<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 14, 1995
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PFIZER INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 2834 13-5315170
(State of other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification No.)
incorporation or
organization)
</TABLE>
235 EAST 42ND STREET NEW YORK, NEW YORK 10017
(212) 573-2323
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
TERENCE J. GALLAGHER, ESQ.
PFIZER INC.
235 EAST 42ND STREET
NEW YORK, NEW YORK 10017
(212) 573-2323
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
UPON CONSUMMATION OF THE MERGER DESCRIBED IN THE ENCLOSED PROXY
STATEMENT/PROSPECTUS.
------------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
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<CAPTION>
PROPOSED
PROPOSED MAXIMUM
AMOUNT TO MAXIMUM AGGREGATE AMOUNT OF
TITLE OF SECURITIES TO BE BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED (1) PER UNIT (2) PRICE (2) FEE (3)
<S> <C> <C> <C> <C>
Common Stock, $.10 par value,
together with the associated
Preferred Stock Purchase
Rights...................... 2,211,574 shs. $19.50 $174,164,770.52 $27,003.65
</TABLE>
(1) This Registration Statement covers the maximum number of shares of the
Registrant's common stock that may be issued in connection with the merger
and the other transactions described in the enclosed Proxy
Statement/Prospectus.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) based on the average of the high and low prices of
the shares of common stock of NAMIC U.S.A. Corporation on the Nasdaq
National Market System on February 9, 1995 ($19.50) and the maximum number
of such shares (8,990,502) that may be exchanged for the securities being
registered. In addition, according to Rule 457(f)(3), the amount of
$1,150,018.48, which represents the amount of cash to be paid by the
Registrant in connection with the exchange, has been deducted from the value
of the securities to be received by the Registrant in the exchange.
(3) The required fee of $60,056.82 pursuant to Section 6(b) of the Securities
Act of 1933 has been reduced, in accordance with Rule 457(b) thereunder, by
$33,053.17, the amount of the fee previously paid to the Commission with
respect to the Merger.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PFIZER INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501 OF REGULATION S-K
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FORM S-4 ITEM NUMBER AND CAPTION LOCATION IN PROXY STATEMENT/PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus............................ Outside Front Cover Page of Proxy
Statement/Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus.......................................... Inside Front Cover Page of Proxy Statement/
Prospectus
3. Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information................................... Summary
4. Terms of the Transaction............................. Proxy Statement/Prospectus Cover Page; Summary; The
Merger; Comparative Rights of NAMIC's Stockholders
and Pfizer's Stockholders
5. Pro Forma Financial Information...................... Selected Financial Data
6. Material Contacts with the Company Being Acquired.... The Merger; Existing Relationships between Pfizer and
NAMIC
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters....... Not Applicable
8. Interests of Named Experts and Counsel............... Not Applicable
9. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information With Respect to S-3 Registrants.......... Incorporation of Certain Documents by Reference;
Summary
11. Incorporation of Certain Information by Reference.... Incorporation of Certain Documents by Reference
12. Information With Respect to S-2 or S-3 Registrants... Not Applicable
13. Incorporation of Certain Information by Reference.... Not Applicable
14. Information With Respect to Registrants Other Than
S-3 or S-2 Registrants.............................. Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND CAPTION LOCATION IN PROXY STATEMENT/PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
<S> <C> <C>
15. Information With Respect to S-3 Companies............ Not Applicable
16. Information With Respect to S-2 or S-3 Companies..... Not Applicable
17. Information With Respect to Companies Other Than S-3
or S-2 Companies.................................... Summary; Business of NAMIC; NAMIC Management's
Discussion and Analysis of Financial Condition and
Results of Operations; Existing Relationships
Between Pfizer and NAMIC; Security Ownership of
Certain Beneficial Owners and Management of NAMIC;
Management of NAMIC; NAMIC Executive Compensation;
Certain Relationships and Related Transactions of
NAMIC; Comparative Rights of NAMIC's Stockholders
and Pfizer's Stockholders; NAMIC's Consolidated
Financial Statements.
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or Authorizations
are to be Solicited................................. Summary; The Special Meeting; The Merger
19. Information if Proxies, Consents or Authorizations
are not to be Solicited, or in an Exchange Offer.... Not Applicable
</TABLE>
<PAGE>
NAMIC U.S.A. CORPORATION
PRUYN'S ISLAND
GLENS FALLS, NEW YORK 12801
February 14, 1995
Dear Stockholder:
You are cordially invited to attend a special meeting (the "Special
Meeting") of the stockholders of NAMIC U.S.A. Corporation ("NAMIC"), which will
be held at The Rockefeller Center Club, 30 Rockefeller Plaza, Radio City Room,
64th Floor, New York, New York 10112, on March 16, 1995, at 9:00 a.m. E.S.T.
At the Special Meeting, you will be asked to approve and adopt (1) the
Amended and Restated Agreement and Plan of Merger, dated as of October 31, 1994
(the "Merger Agreement"), among NAMIC, Pfizer Inc. ("Pfizer"), and Dart
Acquisition Corporation ("Merger Sub"), a newly-formed Delaware corporation and
a wholly-owned subsidiary of Pfizer, and (2) the merger (the "Merger") of Merger
Sub with and into NAMIC, with NAMIC surviving the Merger as a wholly-owned
subsidiary of Pfizer. In connection with the Merger, NAMIC stockholders will
receive, for each outstanding share of common stock of NAMIC, .24599 of one
share of common stock of Pfizer and, since the effective time of the Merger is
after the record date for the dividend of $.52 per share declared by Pfizer's
Board of Directors on the Pfizer common stock in the first quarter of calendar
year 1995, a cash payment equal to the product of .24599 and the amount of such
per share quarterly cash dividend. Following the Merger, I will continue as the
President and Chief Executive Officer of NAMIC, with NAMIC's current management
team (other than Phillip H. Morse) and associate personnel also continuing in
place.
Approval and adoption of the Merger Agreement and the Merger require the
affirmative vote of the holders of a majority of the outstanding shares of NAMIC
common stock. As disclosed in the Proxy Statement/Prospectus accompanying this
letter, Phillip H. Morse, the Chairman of the Board of Directors of NAMIC, and
his brother, Richard H. Morse, who together hold approximately 63% of NAMIC's
outstanding common stock, have entered into agreements with Pfizer obligating
them to vote in favor of the Merger Agreement and the Merger and against
approval of any proposal made in opposition to or in competition with the Merger
Agreement and the Merger. Accordingly, approval and adoption of the Merger
Agreement and the Merger are assured.
YOUR BOARD OF DIRECTORS HAS CAREFULLY CONSIDERED THE TERMS AND CONDITIONS OF
THE PROPOSED MERGER AND HAS UNANIMOUSLY DETERMINED THAT THE MERGER IS IN THE
BEST INTERESTS OF, AND IS ON TERMS THAT ARE FAIR TO, NAMIC AND ITS STOCKHOLDERS.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED AND ADOPTED THE MERGER AGREEMENT
AND THE MERGER AND RECOMMENDS THAT THE STOCKHOLDERS OF NAMIC APPROVE AND ADOPT
THE MERGER AGREEMENT AND THE MERGER.
The enclosed Proxy Statement/Prospectus describes the Merger in greater
detail and sets forth certain other important information. Please read it
carefully.
We hope that you will be able to attend the Special Meeting. However,
whether or not you plan to attend, I urge you to complete, date, sign and return
your proxy card in the enclosed envelope as soon as possible to ensure that your
shares will be represented at the Special Meeting. If you do attend, you will,
of course, be entitled to vote in person, and such vote will revoke your proxy.
Sincerely,
Cynthia L. Morris
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
NAMIC U.S.A. CORPORATION
PRUYN'S ISLAND
GLENS FALLS, NEW YORK 12801
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
------------------
NOTICE IS HEREBY GIVEN that a special meeting (the "Special Meeting") of the
stockholders of NAMIC U.S.A. Corporation, a Delaware corporation ("NAMIC"), will
be held at The Rockefeller Center Club, 30 Rockefeller Plaza, Radio City Room,
64th Floor, New York, New York 10112, on March 16, 1995, at 9:00 a.m. E.S.T. to
consider and vote upon a proposal to approve and adopt (a) the Amended and
Restated Agreement and Plan of Merger, dated as of October 31, 1994 (the "Merger
Agreement"), among NAMIC, Pfizer Inc., a Delaware corporation ("Pfizer"), and
Dart Acquisition Corporation ("Merger Sub"), a newly-formed Delaware corporation
and a wholly-owned subsidiary of Pfizer, and (b) the merger (the "Merger") of
Merger Sub with and into NAMIC, with NAMIC surviving the Merger as a
wholly-owned subsidiary of Pfizer, whereby: (i) each issued and outstanding
share of Common Stock, $.01 par value, of NAMIC (the "NAMIC Common Stock") will
be converted into .24599 of one share of the Common Stock, $.10 par value, of
Pfizer (the "Pfizer Common Stock") and, since the effective time of the Merger
is after the record date for the dividend of $.52 per share declared by Pfizer's
Board of Directors on the Pfizer Common Stock in the first quarter of calendar
year 1995, a cash payment equal to the product of .24599 and the amount of such
per share quarterly cash dividend; and (ii) each outstanding option to purchase
NAMIC Common Stock, whether or not then exercisable, will be converted into the
right to receive a cash payment (net of any withholding tax) in an amount equal
to the excess of $18.00 over the per share exercise price of such option.
The Merger is more fully described in the Merger Agreement, which is
attached in its entirety as Appendix A to the Proxy Statement/Prospectus
accompanying this Notice of Special Meeting of Stockholders.
Only stockholders of record of NAMIC at the close of business on January 30,
1995 are entitled to notice of and to vote at the Special Meeting or any
adjournment(s) or postponement(s) thereof. The affirmative vote of a majority of
the votes that stockholders of record of NAMIC Common Stock are entitled to cast
is necessary to approve and adopt the Merger Agreement and the Merger.
BY ORDER OF THE BOARD OF DIRECTORS,
DAVID W. GILMOUR
CHIEF FINANCIAL OFFICER, TREASURER AND
SECRETARY
Glens Falls, New York
February 14, 1995
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AND VOTED AT THE SPECIAL
MEETING. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE
READ THE ENCLOSED PROXY STATEMENT/PROSPECTUS AND COMPLETE, SIGN, DATE AND RETURN
THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED
FROM WITHIN THE UNITED STATES.
<PAGE>
NAMIC U.S.A. CORPORATION
PROXY STATEMENT
------------------------
PFIZER INC.
PROSPECTUS
FOR A SPECIAL MEETING OF
STOCKHOLDERS OF NAMIC U.S.A. CORPORATION
TO BE HELD ON MARCH 16, 1995
NAMIC U.S.A. Corporation, a Delaware corporation ("NAMIC"), is furnishing
this Proxy Statement/Prospectus to its stockholders in connection with the
solicitation of proxies by the Board of Directors of NAMIC for use at a special
meeting of its stockholders to be held at The Rockefeller Center Club, 30
Rockefeller Plaza, Radio City Room, 64th Floor, New York, New York 10112 on
March 16, 1995, at 9:00 a.m. E.S.T., and at any adjournment(s) or
postponement(s) thereof (the "Special Meeting").
At the Special Meeting, NAMIC stockholders will consider and vote upon a
proposal to approve and adopt an Amended and Restated Agreement and Plan of
Merger, dated as of October 31, 1994 (the "Merger Agreement"), among NAMIC,
Pfizer Inc., a Delaware corporation ("Pfizer"), and Dart Acquisition Corporation
("Merger Sub"), a newly-formed Delaware corporation and a wholly-owned
subsidiary of Pfizer. A copy of the Merger Agreement is attached to this Proxy
Statement/Prospectus as Appendix A. Pursuant to the Merger Agreement, and upon
the terms and subject to the conditions thereof, Merger Sub will be merged with
and into NAMIC (the "Merger"), with NAMIC surviving the Merger as a wholly-owned
subsidiary of Pfizer (the "Surviving Corporation"). Each issued and outstanding
share of Common Stock, par value $.01 per share, of NAMIC (the "NAMIC Common
Stock") held immediately prior to the Merger (other than (i) shares held by
Pfizer or any direct or indirect wholly-owned subsidiary of Pfizer and (ii)
shares held by holders who properly exercise their appraisal rights under
Delaware law), will be converted into .24599 of one share of Common Stock, par
value $.10 per share, of Pfizer (the "Pfizer Common Stock") and, since the
effective time of the Merger is after the record date for the dividend of $.52
per share declared by Pfizer's Board of Directors on the Pfizer Common Stock in
the first quarter of calendar year 1995, a cash payment equal to the product of
.24599 and the amount of such per share quarterly cash dividend. NAMIC
stockholders will receive cash in lieu of any fractional shares of Pfizer Common
Stock that otherwise would have been issued in the Merger. See "THE MERGER --
Merger Consideration" and "-- Fractional Shares."
The outstanding shares of Pfizer Common Stock are listed for trading on the
New York Stock Exchange (the "NYSE"). The per share closing price of the Pfizer
Common Stock on the NYSE Composite Tape on February 13, 1995, the latest
practicable trading day before the printing of this Proxy Statement/Prospectus,
was $80.63. The outstanding shares of NAMIC Common Stock are included for
trading on the Nasdaq National Market. The last reported per share sale price of
the NAMIC Common Stock on the Nasdaq National Market on February 13, 1995 was
$19.50. The market price of the Pfizer Common Stock to be received in the Merger
is subject to fluctuation. Fluctuations in the market price of Pfizer Common
Stock will result in an increase or decrease in the value of the consideration
to be received by holders of NAMIC Common Stock in the Merger. Using the per
share closing price of the Pfizer Common Stock on the NYSE Composite Tape on
February 13, 1995, the market value of .24599 of one share of Pfizer Common
Stock on that date would have been $19.83. NAMIC stockholders are advised to
obtain current market quotations for the Pfizer Common Stock. See "Comparative
Per Share Market and Dividend Information."
As described elsewhere in this Proxy Statement/Prospectus, holders of NAMIC
Common Stock will have appraisal rights under Delaware law as dissenting
stockholders in connection with the Merger. See "THE MERGER -- Rights of
Dissenting Stockholders."
Stockholders are urged to read and carefully consider the information
contained in this Proxy Statement/Prospectus and the Appendices attached hereto.
------------------------
<PAGE>
THE SHARES OF PFIZER COMMON STOCK ISSUABLE IN THE MERGER HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/ PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
This Proxy Statement/Prospectus and the accompanying Notice of Special Meeting
of Stockholders
and Proxy Card are first being mailed to NAMIC stockholders on or about February
15, 1995.
------------------------
------------------------
This Proxy Statement/Prospectus also constitutes the Prospectus of Pfizer
filed as part of a Registration Statement on Form S-4 (the "Registration
Statement") with the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Securities Act"), relating to the
shares of Pfizer Common Stock issuable in connection with the Merger.
All information concerning Pfizer contained in this Proxy
Statement/Prospectus has been furnished by Pfizer and all information concerning
NAMIC prior to the Merger contained in this Proxy Statement/Prospectus has been
furnished by NAMIC.
AVAILABLE INFORMATION
Pfizer and NAMIC are subject to the informational and reporting requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Commission. Such reports, proxy statements and other information may be
inspected and copied at the public reference facilities maintained by the
Commission located at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549 and at certain regional offices of the Commission located
at Northwest Atrium Center, Suite 1400, 500 West Madison Street, Chicago,
Illinois 60661, and 7 World Trade Center, 13th Floor, New York, New York 10048.
Copies of such information may be obtained at prescribed rates from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549. In addition, reports, proxy statements and other
information concerning Pfizer are available at the New York Stock Exchange (the
"NYSE"), 20 Broad Street, New York, New York 10005, on which shares of Pfizer
Common Stock are listed.
This Proxy Statement/Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits thereto, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. The Registration Statement and any amendments thereto, including
exhibits filed as a part thereof, are available for inspection and copying as
set forth above. Statements contained in this Proxy Statement/Prospectus or in
any document incorporated by reference in this Proxy Statement/Prospectus
relating to the contents of any contract or other document referred to herein
are not necessarily complete, and in each instance reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement or such other document, each such statement being qualified in all
respects by such reference.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH DOCUMENTS,
OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED BY
REFERENCE THEREIN, ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED, UPON
WRITTEN OR ORAL REQUEST TO THE SECRETARY OF PFIZER INC., 235 E. 42ND STREET, NEW
YORK, NEW YORK 10017, TELEPHONE NUMBER (212) 573-2323. IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BEFORE FEBRUARY 27, 1995.
(ii)
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by Pfizer with the Commission
pursuant to the Exchange Act are incorporated herein by reference:
(1) Pfizer's Annual Report on Form 10-K for the year ended December 31,
1993;
(2) Pfizer's Quarterly Reports on Form 10-Q for the periods ended April 3,
July 3 and October 2, 1994;
(3) Pfizer's Current Report on Form 8-K dated June 23, 1994;
(4) Pfizer's Current Report on Form 8-K dated December 13, 1994;
(5) Pfizer's Current Report on Form 8-K dated January 26, 1995;
(6) Pfizer's Current Report on Form 8-K dated February 7, 1995; and
(7) The description of Pfizer's Common Stock set forth in Pfizer's
registration statement filed under the Exchange Act, including all
amendments and reports updating such description.
All documents filed by Pfizer pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act subsequent to the date hereof and prior to the date of
the Special Meeting shall be deemed to be incorporated by reference herein and
to be made a part hereof from the date any such document is filed.
Any statements contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein (or in any
other subsequently filed document which also is incorporated by reference
herein) modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed to constitute a part hereof except as so modified
or superseded. All information appearing in this Proxy Statement/Prospectus is
qualified in its entirety by the information and financial statements (including
notes thereto) appearing in the documents incorporated herein by reference,
except to the extent set forth in the immediately preceding statement.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION WITH RESPECT TO THE MATTERS DESCRIBED IN THIS PROXY
STATEMENT/PROSPECTUS OTHER THAN THOSE CONTAINED HEREIN OR IN THE DOCUMENTS
INCORPORATED BY REFERENCE HEREIN. ANY INFORMATION OR REPRESENTATION WITH RESPECT
TO SUCH MATTERS NOT CONTAINED HEREIN OR THEREIN MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY PFIZER OR NAMIC. THIS PROXY STATEMENT/PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SECURITIES
IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY
STATEMENT/PROSPECTUS NOR THE ISSUANCE OF ANY PFIZER COMMON STOCK TO WHICH THIS
PROXY STATEMENT/PROSPECTUS RELATES SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF PFIZER OR NAMIC
SINCE THE DATE HEREOF OR THAT THE INFORMATION IN THIS PROXY STATEMENT/PROSPECTUS
OR IN THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATES HEREOF OR THEREOF.
NAMIC-REGISTERED TRADEMARK-, MORSE-REGISTERED TRADEMARK-, SOSA-REGISTERED
TRADEMARK-, PERCEPTOR-REGISTERED TRADEMARK- AND PROTECTION STATION-REGISTERED
TRADEMARK- ARE REGISTERED TRADEMARKS, AND ARIA-TM-, EPIC-TM-, SELECTOR-TM-,
CONTRAST CONTROLLER-TM- AND FLEXCIL-TM- ARE TRADENAMES, OF NAMIC U.S.A.
CORPORATION.
The date of this Proxy Statement/Prospectus is February 14, 1995.
(iii)
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TABLE OF CONTENTS
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AVAILABLE INFORMATION...................................................................................... ii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................................................ iii
SUMMARY.................................................................................................... 1
The Parties.............................................................................................. 1
Special Meeting.......................................................................................... 1
The Merger............................................................................................... 2
Recent Developments...................................................................................... 7
Selected Financial Data.................................................................................. 8
Comparative Per Share Data............................................................................... 13
Comparative Per Share Market and Dividend Information.................................................... 13
THE SPECIAL MEETING........................................................................................ 15
Date, Time and Place of Meeting.......................................................................... 15
Record Date and Outstanding Shares....................................................................... 15
Voting of Proxies........................................................................................ 15
Vote Required............................................................................................ 15
Solicitation of Proxies and Expenses..................................................................... 15
THE MERGER................................................................................................. 16
General.................................................................................................. 16
Background of the Merger................................................................................. 16
Reasons for the Merger................................................................................... 19
Merger Consideration..................................................................................... 21
Opinion of Financial Advisor of NAMIC.................................................................... 22
Voting Agreements........................................................................................ 27
Management and Operations After the Merger; Employment Agreements........................................ 27
Indemnification.......................................................................................... 29
Effective Time and Closing Date.......................................................................... 29
Fractional Shares........................................................................................ 29
Exchange of Certificates................................................................................. 29
Rights of Dissenting Stockholders........................................................................ 30
Conflicts of Interest.................................................................................... 32
Effect on Employees and Employee Benefit Plans of NAMIC.................................................. 33
Representations and Warranties........................................................................... 34
Conditions to the Merger................................................................................. 34
Regulatory Approvals..................................................................................... 35
Waiver and Amendment; Termination and Termination Fee.................................................... 35
No Solicitation.......................................................................................... 36
Conduct of Business Pending the Merger................................................................... 37
Expenses................................................................................................. 38
Accounting Treatment..................................................................................... 38
Resale of Pfizer Common Stock by Affiliates.............................................................. 38
Certain Federal Income Tax Considerations................................................................ 38
Stock Exchange Listing................................................................................... 41
BUSINESS OF NAMIC.......................................................................................... 41
Introduction............................................................................................. 41
Markets and Market Influences............................................................................ 42
National Health Care Reform.............................................................................. 44
Customers................................................................................................ 44
</TABLE>
(iv)
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Key Product Lines........................................................................................ 44
Marketing and Distribution............................................................................... 47
Competition.............................................................................................. 47
Manufacturing and Quality Assurance...................................................................... 47
Company Workforce........................................................................................ 48
Government Regulation.................................................................................... 48
Patents, Proprietary Rights and Trademarks............................................................... 49
Properties............................................................................................... 49
Legal Proceedings........................................................................................ 49
NAMIC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................ 50
Results of Operations.................................................................................... 50
Financial Condition and Liquidity........................................................................ 52
Foreign Currency Exposure................................................................................ 53
Adoption of SFAS No. 109................................................................................. 53
Inflation................................................................................................ 53
National Health Care Reform.............................................................................. 53
Change in Accountants.................................................................................... 53
EXISTING RELATIONSHIPS BETWEEN PFIZER AND NAMIC............................................................ 54
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF NAMIC.................................... 55
MANAGEMENT OF NAMIC........................................................................................ 56
Executive Officers and Directors......................................................................... 56
Significant Associates................................................................................... 57
NAMIC EXECUTIVE COMPENSATION............................................................................... 57
Summary Compensation Table............................................................................... 57
Stock Option Grants...................................................................................... 58
Stock Option Exercises................................................................................... 59
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS OF NAMIC.................................................... 59
DESCRIPTION OF PFIZER CAPITAL STOCK........................................................................ 60
Common Stock............................................................................................. 60
Preferred Stock.......................................................................................... 60
CERTAIN ANTI-TAKEOVER PROVISIONS........................................................................... 60
State Takeover Legislation............................................................................... 60
Stockholder Rights Plan.................................................................................. 61
Amendments to Certificate of Incorporation............................................................... 63
Special Charter Provisions............................................................................... 63
COMPARATIVE RIGHTS OF NAMIC'S STOCKHOLDERS AND PFIZER'S STOCKHOLDERS....................................... 64
Stockholder Action....................................................................................... 65
Special Stockholder Meetings............................................................................. 65
Removal of Directors..................................................................................... 65
Vacancies on the Board................................................................................... 65
Indemnification of Directors............................................................................. 65
LEGAL MATTERS.............................................................................................. 66
EXPERTS.................................................................................................... 66
</TABLE>
(v)
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<TABLE>
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PROPOSALS BY NAMIC'S STOCKHOLDERS.......................................................................... 67
NAMIC'S CONSOLIDATED FINANCIAL STATEMENTS.................................................................. F-1
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Appendix A -- Amended and Restated Agreement and Plan of Merger, dated as of
October 31, 1994 among NAMIC U.S.A. Corporation, Pfizer Inc. and
Dart Acquisition Corporation
Appendix B -- Voting Agreement and Irrevocable Proxy, dated as of October 31,
1994, between Pfizer Inc. and Phillip H. Morse
Appendix C -- Voting Agreement and Irrevocable Proxy, dated as of October 31,
1994, between Pfizer Inc. and Richard H. Morse
Appendix D -- Opinion of Dillon, Read & Co., Inc. dated October 30, 1994
Appendix E -- Section 262 of the General Corporation Law of the State of
Delaware
(vi)
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SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE OR
INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS. THIS SUMMARY IS
NOT INTENDED TO BE A COMPLETE DESCRIPTION OF ALL MATERIAL FACTS REGARDING
PFIZER, NAMIC AND THE MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING AND
REFERENCE IS MADE TO, AND THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, THE MORE
DETAILED INFORMATION CONTAINED ELSEWHERE IN THIS PROXY STATEMENT/PROSPECTUS, IN
THE ATTACHED APPENDICES AND IN THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE.
NAMIC STOCKHOLDERS ARE URGED TO READ CAREFULLY THIS PROXY STATEMENT/PROSPECTUS
AND THE ATTACHED APPENDICES IN THEIR ENTIRETY.
THE PARTIES
PFIZER
Pfizer is a diversified, research-based health care company with global
operations. Pfizer discovers, develops, manufactures and sells
technology-intensive products in four business segments: Health Care, which
includes a broad range of prescription pharmaceuticals, orthopedic implants,
medical devices and surgical equipment; Consumer Health Care, which includes a
variety of nonprescription drugs and personal care products; Animal Health,
which includes animal health products and feed supplements; and Food Science,
which includes ingredients for the food and beverage industries. Additionally,
Pfizer's Financial Subsidiaries include a banking operation in Europe and a
small captive insurance operation. Unless otherwise indicated, all references in
this Proxy Statement/ Prospectus to Pfizer include Pfizer and its subsidiaries.
Pfizer's principal executive office is located at 235 East 42nd Street, New
York, New York 10017, and its telephone number is (212) 573-2323.
NAMIC
NAMIC designs, manufactures and markets a broad range of single-patient use
medical products, offered individually and in customized kits, primarily for use
in the diagnosis and treatment of atherosclerotic cardiovascular disease.
NAMIC's products are used by physicians and skilled clinical staff for fluid
administration and waste containment during angiography and angioplasty. NAMIC's
products are designed to improve the quality of patient care, to enhance the
safety of patients and medical personnel and to help control hospital costs.
Unless otherwise indicated, all references in this Proxy Statement/Prospectus to
NAMIC include its predecessors and its wholly-owned subsidiaries NAMIC
International, Inc. ("NAMIC International"), NAMIC Caribe, Inc. ("NAMIC
Caribe"), NAMIC Eireann B.V. and NAMIC Eireann Limited.
NAMIC's principal executive office is located at Pruyn's Island, Glens
Falls, New York 12801, and its telephone number is (518) 798-0067.
SPECIAL MEETING
DATE, TIME AND PLACE
The Special Meeting will be held at The Rockefeller Center Club, 30
Rockefeller Plaza, Radio City Room, 64th Floor, New York, New York 10112 on
March 16, 1995, at 9:00 a.m. E.S.T.
PURPOSE OF SPECIAL MEETING
At the Special Meeting, holders of NAMIC Common Stock will be asked to
consider and vote upon a proposal to approve and adopt the Merger Agreement and
the Merger.
RECORD DATE
Holders of record of NAMIC Common Stock on January 30, 1995 (the "Record
Date"), are entitled to notice of and to vote at the Special Meeting. At the
close of business on the Record Date, there were outstanding and entitled to
vote 8,896,262 shares of NAMIC Common Stock, each of which will be entitled to
one vote on each matter to be acted upon.
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VOTE REQUIRED
Approval and adoption of the Merger Agreement and the Merger requires the
affirmative vote of the holders of a majority of the outstanding shares of NAMIC
Common Stock entitled to vote. Phillip H. Morse, the Chairman of the NAMIC Board
of Directors, who owned beneficially 4,455,662 outstanding shares of NAMIC
Common Stock on the Record Date (constituting approximately 50.1% of the NAMIC
Common Stock then outstanding), and his brother Richard H. Morse, who owned
1,146,900 outstanding shares of NAMIC Common Stock on the Record Date
(constituting approximately 12.9% of the NAMIC Common Stock then outstanding),
have entered into agreements with Pfizer obligating them to vote in favor of
approval and adoption of the Merger Agreement and the Merger and against the
approval of any proposal made in opposition to or in competition with the
Merger. All of the executive officers and directors of NAMIC, other than Phillip
H. Morse, collectively held approximately 3.5% of the NAMIC Common Stock
outstanding on the Record Date. All NAMIC executive officers and directors have
advised NAMIC of their intention to vote or direct the vote of all shares of
NAMIC Common Stock held by them for approval and adoption of the Merger
Agreement and the Merger, subject to and consistent with any fiduciary
obligations in the case of shares, if any, held as a fiduciary. ACCORDINGLY,
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER BY NAMIC'S
STOCKHOLDERS ARE ASSURED. Nonetheless, consummation of the Merger is subject to
a number of conditions, as described below.
THE MERGER
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL
TEXTS OF THE MERGER AGREEMENT AND THE VOTING AGREEMENTS, WHICH ARE ATTACHED
HERETO AS APPENDICES A, B AND C, RESPECTIVELY, AND INCORPORATED BY REFERENCE
HEREIN.
GENERAL
Pursuant to the Merger Agreement, Merger Sub will be merged with and into
NAMIC, with NAMIC surviving the Merger as a direct wholly-owned subsidiary of
Pfizer. See "THE MERGER -- General."
RECOMMENDATION OF THE BOARD OF DIRECTORS OF NAMIC
The Board of Directors of NAMIC has unanimously approved and adopted the
Merger Agreement and the Merger and has determined that the Merger is in the
best interests of, and is on terms that are fair to, NAMIC and NAMIC's
stockholders. The NAMIC Board of Directors unanimously recommends approval and
adoption of the Merger Agreement and the Merger by NAMIC's stockholders. The
primary factors considered and relied upon by the NAMIC Board of Directors in
reaching its recommendation are referred to in "THE MERGER -- Reasons for the
Merger."
MERGER CONSIDERATION
Subject to the terms and conditions set forth in the Merger Agreement, each
share of NAMIC Common Stock issued and outstanding immediately prior to the
Effective Time (as hereinafter defined), other than (i) shares held by Pfizer or
any direct or indirect wholly-owned subsidiary of Pfizer and (ii) shares held by
holders who properly exercise their appraisal rights under Delaware law, will be
converted into the right to receive .24599 of one share (the "Exchange Ratio")
of Pfizer Common Stock (the "Merger Consideration"). Since the Effective Time is
after the record date for the dividend of $.52 per share declared by Pfizer's
Board of Directors on Pfizer Common Stock in the first quarter of calendar year
1995, each such share of NAMIC Common Stock will also evidence the right to
receive from Pfizer a cash payment equal to the product of (i) .24599 and (ii)
the amount of the per share cash dividend declared by Pfizer's Board of
Directors on Pfizer Common Stock in the first quarter of calendar year 1995 (the
"Cash Consideration"). Pursuant to the terms of the Merger Agreement, cash will
be paid in lieu of fractional shares of Pfizer Common Stock. Each share of
Merger Sub common stock issued and outstanding at the Effective Time will be
converted into one share of the common stock of the Surviving Corporation.
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Based on the per share closing price of Pfizer Common Stock reported on the
NYSE Composite Tape for October 28, 1994, the last trading day before the public
announcement of the proposed Merger, the market value of the Merger
Consideration would have been $18.05 per share of NAMIC Common Stock. Based on
the per share closing price of Pfizer Common Stock reported on the NYSE
Composite Tape for February 13, 1995, the latest practicable trading day before
the printing of this Proxy Statement/Prospectus, the market value of the Merger
Consideration would have been $19.83 per share of NAMIC Common Stock. The market
price of the Pfizer Common Stock to be received in the Merger is subject to
fluctuation. Fluctuations in the market price of Pfizer Common Stock will result
in an increase or decrease in the value of the Merger Consideration to be
received by NAMIC stockholders in the Merger. The number of shares of Pfizer
Common Stock to be received for each share of NAMIC Common Stock has been fixed
at .24599. The market value of the Merger Consideration at the time of the
Merger will depend upon the market price of Pfizer Common Stock at such time.
Stockholders of NAMIC are advised to obtain current market quotations for the
Pfizer Common Stock. See "Comparative Per Share Market and Dividend
Information."
Pursuant to the terms of the Merger Agreement, each holder of an option to
purchase NAMIC Common Stock that is outstanding immediately prior to the
Effective Time, whether or not then exercisable or fully vested, will be
entitled to receive from NAMIC, for each share of NAMIC Common Stock subject to
such option, an amount (net of any applicable withholding tax) in cash equal to
the excess, if any, of $18.00 over the per share exercise price of such option.
See "The MERGER -- Merger Consideration."
VOTING AGREEMENTS
In connection with the execution of the Merger Agreement and to facilitate
the consummation of the Merger, Pfizer entered into separate Voting Agreements
and Irrevocable Proxies, each dated as of October 31, 1994 (each, a "Voting
Agreement" and, collectively, the "Voting Agreements"), with Phillip H. Morse,
the Chairman of the Board of NAMIC, and his brother, Richard H. Morse (each, a
"Stockholder" and, collectively, the "Stockholders"). Pursuant to the Voting
Agreements, Phillip H. Morse and Richard H. Morse represented that they
beneficially owned 4,455,662 and 1,146,900 shares, respectively, of NAMIC Common
Stock as of the date of the Voting Agreements, which shares together constitute
approximately 63% of the outstanding shares of NAMIC Common Stock and are
sufficient to approve the consummation of the Merger without the approval of any
other stockholder of NAMIC. Each Stockholder agreed that at any meeting of the
stockholders of NAMIC, however called, and in any action by written consent of
the stockholders of NAMIC, such Stockholder will (a) vote all of such shares of
NAMIC Common Stock in favor of the approval of the Merger Agreement, the Merger
and the other transactions contemplated thereby and (b) during the period
commencing on October 31, 1994 and ending on October 31, 1995, vote such shares
of NAMIC Common Stock against any (i) merger, consolidation, share exchange,
business combination or other similar transaction pursuant to which control of
NAMIC would be transferred to any person other than Pfizer or (ii) sale, lease,
exchange, mortgage, pledge, transfer or other disposition of 50% or more of the
assets of NAMIC taken as a whole, in a single transaction or a series of
transactions. Each Stockholder has also granted Pfizer an irrevocable proxy to
vote his shares of NAMIC Common Stock as specified above in the event that such
Stockholder fails to vote such shares. In addition, each Stockholder has agreed
not to sell in excess of 10% of the shares of NAMIC Common Stock beneficially
owned by him as of October 31, 1994 during the term of the Voting Agreements.
The Voting Agreements are intended to ensure that the Merger will be
consummated in accordance with the terms of the Merger Agreement. Consequently,
the Voting Agreements may have the effect of discouraging persons who now or
prior to the Effective Time might be interested in acquiring all or a
significant interest in NAMIC from proposing or making such an acquisition, even
if such persons were prepared to pay a higher price per share for NAMIC Common
Stock than the price per share implicit in the Merger Consideration. See "THE
MERGER -- Voting Agreements."
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OPINION OF NAMIC'S FINANCIAL ADVISOR
Dillon, Read & Co. Inc. ("Dillon Read") has delivered its written opinion to
the Board of Directors of NAMIC to the effect that, as of the date of its
opinion, the consideration to be received by NAMIC stockholders pursuant to the
Merger Agreement is fair to NAMIC stockholders from a financial point of view. A
copy of such opinion, which sets forth a description of the procedures followed,
matters considered, assumptions made and methods employed by Dillon Read in
arriving at its opinion, is attached to this Proxy Statement/Prospectus as
Appendix D and should be read in its entirety. See "THE MERGER -- Opinion of
Financial Advisor of NAMIC."
MANAGEMENT AFTER THE MERGER; EMPLOYMENT AGREEMENTS
The present management of NAMIC (other than Phillip H. Morse) will continue
as NAMIC's management after the Merger. After the Merger, the Board of Directors
of NAMIC will consist of one director, P. Nigel Gray, a Vice President of
Pfizer, Executive Vice President of its Hospital Products Group and President of
its Medical Devices Group.
Pfizer has entered into employment agreements with certain of NAMIC's
executive officers with respect to their continued employment with the Surviving
Corporation following the Merger. See "THE MERGER -- Management and Operations
after the Merger; Employment Agreements" and "-- Conflicts of Interest."
EFFECTIVE TIME AND CLOSING DATE
The Merger will become effective at the time and on the date that the
Certificate of Merger, attached to the Merger Agreement as Exhibit A (the
"Certificate of Merger"), is filed with the Secretary of State of the State of
Delaware (the "Effective Time"). Such filing will occur only after the receipt
of all requisite regulatory approvals, approval and adoption of each of the
Merger Agreement and the Merger by the requisite vote of the NAMIC stockholders
and the satisfaction or waiver of all other conditions to the Merger. The
closing of the Merger will occur not later than the third business day following
the day on which all conditions to the consummation of the Merger have been
satisfied or waived in accordance with the terms of the Merger Agreement, or at
another time agreed to in writing by Pfizer and NAMIC (the "Closing Date").
Pfizer and NAMIC anticipate that the Closing Date will occur in March 1995.
APPRAISAL RIGHTS
Since the Effective Time will occur after the record date for the dividend
declared by Pfizer's Board of Directors on Pfizer Common Stock in the first
quarter of calendar year 1995, holders of record of shares of NAMIC Common Stock
will have appraisal rights with respect to their shares. Such stockholders who
do not vote to approve and adopt the Merger Agreement and the Merger may elect
to have the fair value of their shares, based on all relevant factors and
excluding any element of value arising from the accomplishment or expectation of
the Merger, judicially appraised and paid to them in cash. Such stockholders
must deliver a written demand for such appraisal to NAMIC prior to the taking of
the vote on the approval and adoption of the Merger Agreement and the Merger and
comply with the other requirements of Section 262 of the Delaware General
Corporation Law ("DGCL"), the full text of which is attached to this Proxy
Statement/Prospectus as Appendix E. Voting for the approval and adoption of the
Merger Agreement and the Merger, or delivering a proxy in connection with the
Special Meeting (unless the proxy specifies a vote against, or expressly
abstains from the vote on, the approval and adoption of the Merger Agreement and
the Merger), will constitute a waiver of a stockholder's right to seek appraisal
and will nullify any written demand for appraisal submitted by such stockholder.
Any deviation from the requirements of Section 262 of the DGCL may result in a
forfeiture of appraisal rights. See "THE MERGER -- Rights of Dissenting
Stockholders."
CONFLICTS OF INTEREST
In considering the recommendation of the NAMIC Board of Directors to approve
and adopt the Merger Agreement and the Merger, NAMIC stockholders should be
aware that the executive officers of NAMIC and members of the NAMIC Board of
Directors have interests in the Merger that are in
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addition to the interests of NAMIC stockholders generally, and that the members
of the Board having such interests participated in the discussion, deliberation
and voting of the Board with respect to the Merger.
EMPLOYMENT AGREEMENTS. Each of Cynthia L. Morris, the President and Chief
Executive Officer and a director of NAMIC, David W. Gilmour, the Chief Financial
Officer, Treasurer and Secretary of NAMIC, and Donald F. Boden, the Vice
President, Marketing of NAMIC, has entered into an Employment Agreement with
Pfizer relating to his or her continued employment with the Surviving
Corporation for the two-year period following the Merger. Pursuant to such
Employment Agreements, Ms. Morris, Mr. Gilmour and Mr. Boden will receive annual
base salaries of $207,200, $125,000 and $135,000, respectively, and each will be
eligible to receive incentive compensation and stock options in accordance with
the terms of their Employment Agreements. See "THE MERGER -- Management and
Operations After the Merger; Employment Agreements."
CASH PAYMENTS FOR STOCK OPTIONS. Pursuant to the Merger Agreement, each
holder of an option to purchase NAMIC Common Stock, whether or not then
exercisable or fully vested, will receive a cash payment from NAMIC immediately
prior to the Merger in an amount equal to the excess, if any, of $18.00 over the
exercise price of such option. See "THE MERGER -- Merger Consideration." As of
February 13, 1995, Ms. Morris, Mr. Gilmour, Mr. Boden and NAMIC Board members
William L. Bitner III, Ph. D., and William E. Philion each held options to
purchase NAMIC Common Stock and will receive the following cash payments
immediately prior to the Merger in respect of such options (assuming none of
such options are exercised prior to the Effective Time): Ms. Morris, $2,360,000;
Mr. Gilmour, $540,000; Mr. Boden, $863,000; Mr. Bitner, $32,655; and Mr.
Philion, $32,655. See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF NAMIC."
GUARANTEE OF NAMIC'S SUBLEASE OBLIGATIONS. Phillip H. Morse, the Chairman
of the Board of Directors of NAMIC, subleases certain manufacturing and office
facilities to NAMIC. As a result of financing arrangements for such facilities,
Mr. Morse is the prime lessee of such facilities from the Glens Falls Industrial
Development Agency. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS OF
NAMIC." In satisfaction of a condition to each party's obligation to consummate
the Merger, effective as of the Effective Time, Pfizer will guarantee the
obligations of NAMIC to Mr. Morse under the sublease.
INDEMNIFICATION. Pursuant to the Merger Agreement, the Surviving
Corporation and Pfizer have agreed that, until six years following the Effective
Time, the Surviving Corporation will maintain all rights to indemnification now
existing in favor of the directors, officers, employees, fiduciaries and agents
of NAMIC (the "Indemnified Parties") as provided in NAMIC's Restated Certificate
of Incorporation (the "NAMIC Certificate of Incorporation") and By-laws (the
"NAMIC By-laws") and as otherwise in effect under any agreement or otherwise on
the date of the Merger Agreement. In addition, the Surviving Corporation will
indemnify and hold harmless the Indemnified Parties to the fullest extent
permitted by law against any actual or threatened claim, action, suit,
proceeding or investigation arising from their services prior to, and including,
the Effective Time and for at least six years following the Effective Time.
Pfizer will cause the Surviving Corporation to honor in accordance with their
terms any indemnification agreements between NAMIC and any of the Indemnified
Parties that are in existence on the date of the Merger Agreement. See "THE
MERGER -- Indemnification."
The NAMIC Board of Directors was aware of these interests, but did not
consider them to be significant or of a nature that would affect the objectivity
of any director's determination that the Merger was in the best interests of
NAMIC's stockholders.
ACCELERATION OF OPTIONS. The vesting of options at varying exercise prices
held by David W. Gilmour, the Chief Financial Officer, Treasurer and Secretary
of NAMIC, to purchase 38,000 shares of NAMIC Common Stock was accelerated by
NAMIC to become exercisable as of December 29, 1994, and all such options were
exercised by Mr. Gilmour on such date.
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CONDITIONS TO THE MERGER
The respective obligations of the parties to consummate the Merger are
subject to the satisfaction or waiver of certain conditions specified in the
Merger Agreement, including, among other things, the receipt of the requisite
regulatory and stockholder approvals, the accuracy of the representations and
warranties contained therein, the performance of all obligations imposed
thereby, the delivery of a tax opinion and certain other conditions customary in
transactions of this nature. See "THE MERGER -- Conditions to the Merger."
WAIVER AND AMENDMENT; TERMINATION AND TERMINATION FEE
Prior to the Effective Time and subject to applicable law, Pfizer and NAMIC
may extend the time for performance of any obligations under the Merger
Agreement, waive any inaccuracies in the representations and warranties
contained in the Merger Agreement and waive compliance with any agreements or
conditions contained in the Merger Agreement. Subject to applicable law, Pfizer
and NAMIC may also amend the Merger Agreement at any time before or after
approval of the Merger Agreement by NAMIC's stockholders, provided that any
amendment effected after approval of the NAMIC stockholders may not adversely
affect such stockholders. Such an adverse effect includes the alteration of the
amount or kind of consideration to be received by holders of NAMIC Common Stock
in exchange for their shares of NAMIC Common Stock. Any material modification to
the terms of the Merger or the Merger Agreement, including a change that could
result in the Merger being a taxable transaction to Pfizer, NAMIC or NAMIC's
stockholders, may also require NAMIC to seek stockholder approval of such
modification prior to the consummation of the Merger.
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether prior to or after approval of the Merger Agreement by NAMIC's
stockholders, (i) by mutual consent of the parties in writing, (ii) by either
party if the Merger is not consummated by April 30, 1995 or (iii) in certain
other circumstances. In the event the Merger Agreement is terminated (i) by
NAMIC, if it shall have received a Superior Proposal (as hereinafter defined) or
(ii) by Pfizer, (A) if NAMIC's Board of Directors shall have (1) withdrawn,
modified or amended in any adverse respect its approval or recommendation of the
Merger Agreement or the transactions contemplated thereby, including the Merger,
or (2) recommended to NAMIC's stockholders a Company Acquisition Proposal (as
hereinafter defined) or (B) as a result of an intentional material breach of the
Merger Agreement by NAMIC following the receipt of a Company Acquisition
Proposal, then, in any such case, NAMIC shall pay Pfizer a termination fee of
$8,000,000 promptly following such termination. See "THE MERGER -- Waiver and
Amendment; Termination and Termination Fee."
CONDUCT OF BUSINESS PENDING THE MERGER
NAMIC has agreed to conduct its business prior to the Effective Time in the
ordinary course in accordance with certain covenants set forth in the Merger
Agreement. See "THE MERGER -- Conduct of Business Pending the Merger."
ACCOUNTING TREATMENT
The Merger will be accounted for as a "purchase" under United States
generally accepted accounting principles.
As a result of the cash payments to be made by NAMIC immediately prior to
the Effective Time of the Merger in respect of outstanding options to acquire
NAMIC Common Stock, NAMIC will recognize nonrecurring compensation expense for
purposes of its financial statements relating to periods prior to the Effective
Time of approximately $5,000,000.
RESALE OF PFIZER COMMON STOCK BY AFFILIATES
The shares of Pfizer Common Stock to be issued in the Merger will be
registered under the Securities Act and will be freely transferable under the
Securities Act, except for shares issued pursuant to the terms of the Merger
Agreement to any holder of NAMIC Common Stock who may be deemed to be an
"affiliate" of NAMIC for purposes of Rule 145 under the Securities Act ("Rule
145"). Such NAMIC affiliates may not sell their shares of Pfizer Common Stock
acquired in connection with
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the Merger except pursuant to an effective registration statement under the
Securities Act covering such shares or in compliance with Rule 145 or another
applicable exemption from the registration requirements of the Securities Act.
NAMIC has agreed in the Merger Agreement to use its best efforts to cause each
director, executive officer and other person who may be deemed an affiliate (for
purposes of Rule 145) of NAMIC to execute and deliver a written agreement
intended to ensure compliance with the Securities Act. See "THE MERGER -- Resale
of Pfizer Common Stock by Affiliates."
CERTAIN TAX CONSEQUENCES OF THE MERGER
The Merger is expected to be a tax-free reorganization for federal income
tax purposes, so that no gain or loss will be recognized by NAMIC's stockholders
on the exchange of NAMIC Common Stock for Pfizer Common Stock, except to the
extent that NAMIC's stockholders receive cash in the exchange (I.E., cash in
lieu of fractional shares or additional cash consideration received as a result
of dividends declared on Pfizer Common Stock prior to the Effective Time). The
Merger Agreement does not require the parties to obtain a ruling from the
Internal Revenue Service (the "Service") as to the tax consequences of the
Merger. NAMIC's stockholders are urged to consult their own tax advisors
regarding such tax consequences. See "THE MERGER -- Certain Federal Income Tax
Consequences."
EFFECTS OF THE MERGER ON RIGHTS OF STOCKHOLDERS
As a result of the Merger, holders of NAMIC Common Stock who receive shares
of Pfizer Common Stock will become stockholders of Pfizer. For a comparison of
the certificates of incorporation and by-laws of Pfizer and NAMIC governing the
rights of Pfizer and NAMIC stockholders, see "CERTAIN ANTI-TAKEOVER PROVISIONS"
and "COMPARATIVE RIGHTS OF NAMIC'S STOCKHOLDERS AND PFIZER'S STOCKHOLDERS."
STOCK EXCHANGE LISTING
Pfizer Common Stock is currently listed on the NYSE. Application will be
made by Pfizer to list the shares of Pfizer Common Stock to be issued in
connection with the Merger for trading on the NYSE. It is a condition to the
consummation of the Merger that the shares of Pfizer Common Stock to be issued
in connection with the Merger shall have been approved for listing on the NYSE,
subject to official notice of issuance.
REGULATORY APPROVALS
Pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and the rules promulgated thereunder, Pfizer and NAMIC
furnished notification of the Merger and provided certain information to the
Federal Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice (the "Division"). The waiting period under the HSR Act
with respect to the Merger expired on December 7, 1994. No additional filings or
waiting periods are applicable with respect to the Merger pursuant to the HSR
Act and the rules promulgated thereunder.
At any time before or after the Effective Time, the FTC or the Division or a
private person or entity could seek under the antitrust laws, among other
things, to enjoin the Merger or to cause Pfizer to divest itself, in whole or in
part, of NAMIC or of other businesses conducted by Pfizer. There can be no
assurance that a challenge to the Merger will not be made or that, if such a
challenge is made, Pfizer and NAMIC will prevail. The obligations of Pfizer and
NAMIC to consummate the Merger are subject to the condition that there be no
preliminary or permanent injunction or other order by any court or governmental
or regulatory authority of competent jurisdiction prohibiting consummation of
the Merger. Each party has agreed to use its reasonable best efforts to have any
such injunction or order lifted.
RECENT DEVELOPMENTS
On January 19, 1995, Pfizer acquired SmithKline Beecham Animal Health for
$1.45 billion in cash. See "Pfizer Pro Forma Combined Financial Information."
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SELECTED FINANCIAL DATA
PFIZER SELECTED FINANCIAL DATA
The following selected financial data as of and for each of the years in the
five-year period ended December 31, 1993, are derived from the consolidated
financial statements of Pfizer and subsidiary companies, which financial
statements have been audited by KPMG Peat Marwick LLP, independent certified
public accountants. The consolidated financial statements as of December 31,
1993, 1992 and 1991 and for each of the years then ended, and the report
thereon, are incorporated by reference elsewhere in this Proxy
Statement/Prospectus. The selected financial data should be read in conjunction
with the consolidated financial statements as of December 31, 1993 and 1992 and
for each of the years then ended, the related notes and the independent
auditors' report, which refers to the adoption of the provisions of the
Financial Accounting Standards Board's Statement of Financial Accounting
Standards ("SFAS") No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" and SFAS No. 109, "Accounting for Income Taxes," in 1992.
The following selected financial data as of and for the nine months ended
October 2, 1994 and October 3, 1993, are derived from the unaudited condensed
consolidated financial statements of Pfizer and subsidiary companies, to which
KPMG Peat Marwick LLP has reported that it has applied limited procedures in
accordance with professional standards for a review of such information. The
unaudited condensed consolidated financial statements as of October 2, 1994 and
October 3, 1993, and for the nine-month periods then ended, and the review
report thereon, are incorporated by reference elsewhere in this Proxy
Statement/Prospectus.
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NINE MONTHS ENDED
------------------------ YEAR ENDED DECEMBER 31,
OCTOBER 2, OCTOBER 3, ---------------------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
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(MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA)
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CONSOLIDATED STATEMENT OF
INCOME DATA
Net sales..................... $ 5,981.1 $ 5,488.5 $ 7,477.7 $ 7,230.2 $ 6,950.0 $ 6,406.0 $ 5,671.5
---------- ----------- ----------- --------------- ----------- -------- -----------
---------- ----------- ----------- --------------- ----------- -------- -----------
Income before cumulative
effect of accounting
changes...................... $ 964.4 $ 368.6(a) $ 657.5(a) $ 1,093.5(b) $ 722.1(d) $ 801.2 $ 681.1(e)
Cumulative effect of
accounting changes........... -- -- -- (282.6)(c) -- -- --
---------- ----------- ----------- --------------- ----------- -------- -----------
Net income.................... $ 964.4 $ 368.6(a) $ 657.5(a) $ 810.9 (b)(c $ 722.1(d) $ 801.2 $ 681.1(e)
---------- ----------- ----------- --------------- ----------- -------- -----------
---------- ----------- ----------- --------------- ----------- -------- -----------
EARNINGS PER COMMON SHARE(F):
Income before cumulative
effect of accounting
changes...................... $ 3.11 $ 1.15 $ 2.05 $ 3.25 $ 2.13 $ 2.38 $ 2.02
Cumulative effect of
accounting changes........... -- -- -- (.84)(c) -- -- --
---------- ----------- ----------- --------------- ----------- -------- -----------
Net income.................... $ 3.11 $ 1.15 $ 2.05 $ 2.41 $ 2.13 $ 2.38 $ 2.02
---------- ----------- ----------- --------------- ----------- -------- -----------
---------- ----------- ----------- --------------- ----------- -------- -----------
Cash dividends paid per common
share(f)..................... $ 1.41 $ 1.26 $ 1.68 $ 1.48 $ 1.32 $ 1.20 $ 1.10
---------- ----------- ----------- --------------- ----------- -------- -----------
---------- ----------- ----------- --------------- ----------- -------- -----------
<CAPTION>
DECEMBER 31,
OCTOBER 2, OCTOBER 3, ---------------------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
---------- ----------- ----------- --------------- ----------- -------- -----------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Total assets.................. $ 10,401.5 $ 9,882.4 $ 9,330.9 $ 9,590.1 $ 9,634.6 $ 9,052.0 $ 8,324.8
---------- ----------- ----------- --------------- ----------- -------- -----------
---------- ----------- ----------- --------------- ----------- -------- -----------
Long-term debt................ $ 586.3 $ 572.9 $ 570.5 $ 571.3 $ 396.6 $ 193.3 $ 190.6
---------- ----------- ----------- --------------- ----------- -------- -----------
---------- ----------- ----------- --------------- ----------- -------- -----------
<FN>
- ------------------------------
(a) Includes pre-tax charges of $690.2 million ($449.1 million after-tax) for
restructuring programs, $121.7 million of unusual items relating to the
write-down of goodwill and a pre-tax gain of $59.9 million on the sale of a
business.
(b) Includes a pre-tax credit of $258.6 million representing the gain on the
sale of certain businesses offset by pre-tax charges of $204.6 million for
restructuring, consolidating and streamlining. In addition, it includes
pre-tax curtailment gains of $56.5 million associated with postretirement
benefits of divested operations.
(c) Represents a pre-tax charge of $520.5 million ($312.6 million after-tax or
$.93 per share) for the cumulative effect of adopting Statement of
Financial Accounting Standards ("SFAS") No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions, and a credit of $30.0 million
($.09 per share) for the cumulative effect of adopting SFAS No. 109,
Accounting for Income Taxes.
(d) Includes an after-tax special charge of $195.0 million for potential future
Shiley C/C heart valve fracture claims.
(e) Includes an after-tax provision of approximately $46.0 million for the loss
on the sale of the pigments business.
(f) In 1991, Pfizer effected a two-for-one stock split of its common stock.
Prior years have been restated to reflect this stock split.
</TABLE>
8
<PAGE>
PFIZER UNAUDITED 1994 FINANCIAL DATA
On January 18, 1995, Pfizer announced unaudited results for the year ended
December 31, 1994. Pfizer reported net income of approximately $1,298,400,000
($4.19 per share) on sales of approximately $8,281,300,000.
PFIZER PRO FORMA COMBINED FINANCIAL INFORMATION
On January 19, 1995, Pfizer acquired the SmithKline Beecham Animal Health
("SBAH") business for $1.45 billion in cash. It was financed through the sale of
commercial paper and available cash. Pfizer acquired the stock of certain
subsidiaries of SmithKline Beecham ("SB") operating solely in the animal health
business and certain net assets used in the animal health business from other SB
subsidiaries. The acquisition will be recorded as a purchase transaction under
generally accepted accounting principles.
SBAH is the second largest business in the non-nutritional area of the
global animal health industry and is a world leader in cattle, swine and
companion animal vaccines. It is a leader in the US animal health market
(non-nutritional) and has a broad presence across Europe with major operations
in the UK, France, Germany, Belgium, the Netherlands and Spain. SBAH
manufactures and sells products in four principal categories: vaccines,
anti-infectives, productivity enhancers, and parasiticides.
The following financial information for SBAH has been extracted from
information utilized to prepare the consolidated financial statements of SB and
has therefore been prepared on the basis of United Kingdom generally accepted
accounting principles ("GAAP") and has been converted from pounds sterling (SB's
reporting currency) to United States dollars utilizing exchange rates for the
appropriate periods. There are no significant differences in the application of
United Kingdom GAAP and United States GAAP which would require adjustment. The
amounts provided with respect to operating profit include the allocation of
certain corporate overhead charges in SB's consolidated financial statements.
Further, where any part of SBAH is operated through an entity covering more than
one of SB's business sectors, certain operating costs, where not separately
identifiable, have been allocated to SBAH when deriving the financial
information below. Other than pro forma adjustments relating to goodwill
amortization, interest expense on the financing of the transaction, as well as
certain fair market value adjustments, no benefits resulting from expected
operational synergies have been reflected in the attached schedules. The effect
of the transaction for the year ended December 31, 1995 is not expected to be
dilutive.
The acquisition of NAMIC by Pfizer is not significant and, therefore, pro
forma information for this transaction has not been provided.
9
<PAGE>
PRO FORMA CONDENSED INCOME STATEMENT DATA:
<TABLE>
<CAPTION>
NINE MONTHS ENDED OCTOBER 2, 1994
(UNAUDITED IN $MILLIONS)
--------------------------------------------------
PRO FORMA
SBAH(4) PFIZER INC. ADJUSTMENTS COMBINED
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales.................................... 454.3 5,981.1 6,435.4
Costs and expenses
Cost of sales.............................. 174.9 1,372.3 1,547.2
Selling, informational and administrative
expenses.................................. 156.3 2,327.1 2,483.4
Research and development expenses.......... 41.5 812.1 853.6
Divestitures, restructuring and unusual
items -- net..............................
Other (income) deductions -- net........... (1)20.6
87.0 (2)76.1 183.7
----- ----------- ----------- -----------
Income before provision for taxes on income
and minority interests...................... 81.6 1,382.6 (96.7) 1,367.5
----- ----------- ----------- -----------
----- ----------- ----------- -----------
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
(UNAUDITED IN $MILLIONS)
-----------------------------------------------
PRO FORMA
SBAH PFIZER INC. ADJUSTMENTS COMBINED
-------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales.................................... 613.5 7,477.7 8,091.2
Costs and expenses
Cost of sales.............................. 234.0 1,772.0 2,006.0
Selling, informational and administrative
expenses.................................. 220.5 3,066.0 3,286.5
Research and development expenses.......... 55.5 974.4 1,029.9
Divestitures, restructuring and unusual
items -- net.............................. 752.0 752.0
Other (income) deductions -- net........... (1) 27.5
61.9 (2)101.5 190.9
-------- ----------- ----------- -----------
Income before provision for taxes on income
and minority interests...................... 103.5 851.4 (129.0 ) 825.9
-------- ----------- ----------- -----------
-------- ----------- ----------- -----------
<FN>
- ------------------------------
Notes:
(1) To record amortization of goodwill of $1.1 billion on a straight-line basis
over 40 years.
(2) To record interest expense related to short-term borrowings of $1.45
billion with 7% interest used to finance the acquisition.
(3) Allocation to the fair value of inventories acquired may range from $30
million to $70 million which would affect income from operations. This
non-recurring adjustment has not been reflected for purposes of this pro
forma data.
(4) SBAH amounts are for the first three quarters of 1994.
(5) SBAH amounts have been translated from pounds sterling to United States
dollars utilizing average exchange rates in effect for the nine months
ended October 2, 1994 and the year ended December 31, 1993.
</TABLE>
It is expected that this transaction will generate goodwill of approximately
$1.1 billion which will be amortized on a straight-line basis. Annual goodwill
amortization could range from $27.5 million to $44.0 million depending on the
rational life of the intangible.
10
<PAGE>
PRO FORMA CONDENSED BALANCE SHEET DATA:
<TABLE>
<CAPTION>
OCTOBER 2, 1994
(IN $MILLIONS)
-------------------------------------------------
PFIZER PRO FORMA
SBAH(3) INC. ADJUSTMENTS COMBINED
----------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Current assets...... 302.1 5,425.8 (2) 50.0 5,777.9
Property, plant and
equipment.......... 226.7 2,941.9 3,168.6
Other assets........ 1,741.9 1,741.9
Goodwill............ 291.9 (2)1,100.0 1,391.9
----- ---------- ------------ ----------
Total assets.... 528.8 10,401.5 1,150.0 12,080.3
----- ---------- ------------ ----------
----- ---------- ------------ ----------
Current
liabilities........ 110.0 4,139.0 (1)1,475.0 5,814.0
(2) 90.0
Other liabilities... 3.8 2,108.6 2,112.4
----- ---------- ------------ ----------
Total
liabilities.... 113.8 6,247.6 1,565.0 7,926.4
Total shareholders'
equity............. 4,153.9 4,153.9
----- ---------- ------------ ----------
Total liabilities
and shareholders'
equity............. 113.8 10,401.5 1,565.0 12,080.3
----- ---------- ------------ ----------
----- ---------- ------------ ----------
<FN>
- ------------------------
Notes:
(1) To record financing for the aggregate purchase price of $1.45 billion and
estimated direct acquisition costs of $25 million.
(2) To record the allocation of the purchase price to assets and liabilities.
Allocation to the fair value of inventories acquired may range from $30
million to $70 million, however, for purposes of this presentation $50
million was used.
