other person
or otherwise) payable on account of the transfer to such person will be
deducted from the purchase price unless satisfactory evidence of the payment
of such taxes, or exemption therefrom, is submitted.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter of
Transmittal.
7. Special Payment and Delivery Instruction. If the check for the purchase
price of any Shares purchased is to be issued, or any Shares not tendered or
not purchased are to be returned, in the name of a person other than the
person(s) signing this Letter of Transmittal or if the check or any
certificates for Shares not tendered or not purchased are to be mailed to
someone other than the person(s) signing this Letter of Transmittal or to the
person(s) signing this Letter of Transmittal at an address other than that
shown above, the appropriate boxes on this Letter of Transmittal should be
completed. Stockholders tendering Shares by book-entry transfer may request
that Shares not purchased be credited to such account at any of the Book-Entry
Transfer Facilities as such stockholder may designate under "Special Payment
Instructions." If no such instructions are given, any such Shares not
purchased will be returned by crediting the account at the Book-Entry Transfer
Facilities designated above.
8. Substitute Form W-9. The tendering stockholder is required to provide the
Depositary with such stockholder's correct TIN on Substitute Form W-9, which
is provided above, unless an exemption applies. Failure to provide the
information on the Substitute Form W-9 may subject the tendering stockholder
to a $50 penalty and to 31% federal income tax backup withholding on the
payment of the purchase price for the Shares.
9. Requests for Assistance or Additional Copies. Requests for assistance or
additional copies of the Offer to Purchase and this Letter of Transmittal may
be obtained from the Information Agent or the Dealer Manager at their
respective addresses or telephone numbers set forth below.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE COPY
HEREOF (TOGETHER WITH CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND
ALL OTHER REQUIRED DOCUMENTS) OR NOTICE OF GUARANTEED DELIVERY MUST BE
RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE (AS DEFINED IN
THE OFFER TO PURCHASE).
<PAGE>
IMPORTANT TAX INFORMATION
Under federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required to provide the Depositary with such
stockholder's correct TIN on the Substitute Form W-9. If such stockholder is
an individual, the TIN is such stockholder's social security number. If the
Depositary is not provided with the correct TIN, the stockholder may be
subject to a $50 penalty imposed by the Internal Revenue Service. In addition,
payments that are made to such stockholder with respect to Shares purchased
pursuant to the Offer may be subject to backup withholding.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that stockholder must submit a statement, signed under penalties of
perjury, attesting to that individual's exempt status. Such statements may be
obtained from the Depositary. All exempt recipients (including foreign persons
wishing to qualify as exempt recipients) should see the enclosed Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will
be reduced by the amount of tax withheld. If backup withholding results in an
overpayment of taxes, a refund may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup federal income tax withholding on payments that are made
to a stockholder with respect to Shares purchased pursuant to the Offer, the
stockholder is required to notify the Depositary of his or her correct TIN by
completing the form certifying that the TIN provided on the Substitute Form W-
9 is correct.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or employer identification number of the record owner of the Shares. If
the Shares are in more than one name or are not in the name of the actual
owner, consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional guidelines on
which number to report.
The Information Agent for the Offer is:
D. F. KING & CO., INC.
77 Water Street New York, New York 10005
Toll Free (800) 549-6864
June 11, 1996
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
SYSTEMED INC.
AT
$3.00 NET PER SHARE
BY
S ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
MERCK-MEDCO MANAGED CARE, INC.
AND AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
MERCK & CO., INC.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
11:59 P.M., NEW YORK CITY TIME, ON TUESDAY, JULY 9, 1996,
UNLESS THE OFFER IS EXTENDED
- --------------------------------------------------------------------------------
June 11, 1996
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
S Acquisition Corp., a Delaware corporation (the "Offeror"), and a wholly
owned subsidiary of Merck-Medco Managed Care, Inc. a Delaware corporation
("Medco"), and an indirect wholly owned subsidiary of Merck & Co., Inc., a New
Jersey corporation ("Merck", together with Medco, the "Parent"), is offering
to purchase, all outstanding shares of common stock, par value $.001 per share
(the "Shares"), of Systemed Inc., a Delaware corporation (the "Company"), at a
purchase price of $3.00 per Share, net to the seller in cash, without
interest, upon the terms and subject to the conditions set forth in the Offer
to Purchase, dated June 11, 1996 (the "Offer to Purchase"), and in the related
Letters of Transmittal (which together constitute the "Offer") enclosed
herewith.
The Offer is being made in connection with the Amended and Restated
Agreement and Plan of Merger, dated as of June 10, 1996, among Merck, Medco,
the Offeror and the Company (the "Merger Agreement").
Holders of Shares whose certificates for such Shares (the "Certificates")
are not immediately available or who cannot deliver their Certificates and all
other required documents to the Depositary or complete the procedures for
book-entry transfer prior to the Expiration Date (as defined in Section 1 of
the Offer to Purchase) must tender their Shares according to the guaranteed
delivery procedures set forth in Section 3 of the Offer to Purchase.
Please furnish copies of the enclosed materials to those of your clients for
whose accounts you hold Shares in your name or in the name of your nominee.
<PAGE>
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offer to Purchase dated June 11, 1996.
2. The Letter of Transmittal to tender Shares for your use and for the
information of your clients. Facsimile copies of the Letter of Transmittal
(with manual signatures) may be used to tender Shares.
3. A letter to stockholders of the Company from Mr. Sam Westover, the
President and Chief Executive Officer of the Company, together with a
Solicitation/Recommendation Statement on Schedule 14D-9 filed with the
Securities and Exchange Commission by the Company and mailed to the
stockholders of the Company, each recommending that stockholders accept the
Offer and tender their Shares.
4. The Notice of Guaranteed Delivery for Shares to be used to accept the
Offer if neither of the two procedures for tendering Shares set forth in
the Offer to Purchase can be completed on a timely basis.
5. A printed form of letter which may be sent to your clients for whose
accounts you hold Shares registered in your name, with space provided for
obtaining such clients' instructions with regard to the Offer.
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE
AT 11:59 P.M., NEW YORK CITY TIME, ON TUESDAY, JULY 9, 1996, UNLESS THE OFFER
IS EXTENDED.
Please note the following:
1. THE OFFER IS BEING MADE PURSUANT TO THE AMENDED AND RESTATED AGREEMENT
AND PLAN OF MERGER DATED AS OF JUNE 10, 1996, AMONG MERCK, MEDCO, THE
OFFEROR AND THE COMPANY. THE BOARD OF DIRECTORS OF THE COMPANY HAS
UNANIMOUSLY APPROVED THE OFFER AND THE MERGER AGREEMENT AND HAS DETERMINED
THAT THE TERMS OF THE OFFER AND THE MERGER AGREEMENT ARE FAIR TO AND IN THE
BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES IN THE OFFER.
2. The tender price is $3.00 per Share, net to the seller in cash,
without interest.
3. The Offer is being made for all of the outstanding Shares.
4. The Offer is conditioned upon (i) there being validly tendered by the
expiration date and not withdrawn that number of Shares representing at
least a majority of all outstanding shares of common stock of the Company
on a fully diluted basis and (ii) satisfaction of certain other terms and
conditions set forth in the Offer to Purchase.
5. Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth the Letter of Transmittal, stock
transfer taxes on the transfer of Shares pursuant to the Offer.
In order to take advantage of the Offer, (i) a duly executed and properly
completed Letter of Transmittal (or a manually signed facsimile thereof) and
any required signature guarantees or, in the case of a book-entry transfer, an
Agent's Message (as defined in the Offer to Purchase) or other required
documents should be sent to the Depositary and (ii) certificates representing
the tendered Shares or a timely Book-Entry Confirmation (as defined in the
Offer to Purchase) should be delivered to the Depositary in accordance with
the instructions set forth in the Offer.
If holders of Shares wish to tender, but it is impracticable for them to
forward their Certificates or other required documents or complete the
procedures for book-entry transfer prior to the Expiration Date, a tender may
be effected by following the guaranteed delivery procedures specified in
Section 3 of the Offer to Purchase.
<PAGE>
Neither the Offeror, the Parent nor any officer, director, stockholder,
agent or other representative of the Offeror will pay any fees or commissions
to any broker, dealer or other person (other than the Depositary and the
Information Agent as described in the Offer to Purchase) for soliciting
tenders of Shares pursuant to the Offer. The Offeror will, however, upon
request, reimburse you for customary mailing and handling expenses incurred by
you in forwarding any of the enclosed materials to your clients. The Offeror
will pay or cause to be paid any transfer taxes payable on the transfer of
Shares to it, except as otherwise provided in the Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
D. F. King & Co., Inc. 77 Water Street, New York, New York 10005, (212) 269-
5550 or (800) 549-6864.
Requests for copies of the enclosed materials may be directed to the
Information Agent at the above address and telephone number.
Very truly yours,
S ACQUISITION CORP.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE PARENT, THE OFFEROR, THE DEPOSITARY, THE
INFORMATION AGENT OR ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON BEHALF OF ANY OF
THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE
STATEMENTS CONTAINED THEREIN.
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
SYSTEMED INC.
AT
$3.00 NET PER SHARE
BY
S ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
MERCK-MEDCO MANAGED CARE, INC.
AND AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
MERCK & CO., INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
11:59 P.M., NEW YORK CITY TIME, ON TUESDAY, JULY 9, 1996,
UNLESS THE OFFER IS EXTENDED
June 11, 1996
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated June 11,
1996 (the "Offer to Purchase"), and the related Letter of Transmittal (which
together constitute the "Offer") relating to an offer by S Acquisition Corp.,
a Delaware corporation (the "Offeror"), and a wholly owned subsidiary of
Merck-Medco Managed Care, Inc., a Delaware corporation ("Medco"), and an
indirect wholly owned subsidiary of Merck & Co., Inc., a New Jersey
corporation ("Merck", together with Medco, the "Parent"), to purchase all
outstanding shares of common stock, par value $.001 per share (the "Shares"),
of Systemed Inc., a Delaware corporation (the "Company"), at a purchase price
of $3.00 per Share, net to the seller in cash, without interest, upon the
terms and subject to the conditions set forth in the Offer.
The Offer is being made in connection with the Amended and Restated
Agreement and Plan of Merger, dated as of June 10, 1996, among Merck, Medco,
the Offeror and the Company (the "Merger Agreement").
This material is being forwarded to you as the beneficial owner of Shares
carried by us in your account but not registered in your name.
A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND
PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU
FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY
US FOR YOUR ACCOUNT.
Accordingly, we request instructions as to whether you wish to tender any or
all of the Shares held by us for your account, upon the terms and conditions
set forth in the Offer.
<PAGE>
Please note the following:
1. THE OFFER IS BEING MADE PURSUANT TO THE AMENDED AND RESTATED AGREEMENT
AND PLAN OF MERGER DATED AS OF JUNE 10, 1996, AMONG MERCK, MEDCO, THE
OFFEROR AND THE COMPANY. THE BOARD OF DIRECTORS OF THE COMPANY HAS
UNANIMOUSLY APPROVED THE OFFER AND THE MERGER AGREEMENT AND HAS DETERMINED
THAT THE TERMS OF THE OFFER AND THE MERGER AGREEMENT ARE FAIR TO AND IN THE
BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES IN THE OFFER.
2. The tender price is $3.00 per Share, net to the seller in cash,
without interest.
3. The Offer is being made for all of the outstanding Shares.
4. The Offer and withdrawal rights will expire at 11:59 p.m., New York
City time, on Tuesday, July 9, 1996, unless the Offer is extended.
5. The Offer is conditioned upon (i) there being validly tendered by the
expiration date and not withdrawn that number of Shares representing at
least a majority of all outstanding shares of common stock of the Company
on a fully diluted basis and (ii) satisfaction of certain other terms and
conditions set forth in the Offer to Purchase.
6. Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in the Letter of Transmittal, stock
transfer taxes on the transfer of Shares pursuant to the Offer.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing, detaching and returning to us the instruction
form contained in this letter. An envelope to return your instruction to us is
enclosed. If you authorize tender of your Shares, all such Shares will be
tendered unless otherwise indicated in such instruction form. PLEASE FORWARD
YOUR INSTRUCTIONS TO US AS SOON AS POSSIBLE TO ALLOW US AMPLE TIME TO TENDER
YOUR SHARES ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
The Offer is made solely by the Offer to Purchase and the related Letters of
Transmittal and any supplements or amendments thereto. The Offer is not being
made to, nor will tenders be accepted from or on behalf of, holders of Shares
residing in any jurisdiction in which the making of the Offer or acceptance
thereof would not be in compliance with the securities laws of such
jurisdiction.
<PAGE>
INSTRUCTIONS WITH RESPECT TO
THE OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK,
OF
SYSTEMED INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase dated June 11, 1996 (the "Offer to Purchase"), and the related
Letter of Transmittal (which together constitute the "Offer") in connection
with the offer by S Acquisition Corp., a Delaware corporation (the "Offeror"),
and a wholly owned subsidiary of Merck-Medco Managed Care, Inc., a Delaware
corporation, and an indirect wholly owned subsidiary of Merck & Co., Inc., a
New Jersey corporation, to purchase, among other things, all outstanding
shares of common stock, par value $.001 per share ("Shares"), of Systemed
Inc., a Delaware corporation.
This will instruct you to tender to the Offeror the number of Shares
indicated below (or if no number is indicated below, all Shares) which are
held by you for the account of the undersigned, upon the terms and subject to
the conditions set forth in the Offer.
Number of shares of Common Stock to be Tendered:*
Account Number:
Date:
SIGN HERE
- ---------------------------------
- ---------------------------------
Signature(s)
- ---------------------------------
- ---------------------------------
(Print Name(s))
- ---------------------------------
(Print Address(es))
- ---------------------------------
(Area Code and Telephone Number(s))
- ---------------------------------
(Taxpayer Identification or
Social Security Number(s))
- --------
* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
SYSTEMED INC.
This form, or one substantially equivalent hereto, must be used to accept
the Offer (as defined below) if certificates for shares of common stock, par
value $.001 per share (the "Shares"), of Systemed Inc., a Delaware corporation
(the "Company"), are not immediately available or if the procedure for book-
entry transfer cannot be completed on a timely basis or time will not permit
all required documents to reach the Depositary on or prior to the Expiration
Date (as defined in the Offer to Purchase). Such form may be delivered by hand
or facsimile transmission, or mail to the Depositary. See Section 3 of the
Offer to Purchase, dated June 11, 1996 (the "Offer to Purchase").
THE DEPOSITARY FOR THE OFFER IS:
NORWEST BANK MINNESOTA, N.A.
Facsimile Transmission:
(612) 450-4163
Confirm by Telephone:
(612) 450-4064
By Mail: By Hand: By Overnight Courier:
Norwest Shareowner Norwest Shareowner Services Norwest Shareowner
Services 161 North Concord Exchange Services
P.O. Box 64858 2nd Floor 161 North Concord
St. Paul, MN 55164-0858 South St. Paul, MN 55075 Exchange
South St. Paul, MN 55075
or
Norwest Trust Company of
New York
3 New York Plaza
New York, NY 10004
----------------
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR
TRANSMISSION OF INSTRUMENTS VIA A FACSIMILE, OTHER THAN AS SET FORTH ABOVE
DOES NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal or an
Agent's Message and certificates for Shares to the Depositary within the time
period shown herein. Failure to do so could result in a financial loss to such
Eligible Institution.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to S Acquisition Corp., a Delaware
corporation, upon the terms and subject to the conditions set forth in the
Offer to Purchase, and the related Letter of Transmittal with respect to the
Shares (which together constitute the "Offer"), receipt of which is hereby
acknowledged, Shares of the Company, pursuant to the guaranteed delivery
procedure set forth in Section 3 of the Offer to Purchase.
Number of Shares: ___________________ SIGN HERE
_____________________________________
Certificate No(s) (if available): Name(s):
_____________________________________ _____________________________________
_____________________________________ _____________________________________
(Please Print)
If Shares will be tendered by book-
entry transfer: ____________________
Address: ____________________________
_____________________________________
Name of Tendering Institutions (Zip Code)
_____________________________________ Area Code and Telephone No.:
Account No.: _____________________ at _____________________________________
[_] The Depository Trust Company
Signature(s): _______________________
[_] Philadelphia Depository Trust _____________________________________
Company
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a bank, broker, dealer, credit union, savings association
or other entity which is a member in good standing of the Securities Transfer
Agents Medallion Program or a bank, broker, dealer, credit union, savings
association or other entity which is an "eligible guarantor institution," as
such term is defined in Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended, guarantees the delivery to the Depositary of the Shares
tendered hereby, together with a properly completed and duly executed Letter
of Transmittal (or manually signed facsimile(s) thereof) and any other
required documents, or an Agent's Message (as defined in the Offer to
Purchase) in the case of a book-entry delivery of Shares, all within three
Nasdaq/National Market System trading days of the date hereof.
