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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
September 22, 1997
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
McKESSON CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 1-13252 94-3207296
(STATE OR OTHER (COMMISSION (IRS EMPLOYER
JURISDICTION OF FILE NUMBER) IDENTIFICATION NO.)
INCORPORATION)
One Post Street, San Francisco, California 94104
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(415) 983-8300
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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ITEM 5. OTHER EVENTS
On September 23, 1997, McKesson Corporation ("McKesson") and
AmeriSource Health Corporation ("AmeriSource") announced that they have entered
into an Agreement and Plan of Merger, dated as of September 22, 1997 (the
"Merger Agreement"), pursuant to which Patriot Acquisition Corp. ("Merger Sub"),
a newly formed wholly owned subsidiary of McKesson, will be merged with and into
AmeriSource (the "Merger"). Under the terms of the Merger Agreement,
stockholders of AmeriSource will receive 0.71 of a share of McKesson common
stock for each share of AmeriSource common stock (the "AmeriSource Common
Stock") they hold. The Merger is intended to be a tax-free reorganization and to
qualify as a pooling of interests for financial reporting purposes. Consummation
of the transaction is subject to the satisfaction of certain conditions,
including approvals by the stockholders of AmeriSource and McKesson and receipt
of certain regulatory approvals. The Merger Agreement is filed as Exhibit 99.1
hereto and is incorporated herein by reference. The foregoing description of the
Merger Agreement is qualified in its entirety by reference to such Exhibit.
In connection with the execution of the Merger Agreement,
AmeriSource and McKesson entered into a Stock Option Agreement, dated September
22, 1997 (the "Stock Option Agreement"), pursuant to which AmeriSource granted
McKesson an option, exercisable under certain circumstances specified in the
Stock Option Agreement, to purchase, at a purchase price of $70.87 per share, up
to 3,418,601 shares of either AmeriSource Class A Common Stock (the voting
capital stock) or AmeriSource Class B Common Stock (non-voting capital stock),
at McKesson's election. If McKesson exercised its option and elected to acquire
solely shares of Class A Common Stock, then its acquisition would represent
approximately 19.9% of the outstanding shares of voting capital stock of
AmeriSource, without giving effect to the exercise of the option. The Stock
Option Agreement is filed as Exhibit 99.2 hereto and is incorporated herein by
reference. The foregoing description of the Stock Option Agreement is qualified
in its entirety by reference to such Exhibit.
In connection with the execution of the Merger Agreement,
McKesson and Merger Sub entered into a Voting/Support Agreement with 399 Venture
Partners, Inc. ("VPI"), dated September 22, 1997 (the "VPI Voting/Support
Agreement"), pursuant to which VPI agreed to take certain actions in connection
with the proposed Merger, including voting the shares of AmeriSource Common
Stock owned by it in favor of the Merger at any meeting of stockholders held to
consider the Merger. VPI owns approximately 28% of the outstanding equity of
AmeriSource, which ownership is comprised of approximately 1.4% of the
outstanding shares of Class A Common Stock (the voting capital stock) and nearly
100% of the outstanding shares of Class B Common Stock (nonvoting capital
stock). The Class B Common Stock is convertible on a share-for-share basis into
Class A Common Stock upon request, subject to regulatory limitations.
2
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The Voting/Support Agreement with VPI provides that, at the request of McKesson,
VPI will take all action necessary to convert its Class B Common Stock to Class
A Common Stock (but not in excess of the number of shares which would cause VPI
to hold more than 19% of the voting stock of AmeriSource). McKesson expects that
it will be entering into similar Voting/Support Agreements with three senior
executives of AmeriSource who own in the aggregate approximately 2.3% (based on
information set forth in AmeriSource's 1996 proxy statement) of the outstanding
Class A Common Stock. The Voting/Support Agreement with VPI is filed as Exhibit
99.3 and is incorporated herein by reference. The foregoing description of the
Voting/Support Agreement is qualified in its entirety by reference to such
Exhibit.
In connection with the execution of the Merger Agreement,
McKesson entered into an agreement dated September 22, 1997 with VPI (the
"Registration Rights Agreement") with respect to the registration rights that
will be accorded to VPI as a holder of McKesson common stock after the
AmeriSource Common Stock is converted in the Merger. The Registration Rights
Agreement is filed as Exhibit 99.4 hereto and is incorporated herein by
reference. The foregoing description of the Registration Rights Agreement is
qualified in its entirety by reference to such Exhibit.
3
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits.
The following exhibits are filed as part of this report:
99.1 Agreement and Plan of Merger, dated as of September 22, 1997, by and
among McKesson Corporation, AmeriSource Health Corporation and Patriot
Acquisition Corp.
99.2 Stock Option Agreement, dated September 22, 1997, by and between
McKesson Corporation and AmeriSource Health Corporation.
99.3 Voting/Support Agreement, dated September 22, 1997, by and among 399
Venture Partners, Inc., McKesson Corporation and Patriot Acquisition
Corp.
99.4 Registration Rights Agreement, dated September 22, 1997, by and between
McKesson Corporation and 399 Venture Partners, Inc.
4
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
McKESSON CORPORATION
Dated: September 24, 1997 By: /s/ Nancy A. Miller
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Vice President, Secretary
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EXHIBIT INDEX
Exhibit
Number Description
99.1 Agreement and Plan of Merger, dated as of September 22, 1997, by and
among McKesson Corporation, AmeriSource Health Corporation and Patriot
Acquisition Corp.
99.2 Stock Option Agreement, dated September 22, 1997, by and between
McKesson Corporation and AmeriSource Health Corporation.
99.3 Voting/Support Agreement, dated September 22, 1997, by and among 399
Venture Partners, Inc., McKesson Corporation and Patriot Acquisition
Corp.
99.4 Registration Rights Agreement, dated September 22, 1997, by and between
McKesson Corporation and 399 Venture Partners, Inc.
6
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Exhibit 99.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
McKESSON CORPORATION
PATRIOT ACQUISITION CORP.
a wholly owned direct subsidiary of McKesson Corporation
and
AMERISOURCE HEALTH CORPORATION
September 22, 1997
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TABLE OF CONTENTS
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ARTICLE I 1
THE MERGER................................................................... 1
1.1 The Merger............................................................ 1
1.2 Effective Time; Closing............................................... 2
1.3 Effects of the Merger................................................. 2
1.4 Certificate of Incorporation and Bylaws............................... 2
1.5 Directors and Officers of the Surviving Corporation................... 2
ARTICLE II CONVERSION OF SECURITIES........................................ 3
2.1 Conversion of Capital Stock........................................... 3
2.2 Fractional Shares; Adjustments........................................ 3
2.3 Exchange of Certificates.............................................. 4
(a) Exchange Agent....................................................... 4
(b) Exchange Procedures.................................................. 4
(c) Distributions with Respect to Unexchanged Shares..................... 5
(d) No Further Ownership Rights in AmeriSource Common Stock.............. 5
(e) Termination of Exchange Fund......................................... 6
(f) No Liability......................................................... 6
(g) Investment of Exchange Fund.......................................... 6
(h) Missing Certificates................................................. 6
2.4 Treatment of Stock Options............................................ 7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF AMERISOURCE.................. 8
3.1 Organization and Standing............................................. 8
3.2 Subsidiaries.......................................................... 8
3.3 Corporate Power and Authority......................................... 9
3.4 Capitalization of AmeriSource......................................... 9
3.5 Conflicts; Consents and Approvals..................................... 10
3.6 No Material Adverse Change............................................ 11
3.7 AmeriSource SEC Documents............................................. 12
3.8 Taxes................................................................. 12
3.9 Compliance with Law................................................... 14
3.10 Intellectual Property................................................ 14
3.11 Title to Properties.................................................. 15
3.12 Registration Statement; Joint Proxy Statement........................ 15
3.13 Litigation........................................................... 15
3.14 Brokerage and Finder's Fees; Expenses................................ 16
3.15 Accounting Matters; Reorganization................................... 16
3.16 Employee Benefit Plans............................................... 16
3.17 Contracts............................................................ 19
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3.18 Labor Matters....................................................... 20
3.19 Undisclosed Liabilities............................................. 21
3.20 Operation of AmeriSource's Business; Relationships.................. 21
3.21 Permits; Compliance................................................. 21
3.22 Environmental Matters............................................... 22
3.23 Opinion of Financial Advisor........................................ 23
3.24 Board Recommendation................................................ 23
3.25 Related Party Transactions.......................................... 23
3.26 Employee Agreements................................................. 23
3.27 Rights Plan......................................................... 24
3.28 Voting on Transaction............................................... 24
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB........ 24
4.1 Organization and Standing............................................ 24
4.2 Subsidiaries......................................................... 24
4.3 Corporate Power and Authority........................................ 25
4.4 Capitalization of Parent and Merger Sub.............................. 25
4.5 Conflicts; Consents and Approval..................................... 26
4.6 Brokerage and Finder's Fees.......................................... 27
4.7 Accounting Matters; Reorganization................................... 27
4.8 Parent SEC Documents................................................. 27
4.9 Registration Statement; Joint Proxy Statement........................ 28
4.10 Compliance with Law................................................. 28
4.11 Litigation.......................................................... 28
4.12 Board Recommendation................................................ 28
4.13 No Material Adverse Change.......................................... 29
4.14 Title to Properties................................................. 29
4.15 Undisclosed Liabilities............................................. 29
4.16 Operation of Parent's Business; Relationships....................... 29
4.17 Opinion of Financial Advisor........................................ 30
4.18 Beneficial Ownership of Shares...................................... 30
ARTICLE V COVENANTS OF THE PARTIES........................................ 30
5.1 Mutual Covenants..................................................... 30
(a) HSR Act Filings; Best Efforts; Notification......................... 30
(b) Pooling-of-Interests................................................ 33
(c) Tax-Free Treatment.................................................. 33
(d) Public Announcements................................................ 33
(e) Joint Proxy Statement; Registration Statement....................... 34
5.2 Covenants of Parent.................................................. 34
(a) Parent Stockholders Meeting......................................... 34
(b) Joint Proxy Statement; Registration Statement....................... 34
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(c) Conduct of Parent's Operations....................................... 35
(d) Indemnification; Directors' and Officers' Insurance.................. 36
(e) Merger Sub........................................................... 38
(f) NYSE Listing......................................................... 39
(g) Access............................................................... 39
(h) Board of Directors and Officers of Parent............................ 39
(i) Affiliates of Parent................................................. 39
(j) Notification of Certain Matters...................................... 39
(k) Employees and Employee Benefits...................................... 40
(l) Letters of Parent's Accountants...................................... 40
(m) Purchases of Common Stock of AmeriSource............................. 40
(n) Registration Rights.................................................. 41
(o) Publishing Financial Results......................................... 41
5.3 Covenants of AmeriSource.............................................. 41
(a) AmeriSource Stockholders Meeting..................................... 41
(b) Joint Proxy Statement; Registration Statement........................ 41
(c) Conduct of AmeriSource's Operations.................................. 42
(d) No Solicitation...................................................... 45
(e) Termination Right.................................................... 47
(f) Affiliates of AmeriSource............................................ 48
(g) Access............................................................... 49
(h) Notification of Certain Matters...................................... 49
(i) Subsequent Financial Statements...................................... 49
(j) Letters of AmeriSource's Accountants................................. 49
ARTICLE VI CONDITIONS...................................................... 50
6.1 Conditions to the Obligations of Each Party........................... 50
6.2 Conditions to Obligations of AmeriSource.............................. 51
6.3 Conditions to Obligations of Parent and Merger Sub.................... 52
ARTICLE VII TERMINATION AND AMENDMENT...................................... 53
7.1 Termination........................................................... 53
7.2 Effect of Termination................................................. 56
7.3 Amendment............................................................. 59
7.4 Extension; Waiver..................................................... 59
ARTICLE VIII MISCELLANEOUS................................................. 60
8.1 No Survival of Representations and Warranties......................... 60
8.2 Notices............................................................... 60
8.3 Interpretation; Definitions........................................... 61
8.4 Counterparts.......................................................... 62
8.5 Entire Agreement...................................................... 62
8.6 Third Party Beneficiaries............................................. 62
8.7 Governing Law......................................................... 62
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8.8 Specific Performance.................................................. 62
8.9 Assignment............................................................ 62
8.10 Expenses............................................................. 63
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Exhibit A-1 Form of Patriot Affiliate Letter
Exhibit A-2 Form of Parent Affiliate Letter
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made and
entered into as of the 22nd day of September, 1997, by and among McKesson
Corporation, a Delaware corporation ("Parent"), Patriot Acquisition Corp., a
Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub"), and
AmeriSource Health Corporation, a Delaware corporation ("AmeriSource").
WITNESSETH
WHEREAS, the Board of Directors of Parent has determined that a
combination with AmeriSource is in the long term interest of its stockholders;
WHEREAS, the Board of Directors of AmeriSource has determined that a
combination with Parent is in the long term interest of its stockholders, and
AmeriSource desires to combine its pharmaceutical distribution business with the
operations of Parent and for AmeriSource's stockholders to have a continuing
equity interest in the combined business;
WHEREAS, in effectuation of the foregoing, the respective Boards of
Directors of Parent, Merger Sub and AmeriSource have approved and declared
advisable and in the best interests of their respective stockholders the merger
of Merger Sub with and into AmeriSource, with AmeriSource as the surviving
corporation (the "Merger"), upon the terms and subject to the conditions of this
Agreement and in accordance with the General Corporation Law of the State of
Delaware (the "DGCL");
WHEREAS, the parties intend that the Merger constitute a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"); and
WHEREAS, the parties intend that the Merger be accounted for as a
pooling-of-interests for accounting purposes.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements hereinafter set forth, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions
----------
hereof, and in accordance with the provisions of the DGCL, at the Effective Time
(as defined in
<PAGE>
Section 1.2(a)), Merger Sub shall be merged with and into AmeriSource. As a
result of the Merger, the separate corporate existence of Merger Sub shall cease
and AmeriSource shall continue as the surviving corporation of the Merger (the
"Surviving Corporation").
1.2 Effective Time; Closing. (a) Concurrently with the Closing (as
-----------------------
defined in Section 1.2(b)), the parties shall cause the Merger to be consummated
by filing with the Secretary of State of the State of Delaware (the "Delaware
Secretary of State") a certificate of merger (the "Certificate of Merger") in
accordance with Section 251 of the DGCL. The Merger shall become effective (the
"Effective Time") when the Certificate of Merger has been filed with the
Delaware Secretary of State or at such later time as shall be agreed upon by
Parent and AmeriSource and specified in the Certificate of Merger.
(b) The closing of the transactions contemplated hereby (the
"Closing") shall be held at the offices of Fried, Frank, Harris, Shriver &
Jacobson, One New York Plaza, New York, New York, at 10:00 a.m. New York City
time on the fifth business day following the latest of: (i) the date on which
the Parent Stockholders Meeting (as defined in Section 5.2(a)) (including any
adjournment or postponement thereof) shall have been held, (ii) the date on
which the AmeriSource Stockholders Meeting (as defined in Section 5.3(a))
(including any adjournment or postponement thereof) shall have been held, (iii)
the date on which the condition set forth in Section 6.1(b) shall have been
satisfied or waived, (iv) the date on which the condition set forth in Section
6.1(e) shall have been satisfied or waived and (v) the date on which the
condition set forth in Section 6.1(f) shall have been satisfied or waived; or at
such other place or time or on such other date as Parent and AmeriSource may
agree. The date on which the Closing takes place is referred to herein as the
"Closing Date."
1.3 Effects of the Merger. From and after the Effective Time, the
---------------------
Merger shall have the effects set forth in the DGCL.
1.4 Certificate of Incorporation and Bylaws. At the Effective Time,
---------------------------------------
the Certificate of Incorporation and Bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation and Bylaws, respectively, of the Surviving Corporation.
1.5 Directors and Officers of the Surviving Corporation. From and
---------------------------------------------------
after the Effective Time, the directors of Merger Sub shall be the directors of
the Surviving Corporation and the officers of Merger Sub shall be the officers
of the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
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ARTICLE II
CONVERSION OF SECURITIES
2.1 Conversion of Capital Stock. At the Effective Time, by virtue
---------------------------
of the Merger and without any action on the part of Parent, Merger Sub or
AmeriSource or their respective stockholders:
(a) Each share of common stock, $0.01 par value, of Merger Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into one validly issued, fully paid and nonassessable share of common
stock, $0.01 par value, of the Surviving Corporation.
(b) Subject to the other provisions of this Article II, each
share of AmeriSource Common Stock (as defined in Section 3.4) issued and
outstanding immediately prior to the Effective Time shall be converted into and
represent 0.71 (the "Exchange Ratio") of a share of common stock, par value $.01
per share, of Parent ("Parent Common Stock"), together with the associated
preferred stock purchase rights ("Rights") issued pursuant to the Rights
Agreement dated as of October 21, 1994 between Parent and First Chicago Trust
Company of New York (the "Rights Agreement"). Subject to the other provisions of
this Article II, as of the Effective Time, each such share of AmeriSource Common
Stock shall, by virtue of the Merger, cease to be outstanding and shall be
cancelled and retired, and each holder of a certificate representing any such
shares shall thereafter cease to have any rights with respect thereto except the
right to receive (i) certificates representing the number of whole shares of
Parent Common Stock into which such shares have been converted, (ii) certain
dividends and other distributions in accordance with Section 2.3(c) and (iii)
cash in lieu of fractional shares of Parent Common Stock in accordance with
Section 2.2(a), without interest.
(c) Each share of capital stock of AmeriSource held in the
treasury of AmeriSource shall be cancelled and retired and no payment shall be
made in respect thereof.
2.2 Fractional Shares; Adjustments. (a) No fractional shares of
------------------------------
Parent Common Stock shall be issued as a result of the conversion provided for
in Section 2.1(b). In lieu of any such fractional shares, the holder of a
certificate previously evidencing AmeriSource Common Stock, upon presentation of
such fractional interest represented by an appropriate certificate for
AmeriSource Common Stock to the Exchange Agent (as defined in Section 2.3)
pursuant to Section 2.3, shall be entitled to receive a cash payment therefor in
an amount equal to the value (determined with reference to the closing price of
a share of Parent Common Stock as reported on the New York Stock Exchange
("NYSE") Composite Tape on the last full trading day immediately
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prior to the Closing Date) of such fractional interest. Such payment with
respect to fractional shares is merely intended to provide a mechanical rounding
off of, and is not a separately bargained for, consideration. If more than one
certificate representing shares of AmeriSource Common Stock shall be surrendered
for the account of the same holder, the number of shares of Parent Common Stock
for which certificates have been surrendered shall be computed on the basis of
the aggregate number of shares represented by the certificates so surrendered.
Any payment owed with respect to fractional shares shall be rounded upward to
the nearest cent.
(b) If, prior to the Effective Time, Parent shall declare a
stock dividend or other similar distribution of Parent Common Stock or
securities convertible into shares of Parent Common Stock, or effect a stock
split, reclassification, recapitalization, stock combination or other change
with respect to the Parent Common Stock, the Exchange Ratio shall be adjusted to
reflect such dividend, distribution, stock split, reclassification,
recapitalization, stock combination or other change.
2.3 Exchange of Certificates.
------------------------
(a) Exchange Agent. Promptly following the Effective Time,
--------------
Parent shall deposit with First Chicago Trust Company of New York or such other
exchange agent as may be designated by Parent and reasonably acceptable to
AmeriSource (the "Exchange Agent"), for the benefit of the holders of
AmeriSource Common Stock, for exchange in accordance with this Section 2.3,
certificates representing shares of Parent Common Stock issuable pursuant to
Section 2.1(b) in exchange for outstanding shares of AmeriSource Common Stock
and shall from time to time deposit cash in an amount required to be paid
pursuant to Section 2.2(a) (such shares of Parent Common Stock (including the
associated Rights) and cash, together with any dividends or distributions with
respect thereto, being hereinafter referred to as the "Exchange Fund").
(b) Exchange Procedures. As soon as practicable after the
-------------------
Effective Time, Parent shall instruct the Exchange Agent to mail to each holder
of record of a certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of AmeriSource Common Stock whose
shares were converted into the right to receive shares of Parent Common Stock
pursuant to Section 2.1(b) ("Certificates"), (i) a letter of transmittal (the
form and substance of which shall have been reasonably approved by AmeriSource
prior to the Effective Time and which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent and shall be in such form and
have such other provisions as Parent may reasonably specify, including offering
holders of Certificates the ability to hold their shares of Parent Common Stock
in book entry form in lieu of the certificates provided for below) and (ii)
instructions for effecting
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the surrender of the Certificates in exchange for certificates representing
shares of Parent Common Stock. Upon surrender of a Certificate for cancellation
to the Exchange Agent, together with a duly executed letter of transmittal, the
holder of such Certificate shall be entitled to receive in exchange therefor (x)
a certificate or certificates representing that whole number of shares of Parent
Common Stock which such holder has the right to receive pursuant to Section
2.1(b) in such denominations and registered in such names as such holder may
request and (y) a check representing the amount of cash in lieu of fractional
shares, if any, and unpaid dividends and distributions, if any, which such
holder has the right to receive pursuant to the provisions of this Article II,
after giving effect to any required withholding tax. No interest will be paid or
accrued on the cash in lieu of fractional shares, if any, and unpaid dividends
and distributions, if any, payable to holders of shares of AmeriSource Common
Stock. In the event of a transfer of ownership of shares of AmeriSource Common
Stock which is not registered on the transfer records of AmeriSource, a
certificate representing the proper number of shares of Parent Common Stock,
together with a check for the cash to be paid in lieu of fractional shares, if
any, and unpaid dividends and distributions, if any, may be issued to such
transferee if the Certificate representing such shares of AmeriSource Common
Stock held by such transferee is presented to the Exchange Agent, accompanied by
all documents required to evidence and effect such transfer and to evidence that
any applicable stock transfer taxes have been paid.
(c) Distributions with Respect to Unexchanged Shares.
------------------------------------------------
Notwithstanding any other provisions of this Agreement, no dividends or other
distributions declared or made after the Effective Time with respect to any
shares of Parent Common Stock having a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate, and no cash
payment in lieu of fractional shares shall be paid to any such holder, until the
holder shall surrender such Certificate as provided in this Section 2.3. Subject
to the effect of Applicable Laws (as defined in Section 3.9), there shall be
paid to the holder of the certificates representing whole shares of Parent
Common Stock issued in exchange therefor, without interest, (i) at the time of
surrender of such Certificate, the amount of dividends or other distributions
with a record date after the Effective Time theretofore payable with respect to
such whole shares of Parent Common Stock and not paid, less the amount of any
withholding taxes which may be required thereon, and (ii) at the appropriate
payment date subsequent to surrender of such Certificate, 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 whole shares of Parent Common Stock, less the amount of any
withholding taxes which may be required thereon.
(d) No Further Ownership Rights in AmeriSource Common Stock.
-------------------------------------------------------
All shares of Parent Common Stock issued upon surrender of Certificates in
accordance with the terms hereof (including any cash paid pursuant to this
Article II)
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shall be deemed to have been issued in full satisfaction of all rights
pertaining to the shares of AmeriSource Common Stock represented thereby, and
there shall be no further registration of transfers on the stock transfer books
of AmeriSource of shares of AmeriSource Common Stock outstanding immediately
prior to the Effective Time. All Certificates presented to the Surviving
Corporation after the Effective Time for any reason shall be cancelled and
exchanged as provided in this Section 2.3. Certificates surrendered for exchange
by any person constituting an "affiliate" of AmeriSource for purposes of Rule
145(c) under the Securities Act of 1933, as amended (together with the rules and
regulations thereunder, the "Securities Act"), shall not be exchanged until
Parent has received written undertakings from such person in the form attached
hereto as Exhibit A-1.
(e) Termination of Exchange Fund. Any portion of the Exchange
----------------------------
Fund which remains undistributed to holders of AmeriSource Common Stock one year
after the date of the mailing required by Section 2.3(b) shall be delivered to
Parent, upon demand therefor, and holders of Certificates previously
representing shares of AmeriSource Common Stock who have not theretofore
complied with this Section 2.3 shall thereafter look only to Parent for payment
of any claim to shares of Parent Common Stock, cash in lieu of fractional shares
thereof, or dividends or distributions, if any, in respect thereof.
(f) No Liability. None of Parent, the Surviving Corporation or
------------
the Exchange Agent shall be liable to any person in respect of any shares of
Parent Common Stock (or dividends or distributions with respect thereto) or cash
from the Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certificates shall not have
been surrendered prior to seven years after the Effective Time of the Merger (or
immediately prior to such earlier date on which any shares of Parent Common
Stock, any dividends or distributions with respect thereto, or any cash in lieu
of fractional shares in respect of such Certificate would otherwise escheat to
or become the property of any Governmental Authority (as defined in Section
3.5)), any such shares, dividends or distributions or cash in respect of such
Certificate shall, to the extent permitted by Applicable Laws, become the
property of Parent, free and clear of all claims or interest of any person
previously entitled thereto.
(g) Investment of Exchange Fund. The Exchange Agent shall
---------------------------
invest any cash included in the Exchange Fund, as directed by Parent, on a daily
basis. Any interest and other income resulting from such investments shall be
paid to Parent upon termination of the Exchange Fund pursuant to Section 2.3(e).
(h) Missing Certificates. In the event any Certificate shall
--------------------
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact and providing an appropriate indemnity or surety bond by the person
claiming such Certificate to be
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lost, stolen or destroyed, the Exchange Agent will issue in exchange for such
lost, stolen or destroyed Certificate the shares of Parent Common Stock
(including the associated Rights, dividends and distributions with respect
thereto) and cash in lieu of fractional shares, deliverable in respect thereof
pursuant to this Agreement.
2.4 Treatment of Stock Options. (a) Prior to the Effective Time,
--------------------------
Parent and AmeriSource shall take all such actions as may be necessary to cause
each unexpired and unexercised option under stock option plans of AmeriSource in
effect on the date hereof which has been granted to current or former directors,
officers or employees of AmeriSource by AmeriSource (or which has been granted
by AmeriSource prior to the Effective Time in compliance with the terms of this
Agreement) (each, a "AmeriSource Option") to be automatically converted at the
Effective Time into an option (a "Parent Exchange Option") to purchase that
number of shares of Parent Common Stock equal to the number of shares of
AmeriSource Common Stock issuable immediately prior to the Effective Time upon
exercise of the AmeriSource Option (without regard to actual restrictions on
exercisability) multiplied by the Exchange Ratio, with an exercise price equal
to the exercise price which existed under the corresponding AmeriSource Option
divided by the Exchange Ratio, and with other terms and conditions that are the
same as the terms and conditions of such AmeriSource Option immediately before
the Effective Time. In connection with the issuance of Parent Exchange Options,
Parent shall (i) reserve for issuance the number of shares of Parent Common
Stock that will become subject to Parent Exchange Options pursuant to this
Section 2.4 and (ii) from and after the Effective Time, upon exercise of Parent
Exchange Options, make available for issuance all shares of Parent Common Stock
covered thereby, subject to the terms and conditions applicable thereto.
(b) AmeriSource agrees to issue treasury shares of AmeriSource,
to the extent available, upon the exercise of AmeriSource Options prior to the
Effective Time.
(c) Parent agrees to use its reasonable efforts to file with
the Securities and Exchange Commission (the "Commission") within 15 business
days after the Closing Date a registration statement on Form S-8 or other
appropriate form under the Securities Act to register the shares of Parent
Common Stock issuable upon exercise of the Parent Exchange Options and use its
reasonable efforts to cause such registration statement to remain effective
until the exercise or expiration of such options.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AMERISOURCE
In order to induce Merger Sub and Parent to enter into this Agreement,
AmeriSource hereby represents and warrants to Parent and Merger Sub that the
statements contained in this Article III are true, correct and complete.
3.1 Organization and Standing. Each of AmeriSource and each
-------------------------
subsidiary (as defined in Section 8.3) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation with full corporate power and authority to own, lease, use and
operate its properties and to conduct its business as and where now owned,
leased, used, operated and conducted. Each of AmeriSource and each subsidiary of
AmeriSource is duly qualified to do business and in good standing in each
jurisdiction in which the nature of the business conducted by it or the property
it owns, leases or operates requires it to so qualify, except where the failure
to be so qualified or in good standing in such jurisdiction individually or in
the aggregate would not reasonably be expected to have a Material Adverse Effect
(as defined in Section 8.3) on AmeriSource. AmeriSource is not in default in the
performance, observance or fulfillment of any provision of its Restated
Certificate of Incorporation or its Bylaws, each as in effect on the date hereof
(the "AmeriSource Certificate" and the "AmeriSource Bylaws," respectively).
AmeriSource has heretofore furnished to Parent a complete and correct copy of
the AmeriSource Certificate and the AmeriSource Bylaws. Listed in Section 3.1 to
the disclosure schedule delivered by AmeriSource to Parent and dated the date
hereof (the "AmeriSource Disclosure Schedule") is each jurisdiction in which
AmeriSource or a subsidiary of AmeriSource is qualified to do business and in
good standing as of the date of the Agreement.