(3) SBAH amounts are as of the end of the first three quarters
(4) SBAH amounts have been translated from pounds sterling to United States
dollars utilizing exchange rates in effect at October 2, 1994.
</TABLE>
NAMIC SELECTED FINANCIAL DATA
The following selected financial data as of and for the year ended May 31,
1994, is derived from the consolidated financial statements of NAMIC and
subsidiaries, which financial statements have been audited by Coopers & Lybrand,
LLP, independent accountants. The consolidated financial statements as of May
31, 1994 and for the year then ended, and the report thereon, are included
elsewhere in this Proxy Statement/Prospectus. The selected financial data as of
May 31, 1993 and for the years ended May 31, 1993 and 1992, are derived from the
consolidated financial statements of NAMIC and subsidiaries, which financial
statements have been audited by KPMG Peat Marwick LLP, independent certified
public accountants. The consolidated financial statements as of May 31, 1993 and
for the years ended May 31, 1993 and 1992, and the report thereon, are included
elsewhere in this Proxy Statement/Prospectus. The selected financial data as of
May 31, 1992, 1991 and 1990 and for the years ended May 31, 1991 and 1990, are
derived from the consolidated financial statements of NAMIC and subsidiaries,
which financial statements have been audited by KPMG Peat Marwick LLP,
independent certified public accountants, but are not included in this Proxy
Statement/Prospectus.
The selected financial data of NAMIC as of November 25, 1994 and November
26, 1993, and for the 26-week periods ended November 25, 1994 and November 26,
1993, are derived from unaudited consolidated financial statements of NAMIC and
subsidiaries, which are also included elsewhere in this Proxy
Statement/Prospectus, and which, in the opinion of management, include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair statement of the results for such unaudited interim periods.
11
<PAGE>
The following selected financial data of NAMIC should be read in conjunction
with "NAMIC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" and NAMIC's consolidated financial statements and the
notes thereto appearing elsewhere in this Proxy Statement/Prospectus. NAMIC has
never paid dividends on its Common Stock.
NAMIC
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
26-WEEKS ENDED
--------------------------
NOVEMBER 25, NOVEMBER 26, YEAR ENDED MAY 31,
------------ ------------ -----------------------------------------------------
1994 1993 1994 1993 1992 1991 1990
------------ ------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA
Net sales............................ $ 30,277 $ 27,433 $ 57,367 $ 54,153 $ 52,126 $ 44,204 $ 35,378
------------ ------------ --------- --------- --------- --------- ---------
------------ ------------ --------- --------- --------- --------- ---------
Gross profit......................... 13,703 13,143 26,840 27,985 27,039 21,962 17,986
Operating income..................... 3,674 3,221 7,215 9,726 10,249 7,574 5,974
Earnings before extraordinary item
and cumulative effect of change in
accounting principle(1)(2).......... 3,094 2,053 4,583 6,103 6,161 3,605 2,442
Net earnings......................... $ 3,094 $ 2,476 $ 5,005 $ 6,103 $ 6,161 $ 4,713 $ 2,442
------------ ------------ --------- --------- --------- --------- ---------
------------ ------------ --------- --------- --------- --------- ---------
EARNINGS PER SHARE
Earnings before extraordinary item
and cumulative effect of change in
accounting principle(1)(2).......... $0.35 $0.23 $0.52 $0.66 $0.74 $0.52 $0.35
------------ ------------ --------- --------- --------- --------- ---------
------------ ------------ --------- --------- --------- --------- ---------
Net earnings per share............... $0.35 $0.28 $0.56 $0.66 $0.74 $0.68 $0.35
------------ ------------ --------- --------- --------- --------- ---------
------------ ------------ --------- --------- --------- --------- ---------
Weighted average shares
outstanding(3)...................... 8,764 8,971 8,875 9,293 8,168 6,699 6,901
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER 25, NOVEMBER 26, MAY 31,
------------ ------------ -----------------------------------------------------
1994 1993 1994 1993 1992 1991 1990
------------ ------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Working capital...................... $ 30,353 $ 29,682 $ 28,596 $ 29,399 $ 33,794 $ 3,137 $ 3,162
------------ ------------ --------- --------- --------- --------- ---------
------------ ------------ --------- --------- --------- --------- ---------
Total assets......................... $ 83,231 $ 80,965 $ 82,586 $ 76,714 $ 73,157 $ 33,372 $ 29,362
------------ ------------ --------- --------- --------- --------- ---------
------------ ------------ --------- --------- --------- --------- ---------
Total debt and capital lease
obligations......................... $ 6,608 $ 7,280 $ 7,147 $ 7,747 $ 8,539 $ 15,976 $ 14,839
------------ ------------ --------- --------- --------- --------- ---------
------------ ------------ --------- --------- --------- --------- ---------
Stockholders' equity(3).............. $ 68,103 $ 64,137 $ 65,452 $ 63,302 $ 59,203 $ 12,600 $ 9,542
------------ ------------ --------- --------- --------- --------- ---------
------------ ------------ --------- --------- --------- --------- ---------
<FN>
- ------------------------
(1) During the year ended May 31, 1991, NAMIC utilized a net operating loss
carryforward of approximately $3,260,000. The resulting tax benefit of
$1,107,700 was recorded as an extraordinary item.
(2) During the year ended May 31, 1994, NAMIC adopted SFAS No. 109 and reported
a cumulative effect of change in accounting principle. The cumulative
effect of change in accounting principle resulted in an increase in net
earnings of $422,600.
(3) In August 1991, NAMIC's Board of Directors authorized a two-for-one common
stock split in the form of a common stock dividend. Prior years have been
restated to reflect this stock dividend.
</TABLE>
12
<PAGE>
COMPARATIVE PER SHARE DATA
The following tables set forth historical per share data for each of Pfizer
and NAMIC and the equivalent per share data for NAMIC. The equivalent per share
data for NAMIC is computed by multiplying the historical per share information
for Pfizer by .24599.
<TABLE>
<CAPTION>
AT OR FOR THE YEAR
AT OR FOR THE 9 MONTHS ENDED
ENDED OCTOBER 2, 1994 DECEMBER 31, 1993
----------------------- -----------------------
<S> <C> <C>
PFIZER HISTORICAL DATA
Per Share of Pfizer Common Stock
Shareholders' Equity......................................... $ 13.63 $ 12.43
Cash Dividends Paid.......................................... 1.41 1.68
Net Income................................................... 3.11 2.05
<CAPTION>
AT OR FOR THE YEAR
AT OR FOR THE 26 WEEKS ENDED
ENDED NOVEMBER 25, 1994 MAY 31, 1994
----------------------- -----------------------
<S> <C> <C>
NAMIC HISTORICAL DATA
Per Share of NAMIC Common Stock
Stockholders' Equity......................................... $ 7.77 $ 7.38
Cash Dividends Paid.......................................... -- --
Net Income................................................... .35 .56
<CAPTION>
AT OR FOR THE YEAR
AT OR FOR THE 9 MONTHS ENDED
ENDED OCTOBER 2, 1994 DECEMBER 31, 1993
----------------------- -----------------------
<S> <C> <C>
PFIZER EQUIVALENT DATA
Per Share of NAMIC Common Stock
Shareholders' Equity......................................... $ 3.35 $ 3.06
Cash Dividends Paid.......................................... .35 .41
Net Income................................................... .77 .50
</TABLE>
COMPARATIVE PER SHARE MARKET AND DIVIDEND INFORMATION
Pfizer Common Stock is listed for trading on the NYSE and NAMIC Common Stock
is included for trading over the counter on the Nasdaq National Market. The
information presented in the table below sets forth the high and low sales
prices per share of Pfizer Common Stock reported on the NYSE Composite Tape and
of NAMIC Common Stock on the Nasdaq National Market during the periods
indicated, as well as the quarterly cash dividends per share paid by Pfizer on
shares of Pfizer Common Stock. No dividends have been paid on NAMIC Common Stock
during any such period.
<TABLE>
<CAPTION>
PFIZER NAMIC
----------------------------- ------------------
PRICE PER SHARE OF PRICE PER SHARE OF
COMMON STOCK PER COMMON STOCK
------------------ SHARE ------------------
HIGH LOW DIVIDENDS HIGH LOW
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Calendar 1992
First Quarter..... 87 68 3/8 .37 28 1/2 20 3/4
Second Quarter.... 75 1/4 65 1/8 .37 24 1/4 15 3/4
Third Quarter..... 83 1/4 71 3/4 .37 17 12 5/8
Fourth Quarter.... 80 69 1/2 .37 18 11 3/4
Calendar 1993
First Quarter..... 72 3/4 52 1/2 .42 13 1/4 7 3/8
Second Quarter.... 75 5/8 57 1/2 .42 12 9 3/4
Third Quarter..... 66 1/4 55 5/8 .42 10 1/2 7 1/4
Fourth Quarter.... 70 3/8 57 3/4 .42 10 1/4 7
Calendar 1994
First Quarter..... 69 7/8 53 1/8 .47 11 8 3/4
Second Quarter.... 64 3/4 53 1/4 .47 9 1/4 7 3/4
Third Quarter..... 70 1/2 59 1/8 .47 12 3/4 7 1/2
Fourth Quarter.... 79 3/8 68 .47 19 1/2 10 1/2
Calendar 1995
First Quarter
(through
2/13/95)......... 83 3/8 74 1/2 .52(1) 20 1/4 18
<FN>
- ------------------------
(1) Although the dividend was declared, the amount has not yet been paid.
</TABLE>
13
<PAGE>
On October 28, 1994, the last trading day prior to the announcement of the
proposed Merger, the closing price per share of Pfizer Common Stock on the NYSE
Composite Tape was $73.38 and the closing price per share of NAMIC Common Stock
was $13.63. Based on the closing price per share of Pfizer Common Stock on
October 28, 1994, the market value of .24599 of one share of Pfizer Common Stock
was $18.05. The trading price of Pfizer Common Stock is subject to increase or
decrease and, therefore, no assurance can be given that the market value of
.24599 of one share of Pfizer Common Stock will be at least $18.05 at the
Effective Time. On February 13, 1995, the latest practicable trading date prior
to the printing of this Proxy Statement/Prospectus, the closing prices per share
of Pfizer Common Stock and NAMIC Common Stock were $80.63 and $19.50,
respectively. NAMIC's stockholders are advised to obtain current market
quotations for Pfizer Common Stock and NAMIC Common Stock.
As of the Record Date, there were 346 record holders of NAMIC Common Stock.
Although Pfizer has historically paid a cash dividend, the timing and amount
of future dividends of Pfizer, if any, will depend upon its earnings, cash
requirements, financial condition and other factors deemed relevant by the
Pfizer Board of Directors.
14
<PAGE>
THE SPECIAL MEETING
DATE, TIME AND PLACE OF MEETING
The Special Meeting will be held at The Rockefeller Center Club, 30
Rockefeller Plaza, Radio City Room, 64th Floor, New York, New York 10112 on
March 16, 1995, at 9:00 a.m. E.S.T.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of NAMIC Common Stock at the close of business on
January 30, 1995, the Record Date, are entitled to notice of and to vote at the
Special Meeting. As of the close of business on the Record Date, there were
8,896,262 shares of NAMIC Common Stock outstanding and entitled to vote, held of
record by 346 stockholders. A majority, or 4,448,132, of these shares, present
in person or represented by proxy, will constitute a quorum for the transaction
of business. Each NAMIC stockholder is entitled to one vote for each share of
NAMIC Common Stock held as of the Record Date.
VOTING OF PROXIES
The NAMIC proxy accompanying this Proxy Statement/Prospectus is solicited on
behalf of the NAMIC Board of Directors for use at the Special Meeting. NAMIC's
stockholders are requested to complete, date and sign the accompanying proxy and
promptly return it in the enclosed envelope to NAMIC. All properly executed
proxies received by NAMIC prior to the vote at the Special Meeting that are not
revoked will be voted in accordance with the instructions indicated on the
proxies or, if no direction is indicated, to approve and adopt the Merger
Agreement and the Merger, except as specified in the notice of the Special
Meeting. A NAMIC stockholder who has given a proxy may revoke it at any time
before it is exercised at the Special Meeting by (i) delivering to the Secretary
of NAMIC (by any means, including facsimile) a written notice, bearing a date
later than the date of the proxy, stating that the proxy is revoked, (ii)
signing and so delivering a proxy relating to the same shares and bearing a
later date prior to the vote at the Special Meeting or (iii) attending the
Special Meeting and voting in person (although attendance at the Special Meeting
will not, by itself, revoke a proxy).
VOTE REQUIRED
Approval and adoption of the Merger Agreement and the Merger requires the
affirmative vote of the holders of a majority of the outstanding NAMIC Common
Stock entitled to vote. Phillip H. Morse, the Chairman of the NAMIC Board of
Directors, who owned beneficially 4,455,662 outstanding shares of NAMIC Common
Stock on the Record Date (constituting approximately 50.1% of the NAMIC Common
Stock then outstanding), and his brother, Richard H. Morse, who owned 1,146,900
outstanding shares of NAMIC Common Stock on the Record Date (constituting
approximately 12.9% of the NAMIC Common Stock then outstanding), have entered
into agreements obligating them to vote in favor of approval and adoption of the
Merger Agreement and the Merger and against approval of any proposal made in
opposition to or in competition with the Merger. See "THE MERGER -- Voting
Agreements." All of the executive officers and directors of NAMIC, other than
Phillip H. Morse, collectively held approximately 3.5% of the NAMIC Common Stock
outstanding on the Record Date. All NAMIC executive officers and directors have
advised NAMIC of their intention to vote or direct the vote of all shares of
NAMIC Common Stock held by them for approval and adoption of the Merger
Agreement and the Merger, subject to and consistent with any fiduciary
obligations in the case of shares held as a fiduciary. ACCORDINGLY, APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND THE MERGER BY NAMIC'S STOCKHOLDERS ARE
ASSURED. Nonetheless, consummation of the Merger is subject to a number of
conditions, as described below.
SOLICITATION OF PROXIES AND EXPENSES
NAMIC will bear the cost of the solicitation of proxies in the enclosed form
from NAMIC's stockholders. In addition to solicitation by mail, the directors,
officers and employees of NAMIC may solicit proxies from NAMIC's stockholders by
telephone, telegram, letter or in person. Following the original mailing of the
proxies and other soliciting materials, NAMIC will request brokers, custodians,
nominees and other record holders to forward copies of the proxy and other
soliciting materials to
15
<PAGE>
persons for whom they hold shares of NAMIC Common Stock and to request authority
for the exercise of proxies. In such cases, NAMIC, upon the request of the
record holders, will reimburse such holders for their reasonable expenses.
THE MERGER
THE INFORMATION IN THIS PROXY STATEMENT/PROSPECTUS CONCERNING THE TERMS OF
THE MERGER AGREEMENT AND THE VOTING AGREEMENTS IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXTS OF THE MERGER AGREEMENT AND THE VOTING AGREEMENTS,
WHICH ARE ATTACHED HERETO AS APPENDICES A, B AND C, RESPECTIVELY, AND
INCORPORATED BY REFERENCE HEREIN. ALL STOCKHOLDERS OF NAMIC ARE URGED TO READ
THE MERGER AGREEMENT AND THE VOTING AGREEMENTS IN THEIR ENTIRETY.
GENERAL
Pursuant to the Merger Agreement, Merger Sub will be merged with and into
NAMIC, with NAMIC surviving the Merger as a direct wholly-owned subsidiary of
Pfizer. The Surviving Corporation will be named NAMIC U.S.A. Corporation. The
Merger will become effective at the time the Certificate of Merger is filed with
the Secretary of State of the State of Delaware.
Upon consummation of the Merger, NAMIC's stockholders will be entitled to
receive the Merger Consideration and the Cash Consideration in consideration for
their shares of NAMIC Common Stock held and thereupon shall cease to be
stockholders of NAMIC. Mr. P. Nigel Gray, the sole member of the Board of
Directors of Merger Sub immediately prior to the Effective Time, will be the
sole member of the Board of Directors of NAMIC. Ms. Cynthia L. Morris will be
the President and Chief Executive Officer of the Surviving Corporation
immediately after the Effective Time. NAMIC's current management (except for
Phillip H. Morse) will also remain in place. See "-- Management and Operations
After the Merger; Employment Agreements."
BACKGROUND OF THE MERGER
In connection with the annual American College of Cardiology meeting in
March 1994, Cynthia L. Morris, the President and Chief Executive Officer of
NAMIC, David Gilmour, the Chief Financial Officer of NAMIC, and Donald Boden,
Vice President, Marketing of NAMIC, held preliminary meetings with sales and
marketing executives from several interventional cardiology companies on the
subject of potential strategic marketing alliances. NAMIC's interest in such
alliances was borne of a belief that the broadest possible product line would be
a significant competitive advantage to it in a managed health care environment,
especially in light of its customers' interest in risk-sharing arrangements such
as price capitation for the procedures in which its products are employed.
Although NAMIC's product line includes a wide range of disposable accessory
devices for both angiography and angioplasty, as well as catheters for coronary
angiography, its product lines do not currently include balloon angioplasty
catheters or angioplasty guiding catheters.
NAMIC believes it possesses the fundamental clinical, engineering and
regulatory skills which might be required to design and commercialize basic
balloon angioplasty catheters and angioplasty guiding catheters. However, the
market for such catheters is intensely competitive, rapidly changing, dominated
by companies much larger than NAMIC, with much greater financial, marketing and
technological resources, and noted for costly and time-consuming disputes with
respect to intellectual property rights. Therefore, NAMIC's preference was to
form a marketing alliance with a company or companies possessing these
complementary product lines. Although initially conceived as a principally
domestic alliance, NAMIC also discussed the possible marketing of its products
in Europe and the Far East with its potential partners.
After the introductory meetings, NAMIC met with several potential alliance
partners during April, May and June 1994. The purpose of these meetings was for
NAMIC and its potential partners to understand the products, worldwide
distribution methods, competitive positions, goals and strategies of the other.
The meetings were also intended to begin defining the proposed roles and
responsibilities
16
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of each of the parties in the proposed marketing alliances. The meetings
included discussion of possible commercial terms of such alliances, which
permitted NAMIC to compare the relative risks and benefits of each proposed
partnership.
Although NAMIC was aware of the business of Pfizer's wholly-owned
subsidiaries, Schneider USA, Inc. and Schneider (Europe) AG, which manufacture
and market angioplasty and angiography catheters and vascular and nonvascular
stents, Pfizer was not approached as a potential marketing alliance partner in
the original marketing alliance discussions initiated by NAMIC because of what
NAMIC had perceived to be a lack of parity in the competitive positions of NAMIC
and Pfizer within the United States. Pfizer, through Schneider (Europe) AG, and
NAMIC had developed, however, common commercial interests outside of the United
States for a number of years. The common interests were a result of Schneider
(Europe) AG's acquisition of distribution companies in the Netherlands and
Japan, both of which were the exclusive distributors of NAMIC products in their
respective territories.
NAMIC's discussions on European and Far East distribution with potential
marketing alliance partners other than Pfizer progressed in June 1994 to
substantive negotiations on proposed terms of such distribution. As a result of
the common interests of NAMIC and Schneider (Europe) AG, NAMIC was inclined as a
courtesy to inform Pfizer of the existence of such negotiations with other
companies. Ms. Morris contacted Ms. Heliane Canepa, President of Schneider
(Europe) AG, based in Bulach, Switzerland, to determine whether Pfizer had an
interest in discussing the future of NAMIC's distribution in the Netherlands and
Japan. The first such discussion between NAMIC and Pfizer took place on June 16,
1994 in New York, New York. At that meeting, Ms. Morris, Mr. P. Nigel Gray, a
Vice President of Pfizer, Executive Vice President of its Hospital Products
Group and President of its Medical Devices Group, and Ms. Canepa reviewed the
common interests of NAMIC and Pfizer and Ms. Morris related the status of
NAMIC's discussions with other companies on both potential U.S. and
international alliances. Ms. Morris informed Ms. Canepa and Mr. Gray that
although NAMIC would consider Pfizer as a potential partner outside the United
States, the lack of market parity between the two companies within the United
States was problematic for NAMIC and that NAMIC's preference was to enter into a
worldwide alliance. It was at this time that Mr. Gray inquired as to whether
there would be an interest on the part of NAMIC in pursuing discussions on the
subject of a possible acquisition of NAMIC by Pfizer. In response to such
inquiry, Ms. Morris stated that NAMIC's Board of Directors would consider an
acquisition proposal by Pfizer if such proposal was determined by NAMIC's Board
of Directors to be in the best interests of NAMIC's stockholders. However, Mr.
Gray did not propose, nor did Ms. Morris and Mr. Gray discuss, any possible
terms of such an acquisition at that time.
In the months of July and August 1994, other exploratory inquiries on
potential business combinations were made by several companies with which NAMIC
had been engaged in marketing alliance discussions. Ms. Morris had informal
contact with certain of these companies to determine the nature of their
interest in NAMIC, although no specific proposals were made by any parties at
that time.
On August 15, 1994, the NAMIC Board of Directors met to discuss the status
of NAMIC's marketing alliance discussions and the inquiries received on the
subject of a potential acquisition of NAMIC. Ms. Morris recommended, and the
NAMIC Board of Directors resolved, that NAMIC retain an investment banking firm
for advisory services. On August 15, 1994, NAMIC retained Dillon Read to assist
the management and NAMIC Board of Directors in evaluating the inquiries in
connection with its evaluation of certain strategic alternatives.
Beginning on August 16, 1994, NAMIC and Dillon Read held a number of
meetings with representatives of the interested companies for the purpose of
discussing NAMIC's products, market positions, distribution networks and
strategies in the context of further strategic marketing alliance discussions or
a possible business combination. In order to permit NAMIC's management and
NAMIC's Board of Directors to fully evaluate business combination opportunities
in light of strategic marketing alliance possibilities and the prospect of
pursuing NAMIC's business plan without a formal
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association with any other company, Dillon Read, at the instruction of NAMIC,
invited the companies that had previously indicated an interest in a potential
business combination with NAMIC to make preliminary indications of value with
respect to an acquisition of NAMIC. Pfizer was one of such invited companies.
On September 16, 1994, certain of such companies provided to Dillon Read
their preliminary indications of value with respect to an acquisition of NAMIC.
On September 22, 1994, the NAMIC Board of Directors met to consider the
valuation indications and concluded that, in their opinion, the indications did
not reflect the value of NAMIC's market position and its prospects. The decision
was made at that time that NAMIC would continue to pursue its long term business
plan and would continue to investigate potential strategic marketing alliances
unless a significantly higher indication of value was received.
On October 4, 1994, Dillon Read received a letter from Pfizer indicating
that Pfizer would be interested in entering into an agreement whereby NAMIC
would be acquired by Pfizer for cash or in a tax-free exchange of stock, subject
to due diligence review and other customary terms and conditions. The letter
proposed a valuation of NAMIC that gave the NAMIC Board of Directors a basis for
engaging in further discussions. On October 5, 1994, Ms. Morris and advisors to
NAMIC met with Pfizer and its advisors for the purpose of discussing certain
nonfinancial aspects of the Pfizer proposal, including preservation of NAMIC's
brand identity and independence in U.S. sales and marketing, maintaining NAMIC's
operations in Glens Falls, New York and employment agreements with certain of
NAMIC's executive officers (which were required by Pfizer). On October 11, 1994,
NAMIC and Pfizer executed an agreement granting Pfizer an exclusive period, to
expire on October 30, 1994, to conduct due diligence and negotiations with
NAMIC. At that time, NAMIC ceased discussions with other companies on the
subjects of potential business combinations and marketing alliances.
From October 11 through October 30, 1994, NAMIC and Pfizer undertook a
mutual due diligence process and negotiated the terms of the Merger. During the
course of such negotiations, after a review by NAMIC's Board of Directors of
Pfizer's recent performance and prospects, NAMIC proposed to Pfizer that the
Merger be effected pursuant to a tax-free exchange of stock, rather than an
exchange of NAMIC Common Stock for cash, which proposal was acceptable to
Pfizer. A stock-for-stock exchange was preferred by NAMIC's Board of Directors
because (i) it would allow NAMIC stockholders the opportunity for continued
capital appreciation with respect to Pfizer shares acquired in the Merger, (ii)
it would permit the exchange of NAMIC Common Stock for Pfizer Common Stock on a
tax-free basis and (iii) it would allow NAMIC stockholders to participate in
Pfizer's cash dividend.
The NAMIC Board of Directors met on Friday, October 28, to discuss the
status of the negotiations of the terms of the Merger, and such meeting was kept
open pending additional information to be provided by Pfizer and its advisors
over the upcoming weekend. Negotiations on proposed terms of the Merger,
including the ratio for the exchange of NAMIC Common Stock for Pfizer Common
Stock, continued through Saturday, October 29, and Sunday, October 30. The
exchange ratio was determined by dividing the average closing price of Pfizer
Common Stock for the five trading days immediately preceding the signing of the
Merger Agreement by $18.00. The $18.00 denominator was the highest price Pfizer
had offered in cash per share of NAMIC Common Stock during the course of the
negotiations. Pfizer Common Stock closed at $73.375 per share on October 28,
1994, the last trading day preceding the execution of the Merger Agreement.
Thus, had the Merger been effected as of the close of trading on October 28,
1994, the .24599-for-one exchange ratio would result in NAMIC stockholders
receiving Pfizer Common Stock with a market value of $18.05 for each share of
NAMIC Common Stock. Such $18.05 in market value represented a $4.425 increase
over the closing price of NAMIC Common Stock on October 28, 1994, or an increase
of 32.5%.
Early in the evening on Sunday, October 30, the meeting of the NAMIC Board
of Directors resumed and the NAMIC Board of Directors unanimously approved the
terms of the Merger, including
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the Exchange Ratio. Later in the evening on Sunday, October 30, the Merger
Agreement and associated documents were executed. Pfizer and NAMIC made a joint
announcement of the Merger at approximately 9:00 a.m. on Monday, October 31,
1994.
REASONS FOR THE MERGER
JOINT REASONS FOR THE MERGER
NAMIC and Pfizer have identified several potential mutual benefits of the
Merger that they believe will contribute to the success of the combined company.
These potential benefits include:
- the ability to achieve greater sales penetration in interventional
cardiology and radiology laboratories in North America by virtue of the
size and quality of the combined sales forces of NAMIC and Schneider
(USA), Inc.;
- the ability to increase Pfizer's revenue per angiography and angioplasty
procedure as a result of the addition of the NAMIC product line to the
product line marketed outside North America by the present and planned
direct sales forces of Schneider (USA), Inc. and Schneider (Europe) AG;
- the ability for NAMIC and Schneider, as a result of their complementary
joint product lines, to offer risk-sharing arrangements, such as price
capitation, which are highly desirable to hospital customers;
- the ability to offer a wide range of products and to demonstrate
significant existing purchase volumes to group purchasing organizations
such as multi-hospital chains and buying groups;
- the ability to couple Pfizer's technological and intellectual property
expertise in revascularization products with NAMIC's materials management,
customer service and logistics systems in order to more fully meet both
clinical and business needs of customers;
- the ability to share product application and technical information which
will lead to accelerated new product introductions and significant
improvements in existing products;
- the ability to pair the extrusion, balloon and coating technologies of
Schneider (USA), Inc. and Schneider (Europe) AG with the injection molding
and low-cost assembly methods of NAMIC to enable creation of
fully-integrated catheter products and delivery systems; and
- the ability to draw from a broadened pool of management with relevant
industry and market experience.
PFIZER' S REASONS FOR THE MERGER
Pfizer's management believes that the acquisition of NAMIC as a result of
the Merger is in the best interests of Pfizer for the following reasons:
- It will broaden the product line of Pfizer's Schneider subsidiaries.
Schneider's current product line includes angioplasty balloons, guiding
catheters and stents, which are used in the invasive part of an
angioplasty procedure. NAMIC's products include manifolds, inflators,
tubing and kits, which are used in the non-invasive part of an angioplasty
procedure.
- It will approximately double the size of the U.S. cardiology sales force
of Schneider (USA), Inc.
- It will facilitate both the international expansion of NAMIC's business in
countries where Schneider (Europe) AG has direct operations and the
continuation of existing relationships with Schneider (USA), Inc. and
Schneider (Europe) AG.
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NAMIC'S REASONS FOR THE MERGER
The Board of Directors of NAMIC believes that the following are additional
reasons for NAMIC's stockholders to vote for approval and adoption of the Merger
Agreement and the Merger and considered each of them to be material in its
decision to approve and adopt the Merger Agreement and the Merger.
- The Merger will result in an expected tax-free exchange of stock in which
each NAMIC stockholder will receive .24599 of one share of Pfizer Common
Stock for each share of the stockholder's NAMIC Common Stock. Pfizer
Common Stock closed at $73.375 per share on October 28, 1994, the last
trading day preceding execution of the Merger Agreement, which was
equivalent to $18.05 in Pfizer Common Stock per share of NAMIC Common
Stock. Although the price per share of Pfizer Common Stock will vary
during the period prior to the Effective Time of the Merger and there can
be no assurance as to the price of Pfizer Common Stock on the Closing
Date, the $18.05 implied value on such date represented a significant
premium to the recent historical trading price of the NAMIC Common Stock
and a significant premium to valuations indicated by customary methods
such as comparable company analyses and precedent mergers and acquisition
analyses.
- The Merger will result in the exchange of NAMIC Common Stock for Pfizer
Common Stock, which has a substantially higher average daily trading
volume than NAMIC Common Stock.
- Pfizer Common Stock has historically paid a cash dividend. Although there
can be no assurance that Pfizer will maintain or increase its dividend, or
that there will be any dividend at all, NAMIC has not paid any cash
dividends on NAMIC Common Stock and does not intend to pay cash dividends
for the foreseeable future.
- The Merger will result in NAMIC's assimilation into a much larger health
care company. The NAMIC Board of Directors and senior management of NAMIC
believe that the consolidation which is occurring among health care
providers will generally favor larger multinational integrated companies
like Pfizer with wide-ranging product offerings for prevention, diagnosis
and intervention in disease processes.
In the course of its deliberations, the NAMIC Board of Directors reviewed
with the management of NAMIC a number of additional factors relevant to the
Merger. Of particular significance were (i) the relative probability and
attractiveness of various strategic alternatives available to NAMIC if the
Merger were not consummated, including the marketing alliances originally
contemplated, (ii) a consideration of NAMIC's alternatives for entering into the
balloon angioplasty and guiding catheter market and the costs and risks of
significant expansion of NAMIC's direct sales efforts outside North America,
(iii) the value expected to be achieved through the coordination of the sales
and marketing effort of NAMIC, Schneider (USA), Inc. and Schneider (Europe) AG
and (iv) the strategic importance of the Merger in light of proposed legislative
health care reform measures in the U.S. Other factors considered included (i)
potential commercial repercussions to NAMIC of entering into a strategic
marketing alliance in favor of one party over another in the event that the
Merger were not consummated, (ii) information concerning NAMIC's and Pfizer's
respective businesses, prospects, financial performances and conditions,
operations, managements and competitive positions, (iii) the current financial
market conditions and historical market prices, volatility and trading
information with respect to NAMIC Common Stock, (iv) the current financial
market conditions, historical market prices, dividend history, volatility,
trading information and analysts' reports on Pfizer Common Stock, (v) the plans
described by Pfizer for maintenance and deployment of NAMIC's market reputation,
tradenames, manufacturing operations and sales and marketing force and (vi) the
opinion of Dillon Read (see "-- Opinion of Financial Advisor of NAMIC").
The material factors considered by the Board of Directors of NAMIC in the
determination of the Exchange Ratio for the Merger included: (i) the competitive
position and prospects of NAMIC and the nature of the industry in which it
competes, on both a historical and prospective basis; (ii) recent
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events within the industry in which NAMIC operates; (iii) the stock price
trading history of NAMIC and Pfizer; (iv) the ratio of the closing stock prices
of NAMIC to Pfizer; (v) an analysis of the implied value of Pfizer stock to be
received per share of NAMIC stock, based on a range of possible Pfizer stock
prices and the proposed Exchange Ratio of .24599; (vi) financial results for the
two companies; and (vii) the terms and conditions of the Merger Agreement.
NAMIC's Board of Directors also considered a number of potentially negative
factors in its deliberations concerning the Merger, including: (i) the loss of
control over the future operations of NAMIC following the Merger; (ii) the risk
prior to or following consummation of the Merger that the trading price of
Pfizer's Common Stock may drop below its level at the time the Merger was
negotiated; and (iii) the risk that the capital market's concern about proposed
legislative health care reform measures on pharmaceutical prices may adversely
affect the prospects of Pfizer and the Pfizer Common Stock.
NAMIC's Board of Directors considered the fact that no auction process had
been conducted with respect to a potential sale of NAMIC; however, the Board had
received indications of value from the entities that had expressed an interest
in a potential business combination with NAMIC and which, in the Board's view,
provided the best strategic fit with NAMIC. Because of such indications of
interest and strategic fit, the Board felt that such companies were the most
likely to propose transactions that could maximize value to NAMIC's stockholders
and, in a stock-for-stock exchange (which was considered desirable by NAMIC's
Board), would provide NAMIC's stockholders with the opportunity to continue to
participate in an entity which would benefit from the strategic synergies of a
business combination with NAMIC. NAMIC's Board was also aware that the Voting
Agreements to be entered into by Phillip H. Morse and Richard H. Morse could be
a deterrent to other parties who might be interested in a business combination
with NAMIC. However, such Voting Agreements were required by Pfizer as a
condition to executing the Merger Agreement and, in light of the benefits of the
Merger described above, the Board determined it to be in the best interests of
NAMIC stockholders to enter into the Merger Agreement notwithstanding such
Voting Agreements.
After taking into consideration all of the factors set forth above, the
Board of Directors of NAMIC unanimously determined that the Merger was in the
best interests of NAMIC and its stockholders, and that NAMIC should proceed with
the Merger at this time. In view of the wide variety of factors considered, both
positive and negative, NAMIC's Board of Directors did not find it practicable
to, and did not, quantify or otherwise assign relative weights to the specific
factors considered. However, all material factors considered by NAMIC's Board of
Directors in reaching its decision to approve and adopt the Merger Agreement and
the Merger are described above under the headings "Joint Reasons for the Merger"
and "NAMIC's Reasons for the Merger."
THE NAMIC BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED AND ADOPTED THE MERGER
AGREEMENT AND THE MERGER AND HAS DETERMINED THAT THE MERGER IS IN THE BEST
INTERESTS OF, AND IS ON TERMS THAT ARE FAIR TO, NAMIC AND ITS STOCKHOLDERS AND
UNANIMOUSLY RECOMMENDS THAT NAMIC'S STOCKHOLDERS VOTE IN FAVOR OF THE APPROVAL
AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.
MERGER CONSIDERATION
Subject to the terms, conditions and procedures set forth in the Merger
Agreement, each share of NAMIC Common Stock issued and outstanding immediately
prior to the Effective Time (other than shares owned by Pfizer or any direct or
indirect wholly-owned subsidiary of Pfizer or shares held by holders who
properly exercise their appraisal rights, if any, under Delaware law) will be
converted into the right to receive the Merger Consideration and the Cash
Consideration. Pursuant to the terms of the Merger Agreement, cash will be paid
in lieu of fractional shares of Pfizer Common Stock. All shares of Pfizer Common
Stock issued as Merger Consideration will include the corresponding percentage
of a right to purchase shares of Series A Junior Participating Preferred Stock,
without par value, of Pfizer (the "Series A Preferred Stock") pursuant to the
Rights Agreement, dated as of September 24, 1987, as amended, between Pfizer and
The Chase Manhattan Bank, as Rights Agent
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(the "Rights Agreement"). Since the Effective Time is after the record date for
the dividend of $.52 per share declared by Pfizer's Board of Directors on Pfizer
Common Stock in the first quarter of calendar 1995, each such share of NAMIC
Common Stock will also evidence the right to receive from Pfizer the Cash
Consideration. Each share of Merger Sub common stock issued and outstanding at
the Effective Time will be converted into one share of the common stock of the
Surviving Corporation.
Based on the per share closing price of Pfizer Common Stock reported on the
NYSE Composite Tape for October 28, 1994, the last trading day before the public
announcement of the proposed Merger, the market value of the Merger
Consideration would have been $18.05 per share of NAMIC Common Stock. Based on
the per share closing price of the Pfizer Common Stock reported on the NYSE
Composite Tape for February 13, 1995, the latest practicable trading day before
the printing of this Proxy Statement/Prospectus, the market value of the Merger
Consideration would have been $19.83 per share of NAMIC Common Stock. The market
price of Pfizer Common Stock to be received in the Merger is subject to
fluctuation. Fluctuations in the market price of Pfizer Common Stock will result
in an increase or decrease in the value of the Merger Consideration to be
received by NAMIC stockholders in the Merger. The number of shares of Pfizer
Common Stock to be received for each share of NAMIC Common Stock has been fixed
at .24599. Accordingly, an increase in the market value of Pfizer Common Stock
will increase the market value of the Merger Consideration to be received by
holders of NAMIC Common Stock in the Merger. A decrease in the market price of
Pfizer Common Stock will have the opposite effect. The market value of the
Merger Consideration at the time of the Merger will depend upon the market price
of Pfizer Common Stock at such time. Stockholders of NAMIC are advised to obtain
current market quotations for Pfizer Common Stock. See "SUMMARY -- Comparative
Per Share Market and Dividend Information."
TREATMENT OF STOCK OPTIONS
Pursuant to the terms of the Merger Agreement, each holder of an option to
purchase NAMIC Common Stock that is outstanding immediately prior to the
Effective Time, whether or not then exercisable or fully vested, will be
entitled to receive from NAMIC, immediately prior to the Effective Time, an
amount (net of any applicable withholding tax) in cash equal to the excess, if
any, of $18.00 over the per share exercise price of such option. This treatment
of stock options was determined at the time of the determination of the Exchange
Ratio. $18.00 represented the highest cash price offered by Pfizer for one share
of NAMIC Common Stock during the course of negotiations with NAMIC and was used
as the denominator in determining the Exchange Ratio. See "THE MERGER -- NAMIC's
Reasons for the Merger."
OPINION OF FINANCIAL ADVISOR OF NAMIC
On October 28, 1994, the NAMIC Board of Directors received Dillon Read's
oral opinion, which was followed by Dillon Read's written opinion dated October
30, 1994 that, as of such date, the consideration to be received by NAMIC
stockholders pursuant to the Merger Agreement was fair to such stockholders from
a financial point of view. Dillon Read has confirmed its written opinion as of
the date of this Proxy Statement/Prospectus. A COPY OF DILLON READ'S WRITTEN
OPINION IS ATTACHED AS APPENDIX D HERETO AND SHOULD BE READ IN ITS ENTIRETY FOR
A DESCRIPTION OF THE PROCEDURES FOLLOWED, MATTERS CONSIDERED, ASSUMPTIONS MADE
AND METHODS EMPLOYED BY DILLON READ IN ARRIVING AT ITS OPINION.
In arriving at its opinion, Dillon Read (i) examined the Merger Agreement,
(ii) examined certain publicly available information relating to the business,
financial condition and operations of NAMIC, as well as certain financial and
other information furnished to Dillon Read by NAMIC that is not publicly
available, including certain projections prepared by management of NAMIC, (iii)
met with certain executive officers of NAMIC to discuss the operations,
financial condition, history and prospects of NAMIC, (iv) reviewed historical
common stock price and trading volume data relating to NAMIC and analyzed the
consideration to be received by NAMIC stockholders in relation to, among other
measures, market price, historical earnings, future earnings potential, cash
flow of NAMIC's business and NAMIC's book value, (v) reviewed recent merger and
acquisition transactions involving
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similar companies and (vi) analyzed certain publicly available information,
including financial information, relating to public companies whose operations
Dillon Read deemed comparable to those of NAMIC and Pfizer. In addition, Dillon
Read (i) examined certain publicly available information relating to the
business, financial condition and operations of Pfizer and (ii) met with certain
executive officers of Pfizer to discuss the operations, financial condition,
history and prospects of Pfizer. Dillon Read also conducted such other analyses
and examinations as it deemed necessary.
In connection with its review, Dillon Read did not independently verify any
of the publicly available information furnished by Pfizer or publicly available
information or non-public financial or other information furnished by NAMIC, and
relied upon such information as being complete and accurate. With respect to the
projections prepared by NAMIC management, Dillon Read has assumed that such
information was reasonably prepared on bases reflecting currently available
estimates and judgments of NAMIC management as to future financial performance.
In addition, Dillon Read did not make, request or receive any independent
evaluation or appraisal of the assets of NAMIC or Pfizer. Dillon Read conducted
discussions with a limited number of parties with respect to a business
combination with NAMIC and was not authorized to conduct, and did not conduct,
an "auction process" with respect to the solicitation of proposals regarding a
business combination with NAMIC.
Also in connection with its review, Dillon Read performed an analysis of the
historical financial results and certain non-public financial information of
NAMIC. This analysis examined, among other things, the historical financial
results, future operating estimates and certain non-public financial information
of NAMIC. Historical financial results were obtained from publicly available
filings with the Commission. The non-public financial information was obtained
from NAMIC.
Dillon Read's financial analysis of NAMIC examined, among other things,
NAMIC's net sales, earnings and profit margins for the last three fiscal years.
The financial analysis showed that NAMIC's net sales increased from $52.1
million in fiscal 1992 to $57.4 million in fiscal 1994. NAMIC's operating income
decreased from $10.2 million in fiscal 1992 to $7.2 million in fiscal 1994.
NAMIC's income before cumulative effect of change in accounting principle
decreased from $6.2 million in fiscal 1992 to $4.6 million in fiscal 1994.
NAMIC's operating profit margin decreased from 19.7% in fiscal 1992 to 12.6% in
fiscal 1994. NAMIC's net profit margin (excluding the cumulative effect of the
change in accounting principle in 1994) decreased from 11.8% in fiscal 1992 to
8.0% in fiscal 1994.
The amount of consideration to be paid to the stockholders of NAMIC pursuant
to the Merger Agreement was determined through negotiations between NAMIC and
Pfizer.
In connection with rendering its opinion, Dillon Read considered a variety
of valuation methods. The material valuation methods used are summarized below.
These analyses taken together support Dillon Read's opinion.
COMPARABLE COMPANY ANALYSIS
Using publicly available information, Dillon Read analyzed, based upon
market trading values, multiples of certain financial criteria (such as net
income, projected net income, earnings before interest and taxes, earnings
before depreciation, amortization, interest and taxes, revenues and book value)
used to value certain other companies, which, in Dillon Read's judgment, were
comparable to NAMIC for the purpose of this analysis. The primary comparable
company analysis was comprised of six public medical supplies and device
businesses which Dillon Read deemed most similar to NAMIC. These businesses
included Cordis Corporation, Medex, Inc., Merit Medical Systems, Inc., SciMed
Life Systems, Inc., Utah Medical Products, Inc. and Vital Signs, Inc. The
secondary comparable company analysis was comprised of five other medical device
companies and included C.R. Bard, Inc., Datascope Corporation, Medtronic, Inc.,
St. Jude Medical, Inc. and Target Therapeutics, Inc.
The range, median and mean for market capitalization as a multiple of each
of the indicated statistics for the primary comparable companies were as
follows: (a) latest twelve months net income -- 12.6x to 26.0x with a median of
15.4x and a mean of 16.5x; (b) estimated calendar 1994 earnings based upon
estimates from industry sources -- 11.3x to 22.9x with a median of 13.8x and a
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mean of 14.9x; (c) estimated calendar 1995 earnings based upon estimates from
industry sources -- 9.7x to 18.7x with a median of 11.2x and a mean of 12.5x;
and (d) book value -- 1.1x to 4.8x with a median of 2.5x and a mean of 2.8x. The
adjusted market capitalization (defined as market capitalization plus the book
value of debt and preferred stock less cash and cash equivalents) as a multiple
of each of the indicated statistics for the primary comparable companies were as
follows: (a) latest twelve months revenues -- 0.8x to 2.8x with a median of 2.0x
and a mean of 1.8x; (b) latest twelve months earnings before depreciation,
amortization, interest and taxes -- 5.3x to 13.0x with a median of 8.1x and a
mean of 8.4x; and (c) latest twelve months earnings before interest and taxes --
7.7x to 15.5x with a median of 9.8 and a mean of 10.5x.
The range, median and mean for market capitalization as a multiple of each
of the indicated statistics for the group of the secondary comparable companies
were as follows: (a) latest twelve months net income -- 16.0x to 43.9x, with a
median of 20.4x and a mean of 24.1x; (b) estimated calendar 1994 earnings based
upon estimates from industry sources -- 13.3x to 51.6x, with a median of 16.5x
and a mean of 20.8x; (c) estimated calendar 1995 earnings based upon estimates
from industry sources -- 11.6x to 26.5x, with a median of 14.6x and a mean of
17.3x; and (d) book value -- 2.0x to 14.8x, with a median of 3.8x and a mean of
5.8x. The range, median and mean for adjusted market capitalization (defined as
market capitalization plus the book value of debt and preferred stock less cash
and cash equivalents) as a multiple of each of the indicated statistics for the
group of the secondary comparable companies were as follows: (a) latest twelve
months revenues -- 1.4x to 6.4x, with a median of 4.0x and a mean of 3.6x; (b)
latest twelve months earnings before depreciation, amortization, interest and
taxes -- 7.6x to 23.0x, with a median of 10.7x and a mean of 12.7x; and (c)
latest twelve months earnings before interest and taxes -- 9.7x to 30.3x, with a
median of 11.9x and a mean of 15.8.
NAMIC's multiples based upon the consideration to be offered in connection
with the Merger, which at the time of Dillon Read's rendering of its opinion had
a value of $18.05 per share, were as follows: (a) latest twelve months net
income -- 33.3x; (b) net income for calendar year 1994 (based on NAMIC
estimates) -- 26.8x; (c) net income for calendar year 1995 (based on NAMIC
estimates) -- 19.2x; (d) book value -- 2.5x; (e) latest twelve month revenues --
2.8x; (f) latest twelve months earnings before depreciation, amortization,
interest and taxes --13.4x; and (g) latest twelve months earnings before
interest and taxes -- 22.2x. Dillon Read believes that these multiples supported
Dillon Read's view that the consideration to be received by NAMIC stockholders
is fair, from a financial point of view, to such stockholders, because the
ratios described above were within the range of, or exceeded, selected public
comparable multiples.
COMPARABLE MERGERS AND ACQUISITIONS
Using publicly available information, Dillon Read analyzed, based upon the
purchase price of the equity of the acquired companies and total transaction
values, multiples of certain financial criteria (such as net income, projected
net income, earnings before interest and taxes, earnings before depreciation,
interest and taxes, revenues and book value) used to value certain mergers and
acquisitions of acquired companies. In connection with this analysis, Dillon
Read advised the NAMIC Board of Directors that the mergers and acquisitions
analyzed were only generally comparable and should therefore not receive as much
consideration as other valuation methodologies used by Dillon Read in rendering
its opinion.
The merger and acquisition transactions which were analyzed included nine
transactions completed or pending in the medical device and supplies industry.
The acquisitions reviewed by Dillon Read, in reverse chronological order of
announcement date, included: (a) the pending acquisition of Puritan-Bennett
Corporation by Thermo Electron Corporation, (b) the acquisition of Kendall
International, Inc., by Tyco International Ltd., (c) the acquisition of
Cardiovascular Imaging Systems by Boston Scientific Corporation, (d) the
acquisition of Webster Laboratories, Inc., by Cordis Corporation, (f) the
acquisition of Electromedics, Inc., by Medtronic, Inc., (g) the acquisition of
Costar Corp. by
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Corning, Inc., (h) the acquisition of Durr-Fillauer Medical, Inc., by Bergen
Brunswig Corporation, (i) the acquisition of Bio-Medicus, Inc., by Medtronic,
Inc., and (j) the acquisition of Concept Inc. by Bristol-Myers Squibb Company.
The range, median and mean for the purchase price of equity as a multiple of
each of the indicated statistics for the above transactions were as follows: (a)
latest twelve months net income -- 24.0x to 36.6x, with a median of 29.9x and a
mean of 29.2x; (b) estimated next fiscal year earnings (based upon estimates
from industry sources) -- 22.3x to 32.1x, with a median of 21.9x and a mean of
23.4x; and (c) book value -- 2.8x to 5.6x, with a median of 3.5x and a mean of
3.8x. The range, median and mean for the transaction value (defined as purchase
price of equity plus the book value of debt less cash and cash equivalents) as a
multiple of each of the indicated statistics for the group of comparable
acquisitions were as follows: (a) latest twelve months revenues -- 0.3x to 3.6x,
with a median of 2.3x and a mean of 1.9x; (b) latest twelve months earnings
before depreciation, amortization, interest and taxes -- 8.7x to 19.9x, with a
median of 14.0x and a mean of 13.8x; and (c) latest twelve months earnings
before interest and taxes -- 12.0x to 27.0x, with a median of 16.7x and a mean
of 14.0x.
NAMIC's multiples based upon the consideration to be received by NAMIC
stockholders in connection with the Merger were as follows: (a) net income for
latest twelve months -- 33.3x; (b) net income for fiscal year ending May 31,
1995 -- 26.8x; (c) latest twelve months net revenues -- 2.8x; (d) book value --
2.5x; (e) latest twelve months earnings before depreciation, amortization,
interest and taxes -- 13.4x; (f) latest twelve months earnings before interest
and taxes -- 22.2x. Dillon Read believes that these multiples in the aggregate
supported Dillon Read's view that the consideration to be received by NAMIC
stockholders is fair, from a financial point of view, to such stockholders,
because taken as a whole, the ratios described above were within the range of
selected multiples.
DISCOUNTED CASH FLOW ANALYSIS
Based on NAMIC management's financial forecast for NAMIC's future cash flows
through 1997, terminal value multiples of NAMIC management's estimates of
NAMIC's earnings before depreciation, amortization, interest and taxes in 1997
ranging from 6.0x to 8.0x, and discount rates ranging from 12.0% to 16.0%,
Dillon Read analyzed the present value of NAMIC's estimated future cash flows.
Such analysis indicated that assuming the above terminal value multiples ranging
from 6.0x to 8.0x (as indicated by the comparable company and comparable mergers
analyses) and discount rates ranging from 12.0% to 16.0%, the net after-tax
present value of NAMIC's future cash flows ranged from $13.935 to $19.019 per
share of NAMIC Common Stock. Dillon Read believes that the discounted cash flow
analysis supported Dillon Read's opinion that the consideration to be received
by NAMIC shareholders is fair, from a financial point of view, because the
consideration valued at the time of Dillon Read's opinion was within the range
of present values of NAMIC's future cash flows.
TRADING HISTORY OF THE COMMON STOCK
Dillon Read analyzed (i) the price and trading volume history of NAMIC and
Pfizer and (ii) the distribution of volume at various prices of the NAMIC Common
Stock and the Pfizer Common Stock during 1991, 1992, 1993 and the first three
calendar quarters of 1994. See "SUMMARY -- Comparative Per Share Market and
Dividend Information." The trading history of the Pfizer Common Stock was
examined to evaluate the reasonableness of the market price of the Pfizer Common
Stock in light of historical trading levels and volumes. Dillon Read believes
that Pfizer's trading history supported Dillon Read's view that the
consideration to be received by NAMIC shareholders is fair, from a financial
point of view, because the Exchange Ratio was based upon a market valuation of
Pfizer Common Stock that was consistent with historical trading levels at the
time of Dillon Read's opinion.
FINANCIAL ANALYSIS OF PFIZER
The public market valuation of the Pfizer Common Stock was also examined to
study the reasonableness of the market price of the Pfizer Common Stock in light
of certain financial criteria of Pfizer and certain comparable companies. Using
publicly available information, Dillon Read analyzed, based upon market trading
values, multiples of certain financial criteria (such as latest twelve months
net income, projected net income for two years, latest twelve months earnings
before depreciation,
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amortization and interest and tangible book value) used to value certain other
companies, which, in Dillon Read's judgment, were comparable to Pfizer for the
purposes of this analysis. Dillon Read compared Pfizer to seven pharmaceutical
companies, including: American Home Products Corporation, Bristol-Myers Squibb
Company, Eli Lilly and Company, Johnson & Johnson, Marion Merrill Dow Inc.,
Merck & Co., Inc. and Schering-Plough Corporation.
The range, median and mean for market capitalization as a multiple of each
of the indicated statistics for the Pfizer comparable companies were as follows:
(a) latest twelve months net income -- 12.1x to 18.6x with a median of 15.2x and
a mean of 14.9x; (b) estimated calendar 1994 earnings based upon estimates from
industry sources -- 12.6x to 17.7x with a median of 14.7x and a mean of 14.7x;
(c) estimated calendar 1995 earnings based upon estimates from industry sources
- -- 12.0x to 20.0x with a median of 13.5x and a mean of 14.5x; and (d) book value
- --3.4x to 5.3x with a median of 4.5x and a mean of 4.3x. The adjusted market
capitalization (defined as market capitalization plus the book value of debt and
preferred stock less cash and cash equivalents) as a multiple of latest twelve
months earnings before depreciation, amortization, interest and taxes -- 7.8x to
11.4x with a median of 8.6x and a mean of 9.0x.
Pfizer's multiples, based upon the market trading activity at the time of
the rendering of Dillon Read's opinion, were as follows: (a) latest twelve
months net income -- 19.8x; (b) net income for calendar year 1994 (based on
industry estimates) -- 17.5x; (c) net income for calendar year 1995 (based on
industry estimates) -- 15.3x; (d) book value -- 6.1x; and (e) latest twelve
months earnings before depreciation, amortization, interest and taxes -- 11.4x.
Dillon Read believes that Pfizer's trading multiples supported Dillon Read's
view that the consideration to be received by NAMIC shareholders is fair, from a
financial point of view, because the Exchange Ratio was determined based upon a
market valuation of Pfizer Common Stock that was within the range of selected
multiples of its public company comparables at the time of Dillon Read's
opinion.
Dillon Read believes that its analyses must be considered as a whole and
that selecting portions of its analyses and other factors considered by it,
without considering all factors and analyses, could create a misleading view of
the processes underlying its opinion. Dillon Read did not quantify the effect of
each factor upon its opinion. Dillon Read made numerous assumptions with respect
to industry performance, general business and economic conditions and other
matters, many of which are beyond NAMIC's and Dillon Read's control. Any
estimates contained in Dillon Read's analyses are not necessarily indicative of
actual values, which may be significantly more or less favorable than as set
forth therein. Estimates of the financial value of companies do not purport to
be appraisals or necessarily reflect the prices at which companies actually may
be sold. Because such estimates inherently are subject to uncertainty neither
NAMIC, Pfizer, Dillon Read nor any other person assumes responsibility for their
accuracy. In rendering its opinion, Dillon Read expressed no view as to the
range of values at which the Pfizer Common Stock may trade following
consummation of the Merger, nor did Dillon Read make any recommendations to the
NAMIC stockholders with respect to how such holders should vote on the Merger,
or to the advisability of disposing of or retaining such Pfizer Common Stock
following the Merger.
The NAMIC Board of Directors selected Dillon Read as its financial advisor
because Dillon Read is a nationally-recognized investment banking firm with
substantial experience in transactions similar to the Merger. As a part of its
investment banking business, Dillon Read is continually engaged in the valuation
of businesses and their securities in connection with mergers and acquisitions.
Pursuant to the engagement letter between NAMIC and Dillon Read, NAMIC has
paid to Dillon Read for its services a fee of $100,000 and has agreed to pay
Dillon Read for its services an additional fee of 1.5% of the first $50 million
of the aggregate amount of the consideration paid to NAMIC stockholders plus
0.75% of the consideration in excess of the first $50 million. Dillon Read will
receive total fees of approximately $1.7 million upon the completion of the
Merger. NAMIC has also agreed to reimburse Dillon Read for its reasonable
expenses, including attorneys' fees, and to indemnify Dillon Read against
certain liabilities in connection with it engagement.
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VOTING AGREEMENTS
In connection with the execution of the Merger Agreement and to facilitate
the consummation of the Merger, Pfizer entered into separate Voting Agreements
with the Stockholders. Pursuant to the Voting Agreements, Phillip H. Morse and
his brother, Richard H. Morse, represented that they beneficially owned
4,455,662 and 1,146,900 shares, respectively, of NAMIC Common Stock as of the
date of the Voting Agreements, which shares together constitute approximately
63% of the outstanding shares of NAMIC Common Stock and are sufficient to
approve the consummation of the Merger without the approval of any other
stockholder of NAMIC. Each Stockholder agreed that at any meeting of the
stockholders of NAMIC, however called, and in any action by written consent of
the stockholders of NAMIC, such Stockholder will (a) vote all of such shares of
NAMIC Common Stock in favor of the approval of the Merger Agreement, and the
transactions contemplated thereby, including the Merger; and (b) during the
period commencing on October 31, 1994 and ending on October 31, 1995, vote such
shares of NAMIC Common Stock against any (i) merger, consolidation, share
exchange, business combination or other similar transaction pursuant to which
control of NAMIC would be transferred to any person other than Pfizer or (ii)
sale, lease, exchange, mortgage, pledge, transfer or other disposition of 50% or
more of the assets of NAMIC taken as a whole, in a single transaction or a
series of transactions. Each Stockholder has also granted Pfizer an irrevocable
proxy to vote his shares of NAMIC Common Stock as specified above in the event
that such Stockholder fails to so vote such shares. In addition, each
Stockholder has agreed not to sell in excess of 10% of the shares of NAMIC
Common Stock beneficially owned by him as of October 31, 1994 during the term of
the Voting Agreements.
The Voting Agreements will terminate on the earlier of (i) October 31, 1995
or (ii) the termination of the Merger Agreement: (A) by mutual consent of the
parties pursuant to the Merger Agreement; (B) by Pfizer if the Effective Time
shall not have occurred on or before April 30, 1995; (C) by NAMIC following a
Stipulated Delay (as hereinafter defined) if the Effective Time shall not have
occurred on or before April 30, 1995; (D) by Pfizer or NAMIC if any federal or
state court of competent jurisdiction or other federal or state governmental
body shall have issued an order, decree or ruling, or taken any other action
permanently restraining, or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have become final and non-appealable; or
(E) by NAMIC if (a) Pfizer shall have failed to comply in any material respect
with any of the material covenants and agreements contained in the Merger
Agreement to be complied with or performed by such party at or prior to such
date of termination, and such failure is not cured on a timely basis, or (b) a
material representation or warranty of Pfizer contained in the Merger Agreement
shall be untrue in any material respect when made or on and as of the Closing
Date as if made on and as of the Closing Date. For purposes of the foregoing,
"Stipulated Delay" means a delay in the ability of the parties to the Merger
Agreement to consummate the Merger and the other transactions contemplated
thereby by reason of (i) a statute, rule, regulation, executive order, decree or
injunction having been enacted, entered, promulgated or enforced by any federal
or state court or governmental authority which has the effect of prohibiting the
consummation of the Merger or (ii) the waiting period (and any extension
thereof) applicable to the consummation of the Merger under the HSR Act not
having expired or been terminated, and any formal investigations relating to the
Merger that may have been opened by the Division or the FTC not having been
terminated.
The Voting Agreements are intended to ensure that the Merger will be
consummated in accordance with the terms of the Merger Agreement. Consequently,
the Voting Agreements may have the effect of discouraging persons who might now
or prior to the Effective Time be interested in acquiring all or a significant
interest in NAMIC from proposing or making such an acquisition, even if such
persons were prepared to pay a higher price per share for NAMIC Common Stock
than the price per share implicit in the Merger Consideration.
MANAGEMENT AND OPERATIONS AFTER THE MERGER; EMPLOYMENT AGREEMENTS
The present management of NAMIC (other than Phillip H. Morse) will continue
as the management of the Surviving Corporation after the Merger. The Board of
Directors of NAMIC after the
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Merger will consist of one director, P. Nigel Gray, a Vice President of Pfizer,
Executive Vice President of Pfizer's Hospital Products Group and President of
Pfizer's Medical Devices Group. Pursuant to the Merger Agreement, Pfizer agreed
that, for a period of not less than two years following the Effective Time, the
headquarters of NAMIC will remain in Glens Falls, New York.
Pfizer has entered into Employment Agreements dated as of October 31, 1994
with each of Cynthia L. Morris, the President and Chief Executive Officer of
NAMIC, David W. Gilmour, the Chief Financial Officer, Treasurer and Secretary of
NAMIC, and Donald F. Boden, Vice President, Marketing of NAMIC. The term of each
Employment Agreement commences at the Effective Time of the Merger and
terminates on the second anniversary thereof, unless terminated earlier in
accordance with the provisions thereof.
Pursuant to the Employment Agreement between Ms. Morris and Pfizer, Ms.
Morris will serve as the President and Chief Executive Officer of NAMIC
following the Merger at an annual base salary of $207,200, subject to annual
increase as deemed desirable by Pfizer based on performance reviews. Ms. Morris
will be entitled to receive an annual payment pursuant to and determined in
accordance with the Pfizer Variable Incentive Compensation Plan (the "Incentive
Compensation Plan"). The initial payment, if any, under the Incentive
Compensation Plan will be made to Ms. Morris in February 1996 and will be based
on performance for the year ending December 31, 1995.
Pursuant to the Employment Agreement between Mr. Gilmour and Pfizer, Mr.
Gilmour will serve as the Chief Financial Officer of NAMIC following the Merger
at an annual base salary of $125,000, subject to annual increase as deemed
desirable by Pfizer based on performance reviews. Mr. Gilmour will be entitled
to receive an annual payment pursuant to and determined in accordance with the
Incentive Compensation Plan. The initial payment, if any, under the Incentive
Compensation Plan will be made to Mr. Gilmour in February 1996 and will be based
on performance for the year ending December 31, 1995.
