UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
PCI SERVICES, INC.
(Name of Issuer)
COMMON STOCK, $0.001 PAR VALUE
(Title of Class of Securities)
693206104
(CUSIP Number)
ROBERT D. WALTER,
CARDINAL HEALTH, INC.
5555 GLENDON COURT
DUBLIN, OHIO 43016
(614) 717-5000
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
Copy to:
DAVID A. KATZ
WACHTELL, LIPTON ROSEN & KATZ
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019
(212) 403-1000
JULY 23, 1996
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on
Schedule 13G to report the acquisition which is the subject of
this Schedule 13D, and is filing this schedule because of Rule
13d-1(b)(3) or (4), check the following box / /.
Check the following box if a fee is being paid with the
statement /x/.
Page 1 of 11 Pages<PAGE>
CUSIP NO. 693206104
SCHEDULE 13D
1. NAME OF REPORTING PERSON
SS OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Cardinal Health, Inc.
31-0958666
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) / /
3. SEC USE ONLY
4. SOURCE OF FUNDS
WC
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) / /
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Ohio
NUMBER OF 7. SOLE VOTING POWER
SHARES 0
BENEFICIALLY
OWNED BY 8. SHARED VOTING POWER
EACH 0
REPORTING
PERSON 9. SOLE DISPOSITIVE POWER
WITH 0
10. SHARED DISPOSITIVE POWER
0
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,875,000 shares of Common Stock.
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES / /
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 46.3%.
Based upon 6,211,250 shares of Common Stock outstanding as of
July 23, 1996, as represented by Issuer, calculated pursuant
to Rule 13d-3(d)(1).
14. TYPE OF REPORTING PERSON
HC, CO
Page 2 of 11 Pages<PAGE>
Item 1. Security and Issuer.
This Schedule 13D relates to the common stock, $0.001
par value per share ("PCI Common Stock"), of PCI Services, Inc., a
Delaware corporation ("PCI"). The principal executive offices of
PCI are located at 1403 Foulk Road, Suite 102, Wilmington, Delaware
19803.
Item 2. Identity and Background.
This Schedule 13D is filed by Cardinal Health, Inc., an
Ohio corporation ("Cardinal"). Cardinal is a national health care
service provider, providing an array of value-added pharmaceutical
distribution services to a broad base of customers nationwide.
Through its wholly owned subsidiary, Pyxis Corporation, Cardinal
develops and manufactures point-of-use systems which automate the
distribution, management and control of medications and supplies
in hospitals and alternate care facilities. Cardinal is also a
franchisor of retail pharmacies through its wholly owned
subsidiary, Medicine Shoppe International, Inc. In addition,
Cardinal's subsidiary Allied Pharmacy Management, Inc. is a
provider of pharmacy management services to hospitals. Cardinal's
principal executive offices are located at 5555 Glendon Court,
Dublin, Ohio 43016.
Each executive officer and each director of Cardinal is
a citizen of the United States. The name, business address and
present principal occupation of each executive officer and
director are set forth in Annex I to this Schedule 13D which is
incorporated herein by this reference.
During the last five years, to the best of Cardinal's
knowledge, neither Cardinal nor any of its executive officers or
directors has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or has been a party to
a civil proceeding of a judicial or administrative body of
competent jurisdiction as a result of which Cardinal or such
person was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws, or
finding any violation with respect to such laws, and which
judgment, decree or final order was not subsequently vacated.
Item 3. Source and Amount of Funds or Other Consideration.
Pursuant to the Stock Option Agreement, dated July 23,
1996, between Cardinal, MEDIQ Incorporated, a Delaware
corporation, and MEDIQ Investment Services, Inc., a Delaware
corporation (together with MEDIQ Incorporated, "MEDIQ") and a
wholly owned subsidiary of MEDIQ Incorporated, MEDIQ granted
Cardinal an irrevocable option (the "Option") to purchase from
MEDIQ, under certain circumstances and subject to certain
adjustments, all of the issued and outstanding shares of PCI
Common Stock owned, directly or indirectly, or thereafter
Page 3 of 11 Pages<PAGE>
acquired, directly or indirectly, by MEDIQ, at a price per share,
payable in cash, equal to the lower of (x) $23.00 or (y) the
exchange ratio under the Agreement and Plan of Merger, dated as of
July 23, 1996, among Cardinal, Panther Merger Corp., a Delaware
corporation and a wholly owned subsidiary of Cardinal ("Subcorp"),
PCI and MEDIQ Incorporated (the "Merger Agreement"), described
under Item 4 below, multiplied by the closing price of Cardinal
common shares, without par value ("Cardinal Common Shares"), as
reported on the New York Stock Exchange Composite Tape on the last
trading day immediately preceding the date of delivery to PCI of
written notice of Cardinal's exercise of the Option. The Stock
Option Agreement provides that, notwithstanding the foregoing, in
no event will such purchase price be less than $19.53 per share.
As of the date hereof, the Option is not exercisable. In the
Stock Option Agreement, MEDIQ has represented to Cardinal that the
number of shares of PCI Common Stock currently owned by MEDIQ and
subject to the Option is 2,875,000. Cardinal may exercise the
Option in whole or in part; provided that to the extent that
Cardinal exercises the Option in part, Cardinal may only exercise
the Option for up to 390,499 shares of PCI Common Stock in the
aggregate, unless Cardinal exercises the Option for at least
2,253,876 shares of PCI Common Stock in the aggregate.
The Option was granted by MEDIQ as a condition of and in
consideration for Cardinal entering into the Merger Agreement.
The exercise of the Option for the full number of shares
currently covered thereby would require aggregate funds of
$65,084,250, based on an exchange ratio of .336 and a closing
price for Cardinal Common Share of $67.375 on July 25, 1996. It
is anticipated that, should the Option become exercisable and
should Cardinal determine to exercise the Option, Cardinal would
obtain the funds for purchase from working capital or by borrowing
from parties whose identity is not yet known.
A copy of the Stock Option Agreement is included as
Exhibit 2.2 to this Schedule 13D and is incorporated herein by
this reference. The foregoing description of the Stock Option
Agreement is qualified in its entirety by reference to such
exhibit.
Item 4. Purpose of Transaction.
In connection with the execution of the Stock Option
Agreement, Cardinal, Subcorp, PCI and MEDIQ Incorporated entered
into the Merger Agreement, pursuant to which, among other matters
and subject to the terms and conditions set forth in the Merger
Agreement, Subcorp will merge with and into PCI, with PCI as the
surviving corporation (the "Merger"). The Option was granted by
MEDIQ as a condition of and in consideration for Cardinal entering
into the Merger Agreement. Consummation of the Merger is subject
to certain conditions, including: (i) receipt of the approval of
the Merger Agreement by the holders of a majority of the
outstanding shares of PCI Common Stock; (ii) expiration or
Page 4 of 11 Pages<PAGE>
termination of all waiting periods applicable to the consummation
of the Merger under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended; (iii) registration of the Cardinal Common
Shares to be issued in the Merger under the Securities Act of
1933, as amended; (iv) receipt by Cardinal of an accountant's
letter confirming that the Merger will qualify as a pooling of
interests transaction for financial reporting purposes; and (v)
satisfaction of certain other conditions. Pursuant to the Merger
Agreement, (a) the officers of the surviving corporation in the
Merger will be the officers of PCI, (b) the directors of the
surviving corporation in the Merger will be the directors of
Subcorp, (c) each share of PCI Common Stock will be converted into
.336 of a Cardinal Common Shares, subject to adjustment under the
circumstances described in the Merger Agreement, plus cash in lieu
of receipt of fractional Cardinal Common Shares, and (d) at the
effective time of the Merger, the Certificate of Incorporation and
By-laws of PCI, as the surviving corporation, will be amended to
be identical (save for the name of the corporation) to those of
Subcorp. Upon consummation of the Merger, the PCI Common Stock
will be delisted from the Nasdaq National Market.
A copy of the Merger Agreement is included as Exhibit
2.1 to this Schedule 13D and is incorporated herein by this
reference. The foregoing description of the Merger Agreement is
qualified in its entirety by reference to such exhibit.
Except as set forth herein, Cardinal does not have any
current plans or proposals that relate to or would result in (i)
the acquisition by any person of additional shares of PCI Common
Stock or the disposition of shares of PCI Common Stock; (ii) an
extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving PCI or any of its
subsidiaries; (iii) a sale or transfer of any material amount of
assets of PCI or any of its subsidiaries; (iv) any change in the
present board of directors or management of PCI, including any
plans or proposals to change the number or term of directors or to
fill any vacancies on the board; (v) any material change in the
present capitalization or dividend policy of PCI; (vi) any other
material change in PCI's business or corporate structure; (vii)
any change in PCI's charter or bylaws, or instruments
corresponding thereto, or other actions that may impede the
acquisition of control of PCI by any person; (viii) causing a
class of securities of PCI to be delisted from a national
securities exchange or to cease to be authorized to be quoted in
an inter-dealer quotation system of a registered national
securities association; (ix) a class of equity securities of PCI
becoming eligible for termination of registration pursuant to
Section 12(g)(4) of the Securities Exchange Act of 1934, as
amended; or (x) any action similar to any of those enumerated
above.
Page 5 of 11 Pages<PAGE>
Item 5. Interest in Securities of Issuer.
Although the Option does not allow Cardinal to purchase
any shares of PCI Common Stock pursuant thereto unless and until
the conditions to exercise specified in the Stock Option Agreement
occur, assuming for purposes of this Item 5 that such conditions
are satisfied and Cardinal is entitled to purchase shares of PCI
Common Stock pursuant to the Option, Cardinal would currently be
entitled to purchase 2,875,000 shares of PCI Common Stock, or
approximately 46.3% of the outstanding PCI Common Stock (based
upon 6,211,250 shares of PCI Common Stock outstanding as of July
23, 1996, as represented by PCI in the Merger Agreement).
Cardinal does not currently have the right to acquire
any shares of PCI Common Stock under the Option unless certain
events specified in the Stock Option Agreement occur.
Accordingly, Cardinal does not have sole or shared voting or
dispositive power with respect to any shares of PCI Common Stock,
and Cardinal disclaims beneficial ownership of PCI Common Stock
subject to the Option until such events occur. Assuming for
purposes of this Item 5 that events occurred that would enable
Cardinal to exercise the Option and Cardinal exercised the Option,
Cardinal would have sole voting power and sole dispositive power
with respect to the shares of PCI Common Stock acquired pursuant
to the Option.
The foregoing description of certain terms of the Stock
Option Agreement is qualified in its entirety by reference to the
Stock Option Agreement which is filed as Exhibit 2.2 hereto and
which is incorporated herein by this reference.
To the best of Cardinal's knowledge, no executive
officer or director of Cardinal beneficially owns any shares of
PCI Common Stock, nor (except for the issuance of the Option) have
any transactions in PCI Common Stock been effected during the past
60 days by Cardinal or, to the best knowledge of Cardinal, by any
executive officer or director of Cardinal. In addition, no other
person is known by Cardinal to have the right to receive or the
power to direct the receipt of dividends from, or the proceeds
from the sale of, the securities covered by this Schedule 13D.
Item 6. Contracts, Arrangements, Understandings or Relationships
with Respect to Securities of the Issuer.
Each of MEDIQ and the persons set forth in Annex II to
this Schedule 13D, which Annex II is incorporated herein by this
reference, has entered into an agreement with Cardinal pursuant to
which, among other matters, such person has agreed (i) to vote all
of the shares of PCI Common Stock beneficially owned by such
person or its affiliates or over which such person or any of its
affiliates has voting power or control to approve the Merger and
the Merger Agreement, (ii) not to vote such shares in favor of any
other recapitalization, merger, consolidation or other business
combination involving PCI, or acquisition of any capital stock or
Page 6 of 11 Pages<PAGE>
any material portion of the assets (except for acquisitions of
assets in the ordinary course of business consistent with past
practice) of PCI and (iii) not to, and not to permit any company,
trust or other entity controlled by such person to, and not to
permit any of its affiliates to, contract to sell, sell or
otherwise transfer or dispose of any of such shares or any
interest therein or securities convertible thereinto or any voting
rights with respect thereto other than pursuant to the Merger or
without Cardinal's consent. MEDIQ is estimated to have voting
power over approximately 46.3% of the outstanding shares of PCI
Common Stock, based upon 6,211,250 shares of PCI Common Stock
outstanding as of July 23, 1996, as represented by PCI in the
Merger Agreement. A copy of the Support/Voting Agreement, dated
as of July 23, 1996, executed by MEDIQ (the "MEDIQ Support/Voting
Agreement") is included as Exhibit 99.1 to this Schedule 13D and
is incorporated herein by this reference. The foregoing
description of the MEDIQ Support/Voting Agreement is qualified in
its entirety by reference to such exhibit. The persons listed on
Annex II in the aggregate are estimated to have voting power over
approximately 3.2% of the outstanding shares of PCI Common Stock
(assuming such persons exercise all of their outstanding options
to acquire PCI Common Stock and to vote such shares), based upon
6,211,250 shares of PCI Common Stock outstanding as of July 23,
1996, as represented by PCI in the Merger Agreement. Cardinal may
hereafter enter into similar agreements with other holders of PCI
Common Stock. A copy of the form of Support/Voting Agreement,
dated as of July 23, 1996, executed by such persons (the "Support/
Voting Agreement") is included as Exhibit 99.2 to this Schedule
13D and is incorporated herein by this reference. The foregoing
description of the Support/Voting Agreement is qualified in its
entirety by reference to such exhibit.
A copy of the Merger Agreement is included as Exhibit
2.1 to this Schedule 13D and is incorporated herein by this
reference. See Item 4.
A copy of the Stock Option Agreement is included as
Exhibit 2.2 to this Schedule 13D and is incorporated herein by
this reference. See Items 3 and 5.
Item 7. Material to be Filed as Exhibits.
The following exhibits are filed as part of this
Schedule 13D:
Exhibit 2.1 -- Merger Agreement
Exhibit 2.2 -- Stock Option Agreement
Exhibit 99.1 -- MEDIQ Support/Voting Agreement
Exhibit 99.2 -- Form of Support/Voting Agreement
Page 7 of 11 Pages<PAGE>
ANNEX I
Directors and Executive Officers
Set forth below are the name and present principal
occupation of each director and executive officer of Cardinal
Health, Inc. as of July 26, 1996. The business address of each
such director and executive officer is c/o Cardinal Health, Inc.,
5555 Glendon Court, Dublin, Ohio 43016.
Name Principal Occupation
Directors
of Cardinal
Health, Inc.:
John F. Finn Chairman and Chief Executive
Officer of Gardner, Inc., an
outdoor power equipment
distributor.
Robert L. Gerbig President and Chief Executive
Officer of Gerbig, Snell/
Weisheimer & Associates, Inc., an
advertising agency.
John F. Havens Retired Chairman and Director
Emeritus of Banc One Corporation,
a bank holding company.
Regina E. Herzlinger Professor, Harvard University
Graduate School of Business
Administration.
John C. Kane President and Chief Operating
Officer of Cardinal Health, Inc.
J. Michael Losh Executive Vice President and Chief
Financial Officer of General
Motors Corporation, a manufacturer
of automobiles.
George R. Manser Chairman of Uniglobe Travel
(Capital Cities) Inc., a travel
planning services company.
John B. McCoy Chairman and Chief Executive
Officer of Banc One Corporation, a
bank holding company.
Jerry E. Robertson Retired Executive Vice President
of the Life Sciences Sector and
Corporate Services of Minnesota
Mining & Manufacturing Company, a
manufacturer of industrial
Page 8 of 11 Pages<PAGE>
commercial, health care and
consumer products.
L. Jack Van Fossen Retired President and Chief
Executive Officer of Red Roof
Inns, Inc., a lodging company.
Robert D. Walter Chairman and Chief Executive
Officer of Cardinal Health, Inc.
Melburn G. Whitmire Vice Chairman of Cardinal Health,
Inc.
Executive Officers
of Cardinal Health, Inc.
(that are not directors):
David Bearman Executive Vice President and Chief
Financial Officer.
George H. Bennett, Jr. Executive Vice President, General
Counsel and Secretary.
Anthony J. Campanaro Executive Vice President-Central
Group.
James E. Clare Executive Vice President-Southern
Group.
Gary E. Close Executive Vice President-Western
Group.
Phillip A. Greth Executive Vice President and Chief
Information Officer.
James F. Millar Executive Vice President-Cardinal
Distribution.
Gordon A. Troup Executive Vice President-Northern
Group.
Page 9 of 11 Pages<PAGE>
ANNEX II
Persons Executing Support/Voting Agreements
Richard S. Sauter
Herbert Lotman
Theodore H. Seidenberg
Michael J. Rotko
H. Scott Miller
Sheldon M. Bonovitz
Page 10 of 11 Pages<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge
and belief, I certify that the information set forth in this
statement is true, complete and correct.
CARDINAL HEALTH, INC.
By: /s/ David Bearman
Name: David Bearman
Title: Executive Vice President and
Chief Financial Officer
Dated: July 29, 1996
Page 11 of 11 Pages<PAGE>
EXHIBIT INDEX
Exhibit Description
2.1 Agreement and Plan of
Merger, dated July 23,
1996, among Cardinal Health, Inc.,
Panther Merger Corp., PCI Services,
Inc. and MEDIQ Incorporated
2.2 Stock Option Agreement, dated
July 23, 1996, among
Cardinal Health, Inc., MEDIQ
Investment Services, Inc. and
MEDIQ Incorporated
99.1 Support/Voting Agreement, dated
July 23, 1996, among MEDIQ
Incorporated, MEDIQ Investment
Services, Inc. and Cardinal Health,
Inc.
99.2 Form of Support/Voting Agreement
between Cardinal Health, Inc. and
each of the persons listed on Annex
II of the Schedule 13D.
[CONFORMED COPY]
AGREEMENT AND PLAN OF MERGER
AMONG
CARDINAL HEALTH, INC.
("Cardinal"),
PANTHER MERGER CORP.
a wholly owned direct subsidiary of Cardinal
("Subcorp"),
PCI SERVICES, INC.
