SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-9
(Amendment No. 3)
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
McKESSON CORPORATION
(Name of Subject Company)
McKESSON CORPORATION
(Name of Person(s) Filing Statement)
Common Stock, par value $2.00 per share
(Title of Class of Securities)
581556 10 7
(CUSIP number of Class of Securities)
Ivan D. Meyerson, Esq.
Vice President and General Counsel
McKESSON CORPORATION
McKesson Plaza
One Post Street
San Francisco, California 94104
(415) 983-8300
(Name, address and telephone number of person
authorized to receive notice and communications on
behalf of the person(s) filing statement)
With a copy to:
Peter Allan Atkins, Esq.
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
(212) 735-3000
This Amendment No. 3 amends the
Solicitation/Recommendation Statement on Schedule 14D-9
(the "Schedule 14D-9") of McKesson Corporation, a
Delaware corporation (the "Company"), filed with the
Securities and Exchange Commission on July 15, 1994,
relating to the tender offer for all outstanding shares
of common stock, par value $2.00 per share, of the
Company (including all associated preferred stock
purchase rights), by ECO Acquisition Corporation, a
Delaware corporation and a wholly-owned subsidiary of Eli
Lilly and Company, an Indiana corporation, as follows:
Item 9. Material to be Filed as Exhibits.
Item 9 is hereby amended by the addition of the
following exhibits thereto:
Exhibit 16 Press Release dated September 19,
1994.
Exhibit 17 First Supplemental Indenture dated as
of July 10, 1994 by and among
McKesson Corporation, SP Ventures,
Inc. and Chemical Bank.
Exhibit 18 First Supplemental Indenture dated
July 10, 1994 by and among McKesson
Corporation, SP Ventures, Inc. and
The First National Bank of Chicago.
Exhibit 19 First Amendment to Exchange Agent
Agreement dated July 10, 1994 by and
among McKesson Corporation, SP
Ventures, Inc. and The First National
Bank of Chicago.
Exhibit 20 Conversion Agreement dated as of
August 1, 1994 by and between
McKesson Corporation and The Chase
Manhattan Bank, N.A., as trustee of
the McKesson Corporation Profit-
Sharing Investment Plan.
SIGNATURE
After reasonable inquiry and to the best of my
knowledge and belief, I certify that the information set forth
in this statement is true, complete and correct.
McKESSON CORPORATION
By:/s/ Nancy A. Miller
Name: Nancy A. Miller
Title: Vice President and
Corporate Secretary
Dated: September 20, 1994
EXHIBIT INDEX
Exhibit No. Description
Exhibit 16 Press Release dated September 19, 1994.
Exhibit 17 First Supplemental Indenture dated as of July 10,
1994 by and among McKesson Corporation, SP Ventures,
Inc. and Chemical Bank.
Exhibit 18 First Supplemental Indenture dated July 10, 1994 by
and among McKesson Corporation, SP Ventures, Inc.
and The First National Bank of Chicago.
Exhibit 19 First Amendment to Exchange Agent Agreement dated
July 10, 1994 by and among McKesson Corporation, SP
Ventures, Inc. and The First National Bank of
Chicago.
Exhibit 20 Conversion Agreement dated as of August 1, 1994 by
and between McKesson Corporation and The Chase
Manhattan Bank, N.A., as trustee of the McKesson
Corporation Profit-Sharing Investment Plan.
Exhibit 16
[McKESSON LETTERHEAD]
Contact: Marvin Krasnansky
(415) 983-8316
Monday, September 19, 1994
In response to press inquiries, Alan Seelenfreund, chairman and
chief executive officer of McKesson Corp., today issued the
following statement:
On July 10, McKesson Corp. and Eli Lilly and Company entered
into a definitive agreement under which Eli Lilly will acquire PCS
Health Systems, Inc. from McKesson. As part of that agreement,
McKesson and Lilly entered into a Memorandum of Understanding (MOU)
to explore the extension of their business relationship. The MOU
was filed with the Securities and Exchange Commission as part of
the disclosure of the terms of the agreement between McKesson and
Lilly. (See attachment)
The document states, in part, "This Memorandum of
Understanding does not set forth any binding obligations of the
parties but is intended to describe those areas into which their
business relationships could be extended in the future if the
parties determined that it is mutually advantageous to do so."