Name of Firm: _______________________ Title: ______________________________
_____________________________________ Name: _______________________________
(Authorized Signature) (Please Print or Type)
Address: ____________________________ Area Code and Telephone No.: ________
DO NOT SEND CERTIFICATES FOR SHARES WITH THIS FORM
CERTIFICATES SHOULD BE SENT WITH LETTER OF TRANSMITTAL
Dated: __________________, 1996
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER. Social Security numbers have nine digits separated by two hyphens, i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen, i.e., 00-0000000. The table below will help determine the number to
give the payer.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF:
- --------------------------------------------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals (joint account) The actual owner
of the account
or, if combined
funds, any one
of the
individuals(1)
3. Husband and wife (joint account) The actual owner
of the account
or, if joint
funds, either
person(1)
4. Custodian account of a minor (Uniform Gift to Minors Act) The minor(2)
5. Adult and minor (joint account) The adult or, if
the minor is the
only
contributor, the
minor(1)
The ward, minor,
6. Account in the name of guardian or committee for a or incompetent
designated ward, minor, or incompetent person person(3)
7. a. The usual revocable savings trust account (grantor is The grantor-
also trustee) trustee(1)
b. So-called trust account that is not a legal or valid
trust under state law
8. Sole proprietorship account The owner(4)
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF:
- ------------------------------------------------------------------------------
<S> <C>
9. A valid trust, estate, or pension trust The legal entity
(Do not furnish
the identifying
number of the
personal
representative
or trustee
unless the legal
entity itself is
not designated
in the account
title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or educational organization The organization
account
12. Partnership account held in the name of the business The partnership
13. Association, club, or other tax-exempt organization The organization
14. A broker or registered nominee The broker or
nominee
15. Account with the Department of Agriculture in the name The public
of a public entity (such as a State or local government, entity
school district, or prison) that receives agricultural
program payments
</TABLE>
- --------------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your num-
ber, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of
the Social Security Administration or the Internal Revenue Service and apply
for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual re-
tirement plan.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a)
. An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
. An entity registered at all times under the Investment Company Act of 1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by indi-viduals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not pro-
vided your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to non-resident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
Exempt payees described above must still complete the Substitute Form W-9 en-
closed herewith to avoid possible erroneous backup withholding. FILE SUBSTI-
TUTE FORM W-9 WITH THE PAYER, REMEMBERING TO CERTIFY YOUR TAXPAYER IDENTIFICA-
TION NUMBER ON THE FORM AND WRITE "EXEMPT" ON THE FACE OF THE FORM.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.-- Section 6109 requires most recipients of dividend, in-
terest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are re-
quired to file tax returns. Beginning January 1, 1993, payers must generally
withhold 31% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer. Cer-
tain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. If you fail
to furnish your taxpayer identification number to a payer, you are subject to
a penalty of $50 for each such failure unless your failure is due to reason-
able cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. If you fail to
include any portion of an includible payment for interest, dividends, or pat-
ronage dividends in gross income and such failure is due to negligence, a pen-
alty of 20% is imposed on any portion of an under-payment attributable to that
failure.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Fal-sifying certifications or
affirmations may subject you to criminal penalties including fines and/or im-
prisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase dated June 11,
1996 and the related Letter of Transmittal and is being made to all holders of
Shares. The Purchaser is not aware of any state where the making of the Offer is
prohibited by administrative or judicial action pursuant to any valid state
statute. If the Purchaser becomes aware of any valid statute prohibiting the
making of the Offer or the acceptance of Shares pursuant thereto, the Purchaser
will make a good faith effort to comply with such state statute or seek to have
such statute declared inapplicable to the Offer. If, after such good faith
effort, the Purchaser cannot comply with such state statute, the Offer will not
be made to (nor will tenders be accepted from or on behalf of) the holders of
Shares in such state. In any jurisdiction where the securities, blue sky or
other laws require the Offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of the Purchaser by one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
Notice of Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
Systemed Inc.
at
$3.00 Net Per Share
by
S Acquisition Corp.
a wholly owned subsidiary
of
Merck-Medco Managed Care, Inc.
and an indirect wholly owned subsidiary
of
Merck & Co., Inc.
S Acquisition Corp., a Delaware corporation (the "Purchaser"), and a wholly
owned subsidiary of Merck-Medco Managed Care, Inc., a Delaware corporation
("Medco"), and an indirect wholly owned subsidiary of Merck & Co., Inc., a New
Jersey corporation ("Merck", together with Medco, the "Parent"), is offering to
purchase all outstanding shares of common stock, $.001 par value (the "Shares"),
of Systemed Inc., a Delaware corporation (the "Company"), at a price of $3.00
per Share, net to the seller in cash without interest thereon, upon the terms
and subject to the conditions set forth in the Offer to Purchase dated June 11,
1996 and the related Letter of Transmittal (which together constitute the
"Offer").
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 11:59 P.M., NEW YORK CITY TIME,
ON TUESDAY, JULY 9, 1996, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
The Offer is conditioned upon, among other things (i) there being validly
tendered by the expiration date and not withdrawn that number of shares of
common stock of Systemed Inc. which would represent at least a majority of the
outstanding Shares on a fully diluted basis and (ii) satisfaction of certain
other terms and conditions. See Section 15 of the Offer to Purchase.
<PAGE>
The Offer is being made pursuant to the Amended and Restated Agreement and
Plan of Merger, dated as of June 10, 1996 (the "Merger Agreement"), among Merck,
Medco, the Purchaser and the Company. The Merger Agreement provides that, among
other things, as soon as practicable after the purchase of Shares pursuant to
the Offer and the satisfaction of the other conditions set forth in the Merger
Agreement and in accordance with relevant provisions of the General Corporation
Law of the State of Delaware ("Delaware Law"), the Purchaser will be merged with
and into the Company (the "Merger"). Following the consummation of the Merger,
the Company will continue as the surviving corporation and will be a wholly
owned subsidiary of Medco and an indirect wholly owned subsidiary of Merck. At
the effective time of the Merger, each outstanding Share (other than Shares
owned by the Company as treasury stock, Shares owned by any subsidiary of the
Company, Shares owned by the Parent or the Purchaser or any subsidiary thereof,
or Shares with respect to which appraisal rights are properly exercised under
Delaware Law) will be converted into and represent the right to receive $3.00
(or any higher price that may be paid for each Share pursuant to the Offer) in
cash, without interest thereon.
The Board of Directors of the Company has unanimously approved the Offer,
the Merger and the Merger Agreement, has determined that the terms of each of
the Offer and the Merger and the terms of the Merger Agreement are fair to and
in the best interests of the Company's stockholders, and recommends that the
Company's stockholders accept the Offer and tender their Shares in the Offer.
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in of the Letter of Transmittal, transfer
taxes on the purchase of Shares pursuant to the Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares validly tendered and not properly
withdrawn as, if, and when the Purchaser gives oral or written notice to the
depositary (the "Depositary") of its acceptance of such Shares for payment.
Upon the terms and subject to the conditions of the Offer, payment for Shares
accepted pursuant to the Offer will be made by deposit of the purchase price
therefor with the Depositary, which will act as agent for tendering stockholders
for the purposes of receiving payments from the Purchaser and transmitting
payments to tendering stockholders whose Shares have theretofore been accepted
for payment. In all cases, payment for Shares purchased pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) the certificates
for such Shares or timely Book-Entry Confirmation (as defined in Section 2 of
the Offer to Purchase) of such Shares, if such procedure is available, into the
Depositary's account at The Depository Trust Company or the Philadelphia
Depository Trust Company pursuant to the procedures set forth in Section 3 of
the Offer to Purchase, (ii) the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed with all required signature guarantees or,
in the case of a book-entry transfer, an Agent's Message and (iii) all other
documents required by the Letter of Transmittal. Under no circumstances will
interest be paid on the purchase price for Shares to be paid by the Purchaser,
regardless of any delay in making such payment.
The term "Expiration Date" shall mean 11:59 p.m., New York City time, on
Tuesday July 9, 1996, unless and until the Purchaser, in accordance with the
terms of the Offer and the Merger Agreement, shall have extended the period of
time during which the Offer is open, in which event the term "Expiration Date"
shall mean the latest time and date at which the Offer, as so extended by the
Purchaser, shall expire. Subject to the terms of the Merger Agreement, the
Purchaser expressly reserves the right, in its sole discretion, at any time or
from time to time, to extend for any reason the period of time during which the
Offer is open, including the occurrence of any of the events specified in
Section 15 of the Offer to Purchase, by giving oral or written notice of such
extension to the Depositary. Any such extension will be followed by a public
announcement thereof by no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. During any such
extension, all Shares previously tendered and not withdrawn will remain subject
to the Offer, subject to the right of a tendering stockholder to withdraw such
stockholder's Shares. Without limiting the manner in which the Purchaser may
choose to make any public announcement, the Purchaser will have no obligation to
publish, advertise or otherwise communicate any such announcement other than by
issuing a press release to the Dow Jones News Service or as otherwise may be
required by law.
Except as otherwise provided below, tenders of Shares made pursuant to the
Offer are irrevocable. Shares tendered pursuant to the Offer may be withdrawn
any time prior to the Expiration Date and, unless theretofore accepted for
payment by the Purchaser pursuant to the Offer, may also be withdrawn at any
time after Friday, August 9, 1996 or such later date as may apply if the Offer
is extended. For a withdrawal to be effective, a written, telegraphic or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth below. Any such notice of
withdrawal must specify the name of the person who tendered the Shares to be
withdrawn, the number of Shares to be withdrawn and the name of the registered
holder, if different from that of the person who tendered such Shares. If
certificates evidencing Shares
<PAGE>
have been delivered or otherwise identified to the Depositary, then, prior to
the physical release of such certificates, the tendering stockholder must also
submit the serial numbers shown on the particular certificate evidencing the
Shares to be withdrawn, and the signature on the notice of withdrawal must be
guaranteed by an Eligible Institution, as defined in Section 3 of the Offer to
Purchase. If Shares have been tendered pursuant to the procedure for book-entry
transfer set forth in Section 3 of the Offer to Purchase any notice of
withdrawal must also specify the name and number of the account at the
applicable Book-Entry Transfer Facility (as defined in Section 2 of the Offer to
Purchase) to be credited with the withdrawn Shares. All questions as to the form
and validity (including time of receipt) of notices of withdrawal will be
determined by the Purchaser, in its sole discretion, whose determination shall
be final and binding on all parties. None of the Purchaser, the Parent, the
Depositary, the Information Agent or any other person will be under any duty to
give notification of any defects or irregularities in any notice of withdrawal
or incur any liability for failure to give any such notification. Any Shares
properly withdrawn will thereafter be deemed not validly tendered for purposes
of the Offer, but may be tendered at any time to the Expiration Date by
following any of the procedures described in Section 3 of the Offer to Purchase.
The Company has provided the Purchaser with the Company's stockholder list
and security position listings for the purpose of disseminating the Offer to
stockholders. The Offer to Purchase, the related Letter of Transmittal and any
relevant materials will be mailed to record holders of Shares whose names appear
on the Company's stockholder list and will be furnished, for subsequent
transmittal to beneficial owners of Shares, to brokers, dealers, commercial
banks, trust companies and similar persons whose names, or the names of whose
nominees appear on the Company's stockholder list or, if applicable, who are
listed as participants in a clearing agency's security position listing.
The information required to be disclosed by paragraph (e)(1)(vii) of Rule
14d-6 under the Securities Exchange Act of 1934, as amended, is contained in the
Offer to Purchase and is incorporated herein by reference.
The Offer to Purchase and the related Letter of Transmittal contain
important information which should be read carefully before any decision is made
with respect to the Offer.
Requests for copies of the Offer to Purchase, the related Letter of
Transmittal and other tender offer documents may be directed to the Information
Agent as set forth below, and copies will be furnished promptly at the
Purchaser's expense. Questions or requests for assistance may be directed to
the Information Agent as set forth below. Neither the Parent nor the Purchaser
will pay any fees or commissions to any broker or dealer or other person (other
than the Depositary and the Information Agent) in connection with the
solicitation of tenders of Shares pursuant to the Offer.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Toll Free (800) 549-6864
Banks and Brokerage Firms, please call:
(212) 269-5550
<PAGE>
MERCK-MEDCO MANAGED CARE TO ACQUIRE SYSTEMED
Montvale, NJ, April 29, 1996 - Merck-Medco Managed Care, Inc., a subsidiary of
Merck & Co., Inc., announced that it has reached a definitive agreement with
Systemed Inc. (NASDAQ:SYSM) to acquire Systemed in a merger for $3.00 per share
in cash for a total of approximately $67 million. The agreement has been
approved by the Boards of Directors of both Merck and Systemed and is expected
to be completed subject to regulatory reviews and the approval of Systemed's
shareholders.
Systemed, based in Torrance, California, develops and administers pharmacy
benefit programs for employers, insurers and governmental agencies throughout
the United States. It operates a mail service pharmacy located in Des Moines,
Iowa, and a claims processing operation in Cleveland, Ohio. In 1995, the company
had sales of $152 million and net income of $4.3 million.
"Systemed brings Merck-Medco Managed Care important new customers who now
will benefit from the significant investments we've made in advanced clinical
and health-management programs since our acquisition by Merck-investments which
enable us to provide patients with the safest, most effective and economical
pharmaceutical care," said Per G.H. Lofberg, President, Merck-Medco Managed
Care.
"We believe that combining our operations with those of Merck-Medco Managed
Care is in the best long-term interests of our shareholders, customers and
employees," said Mr. Sam Westover, President and Chief Executive Officer,
Systemed. "Merck-Medco shares our commitment to providing patients with
high-quality pharmaceutical care, while at the same time helping benefit
sponsors reduce overall health-care costs."
Systemed said a meeting will be scheduled for its shareholders to vote on
the proposed acquisition. The acquisition is also subject to Hart-Scott-Rodino
antitrust clearance and other customary conditions.
Merck-Medco Managed Care, Inc., is the leading pharmacy benefit manager in
the United States. It serves employers, unions, health maintenance
organizations, Blue
<PAGE>
Cross/Blue Shield plans and insurance companies, providing pharmaceutical
benefits to more than 47 million Americans.
###
<PAGE>
EXHIBIT 99.(A)(9)
Systemed and Merck-Medco Amend Merger Agreement
Merck-Medco Commences Tender Offer
Torrance, California and Montvale, New Jersey, June 11, 1996 -- Systemed Inc.
(NASDAQ: SYSM) and Merck-Medco Managed Care, Inc., a subsidiary of Merck & Co.,
Inc. (NYSE: MRK), announced today that they have amended their merger agreement
and that a subsidiary of Merck-Medco has commenced a tender offer of $3 per
share in cash for all outstanding shares of Systemed Inc. Common Stock.
Stockholder material will be distributed shortly, and stockholders will be given
twenty business days from the date of this release to tender their shares for
the $3 in cash indicated in the announcement of the merger. The Board of
Directors of Systemed believes that the Merck-Medco offer is fair to, and in the
best interests of, the Company's stockholders and recommends that the Company
stockholders tender their shares pursuant to the Merck-Medco offer. D.F. King &
Co., Inc. will be acting as information agent for this offer, and can be reached
at (800) 549-6864 to answer any specific questions concerning the tender offer
and/or ensuing cash distributions.
# # # # #
<PAGE>
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MERCK & CO., INC.
MERCK-MEDCO MANAGED CARE, INC.
S ACQUISITION CORP.
AND
SYSTEMED INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
ARTICLE I THE OFFER AND THE MERGER........................................ 1
SECTION 1.01 The Offer................................................ 1
SECTION 1.02 Company Actions.......................................... 2
SECTION 1.03 The Merger............................................... 3
SECTION 1.04 Effective Time........................................... 3
SECTION 1.05 Effect of the Merger..................................... 3
SECTION 1.06 Certificate of Incorporation; By-Laws.................... 4
SECTION 1.07 Directors and Officers................................... 4
ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES............. 4
SECTION 2.01 Conversion of Securities................................. 4
SECTION 2.02 Payment for Shares....................................... 4
SECTION 2.03 Stock Transfer Books..................................... 5
SECTION 2.04 Stock Options, Payment Rights............................ 6
SECTION 2.05 Dissenting Shares........................................ 6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY................. 7
SECTION 3.01 Organization and Qualification; Subsidiaries............. 7
SECTION 3.02 Certificates of Incorporation and By-Laws................ 7
SECTION 3.03 Capitalization........................................... 7
SECTION 3.04 Authority................................................ 9
SECTION 3.05 No Conflict; Required Filings and Consents............... 9
SECTION 3.06 Permits; Compliance...................................... 10
SECTION 3.07 Reports; Financial Statements............................ 10
SECTION 3.08 Absence of Certain Changes or Events..................... 11
SECTION 3.09 Absence of Litigation.................................... 11
SECTION 3.10 Employee Benefit Plans, Labor Matters.................... 12
SECTION 3.11 Taxes.................................................... 13
SECTION 3.12 Disclosure............................................... 13
SECTION 3.13 Certain Business Matters................................. 13
SECTION 3.14 Opinion of Financial Advisor............................. 13
SECTION 3.15 Vote Required............................................ 14
SECTION 3.16 Brokers.................................................. 14
SECTION 3.17 Certain Agreements....................................... 14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND PARENT SUB........ 15
SECTION 4.01 Organization and Qualification; Subsidiaries............. 15
SECTION 4.02 Certificate of Incorporation and By-Laws................. 15
SECTION 4.03 Capitalization........................................... 15
SECTION 4.04 Authority................................................ 15
SECTION 4.05 No Conflict; Required Filings and Consents............... 16
SECTION 4.06 Permits; Compliance...................................... 16
SECTION 4.07 Absence of Litigation.................................... 17
SECTION 4.08 Ownership of Parent Sub; No Prior Activities............. 17
SECTION 4.09 Brokers.................................................. 17
ARTICLE V COVENANTS....................................................... 17
SECTION 5.01 Affirmative Covenants of the Company..................... 17
SECTION 5.02 Negative Covenants of the Company........................ 18
SECTION 5.03 Access and Information................................... 20
SECTION 5.04 Confidentiality.......................................... 20
SECTION 5.05 Rights Agreement......................................... 20
ARTICLE VI ADDITIONAL AGREEMENTS.......................................... 20
SECTION 6.01 Meeting of Stockholders.................................. 20
</TABLE>
i
<PAGE>
<TABLE>
<C> <S> <C>
SECTION 6.02 Proxy Statement........................................ 21
SECTION 6.03 Board Representation................................... 22
SECTION 6.04 Appropriate Action; Consents; Filings.................. 22
SECTION 6.05 Public Announcements................................... 23
SECTION 6.06 Indemnification of Directors and Officers.............. 23
SECTION 6.07 Obligations of Parent Sub.............................. 24
SECTION 6.08 Supplemental Indentures; Assumption of Certain
Obligations to Issue Company Common Stock............. 24
SECTION 6.09 Employment Agreements and Benefit Plans................ 24
ARTICLE VII CLOSING CONDITIONS.......................................... 25
Conditions to Obligations of Each Party Under This
SECTION 7.01 Agreement............................................. 25
SECTION 7.02 Additional Conditions to Obligations of Parent......... 25
SECTION 7.03 Additional Conditions to Obligations of the Company.... 25
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER.......................... 26
SECTION 8.01 Termination............................................ 26
SECTION 8.02 Effect of Termination.................................. 27
SECTION 8.03 Amendment.............................................. 27
SECTION 8.04 Waiver................................................. 27
SECTION 8.05 Fees, Expenses and Other Payments...................... 27
ARTICLE IX GENERAL PROVISIONS........................................... 28
Effectiveness of Representations, Warranties and
SECTION 9.01 Agreements............................................ 28
SECTION 9.02 Notices................................................ 29
SECTION 9.03 Certain Definitions.................................... 29
SECTION 9.04 Conveyance Taxes....................................... 30
SECTION 9.05 Headings............................................... 30
SECTION 9.06 Severability........................................... 30
SECTION 9.07 Entire Agreement....................................... 30
SECTION 9.08 Assignment............................................. 31
SECTION 9.09 Parties in Interest.................................... 31
SECTION 9.10 Failure or Indulgence Not Waiver; Remedies Cumulative.. 31
SECTION 9.11 Governing Law.......................................... 31
SECTION 9.12 Counterparts........................................... 31
</TABLE>
ii
<PAGE>
Amended and Restated Agreement and Plan of Merger dated as of June 10, 1996
(this "Agreement"), among Merck & Co., Inc., a New Jersey corporation ("M"),
Merck-Medco Managed Care, Inc., a Delaware corporation ("MC", together with M,
"Parent"), S Acquisition Corp., a Delaware corporation ("Parent Sub") and a
wholly owned subsidiary of Parent, and Systemed Inc., a Delaware corporation
(the "Company").