("PCI")
and
MEDIQ INCORPORATED
("MEDIQ")
July 23, 1996<PAGE>
TABLE OF CONTENTS
PAGE
AGREEMENT AND PLAN OF MERGER............................. 1
PRELIMINARY STATEMENTS................................... 1
AGREEMENT ......................................... 1
ARTICLE I: THE MERGER................................... 2
1.1 The Merger................................... 2
1.2 Effective Time............................... 2
1.3 Effects of the Merger........................ 2
1.4 Certificate of Incorporation and Bylaws...... 2
1.5 Directors and Officers....................... 2
1.6 Additional Actions........................... 2
ARTICLE II: CONVERSION OF SECURITIES.................... 3
2.1 Conversion of Capital Stock.................. 3
2.2 Exchange Ratio; Fractional Shares............ 3
2.3 Exchange of Certificates..................... 4
(a) Exchange Agent........................... 4
(b) Exchange Procedures...................... 4
(c) Distributions with Respect to
Unexchanged Shares...................... 5
(d) No Further Ownership Rights in
PCI Common Stock........................ 5
(e) Termination of Exchange Fund............. 5
(f) No Liability............................. 5
(g) Investment of Exchange Fund.............. 6
2.4 Treatment of Stock Options................... 6
ARTICLE III: REPRESENTATIONS AND WARRANTIES OF
CARDINAL AND SUBCORP....................... 6
3.1 Organization and Standing.................... 7
3.2 Corporate Power and Authority................ 7
3.3 Capitalization of Cardinal................... 7
3.4 Conflicts, Consents and Approval............. 7
3.5 Brokerage and Finder's Fees.................. 8
3.6 Accounting Matters........................... 8
3.7 Cardinal SEC Documents....................... 8
3.8 Registration Statement....................... 9
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF
PCI........................................ 9
4.1 Organization and Standing.................... 9
4.2 Subsidiaries................................. 10
4.3 Corporate Power and Authority................ 10
4.4 Capitalization of PCI........................ 10
4.5 Conflicts; Consents and Approvals............ 11
-i-<PAGE>
Page
4.6 No Material Adverse Change................... 12
4.7 PCI SEC Documents............................ 12
4.8 Taxes........................................ 12
4.9 Compliance with Law.......................... 13
4.10 Intellectual Property........................ 13
4.11 Title to and Condition of Properties......... 15
4.12 Registration Statement; Proxy Statement...... 15
4.13 Litigation................................... 15
4.14 Brokerage and Finder's Fees; Expenses........ 16
4.15 Accounting Matters........................... 16
4.16 Employee Benefit Plans....................... 16
4.17 Contracts.................................... 19
4.18 Accounts Receivable.......................... 20
4.19 Labor Matters................................ 20
4.20 Undisclosed Liabilities...................... 20
4.21 Operation of PCI's Business; Relationships... 20
4.22 Permits; Compliance.......................... 21
4.23 Product Warranties and Liabilities........... 21
4.24 Environmental Matters........................ 21
4.25 Opinion of Financial Advisor................. 22
4.26 Board Recommendation......................... 22
4.27 DGCL Section 203 and State Takeover Laws..... 22
4.28 Employment Agreements........................ 22
4.29 Insurance.................................... 22
4.30 Affiliate Transactions....................... 23
ARTICLE V: COVENANTS OF THE PARTIES..................... 23
5.1 Mutual Covenants............................. 23
(a) General................................. 23
(b) HSR Act................................. 23
(c) Other Governmental Matters.............. 23
(d) Pooling-of-Interests.................... 24
(e) Tax-Free Treatment...................... 24
(f) Public Announcements.................... 24
(g) Intercompany Agreements................. 24
5.2 Covenants of Cardinal........................ 24
(a) Preparation of Registration Statement... 24
(b) Indemnification......................... 24
(c) Notification of Certain Matters......... 24
(d) Pooling Press Release................... 25
5.3 Covenants of PCI and MEDIQ................... 25
(a) PCI Stockholders Meeting................ 25
(b) Information for the Registration Statement
and Preparation of Proxy Statement...... 25
(c) Conduct of PCI's Operations............. 25
(d) Intellectual Property Matters........... 27
(e) No Solicitation......................... 28
(f) Affiliates of PCI....................... 28
(g) Access.................................. 28
-ii-<PAGE>
Page
(h) Notification of Certain Matters by PCI.. 29
(g) Notification of Certain Matters by MEDIQ 29
ARTICLE VI: CONDITIONS.................................. 29
6.1 Mutual Conditions............................ 29
6.2 Conditions to Obligations of PCI............. 30
6.3 Conditions to Obligations of Cardinal and
Subcorp................................. 30
ARTICLE VII: TERMINATION AND AMENDMENT.................. 32
7.1 Termination.................................. 32
7.2 Effect of Termination........................ 33
7.3 Amendment.................................... 34
7.4 Extension; Waiver............................ 34
ARTICLE VIII: MISCELLANEOUS............................. 34
8.1 Representations and Warranties of MEDIQ...... 34
8.2 Survival of Representations and Warranties... 36
8.3 Notices...................................... 36
8.4 Interpretation............................... 37
8.5 Counterparts................................. 37
8.6 Entire Agreement............................. 37
8.7 Third Party Beneficiaries.................... 37
8.8 Governing Law................................ 37
8.9 Specific Performance......................... 38
8.10 Assignment................................... 38
8.11 Registration Rights.......................... 38
8.12 Expenses..................................... 38
Exhibit A - Form of Affiliate Letter
Exhibit B - Opinion of Cardinal's and Subcorp's Counsel
Exhibit C - Opinion of PCI's Counsel
-iii-<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement")
is made and entered into as of the 23rd day of July, 1996, by
and among Cardinal Health, Inc., an Ohio corporation
("Cardinal"), Panther Merger Corp., a Delaware corporation and
a wholly owned subsidiary of Cardinal ("Subcorp"), PCI
Services, Inc., a Delaware corporation ("PCI"), and MEDIQ
Incorporated, a Delaware corporation ("MEDIQ").
PRELIMINARY STATEMENTS
A. Cardinal desires to acquire the pharmaceutical
packaging business and other businesses operated by PCI through
the merger (the "Merger") of Subcorp with and into PCI, with
PCI as the surviving corporation, pursuant to which each share
of PCI Common Stock (as defined in Section 4.4) outstanding at
the Effective Time (as defined in Section 1.2) will be
converted into the right to receive Cardinal Common Shares (as
defined in Section 3.3) as more fully provided herein.
B. PCI desires to combine its pharmaceutical packag-
ing and other businesses with the wholesale drug distribution
and related businesses operated by Cardinal and for the holders
of shares of PCI Common Stock ("PCI Stockholders") to have a
continuing equity interest in the combined Cardinal/PCI busi-
nesses.
C. MEDIQ, as the beneficial owner of 2,875,000
shares of PCI Common Stock, desires that the Merger be
consummated as soon as practicable.
D. PCI and Cardinal intend that the Merger
constitute a tax-free "reorganization" within the meaning of
Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as
amended (the "Code"), by reason of Section 368(a)(2)(E)
thereof.
E. The parties intend that the Merger be accounted
for as a pooling-of-interests for financial reporting purposes.
F. The respective Boards of Directors of Cardinal,
Subcorp, PCI and MEDIQ have determined the Merger in the manner
contemplated herein to be desirable and in the best interests
of their respective shareholders and, by resolutions duly
adopted, have approved and adopted this Agreement.<PAGE>
AGREEMENT
Now, therefore, in consideration of these premises
and the mutual and dependent promises hereinafter set forth,
the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the
conditions hereof, and in accordance with the provisions of the
Delaware General Corporation Law (the "DGCL"), Subcorp shall be
merged with and into PCI as soon as practicable following the
satisfaction or waiver of the conditions set forth in Article
VI. Following the Merger, the separate corporate existence of
Subcorp shall cease and PCI shall continue its existence under
the laws of the State of Delaware. PCI, in its capacity as the
corporation surviving the Merger, is hereinafter sometimes re-
ferred to as the "Surviving Corporation."
1.2 Effective Time. The Merger shall be consummated
by filing with the Secretary of State of the State of Delaware
(the "Delaware Secretary of State") a certificate of merger
(the "Certificate of Merger") in such form as is required by
and executed in accordance with Section 251(c) of the DGCL.
The Merger shall become effective (the "Effective Time") when
the Certificate of Merger has been filed with the Delaware Sec-
retary of State or at such later time as shall be specified in
the Certificate of Merger. Prior to the filing referred to in
this Section 1.2, a closing (the "Closing") shall be held at
the offices of Cardinal, 5555 Glendon Court, Dublin, Ohio
43016, or such other place as the parties may agree on a date
(the "Closing Date") specified by Cardinal, which date shall be
within ten business days following the date upon which all
conditions set forth in Article VI hereof have been satisfied
or waived.
1.3 Effects of the Merger. The Merger shall have
the effects set forth in Section 259 of the DGCL.
1.4 Certificate of Incorporation and Bylaws. The
Certificate of Merger shall provide that at the Effective Time
(i) the Certificate of Incorporation of the Surviving Corpora-
tion as in effect immediately prior to the Effective Time shall
be amended as of the Effective Time so as to contain the provi-
sions, and only the provisions, contained immediately prior
thereto in the Certificate of Incorporation of Subcorp, except
for Article I thereof which shall continue to read "The name of
-2-<PAGE>
the corporation is 'PCI Services, Inc.'", and (ii) the By-laws
of Subcorp in effect immediately prior to the Effective Time
shall be the By-laws of the Surviving Corporation; in each case
until amended in accordance with applicable law.
1.5 Directors and Officers. From and after the Ef-
fective Time, the officers of PCI shall be the officers of the
Surviving Corporation and the directors of Subcorp shall be the
directors of the Surviving Corporation, in each case until
their respective successors are duly elected and qualified. On
or prior to the Closing Date, PCI shall deliver to Cardinal
evidence satisfactory to Cardinal of the resignations of the
directors of PCI, such resignations to be effective as of the
Effective Time.
1.6 Additional Actions. If, at any time after the
Effective Time, the Surviving Corporation shall consider or be
advised that any further deeds, assignments or assurances in
law or any other acts are necessary or desirable to (a) vest,
perfect or confirm, of record or otherwise, in the Surviving
Corporation its right, title or interest in, to or under any of
the rights, properties or assets of PCI, or (b) otherwise carry
out the provisions of this Agreement, PCI and its officers and
directors shall be deemed to have granted to the Surviving Cor-
poration an irrevocable power of attorney to execute and de-
liver all such deeds, assignments or assurances in law and to
take all acts necessary, proper or desirable to vest, perfect
or confirm title to and possession of such rights, properties
or assets in the Surviving Corporation and otherwise to carry
out the provisions of this Agreement, and the officers and di-
rectors of the Surviving Corporation are authorized in the name
of PCI or otherwise to take any and all such action.
ARTICLE II
CONVERSION OF SECURITIES
2.1 Conversion of Capital Stock. At the Effective
Time, by virtue of the Merger and without any action on the
part of Cardinal, Subcorp or PCI:
(a) Each share of common stock, $0.01 par value, of
Subcorp issued and outstanding immediately prior to the
Effective Time shall be converted into one share of common
stock, $0.01 par value, of the Surviving Corporation.
Such newly issued shares shall thereafter constitute all
of the issued and outstanding capital stock of the Surviv-
ing Corporation.
-3-<PAGE>
(b) Each share of PCI Common Stock issued and out-
standing immediately prior to the Effective Time shall be
converted into and represent a number of Cardinal Common
Shares equal to the Exchange Ratio (as defined below).
(c) Each share of capital stock of PCI held in the
treasury of PCI shall be cancelled and retired and no pay-
ment shall be made in respect thereof.
2.2 Exchange Ratio; Fractional Shares. The "Ex-
change Ratio" shall equal (i) if Cardinal has not made an Ad-
justment Election (as defined in Section 7.1(d)), .336 or (ii)
if Cardinal has made an Adjustment Election, then the product
of (x) .336 and (y) the quotient obtained by dividing 58.12 by
the average of the closing prices of Cardinal Common Shares as
reported on the New York Stock Exchange ("NYSE") Composite Tape
("NYSE Composite Tape") on each of the last 15 trading days
ending on the sixth trading day prior to the meeting of PCI
Stockholders at which the vote to approve the Merger occurs
(the "Average Share Price"). No certificates for fractional
Cardinal Common Shares shall be issued as a result of the
conversion provided for in Section 2.1(b). To the extent that
an outstanding share of PCI Common Stock would otherwise have
become a fractional Cardinal Common Share, the holder thereof,
upon presentation of such fractional interest represented by an
appropriate certificate for PCI Common Stock to the Exchange
Agent pursuant to Section 2.3, shall be entitled to receive a
cash payment therefor in an amount equal to the value (de-
termined with reference to the closing price of Cardinal Common
Shares on the NYSE Composite Tape on the last full trading day
immediately prior to the Effective Time) of such fractional
interest. Such payment with respect to fractional shares is
merely intended to provide a mechanical rounding off of, and is
not a separately bargained for, consideration. If more than
one certificate representing shares of PCI Common Stock shall
be surrendered for the account of the same holder, the number
of Cardinal Common Shares for which certificates have been
surrendered shall be computed on the basis of the aggregate
number of shares represented by the certificates so
surrendered. In the event that prior to the Effective Time
Cardinal shall declare a stock dividend or other distribution
payable in Cardinal Common Shares or securities convertible
into Cardinal Common Shares, or effect a stock split, reclas-
sification, combination or other change with respect to
Cardinal Common Shares, the Exchange Ratio set forth in this
Section 2.2 shall be appropriately adjusted to reflect such
dividend, distribution, stock split, reclassification,
combination or other change.
-4-<PAGE>
2.3 Exchange of Certificates.
(a) Exchange Agent. Promptly following the Effec-
tive Time, Cardinal shall deposit with Boatmen's Trust Company
or such other exchange agent as may be designated by Cardinal
(the "Exchange Agent"), for the benefit of PCI Stockholders,
for exchange in accordance with this Section 2.3, certificates
representing Cardinal Common Shares issuable pursuant to
Section 2.1 in exchange for outstanding shares of PCI Common
Stock and shall from time-to-time deposit cash in an amount
reasonably expected to be paid pursuant to Section 2.2 (such
Cardinal Common Shares and cash, together with any dividends or
distributions with respect thereto, being hereinafter referred
to as the "Exchange Fund").
(b) Exchange Procedures. As soon as practicable
after the Effective Time, the Exchange Agent shall mail to each
holder of record of a certificate or certificates (the "Cer-
tificates") which immediately prior to the Effective Time rep-
resented outstanding shares of PCI Common Stock whose shares
were converted into the right to receive Cardinal Common Shares
pursuant to Section 2.1(b) (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 delivery of
the Certificates to the Exchange Agent and shall be in such
form and have such other provisions as Cardinal may reasonably
specify) and (ii) instructions for effecting the surrender of
the Certificates in exchange for certificates representing
Cardinal Common Shares. Upon surrender of a Certificate for
cancellation to the Exchange Agent, together with a duly ex-
ecuted letter of transmittal, the holder of such Certificate
shall be entitled to receive in exchange therefor (x) a cer-
tificate representing that whole number of Cardinal Common
Shares which such holder has the right to receive pursuant to
Section 2.1 and (y) a check representing the amount of cash in
lieu of fractional shares, if any, and unpaid dividends and
distributions, if any, which such holder has the right to
receive pursuant to the provisions of this Article II, after
giving effect to any required withholding tax, and the shares
represented by the Certificate so surrendered shall forthwith
be cancelled. No interest will be paid or accrued on the cash
in lieu of fractional shares, if any, and unpaid dividends and
distributions, if any, payable to holders of shares of PCI
Common Stock. In the event of a transfer of ownership of
shares of PCI Common Stock which is not registered on the
transfer records of PCI, a certificate representing the proper
number of Cardinal Common Shares, together with a check for the
cash to be paid in lieu of fractional shares, if any, and
unpaid dividends and distributions, if any, may be issued to
such transferee if the Certificate representing such shares of
-5-<PAGE>
PCI Common Stock held by such transferee is presented to the
Exchange Agent, accompanied by all documents required to evi-
dence and effect such transfer and to evidence that any appli-
cable stock transfer taxes have been paid. Until surrendered
as contemplated by this Section 2.3, each Certificate shall be
deemed at any time after the Effective Time to represent only
the right to receive upon surrender a certificate representing
Cardinal Common Shares and cash in lieu of fractional shares,
if any, and unpaid dividends and distributions, if any, as pro-
vided in this Article II.
(c) Distributions with Respect to Unexchanged
Shares. Notwithstanding any other provisions of this Agree-
ment, no dividends or other distributions declared or made af-
ter the Effective Time with respect to Cardinal Common Shares
having a record date after the Effective Time shall be paid to
the holder of any unsurrendered Certificate, and no cash pay-
ment in lieu of fractional shares shall be paid to any such
holder, until the holder shall surrender such Certificate as
provided in this Section 2.3. Subject to the effect of Appli-
cable Laws (as defined in Section 4.9), following surrender of
any such Certificate, there shall be paid to the holder of the
certificates representing whole Cardinal Common Shares issued
in exchange therefor, without interest, (i) at the time of such
surrender, the amount of dividends or other distributions with
a record date on or after the Effective Time theretofore
payable with respect to such whole Cardinal Common Shares and
not paid, less the amount of any withholding taxes which may be
required thereon, and (ii) at the appropriate payment date
subsequent to surrender, the amount of dividends or other
distributions with a record date on or after the Effective Time
but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole Cardinal Common
Shares, less the amount of any withholding taxes which may be
required thereon.
(d) No Further Ownership Rights in PCI Common Stock.
All Cardinal Common Shares issued upon surrender of Certifi-
cates in accordance with the terms hereof (including any cash
paid pursuant to this Article II) shall be deemed to have been
issued in full satisfaction of all rights pertaining to such
shares of PCI Common Stock represented thereby, and there shall
be no further registration of transfers on the stock transfer
books of PCI of shares of PCI Common Stock outstanding
immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be cancelled and ex-
changed as provided in this Section 2.3. Certificates sur-
rendered for exchange by any person constituting an "affiliate"
of PCI for purposes of Rule 145(c) under the Securities Act of
-6-<PAGE>
1933, as amended (the "Securities Act"), shall not be exchanged
until Cardinal has received written undertakings from such
person in the form attached hereto as Exhibit A.
(e) Termination of Exchange Fund. Any portion of
the Exchange Fund which remains undistributed to PCI Stockhold-
ers for six months after the Effective Time shall be delivered
to Cardinal, upon demand thereby, and holders of shares of PCI
Common Stock who have not theretofore complied with this Sec-
tion 2.3 shall thereafter look only to Cardinal for payment of
any claim to Cardinal Common Shares, cash in lieu of fractional
shares thereof, or dividends or distributions, if any, in re-
spect thereof.
(f) No Liability. None of Cardinal, the Surviving
Corporation or the Exchange Agent shall be liable to any person
in respect of any shares of PCI Common Stock (or dividends or
distributions with respect thereto) or cash from the Exchange
Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certifi-
cates shall not have been surrendered prior to seven years af-
ter the Effective Time of the Merger (or immediately prior to
such earlier date on which any cash, any cash in lieu of frac-
tional shares or any dividends or distributions with respect to
whole shares of PCI Common Stock in respect of such Certificate
would otherwise escheat to or become the property of any Gov-
ernmental Authority (as defined in Section 3.4)), any such
cash, dividends or distributions in respect of such Certificate
shall, to the extent permitted by Applicable Laws, become the
property of Cardinal, free and clear of all claims or interest
of any person previously entitled thereto.
(g) Investment of Exchange Fund. The Exchange Agent
shall invest any cash included in the Exchange Fund, as di-
rected by Cardinal, on a daily basis. Any interest and other
income resulting from such investments shall be paid to
Cardinal upon termination of the Exchange Fund pursuant to
Section 2.3(e).
2.4 Treatment of Stock Options.
(a) Prior to the Effective Time, Cardinal and PCI
shall take all such actions as may be necessary to cause each
unexpired and unexercised option under stock option plans of
PCI in effect on the date hereof which has been granted to
current or former directors, officers or key employees of PCI
by PCI (each, an "PCI Option") to be automatically converted at
the Effective Time into an option (a "Cardinal Exchange
Option") to purchase that number of Cardinal Common Shares
equal to the number of shares of PCI Common Stock issuable
-7-<PAGE>
immediately prior to the Effective Time upon exercise of the
PCI Option (without regard to actual restrictions on
exercisability) multiplied by the Exchange Ratio, with an
exercise price equal to the exercise price which existed under
the corresponding PCI Option divided by the Exchange Ratio, and
with other terms and conditions that are the same as the terms
and conditions of such PCI Option immediately before the
Effective Time (including, without limitation, to the extent
provided as of the date hereof in the plans and agreements
covering such PCI Options (copies of which have been provided
to PCI or filed as exhibits to the PCI SEC Documents (as
defined in Section 4.7)), the ability to exercise such Cardinal
Exchange Options through "cashless exercises"); provided that
with respect to any PCI Option that is an "incentive stock
option" within the meaning of Section 422 of the Code, the
foregoing conversion shall be carried out in a manner sat-
isfying the requirements of Section 424(a) of the Code. In
connection with the issuance of Cardinal Exchange Options,
Cardinal shall (i) reserve for issuance the number of Cardinal
Common Shares that will become subject to Cardinal Exchange Op-
tions pursuant to this Section 2.4 and (ii) from and after the
Effective Time, upon exercise of Cardinal Exchange Options,
make available for issuance all Cardinal Common Shares covered
thereby, subject to the terms and conditions applicable
thereto.
(b) PCI agrees to issue treasury shares of PCI, to
the extent available, upon the exercise of PCI Options prior to
the Effective Time.