The MOU identifies several potential areas of cooperation.
These include generic drugs, managed care support and distribution.
In respect to distribution, McKesson and Lilly said we "intend to
investigate the possibility of closing" certain Lilly distribution
centers and using McKesson "to handle physical distribution" of
Lilly products to wholesalers, and, "subject to legal review and
where feasible from a business standpoint (for McKesson) to be the
sole distributor" of Lilly's products.
Given the rapid changes taking place in the U.S. healthcare
delivery system, the intent of the MOU is to explore approaches in
respect to how McKesson and Lilly may be able to work together in
the future to develop new methods that would assure that Lilly's
products achieve the widest, most cost-effective distribution
utilizing a range of distribution channels. Our goal is to seek to
improve the delivery of health care products and services and to
reduce the cost to consumers while improving access. In this
context, it is not unusual for pharmaceutical companies and other
manufacturers of health care products to employ sole or a limited
number of distributors for certain products where it is appropriate
and mutually advantageous to do so. Such arrangements are not
precluded by federal or state statutes.
Contrary to misleading information being disseminated by a
wholesale drug competitor to the trade and media, nothing in the
MOU is intended to interfere with Lilly's relationship with other
pharmaceutical wholesalers and customers, a subject about which
Lilly has been explicit from the day our agreement was announced.
Lilly stated at that time and has since reiterated that "The
warehousing and distribution services agreement between Lilly and
wholesalers will not be affected as a result of (the PCS)
acquisition. For more than 118 years, Lilly product distribution
has relied on the wholesaler, and we want to continue to utilize
this system of distribution for our products." Lilly added, "Lilly
will not put any of its authorized wholesalers at a disadvantage by
preventing access to any special net prices available to approved
customers."
Given Lilly's history and close relationships with the
wholesale drug industry and the realities of the marketplace, it is
absurd to believe that Lilly would enter into any agreement that
would limit its ability to achieve maximum availability of its
products.
Exhibit 17
FIRST SUPPLEMENTAL INDENTURE
This First Supplemental Indenture (the "Supplemental
Indenture"), dated as of July 10, 1994, is made by and among
McKesson Corporation, a Delaware corporation (the "Company"), SP
Ventures, Inc., a Delaware corporation and a wholly-owned
subsidiary of the Company ("SP Ventures"), and Chemical Bank, a New
York corporation (the "Trustee").
WITNESSETH:
WHEREAS, the Company and the Trustee have heretofore
entered into an Indenture dated as of September 1, 1990 (the
"Indenture"), by and between the Company and the Trustee, which
Indenture provided for the issuance by the Company from time to
time of its unsecured bonds, debentures, notes or other evidences
of indebtedness to be issued in one or more series (the
"Securities") up to such principal amount or amounts as may from
time to time be authorized in accordance with the Indenture;
WHEREAS, there have been issued and are now outstanding
under the Indenture, 8.75% Series A Medium Term Notes due February
4, 1997 in the aggregate principal amount of $10,000,000, and 8 %
Notes due February 1, 1998 in the aggregate principal amount of
$49,240,000;
WHEREAS, pursuant to the Agreement and Plan of Merger,
dated as of July 10, 1994 (the "Merger Agreement"), among the
Company, Eli Lilly and Company, an Indiana corporation ("Lilly"),
and ECO Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of Lilly ("ECO"), ECO has commenced a
tender offer (the "Offer") to purchase all of the outstanding
shares of the Company's Common Stock, par value $2.00 per share
(the "Shares"), at a price of $76.00 net per Share in cash;
WHEREAS, pursuant to a Reorganization and Distribution
Agreement, dated as of July 10, 1994, among the Company, SP
Ventures and certain other affiliates of the Company (the
"Distribution Agreement"), prior to the consummation of the Offer,
the Company will transfer certain of the businesses of the Company
and its subsidiaries to SP Ventures which was established to hold
all of the assets of the Company other than those related to the
pharmaceutical benefits management business (the "Transfer") and
will distribute by dividend all shares of SP Ventures common stock
to the stockholders of the Company;
WHEREAS, as provided in the Distribution Agreement, SP
Ventures desires in and by this First Supplemental Indenture,
pursuant to and as contemplated by Section 8.1(e) of the Indenture,
to expressly assume, jointly and severally with the Company, the
covenants, agreements and undertakings of the Company in the