Whereas, Parent, Parent Sub and the Company entered into an Agreement and
Plan of Merger, dated as of April 28, 1996 (the "Initial Agreement");
Whereas, the parties herein desire to amend the Initial Agreement and
accordingly the parties agree to amend and restate the Initial Agreement in
its entirety to read as set forth below;
Whereas, the respective Boards of Directors of Parent, Parent Sub and the
Company have each approved the acquisition of the Company on the terms and
subject to the conditions set forth herein;
Whereas, in furtherance of such acquisition, Parent agrees to cause Parent
Sub to make a tender offer to purchase all the issued and outstanding shares
of Common Stock, par value $0.001 per share, of the Company (the "Company
Common Stock"), at a price of $3.00 per share net to the seller in cash,
without interest, upon the terms and subject to the conditions set forth
herein (such tender offer, as it may be amended or supplemented from time to
time as permitted under this Agreement, the "Offer"); and the Board of
Directors of the Company has adopted resolutions approving the Offer and
recommending that the Company's stockholders accept the Offer;
Whereas, the Company, upon the terms and subject to the conditions of this
Agreement and in accordance with the General Corporation Law of the State of
Delaware ("Delaware Law"), will merge with Parent Sub (the "Merger");
Whereas, the Board of Directors of the Company has determined that the
Merger is fair to, and in the best interests of, the Company and the holders
of Company Common Stock and has approved and adopted this Agreement and the
transactions contemplated hereby, and recommended approval and adoption of
this Agreement by the stockholders of the Company;
Whereas, the Board of Directors of Parent has approved and adopted this
Agreement and the transactions contemplated hereby;
Now, Therefore, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
The Offer and the Merger
Section 1.01 The Offer
(a) Sbject to the provisions of this Agreement, as promptly as practicable
(but in no event later than five business days after the date of this
Agreement), Parent Sub shall, and Parent shall cause Parent Sub to, commence,
within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Offer at a cash price of $3.00 per share,
net to the seller in cash, without interest. The obligation of Parent Sub to,
and of Parent to cause Parent Sub to, consummate the Offer and accept for
payment and pay for any shares of Common Stock tendered shall be subject to
the satisfaction of the conditions set forth in Annex I and to the terms and
conditions of this Agreement.
(b) On the date of commencement of the Offer, Parent and Parent Sub shall
file with the Securities and Exchange Commission (the "SEC") with respect to
the Offer a Tender Offer Statement on Schedule l4D-l (as
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amended and supplemented from time to time, the "Schedule 14D-1"), which shall
comply in all material respects with the provisions of applicable federal
securities laws, and shall contain the offer to purchase relating to the Offer
and the form of the related letter of transmittal (which documents, as amended
or supplemented from time to time, are referred to collectively as the "Offer
Documents"). Parent shall deliver copies of the proposed forms of the Schedule
14D-1 and the Offer Documents to the Company within a reasonable time prior to
the commencement of the Offer for review and comment by the Company and its
counsel (who shall provide any comments thereon as soon as practicable).
Parent agrees to provide in writing to the Company and its counsel, promptly
after receipt thereof, any comments that either Parent, Parent Sub or their
counsel may receive from the SEC or its staff with respect to the Schedule
14D-1 or the Offer Documents. Parent and Parent Sub shall promptly correct any
information in the Schedule l4D-l or the Offer Documents that shall become
false or misleading in any material respect, and shall take all steps
necessary to cause the Schedule 14D-1 or the Offer Documents as so corrected
to be filed with the SEC and disseminated to the stockholders of the Company
as and to the extent required by applicable laws.
(c) The Offer shall initially expire 20 business days after the date of its
commencement, unless this Agreement is terminated in accordance with Article
VIII, in which case the Offer (whether or not previously extended in
accordance with the terms hereof) shall expire on such date of termination.
Neither Parent nor Parent Sub shall, without the prior written consent of the
Company, decrease the price per share of Company Common Stock payable in the
Offer, change the form of consideration payable in the Offer, decrease the
number of shares of Company Common Stock sought pursuant to the Offer, change
or impose additional conditions to the Offer or otherwise amend the Offer in
any manner adverse to the Company's stockholders. Notwithstanding the
foregoing, Parent Sub may, without the consent of the Company, extend the
Offer (i) if at the then scheduled expiration date of the Offer any of the
conditions to Parent Sub's obligation to accept for payment and pay for shares
of Company Common Stock set forth in Annex I hereto shall not be satisfied or
waived, until such time as such conditions are satisfied or waived; (ii) for
an aggregate period of not more than ten business days beyond the initial
expiration date of the Offer if all conditions have been satisfied but less
than 90% of the outstanding shares of Company Common Stock have been validly
tendered and not withdrawn (not including shares covered by notices of
guaranteed delivery); and (iii) for any period required by any rule,
regulation, interpretation or position of the SEC or the staff applicable to
the Offer. Assuming the prior satisfaction or waiver of the conditions of the
Offer set forth in Annex I hereto and subject to clauses (ii) and (iii) of the
preceding sentence, Parent Sub shall, and Parent shall cause Parent Sub to,
accept for payment and pay for shares of Company Common Stock validly tendered
and not withdrawn pursuant to the Offer as soon as legally permitted after the
commencement thereof.
(d) Parent shall provide or cause to be provided to Parent Sub on a timely
basis the funds necessary to purchase any shares of Company Common Stock that
Parent Sub becomes obligated to purchase pursuant to the Offer and shall be
liable on a direct and primary basis for the performance by Parent Sub of its
obligations under this Agreement.
Section 1.02 Company Actions.
(a) The Company hereby approves of and consents to the Offer and represents
that (i) the Board of Directors of the Company, at a meeting duly called and
held, has adopted resolutions (A) determining that this Agreement and the
terms of each of the Offer and the Merger are fair to and in the best
interests of the Company and its stockholders, (B) approving the Offer, the
Merger and this Agreement and acknowledging that such approval is effective
for purposes of Section 203 of Delaware Law and (C) recommending acceptance of
the Offer and approval of the Merger and this Agreement by the Company's
stockholders and (ii) Morgan, Stanley & Co. Incorporated ("Morgan Stanley")
has delivered to the Board of Directors of the Company its opinion that the
proposed consideration to be received by the Company's stockholders pursuant
to the Offer and the Merger is fair to such stockholders from a financial
point of view. The Company hereby consents to the inclusion in the Offer
Documents of the recommendation of the Board of Directors of the Company
described in the first sentence of this Section 1.02(a) and Morgan Stanley has
consented to inclusion of its opinion in the Schedule 14D-9 (as defined in
Section 1.02(b)).
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(b) The Company shall file with the SEC on the date of commencement of the
Offer a Solicitation/Recommendation Statement on Schedule 14D-9 (as amended
and supplemented from time to time, the "Schedule 14D-9") containing such
recommendations of the Board of Directors of the Company with respect to the
Offer and the Merger and shall disseminate the Schedule 14D-9 to stockholders
of the Company as required by Rule 14d-9 promulgated under the Exchange Act.
The Schedule 14D-9 shall comply in all material respects with the provisions
of applicable federal securities laws. The Company shall deliver copies of the
proposed form of the Schedule 14D-9 to Parent within a reasonable time prior
to the filing thereof with the SEC for review and comment by Parent and its
counsel (who shall provide any comments thereon as soon as practicable). The
Company agrees to provide in writing to Parent and its counsel, promptly after
receipt thereof, any comments that the Company or its counsel may receive from
the SEC or its staff with respect to the Schedule l4D-9. The Company shall
promptly correct any information in the Schedule l4D-9 that shall become false
or misleading in any material respect, and shall take all steps necessary to
cause the Schedule 14D-9 as so corrected to be filed with the SEC and
disseminated to the stockholders of the Company as and to the extent required
by applicable laws.
(c) In connection with the Offer, the Company shall promptly furnish Parent
with (or cause Parent to be furnished with) mailing labels, security position
listings and any available listing or computer file containing the names and
addresses of the record holders of the shares of Company Common Stock as of a
recent date, and of those persons becoming record holders after such date, and
shall furnish Parent with such information and assistance as Parent or its
agents may reasonably request in communicating the Offer to the stockholders
of the Company. Subject to the requirements of applicable law, and except for
such steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Merger, Parent and Parent Sub shall, and
shall cause each of their affiliates to, hold in confidence the information
contained in any of such labels, listings and files, use such information only
in connection with the Offer and the Merger, and, if this Agreement is
terminated, deliver to the Company all copies of such information or extracts
therefrom then in their possession or under their control.
Section 1.03 The Merger.
Upon the terms and subject to the conditions set forth in this Agreement,
and in accordance with Delaware Law, at the Effective Time (as defined in
Section 1.04), Parent Sub shall be merged with and into the Company. As a
result of the Merger, the separate corporate existence of Parent Sub shall
cease and the Company shall continue as the surviving corporation of the
Merger (the "Surviving Corporation"). The name of the Surviving Corporation
shall be Systemed, Inc.
Section 1.04 Effective Time.
As promptly as practicable after the satisfaction or, if permissible, waiver
of the conditions set forth in Article VII, the parties hereto shall cause the
Merger to be consummated by filing a certificate of merger (the "Certificate
of Merger") with the Secretary of State of the State of Delaware, in such form
as required by, and executed in accordance with the relevant provisions of,
Delaware Law (the date and time of such filing being the "Effective Time").
Section 1.05 Effect of the Merger.
At the Effective Time, the effect of the Merger shall be as provided in the
applicable provisions of Delaware Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, except as otherwise
provided herein, all the property, rights, privileges, powers and franchises
of Parent Sub and the Company shall vest in the Surviving Corporation, and all
debts, liabilities and duties of Parent Sub and the Company shall become the
debts, liabilities and duties of the Surviving Corporation.
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Section 1.06 Certificate of Incorporation; By-Laws.
At the Effective Time, the Certificate of Incorporation and the By-Laws of
Parent Sub, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation and the By-Laws of the Surviving Corporation.
Section 1.07 Directors and Officers.
The directors of Parent Sub immediately prior to the Effective Time shall be
the initial directors of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and By-Laws of the Surviving
Corporation, and the officers of the Company immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation, in
each case until their respective successors are duly elected or appointed and
qualified.
ARTICLE II
Conversion of Securities; Exchange of Certificates
Section 2.01 Conversion of Securities.
At the Effective Time, by virtue of the Merger and without any action on the
part of Parent Sub, the Company or the holders of any of the following
securities:
(a) Subject to the other provisions of this Section 2.01, each share of
Company Common Stock issued and outstanding immediately prior to the
Effective Time (excluding any treasury shares, shares held by Parent or any
direct or indirect wholly owned subsidiary of Parent and Dissenting Shares
(as defined in Section 2.05)) shall be converted into the right to receive
an amount in cash, without interest, equal to the price per share of
Company Common Stock paid pursuant to the Offer (the "Merger
Consideration").
(b) All such shares of Company Common Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease
to exist, and each certificate previously evidencing any such shares shall
thereafter represent the right to receive the Merger Consideration. The
holders of such certificates previously evidencing such shares of Company
Common Stock outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such shares of Company Common
Stock except as otherwise provided herein or by law. Such certificates
previously evidencing shares of Company Common Stock shall be exchanged for
the Merger Consideration upon the surrender of the certificates
representing such shares.
(c) Each share of Company Common Stock held in the treasury of the
Company and each share of Company Common Stock owned by Parent or any
direct or indirect wholly owned subsidiary of Parent or of the Company
immediately prior to the Effective Time shall be canceled and extinguished
and no payment shall be made with respect thereto.
(d) Each share of capital stock of Parent Sub issued and outstanding
immediately prior to the Effective Time shall be converted into and
exchangeable for 23,000 (or such lesser number as Parent may elect by
notice in writing to the Company) shares of the common stock, par value
$.001, of the Surviving Corporation.
Section 2.02 Payment for Shares.
(a) Prior to the Effective Time, Parent shall authorize one or more
commercial banks (acceptable to the Company) organized under the laws of the
United States or any state thereof with capital, surplus and undivided profits
of at least $500,000,000 to act as Paying Agent hereunder (the "Paying
Agent"). When and as needed, Parent shall make available to the Paying Agent
sufficient funds to make the payments pursuant to Section 2.01 hereof to
holders (other than Parent Sub or any of its subsidiaries) of shares of
Company Common Stock that are issued and outstanding immediately prior to the
Effective Time (such amounts being hereinafter referred to
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as the "Exchange Fund"), and to make the appropriate cash payments, if any, to
holders of Dissenting Shares. The Paying Agent shall, pursuant to irrevocable
instructions, make the payments provided for in the preceding sentence out of
the Exchange Fund. The Exchange Fund shall not be used for any other purpose,
except as provided in this Agreement.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, Parent will instruct the Paying Agent to mail to each holder
of record of a certificate or certificates which immediately prior to the
Effective Time evidenced outstanding shares of Company Common Stock (other
than Dissenting Shares) (the "Certificates"), (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Paying Agent and shall be in such form and have such other
provisions as Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for payment in cash
therefor. Upon surrender of a Certificate for cancellation to the Paying Agent
together with such letter of transmittal, duly executed, and such other
customary documents as may be required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in exchange therefor
cash in an amount equal to the product of the number of shares of Company
Common Stock represented by such Certificate multiplied by the Merger
Consideration, and the Certificate so surrendered shall forthwith be
cancelled. In the event of a transfer of ownership of shares of Company Common
Stock which is not registered in the transfer records of the Company, cash may
be paid in accordance with this Article II to a transferee if the Certificate
evidencing such shares of Company Common Stock is presented to the Paying
Agent, accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 2.02, each Certificate
shall represent for all purposes after the Effective Time only the right to
receive upon such surrender the Merger Consideration in cash multiplied by the
number of shares of Company Common Stock evidenced by such Certificate,
without any interest thereon.
(c) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of shares of Company Common Stock for six
months after the Effective Time shall be delivered to Parent, upon demand, and
any holders of shares of Company Common Stock who have not theretofore
complied with this Article II shall thereafter look only to Parent for payment
of their claim for the Merger Consideration to which they are entitled
pursuant to this Agreement.
(d) Withholding Rights. Parent shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement to any holder
of shares of Company Common Stock such amounts as Parent 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 by
Parent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of Company Common
Stock in respect of which such deduction and withholding was made by Parent.
(e) No Liability. Neither Parent nor the Surviving Corporation shall be
liable to any holder of shares of Company Common Stock for any cash or cash
from the Exchange Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
Section 2.03 Stock Transfer Books.
At the Effective Time, the stock transfer books of the Company shall be
closed and there shall be no further registration of transfers of shares of
Company Common Stock thereafter on the records of the Company. On or after the
Effective Time, any certificates presented to the Paying Agent or Parent for
any reason shall be converted into the Merger Consideration.
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Section 2.04 Stock Options, Payment Rights.