(c) Cardinal agrees to file with the Securities and
Exchange Commission (the "Commission") within one month after
the Closing Date a registration statement on Form S-8 or other
appropriate form under the Securities Act to register Cardinal
Common Shares issuable upon exercise of the Cardinal Exchange
Options and use its reasonable efforts to cause such registra-
tion statement to remain effective until the exercise or expi-
ration of all of such Cardinal Exchange Options.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CARDINAL AND SUBCORP
In order to induce PCI and MEDIQ to enter into this
Agreement, Cardinal and Subcorp hereby represent and warrant to
PCI and MEDIQ that the statements contained in this Article III
are true, correct and complete.
-8-<PAGE>
3.1 Organization and Standing. Each of Cardinal and
Subcorp is a corporation duly organized, validly existing and
in good standing under the laws of its state of incorporation
with full power and authority (corporate and other) to own,
lease, use and operate its properties and to conduct its busi-
ness as and where now owned, leased, used, operated and con-
ducted. Each of Cardinal and Subcorp is duly qualified to do
business and in good standing in each jurisdiction in which the
nature of the business conducted by it or the property it owns,
leases or operates, makes such qualification necessary, except
where the failure to be so qualified or in good standing in
such jurisdiction would not have a material adverse effect on
Cardinal. Cardinal is not in default in the performance,
observance or fulfillment of any provision of its Articles of
Incorporation, as amended and restated (the "Cardinal
Articles"), or Code of Regulations, as amended and restated,
and Subcorp is not in default in the performance, observance or
fulfillment of any provisions of its Certificate of Incorpora-
tion or Bylaws.
3.2 Corporate Power and Authority. Each of Cardinal
and Subcorp has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions
contemplated by this Agreement. The execution and delivery of
this Agreement and the consummation of the transactions contem-
plated hereby have been duly authorized by all necessary corpo-
rate action on the part of each of Cardinal and Subcorp. This
Agreement has been duly executed and delivered by each of
Cardinal and Subcorp, and constitutes the legal, valid and
binding obligation of each of Subcorp and Cardinal enforceable
against each of them in accordance with its terms.
3.3 Capitalization of Cardinal. As of July 22,
1996, Cardinal's authorized capital stock consisted solely of
(a) 100,000,000 common shares, without par value ("Cardinal
Common Shares"), of which (i) 63,989,830 shares were issued and
outstanding, (ii) 223,098 shares were issued and held in
treasury (which does not include the shares reserved for issu-
ance as set forth in clause (a)(iii) below) and (iii) 5,264,145
shares were reserved for issuance upon the exercise or
conversion of options, warrants or convertible securities
granted or issuable by Cardinal, (b) 5,000,000 Class B common
shares, without par value ("Cardinal Class B Common Shares"),
none of which was issued and outstanding or reserved for issu-
ance, and (c) 500,000 Non-Voting Preferred Shares, without par
value, none of which was issued and outstanding or reserved for
issuance. Each outstanding share of Cardinal capital stock is,
and all Cardinal Common Shares to be issued in connection with
the Merger will be, duly authorized and validly issued, fully
paid and nonassessable, and each outstanding share of Cardinal
-9-<PAGE>
capital stock has not been, and all Cardinal Common Shares to
be issued in connection with the Merger will not be, issued in
violation of any preemptive or similar rights. As of the date
hereof, other than as set forth in the first sentence hereof or
in Section 3.3 to the disclosure schedule (the "Cardinal Dis-
closure Schedule") delivered by Cardinal to PCI and dated the
date hereof, there are no outstanding subscriptions, options,
warrants, puts, calls, agreements, understandings, claims or
other commitments or rights of any type relating to the issu-
ance, sale or transfer by Cardinal of any equity securities of
Cardinal, nor are there outstanding any securities which are
convertible into or exchangeable for any shares of capital
stock of Cardinal.
3.4 Conflicts, Consents and Approval. Neither the
execution and delivery of this Agreement by Cardinal or Subcorp
nor the consummation of the transactions contemplated hereby
will:
(a) conflict with, or result in a breach of any pro-
vision of the Cardinal Articles or Code of Regulations, as
amended and restated, of Cardinal or the Certificate of
Incorporation or Bylaws of Subcorp;
(b) violate, or conflict with, or result in a breach
of any provision of, or constitute a default (or an event
which, with the giving of notice, the passage of time or
otherwise, would constitute a default) under, or entitle
any party (with the giving of notice, the passage of time
or otherwise) to terminate, accelerate, modify or call a
default under, or result in the creation of any lien, se-
curity interest, charge or encumbrance upon any of the
properties or assets of Cardinal or any of its subsidiar-
ies under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, li-
cense, contract, undertaking, agreement, lease or other
instrument or obligation to which Cardinal or any of its
subsidiaries is a party;
(c) violate any order, writ, injunction, decree,
statute, rule or regulation, applicable to Cardinal or any
of its subsidiaries or their respective properties or as-
sets; or
(d) require any action or consent or approval of, or
review by, or registration or filing by Cardinal or any of
its affiliates with any third party or any local, domestic
or foreign court, arbitral tribunal, administrative agency
or commission or other governmental or regulatory body,
-10-<PAGE>
agency, instrumentality or authority (a "Governmental Au-
thority"), other than (i) authorization for inclusion of
the Cardinal Common Shares to be issued in the Merger and
the transactions contemplated hereby (including upon
exercise of the Cardinal Exchange Options) on the NYSE,
subject to official notice of issuance, (ii) actions
required by the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR Act"), (iii)
registrations or other actions required under federal and
state securities laws as are contemplated by this Agree-
ment, (v) consents or approvals of any Governmental
Authority set forth in Section 3.4 to the Cardinal
Disclosure Schedule;
except in the case of (b), (c) and (d) for any of the foregoing
that would not, individually or in the aggregate, have a mate-
rial adverse effect on Cardinal.
3.5 Brokerage and Finder's Fees. Except for
Cardinal's obligation to Smith Barney Inc. ("Smith Barney"),
neither Cardinal nor any shareholder, director, officer or em-
ployee thereof, has incurred or will incur on behalf of
Cardinal, any brokerage, finder's or similar fee in connection
with the transactions contemplated by this Agreement.
3.6 Accounting Matters. Neither Cardinal nor any of
its affiliates has taken or agreed to take any action that
(without giving effect to any actions taken or agreed to be
taken by PCI or any of its affiliates) would prevent Cardinal
from accounting for the business combination to be effected by
the Merger as a pooling-of-interests for financial reporting
purposes.
3.7 Cardinal SEC Documents. Cardinal has timely
filed with the Commission all forms, reports, schedules, state-
ments and other documents required to be filed by it since
December 31, 1991 under the Securities Exchange Act of 1934, as
amended (together with the rules and regulations thereunder,
the "Exchange Act") or the Securities Act (such documents, as
supplemented and amended since the time of filing, collec-
tively, the "Cardinal SEC Documents"). The Cardinal SEC Docu-
ments, including, without limitation, any financial statements
or schedules included therein, at the time filed (and, in the
case of registration statements and proxy statements, on the
dates of effectiveness and the dates of mailing, respectively)
(a) did not 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 light of
the circumstances under which they were made, not misleading,
-11-<PAGE>
and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the
case may be. The financial statements of Cardinal included in
the Cardinal SEC Documents at the time filed (and, in the case
of registration statements and proxy statements, on the date of
effectiveness and the date of mailing, respectively) complied
as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of
the Commission with respect thereto, were prepared in ac-
cordance with generally accepted accounting principles applied
on a consistent basis during the periods involved (except as
may be indicated in the notes thereto or, in the case of unau-
dited statements, as permitted by Form 10-Q of the Commission),
and fairly present (subject in the case of unaudited statements
to normal, recurring audit adjustments) the consolidated finan-
cial position of Cardinal and its consolidated subsidiaries as
at the dates thereof and the consolidated results of their op-
erations and cash flows for the periods then ended.
3.8 Registration Statement. None of the information
provided by Cardinal for inclusion in the registration state-
ment on Form S-4 to be filed with the Commission by Cardinal
under the Securities Act, including the prospectus relating to
Cardinal Common Shares to be issued in the Merger and the proxy
statement and form of proxy relating to the vote of PCI
Stockholders with respect to the Merger (as amended,
supplemented or modified, the "Proxy Statement") contained
therein (such registration statement as amended, supplemented
or modified, the "Registration Statement"), at the time the
Registration Statement becomes effective or, in the case of the
Proxy Statement, at the date of mailing, will contain any
untrue statement of a material fact or omit to state any mate-
rial fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances
under which they are made, not misleading. Each of the
Registration Statement and Proxy Statement, except for such
portions thereof that relate only to PCI or MEDIQ, will comply
as to form in all material respects with the provisions of the
Securities Act and Exchange Act, as applicable.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PCI
In order to induce Subcorp and Cardinal to enter into
this Agreement, PCI hereby represents and warrants to Cardinal
and Subcorp that the statements contained in this Article IV
are true, correct and complete.
-12-<PAGE>
4.1 Organization and Standing. PCI is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Delaware with full power and authority
(corporate and other) to own, lease, use and operate its prop-
erties and to conduct its business as and where now owned,
leased, used, operated and conducted. Each of PCI and its
subsidiaries is duly qualified to do business and in good
standing in each jurisdiction listed in Section 4.2 to the dis-
closure schedule (the "PCI Disclosure Schedule") delivered by
PCI to Cardinal and dated the date hereof, is not qualified to
do business in any other jurisdiction and neither the nature of
the business conducted by it nor the property it owns, leases
or operates requires it to qualify to do business as a foreign
corporation in any other jurisdiction, except where the failure
to be so qualified or in good standing in such jurisdiction
would not have a material adverse effect on PCI. PCI is not in
default in the performance, observance or fulfillment of any
provision of its Certificate of Incorporation, as amended and
restated, or Bylaws.
4.2 Subsidiaries. PCI does not own, directly or
indirectly, any equity or other ownership interest in any cor-
poration, partnership, joint venture or other entity or en-
terprise, except for the subsidiaries as set forth in Section
4.2 to the PCI Disclosure Schedule. Except as set forth in
Section 4.2 to the PCI Disclosure Schedule, PCI is not subject
to any obligation or requirement to provide funds to or make
any investment (in the form of a loan, capital contribution or
otherwise) in any such entity. PCI owns directly or indirectly
each of the outstanding shares of capital stock (or other own-
ership interests having by their terms ordinary voting power to
elect a majority of directors or others performing similar
functions with respect to such subsidiary) of each of PCI's
subsidiaries. Except as set forth in Section 4.2 to the PCI
Disclosure Schedule, each of the outstanding shares of capital
stock of each of PCI's subsidiaries is duly authorized, validly
issued, fully paid and nonassessable, and is owned, directly or
indirectly, by PCI free and clear of all liens, pledges, secu-
rity interests, claims or other encumbrances. The following
information for each subsidiary of PCI is set forth in Section
4.2 to the PCI Disclosure Schedule, as applicable: (i) its
name and jurisdiction of incorporation or organization; (ii)
its authorized capital stock or share capital; and (iii) the
number of issued and outstanding shares of capital stock or
share capital and the record owner(s) thereof. Other than as
set forth in Section 4.2 to the PCI Disclosure Schedule, there
are no outstanding subscriptions, options, warrants, puts,
calls, agreements, understandings, claims or other commitments
or rights of any type relating to the issuance, sale or trans-
fer of any securities of any subsidiary of PCI, nor are there
-13-<PAGE>
outstanding any securities which are convertible into or ex-
changeable for any shares of capital stock of any subsidiary of
PCI; and no subsidiary of PCI has any obligation of any kind to
issue any additional securities or to pay for securities of any
subsidiary of PCI or any predecessor thereof.
4.3 Corporate Power and Authority. PCI has all req-
uisite corporate power and authority to enter into this Agree-
ment and, subject to authorization of the Merger and the trans-
actions contemplated hereby by PCI Stockholders, to consummate
the transactions contemplated by this Agreement. The execution
and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of PCI, subject to
authorization of the Merger and the transactions contemplated
hereby by PCI Stockholders. This Agreement has been duly ex-
ecuted and delivered by PCI and constitutes the legal, valid
and binding obligation of PCI enforceable against it in ac-
cordance with its terms.
4.4 Capitalization of PCI. As of July 23, 1996,
PCI's authorized capital stock consisted solely of (a)
25,000,000 shares of common stock, $0.001 par value per share
("PCI Common Stock"), of which (i) 6,211,250 shares were issued
and outstanding, (ii) 715,000 shares were issued and held in
treasury (which does not include the shares reserved for issu-
ance set forth in clause (iii) below) and (iii) 470,000 shares
were reserved for issuance upon the exercise or conversion of
outstanding options, warrants or convertible securities granted
or issued by PCI with an average weighted exercise price of
$10.3032, and (b) 10,000,000 shares of preferred stock, $0.001
par value per share ("PCI Preferred Stock"), none of which was
issued and outstanding or reserved for issuance. Each out-
standing share of PCI capital stock is duly authorized and val-
idly issued, fully paid and nonassessable, and has not been
issued in violation of any preemptive or similar rights. Other
than as set forth in the first sentence hereof, or in Section
4.4 to the PCI Disclosure Schedule, there are no outstanding
subscriptions, options, warrants, puts, calls, agreements,
understandings, claims or other commitments or rights of any
type relating to the issuance, sale or transfer of any
securities of PCI by PCI, nor are there outstanding any securi-
ties which are convertible into or exchangeable for any shares
of capital stock of PCI; and PCI has no obligation of any kind
to issue any additional securities or to pay for securities of
PCI or any predecessor. The issuance and sale of all of the
shares of capital stock described in this Section 4.4 have been
in compliance with federal and state securities laws. Section
4.4 to the PCI Disclosure Schedule accurately sets forth the
names of, and the number of shares issuable upon exercise of
-14-<PAGE>
PCI Options, and the exercise price with respect thereto and
the number of options and warrants held by, all holders of
options or warrants to purchase PCI capital stock. Except as
set forth in Section 4.4 to the PCI Disclosure Schedule, PCI
has not agreed to register any securities under the Securities
Act or under any state securities law or granted registration
rights to any person or entity.
4.5 Conflicts; Consents and Approvals. Neither the
execution and delivery of this Agreement by PCI, nor the con-
summation of the transactions contemplated hereby will:
(a) conflict with, or result in a breach of any pro-
vision of the Certificate of Incorporation, as amended and
restated, or Bylaws of PCI;
(b) violate, or conflict with, or result in a breach
of any provision of, or constitute a default (or an event
which, with the giving of notice, the passage of time or
otherwise, would constitute a default) under, or entitle
any party (with the giving of notice, the passage of time
or otherwise) to terminate, accelerate, modify or call a
default under, or result in the creation of any lien, se-
curity interest, charge or encumbrance upon any of the
properties or assets of PCI or any of its subsidiaries
under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, license,
contract, undertaking, agreement, lease or other instru-
ment or obligation to which PCI or any of its subsidiaries
is a party;
(c) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to PCI or any of
its subsidiaries or any of their respective properties or
assets; or
(d) require any action or consent or approval of, or
review by, or registration or filing by PCI or any of its
affiliates with any third party or any Governmental Au-
thority, other than (i) authorization of the Merger and
the transactions contemplated hereby by PCI Shareholders,
(ii) actions required by the HSR Act, (iii) registrations
or other actions required under federal and state securi-
ties laws as are contemplated by this Agreement and (iv)
consents or approvals of any Governmental Authority set
forth in Section 4.5 to the PCI Disclosure Schedule.
except in the case of (b) for any of the foregoing that are set
forth in Section 4.5 to the PCI Disclosure Schedule, and in the
-15-<PAGE>
case of (b) (solely with respect to items other than those re-
lating to indebtedness of PCI or its subsidiaries), (c) and (d)
for any of the foregoing that would not, individually or in the
aggregate, have a material adverse effect on PCI.
4.6 No Material Adverse Change. Except as set forth
in Section 4.6 to the PCI Disclosure Schedule, since September
30, 1995, PCI has conducted its business in the ordinary
course, consistent with past practice, and there has been no
(i) material adverse change in the assets, liabilities, pros-
pects, results of operations, business or financial condition
of PCI and its subsidiaries taken as a whole or (ii) material
adverse effect on the ability of PCI to consummate the trans-
actions contemplated hereby.
4.7 PCI SEC Documents. PCI has timely filed with
the Commission, and has heretofore delivered to Cardinal true,
correct and complete copies of, all forms, reports, schedules,
statements and other documents required to be filed by it since
December 31, 1991 under the Exchange Act or the Securities Act
(such documents, as supplemented and amended since the time of
filing, collectively, the "PCI SEC Documents"). The PCI SEC
Documents, including, without limitation, any financial state-
ments or schedules included therein, at the time filed (and, in
the case of registration statements and proxy statements, on
the dates of effectiveness and the dates of mailing, respec-
tively) (a) did not 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 light of the circumstances under which they were made, not
misleading, and (b) complied in all material respects with the
applicable requirements of the Exchange Act and the Securities
Act, as the case may be. The financial statements of PCI in-
cluded in the PCI SEC Documents at the time filed (and, in the
case of registration statements and proxy statements, on the
date of effectiveness and the date of mailing, respectively)
complied as to form in all material respects with applicable
accounting requirements and with the published rules and regu-
lations of the Commission with respect thereto, were prepared
in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (ex-
cept as may be indicated in the notes thereto or, in the case
of unaudited statements, as permitted by Form 10-Q of the Com-
mission), and fairly present (subject in the case of unaudited
statements to normal, recurring audit adjustments) the consoli-
dated financial position of PCI as at the dates thereof and the
consolidated results of its operations and cash flows for the
periods then ended.
-16-<PAGE>
4.8 Taxes. PCI has duly filed all federal, and
state, local and foreign income, franchise, material excise,
real and personal property and other tax returns and reports
(including, but not limited to, those filed on a consolidated,
combined or unitary basis) required to have been filed by PCI
prior to the date hereof. All of the foregoing returns and
reports are true and correct (except for such inaccuracies
which are individually, or in the aggregate, not material), and
PCI has paid or, prior to the Effective Time, will pay all
taxes, interest and penalties required to be paid in respect of
the periods covered by such returns or reports or shown as due
to any federal, state, foreign, local or other taxing author-
ity. PCI has paid or made adequate provision in the financial
statements of PCI included in the PCI SEC Documents for all
taxes payable in respect of all periods ending on or prior to
June 30, 1996. Neither PCI nor any of its subsidiaries will
have any material liability for any taxes in excess of the
amounts so paid or reserves so established and neither PCI nor
any of its subsidiaries is delinquent in the payment of any
material tax, assessment or governmental charge and none of
them has requested any extension of time within which to file
any returns in respect of any fiscal year which have not since
been filed. No deficiencies for any tax, assessment or govern-
mental charge have been proposed in writing, asserted or as-
sessed (tentatively or definitely) to PCI or any of its subsid-
iaries, in each case, by any taxing authority, against PCI or
any of its subsidiaries for which there are not adequate re-
serves. Except as set forth in Section 4.8 to the PCI Disclo-
sure Schedule, neither PCI nor any of its subsidiaries is the
subject of any tax audit. Except as set forth in Section 4.8
to the PCI Disclosure Schedule, as of the date of this Agree-
ment, there are no pending requests for waivers of the time to
assess any such tax, other than those made in the ordinary
course and for which payment has been made or there are ade-
quate reserves. Except as set forth in Section 4.8 to the PCI
Disclosure Schedule, the federal income tax returns of PCI and
its subsidiaries have been audited by the Internal Revenue Ser-
vice through the fiscal year ending September 30, 1993. For
the purposes of this Agreement, the term "tax" shall include
all federal, state, local and foreign taxes including interest
and penalties thereon. PCI has not filed an election under
Section 341(f) of the Code to be treated as a consenting corpo-
ration.