Indenture and the outstanding securities;
WHEREAS, the execution and delivery of this First
Supplemental Indenture has been authorized by a resolution of the
Board of Directors of both the Company and SP Ventures;
WHEREAS, Section 8.1 of the Indenture, "Supplemental
Indentures Without Consent of Securityholders", provides that
provisions of the Indenture may be amended or supplemented without
the consent of the holders of Securities, provided that no such
amendment or supplement shall materially and adversely affect the
interests of the holders of any Securities;
WHEREAS, all conditions and requirements necessary to
make this First Supplemental Indenture a valid and binding
instrument in accordance with its terms have been performed and
fulfilled and the execution and delivery hereof have been in all
respects duly authorized;
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE
WITNESSETH that the Company and SP Ventures covenant and agree with
the Trustee as follows:
ARTICLE I
ASSUMPTION OF OBLIGATIONS
SECTION 1.01. Assumption. SP Ventures hereby expressly
assumes, jointly and severally with the Company, the obligation to
make due and punctual payment of the principal of, premium, if any,
and interest on any Security outstanding when and as the same shall
become due and payable according to the terms of the Security and
this Indenture, and the due and punctual performance and observance
of each and every covenant and condition of the Company in the
Indenture as if SP Ventures had been the original maker of the
Securities, and also hereby expressly assumes each and every
covenant and condition of the Company in each Security outstanding
on the date of this First Supplemental Indenture.
ARTICLE II
MISCELLANEOUS
SECTION 2.01. Indenture. Except as expressly
supplemented hereby, the Indenture is in all respects ratified and
confirmed and all the terms, provisions and conditions thereof
shall be and remain in full force and effect. This First
Supplemental Indenture is an indenture supplemental to and in
implementation of the Indenture, and said Indenture and this First
Supplemental Indenture shall henceforth be read together.
SECTION 2.02. Terms Defined. For all purposes of this
First Supplemental Indenture, except as otherwise defined or unless
the context otherwise requires, terms used in capitalized form in
this First Supplemental Indenture and defined in the Indenture have
the meanings specified in the Indenture.
SECTION 2.03. Notices. The address to which notice to
SP Ventures is to be given pursuant to Section 11.4 of the
Indenture, from and after the date of this First Supplemental
Indenture, shall be:
SP Ventures, Inc.
c/o McKesson Corporation
One Post Street
San Francisco, California 94104
SECTION 2.04. Governing Law. This First Supplemental
Indenture shall be governed under the laws of the State of New
York.
SECTION 2.05. Successors. All agreements of the
Company, SP Ventures and the Trustee in this First Supplemental
Indenture shall bind their respective successors.
SECTION 2.06. Effectiveness. This First Supplemental
Indenture shall become a legally effective and binding instrument
upon the execution and delivery hereof by all parties hereto but
the provisions hereof shall only become operative upon the date on
which the Transfer occurs. The Company agrees to provide the
Trustee with prompt written notice of the occurrence of the
Transfer.
SECTION 2.07. Counterparts. This First Supplemental
Indenture may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together
constitute but one and the same instrument.
SECTION 2.08. Recitals. The recitals of fact contained
herein shall be taken as the statements of the Company and SP
Ventures, and the Trustee assumes no responsibility for the
correctness of the same. The Trustee makes no representations as
to the validity or adequacy of this First Supplemental Indenture or
the due execution hereof by the Company and SP Ventures.
IN WITNESS WHEREOF, the parties hereto have caused this
First Supplemental Indenture to be duly executed and their
respective corporate seals to be hereunto affixed and attested, all
as of the day and year first above written.
[corporate seal] McKesson Corporation
Attest: By: /s/ Garret A. Scholz
/s/ Nancy A. Miller Title: Vice President Finance
[corporate seal] SP Ventures, Inc.
Attest: By: /s/ Garret A. Scholz
/s/ Nancy A. Miller Title: Executive Vice President and
Treasurer
[corporate seal] Chemical Bank, as Trustee
Attest: By: /s/ Paul Gilkerson
/s/ P. Morabito Title: Vice President
Exhibit 18
FIRST SUPPLEMENTAL INDENTURE
This First Supplemental Indenture (the "Supplemental
Indenture"), dated as of July 10, 1994, is made by and among
McKesson Corporation, a Delaware corporation (the "Company"), SP
Ventures, Inc., a Delaware corporation and a wholly-owned
subsidiary of the Company ("SP Ventures"), and The First National
Bank of Chicago, a national banking association (the "Trustee").