3.2 Subsidiaries. AmeriSource does not own, directly or indirectly,
------------
any equity or other ownership interest in any corporation, partnership, joint
venture or other entity or enterprise, except for the subsidiaries and other
entities set forth in Section 3.2 to the AmeriSource Disclosure Schedule. Except
as set forth in Section 3.2 to the AmeriSource Disclosure Schedule, AmeriSource
is not subject to any obligation or requirement to provide funds to or make any
investment (in the form of a loan, capital contribution or otherwise) in any
entity or enterprise that is not wholly owned by AmeriSource. Except as set
forth in Section 3.2 to the AmeriSource Disclosure Schedule, AmeriSource owns
directly or indirectly each of the outstanding shares of capital stock (or other
ownership interests having by their terms ordinary voting power to elect a
majority of directors or others performing similar functions with respect to
such subsidiary) of each of AmeriSource's subsidiaries, free and clear of all
liens, pledges, security interests, claims or other encumbrances. Each of the
outstanding shares of capital stock of each of AmeriSource's subsidiaries is
duly authorized, validly issued,
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<PAGE>
fully paid and nonassessable. All of the capital stock of each subsidiary of
AmeriSource is owned by AmeriSource and/or one or more wholly-owned subsidiaries
of AmeriSource. Other than as set forth in Section 3.2 to the AmeriSource
Disclosure Schedule, there are no outstanding subscriptions, options, warrants,
puts, calls, agreements, understandings, claims or other commitments or rights
of any type relating to the issuance, sale, repurchase or transfer of any
capital stock or other securities of any subsidiary of AmeriSource, nor are
there outstanding any securities which are convertible into or exchangeable for
any shares of capital stock or other securities of any subsidiary of
AmeriSource, and neither AmeriSource nor any subsidiary of AmeriSource has any
obligation of any kind to issue any additional shares of capital stock or other
securities of any subsidiary of AmeriSource or to pay for or repurchase any
shares of capital stock or other securities of any subsidiary of AmeriSource or
any predecessor thereof.
3.3 Corporate Power and Authority. AmeriSource has all requisite
-----------------------------
corporate power and authority to enter into and deliver this Agreement, to
perform its obligations hereunder and, subject to approval of the Merger and the
transactions contemplated hereby by the stockholders of AmeriSource, to
consummate the transactions contemplated by this Agreement. The execution,
delivery and performance of this Agreement by AmeriSource have been duly
authorized by all necessary corporate action on the part of AmeriSource, subject
to approval of the Merger and the transactions contemplated hereby by the
stockholders of AmeriSource. This Agreement has been duly executed and delivered
by AmeriSource and constitutes the legal, valid and binding obligation of
AmeriSource enforceable against it in accordance with its terms.
3.4 Capitalization of AmeriSource. As of September 15, 1997,
-----------------------------
AmeriSource's authorized capital stock consisted solely of (a) 50,000,000 shares
of Class A common stock, par value $0.01 per share ("AmeriSource Class A
Stock"), of which (i) 17,178,901 shares were issued and outstanding, (ii)
351,082 shares were issued and held in treasury (which does not include the
shares reserved for issuance set forth in clause (iii) below) and no shares were
held by subsidiaries of AmeriSource, and (iii) 1,268,007 shares were reserved
for issuance upon the exercise of outstanding AmeriSource Options, and 6,663,010
shares were reserved for issuance upon the conversion of AmeriSource Class B
Stock and AmeriSource Class C Stock into AmeriSource Class A Stock, and no other
shares were reserved for issuance for any other purposes; (b) 15,000,000 shares
of Class B common stock, par value $0.01 per share ("AmeriSource Class B
Stock"), of which (i) 6,490,370 shares were issued and outstanding, (ii)
2,950,000 shares were issued and held in treasury and no shares were held by
subsidiaries of AmeriSource, and (iii) no shares were reserved for issuance for
any purpose; and (c) 2,000,000 shares of Class C common stock, par value $0.01
per share (the "AmeriSource Class C Stock" and, with the AmeriSource Class A
Stock and AmeriSource Class B Stock, the "AmeriSource Common Stock"), of which
(i) 172,640 shares were issued and outstanding, (ii) no shares were issued and
held in treasury and no shares were held by subsidiaries of AmeriSource, and
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<PAGE>
(iii) no shares were reserved for issuance for any purpose. Since September 15,
1997 through the date hereof, except for any conversions of AmeriSource Class B
Stock or AmeriSource Class C Stock into AmeriSource Class A Stock after
September 15, 1997, there have been no increases to any of the foregoing amounts
other than (i) increases in the number of shares of AmeriSource Class A Stock
outstanding by reason of the exercise of any AmeriSource Options listed in
Section 3.4 to the AmeriSource Disclosure Schedule during the period, which
exercise has reduced the number of shares of AmeriSource Class A Stock reserved
for issuance by a corresponding amount, and (ii) an additional 3,418,601 shares
of AmeriSource Class A Stock and an additional 3,418,601 shares of AmeriSource
Class B Stock have been reserved for issuance under the Stock Option Agreement
dated as of the date hereof between Parent and AmeriSource (the "AmeriSource
Stock Option Agreement"). Each outstanding share of AmeriSource capital stock
is duly authorized, validly issued, fully paid and nonassessable, and has not
been issued in violation of any preemptive or similar rights. Other than as set
forth in Section 3.4 to the AmeriSource Disclosure Schedule or as contemplated
by the AmeriSource Stock Option Agreement, there are no outstanding
subscriptions, options, warrants, puts, calls, agreements, understandings,
claims or other commitments or rights of any type relating to the issuance,
sale, repurchase or transfer by AmeriSource of any capital stock or other
securities of AmeriSource, nor are there outstanding any securities which are
convertible into or exchangeable for any shares of capital stock or other
securities of AmeriSource, and neither AmeriSource nor any subsidiary of
AmeriSource has any obligation of any kind to issue any additional shares of
capital stock or other securities or to pay for or repurchase any shares of
capital stock or other securities of AmeriSource or any predecessor. Section
3.4 to the AmeriSource Disclosure Schedule accurately sets forth as of September
15, 1997 the names of, and the number of shares of each class and the number of
options held by all holders of AmeriSource Options (including the exercise price
and the number of vested and unvested shares with respect thereto). Except as
set forth in Section 3.4 to the AmeriSource Disclosure Schedule, AmeriSource has
no agreement, arrangement or understandings to register any securities of
AmeriSource or any of its subsidiaries under the Securities Act or under any
state securities law and has not granted registration rights to any person or
entity (other than agreements, arrangements or understandings with respect to
registration rights that are no longer in effect as of the date of this
Agreement); copies of all such agreements have previously been provided to
Parent. At the Effective Time, assuming the Registration Rights Agreement (as
defined in Section 5.2(n)) has been executed by the parties, all agreements,
arrangements and understandings with 399 Venture Partners, Inc. ("VPI") to
register any securities of AmeriSource under the Securities Act or under any
state securities law will terminate without further action of the parties
thereto.
3.5 Conflicts; Consents and Approvals. Except as set forth in
---------------------------------
Section 3.5 to the AmeriSource Disclosure Schedule, neither the execution and
delivery of this
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<PAGE>
Agreement or the AmeriSource Stock Option Agreement by AmeriSource, nor the
consummation of the transactions contemplated hereby or thereby will:
(a) conflict with, or result in a breach of any provision of, the
AmeriSource Certificate or the AmeriSource Bylaws,
(b) violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which, with the giving of
notice, the passage of time or otherwise, would constitute a default) under, or
entitle any party (with the giving of notice, the passage of time or otherwise)
to terminate, accelerate, modify or call a default under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of AmeriSource under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
contract, undertaking, agreement, lease or other instrument or obligation to
which AmeriSource or any of its subsidiaries is a party,
(c) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to AmeriSource or any of its subsidiaries or any of their
respective properties or assets, or
(d) require any action or consent or approval of, or review by,
or registration or filing by AmeriSource or any of its affiliates with, any
third party or any local, domestic, foreign or multi-national court, arbitral
tribunal, administrative agency or commission or other governmental or
regulatory body, agency, instrumentality or authority (a "Governmental
Authority"), other than (i) approval of the Merger and the transactions
contemplated hereby by stockholders of AmeriSource, (ii) actions required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder (the "HSR Act"), and (iii) registrations
or other actions required under federal and state securities laws as are
contemplated by this Agreement;
except in the case of (b), (c) and (d), for any of the foregoing that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on AmeriSource or a material adverse effect on the ability of the
parties to consummate the transactions contemplated hereby.
3.6 No Material Adverse Change. Except as set forth in Section 3.6
--------------------------
to the AmeriSource Disclosure Schedule and except as specifically disclosed in
the AmeriSource SEC Documents (as defined in Section 3.7) filed with the
Commission prior to the date of this Agreement, since September 30, 1996, there
has been no change in the business, assets, liabilities, results of operations
or financial condition of AmeriSource which individually or in the aggregate
would reasonably be expected to have a Material
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<PAGE>
Adverse Effect on AmeriSource, or any event, occurrence or development which
individually or in the aggregate would have a material adverse effect on the
ability of AmeriSource to consummate the transactions contemplated hereby.
3.7 AmeriSource SEC Documents. AmeriSource has timely filed with
-------------------------
the Commission all forms, reports, schedules, statements and other documents
required to be filed by it since December 31, 1994 under the Securities Exchange
Act of 1934, as amended (together with the rules and regulations thereunder, the
"Exchange Act") or the Securities Act (such documents, as supplemented and
amended since the time of filing, collectively, the "AmeriSource SEC
Documents"). The AmeriSource SEC Documents, including, without limitation, any
financial statements or schedules included therein, at the time filed (and, in
the case of registration statements and proxy statements, on the dates of
effectiveness and the dates of mailing, respectively) (a) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading, and (b) except
as set forth in Section 3.7 to the AmeriSource Disclosure Schedule, complied in
all material respects with the applicable requirements of the Exchange Act and
the Securities Act, as the case may be. The financial statements of AmeriSource
included in the AmeriSource SEC Documents at the time filed (and, in the case of
registration statements and proxy statements, on the dates of effectiveness and
the dates of mailing, respectively) complied as to form in all material respects
with applicable accounting requirements and with the published rules and
regulations of the Commission with respect thereto, were prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto or,
in the case of unaudited statements, as permitted by Form 10-Q of the
Commission), and fairly present (subject, in the case of the unaudited interim
financial statements, to normal, recurring year-end audit adjustments consistent
with past practice), in all material respects, the consolidated financial
position of AmeriSource and its consolidated subsidiaries as at the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended. No subsidiary of AmeriSource is subject to the periodic
reporting requirements of the Exchange Act or required to file any form, report
or other document with the Commission, the NYSE, any other stock exchange or any
other comparable Governmental Authority.
3.8 Taxes. Except as set forth in Section 3.8 to the AmeriSource
-----
Disclosure Schedule and except for such matters that would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect on
AmeriSource:
(a) AmeriSource and its subsidiaries (i) have duly filed all Tax
Returns (as defined in Section 3.8(d)) (including, but not limited to, those
filed on a consolidated, combined or unitary basis) required to have been filed
by AmeriSource or
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<PAGE>
its subsidiaries, all of which Tax Returns are true and correct; (ii) have
within the time and manner prescribed by Applicable Law paid or, prior to the
Effective Time, will pay all Taxes (as defined in Section 3.8(d)), required to
be paid in respect of the periods covered by such Tax Returns or otherwise due
to any Governmental Authority; (iii) have established or, prior to the Effective
Time, will establish, in accordance with their normal accounting practices and
procedures, accruals and reserves that are adequate for the payment of all Taxes
not yet due and payable and attributable to any period preceding the Effective
Time; (iv) are not delinquent in the payment of any Tax; and (v) have not
received written notice of any deficiencies for any Tax from any Governmental
Authority against AmeriSource or any of its subsidiaries, which deficiency has
not been satisfied. Neither AmeriSource nor any of its subsidiaries is the
subject of any currently ongoing Tax audit. With respect to any taxable period
ended prior to September 30, 1993, all federal income Tax Returns including
AmeriSource or any of its subsidiaries have been audited by the Internal Revenue
Service or are closed by the applicable statute of limitations. There are no
liens with respect to Taxes upon any of the properties or assets, real or
personal, tangible or intangible, of AmeriSource or any of its subsidiaries
(other than liens for Taxes not yet due). No claim has ever been made in writing
by a Governmental Authority in a jurisdiction where AmeriSource or its
subsidiaries do not file Tax Returns that AmeriSource or any of its subsidiaries
is or may be subject to taxation by that jurisdiction. Neither AmeriSource nor
any of its subsidiaries has filed an election under Section 341(f) of the Code
to be treated as a consenting corporation.
(b) Neither AmeriSource nor any of its subsidiaries is
obligated by any contract, agreement or other arrangement to indemnify any other
person with respect to Taxes. Neither AmeriSource nor any of its subsidiaries is
now or has ever been a party to or bound by any contract, agreement or other
arrangement (whether or not written and including, without limitation, any
arrangement required or permitted by Applicable Law (including pursuant to
Treasury Regulation Section 1.1502-6 or any analogous provision of state, local
or foreign law)) which (i) requires AmeriSource or any of its subsidiaries to
make any Tax payment to (other than payments made prior to June 30, 1997) or for
the account of any other person, (ii) affords any other person the benefit of
any net operating loss, net capital loss, investment Tax credit, foreign Tax
credit, charitable deduction or any other credit or Tax attribute which could
reduce Taxes (including, without limitation, deductions and credits related to
alternative minimum Taxes) of AmeriSource or any of its subsidiaries, or (iii)
requires or permits the transfer or assignment of income, revenues, receipts or
gains to AmeriSource or any of its subsidiaries from any other person.
(c) AmeriSource and its subsidiaries have withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder or other
third party.
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<PAGE>
(d) For purposes of this Agreement, (i) "Tax" (and, with correlative
meaning, "Taxes") means any federal, state, local or foreign income, gross
receipts, property, sales, use, license, excise, franchise, employment, payroll,
premium, withholding, alternative or added minimum, ad valorem, inventory,
transfer or excise tax, or any other tax, custom, duty, governmental fee or
other like assessment or charge of any kind whatsoever, together with any
interest or penalty, imposed by any Governmental Authority, and (ii) "Tax
Return" means any return, report or similar statement required to be filed with
respect to any Tax (including any attached schedules), including, without
limitation, any information return, claim for refund, amended return or
declaration of estimated Tax.
3.9 Compliance with Law. Except as set forth in Section 3.9 to the
-------------------
AmeriSource Disclosure Schedule or as specifically disclosed in the AmeriSource
SEC Documents filed with the Commission prior to the date hereof, AmeriSource is
in compliance with all applicable laws, statutes, orders, rules, regulations,
policies or guidelines promulgated, or judgments, decisions or orders entered,
by any Governmental Authority, including, without limitation, the Federal
Prescription Drug Marketing Act and comparable or related state law provisions,
the Federal Controlled Substances Act of 1970, the Food, Drug and Cosmetic Act,
the Good Manufacturing Practices and other standards of the Food and Drug
Administration, federal Medicare and Medicaid statutes, including, without
limitation, 42 U.S.C. Section 1320a-7b and 42 U.S.C. Section 1395nn or related
state or local statutes or regulations, applicable state laws regulating
pharmacy or wholesaling practices, statutes and regulations relating to billing
or sales practices, the Foreign Corrupt Practices Act of 1977 and the
Occupational Safety and Health Act and the regulations promulgated thereunder
(all such laws, statutes, orders, rules, regulations, policies, guidelines,
judgments, decisions and orders, collectively, "Applicable Laws"), relating to
AmeriSource or its business or properties, except where the failure to be in
compliance with such Applicable Laws individually or in the aggregate would not
reasonably be expected to have a Material Adverse Effect on AmeriSource. Except
as disclosed in Section 3.9 to the AmeriSource Disclosure Schedule or as
specifically disclosed in the AmeriSource SEC Documents filed with the
Commission prior to the date hereof, no investigation or review by any
Governmental Authority with respect to AmeriSource is pending, or, to the
knowledge of AmeriSource, threatened, nor has any Governmental Authority
indicated in writing an intention to conduct the same, other than those the
outcome of which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on AmeriSource.
3.10 Intellectual Property. Except as set forth in Section 3.10 to
---------------------
the AmeriSource Disclosure Schedule and except as would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on
AmeriSource, AmeriSource owns or possesses adequate licenses or other valid
rights to use all patents, patent rights, trademarks, trademark rights, trade
names, trade dress, trade name rights,
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<PAGE>
copyrights, service marks, trade secrets, applications for trademarks and for
service marks, computer software and data bases, including all embodiments or
fixations thereof and related documentation, know-how and other proprietary
rights and information ("Intellectual Property") used in or necessary for the
conduct of the business of AmeriSource as currently conducted. Except as set
forth in Section 3.10 to the AmeriSource Disclosure Schedule, the conduct of the
businesses of AmeriSource as currently conducted does not conflict with or
infringe upon any Intellectual Property of any third party except for any
conflict or infringement that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on AmeriSource. Except
as set forth in Section 3.10 to the AmeriSource Disclosure Schedule and except
as would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on AmeriSource, to Parent's knowledge, no third party is
infringing on any of the Intellectual Property owned by AmeriSource.
3.11 Title to Properties. AmeriSource owns or holds under valid
-------------------
leases all real property, plants, machinery and equipment necessary for the
conduct of the business of AmeriSource as presently conducted, except where the
failure to own or so hold such property, plants, machinery and equipment would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on AmeriSource.
3.12 Registration Statement; Joint Proxy Statement. None of the
---------------------------------------------
information provided by AmeriSource for inclusion in the registration statement
on Form S-4 (such registration statement as amended, supplemented or modified,
the "Registration Statement") to be filed with the Commission by Parent under
the Securities Act, including the prospectus relating to the shares of Parent
Common Stock to be issued in the Merger (as amended, supplemented or modified,
the "Prospectus") and the joint proxy statement and form of proxies relating to
the vote of the stockholders of AmeriSource with respect to the Merger and the
vote of the stockholders of Parent with respect to the Parent Stockholder
Proposal (as defined in Section 4.3) (as amended, supplemented or modified, the
"Joint Proxy Statement"), at the time the Registration Statement becomes
effective or, in the case of the Joint Proxy Statement, at the date of mailing
and at the date of the AmeriSource Stockholders Meeting or the Parent
Stockholders Meeting, will contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The Joint Proxy Statement, except for such
portion thereof that relates only to Parent and its subsidiaries (as to which no
representations or warranties are made), will comply as to form in all material
respects with the provisions of the Exchange Act.
3.13 Litigation. Except as set forth in Section 3.13 to the
----------
AmeriSource Disclosure Schedule or specifically disclosed in the AmeriSource SEC
Documents filed with the Commission prior to the date of this Agreement, there
is no suit, claim, action,
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<PAGE>
proceeding, audit or investigation (an "Action") pending or, to the knowledge of
AmeriSource, threatened against AmeriSource which, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect on
AmeriSource or a material adverse effect on the ability of AmeriSource to
consummate the transactions contemplated hereby. Except as set forth in Section
3.13 to the AmeriSource Disclosure Schedule, since September 30, 1994
AmeriSource has not been subject to any outstanding order, writ, injunction or
decree specifically applicable to AmeriSource which, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect on
AmeriSource or a material adverse effect on the ability of AmeriSource to
consummate the transactions contemplated hereby.
3.14 Brokerage and Finder's Fees; Expenses. Except in connection
-------------------------------------
with the retention of Goldman, Sachs & Co. (the fees of which firm shall be the
sole responsibility of AmeriSource) and except as set forth in Section 3.14 to
the AmeriSource Disclosure Schedule, neither AmeriSource nor any stockholder,
director, officer or employee thereof has incurred or will incur on behalf of
AmeriSource any brokerage, finder's or similar fee in connection with the
transactions contemplated by this Agreement. AmeriSource has heretofore
furnished to Parent a complete and correct copy of the engagement letter between
AmeriSource and Goldman, Sachs & Co.
3.15 Accounting Matters; Reorganization. Neither AmeriSource nor
----------------------------------
any of its affiliates has taken or agreed to take any action that would (a)
prevent Parent from accounting for the business combination to be effected by
the Merger as a pooling-of-interests for accounting purposes or (b) prevent the
Merger from constituting a reorganization qualifying under the provisions of
Section 368(a) of the Code.
3.16 Employee Benefit Plans.
----------------------
(a) For purposes of this Section 3.16, the following terms
have the definitions given below:
"Controlled Group Liability" means any and all liabilities under
(i) Title IV of ERISA, (ii) Section 302 of ERISA, (iii) Sections 412 and 4971 of
the Code, (iv) the continuation coverage requirements of Section 601 et seq. of
ERISA and Section 4980B of the Code, or (v) corresponding or similar provisions
of foreign laws or regulations, in each case other than pursuant to the Plans.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the regulations thereunder.
"ERISA Affiliate" means, with respect to any entity, trade or
business, any other entity, trade or business that is a member of a group
described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1)
of ERISA that includes
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<PAGE>
the first entity, trade or business, or that is a member of the same "controlled
group" as the first entity, trade or business pursuant to Section 4001(a)(14) of
ERISA.
"Plans" means each plan, program, policy, practice or other
arrangement providing for compensation, severance, retirement benefits, fringe
benefits, equity-based awards or other benefits of any kind (including, but not
limited to, all employee welfare benefit plans within the meaning of Section
3(l) of ERISA and all employee pension benefit plans within the meaning of
Section 3(2) of ERISA) with respect to which AmeriSource or any of its
subsidiaries or ERISA Affiliates has or may have any liability, contingent or
otherwise, and further including any of the foregoing which cover directors or
former directors of AmeriSource or any subsidiary.
"Withdrawal Liability" means liability to a Multiemployer Plan
(as defined in Section 3.16) as a result of a complete or partial withdrawal
from such Multiemployer Plan, as those terms are defined in Part I of Subtitle E
of Title IV of ERISA.
(b) With respect to each Plan, AmeriSource has provided to Parent a
true, correct and complete copy of each material document relating to a material
liability with respect thereto, including without limitation the following
(where applicable): (i) each writing constituting a part of such Plan, including
without limitation all plan documents, trust agreements, and insurance contracts
and other funding vehicles; (ii) the most recent Annual Report (Form 5500
Series) and accompanying schedule, if any; (iii) the current summary plan
description, if any; (iv) the most recent annual financial report, if any; and
(v) the most recent determination letter from the Internal Revenue Service, if
any.
(c) Except as set forth in Section 3.16(c) to the AmeriSource
Disclosure Schedule, the Internal Revenue Service has issued a favorable
determination letter with respect to each Plan that is intended to be a
"qualified plan" within the meaning of Section 401(a) of the Code (a "Qualified
Plan") and there are no existing circumstances nor any events that have occurred
that could adversely affect the qualified status of any Qualified Plan or the
related trust.
(d) All contributions required to be made to any Plan by Applicable
Laws or by any plan document or other contractual undertaking, and all premiums
due or payable with respect to insurance policies funding any Plan, before the
date hereof have been made or paid in full on or before the final due date
thereof and through the Effective Time will be made or paid in full on or before
the final due date thereof.
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<PAGE>
(e) AmeriSource and its subsidiaries have complied, and are now in
compliance, with all applicable provisions of ERISA and the Code and all
Applicable Laws relating to employees and employee benefits, except for such
non-compliance which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on AmeriSource. Each Plan has been
established and operated in compliance with its terms and Applicable Laws,
except for such non-compliance which, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect on AmeriSource.
There is not now, and there are no existing circumstances that individually or
in the aggregate would reasonably be expected to give rise to, any requirement
for the posting of security with respect to a Plan or the imposition of any lien
on the assets of AmeriSource or any of its subsidiaries under ERISA or the Code.
AmeriSource and its subsidiaries are each in compliance with all Applicable Laws
respecting employment, except for such non-compliance which, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect on AmeriSource.
(f) Except as set forth in Section 3.16(f) to the AmeriSource
Disclosure Schedule, no Plan is a "multiemployer plan" within the meaning of
Section 4001(a)(3) of ERISA (a "Multiemployer Plan") or a plan that has two or
more contributing sponsors at least two of whom are not under common control,
within the meaning of Section 4063 of ERISA (a "Multiple Employer Plan"), nor
has AmeriSource or any of its subsidiaries or any of their respective ERISA
Affiliates, at any time within six years before the date hereof, contributed to
or been obligated to contribute to any Multiemployer Plan or Multiple Employer
Plan. With respect to each Multiemployer Plan: (i) neither AmeriSource nor any
of its ERISA Affiliates has incurred any Withdrawal Liability that has not been
satisfied in full; (ii) neither AmeriSource nor any ERISA Affiliate has received
any notification, nor has any reason to believe, that any such plan is in
reorganization, is insolvent, or has been terminated, or could reasonably be
expected to be in reorganization, to be insolvent, or to be terminated; and
(iii) no circumstances exist which individually or in the aggregate could
reasonably be expected to result in Withdrawal Liability with respect to a Plan.
(g) There does not now exist, and there are no existing circumstances
that individually or in the aggregate would reasonably be expected to result in,
any Controlled Group Liability that individually or in the aggregate would
reasonably be expected to have a Material Adverse Effect on AmeriSource or any
of its subsidiaries. Without limiting the generality of the foregoing, neither
AmeriSource nor any of its subsidiaries nor any of their respective ERISA
Affiliates has engaged in any transaction described in Section 4069 or Section
4204 of ERISA.
(h) Except for health continuation coverage as required by Section
4980B of the Code or Part 6 of Title I of ERISA and except as set forth in
Section
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<PAGE>
3.16(h) to the AmeriSource Disclosure Schedule, neither AmeriSource nor any of
its subsidiaries has any material liability for life, health, medical or other
welfare benefits to former employees or beneficiaries or dependents thereof.
(i) Except as disclosed in Section 3.16(i) to the AmeriSource
Disclosure Schedule, neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will result in, cause
the accelerated vesting or delivery of, or increase the amount or value of, any
payment or benefit to any employee, officer, director or consultant of
AmeriSource or any of its subsidiaries. Without limiting the generality of the
foregoing, except as set forth in Section 3.16(i) to the AmeriSource Disclosure
Schedule, no amount paid or payable by AmeriSource or any of its subsidiaries or
Parent or any of its affiliates in connection with the transactions contemplated
hereby either solely as a result thereof or as a result of such transactions in
conjunction with any other events will be an "excess parachute payment" within
the meaning of Section 280G of the Code.
(j) Except as disclosed in Section 3.16(j) to the AmeriSource
Disclosure Schedule, there are no pending, or to the knowledge of AmeriSource
threatened, Actions (other than claims for benefits in the ordinary course) with
respect to the Plans which individually or in the aggregate would reasonably be
expected to have a Material Adverse Effect on AmeriSource or any of its
subsidiaries.
(k) Section 3.16(k) to the AmeriSource Disclosure Schedule sets forth
a list of each employment, consulting, severance or similar agreement under
which AmeriSource or any of its subsidiaries is or could become obligated to
provide compensation or benefits in excess of $200,000, and AmeriSource has
provided to Parent a copy of each such agreement.
3.17 Contracts. Section 3.17 to the AmeriSource Disclosure Schedule
---------
lists all contracts, agreements, guarantees, leases and executory commitments
(each a "Contract"), other than Plans and any Contracts heretofore filed as an
exhibit to any AmeriSource SEC Document, that exist as of the date hereof to
which AmeriSource is a party or by which it is bound and which fall within any
of the following categories: (a) Contracts not entered into in the ordinary
course of AmeriSource's business other than those that individually or in the
aggregate are not material to the business of AmeriSource, (b) joint venture and
partnership agreements, (c) Contracts containing covenants purporting to limit
the freedom of AmeriSource to compete in any line of business in any geographic
area or to hire any individual or group of individuals, (d) Contracts which
after the Effective Time would have the effect of limiting the freedom of Parent
or its subsidiaries (other than AmeriSource) to compete in any line of business
in any geographic area or to hire any individual or group of individuals, (e)
Contracts which contain minimum purchase conditions in excess of $10,000,000
with
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respect to inventory purchases for resale, and $500,000 in the case of
everything else, or requirements or other terms that restrict or limit the
purchasing relationships of AmeriSource or its affiliates, or any customer,
licensee or lessee thereof, (f) Contracts relating to any outstanding commitment
for capital expenditures in excess of $1,000,000, (g) indentures, mortgages,
promissory notes, loan agreements or guarantees of borrowed money in excess of
$1,000,000 in the aggregate, letters of credit or other agreements or
instruments of AmeriSource or commitments for the borrowing or the lending by
AmeriSource of amounts in excess of $1,000,000 in the aggregate or providing for
the creation of any charge, security interest, encumbrance or lien upon any of
the assets of AmeriSource with an aggregate value in excess of $1,000,000, (h)
Contracts providing for "earn-outs" or other contingent payments by AmeriSource
involving more than $1,000,000 in the aggregate over the terms of all such
Contracts, (i) Contracts providing for the purchase by AmeriSource of product
for resale at a price above the weighted average price at which AmeriSource
sells such product, (j) Contracts relating to material customer programs,
including Contracts providing for loans to customers or slotting allowances, (k)
Contracts associated with off balance sheet financing in excess of $1,000,000 in
the aggregate, including but not limited to arrangements for the sale of
receivables, (l) licenses or similar agreements granting the right to use any
material Intellectual Property, (m) stock purchase agreements, asset purchase
agreements or other acquisition or divestiture agreements relating to material
transactions since January 1, 1994, or (n) any agreement which is material to
AmeriSource, irrespective of amount. All Contracts to which AmeriSource is a
party or by which it is bound are valid and binding obligations of AmeriSource
and, to the knowledge of AmeriSource, the valid and binding obligation of each
other party thereto except such Contracts which if not so valid and binding
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on AmeriSource. Neither AmeriSource nor, to the
knowledge of AmeriSource, any other party thereto is in violation of or in
default in respect of, nor has there occurred an event or condition which with
the passage of time or giving of notice (or both) would constitute a default
under or permit the termination of, any such Contract except such violations or
defaults under or terminations which, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect on AmeriSource. Set
forth in Section 3.17(o) to the AmeriSource Disclosure Schedule is a description
of any material changes to the amount and terms of the indentures of AmeriSource
and its subsidiaries from the description in the notes to the financial
statements incorporated in AmeriSource's Form 10-K for the period ended
September 30, 1996 filed with the Commission. Set forth in Section 3.17(p) to
the AmeriSource Disclosure Schedule is the amount of the annual premium
currently paid by AmeriSource for its directors' and officers' liability
insurance.