As soon as practicable following the date of this Agreement, the Board of
Directors of the Company (or, if appropriate, any committee administering the
Employee Option Plans (defined in Section 3.03(a)(i)) shall (except to the
extent that Parent and the holder of a Stock Option otherwise agree prior to
the Effective Time) adopt such resolutions or take such other actions as may
be required to provide that, at the Effective Time, each Stock Option (as
defined in Section 3.03(a)(i)) outstanding immediately prior to the Effective
Time of the Merger shall:
(a) if such Stock Option is vested before or as a consequence of the
Merger and exercisable and the holder of such Stock Option shall have
elected by written notice to Parent prior to the date five (5) business
days prior to the Effective Time to receive the payment contemplated by
this clause (a), be cancelled in exchange for a payment from the Surviving
Corporation (subject to any applicable withholding taxes) equal to the
excess of the Merger Consideration over the exercise price per share of
Company Common Stock subject to such Stock Option, payable in cash
immediately following the Effective Time of the Merger; provided, however,
that with respect to any person subject to Section 16(a) of the Exchange
Act any such amount to be paid shall be paid as soon as practicable after
the first date payment can be made without liability for such person under
Section 16(b) of the Exchange Act; or
(b) with respect to any Stock Option not cancelled pursuant to clause (a)
above, be deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under such Stock Option, the number of shares
of common stock, no par value per share, of M ("M Common Stock") equal to
the product of (1) the number of shares of Company Common Stock issuable
upon exercise of such Option and (2) the Merger Consideration divided by
the average of the closing sales prices of M Common Stock on the New York
Stock Exchange for the ten (10) consecutive days immediately prior to and
including the day preceding the Effective Time, at a price per share equal
to (1) the aggregate exercise price for the shares of Company Common Stock
otherwise purchasable pursuant to such Stock Option divided by (2) the
number of shares of M Common Stock issuable per share of Company Common
Stock upon exercise of such Option set forth above, provided, however, that
in the case of any option to which Sections 422 and 423 of the Code applies
by reason of its qualification under any of Sections 422-424 of the Code
("qualified stock options"), M shall use reasonable efforts to cause the
option price, the number of shares purchasable pursuant to such option and
the terms and conditions of exercise of such option to be determined in
order to comply with Section 424(a) of the Code.
M shall (i) reserve for issuance the number of shares of M Common Stock that
will become issuable upon the exercise of such Stock Options pursuant to this
Section 2.04 and (ii) at the Effective Time, execute a document evidencing the
assumption by M of the Company's obligations with respect thereto under this
Section 2.04. As soon as practicable after the Effective Time, M shall file a
registration statement on Form S-8 (or any successor form), or another
appropriate form with respect to the shares of M Common Stock subject to such
options and shall use its best efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as
such options remain outstanding.
Section 2.05 Dissenting Shares.
Notwithstanding any other provisions of this Agreement to the contrary,
shares of Company Common Stock that are outstanding immediately prior to the
Effective Time and which are held by stockholders who shall have not voted in
favor of the Merger or consented thereto in writing and who shall have
demanded properly in writing appraisal for such shares in accordance with
Section 262 of Delaware Law (collectively, the "Dissenting Shares") shall not
be converted into or represent the right to receive the Merger Consideration.
Such stockholders shall be entitled to receive payment of the appraised value
of such shares of Company Common Stock held by them in accordance with the
provisions of such Section 262, except that all Dissenting Shares held by
stockholders who shall have failed to perfect or who effectively shall have
withdrawn or lost their rights to appraisal of such shares of Company Common
Stock under such Section 262 shall thereupon be deemed to have been converted
into and to have become exchangeable, as of the Effective Time, for the right
to receive, without
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any interest thereon, the Merger Consideration, upon surrender, in the manner
provided in Section 2.02, of the certificate or certificates that formerly
evidenced such shares of Company Common Stock.
ARTICLE III
Representations and Warranties of the Company
Except as set forth in the Disclosure Schedule delivered by the Company to
Parent concurrently with the execution of the Initial Agreement (the "Company
Disclosure Schedule"), which shall identify exceptions by specific Section
references, the Company hereby (which, for purposes of this Article III, shall
be deemed to be pursuant to the Initial Agreement and as if this Amended and
Restated Agreement had never been executed) represents and warrants to Parent
that:
Section 3.01 Organization and Qualification; Subsidiaries.
Each of the Company and its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation or organization, has all requisite power and authority to
own, lease and operate its properties and to carry on its business as it is
now being conducted and is duly qualified and in good standing to do business
in each jurisdiction in which the nature of the business conducted by it or
the ownership or leasing of its properties makes such qualification necessary,
other than where the failure to be so duly organized, validly existing and in
good standing, or to have such power and authority, or to be duly qualified
and in good standing, as the case may be, would not have a Company Material
Adverse Effect. The term "Company Material Adverse Effect" as used in this
Agreement shall mean any change or effect that, individually or when taken
together with all other such changes or effects, would be, or would be
reasonably likely to be, materially adverse to the financial condition,
assets, liabilities, business or operations of the Company and its
subsidiaries, taken as a whole. Section 3.01 of the Company Disclosure
Schedule sets forth, as of the date of this Agreement, a true and complete
list of all the Company's directly or indirectly owned subsidiaries, together
with (A) the jurisdiction of incorporation of each subsidiary and the
percentage of each subsidiary's outstanding capital stock or other equity
interests owned by the Company or another subsidiary of the Company, and (B)
indication of whether each such subsidiary is a "Significant Subsidiary" as
defined in Section 9.03(f). There are no partnerships or joint venture
arrangements or other business entities in which the Company or any subsidiary
of the Company owns an equity interest that is material to the business of the
Company and its subsidiaries, taken as a whole.
Section 3.02 Certificates of Incorporation and By-Laws.
The Company has heretofore furnished to Parent complete and correct copies
of the Certificates of Incorporation and the By-Laws or the equivalent
organizational documents, in each case as amended or restated, of the Company
and its subsidiaries. Neither the Company nor any of its subsidiaries is in
violation of any of the provisions of its Certificate of Incorporation or By-
Laws.
Section 3.03 Capitalization.
(a) The authorized capital stock of the Company consists of 30,000,000
shares of Company Common Stock and 2,000,000 shares of 8% Convertible
Preferred Stock, par value $.001 (the "Convertible Preferred"). As of April
17, 1996, (i) 22,324,773 shares of Company Common Stock were issued and
outstanding, all of which are duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights created by statute, the
Company's Certificate of Incorporation or By-Laws or any agreement to which
the Company is a party or is bound; (ii) 161,325 shares of Convertible
Preferred were issued and outstanding, (iii) 3,454,275 shares of Company
Common Stock were reserved for future issuance pursuant to (1) outstanding
employee stock options (the "Company Stock Options") granted pursuant to the
following plans: the Company's 1986 Employee Non Qualified Stock Option Plan,
the Company's 1987 Employee Stock Option Plan, the Company's 1993 Non-Employee
Director Stock Option Plan and the Company's 1993 Employee Stock Option Plan
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(collectively, the "Employee Option Plans"), and (2) outstanding stock options
granted to certain directors and key employees of the Company outside of any
Employee Option Plans (the "Executive Stock Options," together with the
Company Stock Options, collectively, the "Stock Options"); (iv) 375,234 shares
of Company Common Stock were reserved for issuance pursuant to the Company's
1990 Employee Stock Purchase Plan; (v) 1,073,253 shares of Company Common
Stock were reserved for future issuance pursuant to the Company's 10% Senior
Secured Convertible Notes due 2002 ("Convertible Notes"); (vi) 143,750 shares
were reserved for issuance in connection with warrants to purchase Company
Common Stock (the "Warrants"); and (vii) 217,789 shares of Company Common
Stock were reserved for issuance pursuant to the Convertible Preferred. Except
as described in this Section 3.03 or in Section 3.03 of the Company Disclosure
Schedule, as of the date of this Agreement, no other shares of Company capital
stock are issued and outstanding and no shares of Company Common Stock are
reserved for any other purpose. Between April 17, 1996 and the date of this
Agreement, no shares of Company Common Stock have been issued by the Company,
except pursuant to the exercise of Stock Options, or Warrants or the
conversion of Convertible Notes or Convertible Preferred prior to the date of
this Agreement, in each case in accordance with their terms. Since April 17,
1996, the Company has not granted any options in, or other rights to purchase,
shares of Company Common Stock or Convertible Preferred. The Company has
outstanding preferred stock purchase rights of the Company (the "Rights")
issued pursuant to the Rights Agreement, dated August 17, 1994, between the
Company and the First National Bank of Boston (the "Company Rights
Agreement"). Each of the outstanding shares of capital stock of, or other
equity interests in, each of the Company and its subsidiaries is duly
authorized and validly issued, and, in the case of shares of capital stock,
fully paid and nonassessable, and except as disclosed in Section 3.03 of the
Company Disclosure Schedule, such shares or other equity interests owned by
the Company or its subsidiaries are owned free and clear of all security
interests, liens, claims, pledges, voting rights, charges or other
encumbrances of any nature whatsoever. Neither the execution, delivery, and
performance of this Agreement nor the consummation of the transactions
contemplated hereby will result in any change in the conversion price,
conversion ratio, exchange ratio or other similar term of any outstanding
security (including any preferred stock or convertible debt security) of the
Company or any of its subsidiaries.
(b) Except as set forth in Section 3.03(a) above, there are no options,
warrants or other rights (including registration rights), agreements,
arrangements or commitments of any character to which the Company or any of
its subsidiaries is a party relating to the issued or unissued capital stock
of the Company or any of its subsidiaries or obligating the Company or any of
its subsidiaries to grant, issue or sell any shares of the capital stock of
the Company or any of its subsidiaries, by sale, lease, license or otherwise.
Except as set forth in Section 3.03 of the Company Disclosure Schedule, there
are no obligations, contingent or otherwise, of the Company or any of its
subsidiaries to (x) repurchase, redeem or otherwise acquire any shares of
Company Common Stock or Company preferred stock, or the capital stock or other
equity interests of any subsidiary of the Company or (y) (other than advances
to subsidiaries in the ordinary course of business) provide material funds to,
or make any material investment in (whether in the form of a loan, capital
contribution or otherwise), or provide any guarantee with respect to the
obligations of, any subsidiary of the Company or any other person. Neither the
Company nor any of its subsidiaries directly or indirectly owns, or has agreed
to purchase or otherwise acquire, any capital stock of, or any interest
convertible into or exchangeable or exercisable for any capital stock of, any
corporation, partnership, joint venture or other business association or
entity (other than the subsidiaries of the Company set forth in Section 3.01
of the Company Disclosure Schedule). Except as set forth in Section 3.03 of
the Company Disclosure Schedule and except for any agreements, arrangements or
commitments between the Company and its subsidiaries or between such
subsidiaries, there are no agreements, arrangements or commitments of any
character (contingent or otherwise) pursuant to which any person is or may be
entitled to receive any payment based on the revenues or earnings, or
calculated in accordance therewith, of the Company or any of its subsidiaries.
There are no voting trusts, proxies or other agreements or understandings to
which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries is bound with respect to the voting of any
shares of capital stock of the Company or any of its subsidiaries.
(c) The Company has made available to Parent complete and correct copies of
(i) the Employee Option Plans and the forms of Company Stock Options issued
pursuant to the Employee Option Plans, including all
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amendments thereto and (ii) the forms of the Warrants and the Executive Stock
Options including all amendments thereto. The Company has previously provided
to Parent a complete and correct list setting forth as of April 17, 1996, (i)
the number of Stock Options and Warrants outstanding, (ii) the exercise price
for the outstanding Stock Options and Warrants, and (iii) the number of Stock
Options and Warrants exercisable.
Section 3.04 Authority.
The Company has all requisite corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby and thereby to be consummated by the
Company (other than with respect to the Merger, the approval and adoption of
this Agreement by the holders of a majority of the outstanding shares of
Company Common Stock and the Convertible Preferred, voting together). The
execution and delivery of this Agreement by the Company and the consummation
by the Company of the transactions contemplated hereby has been duly
authorized by all necessary corporate action and no other corporate
proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby (other than
with respect to the approval and adoption of this Agreement, approval by the
holders of a majority of the outstanding shares of Company Common Stock and
the Convertible Preferred, voting together, in accordance with Delaware Law).
This Agreement has been duly executed and delivered by the Company and,
assuming the due authorization, execution and delivery thereof by Parent and
Parent Sub, constitutes a legal, valid and binding obligation of the Company.
Section 3.05 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, (i) conflict
with or violate the Certificate of Incorporation or By-Laws, or the equivalent
organizational documents, in each case as amended or restated, of the Company
or any of its subsidiaries, (ii) conflict with or violate any federal, state,
foreign or local law, statute, ordinance, rule, regulation, order, judgment or
decree (including, without limitation, the Prescription Drug Marketing Act,
the Federal Controlled Substances Act of 1970, tit. II, 84 Stat. 1242, the
Food, Drug and Cosmetic Act, 21 U.S.C. (S)(S) 301 et seq., and any applicable
state Pharmacy Practice Acts, Controlled Substances Acts, Dangerous Drug Acts
and Food, Drug and Cosmetic Acts) (collectively, "Laws") applicable to the
Company or any of its subsidiaries or by which any of their respective
properties is bound or subject to or (iii) except as set forth in Section 3.05
of the Company Disclosure Schedule, result in any breach of or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or require payment under, or result in the
creation of a lien or encumbrance on any of the properties or assets of the
Company or any of its subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
interest or obligation to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or any of their
respective properties is bound or subject to, except for any such conflicts or
violations described in clause (ii) or breaches, defaults, events, rights of
termination, amendment, acceleration or cancellation, payment obligations or
liens or encumbrances described in clause (iii) that would not have a Company
Material Adverse Effect. Assuming the accuracy of the representation contained
in the last sentence of Section 4.05(a), the Board of Directors of the Company
has taken all actions necessary under Delaware Law, including approving the
transactions contemplated in this Agreement, to ensure that Section 203 of
Delaware Law does not, or will not, apply to the transactions contemplated in
this Agreement.
(b) The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, require the
Company to obtain any consent, approval, authorization or permit of, or except
as set forth in Section 3.05 of the Company Disclosure Schedule, to make any
filing with or notification to, any governmental or regulatory authority,
domestic or foreign ("Governmental Entities"), except (i) for applicable
requirements, if any, of the Securities Act of 1933, as amended (the
"Securities Act"), and the Exchange Act, state securities or blue sky laws
("Blue Sky Laws"), the NASD and the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), and the filing and recordation of
appropriate
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Merger documents as required by Delaware Law and (ii) where the failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not, either individually or in the aggregate,
prevent the Company from performing its obligations under this Agreement and
would not have a Company Material Adverse Effect.
Section 3.06 Permits; Compliance.
Except as set forth in Section 3.06 of the Company Disclosure Schedule or
the SEC Reports, each of the Company and its subsidiaries is in possession of
all franchises, grants, authorizations, licenses, permits, easements,
variances, exemptions, consents, certificates, approvals and orders necessary
to own, lease and operate its properties and to carry on its business as it is
now being conducted (collectively, the "Company Permits"), and there is no
action, proceeding or investigation pending or, to the knowledge of the
Company, threatened regarding suspension or cancellation of any of the Company
Permits, except where the failure to possess, or the suspension or
cancellation of, such Company Permits would not have a Company Material
Adverse Effect. Except as set forth in Section 3.06 of the Company Disclosure
Schedule or the SEC Reports, neither the Company nor any of its subsidiaries
is in conflict with, or in default or violation of, or is permitting to exist
any condition that is in conflict with or default of, (a) any Law and all
rules of professional conduct applicable thereto and applicable to the Company
or any of its subsidiaries or by which any of their respective properties is
bound or subject to or (b) any of the Company Permits, except for any such
conflicts, defaults or violations which would not have a Company Material
Adverse Effect. Except as set forth in Section 3.06 of the Company Disclosure
Schedule, since January 1, 1996, neither the Company nor any of its
subsidiaries has received from any Governmental Entity (including, without
limitation, any state board of pharmacy) any written notification with respect
to possible conflicts, defaults or violations of Laws, except for written
notice relating to possible conflicts, defaults or violations, which
conflicts, defaults or violations would not have a Company Material Adverse
Effect.
Section 3.07 Reports; Financial Statements.
(a) Since December 31, 1993, (x) the Company has filed all forms, reports,
statements and other documents required to be filed with (i) the SEC,
including, without limitation, (A) all Annual Reports on Form 10-K, (B) all
Quarterly Reports on Form 10-Q, (C) all proxy statements relating to meetings
of stockholders (whether annual or special), (D) all Reports on Form 8-K, (E)
all other reports or registration statements and (F) all amendments and
supplements to all such reports and registration statements (collectively
referred to as the "SEC Reports") and (ii) any other applicable state
securities authorities and (y) the Company and its respective subsidiaries has
filed all forms, reports, statements and other documents required to be filed
with any other applicable federal or state regulatory authorities where the
Company has a Company Permit, including, without limitation, state boards of
pharmacy, the U.S. Drug Enforcement Administration, the U.S. Food and Drug
Administration, state insurance and state and federal health regulatory
authorities, except where the failure to file any such forms, reports,
statements or other documents would not have a Company Material Adverse Effect
(all such forms, reports, statements and other documents in clauses (x) and
(y) of this Section 3.07(a) being referred to herein, collectively, as the
"Reports"). The Reports, including all Reports filed after the date of this
Agreement and prior to the Effective Time, (i) were or will be prepared in all
material respects in accordance with the requirements of applicable Law
(including with respect to the SEC Reports, the Securities Act and the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such SEC Reports) and (ii) did not at the time they
were filed, or will not at the time they are filed, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. Except
as and to the extent set forth on the consolidated balance sheet of the
Company and its subsidiaries at December 31, 1995, including all notes
thereto, or as set forth in the SEC Reports or Section 3.07(a) of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) which, individually or in the aggregate, would have a
Company Material Adverse Effect.