WITNESSETH:
WHEREAS, the Company and the Trustee have heretofore
entered into an Indenture dated as of March 14, 1994 (the
"Indenture"), by and between the Company and the Trustee, which
Indenture provided for the Company to issue its 41/2% Exchangeable
Subordinated Debentures Due 2004 (the "Debentures"), in an
aggregate principal amount not to exceed $180,000,000;
WHEREAS, there have been issued and are now outstanding
under the Indenture, Debentures in the aggregate principal amount
of $180,000,000;
WHEREAS, pursuant to the Agreement and Plan of Merger,
dated as of July 10, 1994 (the "Merger Agreement"), among the
Company, Eli Lilly and Company, an Indiana corporation ("Lilly"),
and ECO Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of Lilly ("ECO"), ECO has commenced a
tender offer (the "Offer") to purchase all of the outstanding
shares of the Company's Common Stock, par value $2.00 per share
(the "Shares"), at a price of $76.00 net per Share in cash;
WHEREAS, pursuant to a Reorganization and Distribution
Agreement, dated as of July 10, 1994, among the Company, SP
Ventures and certain other affiliates of the Company (the
"Distribution Agreement"), prior to the consummation of the Offer,
the Company will transfer certain of the businesses of the Company
and its subsidiaries to SP Ventures which was established to hold
all of the assets of the Company other than those related to the
pharmaceutical benefits management business, and will distribute by
dividend all shares of SP Ventures common stock to the stockholders
of the Company;
WHEREAS, as provided in the Distribution Agreement, SP
Ventures desires in and by this First Supplemental Indenture,
pursuant to and as contemplated by Section 11.1(f) of the
Indenture, to expressly assume, jointly and severally with the
Company, the covenants, agreements and undertakings of the Company
in the Indenture and the outstanding Debentures;
WHEREAS, the execution and delivery of this First
Supplemental Indenture has been authorized by a resolution of the
Board of Directors of both the Company and SP Ventures;
WHEREAS, Section 11.1 of the Indenture, "Supplemental
Indentures Without Consent of Debentureholders", provides that
provisions of the Indenture may be amended or supplemented without
the consent of the holders of Debentures with respect to certain
matters therein identified;
WHEREAS, all conditions and requirements necessary to
make this First Supplemental Indenture a valid and binding
instrument in accordance with its terms have been performed and
fulfilled and the execution and delivery hereof have been in all
respects duly authorized;
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE
WITNESSETH that the Company and SP Ventures covenant and agree with
the Trustee as follows:
ARTICLE I
ASSUMPTION OF OBLIGATIONS
SECTION 1.01. Assumption. SP Ventures hereby expressly
assumes, jointly and severally with the Company, the obligation to
make due and punctual payment of the principal of, premium, if any,
and interest on any Debenture outstanding when and as the same
shall become due and payable according to the terms of the
Debenture and this Indenture, and the performance and observance of
each and every covenant and condition of the Company in the
Indenture as if SP Ventures had been the original maker of the
Debentures and the original obligor under the Indenture, and also
hereby expressly assumes each and every covenant and condition of
the Company in each Debenture outstanding on the date of this First
Supplemental Indenture.
ARTICLE II
MISCELLANEOUS
SECTION 2.01. Indenture. Except as expressly
supplemented hereby, the Indenture is in all respects ratified and
confirmed and all the terms, provisions and conditions thereof
shall be and remain in full force and effect. This First
Supplemental Indenture is an indenture supplemental to and in
implementation of the Indenture, and said Indenture and this First
Supplemental Indenture shall henceforth be read together.
SECTION 2.02. Terms Defined. For all purposes of this
First Supplemental Indenture, except as otherwise defined or unless
the context otherwise requires, terms used in capitalized form in
this First Supplemental Indenture and defined in the Indenture have
the meanings specified in the Indenture.