4.9 Compliance with Law. Except as set forth in
Section 4.9 to the PCI Disclosure Schedule, PCI is in compli-
ance with, and at all times since December 31, 1991 has been in
compliance with, all applicable laws, statutes, orders, rules,
regulations, policies or guidelines promulgated, or judgments,
-17-<PAGE>
decisions or orders entered by any Governmental Authority (col-
lectively, "Applicable Laws") relating to PCI or its business
or properties, including, without limitation, laws regarding
the Federal Controlled Substances Act of 1970, the Food, Drug
and Cosmetic Act, any federal or state Pharmacy Practice Acts,
the Good Manufacturing Practices standards of the Food and Drug
Administration, Controlled Substance Acts, Dangerous Drugs Acts
and Food, Drug and Cosmetic Acts, the Occupational Safety and
Health Act and the regulations promulgated thereunder ("OSHA")
and all rules of professional conduct applicable to PCI or by
which any of its properties are bound or subject, except where
the failure to be in compliance therewith would not have a ma-
terial adverse effect on PCI. PCI has heretofore provided
Cardinal with copies of all citations heretofore issued to PCI
under OSHA and made available copies of all material
correspondence from and to the Occupational Safety and Health
Administration or any other Governmental Authority.
4.10 Intellectual Property.
(a) Set forth in Section 4.10 to the PCI Disclosure
Schedule is a true and complete list of (i) all of PCI's for-
eign and domestic material patents, patent applications, inven-
tion disclosures, trademarks, service marks, tradenames (and
any registrations or applications for registration for any of
the foregoing) and all material design right and copyright ap-
plications and registrations and (ii) all material agreements
to which PCI is a party which concern any of the Intellectual
Property ("Intellectual Property" shall mean all intellectual
property or other proprietary rights of every kind, including,
without limitation, all domestic or foreign patents, patent
applications, inventions (whether or not patentable), pro-
cesses, products, technologies, discoveries, copyrightable and
copyrighted works, apparatus, trade secrets, trademarks and
trademark applications and registrations, service marks and
service mark applications and registrations, trade names, trade
dress, copyright registrations, design rights, customer lists,
marketing and customer information, mask works rights, know-
how, licenses, technical information (whether confidential or
otherwise), software, and all documentation thereof). Other
than the Intellectual Property set forth in Section 4.10 to the
PCI Disclosure Schedule, no name, patent, invention, trade se-
cret, proprietary right, computer software, trademark, trade
name, service mark, logo, copyright, franchise, license, subli-
cense, or other such right is necessary for the operation of
the business of PCI in substantially the same manner as such
business is presently or proposed to be conducted. Except as
set forth in Section 4.10 to the PCI Disclosure Schedule, to
the knowledge of PCI, (i) PCI owns, free and clear of any
liens, claims or encumbrances, the Intellectual Property and
-18-<PAGE>
has the exclusive right to bring actions for the infringement
thereof; (ii) all of the patents, trademark registrations, ser-
vice mark registrations, and design right registrations, and
copyright registrations included in the Intellectual Property
are valid (other than, in each case, defects which are immate-
rial with respect to such Intellectual Property); (iii) the In-
tellectual Property does not infringe and has not infringed any
now existing or subsequently issued domestic or foreign patent,
trademark, service mark, tradename, copyright, design right or
other intellectual property or proprietary right; (iv) no per-
son or entity has asserted to PCI that, with respect to the
Intellectual Property, PCI or a licensee of PCI is infringing
or has infringed any domestic or foreign patent, trademark,
service mark, tradename, or copyright or design right, or has
misappropriated or improperly used or disclosed any trade se-
cret, confidential information or know-how; (v) PCI has no in-
formation which would form the basis for any belief that any of
the Intellectual Property, or its use or operation, infringe,
or have infringed, any foreign or domestic patent, trademark,
service mark, tradename or copyright of any entity or have in-
volved the misappropriation or improper use or disclosure of
any trade secrets, confidential information or know-how of any
entity; (vi) all working requirements and all fees, annuities,
and other payments which are due from PCI on or before the ef-
fective date of this Agreement for any of the Intellectual
Property, including, without limitation, all material foreign
or domestic patents, patent applications, trademarks registra-
tions, service mark registrations, copyright registrations and
any applications for any of the preceding, have been met or
paid; (vii) the claims made in the material foreign or domestic
patents and patent applications that are a part of the Intel-
lectual Property are not dominated by claims of patents owned
by other persons or entities; (viii) the making, using, sell-
ing, manufacturing, marketing, licensing, reproduction, distri-
bution, or publishing of any process, machine, manufacture,
composition of matter, or material pursuant to any part of the
Intellectual Property, does not and will not infringe any do-
mestic or foreign patent, trademark, service mark, tradename,
copyright or other intellectual property right; (ix) no unex-
pired foreign or domestic patents or patent applications exist
that are adverse to the material interests of PCI; (x) the In-
tellectual Property is not the subject of any pending Action;
(xi) no part of the Intellectual Property was obtained through
inequitable conduct or fraud in the United States Patent and
Trademark Office or any foreign governmental entity; (xii) PCI
is not aware of any (a) prior act that would adversely affect,
void or invalidate any of the Intellectual Property or (b) con-
duct or use by PCI or any third party that would adversely af-
fect, void or invalidate any of the Intellectual Property;
-19-<PAGE>
(xiii) the execution, delivery and performance of this Agree-
ment by PCI, and the consummation of the transactions contem-
plated thereby, will not breach, violate or conflict with any
instrument or agreement governing or contained within any of
the Intellectual Property, will not cause the forfeiture or
termination or give rise to a right of forfeiture or termina-
tion of any of the Intellectual Property or materially impair
the right of Cardinal or Subcorp to use, sell, license or
dispose of, or to bring any action for the infringement of, any
Intellectual Property; (xiv) there are no material royalties,
honoraria, fees or other payments payable to any third party by
reason of the ownership, use, license, sale or disposition of
the Intellectual Property; (xv) no part of the source or object
code, algorithms or structure included in any of the Intel-
lectual Property is copied from, based upon, or derived from
any source or object code, algorithm or structure included in
any computer software product owned by any third party nor does
any substantial similarity of any of such source or object
code, algorithms or structure to any computer software product
owned by any third party result from such source or object
code, algorithms or structure being copied from, based upon or
derived from any computer software product owned by any third
party; and (xvi) no software included in the Intellectual Prop-
erty contains any "Self-Help Code," i.e., any back door, time
bomb, drop dead device, or other software routine designed to
disable a computer program automatically with the passage of
time or under the positive control of any unauthorized person,
or, to PCI's knowledge, any "Unauthorized Code," i.e., any vi-
rus, Trojan horse, worm, or other software routines or hardware
components designed to permit unauthorized access, disable,
erase, or otherwise harm software, hardware, or data or to per-
form any other such actions.
(b) PCI has taken all reasonably appropriate steps
to safeguard and maintain the secrecy and confidentiality of
all trade secrets contained in the Intellectual Property.
(c) PCI has taken all reasonably appropriate steps
to safeguard and maintain all copyrights and patents contained
in the Intellectual Property.
4.11 Title to and Condition of Properties. PCI owns
or holds under valid leases all real property, plants, machin-
ery and equipment necessary for the conduct of the business of
PCI as presently conducted, except where the failure to own or
hold such property, plants, machinery and equipment would not
have a material adverse effect on PCI. Section 4.11 to the PCI
Disclosure Schedule lists, and PCI has furnished to Cardinal,
copies of all third party and internal environmental or other
-20-<PAGE>
reports prepared by or for PCI with respect to the real
property owned, leased or used by PCI in PCI's possession.
4.12 Registration Statement; Proxy Statement. None
of the information provided by PCI for inclusion in the Regis-
tration Statement at the time it becomes effective or, in the
case of the Proxy Statement, at the date of mailing, will con-
tain 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 light of the circum-
stances under which they were made, not misleading. The Regis-
tration Statement and Proxy Statement, except for such portions
thereof that relate only to Cardinal and its subsidiaries, will
each comply as to form in all material respects with the provi-
sions of the Securities Act and the Exchange Act, as
applicable.
4.13 Litigation. Except as set forth in Section
4.13 to the PCI Disclosure Schedule, there is no suit, claim,
action, proceeding or investigation (an "Action) pending or, to
the knowledge of PCI (or its officers or directors), threatened
against PCI or any officer or director of PCI which, individu-
ally or in the aggregate, if adversely determined, would have a
material adverse effect on PCI or a material adverse effect on
the ability of PCI to consummate the transactions contemplated
hereby. PCI is not subject to any outstanding order, writ,
injunction or decree which, individually or in the aggregate,
insofar as can be reasonably foreseen by PCI, would have a ma-
terial adverse effect on PCI or a material adverse effect on
the ability of PCI to consummate the transactions contemplated
hereby. Except as set forth in Section 4.13 to the PCI Disclo-
sure Schedule, since December 31, 1991, (i) there has not been
any Action asserted, or to the knowledge of PCI, threatened
against PCI relating to PCI's method of doing business or its
relationship with past, existing or future users or purchasers
of any goods or services of PCI and (ii) PCI has not been sub-
ject to any outstanding order, writ, injunction or decree re-
lating to PCI's method of doing business or its relationship
with past, existing or future lessees, users, purchasers or
licensees of any Intellectual Property, goods or services of
PCI.
4.14 Brokerage and Finder's Fees; Expenses. Except
for PCI's obligations to Lehman Brothers ("Lehman") (a copy of
the written agreement relating to such obligations having pre-
viously been provided to Cardinal), neither PCI nor any
director, officer, employee or (to the knowledge of PCI)
stockholder thereof, has incurred or will incur on behalf of
PCI, any brokerage, finder's or similar fee in connection with
the transactions contemplated by this Agreement. Section 4.14
-21-<PAGE>
to the PCI Disclosure Schedule discloses the maximum aggregate
amount of all fees and expenses which will be paid or will be
payable by PCI to all attorneys, accountants and investment
bankers in connection with the Merger ("Merger Fees").
4.15 Accounting Matters. Neither PCI nor any of its
affiliates has taken or agreed to take any action that (without
giving effect to any actions taken or agreed to be taken by
Cardinal or any of its affiliates) would prevent Cardinal from
accounting for the business combination to be effected by the
Merger as a pooling-of-interests for financial reporting
purposes.
4.16 Employee Benefit Plans.
(a) For purposes of this Section 4.16, the following
terms have the definitions given below:
"Controlled Group Liability" means any and all
liabilities under (i) Title IV of ERISA, (ii) section
302 of ERISA, (iii) sections 412 and 4971 of the
Code, (iv) the continuation coverage requirements of
section 601 et seq. of ERISA and section 4980B of the
Code, and (v) corresponding or similar provisions of
foreign laws or regulations, in each case other than
pursuant to the Plans.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended, and the regulations
thereunder.
"ERISA Affiliate" means, with respect to any
entity, trade or business, any other entity, trade or
business that is a member of a group described in
Section 414(b), (c), (m) or (o) of the Code or Sec-
tion 4001(b)(1) of ERISA that includes the first en-
tity, trade or business, or that is a member of the
same "controlled group" as the first entity, trade or
business pursuant to Section 4001(a)(14) of ERISA.
"Foreign Plan" means a Plan providing compensa-
tion or benefits to any employee who is, or former
employee who was, employed outside the United States,
or any beneficiary or dependent thereof.
"Plans" means all employment agreements and all
employee benefit plans, programs, policies, prac-
tices, and other arrangements providing incentive
compensation, pension, profit sharing, deferred com-
pensation, stock option, medical, dental, disability
-22-<PAGE>
or life insurance benefits to any employee or former
employee or beneficiary or dependent thereof, whether
or not written, and whether covering one person or
more than one person, sponsored or maintained by PCI
or any of its subsidiaries or to which PCI or any of
its subsidiaries contributes or is obligated to con-
tribute. Without limiting the generality of the
foregoing, the term "Plans" includes all employee
welfare benefit plans within the meaning of Section
3(1) of ERISA and all employee pension benefit plans
within the meaning of Section 3(2) of ERISA.
"Withdrawal Liability" means liability to a Mul-
tiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan, as those
terms are defined in Part I of Subtitle E of Title IV
of ERISA.
(b) Section 4.16(b) to the PCI Disclosure Schedule
lists all Plans, and specifically identifies those Plans that
are Foreign Plans. With respect to each Plan, PCI has made
available to Cardinal a true, correct and complete copy of:
(i) each writing constituting a part of such Plan, including
without limitation all plan documents, benefit schedules, trust
agreements, and insurance contracts and other funding vehicles;
(ii) the most recent Annual Report (Form 5500 Series) and ac-
companying schedule, if any; (iii) the current summary plan
description or corresponding filing with respect to any Foreign
Plan, if any; (iv) the most recent annual financial report, if
any; and (v) the most recent determination letter from the IRS,
if any.
(c) Except as set forth in Section 4.16(c) to the
PCI Disclosure Schedule, the Internal Revenue Service has is-
sued a favorable determination letter with respect to each Plan
that is intended to be a "qualified plan" within the meaning of
Section 401(a) of the Code (a "Qualified Plan") and there are
no existing circumstances nor any events that have occurred
that could adversely affect the qualified status of any Quali-
fied Plan or the related trust. Each Plan that is intended to
be tax-qualified or registered in any non-U.S. jurisdiction is
so qualified or registered. Each Foreign Plan that is intended
to qualify for any favorable tax status or treatment meets all
requirements for such status or treatment.
(d) All contributions required to be made to any
Plan by Applicable Laws or by any plan document or other con-
tractual undertaking, and all premiums due or payable with re-
spect to insurance policies funding any Plan, for any period
through the date hereof have been timely made or paid in full
-23-<PAGE>
and through the Closing Date will be timely made or paid in
full or, to the extent not required to be made or paid on or
before the date hereof or the Closing Date, as applicable, have
been or will be fully reflected in the PCI SEC Documents filed
or to be filed with the Commission.
(e) Except as set forth in Section 4.16(c) to the
PCI Disclosure Schedule, PCI and its subsidiaries have com-
plied, and are now in compliance, in all material respects,
with all provisions of ERISA, the Code and all laws and regula-
tions applicable to the Plans. Except as set forth in Section
4.16(c), with respect to each Foreign Plan, PCI and its subsid-
iaries have complied, and are now in compliance, in all
material respects with all laws and regulations applicable to
such Foreign Plans. Except as set forth in Section 4.16(c) to
the PCI Disclosure Schedule, each Plan has been operated in
compliance with its terms. There is not now, and there are no
existing, circumstances that could give rise to, any
requirement for the posting of security with respect to a Plan
or the imposition of any lien on the assets of PCI or any of
its subsidiaries under ERISA or the Code or, with respect to a
Foreign Plan, any other law or regulation applicable to such
Foreign Plan.
(f) Except as set forth in Section 4.16(f) to the
PCI Disclosure Schedule, no Plan is a "multiemployer plan"
within the meaning of Section 4001(a)(3) of ERISA (a "Multiem-
ployer Plan") or a plan that has two or more contributing spon-
sors at least two of whom are not under common control, within
the meaning of Section 4063 of ERISA (a "Multiple Employer
Plan"), nor has PCI or any of its subsidiaries or any of their
respective ERISA Affiliates, at any time within five years be-
fore the date hereof, contributed to or been obligated to con-
tribute to any Multiemployer Plan or Multiple Employer Plan.
With respect to each Multiemployer Plan, except as set forth in
Section 4.16(f) to the PCI Disclosure Schedule: (i) neither PCI
nor any of its ERISA Affiliates has incurred any Withdrawal
Liability that has not been satisfied in full; (ii) if PCI or
any of its ERISA Affiliates were to experience a withdrawal or
partial withdrawal from such plan, no Withdrawal Liability
would be incurred; and (iii) neither PCI nor any ERISA Affili-
ate has received any notification, nor has any reason to be-
lieve, that any such plan is in reorganization, has been termi-
nated, or may reasonably be expected to be in reorganization or
to be terminated. No Plan (other than a Multiemployer Plan) is
subject to Title IV of ERISA, and no Plan has any accumulated
funding deficiency, whether or not waived.
(g) There does not now exist, and there are no ex-
isting circumstances that could result in, any Controlled Group
-24-<PAGE>
Liability that would be a material liability of PCI or any of
its subsidiaries following the Closing. Without limiting the
generality of the foregoing, neither PCI nor any of its sub-
sidiaries nor any of their respective ERISA Affiliates has en-
gaged in any transaction described in Section 4069 or Section
4204 of ERISA.
(h) Except for health continuation coverage as re-
quired by Section 4980B of the Code or Part 6 of Title I of
ERISA and as disclosed in Section 4.16(h) to the PCI Disclosure
Schedule, neither PCI nor any of its subsidiaries has any li-
ability for life, health, medical or other welfare benefits to
former employees or beneficiaries or dependents thereof.
(i) Except as set forth in Section 4.16(i) to the
PCI Disclosure Schedule, neither the execution and delivery of
this Agreement nor the consummation of the transactions con-
templated hereby will result in, cause the accelerated vesting
or delivery of, or increase the amount or value of, any payment
or benefit to any employee of PCI or any of its subsidiaries.
Without limiting the generality of the foregoing and except as
set forth in Section 4.16(i) to the PCI Disclosure Schedule, no
amount paid or payable by PCI or any of its subsidiaries in
connection with the transactions contemplated hereby either
solely as a result thereof or as a result of such transactions
in conjunction with any other events will be an "excess para-
chute payment" within the meaning of Section 280G of the Code.
(j) There are no pending claims or claims threatened
in writing (other than claims for benefits in the ordinary
course), lawsuits or arbitrations which have been asserted or
instituted against the Employee Plans, any fiduciaries thereof
with respect to their duties to the Employee Plans or the as-
sets of any of the trusts under any of the Employee Plans which
could reasonably be expected to result in any material li-
ability of PCI or any of its subsidiaries to the Pension Ben-
efit Guaranty Corporation, the Department of Treasury, the De-
partment of Labor or any multiemployer plan.
(k) Section 4.16(k) to the PCI Disclosure Schedule
sets forth the names of all directors and officers of PCI, the
total salary, bonus, fringe benefits and perquisites each re-
ceived in the fiscal year ended September 30, 1995, and any
changes to the foregoing which have occurred subsequent to Sep-
tember 30, 1995; Section 4.16(k) to the PCI Disclosure Schedule
also lists and describes the current compensation of any other
employee of PCI whose fiscal year 1995 salary and bonus ex-
ceeded $100,000 annually and any other employee who is substan-
tially certain to receive in excess of $100,000 in salary and
bonus in fiscal year 1996. Except as disclosed in Section
-25-<PAGE>
4.16(k) to the PCI Disclosure Schedule, there are no other ma-
terial forms of compensation paid to any such director, officer
or employee of PCI. Except as set forth in Section 4.16(k) to
the PCI Disclosure Schedule, no officer, director, or employee
of PCI or any other affiliate of PCI, or any immediate family
member of any of the foregoing, provides or causes to be pro-
vided to PCI any material assets, services or facilities and
PCI does not provide or cause to be provided to any such of-
ficer, director, employee or affiliate, or any immediate family
member of any of the foregoing, any material assets, services
or facilities.