3.18 Labor Matters. Except as set forth in Section 3.18 to the
-------------
AmeriSource Disclosure Schedule, AmeriSource does not have any labor contracts
or
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<PAGE>
collective bargaining agreements with any persons employed by AmeriSource or any
persons otherwise performing services primarily for AmeriSource, nor as of the
date hereof is AmeriSource in the process of negotiating any such agreement.
There is no labor strike, dispute or stoppage pending or, to the knowledge of
AmeriSource, threatened against AmeriSource which individually or in the
aggregate would reasonably be expected to have a Material Adverse Effect, and
AmeriSource has not experienced any such labor strike, dispute or stoppage since
September 30, 1994.
3.19 Undisclosed Liabilities. Except (i) as and to the extent
-----------------------
disclosed or reserved against in the consolidated balance sheet of AmeriSource
as of June 30, 1997 included in the AmeriSource SEC Documents, or disclosed in
the footnotes to the financial statements as of such date or the footnotes to
the September 30, 1996 financial statements included in the AmeriSource SEC
Documents, (ii) as incurred after June 30, 1997 in the ordinary course of
business consistent with prior practice and not prohibited by this Agreement or
(iii) as set forth in Section 3.19 to the AmeriSource Disclosure Schedule,
AmeriSource does not have any liabilities or obligations of any nature, whether
known or unknown, absolute, accrued, contingent or otherwise and whether due or
to become due, that, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on AmeriSource.
3.20 Operation of AmeriSource's Business; Relationships. (a) Since
--------------------------------------------------
September 30, 1996 through the date of this Agreement and except for entering
into this Agreement and the AmeriSource Stock Option Agreement, AmeriSource has
not engaged in any transaction which, if done after execution of this Agreement,
would violate in any material respect Section 5.3(c) except as set forth in
Section 3.20(a) to the AmeriSource Disclosure Schedule or as specifically
disclosed in the AmeriSource SEC Documents filed with the Commission prior to
the date of this Agreement.
(b) Except as set forth in Section 3.20(b) to the AmeriSource
Disclosure Schedule, (i) from January 1, 1997 to the date hereof, no material
customer of AmeriSource has indicated that it will stop or materially decrease
purchasing materials, products or services from AmeriSource and (ii) since
January 1, 1997, no material supplier of AmeriSource has indicated that it will
stop or materially decrease the supply of materials, products or services to
AmeriSource, in each case, the effect of which individually or in the aggregate
would reasonably be expected to have a Material Adverse Effect on AmeriSource.
3.21 Permits; Compliance. AmeriSource is in possession of all
-------------------
material franchises, grants, authorizations, licenses, permits, easements,
variances, exemptions, consents, certificates, approvals and orders necessary to
own, lease and operate its properties and to carry on its business as it is now
being conducted (collectively, the "AmeriSource Permits"), except where the
failure to be in possession of such
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<PAGE>
AmeriSource Permits would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on AmeriSource or a material adverse
effect on the ability of the parties to consummate the transactions contemplated
hereby.
3.22 Environmental Matters. Except for matters disclosed in Section
---------------------
3.22 of the AmeriSource Disclosure Schedule and except for matters that would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on AmeriSource, (a) the properties, operations and activities of
AmeriSource and its subsidiaries have at all times been for all applicable
periods of limitation, and are, in compliance with all applicable Environmental
Laws and Environmental Permits (each as defined below); (b) AmeriSource and its
subsidiaries and the properties and operations of AmeriSource and its
subsidiaries are not subject to any pending or, to the knowledge of AmeriSource,
threatened Action under any Environmental Law, including without limitation with
respect to any present or former operations, facilities or subsidiaries; (c)
there has been no release of any Hazardous Materials (as defined below) into the
environment by AmeriSource or its subsidiaries, and there are no Hazardous
Materials present at, on, under, within or which have migrated from, any
properties of AmeriSource or its subsidiaries; (d) there has been no exposure of
any person or property to any Hazardous Materials in connection with the
properties, operations and activities of AmeriSource or its subsidiaries
(provided that the foregoing is not intended to apply to exposure relating to
the consumption or other customary use of pharmaceutical products manufactured
or distributed by AmeriSource); and (e) neither AmeriSource nor any of its
subsidiaries (x) has received any written notice that AmeriSource, any of its
subsidiaries or any of their respective present or former operations, facilities
or subsidiaries is or may be a potentially responsible party or otherwise liable
in connection with any site used for the disposal of or otherwise containing
Hazardous Materials, or (y) has disposed of, arranged for the disposal of, or
transported any Hazardous Materials to any site which is listed on the U.S.
Environmental Protection Agency's National Priorities List or which is otherwise
subject to remediation or investigation. AmeriSource and its subsidiaries have
made available to Parent all material internal and external environmental audits
and reports (in each case relevant to AmeriSource or any of its subsidiaries)
prepared since January 1, 1992 and in the possession of AmeriSource or its
subsidiaries. The term "Environmental Laws" means all federal, state, local or
foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or industrial, toxic or hazardous
substances or wastes (collectively, "Hazardous Materials") into the environment,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials, as
well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
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<PAGE>
plans or regulations issued, entered, promulgated or approved thereunder, as in
effect on the date hereof. "Environmental Permit" means any permit, approval,
identification number, license or other authorization required under or issued
pursuant to any applicable Environmental Law.
3.23 Opinion of Financial Advisor. AmeriSource has received the
----------------------------
written opinion of Goldman, Sachs & Co., its financial advisor, to the effect
that, as of the date of this Agreement, the Exchange Ratio is fair to the
AmeriSource Stockholders, and such opinion has not been withdrawn or revoked or
modified in any material respect.
3.24 Board Recommendation. The Board of Directors of AmeriSource,
--------------------
at a meeting duly called and held at which a quorum was present throughout, has
by the requisite vote of the directors (i) determined that this Agreement and
the transactions contemplated hereby, including the Merger, and the AmeriSource
Stock Option Agreement and the transactions contemplated thereby, taken
together, are fair to and in the best interests of the AmeriSource Stockholders,
(ii) resolved to recommend that the holders of the shares of AmeriSource Common
Stock entitled to vote thereon approve this Agreement and the transactions
contemplated herein, including the Merger, and (iii) taken all action necessary
to render Section 203 of the DGCL inapplicable to this Agreement, the
AmeriSource Stock Option Agreement, the Merger and the transactions contemplated
hereby and thereby (the "AmeriSource Board Recommendation"). The AmeriSource
Board Recommendation has not been withdrawn, revoked or modified.
3.25 Related Party Transactions. Except as set forth in Section
--------------------------
3.25 to the AmeriSource Disclosure Schedule, since the date of AmeriSource's
proxy statement dated January 15, 1997, no event has occurred that would be
required to be reported under Item 404 of Regulation S-K promulgated by the
Commission.
3.26 Employee Agreements. Each of the employees of AmeriSource
-------------------
specified in Section 3.26 to the AmeriSource Disclosure Schedule has duly
executed and delivered an employee agreement with AmeriSource, a copy of which
is attached to Section 3.26A to the AmeriSource Disclosure Schedule (each, a
"Current Employee Agreement"), and an employee agreement with AmeriSource and
Parent to take effect at the Effective Time, a copy of which is attached to
Section 3.26B to the Disclosure Schedule (each, a "Successor Employee
Agreement") (the Current Employee Agreements and the Successor Employee
Agreements collectively, the "Employee Agreements"), and none of such Employee
Agreements has been amended or terminated, except that no representation and
warranty is made as to Parent; provided, however, it is understood that this
representation and warranty shall not fail to be true and correct after the date
of this Agreement with respect to any person who is no longer employed by
AmeriSource so long as AmeriSource shall not have amended, granted any waiver or
release under, or assigned any rights or claims under the Employee Agreements
with such former
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<PAGE>
employee. AmeriSource has previously provided to Parent copies of all employee
agreements with the above individuals.
3.27 Rights Plan. AmeriSource does not have a so-called "poison
-----------
pill," shareholder rights plan or similar plan.
3.28 Voting on Transaction. Neither the AmeriSource Class B Stock
---------------------
nor the AmeriSource Class C Stock entitles any holders thereof to vote on any of
the transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
In order to induce AmeriSource to enter into this Agreement, Parent
and Merger Sub hereby jointly and severally represent and warrant to AmeriSource
that the statements contained in this Article IV are true, correct and complete.
4.1 Organization and Standing. Each of Parent and Merger Sub is a
-------------------------
corporation duly organized, validly existing and in good standing under the laws
of Delaware with full corporate power and authority to own, lease, use and
operate its properties and to conduct its business as and where now owned,
leased, used, operated and conducted. Each of Parent and Merger Sub is duly
qualified to do business and in good standing in each jurisdiction in which the
nature of the business conducted by it or the property it owns, leases or
operates makes such qualification necessary, except where the failure to be so
qualified or in good standing in such jurisdiction would not reasonably be
expected to have a Material Adverse Effect on Parent. Parent is not in default
in the performance, observance or fulfillment of any provision of its Restated
Certificate of Incorporation (the "Parent Certificate"), or its Restated By-Laws
(the "Parent Bylaws"), and Merger Sub is not in default in the performance,
observance or fulfillment of any provisions of its Certificate of Incorporation
or Bylaws. Parent has heretofore furnished to AmeriSource a complete and correct
copy of the Parent Certificate and Parent Bylaws and the Certificate of
Incorporation and Bylaws of Merger Sub.
4.2 Subsidiaries. Except as set forth in Section 4.2 to the
------------
disclosure schedule delivered by Parent to AmeriSource and dated the date hereof
(the "Parent Disclosure Schedule"), Parent owns directly or indirectly each of
the outstanding shares of capital stock (or other ownership interests having by
their terms ordinary voting power to elect a majority of directors or others
performing similar functions with respect to such subsidiary) of each of
Parent's subsidiaries.
-24-
<PAGE>
4.3 Corporate Power and Authority. Each of Parent and Merger Sub
-----------------------------
has all requisite corporate power and authority to enter into and deliver this
Agreement and, subject to approval by the stockholders of Parent of the issuance
of shares of Parent Common Stock issuable in the Merger (such proposal to
approve the issuance of shares of Parent Common Stock, the "Parent Stockholder
Proposal"), to perform its obligations hereunder and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of each of Parent
and Merger Sub, subject to approval by the stockholders of Parent of the Parent
Stockholder Proposal. This Agreement has been duly executed and delivered by
each of Merger Sub and Parent, and constitutes the legal, valid and binding
obligation of each of Parent and Merger Sub enforceable against each of them in
accordance with its terms.
4.4 Capitalization of Parent and Merger Sub. (a) As of September
---------------------------------------
15, 1997, Parent's authorized capital stock consisted solely of (i) 200,000,000
shares of Parent Common Stock, of which (x) 46,171,876 shares were issued and
outstanding, (y) 225,098 shares were issued and held in treasury (which does not
include the shares reserved for issuance as set forth in clause (z) below) and
(z) 14,365,411 shares were reserved for issuance upon the exercise of stock
options or as shares of restricted stock or for issuance under Parent's Deferred
Compensation Administration Plan, Parent's Stock Purchase Plan, and Parent's
1997 Directors Equity Compensation and Deferral Plan or upon conversion of
Parent's 5% Trust Convertible Preferred Securities, and (ii) 100,000,000 shares
of Series Preferred Stock, par value $.01 per share, of which no shares were
issued and outstanding. Each outstanding share of Parent capital stock is, and
the shares of Parent Common Stock to be issued in connection with the Merger
will be, duly authorized and validly issued, fully paid and nonassessable, and
each outstanding share of Parent capital stock has not been, and the shares of
Parent Common Stock to be issued in connection with the Merger will not be,
issued in violation of any preemptive or similar rights. As of the date hereof,
other than as set forth in the first sentence hereof or in Section 4.4 to the
Parent Disclosure Schedule, there are no outstanding subscriptions, options,
warrants, puts, calls, agreements, understandings, claims or other commitments
or rights of any type relating to the issuance, sale, repurchase or transfer by
Parent of any equity securities of Parent, nor are there outstanding any
securities which are convertible into or exchangeable for any shares of capital
stock of Parent, and neither Parent nor any subsidiary of Parent has any
obligation of any kind to issue any additional securities or to pay for or
repurchase any securities of Parent, its subsidiaries or its or their
predecessors. The shares of Parent Common Stock (including those shares to be
issued in the Merger) are registered under the Exchange Act. Except as set forth
in Section 4.4 to the Parent Disclosure Schedule, Parent has no agreement,
arrangement or understanding to register any securities of Parent or any of its
subsidiaries under the Securities Act or under any
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<PAGE>
state securities law and has not granted registration rights to any person or
entity (other than agreements, arrangements or understandings with respect to
registration rights that are no longer in effect as of the date of this
Agreement); copies of all such agreements have previously been provided to
AmeriSource.
(b) Merger Sub's authorized capital stock consists solely of
1,000 shares of Common Stock, par value $.01 per share ("Merger Sub Common
Stock"), of which, as of the date hereof, 100 shares were issued and outstanding
and none were reserved for issuance. As of the date hereof, all of the
outstanding shares of Merger Sub Common Stock are owned free and clear of any
liens, claims or encumbrances by Parent.
4.5 Conflicts; Consents and Approval. Except as set forth in
--------------------------------
Section 4.5 to the Parent Disclosure Schedule, neither the execution and
delivery of this Agreement by Parent or Merger Sub nor the consummation of the
transactions contemplated hereby will:
(a) conflict with, or result in a breach of, any provision of
the Parent Certificate or Parent Bylaws or the Certificate of Incorporation or
Bylaws of Merger Sub,
(b) violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which, with the giving of
notice, the passage of time or otherwise, would constitute a default) under, or
entitle any party (with the giving of notice, the passage of time or otherwise)
to terminate, accelerate, modify or call a default under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of Parent or any of its subsidiaries under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust, license, contract, undertaking, agreement, lease or other instrument or
obligation to which Parent or any of its subsidiaries is a party,
(c) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to Parent or any of its subsidiaries or any of their
respective properties or assets, or
(d) require any action or consent or approval of, or review by,
or registration or filing by Parent or any of its affiliates with, any third
party or any Governmental Authority, other than (i) approval by the stockholders
of Parent of the Parent Stockholder Proposal, (ii) authorization for the listing
of the shares of Parent Common Stock to be issued in the Merger on the NYSE and
the Pacific Exchange, Inc., subject to official notice of issuance, (iii)
actions required by the HSR Act, and (iv) registrations or other actions
required under federal and state securities laws as are contemplated by this
Agreement;
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<PAGE>
except in the case of (b), (c) and (d) for any of the foregoing that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Parent or a material adverse effect on the ability of the
parties to consummate the transactions contemplated hereby.
4.6 Brokerage and Finder's Fees. Except in connection with the
---------------------------
retention of Peter J. Solomon Company Limited (the fees of which shall be the
responsibility of Parent), neither Parent nor any stockholder, director, officer
or employee thereof has incurred or will incur on behalf of Parent any
brokerage, finder's or similar fee in connection with the transactions
contemplated by this Agreement.
4.7 Accounting Matters; Reorganization. Neither Parent nor any of
----------------------------------
its affiliates has taken or agreed to take any action that would (a) prevent
Parent from accounting for the business combination to be effected by the Merger
as a pooling-of-interests for accounting purposes or (b) prevent the Merger from
constituting a reorganization qualifying under the provisions of Section 368(a)
of the Code.
4.8 Parent SEC Documents. Parent has timely filed with the
--------------------
Commission all forms, reports, schedules, statements and other documents
required to be filed by it since December 31, 1994 under the Exchange Act or the
Securities Act (such documents, as supplemented and amended since the time of
filing, collectively, the "Parent SEC Documents"). The Parent SEC Documents,
including, without limitation, any financial statements or schedules included
therein, at the time filed (and, in the case of registration statements and
proxy statements, on the dates of effectiveness and the dates of mailing,
respectively) (a) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, and (b) except as set forth in Section 4.8 to
the Parent Disclosure Schedule, complied in all material respects with the
applicable requirements of the Exchange Act and the Securities Act, as the case
may be. The financial statements of Parent included in the Parent SEC Documents
at the time filed (and, in the case of registration statements and proxy
statements, on the dates of effectiveness and the dates of mailing,
respectively) complied as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the
Commission with respect thereto, were prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Form 10-Q of the Commission), and fairly
present (subject, in the case of the unaudited interim financial statements, to
normal, recurring year-end audit adjustments consistent with past practices), in
all material respects, the consolidated financial position of Parent and its
consolidated subsidiaries as at the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended.
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<PAGE>
4.9 Registration Statement; Joint Proxy Statement. None of the
---------------------------------------------
information provided by Parent for inclusion in the Registration Statement or
the Joint Proxy Statement, at the time the Registration Statement becomes
effective or, in the case of the Joint Proxy Statement, at the date of mailing
and at the date of the AmeriSource Stockholders Meeting or the Parent
Stockholders Meeting, will 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 Joint Proxy Statement, with respect to the
portion thereof that relates only to Parent and its subsidiaries, will comply as
to form in all material respects with the provisions of the Exchange Act, and
the Registration Statement, except for such portion thereof that relates only to
AmeriSource and its subsidiaries (as to which no representations or warranties
are made), will comply as to form in all material respects with the provisions
of the Securities Act.
4.10 Compliance with Law. Parent and its subsidiaries are in
-------------------
compliance with all Applicable Laws relating to Parent, its subsidiaries or
their respective business or properties, except where the failure to be in
compliance therewith (individually or in the aggregate) would not reasonably be
expected to have a Material Adverse Effect on Parent. Except as disclosed in
Section 4.10 to the Parent Disclosure Schedule or as specifically disclosed in
the Parent SEC Documents filed with the Commission prior to the date of this
Agreement, no investigation or review by any Governmental Authority with respect
to Parent or its subsidiaries is pending, or, to the knowledge of Parent,
threatened, nor has any Governmental Authority indicated in writing an intention
to conduct the same, other than those the outcome of which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Parent.
4.11 Litigation. Except as set forth in Section 4.11 to the Parent
----------
Disclosure Schedule or specifically disclosed in the Parent SEC Documents filed
with the Commission prior to the date of this Agreement, there is no Action
pending or, to the knowledge of Parent, threatened against Parent or any of its
subsidiaries which, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on Parent or a material adverse
effect on the ability of Parent to consummate the transactions contemplated
hereby. Except as set forth in Section 4.11 to the Parent Disclosure Schedule,
since September 30, 1994, neither Parent nor any of its subsidiaries has been
subject to any outstanding order, writ, injunction or decree specifically
applicable to Parent which, individually or in the aggregate, would reasonably
be expected to have a Material Adverse Effect on Parent or a material adverse
effect on the ability of Parent to consummate the transactions contemplated
hereby.
4.12 Board Recommendation. The Board of Directors of Parent, at a
--------------------
meeting duly called and held at which a quorum was present throughout, has by
the requisite vote of the directors (i) determined that this Agreement and the
transactions
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<PAGE>
contemplated hereby, including the Merger, taken together, are fair to and in
the best interests of Parent and the stockholders of Parent, and (ii) resolved
to recommend that the stockholders of Parent approve the Parent Stockholder
Proposal and such recommendation has not been withdrawn, revoked or modified.
4.13 No Material Adverse Change. Except as specifically disclosed
--------------------------
in the Parent SEC Documents filed with the Commission prior to the date of this
Agreement, since March 31, 1997, there has been no change in the business,
assets, liabilities, results of operations or financial condition of Parent
which individually or in the aggregate would reasonably be expected to have a
Material Adverse Effect on Parent or any event, occurrence or development which
individually or in the aggregate would have a material adverse effect on the
ability of Parent to consummate the transactions contemplated hereby.
4.14 Title to Properties. Parent and its subsidiaries own or hold
-------------------
under valid leases all real property, plants, machinery and equipment necessary
for the conduct of the business of Parent and its subsidiaries as presently
conducted, except where the failure to own or so hold such property, plants,
machinery and equipment would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on Parent.
4.15 Undisclosed Liabilities. Except (i) as and to the extent
-----------------------
disclosed or reserved against in the consolidated balance sheet of Parent as of
June 30, 1997 included in the Parent SEC Documents, or disclosed in the
footnotes to the financial statements as of such date or the footnotes to the
March 31, 1997 financial statements included in the Parent SEC Documents, (ii)
as incurred after June 30, 1997 in the ordinary course of business consistent
with prior practice and not prohibited by this Agreement or (iii) as set forth
in Section 4.15 to the Parent Disclosure Schedule, Parent and its subsidiaries
do not have any liabilities or obligations of any nature, whether known or
unknown, absolute, accrued, contingent or otherwise and whether due or to become
due, that, individually or in the aggregate, would reasonably be expected to
have a Material Adverse Effect on Parent.
4.16 Operation of Parent's Business; Relationships. (a) Since
---------------------------------------------
March 31, 1997 through the date of this Agreement and except for entering into
this Agreement and the AmeriSource Stock Option Agreement, neither Parent nor
any of its subsidiaries has engaged in any transaction which, if done after
execution of this Agreement, would violate in any material respect Section
5.2(c) except as set forth in Section 4.16(a) to the Parent Disclosure Schedule
or except as specifically disclosed in the Parent SEC Documents filed prior to
the date of this Agreement.
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(b) Except as set forth in Section 4.16(b) to the Parent Disclosure
Schedule, (i) from January 1, 1997 to the date hereof, no material customer of
Parent or any of its subsidiaries has indicated that it will stop or materially
decrease purchasing materials, products or services from Parent or its
subsidiaries and (ii) since January 1, 1997, no material supplier of Parent or
any of its subsidiaries has indicated that it will stop or materially decrease
the supply of materials, products or services to Parent or its subsidiaries, in
each case, the effect of which individually or in the aggregate would reasonably
be expected to have a Material Adverse Effect on Parent.
4.17 Opinion of Financial Advisor. Parent has received the written
----------------------------
opinion of Peter J. Solomon Company Limited, its financial advisor, to the
effect that, as of the date hereof, the Exchange Ratio is fair to Parent from a
financial point of view, and such opinion has not been withdrawn or revoked or
modified in any material respect.
4.18 Beneficial Ownership of Shares. Except pursuant to the
------------------------------
AmeriSource Stock Option Agreement, none of Parent or Merger Sub "beneficially
owns" (as such term is defined in Rule 13d-3(a) under the Exchange Act) any
shares of AmeriSource Common Stock or any securities convertible into or
exchangeable for shares of AmeriSource Common Stock.
ARTICLE V
COVENANTS OF THE PARTIES
The parties hereto agree that:
5.1 Mutual Covenants.
----------------
(a) HSR Act Filings; Best Efforts; Notification. (i) Each of
-------------------------------------------
Parent and AmeriSource shall (A) make or cause to be made the filings required
of such party or any of its subsidiaries or affiliates under the HSR Act with
respect to the transactions contemplated hereby as promptly as practicable and
in any event within ten business days after the date of this Agreement, (B)
comply at the earliest practicable date with any request under the HSR Act for
additional information, documents, or other materials received by such party or
any of its subsidiaries from the Federal Trade Commission or the Department of
Justice (either, an "HSR Authority") or any other Governmental Authority in
respect of such filings or such transactions, and (C) cooperate with the other
party in connection with any such filing (including, with respect to the party
making a filing, providing copies of all such documents to the nonfiling party
and its advisors prior to filing and, if requested, to accept all reasonable
changes suggested in connection therewith) and in connection with resolving any
investigation or other inquiry of any such agency or other Governmental
Authority under any Antitrust Laws (as
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defined in Section 5.1(a)(ii)) with respect to any such filing or any such
transaction. Each party shall use its best efforts to furnish to each other all
information required for any application or other filing to be made pursuant to
any Applicable Law in connection with the Merger and the other transactions
contemplated by this Agreement. Each party shall promptly inform the other party
of any communication with, and any proposed understanding, undertaking, or
agreement with, any Governmental Authority regarding any such filings or any
such transaction. Neither party shall independently participate in any formal
meeting with any Governmental Authority in respect of any such filings,
investigation, or other inquiry without giving the other party prior notice of
the meeting and, to the extent permitted by such Governmental Authority, the
opportunity to attend and/or participate. The parties hereto will consult and
cooperate with one another in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of any party hereto in connection with proceedings
under or relating to the HSR Act or other Antitrust Laws. All documents and
information disclosed to any party pursuant to this Section 5.1(a)(i) shall be
governed by the terms of the Joint Defense Agreement, dated September 1, 1997,
between counsel for Parent and AmeriSource (the "Joint Defense Agreement") and
the Confidentiality Agreement among such counsel and Parent's economic
consultant (the "Antitrust Confidentiality Agreement"), to the extent either
such agreement is applicable to any such documents and information.
(ii) Each of Parent and AmeriSource shall use its best
efforts to resolve such objections, if any, as may be asserted by any
Governmental Authority with respect to the transactions contemplated by this
Agreement under the HSR Act, the Sherman Act, as amended, the Clayton Act, as
amended, the Federal Trade Commission Act, as amended, and any other federal,
state or foreign statutes, rules, regulations, orders, decrees, administrative
or judicial doctrines or other laws that are designed to prohibit, restrict or
regulate actions having the purpose or effect of monopolization or restraint of
trade (collectively, "Antitrust Laws"). In connection therewith, if any
administrative or judicial action or proceeding is instituted (or threatened to
be instituted) challenging any transaction contemplated by this Agreement as
violative of any Antitrust Law, each of Parent and AmeriSource shall cooperate
and use its best efforts vigorously to contest and resist any such action or
proceeding, including any legislative, administrative or judicial action, and to
have vacated, lifted, reversed or overturned any decree, judgment, injunction or
other order, whether temporary, preliminary or permanent (each an "Order"), that
is in effect and that prohibits, prevents, or restricts consummation of the
Merger or any other transactions contemplated by this Agreement, and vigorously
to pursue all available avenues of administrative and judicial appeal and all
available legislative action, unless by mutual agreement Parent and AmeriSource
decide that litigation is not in their respective best interest. Parent shall be
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entitled to direct any proceedings or negotiations with any Governmental
Authority relating to any of the foregoing described in this paragraph (ii) or
to the matters described in paragraph (i) of this Section 5.1(a), provided that
it shall afford AmeriSource a reasonable opportunity to participate therein, and
provided, further, that nothing in this sentence shall affect the parties'
rights and obligations contained in the third, fourth and fifth sentences of
Section 5.1(a)(i). Notwithstanding the foregoing or any other provision of this
Agreement, nothing in this Section 5.1(a) shall limit a party's right to
terminate this Agreement pursuant to Section 7.1, so long as such party has up
to then complied in all material respects with its obligations under this
Section 5.1(a). Each of Parent and AmeriSource shall use its best efforts to
take such action as may be required to cause the expiration of the notice period
under the HSR Act or other Antitrust Laws with respect to such transactions as
promptly as possible after the execution of this Agreement.
(iii) Each of the parties shall use its best efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including (A) the obtaining of all other necessary actions or
nonactions, waivers, consents, licenses, permits, authorizations, orders and
approvals from Governmental Authorities and the making of all other necessary
registrations and filings (including other filings with Governmental
Authorities, if any), (B) the obtaining of all consents, approvals or waivers
from third parties related to or required in connection with the Merger that are
necessary to consummate the Merger and the transactions contemplated by this
Agreement or required to prevent a Material Adverse Effect on Parent or
AmeriSource from occurring prior to or after the Effective Time, (C) the
preparation of the Joint Proxy Statement, the Prospectus and the Registration
Statement, (D) the taking of all action necessary to ensure that it is a
"poolable entity" eligible to participate in a transaction to be accounted for
as a pooling of interests for accounting purposes and to ensure that the Merger
constitutes a reorganization within the meaning of Section 368(a) of the Code,
and (E) the execution and delivery of any additional instruments necessary to
consummate the transaction contemplated by, and to fully carry out the purposes
of, this Agreement.
(iv) Notwithstanding anything to the contrary in this Agreement,
neither Parent nor AmeriSource shall be required to hold separate (including by
trust or otherwise) or divest any of their respective businesses or assets,
provided, however, that unless Parent and AmeriSource otherwise agree, if
required to avoid an HSR Authority instituting an Action challenging the
transactions contemplated by this Agreement under the Antitrust Laws and seeking
to enjoin or prohibit the consummation of any of the transactions contemplated
by this Agreement (or if required to settle any Action previously instituted by
an HSR Authority), Parent shall and, at the direction of Parent, AmeriSource
shall, hold separate (including by trust or otherwise) or divest any of
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their respective businesses or assets, or take or agree to take any action or
agree to any limitation required to avoid an HSR Authority instituting an Action
challenging the transactions under this Agreement under the Antitrust Laws and
seeking to enjoin or prohibit the consummation of any of the transactions
contemplated hereby (or to settle any Action previously instituted by an HSR
Authority) unless such action, in the reasonable judgment of Parent's Board of
Directors, would reasonably be expected to (x) have a material adverse effect on
the business, assets, liabilities, results of operations or financial condition
of Parent combined with the Surviving Corporation after the Effective Time, or
(y) reduce or render more uncertain the financial or strategic benefits
expected, as of the date hereof, to be realized from consummation of the Merger.