SECTION 2.03. Notices. The address to which notice to
SP Ventures is to be given pursuant to Section 16.3 of the
Indenture, from and after the date of this First Supplemental
Indenture, shall be:
SP Ventures, Inc.
c/o McKesson Corporation
One Post Street
San Francisco, California 94104
SECTION 2.04. Governing Law. This First Supplemental
Indenture shall be governed under the laws of the State of New
York.
SECTION 2.05. Successors. All agreements of the
Company, SP Ventures and the Trustee in this First Supplemental
Indenture shall bind their respective successors.
SECTION 2.06. Effectiveness. This First Supplemental
Indenture shall become a legally effective and binding instrument
upon the execution and delivery hereof by all parties hereto but
the provisions hereof shall only become operative upon the date on
which ECO accepts for payment and pays for Shares tendered pursuant
to the Offer.
SECTION 2.07. Counterparts. This First Supplemental
Indenture may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together
constitute but one and the same instrument.
SECTION 2.08. Recitals. The recital of fact contained
herein shall be taken as the statements of the Company and SP
Ventures, and the Trustee assumes no responsibility for the
correctness of the same. The Trustee makes no representations as
to the validity or adequacy of this First Supplemental Indenture or
the due execution hereof by the Company and SP Ventures.
IN WITNESS WHEREOF, the parties hereto have caused this
First Supplemental Indenture to be duly executed and their
respective corporate seals to be hereunto affixed and attested, all
as of the day and year first above written.
[corporate seal] McKesson Corporation
Attest: By: /s/ Garret A. Scholz
/s/ Nancy A. Miller Title: Vice President Finance
[corporate seal] SP Ventures, Inc.
Attest: By: /s/ Garret A. Scholz
/s/ Nancy A. Miller Title: Executive Vice President and
Treasurer
[corporate seal] The First National Bank of Chicago,
as Trustee
Attest: By: Eydie A. Pacella
/s/ Lois Jenkins Title: Trust Officer
Exhibit 19
FIRST AMENDMENT TO
EXCHANGE AGENT AGREEMENT
This First Amendment to the Exchange Agent Agreement (the
"First Amendment"), dated as of July 10, 1994, is made by and among
McKesson Corporation, a Delaware corporation (the "Company"), SP
Ventures, Inc., a Delaware corporation and a wholly-owned
subsidiary of the Company ("SP Ventures"), and The First National
Bank of Chicago, a national banking association (the "Exchange
Agent").
WITNESSETH:
WHEREAS, the Company and the Exchange Agent have
heretofore entered into an Indenture dated as of March 14, 1994
(the "Indenture"), by and between the Company and the Exchange
Agent, as trustee, which Indenture provided for the Company to
issue its 41/2% Exchangeable Subordinated Debentures Due 2004 (the
"Debentures"), in an aggregate principal amount not to exceed
$180,000,000;
WHEREAS, there have been issued and are now outstanding
under the Indenture, Debentures in the aggregate principal amount
of $180,000,000;
WHEREAS, in connection with the execution of the
Indenture, the Company and the Exchange Agent entered into an
Exchange Agent Agreement, dated as of March 14, 1994 (the "Exchange
Agent Agreement") to set forth certain obligations of the Company
and the Exchange Agent relating to the exchange of the Debentures
at the option of the Debentureholders for a number of shares of the
common stock, par value $0.01 per share of Armor All Products
Corporation, a Delaware corporation at the Exchange Price (as
defined in the Indenture) and other Exchange Property (as defined
in the Exchange Agent Agreement) as provided for in the Indenture;
WHEREAS, pursuant to the Agreement and Plan of Merger,
dated as of July 10, 1994 (the "Merger Agreement"), among the
Company, Eli Lilly and Company, an Indiana corporation ("Lilly"),
and ECO Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of Lilly ("ECO"), ECO has commenced a
tender offer (the "Offer") to purchase all of the outstanding
shares of the Company's Common Stock, par value $2.00 per share
(the "Shares"), at a price of $76.00 net per Share in cash;
WHEREAS, pursuant to a Reorganization and Distribution
Agreement, dated as of July 10, 1994, among the Company, SP
Ventures and certain other affiliates of the Company (the