4.17 Contracts. Section 4.17 to the PCI Disclosure
Schedule lists all written or oral contracts, agreements, guar-
antees, leases and executory commitments (each a "Contract") to
which PCI is a party and which fall within any of the following
categories: (a) Contracts not entered into in the ordinary
course of PCI's business, (b) joint venture, partnership and
like agreements, (c) Contracts which are service contracts (ex-
cluding contracts for delivery services entered into in the
ordinary course of business) or equipment leases involving pay-
ments by PCI of more than $200,000 per year, (d) Contracts con-
taining covenants purporting to limit the freedom of PCI to
compete in any line of business in any geographic area or to
hire any individual or group of individuals, (e) Contracts
which after the Effective Time would have the effect of limit-
ing the freedom of Cardinal or its subsidiaries (other than PCI
and its subsidiaries) to compete in any line of business in any
geographic area or to hire any individual or group of individu-
als, (f) Contracts which contain minimum purchase conditions or
requirements or other terms that restrict or limit the purchas-
ing relationships of PCI or any lessee thereof, (g) Contracts
relating to any outstanding commitment for capital expenditures
in excess of $250,000, (h) Contracts relating to the lease or
sublease of or sale or purchase of real or personal property
involving any annual expense or price in excess of $175,000 and
not cancellable by PCI (without premium or penalty) within one
month, (i) Contracts with any labor organization, (j) inden-
tures, mortgages, promissory notes, loan agreements, guarantees
of amounts in excess of $250,000, letters of credit or other
agreements or instruments of PCI or commitments for the borrow-
ing or the lending of amounts in excess of $250,000 or by PCI
or providing for the creation of any charge, security interest,
encumbrance or lien upon any of the assets of PCI, (k) Con-
tracts involving annual revenues or expenditures to the busi-
ness of PCI in excess of 1.0% of PCI's annual revenues, (l)
Contracts providing for "earn-outs" or other contingent pay-
ments involving more than $20,000 over the term of the Contract
and (m) Contracts with or for the benefit of any affiliate of
PCI or MEDIQ or immediate family member thereof (other than
-26-<PAGE>
subsidiaries of PCI). All such Contracts are valid and binding
obligations of PCI and, to the knowledge of PCI, the valid and
binding obligation of each other party thereto except such Con-
tracts which if not so valid and binding would not, individu-
ally or in the aggregate, have a material adverse effect on
PCI. Neither PCI nor, to the knowledge of PCI, any other party
thereto is in violation of or in default in respect of, nor has
there occurred an event or condition which with the passage of
time or giving of notice (or both) would constitute a default
under, any such Contract except such violations or defaults
under such Contracts which, individually or in the aggregate,
would not have a material adverse effect on PCI.
4.18 Accounts Receivable. All accounts and notes
receivable (including lease and finance notes receivable) and
accrued interest receivable of PCI have arisen in the ordinary
course of business and the accounts receivable reserves re-
flected on the balance sheet as of March 31, 1996 included in
the PCI SEC Documents are as of such date established in ac-
cordance with generally accepted accounting principles con-
sistently applied and to the best knowledge of PCI will be col-
lectible, in the aggregate, in an amount not less than the
amounts thereof carried on the balance sheet as of such date
included in the PCI SEC Documents, net of any reserves included
thereon, as applicable, except for any uncollectable amount
which, individually or in the aggregate, would not have a mate-
rial adverse effect on PCI.
4.19 Labor Matters. Except as set forth in Section
4.17 to the PCI Disclosure Schedule, neither PCI nor any of its
subsidiaries has any labor contracts, collective bargaining
agreements or employment or consulting agreements with any per-
sons employed by PCI or any persons otherwise performing ser-
vices primarily for PCI or any of its subsidiaries (the "PCI
Business Personnel"). Except as set forth in Section 4.19 to
the PCI Disclosure Schedule, neither PCI nor any of its subsid-
iaries has engaged in any unfair labor practice with respect to
PCI Business Personnel, and there is no unfair labor practice
complaint pending or, to the knowledge of PCI, threatened,
against PCI or any of its subsidiaries with respect to PCI
Business Personnel. Except as set forth in Section 4.19 to the
PCI Disclosure Schedule, there is no labor strike, dispute,
slowdown or stoppage pending or, to the knowledge of PCI,
threatened against PCI or any of its subsidiaries, and neither
PCI nor any of its subsidiaries has experienced any labor
strike, dispute, slowdown or stoppage or other labor difficulty
involving its employees since December 31, 1991.
4.20 Undisclosed Liabilities. Except (i) as and to
the extent disclosed or reserved against on the balance sheet
-27-<PAGE>
of PCI as of March 31, 1996 included in the PCI SEC Documents,
(ii) as incurred after the date thereof in the ordinary course
of business consistent with prior practice and not prohibited
by this Agreement or (iii) as set forth in Section 4.20 to the
PCI Disclosure Schedule, PCI does not have any liabilities or
obligations of any nature, absolute, accrued, contingent or
otherwise and whether due or to become due, that, individually
or in the aggregate, have or would have a material adverse ef-
fect on PCI.
4.21 Operation of PCI's Business; Relationships.
(a) Since March 31, 1996 through the date of this Agreement,
PCI has not engaged in any transaction which, if done after
execution of this Agreement, would violate Section 5.3(c)
hereof except as set forth in Section 4.21(a) to the PCI Dis-
closure Schedule.
(b) The relationships of PCI with its customers and
suppliers are satisfactory and the execution of this Agreement,
the Merger and the transactions contemplated hereby to be un-
dertaken by PCI will not have a material adverse effect on the
relationships of PCI with such customers or suppliers, the ef-
fect of which, individually or in the aggregate, would have a
material adverse effect on PCI.
(c) Except as set forth in Section 4.21(c) to the
PCI Disclosure Schedule, to the knowledge of PCI, (i) no prod-
uct produced or packaged by PCI has been recalled voluntarily
or involuntarily since December 31, 1991, (ii) no such recall
is being considered by PCI, and (iii) no such recall is being
considered by or has been requested or ordered by any PCI cus-
tomer, Governmental Authority or consumer group.
4.22 Permits; Compliance. PCI is in possession of
all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, ap-
provals and orders necessary to own, lease and operate its
properties and to carry on its business as it is now being con-
ducted (collectively, the "PCI Permits"), and there is no Ac-
tion pending or, to the knowledge of PCI, threatened regarding
suspension or cancellation of any of the PCI Permits. PCI is
not in conflict with, or in default or violation of, any of the
PCI Permits, except for any such conflicts, defaults or vio-
lations which, individually or in the aggregate, would not rea-
sonably be expected to have a material adverse effect on PCI.
During the period commencing on December 31, 1991 and ending on
the date hereof, PCI has not received any notification with
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respect to possible conflicts, defaults or violations of Ap-
plicable Laws, except for notices relating to possible con-
flicts, defaults or violations, which conflicts, defaults or
violations would not have a material adverse effect on PCI.
4.23 Product Warranties and Liabilities. Except as
listed in Section 4.23 to the PCI Disclosure Schedule, PCI has
no forms of warranties or guarantees of its products and ser-
vices that are in effect or proposed to be used by it. Section
4.23 to the PCI Disclosure Schedule sets forth a description of
each pending or, to the knowledge of PCI, threatened Action un-
der any warranty or guaranty against PCI. PCI has not in-
curred, nor does PCI know or have any reason to believe there
is any basis for alleging, any material liability, damage,
loss, cost or expense as a result of any material defect or
other deficiency (whether of design, materials, workmanship,
labeling instructions or otherwise) ("Product Liability") with
respect to any product sold or services rendered by or on be-
half of PCI (including any lessee thereof) prior to the Effec-
tive Time, whether such Product Liability is incurred by reason
of any express or implied warranty (including, without limita-
tion, any warranty of merchantability or fitness), any doctrine
of common law (tort, contract or other), any statutory provi-
sion or otherwise and irrespective of whether such Product Li-
ability is covered by insurance.
4.24 Environmental Matters.
(a) As used herein, the term "Environmental Laws"
means all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment (in-
cluding, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants, con-
taminants, or toxic or hazardous substances or wastes (col-
lectively, "Hazardous Materials") into the environment, or oth-
erwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of
Hazardous Materials, as well as all authorizations, codes, de-
crees, demands or demand letters, injunctions, judgments, li-
censes, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereun-
der.
(b) Except as set forth in Section 4.24(b) to the
PCI Disclosure Schedule, there are, with respect to PCI, its
subsidiaries or any predecessor of the foregoing, no past or
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present violations of Environmental Laws, releases of any ma-
terial into the environment, actions, activities, circum-
stances, conditions, events, incidents, or contractual obliga-
tions which may give rise to any common law environmental li-
ability or any liability under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 or similar
federal, state, local or foreign laws and none of PCI and its
subsidiaries has received any notice with respect to any of the
foregoing, nor is any Action pending or threatened in connec-
tion with any of the foregoing.
(c) Other than those that are or were stored, used
or disposed of in compliance with Applicable Law, no Hazardous
Materials are contained on or about any real property currently
owned, leased or used by PCI or any of its subsidiaries and no
Hazardous Materials were released on or about any real property
previously owned, leased or used by PCI during the period the
property was owned, leased or used by PCI, except in the normal
course of PCI's business.
(d) Except as set forth in Section 4.24(d) to the
PCI Disclosure Schedule, there are no underground storage tanks
on or under any real property owned, leased or used by PCI or
any of its subsidiaries that are not in compliance with Ap-
plicable Law.
4.25 Opinion of Financial Advisor. PCI has received
the written opinion of Lehman, its financial advisor, to the
effect that, as of July 23, 1996, the Exchange Ratio is fair to
the PCI Stockholders from a financial point of view, PCI has
heretofore provided a copy of such opinion to Cardinal and such
opinion has not been withdrawn, revoked or modified.
4.26 Board Recommendation. The Board of Directors
of PCI, at a meeting duly called and held, has by unanimous
vote of those directors present (who constituted 100% of the
directors then in office) (i) determined that this Agreement
and the transactions contemplated hereby, including the Merger,
and the transactions contemplated thereby, are fair to and in
the best interests of the stockholders of PCI, and (ii)
resolved to recommend that the holders of the shares of PCI
Common Stock approve this Agreement and the transactions
contemplated herein, including the Merger.
4.27 DGCL Section 203 and State Takeover Laws.
Prior to the time this Agreement was executed, the Board of
Directors of PCI has taken all action necessary to exempt under
or make not subject to (x) Section 203 of the DGCL and (y) any
other state takeover law or state law that purports to limit or
restrict business combinations or the ability to acquire or
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vote shares: (i) the execution of this Agreement, the Support/
Voting Agreements dated as of July 23, 1996 between Cardinal
and certain PCI Stockholders (collectively, the "Support
Agreements") and the Stock Option Agreement dated July 23, 1996
between Cardinal and MEDIQ (the "MEDIQ Option Agreement"), (ii)
the Merger and (iii) the transactions contemplated hereby and
by the MEDIQ Option Agreement and the Support Agreements.
4.28 Employment Agreements. Each of the employment
agreements between PCI and Messrs. Daniel Gerner and Richard
Sauter dated the date hereof (i) has been duly executed and
delivered by the respective employee and (ii) as of the Effec-
tive Time, shall not have been terminated since the date here-
of.
4.29 Insurance. Except as set forth in Section 4.29
to the PCI Disclosure Schedule, PCI is presently insured, and
during each of the past five calendar years has been insured
against such risks as companies engaged in a similar business
would, in accordance with good business practice, customarily
be insured. Except as set forth in Section 4.29 to the PCI
Disclosure Schedule, the policies of fire, theft, liability and
other insurance maintained with respect to the assets or busi-
nesses of the Company and its subsidiaries provide adequate
coverage against loss and may be continued by PCI without modi-
fication or premium increase after the Effective Time and for
the duration of their current terms which terms expire as set
forth in Section 4.29 to the PCI Disclosure Schedule.
4.30 Affiliate Transactions. Except as set forth in
Section 4.17 to the PCI Disclosure Schedule or as contemplated
by the transactions contemplated hereby, there are no Contracts
or other transactions between PCI, on the one hand, and any (i)
officer or director of PCI, (ii) record or beneficial owner of
five percent or more of the voting securities of PCI or (iii)
affiliate (as such term is defined in Regulation 12b-2 promul-
gated under the Exchange Act) of any such officer, director or
beneficial owner, on the other hand.
ARTICLE V
COVENANTS OF THE PARTIES
The parties hereto agree as follows with respect to
the period from and after the execution of this Agreement.
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5.1 Mutual Covenants.
(a) General. Each of the parties shall use its rea-
sonable efforts to take all action and to do all things neces-
sary, proper or advisable to consummate the Merger and the
transactions contemplated by this Agreement (including, without
limitation, using its reasonable efforts to cause the condi-
tions set forth in Article VI for which they are responsible to
be satisfied as soon as reasonably practicable and to prepare,
execute and deliver such further instruments and take or cause
to be taken such other and further action as any other party
hereto shall reasonably request).
(b) HSR Act. As soon as practicable, and in any
event no later than ten (10) business days after the date here-
of, each of the parties hereto will file any Notification and
Report Forms and related material required to be filed by it
with the Federal Trade Commission and the Antitrust Division of
the United States Department of Justice under the HSR Act with
respect to the Merger, will use its reasonable efforts to ob-
tain an early termination of the applicable waiting period, and
shall promptly make any further filings pursuant thereto that
may be necessary, proper or advisable; provided, however, that
neither Cardinal nor any of its subsidiaries shall be required
hereunder to divest or hold separate any portion of their busi-
ness or assets.
(c) Other Governmental Matters. Each of the parties
shall use its reasonable efforts to take any additional action
that may be necessary, proper or advisable in connection with
any other notices to, filings with, and authorizations, con-
sents and approvals of any Governmental Authority that it may
be required to give, make or obtain.
(d) Pooling-of-Interests. Each of the parties shall
use its best efforts to cause the Merger to qualify for
pooling-of-interests accounting treatment for financial report-
ing purposes.
(e) Public Announcements. Unless otherwise required
by Applicable Laws or requirements of the National Association
of Securities Dealers, the American Stock Exchange or the NYSE
(and in that event only if time does not permit), at all times
prior to the earlier of the Effective Time or termination of
this Agreement pursuant to Section 7.1, Cardinal, MEDIQ and PCI
shall consult with each other before issuing any press release
with respect to the Merger and shall not issue any such press
release prior to such consultation.
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(f) Intercompany Agreements. Unless otherwise
specified by Cardinal prior to the Effective Time, as of the
Effective Time all Contracts, agreements, arrangements or
understandings between MEDIQ and PCI (other than this Agreement
and those in Section 5.1(f) to the PCI Disclosure Schedule)
shall be terminated without any liability to PCI.
5.2 Covenants of Cardinal.
(a) Preparation of Registration Statement. Cardinal
shall, as soon as is reasonably practicable, prepare and file
the Proxy Statement with the Commission on a confidential ba-
sis. Cardinal shall prepare and file the Registration State-
ment with the Commission as soon as is reasonably practicable
following clearance of the Proxy Statement by the Commission
and shall use all reasonable efforts to have the Registration
Statement declared effective by the Commission as promptly as
practicable and to maintain the effectiveness of the Registra-
tion Statement through the Effective Time, including, to the
extent Cardinal becomes aware of any information contained or
omitted from the Registration Statement which makes any
material statement contained therein false or misleading,
filing the information necessary to make such statements in the
Registration Statement not false or misleading. Cardinal shall
use all reasonable efforts to cause the Registration Statement
to register under the Securities Act all of the Cardinal Common
Shares to be issued in the Merger to the PCI Stockholders
(including MEDIQ). Cardinal also shall take such other
reasonable actions (other than qualifying to do business in any
jurisdiction in which it is not so qualified) required to be
taken under any applicable state securities laws in connection
with the issuance of Cardinal Common Shares in the Merger.
(b) Indemnification. From and after the Effective
Time, Cardinal shall cause the Surviving Corporation
(including, to the extent required, providing sufficient
funding) to indemnify and hold harmless and advance expenses
for the present and former officers and directors of PCI in
respect of acts or omissions occurring prior to the Effective
Time to the extent provided under the PCI Certificate of In-
corporation, as amended and restated, and Bylaws, in each case
as in effect on the date hereof.
(c) Notification of Certain Matters. Cardinal shall
give prompt notice to PCI of (i) the occurrence or non-
occurrence of any event the occurrence or non-occurrence of
which would cause any Cardinal or Subcorp representation or
warranty contained in this Agreement to be untrue or inaccurate
at or prior to the Effective Time and (ii) any material failure
of Cardinal to comply with or satisfy any covenant, condition
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or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to
this Section 5.2(c) shall not limit or otherwise affect the
remedies available hereunder to PCI.
(d) Pooling Press Release. If the Effective Time
occurs after December 1, 1996, then Cardinal shall use its best
efforts to prepare and publicly release as soon as practicable
following the end of the first full calendar month following
the Effective Time a report in the form of a quarterly earnings
report, registration statement filed with the Commission, a
report filed with the Commission on Form 10-K, 10-Q or 8-K or
any other public filing, statement or announcement which in-
cludes the combined financial results (including combined sales
and net income) of Cardinal and PCI for a period of at least 30
days of combined operations of Cardinal and PCI following the
Effective Time.
5.3 Covenants of PCI and MEDIQ.
(a) PCI Stockholders Meeting. PCI shall take all
action in accordance with the federal securities laws, the DGCL
and its Certificate of Incorporation, as amended and restated,
and Bylaws necessary to obtain the consent and approval of PCI
Stockholders with respect to the Merger, this Agreement and the
transactions contemplated hereby on the earliest practicable
date.
(b) Information for the Registration Statement and
Preparation of Proxy Statement. PCI and MEDIQ shall each
promptly furnish Cardinal with all information concerning it as
may be required for inclusion in the Registration Statement.
PCI and MEDIQ shall cooperate with Cardinal in the preparation
of the Registration Statement in a timely fashion and shall use
all reasonable efforts to assist Cardinal in having the
Registration Statement declared effective by the Commission as
promptly as practicable. If at any time prior to the Effective
Time, any information pertaining to PCI or MEDIQ, as the case
may be, contained in or omitted from the Registration Statement
makes such statements contained in the Registration Statement
false or misleading, PCI or MEDIQ, as the case may be, shall
promptly so inform Cardinal and provide Cardinal with the
information necessary to make statements contained therein not
false and misleading. PCI and MEDIQ shall use all reasonable
efforts to cooperate with Cardinal in the preparation and
filing of the Proxy Statement with the Commission on a
confidential basis and PCI shall be responsible for paying the
required filing fee under the Exchange Act in connection with
the initial filing of the Proxy Statement with the Commission.
PCI shall use all reasonable efforts to mail at the earliest
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practicable date to PCI Stockholders the Proxy Statement, which
shall include all information required under Applicable Law to
be furnished to PCI Stockholders in connection with the Merger
and the transactions contemplated thereby and shall include the
recommendation of PCI's Board of Directors in favor of the
Merger.