Pursuant to the Employment Agreement between Mr. Boden and Pfizer, Mr. Boden
will serve as the Vice President, Sales and Marketing of NAMIC following the
Merger at an annual base salary of $135,000, subject to annual increase as
deemed desirable by Pfizer based on performance reviews. Mr. Boden is also
entitled to receive incentive compensation determined, for the fiscal year
ending May 31, 1995, in accordance with an exhibit attached to his Employment
Agreement, and thereafter in accordance with a bonus plan to be determined by
mutual agreement.
In addition to the foregoing compensation arrangements, the Employment
Agreements also provide, among other things, that Ms. Morris, Mr. Gilmour and
Mr. Boden shall be eligible to participate in the medical, dental and other
benefit plans of NAMIC or, if such plans are terminated by Pfizer, comparable
benefit plans of Pfizer. Ms. Morris, Mr. Gilmour and Mr. Boden are also eligible
to receive stock option grants at such time as options are granted to executives
of Pfizer and in such amounts as are consistent with Pfizer executives in
comparable positions.
Each Employment Agreement can be terminated prior to the second anniversary
of the Commencement Date by the employee for Good Reason (as defined in the
Employment Agreements) or by Pfizer, with or without "cause" (as defined in the
Employment Agreements). In the event of a termination by the employee for Good
Reason or by Pfizer without cause, the employee shall be entitled to receive,
among other things, (i) a lump sum severance payment equal to 12 months of his
or her annual base salary, (ii) continued coverage under standard medical and
dental coverage packages offered to other terminated employees of Pfizer for 12
months following the date of termination and (iii) immediate vesting of all
unvested options granted to the employee by Pfizer.
Under the Employment Agreements, Ms. Morris and Messrs. Gilmour and Boden
are required to maintain the confidentiality of Pfizer's proprietary information
and to disclose to Pfizer any discoveries or inventions conceived or developed
by them during the term of the Employment Agreements. The Agreements also
provide for restrictions on the ability of the individuals to work for a
competitor of Pfizer or NAMIC for a period of one year following the termination
of their employment.
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INDEMNIFICATION
Pursuant to the Merger Agreement, the Surviving Corporation and Pfizer have
agreed that, until six years following the Effective Time, the Surviving
Corporation will maintain all rights to indemnification now existing in favor of
the Indemnified Parties as provided in the NAMIC Certificate of Incorporation
and NAMIC By-laws and as otherwise in effect under any agreement or otherwise on
the date of the Merger Agreement. In addition, the Surviving Corporation will
indemnify and hold harmless the Indemnified Parties to the fullest extent
permitted by law against any actual or threatened claim, action, suit,
proceeding or investigation arising from their services prior to, and including,
the Effective Time and for at least six years following the Effective Time.
Pfizer will cause the Surviving Corporation to honor in accordance with their
terms any indemnification agreements between NAMIC and any of the Indemnified
Parties that are in existence on the date of the Merger Agreement.
EFFECTIVE TIME AND CLOSING DATE
The Merger will become effective at the time that the Certificate of Merger
is filed with the Secretary of State of the State of Delaware. Such filing will
occur only after the receipt of all requisite regulatory approvals, approval of
the Merger Agreement by the requisite vote of NAMIC's stockholders and the
satisfaction or waiver of all other conditions to the Merger. The closing of the
Merger will occur not later than the third business day following the day on
which all conditions to the consummation of the Merger have been satisfied or
waived in accordance with the terms of the Merger Agreement, or at another time
agreed to in writing by Pfizer and NAMIC.
FRACTIONAL SHARES
No certificates or scrip representing fractional shares of Pfizer Common
Stock will be issued upon the surrender for exchange of certificates
representing NAMIC Common Stock. In addition, no dividend or distribution of
Pfizer will relate to any fractional shares, and such fractional share interests
will not entitle the owner thereof to vote or to any rights of a stockholder of
Pfizer. Each stockholder of NAMIC who would be entitled to a fractional share in
the Merger will receive an amount in cash equal to the product of (i) the
average of the per share closing prices on the NYSE of Pfizer Common Stock
during the five consecutive trading days ending on the trading day immediately
prior to the Effective Time and (ii) the fraction of a share of Pfizer Common
Stock otherwise issuable to such holder. The fractional interests of each holder
of NAMIC Common Stock will be aggregated so that no such holder will receive
cash in an amount equal to or greater than the average of the per share closing
price on the NYSE of Pfizer Common Stock during the five consecutive trading
days ending on the trading day immediately prior to the Effective Time.
EXCHANGE OF CERTIFICATES
At the Effective Time, Pfizer shall mail to each record holder of a
certificate or certificates, which immediately prior to the Effective Time
represented outstanding shares of NAMIC Common Stock (the "Certificates"), a
notice advising such holder of the effectiveness of the Merger and a transmittal
letter and instructions to be used in surrendering Certificates in exchange for
(i) certificates representing the number of shares of Pfizer Common Stock into
which their shares of NAMIC Common Stock were converted pursuant to the Merger
Agreement, and (ii) a check representing the Cash Consideration and the amount
of cash in lieu of fractional shares, if any, and unpaid dividends and
distributions, if any, which such stockholder has the right to receive in
respect of the Certificates surrendered in connection with the Merger. Until
surrendered and exchanged, each Certificate will, after the Effective Time,
represent solely the right to receive promptly upon surrender such certificates
and check, and its holder shall have no other rights. Following surrender of the
Certificates in accordance with the terms of the Merger Agreement, the holders
of newly-issued Pfizer certificates will be paid, without interest, any
dividends or other distributions with respect to the shares of Pfizer Common
Stock, the record date for which payment of dividends or other distributions is
after the
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Effective Time. No interest will be paid or accrued on the Cash Consideration,
the cash in lieu of fractional shares or on the unpaid dividends and
distributions, if any, payable to holders of NAMIC Common Stock.
After the Effective Time, holders of unsurrendered Certificates shall not be
entitled to vote at any meeting of Pfizer stockholders at which holders of
Pfizer Common Stock are eligible to vote. Any Certificate representing shares of
Pfizer Common Stock to be issued in a name other than that in which the
Certificate is registered must be properly endorsed and otherwise in proper form
for transfer, and the holder requesting such exchange must pay to Pfizer in
advance any transfer or other taxes in connection therewith.
In the event any Certificate has been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the holder of such Certificate and the
posting of any bond required by Pfizer, Pfizer will issue for such lost, stolen
or destroyed Certificate, the shares of Pfizer Common Stock and deliver the Cash
Consideration and cash in lieu of fractional shares due to the holder of such
Certificate under the terms of the Merger Agreement.
After the Effective Time, there will be no further transfers on the records
of NAMIC and, if such Certificates are presented to Pfizer for transfer, they
will be cancelled and exchanged as provided above.
STOCKHOLDERS OF NAMIC SHOULD NOT FORWARD STOCK CERTIFICATES REPRESENTING
NAMIC COMMON STOCK UNTIL THEY RECEIVE THE TRANSMITTAL LETTER AND INSTRUCTIONS.
RIGHTS OF DISSENTING STOCKHOLDERS
Since the Effective Time is after the record date for the dividend of $.52
per share declared by Pfizer's Board of Directors on Pfizer Common Stock in the
first quarter of calendar year 1995, holders of record of shares of NAMIC Common
Stock will have appraisal rights with respect to their shares. Such stockholders
who do not vote to approve and adopt the Merger Agreement and the Merger may
elect to have the fair value of their shares, based on all relevant factors and
excluding any element of value arising from the accomplishment or expectation of
the Merger, judicially appraised and paid to them in cash. Under Section 262 of
the DGCL ("Section 262"), if the Merger is consummated, holders of record of
shares of NAMIC Common Stock may exercise their appraisal rights by complying
with the provisions of Section 262. The following brief summary of Section 262
sets forth the procedures for demanding statutory appraisal rights. This summary
is qualified in its entirety by reference to Section 262, a copy of the text of
which is attached to this Proxy Statement/Prospectus as Appendix E.
Stockholders of record who desire to exercise their appraisal rights must
fully satisfy all of the following conditions. A written demand for appraisal of
shares of NAMIC Common Stock must be delivered to the Secretary of NAMIC before
the taking of the vote on the approval and adoption of the Merger Agreement.
This written demand for appraisal must be in addition to and separate from any
proxy or vote abstaining from or against the approval and adoption of the Merger
Agreement. Neither voting against, abstaining from voting, nor failing to vote
on the Merger Agreement will constitute a demand for appraisal within the
meaning of Section 262. Any stockholder seeking appraisal rights must hold the
shares of NAMIC Common Stock for which appraisal is sought on the date of the
making of the demand, continuously hold such shares through the Effective Time
and otherwise comply with the provisions of Section 262.
Stockholders electing to exercise their appraisal rights under Section 262
must not vote for the approval and adoption of the Merger Agreement and the
Merger or consent thereto in writing. Voting in favor of the approval and
adoption of the Merger Agreement and the Merger, or delivering a proxy in
connection with the Special Meeting (unless the proxy votes against, or
expressly abstains from the vote on, the approval and adoption of the Merger
Agreement and the Merger), will constitute a waiver of the stockholder's right
of appraisal and will nullify any written demand for appraisal submitted by the
stockholder.
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A demand for appraisal must be executed by or for the stockholder of record,
fully and correctly, as such stockholder's name appears on the stock
certificates. If shares of NAMIC Common Stock are owned of record in a fiduciary
capacity, such as by a trustee, guardian or custodian, such demand must be
executed by the fiduciary. If shares of NAMIC Common Stock are owned of record
by more than one person, as in a joint tenancy or tenancy in common, such demand
must be executed by all joint owners. An authorized agent, including an agent
for two or more joint owners, may execute the demand for appraisal for a
stockholder of record; however, the agent must identify the record owner and
expressly disclose the fact that, in exercising the demand, he is acting as
agent for the record owner.
A record owner, such as a broker, who holds shares of NAMIC Common Stock as
a nominee for others, may exercise appraisal rights with respect to the shares
held for all or less than all beneficial owners of shares as to which the holder
is the record owner. In such case, the written demand must set forth the number
of shares of NAMIC Common Stock covered by such demand. Where the number of
shares of NAMIC Common Stock is not expressly stated, the demand will be
presumed to cover all shares outstanding in the name of such record owner.
Beneficial owners who are not record owners and who intend to exercise appraisal
rights should instruct the record owner to comply strictly with the statutory
requirements with respect to the exercise of appraisal rights before the date of
the Special Meeting.
Stockholders who elect to exercise appraisal rights must mail or deliver
their written demands to: Secretary, NAMIC U.S.A. Corporation, Pruyn's Island,
Glens Falls, New York 12801. The written demand for appraisal should specify the
stockholder's name and mailing address, the number of shares of NAMIC Common
Stock covered by the demand, and that the stockholder is thereby demanding
appraisal of such shares. Within ten days after the Effective Time, NAMIC must
provide notice of the Effective Time to all stockholders who have complied with
Section 262 and have not voted for approval and adoption of the Merger Agreement
and the Merger.
Within 120 days after the Effective Time, either NAMIC or any stockholder
who has complied with the required conditions of Section 262 and who is
otherwise entitled to appraisal rights may file a petition in the Delaware Court
of Chancery demanding a determination of the fair value of the shares of NAMIC
Common Stock of the dissenting stockholders. If a petition for an appraisal is
timely filed, after a hearing on such petition, the Delaware Court of Chancery
will determine which stockholders are entitled to appraisal rights and
thereafter will appraise the shares of NAMIC Common Stock owned by such
stockholders, determining the fair value of such shares, exclusive of any
element of value arising from the accomplishment or expectation of the Merger,
together with a fair rate of interest to be paid, if any, upon the amount
determined to be the fair value. In determining fair value, the Delaware Court
of Chancery is to take into account all relevant factors. In WEINBERGER V. UOP,
INC., ET AL., the Delaware Supreme Court discussed the factors that could be
considered in determining fair value in an appraisal proceeding, stating that
"proof of value by any techniques or methods which are generally considered
acceptable in the financial community and otherwise admissible in court" should
be considered and that "[f]air price obviously requires consideration of all
relevant factors involving the value of a company." The Delaware Supreme Court
stated that in making this determination of fair value, the court must consider
"market value, asset value, dividends, earnings prospects, the nature of the
enterprise and any other facts which were known or which could be ascertained as
of the date of merger which throw any light on future prospects of the merged
corporation...." The Delaware Supreme Court has construed Section 262 to mean
that "elements of future value, including the nature of the enterprise, which
are known or susceptible of proof as of the date of the merger and not the
product of speculation, may be considered." However, the court noted that
Section 262 provides that fair value is to be determined "exclusive of any
element of value arising from the accomplishment or expectation of the merger."
Stockholders considering seeking appraisal should keep in mind that the fair
value of their shares of NAMIC Common Stock determined under Section 262 could
be more than, the same as or less than the value of the Merger Consideration and
the Cash Consideration if they do not seek appraisal of their shares, and that
opinions of investment banking firms as to fairness from a financial point of
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view are not necessarily opinions as to fair value under Section 262. The cost
of the appraisal proceeding may be determined by the Delaware Court of Chancery
and taxed upon the parties as the Delaware Court of Chancery deems equitable in
the circumstances. Upon application of a dissenting stockholder, the Delaware
Court of Chancery may order that all or a portion of the expenses incurred by
any dissenting stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorneys' fees and the fees and
expenses of experts, be charged pro rata against the value of all shares of
NAMIC Common Stock entitled to appraisal. In the absence of such a determination
or assessment, each party bears its own expenses.
Any stockholder who has duly demanded appraisal in compliance with Section
262 will not, after the Effective Time, be entitled to vote, for any purpose,
the shares of NAMIC Common Stock subject to such demand or to receive payment of
dividends or other distributions on such shares, except for dividends or other
distributions payable to stockholders of record at a date prior to the Effective
Time.
At any time within 60 days after the Effective Time, any former holder of
shares of NAMIC Common Stock shall have the right to withdraw his or her demand
for appraisal and to accept the terms offered in the Merger. After this period,
such holder may withdraw his or her demand for appraisal only with the consent
of NAMIC as the surviving corporation in the Merger. If no petition for
appraisal is filed with the Delaware Court of Chancery within 120 days after the
Effective Time, stockholders' rights to appraisal shall cease and all
stockholders shall be entitled to receive the consideration offered per share of
NAMIC Common Stock provided for in the Merger Agreement. Inasmuch as NAMIC has
no obligation to file such a petition, and has no present intention to do so,
any stockholder who desires such a petition to be filed is advised to file it on
a timely basis. However, no petition timely filed in the Delaware Court of
Chancery demanding appraisal shall be dismissed as to any stockholder without
the approval of the Delaware Court of Chancery, and such approval may be
conditioned upon such terms as the Delaware Court of Chancery deems just.
Failure to take any required step in connection with the exercise of
appraisal rights may result in the termination or waiver of such rights. In view
of the complexity of these provisions of the DGCL, stockholders who are
considering exercising their appraisal rights under Section 262 should consult
their legal advisors.
CONFLICTS OF INTEREST
In considering the recommendation of the NAMIC Board of Directors to approve
and adopt the Merger Agreement and the Merger, NAMIC stockholders should be
aware that the executive officers of NAMIC and members of the NAMIC Board of
Directors have interests in the Merger that are in addition to the interests of
NAMIC stockholders generally, and that members of the Board having such
interests participated in the discussion, deliberation and voting of the Board
with regard to the Merger.
EMPLOYMENT AGREEMENTS. Each of Cynthia L. Morris, the President and Chief
Executive Officer and a director of NAMIC, David W. Gilmour, the Chief Financial
Officer, Treasurer and Secretary of NAMIC, and Donald F. Boden, the Vice
President, Marketing of NAMIC, has entered into an Employment Agreement with
Pfizer relating to his or her continued employment with NAMIC for the two-year
period following the Merger. Pursuant to such Employment Agreements, Ms. Morris,
Mr. Gilmour and Mr. Boden will receive annual base salaries of $207,200,
$125,000 and $135,000, respectively, and each will be eligible to receive
incentive compensation and stock options in accordance with the terms of the
Employment Agreements. See "THE MERGER -- Management and Operations After the
Merger; Employment Agreements."
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CASH PAYMENTS FOR STOCK OPTIONS. Pursuant to the Merger Agreement, each
holder of an option to purchase NAMIC Common Stock, whether or not then
exercisable or fully vested, will receive a cash payment from NAMIC immediately
prior to the Merger in an amount equal to the excess, if any, of $18.00 over the
exercise price of such option. See "THE MERGER -- Merger Consideration." As of
February 9, 1995, Ms. Morris, Mr. Gilmour, Mr. Boden and NAMIC Board members
William L. Bitner III, Ph. D., and William E. Philion each held options to
purchase NAMIC Common Stock and will receive the following cash payments
immediately prior to the Merger in respect of such options (assuming none of
such options are exercised prior to the Effective Time): Ms. Morris, $2,360,000;
Mr. Gilmour, $540,000; Mr. Boden, $863,000; Mr. Bitner, $32,655; and Mr.
Philion, $32,655. See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF NAMIC."
GUARANTEE OF NAMIC'S SUBLEASE OBLIGATIONS. Phillip H. Morse, the Chairman
of the Board of Directors of NAMIC, subleases certain manufacturing and office
facilities to NAMIC. As a result of financing arrangements for such facilities,
Mr. Morse is the prime lessee of such facilities from the Glens Falls Industrial
Development Agency. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS OF
NAMIC." In satisfaction of a condition to each party's obligation to consummate
the Merger, effective as of the Effective Time, Pfizer will guarantee the
obligations of NAMIC to Mr. Morse under the sublease.
INDEMNIFICATION. Pursuant to the Merger Agreement, the Surviving
Corporation and Pfizer have agreed that, until six years following the Effective
Time, the Surviving Corporation will maintain all rights to indemnification now
existing in favor of the Indemnified Parties as provided in the NAMIC
Certificate of Incorporation and NAMIC By-laws and as otherwise in effect under
any agreement or otherwise on the date of the Merger Agreement. In addition, the
Surviving Corporation will indemnify and hold harmless the Indemnified Parties
to the fullest extent permitted by law against any actual or threatened claim,
action, suit, proceeding or investigation arising from their services prior to,
and including, the Effective Time and for at least six years following the
Effective Time. Pfizer will cause the Surviving Corporation to honor in
accordance with their terms any indemnification agreements between NAMIC and any
of the Indemnified Parties that are in existence on the date of the Merger
Agreement.
The NAMIC Board of Directors was aware of these interests, but did not
consider them to be significant or of a nature that would affect the objectivity
of any director's determination that the Merger was in the best interests of
NAMIC's stockholders.
ACCELERATION OF OPTIONS. The vesting of options at varying exercise prices
held by David W. Gilmour, the Chief Financial Officer, Treasurer and Secretary
of NAMIC, to purchase 38,000 shares of NAMIC Common Stock was accelerated by
NAMIC to become exercisable as of December 29, 1994, and all such options were
exercised by Mr. Gilmour on such date.
EFFECT ON EMPLOYEES AND EMPLOYEE BENEFIT PLANS OF NAMIC
Pursuant to the Merger Agreement, Pfizer will cause the Surviving
Corporation to provide, until December 31, 1995, to the current officers and
employees of NAMIC, so long as they remain officers or employees of NAMIC,
employee benefits, including, without limitation, cash compensation, incentive
opportunities, non-cash non-incentive benefits, retirement and savings plans and
programs, health and welfare plans and programs and severance plans and policies
pursuant to NAMIC's current plans, programs, policies and arrangements disclosed
to Pfizer in connection with the Merger Agreement. In connection therewith, the
Surviving Corporation will contribute to the Surviving Corporation's Profit
Sharing and 401(k) Plan, $300,000 in respect of the fiscal year ending May 31,
1995 and $175,000 in respect of the seven months ending December 31, 1995.
Pfizer has also agreed that, as of January 1, 1996, the employees of the
Surviving Corporation as of such date and thereafter will be eligible to
participate in Pfizer's benefit plans and practices generally available to
similarly situated employees of Pfizer and its subsidiaries. For purposes of
determining eligibility and benefits under such plans and
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practices, other than retiree medical coverage and Pfizer's pension plan, the
employees of the Surviving Corporation will receive credit for their years of
service to NAMIC prior to the Effective Time. If any employee of NAMIC becomes a
participant in any pension plan of Pfizer following the Effective Time, such
employee shall be given one additional year of credit for purposes of
eligibility and vesting (but not for purposes of determining benefit amounts)
under such plan for each year of service to the Surviving Corporation, Pfizer or
any other affiliate of Pfizer following the Effective Time; PROVIDED, HOWEVER,
that such additional years of service credit shall not exceed the actual years
of service of such participant to NAMIC prior to the Effective Time (to the
extent such credit was given by NAMIC). The Surviving Corporation shall also
provide professional outplacement services for all officers and salaried
employees of NAMIC at the Effective Time who are terminated within two years
after the Effective Time in a manner consistent with similar services provided
by Pfizer to its employees.
REPRESENTATIONS AND WARRANTIES
In the Merger Agreement, NAMIC has made certain customary representations
and warranties relating to, among other things, its organization, authority
relative to the Merger Agreement, capitalization, subsidiaries, required
consents and approvals, reliability of financial statements, taxes, employee
benefit plans, material contracts, litigation, compliance with applicable laws,
environmental matters and the absence of material adverse changes in the
condition (financial or otherwise), business, assets or results of operations of
NAMIC and its subsidiaries, taken as a whole. In the Merger Agreement, Pfizer
and Merger Sub have made customary representations and warranties relating to,
among other things, their respective organization, authority relative to the
Merger Agreement, Pfizer's capital stock, required consents and approvals,
reliability of financial statements, the absence of material adverse changes in
the condition (financial or otherwise), business, assets or results of
operations of Pfizer and its subsidiaries, taken as a whole, and the ownership
by Pfizer of all of the outstanding capital stock of Merger Sub. For detailed
information on such representations and warranties, see the Merger Agreement
attached hereto as Appendix A and incorporated by reference herein.
CONDITIONS TO THE MERGER
The respective obligations of each party to consummate the Merger are
subject to the satisfaction or waiver, where permissible, prior to the Effective
Time, of the following conditions: (i) the Merger Agreement and the Merger shall
have been approved by the requisite vote of the holders of NAMIC Common Stock;
(ii) no statute, rule, regulation, executive order, decree or injunction shall
have been enacted, entered, promulgated or enforced by any federal or state
court or governmental authority which is in effect and has the effect of
prohibiting the consummation of the Merger; (iii) the waiting period (and any
extension thereof) under the HSR Act, shall have expired or been terminated, and
any formal investigations relating to the Merger that may have been opened by
the Division or the FTC shall have been terminated; (iv) the Registration
Statement relating to the shares of Pfizer Common Stock to be issued in the
Merger shall have been declared effective and shall not be subject to a stop
order; (v) Pfizer shall have received all state securities law and "blue sky"
authorizations necessary to consummate the transactions contemplated by the
Merger Agreement and the shares of Pfizer Common Stock to be issued in
connection with the Merger shall have been approved for listing on the NYSE,
upon official notice of issuance; (vi) all regulatory and related approvals
(other than any approval contemplated by the HSR Act) shall have been obtained
on terms mutually satisfactory to Pfizer and NAMIC, except for any failure of
which to obtain would not have a material adverse effect on Pfizer or the
Surviving Corporation, taken as a whole; and (vii) Pfizer, NAMIC and Phillip H.
Morse shall have entered into mutually satisfactory agreements relating to
Pfizer's support of NAMIC's obligations under the sublease of its headquarters
and manufacturing facilities in Glens Falls, New York and NAMIC's right to
sub-sublease such properties.
In addition, the obligations of Pfizer and Merger Sub to consummate the
Merger are subject to the satisfaction or waiver, where permissible, prior to
the Effective Time, of the following conditions: (i) the representations and
warranties of NAMIC contained in the Merger Agreement shall be true and correct
in all material respects on the date of the Merger Agreement and as of the
Closing Date as
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if made on and as of the Effective Time; and (ii) NAMIC shall have performed in
all material respects any and all obligations and agreements, and complied in
all material respects with all covenants and conditions, contained in the Merger
Agreement to be performed or complied with by it prior to the Effective Time.
In addition, the obligation of NAMIC to consummate the Merger is subject to
the satisfaction or waiver, where permissible, prior to the Effective Time, of
the following conditions: (i) the representations and warranties of Pfizer
contained in the Merger Agreement shall be true and correct in all material
respects on the date of the Merger Agreement and as of the Closing Date as if
made on and as of the Effective Time; (ii) Pfizer shall have performed in all
material respects any and all obligations and agreements, and complied in all
material respects with all covenants and conditions, contained in the Merger
Agreement to be performed or complied with by it prior to the Effective Time;
and (iii) NAMIC shall have received from its counsel an opinion to the effect
that the Merger will be treated as a reorganization within the meaning of
Section 368(a) of the Code, as hereinafter defined (see "-- Certain Federal
Income Tax Considerations"), that NAMIC and Pfizer will each be a party to that
reorganization within the meaning of Section 368(b) of the Code and that no gain
or loss will be recognized by a stockholder of NAMIC as a result of the Merger
with respect to the shares of NAMIC Common Stock converted into Pfizer Common
Stock.
REGULATORY APPROVALS
Pursuant to the HSR Act, and the rules promulgated thereunder, Pfizer and
NAMIC furnished notification of the Merger and provided certain information to
the FTC and the Division. The waiting period under the HSR Act with respect to
the Merger expired on December 7, 1994. No additional filings or waiting periods
are applicable with respect to the Merger pursuant to the HSR Act and the rules
promulgated thereunder.
At any time before or after the Effective Time, the FTC or the Division or a
private person or entity could seek under the antitrust laws, among other
things, to enjoin the Merger or to cause Pfizer to divest itself, in whole or in
part, of NAMIC or of other businesses conducted by Pfizer. There can be no
assurance that a challenge to the Merger will not be made or that, if such a
challenge is made, Pfizer and NAMIC will prevail. The obligations of Pfizer and
NAMIC to consummate the Merger are subject to the condition that there be no
preliminary or permanent injunction or other order by any court or governmental
or regulatory authority of competent jurisdiction prohibiting consummation of
the Merger. Each party has agreed to use its reasonable best efforts to have any
such injunction or order lifted.
WAIVER AND AMENDMENT; TERMINATION AND TERMINATION FEE
Prior to the Effective Time and subject to applicable law, Pfizer, Merger
Sub and NAMIC may, by mutual written consent, (i) extend the time for
performance of any obligations or other acts required by the Merger Agreement;
(ii) waive any inaccuracies in the representations and warranties contained in
the Merger Agreement or in any document delivered pursuant to the Merger
Agreement; and (iii) waive compliance with any agreements or conditions
contained in the Merger Agreement. Subject to applicable law, Pfizer, Merger Sub
and NAMIC may, by mutual written consent, amend or modify any of the provisions
of the Merger Agreement at any time before or after approval of the Merger
Agreement by NAMIC's stockholders. The DGCL, governing mergers among Delaware
corporations, provides, among other things, that a merger agreement may confer
upon the respective boards of directors of the constituent corporations the
authority to amend the agreement at any time prior to the effective time of the
transaction, provided that any amendment effected after approval of such
stockholders may not adversely affect such stockholders. Such adverse effect
includes the alteration of the amount or kind of consideration to be received by
holders of NAMIC Common Stock in exchange for their shares of NAMIC Common
Stock. Any material modification to the terms of the Merger or the Merger
Agreement may also require NAMIC to seek stockholder approval of such
modification prior to the consummation of the Merger, including a change that
could result in the Merger being a taxable transaction to Pfizer, NAMIC or
NAMIC's stockholders.
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The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval by the stockholders of NAMIC, by mutual
consent of Pfizer, Merger Sub and NAMIC in writing, or by either party if (i)
the Merger is not consummated by April 30, 1995; (ii) any federal or state court
of competent jurisdiction or other federal or state governmental body shall have
issued an order, decree or ruling, or taken any other action permanently
restraining, enjoining or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have become final and nonappealable; or
(iii) (A) the other party shall have failed to comply in any material respect
with any of the material covenants and agreements contained in the Merger
Agreement to be complied with or performed by such party at or prior to such
date of termination, and such failure continues for five business days after
receipt of notice, or (B) a material representation or warranty of the other
party contained in the Merger Agreement shall be untrue in any material respect
when made or on and as of the Closing Date if made on and as of the Closing
Date.
Pfizer also shall be entitled to terminate the Merger Agreement if NAMIC's
Board of Directors shall have (i) withdrawn, modified or amended in any respect
its approval or recommendation of the Merger Agreement, the Merger or the
transactions contemplated thereby or (ii) recommended to its stockholders a
Company Acquisition Proposal. For purposes of the Merger Agreement, "Company
Acquisition Proposal" means any of the following (other than the transactions
contemplated by the Merger Agreement) involving NAMIC or any of its
subsidiaries: (i) any merger, consolidation, share exchange, business
combination or other similar transaction pursuant to which control of NAMIC
would be transferred; (ii) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition of 50% or more of the assets of NAMIC and its subsidiaries
taken as a whole, in a single transaction or series of transactions; (iii) any
tender offer or exchange offer for in excess of 50% of the outstanding shares of
capital stock of NAMIC; or (iv) any public announcement of a proposal, plan or
intention to do any of the foregoing or any agreement to engage in any of the
foregoing. NAMIC shall also be entitled to terminate the Merger Agreement if (i)
the Merger shall have been voted on by stockholders of NAMIC and such
stockholders did not approve the Merger by the requisite vote or (ii) NAMIC
accepts a Superior Proposal (as hereinafter defined). See "-- No Solicitation".
In the event the Merger Agreement is terminated (i) by NAMIC, if it shall
have received a Superior Proposal or (ii) by Pfizer, (A) if NAMIC's Board of
Directors shall have (1) withdrawn, modified or amended its approval or
recommendation of the Merger Agreement, the Merger, or the transactions
contemplated thereby or (2) recommended to NAMIC's stockholders a Company
Acquisition Proposal or (B) as a result of an intentional material breach of the
Merger Agreement by NAMIC following the receipt of a Company Acquisition
Proposal, then, in any case, NAMIC shall pay Pfizer a termination fee of
$8,000,000 promptly following such termination.
NO SOLICITATION
NAMIC has agreed that, prior to the Effective Time or the termination of the
Merger Agreement, neither it and its subsidiaries, nor any of their respective
officers, directors, employees, representatives or agents (including, without
limitation, any investment banker, attorney or accountant retained by NAMIC or
any of its subsidiaries), will, directly or indirectly, initiate, solicit or
knowingly encourage (including by way of furnishing non-public information or
assistance) any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Company Acquisition Proposal. NAMIC has
further agreed not to enter into or maintain or continue discussions, or
negotiate with any person or entity in furtherance of such inquiries or to
obtain a Company Acquisition Proposal or agree to or endorse any Company
Acquisition Proposal. NAMIC will notify Pfizer orally (within one business day)
and in writing (as promptly as practicable) of all the relevant details relating
to all written inquiries and proposals which it or any of its subsidiaries or
any such officer, director, employee, investment banker, financial advisor,
attorney, accountant or other representative may receive relating to any of such
matters; PROVIDED, HOWEVER, that NAMIC's Board of Directors shall not be
prohibited from (i) furnishing information to, or entering into discussion or
negotiations with, any person or entity that makes an unsolicited written, bona
fide Company Acquisition Proposal, subject to no conditions relating to
financing or any due diligence review of NAMIC or
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its subsidiaries if, and only to the extent that, the Board of Directors of
NAMIC, after consultation with and based upon the written advice of independent
legal counsel, determines in good faith that such action is necessary for
NAMIC's Board of Directors to comply with its fiduciary duties to stockholders
under applicable law (a "Superior Proposal"), and prior to furnishing such
information to, or entering into discussions or negotiations with, such person
or entity, NAMIC provides notice to Pfizer to the effect that it is furnishing
to, or entering into discussions or negotiations with, such person or entity,
(ii) complying with Rule 14e-2 promulgated under the Exchange Act with regard to
a tender or exchange offer or (iii) failing to make or withdrawing or modifying
its recommendation of the Merger Agreement, the Merger and the transactions
contemplated thereby if there exists a Superior Proposal and NAMIC's Board of
Directors, after consultation with and based upon the written advice of outside
legal counsel, determines in good faith that such action is necessary for
NAMIC's Board of Directors to comply with its fiduciary duties to stockholders
under applicable law.
CONDUCT OF BUSINESS PENDING THE MERGER
NAMIC has agreed that, prior to the Effective Time or the termination of the
Merger Agreement, it will conduct its operations according to its ordinary and
usual course of business consistent with past practice and will use its
commercially reasonable efforts to preserve intact its business organization,
keep available the services of its officers and employees and maintain
satisfactory relationships with licensors, suppliers, distributors, customers
and others having business relationships with NAMIC. NAMIC has also agreed that,
prior to the Effective Time or the termination of the Merger Agreement, it will
maintain its books and records in the usual manner and consistent with past
practice and will not permit a material change in any of its financial
reporting, tax or accounting practices or policies except as may be required by
generally accepted accounting principles.
NAMIC has further agreed that, prior to the Effective Time or the
termination of the Merger Agreement, it will not, except as otherwise
contemplated by the Merger Agreement or as may be agreed to in writing by Pfizer
and Merger Sub: (i) issue, sell, pledge or encumber, or authorize or propose the
issuance, sale, pledge or encumbrance of (A) any shares of capital stock of any
class, or securities convertible into any such shares, or any rights, warrants
or options to acquire any such shares or other convertible securities, or grant
or accelerate any right to convert or exchange any securities of NAMIC for such
shares, other than shares of NAMIC Common Stock issuable upon exercise of
currently outstanding stock options or stock awards, or (B) any other securities
in respect of, in lieu of or in substitution for shares of common stock
outstanding on the date of the Merger Agreement (including the shares of NAMIC
Common Stock); (ii) redeem, purchase or otherwise acquire, or propose to redeem,
purchase or otherwise acquire, any of its outstanding securities (including the
shares of NAMIC Common Stock); (iii) split, combine or reclassify any shares of
its capital stock or declare or pay any dividend or distribution on any shares
of capital stock of NAMIC; (iv) subject to certain exceptions, make any
acquisition of a material amount of assets or securities, any disposition of a
material amount of assets or securities, or enter into or modify any material
contract, agreement, commitment, arrangement, license or right or any release or
relinquishment of any material contract rights, not in the ordinary course of
business; (v) pledge or encumber any material assets of NAMIC except in the
ordinary course of business consistent with past practice; (vi) incur any
long-term debt for borrowed money or short-term debt for borrowed money, except
for debt incurred in the ordinary course of business consistent with past
practice; (vii) propose or adopt any amendments to the NAMIC Certificate of
Incorporation or the NAMIC By-laws (each as hereinafter defined); (viii) enter
into any new employment agreement or amend any existing agreement with any
officer, director or employee or grant any increase in the compensation or
benefits to officers, directors, employees and former employees other than
increases in the ordinary course of business and consistent with past practice
or pursuant to the terms of agreements or plans as currently in effect; (ix)
adopt a plan of complete or partial liquidation or resolutions providing for the
complete or partial liquidation or dissolution of NAMIC; (x) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person except
wholly-owned subsidiaries of NAMIC in the ordinary course of business and
consistent
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with past practices; (xi) make any loans, advances or capital contributions to,
or investments in, any other person (other than loans or advances to
subsidiaries and customary loans or advances to employees in accordance with
past practices); (xii) adopt or amend any bonus, profit sharing, compensation,
stock option, pension, retirement, deferred compensation, employment or other
employee benefit plan, agreement, trust, fund or other arrangement for the
benefit or welfare of any employee or former employee; (xiii) take any action
other than in the ordinary course of business and consistent with past practice
with respect to the grant of any severance or termination pay or with respect to
any increase of benefits payable under its severance or termination pay policies
in effect on the date hereof; (xiv) make any tax election or settle or
compromise any material federal, state, local or foreign income tax liability,
except in the ordinary course of business and consistent with past practice;
(xv) subject to certain exceptions, authorize capital expenditures in excess of
$250,000 in the aggregate; or (xvi) authorize or propose any of the foregoing,
or enter into any contract, agreement, commitment or arrangement to do any of
the foregoing, or take any action which would make any representation or
warranty of NAMIC in the Merger Agreement untrue or incorrect.
EXPENSES
All costs and expenses incurred in connection with the Merger Agreement and
the transactions contemplated thereby are to be paid by the party incurring such
costs and expenses; PROVIDED, HOWEVER, that the costs of printing this Proxy
Statement/Prospectus and all appendices, amendments or supplements thereto shall
be borne equally by NAMIC and Pfizer.
ACCOUNTING TREATMENT
The Merger will be accounted for as a "purchase" under United States
generally accepted accounting principles. Under this method of accounting, the
excess of the purchase price over the fair value of the net assets acquired is
expected to be amortized on a straight-line basis over an appropriate period not
to exceed 40 years.
As a result of the cash payments to be made by NAMIC immediately prior to
the Effective Time of the Merger in respect of outstanding options to acquire
NAMIC Common Stock, NAMIC will recognize nonrecurring compensation expense for
purposes of its financial statements relating to periods prior to the Effective
Time of approximately $5,000,000.
RESALE OF PFIZER COMMON STOCK BY AFFILIATES
The shares of Pfizer Common Stock to be issued in the Merger will be
registered under the Securities Act and will be freely transferable under the
Securities Act, except for shares issued pursuant to the terms of the Merger
Agreement to any holder of NAMIC Common Stock who may be deemed to be an
"affiliate" of NAMIC for purposes of Rule 145 under the Securities Act. Such
NAMIC affiliates may not sell their shares of Pfizer Common Stock acquired in
connection with the Merger, except pursuant to an effective registration
statement under the Securities Act covering such shares, or in compliance with
Rule 145 or another applicable exemption from the registration requirements of
the Securities Act. Persons who may be deemed to be affiliates of NAMIC
generally include individuals or entities that control, are controlled by or are
under common control with NAMIC, and is expected to include the directors, the
executive officers and certain of the principal stockholders of NAMIC.
NAMIC has agreed in the Merger Agreement to use its best efforts to cause
each director, executive officer and other person who may be deemed an affiliate
(for purposes of Rule 145) of NAMIC to execute and deliver a written agreement
intended to ensure compliance with the Securities Act.
This Proxy Statement/Prospectus cannot be used for resales of Pfizer Common
Stock received by any person who may be deemed an affiliate of NAMIC.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes certain federal income tax
considerations relevant to Pfizer, Merger Sub, NAMIC and the NAMIC's
stockholders relating to the Merger. This discussion does not
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deal with all federal income tax considerations that may be relevant to
particular NAMIC's stockholders in light of their particular circumstances, such
as dealers in securities, stockholders who do not hold their NAMIC Common Stock
as capital assets, foreign persons, tax exempt entities or persons who acquired
their shares in compensatory transactions. Furthermore, no foreign, state or
local tax considerations are addressed herein. ACCORDINGLY, NAMIC'S STOCKHOLDERS
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES
OF THE MERGER, INCLUDING THE APPLICABILITY OF FEDERAL, STATE, LOCAL AND FOREIGN
TAX LAWS.
No party to the Merger has requested a ruling from the Service with regard
to the federal income tax consequences of the Merger. As a condition to NAMIC's
obligation to consummate the Merger, O'Sullivan Graev & Karabell, LLP, counsel
to NAMIC, will render an opinion to NAMIC stating that, if the Merger is
consummated in accordance with the provisions of the Merger Agreement and the
exhibits thereto, the Merger will be treated, for federal income tax purposes,
as a reorganization within the meaning of Section 368(a)(i)(A) of the Code by
virtue of Section 368(a)(2)(E) of the Code, NAMIC and Pfizer will each be a
party to that reorganization within the meaning of Section 368(b) of the Code
and no gain or loss will be recognized by NAMIC's stockholders upon their
receipt in the Merger of Pfizer Common Stock in exchange for NAMIC Common Stock
(except to the extent of cash received in lieu of a fractional share of Pfizer
Common Stock or cash consideration received as a result of dividends declared on
Pfizer Common Stock). Such opinion also confirms that the discussion in this
Proxy Statement/Prospectus of certain federal income tax law consequences to
Pfizer, Merger Sub, NAMIC and NAMIC's stockholders fairly presents the current
federal income tax applicable to the Merger and all material tax consequences to
Pfizer, Merger Sub, NAMIC and NAMIC stockholders as a result of the Merger.
NAMIC's stockholders should be aware that such opinion will not be binding
on the Service and that there can be no assurance that future legislative,
judicial or administrative changes or interpretations will not adversely affect
the accuracy of the statements and conclusions set forth herein. Any such
changes or interpretations could be applied retroactively and could affect the
tax consequences of the Merger. The following discussion does not analyze all
potential tax consequences that may be relevant to particular categories of
NAMIC's stockholders subject to special treatment under federal income tax law
or to any individual NAMIC stockholder in light of such stockholder's facts and
circumstances.
CONSEQUENCES TO PFIZER, MERGER SUB AND NAMIC
The Merger should constitute a reorganization as defined in Section
368(a)(1)(A) of the Code by virtue of the application of Section 368(a)(2)(E) of
the Code if carried out in the manner set forth in the Merger Agreement. In such
event, no gain or loss will be recognized by Pfizer or NAMIC upon Pfizer's
issuance of Pfizer Common Stock solely in exchange for NAMIC Common Stock and
the transfer by operation of law of Merger Sub's assets and liabilities to NAMIC
upon consummation of the Merger. Neither Pfizer nor Merger Sub should recognize
any income upon Pfizer's issuance of Pfizer Common Stock directly to NAMIC's
stockholders, or Merger Sub's merger into NAMIC, in the event the Service were
successfully to challenge the tax-free nature of the Merger.
NAMIC's taxable year will end for federal income tax purposes on the
Effective Date, and NAMIC will be required to file a federal income tax return
for its short taxable year ending on the Effective Date. The Merger will also
terminate NAMIC's federal consolidated return group election and cause NAMIC and
any of its consolidated subsidiaries to become members of Pfizer's federal
consolidated return group. The termination of NAMIC's consolidated return group
may terminate any deferral of gains or losses on intercompany NAMIC group
transactions, and if so, they would be required to be reported in NAMIC's final
short period federal consolidated tax return.
As a result of the Merger, NAMIC will experience an ownership change as
defined in Section 382(g) of the Code with the result that any NAMIC tax credit
carryforwards, net operating loss carryovers, capital loss carry forwards or
built-in deductions will become subject to the limitation on use provided
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by SectionSection 382 and 383 of the Code. In addition, Pfizer's acquisition of
NAMIC in the Merger may result in the imposition of certain consolidated return
limitations on the ability of the Pfizer consolidated return group to utilize
any NAMIC tax credit carryovers, net operating loss carryovers, capital loss
carryforwards or built-in deductions pursuant to the Treasury regulations under
Section 1502 of the Code.
CONSEQUENCES TO NAMIC'S STOCKHOLDERS
Generally, no gain or loss will be recognized by NAMIC's stockholders upon
their receipt in the Merger of Pfizer Common Stock (except to the extent of cash
received in lieu of a fractional share of Pfizer Common Stock or cash
consideration received as a result of dividends declared on Pfizer Common
Stock).
The aggregate tax basis of Pfizer Common Stock received in the Merger
(including any fractional share deemed received) will be the same as the
aggregate tax basis of the NAMIC Common Stock surrendered in exchange therefor,
increased by the amount of gain realized in connection with the receipt of cash
by the NAMIC's stockholders.
The holding period for federal income tax purposes of each share of Pfizer
Common Stock received by each NAMIC stockholder in the Merger will include the
period during which such stockholder held his or her NAMIC Common Stock
surrendered in exchange therefor, provided that the NAMIC Common Stock is held
as a capital asset at the time of the Merger.
Cash payments in lieu of a fractional share should be treated as if a
fractional share of Pfizer Common Stock had been issued in the Merger and then
redeemed by Pfizer. A NAMIC stockholder receiving such cash should generally
recognize gain or loss upon such payment equal to the difference (if any)
between such stockholder's basis in the fractional share (which will be a PRO
RATA portion of the stockholder's basis in the Pfizer Common Stock received in
the Merger) and the amount of cash received.
Even if the Merger qualifies as a reorganization, a recipient of shares of
Pfizer Common Stock could recognize income to the extent that such shares were
considered by the Service to be received in exchange for consideration other
than NAMIC Common Stock such as dividends accrued on such NAMIC Common Stock.
All or a portion of such income may be taxable as ordinary income.
Pursuant to the terms of the Merger Agreement, if the Effective Time of the
Merger is after the record date for dividends, if any, declared by Pfizer's
Board of Directors on Pfizer's Common Stock in the first quarter of calendar
1995, the holders of NAMIC Common Stock shall receive a cash amount equal to the
amount they would have received if the Effective Time had occurred before such
record date. The full amount of any such cash payment will be taxable to the
recipient as ordinary income.
Although the matter is not entirely free from doubt, the Pfizer Rights
received in the Merger should not constitute "other property" within the meaning
of Section 356 of the Code and, accordingly, no income, gain or loss should be
recognized upon their receipt. If the Pfizer Rights did constitute "other
property," the status of the Merger as a reorganization for federal income tax
purposes would not be affected, but NAMIC stockholders receiving Pfizer Rights
would be required to recognize income in an amount equal to the lesser of (a)
the value of the Pfizer Rights received and (b) the gain realized on the
exchange of the Pfizer Common Stock and the corresponding Pfizer Rights for the
NAMIC Common Stock. Pfizer believes that the value of each Pfizer Right is
minimal.
LIMITATIONS ON OPINION AND DISCUSSION
The opinion to be rendered by O'Sullivan Graev & Karabell, LLP, will be
based on certain assumptions and subject to certain qualifications to be set
forth therein. NAMIC's stockholders should be aware that such opinion will not
bind the Service and the Service is therefore not precluded from successfully
asserting a contrary opinion. In addition, as noted earlier, all the tax
opinions are subject to certain assumptions, including, but not limited to, the
truth and accuracy of certain
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representations made by Pfizer, NAMIC and certain stockholders of NAMIC. Of
particular importance are certain assumptions and representations relating to
the Code's "continuity of interest" requirement.
In order to satisfy the continuity of interest requirement, NAMIC's
stockholders must not, pursuant to a plan or intent existing at or prior to the
Merger, dispose of or transfer an aggregate amount of (i) their NAMIC Common
Stock in anticipation of the Merger and (ii) Pfizer Common Stock to be received
in the Merger (collectively, "Planned Dispositions"), such that NAMIC's
stockholders, as a group, would no longer have a meaningful continuing equity
interest in the NAMIC business being conducted by Pfizer after the Merger.
NAMIC's stockholders will generally be regarded as having a meaningful
continuing equity interest as long as the number of shares of Pfizer Common
Stock received in the Merger less the number of shares subject to Planned
Dispositions (if any) represents, in the aggregate, a continuing interest
through stock ownership in Pfizer that is equal in value, as of the Effective
Time of the Merger, to more than 50% of the value of all of the formerly
outstanding NAMIC Common Stock as of the same date.
A successful challenge by the Service to the tax-free reorganization status
of the Merger (as a result of a failure of the continuity of interest
requirement or otherwise) would result in NAMIC's stockholders recognizing
taxable gain or loss with respect to each share of NAMIC Common Stock
surrendered equal to the difference between the stockholder's basis in such
share and the fair market value, as of the Effective Time of the Merger, of the
Pfizer Common Stock, the Pfizer Rights and any cash received in exchange
therefor. In such event, a stockholder's aggregate basis in Pfizer Common Stock
so received would equal its fair market value at the Effective Time of the
Merger and the holding period for such stock would begin on the day after the
Effective Date of the Merger.
CONSEQUENCE TO HOLDERS OF OPTIONS TO PURCHASE NAMIC COMMON STOCK
Pursuant to the terms of the Merger Agreement, all outstanding options to
acquire NAMIC Common Stock will be cancelled immediately prior to the Effective
Time of the Merger and the holders thereof shall receive from NAMIC a cash
payment in an amount (net of any applicable withholding tax) equal to the
excess, if any, of $18.00 over the per share exercise price of such options. The
full amount of such cash payment will be taxable to the recipient as ordinary
income.
STOCK EXCHANGE LISTING
Shares of Pfizer Common Stock are currently listed on the NYSE. Application
has been made by Pfizer to list the shares of Pfizer Common Stock to be issued
in connection with the Merger on the NYSE. It is a condition to the consummation
of the Merger that the shares of Pfizer Common Stock to be issued in connection
with the Merger shall have been approved for listing on the NYSE upon official
notice of issuance.
BUSINESS OF NAMIC
INTRODUCTION
NAMIC designs, manufactures and markets a broad range of single-patient use
medical products, offered individually and in customized kits, primarily for use
in the diagnosis and treatment of atherosclerotic cardiovascular disease.
NAMIC's products are used by physicians and skilled clinical staff for fluid
administration and waste containment during angiography and angioplasty. NAMIC's
products are designed to improve the quality of patient care, to enhance the
safety of patients and medical personnel and to help control hospital costs.
During the period from NAMIC's 1990 fiscal year to its 1994 fiscal year, sales
increased from $35.4 million to $57.4 million, a compound annual rate of 12.8%.
There can be no assurance, however, that NAMIC sales will continue to increase
at such rate.
The original predecessor to NAMIC was founded in Massachusetts in 1969 and
was merged in 1977 with North American Instrument Corporation, a New York
corporation, which in turn was merged in May 1991 into NAMIC. NAMIC was
incorporated in Delaware in May 1991. In November 1991, NAMIC consummated the
initial public offering of its Common Stock (the "Offering").
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During the fiscal year ended May 31, 1991, AAS, a corporation wholly-owned
by Phillip H. Morse, the Chairman of the NAMIC Board of Directors, was merged
(the "AAS Merger") with and into NAMIC. The AAS Merger was accounted for as a
combination of entities under common control similar to a "pooling of
interests."
On May 21, 1992, NAMIC acquired Novoste Puerto Rico Inc., a Florida
corporation ("Novoste"). Pursuant to the Agreement and Plan of Merger dated as
of May 11, 1992, among NAMIC, NAMIC Caribe, Inc., a Delaware corporation
(formerly, a Florida corporation), Novoste and certain stockholders of Novoste,
NAMIC Caribe was merged (the "NAMIC Caribe Merger") with and into Novoste, with
Novoste surviving the NAMIC Caribe Merger under the name NAMIC Caribe, Inc. as a
wholly-owned subsidiary of NAMIC.
NAMIC's United States sales operations are conducted through two divisions:
the Angiographic Systems Division, which comprises core domestic sales
operations, and the OEM Division, which markets certain of NAMIC's
nonproprietary products directly to other medical device manufacturers. During
the fiscal year ended May 31, 1993, NAMIC completed a planned downsizing of its
Electronics Systems Division, which provided electronics assembly and testing
services primarily to the Angiographic Systems Division, as well as to a select
number of third parties, and ceased all sales operations of the Electronics
Systems Division in November 1992. International sales are made primarily
through NAMIC's wholly-owned subsidiary, NAMIC International. A portion of
international sales and manufacturing operations are conducted in Ireland by
NAMIC Eireann B.V., a newly-incorporated, wholly-owned subsidiary of NAMIC.
NAMIC's current manufacturing operations are conducted in Glens Falls, New York,
by its Angiographic Systems Division, Aguadilla, Puerto Rico, by NAMIC Caribe
and in Tullamore, Ireland, by NAMIC Eireann B.V. Unless the context requires
otherwise, all references herein to NAMIC are to NAMIC and its predecessors and
its wholly-owned subsidiaries. NAMIC Eireann Limited was formed in July 1993 for
the purpose of conducting certain interim operations prior to the formation of
NAMIC Eireann B.V. NAMIC Eireann Limited currently has no assets and conducts
no operations.
MARKETS AND MARKET INFLUENCES
MEDICAL PROCEDURES USING COMPANY PRODUCTS
The majority of NAMIC's products are used in the diagnosis and treatment,
through angiography and angioplasty, of atherosclerosis. Atherosclerosis is a
progressive and incurable disease in which arterial walls gradually thicken and
lose their natural elasticity and arteries narrow due to accumulated cholesterol
and fat deposits known as plaque. Atherosclerosis causes a reduction in blood
flow to tissues and organs, oxygen deprivation and eventual tissue damage. The
most serious form of atherosclerosis affects the coronary arteries, which
nourish the heart. Coronary artery disease is the leading cause of death in the
United States, causing over 1,500,000 acute myocardial infarctions, or heart
attacks, annually, 720,000 of which result in death. The American Heart
Association estimates that over 6,100,000 Americans have clinically-confirmed
coronary atherosclerosis and that another 34,000,000 suffer from the disease but
have not yet been diagnosed.
Angiography has been the principal procedure used to diagnose and to plan
treatment for atherosclerosis for over 40 years. In angiography, a specialized
tube or catheter is inserted into a blood vessel through a small incision in the
skin. This minimally-invasive insertion is termed percutaneous, meaning that it
occurs through the skin. The catheter is threaded under fluoroscopic guidance (a
form of X-ray) until it is precisely positioned in the suspect area of the
patient's vasculature. Controlled injections of an imaging agent are then made
into the blood vessel to increase the visual contrast between the vessel being
observed and other physiological structures. Both motion and still pictures are
taken under fluoroscopy to completely visualize the blood vessels, allowing the
cardiologist or radiologist to assess both the location and severity of the
atherosclerotic condition. The diagnostic information obtained during
angiography is critical in guiding the physician's choice of treatment.
During the late 1960's, severe cases of arterial occlusion began to be
treated by grafting either a prosthesis or the patient's own blood vessels to
bypass the site of disease. Bypass graft surgery,
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particularly coronary artery bypass graft surgery, is a major surgical procedure
with attendant morbidity, mortality and hospitalization costs. In the early
1980's, angioplasty, a less invasive procedure, was developed, offering
cardiologists and radiologists another treatment option for cases requiring
intervention. This treatment is known as percutaneous transluminal coronary
angioplasty ("PTCA") when performed in the coronary arteries and percutaneous
transluminal angioplasty ("PTA") when performed in peripheral vasculature. The
most common form of angioplasty involves the dilation of the occluded segment of
the affected blood vessel using a balloon-tipped catheter, which widens the
vessel as it stretches the vessel walls. PTCA and PTA can be less costly and
less traumatic alternatives to bypass surgery for the seriously compromised
patient. In less severe cases, these procedures allow a more aggressive
therapeutic approach than non-surgical approaches. Other techniques for
treatment of arterial occlusion include laser angioplasty, which removes plaque
using laser energy, and atherectomy, which removes plaque mechanically using
cutting or grinding catheters.
FACTORS INFLUENCING GROWTH IN PROCEDURES
NAMIC believes, based on industry estimates, that the number of
angiographies and angioplasties performed in the United States has grown over
the past five years. NAMIC expects that the number of such procedures performed
will continue to grow, although the rate of such growth has declined. A number
of factors have contributed, and are expected to continue to contribute, to the
growth in the number of angiography and angioplasty procedures. These factors
include an aging population, increased patient awareness of the risks of
cardiovascular disease, improvements in clinical technology and favorable
reimbursement rates.
The population of the United States is aging. Cardiovascular disease
develops with increasing frequency with age. Accordingly, as the median age of
the population increases, it is anticipated that more people will require
diagnostic and therapeutic procedures.
There is also an increasing awareness of the risks and symptoms of, and
treatment options for, cardiovascular disease. As a result of this heightened
awareness, patients are likely to be diagnosed earlier in the progression of
their diseases and therefore undergo treatment over a longer period of their
lives. In addition, patients who are diagnosed early are likely candidates for
angioplasty. Non-invasive imaging techniques, such as cardiac ultrasound, have
provided improved means of early detection of disease, which leads to referrals
of patients seeking definitive diagnosis with angiography.
Patient compliance has improved and morbidity and mortality have decreased
due to improvements in clinical technology. The introduction of smaller
catheters and better-tolerated imaging agents for angiography and angioplasty
permits procedures to be performed on patients for whom such procedures would
not otherwise be appropriate. Further, such improvements have made it safer for
a patient to undergo multiple angiographies and angioplasties. With restenosis
(recurring accumulation of plaque and associated blood vessel occlusion)
occurring in approximately 30% of all initial angioplasties, follow-up
angiographies and angioplasties are not uncommon.
The clinical success of angiography and angioplasty has contributed to the
growth of the medical subspecialty of interventional cardiology and the
establishment of new Cardiac Catheterization Laboratories. These procedures, as
less costly and less invasive surgical procedures, have a generally favored
status under the Medicare prospective payments system and are often profitable
for hospitals and physicians. Increasing competition and cost containment
pressures have caused hospitals and physicians to participate in outreach
programs to attract referrals from outlying areas. Outreach programs and other
marketing activities increase the number of patients identified and consequently
the number of procedures performed.
FACTORS INFLUENCING DEMAND FOR NAMIC'S PRODUCTS
The growth in the number of medical procedures in which NAMIC's products are
used has resulted in increased demand for NAMIC's products. Other factors
contributing to increased demand
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include the cost benefits and convenience of single-patient use devices and
custom kits, improvements in clinical technology and increased awareness of the
risks of disease borne in blood and blood products.
The advent of the prospective payments system in the 1980s provided an
incentive for hospitals to become more cost conscious, hastening the conversion
from reusable (multiple-patient use) to disposable (single-patient use) devices.
Single-patient use devices help hospitals reduce their central supply staff
requirements and administrative costs by eliminating the need to reprocess and
resterilize devices. Custom kits reduce the stocking and purchasing burdens
associated with providing physicians with single, sterile devices and
accessories. Custom kits also facilitate accurate attribution of costs to a
particular procedure or patient, which is particularly useful in the context of
the prospective payments system. Custom kits reduce set-up time for procedures,
allowing more revenue-generating procedures to be performed with costly
laboratory equipment, helping hospitals improve their return on assets. Custom
kits provide physicians with devices and accessories meeting their individual
procedural needs in a convenient, prepackaged form.
As procedures become increasingly sophisticated, and are performed on older
and sicker patients, a greater number of physiological parameters must be
monitored and a wider variety of medicines administered. The climate of clinical
experimentation precipitated by innovations such as computer-enhanced
angiography, low-profile balloon catheters, laser angioplasty and atherectomy
has engendered innovation in fluid administration systems. Fully-featured
products and fluid administration systems, such as those offered by NAMIC, are
required to meet the specific needs of hospitals, laboratories and individual
physicians and to keep pace with the evolving and varied demands of emerging
medical procedures.
Heightened clinical and public awareness of the risks of contact with blood
and blood products has increased demand for closed fluid systems such as those
designed and offered by NAMIC. These systems reduce the possibility of the
patient's circulatory system coming into contact with external contaminants and
help isolate clinical personnel from unnecessary contact with blood and blood
products.
NATIONAL HEALTH CARE REFORM
Health care reimbursement policy in the United States may be changed in the
future if national health care reform legislation is enacted. NAMIC cannot
predict which, if any, reform measures may be enacted or when any such reform
measures may be implemented or what impact national health care reform may have
on its business.
CUSTOMERS
NAMIC's primary customers in the United States comprise over 2,300
hospitals, medical centers and clinics. Within hospitals, NAMIC serves the
specialty units that perform angiographies and angioplasties. Coronary
angiographies and PTCAs are usually performed in Cardiac Catheterization
Laboratories of which there are estimated to be 1,400 nationwide. There are also
approximately 2,200 Special Procedures Units and Neuroradiology Units in which
peripheral and neurovascular angiographies and PTAs are performed. NAMIC also
serves hospital customers in the specialties of anesthesia, cardiac surgery and
critical care, although these areas represent a smaller portion of NAMIC's
business.
NAMIC is not dependent on any one of its customers and the loss of any
single customer would not have a material adverse effect on NAMIC. None of
NAMIC's customers accounts for more than 10% of NAMIC's total sales.
KEY PRODUCT LINES
CUSTOM KITS
Fundamental to NAMIC's overall marketing approach is extensive
customization. A custom kit offered by NAMIC typically contains certain of
NAMIC's standard and custom products assembled in
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a unique configuration, which meets the specification of a particular customer.
If further specialization is required, NAMIC makes every attempt to modify and
adapt the features of its products to the needs presented. NAMIC has structured
its sales operations, customer service, manufacturing processes and information
systems to reflect the predominance and special business requirements of custom
modifications. NAMIC believes that customization in both products and kits and
the efficiency with which it is achieved is a significant competitive advantage
for NAMIC. During the fiscal years ended May 31, 1994, 1993 and 1992, custom
kits accounted for 60%, 62% and 61%, respectively, of total sales or
approximately $34,400,000, $33,600,000 and $31,700,000, respectively. Revenues
attributable to products included in custom kits are not segregated and are
combined with sales of identical products. Consequently, revenues associated
with sales of products, other than custom kits, reflect such products sold
separately and do not include sales of products included in custom kits.
MORSE MANIFOLDS
The MORSE Manifold line has been NAMIC's core proprietary product line since
1971. The MORSE Manifold was introduced in reusable form as the first
transparent angiographic manifold and has been available since 1982 as a
single-patient use disposable. Consisting of two, three, four or five valves,
the MORSE Manifold simplifies fluid administration and monitoring practices for
its clinical users by controlling the delivery of saline solution, radiographic
imaging agents or other fluids through an angiography or angioplasty catheter.
MORSE ANGIOGRAPHIC SYRINGES
In 1988, NAMIC introduced the MORSE Angiographic Syringe product line, a
single-patient use alternative for the controlled administration of radiographic
imaging agents and other medical fluids otherwise delivered with reusable
syringes.