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(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the SEC Reports filed prior to or
after the date of this Agreement (i) have been or will be prepared in
accordance with the published rules and regulations of the SEC and generally
accepted accounting principles applied on a consistent basis throughout the
periods involved (except (A) to the extent required by changes in generally
accepted accounting principles and (B) with respect to SEC Reports filed prior
to the date of this Agreement, as may be indicated in the notes thereto) and
(ii) fairly present or will fairly present the consolidated financial position
of the Company and its subsidiaries as of the respective dates thereof and the
consolidated results of operations and cash flows for the periods indicated
(including reasonable estimates of normal and recurring year-end adjustments),
except that (x) any unaudited interim financial statements were or will be
subject to normal and recurring year-end adjustments, and (y) any pro forma
financial statements contained in such consolidated financial statements is
not necessarily indicative of the consolidated financial position of the
Company and its subsidiaries, as the case may be, as of the respective dates
thereof and the consolidated results of operations and cash flows for the
periods indicated.
Section 3.08 Absence of Certain Changes or Events.
Except as disclosed in the SEC Reports filed prior to the date of this
Agreement or as contemplated in this Agreement or as set forth in Section 3.08
of the Company Disclosure Schedule, since January 1, 1996 the Company and its
subsidiaries have conducted their respective businesses only in the ordinary
course and in a manner consistent with past practice and there has not been:
(i) any material damage, destruction or loss (not covered by insurance) with
respect to any material assets of the Company or any of its subsidiaries which
resulted in a Company Material Adverse Effect; (ii) any change in the
accounting methods, principles or practices of the Company or any of its
subsidiaries; (iii) except for dividends by a subsidiary of the Company to the
Company or another subsidiary of the Company, any declaration, setting aside
or payment of any dividends or distributions in respect of shares of Company
Common Stock or the shares of stock of, or other equity interests in, any
subsidiary of the Company or any redemption, purchase or other acquisition of
any of the Company's securities or any of the securities of any subsidiary of
the Company; (iv) except as permitted pursuant to Section 5.02(a), any
increase in the benefits under, or the establishment or amendment of, any
bonus, insurance, severance, deferred compensation, pension, retirement,
profit sharing, stock option (including, without limitation, the granting of
stock options, stock appreciation rights, performance awards, or restricted
stock awards), stock purchase or other employee benefit plan, or any increase
in the compensation payable or to become payable to directors, officers or
employees of the Company or its subsidiaries, except for (A) increases in
salaries or wages payable or to become payable in the ordinary course of
business and consistent with past practice or (B) the granting of stock
options in the ordinary course of business to employees and directors of the
Company or its subsidiaries; or (v) a Company Material Adverse Effect.
Section 3.09 Absence of Litigation.
Except as set forth in Section 3.09 of the Company Disclosure Schedule,
there is no claim, action, suit, litigation, proceeding, arbitration or, to
the knowledge of the Company, investigation of any kind, at law or in equity
(including actions or proceedings seeking injunctive relief), pending or, to
the knowledge of the Company, threatened against the Company or any of its
subsidiaries or any properties or rights of the Company or any of its
subsidiaries (except for claims, actions, suits, litigations, proceedings,
arbitrations, or investigations which individually or in the aggregate, would
not reasonably be expected to have a Company Material Adverse Effect), and
neither the Company nor any of its subsidiaries is subject to any continuing
order of, consent decree, settlement agreement or other similar written
agreement with, or, to the knowledge of the Company, continuing investigation
by, any Governmental Entity, or any judgment, order, writ, injunction, decree
or award of any Governmental Entity or arbitrator, including, without
limitation, cease-and-desist or other orders, except as disclosed in the SEC
Reports filed prior to the date of this Agreement and except for matters
which, individually or in the aggregate, would not have a Company Material
Adverse Effect.
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Section 3.10 Employee Benefit Plans, Labor Matters.
(a) Section 3.10 of the Company Disclosure Schedule contains a true and
complete list of each employee benefit plan, program, arrangement and contract
(including, without limitation, any "employee benefit plan," as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), which is now or previously has been sponsored, maintained
or contributed to or required to be contributed to by the Company or any of
its subsidiaries, and with respect to which the Company or any of its
subsidiaries has or may have liability, contingent or otherwise, (the "Benefit
Plans"), and the Company has provided to Parent with respect to each Benefit
Plan a true and correct copy of (i) the most recent annual report (Series
5500) filed with the Internal Revenue Service (the "IRS"), (ii) all material
documents embodying or relating to each Benefit Plan, (iii) each trust
agreement relating to such Benefit Plan, (iv) the most recent summary plan
description for each Benefit Plan for which a summary plan description is
required, (v) the most recent actuarial report or valuation prepared for each
Benefit Plan, (vi) if the Benefit Plan is funded, the most recent annual and
periodic accounting of the assets of the Benefit Plan and (vii) the most
recent determination letter, if any, issued by the IRS with respect to any
Benefit Plan intended to be qualified under Section 401(a) of the Code.
(b) With respect to each Benefit Plan (i) except as would not have a Company
Material Adverse Effect, the Company and each of its subsidiaries have
performed all obligations required to be performed by them under each Benefit
Plan and neither the Company nor any of its subsidiaries is in default under
or in violation of any Benefit Plan, (ii) except as would not have a Company
Material Adverse Effect, each Benefit Plan has been established and maintained
in accordance with its terms and in compliance with all applicable laws,
statutes, orders, rules and regulations, including but not limited to ERISA
and the Code, (iii) each Benefit Plan intended to qualify under Section 401 of
the Code is, and since its inception has been, so qualified and a
determination letter has been issued by the IRS to the effect that each such
Benefit Plan is so qualified and that each trust forming a part of any such
Benefit Plan is exempt from tax pursuant to Section 501(a) of the Code and no
circumstances exist which would adversely affect this qualification or
exemption; (iv) there are no actions, proceedings, arbitrations, suits or
claims pending, or to the knowledge of the Company, threatened or anticipated
(other than routine claims for benefits) with respect to any Benefit Plan; (v)
each Benefit Plan can be amended, terminated or otherwise discontinued without
liability to the Company, or any of its subsidiaries; and (vi) no Benefit Plan
is under audit or investigation by any governmental agency, and to the
knowledge of the Company or any of its subsidiaries, no such audit or
investigation is pending or threatened.
(c) No "employee pension benefit plan" within the meaning of Section 3(2) of
ERISA is now or previously has been sponsored, maintained, contributed to or
required to be contributed to by the Company or any of its subsidiaries.
(d) Neither the Company nor any subsidiary has any liability, contingent or
otherwise, to or with respect to any employee benefit plan, program or
arrangement other than the Benefit Plans.
(e) The Company and its subsidiaries are not parties to any collective
bargaining or other labor union contracts applicable to persons employed by
the Company or its subsidiaries and no collective bargaining agreement is
being negotiated by the Company or any of its subsidiaries. There is no
pending or threatened labor dispute, strike or work stoppage against the
Company or any of its subsidiaries which may interfere with the respective
business activities of the Company or its subsidiaries except where such
dispute, strike or work stoppage would not have a Company Material Adverse
Effect. To the knowledge of the Company, the Company and its subsidiaries and
their respective representatives or employees, are in compliance with all
applicable federal, state and local laws, rules and regulations (domestic and
foreign) respecting employment, employment practices, labor, terms and
conditions of employment and wages and hours, in each case, with respect to
employees, except where failure to be in compliance would not have a Company
Material Adverse Effect.
(f) The Company has provided to Parent (i) copies of all employment
agreements with officers of the Company; (ii) copies of all agreements with
consultants who are individuals obligating the Company to make annual cash
payments in an amount exceeding $100,000; (iii) a schedule listing all
officers of the Company who
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have executed a non-competition agreement with the Company; (iv) copies of all
severance agreements, programs and policies of the Company with or relating to
its employees which are not Benefit Plans; and (v) copies of all plans,
programs, agreements and other arrangements of the Company with or relating to
its employees which contain change in control provisions which are not Benefit
Plans.
(g) No Benefit Plan provides retiree medical or retiree life insurance
benefits to any person and except as provided in the employment agreements
referred to in clause (i) of Section 3.10(f), the Company is not contractually
obligated (whether or not in writing) to provide any person with life
insurance or medical benefits upon retirement or termination of employment,
except as required under Section 4980B of the Code. Except as set forth in
Section 3.10 of the Company Disclosure Schedule, no payment or benefit which
will or may be made by the Company or any of its subsidiaries or by Parent,
Parent Sub or Surviving Corporation with respect to any employee of the
Company or any of its subsidiaries will be characterized as an "excess
parachute payment," within the meaning of Section 280G(b)(1) of the Code.
Section 3.11 Taxes.
Except for such matters that would not have a Company Material Adverse
Effect, the Company and its subsidiaries have timely filed or will timely file
all returns and reports required to be filed by them with any taxing authority
with respect to Taxes for any period ending on or before the Effective Time,
taking into account any extension of time to file granted to or obtained on
behalf of the Company and its subsidiaries and all Taxes arising with respect
to taxable periods or portions thereof ending on or prior to the Effective
Time have been paid or will be paid, whether or not shown to be due on such
returns. No deficiency for any material amount of Tax has been asserted or
assessed by a taxing authority against the Company or its subsidiaries. All
liability for Taxes of the Company or its subsidiaries that are or will become
due or payable with respect to periods covered by the financial statements
referred to in Section 3.07(b) hereof have been paid or adequately reserved
for on such financial statements.
Section 3.12 Disclosure.
Neither this Agreement nor any certificate or schedule furnished or made to
Parent or Parent Sub by or on behalf of the Company or any of its subsidiaries
pursuant to this Agreement contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
contained herein and therein not misleading.
Section 3.13 Certain Business Matters.
Neither the Company nor any of its subsidiaries nor any directors, officers,
agents or employees of the Company or any of its subsidiaries has (i) used any
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns or violated any provision of the
Foreign Corrupt Practices Act of 1977, as amended, or (iii) made any other
unlawful payment. Section 3.13 of the Company Disclosure Schedule sets forth
certain information relating to the Company's operations in Costa Rica, Panama
and Peru. The information set forth on Section 3.13 of the Company Disclosure
Schedule is true and correct.
Section 3.14 Opinion of Financial Advisor.
The Company has received the oral opinion of Morgan Stanley on the date of
this Agreement to the effect that the Merger Consideration to be received by
the holders of Company Common Stock in the Merger is fair, from a financial
point of view, to such holders.
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Section 3.15 Vote Required.
The affirmative vote of the holders of a majority of the outstanding shares
of Company Common Stock and the Convertible Preferred, voting together, is the
only vote of the holders of any class or series of Company capital stock
necessary to approve the Merger.
Section 3.16 Brokers.
Except as set forth in Section 3.16 of the Company Disclosure Schedule, no
broker, finder or investment banker (other than Morgan Stanley) is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company. Prior to the date of this Agreement, the Company has
made available to Parent a complete and correct copy of all agreements between
the Company and Morgan Stanley pursuant to which such firm will be entitled to
any payment relating to the transactions contemplated by this Agreement.
Section 3.17 Certain Agreements.
(a) Except as set forth in Section 3.17(a) of the Company Disclosure
Schedule, during the twelve months immediately prior to the date hereof, no
Significant Customer has or Significant Customers have cancelled or otherwise
terminated or threatened in writing to terminate its or their relationship
with the Company or its subsidiaries. For purposes of this Section 3.17,
"Significant Customer" or "Significant Customers" shall mean any customer or
customers of the Company's pharmacy management business which, individually or
in the aggregate, accounted for 7.5% or more of the consolidated revenues of
the Company during the fiscal year ended December 31, 1995. The information
set forth in Section 3.17 of the Company Disclosure Schedule is true and
correct.
(b) Section 3.17(b) of the Company Disclosure Schedule sets forth a true and
correct list of all contracts, agreements and understandings (as of the date
hereof with respect to (i) and (ii)) (whether or not executed by the parties)
(a "Contract") to which the Company and/or its subsidiaries is a party or by
which the Company or any of its subsidiaries or any of their respective
properties is bound or subject to, in the following categories: (i) Contracts
with the Company's 25 largest mail service customers and 10 largest retail
customers, (ii) any Contracts with pharmaceutical manufacturers or
wholesalers, (iii) any material leases for real property (including, without
limitation, the lease with Summit Office Park Limited Partnership relating to
the facility in Independence, Ohio and the lease with Mid-America Development
Company relating to the facility in West Des Moines, Iowa), (iv) Contracts
which restrict the Company and/or its subsidiaries from doing business
anywhere in the world or from engaging in or competing in any line of business
or with any person and (v) any other Contract that is material to the business
and operations of the Company and its subsidiaries taken as a whole. The
Company has heretofore furnished to Parent all of the Contracts required to be
set forth in Section 3.17(b) of the Company Disclosure Schedule requested by
Parent. With respect to each Contract required to be set forth in Section
3.17(b) of the Company Disclosure Schedule, (i) there has been no breach or
default under any such Contract by the Company or any of its subsidiaries or,
to the knowledge of the Company, by any other party which breach or default
would have a Company Material Adverse Effect; (ii) except as set forth in
Section 3.09 of the Company Disclosure Schedule, there are no material
disagreements with respect to any of the terms and conditions under which the
parties to any Contract are being serviced; (iii) such Contract is a valid and
binding obligation of the Company and/or its subsidiary party thereto, is in
full force and effect with respect to the Company and/or its subsidiary party
thereto and is enforceable against the Company and/or its subsidiary party
thereto in accordance with its terms, except as the enforceability thereof may
be limited by (A) applicable bankruptcy, insolvency, moratorium,
reorganization, fraudulent conveyance or similar laws in effect which affect
the enforcement of creditors' rights generally or (B) general principles of
equity, whether considered in a proceeding at law or in equity; and (iv) no
action has been taken by the Company or any subsidiary and no event has
occurred which, with notice or lapse of time or both, would give to others any
rights of termination, amendment, acceleration or cancellation of, or require
payment under, or result in the creation of a lien or encumbrance on any of
the properties or assets of the Company or any of its subsidiaries under, any
such
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Contract except for events, rights of termination, amendment, acceleration or
cancellation, payment obligations or liens or encumbrances that would not have
a Company Material Adverse Effect.
(c) There are no pending, or to the knowledge of the Company, threatened
condemnation proceedings relating to any parcel of real property leased by the
Company and/or any of its subsidiaries (including, without limitation, the
leased facilities in Independence, Ohio and West Des Moines, Iowa) other than
with respect to any immaterial facility leased by the Company and/or any of
its subsidiaries.
(d) Except as set forth in Section 3.17(b)(ii) of the Company Disclosure
Schedule, each pharmaceutical manufacturing Contract required to be set forth
on such Schedule is terminable or cancelable by the Company or its subsidiary
party thereto upon no more than 90 days notice without any penalty or
increased cost.
ARTICLE IV
Representations and Warranties of Parent and Parent Sub
Except as set forth in the Disclosure Schedule delivered by Parent and
Parent Sub to the Company prior to the execution of the Initial Agreement (the
"Parent Disclosure Schedule"), which shall identify exceptions by specific
Section references, Parent and Parent Sub hereby (which, for purposes of this
Article IV, shall be deemed to be pursuant to the Initial Agreement and as if
this Amended and Restated Agreement had never been executed) jointly and
severally represent and warrant to the Company that:
Section 4.01 Organization and Qualification; Subsidiaries.
Each of Parent and Parent Sub is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has all requisite power and authority to
own, lease and operate its properties and to carry on its business as it is
now being conducted and Parent is duly qualified and in good standing to do
business in each jurisdiction in which the nature of the business conducted by
it or the ownership or leasing of its properties makes such qualification
necessary, other than where the failure to be so duly qualified and in good
standing would not have a Parent Material Adverse Effect. The term "Parent
Material Adverse Effect" as used in this Agreement shall mean any change or
effect that, individually or when taken together with all such other changes
or effects, would prevent Parent or Parent Sub from performing their
obligations under this Agreement.
Section 4.02 Certificate of Incorporation and By-Laws.
Parent has heretofore furnished to the Company a complete and correct copy
of the Certificates of Incorporation and the By-Laws, as amended or restated,
of each of Parent and Parent Sub. Neither Parent nor Parent Sub is in
violation of any of the provisions of its Certificate of Incorporation or By-
Laws.
Section 4.03 Capitalization.
The authorized capital stock of Parent Sub consists of 1,000 shares of
Parent Sub common stock, 100 shares of which are duly authorized validly
issued, fully paid and nonassessable and all of which are owned by Parent.
Section 4.04 Authority.
(a) Parent has all requisite corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby and to be consummated by
Parent. The execution and delivery of this Agreement by Parent and the
consummation by Parent of the transactions contemplated hereby have been duly
authorized by all necessary corporate action and no other corporate
proceedings on the part of Parent are necessary to authorize this Agreement or
to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Parent and,
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assuming the due authorization, execution and delivery thereof by the Company,
constitute the legal, valid and binding obligation of Parent.
(b) Parent Sub has the requisite corporate power and authority to execute
and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby to be consummated by Parent
Sub. The execution and delivery of this Agreement by Parent Sub and the
consummation by Parent Sub of the transactions contemplated hereby have been
duly authorized by all necessary corporate action and no other corporate
proceedings on the part of Parent Sub are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Parent Sub and, assuming the
due authorization, execution and delivery thereof by the Company, constitutes
a legal, valid and binding obligation of Parent Sub.