(c) Conduct of PCI's Operations. During the period
from the date of this Agreement to the Effective Time, PCI
shall conduct its operations in the ordinary course except as
expressly contemplated by this Agreement and the transactions
contemplated hereby and shall use its reasonable efforts to
maintain and preserve its business organization and its mate-
rial rights and franchises and to retain the services of its
officers and key employees and maintain relationships with cus-
tomers, suppliers, lessees, licensees and other third parties
to the end that their goodwill and ongoing business shall not
be impaired in any material respect. Without limiting the gen-
erality of the foregoing, during the period from the date of
this Agreement to the Effective Time, PCI shall not, except as
otherwise expressly contemplated by this Agreement and the
transactions contemplated hereby or as set forth in Section
5.3(c) to the PCI Disclosure Schedule, without the prior writ-
ten consent of Cardinal:
(i) do or effect any of the following actions with
respect to its securities: (A) adjust, split, combine or
reclassify its capital stock, (B) make, declare or pay any
dividend or distribution on, or directly or indirectly
redeem, purchase or otherwise acquire, any shares of its
capital stock or any securities or obligations convertible
into or exchangeable for any shares of its capital stock,
(C) grant any person any right or option to acquire any
shares of its capital stock, (D) issue, deliver or sell or
agree to issue, deliver or sell any additional shares of
its capital stock or any securities or obligations con-
vertible into or exchangeable or exercisable for any
shares of its capital stock or such securities (except (i)
the issuance of shares of PCI Common Stock held in PCI's
treasury pursuant to the exercise of outstanding options
to purchase PCI Common Stock or (ii) to sell shares of PCI
Common Stock held in PCI's treasury in order for PCI to
satisfy its obligations pursuant to Section 5.1(d)), or
(E) enter into any agreement, understanding or arrangement
with respect to the sale or voting of its capital stock;
(ii) sell, transfer, lease, pledge, mortgage, encum-
ber or otherwise dispose of any of its property or assets
other than sales or leases of inventory or licensing of
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Intellectual Property made in the ordinary course of busi-
ness;
(iii) make or propose any changes in its Certificate
of Incorporation or Bylaws;
(iv) merge or consolidate with any other person or
acquire a material amount of assets or capital stock of
any other person or, except to the extent permitted under
Section 5.3(e), enter into any confidentiality agreement
with any person other than in the ordinary course of busi-
ness;
(v) incur, create, assume or otherwise become liable
for indebtedness for borrowed money, or assume, guarantee,
endorse or otherwise as an accommodation become respon-
sible or liable for obligations of any other individual,
corporation or other entity, in excess of $100,000, in
each instance, or in excess of $250,000, in the aggregate,
other than pursuant to existing working capital credit
lines and facilities the aggregate amount available under
which has not been increased following the date hereof;
(vi) create any subsidiaries;
(vii) enter into or modify any employment, severance,
termination or similar agreements or arrangements with, or
grant any bonuses, salary increases, severance or termina-
tion pay to, any officer, director, consultant or employee
other than salary increases granted in the ordinary course
of business consistent with past practice to employees who
are not officers or directors of PCI, or otherwise in-
crease the compensation or benefits provided to any of-
ficer, director, consultant or employee except as may be
required by Applicable Law or a binding written contract
in effect on the date of this Agreement, and, in the case
of consultants and employees, other than in the ordinary
course of business consistent with past practice;
(viii) (A) change its method of doing business other
than in any immaterial respect or (B) change any method or
principle of accounting in a manner that is inconsistent
with past practice;
(ix) settle any Actions, whether now pending or here-
after made or brought involving an amount in excess of
$50,000;
(x) modify, amend or terminate, or waive, release or
assign any material rights or claims with respect to, any
-36-<PAGE>
Contract set forth in Section 4.17 to the PCI Disclosure
Schedule, any other material Contract to which PCI is a
party or, except to the extent required by Applicable Law
as advised by outside counsel, any confidentiality agree-
ment to which PCI is a party;
(xi) incur or commit to any capital expenditures,
obligations or liabilities in respect thereof which exceed
or would exceed $100,000, individually or $1,000,000, in
the aggregate (provided that in no event shall approval be
required for any individual expenditure not in excess of
$25,000);
(xii) make any material changes or modifications to
any pricing policy (related discounts or fees) or invest-
ment policy or enter into any new leases on terms differ-
ent from those in effect in the ordinary and usual course
of business, consistent with past practice;
(xiii) pay (or agree to become obligated to pay) any
Merger Fees in excess of the amount set forth in Section
4.14 to the PCI Disclosure Schedule;
(xiv) take any action to exempt or make not subject to
(x) Section 203 of the DGCL or (y) any other state take-
over law or state law that purports to limit or restrict
business combinations or the ability to acquire or vote
shares, any person or entity (other than Cardinal or its
subsidiaries) or any action taken thereby, which person,
entity or action would have otherwise been subject to the
restrictive provisions thereof and not exempt therefrom;
(xv) take any action that would result in the repre-
sentations and warranties set forth in Article IV becoming
false or inaccurate;
(xvi) enter into or carry out any other transaction
other than in the ordinary and usual course of business;
(xvii) permit or cause any subsidiary to do any of the
foregoing or agree or commit to do any of the foregoing;
or
(xviii) agree in writing or otherwise to take any of the
foregoing actions.
(d) Intellectual Property Matters. PCI shall use
its best efforts to preserve its ownership rights to the Intel-
lectual Property free and clear of any liens, claims or encum-
brances and shall use its best efforts to assert, contest and
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prosecute any infringement of any issued foreign or domestic
patent, trademark, service mark, tradename or copyright that
forms a part of the Intellectual Property or any misappropria-
tion or disclosure of any trade secret, confidential informa-
tion or know-how that forms a part of the Intellectual Prop-
erty.
(e) No Solicitation. Each of PCI and MEDIQ, sever-
ally and not jointly, agrees that, during the term of this
Agreement, it shall not, and shall not authorize or permit any
of its subsidiaries or any of its or its subsidiaries' direc-
tors, officers, employees, agents or representatives, directly
or indirectly, to solicit, initiate, encourage or facilitate,
or furnish or disclose non-public information in furtherance
of, any inquiries or the making of any proposal with respect to
any recapitalization, merger, consolidation or other business
combination involving PCI, or acquisition of any capital stock
(other than upon exercise of outstanding PCI Options) or any
material portion of the assets (except for acquisition of as-
sets in the ordinary course of business consistent with past
practice) of PCI, or any combination of the foregoing (a "-
Competing Transaction"), or negotiate, explore or otherwise en-
gage in discussions with any person (other than Cardinal,
Subcorp or their respective directors, officers, employees,
agents and representatives) with respect to any Competing
Transaction or enter into any agreement, arrangement or un-
derstanding requiring it to abandon, terminate or fail to
consummate the Merger or any other transactions contemplated by
this Agreement; provided that PCI may furnish information to,
and negotiate or otherwise engage in discussions with, any
party who delivers a written proposal for a Competing Trans-
action if and so long as the Board or Directors of PCI deter-
mines in good faith by a majority vote, based upon the advice
of its outside legal counsel, that failing to take such action
would constitute a breach of the fiduciary duties of the Board
(and so advises Cardinal) and such a proposal is, based upon
written advice of Lehman (or any other nationally recognized
investment banking firm), more favorable to PCI's Stockholders
in the aggregate and from a financial point of view than the
transactions contemplated by this Agreement (including any
adjustment to the terms and conditions of such transactions
proposed by Cardinal in response to such Competing
Transaction), and in such case the Board of Directors of PCI
may withdraw its recommendation of this Agreement or the Merger
(provided that the foregoing shall in no way limit or otherwise
affect Cardinal's right to terminate this Agreement pursuant to
Section 7.1(e)). PCI will immediately cease all existing ac-
tivities, discussions and negotiations with any parties con-
ducted heretofore with respect to any of the foregoing. From
and after the execution of this Agreement, each of PCI and
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MEDIQ shall immediately advise Cardinal in writing of the re-
ceipt, directly or indirectly, of any inquiries, discussions,
negotiations, or proposals relating to a Competing Transaction
(including the specific terms thereof) and promptly furnish to
Cardinal a copy of any such proposal or inquiry in addition to
any information provided to or by any third party relating
thereto.
(f) Affiliates of PCI. PCI shall cause each such
person who may be at the Effective Time or was on the date
hereof an "affiliate" of PCI for purposes of Rule 145 under the
Securities Act, to execute and deliver to Cardinal no less than
45 days prior to the date of the meeting of PCI Stockholders to
approve the Merger, the written undertakings in the form at-
tached hereto as Exhibit A. On or prior to such date, outside
counsel for PCI shall provide Cardinal with a letter
(reasonably satisfactory to counsel to Cardinal) specifying all
of the persons or entities who, in such counsel's view, may be
deemed to be "affiliates" of PCI under the preceding sentence.
(g) Access. From and after the date of this Agree-
ment until the Effective Time (or the termination of this
Agreement), PCI shall permit representatives of Cardinal to
have appropriate access at all reasonable times to PCI's pre-
mises, properties, books, records, contracts, tax records, doc-
uments, customers and suppliers. Information obtained by
Cardinal pursuant to this Section 5.1(g) shall be subject to
the provisions of the confidentiality agreement between
Cardinal and Lehman dated June 19, 1996 (the "Confidentiality
Agreement"), which agreement remains in full force and effect.
Without limiting the generality of the foregoing, Cardinal
shall be provided the opportunity to have its representatives
participate in all meetings and, to the extent practicable,
phone conversations with representatives of the Internal
Revenue Service ("IRS") relating to the Qualified Plans and to
review and comment upon any written materials submitted to the
IRS relating to the Qualified Plans before such submission is
made.
(h) Notification of Certain Matters by PCI. PCI
shall give prompt notice to Cardinal of (i) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of
which would cause any PCI representation or warranty contained
in this Agreement to be untrue or inaccurate at or prior to the
Effective Time and (ii) any material failure of PCI to comply
with or satisfy any covenant, condition or agreement to be com-
plied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 5.3(h)
shall not limit or otherwise affect the remedies available
hereunder to Cardinal.
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(i) Notification of Certain Matters by MEDIQ. MEDIQ
shall give prompt notice to Cardinal and PCI of (i) the
occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would cause any MEDIQ representation or
warranty contained in this Agreement to be untrue or inaccurate
at or prior to the Effective Time and (ii) any material failure
of MEDIQ to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to
this Section 5.3(i) shall not limit or otherwise affect the
remedies available hereunder to Cardinal.
ARTICLE VI
CONDITIONS
6.1 Mutual Conditions. The obligations of the par-
ties hereto to consummate the Merger shall be subject to ful-
fillment of the following conditions:
(a) No temporary restraining order, preliminary or
permanent injunction or other order or decree which pre-
vents the consummation of the Merger shall have been is-
sued and remain in effect, and no statute, rule or regu-
lation shall have been enacted by any Governmental Author-
ity which prevents the consummation of the Merger.
(b) All waiting periods applicable to the consumma-
tion of the Merger under the HSR Act shall have expired or
been terminated.
(c) The Merger and the transactions contemplated
hereby shall have been approved by the PCI Stockholders in
the manner required by any Applicable Law.
(d) The Commission shall have declared the Reg-
istration Statement effective. On the Closing Date and at
the Effective Time, no stop order or similar restraining
order shall have been threatened by the Commission or en-
tered by the Commission or any state securities admin-
istrator prohibiting the Merger.
(e) No Action shall be instituted by any Governmen-
tal Authority which seeks to prevent consummation of the
Merger or seeking material damages in connection with the
transactions contemplated hereby which continues to be
outstanding.
-40-<PAGE>
6.2 Conditions to Obligations of PCI. The obliga-
tions of PCI to consummate the Merger and the transactions con-
templated hereby shall be subject to the fulfillment of the
following conditions unless waived by PCI:
(a) The representations and warranties of each of
Cardinal and Subcorp set forth in Article III shall be
true and correct on the date hereof and on and as of the
Closing Date as though made on and as of the Closing Date
(except for representations and warranties made as of a
specified date, which need be true and correct only as of
the specified date), except for such inaccuracies which
have not had and would not reasonably be expected to have
in the reasonably foreseeable future a material adverse
effect on Cardinal.
(b) Each of Cardinal and Subcorp shall have per-
formed in all material respects each obligation and agree-
ment and shall have complied in all material respects with
each covenant to be performed and complied with by it
hereunder at or prior to the Effective Time.
(c) Each of Cardinal and Subcorp shall have fur-
nished PCI with a certificate dated the Closing Date
signed on behalf of it by the Chairman, President or any
Vice President to the effect that the conditions set forth
in Sections 6.2(a) and (b) have been satisfied.
(d) PCI shall have received the legal opinion, dated
the Closing Date, of Wachtell, Lipton, Rosen & Katz, spe-
cial counsel to Cardinal, in substantially the form at-
tached hereto as Exhibit B.
(e) The Cardinal Common Shares to be issued in the
Merger and upon exercise of the Cardinal Exchange Options
and the transactions contemplated hereby shall have been
authorized for inclusion on the NYSE, subject to official
notice of issuance.
6.3 Conditions to Obligations of Cardinal and Sub-
corp. The obligations of Cardinal to consummate the Merger and
the other transactions contemplated hereby shall be subject to
the fulfillment of the following conditions unless waived by
each of Cardinal and Subcorp:
(a) The representations and warranties of PCI set
forth in Article IV shall be true and correct on the date
hereof and on and as of the Closing Date as though made on
and as of the Closing Date (except for representations and
warranties made as of a specified date, which need be true
-41-<PAGE>
and correct only as of the specified date), except for
such inaccuracies which have not had and would not reason-
ably be expected to have in the reasonably foreseeable
future a material adverse effect on PCI. The possible
liabilities with respect to the compliance issues
described in Schedule 4.16(c) A, B and C have not had and
would not reasonably be expected to have in the reasonably
foreseeable future a material adverse effect on PCI. The
representations and warranties of MEDIQ set forth in
Section 8.1 shall be true and correct on the date hereof
and on and as of the Closing Date (except for any
representations and warranties made as of a specific date
which need be true and correct only as of the specified
date), except for such inaccuracies which have not had and
would not reasonably be expected to have in the reasonably
foreseeable future a material adverse effect on the
ability of MEDIQ to consummate the transactions
contemplated hereby.
(b) PCI shall have performed in all material re-
spects each obligation and agreement and shall have com-
plied in all material respects with each covenant to be
performed and complied with by it hereunder at or prior to
the Effective Time.
(c) PCI shall have furnished Cardinal with a cer-
tificate dated the Closing Date signed on its behalf by
its Chairman, President or any Vice President to the ef-
fect that the conditions set forth in Sections 6.3(a) and
(b) have been satisfied.
(d) Cardinal shall have received the legal opinion,
dated the Closing Date, of Ballard Spahr Andrews &
Ingersoll, substantially in the form attached hereto as
Exhibit C.
(e) Cardinal shall have received a letter, in form
and substance reasonably satisfactory to Cardinal, from
Deloitte & Touche L.L.P. dated the date of the Proxy
Statement and confirmed in writing at the Effective Time
stating that the Merger will qualify as a pooling of in-
terests transaction under Opinion 16 of the Accounting
Principles Board.
(f) Each person who may be at the Effective Time or
was on the date of this Agreement an "affiliate" of PCI
for purposes of Rule 145 under the Securities Act, shall
have executed and delivered to Cardinal at least 45 days
prior to the date of the meeting of PCI Stockholders to
-42-<PAGE>
approve the Merger the written undertakings in the form
attached hereto as Exhibit A.
(g) There shall not have been a breach of (i) any
obligation by any stockholder which has entered into a
Support Agreement and (ii) the MEDIQ Option Agreement.
(h) Since the date of this Agreement, except to the
extent contemplated by Section 4.6 to the PCI Disclosure
Schedule, there shall not have been any material adverse
change in the assets, liabilities, prospects, results of
operations, business or financial condition of PCI and its
subsidiaries taken as a whole or any material adverse ef-
fect on the ability of PCI to consummate the transactions
contemplated hereby.
(i) The two employment agreements referenced in Sec-
tion 4.28 hereof shall not have been breached or termi-
nated and shall be in effect.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination. This Agreement may be terminated at
any time prior to the Effective Time, whether before or after
approval and adoption of this Agreement by PCI Stockholders:
(a) by mutual consent of Cardinal and PCI;
(b) by either Cardinal or PCI if any permanent
injunction or other order of a court or other competent
Governmental Authority preventing the consummation of the
Merger shall have become final and nonappealable;
(c) by either Cardinal or PCI if the Merger shall
not have been consummated before January 31, 1997, unless
extended by the Boards of Directors of both Cardinal and
PCI (provided that the right to terminate this Agreement
under this Section 7.1(c) shall not be available to any
party whose failure or whose affiliate's failure to per-
form any material covenant or obligation under this Agree-
ment has been the cause of or resulted in the failure of
the Merger to occur on or before such date);
(d) (i) by PCI, no earlier than the fifth trading
day nor later than the third full trading day immediately
preceding the meeting of PCI Stockholders at which the
-43-<PAGE>
vote to approve the Merger occurs (the "7.1(d) Termination
Period") if the Average Share Price is less than $58.12,
provided that PCI will have no right to terminate pursuant
to this clause (i) unless (x) PCI shall have given, during
the 7.1(d) Termination Period, one full trading day's
prior written notice of its intention to terminate pursu-
ant to this Section 7.1(d) and (y) Cardinal during such
one full trading day notice period shall not have given
written notice (an "Adjustment Election") to PCI that the
Exchange Ratio shall be calculated pursuant to clause (ii)
of Section 2.2, (ii) by Cardinal during the 7.1(d)
Termination Period if the Average Share Price is less than
$56.41,or (iii) by either PCI or Cardinal during the
7.1(d) Termination Period if the Average Share Price is
less than $54.70;
(e) by Cardinal if the Board of Directors of PCI
shall withdraw, modify or change its recommendation of
this Agreement or the Merger in a manner adverse to
Cardinal, or if the Board of Directors of PCI shall have
refused to affirm its recommendation within two business
days of any written request from Cardinal which request
was made upon a reasonable basis;
(f) by Cardinal or PCI if at the meeting of PCI
Stockholders (including any adjournment or postponement
thereof) the requisite vote of the PCI Stockholders to
approve the Merger and the transactions contemplated
hereby shall not have been obtained;
(g) [Intentionally omitted]
(h) by Cardinal if MEDIQ shall have breached any of
its representations, covenants, or obligations under the
MEDIQ Option Agreement (other than in any immaterial
respect);
(i) by Cardinal if at any time the representations
and warranties of PCI set forth in Section 4.15 shall not
be true and correct;
(j) by Cardinal if Cardinal shall have been advised
that the condition set forth in Section 6.3(e) cannot be
satisfied; or
(k) by PCI if, prior to the meeting of PCI Stock-
holders at which the vote to approve the Merger is to oc-
cur, the Board of Directors of PCI approves an agreement
to effect a Competing Transaction if the PCI Board has
determined in good faith, upon advice from its outside
-44-<PAGE>
counsel, that failure to approve such agreement and termi-
nate this Agreement would constitute a breach of the fidu-
ciary duties of the PCI Board (and so advised Cardinal)
and such Competing Transaction is, based upon written
advice of Lehman (or any other nationally recognized
investment banking firm), more favorable to PCI's Stock-
holders in the aggregate and from a financial point of
view than the transactions contemplated by this Agreement
(including any adjustment to the terms and conditions of
such transactions proposed by Cardinal in response to such
Competing Transaction); provided that the termination
described in this paragraph (k) shall not be effective
until the close of business on the second business day
following the date on which Cardinal receives written
notice from PCI of PCI's intent to terminate pursuant to
this paragraph (k) and unless and until PCI shall have
paid Cardinal all of the fees and expenses described in
Section 7.2.
7.2 Effect of Termination. In the event of the ter-
mination of this Agreement pursuant to Section 7.1, this Agree-
ment, except for the provisions of the last sentence of Section
5.3(g) and the provisions of Sections 7.2, 8.11 and 8.12, shall
become void and have no effect, without any liability on the
part of any party or its directors, officers or stockholders.
Notwithstanding the foregoing, nothing in this Section 7.2
shall relieve any party to this Agreement of liability for a
material breach of any provision of this Agreement and pro-
vided, further, however, that if it shall be judicially deter-
mined that termination of this Agreement was caused by an in-
tentional breach of this Agreement, then, in addition to other
remedies at law or equity for breach of this Agreement, the
party so found to have intentionally breached this Agreement
shall indemnify and hold harmless the other parties for their
respective costs, fees and expenses of their counsel, accoun-
tants, financial advisors and other experts and advisors as
well as fees and expense incident to negotiation, preparation
and execution of this Agreement and related documentation and
shareholders' meetings and consents ("Costs"). If this Agree-
ment is terminated for any reason pursuant to Section 7.1
(other than a termination pursuant to Sections 7.1(a), 7.1(b),
7.1(c) (other than a termination by Cardinal pursuant to
Section 7.1(c) if PCI, MEDIQ or PCI's affiliates failure to
perform any material covenant or obligation under this
Agreement has been the cause of or resulted in the failure of
the Merger to occur on or before January 31, 1997), 7.1(d),
7.1(h) or 7.1(j)) PCI will, in the case of a termination by
Cardinal, within three business days following any such
termination or, in the case of a termination by PCI, prior to
such termination, pay to Cardinal in cash by wire transfer in
-45-<PAGE>
immediately available funds to an account designated by
Cardinal (i) in reimbursement for Cardinal's expenses an amount
in cash equal to the aggregate amount of Cardinal's Costs
incurred in connection with pursuing the transactions contem-
plated by this Agreement, including, without limitation, legal,
accounting and investment banking fees, up to but not in excess
of an amount equal to $1.0 million in the aggregate and (ii) a
termination fee in an amount equal to $5.0 million. If this
Agreement is terminated pursuant to Section 7.1(j), PCI will,
in the case of a termination by Cardinal, within three business
days following any such termination, pay to Cardinal in cash by
wire transfer in immediately available funds to an account
designated by Cardinal in reimbursement for Cardinal's expenses
an amount in cash equal to the aggregate amount of Cardinal's
Costs incurred in connection with pursuing the transactions
contemplated by this Agreement, including, without limitation,
legal, accounting and investment banking fees, up to but not in
excess of an amount equal to $1.0 million in the aggregate.