CLOSED SYSTEMS
Concerns about the risks of contact with blood and blood products created a
need filled by NAMIC's closed system product line, initiated in 1988 with the
PROTECTION STATION. A closed system reduces the possibility of the patient's
circulatory system coming in contact with external contaminants and helps
isolate clinical personnel from unnecessary contact with blood and blood
products. A closed system also provides a convenient means for the physician and
clinical staff to administer fluids and contain procedural wastes.
PERCEPTOR PRODUCTS
In the mid-1980's, NAMIC observed a shift in pressure monitoring practices
during angiography and angioplasty procedures. Cardiac Catheterization
Laboratories and Special Procedures Units began converting to single-patient use
pressure monitoring devices or transducers. NAMIC introduced its PERCEPTOR DT, a
single-patient use transducer, in its 1990 fiscal year to meet this growing
demand. NAMIC originally purchased the PERCEPTOR DT from Graphic Controls
Corporation on a private-label basis. Also in its 1990 fiscal year, NAMIC
acquired from Graphic Controls the molds, tooling, equipment and proprietary
rights to the product line. This backward integration, as well as the AAS
Merger, enabled NAMIC to lower its manufacturing costs, control production
processes for customization and target the device to new as well as existing
customers.
NAMIC introduced the PERCEPTOR MORSE Manifold, a MORSE Manifold which
incorporates a transducer in the body of the device, in May 1991. This product
offers improved blood pressure waveform fidelity and set-up convenience by
eliminating the attenuating effects of fluid-filled pressure monitoring lines
connected to a traditional, pole mounted transducer.
MORSE Y-ADAPTORS
Introduced in October 1990, the MORSE Y-Adaptor complements NAMIC's general
line of angioplasty accessories. The MORSE Y-Adaptor is an adjustable hemostasis
valve, which is attached to the hub of a balloon catheter or guiding catheter to
prevent blood leakage around an indwelling guidewire or other catheter. The
product line was expanded in May 1991 to include both Y- and Tri-configurations,
available in standard or extended form. In December 1993, the MORSE Y-Adaptor
product line
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was expanded further to include large bore MORSE Y-Adaptors. MORSE Y- and
Tri-Adaptors are offered individually or in custom kits with the NAMIC Guidewire
lntroducer and Torque Device. Based on average selling prices of competitive
products, NAMIC estimates the total market for Y-Adaptors to be between $10 and
$15 million annually.
ARIA BALLOON INFLATION DEVICE
In May 1992, NAMIC introduced the ARIA Balloon Inflation Device, used by
physicians to inflate and deflate angioplasty catheter balloons. The ARIA
Balloon Inflation Device is designed to allow substantially more custom
alternatives than competitive devices and is intended for convenient inclusion
in existing custom kits. In addition to the PTCA market, NAMIC believes that its
device will provide a fully-featured specialty upgrade for interventional
radiologists using a reusable or general purpose syringe in PTA.
SELECTOR CATHETERS
In July 1992, NAMIC introduced its new line of proprietary coronary
angiography catheters, marketed under the trade name SELECTOR. This product line
was obtained through NAMIC's acquisition of Novoste in May 1992, as was a line
of peripheral angiography and coronary angioplasty guiding catheters which have
yet to be introduced through NAMIC's direct sales force. The SELECTOR line is
manufactured with a proprietary and patented manufacturing process which permits
the catheter to have a large inner diameter in comparison with the catheter's
outer diameter. The high flow rate through the catheter allows physicians to
downsize to smaller catheters without compromising image quality. NAMIC believes
that SELECTOR catheters will be attractive to the growing outpatient angiography
market as well as for inpatient catheterization.
EPIC LNTRODUCER SHEATHS
In January 1993, NAMIC introduced a line of percutaneous catheter introducer
sets consisting of sheaths, dilators and guidewires marketed under the trade
name EPIC. The EPIC is intended for use in interventional cardiology and
radiology and is designed to provide safe and convenient vascular access during
angiography and angioplasty procedures.
NAMIC is currently engaged in development of extensions for its EPIC
Introducer Sheath and ARIA product lines.
OTHER PRODUCTS
NAMIC's other products include flexCIL Contrast Injection Lines, MORSE
Stopcocks, NAMIC Fluid Administration Sets, NAMIC Pressure Monitoring Lines and
the CONTRAST CONTROLLER.
FlexCIL Contrast Injection Lines are used in high-pressure intravascular
injections of radiographic imaging agents. The product group consists of 500 and
1000 psi-rated clear polyvinyl chloride plastic lines, and a 1200 psi-rated
nylon braid reinforced flexible contrast injection line.
NAMIC's single-patient use MORSE Stopcock product line consists of low,
medium and high pressure fluid control valves. With three pressure ratings, five
terminal fitting styles, two body configurations, tubing extensions and other
variations, the MORSE Stopcock product line is easily customized.
NAMIC's extensive line of standard and custom NAMIC Fluid Administration
Sets includes styles with vent filters, drip chamber filters, microdrip
chambers, wide-bore tubing and other features. The SOSA Pressurized Fluid
Delivery System allows pressurization of fluid in an intravenous or imaging
agent bottle for controlled and convenient aspiration.
NAMIC Pressure Monitoring Lines serve as fluid-filled couplings to connect
MORSE Manifolds to PERCEPTOR DTs to other invasive blood pressure monitoring
devices. NAMIC offers a variety of lengths, unit volumes and connecting hub
configurations and provides custom variations such as
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color-coded or coiled lines. The majority of the items sold under this product
line are marketed by NAMIC's direct sales force, but a significant amount are
sold through its OEM Division in bulk, non-sterile form.
In July 1992, NAMIC introduced the first CONTRAST CONTROLLER and in May
1994, NAMIC introduced its current version of the CONTRAST CONTROLLER, designed
to help hospitals reduce intraprocedural waste of costly non-ionic radiographic
imaging agents (contrast media). Intended for inclusion in custom kits, the
CONTRAST CONTROLLER permits the hospital to purchase contrast media in large
bottles to obtain unit savings by providing a safe and convenient way to decant
the contents into smaller vessels for single-patient use. NAMIC has applied for
patents on the CONTRAST CONTROLLER.
MARKETING AND DISTRIBUTION
NAMIC markets its products worldwide, with its primary focus on the United
States. During fiscal 1994, 84.4% of NAMIC's sales were made through its
Angiographic Systems Division directly to hospitals located in the United
States. NAMIC markets its proprietary products in the United States through its
54 person direct sales organization, consisting of 47 sales associates, 1
associate in the Product Application Specialist Group ("PAS") and 6 Regional
Managers. The remaining United States sales are made through the OEM Division,
through which NAMIC offers its nonproprietary products to other medical products
firms on a private label basis. At the request of a number of hospitals, the
Angiographic Systems Division also provides its medical products in sterile,
packaged form through stockless distributors for short notice delivery, and in
non-sterile, kit form to custom sterile procedure tray packagers for set-up
convenience.
NAMIC's marketing efforts outside the United States are conducted by NAMIC
International and NAMIC Eireann B.V. through 20 independent medical products
distributors in Europe, Asia and South America, 3 direct sales representatives
in Canada and 1 direct sales representative in the United Kingdom. International
sales accounted for 15.6% and 11.5%, respectively, of total sales of NAMIC in
the fiscal years ended May 31, 1994 and 1993, respectively. International sales
for the fiscal year ending May 31, 1992 were less than 10% of total sales. NAMIC
believes that its products are well-suited for use internationally. Although the
conversion from reusable to single-patient use devices is not as advanced, nor
are the factors affecting product needs identical to those in NAMIC's domestic
markets, NAMIC believes its international opportunities are significant,
particularly in Europe.
COMPETITION
The markets for certain of NAMIC's products are highly competitive. No
single company competes with NAMIC across all of its standard and customized
product lines. However, certain companies that compete with NAMIC in certain
product lines and companies that may enter NAMIC's markets have substantially
greater financial, technical and marketing resources at their disposal than does
NAMIC. NAMIC has historically faced and will continue to face considerable
pressure from competition. Other than the limited protection afforded under the
patent laws, there are no substantial legal or technological barriers to entry
preventing other companies from marketing products directly competitive with
NAMIC's products.
The primary competitive factors in the markets for NAMIC's products are
product features, performance and quality, customer service, direct field
support for customers, reputation for technological innovation and price. NAMIC
believes its competitive advantages include dedication to product quality,
innovation and customization, the breadth of its product lines, its direct sales
organization and its customer programs.
MANUFACTURING AND QUALITY ASSURANCE
NAMIC's manufacturing is substantially vertically integrated. Current
production of medical devices is carried out in Glens Falls, New York,
Aguadilla, Puerto Rico and Tullamore, Ireland. NAMIC's core fluid management and
pressure monitoring product lines are manufactured in Glens Falls and Tullamore,
employing processes including injection molding, general assembly, packaging
47
<PAGE>
and custom product and kit assembly. The SELECTOR Angiographic Catheter line is
manufactured in Puerto Rico, along with certain of NAMIC's fluid management
systems, with major processes including extrusion, solid state polymerization,
injection molding, tip forming and packaging. Sterilization services are
purchased by NAMIC from local contract sterilizers in New York, Rhode Island,
Puerto Rico and Ireland.
Quality assurance at NAMIC's Glens Falls medical device manufacturing
facilities consists of four functions: documentation, quality engineering,
inspection and regulatory affairs. On-site quality assurance for the Puerto Rico
and Ireland locations include documentation and inspection, with quality
engineering and regulatory affairs managed by NAMIC's Glens Falls headquarters.
COMPANY WORKFORCE
At February 7, 1995, NAMIC employed approximately 792 associates. Of this
workforce, 83 associates are in sales, customer service and marketing, 667
associates are in manufacturing, quality assurance, human resources, finance and
administration and 42 associates are in engineering and new product development.
NAMIC has no employment agreements with any of its associates. None of NAMIC's
associates are represented by a union or other bargaining group. NAMIC considers
its relations with its associates to be satisfactory.
GOVERNMENT REGULATION
The products manufactured and marketed by NAMIC are subject to regulation by
numerous governmental authorities, principally the United States Food and Drug
Administration (the "FDA") and corresponding state and foreign agencies. NAMIC
is subject to the FDA's standards and procedures regarding registration of its
manufacturing facilities and the manufacture of medical devices in accordance
with Good Manufacturing Practices regulations ("GMP"). Further, NAMIC is subject
to periodic on-site inspection by the FDA for compliance with such standards and
procedures. The FDA also has broad regulatory powers in the areas of preclinical
and clinical testing of new medical devices and the manufacture, marketing and
advertising of medical devices.
The FDA requires that all medical devices introduced to the market be
preceded by either a premarket notification clearance pursuant to Section 510(k)
of the Federal Food, Drug and Cosmetic Act or an approved Premarket Approval
Application ("PMA"). A 510(k) premarket notification clearance indicates FDA
agreement with an applicant's determination that the product for which clearance
has been sought is substantially equivalent to another medical device that was
on the market prior to 1976. An approved PMA application indicates that the FDA
has determined that the device has been proven, through the submission of
clinical data and manufacturing information, to be safe and effective for its
labeled indications. The process of obtaining a 510(k) clearance typically takes
several months and involves the submission of limited clinical data and
supporting information, while the PMA process typically lasts more than one year
and requires the submission of significant quantities of clinical data and
supporting information. Historically, NAMIC's products have required only 510(k)
clearance.
NAMIC maintains device master records, lot history records, standard
operating procedure and customer complaint files, in addition to other records,
and conducts periodic GMP audits and testing to assure compliance with FDA
regulations and GMPs. In May 1994, NAMIC's manufacturing facility located in
Glens Falls, New York received ISO 9000 Registration through the Manufacturer's
Registration Scheme, Department of Health, United Kingdom.
NAMIC is subject to regulation in the foreign countries in which it markets
its products. Many of the regulations applicable to NAMIC's products in such
countries are similar to those of the FDA. However, certain foreign regulatory
agencies establish product standards and qualification requirements for medical
devices which are different from those in the United States. NAMIC has not
experienced any material difficulties with foreign registration of its products.
48
<PAGE>
Federal, state and foreign regulations relating to the manufacture and sale
of NAMIC's products are subject to change. NAMIC cannot predict what impact, if
any, such change might have on its business.
PATENTS, PROPRIETARY RIGHTS AND TRADEMARKS
NAMIC protects its proprietary technology through a combination of
confidentiality agreements and trade secrets and patent laws. NAMIC has 33 U.S.
patents, four of which were acquired in connection with the acquisition of
Novoste. The patents expire during the years ending May 31, 1997 through May 31,
2010. NAMIC has several U.S. and foreign patent applications pending, and
intends to file patent applications with respect to subsequent patentable
developments and improvements when it believes that such protection is in its
best interests. NAMIC considers its patents important but does not believe its
future success is dependent upon patents. In addition to its patented
technology, NAMIC depends on technical expertise, unpatented proprietary
technology and know-how in its business. NAMIC's associates and third parties
who have access to NAMIC's proprietary information have signed confidentiality
agreements with NAMIC.
NAMIC has ten trademarks which have been registered in the United States
Patent and Trademark Office and has submitted applications for additional
trademarks. NAMIC has registered or is pursuing registration of its principal
trademarks in key European countries.
PROPERTIES
NAMIC's headquarters, executive offices, manufacturing plants, product
development offices and associated warehousing facilities are located in Glens
Falls, New York; Aguadilla, Puerto Rico; and Tullamore, Ireland.
NAMIC's corporate headquarters and executive offices located in Glens Falls
consist of a nine-year old, 57,000 square foot building subleased from Phillip
H. Morse, NAMIC's Chairman of the Board and majority stockholder. The majority
of this facility is used for sales, customer service, product development and
administrative offices, with approximately 13,000 square feet dedicated to
finished goods warehousing and shipping functions. During fiscal 1994, NAMIC's
product development function was relocated from an 8,000 square foot facility
owned by NAMIC located in Hudson Falls to the corporate headquarters located in
Glens Falls. NAMIC is in the process of negotiating to sell the Hudson Falls
facility. No assurance can be given that NAMIC will be able to sell such
facility on terms favorable to NAMIC, if at all.
NAMIC's principal manufacturing facility is located in the Glens Falls
Technical Park and consists of a ten-year old, 103,000 square foot building,
which is also subleased from Mr. Morse. NAMIC's injection molding, general
assembly, custom packaging and main warehousing facilities are contained in this
building. NAMIC also leases from an unrelated third party, pursuant to a lease
expiring April 1995, a 12,000 square foot facility adjacent to its principal
manufacturing facility, which previously housed its Electronics Systems
Division, and is currently being used for product automation development.
NAMIC Caribe's manufacturing and administrative offices consist of a
seven-year old, 11,000 square foot facility located in Aguadilla, Puerto Rico,
which is leased from an unrelated third party pursuant to a lease expiring
January 1998.
During the fiscal year ended May 31, 1994, NAMIC completed construction of a
25,000 square foot facility in Ireland. The facility is owned by NAMIC.
NAMIC believes that its facilities are suitable and adequate for its present
operations. NAMIC presently utilizes approximately 65% of the total productive
capacity of its facilities.
LEGAL PROCEEDINGS
NAMIC is subject to various proceedings which arise in the ordinary course
of its business. NAMIC believes that none of such proceedings, individually or
in the aggregate, will have a material adverse effect on the business or
financial condition of NAMIC.
49
<PAGE>
NAMIC MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
TWENTY-SIX WEEKS ENDED NOVEMBER 25, 1994 COMPARED TO TWENTY-SIX WEEKS ENDED
NOVEMBER 26, 1993
NET SALES. Net sales for the twenty-six weeks ended November 25, 1994 were
$30,276,700, an increase of $2,843,400, or 10.4%, over the twenty-six weeks
ended November 26, 1993. Sales of the Angiographic Systems Division increased by
$2,885,700, or 12.6%, to $25,781,600. The increase in sales was primarily due to
an easing of competitive pressures on the Company's pricing, an increase of
$1,194,900 in sales of key core product lines and an increase in sales of
$1,690,800 from sales of the NAMIC CONTRAST CONTROLLER, SELECTOR Angiographic
Catheters and ARIA Inflation Devices. Sales of NAMIC International and NAMIC
Eireann outside the United States were $4,495,100, a decrease of $53,100, or
1.2%, primarily as a result of decreased sales in Japan.
COST OF SALES. Cost of sales was $16,573,200 for the twenty-six weeks ended
November 25, 1994, an increase of $2,283,000, or 16.0%, over the comparable
period in fiscal 1994. Cost of sales represented 54.7% of net sales compared to
52.1% of net sales in fiscal 1994. The increase in cost of sales as a percent of
sales is primarily due to the cumulative effect of price reductions given to
selected customers in fiscal 1994 as well as start-up costs associated with
NAMIC Eireann. This increase was partially offset by improved sales of certain
core products at higher gross margins than the Company's average gross profit
margins.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $10,029,600 for the twenty-six weeks ended November
25, 1994, an increase of $107,800, or 1.1%, over the comparable period in fiscal
1994. The increase is due primarily to increased spending on research and
development and start-up expenses associated with NAMIC Eireann.
INTEREST EXPENSE AND INCOME. Interest expense was $440,200 for the
twenty-six weeks ended November 25, 1994, a decrease of $9,600, or 2.1%, over
the comparable period in fiscal 1994. The decrease is primarily due to a
reduction in the Company's outstanding indebtedness. This decrease was offset by
an increase in the variable interest rates applicable to much of the Company's
outstanding indebtedness. Interest income was $238,200 for the twenty-six weeks
ended November 25, 1994, a decrease of $142,800, or 37.5%, over the comparable
period in fiscal 1994. The decrease is attributable to a decrease in the amount
of cash and cash equivalents available for investment as the Company continued
to use the proceeds of the Offering.
PROVISION FOR INCOME TAXES. For the twenty-six weeks ended November 25,
1994, the Company's provision for income taxes was $503,700, an effective tax
rate of 14.0% of earnings before income taxes, compared with a provision for
income taxes of $1,126,400, or 35.4% of earnings before income taxes, for the
comparable period in fiscal 1994. The decrease in the effective tax rate is
primarily due to the increased contribution of earnings of NAMIC Caribe, Inc. at
a tax rate lower than the tax rate applied to the earnings of the Angiographic
Systems Division.
YEAR ENDED MAY 31, 1994 COMPARED TO YEAR ENDED MAY 31, 1993
NET SALES. Net sales for the year ended May 31, 1994 were $57,366,600, an
increase of $3,213,600, or 5.9%, over the year ended May 31, 1993. Sales of the
Angiographic Systems Division increased by $938,200, or 2.0%, to $48,441,300.
The increase in sales was primarily due to an increase in sales of $1,930,400 of
the ARIA Inflation Device, SELECTOR Angiographic Catheter and CONTRAST
CONTROLLER product lines. The increase in sales was offset by the cumulative
effect of price reductions to customers as a result of increased competition and
customer concern about pending United States health care reform proposals. Sales
of NAMIC International outside the United States were $8,925,300, an increase of
$2,718,000, or 43.8%. Sales of the Electronics Systems Division decreased by
$380,300, or 100.0%, as a result of a planned downsizing program completed in
November 1992.
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<PAGE>
COST OF SALES. Cost of sales was $30,526,600 for the year ended May 31,
1994, an increase of $4,358,700, or 16.7%, over the year ended May 31, 1993.
Cost of sales represented 53.2% of net sales compared to 48.3% of net sales in
fiscal 1993. The increase in cost of sales as a percent of net sales was due
primarily to the cumulative effect of price reductions to customers, increased
contribution of sales of NAMIC International at lower gross margins than sales
of the Angiographic Systems Division and increased sales of the SELECTOR
Angiographic Catheter, EPIC Introducer Sheath and ARIA Inflation Device product
lines at lower gross margins than NAMIC's average gross margins for its other
product lines.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $19,624,900 for the year ended May 31, 1994, an
increase of $1,366,200, or 7.5%, over the year ended May 31, 1993. The increase
is due to increased spending on research and development, start-up costs
associated with NAMIC Eireann B.V. in Ireland and expansion of NAMIC's sales
organization.
INTEREST EXPENSE AND INCOME. Interest expense was $879,200 for the year
ended May 31, 1994, a decrease of $50,400, or 5.4%, over the year ended May 31,
1993. The decrease is primarily due to the reduction in NAMIC's outstanding
indebtedness. Interest income was $655,200 for the year ended May 31, 1994, a
decrease of $39,600, or 5.7%, over the year ended May 31, 1993. The decrease is
attributable to a decrease in the amount of cash and cash equivalents available
for investment as NAMIC continued to use the proceeds of the initial public
offering.
PROVISION FOR INCOME TAXES. For the year ended May 31, 1994, NAMIC's
provision for income taxes was $2,459,300, an effective tax rate of 34.9% of
earnings before income taxes, compared with a provision of $3,540,000, or 36.7%
of earnings before income taxes for the year ended May 31, 1993. The decrease in
the effective tax rate is primarily due to the increased contribution of
earnings of NAMIC International at lower tax rates than earnings of the
Angiographic Systems Division.
YEAR ENDED MAY 31, 1993 COMPARED TO YEAR ENDED MAY 31, 1992
NET SALES. Net sales for the year ended May 31, 1993 were $54,153,000, an
increase of $2,026,800, or 3.9%, over the year ended May 31, 1992. Sales of the
Angiographic Systems Division increased by $2,358,700, or 5.2%, to $47,503,100.
This increase was a result of the effect of increased sales of $1,045,800 of the
PERCEPTOR and Y-Adaptor product lines and increased sales of $1,910,600 of
NAMIC's closed fluid systems, ARIA Inflation Device, EPIC Introducer Sheath and
SELECTOR Catheter product lines. The increase in sales from these product lines
was offset by price reductions to selected customers, a decline in the growth
rate of procedures served, increased competition and delays in new product
introductions. Sales of NAMIC International outside the United States were
$6,207,300, an increase of $1,460,600, or 30.8%, as a result of increased
customer acceptance of NAMIC's products. Sales of the Electronics Systems
Division decreased by $1,824,500, or 82.8%, to $380,300, as a result of a
planned downsizing program completed in November 1992.
COST OF SALES. Cost of sales was $26,168,000 for the year ended May 31,
1993, an increase of $1,080,700, or 4.3%, over the year ended May 31, 1992. Cost
of sales represented 48.3% of net sales compared to 48.1% of net sales in fiscal
1992. The increase in cost of sales as a percent of net sales was due primarily
to increased sales of the new SELECTOR Catheter and EPIC Introducer Sheath
product lines at lower gross margins than NAMIC's average gross margins for its
other product lines. This increase was offset by control of production-related
overhead and favorable labor efficiencies yielded by cost reduction programs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $18,258,700 for the year ended May 31, 1993, an
increase of $1,468,700, or 8.7%, over the year ended May 31, 1992. The increase
was primarily due to increased investment in NAMIC's sales organization,
increased sales and marketing expenses associated with the introduction of new
products and amortization expenses of intangible assets acquired in the
acquisition of Novoste. The increase was partially offset by operating
efficiencies and cost containment programs.
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<PAGE>
INTEREST EXPENSE AND INCOME. Interest expense was $929,600 for the year
ended May 31, 1993, a decrease of $436,100, or 31.9%, over the year ended May
31, 1992. The decrease was primarily due to the repayment of NAMIC's short term
borrowings from the proceeds of NAMIC's initial public offering and the
reduction in the variable interest rates applicable to much of NAMIC's
indebtedness. Interest income was $694,800 for the year ended May 31, 1993, a
decrease of $600, or less than 1%, over the year ended May 31, 1992. The
decrease is attributable to a decrease in the amount of cash and cash
equivalents available for investment as NAMIC continued to use the proceeds of
NAMIC's initial public offering.
PROVISION FOR INCOME TAXES. For the year ended May 31, 1993, NAMIC's
provision for income taxes was $3,540,000, an effective tax rate of 36.7% of
earnings before income taxes, compared with a provision of $3,509,600, or 36.3%
of earnings before income taxes, for the year ended May 31, 1992.
FINANCIAL CONDITION AND LIQUIDITY
NAMIC's primary capital requirements are for capital expenditures and for
investment in inventory and accounts receivable required to sustain its sales
growth. Net cash provided by operating activities was $4,889,900 and $3,005,500
during the twenty-six weeks ended November 25, 1994 and November 26, 1993,
respectively. Net cash provided by operating activities was $5,789,900 and
$8,123,700 during the years ended May 31, 1994 and May 31, 1993, respectively.
During the twenty-six weeks ended November 25, 1994, inventory decreased
$1,679,700, compared to an increase of $1,585,300 for the twenty-six weeks ended
November 26, 1993. The decrease in inventory of $1,679,700 was due to an
increase in the Company's sales during the twenty-six weeks ended November 25,
1994. Net cash used in increasing inventory was $3,909,300 and $1,771,700 during
the years ended May 31, 1994 and May 31, 1993, respectively. NAMIC maintains
substantial inventories of materials, partially-completed assemblies and
finished custom kits for its customers to ensure its ability to deliver products
and protect against service lapses. The increase in net cash used for increasing
inventory during the year ended May 31, 1994 was primarily due to the high
material composition of the PERCEPTOR and ARIA Inflation Device product lines,
start-up inventories of new products, increased customer demand for the SELECTOR
Catheter product line and the start-up of NAMIC Eireann B.V. The Company closely
monitors inventory levels of raw materials, sub-assemblies and finished goods.
The Company has developed procedures to monitor the impact of new product
introductions on existing inventory to measure, account for and minimize
inventory obsolescence.
Net cash used by investing activities was $2,400,900 and $3,040,900 during
the twenty-six weeks ended November 25, 1994 and November 26, 1993,
respectively. Net cash used by investing activities was $7,090,700 and
$12,896,000 during the years ended May 31, 1994 and May 31, 1993, respectively.
Capital expenditures include buildings, molds, tooling and equipment for new
products and equipment to increase production capacity for existing products.
Net cash used for capital expenditures was $2,426,300 and $3,202,400 during the
twenty-six weeks ended November 25, 1994 and November 26, 1993, respectively.
Net cash used for capital expenditures was $7,211,200 and $12,034,600 during the
years ended May 31, 1994 and May 31, 1993, respectively.
NAMIC historically has satisfied its cash requirements from
internally-generated cash flow and bank borrowings. During the twenty-six weeks
ended November 25, 1994, NAMIC generated $5,257,100 in cash flow (net income
plus depreciation, amortization and deferred income taxes and less the effect of
change in accounting principle) compared to $5,147,100 during the twenty-six
weeks ended November 26, 1993. During the year ended May 31, 1994, NAMIC
generated $9,647,300 in cash flow compared to $11,406,500 during the year ended
May 31, 1993. During the year ended May 31, 1994, NAMIC renewed a $10,000,000
unsecured line of credit agreement with a bank. Interest is payable at the
lesser of the prime lending rate, or LIBOR plus 1.25%, until the line of credit
expires on December 31, 1995. During the year ended May 31, 1994, NAMIC Eireann
B.V. entered into an unsecured line of credit agreement with a bank of
approximately $7,400,000. Interest is payable at the prime lending rate, until
the line of credit expires on May 31, 1995. As of November 25, 1994, there
52
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were no outstanding borrowings under the lines of credit. NAMIC believes that
internally-generated cash, the remaining proceeds from NAMIC's initial public
offering and the lines of credit will be sufficient to meet its liquidity and
capital needs for at least the next 12 months.
FOREIGN CURRENCY EXPOSURE
The financial results of the Company are subject to fluctuations in foreign
currency exchange rates. The fluctuations in foreign currency exchange rates has
not had a material impact on the results of operations or liquidity of the
Company.
ADOPTION OF SFAS NO. 109
During the year ended May 31, 1994, NAMIC adopted SFAS No. 109. The
cumulative effect of adopting SFAS No. 109 resulted in an increase in net
earnings of $422,600.
INFLATION
NAMIC does not believe that inflation has had or is likely to have any
impact on NAMIC's operations.
NATIONAL HEALTH CARE REFORM
Health care reimbursement policy in the United States may change in the
future if national health care reform legislation is enacted. NAMIC cannot
predict which, if any, reform measures might be enacted or when any such reform
measures may be implemented or what impact national health care reform may have
on its business.
CHANGE IN ACCOUNTANTS
On August 16, 1993, the Audit Committee of the NAMIC Board of Directors
approved a resolution to dismiss KPMG Peat Marwick LLP as independent certified
public accountants of NAMIC and to engage Coopers & Lybrand, LLP to serve as
auditors of NAMIC for the fiscal year ending May 31, 1994. The Audit Committee's
decision was ratified by the NAMIC Board of Directors.
During NAMIC's fiscal years ended May 31, 1993 and 1992, and the interim
period subsequent to May 31, 1993, there had been no disagreements with KPMG
Peat Marwick LLP on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure or any reportable events.
KPMG Peat Marwick LLP's report on NAMIC's consolidated financial statements for
the fiscal years ended May 31, 1993 and 1992 contained no adverse opinion or
disclaimer of opinion and was not qualified or modified as to uncertainty, audit
scope or accounting principles. KPMG Peat Marwick LLP has furnished NAMIC with a
letter addressed to the Commission stating that it agrees with the foregoing
statements of NAMIC. A copy of KPMG Peat Marwick LLP's letter to the Commission,
dated August 17, 1993, was filed as Exhibit 16 to a Form 8-K filed by NAMIC on
August 20, 1993 with the Commission.
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EXISTING RELATIONSHIPS BETWEEN PFIZER AND NAMIC
Pursuant to a distribution agreement dated January 2, 1992, Cadsand Medica
B.V., a subsidiary of Pfizer, agreed to act as NAMIC's exclusive distributor for
certain NAMIC products in the territories of Belgium, the Netherlands and
Luxembourg (the "Benelux Countries"), except for sales to the United States
military or to any United States instrumentality within the Benelux Countries.
The agreement is automatically renewable for successive one-year terms at the
end of the initial three-year term.
Schneider Japan K.K., a Pfizer subsidiary ("Schneider Japan"), acts as
exclusive distributor in Japan for Koshin International Corporation, a Japanese
distribution company, for the Koshin and NAMIC product lines pursuant to a
distribution agreement dated March 3, 1993. In accordance with the terms of this
distribution agreement, Schneider Japan agreed to pay Koshin an aggregate
monthly fee of nine million yen in consideration of Schneider Japan's acting as
the distributor; Koshin's acting as importer of the NAMIC products; and Koshin's
preparation and assembly of the Koshin products. Koshin delivered a written
notice of termination to Schneider Japan on May 19, 1994, effectively
terminating the Koshin distribution agreement as of November 25, 1994. On
October 31, 1994, however, Koshin and Schneider Japan entered into an Extension
Agreement to extend the agreement from November 26, 1994 to June 20, 1995 and
NAMIC executed a letter agreement on November 4, 1994 (the "NAMIC Letter
Agreement") pursuant to which NAMIC agreed to accept for return any inventory of
NAMIC products held in connection with the distribution agreement. Under the
terms of the NAMIC Letter Agreement, Koshin's account with NAMIC will be
credited for the total value of such items at the original purchase price of the
NAMIC products. In connection therewith, Pfizer executed a letter agreement on
November 8, 1994 in which Pfizer agreed to unconditionally guarantee to
purchase, at NAMIC's request, any products purchased by NAMIC from Koshin at the
price that NAMIC paid Koshin for such products.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT OF NAMIC
The following table sets forth certain information with respect to the
beneficial ownership of NAMIC's Common Stock as of the Record Date by (i) each
person known to NAMIC to own beneficially more than 5% of the outstanding shares
of NAMIC Common Stock, (ii) each of NAMIC's directors, (iii) each of NAMIC's
executive officers and (iv) all directors and officers of NAMIC as a group.
Except as otherwise stated, each of the persons named in the table has sole
voting and investment power with respect to all shares of NAMIC Common Stock
beneficially owned by him or her as set forth opposite his or her name. Unless
otherwise indicated, the address of each stockholder and officer is c/o NAMIC,
Pruyn's Island, Glens Falls, New York 12801.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
---------------------------
SHARES OF
COMMON STOCK PERCENT
-------------- -----------
<S> <C> <C>
Phillip H. Morse................................................... 4,455,662 50.08%
Richard H. Morse (1)............................................... 1,146,900 12.89%
The State of Wisconsin Investment Board (2)........................ 900,000 10.17%
Cynthia L. Morris.................................................. 220,000 2.47%
William L. Bitner III, Ph.D. (3)................................... 7,750 0.09%
William E. Philion (4)............................................. 4,750 0.05%
David W. Gilmour (5)............................................... 66,100 0.74%
Donald F. Boden (6)................................................ 28,700 0.32%
All officers and directors (5)(6).................................. 4,782,962 53.76%
<FN>
- ------------------------
(1) Address is c/o Boston Financial Management, Inc., 40 Broad Street, Suite
1010, Boston, Massachusetts 02109. Richard H. Morse and Phillip H. Morse
are brothers.
(2) Address is P.O. Box 7842, Madison, Wisconsin 53707. Based on a Schedule
13G, as amended, filed with the Securities and Exchange Commission.
(3) Address is 54 Wincrest Drive, Glens Falls, New York 12804. Includes 1,000
shares owned by Dr. Bitner's wife, and 3,750 shares which Mr. Bitner has
the right to acquire within 60 days of the Record Date by the exercise of
stock options.
(4) Address is 18 Westwood Drive, Queensbury, New York 12804. Includes 3,750
shares which Mr. Philion has the right to acquire within 60 days of the
Record Date by the exercise of stock options.
(5) Includes 10,000 shares which Mr. Gilmour has the right to acquire within 60
days of the Record Date by the exercise of stock options.
(6) Includes 18,000 shares which Mr. Boden has the right to acquire within 60
days of the Record Date by the exercise of stock options.
</TABLE>
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MANAGEMENT OF NAMIC
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of NAMIC are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------- --- --------------------------------------------------------
<S> <C> <C>
Phillip H. Morse (1)(2) 53 Chairman of the Board of Directors
Cynthia L. Morris 34 President, Chief Executive Officer and Director
David W. Gilmour 30 Chief Financial Officer, Treasurer and Secretary
Donald F. Boden 49 Vice President, Sales and Marketing
William L. Bitner III, Ph.D. (1)(2) 64 Director
William E. Philion (1)(2) 68 Director
<FN>
- ------------------------
(1) Member of the Audit Committee.
(2) Member of the Stock Option and Compensation Committee.
</TABLE>
PHILLIP H. MORSE founded NAMIC in 1969, has served as Chairman of the Board
since its inception and, until May 1991, was its President and Chief Executive
Officer. Mr. Morse is a member of the Stock Option and Compensation Committee
and the Audit Committee of the Board of Directors. Prior to founding NAMIC, Mr.
Morse was employed with the USCI Division of C.R. Bard, Inc. as a sales
representative for a line of cardiovascular catheters and products. NAMIC's core
product line, the MORSE Manifold, was conceived and developed by Mr. Morse. Mr.
Morse holds a Bachelor of Arts Degree in Sociology from the University of Maine
at Orono. Mr. Morse also serves on the Board of Directors of Evergreen Bancorp,
Inc. and First National Bank of Glens Falls.
CYNTHIA L. MORRIS has been President and Chief Executive Officer and a
director of NAMIC since May 1991. Ms. Morris joined NAMIC in April 1985 as
Manager, Product Development. Prior to becoming President and Chief Executive
Officer of NAMIC in May 1991, Ms. Morris served as NAMIC's Executive Vice
President and Chief Operating Officer (from November 1989), its Treasurer and
Chief Financial Officer (from May 1988) and its Director, Corporate Development
(from August 1986). Ms. Morris holds a Bachelor of Arts Degree in Physics from
the State University of New York at Plattsburgh.
DAVID W. GILMOUR, C.P.A., joined NAMIC in June 1989 as Controller. Mr.
Gilmour was appointed Secretary, Treasurer and Chief Financial Officer in May
1991. A graduate of Siena College with a Bachelor of Business Administration
Degree, Mr. Gilmour was a Senior Tax Consultant with the independent public
accounting firm of Ernst & Young for three years prior to joining NAMIC.
DONALD F. BODEN, Vice President, Sales and Marketing, joined NAMIC in
October 1991 as Director of Corporate Development. Mr. Boden has served as Vice
President of Marketing since May 1992. Prior to joining NAMIC, Mr. Boden served
for three years as President of Cardiovascular Designs, Inc., and 18 years in
the positions of Director of Sales and Director of Marketing with various
divisions of C.R. Bard, Inc. Mr. Boden received his Bachelor of Arts Degree in
Mathematics from Mt. St. Mary's College and his Master's Degree in Management
from Adelphi University.
WILLIAM L. BITNER III, Ph.D. has been a director of NAMIC since July 1991
and is a member of the Stock Option and Compensation Committee and the Audit
Committee of the Board of Directors. Dr. Bitner, who retired in June 1993,
served as Chairman and President and Chief Executive Officer of First National
Bank of Glens Falls and Evergreen Bancorp, Inc. since 1980. Dr. Bitner has had a
20-year career in the field of education, including four years as Associate
Commissioner for the New York State Education Department and nine years as
Superintendent of the Glens Falls City School District. Dr. Bitner has served as
President of the New York State Bankers Association and the Independent Bankers
Association of New York State, and was a member of the American Bankers
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Association Leadership Conference. Dr. Bitner was formerly a Director of the
Business Council of New York State, a director of the Lake Champlain Cancer
Research Organization, Inc. of Burlington, Vermont, and a director of the Board
of Governors of The Glens Falls Hospital. Dr. Bitner holds a Bachelor's Degree
in History, a Master's Degree in Administration and a Doctorate in Management.
WILLIAM E. PHILION has served as a director of NAMIC since 1980 and is a
member of the Stock Option and Compensation Committee of the Board of Directors.
He is a former President and Chief Executive Officer of the Glens Falls Hospital
and is currently a hospital consultant. Mr. Philion also serves on the Boards of
Directors of Evergreen Bancorp, Inc., First National Bank of Glens Falls and
Finch, Pruyn & Co., a privately-held manufacturing company. Mr. Philion has
served as Examiner for the New York State Board of Radiology, President of the
Northeastern New York Hospital Association and Trustee of the New York State
Hospital Association.
Executive officers of NAMIC are appointed by the NAMIC Board of Directors
and serve at the discretion of the Board. NAMIC has no employment agreements
with any of its executive officers. However, Ms. Morris and Messrs. Gilmour and
Boden entered into employment agreements with Pfizer simultaneously with the
execution of the Merger Agreement. See "THE MERGER -- Management and Operations
After the Merger; Employment Agreements."
SIGNIFICANT ASSOCIATES
Robert E. Franklin joined NAMIC in March 1988 as Quality Assurance Manager.
Mr. Franklin was appointed Director of Quality Assurance and Regulatory Affairs
in June 1992. Prior to joining NAMIC, Mr. Franklin served 13 years as Director
of Quality Assurance and Quality Control, and Quality Assurance Manager for
Sterling Pharmaceuticals, Inc. Mr. Franklin graduated from the State University
of New York at Albany with a Bachelor of Science Degree in Biology.
Rebecca M. Smith has been with NAMIC since 1978. Manager, Human Resources
since 1985, Ms. Smith was promoted to her current position as Director, Human
Resources in 1989. Ms. Smith holds an Associate Degree in Business
Administration from Adirondack Community College and is pursuing the completion
of her Bachelor of Science Degree at Skidmore College. Ms. Smith has membership
on numerous community service boards including the Employee Assistance Program
and the Private Industry Council.
NAMIC EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth a summary of the compensation of the Chairman
of NAMIC's Board of Directors and NAMIC's President and Chief Executive Officer
and the other executive officers of NAMIC for services rendered in all
capacities during NAMIC's fiscal years ended May 31, 1994, 1993 and 1992,
respectively.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION -------------
---------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)(1)
- -------------------------------------- --------- --------- --------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
1994 $ 216,000 $ 25,000 $ 0 $ 0 $ 0
Cynthia L. Morris 1993 $ 200,000 $ 50,000 $ 0 $ 0 $ 0
President & CEO 1992 $ 150,000 $ 100,000 $ 125,000(2) 350,000 $ 0
Phillip H. Morse 1994 $ 250,000 $ 0 $ 0 $ 0 $ 25,769
Chairman of the 1993 $ 250,000 $ 0 $ 0 $ 0 $ 48,300
Board of Directors 1992 $ 340,691 $ 0 $ 0 $ 0 $ 76,393
1994 $ 110,954 $ 15,000 $ 0 50,000 $ 2,892
David W. Gilmour 1993 $ 85,000 $ 31,885 $ 0 25,000 $ 2,910
Secretary, Treasurer & CFO 1992 $ 85,000 $ 45,000 $ 0 25,000 $ 6,905
1994 $ 135,000 $ 0 $ 0 0 $ 3,099
Donald F. Boden 1993 $ 125,000 $ 40,000 $ 0 70,000 $ 2,551
V.P., Sales and Marketing (3) 1992 $ 62,058 $ 30,000 $ 0 55,000 $ 0
<FN>
- ------------------------------
(1) Amounts reported as "All Other Compensation" represent income after
expenses derived from rental payments made by NAMIC to Mr. Morse under two
real property subleases in the aggregate amount of $25,769, $48,300 and
$76,393, respectively, in fiscal 1994, 1993 and 1992, and contributions
made to Messrs. Gilmour and Boden under NAMIC's Profit Sharing and
Incentive Plan.
(2) Amount represents the dollar value of the difference between the price paid
by Ms. Morris for shares of NAMIC's Common Stock and the fair market value
of NAMIC Common Stock at the date of purchase.
(3) Mr. Boden's employment as an executive officer commenced October 7, 1991.
</TABLE>
STOCK OPTION GRANTS
The following table sets forth, for the fiscal year ended May 31, 1994, the
number of individual grants of stock options made during such fiscal year to
each of the executive officers named in the Summary Compensation Table. All
options granted during the last fiscal year were granted pursuant to NAMIC's
1991 Employee Stock Option Plan at an exercise price equal to the fair market
value on the date of grant.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
NUMBER OF ANNUAL RATES OF
SECURITIES PERCENT OF TOTAL STOCK PRICE
UNDERLYING OPTIONS/SARS APPRECIATION FOR
OPTIONS/SARS GRANTED TO EXERCISE OR OPTION TERM (1)
GRANTED (2) EMPLOYEES IN BASE PRICE EXPIRATION ----------------
NAME (#) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ----------------------------------- ------------ ---------------- ----------- ------------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Cynthia L. Morris 0 N/A N/A N/A N/A N/A
Phillip H. Morse 0 N/A N/A N/A N/A N/A
David W. Gilmour 50,000(3) 63% $10.00 Feb. 24, 2001 203,550 474,359
Donald F. Boden 0 N/A N/A N/A N/A N/A
<FN>
- ------------------------------
(1) Potential realizable value is based on the assumption that the price of
NAMIC's Common Stock appreciates at the annual rate shown, compounded
annually, from the date of grant until the end of the seven-year option
term. The values are calculated in accordance with rules promulgated by the
Securities and Exchange Commission and do not reflect NAMIC's estimate of
future stock price appreciation.
(2) All options granted are non-qualified options granted at an exercise price
equal to fair market value on the date of grant, vest at a rate of 20% per
year and have a term of seven years.
(3) Each option becomes exercisable on a cumulative basis in five equal annual
installments on February 24, 1995, 1996, 1997, 1998 and 1999, respectively,
provided that the optionee continues to be employed by NAMIC on such dates.
</TABLE>
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STOCK OPTION EXERCISES
The following table sets forth information with respect to each exercise of
stock options during the fiscal year ended May 31, 1994, by each of the named
executive officers and the number of options held at fiscal year end and the
aggregate value of in-the-money options held at fiscal year end.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES NUMBER OF SECURITIES IN- THE-MONEY
ACQUIRED ON VALUE UNDERLYING OPTIONS/SARS OPTIONS/SARS AT FISCAL
EXERCISE REALIZED AT FISCAL YEAR-END (#) YEAR END ($)
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- --------------------------------------- ----------- --------- ----------------------- -----------------------
<S> <C> <C> <C> <C>
Cynthia L. Morris N/A N/A 140,000/210,000 $0/$0
Phillip H. Morse N/A N/A N/A N/A
David W. Gilmour N/A N/A 15,000/85,000 $0/$0
Donald F. Boden N/A N/A 26,000/49,000 $15,000/$22,500
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS OF NAMIC
NAMIC subleases two of its manufacturing and office facilities from its
Chairman, Phillip H. Morse. Such facilities were acquired in 1984 and 1989 and
were financed by the sale of industrial revenue bonds issued by the Glens Falls
Industrial Development Agency (the "Glens Falls IDA"). Pursuant to such
financings, the Glens Falls IDA acquired title to such facilities and leased
them to Mr. Morse, who in turn subleased them to NAMIC. The primary lease
between the Glens Falls IDA and Mr. Morse and the sublease between Mr. Morse and
NAMIC expire on December 1, 2004. Upon expiration of the primary lease and
payment of all amounts due thereunder to the Glens Falls IDA, Mr. Morse has the
option to purchase the facilities from the Glens Falls IDA for $1.00.
Capital funds to acquire and improve the property covered by the 1984
primary lease were provided by the issuance of $4.5 million tax-exempt variable
rate demand industrial revenue bonds. NAMIC's sublease with Mr. Morse requires
it to make monthly rental payments based on the weekly floating interest rate on
the bonds plus 450 basis points, applied to the original principal amount of the
bonds. NAMIC makes an additional rental payment of $200,000 annually which is
used to redeem outstanding bonds. During the fiscal year ended May 31, 1994,
NAMIC paid Mr. Morse rentals under the sublease with respect to the 1984 primary
lease of $316,686.
Capital funds for the real property improvements covered by the 1989 primary
lease were provided by a private placement of $3.5 million in fixed rate demand
industrial revenue bonds. The sublease calls for monthly rental payments based
on the bond interest rate plus 325 basis points, applied to the original
principal amount of the bonds. NAMIC is also obligated to make annual payments
of $320,000 per year until expiration of the sublease on December 1, 2004.
During the fiscal year ended May 31, 1994, NAMIC paid Mr. Morse rentals under
the sublease with respect to the 1989 primary lease of $455,004.
NAMIC and NAMIC International have guaranteed the obligations of Mr. Morse
under the 1984 and 1989 primary leases, and NAMIC's obligations under its
sublease are personally guaranteed by Mr. Morse. Under the terms of the primary
leases and subleases, Mr. Morse is responsible for maintaining security for the
bondholders in the form of two irrevocable letters of credit and for expenses,
such as property taxes, remarketing fees and trustee fees.
NAMIC believes that the terms of the sublease and the guarantees described
above are no less favorable to NAMIC than those that could be obtained from
unaffiliated third parties. Pursuant to the Merger Agreement, Pfizer will
guarantee the obligations of NAMIC to Mr. Morse under the sublease, effective as
of the Effective Time.
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DESCRIPTION OF PFIZER CAPITAL STOCK
The following information is subject to the detailed provisions of Pfizer's
Restated Certificate of Incorporation (the "Pfizer Certificate of
Incorporation"), Pfizer's By-laws, as amended (the "Pfizer By-laws"), and the
Rights Agreement. A copy of the Pfizer Certificate of Incorporation is filed as
an exhibit to Registration Statement No. 33-49629 dated May 27, 1993; a copy of
the Pfizer By-laws is filed as part of Form 8-K dated June 23, 1994; and a copy
of the Rights Agreement is filed as an exhibit to Registration Statement No.
33-25893 dated December 5, 1988. The following information is qualified in its
entirety by reference to such filed documents.
The Pfizer Certificate of Incorporation authorizes 750,000,000 shares of
Pfizer Common Stock, par value $.10 per share, and 12,000,000 shares of
Preferred Stock, without par value (the "Pfizer Preferred Stock"). As of October
31, 1994, 314,778,431 shares of Pfizer Common Stock were outstanding. No shares
of Pfizer Preferred Stock are outstanding, although 1,900,000 shares of the
Series A Preferred Stock are reserved for issuance in connection with the Rights
(as hereinafter defined) referred to below.
COMMON STOCK
Holders of Pfizer Common Stock are entitled to receive such dividends as may
be declared by the Board of Directors of Pfizer in its discretion out of any
assets of Pfizer legally available therefor. Holders of Pfizer Common Stock are
entitled to one vote for each share held and have no preemptive rights or other
rights to subscribe for additional shares of Pfizer. There are no cumulative
voting rights. In the event of any liquidation, dissolution or winding up of
Pfizer, whether voluntary or involuntary, the holders of Pfizer Common Stock
will be entitled to share ratably in the net assets of Pfizer remaining after
the payment of all creditors and liquidation preferences, if any. There are no
repurchase or redemption provisions, conversion rights or sinking fund
provisions applicable to Pfizer Common Stock. All issued shares of Pfizer Common
Stock are fully paid and non-assessable.
Pfizer's Common Stock is traded on the NYSE under the symbol "PFE". Pfizer
acts as its own transfer agent.
PREFERRED STOCK
The Board of Directors of Pfizer is authorized by the Pfizer Certificate of
Incorporation to issue Pfizer Preferred Stock from time to time in one or more
series, each series to have such dividend rates, convertibility features,
redemption rates and prices, liquidation preferences, voting rights and other
rights, limitations and qualifications as the Board of Directors may determine,
subject to certain exceptions. The Pfizer Certificate of Incorporation provides
that holders of each series of Pfizer Preferred Stock will be entitled to
receive cash dividends in accordance with the resolutions of the Board of
Directors of Pfizer fixing such series before any dividends (other than
dividends payable in Pfizer Common Stock) may be paid on Pfizer Common Stock.
The foregoing Pfizer Certificate of Incorporation provisions could be used by
management to dilute the voting and ownership interests of persons seeking to
gain control of Pfizer.
CERTAIN ANTI-TAKEOVER PROVISIONS
THIS SECTION SUMMARIZES CERTAIN PROVISIONS OF DELAWARE LAW WHICH MAY HAVE
ANTI-TAKEOVER EFFECTS. THIS SECTION ALSO SETS FORTH A BRIEF DISCUSSION OF THE
REASONS FOR, AND THE OPERATION AND EFFECTS OF, CERTAIN PROVISIONS OF THE PFIZER
CERTIFICATE OF INCORPORATION AND PFIZER BY-LAWS WHICH MAY HAVE CERTAIN ANTI-
TAKEOVER EFFECTS.
STATE TAKEOVER LEGISLATION
SECTION 203 OF THE DGCL. Section 203 of the DGCL prohibits publicly-held
Delaware corporations, including Pfizer and NAMIC, from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date such person became an interested stockholder, unless (i) prior to such
date, the business combination or the transaction which resulted in the
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stockholder becoming an interested stockholder is approved by the Board of
Directors of the corporation, (ii) upon consummation of the transaction which
resulted in the stockholder becoming an interested stockholder, the interested
stockholder owns at least 85% of the outstanding voting stock or (iii) on or
after such date the business combination is approved by the Board of Directors
of the corporation and by the affirmative vote of at least 66 2/3% of the
outstanding voting stock which is not owned by the interested stockholder. A
"business combination" includes a merger, an asset sale and certain other
transactions resulting in a financial benefit to the stockholder. An "interested
stockholder" is a person who, together with affiliates and associates, owns (or
within three years, did own) 15% or more of the corporation's voting stock.
Under certain circumstances, Section 203 of the DGCL may make it more
difficult for a person who would be an "interested stockholder" to effect
various business combinations with a corporation for a three-year period,
although the corporation's certificate of incorporation or stockholders may
elect to exclude a corporation from the restrictions imposed thereunder. The
Pfizer Certificate of Incorporation does not exclude Pfizer from the
restrictions imposed under Section 203 of the DGCL. Similarly, the NAMIC
Certificate of Incorporation does not exclude NAMIC from the restrictions
imposed under Section 203. It is anticipated that the provisions of Section 203
of the DGCL may encourage companies interested in acquiring Pfizer to negotiate
in advance with the Pfizer Board of Directors, since the stockholder approval
requirements would be avoided if a majority of the directors then in office
approve either the business combination or the transaction which results in the
stockholder becoming an interested stockholder.
STOCKHOLDER RIGHTS PLAN
On September 24, 1987, the Board of Directors of Pfizer declared a dividend
distribution of one preferred stock purchase right (a "Right") for each
outstanding share of Pfizer Common Stock. The dividend was payable on October 5,
1987 to stockholders of record on that date. Each Right entitles the registered
holder to purchase from Pfizer one-hundredth (1/100) of a share of Series A
Preferred Stock at a price of $300 per one-hundredth (1/100) of a share or
$30,000 per share (the "Exercise Price"), subject to certain adjustments. The
description and terms of the Rights are set forth in the Rights Agreement which
is included as an exhibit to Pfizer's Form 8-K filed with the Commission on
September 24, 1987 as amended by a First Amendment to Rights Agreement which is
included as an exhibit to Pfizer's Form 8 filed with the Commission on June 22,
1989.
The Rights will be evidenced by Pfizer's Common Stock certificates unless a
"Distribution Date" occurs. A "Distribution Date" occurs at the close of
business on the earlier of:
(i) the tenth day after a person or group of affiliated or associated
persons ("Acquiring Person"), other than, among other persons, Pfizer, any
subsidiary of Pfizer or any employee benefit plan or employee stock plan of
Pfizer or of any subsidiary of Pfizer ("Exempt Person"), acquires, or
obtains the right to acquire, beneficial ownership of 15% or more of the
outstanding shares of Pfizer Voting Stock, together with the public
announcement of such; or
(ii) the tenth day, or such later date as may be determined by action of
the Board of Directors prior to the time any person becomes an Acquiring
Person, after the commencement of, or public announcement of an intention to
make, a tender or exchange offer (other than a tender or exchange offer by
an Exempt Person for Pfizer Voting Stock) which, if consummated, would
result in the ownership of 30% or more of the outstanding shares of Pfizer
Voting Stock even if no shares are actually purchased pursuant to such
offer.
The Rights Agreement provides that, until the Distribution Date, the Rights
may only be transferred together with Pfizer Common Stock. Until the
Distribution Date (or earlier redemption or expiration of the Rights), the
surrender for transfer of any of the Pfizer Common Stock certificates
outstanding as of October 5, 1987, will constitute the transfer of the Rights
associated with the Pfizer Common Stock represented by such certificate.
Separate certificates evidencing the Rights ("Right
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<PAGE>
Certificates") would be mailed to holders of record of Pfizer Common Stock as of
the close of business on the Distribution Date and such separate certificates
alone will evidence the Rights from and after the Distribution Date.
The Rights are not exercisable until the Distribution Date. The Rights will
expire at the close of business on October 5, 1997, unless earlier redeemed by
Pfizer as described below.
The Series A Preferred Stock will be nonredeemable and, unless otherwise
provided in connection with the creation of a subsequent series of preferred
stock, will be subordinate to any other series of Pfizer's preferred stock.
Series A Preferred Stock may not be issued except upon exercise of the Rights.
Each share of Series A Preferred Stock will be entitled to receive when, as and
if declared, a preferential cash dividend in an amount equal to 100 times the
cash dividends declared on Pfizer Common Stock and a preferential quarterly cash
dividend, if any, less the per share amount of all cash dividends paid on the
Series A Preferred Stock since the immediately preceding quarterly dividend
payment date. In addition, the Series A Preferred Stock is entitled to 100 times
any non-cash dividends (other than dividends payable in equity securities)
declared on the Pfizer Common Stock, in like kind. In the event of liquidation,
the holders of the Series A Preferred Stock will be entitled to receive a
liquidation payment in an amount equal to the greater of $300 per one-hundredth
of a share or 100 times the payment made per share of Pfizer Common Stock, plus
all accrued and unpaid dividends and distributions. Each share of Series A
Preferred Stock will have 1 vote, voting together with the shares of Pfizer
Common Stock. In the event of any merger, consolidation or other transaction in
which common shares are exchanged, each share of Series A Preferred Stock will
be entitled to receive 100 times the amount received per share of Pfizer Common
Stock. The rights of the Series A Preferred Stock as to dividends, liquidation
and voting are protected by antidilution provisions.
The number of shares of Series A Preferred Stock issuable upon exercise of
the Rights is subject to certain adjustments from time to time in the event of a
stock dividend on, or a subdivision or combination of, the Pfizer Common Stock.
The Exercise Price is subject to adjustment in the event of extraordinary
distributions of cash or other property to holders of Pfizer Common Stock.
Unless the Rights are earlier redeemed or the transaction is approved by the
Continuing Directors, in the event that, after the Rights have become
exercisable, (a) Pfizer were to be acquired in a merger or other business
combination (in which any shares of Pfizer's Common Stock are changed into or
exchanged for other securities or assets) or (b) more than 50% of the assets or
earning power of Pfizer and its subsidiaries (taken as a whole) were to be sold
or transferred in one or a series of related transactions, the Rights Agreement
provides that proper provision must be made so that each holder of a Right will
from and after such date have the right to receive, upon payment of the Exercise
Price, that number of shares of common stock of the acquiring company having a
Fair Market Value (as such term is defined in the Rights Agreement) at the time
of such transaction equal to two times the Exercise Price. In addition, unless
the Rights are earlier redeemed, or the transaction is approved by the
Continuing Directors in the event that any person or group becomes the
beneficial owner of 15% or more of Pfizer's Voting Stock, the Rights Agreement
provides that proper provision must be made so that each holder of record of a
Right, other than the Acquiring Person (whose Rights will thereupon become null
and void), will thereafter have the right to receive, upon payment of the
Exercise Price, that number of shares of Series A Preferred Stock having a Fair
Market Value (as such term is defined in the Rights Agreement) at the time of
the transaction equal to two times the Exercise Price.
Fractions of shares of Series A Preferred Stock may, at the election of
Pfizer, be evidenced by depositary receipts. Pfizer may also issue cash in lieu
of fractional shares which are not integral multiples of one-hundredth of a
share.
At any time on or prior to the close of business on the tenth day (or such
later date as the Continuing Directors may determine) after a public
announcement that a person has become an Acquiring Person, Pfizer may redeem the
Rights in whole, but not in part, at a price of $0.05 per Right (the "Redemption
Price"), should the Board of Directors of Pfizer determine in its sole
discretion that redemption is in the best interests of Pfizer and its
stockholders, whether or not (i) any of the Rights
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have theretofore been exercised, or (ii) exercise thereof at the time would be
deemed economic, or (iii) any of the transactions referred to in Sections 11 or
13 of the Rights Agreement have been proposed. Immediately upon the action of
the Board of Directors of Pfizer authorizing redemption of the Rights, the right
to exercise the rights will terminate and the only right of the holders of
Rights will be to receive the Redemption Price.
Until a Right is exercised, the holder, as such, will have no rights as a
stockholder of Pfizer, including, without limitation, the right to vote or to
receive dividends.
The Rights have certain potential "anti-takeover" effects in that exercise
of the Rights may cause substantial dilution to a person or group who or that
attempts to acquire Pfizer on terms not approved by Pfizer's Board of Directors.
NAMIC does not have a stockholder rights plan.
AMENDMENTS TO CERTIFICATE OF INCORPORATION
Under the DGCL, a proposed charter amendment requires an affirmative vote of
a majority of the outstanding stock entitled to vote thereon and a majority of
the outstanding stock of each class entitled to vote thereon unless otherwise
specified in a company's certificate of incorporation. As to the following
specific matters, Article SEVENTH of the Pfizer Certificate of Incorporation
requires an affirmative vote of the holders of at least 80% of all the
outstanding shares of voting stock for any amendment of the following: (i) the
number of directors of Pfizer, (ii) the classification of the Board of
Directors, (iii) the manner in which newly created directorships or vacancies in
the Board of Directors are filled, (iv) the manner in which any director, or the
entire Board of Directors, may be removed from office, (v) the manner in which a
quorum of directors is prescribed, (vi) the power of the Board of Directors to
adopt, amend or repeal the By-laws, (vii) the manner in which the business and
affairs of Pfizer are managed, and (viii) the designation of those paragraphs of
Article SEVENTH of the Pfizer Certificate of Incorporation for which such 80%
vote is required.
The NAMIC Certificate of Incorporation does not contain any such
supermajority provisions.
SPECIAL CHARTER PROVISIONS
The Pfizer Certificate of Incorporation contains provisions which are
summarized below that are intended to enhance the likelihood of continuity and
stability in the composition of Pfizer's Board of Directors (the "Board") and in
the policies formulated by the Board and to discourage an unsolicited takeover
of Pfizer if the Board determines that such a takeover is not in the best
interests of Pfizer and its stockholders. The provisions are intended to provide
the Board with the means to counter takeover tactics the Board deems essentially
unfair and to enhance the ability of the Board to negotiate with any potential
acquiring person or group from the strongest possible position. However, these
provisions could have the effect of discouraging certain attempts to acquire
Pfizer or remove incumbent management even if some or a majority of stockholders
deemed such an attempt to be in their best interests.
FAIR PRICE PROVISION. The Pfizer Certificate of Incorporation contains
provisions intended to insure that all stockholders will receive the same
consideration per share if Pfizer is involved in certain Business Transactions
(as hereinafter defined). Generally, the affirmative vote of the holders of a
majority of the outstanding shares of Pfizer Common Stock is required to approve
any merger, consolidation or similar business transaction involving Pfizer and
the sale, lease or exchange of all or substantially all of its assets. However,
the Pfizer Certificate of Incorporation requires the affirmative vote of the
holders of at least 80% of the then outstanding shares of voting stock, voting
together as a single class, to approve certain Business Transactions with
Related Persons (as hereinafter defined), unless there is compliance with the
requirements specified below.