Section 4.05 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Parent and Parent Sub
does not, and the performance of this Agreement by Parent and Parent Sub will
not (i) conflict with or violate the Certificate of Incorporation or By-Laws
or the equivalent organizational documents, in each case as amended or
restated, of Parent or Parent Sub, (ii) conflict with or violate any Laws in
effect as of the date of this Agreement applicable to Parent or Parent Sub or
by which any of their respective properties is bound or (iii) result in any
breach of or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of Parent
or Parent Sub pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Parent or Parent Sub is a party or by which Parent or Parent Sub or
any of their respective properties is bound or subject to, except for any such
conflicts or violations described in clause (ii) or breaches, defaults,
events, rights of termination, amendment, acceleration or cancellation or
liens or encumbrances described in clause (iii) that would not have a Parent
Material Adverse Effect. Neither Parent nor any of its affiliates or
associates (as each such term is defined in Section 203 of Delaware Law) is an
"interested stockholder" (as such term is defined in Section 203 of Delaware
Law) of the Company.
(b) The execution and delivery of this Agreement by Parent and Parent Sub
does not, and the performance of this Agreement by Parent and Parent Sub will
not, require Parent or Parent Sub to obtain any consent, approval,
authorization or permit of, or to make any filing with or notification to, any
Governmental Entities, except (i) for applicable requirements, if any, of the
Securities Act, the Exchange Act, Blue Sky Laws and the HSR Act and the filing
and recordation of appropriate Merger documents as required by Delaware Law
and (ii) where the failure to obtain such consents, approvals, authorizations
or permits, or to make such filings or notifications, would not, either
individually or in the aggregate, prevent Parent or Parent Sub from performing
its obligations under this Agreement.
Section 4.06 Permits; Compliance.
Each of Parent and its subsidiaries is in possession of all franchises,
grants, authorizations, licenses, permits, easements, variances, exemptions,
consents, certificates, identification numbers, approvals and orders
(collectively, the "Parent Permits") necessary to own, lease and operate its
properties and to carry on its business as it is now being conducted, and
there is no action, proceeding or investigation pending or, to the knowledge
of Parent, threatened regarding suspension or cancellation of any of the
Parent Permits, except where the failure to possess, or the suspension or
cancellation of, such Parent Permits would not have a Parent Material Adverse
Effect. Neither Parent nor any of its subsidiaries is in conflict with, or in
default or violation of (a) any Law and all rules of professional conduct
applicable thereto applicable to Parent or any of its subsidiaries or by which
any of their respective properties is bound or subject to or (b) any of the
Parent Permits, except for any such conflicts, defaults or violations which
would not have a Parent Material Adverse Effect.
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Section 4.07 Absence of Litigation.
Except as disclosed in the forms, reports, statements and other documents
filed by M with the SEC ("Parent SEC Reports") prior to the date of this
Agreement, (a) there is no claim, action, suit, litigation, proceeding,
arbitration or, to the knowledge of Parent, investigation of any kind, at law
or in equity (including actions or proceedings seeking injunctive relief),
pending or, to the knowledge of Parent, threatened against Parent or any of
its subsidiaries or any properties or rights of Parent or any of its
subsidiaries (except for claims, actions, suits, litigations, proceedings,
arbitrations or investigations which, individually or in the aggregate, would
not have a Parent Material Adverse Effect) and (b) neither Parent nor any of
its subsidiaries is subject to any continuing order of, consent decree,
settlement agreement or other similar written agreement with, or, to the
knowledge of Parent, continuing investigation by, any Governmental Entity, or
any judgment, order, writ, injunction, decree or award of any Governmental
Entity or arbitrator, including, without limitation, cease-and-desist or other
orders, except for such matters which would not have a Parent Material Adverse
Effect.
Section 4.08 Ownership of Parent Sub; No Prior Activities.
(a) Parent Sub was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement.
(b) Except for obligations or liabilities incurred in connection with its
incorporation or organization and the transactions contemplated by this
Agreement and except for this Agreement and any other agreements or
arrangements contemplated by this Agreement, Parent Sub has not and will not
have incurred, directly or indirectly, through any subsidiary or affiliate,
any obligations or liabilities or engaged in any business activities or any
type or kind whatsoever or entered into any agreements or arrangements with
any person.
Section 4.09 Brokers.
No broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent or Parent Sub.
ARTICLE V
Covenants
Section 5.01 Affirmative Covenants of the Company.
The Company hereby covenants and agrees that, from and after the date of the
Initial Agreement and prior to the Effective Time, unless otherwise expressly
contemplated by this Agreement or consented to in writing by Parent, the
Company will and will cause its subsidiaries to:
(a) operate its business to the extent commercially reasonable only in
the usual and ordinary course consistent with past practices;
(b) use its commercially reasonable efforts to preserve substantially
intact its business organization, maintain its rights and franchises,
retain the services of its respective officers and key employees and
maintain its relationships with its respective customers and suppliers;
(c) use its commercially reasonable efforts to maintain and keep its
properties and assets in as good repair and condition as at present,
ordinary wear and tear excepted, and maintain inventories in quantities
consistent with its customary business practice; and
(d) use its commercially reasonable efforts to keep in full force and
effect insurance and bonds comparable in amount and scope of coverage to
that currently maintained;
provided, however, that in the event the Company deems it necessary to take
certain actions that would otherwise be proscribed by clauses (a)-(d) of this
Section 5.01, the Company shall consult with Parent and Parent shall
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consider in good faith the Company's request to take such action and not
unreasonably withhold its consent to such action.
Section 5.02 Negative Covenants of the Company.
Except as expressly contemplated by this Agreement and except as set forth
in Section 5.02 of the Company Disclosure Schedule, or otherwise consented to
in writing by Parent, from the date of this Agreement until the Effective
Time, the Company will not do, and will not permit any of its subsidiaries to
do, any of the following:
(a) (i) increase the compensation payable to or to become payable to any
director or executive officer, except for increases in salary or wages
payable or to become payable in the ordinary course of business and
consistent with past practice; (ii) grant any severance or termination pay
(other than pursuant to the normal severance policy or practice of the
Company or its subsidiaries as in effect on the date of this Agreement or
employment or severance agreements in effect on the date of this Agreement)
to, or enter into any employment or severance agreement with, any director,
officer or employee, provided that the Company may adopt a retention bonus
program (the "Retention Plan") that provides for the payment of a retention
bonus of up to three month's base salary to such employees of the Company
(other than senior management) as may be determined by the Company with the
consent of the Parent which shall not be unreasonably withheld subject to
(a) an employee's receipt of a retention bonus being conditioned on such
employee either being terminated by the Company without cause following the
Effective Time or remaining as an employee of the Company for not less than
six months following the Effective Time and (b) the aggregate amount of all
retention bonuses payable to all employees not exceeding $500,000 or (iii)
establish, adopt, enter into or amend any employee benefit plan or
arrangement except as may be required by applicable Law or existing
contracts;
(b) declare or pay any dividend on, or make any other distribution in
respect of, outstanding shares of capital stock, except for dividends by a
subsidiary of the Company to the Company or another subsidiary of the
Company;
(c) (i) redeem, purchase or otherwise acquire any shares of its or any of
its subsidiaries' capital stock or any securities or obligations
convertible into or exchangeable for any shares of its or its subsidiaries'
capital stock (other than any such acquisition directly from any wholly
owned subsidiary of the Company in exchange for capital contributions or
loans to such subsidiary), or any options, warrants or conversion or other
rights to acquire any shares of its or its subsidiaries' capital stock or
any such securities or obligations (except in connection with the exercise
of outstanding Stock Options and Warrants referred to in Section 3.03(a) in
accordance with their terms or in connection with the conversion of
Convertible Notes and Convertible Preferred in accordance with their
terms); (ii) effect any reorganization or recapitalization; or (iii) split,
combine or reclassify any of its or its respective subsidiaries' capital
stock or issue or authorize or propose the issuance of any other securities
in respect of, in lieu of or in substitution for, shares of its or its
respective subsidiaries' capital stock;
(d) (i) except as are described in Section 3.03(b) of the Company
Disclosure Schedule, issue, deliver, award, grant or sell, or authorize or
propose the issuance, delivery, award, grant or sale (including the grant
of any security interests, liens, claims, pledges, limitations in voting
rights, charges or other encumbrances) of, any shares of any class of its
or its subsidiaries' capital stock (including shares held in treasury), any
securities convertible into or exercisable or exchangeable for any such
shares, or any rights, warrants or options to acquire, any such shares
(except for the issuance of shares upon the exercise of outstanding Stock
Options, Warrants or the conversion of Convertible Notes and Convertible
Preferred in accordance with their terms); or (ii) amend or otherwise
modify the terms of any such rights, warrants or options the effect of
which shall be to make such terms more favorable to the holders thereof;
(e) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division (other than a wholly owned
subsidiary) thereof, or otherwise acquire or agree to acquire any assets of
any other person (other than the purchase of assets from suppliers or
vendors (i) for resale or use by or for customers which assets do not
constitute capital items,
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(ii) that consist of office supplies or materials not constituting capital
items or (iii) in an amount not to exceed $250,000 in the aggregate (or
such greater amount as may be consented to by the Parent which consent
shall not be unreasonably withheld), in each case, in the ordinary course
of business and consistent with past practice);
(f) sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer
or otherwise dispose of, any of its assets, except as set forth in Section
3.13 of the Company Disclosure Schedule or for dispositions of inventories
and of assets in the ordinary course of business and consistent with past
practice;
(g) initiate, solicit or encourage (including by way of furnishing
information or assistance), 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 Competing Transaction, or enter into
discussions or negotiate with any person or entity in furtherance of such
inquiries or to obtain a Competing Transaction, or agree to or endorse any
Competing Transaction, or authorize or permit any of the officers,
directors or employees of the Company or any of its subsidiaries or any
investment banker, financial advisor, attorney, accountant or other
representative retained by the Company or any of the Company's subsidiaries
to take any such action and the Company shall promptly notify Parent of all
relevant terms of any such inquiries and proposals received by the Company
or any of its subsidiaries or by any such officer, director, investment
banker, financial advisor or attorney, relating to any of such matters and
if such inquiry or proposal is in writing, the Company shall deliver or
cause to be delivered to Parent a copy of such inquiry or proposal;
provided, however, that nothing contained in this subsection (g) shall
prohibit the Board of Directors of the Company from (i) furnishing
information to, or entering into discussions or negotiations with, any
persons or entity in connection with an unsolicited bona fide proposal by
such person or entity to acquire the Company pursuant to a merger,
consolidation, share exchange, business combination or other similar
transaction or to acquire all or substantially all of the assets of the
Company or any of its Significant Subsidiaries, if, and only to the extent
that (A) the Board of Directors of the Company, after consultation with
independent legal counsel (which may include its regularly engaged
independent legal counsel), determines in good faith that such action is
required for the Board of Directors of the Company to comply with its
fiduciary duties to stockholders imposed by Delaware Law and (B) the
Company (x) promptly provides notice to Parent to the effect that it is
furnishing information to, or entering into discussions or negotiations
with, such person or entity and (y) receives a customary confidentiality
agreement from such person or entity; or (ii) complying with Rule 14e-2
promulgated under the Exchange Act with regard to a Competing Transaction.
For purposes of this Agreement, "Competing Transaction" shall mean any of
the following involving the Company or any of its subsidiaries: (i) any
merger, consolidation, share exchange, business combination, or other
similar transaction (other than the transactions contemplated by this
Agreement); (ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition of 15% or more of the assets of the Company and its
subsidiaries, taken as a whole, in a single transaction or series of
transactions, other than in the ordinary course of business; (iii) any
tender offer or exchange offer (other than the Offer) for 15% or more of
the outstanding shares of capital stock of the Company or the filing of a
registration statement under the Securities Act in connection therewith;
(iv) any person (other than Parent or any of its subsidiaries) shall have
acquired beneficial ownership or the right to acquire beneficial ownership
of, or any "group" (as such term is defined under Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder) shall
have been formed which beneficially owns or has the right to acquire
beneficial ownership of, 15% or more of the then outstanding shares of
capital stock of the Company (other than through the vesting of Stock
Options granted prior to the date of this Agreement or acquisitions in
arbitrage transactions); or (v) any public announcement of a proposal, plan
or intention to do any of the foregoing;
(h) propose or adopt any amendments to its Certificate of Incorporation
or By-Laws that would have an adverse impact on the consummation of the
transactions contemplated by this Agreement;
(i) (A) change any of its methods of accounting in effect at December 31,
1995, or (B) make or rescind any express or deemed election relating to
taxes, settle or compromise any claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating to
taxes, or change any of its methods of reporting income or deductions for
federal income tax purposes from those employed in the preparation of
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the federal income tax returns for the taxable year ending December 31,
1995, except, in the case of clause (A) or clause (B), as may be required
by Law or generally accepted accounting principles;
(j) incur any obligation for borrowed money or purchase money
indebtedness, whether or not evidenced by a note, bond, debenture or
similar instrument;
(k) enter into or amend (i) any material contract with any supplier that
is not terminable or cancelable by the Company or its subsidiary party
thereto upon notice of 90 days or less without penalty or increased cost;
or (ii) any contract which restricts the Company and/or its subsidiaries
from doing business anywhere in the world or from engaging in or competing
in any line of business or with any person; or
(l) agree in writing or otherwise to do any of the foregoing.
Section 5.03 Access and Information.
Subject to confidentiality agreements to which the Company or any of its
subsidiaries is a party, the Company shall, and shall cause its subsidiaries
to (i) afford to Parent and its officers, directors, employees, accountants,
consultants, legal counsel, agents and other representatives (collectively,
the "Parent Representatives") reasonable access at reasonable times upon
reasonable prior notice to the officers, employees, agents, properties,
offices and other facilities of the Company and its subsidiaries and to the
books and records thereof and (ii) furnish promptly to Parent and the Parent
Representatives such information concerning the business, properties,
contracts, records and personnel of the Company and its subsidiaries
(including, without limitation, financial, operating and other data and
information) as may be reasonably requested, from time to time, by Parent.
Section 5.04 Confidentiality.
The parties will comply with all of their respective obligations under the
Confidentiality Agreement dated June 29, 1995.
Section 5.05 Rights Agreement.
The Company shall take all necessary action prior to the Effective Time to
cause the dilution provision of the Company Rights Agreement to be
inapplicable to the transactions contemplated by this Agreement, without any
payment to holders of rights issued pursuant to such Rights Agreement.
ARTICLE VI
Additional Agreements
Section 6.01 Meeting of Stockholders.
If required by applicable law in order to consummate the Merger, the Company
shall, as promptly as practicable following the purchase of the shares of
Company Common Stock in the Offer, take all action necessary in accordance
with Delaware Law and its Certificate of Incorporation and By-Laws to convene
a meeting of the Company's stockholders to act on the Merger Agreement (the
"Stockholders' Meeting"). At the Stockholders' Meeting, all of the shares of
Company Common Stock then owned by Parent, Parent Sub or any other subsidiary
of Parent shall be voted to approve the Merger and this Agreement (subject to
applicable law and subject to the right of Parent, Parent Sub or any other
subsidiary of Parent to vote such shares of Company Common Stock as they elect
in the event of a Competing Transaction that is being recommended by the Board
of Directors of the Company in lieu of the Merger). The Company shall use its
reasonable best efforts to solicit from stockholders of the Company proxies in
favor of the approval and adoption of the Merger Agreement and to secure the
vote or consent of stockholders required by Delaware Law to approve and adopt
the Merger Agreement, unless otherwise required by the applicable fiduciary
duties of the directors of Company, as
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determined by such directors in good faith after consultation with independent
legal counsel (which may include the Company's regularly engaged legal
counsel).
Section 6.02 Proxy Statement.
(a) If required under applicable law, the Company shall prepare and file
with the SEC a proxy statement, and a form of proxy, in connection with the
vote of the Company's stockholders with respect to the Merger (such proxy
statement, together with any amendments thereof or supplements thereto, in
each case in the form or forms mailed to the Company's stockholders, being the
"Proxy Statement"). Each of Parent and the Company shall furnish all
information concerning it and the holders of its capital stock as the other
may reasonably request in connection with the Proxy Statement. As promptly as
practicable after the Proxy Statement has been cleared by the SEC, the Company
shall mail the Proxy Statement to its stockholders. The Proxy Statement shall
include the recommendation of the Company's Board of Directors in favor of the
Merger unless otherwise required by the applicable fiduciary duties of the
directors of the Company, as determined by such directors in good faith after
consultation with independent legal counsel (which may include the Company's
regularly engaged legal counsel).
If a Proxy Statement is not required to be disseminated to stockholders of
the Company under the federal securities laws in connection with the Merger,
the Company shall prepare and mail to stockholders of the Company, as promptly
as practicable following the purchase of shares of Company Common Stock in the
Offer, such notices and other materials as may be required under the Delaware
Law in connection with the consummation of the Merger. The Company shall give
Parent and its counsel the opportunity to review such notices and other
materials and all amendments and supplements thereto prior to their being
mailed.
(b) The information supplied by the Company for inclusion in any of the
Proxy Statement to be sent to the stockholders of the Company in connection
with the Stockholders' Meeting, the Schedule 14D-1, the Schedule 14D-9 or the
Offer Documents shall not, in the case of the Schedule 14D-1, the Schedule
14D-9 or the Offer Documents (or any amendment thereof or supplement thereto),
at the time filed with the SEC and upon expiration of the Offer, or in the
case of the Proxy Statement, at the date the Proxy Statement (or any amendment
thereof or supplement thereto) is first mailed to stockholders, at the time of
the Stockholders' Meeting or at the Effective Time, 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 the
light of the circumstances under which they are made, not misleading. If at
any time prior to the Effective Time any event or circumstance relating to the
Company or any of its affiliates, or its or their respective officers or
directors, should be discovered by the Company which should be set forth in a
supplement to the Schedule 14D-1, the Schedule 14D-9, the Offer Documents or
the Proxy Statement, the Company shall promptly inform Parent. All documents
that the Company is responsible for filing with the SEC in connection with the
transactions contemplated herein will comply as to form and substance in all
material respects with the applicable requirements of the Securities Act and
the rules and regulations thereunder.