Notwithstanding any other provision of this Section 5.1(a)(iv) neither party
shall be required to (i) waive any of the conditions to the Merger set forth in
Article VI of this Agreement as they apply to such party, or (ii) divest any of
their respective businesses or assets if the divestitures would be required to
be consummated prior to the Effective Time.
(b) Pooling-of-Interests. Each of the parties agrees that it
--------------------
shall not, and shall not permit any of its subsidiaries to, take any actions
which would, or would be reasonably likely to, prevent Parent from accounting,
and shall use its best efforts (including, without limitation, providing
appropriate representation letters, and, in the case of AmeriSource, causing
AmeriSource's independent accountants to provide an appropriate letter, to
Parent's independent accountants) to allow Parent to account, for the Merger in
accordance with the pooling-of-interests method of accounting under the
requirements of Opinion No. 16 "Business Combinations" of the Accounting
Principles Board of the American Institute of Certified Public Accountants, as
amended by applicable pronouncements by the Financial Accounting Standards
Board, and all related published rules, regulations and policies of the
Commission ("APB No. 16"), and to obtain a letter, in form and substance
reasonably satisfactory to Parent, from Parent's independent accountants dated
the date of the Effective Time and, if requested by Parent, dated the date of
the Joint Proxy Statement stating that they concur with management's conclusion
that the Merger will qualify as a transaction to be accounted for by Parent in
accordance with the pooling-of-interests method of accounting under the
requirements of APB No. 16.
(c) Tax-Free Treatment. Each of the parties shall use its best
------------------
efforts to cause the Merger to constitute a "reorganization" under Section
368(a) of the Code.
(d) Public Announcements. Each of the parties agrees that it
--------------------
shall not, nor shall any of their respective affiliates, issue or cause the
publication of any press release or other public announcement with respect to
the Merger, this Agreement or the other transactions contemplated hereby without
the prior approval of the other party, except such disclosure as may be required
by law or by any listing agreement with a
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national securities exchange; provided, if such disclosure is required by law or
any such listing agreement, such disclosure may not be made without prior
consultation of the other parties.
(e) Joint Proxy Statement; Registration Statement. As promptly
---------------------------------------------
as practicable after the execution of this Agreement, Parent and AmeriSource
shall jointly prepare the Joint Proxy Statement, and Parent and AmeriSource
shall each file the Joint Proxy Statement with the Commission on a confidential
basis. Each of AmeriSource and Parent shall, as promptly as practicable, furnish
the other party with all information concerning it as may be required for
inclusion in the Joint Proxy Statement and the Registration Statement.
5.2 Covenants of Parent.
-------------------
(a) Parent Stockholders Meeting. Parent shall take all action
---------------------------
in accordance with the federal securities laws, the DGCL and the Parent
Certificate and Parent Bylaws necessary to convene a special meeting of the
stockholders of Parent (the "Parent Stockholders Meeting") to be held and
completed on the earliest practical date determined by Parent, subject to the
consent of AmeriSource (which shall not be unreasonably withheld) (which date
shall be the same date as the date of the AmeriSource Stockholders Meeting or as
close to one another as reasonably practicable), to consider and vote upon
approval of the Parent Stockholder Proposal.
(b) Joint Proxy Statement; Registration Statement. The Joint
---------------------------------------------
Proxy Statement shall include the recommendation of Parent's Board of Directors
referred to in Section 4.12 and the opinion of Peter J. Solomon Company Limited
referred to in Section 4.17. Consistent with the timing for the Parent
Stockholders Meeting and the AmeriSource Stockholders Meeting as determined by
Parent, subject to the consent of AmeriSource (which shall not be unreasonably
withheld), Parent shall prepare and file the Registration Statement with the
Commission as soon as is reasonably practicable following clearance of the Joint
Proxy Statement by the Commission and shall use all reasonable efforts to have
the Registration Statement declared effective by the Commission as promptly as
practicable and to maintain the effectiveness of the Registration Statement
through the Effective Time. If, at any time prior to the Effective Time, Parent
shall obtain knowledge of any information pertaining to Parent that would
require an amendment or supplement to the Registration Statement or the Joint
Proxy Statement, Parent shall so advise AmeriSource in writing and shall
promptly furnish AmeriSource with all information as shall be required for such
amendment or supplement and shall promptly take such action as shall be required
to amend or supplement the Registration Statement and/or the Joint Proxy
Statement. Parent shall use all reasonable efforts to mail at the earliest
practicable date to the stockholders of Parent the Joint Proxy Statement, which
shall include all information required by Applicable Law to be
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furnished to the stockholders of Parent in connection with the Parent
Stockholder Proposal. Parent also shall take such other reasonable actions
(other than qualifying to do business in any jurisdiction in which it is not so
qualified) required to be taken under any applicable state securities laws in
connection with the issuance of shares of Parent Common Stock in the Merger.
(c) Conduct of Parent's Operations. During the period from the
------------------------------
date of this Agreement to the Effective Time, Parent shall use all reasonable
efforts to maintain and preserve its business organization and to retain the
services of its officers and key employees and maintain relationships with
customers, suppliers and other third parties to the end that its goodwill and
ongoing business shall not be impaired in any material respect. Without limiting
the generality of the foregoing, during the period from the date of this
Agreement to the Effective Time, Parent shall not, except as otherwise expressly
contemplated by this Agreement and the transactions contemplated hereby or as
set forth in Section 5.2(c) to the Parent Disclosure Schedule, without the prior
written consent of AmeriSource:
(i) change any method or principle of accounting in a
manner that is inconsistent with past practice except to the extent required by
generally accepted accounting principles as advised by Parent's regular
independent accountants;
(ii) take any action that could likely result in the
representations and warranties set forth in Article IV becoming false or
inaccurate in any material respect;
(iii) make any changes in the Parent Certificate or Parent
Bylaws that would adversely affect in any material respect the rights and
preferences of the holders of shares of Parent Common Stock or make any changes
in the Certificate of Incorporation or Bylaws of Merger Sub;
(iv) without giving AmeriSource and Parent's counsel
written notice at least six business days prior to the filing of any application
under the HSR Act with respect thereto, or, if no such filing is made, at least
six business days prior to the entering into of any agreement to make such
acquisition, or within two business days after entering into any such agreement
provided the agreement is contingent on compliance with this paragraph (iv),
acquire a material amount of assets or capital stock of or other equity
interests in (A) an entity engaged in the U.S. pharmaceutical distribution
business (as defined below) or (B) any other business; provided that, in the
case of clause (A), no such acquisition shall be made if either Parent's outside
antitrust counsel or AmeriSource's outside antitrust counsel shall, within five
business days of receipt of the aforesaid notice, deliver to Parent its written
opinion that such acquisition would materially and adversely affect the ability
of Sections 6.1(b), 6.1(c) and 6.1(d)
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(insofar as they relate to federal Antitrust Laws) to be satisfied on or
prior to the Termination Date (as defined in Section 7.1(c)) (Parent agreeing
promptly to provide AmeriSource's counsel with all information, analyses and
materials available to Parent in connection with such acquisition that would be
reasonably necessary in formulating its opinion); and provided that, in the case
of clause (B), no such acquisition shall be made if such acquisition would
materially and adversely affect the ability of Sections 6.1(b), 6.1(c) and
6.1(d) (insofar as they relate to federal Antitrust Laws) to be satisfied on or
prior to the Termination Date; Parent hereby agreeing that it will make its
determination as to whether the acquisition would materially and adversely
affect such ability after consulting with Parent's outside antitrust counsel and
AmeriSource's outside antitrust counsel (for the purposes of this Section
5.2(c)(iv) only, an entity shall be deemed to be engaged in the U.S.
pharmaceutical distribution business if it derived at least $200 million in
revenues from the pharmaceutical distribution business (and shall have more than
$25 million of revenues or $15 million in assets in the U.S.) in its fiscal year
preceding the date of the agreement or filing referred to above) (it being
understood that, with respect to joint ventures or newly formed entities, the
revenues of such entity for a fiscal year will include revenues the contributing
party derived from the assets or businesses contributed
to such entity for the entire twelve-month period ending on the same date as the
end of such entity's fiscal year);
(v) declare or pay (i) any non-cash dividend or
distribution, other than dividends or distributions for which there would be an
adjustment to the Exchange Ratio pursuant to Section 2.2(b), on any shares of
Parent Common Stock, or (ii) any cash dividend or distribution other than
regular quarterly cash dividends (with declaration, record and payment dates
consistent with past practice) not to exceed 110% of the per share amount of
quarterly cash dividends declared and paid on its shares of Parent Common Stock
with respect to the previous four fiscal quarters;
(vi) permit or cause any subsidiary to do any of the
foregoing or agree or commit to do any of the foregoing; or
(vii) agree in writing or otherwise to take any of the
foregoing actions.
(d) Indemnification; Directors' and Officers' Insurance.
---------------------------------------------------
(i) From and after the Effective Time, Parent shall, and shall cause the
Surviving Corporation to, indemnify, defend and hold harmless any person who is
now, or has been at any time prior to the date hereof, or who becomes prior to
the Effective Time, a director or officer (an "Indemnified Person") of
AmeriSource or any of its subsidiaries against all losses, claims, damages,
liabilities, costs and expenses (including reasonable fees and expenses of legal
counsel selected by the Indemnified Person with the consent of Parent, which
consent will not be unreasonably withheld), judgments, fines and amounts paid in
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settlement in connection with any actual or threatened action, suit, claim,
proceeding or investigation (each a "Claim") to the extent that any such Claim
is based on, or arises out of: (x) the fact that such Indemnified Person is or
was a director or officer of AmeriSource or any of its subsidiaries or is or was
serving at the request of AmeriSource or any of its subsidiaries as a director
or officer of another corporation, partnership, joint venture, trust or other
enterprise; or (y) this Agreement or any of the transactions contemplated
hereby, in each case to the extent that any such Claim pertains to any matter or
fact arising, existing or occurring prior to or at the Effective Time,
regardless of whether such Claim is asserted or claimed prior to, at or after
the Effective Time, to the full extent permitted under the DGCL, the AmeriSource
Certificate or the AmeriSource Bylaws or any indemnification agreement in effect
at the date hereof and listed in Section 5.2(d) to the AmeriSource Disclosure
Schedule, including provisions relating to advancement of expenses incurred in
the defense of any such Claim. Without limiting the generality of the preceding
sentence, in the event any Indemnified Person becomes involved in any Claim,
after the Effective Time, Parent shall, or shall cause the Surviving Corporation
to, periodically advance to such Indemnified Person its legal and other expenses
(including the cost of any investigation and preparation incurred in connection
therewith), subject to the provisions of paragraph (ii) of this Section 5.2(d),
and subject to the providing by such Indemnified Person of an undertaking to
reimburse all amounts so advanced in the event of a final non-appealable
determination by a court of competent jurisdiction that such Indemnified Person
is not entitled hereto.
(ii) The Indemnified Person shall control the defense of
any Claim with counsel selected by the Indemnified Person, which counsel shall
be reasonably acceptable to Parent, provided that Parent and the Surviving
Corporation shall be permitted to participate in the defense of such Claim at
their own expense, and provided, further, that if any D&O Insurance (as defined
in Section 5.2(d)(iv)) in effect at the time shall require the insurance company
to control such defense in order to obtain the full benefits of such insurance
and such provision is consistent with the provisions of AmeriSource's D&O
Insurance in existence as of the date of this Agreement, then the provision of
such policy shall govern. Parent and the Surviving Corporation shall not be
obligated to pay the fees and expenses of more than one counsel for all
Indemnified Persons in any single Claim except to the extent that, in the
opinion of independent legal counsel selected by the Indemnified Person, which
counsel shall be reasonably acceptable to Parent, representation of two or more
of such Indemnified Persons would present a conflict of interest under
applicable standards of conduct in the legal profession. Neither Parent nor the
Surviving Corporation shall be liable for any settlement effected without its
written consent, which consent shall not unreasonably be withheld.
(iii) Parent, Merger Sub and AmeriSource agree that all
rights to indemnification or liabilities, and all limitations with respect
thereto, existing in favor of any Indemnified Person, as provided in the
AmeriSource Certificate or the
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AmeriSource Bylaws and any indemnification agreement in effect at the date
hereof and listed in Section 5.2(d) to the AmeriSource Disclosure Schedule,
shall survive the Merger and shall continue in full force and effect, without
any amendment thereto; provided, however, that in the event any Claim is
asserted or made, any determination required to be made with respect to whether
an Indemnified Person's conduct complies with the standards set forth under the
DGCL, the AmeriSource Certificate or the AmeriSource Bylaws or any such
agreement, as the case may be, shall be made by independent legal counsel
selected by such Indemnified Person and reasonably acceptable to Parent; and
provided further that nothing in this Section 5.2(d) shall impair any rights or
obligations of any current or former director or officer of AmeriSource or its
subsidiaries, including pursuant to the respective certificates of incorporation
or bylaws of Parent, the Surviving Corporation or AmeriSource, or their
respective subsidiaries, under the DGCL or otherwise.
(iv) Parent or the Surviving Corporation shall maintain
AmeriSource's existing directors' and officers' liability insurance policy ("D&O
Insurance") for a period of not less than six years after the Effective Time;
provided, however, that Parent may substitute therefor policies of substantially
similar coverage and amounts (with carriers comparable to AmeriSource's existing
carriers) containing terms no less advantageous to such former directors or
officers; provided further that if the existing D&O Insurance expires or is
canceled during such period, Parent or the Surviving Corporation shall use their
reasonable efforts to obtain substantially similar D&O Insurance, and provided
further that Parent and the Surviving Corporation shall not be required to pay
in the aggregate an annual premium for D&O Insurance in excess of 150% of the
last annual premium paid prior to the date hereof, but in such case shall
purchase as much coverage as possible for such amount.
(v) The provisions of this Section 5.2(d) are intended to
be for the benefit of, and shall be enforceable by, each Indemnified Person, his
or her heirs and his or her personal representatives.
(vi) From and after the Effective Time Parent shall (A)
provide to the directors of AmeriSource who become directors of Parent
directors' and officers' liability insurance on the same basis and to the same
extent as that, if any, provided to other directors of Parent, and (B) enter
into indemnification agreements with the directors of AmeriSource who become
directors of Parent on terms entered into with other directors of Parent
generally.
(e) Merger Sub. Prior to the Effective Time, Merger Sub shall
----------
not conduct any business or make any investments other than as specifically
contemplated by this Agreement and will not have any assets (other than a de
minimis amount of cash paid to Merger Sub for the issuance of its stock to
Parent) or any material liabilities.
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(f) NYSE Listing. Parent shall use its best efforts to cause
------------
the shares of Parent Common Stock issuable pursuant to the Merger (including,
without limitation, the shares of Parent Common Stock issuable upon the exercise
of the Parent Exchange Options) to be approved for listing on the NYSE, subject
to official notice of issuance, prior to the Effective Time.
(g) Access. Parent shall permit representatives of AmeriSource
------
to have appropriate access at all reasonable times to Parent's premises,
properties, books, records, contracts, documents, customers and suppliers.
Information obtained by AmeriSource pursuant to this Section 5.2(g) shall be
subject to the provisions of the confidentiality agreement between Parent and
AmeriSource (the "Confidentiality Agreement"), which agreement remains in full
force and effect. No investigation conducted pursuant to this Section 5.2(g) or
otherwise shall affect or be deemed to modify any representation or warranty
made in this Agreement. Notwithstanding the foregoing, Parent shall have no
obligation to provide AmeriSource with information if Parent determines in good
faith, upon written advice of its outside antitrust counsel, that providing such
information may violate any Applicable Law.
(h) Board of Directors and Officers of Parent. The Board of
-----------------------------------------
Directors of Parent shall take all action necessary immediately following the
Effective Time to elect the following persons to the Board of Directors of
Parent: (i) James Urry, who shall be assigned to the class of directors whose
term of office expires at Parent's first annual meeting of stockholders after
the Effective Time, (ii) Michael Delaney, who shall be assigned to the class of
directors whose term of office expires at Parent's second annual meeting of
stockholders after the Effective Time, and (iii) David Yost, who shall be
assigned to the class of directors whose term of office expires at Parent's
third annual meeting of stockholders after the Effective Time. The Board of
Directors of Parent also shall appoint David Yost as Group President of the
AmeriSource Services Group and a Corporate Vice President, effective after the
Effective Time, to serve in accordance with the provisions of the Parent
Certificate, the Parent Bylaws and the provisions of the DGCL.
(i) Affiliates of Parent. Parent shall use its best efforts to
--------------------
cause each such person who may be at the Effective Time or was on the date
hereof an "affiliate" of Parent for purposes of applicable accounting releases
of the Commission with respect to pooling of interests accounting treatment, to
execute and deliver to AmeriSource no less than 30 days prior to the date of the
Parent Stockholders Meeting, the written undertakings in the form attached
hereto as Exhibit A-2 (the "Parent Affiliate Letter").
(j) Notification of Certain Matters. Parent shall give prompt
-------------------------------
notice to AmeriSource of (i) the occurrence
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or non-occurrence of any event the occurrence or non-occurrence of which would
likely cause any Parent representation or warranty contained in this Agreement
to be untrue or inaccurate at or prior to the Effective Time in any material
respect and (ii) any material failure of Parent to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 5.2(j) shall not limit or otherwise affect the remedies available
hereunder to AmeriSource.
(k) Employees and Employee Benefits. From and after the
-------------------------------
Effective Time, Parent shall treat all service by AmeriSource Employees (as
defined below) with AmeriSource and their respective predecessors prior to the
Effective Time as service with Parent for eligibility and vesting purposes under
Parent's employee benefits plans. Following the Effective Time, Parent agrees to
provide or cause its affiliates to provide employee benefits to AmeriSource
Employees that are no less favorable in the aggregate than those provided to
AmeriSource Employees immediately prior to the Effective Time under the employee
benefit plans of AmeriSource and its subsidiaries. With respect to any medical
or dental benefit plan in which AmeriSource Employees participate after the
Effective Time, Parent shall waive or cause to be waived any pre-existing
condition exclusions and actively-at-work requirements (provided, however, that
no such waiver shall apply to a pre-existing condition of any AmeriSource
Employee which was, as of the Effective Time, treated under a AmeriSource plan
as a pre-existing condition), and shall provide that any covered expenses
incurred on or before the Effective Time by a AmeriSource Employee or a
AmeriSource Employee's covered dependent shall be taken into account for
purposes of satisfying applicable deductible, coinsurance and maximum out-of-
pocket provisions after the Effective Time to the same extent as such expenses
are taken into account for the benefit of similarly situated employees of Parent
and subsidiaries of Parent. For purposes of this Section 5.2(k), "AmeriSource
Employees" shall mean persons who are, as of the Effective Time, employees of
AmeriSource.
(l) Letters of Parent's Accountants. Parent shall use all
-------------------------------
reasonable efforts to cause to be delivered to AmeriSource letters of Parent's
independent accountants, dated a date within two business days before the date
on which the Registration Statement shall become effective, the date the Joint
Proxy Statement is mailed and the date of the AmeriSource Stockholders Meeting
and addressed to AmeriSource, in form and substance reasonably satisfactory to
AmeriSource and customary in scope and substance for letters delivered by
independent accountants in connection with registration statements similar to
the Registration Statement.
(m) Purchases of Common Stock of AmeriSource. During the period
----------------------------------------
from the date hereof through the Effective Time, neither Parent nor any of its
subsidiaries will purchase any shares of AmeriSource Common Stock other than
pursuant to the AmeriSource Stock Option Agreement.
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(n) Registration Rights. At or prior to the Closing Parent
-------------------
shall enter into an agreement with VPI to provide it with registration rights
with respect to the Parent Common Stock to be received by it in the Merger,
pursuant to the registration rights agreement (the "Registration Rights
Agreement") attached to Section 5.2(n) to the AmeriSource Disclosure Schedule.
(o) Publishing Financial Results. If the Effective Time is
----------------------------
less than 30 days prior to the end of Parent's fiscal quarter or occurs during
the first 30 days of McKesson's fiscal quarter, Parent shall use reasonable
efforts to prepare and publicly release, as soon as practicable following the
end of the first month ending at least 30 days after the Effective Time, a
report filed with the Commission on Form 8-K or any other public filing,
statement or announcement which includes the combined financial results
(including combined sales and net income) of Parent and AmeriSource for a period
of at least 30 days of combined operations of Parent and AmeriSource following
the Effective Time.
5.3 Covenants of AmeriSource.
------------------------
(a) AmeriSource Stockholders Meeting. AmeriSource shall take
--------------------------------
all action in accordance with the federal securities laws, the DGCL and the
AmeriSource Certificate and the AmeriSource Bylaws necessary to convene a
special meeting of the stockholders of AmeriSource entitled to vote (the
"AmeriSource Stockholders Meeting") to be held and completed on the earliest
practicable date determined by Parent, subject to the consent of AmeriSource
(which shall not be unreasonably withheld) (which date shall be the same date as
the date of the Parent Stockholders Meeting or as close to one another as
reasonably practicable), to consider and vote upon approval of the Merger, this
Agreement and the transactions contemplated hereby.
(b) Joint Proxy Statement; Registration Statement. AmeriSource
---------------------------------------------
shall cooperate with Parent in the preparation and filing of the Registration
Statement in a timely fashion and shall use all reasonable efforts to assist
Parent in having the Registration Statement declared effective by the Commission
as promptly as practicable and in maintaining the effectiveness of the
Registration Statement through the Effective Time. If, at any time prior to the
Effective Time, AmeriSource shall obtain knowledge of any information pertaining
to AmeriSource that would require any amendment or supplement to the
Registration Statement or the Joint Proxy Statement, AmeriSource shall so advise
Parent in writing and shall promptly furnish Parent with all information as
shall be required for such amendment or supplement and shall promptly take such
action as shall be required to amend or supplement the Registration Statement
and/or Joint Proxy Statement. AmeriSource shall use all reasonable efforts to
mail at the earliest practicable date to the stockholders of AmeriSource the
Joint Proxy Statement, which shall include all information required under
Applicable Law to be furnished to the stockholders of AmeriSource in connection
with the Merger and the transactions contemplated thereby
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and shall include the AmeriSource Board Recommendation to the extent not
previously withdrawn in compliance with Section 5.3(d) and the written opinion
of Goldman, Sachs & Co. described in Section 3.23.
(c) Conduct of AmeriSource's Operations. During the period from
-----------------------------------
the date of this Agreement to the Effective Time, AmeriSource shall conduct its
operations in the ordinary course except as expressly contemplated by this
Agreement and the transactions contemplated hereby and shall use all reasonable
efforts to maintain and preserve its business organization and to retain the
services of its officers and key employees and maintain relationships with
customers, suppliers, lessees, licensees and other third parties to the end that
its goodwill and ongoing business shall not be impaired in any material respect.
Without limiting the generality of the foregoing, during the period from the
date of this Agreement to the Effective Time, AmeriSource shall not, except as
otherwise expressly contemplated by this Agreement and the transactions
contemplated hereby or as set forth in Section 5.3(c) to the AmeriSource
Disclosure Schedule, without the prior written consent of Parent:
(i) do or effect any of the following actions with respect
to its securities: (A) adjust, split, combine or reclassify its capital stock,
(B) make, declare or pay any dividend or distribution on, or directly or
indirectly redeem, purchase or otherwise acquire, any shares of its capital
stock or any securities or obligations convertible into or exchangeable for any
shares of its capital stock, (C) grant any person any right or option to acquire
any shares of its capital stock (provided that AmeriSource may grant AmeriSource
Options to purchase shares of AmeriSource Common Stock if such grants are made
at such times and in such amounts as are consistent with previous grants by
AmeriSource in the ordinary course of business ("Additional AmeriSource
Options") and if the Additional AmeriSource Options shall provide that the
Merger shall not be an event which accelerates the vesting thereof, and so long
as no such grant shall jeopardize Parent's ability to account for the Merger in
accordance with the pooling-of-interests method of accounting under the
requirements of APB No. 16 and provided further that prior to granting any
Additional AmeriSource Options AmeriSource shall consult with Parent's and
AmeriSource's independent public accountants and if either of them recommends
that a particular grant of AmeriSource Options not be made or that the number of
AmeriSource Options to be granted shall be reduced then AmeriSource will follow
such recommendation), (D) issue, deliver or sell or agree to issue, deliver or
sell any additional shares of its capital stock or any other securities or
obligations convertible into or exchangeable or exercisable for any shares of
its capital stock or such securities (except pursuant to the exercise of
AmeriSource Options which are outstanding as of the date hereof or which are
granted by AmeriSource prior to the Effective Time in compliance with the terms
of this Agreement), (E) enter into any agreement, understanding or arrangement
with respect to the sale, voting, registration or repurchase
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of its capital stock or (F) adopt a so-called "poison pill" or adopt or enter
into a shareholder rights plan or similar plan;
(ii) directly or indirectly sell, transfer, lease, pledge,
mortgage, encumber or otherwise dispose of any of its property or assets other
than in the ordinary course of business;
(iii) amend the AmeriSource Certificate or the AmeriSource
Bylaws;
(iv) merge or consolidate with any other person;
(v) acquire assets or capital stock of or other equity
interests in any other person valued, giving effect to assumed indebtedness, at
more than $25 million per transaction and $50 million in the aggregate; provided
that AmeriSource shall give Parent written notice of any acquisition of assets
or capital stock of or other equity interests in any other person, regardless of
the size of the transaction, at least six business days prior to the filing of
any application under the HSR Act with respect thereto or, if no such filing is
made, at least six business days prior to the entering into of any agreement to
make such an acquisition, or within two business days after entering into any
such agreement, provided the agreement is contingent on compliance with this
paragraph (v), and provided, further, that AmeriSource shall not make any
acquisition of (A) any entity engaged in the U.S. pharmaceutical distribution
business (as defined below) or (B) any other business, regardless of the size of
the transaction, if (x) in the case of clause (A), either AmeriSource's outside
antitrust counsel or Parent's outside antitrust counsel shall, within five
business days of receipt of the aforesaid notice, deliver to AmeriSource its
written opinion that such acquisition would materially and adversely affect the
ability of Section 6.1(b), 6.1(c) and 6.1(d) (insofar as they relate to federal
Antitrust Laws) to be satisfied on or prior to the Termination Date (AmeriSource
agreeing promptly to provide Parent's counsel with all information, analyses and
materials available to AmeriSource in connection with such acquisition that
would be reasonably necessary in formulating its opinion); and (y) in the case
of clause (B), if such acquisition would materially and adversely affect the
ability of Section 6.1(b), 6.1(c) and 6.1(d) (insofar as they relate to federal
Antitrust Laws) to be satisfied on or prior to the Termination Date; AmeriSource
hereby agreeing that it will make its determination as to whether the
acquisition would materially and adversely affect such ability after consulting
with AmeriSource's outside antitrust counsel (for the purposes of this Section
5.3(c)(v) only, an entity shall be deemed to be engaged in the U.S.
pharmaceutical distribution business if it derived at least $100 million in
revenues from the pharmaceutical distribution business (and shall have more than
$25 million of revenues in the U.S. or $15 million in assets in the U.S.) in its
fiscal year preceding the date of the agreement or filing referred to above) (it
being understood that, with respect to joint ventures or newly
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formed entities, the revenues of such entity for a fiscal year will include
revenues the contributing party derived from the assets or businesses
contributed to such entity for the entire twelve-month period ending on the same
date as the end of such entity's fiscal year);
(vi) except pursuant to existing credit arrangements set
forth in Section 3.17 to the AmeriSource Disclosure Schedule or as set forth in
Section 5.3(c) to the AmeriSource Disclosure Schedule, incur, create, assume or
otherwise become liable for any indebtedness for borrowed money or, other than
in the ordinary course of business consistent with past practice, assume,
guarantee, endorse or otherwise as an accommodation become responsible or liable
for the obligations of any other individual, corporation or other entity;
(vii) except as set forth in Section 5.3(c)(vii) of the
AmeriSource Disclosure Schedule, enter into or modify any employment, severance,
stay-pay termination or similar agreements or arrangements with, or grant any
bonuses, salary increases, severance or termination pay to, any officer,
director, consultant or employee other than in the ordinary course of business
consistent with past practice (except for change-of-control severance agreements
that in all cases shall require the prior written consent of Parent), or
otherwise increase the compensation or benefits provided to any officer,
director, consultant or employee except as may be required by Applicable Law or
in the ordinary course of business consistent with past practice;
(viii) enter into, adopt or amend any employee benefit or
similar plan except as may be required by Applicable Law;
(ix) change any method or principle of accounting in a
manner that is inconsistent with past practice except to the extent required by
generally accepted accounting principles as advised by AmeriSource's regular
independent accountants, or make any material Tax election (unless required by
law or consistent with prior practice) or settle any material Tax liability
which is the subject of dispute between AmeriSource and a Governmental
Authority, unless, in each case, Parent is given reasonable prior written notice
thereof;
(x) modify, amend or terminate, or waive, release or assign
any material rights or claims with respect to, any Contract ("Contract Actions")
other than Contract Actions in the ordinary course of business consistent with
past practices and which individually or in the aggregate would not be
reasonably expected to have a Material Adverse Effect on AmeriSource;
(xi) enter into any confidentiality, standstill or non-
compete agreements or arrangements which after the Effective Time would apply or
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purport to apply to Parent or any of its subsidiaries (other than AmeriSource or
any of its subsidiaries);
(xii) incur or commit to any capital expenditures,
individually or in the aggregate, in excess of the amount set forth in Section
5.3(c) to the AmeriSource Disclosure Schedule;
(xiii) except as permitted by Section 5.3(d), take any
action to exempt or make not subject to (x) the provisions of Section 203 of the
DGCL or (y) any other state takeover law or state law that purports to limit or
restrict business combinations or the ability to acquire or vote shares, any
person or entity (other than Parent or its subsidiaries) or any action taken
thereby, which person, entity or action would have otherwise been subject to the
restrictive provisions thereof and not exempt therefrom;
(xiv) modify or waive any of its rights under any provision
of any confidentiality agreement or standstill agreement;
(xv) take any action that will likely result in the
representations and warranties set forth in Article III becoming false or
inaccurate in any material respect;
(xvi) enter into or carry out any other transaction other
than in the ordinary and usual course of business or other than as permitted
pursuant to the other clauses in this Section 5.3(c);
(xvii) permit or cause any subsidiary to do any of the
foregoing or agree or commit to do any of the foregoing; or
(xviii) agree in writing or otherwise to take any of the
foregoing actions.