"Distribution Agreement"), prior to the consummation of the Offer,
the Company will transfer certain of the businesses of the Company
and its subsidiaries to SP Ventures which was established to hold
all of the assets of the Company other than those related to the
pharmaceutical benefits management business, and will distribute by
dividend all shares of SP Ventures common stock to the stockholders
of the Company;
WHEREAS, as provided in the Distribution Agreement, SP
Ventures desires in and by this First Amendment, pursuant to and as
contemplated by Section 18(a)(iii) of the Exchange Agent Agreement,
to expressly assume, jointly and severally with the Company, the
covenants, agreements and undertakings of the Company in the
Exchange Agent Agreement;
WHEREAS, the execution and delivery of this First
Amendment has been authorized by a resolution of the Board of
Directors of both the Company and SP Ventures;
WHEREAS, Section 18(a)(iii) of the Exchange Agent
Agreement, "Amendments", provides that provisions of the Exchange
Agent Agreement may be amended or supplemented without the consent
of the holders of Debentures with respect to certain matters
therein identified;
WHEREAS, all conditions and requirements necessary to
make this First Amendment a valid and binding instrument in
accordance with its terms have been performed and fulfilled and the
execution and delivery hereof have been in all respects duly
authorized;
NOW, THEREFORE, THIS FIRST AMENDMENT WITNESSETH that the
Company and SP Ventures covenant and agree with the Exchange Agent
as follows:
ARTICLE I
ASSUMPTION OF OBLIGATIONS
SECTION 1.01. Assumption. SP Ventures hereby expressly
assumes, jointly and severally with the Company, the performance
and observance of each and every covenant and condition of the
Company in the Exchange Agent Agreement as if SP Ventures had been
the original party to the Exchange Agent Agreement.
ARTICLE II
MISCELLANEOUS
SECTION 2.01. Exchange Agent Agreement. Except as
expressly amended hereby, the Exchange Agent Agreement is in all
respects ratified and confirmed and all the terms, provisions and
conditions thereof shall be and remain in full force and effect.
SECTION 2.02. Terms Defined. For all purposes of this
First Amendment, except as otherwise defined or unless the context
otherwise requires, terms used in capitalized form in this First
Amendment and defined in the Exchange Agent Agreement have the
meanings specified in the Exchange Agent Agreement.
SECTION 2.03. Governing Law. This First Amendment shall
be governed under the laws of the State of New York.
SECTION 2.04. Successors. All agreements of the
Company, SP Ventures and the Exchange Agent in this First Amendment
shall bind their respective successors.
SECTION 2.05. Effectiveness. This First Amendment shall
become a legally effective and binding instrument upon the
execution and delivery hereof by all parties hereto but the
provisions hereof shall only become operative upon the date on
which ECO accepts for payment and pays for Shares tendered pursuant
to the Offer.
SECTION 2.06. Counterparts. This First Amendment may be
executed in any number of counterparts, each of which shall be an
original, but such counterparts shall together constitute but one
and the same instrument.
SECTION 2.07. Recitals. The recital of fact contained
herein shall be taken as the statements of the Company and SP
Ventures, and the Exchange Agent assumes no responsibility for the
correctness of the same. The Exchange Agent makes no
representations as to the validity or adequacy of this First
Amendment or the due execution hereof by the Company and SP
Ventures.
IN WITNESS WHEREOF, the parties hereto have caused this
First Amendment to be duly executed all as of the day and year
first above written.
McKesson Corporation
By: /s/ Garret A. Scholz
Title: Vice President Finance
SP Ventures, Inc.
By: /s/ Garret A. Scholz
Title: Executive Vice President and
Treasurer
The First National Bank of Chicago,
as Exchange Agent
By: Eydie A. Pacella
Title: Trust Officer
Exhibit 20
CONVERSION AGREEMENT
CONVERSION AGREEMENT, dated as of August 1, 1994 (the
"Agreement"), by and between McKESSON CORPORATION, a Delaware
corporation (the "Company"), and The Chase Manhattan Bank,
N.A., as trustee (the "Trustee") of the McKesson Corporation
Profit-Sharing Investment Plan (the "PSIP").