The voting requirements outlined above will not apply if (1) the Business
Transaction is approved by Pfizer's Board of Directors and by a majority of the
Continuing Directors (as defined in the Pfizer Certificate of Incorporation),
provided that there are at least five Continuing Directors; or (2) the
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<PAGE>
consideration to be received by the holders of the stock of Pfizer is at least
equal to the higher of (a) the highest price paid per share by the Related
Person in acquiring any shares of Pfizer's capital stock or (b) the highest
closing sale price (i) on any day since the Related Person acquired its first
share of Pfizer Common Stock which it continues to own or control or (ii) on any
day during the five-year period preceding the Board's consideration of the
Business Transaction, whichever period is shorter. In addition to satisfying the
fair price criteria, various procedural requirements would have to be met,
including the requirements that the Related Person must not have received from
Pfizer newly issued shares of capital stock or any loans or other financial
assistance, and a proxy statement complying with the federal securities laws
disclosing the terms and conditions of the proposed Business Transaction must be
mailed to all stockholders.
A "Related Person" generally is defined under the Pfizer Certificate of
Incorporation as any person which beneficially owns or controls 10% or more of
the outstanding shares of voting stock. For purposes of the Pfizer Certificate
of Incorporation, a Related Person is deemed beneficially to own shares owned,
directly or indirectly, by an affiliate or associate (as defined) of the Related
Person as well as (i) shares which it or any such affiliate or associate has a
right to acquire pursuant to any agreement, arrangement or understanding or upon
the exercise of conversion rights, exchange rights, warrants or options, or the
right to vote, and (ii) shares beneficially owned by any other person with whom
the Related Person or any such affiliate or associate has any agreement,
arrangement or understanding for the purposes of acquiring, holding, voting or
disposing of any shares of voting stock of Pfizer.
A "Business Transaction" includes: (a) any merger or consolidation of Pfizer
or any subsidiary with any Related Person, (b) any sale, lease or other
disposition to or with any Related Person of all or a substantial part of the
assets of Pfizer or any of its majority-owed subsidiaries, (c) the issuance or
delivery of any shares of voting stock, or any securities convertible into
voting stock, of Pfizer or any of its majority-owned subsidiaries, to a Related
Person in exchange for cash, securities or other property, and (d) any voluntary
liquidation or dissolution of Pfizer.
The Pfizer Certificate of Incorporation provides that this provision may not
be repealed or amended in any respect, unless such action is approved by the
affirmative vote of the holders of at least 80% of the then outstanding shares
of voting stock of Pfizer, voting together as a single class.
The NAMIC Certificate of Incorporation does not contain any fair price
provision.
STAGGERED BOARD OF DIRECTORS. The Pfizer Certificate of Incorporation
provides that each director will serve for a three-year term and that
approximately one-third of the directors are to be elected annually. Therefore,
it would take two annual meetings of stockholders to change the majority of the
members of the Board of Directors. The affirmative vote of the holders of at
least 80% of the then outstanding shares of voting stock of Pfizer, voting
together as a single class, is required to amend, repeal or adopt any provision
inconsistent with the provisions relating to the staggered board of directors.
Directors may be removed only for cause and only by affirmative vote of at least
80% of all of the outstanding shares of capital stock of Pfizer as are entitled
to vote generally in the election of directors.
NAMIC does not have a staggered Board of Directors.
COMPARATIVE RIGHTS OF NAMIC'S STOCKHOLDERS AND
PFIZER'S STOCKHOLDERS
If the Merger is consummated, holders of NAMIC Common Stock will become
holders of Pfizer Common Stock and the rights of the former NAMIC stockholders
will be governed by the Pfizer Certificate of Incorporation, the Pfizer By-laws
and the DGCL. The rights of Pfizer stockholders under the Pfizer Certificate of
Incorporation and the Pfizer By-laws differ in certain respects from the rights
64
<PAGE>
of NAMIC stockholders under NAMIC's Restated Certificate of Incorporation (the
"NAMIC Certificate of Incorporation") and NAMIC's By-laws (the "NAMIC By-laws").
Both Pfizer and NAMIC are organized under the DGCL. Certain differences between
the rights of Pfizer stockholders and NAMIC stockholders are summarized below.
See also "CERTAIN ANTI-TAKEOVER PROVISIONS."
STOCKHOLDER ACTION
Under the DGCL, unless otherwise provided in the certificate of
incorporation, any action required or permitted to be taken at any meeting of
stockholders may instead be taken without a meeting, without prior notice and a
vote, if a written consent setting forth the action taken is signed by holders
of outstanding stock having at least the number of votes that would be required
to authorize such action at a meeting of stockholders at which all shares
entitled to vote thereon were present and voting and a prompt notice of the
action so taken is provided to those stockholders who have not consented in
writing. The Pfizer Certificate of Incorporation provides that all actions
required to be taken by the stockholders of Pfizer may be taken solely at a duly
called annual or special meeting of stockholders and prohibits stockholder
action by written consent.
NAMIC permits stockholder action by written consent.
SPECIAL STOCKHOLDER MEETINGS
Under the DGCL, a special meeting of stockholders may be called only by the
board of directors or by such person or persons as may be authorized by the
certificate of incorporation or by-laws. The Pfizer By-laws provide that a
special meeting of stockholders may be called by a majority of the Board of
Directors or by the Chair of the Board.
The NAMIC By-laws provide that a special meeting may be called by the Board
of Directors, the Chairman of the Board, the President or the record holders of
at least a majority of the issued and outstanding shares of NAMIC Common Stock.
REMOVAL OF DIRECTORS
Under the DGCL, the entire board of directors or any individual director may
be removed from office, with or without cause, by the holders of a majority of
the shares then entitled to vote at an election of directors unless otherwise
specified in a company's certificate of incorporation. If the board of directors
is classified, a director may be removed by a vote of stockholders only for
cause, unless otherwise specified in a company's certificate of incorporation.
The Pfizer Certificate of Incorporation provides for a classified board of
directors and, accordingly, directors may be removed only for cause.
The NAMIC Certificate of Incorporation does not provide for a classified
Board of Directors and, accordingly, NAMIC's directors may be removed with or
without cause by the holders of a majority of the shares then entitled to vote.
VACANCIES ON THE BOARD
As permitted under the DGCL, the Pfizer By-laws provide that the Board of
Directors may within specified limits increase or decrease the number of
directors and fill any vacancy on the Board, including vacancies resulting from
an increase in the number of directors. The NAMIC By-laws provide that the Board
of Directors may increase or decrease the number of directors and fill any
vacancy on the Board.
INDEMNIFICATION OF DIRECTORS
The DGCL generally provides that a corporation may, and in certain
circumstances, must, indemnify its directors, officers, employees or agents
("indemnitees") for expenses, judgments or settlements actually and reasonably
incurred by them in connection with suits and other legal actions or proceedings
if they acted in good faith and in a manner they reasonably believed to be in or
not opposed to the best interests of the corporation and had no reasonable cause
to believe their conduct was unlawful and, with respect to any criminal action
or proceeding, had no reasonable cause to believe their conduct was unlawful. In
the case of shareholder derivative suits, the corporation may indemnify its
directors, officers, employees or agents if they acted in good faith and in a
manner they
65
<PAGE>
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification may be made in respect of any claim,
issue or matter as to which such person shall have been adjudged liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which the action was brought determined upon application that, in view
of all the circumstances of the case, the person is fairly and reasonably
entitled to indemnity for such expenses as the court deems proper. The DGCL also
permits a corporation to adopt procedures for advancing expenses to indemnitees
without the need for a case-by-case determination of eligibility, so long as in
the case of officers and directors they undertake to repay the amounts advanced
if it is ultimately determined that the officer or director was not entitled to
be indemnified. The Pfizer By-laws provide that Pfizer shall indemnify to the
fullest extent permitted by law as it presently exists or may hereafter be
amended, its indemnitees in respect of claims, actions, suits or proceedings
based upon, arising from, relating to or by reason of the fact that any such
director or officer serves or served in such capacity, with the corporation or
at the request of Pfizer in any capacity with any other enterprise. Pfizer shall
pay expenses to a director or officer in advance of the final disposition of a
proceeding; provided, however, that such payment shall be made only upon receipt
of an undertaking by the director or officer to repay all amounts advanced if it
is ultimately determined that the director or officer is not entitled to be
indemnified. Pfizer has entered into indemnification agreements with each of its
directors and executive officers which terminate on the later of ten years after
the date the indemnitee ceases to serve as a director or officer of Pfizer or
the final termination of any proceeding then pending in respect of which the
indemnitee is granted such rights of indemnification. Pfizer shall be required
to indemnify such persons in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Pfizer Board of Directors.
The NAMIC By-laws provide that NAMIC shall indemnify to the fullest extent
permitted by Delaware law, as it presently exists or may hereafter be amended,
its directors and officers in respect of claims, actions, suits or proceedings
based upon, arising from, relating to or by reason of the fact that any such
director or officer serves or served in such capacity with NAMIC or at the
request of NAMIC in any capacity with any other enterprise.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling Pfizer or NAMIC
pursuant to the foregoing provisions, Pfizer and NAMIC have been informed that
in the opinion of the Commission such indemnification is against public policy
as expressed in the Securities Act and is therefore unenforceable.
LEGAL MATTERS
The validity of the shares of the Pfizer Common Stock to be issued in
connection with the Merger will be passed upon for Pfizer by Weil, Gotshal &
Manges (a partnership including professional corporations), New York, New York.
An opinion of O'Sullivan Graev & Karabell, LLP, counsel to NAMIC, relating
to certain tax consequences of the Merger has been filed as an exhibit to the
Registration Statement of which this Proxy Statement/Prospectus is a part.
EXPERTS
The consolidated financial statements and schedules of Pfizer and subsidiary
companies as of December 31, 1993, 1992 and 1991 and for each of the years then
ended, incorporated by reference herein and elsewhere in this Proxy
Statement/Prospectus, have been incorporated by reference herein and in this
Proxy Statement/Prospectus in reliance upon the reports of KPMG Peat Marwick
LLP, independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing. The
report of KPMG Peat Marwick LLP covering the December 31, 1993 and 1992
consolidated financial statements refers to the adoption of the provisions of
SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" and SFAS No. 109, "Accounting for Income Taxes," in 1992.
66
<PAGE>
With respect to the unaudited interim financial information for the periods
ended April 3, 1994 and April 4, 1993, July 3, 1994 and July 4, 1993, and
October 2, 1994 and October 3, 1993, incorporated by reference herein, the
independent certified public accountants have reported that they applied limited
procedures in accordance with professional standards for a review of such
information. However, their separate reports included in Pfizer's Quarterly
Report on Form 10-Q for the quarters ended April 3, 1994, July 3, 1994 and
October 2, 1994, and incorporated by reference herein, state that they did not
audit and they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their reports on such information should
be restricted in light of the limited nature of the review procedures applied.
The accountants are not subject to the liability provisions of section 11 of the
Securities Act for their reports on the unaudited interim financial information
because those reports are not a "report" or a "part" of the Proxy
Statement/Prospectus prepared or certified by the accountants within the meaning
of sections 7 and 11 of the Securities Act.
The consolidated balance sheet of NAMIC as of May 31, 1994, and the
consolidated statements of earnings, changes in stockholders' equity and cash
flows and schedules for the fiscal year then ended, included in this Proxy
Statement/Prospectus, have been included herein in reliance on the reports of
Coopers & Lybrand, L.L.P., independent auditors, given on the authority of that
firm as experts in accounting and auditing. The consolidated financial
statements and schedules of NAMIC and subsidiaries as of May 31, 1993 and for
the years ended May 31, 1993 and 1992, have been included herein and in this
Proxy Statement/Prospectus in reliance upon the reports of KPMG Peat Marwick
LLP, independent certified public accountants, appearing elsewhere herein, and
upon the authority of said firm as experts in accounting and auditing.
Representatives of Coopers & Lybrand, LLP are expected to be present at the
Special Meeting and available to respond to appropriate questions.
PROPOSALS BY NAMIC'S STOCKHOLDERS
If the Merger is not consummated, stockholder proposals intended to be
presented at the 1995 Annual Meeting of Stockholders of NAMIC must be received
by NAMIC not later than April 28, 1995 for inclusion in the proxy materials for
such meeting.
67
<PAGE>
NAMIC U.S.A. CORPORATION AND SUBSIDIARIES
------------------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Coopers & Lybrand................................................................................ F-2
Report of KPMG Peat Marwick LLP............................................................................ F-3
Audited Financial Statements:
Consolidated Balance Sheets as of May 31, 1994 and 1993.................................................. F-4
Consolidated Statements of Earnings for the years ended May 31, 1994, 1993 and 1992...................... F-5
Consolidated Statements of Cash Flows for the years ended May 31, 1994, 1993 and 1992.................... F-6
Consolidated Statements of Changes in Stockholders' Equity for the years ended May 31, 1994, 1993 and
1992.................................................................................................... F-8
Notes to Consolidated Financial Statements............................................................... F-9
Interim Financial Statements (unaudited):
Consolidated Balance Sheet as of November 25, 1994....................................................... F-19
Consolidated Statements of Earnings for the twenty-six weeks ended November 25, 1994 and November 26,
1993.................................................................................................... F-20
Consolidated Statements of Cash Flows for the thirteen weeks ended November 25, 1994 and November 26,
1993.................................................................................................... F-21
Notes to Consolidated Financial Statements............................................................... F-22
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Stockholders and Board of Directors, NAMIC U.S.A. Corporation:
We have audited the accompanying consolidated balance sheet of NAMIC U.S.A.
Corporation and subsidiaries as of May 31, 1994, and the related consolidated
statements of earnings, changes in stockholders' equity and cash flows for the
year then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit. The financial
statements of NAMIC U.S.A. Corporation and subsidiaries as of May 31, 1993 and
for the two-year period ended May 31, 1993, were audited by other auditors whose
report, dated July 9, 1993, expressed an unqualified opinion on those
statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of NAMIC U.S.A.
Corporation and subsidiaries as of May 31, 1994, and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
As described in Note 6 to the financial statements, the Company changed its
method of accounting for income taxes in accordance with Statement of Financial
Accounting Standards No. 109.
Coopers & Lybrand
Albany, New York
July 1, 1994
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Stockholders and Board of Directors, NAMIC U.S.A. Corporation:
We have audited the accompanying consolidated balance sheet of NAMIC U.S.A.
Corporation and subsidiaries as of May 31, 1993, and the related consolidated
statements of earnings, changes in stockholders' equity and cash flows for each
of the years in the two-year period ended May 31, 1993. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of NAMIC U.S.A.
Corporation and subsidiaries as of May 31, 1993, and the results of their
operations and their cash flows for each of the years in the two-year period
ended May 31, 1993, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Albany, New York
July 9, 1993
F-3
<PAGE>
NAMIC U.S.A. CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
MAY 31, 1994 MAY 31, 1993
-------------- --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents...................................................... $ 10,471,727 $ 15,227,310
Trade accounts receivable, less allowance for doubtful accounts of $115,000 as
of May 31, 1994 and May 31, 1993.............................................. 8,520,063 7,458,644
Other receivables.............................................................. 264,780 230,813
Inventories.................................................................... 13,473,136 9,563,837
Prepaid expenses............................................................... 119,491 97,206
Deferred income taxes.......................................................... 656,372 198,280
-------------- --------------
Total current assets......................................................... 33,505,569 32,776,090
-------------- --------------
Property, plant and equipment, net............................................... 34,808,663 31,532,640
Patents, net..................................................................... 10,315,048 7,342,842
Goodwill, net.................................................................... 3,177,791 4,408,506
Other assets, net................................................................ 778,797 654,238
-------------- --------------
Total assets................................................................. $ 82,585,868 $ 76,714,316
-------------- --------------
-------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of obligations under capital leases....................... $ 682,202 $ 402,625
Current installments of long-term debt......................................... 202,481 197,493
Accounts payable............................................................... 1,578,299 1,099,306
Accrued payroll and related costs.............................................. 803,831 949,342
Accrued profit sharing plan contribution....................................... 300,000 300,000
Other accrued expenses......................................................... 289,649 125,770
Income taxes payable........................................................... 1,053,396 302,062
-------------- --------------
Total current liabilities.................................................... 4,909,858 3,376,598
Obligations under capital leases, less current installments...................... 5,700,000 6,382,202
Long-term debt, less current installments........................................ 562,213 764,694
Deferred income taxes............................................................ 5,961,319 2,889,157
-------------- --------------
Total liabilities............................................................ 17,133,390 13,412,651
-------------- --------------
Stockholders' equity:
Class A preferred stock, $1.00 par value. Authorized 65,778 shares; no shares
issued and outstanding........................................................ -- --
Class B preferred stock, $.01 par value. Authorized 4,934,222 shares; no shares
issued and outstanding........................................................ -- --
Common stock, $.01 par value. Authorized 20,000,000 shares; Issued 9,269,662
shares as of May 31, 1994 and May 31, 1993.................................... 92,697 92,697
Additional paid-in capital..................................................... 40,588,653 40,588,653
Retained earnings.............................................................. 29,630,754 24,625,315
Cumulative translation adjustments............................................. 208,499 --
-------------- --------------
70,520,603 65,306,665
Treasury stock, 565,000 shares as of May 31, 1994 and 230,000 shares as of May
31, 1993, at cost............................................................... (5,068,125) (2,005,000)
-------------- --------------
Total stockholders' equity................................................... 65,452,478 63,301,665
-------------- --------------
Commitments and contingencies
Total liabilities and stockholders' equity................................... $ 82,585,868 $ 76,714,316
-------------- --------------
-------------- --------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements
F-4
<PAGE>
NAMIC U.S.A. CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED MAY 31,
----------------------------------------------
1994 1993 1992
-------------- -------------- --------------
<S> <C> <C> <C>
Net sales........................................................ $ 57,366,611 $ 54,152,963 $ 52,126,115
Cost of sales.................................................... 30,526,632 26,167,961 25,087,237
-------------- -------------- --------------
Gross profit................................................. 26,839,979 27,985,002 27,038,878
Selling, general and administrative expenses..................... 19,624,878 18,258,670 16,789,924
-------------- -------------- --------------
Operating income............................................. 7,215,101 9,726,332 10,248,954
-------------- -------------- --------------
Other income (expense):
Interest expense............................................... (879,239) (929,601) (1,365,726)
Interest income................................................ 655,150 694,795 695,396
Miscellaneous income........................................... 51,143 151,726 92,454
-------------- -------------- --------------
(172,946) (83,080) (577,876)
-------------- -------------- --------------
Earnings before income taxes................................. 7,042,155 9,643,252 9,671,078
Income taxes..................................................... 2,459,322 3,540,004 3,509,634
-------------- -------------- --------------
Earnings before cumulative effect of change in accounting
principle................................................... 4,582,833 6,103,248 6,161,444
Cumulative effect of change in accounting principle.............. 422,606 -- --
-------------- -------------- --------------
Net earnings................................................. $ 5,005,439 $ 6,103,248 $ 6,161,444
-------------- -------------- --------------
-------------- -------------- --------------
Earnings per share:
Earnings before cumulative effect of change in accounting
principle..................................................... $ .52 $ .66 $ .74
Cumulative effect of change in accounting principle............ .04 -- --
-------------- -------------- --------------
Net earnings................................................. $ .56 $ .66 $ .74
-------------- -------------- --------------
-------------- -------------- --------------
Weighted average common shares outstanding....................... 8,875,158 9,292,990 8,167,679
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements
F-5
<PAGE>
NAMIC U.S.A. CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED MAY 31,
------------------------------------------------
1994 1993 1992
-------------- --------------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings................................................. $ 5,005,439 $ 6,103,248 $ 6,161,444
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Effect of change in accounting principle................... (422,606) -- --
Depreciation and amortization.............................. 4,742,053 4,023,528 2,787,466
Loss from sale of assets................................... 28,387 91,715 50,683
Compensation expense....................................... -- -- 151,460
Deferred taxes, net........................................ 322,429 1,279,680 510,480
Changes in assets and liabilities:
Trade accounts receivable................................ (1,061,419) (529,630) (841,045)
Other receivables........................................ (33,967) (62,458) (1,880)
Inventories.............................................. (3,909,299) (1,771,659) (637,763)
Prepaid expenses......................................... (22,285) (58,588) (1,842)
Income tax receivable.................................... -- -- 62,638
Other assets............................................. (107,522) (147,412) 66,679
Accounts payable......................................... 478,993 (251,622) (667,278)
Accrued payroll and related costs (145,511) 256,940 (328,111)
Accrued profit sharing plan contribution................. -- (300,000) 50,000
Other accrued expenses................................... 163,879 (158,560) 20,813
Income taxes payable..................................... 751,334 (351,501) 653,563
-------------- --------------- ---------------
Net cash provided by operating activities.............. 5,789,905 8,123,681 8,037,307
-------------- --------------- ---------------
Cash flows from investing activities:
Capital expenditures......................................... (7,211,178) (12,034,598) (5,639,843)
Purchase of Novoste, net of cash acquired.................... -- -- (11,979,032)
Proceeds from sale of assets................................. 246,920 166,872 17,450
Acquisition of patents....................................... (126,486) (1,028,319) --
-------------- --------------- ---------------
Net cash used by investing activities.................. (7,090,744) (12,896,045) (17,601,425)
-------------- --------------- ---------------
Cash flows from financing activities:
Net proceeds from initial public offering.................... -- -- 45,596,745
Net short-term borrowings (payments)......................... -- -- (6,261,306)
Principal payments of lease obligations...................... (402,625) (599,093) (546,757)
Principal payments of long-term debt......................... (197,493) (192,749) (1,360,307)
Preferred stock dividends.................................... -- -- (121,653)
Purchase of common stock for treasury........................ (3,063,125) (2,005,000) --
Redemption of preferred stock................................ -- -- (5,309,800)
Sale of common stock......................................... -- -- 125,000
-------------- --------------- ---------------
Net cash (used) provided by financing activities: (3,663,243) (2,796,842) 32,121,922
Effect of exchange rate changes on cash and cash equivalents... 208,499 -- --
-------------- --------------- ---------------
(Decrease) increase in cash and cash equivalents............... (4,755,583) (7,569,206) 22,557,804
Cash and cash equivalents at beginning of year 15,227,310 22,796,516 238,712
-------------- --------------- ---------------
Cash and cash equivalents at end of year....................... $ 10,471,727 $ 15,227,310 $ 22,796,516
-------------- --------------- ---------------
-------------- --------------- ---------------
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest................................................... $ 881,361 $ 928,328 $ 1,410,745
-------------- --------------- ---------------
-------------- --------------- ---------------
Income taxes............................................... $ 1,384,490 $ 2,611,825 $ 2,287,602
-------------- --------------- ---------------
-------------- --------------- ---------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements
F-6
<PAGE>
NAMIC U.S.A. CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplemental schedule for noncash investing and financing activities:
A capital lease obligation of $627,884 was incurred during the year
ended May 31, 1992 when the Company entered into a lease for certain
equipment.
The Company recorded $125,000 of additional paid-in capital as a result
of a sale of common stock to the President and Chief Executive Officer
during the year ended May 31, 1992.
The Company recorded $26,460 of additional paid-in capital as a result
of option grants made at exercise prices below the fair market value of the
common stock at the time of grant during the year ended May 31, 1992.
See accompanying Notes to Consolidated Financial Statements
F-7
<PAGE>
NAMIC U.S.A. CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED MAY 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CUMULATIVE TOTAL
-------------------- PREFERRED PAID-IN RETAINED TRANSLATION TREASURY STOCKHOLDERS'
SHARES AMOUNT STOCK CAPITAL EARNINGS ADJUSTMENTS STOCK EQUITY
--------- --------- ----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at May 31, 1991...... 6,484,662 $ 64,847 $ 53,098 $ -- $12,482,276 $ -- $ -- $12,600,221
Sale of common stock......... 25,000 250 -- 249,750 -- -- -- 250,000
Preferred stock dividends.... -- -- -- -- (121,653) -- -- (121,653)
Sale of common stock from
initial public offering,
net......................... 2,760,000 27,600 -- 45,569,145 -- -- -- 45,596,745
Redemption of preferred
stock....................... -- -- (53,098) (5,256,702) -- -- -- (5,309,800)
Stock options granted........ -- -- -- 26,460 -- -- -- 26,460
Net earnings................. -- -- -- -- 6,161,444 -- -- 6,161,444
--------- --------- ----------- ----------- ----------- ----------- ----------- ------------
Balance at May 31, 1992...... 9,269,662 92,697 -- 40,588,653 18,522,067 -- -- 59,203,417
--------- --------- ----------- ----------- ----------- ----------- ----------- ------------
Purchase of common stock for
treasury.................... (230,000) -- -- -- -- -- (2,005,000) (2,005,000)
Net earnings................. -- -- -- -- 6,103,248 -- -- 6,103,248
--------- --------- ----------- ----------- ----------- ----------- ----------- ------------
Balance at May 31, 1993...... 9,039,662 92,697 -- 40,588,653 24,625,315 -- (2,005,000) 63,301,665
--------- --------- ----------- ----------- ----------- ----------- ----------- ------------
Purchase of common stock for
treasury.................... (335,000) -- -- -- -- -- (3,063,125) (3,063,125)
Translation adjustments...... -- -- -- -- -- 208,499 -- 208,499
Net earnings................. -- -- -- -- 5,005,439 -- -- 5,005,439
--------- --------- ----------- ----------- ----------- ----------- ----------- ------------
Balance at May 31, 1994...... 8,704,662 $ 92,697 $ -- $40,588,653 $29,630,754 $ 208,499 $(5,068,125) $65,452,478
--------- --------- ----------- ----------- ----------- ----------- ----------- ------------
--------- --------- ----------- ----------- ----------- ----------- ----------- ------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements
F-8
<PAGE>
NAMIC U.S.A. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of NAMIC U.S.A.
Corporation, a Delaware corporation (the "Company"), and its subsidiaries, all
of which are wholly-owned. All significant intercompany balances and
transactions have been eliminated in consolidation.
The Company and its subsidiaries design, manufacture and market a broad
range of single-patient use medical products offered individually and in
customized kits primarily for use in the diagnosis and treatment of
atherosclerotic cardiovascular disease through angiography and angioplasty. The
products are offered to hospitals and other health care providers.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and highly liquid instruments
purchased with maturities of three months or less.
SALES, COST OF SALES AND INVENTORIES
Revenues from sales together with related cost of sales are recognized when
products are shipped to customers or when services are rendered. Inventories are
stated at the lower of cost or market using the first-in, first-out (FIFO)
method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Buildings, machinery and
equipment under capital leases are stated at the present value of future minimum
lease payments at the beginning of the lease.
Depreciation on property, plant and equipment is calculated on a
straight-line basis over the estimated useful lives of the assets. Buildings,
building improvements and leasehold improvements have estimated useful lives
ranging from 15 to 30 years and machinery and equipment have estimated useful
lives ranging from 3 to 20 years. Assets held under capital leases and leasehold
improvements are amortized on a straight-line basis over the shorter of the
lease term or estimated useful life of the assets.
OTHER ASSETS
Included in other assets are organization costs, covenant not to compete and
trademarks. Organization costs and covenant not to compete are amortized on a
straight-line basis over five years. Trademarks are amortized on a straight-line
basis over twenty years. As of May 31, 1994 and May 31, 1993, accumulated
amortization of other assets was $522,754 and $357,293, respectively.
CONCENTRATION OF CREDIT RISK
The Company limits the concentration of credit risk in receivables by
closely monitoring credit and collection policies. The allowance for doubtful
accounts is adequate to absorb estimated losses.
PATENTS AND GOODWILL
Amortization of patents is provided on a straight-line basis over the
shorter of the remaining life of the patent or seventeen years. As of May 31,
1994 and May 31, 1993, accumulated amortization of the patents was $1,512,954
and $526,173, respectively. Amortization of goodwill is provided on a
straight-line basis over approximately seventeen years. As of May 31, 1994 and
May 31, 1993, accumulated amortization of goodwill was $542,272 and $316,632,
respectively.
INCOME TAXES
Effective June 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("Statement 109").
Statement 109 changed the Company's
F-9
<PAGE>
NAMIC U.S.A. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
method of accounting for income taxes from the deferred method to the asset and
liability method. Under the deferred method, annual income tax expense is
matched with pretax accounting income by providing deferred taxes at current tax
rates for timing differences between the determination of net earnings for
financial reporting and tax purposes. The objective of the asset and liability
method is to establish deferred tax assets and liabilities for the temporary
differences between the financial reporting basis and the tax basis of the
Company's assets and liabilities at enacted tax rates expected to be in effect
when such amounts are realized or settled.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are charged to operations as incurred and
totalled $1,099,537, $827,647 and $754,610 during the years ended May 31, 1994,
1993 and 1992, respectively.
TRANSLATION OF FINANCIAL STATEMENTS
Assets and liabilities of non-U.S. operations are translated at the rates of
exchange in effect at the end of the year and the statements of earnings are
translated at the average rates of exchange for the year. Gains or losses
resulting from translating non-U.S. currency financial statements are reported
in Stockholders' Equity under the caption "Cumulative Translation Adjustments".
EARNINGS PER SHARE
Earnings per share is calculated by dividing net earnings less preferred
stock dividends paid by the weighted average number of common and common
equivalent shares outstanding during each of the respective periods. The
weighted average number of common and common equivalent shares was 8,875,158,
9,292,990 and 8,167,679 during the years ended May 31, 1994, 1993 and 1992,
respectively. Fully-diluted earnings per share is not presented as there is no
material dilution.
FOREIGN SALES
Sales of NAMIC International Inc., a foreign sales corporation ("NAMIC
International"), during the years ended May 31, 1994, 1993 and 1992 accounted
for 15.6%, 11.5% and 9.1%, respectively, of total sales of the Company. Export
sales by geographic area are as follows:
<TABLE>
<CAPTION>
YEARS ENDED MAY 31,
-------------------------------------------
1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
Europe........................................... $ 4,640,428 $ 3,185,951 $ 2,114,685
Rest of World.................................... $ 4,284,879 $ 3,021,380 $ 2,632,030
</TABLE>
2. MERGER
On May 21, 1992, the Company acquired Novoste Puerto Rico, Inc., a Florida
corporation ("Novoste"). Pursuant to the Agreement and Plan of Reorganization
dated as of May 11, 1992, among the Company, NAMIC Caribe, Inc., a Florida
corporation ("NAMIC Caribe"), Novoste and certain stockholders of Novoste, NAMIC
Caribe was merged (the "NAMIC Caribe Merger") with and into Novoste, with
Novoste surviving the NAMIC Caribe Merger under the name NAMIC Caribe, Inc. as a
wholly-owned subsidiary of the Company. The Company paid an aggregate of
approximately $12.0 million in consideration and expenses related to the NAMIC
Caribe Merger. In the NAMIC Caribe Merger, approximately $10.5 million was paid
to the former stockholders of Novoste. Approximately $445,000 was paid to
holders of Novoste options and warrants in cancellation of such options and
warrants. An additional $200,000 was paid to a third party to purchase certain
intellectual property rights related to the business conducted by Novoste.
Approximately $823,000 was incurred in acquisition-related expenses, including
legal, accounting and investment banking fees. The Company used a portion of the
proceeds from its initial public offering (the "Offering") to finance the
acquisition.
F-10
<PAGE>
NAMIC U.S.A. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. MERGER (CONTINUED)
The NAMIC Caribe Merger has been accounted for using the purchase method of
accounting for business combinations. Accordingly, the purchase price was
allocated to the assets and liabilities acquired based upon their fair market
values. The Company's results of operations during the years ended May 31, 1994
and 1993 include the results of operations of NAMIC Caribe for the entire year.
The unaudited pro forma consolidated results of operations for the year
ended May 31, 1992, assuming the NAMIC Caribe Merger had occurred as of June 1,
1991 are as follows:
<TABLE>
<S> <C>
Net sales..................................................... $52,388,090
Earnings before extraordinary item............................ $ 5,191,388
Net earnings.................................................. $ 5,191,388
Net earnings per share........................................ $ .62
</TABLE>
3. INVENTORIES
A summary of inventories is as follows:
<TABLE>
<CAPTION>
MAY 31, 1994 MAY 31, 1993
-------------- -------------
<S> <C> <C>
Raw materials and supplies..................................... $ 5,082,474 $ 3,699,208
Work-in-process................................................ 4,484,181 3,101,887
Finished goods................................................. 3,906,481 2,762,742
-------------- -------------
$ 13,473,136 $ 9,563,837
-------------- -------------
-------------- -------------
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment is as follows:
<TABLE>
<CAPTION>
MAY 31, 1994 MAY 31, 1993
-------------- --------------
<S> <C> <C>
Land......................................................... $ 80,339 $ 80,339
Building and building improvements........................... 10,993,379 8,549,470
Machinery and equipment...................................... 38,082,802 35,137,178
Leasehold improvements....................................... 3,350,989 3,069,650
-------------- --------------
52,507,509 46,836,637
Less accumulated depreciation and amortization............... 17,698,846 15,303,997
-------------- --------------
$ 34,808,663 $ 31,532,640
-------------- --------------
-------------- --------------
</TABLE>
Certain of the Company's property, plant and equipment is pledged as
collateral for certain long-term debt.
The Company has made partial payments to certain vendors for the purchase of
a building and various manufacturing equipment estimated to have a total cost of
$5,712,359 as of May 31, 1994. As of May 31, 1994, these payments, totalling
$3,239,620, are included in property, plant and equipment in the accompanying
consolidated financial statements. Similar payments for other manufacturing
equipment totalled $279,946 at May 31, 1993.
Included in property, plant and equipment at May 31, 1994 and 1993 are costs
of $8,725,221 and $9,813,171, respectively, and accumulated amortization of
$3,224,859 and $3,738,869, respectively, related to certain land and buildings
recorded under capital lease agreements entered into with the Chairman of the
Board of Directors of the Company ("the Chairman") and certain unrelated third
parties. Operating lease rental expense during the years ended May 31, 1994,
1993 and 1992 was $241,950, $241,135 and $218,995, respectively.
F-11
<PAGE>
NAMIC U.S.A. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) and the present value of
future minimum lease payments as of May 31, 1994 are as follows:
<TABLE>
<CAPTION>
OPERATING
CAPITAL LEASES LEASES
-------------- -----------
<S> <C> <C>
Years ended May 31:
1995..................................................................... $ 1,459,842 $ 211,363
1996..................................................................... 1,246,557 72,006
1997..................................................................... 1,204,957 48,397
1998..................................................................... 1,163,357 33,579
1999..................................................................... 1,121,757 --
Thereafter............................................................... 6,188,664 --
-------------- -----------
Total minimum lease payments......................................... 12,385,134 $ 365,345
-------------- -----------
-------------- -----------
Less amounts representing interest......................................... 6,002,932
--------------
Present value of future minimum lease payments............................. 6,382,202
Less current installments of obligations under capital leases.............. 682,202
--------------
Obligation under capital leases, excluding current installments............ $ 5,700,000
--------------
--------------
</TABLE>
5. LONG-TERM DEBT
A summary of long-term debt is as follows:
<TABLE>
<CAPTION>
MAY 31, MAY 31,
1994 1993
----------- -----------
<S> <C> <C>
Note payable to City of Glens Falls under a $750,000 mortgage from the City
pursuant to an Urban Development Action grant. Payable in 108 equal monthly
installments of $9,032, including interest at 5% through December 1995.
Collateralized by various manufacturing equipment and a third mortgage on the
Company's leasehold interest in its manufacturing faciltiies in Glens
Falls........................................................................ $ 164,694 $ 262,187
9.75% industrial revenue bonds, payable in annual principal installments of
$100,000 through October 1999. Collateralized by various manufacturing
equipment and a letter of credit............................................. 600,000 700,000
----------- -----------
764,694 962,187
Less current installments..................................................... 202,481 197,493
----------- -----------
$ 562,213 $ 764,694
----------- -----------
----------- -----------
</TABLE>
F-12
<PAGE>
NAMIC U.S.A. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. LONG-TERM DEBT (CONTINUED)
The aggregate maturities of long-term debt for each of the five years
subsequent to May 31, 1994 and thereafter are as follows:
<TABLE>
<CAPTION>
YEARS ENDING MAY 31,
- ---------------------------------------------------------------------------------
<S> <C>
1995............................................................................. $ 202,481
1996............................................................................. 162,213
1997............................................................................. 100,000
1998............................................................................. 100,000
1999............................................................................. 100,000
Thereafter....................................................................... 100,000
</TABLE>
During the year ended May 31, 1994, the Company renewed a $10,000,000
unsecured line of credit agreement with a bank. Interest is payable at the
lesser of the prime lending rate, or LIBOR plus 1.25%, until the line of credit
expires on December 31, 1995. As of May 31, 1994, there were no outstanding
borrowings under the line of credit.
During the year ended May 31, 1994, a wholly-owned subsidiary of the Company
entered into an unsecured line of credit agreement with a bank of approximately
$7,400,000. Interest is payable at the prime lending rate. The line of credit
expires on May 31, 1995. As of May 31, 1994, there were no outstanding
borrowings under the line of credit.
Included in cash at May 31, 1994 and 1993, respectively, is $344,452 and
$299,238 in an escrow account restricted to principal payments on debt.
6. INCOME TAXES
Effective June 1, 1993, the Company adopted Statement 109. In accordance
with the provisions of Statement 109, prior years' financial statements have not
been restated and accordingly, the Company has reported a cumulative effect of
change in accounting principle. The cumulative effect of change in accounting
principle resulted in an increase in net earnings of $422,606 during the year
ended May 31, 1994. In addition to the cumulative effect of change in accounting
principle, the adoption of Statement 109 reduced earnings before income taxes
during the year ended May 31, 1994 by $249,032, which was offset by a
corresponding tax benefit. Certain intangible assets were revalued in accordance
with Statement 109 and the associated income tax effect was included in
long-term deferred taxes. The components of pre-tax income are as follows:
<TABLE>
<CAPTION>
YEARS ENDED MAY 31,
-------------------------------------------
1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
Domestic......................................... $ 7,404,751 $ 9,643,252 $ 9,671,078
Foreign.......................................... (362,596) -- --
------------- ------------- -------------
Total........................................ $ 7,042,155 $ 9,643,252 $ 9,671,078
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
F-13
<PAGE>
NAMIC U.S.A. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. INCOME TAXES (CONTINUED)
Components of income tax expense are as follows:
<TABLE>
<CAPTION>
YEARS ENDED MAY 31,
-------------------------------------------
1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
Current expense:
U.S...................................................... $ 1,810,649 $ 2,260,324 $ 2,999,154
Non-U.S. ................................................ 36,253 -- --
------------- ------------- -------------
1,846,902 2,260,324 2,999,154
Deferred expense, U.S., net................................ 612,420 1,279,680 510,480
------------- ------------- -------------
$ 2,459,322 $ 3,540,004 $ 3,509,634
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
Income tax expense represents effective tax rates of 34.9%, 36.7% and 36.3%
during the fiscal years ended May 31, 1994, 1993 and 1992, respectively. The
actual tax expense differs from the "expected" tax expense by applying the U.S.
corporate tax rate of 34% to earnings before income taxes as follows:
<TABLE>
<CAPTION>
YEARS ENDED MAY 31,
----------------------------------------------------------------------------
1994 1993 1992
------------------------ ------------------------ ------------------------
AMOUNT % AMOUNT % AMOUNT %
------------- --------- ------------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Computed "expected" tax expense.... $ 2,394,333 34.0 $ 3,278,706 34.0 $ 3,288,167 34.0
Effect of non-taxable subsidiary
earnings.......................... (170,157) (2.4) (102,710) (1.0) (93,934) (1.0)
State income taxes, net of Federal
income tax benefit................ 194,068 2.7 251,089 2.6 220,765 2.3
Amortization of intangible
assets............................ 76,748 1.1 226,292 2.3 -- --
Other, net......................... (35,670) (0.5) (113,373) (1.2) 94,636 1.0
------------- --- ------------- --- ------------- ---
$ 2,459,322 34.9 $ 3,540,004 36.7 $ 3,509,634 36.3
------------- --- ------------- --- ------------- ---
------------- --- ------------- --- ------------- ---
</TABLE>
F-14
<PAGE>
NAMIC U.S.A. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. INCOME TAXES (CONTINUED)
The significant components of deferred tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
MAY 31, 1994 JUNE 1, 1993
-------------- --------------
<S> <C> <C>
Current Deferred Assets:
Inventories................................................. $ 368,819 $ 276,345
Capital leases -- current................................... 251,760 148,585
Other....................................................... 35,793 5,714
-------------- --------------
Net current deferred asset................................ $ 656,372 $ 430,644
-------------- --------------
-------------- --------------
Long-Term Deferred Assets (Liabilities):
Capital leases -- long-term................................. $ 2,103,528 $ 2,355,288
Investment tax credit carryforwards, net of Federal
effect..................................................... 831,947 665,280
Net operating loss carryforwards............................ 1,005,077 1,005,077
Deferred tax gain........................................... (1,224,000) --
Property, plant and equipment............................... (6,288,572) (5,378,188)
Intangible assets........................................... (2,005,439) (3,463,940)
Other....................................................... 68,373 (119,038)
-------------- --------------
(5,509,086) (4,935,521)
Valuation allowances.......................................... (452,233) (634,163)
-------------- --------------
Net long-term deferred liability.......................... $ (5,961,319) $ (5,569,684)
-------------- --------------
-------------- --------------
</TABLE>
The valuation allowances for deferred tax assets as of June 1, 1993 was
$634,163. During the year ended May 31, 1994, the net valuation allowance
decreased by $181,930, including a decrease of $301,523 allocated to goodwill.
The sources of deferred income taxes charged (credited) to earnings, and
their tax effects under the deferred liability method as of May 31, 1993 and
1992, are as follows:
<TABLE>
<CAPTION>
YEARS ENDED MAY 31,
--------------------------
1993 1992
------------- -----------
<S> <C> <C>
Accelerated depreciation.......................................... $ 1,020,401 $ 590,868
Difference in carrying value of inventory......................... 131,560 (43,509)
Reserve for inventory obsolescence................................ -- (27,200)
Difference in lease classification................................ (87,888) (59,086)
Accrued vacation.................................................. 49,059 (3,361)
Other, net........................................................ 166,548 52,768
------------- -----------
$ 1,279,680 $ 510,480
------------- -----------
------------- -----------
</TABLE>
For New York State income tax purposes, the Company has investment tax
credit carryforwards of approximately $1,200,000 which, if unused, will expire
in varying amounts during the years ended May 31, 1996 through May 31, 2001.
At May 31, 1994, NAMIC Caribe had unused Federal and Puerto Rico net
operating loss carryforwards of approximately $2,956,000 and $3,784,000,
respectively, which may be used to offset taxable income of NAMIC Caribe,
subject to certain annual limitations. The Federal net operating loss
carryforwards, if unused, will expire in varying amounts during the years ended
May 31, 2001 through May 31, 2006. The Puerto Rico net operating loss
carryforwards, if unused, will expire in varying amounts during the years ended
May 31, 1997 through May 31, 2001.
F-15
<PAGE>
NAMIC U.S.A. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. EMPLOYEE BENEFIT PLAN
The Company sponsors the Profit Sharing and Incentive Savings Plan (the
"Plan") covering all employees meeting minimum age and service requirements.
The profit sharing provisions of the Plan provide for contributions by the
Company in such amounts as the Board of Directors may annually determine, not to
exceed 15% of eligible compensation. Employees are fully vested in Company
contributions at the end of five years of service. The Company's expense for the
profit sharing portion of the Plan during the years ended May 31, 1994, 1993 and
1992 was $300,000, $300,000 and $600,000, respectively.
Under the incentive savings provisions of the Plan, employees may elect to
defer between 2% and 15% of eligible compensation. Employees vest immediately in
their voluntary deferrals.
The Internal Revenue Service has determined that the Plan qualifies under
Section 401(a) of the Internal Revenue Code ("IRC").
8. RELATED PARTY TRANSACTIONS
The Company subleases two of its manufacturing facilities from the Chairman
under a capital lease agreement. The sublease (the "sublease") exists under
primary leases dated 1984 and 1989, respectively, between the Chairman and the
Glens Falls Industrial Development Agency. The sublease expires December 1,
2004.
With respect to the 1984 primary lease, the sublease calls for monthly
payments based upon variable weekly interest rates plus 450 basis points,
applied to the original principal of the bonds. The Company makes an additional
rental payment of $200,000 annually which is used to redeem outstanding bonds.
Payments under the sublease with respect to the 1984 primary lease during the
years ended May 31, 1994, 1993 and 1992 totalled $316,686, $325,177 and
$412,126, respectively.
With respect to the 1989 primary lease, the sublease calls for monthly
rental payments based on the interest rate applicable to the bonds plus 325
basis points, applied to the original principal amount of the bonds. The Company
also makes monthly payments into escrow for a $300,000 additional payment due in
October 1994 and will subsequently be obligated to make annual payments of
$320,000 per year until expiration of the sublease on December 1, 2004. Payments
under the sublease with respect to the 1989 primary lease were $455,004 for each
of the years ended May 31, 1994 , 1993 and 1992.
The Company and NAMIC International have guaranteed the obligations of the
Chairman under the 1984 and 1989 primary leases, and the Company's obligations
under the sublease are guaranteed by the Chairman. Under the terms of the
primary leases and sublease, the Chairman is responsible for maintaining
security for the bondholders in the form of a $4.5 million irrevocable letter of
credit for the 1984 bond and a $1 million irrevocable letter of credit for the
1989 bond, and for expenses, such as property taxes, remarketing fees and
trustee fees. At May 31, 1994 the balance on the capital lease obligations are
$6.2 million and are equal to the obligations of the Chairman guaranteed by the
Company.
On August 1, 1991, the Company sold 25,000 shares of common stock to the
President and Chief Executive Officer of the Company for $125,000. The
difference between the selling price and the estimated fair market value of the
stock on August 1, 1991, is included in compensation expense and additional
paid-in capital.
9. COMMITMENTS AND CONTINGENCIES
Litigation against the Company has arisen in the normal course of business.
In the opinion of management, such litigation will not have a material effect on
the Company's financial position.
F-16
<PAGE>
NAMIC U.S.A. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. INITIAL PUBLIC OFFERING
In November 1991, the Company's Offering of common stock was consummated.
The Company and the Chairman sold 2,760,000 and 690,000 shares, respectively.
The Company received proceeds of $45,596,745 from the Offering, which is net of
underwriting discounts and commissions of $3,477,600 and offering expenses of
$605,655.
11. STOCK OPTIONS
On July 1, 1991, the Company adopted a Stock Option Plan (the "Option
Plan"), which provides for the grant to officers and employees of both
"incentive stock options" within the meaning of Section 422 of the IRC, and
stock options that are non-qualified for Federal income tax purposes. The total
number of shares of common stock for which options may be granted pursuant to
the Option Plan is 1,000,000. No option may be granted under the Option Plan
after July 1, 2001. The exercise price of incentive stock options granted under
the Option Plan may not be less than 100% of the fair market value of the common
stock at the time of the grant and the term of the option may not exceed seven
years. With respect to any employee who owns stock possessing more than 10% of
the voting power of the outstanding capital stock of the Company, the exercise
price of any incentive stock option may not be less than 110% of the fair market
value of such shares at the time of grant and the term may not exceed five
years. The exercise price of a non-qualified stock option may not be less than
100% of the fair market value of the common stock at the time of grant. Options
granted under the Option Plan generally vest over a five-year period. As of May
31, 1994, options to purchase 237,560 shares were exercisable.
A summary of stock option activity is as follows:
<TABLE>
<CAPTION>
EXERCISE PRICE PER
SHARES SHARE
---------- ------------------
<S> <C> <C>
Outstanding at May 31, 1991.................................. -- --
Granted...................................................... 661,020 $10.00 - $19.00
Cancelled.................................................... (22,850) $18.50 - $19.00
----------
Outstanding at May 31, 1992.................................. 638,170 $10.00 - $19.00
Granted...................................................... 138,500 $ 7.50 - $19.50
Cancelled.................................................... (111,030) $18.50 - $19.00
----------
Outstanding at May 31, 1993.................................. 665,640 $ 7.50 - $19.50
Granted...................................................... 80,000 $ 7.75 - $10.25
Cancelled.................................................... (27,490) $18.50 - $19.00
----------
Outstanding at May 31, 1994.................................. 718,150 $ 7.50 - $19.50
----------
----------
</TABLE>
On August 14, 1991, the Company granted options to purchase an aggregate of
21,000 shares of common stock to three persons who are not presently affiliated
with the Company at an exercise price of $16.74. The options became exercisable
upon the consummation of the Offering. The difference between the Offering price
on November 8, 1991 of $18.00 and the exercise price is included in compensation
expense and additional paid-in capital. The options will expire if not exercised
prior to November 15, 1996.
On August 14, 1991, the Company adopted a Stock Option Plan for Non-Employee
Directors (the "Directors' Plan") which provides for the grant of common stock
options to non-employee directors of the Company from and after the consummation
of the Offering. A total of 150,000 shares of common stock may be issued through
the exercise of options granted pursuant to the Directors' Plan. No option may
be granted under the Directors' Plan after November 15, 2001. The exercise price
of options granted under the Directors' Plan is equal to the fair market value
of the common stock on the date of
F-17
<PAGE>
NAMIC U.S.A. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. STOCK OPTIONS (CONTINUED)
the grant, and the term of each option shall not exceed seven years. The options
may be exercised in installments of 25% upon each anniversary of the grant date.
On January 1, 1994, 1993 and 1992, the Company granted options to purchase
5,000, 7,500 and 7,500, shares at exercise prices of $10.063, $12.125 and
$26.375, respectively, per share under the Directors' Plan. During the year
ended May 31, 1994, options to purchase 5,000 shares under the Directors' Plan
were cancelled. As of May 31, 1994, options to purchase 3,750 shares were
exercisable.
12. STOCK REPURCHASE PROGRAM
During the year ended May 31, 1993, the Company's Board of Directors
authorized the repurchase of up to an aggregate of 500,000 shares of its common
stock in the open market. During the year ended May 31, 1994, the Company's
Board of Directors authorized the repurchase of up to an aggregate of an
additional 500,000 shares of its common stock in the open market.
13. QUARTERLY RESULTS (UNAUDITED)
The following tables set forth the Company's selected quarterly results of
operations for the years ended May 31, 1994 and 1993, respectively:
<TABLE>
<CAPTION>
EARNINGS BEFORE
CUMULATIVE EFFECT
OF CHANGE IN
ACCOUNTING
PRINCIPLE
GROSS ---------------------- NET
NET SALES PROFIT AMOUNT PER SHARE EARNINGS
--------- --------- --------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Fiscal 1994
Fourth................................... $ 15,424 $ 6,895 $ 1,294 $ .15 $ 1,294
Third.................................... 14,509 6,802 1,235 .14 1,235
Second................................... 14,678 7,088 1,274 .14 1,274
First.................................... 12,756 6,055 780 .09 1,202
Fiscal 1993
Fourth................................... $ 14,484 $ 7,244 $ 1,750 $ .19 $ 1,750
Third.................................... 13,046 6,823 1,718 .18 1,718
Second................................... 13,517 7,061 1,368 .15 1,368
First.................................... 13,106 6,857 1,267 .14 1,267
</TABLE>
F-18
<PAGE>
NAMIC U.S.A. CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
NOVEMBER 25,
1994
--------------
(UNAUDITED)
<S> <C>
Current assets:
Cash and cash equivalents....................................................................... $ 11,872,556
Trade accounts receivable, less allowance for doubtful accounts of $115,000..................... 8,491,322
Other receivables............................................................................... 168,811
Inventories..................................................................................... 11,795,654
Prepaid expenses................................................................................ 504,609
Income taxes receivable......................................................................... 178,397
Deferred income taxes........................................................................... 622,880
--------------
Total current assets.......................................................................... 33,634,229
--------------
Property, plant and equipment, net................................................................ 35,809,812
Patents, net...................................................................................... 9,980,490
Goodwill, net..................................................................................... 3,064,974
Other assets, net................................................................................. 741,355
--------------
Total assets.................................................................................. $ 83,230,860
--------------
--------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of obligations under capital leases........................................ $ 613,467
Current installments of long-term debt.......................................................... 205,070
Accounts payable................................................................................ 1,760,669
Accrued payroll and related costs............................................................... 459,707
Accrued profit sharing plan contribution........................................................ 150,000
Other accrued expenses.......................................................................... 92,425
--------------
Total current liabilities..................................................................... 3,281,338
Obligations under capital leases, less current installments....................................... 5,380,000
Long-term debt, less current installments......................................................... 409,030
Deferred income taxes............................................................................. 6,057,453
--------------
Total liabilities............................................................................. 15,127,821
--------------
Stockholders' equity:
Class A preferred stock, $1.00 par value. Authorized 65,778 shares; no shares issued and
outstanding.................................................................................... --
Class B preferred stock, $.01 par value. Authorized 4,934,222 shares; no shares issued and
outstanding.................................................................................... --
Common stock, $.01 par value. Authorized 20,000,000 shares; issued 9,269,662 shares............. 92,697
Additional paid-in capital...................................................................... 40,588,653
Retained earnings............................................................................... 32,724,982
Cumulative translation adjustments.............................................................. 380,332
--------------
73,786,664
Treasury stock, 640,000 shares at cost............................................................ (5,683,625)
--------------
Total stockholders' equity.................................................................... 68,103,039
--------------
Commitments and contingencies
Total liabilities and stockholders' equity.................................................... $ 83,230,860
--------------
--------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements
F-19
<PAGE>
NAMIC U.S.A. CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
------------------------------
NOVEMBER 25, NOVEMBER 26,
1994 1993
-------------- --------------
(UNAUDITED)
<S> <C> <C>
Net sales........................................................................ $ 30,276,696 $ 27,433,304
Cost of sales.................................................................... 16,573,199 14,290,220
-------------- --------------
Gross profit................................................................. 13,703,497 13,143,084
Operating expenses:
Selling, general and administrative expenses................................... 9,409,558 9,439,444
Research and development....................................................... 620,038 482,363
-------------- --------------
10,029,596 9,921,807
-------------- --------------
Operating income............................................................. 3,673,901 3,221,277
Other income/(expense):
Interest expense............................................................... (440,150) (449,753)
Interest income................................................................ 238,204 380,997
Miscellaneous income........................................................... 125,984 26,970
-------------- --------------
(75,962) (41,786)
-------------- --------------
Earnings before income taxes................................................. 3,597,939 3,179,491
Income taxes..................................................................... 503,711 1,126,411
-------------- --------------
Earnings before cumulative effect of change in accounting principle............ 3,094,228 2,053,080
Cumulative effective of change in accounting principle......................... -- 422,606
-------------- --------------
Net earnings................................................................. $ 3,094,228 $ 2,475,686
-------------- --------------
-------------- --------------
Earnings per share:
Earnings before cumulative effect of change in accounting principle............ $ .35 $ .23
Cumulative effect of change in accounting principle............................ -- .05
-------------- --------------
Net earnings................................................................. $ .35 $ .28
-------------- --------------
-------------- --------------
Weighted average common shares outstanding....................................... 8,764,089 8,971,047
</TABLE>
See accompanying Notes to Consolidated Financial Statements
F-20
<PAGE>
NAMIC U.S.A. CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
------------------------------
NOVEMBER 25, NOVEMBER 26,
1994 1993
-------------- --------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net earnings................................................................... $ 3,094,228 $ 2,475,686
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Effect of change in accounting principle..................................... -- (422,606)
Depreciation and amortization................................................ 2,033,295 2,474,502
(Gain) loss from sale of assets.............................................. (14,967) 19,905
Deferred taxes............................................................... 129,626 619,732
Changes in assets and liabilities:
Trade accounts receivable.................................................. 10,967 (818,515)
Other receivables.......................................................... 94,034 53,805
Inventories................................................................ 1,679,733 (1,585,308)
Prepaid expenses........................................................... (384,864) (64,563)
Income taxes receivable.................................................... (178,397) --
Other assets............................................................... (30,524) (79,356)
Accounts payable........................................................... 200,716 604,315
Accrued payroll and related costs.......................................... (344,614) (349,246)
Accrued profit sharing plan contribution................................... (150,000) (75,000)
Other accrued expenses..................................................... (197,224) 244,745
Income taxes payable....................................................... (1,052,062) (92,551)
-------------- --------------
Net cash provided by operating activities................................ 4,889,947 3,005,545
-------------- --------------
Cash flows from investing activities:
Capital expenditures........................................................... (2,426,342) (3,202,414)
Proceeds from sale of assets................................................... 56,204 239,109
Acquisition of patents......................................................... (30,764) (77,563)
-------------- --------------
Net cash used by investing activities.................................... (2,400,902) (3,040,868)
-------------- --------------
Cash flows from financing activities:
Principal payments of lease obligations........................................ (388,735) (318,379)
Principal payments of long-term debt........................................... (150,594) (148,138)
Purchase of common stock for treasury.......................................... (615,500) (1,658,375)
-------------- --------------
Net cash used by financing activities:................................... (1,154,829) (2,124,892)
Effect of exchange rate changes on cash and cash equivalents..................... 66,613 18,066
-------------- --------------
Increase (decrease) in cash and cash equivalents................................. 1,400,829 (2,142,149)
Cash and cash equivalents at beginning of period................................. 10,471,727 15,227,310
-------------- --------------
Cash and cash equivalents at end of period....................................... $ 11,872,556 $ 13,085,161
-------------- --------------
-------------- --------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements
F-21
<PAGE>
NAMIC U.S.A. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of NAMIC U.S.A.
Corporation, a Delaware corporation (the "Company"), and its subsidiaries, all
of which are wholly-owned. All significant intercompany balances and
transactions have been eliminated in consolidation.
In the opinion of the Company, the accompanying unaudited consolidated
financial statements include all adjustments (consisting only of normal,
recurring adjustments) that the Company considers necessary for a fair
presentation, in accordance with generally accepted accounting principles, of
the consolidated financial position of the Company and its subsidiaries at
November 25, 1994, and the results of their operations and cash flows for the
twenty-six weeks ended November 25, 1994 and November 26, 1993, respectively.
These results are not necessarily indicative of the results to be expected for
the full fiscal year.
The consolidated financial information presented herein should be read in
conjunction with the audited consolidated financial statements for the fiscal
years ended May 31, 1994 and May 31, 1993 and notes thereto included in the
Company's Annual Report on Form 10-K.
EARNINGS PER SHARE
Earnings per share is calculated by dividing net earnings by the weighted
average number of common and common equivalent shares outstanding during each of
the respective periods, which includes the dilutive effect of outstanding stock
options. The weighted average number of common and common equivalent shares was
8,764,089 and 8,971,047, respectively, for the twenty-six weeks ended November
25, 1994 and November 26, 1993. Fully-diluted earnings per share is not
presented as there is no material dilution.
2. INVENTORIES
A summary of inventories is as follows:
<TABLE>
<CAPTION>
NOVEMBER 25,
1994
--------------
(UNAUDITED)
<S> <C>
Raw materials and supplies.................................................... $ 4,868,359
Work-in-process............................................................... 3,610,832
Finished goods................................................................ 3,316,463
--------------
$ 11,795,654
--------------
--------------
</TABLE>
F-22
<PAGE>
APPENDIX A
<PAGE>
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of October 31,
1994, among PFIZER INC., a Delaware corporation (the "Parent"), DART ACQUISITION
CORPORATION, a Delaware corporation and a wholly-owned subsidiary of the Parent
(the "Sub"), and NAMIC U.S.A. CORPORATION, a Delaware corporation (the
"Company").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of the Parent and the Sub have
each determined that it is advisable and in the best interest of the Parent and
its stockholders to engage in a transaction whereby the Sub will merge with and
into the Company on the terms and subject to the conditions of this Agreement;
and
WHEREAS, the Board of Directors of the Company has determined that it is
advisable and in the best interest of the Company and its stockholders to engage
in a transaction whereby the Sub will merge with and into the Company on the
terms and subject to the conditions of this Agreement; and
WHEREAS, it is intended for Federal income tax purposes that the Merger (as
hereinafter defined) shall qualify as a reorganization under the provisions of
Section 368 of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the Parent, the Sub and the Company entered into an Agreement and
Plan of Merger, dated as of October 31, 1994, to give effect to the Merger; and
WHEREAS, the Parent, the Sub and the Company wish to amend and restate such
Agreement and Plan of Merger in order to make certain amendments, with such
amendment and restatement effective as of October 31, 1994; and
WHEREAS, the Company, the Parent and the Sub wish to make certain
representations, warranties, covenants and agreements in connection with the
Merger.
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements, and upon the terms and subject to the conditions
hereinafter set forth, the parties hereto do hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01 THE MERGER. Upon the terms and subject to the conditions
hereof, and pursuant to Section 251 of the Delaware General Corporation Law (the
"Delaware Law"), the Sub shall be merged with and into the Company (the
"Merger") at the Effective Time (as hereinafter defined). Following the Merger,
the Company shall continue as the surviving corporation (the "Surviving
Corporation") under the name of "NAMIC U.S.A. Corporation," and the separate
corporate existence of the Sub shall cease.
SECTION 1.02 EFFECTIVE TIME. On the date of the Closing (as hereinafter
defined), the Surviving Corporation will cause a certificate of merger
substantially in the form of Exhibit A attached hereto (the "Certificate of
Merger") to be executed and filed with the Secretary of State of the State of
Delaware as provided in Section 251 of the Delaware Law. The Merger shall become
effective (i) at the time and date which the Certificate of Merger is filed with
the Secretary of State of the State of Delaware or (ii) such other time as is
agreed upon by the parties and specified in the Certificate of Merger (such time
as the Merger becomes effective is hereinafter referred to as the "Effective
Time").
SECTION 1.03 CLOSING. The closing of the Merger (the "Closing") shall take
place (i) at the offices of Weil, Gotshal & Manges, 767 Fifth Avenue, New York,
New York, as promptly as practicable following the date on which the last of the
conditions set forth in Article VII is satisfied or waived in
A-1
<PAGE>
accordance with the terms of this Agreement, which date shall in any event not
be later than the third business day following the satisfaction or waiver of the
last of such conditions, or (ii) at such other place and/or on such other date
as the Parent and the Company may agree.