(d) No Solicitation. During the term of this Agreement,
---------------
AmeriSource shall not, and shall not authorize or permit any of its subsidiaries
or any of its or its subsidiaries' directors, officers, employees, agents or
representatives, directly or indirectly, to solicit, initiate, encourage or
facilitate, or furnish or disclose non-public information in furtherance of, any
inquiries or the making of any proposal with respect to any recapitalization,
merger, consolidation or other business combination involving AmeriSource, or
acquisition of any capital stock from AmeriSource (other than upon exercise of
AmeriSource options which are outstanding as of the date hereof or which have
been granted by AmeriSource prior to the Effective Time in compliance with the
terms of this Agreement) or 15% or more of the assets of AmeriSource and its
subsidiaries, taken as a whole, in a single transaction or a series of related
transactions, or
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any acquisition by AmeriSource of any material assets or capital stock of any
other person (other than to the extent specifically permitted by Section
5.3(c)(v)), or any combination of the foregoing (a "Competing Transaction"), or
negotiate or otherwise engage in discussions with any person (other than Parent,
Merger Sub or their respective directors, officers, employees, agents and
representatives) with respect to any Competing Transaction or enter into any
agreement, arrangement or understanding requiring it to abandon, terminate or
fail to consummate the Merger or any other transactions contemplated by this
Agreement; provided that, at any time prior to the approval of the Merger by the
stockholders of AmeriSource, AmeriSource may furnish information to, and
negotiate or otherwise engage in discussions with, any party who delivers a
written proposal for a Competing Transaction which was not solicited or
encouraged after the date of this Agreement if and so long as the Board of
Directors of AmeriSource determines in good faith by a majority vote, after
consultation with and receipt of advice from its outside legal counsel, that
failing to take such action would constitute a breach of the fiduciary duties of
the Board of Directors of AmeriSource under Applicable Law and determines that
such a proposal is, after consulting with Goldman, Sachs & Co. (or any other
nationally recognized investment banking firm), more favorable to AmeriSource's
stockholders from a financial point of view than the transactions contemplated
by this Agreement (including any adjustment to the terms and conditions proposed
by Parent in response to such Competing Transaction). AmeriSource will
immediately cease all existing activities, discussions and negotiations with any
parties conducted heretofore with respect to any proposal for a Competing
Transaction. Notwithstanding any other provision of this Section 5.3(d), in the
event that prior to the approval of the Merger by the stockholders of
AmeriSource the Board of Directors of AmeriSource determines in good faith by a
majority vote, after consultation with and receipt of advice from outside legal
counsel, that failure to do so would constitute a breach of the fiduciary duties
of the AmeriSource Board of Directors under Applicable Law, the Board of
Directors of AmeriSource may (subject to this and the following sentences)
withdraw, modify or change, in a manner adverse to Parent, the AmeriSource Board
Recommendation and take and disclose to the stockholders of AmeriSource a
position with respect to the Competing Transaction and, to the extent
applicable, comply with Rule 14e-2 promulgated under the Exchange Act with
respect to a Competing Transaction by disclosing such withdrawn, modified or
changed AmeriSource Board Recommendation and recommendation with respect to the
Competing Transaction in connection with a tender or exchange offer for
AmeriSource securities, provided that it uses all reasonable efforts to give
Parent two days prior written notice of its intention to do so (provided that
the foregoing shall in no way limit or otherwise affect Parent's right to
terminate this Agreement pursuant to Section 7.1(d)). The AmeriSource Board of
Directors shall not, in connection with any such withdrawal, modification or
change of the AmeriSource Board Recommendation, take any action to change the
approval of the Board of Directors of AmeriSource for purposes of causing any
state takeover statute or other state law to be applicable to the
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transactions contemplated hereby, including this Agreement, the AmeriSource
Stock Option Agreement and the Merger, provided, however, that this sentence
shall not prohibit AmeriSource from withdrawing, modifying or changing its
recommendation or approving or recommending any Competing Transaction under the
circumstances and subject to the conditions set forth in this Section 5.3(d).
From and after the execution of this Agreement, AmeriSource shall immediately
advise Parent in writing of the receipt, directly or indirectly, of any
inquiries, discussions, negotiations, or proposals relating to a Competing
Transaction (including the specific terms thereof and the identity of the other
party or parties involved) and furnish to Parent within 24 hours of such receipt
an accurate description of all material terms (including any changes or
adjustments to such terms as a result of negotiations or otherwise) of any such
written proposal in addition to any information provided to any third party
relating thereto. In addition, AmeriSource shall immediately advise Parent, in
writing, if the Board of Directors of AmeriSource shall make any determination
as to any Competing Transaction as contemplated by the proviso to the first
sentence of this Section 5.3(d).
(e) Termination Right. If prior to the approval of the Merger
-----------------
by the stockholders of AmeriSource the Board of Directors of AmeriSource shall
determine in good faith, after consultation with its financial and legal
advisors, with respect to any written proposal from a third party for a
Competing Transaction received after the date hereof that was not solicited or
encouraged by AmeriSource or any of its subsidiaries or affiliates in violation
of this Agreement that failure to enter into such Competing Transaction would
constitute a breach of the fiduciary duties of the Board of Directors of
AmeriSource under Applicable Law and that such Competing Transaction is more
favorable to the stockholders of AmeriSource from a financial point of view than
the transactions contemplated by this Agreement (including any adjustment to the
terms and conditions of such transaction proposed in writing by Parent in
response to such Competing Transaction) and is in the best interest of the
stockholders of AmeriSource and AmeriSource has received (x) the advice of its
outside legal counsel that failure to enter into such a Competing Transaction
would constitute a breach of the Board of Directors' fiduciary duties under
Applicable Law and (y) a written opinion (a copy of which has been delivered to
Parent) from Goldman, Sachs & Co. (or any other nationally recognized investment
banking firm) that the Competing Transaction is more favorable from a financial
point of view to the stockholders of AmeriSource than the transactions
contemplated by this Agreement (including any adjustment to the terms and
conditions of such transaction proposed in writing by Parent), AmeriSource may
terminate this Agreement and enter into a letter of intent, agreement-in-
principle, acquisition agreement or other similar agreement (each, an
"Acquisition Agreement") with respect to such Competing Transaction provided
that, prior to any such termination, (i) AmeriSource has provided Parent written
notice that it intends to terminate this Agreement pursuant to this Section
5.3(e), identifying the Competing Transaction then determined to be more
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favorable and the parties thereto and delivering an accurate description of all
material terms (including any changes or adjustments to such terms as a result
of negotiations or otherwise) of the Acquisition Agreement to be entered into
for such Competing Transaction, and (ii) at least three full business days after
AmeriSource has provided the notice referred to in clause (i) above (provided
that the advice and opinion referred to in clauses (x) and (y) above shall
continue in effect without revocation, revision or modification), AmeriSource
delivers to Parent (A) a written notice of termination of this Agreement
pursuant to this Section 5.3(e), (B) a check in the amount of Parent's Costs (as
defined in Section 7.2) as the same may have been estimated by Parent in good
faith prior to the date of such delivery (subject to an adjustment payment
between the parties upon Parent's definitive determination of such Costs), plus
the amount of the Termination Fee (as defined in Section 7.2), (C) a written
acknowledgment from AmeriSource that (x) the termination of this Agreement and
the entry into the Acquisition Agreement for the Competing Transaction will be a
"Purchase Event" as defined in the AmeriSource Stock Option Agreement and (y)
the AmeriSource Stock Option Agreement shall be honored in accordance with its
terms and (D) a written acknowledgment from each other party to such Competing
Transaction that it is aware of the substance of AmeriSource's acknowledgment
under clause (C) above and waives any right it may have to contest the matters
thus acknowledged by AmeriSource.
(f) Affiliates of AmeriSource. AmeriSource shall use its best
-------------------------
efforts to cause each such person who may be at the Effective Time or was on the
date hereof an "affiliate" of AmeriSource for purposes of Rule 145 under the
Securities Act or applicable accounting releases of the Commission with respect
to pooling-of-interests accounting treatment, to execute and deliver to Parent
no less than 30 days prior to the date of the AmeriSource Stockholders Meeting,
the written undertakings in the form attached hereto as Exhibit A-1 (the
"AmeriSource Affiliate Letter"). No later than 45 days prior to the date of the
AmeriSource Stockholders Meeting, AmeriSource, after consultation with its
outside counsel, shall provide Parent with a letter (reasonably satisfactory to
outside counsel to Parent) specifying all of the persons or entities who, in
AmeriSource's opinion, may be deemed to be "affiliates" of AmeriSource under the
preceding sentence. The foregoing notwithstanding, Parent shall be entitled to
place legends as specified in the AmeriSource Affiliate Letter on the
certificates evidencing any of the shares of Parent Common Stock to be received
by (i) any such "affiliate" of AmeriSource specified in such letter or (ii) any
person Parent reasonably identifies (by written notice to AmeriSource) as being
a person who may be deemed an "affiliate" for purposes of Rule 145 under the
Securities Act or applicable accounting releases of the Commission with respect
to pooling-of-interests accounting treatment, pursuant to the terms of this
Agreement, and to issue appropriate stop transfer instructions to the transfer
agent for the shares of Parent Common Stock, consistent with the terms of the
AmeriSource Affiliate Letter, regardless of whether such person has executed the
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AmeriSource Affiliate Letter and regardless of whether such person's name
appears on the letter to be delivered pursuant to the preceding sentence.
Promptly upon the request of the holder of such certificates, Parent will issue
new certificates with no legends, and will countermand the stop transfer
instructions, consistent with the terms of the AmeriSource Affiliate Letter.
(g) Access. AmeriSource shall permit representatives of Parent
------
to have full access at all reasonable times to AmeriSource's premises,
properties, books, records, contracts, documents, customers and suppliers, and
shall cause its independent accountants to give Parent access to such
accountants' work papers. Information obtained by Parent pursuant to this
Section 5.3(g) shall be subject to the provisions of the Confidentiality
Agreement, which agreement remains in full force and effect. No investigation
conducted pursuant to this Section 5.3(g) or otherwise shall affect or be deemed
to modify any representation or warranty made in this Agreement. Notwithstanding
the foregoing, AmeriSource shall have no obligation to provide Parent or Merger
Sub with information if AmeriSource determines in good faith, upon written
advice of its outside antitrust counsel, that providing information may violate
any Applicable Law.
(h) Notification of Certain Matters. AmeriSource shall give
-------------------------------
prompt notice to Parent of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would likely cause any representation or
warranty by AmeriSource contained in this Agreement to be untrue or inaccurate
at or prior to the Effective Time in any material respect and (ii) any material
failure of AmeriSource to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 5.3(h) shall not limit
or otherwise affect the remedies available hereunder to Parent.
(i) Subsequent Financial Statements. AmeriSource shall consult
-------------------------------
with Parent prior to making publicly available its financial results for any
period after the date of this Agreement and prior to filing any AmeriSource SEC
Documents after the date of this Agreement, it being understood that Parent
shall have no liability by reason of such consultation.
(j) Letters of AmeriSource's Accountants. AmeriSource shall
------------------------------------
use all reasonable efforts to cause to be delivered to Parent letters of
AmeriSource's independent accountants, dated a date within two business days
before the date on which the Registration Statement shall become effective, the
date the Joint Proxy Statement is mailed and the date of the Parent Stockholders
Meeting and addressed to Parent, in form and substance reasonably satisfactory
to Parent and customary in scope and substance for
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letters delivered by independent accountants in connection with registration
statements similar to the Registration Statement.
ARTICLE VI
CONDITIONS
6.1 Conditions to the Obligations of Each Party. The obligations of
-------------------------------------------
AmeriSource, Parent and Merger Sub to consummate the Merger shall be subject to
the satisfaction of the following conditions:
(a) (i) This Agreement, the Merger and the transactions
contemplated hereby shall have been approved and adopted by the stockholders of
AmeriSource entitled to vote thereon, and (ii) the issuance of the shares of
Parent Common Stock to be issued in the Merger shall have been approved by the
stockholders of Parent entitled to vote thereon, in each case in the manner
required by all Applicable Laws and the applicable stock exchange rules.
(b) Any applicable waiting periods (and any extensions thereof,
including any written commitment to an HSR Authority to defer or delay
consummation of the Merger notwithstanding expiration of such waiting periods)
under the HSR Act relating to the Merger and the transactions contemplated by
this Agreement shall have expired or been terminated.
(c) No provision of any Applicable Law (other than Antitrust
Laws), as supported by written opinion of outside legal counsel, and no
judgment, injunction, order or decree shall prohibit or enjoin the consummation
of the Merger or the transactions contemplated by this Agreement (the parties
having used their respective best efforts (consistent with the provisions of
this Agreement) to cause such Applicable Law to be satisfied (if such Applicable
Law is capable of being satisfied) so as to cause such Applicable Law not to
prohibit the Merger or the transactions contemplated hereby).
(d) There shall not be pending any Action by any Governmental
Authority (i) challenging or seeking to restrain or prohibit the consummation of
the Merger or any of the other transactions contemplated by this Agreement, (ii)
except to the extent consistent with the obligations of AmeriSource and Parent
under Section 5.1(a), seeking to prohibit or limit the ownership or operation by
Parent, AmeriSource or any of their respective subsidiaries of, or to compel
Parent, AmeriSource or any of their respective subsidiaries to dispose of or
hold separate, any material portion of the business or assets of Parent,
AmeriSource or any of their respective subsidiaries, as a result of the Merger
or any of the other transactions contemplated by this Agreement, (iii) seeking
to impose limitations on the ability of Parent to acquire or hold, or exercise
full rights of
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ownership of, any shares of capital stock of the Surviving Corporation,
including the right to vote such capital stock on all matters properly presented
to the stockholders of the Surviving Corporation or (iv) seeking to prohibit
Parent or any subsidiary of Parent from effectively controlling in any material
respect the business or operations of Parent or the subsidiaries of Parent.
(e) The Commission shall have declared the Registration
Statement effective under the Securities Act, and no stop order or similar
restraining order suspending the effectiveness of the Registration Statement
shall be in effect and no proceedings for such purpose shall be pending before
or threatened by the Commission or any state securities administrator.
(f) The shares of Parent Common Stock to be issued in the
Merger (including, without limitation, the shares of Parent Common Stock
issuable upon the exercise of the Parent Exchange Options) shall have been
approved for listing on the NYSE, subject to official notice of issuance.
(g) Parent shall have received a letter, in form and substance
reasonably satisfactory to Parent and AmeriSource, from Parent's independent
accountants dated the date of the Effective Time (a copy of which shall have
been delivered to AmeriSource), stating that they concur with the conclusion of
Parent's management that the Merger will qualify as a transaction to be
accounted for by Parent in accordance with the pooling-of-interests method of
accounting under the requirements of APB No. 16.
6.2 Conditions to Obligations of AmeriSource. The obligations of
----------------------------------------
AmeriSource to consummate the Merger and the transactions contemplated hereby
shall be subject to the fulfillment of the following conditions unless waived by
AmeriSource:
(a) The representations and warranties of each of Parent and
Merger Sub set forth in Article IV (which for purposes of this paragraph (a)
shall be read as though none of them contained any Material Adverse Effect or
materiality qualifier) shall be true and correct in all respects on and as of
the Closing Date with the same effect as though made on and as of the Closing
Date (except for such representations and warranties made as of a specified
date, the accuracy of which will be determined as of the specified date), except
for changes permitted by Section 5.2(c) and except where the failure of the
representations and warranties in the aggregate to be true and correct in all
respects would not have a Material Adverse Effect on Parent.
(b) Each of Parent and Merger Sub shall have performed in all
material respects each obligation and agreement and shall have complied in all
material respects with each covenant to be performed and complied with by it
hereunder at or prior
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to the Effective Time, except, in the case of breaches of Section 5.2(c), for
acts and omissions of Parent which, in the aggregate, do not have a Material
Adverse Effect on Parent.
(c) Each of Parent and Merger Sub shall have furnished
AmeriSource with a certificate dated the Closing Date signed on behalf of it by
the President or any Vice President to the effect that the conditions set forth
in Sections 6.2(a) and (b) have been satisfied.
(d) AmeriSource shall have received an opinion from Dechert,
Price & Rhoads, dated the Closing Date, based upon certain factual
representations of AmeriSource, Parent and Merger Sub reasonably requested by
such counsel, 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.
(e) Since the date of this Agreement, there shall not have been
any change in the business, assets, liabilities, results of operations or
financial condition of Parent which individually or in the aggregate would
reasonably be expected to have a Material Adverse Effect on Parent.
6.3 Conditions to Obligations of Parent and Merger Sub. The
--------------------------------------------------
obligations of Parent and Merger Sub to consummate the Merger and the other
transactions contemplated hereby shall be subject to the fulfillment of the
following conditions unless waived by Parent:
(a) The representations and warranties of AmeriSource set forth
in Article III (which for purposes of this paragraph (a) shall be read as though
none of them contained any Material Adverse Effect or materiality qualifier)
shall be true and correct in all respects on and as of the Closing Date with the
same effect as though made on and as of the Closing Date (except for such
representations and warranties made as of a specified date, the accuracy of
which will be determined as of the specified date), except for changes permitted
by Section 5.3(c) and except where the failure of the representations and
warranties in the aggregate to be true and correct in all respects would not
have a Material Adverse Effect on AmeriSource.
(b) AmeriSource shall have performed in all material respects
each obligation and agreement and shall have complied in all material respects
with each covenant to be performed and complied with by it hereunder at or prior
to the Effective Time, except, in the case of breaches of Section 5.3(c), for
acts and omissions of AmeriSource which, in the aggregate, do not have a
Material Adverse Effect on AmeriSource.
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(c) AmeriSource shall have furnished Parent with a certificate
dated the Closing Date signed on its behalf by its Chairman, President or any
Vice President to the effect that the conditions set forth in Sections 6.3(a)
and (b) have been satisfied.
(d) Since the date of this Agreement, there shall not have been
any change in the business, assets, liabilities, results of operations or
financial condition of AmeriSource which individually or in the aggregate would
reasonably be expected to have a Material Adverse Effect on AmeriSource.
(e) Each of the Employee Agreements shall be in full force and
effect in accordance with its terms and shall not have been modified, amended or
terminated (other than by Parent); provided, however, that it is understood that
this condition shall not fail to be satisfied with respect to any such person
who is no longer employed by AmeriSource so long as AmeriSource shall not have
modified, amended or terminated, granted any waiver or release under, or
assigned any rights or claims under, the Employee Agreements with such former
employee.
(f) There shall not have been a material breach of the
AmeriSource Stock Option Agreement.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination. This Agreement may be terminated and the Merger
-----------
may be abandoned at any time prior to the Effective Time (notwithstanding any
approval of this Agreement by the stockholders of AmeriSource and the
stockholders of Parent):
(a) by mutual written consent of Parent and AmeriSource;
(b) by either Parent or AmeriSource if there shall be any
Applicable Law (other than Antitrust Laws) that, as supported by written opinion
of outside legal counsel, makes consummation of the Merger illegal or otherwise
prohibited (the terminating party having given at least 10 days notice to the
other party of the existence of such Applicable Law and both parties having used
their respective best efforts (consistent with the provisions of this Agreement)
to cause such Applicable Law to be satisfied (if the Applicable Law is capable
of being satisfied) so that it does not have the effect set forth above), or if
any judgment, injunction, order or decree of a court or other competent
Governmental Authority enjoining Parent or AmeriSource from consummating the
Merger shall have been entered and such judgment, injunction, order or decree
shall have become final and nonappealable;
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(c) by either Parent or AmeriSource if the Merger shall not have
been consummated before May 31, 1998; provided, however, that the right to
terminate this Agreement under this Section 7.1(c) shall not be available to any
party whose failure or whose affiliate's failure to perform any material
covenant or obligation under this Agreement has been the cause of or resulted in
the failure of the Merger to occur on or before such date; and, provided
further, that (i) if, on May 31, 1998, the five events set forth in Section
1.2(b) shall have occurred but the Closing shall not have taken place, then
references to "May 31, 1998" in this paragraph (c) shall instead be "June 7,
1998," and (ii) if the date on which any applicable waiting period (and any
extensions thereof) under the HSR Act relating to the merger and other
transactions contemplated by the Agreement and Plan of Merger, dated as of
August 23, 1997, by and among Cardinal Health, Inc. ("Cardinal"), Bruin Merger
Corp. and Bergen Brunswig Corporation (the "Cardinal Transaction") shall have
first expired or been terminated is between May 1, 1998 and May 31, 1998 (each
inclusive), and on such date no judgment, injunction, order or decree shall
prohibit or enjoin consummation of the Cardinal Transaction and there shall not
be pending any Action by an HSR Authority seeking with respect to Cardinal or
Bergen Brunswig Corporation or the Cardinal Transaction any of the remedies set
forth in Section 6.1(d), then references to "May 31, 1998" in this paragraph (c)
shall instead be "June 30, 1998" (the date on which this Agreement may be
terminated pursuant to this paragraph (c), as applicable, being herein referred
to as the "Termination Date");
(d) by Parent if the Board of Directors of AmeriSource shall
withdraw, modify or change the AmeriSource Board Recommendation in a manner
adverse to Parent, or if the Board of Directors of AmeriSource shall have
refused to affirm the AmeriSource Board Recommendation as promptly as
practicable (but in any case within 10 business days) after receipt of any
written request from Parent which request was made on a reasonable basis;
(e) by Parent or AmeriSource if at the AmeriSource Stockholders
Meeting (including any adjournment or postponement thereof) the requisite vote
of the stockholders of AmeriSource to approve the Merger, the Merger Agreement
and the transactions contemplated hereby shall not have been obtained;
(f) by Parent or AmeriSource if at the Parent Stockholders
Meeting (including any adjournment or postponement thereof) the requisite vote
of the stockholders of Parent to approve the issuance of shares of Parent Common
Stock in the Merger shall not have been obtained;
(g) by AmeriSource, pursuant to Section 5.3(e);
(h) by Parent if at any time the representations and warranties
of AmeriSource set forth in Section 3.15 shall not be true and correct and
Parent shall have
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been advised by Parent's independent accountants that the condition set forth in
Section 6.1(g) cannot be satisfied;
(i) by Parent or AmeriSource if:
(x) there shall have been a material breach by the other of
any of its representations, warranties, covenants or agreements contained in
this Agreement, which breach would result in the failure to satisfy one or more
of the conditions set forth in Section 6.2(a) or 6.2(b) (in the case of a breach
by Parent) or Section 6.3(a) or 6.3(b) (in the case of a breach by AmeriSource)
or would result in a material adverse effect on the ability of Parent and/or
AmeriSource to consummate the transactions contemplated hereby, and such breach
shall not have been cured within 30 days after notice thereof shall have been
received by the party alleged to be in breach; or
(y) the condition set forth in Section 6.3(d) (in the case
of a termination by Parent) or Section 6.2(e) (in the case of a termination by
AmeriSource) is not satisfied and cannot reasonably be expected to be satisfied
by the Termination Date or, if earlier, the fifth business day following the
latest to occur of the five events set forth in Section 1.2(b);
(j) by AmeriSource if at any time the representations and
warranties of Parent set forth in Section 4.7 shall not be true and correct and
Parent shall have been advised by Parent's independent accountants that the
condition set forth in Section 6.1(g) cannot be satisfied (Parent hereby
agreeing to request advice from its accountants on the matter upon the
reasonable request of AmeriSource);
(k) subject to the provisions of Section 7.2(c), by Parent or
AmeriSource if either party has received any communication from an HSR Authority
(an "HSR Litigation Communication") (such HSR Litigation Communication to be
promptly communicated to the other party and to be confirmed to the other party
by the Bureau Director of the Federal Trade Commission or such Director's
delegate or an Assistant Attorney General or the latter's delegate) indicating
that an HSR Authority has authorized the institution of litigation challenging
the transactions contemplated by this Agreement under the Antitrust Laws, which
litigation would include a motion seeking an order or injunction prohibiting the
consummation of any of the transactions contemplated by this Agreement;
(l) by Parent if AmeriSource shall have breached in any material
respect any of its obligations under the AmeriSource Stock Option Agreement; or
(m) by AmeriSource, on March 31, 1998 (by written notice to
Parent on such date before 5:00 p.m., New York time) if the conditions set forth
in Sections 6.1(b), 6.1(c) and 6.1(d) (insofar as they relate to federal
Antitrust Laws) shall
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not have been satisfied prior to such time (it being understood that the
termination right contained in this paragraph (m) is a one-time right which, if
not exercised on March 31, 1998, shall terminate at 5:00 p.m., New York time, on
such date and this Agreement shall continue in accordance with its terms);
provided that AmeriSource shall not have any termination rights pursuant to this
paragraph (m) if prior to March 31, 1998 the parties shall have received an HSR
Litigation Communication and on the Exchange Date (as defined in Section 7.2(c))
AmeriSource shall have delivered a notice of waiver or failed to deliver a
notice of exercise pursuant to paragraph (k) of this Section 7.1 and Section
7.2(c).
7.2 Effect of Termination. (a) In the event of the termination of
---------------------
this Agreement pursuant to Section 7.1, this Agreement, except for the
provisions of the second sentence of each of Section 5.2(g) and Section 5.3(g),
the last sentence of Section 5.1(a)(i), and Sections 7.2, 8.7 and 8.10, shall
become void and have no effect, without any liability on the part of any party
or its directors, officers or stockholders. Notwithstanding the foregoing,
nothing in this Section 7.2 shall relieve any party to this Agreement of
liability for a breach of any provision of this Agreement and provided, further,
however, that if it shall be judicially determined that termination of this
Agreement was caused by an intentional breach of this Agreement, then, in
addition to other remedies at law or equity for breach of this Agreement, the
party so found to have intentionally breached this Agreement shall indemnify and
hold harmless the other parties for their respective out-of-pocket costs, fees
and expenses of their counsel, accountants, financial advisors and other experts
and advisors as well as fees and expenses incident to negotiation, preparation
and execution and performance of this Agreement and related documentation and
stockholders' meetings and consents ("Costs").
(b) AmeriSource agrees that, if:
(i) AmeriSource terminates this Agreement pursuant to
Sections 5.3(e) and 7.1(g);
(ii) Parent terminates this Agreement pursuant to Section
7.1(d) or 7.1(l);
(iii) (A) Parent or AmeriSource terminates this Agreement
pursuant to Section 7.1(e), (B) at the time of such failure by the stockholders
of AmeriSource to so approve the Merger, this Agreement and the transactions
contemplated hereby there is a publicly announced or disclosed Competing
Transaction with respect to AmeriSource, and (C) within 12 months after such
termination, AmeriSource shall enter into an Acquisition Agreement for a
Business Combination (as defined in this Section 7.2) or consummate a Business
Combination;
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(iv) (A) Parent or AmeriSource terminates this Agreement
pursuant to Section 7.1(e) and (B) within three months after such termination,
AmeriSource shall enter into an Acquisition Agreement for a Business Combination
or consummate a Business Combination; or
(v) (A) AmeriSource terminates this Agreement pursuant to
Section 7.1(m), and (B) either (x), at the time of such termination there is a
publicly announced or disclosed Competing Transaction with respect to
AmeriSource or the Board of Directors of AmeriSource has been advised of a
Competing Transaction and within six months after such termination, AmeriSource
shall enter into an Acquisition Agreement with the party (or an affiliate
thereof) that had publicly announced or disclosed the Competing Transaction, or
of whose Competing Transaction AmeriSource's Board of Directors had been
advised, for a Transaction (as defined in this Section 7.2) or consummate a
Transaction or (y) within six months after such termination AmeriSource shall
effect a leveraged recapitalization,
then, (X) in the case of a termination by Parent as described in clause (ii)
above, within three business days following any such termination, (Y) in the
case of a termination by AmeriSource as described in clause (i) above,
concurrently with such termination, or (Z) in the case of a termination by
AmeriSource or Parent as described in clause (iii) above or clause (iv) above or
a termination by AmeriSource as described in clause (v) above, prior to the
earlier of the consummation of a Business Combination or a Transaction, as
applicable, or execution of an Acquisition Agreement with respect thereto within
the applicable time period, AmeriSource will pay to Parent in cash by wire
transfer in immediately available funds to an account designated by Parent (i)
in reimbursement for Parent's expenses an amount in cash equal to the aggregate
amount of Parent's Costs, but not in excess of $12 million and (ii) a
termination fee in an amount equal to $65 million (such amount, the "Termination
Fee"). For the purposes of this Section 7.2, "Business Combination" means (i) a
merger, consolidation, share exchange, business combination or similar
transaction involving AmeriSource as a result of which the stockholders of
AmeriSource prior to such transaction in the aggregate cease to own at least 85%
of the voting securities of the entity surviving or resulting from such
transaction (or the ultimate parent entity thereof), (ii) a sale, lease,
exchange, transfer or other disposition of more than 15% of the assets of
AmeriSource and its subsidiaries, taken as a whole, in a single transaction or a
series of related transactions, or (iii) the acquisition, by a person (other
than Parent or any affiliate thereof) or group (as such term is defined under
Section 13(d) of the Exchange Act and the rules and regulations thereunder) of
beneficial ownership of more than 15% of the AmeriSource Common Stock whether by
tender or exchange offer or otherwise. For purposes of this Section 7.2,
"Transaction" means a merger, consolidation, share exchange, business
combination or similar transaction involving AmeriSource as a result of which
the stockholders of AmeriSource immediately prior to the consummation of such
transaction in the aggregate cease to own a majority of the
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voting securities of the entity surviving or resulting from such transaction (or
the ultimate parent entity thereof).