7.3 Amendment. This Agreement may be amended by the
parties hereto, by action taken or authorized by their respec-
tive Boards of Directors, at any time before or after adoption
of this Agreement by PCI Stockholders, but after any such ap-
proval, no amendment shall be made which by law requires fur-
ther approval or authorization by the PCI Stockholders without
such further approval or authorization. Notwithstanding the
foregoing, this Agreement may not be amended except by an in-
strument in writing signed on behalf of each of the parties
hereto.
7.4 Extension; Waiver. At any time prior to the
Effective Time, Cardinal (with respect to PCI and MEDIQ), PCI
(with respect to Cardinal, Subcorp and MEDIQ) and MEDIQ (with
respect to PCI, Cardinal and Subcorp) by action taken or au-
thorized by their respective Boards of Directors, may, to the
extent legally allowed, (a) extend the time for the performance
of any of the obligations or other acts of such party, (b)
waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto
and (c) waive compliance with any of the agreements or condi-
tions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such
party.
-46-<PAGE>
ARTICLE VIII
MISCELLANEOUS
8.1 Representations and Warranties of MEDIQ. In
order to induce PCI, Subcorp and Cardinal to enter into this
Agreement, MEDIQ hereby represents and warrants to PCI,
Cardinal and Subcorp that the following statements are true,
correct and complete:
(a) MEDIQ Investment Services, Inc. is the regis-
tered owner, and MEDIQ is the sole beneficial owner (in
addition to the registered owner), of 2,875,000 shares of
PCI Common Stock.
(b) MEDIQ has full power and authority to execute
and deliver this Agreement and to perform its obligations
under this Agreement. This Agreement is the legal, valid
and binding obligation of MEDIQ, enforceable against MEDIQ
in accordance with its terms. The execution and delivery
of this Agreement, the performance of MEDIQ's obligations
hereunder and the consummation of the transactions contem-
plated hereby have been duly and validly authorized by all
necessary corporate proceedings on the part of MEDIQ, its
Board of Directors and stockholders. The execution, de-
livery and performance of this Agreement and the consumma-
tion of the transactions contemplated hereby will not
(i) violate any provision of MEDIQ's certificate of incor-
poration or by-laws, (ii) violate any provision of, or be
an event that is (or with the passage of time will result
in) a violation of, or result in the acceleration of or
entitle any party to accelerate (whether after the giving
of notice or lapse of time or both) any obligation under,
or result in the imposition of any lien upon or the cre-
ation of a security interest in any of the shares of PCI
Common Stock owned by MEDIQ pursuant to, any mortgage,
lien, lease, agreement, instrument, order, arbitration
award, judgment or decree to which MEDIQ is a party or by
which MEDIQ is bound, or (iii) except as listed on Section
8.1(b) to the disclosure schedule delivered by MEDIQ to
Cardinal and dated the date hereof (the "MEDIQ Disclosure
Schedule"), violate or conflict with any provision of law,
order, judgment or ruling of any governmental authority or
any other material restriction of any kind or character to
which MEDIQ is subject, that, in the case of clause (iii)
would, individually or in the aggregate, have a material
adverse effect on the transactions contemplated by the
Merger Agreement or the benefits anticipated to be real-
ized by Cardinal as a result of the Merger. This Agreement
has been duly executed and delivered by MEDIQ, and,
-47-<PAGE>
assuming the due execution hereof by Cardinal and PCI,
this Agreement constitutes the legal, valid and binding
obligation of MEDIQ, enforceable against MEDIQ in
accordance with its terms.
(c) At the Effective Time of the Merger, as contem-
plated by this Agreement, MEDIQ will deliver to Cardinal
good title to the shares of PCI Common Stock owned by
MEDIQ free and clear of any liens, claims, charges,
security interests, options or other legal or equitable
encumbrances.
(d) With respect to all of the Contracts, agree-
ments, arrangements and understandings between MEDIQ and
PCI, all of which are set forth in Section 8.1(d) to the
MEDIQ Disclosure Schedule, all of such Contracts, agree-
ments, arrangements and understandings may be terminated
at the Effective Time of the Merger without creating any
liability or additional cost to PCI or Cardinal except as
specifically set forth in Section 5.1(f) to the PCI
Disclosure Schedule. Except as set forth in Section 4.17
to the PCI Disclosure Schedule and Section 8.1(d) to the
MEDIQ Disclosure Schedule, there are no Contracts,
arrangements, agreements or understandings between PCI and
MEDIQ.
(e) Neither MEDIQ nor any director, officer, em-
ployee or (to the knowledge of MEDIQ) stockholder thereof,
has incurred or will incur on behalf of PCI, any broker-
age, finder's or similar fee in connection with the trans-
actions contemplated by this Agreement.
(f) Neither MEDIQ nor any of its affiliates has
taken or agreed to take any action that (without giving
effect to any actions taken or agreed to be taken by PCI,
Cardinal or any of their respective affiliates (other than
MEDIQ)) would prevent Cardinal from accounting for the
business combination to be effected by the Merger as a
pooling-of-interests for financial reporting purposes.
8.2 Survival of Representations and Warranties. The
representations and warranties made herein by the parties here-
to shall not survive the Effective Time. This Section 8.2
shall not limit any covenant or agreement of the parties here-
to, which by its terms contemplates performance after the Ef-
fective Time or the termination of this Agreement.
-48-<PAGE>
8.3 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if de-
livered personally, telecopied (which is confirmed) or dis-
patched by a nationally recognized overnight courier service to
the parties at the following addresses (or at such other ad-
dress for a party as shall be specified by like notice):
(a) if to Cardinal or Subcorp:
Cardinal Health, Inc.
5555 Glendon Court
Dublin, Ohio 43016
Attention: Robert D. Walter
Telecopy No.: (614) 717-8919
with a copy to
David A. Katz, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telecopy No.: (212) 403-2000
(b) if to PCI:
PCI Services, Inc.
3001 Red Lion Road
Philadelphia, PA 19114
Attention: Bernard J. Korman
Telecopy No.: (215) 612-1555
with a copy to
Michael P. Gallagher, Esq.
Ballard Spahr Andrews & Ingersoll
1735 Market Street
Philadelphia, PA 19103
Telecopy No.: (215) 864-8999
(c) if to MEDIQ:
MEDIQ Incorporated
One Mediq Plaza
Pennsauken, NJ 08110
Attention: Thomas E. Carroll
Telecopy No.: (609) 665-2391
-49-<PAGE>
with a copy to
F. Douglas Raymond, III, Esq.
Drinker Biddle & Reath
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, PA 19107
Telecopy No.: (215) 988-2757
8.4 Interpretation. When a reference is made in
this Agreement to an Article or Section, such reference shall
be to an Article or Section of this Agreement unless otherwise
indicated. The headings and the table of contents contained in
this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agree-
ment. When a reference is made in this Agreement to PCI, such
reference shall be deemed to include any and all subsidiaries
of PCI, individually and in the aggregate, except for Sections
4.1, 4.2, 4.3, 4.4, 4.6, 4.8, 4.16, 4.19, 4.24 and 4.28. For
the purposes of any provision of this agreement, a "material
adverse effect" with respect to any party shall be deemed to
occur if the aggregate consequences of all breaches and inac-
curacies of covenants and representations of such party under
this Agreement, when read without any exception or qualifica-
tion for a material adverse effect, are reasonably likely to
have a material adverse effect on the assets, liabilities,
prospects, results of operations or financial condition of such
party and its subsidiaries taken as a whole.
8.5 Counterparts. This Agreement may be executed in
counterparts, which together shall constitute one and the same
Agreement. The parties may execute more than one copy of the
Agreement, each of which shall constitute an original.
8.6 Entire Agreement. This Agreement (including the
documents and the instruments referred to herein), the Support
Agreements, the MEDIQ Option Agreement and the Confidentiality
Agreement constitute the entire agreement among the parties and
supersede all prior agreements and understandings, agreements
or representations by or among the parties, written and oral,
with respect to the subject matter hereof and thereof.
8.7 Third Party Beneficiaries. Nothing in this
Agreement, express or implied, is intended or shall be con-
strued to create any third party beneficiaries other than Sec-
tions 5.2(b).
8.8 Governing Law. This Agreement shall be governed
and construed in accordance with the laws of the State of Dela-
ware without regard to principles of conflicts of law.
-50-<PAGE>
8.9 Specific Performance. The transactions contem-
plated by this Agreement are unique. Accordingly, each of the
parties acknowledges and agrees that, in addition to all other
remedies to which it may be entitled, each of the parties here-
to is entitled to a decree of specific performance, provided
such party is not in material default hereunder.
8.10 Assignment. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be as-
signed by any of the parties hereto (whether by operation of
law or otherwise) without the prior written consent of the
other parties. Subject to the preceding sentence, this Agree-
ment shall be binding upon, inure to the benefit of and be en-
forceable by the parties and their respective successors and
assigns.
8.11 Registration Rights. At any time after the
occurrence of a Purchase Event (as defined in the MEDIQ Option
Agreement), PCI shall, if requested by any holder (each a
"Holder") or Beneficial Owner (as defined in the MEDIQ Option
Agreement) of shares of PCI Common Stock acquired upon exercise
of the Option (as defined in the MEDIQ Option Agreement), as
expeditiously as possible file a registration statement on a
form for general use under the Securities Act if necessary in
order to permit the sale or other disposition of the shares of
PCI Common Stock that have been acquired upon exercise of the
Option in accordance with the intended method of sale or other
disposition requested by any such Holder. Each such Holder
shall provide all information reasonably requested by PCI for
inclusion in any registration statement to be filed hereunder.
PCI shall use its best efforts to cause such registration
statement first to become effective and then to remain effec-
tive for such period not in excess of 180 days from the day
such registration statement first becomes effective as may be
reasonably necessary to effect such sales or other disposi-
tions. The registration effected under this Section 8.11 shall
be at such Holders' expense. In no event shall PCI be required
to effect more than two registrations hereunder. The filing of
any registration statement required hereunder may be delayed
for such period of time (not to exceed 60 days) as may rea-
sonably be required to facilitate any public distribution by
PCI of PCI Common Stock or if a special audit of PCI would
otherwise be required in connection therewith. If requested by
any such Holder in connection with such registration, PCI shall
become a party to any underwriting agreement relating to the
sale of such shares on terms and including obligations and
indemnities which are customary for parties similarly situated.
Upon receiving any request for registration under this Section
8.11 from any Holder, PCI agrees to send a copy thereof to any
other person known to PCI to be entitled to registration rights
-51-<PAGE>
under this Section 8.11, in each case by promptly mailing the
same, postage prepaid, to the address of record of the persons
entitled to receive such copies.
8.12 Expenses. Subject to the provisions of Section
7.2., Cardinal, PCI and MEDIQ shall pay their own costs and
expenses associated with the transactions contemplated by this
Agreement.
-52-<PAGE>
IN WITNESS WHEREOF, Cardinal, Subcorp, PCI and MEDIQ
have signed this Agreement as of the date first written above.
CARDINAL HEALTH, INC.
By: /s/ Robert D. Walter
Name: Robert D. Walter
Title: Chairman & CEO
PANTHER MERGER CORP.
By: /s/ Robert D. Walter
Name: Robert D. Walter
Title: Chairman & CEO
PCI SERVICES, INC.
By: /s/ Theodore H. Seidenberg
Name: Theodore H. Seidenberg
Title: Chairman of the Board
MEDIQ INCORPORATED (As to Sections
5.1, 5.3(b), (e) and (i), 7.3 and
7.4 and Article VIII (other than
Section 8.11) only)
By: /s/ Michael Sandler
Name: Michael Sandler
Title: Senior Vice President -
Finance & Chief
Financial Officer
-53-
[CONFORMED COPY]
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT ("Option Agreement") dated
July 23, 1996, between CARDINAL HEALTH, INC., an Ohio
corporation ("Cardinal"), MEDIQ INVESTMENT SERVICES, INC., a
Delaware corporation ("MEDIQ Investment"), and MEDIQ
INCORPORATED, a Delaware corporation (together with MEDIQ
Investment, "MEDIQ").
W I T N E S S E T H:
WHEREAS, the Board of Directors of Cardinal, the
Board of Directors of PCI Services, Inc., a Delaware
corporation ("PCI"), and the Board of Directors of MEDIQ have
approved an Agreement and Plan of Merger dated as of even
date herewith (the "Merger Agreement") providing for the
merger of a wholly owned subsidiary of Cardinal with and into
PCI;
WHEREAS, as a condition and inducement to
Cardinal's willingness to enter into the Merger Agreement,
Cardinal has required that MEDIQ agree, and MEDIQ has agreed,
to grant to Cardinal the option set forth herein to purchase
all shares of PCI Common Stock owned, directly or indirectly,
or hereafter acquired, directly or indirectly, by MEDIQ (the
"Shares");
NOW, THEREFORE, in consideration of the premises
herein contained, the parties agree as follows:
1. Definitions.
Capitalized terms used but not defined herein shall
have the same meanings as in the Merger Agreement.
2. Grant of Option.
Subject to the terms and conditions set forth
herein, MEDIQ hereby grants to Cardinal an irrevocable option
(the "Option") to purchase all of the Shares at a price per
share (the "Purchase Price") equal to the lower of (x) $23.00
or (y) the Exchange Ratio multiplied by the closing price of
Cardinal Common Shares as reported on the NYSE composite tape
on the last trading day immediately preceding the Notice Date
(as hereinafter defined), payable in cash as provided in Sec-
tion 4 hereof, provided that, notwithstanding the foregoing,
in no event shall the Purchase Price be less than $19.53.
3. Exercise of Option.
(a) Cardinal may exercise the Option, in whole or
(subject to the limitation set forth in the last sentence
hereof) in part, at any time or from time to time if a
Purchase Event<PAGE>
(as defined below) shall have occurred; provided, however,
that, to the extent the Option shall not have been previously
exercised, it shall terminate and be of no further force and
effect upon the earliest to occur of (i) the Effective Time
of the Merger and (ii) the termination of the Merger Agree-
ment in accordance with Sections 7.1(a), 7.1(b), 7.1(c)
(other than a termination by Cardinal pursuant to Section
7.1(c) of the Merger Agreement if PCI's, MEDIQ's or PCI's
affiliate's failure to perform any material covenant or obli-
gation under the Merger Agreement has been the cause of or
resulted in the failure of the Merger to occur on or before
January 31, 1997), or 7.1(d) of the Merger Agreement; pro-
vided further, however, if (x) the Merger Agreement is termi-
nated other than as provided in clause (ii) above, or (y) the
termination of the Merger Agreement (other than a termination
(I) pursuant to Section 7.1(a) or (II) by PCI pursuant to
Section 7.1(c) of the Merger Agreement if Cardinal's or
Cardinal's affiliate's failure to perform any material
covenant or obligation under the Merger Agreement has been
the cause of or resulted in the failure of the Merger to oc-
cur on or before January 31, 1997) occurs after a Purchase
Event, the Option shall not terminate until the date that is
6 months following such termination. Notwithstanding the
foregoing, if the Option cannot be exercised before its date
of termination as a result of any injunction, order or simi-
lar restraint issued by a court of competent jurisdiction,
the Option shall expire on the 30th business day after such
injunction, order or restraint shall have been dissolved or
when such injunction, order or restraint shall have become
permanent and no longer subject to appeal, as the case may
be. To the extent Cardinal exercises the Option in part,
Cardinal may only exercise the Option for up to 390,499
Shares in the aggregate, unless Cardinal exercises the Option
for at least 2,253,876 Shares in the aggregate.
(b) As used herein, a "Purchase Event" shall mean
any of the following events:
(i) any person (other than Cardinal or any of its
subsidiaries) shall have commenced (as such term is
defined in Rule 14d-2 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act")), or shall have
filed a registration statement under the Securities Act
of 1933, as amended (the "Securities Act"), with respect
to, a tender offer or exchange offer to purchase any
shares of PCI Common Stock such that, upon consummation
of such offer, such person would own or control 10% or
more of the then outstanding PCI Common Stock;
(ii) PCI or any of its subsidiaries shall or shall
have entered into, authorized, recommended, proposed or
publicly announced an intention to enter into, autho-
rize, recommend, or propose, an agreement, arrangement
or understanding with any person (other than Cardinal or
any
-2-<PAGE>
of its subsidiaries) to, or any person (other than
Cardinal or any of its subsidiaries) shall have publicly
announced a bona fide present intention to, (A) effect
any Competing Transaction with PCI, (B) purchase, lease
or otherwise acquire 10% or more of the assets of PCI
and its consolidated subsidiaries or (C) purchase or
otherwise acquire (including by way of merger, consoli-
dation, tender or exchange offer or similar transaction)
Beneficial Ownership (as defined below) of securities
representing 10% or more of the voting power of PCI or
any of its "significant subsidiaries" (as defined under
Regulation S-X);
(iii) any person (other than Cardinal or any subsid-
iary of Cardinal, and other than MEDIQ) shall have
acquired Beneficial Ownership or the right to acquire
Beneficial Ownership of 10% or more of the voting power
of PCI;
(iv) MEDIQ shall have hereafter acquired Beneficial
Ownership, or the right to acquire Beneficial Ownership,
of an additional 1% or more of the voting power of PCI
over that which it currently possesses, not including
any increase resulting solely from the purchase or other
acquisition by PCI of shares of PCI Common Stock;
(v) PCI's Board of Directors shall have withdrawn,
modified or changed in a manner adverse to Cardinal, or
refused to reaffirm within two business days of any
written request from Cardinal which request was made
upon a reasonable basis, the recommendation of PCI's
Board of Directors with respect to the Merger Agreement
and/or the Merger;
(vi) if MEDIQ shall have breached any of its obli-
gations under that certain Support/Voting Agreement,
dated the date hereof, between MEDIQ and Cardinal or
under the Merger Agreement;
(vii) if at the meeting of PCI Stockholders (includ-
ing any adjournment or postponement thereof) the requi-
site vote of the PCI Stockholders to approve the Merger
and the transactions contemplated by the Merger Agree-
ment shall not have been obtained; or
(viii) the Merger Agreement shall have been termi-
nated by either party pursuant to Section 7.1 thereof
(other than a termination pursuant to Sections 7.1(a),
7.1(b), 7.1(c) (other than a termination by Cardinal
pursuant to Section 7.1(c) of the Merger Agreement if
PCI's,
-3-<PAGE>
MEDIQ's or PCI's affiliate's failure to perform any ma-
terial covenant or obligation under the Merger Agreement
has been the cause of or resulted in the failure of the
Merger to occur on or before January 31, 1997), or
7.1(d)) or any event shall have occurred that would
cause any party thereto to have the right to so termi-
nate the Merger Agreement.
(c) As used herein, the terms "Beneficial Owner-
ship", "Beneficial Owner" and "Beneficially Own" shall have
the meanings ascribed to them in Rule 13d-3 under the Ex-
change Act. As used herein, "person" shall have the meaning
specified in Sections 3(a)(9) and 13(d)(3) of the Exchange
Act.
(d) In the event Cardinal wishes to exercise the
Option, it shall deliver to MEDIQ a written notice (the date
of which being herein referred to as the "Notice Date")
specifying (i) the total number of Shares it intends to pur-
chase pursuant to such exercise and (ii) a place and date not
earlier than two business days nor later than 30 calendar
days from the Notice Date for the closing of such purchase
(the "Closing Date"); provided that if the closing of the
purchase and sale pursuant to the Option (the "Closing")
cannot be consummated by reason of any applicable judgment,
decree, order, law or regulation, the period of time that
otherwise would run pursuant to this sentence shall run
instead from the date on which such restriction on
consummation has expired or been terminated; and, provided
further that, without limiting the foregoing, if prior
notification to or approval of any regulatory authority is
required in connection with such purchase, Cardinal and, if
applicable, MEDIQ shall promptly file the required notice or
application for approval and shall expeditiously process the
same (and MEDIQ shall cooperate with Cardinal in the filing
of any such notice or application and the obtaining of any
such approval), and the period of time that otherwise would
run pursuant to this sentence shall run instead from the date
on which, as the case may be, (i) any required notification
period has expired or been terminated or (ii) such approval
has been obtained, and in either event, any requisite waiting
period has passed.