SECTION 1.04 EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in the Delaware Law. As of the Effective Time, the Parent shall own all of
the issued and outstanding Common Stock of the Surviving Corporation.
SECTION 1.05 CERTIFICATE OF INCORPORATION AND BY-LAWS. At the Effective
Time, the Sub's Certificate of Incorporation and By-laws shall be the
Certificate of Incorporation and By-laws of the Surviving Corporation; except
that Article First of the Sub's Certificate of Incorporation shall be amended to
read as follows: "The name of the Corporation is NAMIC U.S.A. Corporation".
SECTION 1.06 DIRECTORS AND OFFICERS. The directors of the Sub at the
Effective Time shall become the directors of the Surviving Corporation until
their successors are duly elected and qualified. At the Effective Time, the
persons listed on Schedule 1.06 shall become the officers of the Surviving
Corporation until their successors are duly elected and qualified.
ARTICLE II
CONVERSIONS OF SHARES
SECTION 2.01 CONVERSION OF SHARES. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof:
(a) (i) Subject to Section 3.06, each share of common stock, par value $.01
per share, of the Company ("Common Stock") issued and outstanding immediately
prior to the Effective Time that is not owned by Parent or any direct or
indirect wholly-owned subsidiary of Parent shall be converted into .24599 (the
"Exchange Ratio") of a share of common stock, par value $.10 per share ("Parent
Common Stock"), of Parent. Each share of Parent Common Stock to be issued upon
conversion of shares of Common Stock in accordance with this Section 2.01 shall
include the corresponding percentage of a right (the "Parent Rights") to
purchase shares of Series A Junior Preferred Stock, without par value, of Parent
pursuant to the Rights Agreement, dated as of September 24, 1987, between Parent
and The Chase Manhattan Bank, N.A., as Rights Agent, as amended through the date
of this Agreement (the "Parent Rights Agreement"). Prior to the Distribution
Date (as defined in the Parent Rights Agreement), all references in this
Agreement to the Parent Common Stock to be received in the Merger shall be
deemed to include the Parent Rights.
(ii) If the Effective Time is after the record date for the dividend (if
any) declared by the Parent's Board of Directors on the Parent Common Stock
in the first quarter of calendar 1995, then each share of Common Stock
issued and outstanding immediately prior to the Effective Time that is not
owned by Parent or any direct or indirect wholly-owned subsidiary of Parent
shall also evidence the right to receive from Parent a cash payment equal to
the product of (i) .24599 and (ii) the amount of the per share cash dividend
(if any) declared by the Parent's Board of Directors on the Parent Common
Stock in the first quarter of calendar 1995.
(b) All shares of Common Stock to be converted into Parent Common Stock
pursuant to this Section 2.01 shall cease to be outstanding, be cancelled and
retired and cease to exist, and each holder of a certificate representing any
such shares shall thereafter cease to have any rights with respect to such
shares, except the right to receive for each of such shares, upon the surrender
of such certificate in accordance with Section 3.02, the amount of Parent Common
Stock specified in Section 2.01(a)(i) above (the "Merger Consideration"), cash
(if any) pursuant to Section 2.01(a)(ii) and cash in lieu of fractional shares
of Parent Common Stock as contemplated by Section 3.06.
A-2
<PAGE>
(c) Each share of Common Stock issued and outstanding immediately prior to
the Effective Time owned by Parent or any direct or indirect wholly-owned
subsidiary of Parent shall cease to be outstanding, be cancelled and retired
without payment of any consideration therefor and cease to exist.
(d) Each share of Common Stock issued and held immediately prior to the
Effective Time in the Company's treasury or by any of the Company's direct or
indirect wholly-owned subsidiaries shall be cancelled and retired without
payment of any consideration therefor and cease to exist.
(e) Each share of common stock, par value $.01 per share, of the Sub issued
and outstanding immediately prior to the Effective Time shall be converted into
one issued and outstanding share of common stock, par value $.01 per share, of
the Surviving Corporation.
SECTION 2.02 STOCK OPTIONS. Immediately prior to the Effective Time, each
holder of a then outstanding option to purchase shares of Common Stock
(collectively, the "Options") under the Company's 1991 Stock Option Plan and the
Company's 1991 Stock Option Plan for Non-Employee Directors and the agreements
referred to in Schedule 2.02 to the Disclosure Statement (as hereinafter
defined) (collectively, the "Stock Option Plans"), whether or not then
exercisable or fully vested, shall, in settlement thereof, receive from the
Company for each share of Common Stock subject to such Option an amount (net of
any applicable withholding tax) in cash equal to the excess, if any, of $18.00
over the per share exercise price of such Option (such amount being hereinafter
referred to as the "Option Consideration"); PROVIDED, HOWEVER, that prior to
making such payment the Parent shall deliver to the Company an irrevocable
written waiver from the Parent and the Sub of all conditions precedent to their
respective obligations to effect the Merger under Article VII hereof and a
written agreement of the Parent and the Sub to consummate the Merger and effect
the Closing immediately following such payment by the Company, which waiver and
agreement shall be in form and substance satisfactory to the Company. Prior to
the Effective Time, the Company shall use its reasonable efforts to obtain all
necessary consents or releases from holders of Options under the Stock Option
Plans and take any such other action as may be reasonably necessary to give
effect to the transactions contemplated by this Section 2.02 (except for such
action that may require the approval of the Company's stockholders) and to
otherwise cause each Option to be surrendered to the Company and cancelled,
whether or not any Option Consideration is payable with respect thereto, at the
Effective Time. The surrender of an Option to the Company shall be deemed a
release of any and all rights the holder had or may have had in such Option
other than the right to receive the Option Consideration.
ARTICLE III
EXCHANGE OF SHARES
SECTION 3.01 EXCHANGE OF CERTIFICATES. At the Effective Time, the Parent
shall, for the benefit of the holders of shares of Common Stock, set aside a
sufficient number of shares of Parent Common Stock to effect the delivery of the
aggregate number of whole shares of Parent Common Stock to be issued pursuant to
this Agreement and a sufficient cash amount to effect the cash payments, if any,
to be made pursuant to Section 2.01(a)(ii) (such certificates for shares of
Parent Common Stock, together with any dividends or distributions with respect
thereto, and cash amount being hereinafter referred to as the "Exchange Fund").
The Parent shall deliver the shares of Parent Common Stock to be issued pursuant
to Section 2.01(a)(i) and pay any cash required by Section 2.01(a)(ii) out of
the Exchange Fund. The Exchange Fund shall not be used for any other purpose.
SECTION 3.02 NOTICE OF EXCHANGE. As soon as reasonably practicable after
the Effective Time, the Parent shall mail and make available to each record
holder of a certificate which immediately prior to the Effective Time
represented outstanding shares of Common Stock (each such certificate, a
"Certificate") whose shares were converted into the right to receive shares of
Parent Common Stock and cash (if any) pursuant to Section 2.01, a notice and
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificate shall pass, only upon proper delivery
of the Certificate to the Parent) advising such holder of the effectiveness of
the Merger and
A-3
<PAGE>
the procedures to be used in effecting the surrender of the Certificate in
exchange for certificates representing Parent Common Stock. Upon surrender to
the Parent of a Certificate, together with such letter of transmittal duly
executed and completed in accordance with the instructions thereon, and any
other documents reasonably required by the Parent, the holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
representing that number of whole shares of Parent Common Stock which such
holder has the right to receive in respect of the Certificate surrendered
pursuant to the provisions of this Article III, a cash payment (if any) as
required by Section 2.01(a)(ii) and cash in lieu of fractional shares of Parent
Common Stock as contemplated by Section 3.06, and such Certificate shall
forthwith be cancelled.
SECTION 3.03 TRANSFER. If delivery of all or part of the Merger
Consideration is to be made to a person other than the person in whose name a
surrendered Certificate is registered, it shall be a condition to such delivery
or the exchange of such Certificate that such surrendered Certificate be
properly endorsed or shall be otherwise in proper form for transfer and that the
person requesting such delivery or exchange shall have paid any transfer and
other taxes required by reason of such delivery or exchange in a name other than
that of the registered holder of the Certificate surrendered or shall have
established to the satisfaction of the Parent that such tax either has been paid
or is not applicable.
SECTION 3.04 RIGHT TO MERGER CONSIDERATION. Until surrendered and
exchanged in accordance with Section 3.02, each Certificate shall, after the
Effective Time, represent solely the right to receive promptly upon surrender in
accordance with the provisions of Section 3.02 the certificate representing
shares of Parent Common Stock (and any cash pursuant to Section 2.01(a)(ii) and
cash in lieu of fractional shares of Parent Common Stock), together with any
dividends or other distributions, all as provided in this Article III, and shall
have no other rights, including voting rights. From and after the Effective
Time, the Parent shall be entitled to treat any Certificates that have not yet
been surrendered for exchange as evidencing only the ownership of the aggregate
Merger Consideration into which the shares represented by such Certificates
shall have been converted (and any right to receive cash pursuant to Section
2.01(a)(ii) and cash in lieu of fractional shares of Parent Common Stock as
provided in Section 3.06), together with any dividends or other distributions
payable with respect thereto pursuant to Section 3.05, notwithstanding any
failure to surrender such Certificates.
SECTION 3.05 DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED CERTIFICATES. No
dividends or other distributions with respect to Parent Common Stock declared or
paid by the Parent after the Effective Time and with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate
until the holder of such Certificate surrenders such Certificate. Subject to the
effect of applicable laws, following surrender of any such Certificate, there
shall be paid to the holder of the certificates representing whole shares of
Parent Common Stock issued in exchange therefor, without interest, (i) the
amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Parent
Common Stock and (ii) at the appropriate payment date, the amount of dividends
or other distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such shares of Parent Common Stock. The Surviving Corporation shall pay any
dividends or make any other distributions with a record date prior to the
Effective Time which may have been declared by the Company on shares of Common
Stock in accordance with the terms of this Agreement on or prior to the
Effective Time and which remain unpaid at the Effective Time.
SECTION 3.06 FRACTIONAL SHARES. No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests will not entitle
the owner thereof to vote or to any rights of a stockholder of Parent, but in
lieu thereof each holder of Common Stock who would otherwise be entitled to
receive a fraction of a share of Parent Common Stock will receive from the
Parent, at such time as such holder shall receive a certificate representing
shares of Parent Common Stock as contemplated by Section 3.02, an amount of cash
equal to the product of (a) the average of the per share closing prices on the
NYSE of the Parent Common Stock during the five consecutive trading days ending
on the trading
A-4
<PAGE>
day immediately prior to the Effective Time and (b) the fraction of a share of
Parent Common Stock otherwise issuable to such holder. The fractional interests
of each holder of Common Stock will be aggregated so that no such holder will
receive cash in an amount equal to or greater than the average of the per share
closing prices on the NYSE of the Parent Common Stock during the five
consecutive trading days ending on the trading day immediately prior to the
Effective Time.
SECTION 3.07 NO INTEREST. No interest shall be payable on any payments of
dividends or other distributions or any cash payments provided for in Section
2.01(a)(ii) or cash in lieu of fractional shares as provided for by this Article
III.
SECTION 3.08 NO FURTHER OWNERSHIP RIGHTS IN COMMON STOCK. All shares of
Parent Common Stock issued upon conversion of shares of Common Stock in
accordance with the terms hereof (including any cash paid pursuant to Sections
2.01(a)(ii), 3.05 or 3.06) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Common Stock, SUBJECT,
HOWEVER, to the Surviving Corporation's obligation to pay any dividends or make
any other distributions with a record date prior to the Effective Time which may
have been declared or made by the Company on such shares of Common Stock in
accordance with the terms of this Agreement on or prior to the Effective Time
and which remain unpaid at the Effective Time, and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Common Stock which were 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 canceled
and exchanged as provided in this Article III.
SECTION 3.09 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit to that effect by the person claiming such Certificate to be lost,
stolen or destroyed and, if required by Parent, the posting by such person of a
bond in such amount as Parent may reasonably direct as indemnity against any
claim that may be made against it with respect to such Certificate, the Exchange
Agent will issue in exchange for such lost, stolen or destroyed Certificate the
shares of Parent Common Stock and any cash pursuant to Section 2.01(a)(ii) or in
lieu of fractional shares and unpaid dividends and distributions on Parent
Common Stock deliverable in respect thereof pursuant to this Agreement.
SECTION 3.10 NO LIABILITY. Neither Parent nor the Company shall be liable
to any holder of shares of Common Stock or Parent Common Stock, as the case may
be, for shares (or dividends or distributions with respect thereto) of Parent
Common Stock to be issued in exchange for Common Stock pursuant to this Article
III, if, on or after the expiration of six months following the Effective Time,
such shares (and/or dividends and distributions with respect thereto) or cash in
lieu of fractional shares are delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
Subject to Sections 9.13 and 9.14 hereof, the Company represents and
warrants to the Parent and the Sub as follows:
SECTION 4.01 ORGANIZATION AND QUALIFICATION. (a) The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its business as it is now being conducted.
(b) The only direct and indirect subsidiaries of the Company are those named
in Schedule 4.01 to the Disclosure Statement relating hereto, which Disclosure
Statement has been delivered to Parent simultaneously herewith (the "Disclosure
Statement"). Each subsidiary of the Company is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to carry on
its business as it is now
A-5
<PAGE>
being conducted. Each of the Company and its subsidiaries is duly qualified as a
foreign corporation and is in good standing in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification necessary, except where the failure to be so
qualified would not in the aggregate have a Material Adverse Effect (as defined
below). For purposes of this Agreement: (i) "subsidiary" shall mean, when used
with reference to an entity, any corporation, a majority of the outstanding
voting securities of which are owned directly or indirectly by such entity, and
(ii) "Material Adverse Effect" shall mean any adverse change in or effect on the
condition (financial or otherwise), business, assets or results of operations of
the Company and its subsidiaries that is material to the Company and its
subsidiaries taken as a whole.
SECTION 4.02 CAPITALIZATION. (a) The authorized capital stock of the
Company consists of 20,000,000 shares of Common Stock and 65,778 shares of Class
A Preferred Stock, $1.00 par value, and 4,934,222 shares of Class B Preferred
Stock, $.01 par value (collectively the "Preferred Stock"). At the close of
business on October 28, 1994, 8,629,662 shares of Common Stock were issued and
outstanding and 1,013,970 shares of Common Stock were issuable pursuant to
outstanding Options and the Stock Option Plans, whether or not presently
exercisable. In addition, as of such date, 657,030 shares of Common Stock were
reserved for issuance pursuant to the Stock Option Plans. As of the date hereof,
no shares of Preferred Stock are issued and outstanding. All of the outstanding
shares of capital stock of the Company have been duly authorized and validly
issued and are fully paid and nonassessable and free of preemptive rights.
Except as set forth in the preceding sentence, there are not as of the date
hereof, and at the Effective Time there will not be, any outstanding or
authorized subscriptions, options, warrants, calls, rights, commitments or any
other agreements of any character obligating the Company to issue any additional
shares of Common Stock or any other shares of capital stock of the Company or
any other securities convertible into or evidencing the right to subscribe for
any such shares.
(b) The number of outstanding shares of capital stock of each of the
subsidiaries of the Company, owned of record and beneficially by the Company, is
set forth in Schedule 4.01 to the Disclosure Statement. The Company, or a
wholly-owned subsidiary of the Company, is the sole record and beneficial owner
of the issued and outstanding capital stock of each subsidiary listed in
Schedule 4.01 to the Disclosure Statement, except as otherwise set forth in such
Schedule. There are no irrevocable proxies with respect to such shares, and,
except as set forth in Schedule 4.01 to the Disclosure Statement, no equity
securities of any of such subsidiaries are or may become required to be issued
by reason of any options, warrants, rights to subscribe for, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, shares of any capital stock of any such
subsidiary, and there are no contracts, commitments, understandings or
arrangements by which any such subsidiary is bound to issue additional shares of
its capital stock or securities convertible into or exchangeable for such
shares. All of such shares so owned by the Company or a wholly-owned subsidiary
of the Company are validly issued, fully paid and nonassessable and are owned by
it free and clear of all Liens (as defined in Section 4.08).
SECTION 4.03 CORPORATE POWER AND AUTHORITY. The Company has full corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by the Board of Directors of the
Company and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the transactions so
contemplated (other than the approval of this Agreement and the Merger by the
holders of a majority of the outstanding shares of Common Stock). This Agreement
has been duly and validly executed and delivered by the Company and, assuming
this Agreement constitutes a valid and binding obligation of each of the Parent
and the Sub, this Agreement constitutes the legal, valid and binding obligation
of the Company, enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws, now or hereafter in effect, affecting creditors' rights and
remedies and to general principles of equity. Assuming that none of the Parent,
the Sub or any of
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their affiliates is an "interested stockholder" as defined in Section 203 of the
Delaware Law (other than by reason of this Agreement or the Voting Agreements
and Irrevocable Proxies between the Parent and Phillip H. Morse and the Parent
and Richard H. Morse entered into simultaneously with the execution of this
Agreement), no further action is required and no further conditions need be
satisfied in connection with the consummation of the Merger under the provisions
of Section 203(a)(1) of the Delaware Law.
SECTION 4.04 ABSENCE OF CERTAIN CHANGES. Except as disclosed in the
Company's SEC Reports (as defined in Section 4.05) under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), since August 26, 1994, the Company
and its subsidiaries have not suffered any Material Adverse Effect. Except as
disclosed in the Company's SEC Reports under the Exchange Act or in writing to
the Parent by the Company prior to execution of this Agreement, or as otherwise
set forth in this Agreement or the Disclosure Statement, since August 26, 1994,
there has not been (a) any declaration, setting aside or payment of any dividend
or other distribution in respect of the Shares, or any redemption or other
acquisition by the Company of any shares of its capital stock; (b) any increase
in the rate or terms of compensation payable or to become payable by the Company
to its directors, officers or key employees, except increases occurring in the
ordinary course of business consistent with past practices (which shall include
normal periodic performance reviews and related compensation and benefit
increases); (c) any increase in the rate or terms of any bonus, insurance,
pension or other employee benefit plan, payment or arrangement made to, for or
with any such directors, officers or employees, except increases occurring in
the ordinary course of business consistent with past practices (which shall
include normal periodic performance reviews and related compensation and benefit
increases); (d) any entry into any agreement, commitment or transaction by the
Company which is material to the Company and its subsidiaries taken as a whole,
except for agreements, commitments or transactions in the ordinary course of
business; (e) any amendment, termination or lapse of a material contract of the
Company and its subsidiaries, taken as a whole; (f) any loss of a material
customer of the Company and its subsidiaries, taken as a whole; (g) any material
labor dispute involving the employees of the Company or its subsidiaries; (h)
any change by the Company in accounting methods, principles or practices except
as required or permitted by generally accepted accounting principles; (i) any
write-off or write-down of, or any determination to write off or write down, any
asset of the Company or any of its subsidiaries or any portion thereof which
write-off, write-down, or determination exceeds $100,000 individually or
$500,000 in the aggregate; (j) any amendment, termination, waiver, disposal, or
lapse of, or other failure to preserve, any license, permit, or other form of
authorization of the Company or any subsidiary, except for any thereof that
would not have a Material Adverse Effect; or (k) any agreements by the Company
to (1) do any of the things described in the preceding clauses (a) through (j)
other than as expressly contemplated or provided for herein or (2) take, whether
in writing or otherwise, any action which, if taken prior to the date of this
Agreement, would have made any representation or warranty of the Company in this
Agreement untrue or incorrect.
SECTION 4.05 SEC REPORTS. (a) The Company has filed all required forms,
reports and documents with the Securities and Exchange Commission ("SEC")
required to be filed by it pursuant to the Federal securities laws and the SEC
rules and regulations thereunder, all of which have complied as of their
respective filing dates, or, in the case of registration statements, their
respective effective dates, in all material respects with all applicable
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and the Exchange Act, and the rules and regulations promulgated thereunder. None
of such forms, reports or documents, including, without limitation, any
exhibits, financial statements or schedules included therein, at the time filed,
or, in the case of registration statements, their respective effective dates,
contained any untrue statement of a material fact or omitted 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. All forms, reports and documents filed by the Company with the SEC
since the beginning of its current fiscal year are hereinafter collectively
referred to as the "SEC Reports".
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(b) The consolidated balance sheets and the related consolidated statements
of operations, stockholders' equity and cash flows (including, without
limitation, the related notes thereto) of the Company included in the Company's
Annual Report on Form 10-K for the fiscal year ended May 31, 1994 and the
Company's Quarterly Report on Form 10-Q for the quarter ended August 26, 1994
complied as to form, at the time filed, in all material respects with generally
accepted accounting principles and the published rules and regulations of the
SEC with respect thereto at the time filed and present fairly (subject to normal
nonrecurring audit adjustments in the case of unaudited interim financial
statements) the consolidated financial position of the Company as of their
respective dates, and the results of consolidated operations, the stockholders'
equity and the cash flows for the periods presented therein, all in conformity
with generally accepted accounting principles applied on a consistent basis,
except as otherwise noted therein.
SECTION 4.06 PROXY STATEMENT/PROSPECTUS. None of the information with
respect to the Company or any subsidiary of the Company provided by the Company
for inclusion in or incorporated by reference in (i) the Registration Statement
on Form S-4 (the "Registration Statement") to be filed by Parent with the SEC
for the purpose of registering the shares of Parent Common Stock to be issued
pursuant to this Agreement or (ii) the proxy statement of the Company and the
prospectus of Parent (the "Proxy Statement/Prospectus") required to be mailed to
the Company's stockholders in connection with the Merger will, in the case of
the Proxy Statement/Prospectus or any amendments or supplements thereto, at the
time of the mailing of the Proxy Statement/Prospectus and any amendments or
supplements thereto, and at the time of the special or annual meeting of
stockholders of the Company at which such stockholders will vote upon this
Agreement, the Merger and related matters (the "Company Meeting") or, in the
case of the Registration Statement, at the time it becomes effective and at the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading. The Proxy Statement/ Prospectus will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations promulgated thereunder.
SECTION 4.07 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by the Company of this Agreement and the consummation of the
transactions contemplated hereby by the Company require no action by the Company
in respect of, or filing with, any governmental body, agency, official or
authority other than (i) the filing with the SEC of (A) the Registration
Statement, (B) the Proxy Statement/Prospectus and (C) such reports and
information as may be required in connection with this Agreement and the
transactions contemplated hereby pursuant to the applicable requirements of the
Securities Act, the Exchange Act and the rules and regulations promulgated
thereunder, (ii) the filing of the Certificate of Merger in accordance with the
Delaware Law, and, if necessary, appropriate documents with the relevant
authorities of other states in which the Company is qualified to do business,
(iii) such filings, authorizations, orders and approvals as may be required
under foreign laws and (iv) compliance with applicable requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), and any
applicable state securities or Blue Sky laws, and, if applicable, any
Environmental Law (as defined in Section 4.15), except for filings and approvals
which are not required prior to the consummation of the Merger or where the
failure of any such action to be taken or filing to be made would not have or
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect or prevent the consummation of the transactions contemplated
hereby.
SECTION 4.08 NON-CONTRAVENTION. The execution, delivery and performance by
the Company of this Agreement and the consummation of the transactions
contemplated hereby by the Company do not and will not (i) contravene or
conflict with the Company's Restated Certificate of Incorporation (the
"Company's Certificate of Incorporation") or By-laws, (ii) assuming compliance
with the matters referred to in Section 4.07, contravene or conflict with or
constitute a violation of any provision of any law, regulation, judgment,
injunction, order or decree binding upon or applicable to the Company or any of
its subsidiaries, (iii) assuming that the Company, the Parent and the Sub comply
in all respects
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with the applicable provisions of the Securities Act and the Exchange Act and
the rules and regulations thereunder, in each case, as more fully described in
Section 4.07, except as disclosed in the SEC Reports or in Schedule 4.08 to the
Disclosure Schedule, constitute or result in a default under or give rise to a
right of termination, cancellation or acceleration of any right or obligation,
including without limitation, a repurchase obligation, of the Company or any of
its subsidiaries or to a loss of any benefit to which the Company or any of its
subsidiaries is entitled under any provision of any agreement or other
instrument binding upon the Company or any of its subsidiaries or any license,
franchise, permit or other similar authorization held by the Company or any of
its subsidiaries, or (iv) result in the creation or imposition of any Lien (as
defined below) on any asset of the Company or any of its subsidiaries, other
than, in the case of clauses (ii), (iii) or (iv), any such conflicts,
violations, defaults, losses and Liens that individually or in the aggregate
would not have a Material Adverse Effect. For purposes of this Agreement, "Lien"
means, with respect to any asset, any mortgage, lien, pledge, charge, security
interest, encumbrance, restriction or adverse claim of any kind or nature in
respect of such asset, other than any such mortgage, lien, pledge, charge,
security interest, encumbrance, restriction or adverse claim (i) for taxes or
other governmental charges not yet due and payable, (ii) for materialmen's,
mechanic's and similar liens or (iii) reflected on the consolidated balance
sheet of the Company as of August 26, 1994 or (iv) on any of the Company's
properties or assets, or irregularities in title thereto, that do not materially
detract from the value of, or materially impair the use of, any such property or
asset.
SECTION 4.09 INVESTMENT BANKING FEES AND COMMISSIONS. Except for those
fees and expenses payable to Dillon, Read & Co. Inc. with respect to the
Company, no person or entity is entitled to receive from the Company or any of
its subsidiaries any investment banking, brokerage or finder's fee in connection
with this Agreement or the transactions contemplated hereby.
SECTION 4.10 MATERIAL CONTRACTS. Except as disclosed in the SEC Reports or
on Schedule 4.10 to the Disclosure Statement, neither the Company nor any of its
subsidiaries is a party to any written (i) contract or agreement not made in the
ordinary course of business or which is not terminable without penalties of
$50,000 or more in the aggregate or upon notice of thirty (30) days or less;
(ii) employment, consulting, non-competition, severance, golden parachute or
indemnification contract or agreement; (iii) mortgage, pledge, conditional sales
contract, security agreement, loan agreement, credit agreement, promissory note
or other similar contract with respect to any real property of the Company or
any of its subsidiaries; (iv) mortgage pledge, conditional sales contract,
security agreement, factoring agreement, loan agreement, credit agreement,
promissory note or other similar contract with respect to any tangible personal
property of the Company or any of its subsidiaries involving indebtedness for
borrowed money or capital equipment leases, in each case, of more than $50,000;
(v) guarantee, subordination agreement, letter of credit or any other similar
type of contract or agreement involving obligations in excess of $50,000
individually or $100,000 in the aggregate; (vi) contract or agreement with any
governmental authority; or (vii) commitment or agreement to enter into any of
the foregoing. The Company has delivered or otherwise made available to the
Parent true, correct and complete copies of the contracts and agreements listed
on Schedule 4.10 to the Disclosure Statement, together with all amendments,
modifications, supplements or material side letters affecting the obligations of
any party thereunder. Neither the Company nor any of its subsidiaries is in
default under any such contract or agreement nor, to the Company's knowledge, is
any other party thereto, which default, in each case, could reasonably be
expected to have a Material Adverse Effect.
SECTION 4.11 LITIGATION, ETC. As of the date hereof, except as disclosed
in the SEC Reports or in Schedule 4.11 to the Disclosure Statement, there is no
suit, claim, action or proceeding (at law or in equity) pending or, to the
knowledge of the Company, threatened against the Company or any of its
subsidiaries before any court or governmental or regulatory authority or body
seeking money damages in excess of $50,000 or non-monetary relief that, if
granted, could reasonably be expected to have a Material Adverse Effect. As of
the date hereof, there are no such suits, actions, claims, proceedings or
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investigations pending or, to the knowledge of the Company, threatened, seeking
to prevent or challenging the transactions contemplated by this Agreement. The
Company is not subject to any outstanding order, writ, injunction or decree that
would have a Material Adverse Effect.
SECTION 4.12 BENEFIT PLANS. Except as disclosed in the SEC Reports or on
Schedule 4.12 to the Disclosure Statement:
(a) With respect to each employee benefit plan or other benefit arrangement
(including, without limitation, any "employee benefit plan", as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (all of the foregoing being herein called "Benefit Plans"),
maintained or contributed to by the Company or any of its subsidiaries or under
which it has any liability or obligation, the Company has made available to the
Parent a true and correct copy of (a) the most recent annual report (Form 5500)
filed with the IRS, (b) such Benefit Plan, and (c) each trust agreement and
group annuity contract, if any, relating to such Benefit Plan.
(b) With respect to the Benefit Plans, individually and in the aggregate, no
event has occurred, and to the knowledge of the Company, there exists no
condition or set of circumstances in connection with which the Parent or any of
its affiliates could be subject to any liability that is reasonably likely to
have a Material Adverse Effect (except liability for benefits claims and funding
obligations payable in the ordinary course) under ERISA, the Internal Revenue
Code of 1986, as amended (the "Code"), or any other applicable law.
(c) With respect to the Benefit Plans, individually and in the aggregate,
there are no funded benefit obligations for which contributions have not been
made or properly accrued and there are no unfunded benefit obligations that have
not been accounted for by reserves, or otherwise properly footnoted in
accordance with generally accepted accounting principles, on the financial
statements of the Company, which obligations are reasonably likely to have a
Material Adverse Effect.
(d) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
material payment becoming due, or materially increase the amount of compensation
due, any current or former employee of the Company or any of its subsidiaries
including, without limitation, any severance payment or benefit; (ii) materially
increase any benefits otherwise payable under any Benefit Plan; or (iii) result
in the acceleration of the time of payment or vesting of any such material
benefits, except in each case as contemplated by this Agreement.
SECTION 4.13 INTELLECTUAL PROPERTY. To the knowledge of the Company, the
Company and its subsidiaries own, or are licensed or otherwise have the right to
use, all patents, patent rights, trademark rights, trade names, trade name
rights, service mark rights, copyrights and computer programs which are material
to the conduct of the business of the Company and its subsidiaries taken as a
whole (the "Intellectual Property"). Included within the Intellectual Property
are at least the patents, patent rights, trademark rights, trade names, trade
name rights and service mark rights set forth in Schedule 4.13 to the Disclosure
Statement. Except as set forth in Schedule 4.13 to the Disclosure Statement,
neither the Company nor any of its subsidiaries has been granted or has granted
any outstanding license or other rights under any material Intellectual
Property. Except as set forth in Schedule 4.13 to the Disclosure Statement, no
person has communicated to the Company a position in writing that the Company is
infringing or otherwise adversely affecting the rights of that person with
regard to any patent, licenses, trademark, trade name, service mark, copyright
or other intellectual property right held by that person. Except as set forth on
Schedule 4.13 to the Disclosure Statement, to the knowledge of the Company, no
person is currently infringing the rights of the Company with regard to any
material patent, license, trademark, trade name, service mark, copyright or
other intellectual property right.
SECTION 4.14 RESTRICTIONS ON OPERATIONS. Except as set forth on Schedule
4.14 to the Disclosure Statement, the Company and its subsidiaries are not
restricted directly or indirectly by any agreement from carrying on its business
anywhere in the world.
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SECTION 4.15 ENVIRONMENTAL LAWS. Except as disclosed on Schedule 4.15 to
the Disclosure Statement, in the Environmental Reports (as defined in Section
4.15(d)) or as would not have a Material Adverse Effect:
(a) The Company and its subsidiaries and their respective operations comply
with all applicable Environmental Laws.
(b) The Company and its subsidiaries have obtained and maintain all
Environmental Permits necessary for their operations; there are no legal
proceedings pending or, to the knowledge of the Company, threatened to revoke
any such Environmental Permit; the Company and its subsidiaries are in
compliance with all such Environmental Permits, including those relating to the
construction of the NAMIC Eireann facility located in Tullamore, Ireland; none
of the Company or any of its subsidiaries has received any written notice from
any governmental authority to the effect that there is lacking any Environmental
Permit required in connection with the current use or operation of any of its
properties; and the consummation of the transactions contemplated hereby will
not cause the Company to have any of its rights under such Environmental Permits
adversely affected.
(c) To the knowledge of the Company, all real property owned, operated or
leased by the Company and its subsidiaries is free from contamination by
Hazardous Materials and neither the Company nor any of its subsidiaries has
caused or permitted any Hazardous Material to remain or be disposed of, either
on or under real property legally or beneficially owned, leased or operated by
the Company or any of its subsidiaries or on any real property not permitted to
accept, store or dispose of such Hazardous Materials other than in compliance
with applicable Environmental Laws.
(d) The Company and its subsidiaries have provided or made available to
Parent all audits, studies, reports, analyses and results of investigations,
memoranda and correspondence in the Company's possession related to
Environmental Laws or Environmental Claims that have been drafted, created or
performed with respect to currently or previously owned, leased or operated
properties of the operations of the Company and its subsidiaries. The foregoing,
together with the report prepared by ERM in the final form delivered to Parent
regarding environmental, health and safety matters connected with property
owned, leased or operated by the Company or its subsidiaries, are collectively
referred to as the "Environmental Reports".
(e) For purposes of this Agreement:
"ENVIRONMENTAL CLAIM" means any written accusation, allegation, notice of
violation, action, claim, Environmental Lien, demand, abatement or other order
or direction (conditional or otherwise) by any governmental body or any other
person for personal injury (including sickness, disease or death), tangible or
intangible property damage, damage to the environment, nuisance, pollution,
contamination or other adverse effects on the environment, or for fines,
penalties or restrictions resulting from or based upon (i) the existence, or the
continuation of the existence, of a Release (including, without limitation,
sudden or non-sudden accidental or non-accidental Releases) of, or exposure to,
any Hazardous Material in, into or onto the environment (including, without
limitation, the air, soil, surface water or groundwater) at, in, by, from or
related to any property owned, operated or leased by the Company or its
subsidiaries or any activities or operations thereof; (ii) the transportation,
storage, treatment or disposal of Hazardous Materials in connection with any
property owned, operated or leased by the Company or its subsidiaries or their
operations or facilities; or (iii) the violation, or alleged violation, of any
Environmental Law, order or Environmental Permit of or from any governmental
body relating to environmental matters connected with any property owned, leased
or operated by the Company or its subsidiaries.
"ENVIRONMENTAL LAW" means any federal, state, local or foreign law
(including common law), statute, code, ordinance, rule, regulation or other
requirement relating to the environment, natural resources, or public or
employee health and safety and includes, but is not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601 ET SEQ., the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801 ET SEQ., the Resource Conservation and Recovery Act,
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42 U.S.C. Section 6901 ET SEQ., the Clean Water Act, 33 U.S.C. Section 1251 ET
SEQ., the Clean Air Act, 33 U.S.C. Section 2601 ET SEQ., the Toxic Substances
Control Act, 15 U.S.C. Section 2601 ET SEQ., the Federal Insecticide, Fungicide,
and Rodenticide Act, 7 U.S.C. Section 136 ET SEQ., the Oil Pollution Act of
1990, 33 U.S.C. Section 2701 ET SEQ. and the Occupational Safety and Health Act,
29 U.S.C. Section 651 ET SEQ., as such laws have been amended or supplemented,
and the regulations promulgated pursuant thereto, and all analogous state or
local statutes, including without limitation, any state environmental property
transfer statutes.
"ENVIRONMENTAL PERMIT" means any permit, approval, authorization, license,
variance, registration, or permission required under any applicable
Environmental Law or order.
"HAZARDOUS MATERIALS" means any hazardous substance, material or waste which
is regulated by any local, state, Federal or foreign governmental body in the
jurisdiction in which the Company or any of its subsidiaries conducts business,
including, without limitation, any material or substance which is defined as a
"hazardous waste," "hazardous material," "hazardous substance," "extremely
hazardous waste" or "restricted hazardous waste," "subject waste,"
"contaminant," "toxic waste" or "toxic substance" under any provision of
Environmental Law, including, but not limited to, petroleum products, asbestos
and polychlorinated biphenyls.
"RELEASE" means any release, spill, emission, leaking, pumping, pouring,
dumping, emptying, injection, deposit, disposal, discharge, dispersal, leaching,
or migration on or into the indoor or outdoor environment or into or out of any
property.
"REMEDIAL ACTION" means all actions, including, without limitation, any
capital expenditures, required or voluntarily undertaken to (i) clean up,
remove, treat, or in any other way address any Hazardous Material or other
substance; (ii) prevent the Release or threat of Release, or minimize the
further Release of any Hazardous Material so it does not migrate or endanger or
threaten to endanger public health or welfare or the indoor or outdoor
environment; (iii) perform pre-remedial studies and investigations or
post-remedial monitoring and care; or (iv) bring any property owned, operated or
leased by the Company or any of its subsidiaries and the facilities located and
operations conducted thereon into compliance with all Environmental Laws and
Environmental Permits.
SECTION 4.16 TITLE TO PROPERTIES; ENCUMBRANCES. Except as set forth in
Schedule 4.16 to the Disclosure Statement or as would not have a Material
Adverse Effect, the Company and each of its subsidiaries has good and valid
title to (a) all tangible properties and assets (real and personal) owned by the
Company and its subsidiaries, respectively, including, without limitation, all
the properties and assets reflected in the consolidated balance sheet as of May
31, 1994, except as indicated in the notes thereto and except for properties and
assets reflected in the consolidated balance sheet as of May 31, 1994 which have
been sold or otherwise disposed of in the ordinary course of business, and (b)
all the tangible properties and assets purchased by the Company and any of its
subsidiaries since May 31, 1994, except for such properties and assets which
have been sold or otherwise disposed of in the ordinary course of business, in
each case subject to no Lien.
SECTION 4.17 COMPLIANCE WITH LAWS. Except as set forth in Schedule 4.17 to
the Disclosure Statement or as disclosed in the SEC Reports, neither the Company
nor any of its subsidiaries has violated or failed to comply with any statute,
law, ordinance, regulation, rule or order of any foreign, Federal, state or
local government or any other governmental department or agency, or any
judgment, decree or order of any court, applicable to its business or
operations, except where any such violations or failures to comply would not, in
the aggregate, have a Material Adverse Effect; and the conduct of the business
of the Company and its subsidiaries is in conformity with all Federal, state and
local energy and public utility and all other Federal, state and local
governmental and regulatory requirements applicable to its business or
operations, except where such nonconformities would not, in the aggregate, have
a Material Adverse Effect. The Company and its subsidiaries have all permits,
licenses and franchises from governmental agencies required to conduct their
businesses as now being conducted, except for such permits, licenses and
franchises the absence of which would not, in the aggregate, have a Material
Adverse Effect.
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SECTION 4.18 TAXES. Except as set forth in Schedule 4.18 to the Disclosure
Statement:
(a) Each of the Company and its subsidiaries has (i) timely filed all
Federal and all state, local and foreign returns, declarations, reports,
estimates, information returns and statements ("Returns") required to be filed
by or for it through the date hereof in respect of any Taxes and such Returns
are true, complete and correct in all material respects, (ii) timely paid all
Taxes that are shown as being due on such Returns, (iii) established reserves
that are adequate for the payment of all Taxes not yet due and payable with
respect to the results of operations of the Company and its subsidiaries through
the date hereof, (iv) complied in all material respects with all applicable
laws, rules and regulations relating to the withholding of Taxes, and (v) timely
withheld from employee wages and paid over to the proper governmental
authorities all Taxes and other amounts required to be so withheld and paid
over.
(b) Schedule 4.18 to the Disclosure Statement sets forth the last taxable
period (i) through which the Federal Returns of the Company and any of its
subsidiaries have been examined by the Internal Revenue Service ("IRS") and (ii)
for which examination, assessment and deficiency has expired; all deficiencies
asserted as a result of such examinations have been paid, fully settled or
adequately provided for in the Company's most recent audited financial
statements; no Federal tax audits or other administrative proceedings or court
proceedings are presently pending with respect to the Company or any of its
subsidiaries with regard to any Federal Taxes; no deficiency for any such Taxes
aggregating in excess of $50,000 has been proposed, asserted or assessed against
the Company or any of its subsidiaries, by any Federal, state, local or foreign
taxing authority or court with respect to any period.
(c) Neither the Company nor any of its subsidiaries has within the last
twelve months executed or entered into (or prior to the close of business on the
Effective Time will execute or enter into) with the IRS or any other taxing
authority (i) any agreement or other document extending or having the effect of
extending the period for assessments or collection of any Federal, state, local
or foreign Taxes or (ii) a closing agreement pursuant to Section 7121 of the
Code, or any predecessor provision thereof, or any similar agreement, pursuant
to any similar provision of state, local or foreign law.
(d) Neither the Company nor any of its subsidiaries is a party to an
agreement that provides for the payment of any amount that would constitute a
"parachute payment" within the meaning of Section 280G of the Code.
(e) Neither the Company nor any of its subsidiaries has made an election
under Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code
apply to any disposition of a subsection (f) asset (as such term is defined in
Section 341(f)(4) of the Code) owned by the Company or any of its subsidiaries.
(f) Neither the Company nor any of its subsidiaries is a party to, is bound
by or has any obligation under any tax sharing agreement or similar agreement or
arrangement.
(g) All representations made by the Company, any of its subsidiaries or
their respective authorized representatives in connection with any tax
exemption, grant, dispensation or similar allowance under any Federal, state,
local or foreign laws are complete, true and accurate in all material respects
and any covenants, promises or undertakings made or to be performed by the
Company or any of its subsidiaries have been duly discharged or performed in
accordance with their terms.
(h) The Company (i) has not agreed to make, nor is it required to make any
adjustment under Section 481(a) of the Code by reason of a change in accounting
method or otherwise and (ii) has not leased or rented any property other than on
arm's length terms and conditions.
(i) All of the certifications contained in Exhibit B, which is attached
hereto and is incorporated herein by reference, are true and correct.
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For purposes of this Agreement, "Taxes" shall mean all Federal, state,
local, foreign and other taxes, charges, fees, levies, imposts, duties, licenses
or other assessments of every kind and description, together with any interest
and any penalties, additions to tax or additional amounts imposed by any taxing
authority.
SECTION 4.19 LIABILITIES. As of August 26, 1994, neither the Company nor
any of its subsidiaries had any outstanding claims, liabilities or indebtedness,
contingent or otherwise, of a type required to be set forth on a balance sheet
prepared in accordance with generally accepted accounting principles in order to
fairly present the financial position of the Company as of such date, in excess
of $50,000, except (i) as set forth and reserved against in the consolidated
balance sheet as of August 26, 1994, or specifically disclosed in the footnotes
thereto, or (ii) as disclosed or described in this Agreement. Neither the
Company nor any of its subsidiaries is in default in respect of the terms and
conditions of any indebtedness or other agreement relating to borrowing, which
default would have a Material Adverse Effect.
SECTION 4.20 MEDICAL DEVICE REGULATION. Except as set forth on Schedule
4.20 to the Disclosure Statement, with respect to each medical device currently
manufactured or marketed by the Company or any of its subsidiaries, the Company
or such subsidiary has applied for or obtained all applicable licenses,
registrations, approvals, clearances, and authorizations required by local,
state, or federal agencies, foreign or domestic, regulating the safety,
effectiveness, manufacturing or market clearance of such medical device which
are necessary for such medical device to be manufactured or marketed in the
jurisdiction or jurisdictions in which it is currently manufactured or marketed.
SECTION 4.21 LABOR CONTROVERSIES. Except as set forth on Schedule 4.21 to
the Disclosure Statement, since June 1, 1989, to the knowledge of the Company,
no union organizational efforts have been made or threatened involving any
employees of the Company who devote greater than an incidental portion of their
time to any aspect of the business of the Company.
SECTION 4.22 EMPLOYEES. Schedule 4.22 to the Disclosure Statement contains
a true and complete list of all current employees both full time and part time
of the Company and all current consultants of the Company and discloses the date
of hire of each individual and the current annual rate of compensation of each
such individual. Except as would not have a Material Adverse Effect, to the
Company's knowledge, none of the persons disclosed in Schedule 4.22 is subject
to any judgment, order or decree of or agreement with any governmental body or
any person or is the subject of any pending or threatened litigation which could
affect the ability of any such individual to perform services for the Company
and its subsidiaries.
SECTION 4.23 COMPANY ACTION. The Board of Directors of the Company (at a
meeting duly called and held) has by the requisite vote of all directors present
(a) determined that the Merger is advisable and in the best interests of the
Company and it stockholders, (b) approved this Agreement and the transactions
contemplated hereby, including the Merger, and (c) directed that this Agreement
and the Merger be submitted for consideration by the Company's stockholders at
the Company Meeting and has determined to recommend, subject to the Board's
ability to withdraw, modify or change its recommendation regarding this
Agreement and the Merger in accordance with the provisions of Sections 6.02 and
6.12, the approval by the Company's stockholders of these matters. In connection
with its consideration of this Agreement, the Board of Directors of the Company
received a written opinion from Dillon, Read & Co. Inc. that the consideration
to be received by the Company's common stockholders in the Merger is fair, from
a financial point of view, to such stockholders. The affirmative votes of the
holders of a majority of the outstanding shares of Common Stock entitled to vote
thereon are the only votes of the holders of any class or series of Company
capital stock necessary to approve this Agreement and the transactions
contemplated hereby, including the Merger.
SECTION 4.24 PUERTO RICO FACILITY. The one-time costs associated with any
decision to close (which decision is not under consideration) the Company's
facility in Puerto Rico would not exceed $500,000 in the aggregate and such
closing would not have a material adverse effect on the continuing business of
the Company and its subsidiaries taken as a whole.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND SUB
Subject to Section 9.14 hereof, the Parent and the Sub represent and warrant
to the Company as follows:
SECTION 5.01 ORGANIZATION AND QUALIFICATION. Each of the Parent and the
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation and has all requisite
corporate power and authority to carry on its business as it is now being
conducted.
SECTION 5.02 CORPORATE POWER AND AUTHORITY. Each of the Parent and the Sub
has full corporate power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. The execution and delivery
by the Parent and the Sub of this Agreement and the consummation by the Parent
and the Sub of the transactions contemplated hereby have been duly authorized by
the respective Boards of Directors of the Parent and the Sub, and the sole
stockholder of the Sub, and no other corporate proceedings on the part of the
Parent or the Sub are necessary to authorize this Agreement or to consummate the
Merger and the other transactions contemplated by this Agreement. This Agreement
has been duly and validly executed and delivered by each of the Parent and the
Sub and, assuming this Agreement constitutes a valid and binding obligation of
the Company, this Agreement constitutes the legal, valid and binding obligation
of each of the Parent and the Sub, enforceable against each of the Parent and
the Sub in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws, now or
hereafter in effect, affecting creditors' rights and remedies and to general
principles of equity.
SECTION 5.03 SEC REPORTS. (a) Since January 1, 1994, the Parent has filed
all required forms, reports and documents with the SEC required to be filed by
it pursuant to the Federal securities laws and the SEC rules and regulations
thereunder (collectively, the "Parent SEC Reports"), all of which have complied
as of their respective filing dates, or in the case of registration statements,
their effective dates, in all material respects with all applicable requirements
of the Securities Act and the Exchange Act and the rules and regulations
promulgated thereunder. None of such Parent SEC Reports, including, without
limitation, any exhibits, financial statements or schedules included therein, at
the time filed, or in the case of registration statements, their effective
dates, contained any untrue statement of a material fact or omitted 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.
(b) The condensed consolidated balance sheet at July 3, 1994 and the related
condensed consolidated statement of income and cash flows for the three and six
months ended July 3, 1994 (including, without limitation, the related notes
thereto) of the Parent included in the Parent's Quarterly Report on Form 10-Q
(the "Parent's Form 10-Q") for the fiscal quarter ended July 3, 1994 complied as
to form, at the time filed, in all material respects with generally accepted
accounting principles and the published rules and regulations of the SEC with
respect thereto at the time filed and present fairly (subject to normal,
nonrecurring audit adjustments in the case of unaudited interim financial
statements) the consolidated financial position of the Parent as of their
respective dates, and the consolidated income and cash flows for the periods
presented therein, all in conformity with generally accepted accounting
principles applied on a consistent basis, except as otherwise noted therein or
as permitted by Form 10-Q promulgated under the Exchange Act.
SECTION 5.04 PROXY STATEMENT/PROSPECTUS. None of the information with
respect to Parent or any subsidiary of Parent provided by Parent for inclusion
in or incorporated by reference in (i) the Registration Statement or (ii) the
Proxy Statement/Prospectus will, in the case of the Proxy Statement/Prospectus
or any amendments or supplements thereto, at the time of the mailing of the
Proxy
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Statement/ Prospectus and any amendments or supplements thereto, and at the time
of the Company Meeting, or, in the case of the Registration Statement, at the
time it becomes effective and at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The Registration
Statement and the Proxy Statement/Prospectus shall comply as to form in all
material respects with the provisions of the Securities Act, the Exchange Act
and the rules and regulations promulgated thereunder.
SECTION 5.05 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by each of the Parent and the Sub of this Agreement and the
consummation of the transactions contemplated hereby by the Sub require no
action by or in respect of, or filing with, any governmental body, agency,
official or authority other than (i) the filing with the SEC of (A) the
Registration Statement, (B) the Proxy Statement/Prospectus and (C) such reports
and information as may be required in connection with this Agreement and the
transactions contemplated hereby pursuant to the applicable requirements of the
Securities Act and the Exchange Act and the rules and regulations promulgated
thereunder, (ii) the filing of the Certificate of Merger in accordance with the
Delaware Law, (iii) such filings, authorizations, orders and approvals as may be
required under foreign laws, (iv) compliance with applicable requirements of the
HSR Act, and any applicable state securities or Blue Sky laws, and, if
applicable, any Environmental Law, and (v) any filings and approvals required by
the rules and regulations of the NYSE in order that the shares of Parent Common
Stock to be issued in the Merger are validly listed for trading thereon, except
for filings and approvals which are not required prior to the consummation of
the Merger or where the failure of any such action to be taken or filing to be
made would not have or reasonably be expected to have, individually or in the
aggregate, a material adverse effect on the Parent or prevent consummation of
the transactions contemplated hereby.
SECTION 5.06 NON-CONTRAVENTION. The execution, delivery and performance by
the Parent and the Sub of this Agreement and the consummation of the
transactions contemplated hereby by the Parent and the Sub do not and will not
(i) contravene or conflict with the Certificate of Incorporation or By-laws of
the Parent or the Sub, (ii) assuming compliance with the matters referred to in
Section 5.05, contravene or conflict with or constitute a violation of any
provision of any law, regulation, judgment, injunction, order or decree binding
upon or applicable to the Parent or the Sub, (iii) constitute or result in a
default under or give rise to a right of termination, cancellation or
acceleration of any right or obligation of the Parent or the Sub or to a loss of
any benefit to which the Parent or the Sub is entitled under any provision of
any agreement or other instrument binding upon the Parent or the Sub or any
license, franchise, permit or other similar authorization held by the Parent or
the Sub, or (iv) result in the creation or imposition of any Lien on any asset
of the Parent or the Sub, except for any occurrences or results referred to in
clauses (ii), (iii), and (iv) which would not have or reasonably be expected to
have, individually or in the aggregate, a material adverse effect on Parent or
prevent consummation of the transactions contemplated hereby.
SECTION 5.07 MATERIAL ADVERSE CHANGE. Since the date of the Parent's Form
10-Q, there has been no adverse change in or effect on the condition (financial
or otherwise), business, assets or results of operations of the Parent and its
subsidiaries that is material to the Parent and its subsidiaries taken as a
whole.
SECTION 5.08 CAPITAL STOCK. The Parent's Form 10-Q sets forth a true and
complete description of the authorized and outstanding shares of capital stock
of Parent as of such date. All outstanding shares of Parent Common Stock are
validly issued, fully paid and nonassessable and not subject to preemptive
rights. Parent has duly authorized and reserved for issuance the shares of
Parent Common Stock to be issued in the Merger, and, when issued in accordance
with the terms of Articles II and III, such shares will be (a) validly issued,
fully paid and nonassessable and free of preemptive rights and (b) registered
under the Exchange Act and registered or exempt from registration under
applicable state securities or blue-sky laws. Parent owns all of the outstanding
shares of capital stock of Sub, and all of such shares are validly issued, fully
paid and nonassessable and not subject to preemptive rights.
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SECTION 5.09 SUB. (a) Parent owns all of the outstanding stock of Sub; at
all times prior to the Merger, no person other than Parent has owned, or will
own, any of the outstanding stock of Sub. Sub was formed by parent solely for
the purpose of engaging in the transactions contemplated by this Agreement.
(b) There are not as of the date of this Agreement, and there will not be at
the Effective Time, any outstanding or authorized options, warrants, calls,
rights, commitments or any other agreements of any character which Sub is a
party to, or may be bound by, requiring it to issue, transfer, sell, purchase,
redeem or acquire any shares of its capital stock or any securities or rights
convertible into, exchangeable for, or evidencing the right to subscribe for or
acquire, any shares of its capital stock.
(c) As of the date of this Agreement and the Effective Time, except for
obligations incurred in connection with this Agreement, Sub has not and will not
have incurred, directly or indirectly through any other corporation, any
obligations or liabilities of any kind or engaged in any activities of any type
or kind whatsoever or entered into any arrangement or arrangements with any
person or entity.
ARTICLE VI
COVENANTS
SECTION 6.01 CONDUCT OF BUSINESS. Except as expressly provided in this
Agreement or as set forth in Schedule 6.01 to the Disclosure Statement, during
the period from the date of this Agreement and continuing until the Effective
Time or until the termination of this Agreement pursuant to Section 8.01 (the
"Executory Period"):
(a) The Company will, and will cause each of its subsidiaries to, conduct
its operations according to its ordinary and usual course of business and
consistent with past practice and will use their commercially reasonable efforts
to preserve intact their respective business organizations, keep available the
services of their officers and employees and maintain satisfactory relationships
with licensors, suppliers, distributors, customers and others having business
relationships with them.
(b) The Company will, and will cause each of its subsidiaries to, maintain
its books and records in the usual manner and consistent with past practice and
not permit a material change in any of its financial reporting, tax, or
accounting practices or policies or in any assumption underlying such practices
or policies, or in any method of calculating any bad debt, contingency, or other
reserve for financial reporting purposes or for other accounting purposes,
except as may be required by generally accepted accounting principles.
(c) Without limiting the generality of the foregoing, neither the Company
nor any of its subsidiaries, as the case may be, will, without the prior written
consent of the Parent, (i) issue, sell, pledge or encumber, or authorize or
propose the issuance, sale, pledge or encumbrance of (A) any shares of capital
stock of any class (including Shares), or securities convertible into any such
shares, or any rights, warrants or options to acquire any such shares or other
convertible securities, or grant or accelerate any right to convert or exchange
any securities of the Company or any of its subsidiaries for such shares, other
than shares of Common Stock issuable upon exercise of currently outstanding
stock options or stock awards, or (B) any other securities in respect of, in
lieu of or in substitution for shares of common stock outstanding on the date
hereof (including the shares of Common Stock); (ii) redeem, purchase or
otherwise acquire, or propose to redeem, purchase or otherwise acquire, any of
its outstanding securities (including the shares of Common Stock); (iii) split,
combine or reclassify any shares of its capital stock or declare or pay any
dividend or distribution on any shares of capital stock of the Company; (iv)
except as set forth on Schedule 6.01 to the Disclosure Statement, make any
acquisition of a material amount of assets or securities, any disposition of a
material amount of assets or securities, or enter into or modify any material
contract, agreement, commitment, arrangement, license or right or any release or
relinquishment of any material contract rights, not in the ordinary course of
business, except that the Company may sell some or all of the artwork listed on
Schedule 6.01 to the Disclosure Statement to Phillip H. Morse for amounts not
less than the book value of such
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artwork, provided that the Company certifies to the Parent that the fair market
value of any such artwork so sold in the aggregate is no greater than the
aggregate book value of such artwork; (v) pledge or encumber any material assets
of the Company except in the ordinary course of business consistent with past
practice; (vi) incur any long-term debt for borrowed money or short-term debt
for borrowed money, except for debt incurred in the ordinary course of business
consistent with past practice; (vii) propose or adopt any amendments to the
Certificate of Incorporation or By-laws of the Company or any of its
subsidiaries; (viii) enter into any new employment agreement or amend any
existing agreement with any officer, director or employee or grant any increase
in the compensation or benefits to officers, directors, employees and former
employees other than increases in the ordinary course of business and consistent
with past practice or pursuant to the terms of agreements or plans as currently
in effect; (ix) adopt a plan of complete or partial liquidation or resolutions
providing for the complete or partial liquidation or dissolution of the Company
or any of its subsidiaries; (x) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
obligations of any other person except wholly-owned subsidiaries of the Company
in the ordinary course of business and consistent with past practices; (xi) make
any loans, advances or capital contributions to, or investments in, any other
person (other than loans or advances to subsidiaries and customary loans or
advances to employees in accordance with past practices); (xii) adopt or amend
(except as may be required by law or required by this Agreement) any bonus,
profit sharing, compensation, stock option, pension, retirement, deferred
compensation, employment or other employee benefit plan, agreement, trust, fund
or other arrangement for the benefit or welfare of any employee or former
employee; (xiii) take any action other than in the ordinary course of business
and consistent with past practice with respect to the grant of any severance or
termination pay or with respect to any increase of benefits payable under its
severance or termination pay policies in effect on the date hereof; (xiv) make
any tax election or settle or compromise any material Federal, state, local or
foreign income tax liability, except in the ordinary course of business and
consistent with past practice; (xv) except pursuant to agreements in effect on
the date hereof which are disclosed on Schedule 6.01 to the Disclosure Statement
or as contemplated by the capital expenditures budget currently in effect,
authorize capital expenditures in excess of $250,000 in the aggregate; or (xvi)
authorize or propose any of the foregoing, or enter into any contract,
agreement, commitment or arrangement to do any of the foregoing, or take any
action which would make any representation or warranty of the Company in this
Agreement untrue or incorrect.
SECTION 6.02 NO SOLICITATION. During the Executory Period, neither the
Company and its subsidiaries, nor any of their respective officers, directors,
employees, representatives or agents (including, without limitation, any
investment banker, attorney or accountant retained by the Company or any of its
subsidiaries), will, directly or indirectly, initiate, solicit or knowingly
encourage (including by way of furnishing non-public information or assistance)
any inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Company Acquisition Proposal (as defined below), or
enter into or maintain or continue discussions or negotiate with any person or
entity in furtherance of such inquiries or to obtain a Company Acquisition
Proposal or agree to or endorse any Company Acquisition Proposal, and the
Company shall notify Parent orally (within one business day) and in writing (as
promptly as practicable) of all of the relevant details relating to all written
inquiries and proposals which it or any of its subsidiaries or any such officer,
director, employee, investment banker, financial advisor, attorney, accountant
or other representative may receive relating to any of such matters, and the
Company shall deliver to Parent a copy of such written inquiry or proposal
promptly; PROVIDED, HOWEVER, that nothing contained in this Section 6.02 shall
prohibit the Board of Directors of the Company from (i) furnishing information
to, or entering into discussions or negotiations with, any person or entity that
makes an unsolicited written, bona fide Company Acquisition Proposal subject to
no conditions relating to financing or any due diligence review of the Company
or its subsidiaries, if, and only to the extent that, the Board of Directors of
the Company, after consultation with and based upon the written advice of
outside legal counsel (who may be the Company's regularly engaged outside legal
counsel), determines in good faith that such action
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is necessary for the Board of Directors of the Company to comply with its
fiduciary duties to stockholders under applicable law (such proposal being
referred to herein as a "Superior Proposal") and prior to furnishing such
information to, or entering into discussions or negotiations with, such person
or entity, the Company provides notice to the Parent to the effect that it is
furnishing information to, or entering into discussions or negotiations with,
such person or entity, (ii) complying with Rule 14e-2 promulgated under the
Exchange Act with regard to a tender or exchange offer or (iii) failing to make
or withdrawing or modifying its recommendation referred to in Section 4.23 if
there exists a Superior Proposal and the Board of Directors of the Company,
after consultation with and based upon the written advice of outside legal
counsel (who may be the Company's regularly engaged outside counsel), determines
in good faith that such action is necessary for the Board of Directors of the
Company to comply with its fiduciary duties to stockholders under applicable
law. For purposes of this Agreement, "Company Acquisition Proposal" shall mean
any of the following (other than the transactions between the Company, Parent
and Sub contemplated hereunder) involving the Company or any of its
subsidiaries: (i) any merger, consolidation, share exchange, business
combination, or other similar transaction pursuant to which control of the
Company would be transferred to another Person; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of 50% or more of the assets of
the Company and its subsidiaries, taken as a whole, in a single transaction or
series of transactions; (iii) any tender offer or exchange offer for in excess
of 50% of the outstanding shares of capital stock of the Company; or (iv) any
public announcement of a proposal, plan or intention to do any of the foregoing
or any agreement to engage in any of the foregoing.
SECTION 6.03 ACCESS TO INFORMATION. (a) During the Executory Period, the
Company will upon reasonable notice (i) give the Parent and its authorized
representatives reasonable access during regular business hours to all of its
subsidiaries, plants, offices, warehouses and other properties and to their
employees, agents, independent accountants and all of their books, records and
contracts, (ii) permit the Parent and its authorized representatives to make
such inspections, including, without limitation, environmental assessments or
surveys, during regular business hours as the Parent may reasonably require and
(iii) cause its officers and those of its subsidiaries to furnish the Parent and
its authorized representatives with such financial and operating data and other
information with respect to the business and properties of the Company and its
subsidiaries as the Parent may from time to time reasonably request; PROVIDED,
HOWEVER, that such access shall be coordinated through Cynthia L. Morris or
David W. Gilmour, the President and Chief Executive Officer and the Chief
Financial Officer, respectively, of the Company and the review by the Parent and
its representatives shall be conducted in such a manner as to (1) avoid any
undue disruption of the normal business operations of the Company and its
subsidiaries and (2) maintain the confidentiality of NAMIC's Information (as
defined in the Confidentiality Agreement, dated August 22, 1994 (the
"Confidentiality Agreement"), between the Parent and the Company).