(c) The right to terminate this Agreement pursuant to Section 7.1(k)
shall either be exercised or waived on the first business day after an HSR
Authority has authorized litigation challenging the transactions contemplated by
this Agreement under the Antitrust Laws (or the business day immediately
preceding the date, if any, to which the HSR Authority has extended the date for
instituting litigation, it being understood that AmeriSource and Parent shall
agree with each other and with such HSR Authority not to consummate the Merger
and the transactions contemplated hereby for ten business days and shall use
their respective best efforts to obtain the agreement of such HSR Authority to
extend for ten business days the date for instituting litigation) (or such
earlier date as the parties may mutually agree) (the "Exchange Date") by
simultaneous exchanges by representatives of Parent and AmeriSource of their
respective notices of exercise or waiver, as applicable, on the Exchange Date
(it being understood that the failure of any party to deliver such notice on the
Exchange Date shall be deemed to be a waiver of such party's termination rights
pursuant to Section 7.1(k). Parent and AmeriSource agree that:
(i) if Parent shall have elected to exercise its right to
terminate this Agreement pursuant to Section 7.1(k), and AmeriSource shall have
waived its right to terminate this Agreement pursuant to Section 7.1(k), in each
case as reflected in the notice referred to in the preceding sentence (or
absence of notice, as the case may be), then Parent will pay to AmeriSource, in
reimbursement of AmeriSource's expenses, an amount equal to the aggregate amount
of AmeriSource's Costs, but not in excess of $12 million, plus the Stay Pay
Arrangements referred to in Section 5.3(c)(vii) to the AmeriSource Disclosure
Schedule, up to a maximum reimbursement (including Costs) of $20 million in the
aggregate. Stay-Pay Arrangements include payments made whether before or after
termination of this Agreement, so long as such payments were made pursuant to
the Stay-Pay Arrangements set forth in Section 5.3(c) to the AmeriSource
Disclosure Schedule. Reimbursement of any such payments that are not payable to
employees until after the termination of this Agreement shall be made as and
when expended by AmeriSource;
(ii) if AmeriSource shall have elected to exercise its right to
terminate this Agreement pursuant to Section 7.1(k), and Parent shall have
waived its right to terminate pursuant to Section 7.1(k), in each case as
reflected in the notice referred to in the preceding sentence (or absence of
notice, as the case may be), then AmeriSource will pay to Parent, in
reimbursement of Parent's expenses, an amount equal to the aggregate amount of
Parent's Costs but not in excess of $12 million; and
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(iii) if AmeriSource and Parent shall both have elected to
exercise their right to terminate this Agreement pursuant to Section 7.1(k),
then neither AmeriSource nor Parent will be required to reimburse the other for
the other's Costs.
(d) Parent and AmeriSource agree that, in the event that any
Termination Fee and/or Costs are paid pursuant to this Section 7.2, such
Termination Fee and/or Costs, as applicable, shall be the exclusive remedy for
the acts or omissions which resulted in the termination of this Agreement, and
shall be deemed to be liquidated damages, provided that the party paying the
Termination Fee and/or Costs shall not have breached any of its obligations
under this Agreement. If the party paying the Termination Fee and/or Costs
shall have breached any of its obligations under this Agreement, then the other
party shall be entitled to enforce all of its rights under this Agreement in law
and in equity.
(e) The parties acknowledge that the payments provided for in this
Section 7.2 are an integral part of the transactions contemplated by this
Agreement and, without the agreement to make such payments, the parties would
not have entered into this Agreement. Accordingly, if any party shall fail to
make any payment (whether of a Termination Fee or of Costs) owing pursuant to
this Section 7.2 promptly when due, the party to which such payment is owed
shall be entitled to be paid all costs and expenses (including fees and
disbursements of counsel) incurred in collecting such payment.
7.3 Amendment. This Agreement may be amended by the parties hereto,
---------
by action taken or authorized by their respective Boards of Directors, at any
time before or after adoption of this Agreement by stockholders of AmeriSource,
but after any such approval, no amendment shall be made which by law requires
further approval or authorization by the stockholders of AmeriSource without
such further approval or authorization. Notwithstanding the foregoing, this
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
7.4 Extension; Waiver. At any time prior to the Effective Time,
-----------------
Parent (with respect to AmeriSource) and AmeriSource (with respect to Parent and
Merger Sub) by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of such party, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party.
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ARTICLE VIII
MISCELLANEOUS
8.1 No Survival of Representations and Warranties. The
---------------------------------------------
representations and warranties made herein by the parties hereto shall not
survive the Effective Time. This Section 8.1 shall not limit any covenant or
agreement of the parties hereto which by its terms contemplates performance
after the Effective Time or after the termination of this Agreement.
8.2 Notices. All notices and other communications hereunder shall
-------
be in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed) or dispatched by a nationally recognized overnight courier
service to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
(a) if to Parent or Merger Sub:
One Post Street
San Francisco, CA 94104
Attn.: Ivan D. Meyerson, Esq.
Telecopy No.: 415-983-8826
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attn.: Stephen Fraidin, P.C.
Telecopy No.: 212-859-4000
(b) if to AmeriSource:
300 Chester Field Parkway
Malvern, PA 19355
Attn.: Teresa Ciccotelli, Esq.
Telecopy No.: 610-993-7677
with a copy to:
Dechert, Price & Rhoads
1717 Arch Street
Philadelphia, PA 19103
Attn.: G. Daniel O'Donnell, Esq.
Telecopy No.: 215-994-2222
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8.3 Interpretation; Definitions. (a) When a reference is made in this
---------------------------
Agreement to an Article or Section, such reference shall be to an Article or
Section of this Agreement unless otherwise indicated. The headings and the table
of contents contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
When a reference is made in this Agreement to AmeriSource, such reference shall
be deemed to include any and all subsidiaries of AmeriSource, individually and
in the aggregate, except for Sections 3.1, 3.2, 3.3, 3.4, 3.8, 3.15, 3.22, 3.23,
3.24 and 8.3.
(b) For the purposes of any provision of this Agreement, a
"Material Adverse Effect" with respect to any party shall be deemed to occur if
any event, change or effect, individually or in the aggregate with such other
events, changes or effects, has occurred which would reasonably be expected to
have a material adverse effect on the business, assets (including intangible
assets), liabilities (contingent or otherwise), results of operations or
financial condition of such party and its subsidiaries taken as a whole;
provided, however, that a Material Adverse Effect with respect to any party
shall not include any change in or effect upon the business, assets (including
intangible assets), liabilities (contingent or otherwise), results of operations
or financial condition of such party or any of its subsidiaries directly or
indirectly arising out of or attributable to (i) any decrease in the market
price of the shares of Parent Common Stock in the case of Parent or AmeriSource
Common Stock in the case of AmeriSource (but in either case not any change or
effect underlying such decrease to the extent such change or effect would
otherwise constitute a Material Adverse Effect on such party), (ii) conditions,
events, or circumstances generally affecting the economy as a whole or (iii) the
loss by such party (and its subsidiaries) of any customer (including business of
such customer) (including, without limitation, any financial consequence of such
loss of customer) to the other party.
(c) For purposes of this Agreement, a "subsidiary" of any person
means another person, an amount of the voting securities or other voting
ownership or voting partnership interests of which is sufficient to elect at
least a majority of its Board of Directors or other governing body (or, if there
are no such voting securities or interests, 50% or more of the equity interests
of which is owned directly or indirectly by such first person).
(d) For purposes of this Agreement, "knowledge" of a party shall
mean the actual knowledge of all elected officers of such party or any of its
subsidiaries with a title of vice president or higher.
(e) For purposes of this Agreement, references to any financial
statements or any component thereof shall be deemed to include the footnotes
thereto.
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(f) For purposes of this Agreement, the term "including" shall
mean "including, without limitation."
8.4 Counterparts. This Agreement may be executed in counterparts,
------------
which together shall constitute one and the same Agreement. The parties may
execute more than one copy of the Agreement, each of which shall constitute an
original.
8.5 Entire Agreement. This Agreement (including the documents and
----------------
the instruments referred to herein), the AmeriSource Stock Option Agreement, the
Confidentiality Agreement, the Joint Defense Agreement and the Antitrust
Confidentiality Agreement constitute the entire agreement among the parties and
supersede all prior agreements and understandings, agreements or representations
by or among the parties, written and oral, with respect to the subject matter
hereof and thereof.
8.6 Third Party Beneficiaries. Except for the agreement set forth
-------------------------
in Section 5.2(d), nothing in this Agreement, express or implied, is intended or
shall be construed to create any third party beneficiaries.
8.7 Governing Law. This Agreement shall be governed by the laws of
-------------
the State of Delaware, without giving effect to the conflict of laws principles
thereof. Each party hereby irrevocably and unconditionally consents to submit to
the exclusive jurisdiction of the courts of the State of Delaware and of the
United States of America, in each case located in the State of Delaware, for any
Action (and agrees not to commence any Action except in any such court), and
further agrees that service of process, summons, notice or document by U.S.
registered mail to its respective address set forth in Section 8.2 shall be
effective service of process for any Action brought against it in any such
court. Each party hereby irrevocably and unconditionally waives any objection to
the laying of venue of any Action in the courts of the State of Delaware or of
the United States of America, in each case located in the State of Delaware, and
hereby further irrevocably and unconditionally waives and agrees not to plead
or claim in any such court that any Action brought in any such court has been
brought in an inconvenient forum.
8.8 Specific Performance. The transactions contemplated by this
--------------------
Agreement are unique. Accordingly, each of the parties acknowledges and agrees
that, in addition to all other remedies to which it may be entitled, each of the
parties hereto is entitled to a decree of specific performance and injunctive
and other equitable relief, and the parties hereto agree to waive any
requirement for the securing or posting of any bond in connection with the
obtaining thereof.
8.9 Assignment. Neither this Agreement nor any of the rights,
----------
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties,
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except that all or any of the rights of Merger Sub hereunder may be assigned to
any direct wholly-owned subsidiary of Parent provided that no such assignment
shall relieve the assigning party of its obligations hereunder. Subject to the
preceding sentence, this Agreement shall be binding upon, inure to the benefit
of and be enforceable by the parties and their respective successors and
assigns.
8.10 Expenses. Subject to the provisions of Section 7.2 and the
--------
AmeriSource Stock Option Agreement, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby and
thereby shall be paid by the party incurring such expenses, except that those
expenses incurred in connection with filing, printing and mailing the
Registration Statement and the Joint Proxy Statement (including filing fees
related thereto) will be shared equally by Parent and AmeriSource.
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IN WITNESS WHEREOF, Parent, Merger Sub and AmeriSource have signed
this Agreement as of the date first written above.
McKESSON CORPORATION
By: /s/ Ivan D. Meyerson
---------------------
Name: Ivan D. Meyerson
Title: Vice President and General Counsel
PATRIOT ACQUISITION CORP.
By: /s/ Ivan D. Meyerson
---------------------
Name: Ivan D. Meyerson
Title: Executive Vice President
AMERISOURCE HEALTH CORPORATION
By: /s/ David Yost
---------------
Name: David Yost
Title: President and Chief Executive Officer
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Exhibit 99.2
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT ("Option Agreement") dated as of September 22,
1997, between McKesson Corporation, a Delaware corporation ("Parent"), and
AmeriSource Health Corporation, a Delaware corporation ("AmeriSource").
W I T N E S S E T H
WHEREAS, the Board of Directors of Parent and the Board of Directors of
AmeriSource have approved an Agreement and Plan of Merger dated as of even date
herewith (the "Merger Agreement") providing for the merger of a wholly owned
subsidiary of Parent with and into AmeriSource;
WHEREAS, as a condition to Parent's entering into the Merger Agreement,
Parent has required that AmeriSource agree, and AmeriSource has agreed, to grant
to Parent the option set forth herein to purchase authorized but unissued shares
of AmeriSource Common Stock;
NOW, THEREFORE, to induce Parent to enter into the Merger Agreement and
in consideration of the premises herein contained, the parties agree as follows:
1. Definitions. Capitalized terms used but not defined herein shall have the
-----------
same meanings as in the Merger Agreement.
2. Grant of Option. Subject to the terms and conditions set forth herein,
---------------
AmeriSource hereby grants to Parent an option (the "Option") to purchase up to
3,418,601 authorized and unissued shares of capital stock of AmeriSource, which
may be shares of AmeriSource Class A Stock or shares of AmeriSource Class B
Stock, or a combination thereof, at Parent's election (the "Option Shares"), at
a price per share equal to $70.87 (the "Purchase Price") payable in cash as
provided in Section 4 hereof.
3. Exercise of Option. (a) Parent may exercise the Option, in whole or in
------------------
part, at any time or from time to time during the period (the "Option Exercise
Period") commencing from the time a Purchase Event (as defined below) shall have
occurred and terminating 5:00 p.m. New York time on the date which is 180 days
following the occurrence of the Purchase Event (the "Termination Date"),
whereupon the Option, to the extent it shall not have been exercised, shall
terminate and be of no further force and effect. If the Option cannot be
exercised prior to the Termination Date as a result of any injunction, order or
similar restraint issued by a court of competent jurisdiction, the Option
Exercise Period shall terminate on the later of (i) the Termination Date and
(ii) the 10th business day after such injunction, order or restraint shall have
been dissolved or
<PAGE>
shall have become permanent and no longer subject to appeal, as the case may be,
but in no event later than 18 months after the occurrence of a Purchase Event.
(b) This Option Agreement shall terminate, if but only if no Purchase Event
shall have occurred prior thereto, upon the occurrence of any of the following,
as applicable:
(i) at the Effective Time of the Merger; or
(ii) upon the termination of the Merger Agreement pursuant to its
terms other than a termination pursuant to Section 7.1(d), 7.1(e), 7.1(g)
or 7.1(l) thereof; or
(iii) 5:00 p.m. New York time on the one-year anniversary date of the
termination of the Merger Agreement pursuant to Section 7.1(e) thereof if
prior to the AmeriSource Stockholders Meeting (including any adjournment or
postponement thereof) there is a publicly announced or disclosed Competing
Transaction with respect to AmeriSource; or
(iv) 5:00 p.m. New York time on the three-month anniversary date of
the termination of the Merger Agreement pursuant to Section 7.1(e) thereof
if clause (iii) of this paragraph (b) is not applicable.
(c) As used herein, a "Purchase Event" shall mean any of the following events:
(i) the Board of Directors of AmeriSource shall have withdrawn,
modified or changed the AmeriSource Board Recommendation in a manner
adverse to Parent, or the Board of Directors of AmeriSource shall have
refused to affirm the AmeriSource Board Recommendation as promptly as
practicable (but in any case within 10 business days) after receipt of any
written request from Parent which request was made on a reasonable basis;
or
(ii) at the AmeriSource Stockholders Meeting (including any
adjournment or postponement thereof) the requisite vote of the stockholders
of AmeriSource to approve the Merger, the Merger Agreement and the
transactions contemplated thereby shall not have been obtained, and at the
time of such failure to obtain such approval there is a publicly announced
or disclosed Competing Transaction with respect to AmeriSource and within
12 months after termination of the Merger Agreement pursuant to Section
7.1(e) thereof AmeriSource shall enter into an Acquisition Agreement for a
Business Combination or shall consummate a Business Combination; or
2
<PAGE>
(iii) At the AmeriSource Stockholders Meeting (including any
adjournment or postponement thereof) the requisite vote of the stockholders
of AmeriSource to approve the Merger, the Merger Agreement and the
transactions contemplated thereby shall not have been obtained and within
three months after the termination of the Merger Agreement pursuant to
Section 7.1(e) thereof AmeriSource shall enter into an Acquisition
Agreement for a Business Combination or shall consummate a Business
Combination; or
(iv) AmeriSource shall have breached in any material respect any of
its obligations under this Agreement; or
(v) the Merger Agreement shall have been terminated by AmeriSource
pursuant to Sections 5.3(e) and 7.1(g) of the Merger Agreement.
(d) As used herein, the terms "Beneficial Ownership," "Beneficial Owner" and
"Beneficially Own" shall have the meanings ascribed to them in Rule 13d-3 under
the Exchange Act. As used herein, "person" shall have the meaning specified in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(e) Whenever Parent wishes to exercise the Option, it shall deliver to
AmeriSource a written notice (a "Notice of Exercise") (the date of receipt of
which being herein referred to as the "Notice Date") specifying (i) the total
number of shares it intends to purchase pursuant to such exercise, setting forth
what number, if any, of such shares are to be comprised of AmeriSource Class A
Stock and what number, if any, are to be comprised of AmeriSource Class B Stock,
and (ii) a place and date not earlier than two business days nor later than 60
calendar days from the Notice Date for the closing of such purchase (a "Closing
Date"); provided that if any closing of the purchase and sale pursuant to the
Option (a "Closing") cannot be consummated by reason of any Applicable Law, the
period of time that otherwise would run from the Notice Date pursuant to this
sentence shall run instead from the date on which such restriction on
consummation has expired or been terminated; and provided further that, without
limiting the foregoing, if prior notification to or approval of any Governmental
Authority is required in connection with such purchase, Parent and, if
applicable, AmeriSource shall promptly file the required notice or application
for approval and shall expeditiously process the same (and AmeriSource shall
cooperate with Parent in the filing of any such notice or application and the
obtaining of any such approval), and the period of time that otherwise would run
from the Notice Date pursuant to this sentence shall run instead from the date
on which, as the case may be, (i) any required notification period has expired
or been terminated or (ii) such approval has been obtained, and in either event,
any requisite waiting period has passed.
3
<PAGE>
(f) In the event (i) Parent receives official notice that an approval of any
Governmental Authority required for the purchase of Option Shares would not be
issued or granted or (ii) the Closing Date shall not have occurred within 18
months after the related Notice Date due to the failure to obtain any such
required approval, Parent shall be entitled to exercise its right as set forth
in Section 7 or, to the extent legally permitted, to exercise the Option in
connection with the resale of Option Shares pursuant to a registration statement
as provided in Section 8. The provisions of this Section 3 and Section 6 shall
apply with appropriate adjustments to any such exercise.
4. Payment and Delivery of Certificates. (a) At each Closing, Parent shall
------------------------------------
pay to AmeriSource the aggregate Purchase Price for the Option Shares purchased
at such Closing pursuant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated not later than one business
day prior to the Closing Date for such Closing by AmeriSource.
(b) At such Closing, simultaneously with the delivery of the aggregate Purchase
Price as provided in Section 4(a) hereof, AmeriSource shall deliver to Parent a
certificate or certificates representing the number of Option Shares then being
purchased by Parent, registered in the name of Parent or as designated in
writing by Parent, which Option Shares shall be fully paid and nonassessable and
free and clear of all liens, claims, charges and encumbrances of any kind
whatsoever.
(c) If at the time of issuance of any Option Shares pursuant to any exercise of
the Option, AmeriSource shall have issued any share purchase rights or similar
securities ("Rights") to holders of any class of AmeriSource Common Stock, then
each such Option Share shall also represent rights with terms substantially the
same as and at least as favorable to Parent as those issued to other holders of
AmeriSource Common Stock.
(d) Certificates for Option Shares delivered at any Closing hereunder shall be
endorsed with a restrictive legend, which shall read substantially as follows:
"The shares represented by this certificate are subject to certain
provisions of an agreement between the registered holder hereof and
AmeriSource Corporation, a copy of which is on file at the principal office
of AmeriSource Corporation, have not been registered under the Securities
Act of 1933, and are subject to resale restrictions arising under the
Securities Act of 1933, as amended, and any applicable state securities
laws. A copy of such agreement will be provided to the holder hereof
without charge upon receipt by AmeriSource Corporation of a written
request therefor."
4
<PAGE>
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend in connection with a transfer
or sale if (i) AmeriSource has been furnished with an opinion of counsel,
reasonably satisfactory to counsel for AmeriSource, that such transfer or sale
will not violate the Securities Act or applicable securities laws of any state
or (ii) such transfer or sale shall have been registered and qualified pursuant
to the Securities Act and any applicable state securities laws.
5. Representations and Warranties; Covenants. (a) AmeriSource hereby
-----------------------------------------
represents and warrants to Parent that: (i) AmeriSource has full corporate
right, power and authority to execute and deliver this Option Agreement and to
perform all of its obligations hereunder; (ii) such execution, delivery and
performance have been duly authorized by the Board of Directors of AmeriSource,
and no other corporate proceedings are necessary therefor; (iii) this Option
Agreement has been duly and validly executed and delivered by AmeriSource and
represents a valid and legally binding obligation of AmeriSource, enforceable
against AmeriSource in accordance with its terms; and (iv) AmeriSource has
taken all necessary corporate action to authorize and reserve and permit it to
issue, and at all times from the date hereof through the date of the exercise in
full or the expiration or termination of the Option, shall have reserved for
issuance upon exercise of the Option, 3,418,601 shares of AmeriSource Class A
Stock and 3,418,601 shares of AmeriSource Class B Stock (subject to adjustment
as provided herein), all of which, upon issuance in accordance with the terms of
this Option Agreement, shall be duly authorized, validly issued, fully paid and
nonassessable and shall be delivered free and clear of all claims, liens,
encumbrances and security interests and not subject to any preemptive rights of
any stockholder of AmeriSource.
(b) Parent hereby represents and warrants to AmeriSource that (i) Parent has
full corporate right, power and authority to execute and deliver this Option
Agreement and to perform all of its obligations hereunder; (ii) such execution,
delivery and performance have been duly authorized by all requisite corporate
action by Parent, and no other corporate proceedings are necessary therefor;
(iii) this Option Agreement has been duly and validly executed and delivered by
Parent and represents a valid and legally binding obligation of Parent,
enforceable against Parent in accordance with its terms; and (iv) any
AmeriSource Common Stock acquired by Parent upon exercise of the Option will not
be transferred or otherwise disposed of except in compliance with the Securities
Act.
(c) AmeriSource hereby covenants as follows:
(i) if at any time after exercise of the Option and purchase of any
Option Shares, Parent shall desire to convert any AmeriSource Class B Stock
comprising Option Shares purchased into AmeriSource Class A Stock (or vice
5
<PAGE>
versa), and if prior notification to or approval of any Governmental
Authority is required in connection with such conversion, Parent and, if
applicable, AmeriSource shall promptly file the required notice or
application for approval and shall expeditiously process the same (and
AmeriSource shall cooperate with Parent in the filing of any such notice or
application and the obtaining of any such approval);
(ii) for so long as the Option remains outstanding and, if the Option
is exercised for AmeriSource Class B Stock, until such AmeriSource Class B
Stock is converted into AmeriSource Class A Stock, neither the AmeriSource
Certificate nor any other instrument governing the rights of the
AmeriSource Class A Stock or the AmeriSource Class B Stock will be amended
to adversely affect the right of holders of AmeriSource Class B Stock to
convert such shares into AmeriSource Class A Stock; and
(iii) any rights agreement, plan or other instrument which may be
adopted or entered into governing any Rights (collectively, the "Rights
Agreement") shall provide that neither the ownership or exercise of the
Option or any portion thereof nor the purchase or ownership of any of the
Option Shares shall trigger any of the provisions of the Rights Agreement.
6. Adjustment upon Changes in Capitalization. In the event of any change in
-----------------------------------------
AmeriSource Common Stock by reason of stock dividends, split-ups,
recapitalizations or the like, the type and number of shares subject to the
Option and the Purchase Price shall be adjusted appropriately. In the event
that any additional shares of AmeriSource Common Stock are issued after the date
of this Option Agreement (other than pursuant to an event described in the
preceding sentence or pursuant to this Option Agreement or options granted under
employee benefit plans), the number of shares subject to the Option shall be
adjusted so that, after such issuance, it equals at least 19.9% of the number of
shares of AmeriSource Common Stock then issued and outstanding (without
considering any shares subject to or issued pursuant to the Option).
7. Repurchase. (a) At the written request of Parent, at any time during the
----------
Option Exercise Period and, if a Notice of Exercise has been given but the
related Closing has not occurred, during the period from the Notice Date to the
Closing Date (the "Parent Repurchase Period"), AmeriSource shall repurchase the
Option from Parent together with all (but not less than all) Option Shares
purchased by Parent pursuant thereto with respect to which Parent then has
Beneficial Ownership, at a price equal to the sum of:
(i) The difference between (A) the "Market/Tender Offer Price" for
shares of AmeriSource Common Stock (defined as the higher of (x) the
highest
6
<PAGE>
price per share at which a tender or exchange offer has been made
for shares of AmeriSource Common Stock or (y) the highest closing price per
share of AmeriSource Common Stock as reported by the NYSE Composite Tape,
in each case, for any day within that portion of the Parent Repurchase
Period which precedes the date Parent gives notice of the required
repurchase under this Section 7) and (B) the Purchase Price (subject to
adjustment as provided in Section 6), multiplied by the number of Option
Shares with respect to which the Option has not been exercised or has been
exercised but the related Closing has not occurred, but only if such
Market/Tender Offer Price is greater than such exercise price; and
(ii) The greater of the Market/Tender Offer Price and the Purchase
Price paid for any Option Shares acquired upon exercise of the Option,
multiplied by the number of Option Shares so acquired.
(b) In the event Parent exercises its rights under this Section 7, AmeriSource
shall, within 10 business days thereafter, pay the required amount to Parent by
wire transfer of immediately available funds to an account designated by Parent
and Parent shall surrender to AmeriSource the Option and the certificates
evidencing any Option Shares acquired thereunder with respect to which Parent
then has Beneficial Ownership.
(c) In determining the Market/Tender Offer Price, the value of any
consideration other than cash shall be determined by an independent nationally
recognized investment banking firm selected by Parent with the consent of
AmeriSource which consent shall not be unreasonably withheld.
8. Registration Rights. At any time after a Closing, AmeriSource shall, if
-------------------
requested by any holder or Beneficial Owner of Option Shares (each a "Holder"),
as expeditiously as possible file a registration statement on a form for general
use under the Securities Act if necessary in order to permit the sale or other
disposition of Option Shares in accordance with the intended method of sale or
other disposition requested by any such Holder. Each such Holder shall provide
all information reasonably requested by AmeriSource for inclusion in any
registration statement to be filed hereunder. AmeriSource shall use its best
efforts to cause such registration statement first to become effective and then
to remain effective for such period not in excess of 180 days from the day such
registration statement first becomes effective as may be reasonably necessary to
effect such sales or other dispositions. The registration effected under this
Section 8 shall be at AmeriSource's expense except for underwriting commissions
and the fees and disbursements of such Holders' counsel attributable to the
registration of such Option Shares. In no event shall AmeriSource be required
to effect more than one registration hereunder. The filing of any registration
statement required hereunder may be delayed for such period of time (not to
exceed 90 days) (i) as may reasonably be required to
7
<PAGE>
facilitate any public distribution by AmeriSource of AmeriSource Common Stock,
(ii) if a special audit of AmeriSource would otherwise be required in connection
therewith or (iii) during which AmeriSource is in possession of material
information concerning it, its business affairs or a material transaction in
each case the public disclosure of which AmeriSource reasonably determines in
good faith could have a material adverse effect on AmeriSource or significantly
disrupt such material transaction. If requested by any such Holder in connection
with such registration, AmeriSource shall become a party to any underwriting
agreement relating to the sale of such shares on terms and including obligations
and indemnities which are customary for parties similarly situated. Upon
receiving any request for registration under this Section 8 from any Holder,
AmeriSource agrees to send a copy thereof to any other person known to
AmeriSource to be entitled to registration rights under this Section 8, in each
case by promptly mailing the same, postage prepaid, to the address of record of
the persons entitled to receive such copies.
9. Listing. If AmeriSource Common Stock or any other securities to be acquired
-------
upon exercise of the Option are then listed on any national securities exchange,
AmeriSource, upon the request of Parent, will promptly file an application to
list the Option Shares or other securities to be acquired upon exercise of the
Option on all such exchanges and will use its best efforts to obtain approval of
such listings as soon as practicable.
10. Survival. The representations, warranties, covenants and agreements of the
--------
parties hereto shall survive any Closing.
11. Severability. Any term, provision, covenant or restriction contained in
------------
this Option Agreement held by a court or other Governmental Authority of
competent jurisdiction to be invalid, void or unenforceable shall be ineffective
to the extent of such invalidity, voidness or unenforceability, but neither the
remaining terms, provisions, covenants or restrictions contained in this Option
Agreement nor the validity or enforceability thereof in any other jurisdiction
shall be affected or impaired thereby. Any term, provision, covenant or
restriction contained in this Option Agreement that is so found to be so broad
as to be unenforceable shall be interpreted to be as broad as is enforceable.