(e) In the event (i) Cardinal receives official
notice that an approval of any regulatory authority required
for the purchase of the Shares pursuant to exercise of the
Option would not be issued or granted or (ii) a Closing Date
shall not have occurred within 9 months after the related
Notice Date due to the failure to obtain any such required
approval, Cardinal shall be entitled, to the extent legally
permitted, to
-4-<PAGE>
exercise the Option in connection with the resale of PCI Com-
mon Stock or other securities pursuant to a registration
statement as provided in Section 8.11 of the Merger
Agreement. The provisions of this Section 3 and Section 6
shall apply with appropriate adjustments to any such
exercise.
4. Payment and Delivery of Certificates.
(a) At the Closing, referred to in Section 3
hereof, Cardinal shall pay to MEDIQ the aggregate Purchase
Price for the shares of PCI Common Stock purchased pursuant
to the exercise of the Option in immediately available funds
by wire transfer to a bank account designated not later than
one business day prior to the Closing Date by MEDIQ.
(b) At such Closing, simultaneously with the de-
livery of cash as provided in Section 4(a), MEDIQ shall
transfer to Cardinal good, valid and marketable title to, and
shall deliver to Cardinal a certificate or certificates
representing, the number of Shares purchased by Cardinal,
registered in the name of Cardinal or a nominee designated in
writing by Cardinal (or, if it is not possible to have such
registration completed prior to the Closing, the
certificate(s) delivered shall be accompanied by appropriate
stock power(s) in form reasonably satisfactory to Cardinal),
which Shares shall be fully paid and non-assessable and free
and clear of all liens, claims, charges and encumbrances of
any kind whatsoever.
(c) If at the time of issuance of any PCI Common
Stock pursuant to any exercise of the Option, PCI shall have
issued any share purchase rights or similar securities to
holders of PCI Common Stock, then each such Share shall also
represent rights with terms substantially the same as and at
least as favorable to Cardinal as those issued to MEDIQ.
5. Authorization, etc.
(a) MEDIQ hereby represents and warrants to
Cardinal that:
(i) MEDIQ has full corporate authority to execute
and deliver this Option Agreement and to consummate the
transactions contemplated hereby;
(ii) such execution, delivery and consummation have
been authorized by the Board of Directors of MEDIQ, and
no other corporate proceedings are necessary therefor;
(iii) this Option Agreement has been duly and val-
idly executed and delivered and represents a valid and
legally binding obligation of MEDIQ, enforceable against
MEDIQ in accordance with its terms;
-5-<PAGE>
(iv) MEDIQ Investment is the registered owner, and
MEDIQ Incorporated is the sole beneficial owner (in ad-
dition to the registered owner), of, and has good, valid
and marketable title to, 2,875,000 shares of PCI Common
Stock, which are all of the shares of PCI Common Stock
owned, directly or indirectly, by MEDIQ, and MEDIQ does
not have any right to acquire any additional shares of
PCI Common Stock; and
(v) MEDIQ has taken all necessary corporate action
to authorize and permit it to sell the Shares upon exer-
cise of the Option, all of which, upon sale pursuant
hereto, shall have been duly authorized, validly issued,
fully paid and nonassessable, and shall be delivered
free and clear of all claims, liens, encumbrances, re-
strictions and security interests and not subject to any
preemptive rights.
(b) Cardinal hereby represents and warrants to
MEDIQ that:
(i) Cardinal has full corporate authority to ex-
ecute and deliver this Option Agreement and to consum-
mate the transactions contemplated hereby;
(ii) such execution, delivery and consummation have
been authorized by all requisite corporate action by
Cardinal, and no other corporate proceedings are neces-
sary therefor;
(iii) this Option Agreement has been duly and val-
idly executed and delivered and represents a valid and
legally binding obligation of Cardinal, enforceable
against Cardinal in accordance with its terms; and
(iv) any PCI Common Stock or other securities
acquired by Cardinal upon exercise of the Option will
not be taken with a view to the public distribution
thereof and will not be transferred or otherwise
disposed of except in compliance with the Securities
Act.
6. Adjustment upon Changes in Capitalization.
In the event of any change in PCI Common Stock by
reason of a stock dividend, split-up, recapitalization,
merger, consolidation, reorganization, combination, exchange
of shares or similar transaction, the type and number of
shares or securities subject to the Option, and the Purchase
Price therefor, shall be adjusted appropriately so that
Cardinal shall receive upon exercise of the Option the same
class and
-6-<PAGE>
number of outstanding shares or other securities or property
that Cardinal would have received in respect of PCI Common
Stock if the Option had been exercised immediately prior to
such event, or the record date therefor, as applicable.
7. Severability.
Any term, provision, covenant or restriction con-
tained in this Option Agreement held by a court or other Gov-
ernmental Authority of competent jurisdiction to be invalid,
void or unenforceable, shall be ineffective to the extent of
such invalidity, voidness or unenforceability, but neither
the remaining terms, provisions, covenants or restrictions
contained in this Option Agreement nor the validity or en-
forceability thereof in any other jurisdiction shall be af-
fected or impaired thereby. Any term, provision, covenant or
restriction contained in this Option Agreement that is so
found to be so broad as to be unenforceable shall be inter-
preted to be as broad as is enforceable.
8. Miscellaneous.
(a) Expenses. Each of the parties hereto shall
pay all costs and expenses incurred by it or on its behalf in
connection with the transactions contemplated hereunder, in-
cluding fees and expenses of its own financial consultants,
investment bankers, accountants and counsel, except as other-
wise provided herein.
(b) Entire Agreement. This Option Agreement, the
Support Agreements, the Merger Agreement (including the docu-
ments and the instruments referred to therein) and the Con-
fidentiality Agreement constitute the entire agreement among
the parties and supersede all prior agreements and
understandings, agreements or representations by or among the
parties, written and oral, with respect to the subject matter
hereof and thereof.
(c) Successors; No Third Party Beneficiaries. The
terms and conditions of this Option Agreement shall inure to
the benefit of and be binding upon the parties hereto and
their respective successors and permitted assigns. Nothing
in this Option Agreement, expressed or implied, is intended
to confer upon any party, other than the parties hereto, and
their respective successors and assigns, any rights, reme-
dies, obligations, or liabilities under or by reason of this
Option Agreement, except as expressly provided herein.
(d) Notices. All notices or other communications
which are required or permitted hereunder shall be in writing
-7-<PAGE>
and sufficient if delivered in accordance with Section 8.3 of
the Merger Agreement (which is incorporated herein by ref-
erence).
(e) Counterparts. This Option Agreement may be
executed in counterparts, and each such counterpart shall be
deemed to be an original instrument, but both such counter-
parts together shall constitute but one agreement.
(f) Further Assurances. In the event of any exer-
cise of the Option by Cardinal, MEDIQ and Cardinal shall
execute and deliver all other documents and instruments and
take all other action that may be reasonably necessary in
order to consummate the transactions provided for by such
exercise.
(g) Specific Performance. The parties hereto
agree that if for any reason Cardinal or MEDIQ shall have
failed to perform its obligations under this Option Agree-
ment, then either party hereto seeking to enforce this Option
Agreement against such non-performing party shall be entitled
to specific performance and injunctive and other equitable
relief, and the parties hereto further agree to waive any re-
quirement for the securing or posting of any bond in connec-
tion with the obtaining of any such injunctive or other equi-
table relief. This provision is without prejudice to any
other rights that either party hereto may have against the
other party hereto for any failure to perform its obligations
under this Option Agreement.
(h) Governing Law. This Option Agreement shall be
governed by and construed in accordance with the laws of the
State of Delaware applicable to agreements made and entirely
to be performed within such state. Nothing in this Option
Agreement shall be construed to require any party (or any
subsidiary or affiliate of any party) to take any action or
fail to take any action in violation of applicable law, rule
or regulation.
(i) Regulatory Approvals. If, in connection with
the exercise of the Option under Section 3, prior notifica-
tion to or approval of any Governmental Authority is
required, then the required notice or application for ap-
proval shall be promptly filed and/or expeditiously processed
by MEDIQ and periods of time that otherwise would run pursu-
ant hereto (if any) shall run instead from the date on which
any such required notification period has expired or been
terminated or such approval has been obtained, and in either
event, any requisite waiting period shall have passed.
-8-<PAGE>
(j) Waiver and Amendment. Any provision of this
Option Agreement may be waived at any time by the party that
is entitled to the benefits of such provision. This Option
Agreement may not be modified, amended, altered or supple-
mented except upon the execution and delivery of a written
agreement executed by the parties hereto.
-9-<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has
executed this Option Agreement as of the date first written
above.
CARDINAL HEALTH, INC.
By: /s/ Robert D. Walter
Name: Robert D. Walter
Title: Chairman & CEO
MEDIQ INVESTMENT SERVICES, INC.
By: /s/ Michael Sandler
Name: Michael Sandler
Title: Vice President &
Chief Financial Officer
MEDIQ INCORPORATED
By: /s/ Michael Sandler
Name: Michael Sandler
Title: Senior Vice President -
Finance & Chief
Financial Officer
-10-
[CONFORMED COPY]
July 23, 1996
Cardinal Health, Inc.
5555 Glendon Court
Dublin, Ohio 43016
Re: Support/Voting Agreement
Dear Sirs:
The undersigned understand that Cardinal Health,
Inc. ("Cardinal"), Panther Merger Corp., a wholly owned
subsidiary of Cardinal ("Subcorp"), MEDIQ Incorporated and
PCI Services, Inc. ("PCI") are entering into an Agreement and
Plan of Merger, dated the date hereof (the "Agreement"),
providing for, among other things, a merger between Subcorp
and PCI (the "Merger"), in which all of the outstanding
shares of capital stock of PCI will be exchanged for common
shares, without par value, of Cardinal.
MEDIQ Investment Services, Inc. is a stockholder of
PCI (together with MEDIQ Incorporated, the "Stockholder") and
is entering into this letter agreement to induce you to enter
into the Agreement and to consummate the transactions
contemplated thereby.
The Stockholder confirms its agreement with you as
follows:
1. The Stockholder represents, warrants and agrees
that Schedule I annexed hereto sets forth the shares of the
capital stock of PCI of which the Stockholder or its
affiliates (as defined under the Securities Exchange Act of
1934, as amended), other than the directors of Stockholder,
is the record or beneficial owner (the "Shares") and that the
Stockholder and its affiliates, other than the directors of
Stockholder, are on the date hereof the lawful owners of the
number of Shares set forth in Schedule I, free and clear of
all liens, charges, encumbrances, voting agreements and
commitments of every kind, except as disclosed in Schedule I.
Except as set forth in Schedule I, neither the Stockholder
nor any of its affiliates, other than the directors of
Stockholder, own or hold any rights to acquire any additional
shares of the capital stock of PCI (by exercise of stock
options or otherwise) or any interest therein or any voting
rights with respect to any additional shares.
2. The Stockholder agrees that it will not, will
not permit any company, trust or other entity controlled by
the Stockholder to, and will not permit any of its affiliates
to, contract to sell, sell or otherwise transfer or dispose
of any of the Shares or any interest therein or securities
convertible thereinto or any voting rights with respect
thereto, other than (i) pursuant to the Merger or (ii) with
your prior written consent.<PAGE>
3. The Stockholder agrees to, will cause any
company, trust or other entity controlled by the Stockholder
to, and will cause its affiliates to, cooperate fully with
you in connection with the Agreement and the transactions
contemplated thereby. The Stockholder agrees that it will
not, will not permit any such company, trust or other entity
to, and will not permit any of its affiliates to, directly or
indirectly (including through its officers, directors,
employees or other representatives) to solicit, initiate, en-
courage or facilitate, or furnish or disclose non-public
information in furtherance of, any inquiries or the making of
any proposal with respect to any recapitalization, merger,
consolidation or other business combination involving PCI, or
acquisition of any capital stock or any material portion of
the assets (except for acquisition of assets in the ordinary
course of business consistent with past practice) of PCI, or
any combination of the foregoing (a "Competing Transaction"),
or negotiate, explore or otherwise engage in discussions with
any person (other than Cardinal, Subcorp or their respective
directors, officers, employees, agents and representatives)
with respect to any Competing Transaction or enter into any
agreement, arrangement or understanding with respect to any
Competing Transaction or agree to or otherwise assist in the
effectuation of any Competing Transaction; provided, however,
that nothing herein shall require Stockholder to prevent or
restrict any director of Stockholder who is a director or
officer of PCI from taking any action to the extent such
director or officer would be permitted to take such action
under the Agreement and under any Support/Voting Agreement
with Cardinal dated the date hereof to which such director or
officer is a party.
4. The Stockholder agrees that all of the Shares
beneficially owned by the Stockholder or its affiliates, or
over which the Stockholder or any of its affiliates has
voting power or control, directly or indirectly (including
any common shares of PCI acquired after the date hereof), at
the record date for any meeting of stockholders of PCI called
to consider and vote to approve the Merger and the Agreement
and/or the transactions contemplated thereby will be voted by
the Stockholder or its affiliates in favor thereof and that
neither the Stockholder nor any of its affiliates will vote
such Shares in favor of any Competing Transaction.
5. The Stockholder has all necessary power and
authority to enter into this letter agreement. This agree-
ment is the legal, valid and binding agreement of the Stock-
holder, and is enforceable against the Stockholder in ac-
cordance with its terms.
6. The Stockholder agrees that damages are an in-
adequate remedy for the breach by Stockholder of any term or
condition of this letter agreement and that you shall be en-
titled to a temporary restraining order and preliminary and
permanent injunctive relief in order to enforce our agree-
ments herein.
- 2 -<PAGE>
This letter agreement may be terminated at the op-
tion of any party at any time upon the earlier of (i) ter-
mination of the Agreement and (ii) the Effective Time (as de-
fined in the Agreement). Please confirm that the foregoing
correctly states the understanding between us by signing and
returning to me a counterpart hereof.
Very truly yours,
MEDIQ Incorporated
By: /s/ Michael Sandler
Michael Sandler
Senior Vice President - Finance
and Chief Financial Officer
MEDIQ Investment Services, Inc.
By: /s/ Michael Sandler
Michael Sandler
Vice President and Chief
Financial Officer
Confirmed on the date
first above written.
Cardinal Health, Inc.
By: /s/ George H. Bennett
George H. Bennett
Executive Vice President
and General Counsel
- 3 -<PAGE>
Schedule I
Stock Ownership
of MEDIQ Investment Services, Inc.
Owned Beneficially (including Stock Options)
2,875,000 shares of common stock, $0.001 par value, of PCI
Services, Inc.
Owned of Record
2,875,000 shares of common stock, $0.001 par value, of PCI
Services, Inc.
[CONFORMED COPY]
July 23, 1996
Cardinal Health, Inc.
5555 Glendon Court
Dublin, Ohio 43016
Re: Support/Voting Agreement
Dear Sirs:
The undersigned understands that Cardinal Health,
Inc. ("Cardinal"), Panther Merger Corp., a wholly owned
subsidiary of Cardinal ("Subcorp"), MEDIQ, Incorporated and
PCI Services, Inc. ("PCI") are entering into an Agreement and
Plan of Merger, dated the date hereof (the "Agreement"),
providing for, among other things, a merger between Subcorp
and PCI (the "Merger"), in which all of the outstanding
shares of capital stock of PCI will be exchanged for common
shares, without par value, of Cardinal.
The undersigned is a stockholder of PCI (the
"Stockholder") and is entering into this letter agreement to
induce you to enter into the Agreement and to consummate the
transactions contemplated thereby.
The Stockholder confirms its agreement with you as
follows:
1. The Stockholder represents, warrants and agrees
that Schedule I annexed hereto sets forth the shares of the
capital stock of PCI of which the Stockholder or its
affiliates (as defined under the Securities Exchange Act of
1934, as amended) is the record or beneficial owner (the
"Shares") and that the Stockholder and its affiliates are on
the date hereof the lawful owners of the number of Shares set
forth in Schedule I, free and clear of all liens, charges,
encumbrances, voting agreements and commitments of every
kind, except as disclosed in Schedule I. Except as set forth
in Schedule I, neither the Stockholder nor any of its
affiliates own or hold any rights to acquire any additional
shares of the capital stock of PCI (by exercise of stock
options or otherwise) or any interest therein or any voting
rights with respect to any additional shares.
2. The Stockholder agrees that it will not, will
not permit any company, trust or other entity controlled by
the Stockholder to, and will not permit any of its affiliates
to, contract to sell, sell or otherwise transfer or dispose
of any of the Shares or any interest therein or securities
convertible thereinto or any voting rights with respect
thereto, other than (i) pursuant to the Merger or (ii) with
your prior written consent.<PAGE>
3. The Stockholder agrees to, will cause any
company, trust or other entity controlled by the Stockholder
to, and will cause its affiliates to, cooperate fully with
you in connection with the Agreement and the transactions
contemplated thereby. The Stockholder agrees that it will
not, will not permit any such company, trust or other entity
to, and will not permit any of its affiliates to, directly or
indirectly (including through its officers, directors,
employees or other representatives) to solicit, initiate, en-
courage or facilitate, or furnish or disclose non-public
information in furtherance of, any inquiries or the making of
any proposal with respect to any recapitalization, merger,
consolidation or other business combination involving PCI, or
acquisition of any capital stock or any material portion of
the assets (except for acquisition of assets in the ordinary
course of business consistent with past practice) of PCI, or
any combination of the foregoing (a "Competing Transaction"),
or negotiate, explore or otherwise engage in discussions with
any person (other than Cardinal, Subcorp or their respective
directors, officers, employees, agents and representatives)
with respect to any Competing Transaction or enter into any
agreement, arrangement or understanding with respect to any
Competing Transaction or agree to or otherwise assist in the
effectuation of any Competing Transaction; provided, however,
that nothing herein shall prevent the Stockholder from taking
any action, after having notified Cardinal thereof, or
omitting to take any action (i) solely as a member of the
Board of Directors of PCI required so as not to violate such
Stockholder's fiduciary obligations as a Director as so
advised by outside counsel or (ii) if Stockholder is an
officer of PCI, as directed by the Board of Directors of PCI
so long as such direction was not made in violation of any of
the terms of the Agreement.
4. The Stockholder agrees that all of the Shares
beneficially owned by the Stockholder or its affiliates, or
over which the Stockholder or any of its affiliates has
voting power or control, directly or indirectly (including
any common shares of PCI acquired after the date hereof), at
the record date for any meeting of stockholders of PCI called
to consider and vote to approve the Merger and the Agreement
and/or the transactions contemplated thereby will be voted by
the Stockholder or its affiliates in favor thereof and that
neither the Stockholder nor any of its affiliates will vote
such Shares in favor of any Competing Transaction.
5. The Stockholder has all necessary power and
authority to enter into this letter agreement. This agree-
ment is the legal, valid and binding agreement of the Stock-
holder, and is enforceable against the Stockholder in ac-
cordance with its terms.
6. The Stockholder agrees that damages are an in-
adequate remedy for the breach by Stockholder of any term or
condition of this letter agreement and that you shall be en-
titled to a temporary restraining order and preliminary and
permanent injunctive relief in order to enforce our agree-
ments herein.
- 2 -<PAGE>
This letter agreement may be terminated at the op-
tion of any party at any time upon the earlier of (i) ter-
mination of the Agreement and (ii) the Effective Time (as de-
fined in the Agreement). Please confirm that the foregoing
correctly states the understanding between us by signing and
returning to me a counterpart hereof.
Very truly yours,
By:
Confirmed on the date
first above written.
Cardinal Health, Inc.
By: /s/ George H. Bennett
George H. Bennett
Executive Vice President
and General Counsel
- 3 -<PAGE>
Schedule I
Stock Ownership
Owned Beneficially (including Stock Options)
Owned of Record