(b) Information obtained by the Parent and its representatives pursuant to
this Section 6.03 shall be subject to the provisions of the Confidentiality
Agreement, which agreement remains in full force and effect and shall survive
the termination of this Agreement.
SECTION 6.04 REASONABLE BEST EFFORTS. Subject to the terms and conditions
herein, and to the fiduciary duties of the Board of Directors of the Company
under applicable laws, each of the parties hereto agrees to (i) make all
required filings under the HSR Act within six business days of the date hereof,
and thereafter promptly make any other required submissions under the HSR Act,
(ii) promptly make their respective filings and thereafter promptly make any
other required submissions under the Securities Act and the Exchange Act with
respect to the Merger and (iii) use its reasonable best efforts to take, or
cause to be taken, all appropriate action, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, (a) using their respective reasonable best
efforts to obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities and parties to contracts
with the Company and its subsidiaries as are necessary for consummation of the
transactions contemplated
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by this Agreement and to fulfill the conditions to the Merger, (b) taking any
action reasonably necessary to vigorously defend, lift, mitigate and rescind the
effect of any litigation or administrative proceeding adversely affecting this
Agreement or the transactions contemplated hereby, including, without
limitation, promptly appealing any adverse court or administrative order or
injunction and (c) to fulfill all conditions precedent applicable to such party
pursuant to this Agreement. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each party to this Agreement
shall use their reasonable best efforts to take all such necessary action.
SECTION 6.05 INDEMNIFICATION. (a) The Surviving Corporation and the Parent
agree that until six years from the Effective Time, the Surviving Corporation
will maintain all rights to indemnification now existing in favor of the
directors, officers, employees, fiduciaries and agents of the Company as
provided in the Company's Certificate of Incorporation and By-laws or otherwise
in effect under any agreement or otherwise on the date of this Agreement and
that the Certificate of Incorporation and By-laws of the Surviving Corporation
shall not be amended to reduce or limit the rights of indemnity afforded to the
present and former directors and officers of the Company, or the ability of the
Surviving Corporation to indemnify them, nor to hinder, delay or make more
difficult the exercise of such rights of indemnity or the ability to indemnify.
(b) The Surviving Corporation will at all times exercise the powers granted
to it by its Certificate of Incorporation, its By-laws, and by applicable law to
indemnify and hold harmless to the fullest extent possible present or former
directors, officers, employees, fiduciaries and agents of the Company against
any threatened or actual claim, action, suit, proceeding or investigation made
against them arising from their service in such capacities (or service in such
capacities for another enterprise at the request of the Company) prior to, and
including the Effective Time for at least six years from the Effective Time.
(c) Should any threatened or actual claim action, suit, proceeding or
investigation be made against any present or former director, officer, employee,
fiduciary or agent of the Company, arising from his services as such, within six
years from the Effective Time, the provisions of this Section 6.05 shall
continue in effect until the final disposition of all such claims.
(d) Any indemnified party wishing to claim indemnification under this
Section, upon learning of any such action, suit, claim, proceeding or
investigation, shall notify the Parent and the Surviving Corporation within 15
days thereof; PROVIDED, HOWEVER, that any failure so to notify the Parent and
the Surviving Corporation of any obligation to indemnify such indemnified party
or of any other obligation imposed by this Section shall not affect such
obligations except to the extent the Parent and/or the Surviving Corporation is
actually prejudiced thereby. Parent and the Surviving Corporation shall be
entitled to assume the defense of any such action, suit, claim, proceeding or
investigation with counsel of its choice, unless there is, under applicable
standards of professional conduct, a conflict of any significant issue between
the positions of the Parent and the Surviving Corporation, on the one hand, and
the indemnified parties, on the other, in which event the indemnified parties as
a group may retain one law firm to represent them with respect to such matter.
Neither the Parent or the Surviving Corporation, on the one hand, nor the
indemnified parties, on the other hand, may settle any such action, suit, claim,
proceeding or investigation without the prior written consent of the other
party, which consent shall not be unreasonably withheld or delayed.
(e) In addition to the foregoing, the Parent shall cause the Surviving
Corporation to honor in accordance with their terms any indemnification
agreements in existence on the date hereof between the Company and any present
or former director, officer, employee, fiduciary or agent of the Company.
SECTION 6.06 EMPLOYEE PLANS AND BENEFITS AND EMPLOYMENT CONTRACTS. (a) The
Parent and the Sub agree, and agree to cause the Surviving Corporation following
the Merger to agree, that for a period ending on December 31, 1995, the current
officers and employees of the Company, so long as they remain officers or
employees of the Company, will continue to be provided with employee benefits,
including, without limitation, cash compensation, incentive opportunities,
non-cash non-
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incentive benefits, retirement and savings plans and programs, health and
welfare plans and programs and severance plans and policies pursuant to the
Company's plans, programs, policies, and arrangements identified on Schedule
6.06 hereof. Pursuant to the foregoing, the Company will contribute to its
Profit Sharing and 401(k) Plan $300,000 in respect of the fiscal year ending May
31, 1995 and $175,000 in respect of the 7 months ending December 31, 1995.
(b) As of January 1, 1996, the employees of the Surviving Corporation as of
such date and thereafter will be eligible to participate in the Parent's benefit
plans and practices generally available to similarly situated employees of the
Parent and its subsidiaries. For purposes of determining eligibility and
benefits under such plans and practices, other than retiree medical coverage and
the Parent's pension plan, the employees of the Surviving Corporation will
receive credit for their years of service to the Company or its predecessors
prior to the Effective Time. If any employee of the Company or any of its
subsidiaries becomes a participant in any pension plan of Parent following the
Effective Time, such employee shall be given one additional year of credit under
such plan for each year of service to the Surviving Corporation, the Parent or
any other affiliate following the Effective Time; PROVIDED, HOWEVER, that such
additional years of service credit shall not exceed the actual years of service
of such participant to the Company prior to the Effective Time (to the extent
such credit was given by the Company). The foregoing is for purposes of
eligibility and vesting and for all other purposes for which such service is
either taken into account or recognized, but not for determining benefit
amounts.
(c) The Surviving Corporation shall provide professional outplacement
services for all officers and salaried employees of the Company or any
subsidiaries at the Effective Time and who are terminated within two years after
the Effective Time in a manner consistent with similar services provided by the
Parent to its employees.
SECTION 6.07 CONTINUITY OF OPERATIONS. The Parent and the Company agree
that, for a period of not less than two years following the Effective Time, the
headquarters of the Company will remain in Glens Falls, New York in
substantially the same manner as at present. Parent presently intends that the
Surviving Corporation shall continue to be operated as a wholly-owned subsidiary
of Parent operating under the name of "NAMIC U.S.A. Corporation". Parent
presently intends to cause the Surviving Corporation after the Effective Time to
maintain the Company's current level of charitable and community-related
programs as set forth in Schedule 6.07 to the Disclosure Statement.
SECTION 6.08 STATE TAKEOVER STATUTES. The Company shall, upon the request
of the Parent, take all reasonable steps to assist in any challenge by the
Parent to the validity or applicability to the Merger of any state takeover law.
SECTION 6.09 NEW YORK REAL ESTATE GAINS TAX. The Parent agrees to pay any
New York State Tax on Gains Derived from Certain Real Property Transfers ("Gains
Tax") (and any penalties or interest with respect to such tax) payable in
connection with the Merger and to indemnify the stockholders of the Company from
and against any liability with respect to such tax. The Parent also agrees to
pay any expenses relating to the preparation or filing of returns with respect
thereto. The Company, the Parent and the Sub agree to cooperate in the filing of
any returns with respect to such tax. The portion of the consideration allocable
to the real property of the Company, and its subsidiaries in New York State
shall be determined by the Parent and the Company, or if they are unable to
agree, by a qualified independent appraiser selected by the Parent, and the
Parent, the Sub and the Company agree, and the stockholders of the Company shall
be deemed to have agreed, to be bound by the allocation established pursuant to
this sentence, in the preparation of any returns with respect to the Gains Tax.
SECTION 6.10 REGISTRATION STATEMENT AND PROXY STATEMENT/PROSPECTUS; LISTING
OF PARENT COMMON STOCK; OTHER FILINGS. As soon as practicable after the date
hereof, the Parent and the Company shall prepare and file with the Commission
the Proxy Statement/Prospectus. Each of the Company and the Parent will notify
the other party promptly of the receipt of any comments from the SEC or its
staff and of any request by the SEC or its staff for revisions or supplements to
the Proxy Statement/
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Prospectus or for additional information and will supply the other party with
copies of all correspondence between such party or any of its representatives,
on the one hand, and the SEC, or its staff, on the other hand, with respect to
the Proxy Statement/Prospectus. Each of the Parent and the Company shall use its
best efforts to promptly respond to any comments of the SEC with respect to the
Proxy Statement/Prospectus. The Parent shall prepare and file the Registration
Statement with the SEC as soon as practicable following receipt of final
comments from the Staff of the SEC on the Proxy Statement/Prospectus (or advice
that such Staff will not review such filing), but in any event within 2 business
days after the date of receipt of such final comments or notice of no review,
and shall use its best efforts to have the Registration Statement declared
effective by the SEC as promptly as practicable thereafter and to maintain the
effectiveness of such Registration Statement. The Parent shall also promptly
take any action required to be taken under state "blue sky" or securities laws
in connection with the issuance of the Parent Common Stock pursuant to the
Merger. The Company shall furnish the Parent all information concerning the
Company and the holders of its capital stock and shall take any action as the
Parent may reasonably request in connection with any such action contemplated by
this Section 6.10. Promptly after the effectiveness of the Registration
Statement, but in any event within three business days thereafter, the Parent
and the Company shall mail the Proxy Statement/ Prospectus to all holders of the
Common Stock. The Parent and the Company shall cooperate with each other in the
preparation of the Proxy Statement/Prospectus and shall advise the other in
writing if, at any time prior to the Company Meeting, either such party shall
obtain knowledge of any facts that might make it necessary or appropriate to
amend or supplement the Proxy Statement/Prospectus in order to make the
statements contained or incorporated by reference therein not misleading or to
comply with applicable law and shall cooperate in filing with the SEC or its
staff or any other government officials, and/or mailing to stockholders of the
Company, such amendment or supplement. Notwithstanding the foregoing, each party
shall be responsible for the information and disclosures which it makes or
incorporates by reference in all regulatory filings, the Proxy
Statement/Prospectus, and the Registration Statement.
(a) The Parent will use best efforts to cause the Parent Common Stock to be
issued pursuant to this Agreement to be listed for trading on the NYSE, upon
official notice of issuance, prior to the Effective Time.
(b) Each of the Company and the Parent shall promptly provide the other
party (or its counsel) with copies of all filings required to be made by such
party with any governmental authority in connection with this Agreement, the
Merger and the transactions contemplated hereby and thereby. All of such other
filings shall comply in all material respects with all applicable requirements
of law.
SECTION 6.11 AFFILIATE AGREEMENTS. (a) Prior to the Effective Time, the
Company shall deliver to the Parent a letter identifying all persons who, at the
time of the Company Meeting, may be deemed to be "affiliates" of the Company as
that term is used in paragraphs (c) and (d) of Rule 145 under the Securities Act
(a "Company Affiliate").
(b) The Company shall use its best efforts to obtain a written agreement
substantially in the form of Exhibit C attached hereto on or prior to the
Effective Time from each person who is identified as a possible Company
Affiliate pursuant to paragraph (a) above providing that such person (i) shall
not offer, sell, pledge, transfer or otherwise dispose of any shares of Parent
Common Stock to be received by such Company Affiliate pursuant to the Merger,
except in compliance with the applicable provisions of the Securities Act and
the rules and regulations (including Rule 145) thereunder and (ii) for purposes
of ensuring that the Merger will be treated as a tax-free reorganization within
the meaning of Section 368(a) of the Code, has no present intention of
transferring, selling, pledging or otherwise disposing of more than 50% of the
shares of Parent Common Stock to be received by him or her in the Merger.
SECTION 6.12 COMPANY MEETING. (a) The Company shall take all action
necessary, in accordance with the Delaware Law and its Certificate of
Incorporation and By-laws, to convene the Company Meeting as promptly as
practicable for the purpose of considering and voting upon this
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Agreement and the transactions contemplated hereby, including the Merger.
Subject to the fiduciary duties of the Company's Board of Directors under
applicable law as advised in writing by outside legal counsel, the Board of
Directors of the Company shall recommend that the holders of the Common Stock
vote in favor of and approve this Agreement and the Merger at the Company
Meeting.
SECTION 6.13 TAX CERTIFICATIONS. Each of the Parent and the Sub on the one
hand, and the Company on the other shall execute and deliver to O'Sullivan Graev
& Karabell, special counsel to the Company, certificates in the form attached
hereto as Exhibits D-I and D-II, respectively, at such time or times as
reasonably requested by such law firm in connection with its delivery of
opinion(s) with respect to the transactions contemplated hereby.
SECTION 6.14 TAX-FREE REORGANIZATION TREATMENT. Prior to the Effective
Time, neither the Parent nor the Company shall intentionally take, fail to take
or cause to be taken or not take any action which would disqualify the Merger as
a "reorganization" within the meaning of Section 368(a) of the Code. The Parent
Common Stock issued in the Merger will be issued solely in exchange for Common
Stock, and no other transaction other than the Merger represents, provides for
or is intended to be an adjustment to the consideration paid for the Common
Stock. Except for cash paid in lieu of fractional shares, or as otherwise
provided in this Agreement, no consideration that could constitute "other
property" within the meaning of Section 356(b) of the Code is being transferred
by Parent for the Common Stock in the Merger. The parties hereto shall not take
a position on any tax return inconsistent with this Section 6.14. In addition,
the Parent represents as of the date of this Agreement, and as of the Closing
Date, that it presently intends to continue the Company's historic business or
use a significant portion of the Company's business assets in a trade or
business.
SECTION 6.15 CERTAIN ENVIRONMENTAL MATTERS. The Company shall use its
reasonable best efforts and cooperate with the Parent to obtain required
Environmental Permits, as follows: (i) with respect to the facility located in
Puerto Rico, (x) air emissions permits for all subject operations and activities
and (y) a sewer authority discharge permit; and (ii) with respect to the
Tullamore, Ireland, facility, a sanitary wastewater permit. In addition, the
Company shall submit an application notifying the appropriate government body of
the transfer by operation of law of the air emissions permit (Emissions Point ID
No. 004) for the Glens Falls manufacturing facility, located at the Dix Avenue
Industrial Park, Glens Falls, New York as a result of the transactions
contemplated hereby.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger are
subject to the satisfaction or waiver, where permissible, prior to the Effective
Time, of the following conditions:
(a) This Agreement and the Merger shall have been approved and adopted by
the affirmative vote of the stockholders of the Company by the requisite vote in
accordance with applicable law and the Certificate of Merger shall have been
executed and delivered by the Surviving Corporation and filed with the Secretary
of State of the State of Delaware.
(b) No statute, rule, regulation, executive order, decree or injunction
shall have been enacted, entered, promulgated or enforced by any Federal or
state court or governmental authority which is in effect and has the effect of
prohibiting the consummation of the Merger.
(c) The waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated; and any formal investigations relating to the Merger that may have
been opened by the Department of Justice or the Federal Trade Commission (by
means of a written request for additional information or otherwise) shall have
been terminated.
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(d) The Registration Statement shall have become effective in accordance
with the provisions of the Securities Act and no stop order, or proceedings
seeking such a stop order, suspending the effectiveness of the Registration
Statement shall have been issued by the SEC and remain in effect.
(e) The Parent shall have received all state securities laws and "blue sky"
permits and all other authorizations necessary to consummate the transactions
contemplated hereby and the Parent Common Stock required to be issued hereunder
shall have been approved for listing on the NYSE upon official notice of
issuance.
(f) All regulatory and related approvals (other than any approval
contemplated by the HSR Act) shall have been obtained on terms mutually
satisfactory to the Parent and the Company, except for any the failure of which
to obtain would not have a material adverse effect on the Parent or the
Surviving Corporation, taken as a whole.
(g) The Parent, the Company and Phillip H. Morse shall have entered into
mutually satisfactory arrangements relating to the Parent's support of the
Company's obligations under the sublease of its headquarters and manufacturing
facilities in Glens Falls, New York and the Company's right to sub-sublease such
properties (it being understood that such arrangements will not otherwise affect
the terms and conditions of such sublease).
SECTION 7.02 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF THE PARENT AND SUB
TO EFFECT THE MERGER. The obligations of the Parent and the Sub to effect the
Merger are further subject to the satisfaction or waiver, where permissible, on
or prior to the Effective Time of each of the following conditions:
(a) All representations and warranties of the Company contained herein shall
be true and correct in all material respects as of the date of this Agreement
and at and as of the Closing, with the same force and effect as though made on
and as of the Effective Time, except for changes permitted or contemplated by
this Agreement.
(b) The Company shall have performed in all material respects all
obligations and agreements, and complied in all material respects with all
covenants and conditions, contained in this Agreement to be performed or
complied with by it prior to the Effective Time (other than the payment by the
Company immediately prior to the Effective Time of the Option Consideration to
each holder of Options as contemplated by Section 2.02).
(c) The Company shall have furnished the Parent a Certificate, dated the
date of the Closing, signed by the Chief Executive Officer or the Chief
Financial Officer of the Company, for and on behalf of the Company, that, to the
best of his knowledge and belief after due inquiry, the conditions set forth in
Section 7.02(a) and (b) have been satisfied.
SECTION 7.03 ADDITIONAL CONDITIONS TO THE OBLIGATION OF THE COMPANY TO
EFFECT THE MERGER. The obligation of the Company to effect the Merger is further
subject to the satisfaction or waiver, where permissible, on or prior to the
Effective Time of each of the following conditions:
(a) All representations and warranties of the Parent contained herein shall
be true and correct in all material respects as of the date of this Agreement
and at and as of the Closing with same, force and effect as though made on and
as of the Effective Time, except for changes permitted or contemplated by this
Agreement.
(b) The Parent shall have performed in all material respects all obligations
and agreements, and complied in all material respects with all covenants and
conditions contained in this Agreement to be performed or complied with by it at
or prior to the Effective Time.
(c) The Parent shall have furnished the Company a Certificate, dated the
date of the Closing, signed by the Chief Executive Officer or the Chief
Financial Officer of the Parent for, and on behalf of the Parent, that, to the
best of his knowledge and belief after due inquiry, the conditions set forth in
Sections 7.03(a) and 7.03(b) have been satisfied.
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(d) The Company shall have received the opinion of O'Sullivan Graev &
Karabell, counsel to the Company, dated the date of the Closing, to the effect
that the Merger will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, the Company and
the Parent will each be a party to that reorganization within the meaning of
Section 368(b) of the Code and no gain or loss will be recognized by a
stockholder of the Company as a result of the Merger with respect to the Shares
converted into Parent Common Stock.
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
SECTION 8.01 TERMINATION. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time notwithstanding approval
thereof by the stockholders of the Company, but prior to the Effective Time, in
any one of the following circumstances:
(a) By mutual written consent duly authorized by the Boards of Directors of
the Company, the Parent and the Sub.
(b) By the Parent or the Company, if the Effective Time shall not have
occurred on or before April 30, 1995 (provided that the right to terminate this
Agreement under this Section 8.01(b) shall not be available to any party whose
failure to fulfill any obligations under this Agreement has been the cause of or
resulted in the failure of the Effective Time to occur on or before such date).
(c) By the Parent or the Company, if any Federal or state court of competent
jurisdiction or other Federal or state governmental body shall have issued an
order, decree or ruling, or taken any other action permanently restraining,
enjoining or otherwise prohibiting the Merger and such order, decree, ruling or
other action shall have become final and non-appealable.
(d) By the Company if the Merger shall have been voted on by stockholders of
the Company at the Company Meeting and such stockholders did not approve the
Merger by the requisite vote.
(e) By the Company, if it shall have received a Superior Proposal, and the
Company's Board of Directors, after consultation with and based upon the written
advice of outside legal counsel (who may be the Company's regularly engaged
outside legal counsel), determines in good faith that accepting such Superior
Proposal is necessary for the Board of Directors of the Company to comply with
its fiduciary duties to stockholders under applicable law.
(f) By the Parent, if the Board of Directors of the Company shall have (i)
withdrawn, modified or amended in any adverse respect its approval or
recommendation of this Agreement, the Merger or the transactions contemplated
hereby, (ii) failed to include in the Proxy Statement/ Prospectus such
recommendation (including the recommendation that the stockholders of the
Company vote in favor of the Merger), or (iii) recommended to its stockholders a
Company Acquisition Proposal.
(g) By the Parent or the Company, if (A) the other party shall have failed
to comply in any material respect with any of the material covenants and
agreements contained in this Agreement to be complied with or performed by such
party at or prior to such date of termination (other than, in the case of the
Company, the payment by the Company immediately prior to the Effective Time of
the Option Consideration to each holder of Options as contemplated by Section
2.02), and such failure continues for five business days after the actual
receipt by such party of a written notice from the other party setting forth in
detail the nature of such failure, or (B) a material representation or warranty
of the other party contained in this Agreement shall be untrue in any material
respect when made or on and as of the Closing as if made on and as of the
Closing.
SECTION 8.02 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 8.01 hereof, this Agreement,
except for the provisions of Section 6.03(b), this Section 8.02 and Section 9.10
hereof, shall forthwith become void and have no effect, without any liability on
the part of any party or its directors, officers or stockholders. Nothing in
this Section 8.02 shall relieve any party to this Agreement of liability for any
willful or intentional breach
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of this Agreement; PROVIDED, HOWEVER, that in the event the Parent has received
the fee payable under Section 9.10(a), neither it nor any of its affiliates
shall pursue in any manner, directly or indirectly, any claim or cause of action
against any entity or person submitting a Company Acquisition Proposal, or the
Company or any of its officers, directors or affiliates, and none of such
persons shall have any liability to the Parent or any of its affiliates with
respect thereto.
SECTION 8.03 AMENDMENT. To the extent permitted by applicable law, this
Agreement may be amended by action taken by or on behalf of the Boards of
Directors of the Company, the Parent and the Sub at any time before or after
adoption of this Agreement by the stockholders of the Company, the Parent and
the Sub; PROVIDED, HOWEVER, that, after any such stockholder approval, no
amendment shall be made which decreases the Merger Consideration or which by
applicable law requires the further approval of the Company's stockholders
without the approval of the requisite stockholders. This Agreement may not be
amended except by an instrument in writing signed on behalf of all the parties.
SECTION 8.04 EXTENSION; WAIVER. At any time prior to the Effective Time,
the parties hereto, by action taken by or on behalf of the respective Boards of
Directors of the Company, the Parent or the Sub, may (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein by any other applicable party or in any document, certificate or writing
delivered pursuant hereto by any other applicable party or (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party. The failure of any party to assert any of its rights hereunder shall not
constitute a waiver of such rights.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations, warranties and covenants made in this Agreement shall not
survive beyond the Effective Time; PROVIDED, HOWEVER, that this Section 9.01
shall not limit any covenant or agreement of the parties hereto which by its
terms contemplates performance after the Effective Time, including, without
limitation, the covenants contained in Sections 6.05, 6.06, 6.07, 6.09 and 9.10.
SECTION 9.02 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement and the
Confidentiality Agreement (a) constitute the entire agreement among the parties
with respect to the subject matter hereof and supersede all other prior
agreements and understandings, both written and oral, among the parties or any
of them with respect to the subject matter hereof (including, without
limitation, the Original Agreement) and (b) shall not be assigned by operation
of law or otherwise, provided that the Parent or the Sub may assign any of their
rights and obligations to any wholly-owned, direct subsidiary of the Parent but
no such assignment shall relieve the Parent or the Sub of its obligations
hereunder.
SECTION 9.03 ENFORCEMENT OF THE AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereon in any Federal or state
court located in the State of New York (as to which the parties agree to submit
to jurisdiction for the purpose of such action), this being in addition to any
other remedy to which they are entitled at law or in equity.
SECTION 9.04 VALIDITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect. Each
party agrees that, should any court of competent authority hold any provision of
this Agreement to be null, void or unenforceable, or order any party to take any
action inconsistent herewith or not to take any action required herein, the
other party shall not be entitled to
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specific performance of such provision or to any other remedy, including,
without limitation, money damages, for breach hereof or of any other provision
of this Agreement as a result of such holding or order.
SECTION 9.05 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by cable, telegram, telecopier, telex or
overnight courier, or by registered or certified mail (postage prepaid, return
receipt requested) to the respective parties as follows:
if to the Parent or the Sub:
Pfizer Inc.
235 East 42nd Street
New York, New York 10017
Attention: General Counsel
with a copy to:
Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
Attention: Dennis J. Block, Esq.
if to the Company:
NAMIC U.S.A. Corporation
Pruyns Island
Glens Falls, New York 12801
Attention: Cynthia L. Morris
with a copy to:
O'Sullivan Graev & Karabell
30 Rockefeller Plaza
New York, New York 10112
Attention: Laurence G. Graev, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof). All such notices or communications shall be deemed to be
received (a) in the case of personal delivery, cable, telex or telecopy, on the
date of such delivery, (b) in the case of overnight courier, on the next
business day after the date when sent and (c) in the case of registered or
certified mailing, on the third business day following the date on which the
piece of mail containing such communication was posted.
SECTION 9.06 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York regardless of the
laws that might otherwise govern under principles of conflicts of laws
applicable thereto, provided that matters affecting the validity of the
corporate action taken by the Company, the Parent or the Sub relating to the
Merger shall be governed by the laws of the State of Delaware.
SECTION 9.07 DESCRIPTIVE HEADINGS. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
SECTION 9.08 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of
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this Agreement except for Sections 2.01, 2.02 and 6.09, Article III and, in
respect of the indemnified parties only, 6.05, and, with respect to the
employees of the Company only, 6.06 and 6.07 (which are intended to be for the
benefit of the persons referred to therein, and may be enforced by such
persons).
SECTION 9.09 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
SECTION 9.10 FEES AND EXPENSES. (a) If this Agreement or the transactions
contemplated hereby are terminated for any reason, and
(i) such termination occurs pursuant to Section 8.01(e) or (f), or
(ii) such termination occurs pursuant to Section 8.01(g) as a result of an
intentional material breach of this Agreement by the Company following (but not
prior to) the Company's receipt of a Company Acquisition Proposal by any person
or group other than the Parent,
then the Company shall promptly (and in any event within five business days
after such termination) pay Parent a fee equal to $8.0 million, which fee shall
be inclusive of all Expenses (as defined below).
(b) As used herein, the term "Expenses" shall mean all of Parent's, Sub's
and their affiliates' reasonable out-of-pocket expenses (including all fees and
expenses of counsel, accountants, experts and consultants to Parent, Sub and
their affiliates) incurred by them or on their behalf in connection with the
transactions contemplated by this Agreement, including, but not limited to, in
connection with the negotiation, preparation, execution and performance of this
Agreement and the Parent's due diligence investigation of the Company.
(c) Except as provided otherwise in Sections 9.10(a) hereof, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses; PROVIDED, HOWEVER, that the costs of printing the Proxy Statement/
Prospectus and in each case all exhibits, amendments or supplements thereto
shall be borne equally by the Company and the Parent.
SECTION 9.11 PERFORMANCE BY THE SUB. Subject to the terms hereof, the
Parent hereby agrees to cause the Sub to comply with its obligations hereunder
and to cause the Sub to consummate the Merger as contemplated herein.
SECTION 9.12 PUBLICITY. So long as this Agreement is in effect, each of
the Parent and the Sub, on the one hand, and the Company, on the other hand,
promptly shall advise, consult and cooperate with the other prior to issuing, or
permitting any of its subsidiaries, directors, officers, employees or agents to
issue, any press release or other statement to the press or any third party with
respect to this Agreement, or the transactions contemplated hereby.
SECTION 9.13 DISCLOSURE GENERALLY. If, and to the extent, any information
required to be furnished in any Schedule of the Disclosure Statement is
contained herein, in the Exhibits or in any other Schedule of the Disclosure
Statement, such information shall be deemed to be included in all Schedules of
the Disclosure Statement in which it is required to be included, except with
respect to Schedule 6.06. The inclusion of any information in the Exhibits or
any Schedule of the Disclosure Statement shall not be deemed to be an admission
or acknowledgment by the Company, in and of itself, that such information is
material to or outside the ordinary course of the business of the Company or
material to the Company, and nothing disclosed therein constitutes, or shall be
deemed to constitute, an admission of any liability or obligation of the Company
or an admission against the Company's interest.
SECTION 9.14 ACKNOWLEDGMENTS. Each of the Company and the Parent have
conducted, to their satisfaction, an independent investigation and verification
of the other party and of the financial condition, results of operations,
assets, liabilities, properties and projected operations of the other party. In
making their determinations as to the propriety of the transactions contemplated
by this Agreement and the transactions contemplated hereby, each party has
relied on the results of its own
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independent investigation and verification and the representations and
warranties of the other party expressly and specifically set forth in this
Agreement, including the Exhibits attached hereto and the Disclosure Statement.
SUCH REPRESENTATIONS AND WARRANTIES OF EACH PARTY CONSTITUTE THE SOLE AND
EXCLUSIVE REPRESENTATIONS AND WARRANTIES OF SUCH PARTY TO THE OTHER PARTY IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY AND THE COMPANY, ON THE ONE
HAND, AND THE PARENT AND THE SUB, ON THE OTHER HAND, EACH UNDERSTANDS,
ACKNOWLEDGES AND AGREES THAT ALL OTHER REPRESENTATIONS AND WARRANTIES OF ANY
KIND OR NATURE (INCLUDING, BUT NOT LIMITED TO, ANY RELATING TO THE FUTURE OR
HISTORICAL FINANCIAL CONDITION, RESULTS OF OPERATIONS, ASSETS OR LIABILITIES OF
ANY PARTY HERETO) ARE SPECIFICALLY DISCLAIMED.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by an officer thereof thereunto duly authorized, on the
day and year first above written.
PFIZER INC.
By _________/s/_P. NIGEL GRAY_________
Name: P. Nigel Gray
Title: VICE PRESIDENT
DART ACQUISITION CORPORATION
By __________/s/ P. NIGEL GRAY________
Name: P. Nigel Gray
Title: VICE PRESIDENT
NAMIC U.S.A. CORPORATION
By ________/s/ CYNTHIA L. MORRIS______
Name: Cynthia L. Morris
Title: PRESIDENT AND CHIEF
EXECUTIVE OFFICER
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EXHIBIT A
CERTIFICATE OF MERGER
OF
DART ACQUISITION CORPORATION
WITH AND INTO
NAMIC U.S.A. CORPORATION
UNDER SECTION 251
OF
THE DELAWARE GENERAL CORPORATION LAW
THE UNDERSIGNED, NAMIC U.S.A. Corporation, a Delaware corporation (the
"Company"), in connection with the merger of DART Acquisition Corporation, a
Delaware corporation ("Acquisition"), with and into the Company (the "Merger"),
hereby certify as follows:
FIRST: The name and the state of incorporation of each of the constituent
corporations are:
<TABLE>
<CAPTION>
STATE OF
NAME INCORPORATION
- ------------------------------------ --------------------
<S> <C>
NAMIC U.S.A. Corporation Delaware
DART Acquisition Corporation Delaware
</TABLE>
SECOND: An Agreement and Plan of Merger, dated as of October 31, 1994,
relating to the Merger (the "Agreement of Merger") has been approved, adopted,
certified, executed and acknowledged by each of the constituent corporations
named above in accordance with Section 251 of the Delaware General Corporation
Law.
THIRD: The name of the surviving corporation is NAMIC U.S.A. Corporation.
FOURTH: The Certificate of Incorporation of the surviving corporation shall
be the Certificate of Incorporation of Acquisition, amended and restated upon
effectiveness of the Merger as provided in the Agreement of Merger, as shown in
the Restated Certificate of Incorporation attached hereto as Exhibit A.
FIFTH: The executed Agreement of Merger is on file at the principal place of
business of the surviving corporation at Pruyns Island, Glens Falls, New York
12801.
SIXTH: A copy of the Agreement of Merger will be furnished by the surviving
corporation, on request and without cost, to any stockholder of either
constituent corporation.
IN WITNESS WHEREOF, the undersigned corporation has duly executed this
Certificate, as of the day of , 199 .
NAMIC U.S.A. CORPORATION
By: __________________________________
Name:
Title:
ATTEST:
______________________________________
Name:
Title:
<PAGE>
EXHIBIT B
CERTIFICATIONS CONCERNING
TAX-EXEMPT BONDS
1. DEFINITIONS. For purposes of this Exhibit, the following terms shall
have the meanings indicated:
"Code" means the Internal Revenue Code of 1986, as amended, as amplified and
interpreted by current Treasury Regulations and published Revenue Rulings
relevant thereto where the context so requires, references to the Code shall be
construed to include the corresponding section or sections of the Internal
Revenue Code of 1954, as amended.
"Company" means NAMIC U.S.A. Corporation, a Delaware corporation.
"Company Facility" means any facility of which the Company or a Related
Person is or was a Principal User.
"Company Industrial Development Bond" means any bond described in section
144(a)(10)(B)(ii) of the Code, the proceeds of which were used to finance any
Company Facility.
"Company Small Issue Bond" means any Small Issue Bond the proceeds of which
were used to finance any Company Facility.
"Principal User" means, with respect to any facility, any person who is a
principal user of such facility within the meaning of section 144(a) of the
Code. Such terms includes, for example, any person who owns 10 percent or more
(measured by value) of a facility, and any person who has the right to occupy 10
percent or more (measured by fair rental value) of a facility.
"Related Person" means any person who is a related person of the Company
within the meaning of section 144(a)(3) of the Code.
"Small Issue Bond" means any bond described in section 144(a)(1) of the Code
(or in section 103(b)(6)(A) or (D) of the Internal Revenue Code of 1954, as
amended).
"Small Issue Limitation" means, for any Small Issue Bond, the $10 million
limitation imposed by section 144(a)(4) of the Code or section 103(b)(6)(A) and
(D) of the Internal Revenue Code of 1954, as amended, as applicable (or $20
million in the case of a Small Issue Bond that financed a UDAG Facility).
"UDAG Facility" means a facility with respect to which an urban development
action grant has been made under section 119 of the Housing and Community
Development Act of 1974.
2. COMPANY INDUSTRIAL DEVELOPMENT BONDS.
(a) No Company Industrial Development Bond was issued after September 1,
1991.
(b) No Company Facility financed in whole or in part by any Company
Industrial Development Bond was placed in service (within the meaning of section
168 of the Code) after September 1, 1991.
(c) To the knowledge of the Company, no event has occurred that would cause
interest on any Company Industrial Development Bond to be includable in the
gross income of the holder thereof. The property subject to the lease agreement,
dated as of May 1, 1985, between Salvatore R. Beltrone and the Company presently
is being used by the Company as a manufacturing facility.
3. COMPANY SMALL ISSUE BONDS. The Small Issue Limitation has not been
exceeded with respect to any Company Small Issue Bond.
4. OTHER COMPANY FACILITIES. No Company Facility is located within
Richland County, South Carolina.
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EXHIBIT C
, 199
Pfizer Inc.
235 East 42nd Street
New York, New York 10017
Gentlemen:
Reference is made to the provisions of the Agreement and Plan of Merger,
dated as of October , 1994 (together with any amendments thereto, the "Merger
Agreement") among Pfizer Inc., a Delaware corporation ("Pfizer"), DART
Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of
Pfizer (the "Sub"), and NAMIC U.S.A. Corporation, a Delaware corporation (the
"Company"), pursuant to which Sub will be merged with and into the Company, with
the Company continuing as the surviving corporation (the "Merger"). This letter
consists of the undertakings of the undersigned contemplated by Section 6.11(b)
of the Merger Agreement.
I understand that I may be deemed to be an "affiliate" of the Company, as
such term is defined for purposes of Rule 145 ("Rule 145") promulgated under the
Securities Act of 1933, as amended (the "Act"), and that the transferability of
the shares of common stock, par value $.10 per share, of Pfizer (the "Pfizer
Shares") which I will receive upon the consummation of the Merger in exchange
for my shares of common stock, par value $.01 per share, of the Company (the
"Company Shares") is therefore restricted. Nothing herein shall be construed as
an admission that I am an affiliate.
I further understand and agree that it is intended that the Merger will be
treated as a "reorganization" for federal income tax purposes. I have been
informed that the treatment of the Merger as a reorganization for federal income
tax purposes requires that a sufficient number of former stockholders of the
Company maintain a meaningful continuing equity ownership interest in Parent
after the Merger. I understand that my representations, warranties and covenants
set forth herein will be relied upon by Parent, the Company and their respective
counsel and accounting firms.
I hereby represent, warrant and covenant as follows:
(a) I will not transfer, sell or otherwise dispose of any of the Pfizer
Shares except (i) pursuant to an effective Registration Statement under the
Act or (ii) as permitted by, and in accordance with, Rule 145 or another
applicable exemption under the Act.
(b) I have full power and authority to execute this Agreement, to make
the representations, warranties and covenants herein contained and to
perform my obligations hereunder.
(c) APPENDIX A attached hereto sets forth all shares of Company Stock
owned by me, including all Company Stock as to which I have sole or shared
voting or investment power and all rights, options and warrants to acquire
Company Stock owned or held by me.
(d) I have, and as of the Effective Time will have, no plan or intent to
engage in a sale, exchange, transfer, pledge, disposition (including a
distribution by a partnership to its partners or a corporation to its
stockholders) or any other transaction that would result in a reduction in
the risk of ownership (collectively, a "Sale") with respect to more than 50%
of the Pfizer Shares to be received by me in the Merger, or any securities
that may be paid as a dividend or otherwise distributed thereon or with
respect thereto or issued or delivered in exchange or substitution therefor.
I am not aware of, or participating in, any plan or intent on the part of
the Company's stockholders (a "Plan") to engage in Sales of the Pfizer
Shares to be issued in the Merger such that the aggregate fair market value,
as of the effective time of the Merger (the "Effective Time"), of the shares
subject to such Sales would exceed fifty percent (50%) of the aggregate fair
market value of all outstanding shares of the common stock, $.01 par value,
of the Company immediately prior to the Merger (collectively, the
"Outstanding Company Shares"). A Sale of Pfizer Shares
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shall be considered to have occurred pursuant to a Plan if, among other
things, such Sale occurs in a transaction that is in contemplation of, or
related or pursuant to, the Merger or the Merger Agreement (a "Related
Transaction"). In addition, Outstanding Company Shares (i) exchanged in the
Merger for cash pursuant to Section 2.01(a)(ii) of the Merger Agreement or
in lieu of fractional shares of Parent Common Stock or (ii) with respect to
which a Sale occurs in a Related Transaction prior to the Effective Time
shall be considered to be Outstanding Company Shares that are exchanged for
Pfizer Shares and that are disposed of pursuant to a Plan. If any of my
representations and warranties in this subsection (d) cease to be true at
any time prior to the Effective Time of the Merger, I will deliver to each
of the Company and Parent, prior to the Effective Time of the Merger, a
written statement to that effect, signed by me.
I hereby acknowledge that Pfizer is under no obligation to register the
sale, transfer, pledge or other disposition of the Pfizer Shares or to take any
other action necessary for the purpose of making an exemption from the
registration requirements of the Act available.
I understand that Pfizer will impose stop transfer instructions with respect
to the Pfizer Shares and that a restrictive legend will be placed on
certificates delivered to me evidencing the Pfizer Shares in substantially the
following form:
"This certificate and the shares represented hereby have been issued
pursuant to a transaction governed by Rule 145 ("Rule 145") promulgated
under the Securities Act of 1933, as amended (the "Act"), and may not be
sold or otherwise disposed of unless registered under the Act pursuant to a
Registration Statement in effect at the time or unless the proposed sale or
disposition can be made in compliance with Rule 145 or without registration
in reliance on another exemption therefrom."
From and after the Effective Time and for so long as necessary in order to
permit me to sell Pfizer Shares pursuant to Rule 145 and, to the extent
applicable, Rule 144 under the Securities Act, Parent shall use reasonable
efforts to file on a timely basis all reports required to be filed by it
pursuant to Section 13 of the Securities Exchange Act of 1934, as amended,
referred to in paragraph (c)(1) of Rule 144 promulgated by the SEC under the
Securities Act (or, if applicable, Parent shall use reasonable efforts to make
publicly available the information regarding itself referred to in paragraph
(c)(2) of Rule 144), in order to permit me to sell, pursuant to the terms and
conditions of Rule 145 and the applicable provisions of Rule 144, Pfizer Shares
beneficially owned by me.
No waiver by any party of any condition or of any breach of any provision of
this Agreement shall be effective unless in writing.
This Agreement shall become effective at the Effective Time. In the event
that the Merger Agreement shall be terminated in accordance with Article VIII of
the Merger Agreement, this Agreement shall simultaneously therewith cease and
terminate and be of no further force or effect and no party hereunder shall have
any rights or obligations of any nature whatsoever hereunder.
The term Pfizer Shares as used in this letter shall mean and include the
Pfizer Rights (as defined in the Merger Agreement) attached thereto and also any
other stock which may be issued in exchange for, in lieu of, or in addition to,
all or any part of such Pfizer Shares.
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I hereby acknowledge that the receipt of this letter by Pfizer is an
inducement to Pfizer's obligation to consummate the Merger under the Merger
Agreement and that I understand the requirements of this letter and the
limitations imposed upon the transfer, sale or other disposition of the Pfizer
Shares.
Very truly yours,
ACKNOWLEDGED AND RECEIVED:
Pfizer Inc.
By: __________________________________
Name:
Title:
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<PAGE>
EXHIBIT D-I
CERTIFICATE
O'Sullivan Graev & Karabell
30 Rockefeller Plaza
New York, New York 10112
Re: Merger Pursuant to that Agreement and Plan of Merger (the "Agreement"),
dated as of October 31, 1994, by and among Pfizer Inc. ("Parent"), DART
Acquisition Company ("Sub") and NAMIC U.S.A. Corporation ("Company")
Ladies and Gentlemen:
This letter is supplied to you in connection with your rendering of opinions
regarding certain federal income tax consequences of the Merger. Unless
otherwise indicated, capitalized terms not defined herein have the meanings set
forth in the Agreement.
A. REPRESENTATIONS. After consulting with their counsel and auditors
regarding the meaning of and the factual support for the following
representations, the undersigned hereby certify and represent that the following
facts are now true and will continue to be true as of the Effective Time of the
Merger and thereafter where relevant:
1. Sub is a newly-formed corporation that was created for the sole
purpose of facilitating the acquisition of Company. It has not conducted and
is not conducting any business activities.
2. Following the transaction, Company will hold at least 90 percent of
the fair market value of its net assets, at least 70 percent of the fair
market value of its gross assets, at least 90 percent of the fair market
value of Sub's net assets, and at least 70 percent of the fair market value
of Sub's gross assets held immediately prior to the transaction. For
purposes of this representation, amounts paid by Company or Sub to
stockholders who receive cash or other property and amounts used by Company
or Sub to pay reorganization expenses will be included as assets of Company
or Sub, respectively, immediately prior to the transaction.
3. Parent's and Sub's principal reasons for participating in the Merger
are bona fide business reasons.
4. Prior to the Merger, Parent will be in Control of Sub. As used
herein, "Control" shall mean ownership of stock possessing at least eighty
percent (80%) of the total combined voting power of all classes of stock
entitled to vote and at least eighty percent (80%) of the total number of
shares of all other classes of stock of the corporation. For purposes of
determining Control, a person shall not be considered to own voting stock if
rights to vote such stock (or to restrict or otherwise control the voting of
such stock) are held by a third party (including a voting trust) other than
an agent of such person.
5. In the Merger, shares of Company Common Stock will be exchanged
solely for voting stock of Parent except as otherwise provided in Section
2.01(a)(ii) of the Agreement.
6. Parent will acquire Control of Company in the Merger. Control will
be determined without regard to Company Common Stock, if any, held by Parent
prior to the Effective Time of the Merger.
7. Immediately following the Merger, Parent will be in Control of
Company. Parent has no plan or intention to cause Company to issue, after
the Merger, additional shares of stock (or rights to acquire shares of
Company Common Stock) that would result in Parent losing Control of Company.
8. Parent has no plan or intention to reacquire any of its stock issued
in the Merger.
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9. Parent has no plan or intention to: (i) cause Company to sell,
transfer or otherwise dispose of any of its assets or of any of the assets
acquired from Sub except for dispositions made in the ordinary course of
business or for the payment of expenses incurred by Company in the Merger;
(ii) liquidate Company; (iii) merge Company with or into another corporation
including Parent or its affiliates; or (iv) sell, distribute or otherwise
dispose of Company Common Stock.
10. In the Merger, no liabilities of Parent will be assumed by Sub and
Sub will not transfer to Company any assets subject to liabilities, except
to the extent incurred in connection with the formation of Sub or the
transactions contemplated by the Agreement.
11. Parent intends that, following the Merger, Company will continue its
historic business or use a significant portion of its historic business
assets in a business.
12. Neither Parent nor any of its affiliates owns, or has owned during
the past five (5) years, directly or indirectly, any shares of Company
Common Stock or the right to acquire or vote any such stock, other then
pursuant to the Irrevocable Proxy and Voting Agreements between Parent and
each of Richard and Phillip Morse.
13. Neither Parent nor Sub is an investment company within the meaning
of Section 368(a)(2)(F) of the Code.
14. No stockholder of Company is acting as agent for Company in
connection with the Merger or approval thereof, and except as provided in
the Agreement, Parent will not reimburse any Company stockholder for Company
Common Stock that any such stockholder may have purchased or for other
obligations such stockholder may have incurred.
15. Neither Parent nor Sub is under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the
Code.
16. The payment of cash in the Merger in lieu of fractional shares of
Parent Common Stock is solely for the purpose of avoiding the expense and
inconvenience to Parent of issuing fractional shares and does not represent
separately bargained-for consideration. The Parent fractional share
interests to which each Company stockholder may be entitled in the Merger
will be aggregated and no Company stockholder will receive cash in an amount
equal to or greater than the value of one full share of Parent Common Stock.
17. Except with respect to (i) payments of cash to Company stockholders
in lieu of fractional shares of Parent Common Stock, and (ii) any payments
to be made pursuant to Section 2.01(a)(ii) of the Agreement, one hundred
percent (100%) of the Company Common Stock outstanding immediately prior to
the Merger will be exchanged solely for Parent Common Stock. Thus, except as
set forth in the preceding sentence, Parent and Company intend that no
consideration be paid or received (directly or indirectly, actually or
constructively) for Common Stock other than Parent Common Stock.
18. The total fair market value of all consideration other than Parent
Common Stock received by Company stockholders in exchange for the Company
Common Stock in the Merger (including, without limitation, any cash paid
pursuant to Section 2.01(a)(ii) of the Agreement or in lieu of fractional
shares of Parent Common Stock) will be less than percent ( %) of the
aggregate fair market value of Company Common Stock outstanding immediately
prior to the Merger.
19. At the Effective Time of the Merger, the fair market value of the
Parent Common Stock and other consideration received by each Company
stockholder will be approximately equal to the aggregate fair market value
of the Company Common Stock surrendered in exchange therefor.
20. No shares of Sub have been or will be used as consideration or
issued to stockholders of Company in the Merger.
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21. Company and the stockholders of Company will each pay separately its
or their own expenses in connection with the Merger as contemplated by the
Agreement.
22. There is no intercorporate indebtedness existing between Parent and
Sub or between Company and Sub that was issued, acquired, or will be settled
at a discount, and Company will assume no liabilities of Sub or any Company
stockholder in connection with the Merger.
23. The terms of the Agreement and all other agreements entered into
pursuant thereto are the product of arm's length negotiations.
24. None of the compensation payments received by any stockholder of
Company will be separate consideration for, or attributable to, any of their
shares of Common Stock; none of the shares of Parent Common Stock received
by any stockholders of Company will be separate consideration for, or
attributable to, any employment agreement, consulting agreement or any
covenants not to compete; and the compensation paid to any stockholder of
Company will be for services actually rendered and will be commensurate with
amounts paid to third parties bargaining at arm's length for similar
services.
25. Parent and Sub are authorized to make all of the representations set
forth herein.
B. RELIANCE BY YOU IN RENDERING OPINIONS: LIMITATIONS ON YOUR OPINIONS
1. The undersigned recognize that (i) your opinion will be based on,
among other things, the representations and statements set forth herein, in
the Agreement (including exhibits and schedule thereto) and in the documents
related thereto, and (ii) your opinions will be subject to certain
limitations, qualifications and assumptions including that the opinions may
not be relied upon if any such representations or statements are not
accurate in all material respects.
2. The undersigned recognize that your opinions will not address any
tax consequences of the Merger or any action taken in connection therewith
except as expressly set forth in such opinions.
Very truly yours,
Pfizer Inc.
A Delaware corporation
By: __________________________________
Name: ________________________________
Title: _______________________________
DART Acquisition Company
A Delaware corporation
By: __________________________________
Name: ________________________________
Title: _______________________________
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EXHIBIT D-II
CERTIFICATE
O'Sullivan Graev & Karabell
30 Rockefeller Plaza
New York, New York 10112
Re: Merger Pursuant to that Agreement and Plan of Merger (the
"Agreement"), dated as of October 31, 1994, by and among Pfizer Inc.
("Parent"), DART Acquisition Company ("Sub") and NAMIC U.S.A.
Corporation ("Company")
Ladies and Gentlemen:
This letter is supplied to you in connection with your rendering of opinions
regarding certain federal income tax consequences of the Merger. Unless
otherwise indicated, capitalized terms not defined herein have the meanings set
forth in the Agreement.
A. REPRESENTATIONS. After consulting with its counsel and auditors
regarding the meaning of and the factual support for the following
representations, the undersigned hereby certifies and represents that the
following facts are now true and will continue to be true as of the Effective
Time of the Merger and thereafter where relevant:
1. At least ninety percent (90%) of the fair market value of the net
assets and at least seventy percent (70%) of the fair market value of the
gross assets held by each of Company and Sub, respectively immediately prior
to the Merger will continue to be held by Company immediately after the
Merger. For the purpose of determining the percentage of the net and gross
assets held by Company immediately following the Merger for purposes of this
representation, the following assets will be treated as property held by
Company immediately prior but not subsequent to the Merger: (1) assets
disposed of by Company prior to the Merger and in contemplation thereof
(including, without limitation, any asset disposed of by Company other than
in the ordinary course of business, during the period ending on the
Effective Time of the Merger and beginning with the commencement of
negotiations (whether formal or informal) between Company and Parent
regarding the Merger (the "Pre-Merger Period")), (ii) assets used by Company
to pay expenses or liabilities incurred in connection with the Merger, and
(iii) assets used to make distributions (except for regular and normal
dividends), redemption or other payments in respect of Company Common Stock
or rights to acquire such stock (including payments treated as such for tax
purposes) that are made in contemplation of the Merger or related thereto.
2. Company has made no transfer of any of its assets (including any
distribution of assets with respect to, or in redemption of, stock) in
contemplation of the Merger or during the Pre-Merger Period other than (i)
in the ordinary course of business and (ii) payments for expenses incurred
in connection with the Merger.
3. Company's principal reasons for participating in the Merger are bona
fide business reasons.
4. In the Merger, shares of Company Common Stock representing "Control"
of Company will be exchanged solely for voting stock of Parent and any cash
payments pursuant to Section 2.01(a)(ii) and 3.06 of the Agreement; at the
time of the Merger, there will exist no rights of any kind (including,
without limitation, warrants, options, convertible securities, contingent
rights, informal or unwritten rights) to acquire Company Common Stock which,
if exercised, could affect Parent's acquisition and retention of Control of
Company. For purposes of this representation, shares of Company Common Stock
exchanged in the Merger for cash and other property (including, without
limitation, cash paid (if any) pursuant to Section 2.01(a)(ii) of the
Agreement or in lieu of fractional shares of Parent Common Stock) will be
treated as Company Common Stock outstanding on the date of the Merger but
not exchanged for voting stock of Company. As used herein, "Control" shall
mean ownership of stock possessing at least eighty
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percent (80%) of the total combined voting power of all classes of stock
entitled to vote and at least eighty percent (80%) of the total number of
shares of all other classes of stock of the corporation. For purposes of
determining Control, a person shall not be considered to own voting stock if
rights to vote such stock (or to restrict or otherwise control the voting of
such stock) are held by a third party (including a voting trust) other than
an agent of such person.
5. Company will not issue any Company Common Stock prior to the Merger
in an amount which would equal or exceed 20% of Company Common Stock
outstanding.
6. At the Effective Time of the Merger, there will be no accrued but
unpaid dividends on shares of Company Stock.
7. The total fair market value of all consideration other than Parent
Common Stock received by Company stockholders in exchange for their Company
Common Stock in the Merger (including, without limitation, cash paid (if
any) pursuant to Section 2.01(a)(ii) or in lieu of fractional shares of
Parent Common Stock), will be less than percent ( %) of the aggregate
fair market value of Company Common Stock outstanding immediately prior to
the Merger.
8. Company has no obligation, understanding, agreement or intention to
issue additional shares of stock after the Merger that would result in
Parent losing Control of Company.
9. Company has no plan or intention, and is under no obligation, to
discontinue its business, to sell or otherwise dispose of any of its assets
or of any of the assets acquired from Sub in the Merger, except for
dispositions made in the ordinary course of business or the payment of
expenses incurred by Company pursuant to the Merger.
10. The liabilities of Company have been incurred by Company in the
ordinary course of its business.
11. The fair market value of Company's assets will, at the Effective
Time, exceed the aggregate liabilities of Company plus the amount of
liabilities, if any, to which such assets are subject.
12. Other than shares of Company Common Stock or options to acquire such
stock issued as compensation to present or former service providers
(including, without limitation, employees and directors) of Company in the
ordinary course of business, if any, no issuances of Company Common Stock or
rights to acquire such stock have occurred or will occur during the
Pre-Merger Period other than pursuant to options, warrants or agreements
outstanding prior to the Pre-Merger Period.
13. Cash or other property paid to employees of Company during the
Pre-Merger Period has been or will be in the ordinary course of business or
pursuant to agreements entered into prior to the Pre-Merger Period and
constitute reasonable compensation for services rendered.
14. Company is not and will not be at the Effective Time an "investment
company" within the meaning of Section 368(a)(2)(F) of the Code.
15. Company is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
16. The letters to be executed by affiliates of Company pursuant to
Section 6.11(b) of the Agreement will be executed by persons who hold in the
aggregate at least fifty one percent (51%) of the aggregate outstanding
Company Common Stock.
17. To the best knowledge of Company there is no plan or intention on
the part of the Company stockholders (a "Plan") to sell, exchange, transfer,
distribute, pledge, or otherwise dispose of (a "Sale") (a) shares of Parent
Common Stock to be issued to stockholders in the Merger, which shares of
Parent Common Stock to be issued to stockholders in the Merger, which shares
would have an aggregate fair market value, as of the Effective Time of the
Merger, in
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excess of fifty percent (50%) of the aggregate fair market value,
immediately prior to the Merger, of all outstanding shares of Company Common
Stock, or (b) more than fifty percent (50%) of the shares of Parent Common
Stock to be received in exchange for Company Common Stock in the Merger. For
purposes of this representation, shares of Parent Common Stock or the
portion thereof) (i) with respect to which a stockholder receives
consideration in the Merger other than Company Common Stock (including,
without limitation, cash received pursuant to Section 2.01(a)(ii) of the
Merger Agreement or in lieu of fractional shares of Parent Common Stock
and/or (ii) with respect to which a Sale occurs during the Pre-Merger
Period, shall be considered shares of outstanding Parent Common Stock
exchanged for Company Common Stock in the Merger and then disposed of
pursuant to a Plan.
18. The payment of cash in lieu of fractional shares of Parent Common
Stock is, to the best knowledge of the management of Company, solely for the
purpose of avoiding the expense and inconvenience to Parent of issuing
fractional shares and does not represent separately bargained-for
consideration. The total cash consideration that will be paid in the Merger
to Company stockholders in lieu of fractional shares of Parent Common Stock
will not exceed ten percent (10%) of the total consideration that will be
issued in the Merger to stockholders in exchange for their shares of Company
Common Stock. The Parent fractional share interests to which each Company
stockholder may be entitled in the Merger will be aggregated and no Company
stockholder will receive cash in the amount equal to or greater than the
value of one full share of Parent Common Stock.
19. Except with respect to (i) payments of cash to stockholders in lieu
of fractional shares of Parent Common Stock, and (ii) payment of cash (if
any) pursuant to Section 2.01(a)(ii) of the Agreement, 100% of the Company
Common Stock outstanding immediately prior to the Merger will be exchanged
solely for Parent Common Stock. Thus, except as set forth in the preceding
sentence, Company intends that no consideration will be paid or received
(directly or indirectly, actually or constructively) for Company Common
Stock other than Parent Common Stock.
20. Except as disclosed on Schedule A hereto, during the Pre-Merger
Period, no indebtedness or other obligation of Company or its subsidiaries
had been or will be guaranteed by any stockholder of Company (or any person
or entity related to a stockholder of Company).
21. At the Effective Time of the Merger, the fair market value of the
Parent Common Stock and other consideration received by each Company
stockholder will be approximately equal to the aggregate fair market value
of the Company Common Stock surrendered in exchange therefor.
22. No shares of Sub have been or will be used as consideration or
issued to stockholders of Company in the Merger.
23. Parent, Sub, Company and the stockholders of Company will each pay
separately its or their own expenses in connection with the Merger as
contemplated by the Agreement; provided, however, that to the extent any
expenses relating to the Merger.
24. There is no intercorporate indebtedness existing between Parent and
Company or between Sub and Company that was issued, acquired or will be
settled at a discount, and to the best knowledge of the management of
Company, Company will assume no liabilities of Sub or any Company
stockholder in connection with the Merger.
25. The terms of the Agreement and all other agreements entered into
pursuant thereto are the product of arm's length negotiations.
26. None of the compensation payments received by any stockholder of
Company will be separate consideration for, or allocable to, any of their
shares of Company Common Stock; none of the shares of Parent Common Stock
received by any stockholder of Company will be separate
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consideration for, or allocable to, any employment agreement, consulting
agreement, any covenants not to compete or otherwise for the performance of
services; and the compensation paid to any stockholder of Company will be
for services actually rendered and will be commensurate with amounts paid to
third parties bargaining at arm's length for similar services.
27. Company is authorized to make all the representations set forth
herein.
B. RELIANCE BY YOU IN RENDERING OPINIONS: LIMITATIONS ON YOUR OPINIONS
1. The undersigned recognizes that (i) your opinions will be based on
the representations and statements set forth herein, in the Agreement
(including exhibits and schedules thereto) and in the documents related
thereto and (ii) your opinions will be subject to certain limitations and
qualifications and assumptions, including that the opinions may not be
relied upon if any such representations or statements are not accurate in
all material respects.
2. The undersigned recognizes that your opinions will not address any
tax consequences of the Merger or any action taken in connection therewith
except as expressly set forth in such opinions.
Very truly yours,
NAMIC U.S.A. Corporation
A Delaware Corporation
By: __________________________________
Title: _______________________________
4
<PAGE>
SCHEDULE 1.06
OFFICERS OF THE SURVIVING CORPORATION
<TABLE>
<S> <C>
Cynthia Morris President and Chief
Executive Officer
</TABLE>
5
<PAGE>
APPENDIX B
<PAGE>
VOTING AGREEMENT AND IRREVOCABLE PROXY
VOTING AGREEMENT AND IRREVOCABLE PROXY (this "Agreement"), dated as of
October 31, 1994, by and between Phillip H. Morse (the "Stockholder"), and
Pfizer Inc., a Delaware corporation (the "Parent").
W I T N E S S E T H:
WHEREAS, concurrently herewith, the Parent, DART Acquisition Corporation, a
Delaware corporation and a wholly-owned subsidiary of the Parent (the "Sub"),
and NAMIC U.S.A. Corporation, a Delaware corporation (the "Company"), are
entering into an Agreement and Plan of Merger, dated as of October 31, 1994 (the
"Merger Agreement"), pursuant to which the Sub would be merged with and into the
Company on the terms and subject to the conditions described therein (the
"Merger"); and
WHEREAS, the Stockholder owns, of record and beneficially, 4,455,662 shares
of the common stock (the "Common Stock"), par value $.01 per share, of the
Company (all such shares, together with any additional shares of Common Stock
that the Stockholder may acquire during the term hereof, being referred to
herein as the "Shares"); and
WHEREAS, the Parent and the Sub have entered into the Merger Agreement in
reliance on the Stockholder's representations, warranties, covenants and other
agreements contained herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained and other good and valuable consideration, it is
hereby agreed as follows:
1. AGREEMENT TO VOTE AND IRREVOCABLE PROXY.
1.1 AGREEMENT TO VOTE. The Stockholder hereby agrees that at any
meeting of the stockholders of the Company, however called, and in any
action by written consent of the stockholders of the Company, he shall (a)
vote all of his Shares in favor of the Merger Agreement, the Merger and
other transactions contemplated thereby; and (b) during the period of time
commencing on the date hereof and ending on October 31, 1995, vote such
Shares against any (i) merger, consolidation, share exchange, business
combination or other similar transaction pursuant to which control of the
Company would be transferred to any person other than the Parent, or (ii)
sale, lease, exchange, mortgage, pledge, transfer or other disposition of
50% or more of the assets of the Company and its subsidiaries taken as a
whole, in a single transaction or in a series of transactions.