(c) The information supplied by Parent for inclusion in any of the Proxy
Statement to be sent to the stockholders of the Company in connection with the
Stockholders' Meeting, the Schedule 14D-1, the Schedule 14D-9 or the Offer
Documents shall not, in the case of the Schedule 14D-1, the Schedule 14D-9, or
the Offer Documents (or any amendment thereof or supplement thereto), at the
time filed with the SEC and upon expiration of the Offer, or in the case of
the Proxy Statement, at the date the Proxy Statement (or any amendment thereof
or supplement thereto) is first mailed to stockholders, at the time of the
Stockholders' Meeting or at the Effective Time, 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 the light of
the circumstances under which they are made, not misleading. If at any time
prior to the Effective Time any event or circumstance relating to Parent or
any of its respective affiliates, or to their respective officers or
directors, should be discovered by Parent which should be set forth in a
supplement to the Schedule 14D-1, the Schedule 14D-9, the Offer Documents or
the Proxy Statement, Parent shall promptly inform the Company. All documents
that Parent is responsible for filing with the SEC in connection with the
transactions contemplated herein will comply as to form and substance in
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all material respects with the applicable requirements of the Securities Act
and the rules and regulations thereunder and the Exchange Act and the rules
and regulations thereunder.
Section 6.03 Board Representation.
Promptly upon the purchase of shares of Company Common Stock pursuant to the
Offer, Parent Sub shall be entitled to designate such number of directors,
rounded up to the next whole number, on the Board of Directors of the Company
as will give Parent Sub, subject to compliance with Section l4(f) of the
Exchange Act and the rules and regulations promulgated thereunder,
representation on the Board of Directors equal to the product of (a) the total
number of directors on the Board of Directors of the Company and (b) the
percentage that the number of shares of Company Common Stock purchased by
Parent Sub bears to the number of shares of Company Common Stock outstanding,
and the Company shall, upon request by Parent Sub, promptly increase the size
of the Board of Directors and/or exercise its reasonable best efforts to
secure the resignations of such number of directors as is necessary to enable
Parent Sub's designees to be elected to the Board of Directors of the Company
and shall cause Parent Sub's designees to be so elected. The Company shall
take, at its expense, all action required pursuant to Section 14(f) and Rule
14f-1 in order to fulfill its obligations under this Section 6.03 and shall
include in the Schedule 14D-9 or otherwise timely mail to its stockholders
such information with respect to the Company and its officers and directors as
is required by Section 14(f) and Rule 14f-l in order to fulfill its
obligations under this Section 6.03. Parent will supply to the Company in
writing and be solely responsible for any information with respect to itself
and its or Parent Sub's nominees, officers, directors and affiliates required
by Section 14(f) and Rule 14f-l. In the event that Parent Sub's designees are
elected to the Board of Directors of the Company, until the Effective Time,
the Board of Directors shall have at least one director who is a director on
the date hereof (the "Company Director"). In such event, if the Company
Director is unable to serve for any reason whatsoever, the other directors
shall designate a person to fill such vacancy who shall not be a designee,
stockholder or affiliate of Parent or Parent Sub and such person shall be
deemed to be a Company Director for purposes of this Agreement.
Notwithstanding anything in this Agreement to the contrary, in the event that
Parent Sub's designees are elected to the Board of Directors of the Company,
after the acceptance for payment of shares of Company Common Stock pursuant to
the Offer and prior to the Effective Time, the affirmative vote of the Company
Director shall be required to (a) amend or terminate this Agreement by the
Company, (b) exercise or waive any of the Company's rights, benefits or
remedies hereunder, (c) extend the time for performance of Parent's and Parent
Sub's respective obligations hereunder, (d) take any other action by the Board
of Directors of the Company under or in connection with this Agreement, (e)
amend, repeal or otherwise modify the provisions with respect to
indemnification set forth in the Certificate of Incorporation and By-Laws of
the Company on the date of this Agreement, in any manner that would adversely
affect the rights thereunder of individuals who at any time prior to the
Effective Time were directors or officers of the Company in respect of actions
or omissions occurring at or prior to the Effective Time (including, without
limitation, the transactions contemplated by this Agreement), unless such
modification is required by Law or (f) cancel the Company's current policies
of directors' and officers' liability insurance.
Section 6.04 Appropriate Action; Consents; Filings.
(a) The Company and Parent shall cooperate with each other in every way and
shall each use their commercially reasonable efforts to (i) consummate and
make effective the transactions contemplated by this Agreement, (ii) obtain
from any Governmental Entities any consents, licenses, permits, waivers,
approvals, authorizations or orders required to be obtained or made by Parent
or the Company or any of their subsidiaries in connection with the
authorization, execution and delivery of this Agreement and the consummation
of the transactions contemplated herein, including, without limitation, the
Offer and the Merger, (iii) make all necessary filings, and thereafter make
any other required submissions, with respect to this Agreement, the Offer and
the Merger required under (A) the Exchange Act and the rules and regulations
thereunder, and any other applicable federal or state securities laws, (B) the
HSR Act and (C) any other applicable Law; provided that Parent and the Company
shall cooperate with each other in connection with the making of all such
filings, including providing copies of all such documents to the nonfiling
party and its advisors prior to filing and, if requested, to accept all
reasonable additions, deletions or changes suggested in connection therewith.
In connection with the foregoing,
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each of the Company and the Parent shall file their respective notifications
under the HSR Act within five business days of the date hereof and shall, if
there is a "second request" for additional information, work diligently to
comply with such request. The Company and Parent shall furnish all information
required for any application or other filing to be made pursuant to the rules
and regulations of any applicable Law (including all information required to
be included in the Proxy Statement) in connection with the transactions
contemplated by this Agreement.
(b) (i) Each of the Company and Parent shall give (or shall cause their
respective subsidiaries to give) any notices to third parties, and use, and
cause their respective subsidiaries to use, its commercially reasonable
efforts to obtain any third party consents (A) necessary, proper or advisable
to consummate the transactions contemplated in this Agreement, (B) disclosed
or required to be disclosed in the Company Disclosure Schedule, (C) otherwise
required under any contracts, licenses, leases or other agreements in
connection with the consummation of the transactions contemplated herein or
(D) required to prevent a Company Material Adverse Effect from occurring prior
to or after the Effective Time.
(ii) In the event the Company shall fail to obtain any third party consent
described in subsection (b)(i) above, the Company shall use its commercially
reasonable efforts, and shall take any such actions reasonably requested by
Parent to mitigate any adverse effect upon the Company and Parent, their
respective subsidiaries, and their respective businesses resulting, or which
could reasonably be expected to result after the Effective Time, from the
failure to obtain such consent.
(c) Notwithstanding anything contained in this Section 6.04 or elsewhere in
this Agreement, in connection with the consummation of the Merger or any other
transaction contemplated by this Agreement, Parent and its subsidiaries and
their affiliates shall not be required (i) to take any action which involves
substantial cost or expenses or has any impact or effect on their businesses
or operations, (ii) to institute, prosecute, defend or appeal any judicial or
administrative action, (iii) to sell, hold separate or dispose of any assets
or operations or to withdraw from doing business in any jurisdiction or (iv)
to enter into any consent or administrative decree or order.
Section 6.05 Public Announcements.
Unless otherwise required by applicable Law or stock exchange requirements
or the requirements of the NASD (and in each such event only if time does not
permit), Parent and the Company shall consult with each other before issuing
any press release or otherwise making any public statements with respect to
the Offer or the Merger and shall not issue any such press release or make any
such public statement prior to such consultation.
Section 6.06 Indemnification of Directors and Officers.
(a) The Certificate of Incorporation and By-Laws of the Surviving
Corporation shall contain the provisions with respect to indemnification set
forth in the Certificate of Incorporation and By-Laws of the Company on the
date of this Agreement, which provisions shall not be amended, repealed or
otherwise modified for a period of six years after the Effective Time in any
manner that would adversely affect the rights thereunder of individuals who at
any time prior to the Effective Time were directors or officers of the Company
in respect of actions or omissions occurring at or prior to the Effective Time
(including, without limitation, the transactions contemplated by this
Agreement), unless such modification is required by Law.
(b) From and after the Effective Time, the Surviving Corporation shall
indemnify, defend and hold harmless the present and former officers and
directors of the Company (collectively, the "Indemnified Parties") against all
losses, expenses, claims, damages, liabilities or amounts that are paid in
settlement of, with the approval of Parent and the Surviving Corporation
(which approval shall not unreasonably be withheld), or otherwise in
connection with any claim, action, suit, proceeding or investigation (a
"Claim"), based in whole or in part on the fact that such person is or was a
director or officer of the Company and arising out of actions or omissions
occurring at or prior to the Effective Time (including, without limitation,
the transactions contemplated by this
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Agreement), in each case to the full extent permitted under Delaware Law (and
shall pay expenses in advance of the final disposition of any such action or
proceeding to each Indemnified Party to the fullest extent permitted under
Delaware Law, upon receipt from the Indemnified Party to whom expenses are
advanced of the undertaking to repay such advances contemplated by Section
145(e) of Delaware Law). Parent shall guarantee the Surviving Corporation's
obligations pursuant to this Section 6.06(b).
(c) Without limiting the foregoing, in the event any Claim is brought
against any Indemnified Party (whether arising before or after the Effective
Time) after the Effective Time (i) the Indemnified Parties may retain the
Company's regularly engaged independent legal counsel, or other independent
legal counsel satisfactory to them provided that such other counsel shall be
reasonably acceptable to Parent and the Surviving Corporation, (ii) the
Surviving Corporation shall pay all reasonable fees and expenses of such
counsel for the Indemnified Parties promptly as statements therefor are
received and (iii) the Surviving Corporation will use its commercially
reasonable efforts to assist in the vigorous defense of any such matter,
provided that the Surviving Corporation shall not be liable for any settlement
of any Claim effected without its written consent, which consent shall not be
unreasonably withheld. Any Indemnified Party wishing to claim indemnification
under this Section 6.06, upon learning of any such Claim, shall notify the
Surviving Corporation (although the failure so to notify the Surviving
Corporation shall not relieve the Surviving Corporation from any liability
which the Surviving Corporation may have under this Section 6.06 except to the
extent such failure materially prejudices the Surviving Corporation), and
shall deliver to the Surviving Corporation the undertaking contemplated by
Section 145(e) of Delaware Law. The Indemnified Parties as a group may retain
one law firm (in addition to local counsel) to represent them with respect to
each such matter unless there is, under applicable standards of professional
conduct (as determined by counsel to the Indemnified Parties), a conflict on
any significant issue between the positions of any two or more Indemnified
Parties, in which event, such additional counsel as may be required may be
retained by the Indemnified Parties.
(d) For a period of three years after the Effective Time, Parent shall cause
to be maintained in effect the current policies of directors' and officers'
liability insurance maintained by the Company (provided that Parent may
substitute therefor policies of at least the same coverage and amounts
containing terms and conditions which are no less advantageous) with respect
to Claims arising from facts or events which occurred before the Effective
Time (at an aggregate cost no greater than one and one-half times the current
annual premium paid by the Company for its existing coverage).
(e) This Section 6.06 is intended to be for the benefit of, and shall be
enforceable by, the Indemnified Parties, their heirs and personal
representatives and shall be binding on Parent and Parent Sub and the
Surviving Corporation and their respective successors and assigns.
Section 6.07 Obligations of Parent Sub.
Parent shall take all action necessary to cause Parent Sub to perform its
obligations under this Agreement and to consummate the Merger on the terms and
conditions set forth in this Agreement.
Section 6.08 Supplemental Indentures; Assumption of Certain Obligations to
Issue Company Common Stock.
As of the Effective Time, Parent shall enter into such supplemental
indentures as may be required under the terms of the indenture for the
Convertible Notes. Holders of Convertible Notes who convert after the
Effective Time shall be entitled to receive cash based on the Merger
Consideration.
Section 6.09 Employment Agreements and Benefit Plans.
(a) Parent shall cause the Surviving Corporation to honor all employment
agreements, individual severance arrangements, the Retention Plan and the
Company's existing severance policy for any employee who is terminated by the
Company without cause within six months following the Effective Time. Nothing
contained herein shall limit the right of the Surviving Corporation to amend
or terminate any Benefit Plan.
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(b) In the event that Parent Sub's designees are elected to the Board of
Directors of the Company, after acceptance for payment of shares of Company
Common Stock pursuant to the Offer and prior to the Effective Time, Parent
shall use its reasonable best efforts to cause the Company to honor all
employment agreements, individual severance arrangements, the Retention Plan
and the Company's existing severence policy.
ARTICLE VII
Closing Conditions
Section 7.01 Conditions to Obligations of Each Party Under This Agreement.
The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions, any or all of which may be waived, in whole or in part, to the
extent permitted by applicable Law:
(a) Minimum Condition. Parent Sub shall have purchased, pursuant to the
Offer a number of shares of Company Common Stock which satisfies the
Minimum Condition (as defined in Annex I hereto).
(b) Stockholder Approval. This Agreement and the Merger shall have been
approved and adopted by the requisite vote of the stockholders of the
Company.
(c) No Order. No Governmental Entity or federal or state court 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 is in
effect and which has the effect of making the transactions contemplated by
this Agreement illegal or otherwise prohibiting consummation of the
transactions contemplated by this Agreement.
(d) HSR Act. The applicable waiting period under the HSR Act shall have
expired or been terminated.
Section 7.02 Additional Conditions to Obligations of Parent.
The obligations of Parent to effect the Merger are also subject to the
following conditions:
(a) Representations and Warranties. Except where the inaccuracies of any
representations and warranties of the Company would not, in the aggregate
of all such inaccuracies, have a Company Material Adverse Effect, the
representations and warranties of the Company set forth in this Agreement,
shall have been true and correct in all respects as of the date of the
Initial Agreement and as of the Effective Time as if made at such time
(except that those representations and warranties which address matters
only as of a particular date shall remain true and correct as of such date
except where the failure to be so true and correct would not have a Company
Material Adverse Effect). Parent shall have received a certificate of the
President or Chief Financial Officer of the Company to such effect.
(b) Agreements and Covenants. The Company shall have performed or
complied with all agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Effective Time, except
where the failure to so comply would not have a Company Material Adverse
Effect. Parent shall have received a certificate of the President or Chief
Financial Officer of the Company to that effect. The Company shall have
performed or complied with its obligations under the second last paragraph
of Section 3.13 of the Company Disclosure Schedule.
Section 7.03 Additional Conditions to Obligations of the Company.
The obligation of the Company to effect the Merger is also subject to the
following conditions:
(a) Representations and Warranties. Except where the inaccuracies of any
representations and warranties of the Parent or the Parent Sub would not,
in the aggregate of all such inaccuracies, have a Parent Material Adverse
Effect, the representations and warranties of Parent set forth in this
Agreement shall have been true and correct in all respects as of the date
of the Initial Agreement and as of the Effective Time as
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if made at such time (except that those representations and warranties
which address matters only as of a particular date shall remain true and
correct as of such date except where the failure to be so true and correct
would not have a Parent Material Adverse Effect). The Company shall have
received a certificate of the Chief Financial Officer of Parent to such
effect.
(b) Agreements and Covenants. Parent shall have performed or complied
with all agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Effective Time, except
where the failure to comply would not have a Parent Material Adverse
Effect. The Company shall have received a certificate of the Chief
Financial Officer of Parent to that effect.
ARTICLE VIII
Termination, Amendment and Waiver
Section 8.01 Termination.
This Agreement may be terminated at any time prior to the Effective Time,
whether before or after approval of this Agreement and the Merger by the
stockholders of the Company:
(a) by mutual consent of Parent and the Company;
(b) by Parent, upon a breach of any representation, warranty, covenant or
agreement on the part of the Company set forth in this Agreement, such that
the conditions set forth in Section 7.02(a) or Section 7.02(b) would not be
satisfied (a "Terminating Company Breach"), provided that, if such
Terminating Company Breach is curable by the Company through the exercise
of its commercially reasonable efforts and for so long as the Company
continues to exercise such commercially reasonable efforts, Parent may not
terminate this Agreement under this Section 8.01(b);
(c) by the Company, upon breach of any representation, warranty, covenant
or agreement on the part of Parent set forth in this Agreement, such that
the conditions set forth in Section 7.03(a) or Section 7.03(b) would not be
satisfied ("Terminating Parent Breach"), provided that, if such Terminating
Parent Breach is curable by Parent through the exercise of its commercially
reasonable efforts and for so long as Parent continues to exercise such
commercially reasonable efforts, the Company may not terminate this
Agreement under this Section 8.01(c);
(d) by either Parent or the Company, if there shall be any Order which is
final and nonappealable preventing the consummation of the Merger;
(e) by either Parent or the Company if the Offer shall have expired or
been terminated in accordance with its terms as the result of the failure
of any of the conditions set forth in Annex I hereto without Parent Sub
having purchased any shares of Company Common Stock pursuant to the Offer;
(f) by either Parent or the Company, if the Merger shall not have been
consummated before September 30, 1996;
(g) by either Parent or the Company, if the Agreement shall fail to
receive the requisite vote for approval and adoption by the stockholders of
the Company at the Stockholders' Meeting;
(h) by Parent, if (i) the Board of Directors of the Company withdraws,
modifies or changes its recommendation of this Agreement, the Offer or the
Merger in a manner adverse to Parent or Parent Sub or shall have resolved
to do any of the foregoing or the Board of Directors of the Company shall
have recommended to the stockholders of the Company any competing
transaction or resolved to do so; (ii) if the Board of Directors of the
Company shall have recommended to the shareholders of the Company a
Competing Transaction; or (iii) a tender offer or exchange offer (other
than the Offer) for 50% or more of the outstanding shares of capital stock
of the Company is commenced, and the Board of Directors of the Company
recommends that shareholders tender their shares into such tender or
exchange offer or; (iv) any person (other than Parent or its subsidiaries)
shall have acquired beneficial ownership or the right to acquire beneficial
ownership of, or any "group" (as such term is defined under Section 13(d)
of the Exchange Act
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and the rules and regulations promulgated thereunder), shall have been
formed which beneficially owns, or has the right to acquire beneficial
ownership of more than 30% of the then outstanding shares of capital stock
of the Company; and
(i) by the Company if (i) the Board of Directors of the Company
determines in good faith after consultation with independent legal counsel
(which may include the Company's regularly engaged legal counsel) that it
is required by Delaware Law to enter into a definitive agreement for a
Competing Transaction which the Board has determined is financially
superior to the transactions contemplated by this Agreement and is
reasonably likely to be consummated; (ii) the Offer shall not have been
timely commenced in accordance with Section 1.01; or (iii) the Offer shall
have expired or have been terminated without any shares of Company Common
Stock being purchased thereunder or if no shares of Company Common Stock
shall have been purchased thereunder by September 30, 1996 unless failure
to so purchase shares of Company Common Stock has been caused by or results
from a breach by the Company of this Agreement.