WHEREAS, a trust (the "Trust") has been established
pursuant to a Master Trust Agreement, dated as of May 27,
1988, between the Company and the Trustee;
WHEREAS, the Trustee is the record owner of the shares
of Series B ESOP Convertible Preferred Stock, par value $1.00
per share, of the Company (the "Series B ESOP Preferred
Stock") held in the Trust for the benefit of participants in
the PSIP;
WHEREAS, the Company, Eli Lilly and Company, an Indiana
corporation ("Parent"), and ECO Acquisition Corporation, a
Delaware corporation and a wholly-owned subsidiary of Parent
(the "Purchaser"), entered into an Agreement and Plan of
Merger, dated as of July 10, 1994 (the "Merger Agreement")
pursuant to which the Purchaser has commenced an offer (the
"Offer") to purchase for cash all of the outstanding shares of
the common stock, par value $2.00 per share, of the Company
(the "Common Stock");
WHEREAS, the Company has entered into a Reorganization
and Distribution Agreement, dated as of July 10, 1994 (the
"Distribution Agreement"), by and among the Company, McKesson
Corporation, a Maryland corporation, Clinical Pharmaceuticals,
Inc., a Delaware corporation, PCS Health Systems, Inc., a
Delaware corporation, and SP Ventures, Inc., a Delaware
corporation ("Spinco"), pursuant to which the Company intends,
prior to the consummation of the Offer, to (i) transfer to
Spinco certain assets and liabilities of the businesses of the
Company and its subsidiaries (the "Company Assets") other than
assets related to its pharmaceutical benefits management
business and (ii) declare a dividend (conditioned upon
consummation of the Offer) of one share of common stock, par
value $.01 per share, of Spinco, for each share of Common
Stock held of record as of a date (the "Record Date")
determined by the Board of Directors of the Company;
WHEREAS, in connection with Section 2.8(b) of the
Merger Agreement and pursuant to the terms of the Company's
Certificate of Designation, Preferences and Rights of the
Series B ESOP Convertible Preferred Stock (the "Certificate"),
shares of Series B ESOP Preferred Stock which are issued and
outstanding immediately prior to the Effective Time (as
defined in the Merger Agreement) shall, by virtue of the
Merger, be converted into the right to receive the amount of
cash that would have been received by a holder of the
aggregate number of Shares into which such shares of Series B
ESOP Convertible Preferred Stock could have been converted
immediately prior to the Effective Time (after giving effect
to all required adjustments to the conversion price thereof);
WHEREAS, the Company has the authority, pursuant to the
Certificate, to call the Series B ESOP Preferred Stock for
redemption and has indicated to the Trustee its intent to do
so in the absence of this Agreement; and
WHEREAS, the Trustee and the Company, in the exercise
of their respective fiduciary duties with respect to the PSIP,
have determined that under the circumstances it would be in
the best interests of the participants of the PSIP for the
Series B ESOP Preferred Stock to be converted immediately
prior to the Record Date.
NOW, THEREFORE, in consideration of the foregoing, the
parties hereto hereby agree as follows:
1. Immediately prior to the Record Date, all of the
shares of Series B ESOP Preferred Stock then held in the Trust
shall be converted into that number of shares of Common Stock
determined pursuant to the terms of the Certificate (the
"Conversion Shares") and the Trustee shall be the record owner
of such Conversion Shares immediately prior to the Record
Date.
2. Immediately prior to the Record Date, the Company
shall deliver to the Trustee a certificate or certificates
representing the Conversion Shares issued in the name of the
Trustee and the Trustee shall surrender to the Company the
certificate or certificates representing the shares of Series
B ESOP Preferred Stock being converted, which shall be duly
endorsed for transfer to the Company (or accompanied by duly
executed stock powers relating thereto).
3. The parties further acknowledge and agree that this
Agreement shall constitute a written notice of conversion as
required pursuant to the provisions of the Certificate and
that all other applicable provisions of the Certificate
regarding the means by which Series B ESOP Preferred Stock is
to be converted shall be deemed to have been satisfied.
4. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
5. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware,
regardless of the laws that might otherwise govern under
applicable principles of conflicts of law.
IN WITNESS WHEREOF, each of the parties set forth below
has caused this Agreement to be executed on its behalf by a
duly authorized officer as of the date first set forth above.
McKESSON CORPORATION
By:/s/ Jon d'Alessio
Name: Jon d'Alessio
Title: Treasurer
THE CHASE MANHATTAN BANK, N.A.
By:/s/ Edward S. Mollahan
Name: Edward S. Mollahan
Title: Vice President