Notwithstanding the foregoing, the Stockholder's agreements set forth herein
shall not be construed to obligate him in his capacity as a director of the
Company.
1.2 IRREVOCABLE PROXY. The Stockholder hereby constitutes and appoints
the Parent, which shall act by and through P. Nigel Gray or Terence J.
Gallagher (each, a "Proxy Holder"), and each of them, with full power of
substitution, his true and lawful proxy and attorney-in-fact to (i) vote at
the meeting of stockholders of the Company referred to in Section 6.12 of
the Merger Agreement all Shares which he beneficially owns as of the record
date for such meeting (or to execute any consent of the stockholders of the
Company in lieu of such meeting for the number of shares that he
beneficially owns as of the date of or record date for such consent) in
favor of the approval of the Merger Agreement, the Merger and the other
transactions contemplated thereby, with such modifications to the Merger
Agreement as the parties thereto may make and (ii) during the period of time
commencing on the date hereof and ending on October 31, 1995, to vote at any
meeting of the stockholders of the Company all Shares which he beneficially
owns as of the record date for such meeting (or to execute any consent of
the stockholders of the Company in lieu of such meeting for the number of
Shares that he beneficially owns as of the date of or record date for such
consent) against any matter referred to in Section 1.1(b) hereof. Such proxy
shall be limited strictly to the power to vote such Shares in the manner set
forth in the preceding sentence and shall not extend to any other matters,
and the Stockholder shall have the right to vote the Shares on any other
matter
B-1
<PAGE>
whatsoever in his sole discretion. The Stockholder acknowledges that the
proxy granted hereby is coupled with an interest and is irrevocable to the
full extent permitted by the Delaware General Corporation Law.
In the event that the Stockholder fails for any reason to vote his
Shares in accordance with the requirements of Section 1.1 hereof, then the
Proxy Holder shall have the right to vote such shares in accordance with the
provisions of this Section 1.2. The vote of the Proxy Holder shall control
in any conflict between the vote by the Proxy Holder of such Shares and a
vote by the Stockholder of such Shares.
2. CERTAIN COVENANTS OF THE STOCKHOLDER. The Stockholder agrees, until
this Agreement is terminated in accordance with Section 5 hereof, not to:
(a) sell, transfer, pledge, encumber, assign or otherwise dispose of, or
enter into any contract, option or other arrangement or understanding with
respect to the sale, transfer, pledge, encumbrance, assignment or other
disposition of, any Shares; PROVIDED, HOWEVER, that nothing contained in
this Section 2(a) shall prevent the Stockholder from selling, transferring,
pledging, encumbering, assigning or otherwise disposing of in the aggregate
up to 10% of the Shares that he beneficially owns as of the date hereof in
sales made pursuant to the provisions of Rule 144 promulgated pursuant to
the Securities Act of 1933, as amended, or gifts to one or more charitable
organizations;
(b) grant any proxies, deposit any Shares into a voting trust or enter
into a voting agreement with respect to any Shares; or
(c) directly or indirectly solicit or enter into any negotiations with,
or furnish or cause to be furnished any information concerning the business
or assets of the Company or its subsidiaries to, any person or entity (other
than the Parent and the Sub) in connection with any Company Acquisition
Proposal (as defined in the Merger Agreement); PROVIDED, HOWEVER, that the
foregoing does not restrict the Stockholder from otherwise exercising the
fiduciary duties owed by such person to the Company by virtue of his
position as a director of the Company; PROVIDED, FURTHER, HOWEVER, that the
Stockholder will promptly communicate to the Parent any solicitation or
inquiry or proposal relating to a Company Acquisition Proposal received by
the Stockholder in writing.
3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. The Stockholder
represents and warrants to the Parent as follows:
3.1 OWNERSHIP OF SHARES. The Shares are owned of record and
beneficially by the Stockholder free and clear of all liens, encumbrances,
rights to purchase, restrictions and claims of any kind whatsoever, and
constitute all the shares of Common Stock owned of record and beneficially
by such Stockholder. The Stockholder does not have any rights to acquire any
additional shares of Common Stock except pursuant to existing employee stock
options.
3.2 POWER; BINDING AGREEMENT. The Stockholder has full legal right,
power and authority to enter into and perform all of his obligations under
this Agreement. The execution and delivery of this Agreement by the
Stockholder will not violate any other agreement to which he is a party
including, without limitation, any voting agreement, stockholders agreement
or voting trust. This Agreement has been duly executed and delivered by the
Stockholder and constitutes a legal, valid and binding agreement of him,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws, now or
hereafter in effect, affecting creditors' rights and remedies generally and
to general principles of equity.
4. REPRESENTATIONS AND WARRANTIES OF THE PARENT. The Parent represents and
warrants to the Stockholder as follows: (a) that the Parent has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby; (b) the execution, delivery and performance of
this Agreement have been duly authorized and approved by all required corporate
action on the part of the Parent; (c) this Agreement has been duly executed and
delivered by the Parent
B-2
<PAGE>
and is its legal, valid and binding obligation, enforceable against it in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws, now or hereafter in
effect, affecting creditors' rights and remedies generally and to general
principles of equity.
5. TERMINATION. Anything contained herein to the contrary notwithstanding,
this Agreement (other than the provisions of Section 6) shall terminate and be
of no further force or effect on the earlier of (i) October 31, 1995 and (ii)
the termination of the Merger Agreement: (A) by mutual consent of the parties
pursuant to Section 8.01(a) of the Merger Agreement; (B) by the Parent pursuant
to Section 8.01(b) of the Merger Agreement; (C) by the Company pursuant to
Section 8.01(b) of the Merger Agreement following a Stipulated Delay (as
hereinafter defined); (D) by the Parent or the Company pursuant to Section
8.01(c) of the Merger Agreement or (E) by the Company pursuant to Section
8.01(g) of the Merger Agreement. As used herein, the term "Stipulated Delay"
shall mean a delay in the ability of the parties to the Merger Agreement to
consummate the Merger and the other transactions contemplated thereby by reason
of the failure of any of the conditions set forth in Section 7.01(b) or (c) of
the Merger Agreement.
6. EXPENSES. Each party hereto will pay all of its or his own expenses in
connection with the transactions contemplated by this Agreement, including,
without limitation, the fees and expenses of its and his counsel and other
advisers.
7. AMENDMENT; ASSIGNS. This Agreement may not be modified, amended,
altered or supplemented except by an agreement in writing executed by each of
the parties hereto. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns, but
none of the parties hereto may assign any of its rights, interests or
obligations under this Agreement without the prior written consent of the other
party.
8. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall have been duly given when
delivered in person, by cable, telegram, telex, telecopy or overnight courier or
sent by registered or certified mail (postage prepaid, return receipt
requested), to the respective parties as follows:
If to the Parent:
Pfizer Inc.
235 East 42nd Street
New York, New York 10017
Attention: General Counsel
With a copy to:
Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
Attention: Dennis J. Block, Esq.
If to the Stockholder:
Phillip H. Morse
44 Cunningham Avenue
Glens Falls, New York 12801
With a copy to:
O'Sullivan Graev & Karabell
30 Rockefeller Plaza
New York, New York 10112
Attention: Lawrence G. Graev, Esq.
B-3
<PAGE>
or to such other address as any party may designate in writing in accordance
herewith, except that notices of changes of address will only be effective upon
receipt. All such notices or communications shall be deemed to be received (a)
in the case of personal delivery, cable, telex or telecopy, on the date of such
delivery, (b) in the case of overnight courier, on the next business day after
the date when sent and (c) in the case of registered or certified mailing, on
the third business day following the date on which the piece of mail containing
such communication was posted.
9. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original but all of which together shall
constitute one and the same document.
10. GOVERNING LAW. This Agreement, and all matters relating hereto, shall
be governed by and construed and enforced in accordance with the laws of the
State of Delaware from time to time without regard to any principles of choice
of laws or conflicts of law.
11. SEVERABILITY. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in another jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
12. THIRD PARTY BENEFICIARIES. Nothing in this Agreement, expressed or
implied, shall be construed to give any person other than the parties hereto any
legal or equitable right, remedy or claim under or by reason of this Agreement
or any provision contained herein.
13. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter contained herein and
therein and supersedes all prior agreements and understandings, express or
implied, between the parties with respect to such subject matter.
14. INJUNCTIVE RELIEF. The parties agree that in the event of a breach of
any provision of this Agreement by the Stockholder, the Parent may be without an
adequate remedy at law. The parties therefore agree that in the event of a
breach by the Stockholder of any provision of this Agreement, the Parent may
elect to institute and prosecute proceedings in any court of competent
jurisdiction to enforce specific performance or to enjoin the continuing breach
of such provision, as well as to obtain damages for breach of this Agreement. By
seeking or obtaining any such relief, the Parent will not be precluded from
seeking or obtaining any other relief to which it may be entitled.
15. USE OF OFFICE. The Stockholder shall, from the date hereof until the
second anniversary of the Effective Time (as defined in the Merger Agreement),
have the right to continue to use the office currently used by him at the
principal headquarters of the Company in Glens Falls, New York.
IN WITNESS WHEREOF, each of the parties have caused this Agreement to be
duly executed and delivered on the day and year first above written.
__________/s/_PHILIP H. MORSE_________
Phillip H. Morse
PFIZER INC.
By: _________/s/_P. NIGEL GRAY________
Name: P. Nigel Gray
Title: VICE PRESIDENT
B-4
<PAGE>
APPENDIX C
<PAGE>
VOTING AGREEMENT AND IRREVOCABLE PROXY
VOTING AGREEMENT AND IRREVOCABLE PROXY (this "Agreement"), dated as of
October 31, 1994, by and between Richard H. Morse (the "Stockholder"), and
Pfizer Inc., a Delaware corporation (the "Parent").
W I T N E S S E T H:
WHEREAS, concurrently herewith, the Parent, DART Acquisition Corporation, a
Delaware corporation and a wholly-owned subsidiary of the Parent (the "Sub"),
and NAMIC U.S.A. Corporation, a Delaware corporation (the "Company"), are
entering into an Agreement and Plan of Merger, dated as of October 31, 1994 (the
"Merger Agreement"), pursuant to which the Sub would be merged with and into the
Company on the terms and subject to the conditions described therein (the
"Merger"); and
WHEREAS, the Stockholder owns, of record and beneficially, 1,146,900 shares
of the common stock (the "Common Stock"), par value $.01 per share, of the
Company (all such shares, together with any additional shares of Common Stock
that the Stockholder may acquire during the term hereof, being referred to
herein as the "Shares"); and
WHEREAS, the Parent and the Sub have entered into the Merger Agreement in
reliance on the Stockholder's representations, warranties, covenants and other
agreements contained herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained and other good and valuable consideration, it is
hereby agreed as follows:
1. AGREEMENT TO VOTE AND IRREVOCABLE PROXY.
1.1 AGREEMENT TO VOTE. The Stockholder hereby agrees that at any
meeting of the stockholders of the Company, however called, and in any
action by written consent of the stockholders of the Company, he shall (a)
vote all of his Shares in favor of the Merger Agreement, the Merger and
other transactions contemplated thereby; and (b) during the period of time
commencing on the date hereof and ending on October 31, 1995, vote such
Shares against any (i) merger, consolidation, share exchange, business
combination or other similar transaction pursuant to which control of the
Company would be transferred to any person other than the Parent, or (ii)
sale, lease, exchange, mortgage, pledge, transfer or other disposition of
50% or more of the assets of the Company and its subsidiaries taken as a
whole, in a single transaction or in a series of transactions.
Notwithstanding the foregoing, the Stockholder's agreements set forth herein
shall not be construed to obligate him in his capacity as a director of the
Company.
1.2 IRREVOCABLE PROXY. The Stockholder hereby constitutes and appoints
the Parent, which shall act by and through P. Nigel Gray or Terence J.
Gallagher (each, a "Proxy Holder"), and each of them, with full power of
substitution, his true and lawful proxy and attorney-in-fact to (i) vote at
the meeting of stockholders of the Company referred to in Section 6.12 of
the Merger Agreement all Shares which he beneficially owns as of the record
date for such meeting (or to execute any consent of the stockholders of the
Company in lieu of such meeting for the number of shares that he
beneficially owns as of the date of or record date for such consent) in
favor of the approval of the Merger Agreement, the Merger and the other
transactions contemplated thereby, with such modifications to the Merger
Agreement as the parties thereto may make and (ii) during the period of time
commencing on the date hereof and ending on October 31, 1995, to vote at any
meeting of the stockholders of the Company all Shares which he beneficially
owns as of the record date for such meeting (or to execute any consent of
the stockholders of the Company in lieu of such meeting for the number of
Shares that he beneficially owns as of the date of or record date for such
consent) against any matter referred to in Section 1.1(b) hereof. Such proxy
shall be limited strictly to the power to vote such Shares in the manner set
forth in the preceding sentence and shall not extend to any other matters,
and the Stockholder shall have the right to vote the Shares on any other
matter
C-1
<PAGE>
whatsoever in his sole discretion. The Stockholder acknowledges that the
proxy granted hereby is coupled with an interest and is irrevocable to the
full extent permitted by the Delaware General Corporation Law.
In the event that the Stockholder fails for any reason to vote his Shares
in accordance with the requirements of Section 1.1 hereof, then the Proxy
Holder shall have the right to vote such shares in accordance with the
provisions of this Section 1.2. The vote of the Proxy Holder shall control
in any conflict between the vote by the Proxy Holder of such Shares and a
vote by the Stockholder of such Shares.
2. CERTAIN COVENANTS OF THE STOCKHOLDER. The Stockholder agrees, until
this Agreement is terminated in accordance with Section 5 hereof, not to:
(a) sell, transfer, pledge, encumber, assign or otherwise dispose of, or
enter into any contract, option or other arrangement or understanding with
respect to the sale, transfer, pledge, encumbrance, assignment or other
disposition of, any Shares; PROVIDED, HOWEVER, that nothing contained in
this Section 2(a) shall prevent the Stockholder from selling, transferring,
pledging, encumbering, assigning or otherwise disposing of in the aggregate
up to 10% of the Shares that he beneficially owns as of the date hereof in
sales made pursuant to the provisions of Rule 144 promulgated pursuant to
the Securities Act of 1933, as amended, or gifts to one or more charitable
organizations;
(b) grant any proxies, deposit any Shares into a voting trust or enter
into a voting agreement with respect to any Shares; or
(c) directly or indirectly solicit or enter into any negotiations with,
or furnish or cause to be furnished any information concerning the business
or assets of the Company or its subsidiaries to, any person or entity (other
than the Parent and the Sub) in connection with any Company Acquisition
Proposal (as defined in the Merger Agreement); PROVIDED, HOWEVER, that the
foregoing does not restrict the Stockholder from otherwise exercising the
fiduciary duties owed by such person to the Company by virtue of his
position as a director of the Company; PROVIDED, FURTHER, HOWEVER, that the
Stockholder will promptly communicate to the Parent any solicitation or
inquiry or proposal relating to a Company Acquisition Proposal received by
the Stockholder in writing.
3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. The Stockholder
represents and warrants to the Parent as follows:
3.1 OWNERSHIP OF SHARES. The Shares are owned of record and
beneficially by the Stockholder free and clear of all liens, encumbrances,
rights to purchase, restrictions and claims of any kind whatsoever, and
constitute all the shares of Common Stock owned of record and beneficially
by such Stockholder. The Stockholder does not have any rights to acquire any
additional shares of Common Stock except pursuant to existing employee stock
options.
3.2 POWER; BINDING AGREEMENT. The Stockholder has full legal right,
power and authority to enter into and perform all of his obligations under
this Agreement. The execution and delivery of this Agreement by the
Stockholder will not violate any other agreement to which he is a party
including, without limitation, any voting agreement, stockholders agreement
or voting trust. This Agreement has been duly executed and delivered by the
Stockholder and constitutes a legal, valid and binding agreement of him,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws, now or
hereafter in effect, affecting creditors' rights and remedies generally and
to general principles of equity.
4. REPRESENTATIONS AND WARRANTIES OF THE PARENT. The Parent represents and
warrants to the Stockholder as follows: (a) that the Parent has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby; (b) the execution, delivery and performance of
this Agreement have been duly authorized and approved by all required corporate
action on the part of the Parent; (c) this Agreement has been duly executed and
delivered by the Parent
C-2
<PAGE>
and is its legal, valid and binding obligation, enforceable against it in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws, now or hereafter in
effect, affecting creditors' rights and remedies generally and to general
principles of equity.
5. TERMINATION. Anything contained herein to the contrary notwithstanding,
this Agreement (other than the provisions of Section 6) shall terminate and be
of no further force or effect on the earlier of (i) October 31, 1995 and (ii)
the termination of the Merger Agreement: (A) by mutual consent of the parties
pursuant to Section 8.01(a) of the Merger Agreement; (B) by the Parent pursuant
to Section 8.01(b) of the Merger Agreement; (C) by the Company pursuant to
Section 8.01(b) of the Merger Agreement following a Stipulated Delay (as
hereinafter defined); (D) by the Parent or the Company pursuant to Section
8.01(c) of the Merger Agreement; or (E) by the Company pursuant to Section
8.01(g) of the Merger Agreement. As used herein, the term "Stipulated Delay"
shall mean a delay in the ability of the parties to the Merger Agreement to
consummate the Merger and the other transactions contemplated thereby by reason
of the failure of any of the conditions set forth in Section 7.01(b) or (c) of
the Merger Agreement.
6. EXPENSES. Each party hereto will pay all of its or his own expenses in
connection with the transactions contemplated by this Agreement, including,
without limitation, the fees and expenses of its and his counsel and other
advisers.
7. AMENDMENT; ASSIGNS. This Agreement may not be modified, amended,
altered or supplemented except by an agreement in writing executed by each of
the parties hereto. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns, but
none of the parties hereto may assign any of its rights, interests or
obligations under this Agreement without the prior written consent of the other
party.
8. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall have been duly given when
delivered in person, by cable, telegram, telex, telecopy or overnight courier or
sent by registered or certified mail (postage prepaid, return receipt
requested), to the respective parties as follows:
If to the Parent:
Pfizer Inc.
235 East 42nd Street
New York, New York 10017
Attention: General Counsel
With a copy to:
Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
Attention: Dennis J. Block, Esq.
If to the Stockholder:
Richard H. Morse
251 Washington Street
Duxbury, Massachusetts 02332
With a copy to:
O'Sullivan Graev & Karabell
30 Rockefeller Plaza
New York, New York 10112
Attention: Lawrence G. Graev, Esq.
C-3
<PAGE>
or to such other address as any party may designate in writing in accordance
herewith, except that notices of changes of address will only be effective upon
receipt. All such notices or communications shall be deemed to be received (a)
in the case of personal delivery, cable, telex or telecopy, on the date of such
delivery, (b) in the case of overnight courier, on the next business day after
the date when sent and (c) in the case of registered or certified mailing, on
the third business day following the date on which the piece of mail containing
such communication was posted.
9. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original but all of which together shall
constitute one and the same document.
10. GOVERNING LAW. This Agreement, and all matters relating hereto, shall
be governed by and construed and enforced in accordance with the laws of the
State of Delaware from time to time without regard to any principles of choice
of laws or conflicts of law.
11. SEVERABILITY. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in another jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
12. THIRD PARTY BENEFICIARIES. Nothing in this Agreement, expressed or
implied, shall be construed to give any person other than the parties hereto any
legal or equitable right, remedy or claim under or by reason of this Agreement
or any provision contained herein.
13. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter contained herein and
therein and supersedes all prior agreements and understandings, express or
implied, between the parties with respect to such subject matter.
14. INJUNCTIVE RELIEF. The parties agree that in the event of a breach of
any provision of this Agreement by the Stockholder, the Parent may be without an
adequate remedy at law. The parties therefore agree that in the event of a
breach by the Stockholder of any provision of this Agreement, the Parent may
elect to institute and prosecute proceedings in any court of competent
jurisdiction to enforce specific performance or to enjoin the continuing breach
of such provision, as well as to obtain damages for breach of this Agreement. By
seeking or obtaining any such relief, the Parent will not be precluded from
seeking or obtaining any other relief to which it may be entitled.
IN WITNESS WHEREOF, each of the parties have caused this Agreement to be
duly executed and delivered on the day and year first above written.
_________/s/_RICHARD H. MORSE_________
Richard H. Morse
PFIZER INC.
By: _________/s/_P. NIGEL GRAY________
Name: P. Nigel Gray
Title: VICE PRESIDENT
C-4
<PAGE>
APPENDIX D
<PAGE>
[LETTERHEAD OF DILLON, READ & CO. INC.]
October 30, 1994
NAMIC U.S.A. Corporation
Pruyn's Island
Glens Falls, NY 12801
To The Board of Directors:
You have requested our opinion as to the fairness, from a financial point of
view, of the consideration to be received by the holders of common stock, par
value $0.01 per share ("Company Common Stock"), of NAMIC U.S.A. Corporation
("NAMIC" or the "Company") pursuant to an Agreement and Plan of Merger, to be
dated as of October 31, 1994 (the "Agreement"), among NAMIC, Pfizer Inc.
("Pfizer") and Dart Acquisition Corporation, a wholly-owned subsidiary of Pfizer
("Sub"). The Agreement provides for a merger of Sub with and into NAMIC (the
"Merger"), and NAMIC will become a wholly-owned subsidiary of Pfizer.
In the event the Merger is consummated, each outstanding share of Company
Common Stock shall be converted into the right to receive 0.24599 shares of
Pfizer common stock, par value $0.10 per share ("Pfizer Common stock"). The
terms and conditions of the Merger are more fully set forth in the Agreement.
Dillon, Read & Co. Inc. has acted as financial advisor to NAMIC in
connection with the Merger and will receive a fee upon consummation thereof.
In arriving at our opinion we have reviewed the Agreement and have examined
certain publicly available information relating to the business, financial
condition and operations of NAMIC, as well as certain financial and other
information furnished to us by NAMIC that is not publicly available, including
projections prepared by the management of NAMIC. We have met with certain senior
officers of NAMIC to discuss the operations, financial condition, history and
prospects of NAMIC. We have reviewed historical common stock price and trading
volume data relating to NAMIC and analyzed the consideration to be received by
holders of Company Common Stock in relation to, among other measures, market
price, historical earnings, future earnings potential, cash flow and book value
of NAMIC's business. We have considered the financial terms of certain other
recent merger and acquisition transactions which we believe to be generally
comparable to the Merger, and have analyzed certain publicly available
information, including financial information, relating to public companies whose
operations we deemed comparable to those of NAMIC.
In addition, we have also examined certain publicly available information
relating to the business, financial condition and operations of Pfizer. We have
also met with certain senior officers of Pfizer to discuss the operations,
financial condition, history and prospects of Pfizer. We have considered certain
financial and stock market data of Pfizer and have compared that information to
similar data for publicly-held companies in businesses similar to that of
Pfizer. Finally, we have conducted such other analyses and examinations as we
have deemed necessary in arriving at our opinion.
Dillon, Read & Co. Inc. conducted discussions with a limited number of
parties with respect to a business combination with NAMIC and was not authorized
to conduct, and did not conduct, an "auction process" with respect to the
solicitation of proposals regarding a business combination with NAMIC. In the
course of our analysis we have relied upon the accuracy and completeness in all
material respects of the publicly available financial information, and
non-public financial and other information provided to us by NAMIC and Pfizer,
which we have not independently verified. We have not made, requested or
received any independent appraisal of the assets or liabilities (contingent or
D-1
<PAGE>
otherwise) of NAMIC or Pfizer. With respect to the financial projections,
estimates and analyses provided to us by NAMIC, we have assumed with your
permission, that such information was reasonably prepared on bases reflecting
the best currently available estimates and judgments of management as to future
financial performance. Our opinion herein is based upon market, economic and
other circumstances existing and disclosed to us as of the date hereof.
Subject to the foregoing, we are of the opinion, as of the date hereof, that
the consideration to be received by the holders of Company Common Stock pursuant
to the Agreement is fair to the stockholders of NAMIC from a financial point of
view.
Very truly yours,
Dillon, Read & Co. Inc.
D-2
<PAGE>
APPENDIX E
<PAGE>
DELAWARE GENERAL CORPORATION LAW
262 APPRAISAL RIGHTS. (a) Any stockholder of a corporation of this State
who holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to Section 228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of his shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; AND THE WORDS "DEPOSITORY RECEIPT" MEAN A RECEIPT OR OTHER
INSTRUMENT ISSUED BY A DEPOSITORY REPRESENTING AN INTEREST IN ONE OR MORE
SHARES, OR FRACTIONS THEREOF, SOLELY OF STOCK OF A CORPORATION, WHICH STOCK IS
DEPOSITED WITH THE DEPOSITARY.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251, 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock(1), WHICH STOCK, OR
DEPOSITORY RECEIPTS IN RESPECT THEREOF, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000(2)
HOLDERS; and further provided that no appraisal rights shall be available for
any shares of stock of the constituent corporation surviving a merger if the
merger did not require for its approval the vote of the(2) HOLDERS of the
surviving corporation as provided in subsection (f) of Section 251 of this
title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights under
this section shall be available for the shares of any class or series of stock
of a constituent corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to SectionSection 251, 252,
254, 257, 258, 263 and 264 of this title to accept for such stock anything
except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, OR DEPOSITORY RECEIPTS IN RESPECT THEREOF;
b. Shares of stock or any other corporation(1), OR DEPOSITORY RECEIPTS IN
RESPECT THEREOF, WHICH SHARES OF STOCK OR DEPOSITORY RECEIPTS at the effective
date of the merger or consolidation will be either listed on a national
securities exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities Dealers,
Inc. or held of record by more than 2,000(2) HOLDERS;
c. Cash in lieu of fractional shares(3) OR FRACTIONAL DEPOSITORY RECEIPTS
described in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, DEPOSITORY RECEIPTS and cash in
lieu of fractional shares OR FRACTIONAL DEPOSITORY RECEIPTS described in the
foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation party
to a merger effected under Section 253 of this title is not owned by the parent
corporation immediately prior to the merger, appraisal rights shall be available
for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is
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<PAGE>
a constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsections (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of his
shares shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to demand
the appraisal of his shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to take such action
must do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent corporation who
has complied with this subsection and has not voted in favor of or consented to
the merger or consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to Section 228 or
253 of this title, the surviving or resulting corporation, either before the
effective date of the merger or consolidation or within 10 days thereafter,
shall notify each of the stockholders entitled to appraisal rights of the
effective date of the merger or consolidation and that appraisal rights are
available for any or all of the shares of the constituent corporation, and shall
include in such notice a copy of this section. The notice shall be sent by
certified or registered mail, return receipt requested, addressed to the
stockholder at his address as it appears on the records of the corporation. Any
stockholder entitled to appraisal rights may, within 20 days after the date of
mailing of the notice, demand in writing from the surviving or resulting
corporation the appraisal of his shares. Such demand will be sufficient if it
reasonably informs the corporation of the identify of the stockholder and that
the stockholder intends thereby to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw his demand for
appraisal and to accept the terms offered upon the merger or consolidation.
Within 120 days after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections (a) and (d)
hereof, upon written request, shall be entitled to receive from the corporation
surviving the merger or resulting from the consolidation a statement setting
forth the aggregate number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal have been received
and the aggregate number of holders of such shares. Such written statement shall
be mailed to the stockholder within 10 days after his written request for such a
statement is received by the surviving or resulting corporation or within 10
days after expiration of the period for delivery of demands for appraisal under
subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom
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<PAGE>
agreements as to the value of their shares have not been reached by the
surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published by the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonably attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective
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<PAGE>
date of the merger or consolidation as provided in subsection (e) of this
section or thereafter with the written approval of the corporation, then the
right of such stockholder to an appraisal shall cease. Notwithstanding the
foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed
as to any stockholder without the approval of the Court, and such approval may
be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation. (Last amended by Ch. 262. L.
'94, eff. 7-1-94.)
E-4
<PAGE>
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
NAMIC U.S.A. CORPORATION
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Cynthia L. Morris and David W. Gilmour, each
with full powers of substitution, to act as proxies for the undersigned, to vote
all shares of Common Stock of NAMIC U.S.A. Corporation held of record on January
30, 1995, by the undersigned at the Special Meeting of Stockholders to be held
at The Rockefeller Center Club, 30 Rockefeller Plaza, Radio City Room, 64th
Floor, New York, NY 10112 on March 15, 1995, at 9:00 a.m. E.S.T., and at any
adjournment(s) or postponement(s) thereof, as stated on the reverse side.
Each stockholder may revoke a previously executed proxy at any time before
it is voted by voting in person at the Special Meeting, by giving written notice
of revocation to the Secretary of NAMIC U.S.A. Corporation or by delivering a
later dated proxy. Attendance at the Special Meeting without further action will
not automatically revoke a proxy.
/X/ PLEASE MARK YOUR VOTES AS SHOWN
____ Shares of Common Stock
(Continued on reverse side)
<PAGE>
PROPOSAL 1: APPROVAL AND ADOPTION OF THE AMENDED AND RESTATED AGREEMENT AND
PLAN OF MERGER DATED AS OF OCTOBER 31, 1994, AMONG PFIZER INC.
("PFIZER"), DART ACQUISITION CORPORATION, A WHOLLY-OWNED SUBSIDIARY
OF PFIZER ("MERGER SUB"), AND NAMIC U.S.A. CORPORATION ("NAMIC"),
AND THE MERGER (THE "MERGER") OF MERGER SUB WITH AND INTO NAMIC,
WITH NAMIC SURVIVING THE MERGER AS A WHOLLY-OWNED SUBSIDIARY OF
PFIZER, WHEREBY (I) EACH ISSUED AND OUTSTANDING SHARE OF COMMON
STOCK, $.01 PAR VALUE, OF NAMIC (THE "NAMIC COMMON STOCK") WILL BE
CONVERTED INTO .24599 OF ONE SHARE OF THE COMMON STOCK, $.10 PAR
VALUE, OF PFIZER (THE "PFIZER COMMON STOCK") AND, SINCE THE
EFFECTIVE TIME OF THE MERGER IS AFTER THE RECORD DATE FOR THE
DIVIDEND OF $.52 PER SHARE DECLARED BY PFIZER'S BOARD OF DIRECTORS
ON THE PFIZER COMMON STOCK IN THE FIRST QUARTER OF CALENDAR YEAR
1995, A CASH PAYMENT EQUAL TO THE PRODUCT OF .24599 AND THE AMOUNT
OF SUCH PER SHARE QUARTERLY CASH DIVIDEND AND (II) EACH OUTSTANDING
OPTION TO PURCHASE NAMIC COMMON STOCK, WHETHER OR NOT THEN
EXERCISABLE, WILL BE CONVERTED INTO THE RIGHT TO RECEIVE A CASH
PAYMENT (NET OF ANY WITHHOLDING TAX) IN AN AMOUNT EQUAL TO THE
EXCESS, IF ANY, OF $18.00 OVER THE EXERCISE PRICE OF SUCH OPTION.
FOR AGAINST ABSTAIN
/ / / / / /
THIS PROXY WHEN PROPERLY EXECUTED AND RETURNED IN A TIMELY MANNER WILL BE VOTED
AT THE SPECIAL MEETING AND AT ANY ADJOURNMENT THEREOF IN ACCORDANCE WITH THE
DIRECTIONS SPECIFIED HEREIN. IF NO DIRECTIONS ARE INDICATED, THIS PROXY WILL BE
VOTED FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER DESCRIBED
IN PROPOSAL 1.
NOTE: Please sign exactly as your name appears on this proxy. If joint
owners, BOTH must sign this proxy. When signing as attorney, executor,
administrator, trustee, guardian or corporate officer, please give your full
title.
Date: ______________________________ , 1995
______________ ______________________________
Signature Signature
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to Article V, Section 1 of its By-laws, Pfizer shall indemnify
directors and officers who are or who have been made a party to or are
threatened to be made a party to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, to the fullest extent permitted by
applicable law as it presently exists or may hereinafter be amended (discussed
below). Pfizer is insured against actions taken pursuant to its By-laws and the
directors and officers are insured directly at Pfizer's expense against such
liabilities for which indemnification is not made. Pfizer has entered into
agreements with its directors and certain of its officers requiring Pfizer to
indemnify such persons to the fullest extent permitted by Pfizer's By-laws.
Section 145 of the General Corporation Law of Delaware permits a corporation
to indemnify any person who is or has been a director, officer, employee or
agent of the corporation or who is or has been serving as a director, officer,
employee or agent of another corporation, organization or enterprise at the
request of the corporation, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with any action, suit or proceeding, whether civil, criminal,
administrative or investigative, if he/she acted in good faith and in a manner
he/she reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his/her conduct was unlawful. In the case of a
claim, action, suit or proceeding made or brought by or in the right of the
corporation to procure a recovery or judgment in its favor, the corporation
shall not indemnify such person in respect of any claim, issue or matter as to
which such person has been adjudged to be liable to the corporation unless the
Court determines that such person is fairly and reasonably entitled to indemnity
for such expenses as the Court may allow. Any such person who has been wholly
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to above, or in defense of any such claim, action, suit or
proceeding or with respect to any claim, issue or matter therein, shall be
indemnified against expenses (including attorney's fees) actually and reasonably
incurred by him or her in connection therewith or resulting therefrom. Expenses
(including attorney's fees) incurred by an officer or director in defending any
civil, criminal, administrative or investigative action, suit or proceeding may
be paid by the corporation in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of such
officer or director to repay such amount if it is ultimately determined that he
or she is not entitled to be indemnified by the corporation. Expenses incurred
by other employees and agents of the corporation also may be advanced to such
employee or agent upon such terms and conditions, if any, as the board of
directors deems appropriate. The indemnification and advancement of expenses are
not deemed to be exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<C> <C> <S>
(a) -- Exhibits
2.1 -- Amended and Restated Agreement and Plan of Merger, dated as of October 31, 1994,
among NAMIC U.S.A. Corporation, Pfizer Inc. and Dart Acquisition Corporation
(included as Appendix A to the Proxy Statement/Prospectus that forms a part
hereof).
2.2 -- Voting Agreement and Irrevocable Proxy, dated as of October 31, 1994, between
Pfizer Inc. and Phillip H. Morse (included as Appendix B to the Proxy
Statement/Prospectus that forms a part hereof).
2.3 -- Voting Agreement and Irrevocable Proxy, dated as of October 31, 1994, between
Pfizer Inc. and Richard H. Morse (included as Appendix C to the Proxy
Statement/Prospectus that forms a part hereof).
</TABLE>
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<PAGE>
<TABLE>
<C> <C> <S>
5 -- Opinion of Weil, Gotshal & Manges.
8 -- Opinion of O'Sullivan Graev & Karabell, LLP.
12 -- Computation of Ratio of Earnings to Fixed Charges (incorporated by reference to
Exhibit 12 of the Company's Annual Report on Form 10-K For the Fiscal Year ended
December 31, 1993 and the Company's interim report on Form 10-Q for the quarterly
period ended October 2, 1994.)
15 -- Acknowledgement of KPMG Peat Marwick LLP, independent certified public accountants.
23(i) -- Consent of Weil, Gotshal & Manges (included in Exhibit 5 hereto).
23(ii) -- Consent of O'Sullivan Graev & Karabell, LLP (included in Exhibit 8 hereto).
23(iii) -- Consents of KPMG Peat Marwick LLP, independent certified public accountants.
23(iv) -- Consent of Coopers & Lybrand L.L.P., independent certified public accountants.
23(v) -- Consent of Dillon, Read & Co. Inc.
(b) -- Financial Statement Schedules of NAMIC U.S.A. Corporation
-- Report of Coopers & Lybrand, L.L.P.
-- Report of KPMG Peat Marwick LLP
V -- Property, Plant and Equipment
VI -- Accumulated Depreciation, Depletion and Amortization of Property, Plant and
Equipment
VIII -- Valuation and Qualifying Accounts
IX -- Short-term Borrowings
X -- Supplementary Income Statement Information
</TABLE>
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for purposes of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of
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<PAGE>
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
The registrant undertakes that every prospectus (i) that is filed pursuant
to paragraph (1) immediately preceding or (ii) that purports to meet the
requirements of section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4.10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of New York, State of New York, on the 12th day of
December, 1994.
Pfizer Inc.
(Registrant)
By: ____/s/_WILLIAM C. STEERE, JR.____
William C. Steere, Jr.
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
Dated: December 12, 1994
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------- -----------------------
<C> <S> <C>
Chairman of the Board, Chief
/s/WILLIAM C. STEERE, JR. Executive Officer Director December 12, 1994
William C. Steere, Jr. (Principal Executive Officer)
Executive Vice President and
/s/HENRY A. MCKINNELL Chief Financial Officer December 12, 1994
Henry A. McKinnell (Principal Financial Officer)
/s/HERBERT V. RYAN Controller (Principal Accounting
Herbert V. Ryan Officer) December 12, 1994
/s/EDWARD C. BESSEY
Edward C. Bessey Director December 12, 1994
/s/M. ANTHONY BURNS
M. Anthony Burns Director December 12, 1994
/s/GRACE J. FIPPINGER
Grace J. Fippinger Director December 12, 1994
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------- -----------------------
George B. Harvey Director December , 1994
<C> <S> <C>
/s/CONSTANCE J. HORNER
Constance J. Horner Director December 12, 1994
/s/STANLEY O. IKENBERRY
Stanley O. Ikenberry Director December 12, 1994
/s/THOMAS G. LABRECQUE
Thomas G. Labrecque Director December 12, 1994
/s/JAMES T. LYNN
James T. Lynn Director December 12, 1994
/s/PAUL A. MARKS
Paul A. Marks Director December 12, 1994
/s/JOHN R. OPEL
John R. Opel Director December 12, 1994
/s/EDMUND T. PRATT, JR.
Edmund T. Pratt, Jr. Director December 12, 1994
/s/FRANKLIN D. RAINES
Franklin D. Raines Director December 12, 1994
/s/FELIX G. ROHATYN
Felix G. Rohatyn Director December 12, 1994
/s/JEAN-PAUL VALLES
Jean-Paul Valles Director December 12, 1994
</TABLE>
II-5
<PAGE>
REPORT OF INDEPENDENT AUDITORS' REPORT
ON FINANCIAL STATEMENT SCHEDULES
Stockholders and Board of Directors, NAMIC U.S.A. Corporation:
Our report on the consolidated financial statements of NAMIC U.S.A. Corporation
and subsidiaries as of and for the year ended May 31, 1994 is included in the
Proxy Statement/Prospectus. In connection with our audit of such financial
statements, we have also audited the related financial statement schedules as
listed on the accompanying index.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all materially respects, the information required to be
included therein.
/s/ Coopers & Lybrand, L.L.P.
Coopers & Lybrand, L.L.P.
Albany, New York
July 1, 1994
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
NAMIC U.S.A. Corporation:
Under date of July 9, 1993, we reported on the consolidated balance sheet of
NAMIC U.S.A. Corporation and subsidiaries as of May 31, 1993, and the related
consolidated statements of earnings, changes in stockholders' equity and cash
flows for each of the years in the two-year period ended May 31, 1993, as
contained in the Proxy Statement/Prospectus. These consolidated financial
statements and our report thereon are included in the Proxy
Statement/Prospectus. In connection with our audits of the aforementioned
consolidated financial statements, we also have audited the related consolidated
financial statement schedules for the years ended May 31, 1993 and 1992 as
listed in the accompanying index. These financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Albany, New York
July 9, 1993
<PAGE>
SCHEDULE V
NAMIC U.S.A. CORPORATION AND SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED MAY 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING ACQUIRED ADDITIONS END
CLASSIFICATION OF YEAR ASSETS (B) AT COST RETIREMENTS OF YEAR
- ----------------------------------- -------------- ----------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Land............................... $ 80,339 $ -- $ -- $ -- $ 80,339
Buildings and building
improvements...................... 8,549,470 -- -- -- 8,549,470
Machinery and equipment............ 17,325,345 207,971 5,875,572(A) 588,145 22,820,743
Leasehold improvements............. 1,800,184 29,457 234,904 -- 2,064,545
Furniture and fixtures............. 1,742,208 31,343 157,252 4,713 1,926,090
-------------- ----------- -------------- ------------- --------------
Balance at May 31, 1992............ $ 29,497,546 $ 268,771 $ 6,267,728 $ 592,858 $ 35,441,187
-------------- ----------- -------------- ------------- --------------
-------------- ----------- -------------- ------------- --------------
Land............................... $ 80,339 $ -- $ -- $ -- $ 80,339
Buildings and building
improvements...................... 8,549,470 -- -- -- 8,549,470
Machinery and equipment............ 22,820,743 -- 10,861,734(A) 637,335 33,045,142
Leasehold improvements............. 2,064,545 -- 1,005,105(C) -- 3,069,650
Furniture and fixtures............. 1,926,090 -- 167,759 1,813 2,092,036
-------------- ----------- -------------- ------------- --------------
Balance at May 31, 1993............ $ 35,441,187 $ -- $ 12,034,598 $ 639,148 $ 46,836,637
-------------- ----------- -------------- ------------- --------------
-------------- ----------- -------------- ------------- --------------
Land............................... $ 80,339 $ -- $ -- $ -- $ 80,339
Buildings and building
improvements...................... 8,549,470 -- 2,674,305(D) 230,396 10,993,379
Machinery and equipment............ 33,045,142 -- 4,206,181(A) 1,307,434 35,943,889
Leasehold improvements............. 3,069,650 -- 281,339 -- 3,350,989
Furniture and fixtures............. 2,092,036 -- 60,686 13,809 2,138,913
-------------- ----------- -------------- ------------- --------------
Balance at May 31, 1994............ $ 46,836,637 $ -- $ 7,222,511 $ 1,551,639 $ 52,507,509
-------------- ----------- -------------- ------------- --------------
-------------- ----------- -------------- ------------- --------------
</TABLE>
- ------------------------
(A) Additions principally relate to data processing equipment, production
equipment, mold equipment and an aircraft.
(B) Acquired assets are the result of the NAMIC Caribe Merger.
(C) The Company constructed an addition to its manufacturing facility. The
addition was funded by the proceeds from the Offering.
(D) Additions principally relate to construction of a facility in Tullamore,
Ireland.
<PAGE>
SCHEDULE VI
NAMIC U.S.A. CORPORATION AND SUBSIDIARIES
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED MAY 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
BALANCE AT
BEGINNING ADDITIONS BALANCE AT END
CLASSIFICATION OF YEAR AT COST RETIREMENTS OF YEAR
- --------------------------------------------------- -------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Buildings and building improvements................ $ 1,788,361 $ 425,469 $ -- $ 2,213,830
Machinery and equipment............................ 7,351,965 1,990,431 521,511 8,820,885
Leasehold improvements............................. 352,352 128,285 -- 480,637
Furniture and fixtures............................. 841,619 152,185 3,215 990,589
-------------- ------------- ------------- --------------
Balance at May 31, 1992............................ $ 10,334,297 $ 2,696,370 $ 524,726 $ 12,505,941
-------------- ------------- ------------- --------------
-------------- ------------- ------------- --------------
Buildings and building improvements................ $ 2,213,830 $ 425,468 $ -- $ 2,639,298
Machinery and equipment............................ 8,820,885 2,400,813 379,307 10,842,391
Leasehold improvements............................. 480,637 171,140 -- 651,777
Furniture and fixtures............................. 990,589 181,196 1,254 1,170,531
-------------- ------------- ------------- --------------
Balance at May 31, 1993............................ $ 12,505,941 $ 3,178,617 $ 380,561 $ 15,303,997
-------------- ------------- ------------- --------------
-------------- ------------- ------------- --------------
Buildings and building improvements................ $ 2,639,298 $ 423,965 $ 610 $ 3,062,653
Machinery and equipment............................ 10,842,391 2,839,301 1,258,088 12,423,604
Leasehold improvements............................. 651,777 210,081 -- 861,858
Furniture and fixtures............................. 1,170,531 186,501 6,301 1,350,731
-------------- ------------- ------------- --------------
Balance at May 31, 1994............................ $ 15,303,997 $ 3,659,848 $ 1,264,999 $ 17,698,846
-------------- ------------- ------------- --------------
-------------- ------------- ------------- --------------
</TABLE>
<PAGE>
SCHEDULE VIII
NAMIC U.S.A. CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED MAY 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
ADDITIONS
--------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING ACQUIRED COSTS AND OTHER END
DESCRIPTION OF YEAR RESERVE EXPENSES ACCOUNTS DEDUCTIONS OF YEAR
- -------------------------------------------- ----------- --------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Year ended May 31, 1992:
Allowance for doubtful accounts (deducted
from accounts receivable)................ $ 70,000 $ 15,000 $ 96,581 $ -- $ 66,581 $ 115,000
Inventory-reserve for obsolescence
(deducted from inventory)................ 190,000 40,000 80,000 -- -- 310,000
Year ended May 31, 1993:
Allowance for doubtful accounts (deducted
from accounts receivable)................ 115,000 -- 3,285 -- 3,285 115,000
Inventory-reserve for obsolescence
(deducted from inventory)................ 310,000 -- -- -- -- 310,000
Year ended May 31, 1994:
Allowance for doubtful accounts (deducted
from accounts receivable)................ 115,000 -- 2,401 -- 2,401 115,000
Inventory-reserve for obsolescence
(deducted from inventory)................ 310,000 -- 50,000 -- -- 360,000
</TABLE>
<PAGE>
SCHEDULE IX
NAMIC U.S.A. CORPORATION AND SUBSIDIARIES
SHORT-TERM BORROWINGS
YEARS ENDED MAY 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
MAXIMUM AVERAGE WEIGHTED
AMOUNT AMOUNT AVERAGE DAILY
WEIGHTED OUTSTANDING OUTSTANDING INTEREST RATE
BALANCE AT AVERAGE DURING DURING DURING
DESCRIPTION END OF YEAR INTEREST RATE (A) THE YEAR THE YEAR (B) THE YEAR (C)
- ---------------------------------- ----------- ----------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Year ended May 31, 1992:
Banks........................... $ -- 9.16% $ 6,157,806 $ 2,837,779 8.61%
----------- --- ------------- ------------- -----
----------- --- ------------- ------------- -----
Year ended May 31, 1993:
Banks........................... $ -- -- $ -- $ -- --
----------- --- ------------- ------------- -----
----------- --- ------------- ------------- -----
Year ended May 31, 1994:
Banks........................... $ -- 5.81% $ 1,500,000 $ 57,397 6.15%
----------- --- ------------- ------------- -----
----------- --- ------------- ------------- -----
</TABLE>
- ------------------------
(A) The weighted average interest rate during the year was computed by dividing
interest expense related to such borrowings by the weighted average daily
amount of borrowings outstanding during the year.
(B) The average amount outstanding during the year was computed by dividing the
weighted average daily amount of borrowings outstanding during the year by
365.
(C) The weighted average daily interest rate during the year was computed by
multiplying the interest rates charged on the borrowings by the number of
days the rates were charged and dividing by the total number of days
interest was charged.
<PAGE>
SCHEDULE X
NAMIC U.S.A. CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
YEARS ENDED MAY 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
CHARGED TO COSTS AND EXPENSES
-------------------------------------
<S> <C> <C> <C>
1994 1993 1992
----------- ----------- -----------
Maintenance and repairs...................................... $ 885,204 $ 696,399 $ 623,445
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
Royalties, taxes other than payroll and income taxes and advertising costs are
not set forth inasmuch as each item does not exceed one percent of total sales
as shown in the related consolidated statements of earnings.
<PAGE>
[Letterhead of Weil, Gotshal & Manges]
EXHIBIT 5
February 14, 1995
The Board of Directors
Pfizer Inc.
235 East 42nd Street
New York, New York 10017
Gentlemen:
We have acted as counsel to Pfizer Inc., a Delaware corporation ("Pfizer"),
in connection with the preparation and filing with the Securities and Exchange
Commission of Pfizer's Registration Statement on Form S-4 (the "Registration
Statement") under the Securities Act of 1933, as amended, relating to a maximum
of 2,211,574 shares of common stock, par value $.10 per share (the "Common
Stock"), of Pfizer that may be issued pursuant to the Amended and Restated
Agreement and Plan of Merger, dated as of October 31, 1994 (the "Merger
Agreement"), among Pfizer, NAMIC U.S.A. Corporation and Dart Acquisition
Corporation, on the terms and subject to the conditions described in the Proxy
Statement/Prospectus (the "Proxy Statement/Prospectus") included in the
Registration Statement.
In so acting, we have examined originals or copies, certified or otherwise
identified to our satisfaction, of the Registration Statement, the Merger
Agreement, and such corporate records, agreements, documents and other
instruments, and such certificates or comparable documents of public officials
and of officers and representatives of Pfizer, and have made such inquiries of
such officers and representatives as we have deemed relevant and necessary as a
basis for the opinions hereinafter set forth.
In such examination, we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of all documents submitted
to us as originals, the conformity to original documents of documents submitted
to us as certified or photostatic copies and the authenticity of the originals
of such latter documents. As to all questions of fact material to this opinion
that have not been independently established, we have relied upon certificates
or comparable documents of officers and representatives of Pfizer and upon the
representations and warranties of Pfizer contained in the Merger Agreement.
Based on the foregoing, and subject to the qualifications stated herein, we
are of the opinion that the shares of Common Stock to be issued pursuant to the
Merger Agreement have been duly authorized by all necessary corporate action of
Pfizer and, when issued and delivered in accordance with the terms of the Merger
Agreement, will be validly issued, fully paid and nonassessable.
The opinions expressed herein are limited to the laws of the State of New
York, the corporate laws of the State of Delaware and the federal laws of the
United States, and we express no opinion as to the effect on the matters covered
by this letter of the laws of any other jurisdiction.
We hereby consent to the use of this letter as an exhibit to the
Registration Statement and to reference to our firm under the heading "Legal
Matters" in the Proxy Statement/Prospectus.
We further consent to the use of this letter as an exhibit to applications
to the securities commissioners of various states of the United States for
registration or qualification of the shares of Common Stock under the securities
laws of such states.
The opinions expressed herein are rendered solely for your benefit in
connection with the transactions described herein. Those opinions may not be
used or relied upon by any other person, nor may this letter or any copies
thereof be furnished to a third party, filed with a governmental agency or
quoted, cited or otherwise referred to without our prior written consent except
as noted above.
Very truly yours,
/s/ Weil, Gotshal & Manges
Weil, Gotshal & Manges
<PAGE>
EXHIBIT 8
[Letterhead of O'Sullivan Graev & Karabell, LLP]
February 14, 1995
NAMIC U.S.A. Corporation
Pruyn's Island
Glen Falls, New York 12801
Attention: Board of Directors
MERGER OF PFIZER INC.'S WHOLLY-OWNED SUBSIDIARY,
DART ACQUISITION CORP., WITH AND INTO NAMIC U.S.A.
CORPORATION, WITH NAMIC U.S.A. CORPORATION SURVIVING
THE MERGER AS A WHOLLY-OWNED SUBSIDIARY OF PFIZER INC.
Ladies and Gentlemen:
We have been requested to render this opinion concerning certain matters of
federal income tax law in connection with the proposed merger of a newly-formed
corporation, Dart Acquisition Corp., organized and existing under the laws of
the State of Delaware ("SUB") and wholly-owned by Pfizer Inc., a corporation
organized and existing under the laws of the State of Delaware ("PFIZER"), with
and into NAMIC U.S.A. Corporation, a corporation organized and existing under
the laws of the State of Delaware ("NAMIC"), with NAMIC surviving the merger and
becoming a wholly-owned subsidiary of Pfizer, pursuant to the applicable
corporate laws of the State of Delaware (the "MERGER"), and in accordance with
that certain Amended and Restated Agreement and Plan of Merger among Pfizer, Sub
and NAMIC dated as of October 31, 1994 (the "AGREEMENT"). Our opinion has been
requested in connection with the filing of a registration statement with the
Securities and Exchange Commission on February 14, 1995, on Form S-4,which
includes therein a Proxy Statement/Prospectus, in connection with the Merger (as
thereafter amended at any time to and including the date hereof (the
"REGISTRATION STATEMENT")).
To render this opinion, we have examined and are relying upon (without any
independent investigation or review thereof) the truth and accuracy at all
relevant times of the statements, covenants, representations and warranties
contained in the following documents:
1. the Agreement (including the exhibits thereto);
2. the Management Certificate dated February 13, 1995, addressed to us,
signed by an authorized officer of Pfizer and Sub, and delivered to us from
Pfizer and Sub in the form attached hereto as "EXHIBIT A", and incorporated
herein by reference;
3. the Management Certificate dated February 14, 1995, addressed to us,
signed by an authorized officer of NAMIC, and delivered to us from NAMIC in the
form attached hereto as "EXHIBIT B", and incorporated herein by reference;
4. the Registration Statement; and
5. such other instruments and documents related to the formation,
organization and operation of Pfizer, NAMIC and Sub or the consummation of the
Merger and the transactions contemplated thereby as we have deemed necessary or
appropriate.
<PAGE>
In connection with rendering this opinion, we have assumed or obtained
representations (and are relying thereon, without any independent investigation
or review thereof) that:
(a) original documents (including signatures) are authentic, documents
submitted to us as copies conform to the original documents and there has been
(or will be by the Effective Time) due execution and delivery of all documents
where due execution and delivery are prerequisites to the effectiveness thereof;
(b) any representation or statement referred to above made "to the best
knowledge of" or otherwise similarly qualified is correct without such
qualification;
(c) the Merger will be consummated pursuant to the Agreement and will be
effective under applicable state law;
(d) there is no plan or intention on the part of the NAMIC stockholders (a
"PLAN") to sell, exchange, transfer, distribute, pledge or otherwise dispose of
(a "SALE") (i) shares of Pfizer Common Stock to be issued to NAMIC stockholders
in the Merger, which shares would have an aggregate fair market value, as of the
Effective Time, in excess of fifty percent (50%) of the aggregate fair market
value, immediately prior to the Merger, of all outstanding shares of NAMIC
Common Stock, or (ii) more than fifty percent (50%) of the shares of Pfizer
Common Stock to be received in exchange for NAMIC Common Stock in the Merger.
For purposes of this assumption, shares of NAMIC Common Stock (or the portion
thereof) (i) with respect to which a NAMIC stockholder receives consideration in
the Merger other than Pfizer Common Stock (including, without limitation, cash
received pursuant to the exercise of dissenters' rights, if any, or in lieu of
fractional shares of Pfizer Common Stock) and/or (ii) with respect to which a
Sale occurs during the period ending at the Effective Time and beginning with
the commencement of negotiations (whether formal or informal) between NAMIC and
Pfizer regarding the Merger (the "PRE-MERGER PERIOD"), shall be considered
shares of outstanding NAMIC Common Stock exchanged for Pfizer Common Stock in
the Merger and then disposed of pursuant to a Plan;
(e) following the Merger, NAMIC will continue its historic business or use a
significant portion of its historic business assets in a business;
(f) no outstanding indebtedness of Pfizer, NAMIC or Sub has or will
represent equity for tax purposes (including, without limitation, any loans from
Pfizer to NAMIC); no outstanding equity of Pfizer, NAMIC or Sub has represented
or will represent indebtedness for tax purposes; no outstanding security,
instrument, agreement or arrangement that provides for, contains or represents
either a right to acquire NAMIC stock or to share in the appreciation thereof
constitutes or will constitute "stock" for purposes of Section 368(c) of the
Code; and
(g) none of Pfizer, Sub or NAMIC is, or will be at the time of the Merger,
(a) an "investment company" within the meaning of Section 368(a)(2)(F) of the
Code; or (b) under the jurisdiction of a court in a Title 11 or similar case
within the meaning of Section 368(a)(3)(A) of the Code.
Capitalized terms used herein and not otherwise defined are used as defined
in the Agreement.
Based on the foregoing documents, materials, assumptions and information,
and subject to the qualifications and assumptions set forth herein, we are of
the opinion that, if the Merger is consummated in accordance with the provisions
of the Agreement and the exhibits thereto, the Merger will be treated, for
federal income tax purposes, as a reorganization, within the meaning of Section
368(a)(1)(A) of the Code by virtue of Section 368(a)(2)(E) of the Code, NAMIC
and Pfizer will each be a party to that reorganization within the meaning of
Section 368(a) of the Code and no gain or loss will be recognized by NAMIC's
stockholders upon their receipt in the Merger of Pfizer Common Stock in exchange
for NAMIC Common Stock (except to the extent of cash received in lieu of a
fractional share of Pfizer Common Stock or cash consideration received as a
result of dividends declared on Pfizer Common Stock).
In addition to your request for our opinion on this specific matter of
federal income tax law, you have asked us to review the discussion of federal
income tax issues contained in the Registration
<PAGE>
Statement. We have reviewed the discussion entitled "Certain Federal Income Tax
Matters" contained in the Registration Statement and we believe that such
information fairly presents the current federal income tax law applicable to the
Merger, and the material federal income tax consequences to Pfizer, NAMIC, Sub
and the NAMIC stockholders.
Our opinion set forth above is based upon the existing provisions of the
Code, Treasury Regulations (including Temporary and Proposed Treasury
Regulations) promulgated under the Code, published Revenue Rulings, Revenue
Procedures and other announcements of the Internal Revenue Service (the
"SERVICE") and existing court decisions, any of which could change at any time.
Any such changes might be retroactive with respect to transactions entered into
prior to the date of such changes and could significantly modify the opinion set
forth above. Nevertheless, we undertake no responsibility to advise you of any
subsequent developments in the application, operation or interpretation of the
federal income tax laws.
Our opinion concerning certain of the federal tax consequences of the Merger
is limited to the specific federal tax consequences presented above. No opinion
is expressed as to any transaction other than the Merger, including any
transaction undertaken in connection with the Merger. In addition, this opinion
does not address any estate, gift, state, local or foreign tax consequences that
may result from the Merger. In particular, we express no opinion regarding: (i)
the amount, existence or availability after the Merger of any of the federal
income tax attributes of NAMIC or Pfizer (including, without limitation, foreign
tax credits or net operating loss carryforwards, if any, of NAMIC or Pfizer);
(ii) the consequences of the Merger to holders of NAMIC Common Stock acquired
subject to the provisions of Section 83(a) of the Code; and (iii) the effects of
the Merger on any pension or other employee benefit plan maintained by Pfizer or
NAMIC.
No ruling has been or will be requested from the Service concerning the
federal income tax consequences of the Merger. In reviewing this opinion, you
should be aware that the opinion set forth above represents our conclusions
regarding the application of existing federal income tax law to the instant
transaction. If the facts vary from those relied upon (including if any
representation, covenant, warranty or assumption upon which we have relied is
inaccurate, incomplete, breached or ineffective), our opinion contained herein
could be inapplicable. You should be aware that an opinion of counsel represents
only counsel's best legal judgment, and has no binding effect or official status
of any kind, and that no assurance can be given that contrary positions will not
be taken by the Service or that a court considering the issues would not hold
otherwise.
This opinion is being delivered solely for the purpose of being included as
an exhibit to the Registration Statement; it may not be relied upon or utilized
for any other purpose (including, without limitation, satisfying any conditions
in the Agreement) or by any other person or entity, and may not
be made available to any other person or entity, without our prior written
consent. We do, however, consent to the use of our name in the Registration
Statement wherever it appears.
Very truly yours,
/s/ O'Sullivan Graev & Karabell, LLP
O'Sullivan Graev & Karabell, LLP
<PAGE>
EXHIBIT 15
ACCOUNTANTS' ACKNOWLEDGEMENT
Pfizer Inc.
New York, New York
Re: Registration Statement No. 33-
With respect to the subject Registration Statement on Form S-4 of Pfizer
Inc./NAMIC U.S.A. Corporation, we acknowledge our awareness of the use therein
of our reports dated May 17, 1994, August 15, 1994 and November 14, 1994
relating to our reviews of interim financial information.
Pursuant to Rule 436(c) under the Securities Act, such reports are not
considered a part of a Registration Statement prepared or certified by an
accountant or reports prepared or certified by an accountant with the meaning of
sections 7 and 11 of the Act.
Very truly yours,
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
New York, New York
February 14, 1995
<PAGE>
EXHIBIT 23(III)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Pfizer Inc.
Re: Registration Statement No. 33-
We consent to the use of our audit report dated February 24, 1994 on the
consolidated financial statements of Pfizer Inc. and subsidiary companies as of
December 31, 1993, 1992 and 1991 and for each of the years then ended,
incorporated herein by reference, and to the reference to our firm under the
heading "Experts" in the Proxy Statement/Prospectus.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
New York, New York
February 14, 1995
<PAGE>
EXHIBIT 23(III)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
NAMIC U.S.A. Corporation:
We consent to the use of our reports dated July 9, 1993 on the consolidated
financial statements and schedules of NAMIC U.S.A. Corporation and subsidiaries
as of May 31, 1993 and for each of the years in the two-year period ended May
31, 1993, included herein, and to the reference to our firm under the heading
"Experts" in the Proxy Statement/Prospectus.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Albany, New York
February 14, 1995
<PAGE>
EXHIBIT 23(IV)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 (File
No. ) of our reports dated July 1, 1994, on our audits of the
consolidated financial statements and financial statement schedules of NAMIC
U.S.A. Corporation and subsidiaries. We also consent to the reference of our
firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Albany, New York
February 14, 1995
<PAGE>
EXHIBIT 23(V)
[LETTERHEAD OF DILLON, READ & CO. INC.]
We hereby consent to the reference to us under the caption "The Merger --
Opinion of Financial Advisor" in the Registration Statement on Form S-4 (File
No. 33- ) of Pfizer Inc. and to the inclusion of our fairness opinion as an
appendix to the Proxy Statement/Prospectus constituting a part of said
Registration Statement.
/s/ Dillon, Read & Co. Inc.
Dillon, Read & Co. Inc.
Dated: February 13, 1995