The right of any party hereto to terminate this Agreement pursuant to this
Section 8.01 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers or directors,
whether prior to or after the execution of this Agreement.
Section 8.02 Effect of Termination.
Except as provided in Section 8.05 or Section 9.01, in the event of the
termination of this Agreement pursuant to Section 8.01, this Agreement shall
forthwith become void, there shall be no liability on the part of Parent,
Parent Sub or the Company or any of their respective officers or directors to
the other and all rights and obligations of any party hereto shall cease,
except that nothing herein shall relieve any Party for any breach of this
Agreement, other than for breach of representations and warranties.
Section 8.03 Amendment.
This Agreement may be amended by the parties hereto by action taken by or on
behalf of their respective Boards of Directors at any time prior to the
Effective Time; provided, however, that, after approval of the Merger by the
stockholders of the Company, no amendment may be made which would reduce the
amount or change the type of consideration into which each share of Company
Common Stock shall be converted pursuant to this Agreement upon consummation
of the Merger. This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.
Section 8.04 Waiver.
At any time prior to the Effective Time, any party hereto may (a) extend the
time for the performance of any of the obligations or other acts of the other
party hereto, (b) waive any inaccuracies in the representations and warranties
of the other party contained herein or in any document delivered pursuant
hereto and (c) waive compliance by the other party with any of the agreements
or conditions contained herein. Any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by the party or parties
to be bound thereby.
Section 8.05 Fees, Expenses and Other Payments.
(a) Except as provided in Sections 8.05(c) and (d), all Expenses (as defined
in paragraph (b) of this Section 8.05) incurred by the parties hereto shall be
borne solely and entirely by the party which has incurred such Expenses;
provided, however, that the allocable share of each of Parent and the Company
for all Expenses related to printing, filing and mailing the Proxy Statement
and all SEC and other regulatory filing fees incurred in connection with the
Proxy Statement shall be one-half.
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(b) "Expenses" as used in this Agreement shall include all out-of-pocket
expenses (including, without limitation, all fees and expenses of counsel,
accountants, investment bankers, experts and consultants to a party hereto and
its affiliates) incurred by a party or on its behalf in connection with or
related to the authorization, preparation, negotiation, execution and
performance of this Agreement, the preparation, printing, filing and mailing
of the Proxy Statement and the mailing of the Proxy Statement, the
solicitation of stockholder approvals and all other matters related to the
closing of the transactions contemplated herein.
(c) In the event of a termination of this Agreement (A) by the Company
pursuant to Section 8.01(i) (i) or (B) for any reason other than a breach by
Parent or Parent Sub and, with respect to a termination under clause (B) only,
(i) the Board of Directors of the Company shall have withdrawn its
recommendation of (or encouraged stockholders not to approve) the Offer or the
Merger or shall have recommended (or encouraged stockholders to support) any
Competing Transaction, or shall have resolved to do any of the foregoing (and
such withdrawal, recommendation or encouragement is not the result of a
material breach by Parent or Parent Sub of any representation, warranty or
obligation under this Agreement), (ii) prior to such termination, the Company
shall have received any proposal for a Competing Transaction which the Board
of Directors has determined is more favorable to the Company's stockholders
than the transactions contemplated by this Agreement, or (iii)(A) at any time
prior to the termination of this Agreement (I) the stockholders of the Company
shall have failed to approve this Agreement at the Stockholders' Meeting, or
(II) any person (other than Parent or any of its subsidiaries) shall have
publicly announced any proposal for a Competing Transaction and (B) at any
time on or prior to one year after the date of this Agreement, any person
(other than Parent or any of its subsidiaries) shall either (I) become the
beneficial owner of 50% or more of the outstanding shares of Company Common
Stock or (II) consummate a Competing Transaction, then the Company shall
promptly, but in no event later than two business days after the first of such
events set forth in (A) or (B) to occur, (x) pay Parent the sum of $2,000,000
in cash and (y) reimburse Parent for all documented out-of-pocket costs and
expenses (including, without limitation, all documented legal, investment
banking, printing and related fees and expenses) incurred by Parent or Parent
Sub or on their behalf in connection with this Agreement or the transactions
contemplated hereby, up to a maximum of $250,000 and the Company and its
subsidiaries and affiliates shall have no other liabilities or obligations
(and the Parent and Parent Sub shall have no other claim or right against the
Company or any of its subsidiaries of affiliates) in connection with this
Agreement and the transactions contemplated hereby.
(d) In the event that Parent Sub fails to purchase Company Common Stock in
the Offer on account of the failure of the conditions set forth in sub-section
(ii) of the introductory paragraph of Annex I, and paragraphs (a) or (b) of
Annex I hereto, the Parent shall reimburse the Company for all documented out
of pocket Expenses incurred by the Company or on its behalf in connection with
this Agreement or the transactions contemplated hereby, up to a maximum of
$500,000, and the Parent shall also pay the Company $500,000 in cash and the
Parent and its subsidiaries and affiliates shall have no other liabilities or
obligations (and the Company shall have no other claim or right against the
Parent or any of its subsidiaries or affiliates) in connection with this
Agreement and the transactions contemplated hereby.
ARTICLE IX
General Provisions
Section 9.01 Effectiveness of Representations, Warranties and Agreements.
The representations, warranties and agreements in this Agreement shall
terminate at the Effective Time or upon the termination of this Agreement
pursuant to Article VIII, except that the agreements set forth in Articles I
and II and Section 6.06 shall survive the Effective Time and those set forth
in Sections 5.04, 8.02, 8.05 and Article IX hereof shall survive termination.
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Section 9.02 Notices.
All notices and other communications given or made pursuant hereto shall be
in writing and shall be deemed to have been duly given or made as of the date
delivered, mailed or transmitted, and shall be effective upon receipt if
delivered personally, mailed by registered or certified mail (postage prepaid,
return receipt requested) to the parties at the following addresses (or at
such other address for a party as shall be specified by like changes of
address) or sent by electronic transmission to the telecopier number specified
below:
(a) If to Parent or Parent Sub:
MERCK-MEDCO MANAGED CARE, INC.
100 Summit Avenue
Montvale, New Jersey 07645
Attention: Bert Weinstein, Esq.
Telecopy: (201) 358-5773
with a copy to:
MERCK & CO.
One Merck Drive
Whitehouse Station, New Jersey 08889
Attention: Mary M. McDonald, Esq.
Telecopy: (908) 423-1501
and a copy to
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Gary P. Cooperstein, Esq.
Telecopy: (212) 859-8586
(b) If to the Company:
SYSTEMED INC.
970 W. 190th Street, Suite 400
Torrance, California 90502
Attention: Samuel Westover
Telecopy: (310) 538-1522
with a copy to:
Munger, Tolles & Olson
355 South Grand Avenue, 35th Floor
Los Angeles, California 90071
Attention: Robert B. Knauss, Esq.
Telecopy: (213) 687-3702
Section 9.03 Certain Definitions.
For purposes of this Agreement, the term:
(a) "affiliate" means a person that directly or indirectly, through one
or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person;
(b) "business day" means any day other than a day on which banks in the
State of New York are authorized or obligated to be closed;
(c) "control" (including the terms "controlled", "controlled by" and
"under common control with") means the possession, directly or indirectly
or as trustee or executor, of the power to direct or cause the direction of
the management or policies of a person, whether through the ownership of
stock or as trustee or executor, by contract or credit arrangement or
otherwise;
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(d) "knowledge" or "known" shall mean, with respect to any matter in
question, if an executive officer of the Company or Parent, as the case may
be, has actual knowledge of such matter;
(e) "person" means an individual, corporation, partnership, association,
trust, unincorporated organization, other entity or group (as defined in
Section 13(d) of the Exchange Act);
(f) "Significant Subsidiary" or "Significant Subsidiaries" means any
subsidiary of the Company or Parent, as the case may be, that would
constitute a Significant Subsidiary of such party within the meaning of
Rule 1-02 of Regulation S-X of the SEC and, in the case of the Company,
including without limitation, Systemed Pharmacy Inc., an Ohio corporation,
and Systemed Pharmacy Inc., a Delaware corporation.
(g) "subsidiary" or "subsidiaries" of the Company, Parent, the Surviving
Corporation or any other person, means any corporation, partnership, joint
venture or other legal entity of which the Company, Parent, the Surviving
Corporation or such other person, as the case may be (either alone or
through or together with any other subsidiary), owns, directly or
indirectly, 50% or more of the stock or other equity interests the holders
of which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal
entity; and
(h) "Tax" or "Taxes" shall mean any and all taxes, charges, fees, levies,
payable to any federal, state, local or foreign taxing authority or agency,
including, without limitation, (i) income, franchise, profits, gross
receipts, minimum, alternative minimum, estimated, ad valorem, value added,
sales, use, service, real or personal property, capital stock, license,
payroll, withholding, disability, employment, social security, workers
compensation, unemployment compensation, utility, severance, excise, stamp,
windfall profits, transfer and gains taxes, (ii) customs duties, imposts,
charges, levies or other similar assessments of any kind, and (iii)
interest, penalties and additions to tax imposed with respect thereto.
Section 9.04 Conveyance Taxes.
The Parent shall be liable for and shall hold the holders of shares of
Company Common Stock harmless against any New York State Real Property Gains
Tax, New York State Real Estate Transfer Tax and the New York City Real
Property Transfer Tax which become payable in connection with the transactions
contemplated by this Agreement.
Section 9.05 Headings.
The headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Section 9.06 Severability.
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the
end that transactions contemplated hereby are fulfilled to the extent
possible.
Section 9.07 Entire Agreement.
This Agreement (together with the Exhibits), and the Confidentiality
Agreement constitute the entire agreement of the parties and supersede all
prior agreements and undertakings, both written and oral, between the parties,
or any of them, with respect to the subject matter hereof.
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Section 9.08 Assignment.
This Agreement shall not be assigned by operation of law or otherwise.
Section 9.09 Parties in Interest.
This Agreement shall be binding upon and inure solely to the benefit of each
party hereto, and nothing in this Agreement, express or implied (other than
the provisions of Section 6.05) is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.
Section 9.10 Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of any party hereto in the exercise of any
right hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement
herein, nor shall any single or partial exercise of any such right preclude
other or further exercise thereof or of any other right. All rights and
remedies existing under this Agreement are cumulative to, and not exclusive
of, any rights or remedies otherwise available.
Section 9.11 Governing Law.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of law.
Section 9.12 Counterparts.
This Agreement may be executed in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
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In Witness Whereof, Parent, Parent Sub and the Company have caused this
Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
Merck & Co., Inc.
/s/ Mary M. McDonald
By: _________________________________
Name: Mary M. McDonald
Title: Senior Vice President and
General Cousel
Merck-Medco Managed Care, Inc.
/s/ Bert I. Weinstein
By: _________________________________
Name: Bert I. Weinstein
Title: Senior Vice President and
Co-General Counsel
S Acquisition Corp.
/s/ Bert I. Weinstein
By: _________________________________
Name: Bert I. Weinstein
Title: Vice President
Systemed Inc.
/s/ Sam Westover
By: _________________________________
Name: Sam Westover
Title: President and Chief
Executive Officer
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ANNEX I
TO
AGREEMENT AND PLAN OF MERGER
Conditions to the Offer. Notwithstanding any other term of the Offer or this
Agreement, Parent Sub shall not be required to accept for payment or pay for,
subject to any applicable rules and regulations of the SEC, including Rule
14e-1(c) of the Exchange Act, any shares of Company Common Stock not
theretofore accepted for payment or paid for and may terminate the Offer
unless (i) there shall have been validly tendered and not withdrawn prior to
the expiration of the Offer that number of shares of Company Common Stock
which would represent at least a majority of the outstanding shares of Company
Common Stock on a fully diluted basis (the "Minimum Condition") and (ii) any
waiting period under the HSR Act applicable to the purchase of shares of
Company Common Stock pursuant to the Offer shall have expired or been
terminated. Furthermore, notwithstanding any other term of the Offer or this
Agreement, Parent Sub shall not be required to accept for payment or, subject
as aforesaid, to pay for any shares of Company Common Stock not theretofore
accepted for payment or paid for, and may terminate the Offer if, immediately
prior to the acceptance of such shares of Company Common Stock for payment or
the payment therefor, any of the following conditions exist or shall occur and
remain in effect:
(a) any action, suit, or proceeding by any Governmental Entity shall be
threatened or pending (i) challenging the consummation of any of the
transactions contemplated by this Agreement, (ii) seeking rescission of the
transactions contemplated by this Agreement following consummation or
seeking to cause the Parent to hold the Surviving Corporation or its assets
separate, (iii) seeking relief which would adversely effect the right of
Parent to own the Company Common Stock and to control the Surviving
Corporation and its subsidiaries, or (iv) seeking relief which would
adversely effect the right of any of the Surviving Corporation and its
subsidiaries to own its assets and to operate its businesses (and no such
order, decree, injunction, judgment, ruling or charge with respect to the
matters set forth in this clause (a) shall be in effect); or
(b) there shall have been enacted, entered, enforced or deemed applicable
to the Offer or the Merger, by any state, federal or foreign government or
governmental authority or by any court, domestic or foreign, any statute,
rule, regulation, judgment, decree, order or injunction, that prohibits or
makes illegal the making or consummation of the Offer or the Merger; or
(c) the Company and Parent Sub shall have reached an agreement or
understanding that the Offer or this Agreement be terminated or this
Agreement shall have been terminated in accordance with its terms; or
(d) except where the inaccuracies of any representations and warranties
of the Company would not, in the aggregate of all such inaccuracies, have a
Company Material Adverse Effect, any of the representations and warranties
of the Company set forth in this Agreement, shall not have been true and
correct in all respects when made or shall thereafter have ceased to be
true and correct as if made as of such later time (other than
representations and warranties made as of a specific date which shall
remain true and correct as of such date except where the failure to be so
true and correct would not have a Company Material Adverse Effect); or
(e) the Company shall not have performed or complied with any agreement
or covenants required by this Agreement to be performed or complied with by
it on or prior to the scheduled expiration date of the Offer, except where
the failure to so comply would not have a Company Material Adverse Effect.
The Company shall have not performed or complied with its obligations under
the second last paragraph of Section 3.13 of the Company Disclosure
Schedule; or
(f) any consent, approval or authorization legally required to be
obtained to consummate the Offer shall not have been obtained from or made
with all required Governmental Entities; or
(g) the Company's Board of Directors shall have withdrawn, modified or
amended its recommendation of the Offer in any manner adverse to Parent and
Parent Sub, or shall have recommended acceptance of any Competing
Transaction or shall have resolved to do any of the foregoing; or
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(h) a tender offer or exchange offer (other than the Offer) for 50% or
more of the outstanding shares of capital stock of the Company is commenced
and the Board of Directors of the Company recommends that shareholders
tender their shares into such tender or exchange offer;
which, in the reasonable judgment of Parent and Parent Sub, in any case, and
regardless of the circumstances (including any action or inaction by Parent or
Parent Sub or any of their affiliates other than any action or inaction
constituting a material breach by Parent or Parent Sub of their obligations
under this Agreement) giving rise to any such condition, makes it inadvisable
to proceed with the Offer or with such acceptance for payment, purchase of, or
payment for the shares of Company Common Stock.
The foregoing conditions are for the sole benefit of Parent Sub and may be
asserted by Parent Sub regardless of the circumstances giving rise to any such
condition and may be waived by Parent Sub, in whole or in part, at any time
and from time to time, in the sole discretion of Parent Sub. The failure by
Parent Sub at any time to exercise any of the foregoing rights will not be
deemed a waiver of any right, the waiver of such right with respect to any
particular facts or circumstances shall not be deemed a waiver with respect to
any other facts or circumstances, and each right will be deemed an ongoing
right which may be asserted at any time and from time to time.
Should the Offer be terminated pursuant to the foregoing provisions, all
tendered shares of Company Common Stock not theretofore accepted for payment
shall forthwith be returned by the Paying Agent to the tendering stockholders.
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