12. Expenses; Credits. (a) Each of the parties hereto shall pay all costs
-----------------
and expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel, except as otherwise
provided herein.
(b) If AmeriSource shall have paid Parent the Termination Fee pursuant to
Section 7.2 of the Merger Agreement, then Parent shall pay to AmeriSource
Parent's Net Profit (as defined below) up to a maximum (including any prior Net
Profit paid) of $65 million. As used herein, "Net Profit" shall mean all cash
proceeds received in respect of any Option
8
<PAGE>
Shares acquired hereunder (whether by sale thereof or pursuant to Section 7),
less the aggregate Purchase Price for all Option Shares acquired hereunder, and
less any expenses of sale and applicable taxes.
13. Entire Agreement. This Option Agreement, the Merger Agreement (including
----------------
the documents and the instruments referred to therein) and the Confidentiality
Agreement constitute the entire agreement between the parties and supersede all
prior agreements and understandings, agreements or representations by or between
the parties, written and oral, with respect to the subject matter hereof and
thereof.
14. Successors; No Third Party Beneficiaries. The terms and conditions of this
----------------------------------------
Option Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and assigns. Nothing in this Option
Agreement, expressed or implied, is intended to confer upon any party, other
than the parties hereto, and their respective successors and assigns, any
rights, remedies, obligations, or liabilities under or by reason of this Option
Agreement, except as expressly provided herein.
15. Notices. All notices or other communications which are required or
-------
permitted hereunder shall be in writing and sufficient if delivered in
accordance with Section 8.2 of the Merger Agreement (which is incorporated
herein by reference).
16. Counterparts. This Option Agreement may be executed in counterparts, and
------------
each such counterpart shall be deemed to be an original instrument, but both
such counterparts together shall constitute but one agreement.
17. Further Assurances. In the event of any exercise of the Option by Parent,
------------------
AmeriSource and Parent shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
18. Specific Performance. The parties hereto agree that if for any reason
--------------------
Parent or AmeriSource shall have failed to perform its obligations under this
Option Agreement, then either party hereto seeking to enforce this Option
Agreement against such non-performing party shall be entitled to specific
performance and injunctive and other equitable relief, and the parties hereto
further agree to waive any requirement for the securing or posting of any bond
in connection with the obtaining of any such injunctive or other equitable
relief. This provision is without prejudice to any other rights that either
party hereto may have against the other party hereto for any failure to perform
its obligations under this Option Agreement.
9
<PAGE>
19. Governing Law. This Agreement shall be governed by the laws of the State
-------------
of Delaware, without giving effect to the conflict of laws principles thereof.
Each party hereby irrevocably and unconditionally consents to submit to the
exclusive jurisdiction of the courts of the State of Delaware and of the United
States of America located in the State of Delaware, for any Action (and agrees
not to commence any Action except in any such court), and further agrees that
service of process, summons, notice or document by U.S. registered mail to its
respective address set forth in Section 8.2 of the Merger Agreement shall be
effective service of process for any Action brought against it in any such
court. Each party hereby irrevocably and unconditionally waives any objection
to the laying of venue of any Action in the courts of the State of Delaware or
of the United States of America located in the State of Delaware, and hereby
further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any Action brought in any such court has been brought in
an inconvenient forum.
20. Regulatory Approvals; Section 16(b). If, in connection with the exercise
-----------------------------------
of the Option under Section 3, prior notification to or approval of any
Governmental Authority is required, then the required notice or application for
approval shall be promptly filed and/or expeditiously processed by AmeriSource
and periods of time that otherwise would run pursuant hereto (if any) shall run
instead from the date on which any such required notification period has expired
or been terminated or such approval has been obtained, and in either event, any
requisite waiting period shall have passed. Periods of time that otherwise
would run pursuant to this Agreement shall also be extended to the extent
necessary in order to avoid liability under Section 16(b) of the Exchange Act.
21. Waiver and Amendment. Any provision of this Option Agreement may be waived
--------------------
at any time by the party that is entitled to the benefits of such provision.
This Option Agreement may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.
22. Additional Option. Because of the uncertainty of the parties regarding the
-----------------
interpretation of the NYSE rules, the parties have agreed that the Option shall
initially be an option to acquire 3,418,601 shares of AmeriSource Common Stock,
notwithstanding the parties' intention to have the Option be an option for 19.9%
of the voting power and 19.9% of the equity of AmeriSource. Accordingly, if,
but only if, AmeriSource is able to grant to Parent an option to acquire up to
an additional 1,325,939 authorized and unissued shares of AmeriSource Class B
Stock without being required to obtain stockholder approval pursuant to the
rules of the NYSE, then AmeriSource hereby grants to Parent such option (the
"Class B Option") to acquire such additional shares (the "Class B Option
Shares"), at the Purchase Price, payable in cash as provided in Section 4
hereof. Parent hereby covenants and agrees that it will not convert the Class B
Option Shares into shares of AmeriSource Class A Common Stock. AmeriSource
hereby covenants and agrees to
10
<PAGE>
use its best efforts to seek concurrence by the NYSE that stockholder approval
would not be required for AmeriSource to grant to Parent the Class B Option. If
the NYSE advises that, in its view, stockholder approval would be required, then
this Option Agreement shall automatically be amended, without further action of
the parties, to delete all references to the Class B Option and the Class B
Option Shares. If the NYSE advises that, in its view, the Class B Option may be
granted without stockholder approval, this Agreement and the Option granted
hereby shall automatically be amended, without further action of the parties, so
that all references herein to the Option shall include the Class B Option and
all references herein to the Option Shares shall include the Class B Option
Shares.
IN WITNESS WHEREOF, each of the parties hereto has executed this option
Agreement as of the date first written above.
McKESSON CORPORATION
By: _____________________
Name:
Title:
AMERISOURCE HEALTH CORPORATION
By: _____________________
Name:
Title:
0175579
11
<PAGE>
Exhibit 99.3
VOTING/SUPPORT AGREEMENT
------------------------
AGREEMENT, dated as of September 22, 1997 (this "Agreement"), among
McKesson Corporation, a Delaware corporation ("McKesson"), Patriot Acquisition
Corp., a Delaware corporation ("Merger Sub") and 399 Venture Partners, Inc. (the
"Stockholder").
WHEREAS, the Board of Directors of McKesson and the Board of Directors of
AmeriSource (capitalized terms used but not defined herein having the respective
meanings given to them in the Merger Agreement) have approved an Agreement and
Plan of Merger dated as of even date herewith (the "Merger Agreement") providing
for the merger of a wholly owned subsidiary of McKesson with and into
AmeriSource;
WHEREAS, the Stockholder is the record and beneficial owner of shares of
AmeriSource Class A Stock, AmeriSource Class B Stock and/or AmeriSource Class C
Stock in the amounts and of the class set forth opposite the Stockholder's name
on Annex A hereto (the "Shares");
WHEREAS, Stockholder currently has certain registration rights in the
Shares pursuant to a Registration Rights Agreement dated March 30, 1995, by and
between Stockholder and AmeriSource (the "1995 Registration Rights Agreement");
WHEREAS, McKesson and the Stockholder are entering into an agreement with
respect to the registration rights which will be accorded the shares of McKesson
Common Stock into which the Shares will be converted in the Merger (the
"Registration Rights Agreement"), which agreement upon its execution by the
parties will supersede the 1995 Registration Rights Agreement; and
WHEREAS, as a condition to McKesson's entering into the Merger Agreement,
McKesson has required that the Stockholder agree, and the Stockholder has
agreed, to enter into this Agreement.
NOW, THEREFORE, to induce McKesson to enter into the Merger Agreement and
the Registration Rights Agreement and in consideration of the premises herein
contained, the parties agree as follows:
1. Grant of Irrevocable Proxy. (a) Until this Agreement is terminated,
--------------------------
the Stockholder hereby irrevocably appoints Merger Sub, its officers, agents and
<PAGE>
nominees, with full power of substitution, as proxy for and attorney in fact of
the Stockholder to act with respect to and vote the Shares owned by the
Stockholder for and in the name, place and stead of the Stockholder at any
annual, special or other meeting of the holders of shares of AmeriSource Common
Stock and at any adjournment or postponement thereof or pursuant to any written
consent in lieu of a meeting, to the fullest extent that the Shares are entitled
to be voted on any matter which may come before such meeting or which may be the
subject of such written consent, (i) in favor of the Merger, the Merger
Agreement and the transactions contemplated thereby (but not any Material
Adverse Amendments (as defined below) to the Merger Agreement), (ii) against any
Competing Transaction, (iii) against any action or agreement the purpose or
effect of which would be to impede, interfere with or attempt to discourage the
Merger, and (iv) against any action the taking of which would constitute a
breach by AmeriSource of any of its representations, warranties, covenants or
agreements contained in the Merger Agreement or in the AmeriSource Stock Option
Agreement; provided that such proxy may not be used to frustrate AmeriSource's
ability to terminate the Merger Agreement in accordance with the provisions of
Section 7.1(c) of the Merger Agreement. In all other matters, the Shares shall
be voted by and in the manner determined by the Stockholder upon written notice
to Merger Sub. The Stockholder hereby represents that it has not heretofore
granted any irrevocable proxy with respect to its Shares and hereby revokes any
and all proxies which may heretofore have been granted with respect to the
Shares. As used herein, a "Material Adverse Amendment" is an amendment that (i)
materially and adversely affects the Stockholder and (ii) is approved by
AmeriSource's Board of Directors notwithstanding the fact that in such vote the
Stockholder's nominees on AmeriSource's Board of Directors voted against such
amendment.
(b) The Stockholder understands and acknowledges that McKesson is
entering into the Merger Agreement in reliance upon the Stockholder's execution
and delivery of this Agreement. The Stockholder hereby affirms that the
irrevocable proxy set forth in this Section 1 is given in connection with and as
an inducement for the execution by McKesson of the Merger Agreement and the
Registration Rights Agreement and to secure the performance of the duties of the
Stockholder under this Agreement. The Stockholder hereby further affirms that
the irrevocable proxy is coupled with an interest and may not be revoked. The
Stockholder hereby ratifies and confirms all that such proxy may lawfully do or
cause to be done by virtue hereof. This proxy is executed and intended to be
irrevocable in accordance with the provisions of Section 212 of the DGCL.
2
<PAGE>
2. Agreement Not to Transfer. The Stockholder agrees that it will not at
-------------------------
any time during the term of this Agreement sell, transfer, assign or otherwise
dispose of ("Transfer") or pledge or otherwise encumber, or enter into any
contract, option or other arrangement with respect to the Transfer, pledge or
encumbrance of, any of the Shares, or grant or purport to grant to any person
any proxy or voting right or any right to acquire any of the Shares, or enter
into any voting agreement with any person with respect to any of the Shares, or
deposit any of the Shares into a voting trust. The foregoing is in addition to
what will be the Stockholder's obligations under Section 3(d).
3. Additional Covenants of the Stockholder. The Stockholder hereby
---------------------------------------
covenants and agrees with McKesson and Merger Sub that, until this Agreement
terminates:
(a) The Stockholder will not at any time, directly or indirectly,
solicit, initiate, encourage or facilitate, or furnish or disclose non-public
information in furtherance of, any inquiries or the making of any proposal with
respect to any Competing Transaction, or authorize or permit any of its
affiliates that it controls ("Controlled Affiliates") or any of its or its
Controlled Affiliates' directors, officers, employees, agents or representatives
to so act, and will immediately cease all existing activities, discussions and
negotiations with any parties conducted heretofore with respect to any proposal
for a Competing Transaction.
(b) The Stockholder shall take all actions necessary to call, or cause
AmeriSource to call, the AmeriSource Stockholders Meeting, in accordance with
the provisions of the Merger Agreement, and shall use its best efforts to cause
such meeting to be held and completed on the date scheduled for such meeting.
(c) At the request of McKesson, the Stockholder shall take all actions
(including, without limitation, making or causing to be made all necessary
filings with all appropriate Governmental Authorities) necessary for the Shares
that are AmeriSource Class B Stock, or such portion thereof as McKesson may
request (but not in excess of the number of shares that would cause the
Stockholder to hold in excess of 19% of the outstanding voting securities of
AmeriSource), to be converted into AmeriSource Class A Stock.
(d) The Stockholder will not, during the 30 days prior to the
Effective Time, sell, transfer or otherwise dispose of or reduce its risk (as
contemplated by the SEC Accounting Series Release No. 135) with respect to the
Shares or shares of Parent Common Stock that it may hold. Provided that
3
<PAGE>
McKesson is not in breach of the provisions of Section 5(b), the Stockholder
will not sell, transfer or otherwise dispose of or reduce its risk (as
contemplated by SEC Accounting Series Release No. 135) with respect to any
Parent Common Stock received by it in the Merger or any other shares of Parent
Common Stock until after such time as combined financial results (including
combined sales and net income) covering at least 30 days of combined operations
of AmeriSource and Parent have been published by Parent, in the form of a
quarterly earnings report, an effective registration statement filed with the
Commission, a report to the Commission on Form 10-K, 10Q or 8-K, or any other
public filing or announcement which includes such combined results of
operations.
(e) The Stockholder will deliver to McKesson at McKesson's request (i)
a written representation confirming, as of immediately prior to the Effective
Time, the accuracy of the representations and warranties contained in Section 4,
and (ii) such additional written representations as may be reasonably requested
by Dechert, Price & Rhoads or Fried, Frank, Harris, Shriver & Jacobson.
(f) The Stockholder will not take any action which would jeopardize
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code.
(g) The Stockholder will execute the AmeriSource Affiliate Letter
promptly upon request therefor, which letter shall be in the form attached
hereto as Annex B.
4. Representations and Warranties of the Stockholder. The Stockholder
-------------------------------------------------
hereby represents and warrants to McKesson and Merger Sub that:
(a) (i) The Shares listed on Annex A attached hereto opposite the
Stockholder's name are the only shares of AmeriSource Common Stock owned of
record or beneficially by the Stockholder or in which the Stockholder has any
interest; (ii) such Shares are now and at all times during the term of this
Agreement will be owned by the Stockholder, free and clear of all liens, claims,
charges and encumbrances of any kind whatsoever except as contemplated by this
Agreement, and none of such Shares is subject to any voting trust or other
agreement or arrangement (except as created by this Agreement) with respect to
the voting of such Shares; and (iii) the Stockholder does not own any options to
purchase or rights to subscribe for or otherwise acquire any other shares of
AmeriSource Common Stock.
(b) The Stockholder has full right, power and authority to execute and
deliver this Agreement and to perform all of its obligations hereunder and such
4
<PAGE>
execution, delivery and performance have been duly authorized by all requisite
corporate action of the Stockholder and no other corporate proceedings are
necessary therefor.
(c) This Agreement has been duly and validly executed and delivered by
the Stockholder and represents a valid and legally binding obligation of the
Stockholder, enforceable against the Stockholder in accordance with its terms.
(d) The execution, delivery and performance of this Agreement by the
Stockholder will not constitute a violation of, conflict with or result in a
default under (i) any contract, understanding or arrangement to which the
Stockholder is a party or by which the Stockholder is bound or require the
consent of any other person or any party pursuant thereto, (ii) any judgment,
decree or order applicable to the Stockholder, or (iii) any Applicable Law.
(e) The Stockholder has no plan or present intention to sell, exchange
or otherwise dispose of a number of shares of McKesson Common Stock received in
the Merger which, together with sales, exchanges or other dispositions by other
stockholders of AmeriSource, would reduce the aggregate ownership of McKesson
Common Stock by stockholders of AmeriSource who receive McKesson Common Stock in
the Merger to a number of shares having a value, as of the Effective Time, of
less than fifty percent of the value of all of the shares of AmeriSource Common
Stock outstanding immediately prior to the Effective Time.
(f) Based upon the representation set forth in Section 3.4 of the
Merger Agreement, and so long as such representation remains true and complete,
set forth on Annex C hereto is the maximum number of shares of AmeriSource Class
A Stock which the Stockholder may own, beneficially and of record, at any time
without violating any Applicable Laws.
5. Representations, Warranties and Covenants of McKesson and Merger Sub.
--------------------------------------------------------------------
(a) McKesson and Merger Sub hereby represent and warrant to the Stockholder
that (i) McKesson and Merger Sub each have full corporate right, power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder; (ii) such execution, delivery and performance have been duly
authorized by all requisite corporate action by McKesson and Merger Sub, and no
other corporate proceedings are necessary therefor; (iii) this Agreement has
been duly and validly executed and delivered by McKesson and Merger Sub and
represents a valid and legally binding obligation of McKesson and Merger Sub,
enforceable against McKesson and Merger Sub in accordance with its terms; and
5
<PAGE>
(iv) the execution, delivery and performance of this Agreement by McKesson and
Merger Sub will not constitute a violation of, conflict with or result in a
default under (A) any contract, understanding or arrangement to which either
McKesson or Merger Sub is a party or by which either is bound or require the
consent of any other person or any party pursuant thereto, (B) any judgment,
decree or order applicable to McKesson or Merger Sub, or (C) any Applicable Law.
(b) McKesson hereby covenants that, if the Effective Time is less than
30 days prior to the end of McKesson's fiscal quarter or occurs during the first
30 days of McKesson's fiscal quarter, McKesson shall use reasonable efforts to
prepare and publicly release, as soon as practicable following the end of the
first month ending at least 30 days after the Effective Time, a report filed
with the Commission on Form 8-K or any other public filing, statement or
announcement which includes the combined financial results (including combined
sales and net income) of McKesson and Amerisource for a period of at least 30
days of combined operations of McKesson and Amerisource following the Effective
Time.
6. McKesson Board of Directors. (a) McKesson hereby covenants that, if
---------------------------
the Merger is consummated, the Board of Directors of McKesson shall take all
action necessary immediately following the Effective Time to elect the following
persons to its Board of Directors: (i) James Urry, who shall be assigned to the
class of directors whose term of office expires at McKesson's first annual
meeting of stockholders after the Effective Time, and (ii) Michael Delaney, who
shall be assigned to the class of directors whose term of office expires at
McKesson's second annual meeting of stockholders after the Effective Time.
(b) If the Merger is consummated and if at any time the Stockholder
owns less than 60% of the shares of McKesson Common Stock received by it in the
Merger, then the Stockholder, upon the written request of McKesson, shall cause
James Urry promptly to resign from McKesson's Board of Directors, and (ii) if at
any time the Stockholder owns less than 30% of the shares of McKesson Common
Stock received by it in the Merger, then the Stockholder, upon the written
request of McKesson, shall cause Michael Delaney promptly to resign from
McKesson's Board of Directors.
7. Termination. (a) This Agreement, other than the obligations set forth
-----------
in Sections 3(d), 3(f), 5(b) and 6, shall terminate at the Effective Time.
(b) This Agreement shall terminate upon (i) the termination of the
Merger Agreement pursuant to its terms and (ii) the occurrence of a Material
Adverse Amendment.
6
<PAGE>
8. Severability. Any term, provision, covenant or restriction contained
------------
in this Agreement held by a court or other Governmental Authority of competent
jurisdiction to be invalid, void or unenforceable shall be ineffective to the
extent of such invalidity, voidness or unenforceability, but neither the
remaining terms, provisions, covenants or restrictions contained in this
Agreement nor the validity or enforceability thereof in any other jurisdiction
shall be affected or impaired thereby. Any term, provision, covenant or
restriction contained in this Agreement that is so found to be so broad as to be
unenforceable shall be interpreted to be as broad as is enforceable.
9. Expenses. Each of the parties hereto shall pay all costs and expenses
--------
incurred by it or on its behalf in connection with the transactions contemplated
hereunder, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel, except as otherwise provided
herein.
10. Entire Agreement. This Agreement (including the documents and the
----------------
instruments referred to therein) constitutes the entire agreement between the
parties and supersedes all prior agreements and understandings, agreements or
representations by or between the parties, written and oral, with respect to the
subject matter hereof and thereof.
11. Successors; No Third Party Beneficiaries. The terms and conditions of
----------------------------------------
this Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and assigns. Nothing in this Agreement,
expressed or implied, is intended to confer upon any party, other than the
parties hereto and their respective successors and assigns, any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided herein.
12. Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally, telecopied (which is
confirmed) or dispatched by a nationally recognized overnight courier service to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(i) if to McKesson or Merger Sub, to
One Post Street
San Francisco, CA 94104
Attn.: Ivan D. Meyerson, Esq.
Telecopy No.: 415-983-8826
7
<PAGE>
with copies to
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attn.: Stephen Fraidin, P.C.
Telecopy No.: 212-859-6140
(ii) if to the Stockholder,
to the address set forth opposite its
name on Annex A.
with a copy to
Kirkland & Ellis
153 East 53rd Street
Suite 3900
New York, New York 10022
Attn.: Kirk A. Radke, Esq.
Telecopy No.: 212-446-4900
13. Counterparts. This Agreement may be executed in counterparts, and
------------
each such counterpart shall be deemed to be an original instrument, but both
such counterparts together shall constitute but one agreement.
14. Specific Performance. The parties hereto agree that if for any reason
--------------------
McKesson or the Stockholder shall have failed to perform its obligations under
this Agreement, then the party hereto seeking to enforce this Agreement against
such non-performing party shall be entitled to specific performance and
injunctive and other equitable relief, and the parties hereto further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such injunctive or other equitable relief. This provision
is without prejudice to any other rights that any party hereto may have against
any other party hereto for any failure to perform its obligations under this
Agreement.
15. Governing Law. This Agreement shall be governed by the laws of the
-------------
State of Delaware, without giving effect to the conflict of laws principles
thereof. Each party hereby irrevocably and unconditionally consents to submit
to the exclusive jurisdiction of the courts of the State of Delaware and of the
United States of America located in the State of Delaware, for any Action (and
agrees not
8
<PAGE>
to commence any Action except in any such court), and further agrees that
service of process, summons, notice or document by U.S. registered mail to its
respective address set forth in Section 12 shall be effective service of process
for any Action brought against it in any such court. Each party hereby
irrevocably and unconditionally waives any objection to the laying of venue of
any Action in the courts of the State of Delaware or of the United States of
America located in the State of Delaware, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any Action brought in any such court has been brought in an inconvenient forum.
16. Waiver and Amendment. Any provision of this Agreement may be waived
--------------------
at any time by the party that is entitled to the benefits of such provision.
This Agreement may not be modified, amended, altered or supplemented except upon
the execution and delivery of a written agreement executed by the parties
hereto.
17. Additional Shares. Notwithstanding the provisions of Section 16, in
-----------------
the event that the Stockholder acquires any additional shares of AmeriSource
Common Stock, such shares shall, without further action of the parties, be
subject to the provisions of this Agreement (including, without limitation,
Sections 3(c) and 4(f)), and Annex A will be deemed amended accordingly. If the
Stockholder acquires additional shares of AmeriSource Common Stock, it shall
promptly notify McKesson in writing of such acquisition.
9
<PAGE>
IN WITNESS WHEREOF, the parties have caused this agreement to be duly
executed as of the date first above written.
McKESSON CORPORATION
By: __________________________
PATRIOT ACQUISITION CORP.
By: __________________________
399 VENTURE PARTNERS, INC.
By: __________________________
175517
10
<PAGE>
ANNEX A
<TABLE>
<CAPTION>
Securities (in number of shares)
Record and -------------------------------- Percentage
Beneficial Owner Class A Class B Class C Voting Power
- ---------------------------------------- --------- ----------- -------- -------------
<S> <C> <C> <C> <C>
1. 399 Venture Partners, Inc. 234,926 6,486,147 None 1.4%
c/o Helene Shavin
399 Park Avenue
14/th/ Floor Zone 4
NY, NY 10022-4614
</TABLE>
11
<PAGE>
ANNEX B
FORM OF AMERISOURCE AFFILIATE LETTER
McKesson Corporation
One Post Street
San Francisco, California 94104
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to
be an "affiliate" of AmeriSource Health Corporation, a Delaware corporation
("AmeriSource"), as the term "affiliate" is (i) defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Act"), or (ii) used in and for
purposes of Accounting Series, Releases 130 and 135, as amended, of the
Commission. Pursuant to the terms of the Agreement and Plan of Merger dated as
of September 22, 1997 (the "Merger Agreement"), among McKesson Corporation, a
Delaware corporation ("McKesson"), Patriot Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of McKesson ("Merger Sub"), and
AmeriSource, Merger Sub will be merged with and into AmeriSource (the "Merger").
As a result of the Merger, I may receive shares of common stock, par value
$.01 per share, of McKesson (the "McKesson Securities") in exchange for shares
owned by me of common stock, par value $.01 per share, of AmeriSource (or upon
the exercise of options for such shares).
I hereby represent, warrant and covenant to McKesson that in the event I
receive any McKesson Securities as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of the
McKesson Securities in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Merger Agreement and discussed the
requirements of such documents and other applicable limitations upon my ability
to sell, transfer or otherwise dispose of the McKesson Securities, to the extent
I felt necessary, with my counsel or counsel for AmeriSource.
C. I have been advised that the issuance of McKesson Securities to me
pursuant to the Merger has been registered with the Commission under the Act on
12
<PAGE>
a Registration Statement on Form S-4. However, I have also been advised that,
since at the time the Merger was submitted for a vote of the stockholders of
AmeriSource, (i) I may be deemed to have been an affiliate of AmeriSource and
(ii) the distribution by me of the McKesson Securities has not been registered
under the Act, I may not sell, transfer or otherwise dispose of the McKesson
Securities issued to me in the Merger unless (i) such sale, transfer or other
disposition has been registered under the Act, (ii) such sale, transfer or other
disposition is made in conformity with Rule 145 (as such rule may be hereafter
from time to time amended) promulgated by the Commission under the Act, or (iii)
in the opinion of counsel reasonably acceptable to McKesson, or a "no action"
letter obtained by me from the staff of the Commission, such sale, transfer or
other disposition is otherwise exempt from registration under the Act.
D. I understand that, except as may be provided in the Registration Rights
Agreement entered into by McKesson and me, dated as of September 22, 1997,
McKesson is under no obligation to register the sale, transfer or other
disposition of the McKesson Securities by me or on my behalf under the Act or to
take any other action necessary in order to make compliance with an exemption
from such registration available.
E. I also understand that stop transfer instructions will be given to
McKesson's transfer agents with respect to the McKesson Securities and that
there will be placed on the certificates for the McKesson Securities issued to
me, or any substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES, AND MAY ONLY BE SOLD OR OTHERWISE
TRANSFERRED IN COMPLIANCE WITH THE REQUIREMENTS OF RULE 145 OR
PURSUANT TO A REGISTRATION STATEMENT UNDER THAT ACT OR AN
EXEMPTION FROM SUCH REGISTRATION."
F. I also understand that unless the transfer by me of my McKesson
Securities has been registered under the Act or is a sale made in conformity
with the provisions of Rule 145, McKesson reserves the right to put the
following legend on the certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO
13
<PAGE>
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145
PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES. THE
SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR
FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN
THE MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OF 1933."
It is understood and agreed that the legends set forth in paragraphs E and
F above shall be removed by delivery of substitute certificates without such
legend if such legend is not required for purposes of the Act or this Agreement.
It is understood and agreed that such legends and the stop orders referred to
above will be removed if (i) evidence or representations satisfactory to
McKesson that the McKesson Securities represented by such certificates are being
or have been sold in a transaction made in conformity with the provisions of
Rule 145(d) (as such rule may be hereafter from time to time amended) or (ii)
McKesson has received either an opinion of counsel, which opinion and counsel
shall be reasonably satisfactory to McKesson, or a "no action" letter obtained
by me from the staff of the Commission, to the effect that the restrictions
imposed by Rule 145 under the Act no longer apply to me.
I further represent to and covenant with McKesson that I will not, during
the 30 days prior to the Effective Time (as defined in the Merger Agreement),
sell, transfer or otherwise dispose of or reduce my risk (as contemplated by the
SEC Accounting Series Release No. 135) with respect to AmeriSource shares or
shares of the capital stock of McKesson that I may hold and, furthermore,
provided that McKesson is not in breach of Section 5(b) of the Voting/Support
Agreement between McKesson and me dated as of September 22, 1997, I will not
sell, transfer or otherwise dispose of or reduce my risk (as contemplated by SEC
Accounting Series Release No. 135) with respect to any McKesson Securities
received by me in the Merger or any other shares of the capital stock of
McKesson until after such time as combined financial results (including combined
sales and net income) covering at least 30 days of combined operations of
AmeriSource and McKesson have been published by McKesson, in the form of a
quarterly earnings report, an effective registration statement filed with the
Commission, a report to the Commission on Form 10-K, 10-Q or 8-K, or any other
public filing or announcement which includes such combined results of
operations. If the Effective Time is less than 30 days prior to the end of
McKesson's fiscal quarter, McKesson shall use reasonable efforts to prepare and
14
<PAGE>
publicly release such combined financial results as soon as practicable
following the end of the first month ending at least 30 days after the Effective
Time and shall notify the "affiliates" of the publication of such results.
Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of AmeriSource as described in the first paragraph of
this letter, or as a waiver of any rights I may have to object to any claim that
I am such an affiliate on or after the date of this letter.
Very truly yours,
--------------------------------------
Name:
Accepted this ____ day of
__________________________, 199_ by
McKESSON CORPORATION
By: ___________________________
Name: _____________________
Title: ____________________
15
<PAGE>
ANNEX C
The maximum number of shares of AmeriSource Class A Stock which the
Stockholder may own, beneficially or of record, without violating Applicable
Law, is 3,974,513 shares, assuming 16,943,975 shares of AmeriSource Class A
Stock are owned by persons other than the Stockholder.
16
<PAGE>
Exhibit 99.4
REGISTRATION RIGHTS AGREEMENT
Dated as of September 22, 1997
<PAGE>
REGISTRATION RIGHTS AGREEMENT, dated as of September 22, 1997,
by and between McKesson Corporation (the "Company"), and 399 Venture Partners,
Inc. ("399 Venture").
1. Introduction; Term of Agreement. The Company is a party to the
-------------------------------
separate Agreement and Plan of Merger (the "Merger Agreement"), dated as of
September 22, 1997, among the Company, Patriot Acquisition Corp. and AmeriSource
Health Corporation, a Delaware Corporation ("AmeriSource"), pursuant to which
the Company and AmeriSource have agreed, that a wholly owned subsidiary of the
Company, Patriot Acquisition Corp., shall be merged with and into AmeriSource
with AmeriSource as the surviving corporation, and shareholders of AmeriSource
to be entitled to shares of common stock of the Company (the "Common Stock") in
respect of their shares of AmeriSource as specified in the Merger Agreement.
This Agreement shall become effective upon the Effective Time (as defined in the
Merger Agreement). This Agreement shall terminate and be of no further force and
effect at such time as the holders of Registrable Securities in the aggregate
own less than 25% of the Registrable Securities owned by such holders at the
Effective Time. Certain capitalized terms used in this Agreement are defined in
section 3 hereof; references to sections shall be to sections of this Agreement.
2. Registration under Securities Act, etc.
--------------------------------------
2.1 Registration on Request.
-----------------------
(a) Demand Request. Upon the written request of the
--------------
Initiating Holder, requesting that the Company effect the registration
under the Securities Act of all or part of such Initiating Holder's
Registrable Securities and specifying the intended method or
methods of disposition thereof (a "Demand Request"), the Company will, as
promptly as reasonably practicable but in no event later than 20 days
after such request, give written notice of such requested registration to
all registered holders of Registrable Securities
2
<PAGE>
who would be entitled to participate in such registration, and thereupon the
Company will, subject to the terms of this Agreement, use its best efforts to
effect the registration under the Securities Act of:
(i) the Registrable Securities which the Company has
been so requested to register by such Initiating Holder for
disposition in accordance with the intended method or methods of
disposition stated in such request;
(ii) all other Registrable Securities the holders of
which shall have made a written request to the Company for
registration thereof within 30 days after the giving of such
written notice by the Company (which request shall specify the
intended method or methods of disposition of such Registrable
Securities);
(iii) all shares of Common Stock which the Company may
elect to register in connection with the offering of Registrable
Securities pursuant to this section 2.1; and
(iv) all shares of Common Stock which the Company may
be required to register in connection with "piggyback" or
incidental registration rights granted to any other Person;
all to the extent requisite to permit the disposition (in accordance with the
intended method or methods of distribution specified in the Demand Request) of
the Registrable Securities and the additional shares of Common Stock, if any, so
to be registered, provided, however, that each such Demand Request shall be for
a number of shares of Common Stock which represent at least 25% of the aggregate
Registrable Securities received by the holders of Registrable Securities as of
the Effective Time (the "Minimum Demand Amount"), unless the Demand Request is
the last Demand Request available hereunder, in which event the Demand Request
may cover the remainder of the Registrable Securities even if such amount of
Registrable Securities is less than the Minimum Demand Amount. Subject to the
provisions of section 2.1(d), the Initiating Holder will have the right pursuant
to this section 2.1(a) to make an aggregate of two Demand Requests.
Without limiting the generality of the foregoing, the Initiating Holder
shall have the right to request registration pursuant to this section 2.1 and
specify that one of the methods of disposition of Registrable Securities shall
be a block trade or trades involving Registrable Securities held by the
Initiating Holder and that, in connection therewith, the Company shall file with
the Commission
3
<PAGE>
a registration statement under Rule 415 covering all of the Registrable
Securities to be sold in the block trade or trades. In such case, the Company
shall file an appropriate shelf registration statement with the Commission as
promptly as reasonably practicable and in accordance with the provisions of
section 2.3. Subject to the provisions of section 2.1(d), any shelf registration
which involves a block trade or block trades as an intended method of
disposition, whether or not any such block trade is made, shall be considered as
the exercise of one of the two Demand Requests permitted by this section
2.1(a). Notwithstanding anything herein to the contrary, it is understood and
agreed that the Initiating Holder shall not be entitled to make a Demand Request
for registration pursuant to this section 2.1(a) until the date which is the
sixtieth day after the Effective Time and, in the event the Initiating Holder
makes such a request, the Company shall use its best efforts to file a
registration statement with the Commission with respect to such request not
later than the thirtieth day following such request. It is furthermore
understood and agreed that if the Initiating Holder makes a Demand Request on or
within ten days after such sixtieth day, the provisions of section 2.1(g) shall
not apply and the Company shall not be entitled to initiate a Delay Period as
therein provided, except as required by applicable law arising from events
outside of the control of the Company.
(b) Registration Statement Form. Registrations under this section
---------------------------
2.1 shall be on such appropriate registration form of the Commission (i)
as shall be selected by the Company and, as shall be reasonably
acceptable to the Initiating Holder of the Registrable Securities so to
be registered and (ii) as shall permit the disposition of such
Registrable Securities in accordance with the intended method or methods
of disposition specified in the request for such registration.
(c) Expenses. The Company will pay all Registration Expenses in
--------
connection with any registration requested pursuant to this section 2.1
(including any registration deemed not to be "effected" under section
2.1).
(d) Effective Registration Statement. A registration requested
--------------------------------
pursuant to this section 2.1 shall not be deemed to have been effected (and
therefore not requested for purposes of the limitations in section 2.1(a) on the
number of requests for registration that can be made pursuant to section 2.1(a))
(i) unless a registration statement with respect thereto has become effective
and the holders of Registrable Securities have sold at least 90% of the
Registrable Securities which they have requested the Company to register,
provided that a registration which does not become effective after the Company
has filed a registration statement with respect thereto solely by reason of the
refusal to proceed of the Initiating Holder (other than a refusal to proceed
based upon the advice of counsel relating to a matter with respect to the
Company) shall be deemed to have been effected by the Company at the request of
the Initiating Holder unless the Initiating
4
<PAGE>
Holder shall have elected to pay all Registration Expenses in connection with
such registration, (ii) if, after it has become effective, such registration
becomes subject to any stop order, injunction or other order or requirement of
the Commission or other governmental agency or court for any reason, or (iii) if
the conditions to closing specified in the purchase agreement or underwriting
agreement entered into in connection with such registration are not satisfied,
other than by reason of some act or omission by the Initiating Holder or any
other holder of Registrable Securities.
(e) Selection of Underwriters. If a requested registration pursuant
-------------------------
to this section 2.1 involves an underwritten offering, the underwriter or
underwriters thereof shall be selected by the Initiating Holder from a
list of underwriters to be agreed upon by the Initiating Holder and the
Company.
(f) Priority in Requested Registrations. If a requested
-----------------------------------
registration pursuant to this section 2.1 involves an underwritten offering, and
the managing underwriter shall advise the Company in writing (with a copy to
each holder of Registrable Securities requesting registration) that, in its
opinion, the number of securities requested to be included in such registration
(including securities of the Company which are not Registrable Securities)
exceeds the number which can be sold in such offering within a price range
acceptable to the holders of a majority of the Registrable Securities requested
to be included in such registration, the Company will include in such
registration, to the extent of the number which the Company is so advised can be
sold in such offering, (i) first, Registrable Securities requested to be
included in such registration by any holders of Registrable Securities, pro rata
--------
among such holders requesting such registration on the basis of the number of
such securities requested to be included by such holders and (ii) second,
subject to section 2.1(a) hereof, securities the Company proposes to sell and
other securities of the Company included in such registration by other holders
who may have "piggyback" or incidental registration rights.
(g) Delay Periods. The Company shall be entitled to postpone the
-------------
filing of any registration statement otherwise required to be prepared and filed
by the Company pursuant to this section 2, or suspend the use of any effective
registration statement under this section 2, for a reasonable period of time,
but not in excess of 90 days (a "Delay Period"), if any executive officer of the
Company determines that in such executive
5
<PAGE>
officer's reasonable good faith judgment the registration and distribution of
the Registrable Securities covered or to be covered by such registration
statement would materially interfere with any pending material financing,
acquisition or corporate reorganization or other material corporate development
involving the Company or any of its subsidiaries or would require premature
disclosure thereof and promptly gives the Initiating Holder written notice of
such determination, and an approximation of the period of the anticipated delay;
provided, however, that (i) the aggregate number of days included in all Delay
Periods during any consecutive 12 months shall not exceed the aggregate of 180
days and (ii) a period of at least 90 days shall elapse between the termination
of any Delay Period and the commencement of the immediately succeeding Delay
Period. Immediately upon receipt of a written notice of suspension, each holder
of Registrable Securities shall cease all disposition efforts with respect to
Registrable Securities held by such holder. If the Company shall so postpone the
filing of a registration statement, the Holders of Registrable Shares to be
registered shall have the right to withdraw the request for registration by
giving written notice within 45 days after receipt of the notice of postponement
or, if earlier, the termination of such Delay Period (and, in the event of such
withdrawal, such request shall not be counted for purposes of determining the
number of Demand Requests for registration to which the Initiating Holder of
Registrable Shares is entitled pursuant to this section 2). The time period for
which the Company is required to maintain the effectiveness of any registration
statement shall be extended by the aggregate number of days of all Delay Periods
during such registration. The Company shall not be entitled to initiate a Delay
Period unless it shall (A) to the extent permitted by agreements with other
security holders of the Company, concurrently prohibit sales by such other
security holders under registration statements covering securities held by such
other security holders and (B) in the case of a delay arising as a result of
premature disclosure, in accordance with the Company's policies from time to
time in effect, forbid purchases and sales in the open market by senior
executives of the Company.
2.2 Incidental Registration.
-----------------------
(a) Right to Include Registrable Securities. If the Company at any
---------------------------------------
time proposes to register any of its shares of Common Stock (other than
in connection with a registration of securities which are convertible or
exchangeable into Common Stock) under the Securities Act (other than by a
registration on Form S-4 or S-8, or any successor or similar forms and
other than pursuant to section 2.1), whether or not for sale for its own
account, it will each such time give prompt written notice to all holders
of Registrable Securities of its intention to do so and of such holders'
rights under this section 2.2. Upon the written request of any such
holder made within 30 days after the receipt
6
<PAGE>
of any such notice (which request shall specify the Registrable Securities
intended to be disposed of by such holder and the intended method or methods of
disposition thereof), the Company will, subject to the terms of this Agreement,
use its best efforts to effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register by
the holders thereof, to the extent requisite to permit the disposition (in
accordance with the intended method or methods of distribution thereof specified
in the requests of such holders) of the Registrable Securities so to be
registered, by inclusion of such Registrable Securities in the registration
statement which covers the securities which the Company proposes to register;
provided that if, at any time after giving written notice of its intention to
- --------
register any securities and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason either not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each holder of Registrable Securities and, thereupon, (i) in
the case of a determination not to register, shall be relieved of its obligation
to register any Registrable Securities in connection with such registration (but
not from its obligation to pay the Registration Expenses in connection
therewith), without prejudice, however, to the rights of any holder or holders
of Registrable Securities entitled to do so to request that such registration be
effected as a registration under section 2.1, and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Securities, for the same period as the delay in registering such
other securities. No registration effected under this section 2.2 shall relieve
the Company of its obligation to effect any registration upon request under
section 2.1, nor shall any such registration hereunder be deemed to have been
effected pursuant to section 2.1. The Company will pay all Registration Expenses
in connection with each registration of Registrable Securities requested
pursuant to this section 2.2, and each Requesting Holder whose Registrable
Securities are included in a registration requested pursuant to this section 2.2
will pay any underwriting discounts and commissions and fees of such holder's
counsel in connection therewith.
(b) Priority in Incidental Registrations. If (i) a registration
------------------------------------
pursuant to this section 2.2 involves an underwritten offering of the
securities so being registered, whether or not for sale for the account
of the Company, to be distributed (on a firm commitment basis) by or
through one or more underwriters of recognized standing under
underwriting terms appropriate for such a transaction, (ii) the
Registrable Securities so requested to be registered for sale for the
account of holders of Registrable Securities are not also to be included
in such underwritten offering (either because the Company has not
7
<PAGE>
been requested so to include such Registrable Securities pursuant to section
2.4(b) or, if requested to do so, is not obligated to do so under section
2.4(b)), and (iii) the managing underwriter of such underwritten offering shall
inform the Company and holders of the Registrable Securities requesting such
registration by letter of its belief that the number of securities requested to
be included in such registration exceeds the number which can be sold in (or
during the time of) such offering, then the Company will include in such
registration:
(i) first, all the securities the Company proposes to
sell for its own account,
(ii) second all securities of any other holder who has
made a demand for registration, and
(iii) third, to the extent that the number of
securities which the Company and any such other holders proposed to
include pursuant to clauses (i) and (ii) is less than the number of
securities which the Company has been advised can be sold in such
offering, the number of such Registrable Securities requested to be
included in such registration by the Requesting Holders pursuant to
this section 2.2(a) hereof shall be allocated pro rata among all
such Requesting Holders on the basis of the relative number of
Registrable Securities each such holder has requested to be
included in such registration.
2.3 Registration Procedures. Subject to section 2.1(a), if and
-----------------------
whenever the Company is required to effect the registration of any
Registrable Securities under the Securities Act as provided in sections
2.1 and 2.2, the Company shall, as expeditiously as reasonably possible:
(i) prepare and file with the Commission the requisite
registration statement to effect such registration (including such
audited financial statements as may be required by the Securities
Act or the rules and regulations promulgated thereunder) and
thereafter cause such registration statement to become and remain
effective for a period of at least 120 days, provided, however that
-------- -------
the Company may discontinue any registration of its securities
which are not Registrable Securities (and, under the circumstances
specified in section 2.2(a), its securities which are Registrable
Securities) at any time prior to the effective date of the
registration statement relating thereto;
(ii) prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep
such registration statement effective for
8
<PAGE>
a period of at least 120 days and to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered
by such registration statement until the earlier of such time as all of
such securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof set forth in such
registration statement or such other time as is required by the Securities
Act;
(iii) permit any holder of Registrable Securities which
holder, in its reasonable judgment, might be deemed to be an underwriter
or a controlling person of the Company, to participate in the preparation
of such registration or comparable statement and to require the insertion
therein of material, furnished to the Company in writing, which in the
reasonable judgment of such holder and its counsel should be included;
(iv) furnish to each seller of Registrable Securities
covered by such registration statement and each Requesting Holder
and each underwriter, if any, of the securities being sold by such
seller such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in
each case including all exhibits), such number of copies of the
prospectus contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any other
prospectus filed pursuant to Rule 424 under the Securities Act, in
conformity with the requirements of the Securities Act, and such
other documents, as such seller and underwriter, if any, may
reasonably request;
(v) use its best efforts to register or qualify all
Registrable Securities and other securities covered by such
registration statement under such other state securities laws or
blue sky laws of such jurisdictions as any seller thereof and any
underwriter of the securities being sold by such seller and any
Requesting Holder shall reasonably request, to keep such
registrations or qualifications in effect for so long as such
registration statement remains in effect, and take any other action
which may be reasonably necessary or advisable to enable such
seller and underwriter to consummate the disposition in such
jurisdictions of the securities owned by such seller, except that
the Company shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any
jurisdiction wherein it would not but for the requirements of this
subsection (v) be obligated to be so qualified or to consent to
general service of process in any such jurisdiction;
(vi) furnish to each seller of Registrable Securities
and each Requesting Holder a signed counterpart, addressed to such
seller, such Requesting Holder and the underwriters, if any, of:
(X) an opinion of counsel for the Company
(which shall be outside counsel if outside counsel is
rendering such opinion in the transaction and otherwise
may be the Company's inside counsel),
9
<PAGE>
dated the effective date of such registration statement (or,
if such registration includes an underwritten public offering,
an opinion dated the date of the closing under the
underwriting agreement), customary for a transaction of such
type, and
(Y) a "comfort" letter (or, in the case of any
such Person which does not satisfy the conditions for
receipt of a "comfort" letter specified in Statement on
Auditing Standards No. 72, an "agreed upon procedures"
letter), dated the effective date of such registration
statement (and, if such registration includes an
underwritten public offering, a letter of like kind
dated the date of the closing under the underwriting
agreement), signed by the independent public
accountants who have certified the Company's financial
statements included in such registration statement,
covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and,
in the case of the accountants' letter, with respect to events
subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in
accountants' letters delivered to the underwriters in underwritten
public offerings of securities (with, in the case of an "agreed
upon procedure" letter, such modifications or deletions as may be
required under Statement on Auditing Standards No. 35) and, in the
case of the accountants' letter, such other financial matters
customarily covered in a transaction of such type;
(vii) notify the holders of Registrable Securities and
the managing underwriter or underwriters, if any, promptly:
(V) when the registration statement, the
prospectus or any prospectus supplement related thereto
or post-effective amendment to the registration
statement has been filed, and, with respect to the
registration statement or any post-effective amendment
thereto, when the same has become effective:
(W) of any request by the Commission for
amendments or supplements to the registration statement
or the prospectus or for additional information;
10
<PAGE>
(X) of the issuance by the Commission of any
stop order suspending the effectiveness of the
registration statement or the initiation of any
proceedings by any Person for that purpose;
(Y) if at any time the representations and
warranties of the Company made as contemplated by
section 2.4 below cease to be true and correct; and
(Z) of the receipt by the Company of any
notification with respect to the suspension of the
qualification of any Registrable Securities for sale
under the securities or blue sky laws of any
jurisdiction or the initiation or threat of any
proceeding for such purpose;
(viii) notify each seller of Registrable Securities
covered by such registration statement and each Requesting Holder,
at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, upon the Company's discovery
that, or upon the happening of any event as a result of which, the
prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the
circumstances under which they were made, and at the request of any
such seller or Requesting Holder promptly prepare and furnish to
such seller or Requesting Holder and each underwriter, if any, a
reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus
shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances under which they were made;
(ix) make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of the
registration statement at the earliest possible moment;
(x) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and, if
required, make available to its security holders, as soon as
reasonably practicable, an earnings statement covering the period
of at least twelve months, but not more than eighteen months,
beginning with the first day of the Company's first full calendar
quarter after the effective date of such registration statement,
which earnings statement shall satisfy the provisions of Section
11(a) of
11
<PAGE>
the Securities Act and Rule 158 thereunder, and will use its best efforts
to furnish to each such seller and each Requesting Holder at least one
business day prior to the filing thereof a copy of any amendment or
supplement to such registration statement or prospectus and shall not file
any thereof to which any such seller or any Requesting Holder shall have
reasonably objected on the grounds that such amendment or supplement does
not comply in all material respects with the requirements of the
Securities Act or of the rules or regulations thereunder;
(xi) provide and cause to be maintained a transfer agent
and registrar for all Registrable Securities covered by such
registration statement from and after a date not later than the
effective date of such registration statement; and
(xii) use its best efforts to list all Registrable
Securities covered by such registration statement on any securities
exchange on which any of the securities of the same class as the
Registrable Securities are then listed.
The Company will not file any registration statement or amendment
thereto or any prospectus or any supplement thereto to which the holders
of at least a majority of the Registrable Securities covered by such
registration statement or the underwriter or underwriters, if any, shall
reasonably object.
The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish the Company such
information regarding such seller and the distribution of such securities
as the Company may from time to time reasonably request in writing.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company
of the occurrence of any event of the kind described in paragraph (ix)
of this section 2.3, such holder will forthwith discontinue such holder's
disposition of Registrable Securities pursuant to the registration
statement relating to such Registrable Securities until such holder's
receipt of the copies of the supplemented or amended prospectus
contemplated by paragraph (ix) of this section 2.3 and, if so directed
by the Company, will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies, then in such holder's
possession of the prospectus relating to such Registrable Securities
current at the time of receipt of such notice. In the event the Company
shall give any such notice, the period mentioned in paragraph (ii) of
this section 2.3 shall be extended by the length of the period from and
including the date when each seller of any Registrable Securities
12
<PAGE>
covered by such registration statement shall have received such notice to the
date on which each such seller has received the copies of the supplemented or
amended prospectus contemplated by paragraph (ix) of this section 2.3.
If any such registration statement refers to any holder of
Registrable Securities by name or otherwise as the holder of any
securities of the Company, then such holder shall have the right to
require (i) the insertion therein of language, in form and substance
satisfactory to such holder, to the effect that the holding by such
holder of such securities does not necessarily make such holder a
"controlling person" of the Company within the meaning of the Securities
Act and is not to be construed as a recommendation by such holder of the
investment quality of the Company's securities covered thereby and that
such holding does not imply that such holder will assist in meeting any
future financial requirements of the Company, or (ii) in the event that
such reference to such holder by name or otherwise is not required by the
Securities Act or any similar federal statute then in force, the deletion
of the reference to such holder.
2.4 Underwritten Offerings:
----------------------
(a) Requested Underwritten Offerings. If requested by the
--------------------------------
underwriters for any underwritten offering by holders of Registrable
Securities pursuant to a registration requested under section 2.1, the
Company will enter into an underwriting or similar agreement with such
underwriters for such offering, such agreement to be reasonably
satisfactory in substance and form to the Company, each such holder and
the underwriters, and to contain such representations and warranties by
the Company and such other terms as are generally prevailing in
agreements of this type, including, without limitation, indemnities to
the effect and to the extent provided in section 2.7. The holders of the
Registrable Securities will cooperate with the Company in the negotiation
of the underwriting or similar agreement and will give consideration to
the reasonable suggestions of the Company regarding the form thereof,
provided that nothing herein contained shall diminish the foregoing
- --------
obligations of the Company. The holders of Registrable Securities to be
distributed by such underwriters shall be parties to such underwriting
agreement and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part
of, the Company to and for the benefit of such underwriters shall also be
made to and for the benefit of such holders of Registrable Securities and
that any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement be conditions precedent to
the obligations of such holders of Registrable Securities. No
underwriting or similar agreement shall require any holder of Registrable
Securities to make any representations or warranties to or agreements
with the Company or the underwriters other than
13
<PAGE>
representations and warranties or agreements regarding such holder, such
holder's Registrable Securities and such holder's intended method or methods of
distribution and any other representation required by law or to make any
agreements with the Company or the underwriters with respect to indemnification
of any Person or the contribution obligations of any Person that would impose
any obligation which is broader than the indemnity furnished by such holder
pursuant to the provisions of section 2.7. In addition, the Requesting Holders
shall cooperate with the Company in an effort to provide that any such agreement
will contain a provision modifying the indemnification of the underwriter to the
effect that the Company will not be liable to any Person who participates as an
underwriter in the offering or sale of Registrable Securities with respect to
any preliminary prospectus, to the extent that any such loss, claim, damage or
liability of such underwriter results from such underwriter having sold
Registrable Securities to a person to whom there was not sent or given, at or
prior to the written confirmation of such sale, a copy of the final prospectus,
if the Company has previously furnished thereof to such underwriter and such
final prospectus as then amended or supplemented, has corrected any such
misstatement or omission.
(b) Incidental Underwritten Offerings. If the Company at any time
---------------------------------
proposes to register any of its securities under the Securities Act as
contemplated by section 2.2 and such securities are to be distributed by
or through one or more underwriters, the Company will, if requested by
any holder of Registrable Securities as provided in section 2.2 and
subject to the provisions of section 2.2(b), use its best efforts to
arrange for such underwriters to include all the Registrable Securities
to be offered and sold by such holder among the securities to be
distributed by such underwriters. The holders of Registrable Securities
to be distributed by such underwriters shall be parties to the
underwriting agreement between the Company and such underwriters and may,
at their option, require that any or all of the representations and
warranties by, and the other agreements on the part of, the Company to
and for the benefit of such underwriters shall also be made to and for
the benefit of such holders of Registrable Securities and that any or all
of the conditions precedent to the obligations of such underwriters under
such underwriting agreement be conditions precedent to the obligations of
such holders of Registrable Securities. Any such holder of Registrable
Securities shall not be required to make any representations or
warranties to or agreements with the Company or the underwriters other
than representations, warranties or agreements regarding such holder,
such holder's Registrable Securities and such holder's intended method of
distribution and any other representation required by law or to make any
agreements with the Company or the underwriters with respect to
indemnification of any Person or the contribution obligations of any
Person that would impose any obligation which
14
<PAGE>
is broader than the indemnity furnished by such holder pursuant to the
provisions of section 2.7. In addition, the Requesting Holders shall cooperate
with the Company in an effort to provide that any such agreement will contain a
provision modifying the indemnification of the underwriter to the effect that
the Company will not be liable to any Person who participates as an underwriter
in the offering or sale of Registrable Securities with respect to any
preliminary prospectus, to the extent that any such loss, claim, damage or
liability of such underwriter results from such underwriter having sold
Registrable Securities to a person to whom there was not sent or given, at or
prior to the written confirmation of such sale, a copy of the final prospectus,
if the Company has previously furnished thereof to such underwriter and such
final prospectus as then amended or supplemented, has corrected any such
misstatement or omission.
(c) Holdback Agreements.
-------------------
(i) Each holder of Registrable Securities agrees by
acquisition of such Registrable Securities, if and to the extent so
required by the managing underwriter, not to sell, make any short
sale of, loan, grant any option for the purchase of, effect any
public sale or distribution of or otherwise dispose of any
securities of the Company, during the 7 days prior to and the 90
days after any underwritten registration pursuant to section 2.1 or
2.2 has become effective, except as part of such underwritten
registration, whether or not such holder participates in such
registration, provided that the foregoing restrictions shall not
--------
apply with regard to the transfer by the Holders of Registrable Securities
to any Affiliate or to any other transferee in a private transaction not
requiring registration under the Securities Act, or to any bona fide
pledge of such Registrable Securities, provided that such Affiliate or
other transferee and/or lender or creditor acknowledges in writing that it
is bound by the provisions of this section 2.4(c). Each holder of
Registrable Securities agrees that the Company may instruct its transfer
agent to place stop transfer notations in its records to enforce this
section 2.4(c).
(ii) The Company agrees (X) if so required by the
managing underwriter not to sell, make any short sale of, loan,
grant any option for the purchase of, effect any public sale or
distribution of or otherwise dispose of its equity securities or
securities convertible into or exchangeable or exercisable for any
of such securities during the seven days prior to and the 90 days
after any underwritten registration pursuant to section 2.1 or 2.2
has become effective, except as part of such underwritten
registration and except pursuant to registrations on Form S-
15
<PAGE>
4, S-8, or any successor or similar forms thereto, and (Y) to cause each
holder of its securities purchased from the Company at any time after the
date of this Agreement (other than in a public offering) to agree not to
sell, make any short sale of, loan, grant any option for the purchase of,
effect any public sale or distribution of or otherwise dispose of such
securities during such periods.
(d) Participation in Underwritten Offerings. No Person may
---------------------------------------
participate in any underwritten offering hereunder unless such Person (i)
agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved, subject to the terms and conditions
hereof, by the Company and the holders of a majority of Registrable
Securities to be included in such underwritten offering and (ii)
completes and executes all questionnaires, indemnities, underwriting
agreements and other documents (other than powers of attorney) required
under the terms of such underwriting arrangements. Notwithstanding the
foregoing, no underwriting agreement (or other agreement in connection
with such offering) shall require any holder of Registrable Securities to
make any representations or warranties to or agreements with the Company
or the underwriters other than representations and warranties regarding
such holder, such holder's Registrable Securities and such holder's
intended method or methods of distribution and any other representation
required by law or to make any agreements with the Company or the
underwriters with respect to indemnification of any Person or the
contribution obligations of any Person that would impose any obligation
which is broader than the indemnity furnished by such holder pursuant to
the provisions of section 2.7.
2.5 Preparation: Reasonable Investigation. In connection with the
-------------------------------------
preparation and filing of each registration statement under the
Securities Act pursuant to this Agreement, the Company will give the
holders of Registrable Securities registered under such registration
statement, their underwriters, if any, each Requesting Holder and their
respective counsel and accountants, the opportunity to participate in the
preparation of such registration statement, each prospectus included
therein or filed with the Commission, and each amendment thereof or
supplement thereto, and will give each of them such reasonable access
during normal business hours to its books and records and such
opportunities to discuss the business of the Company with its officers
and the independent public accountants who have certified its financial
statements as shall be necessary, in the opinion of such holders' and
such underwriters' respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act.
2.6 Rights of Requesting Holders. The Company will not file any
----------------------------
registration statement relating to Common Stock under
16
<PAGE>
the Securities Act (other than by a registration on Form S-4 or Form S-8 or in
connection with a registration of securities which are convertible into or
exchangeable for Common Stock), unless it shall first have given to each holder
of Registrable Securities (who would be entitled to participate in such
registration) at the time outstanding (other than any such Person who acquired
all such securities held by such Person in a public offering registered under
the Securities Act or as the direct or indirect transferee of shares initially
issued in such an offering), at least 30 days prior written notice thereof. Any
such Person who shall so request within 30 days after such notice (a "Requesting
Holder") shall have the rights of a Requesting Holder provided in sections 2.3,
2.5 and 2.7. In addition, if any such registration statement refers to any
Requesting Holder by name or otherwise (other than through a document filed by
or on behalf of any Requesting Holder which is incorporated by reference) as the
holder of any securities of the Company, then such holder shall have the right
to require (a) the insertion therein of language, in form and substance
satisfactory to such holder, to the effect that the holding by such holder of
such securities does not necessarily make such holder a "controlling person" of
the Company within the meaning of the Securities Act and is not to be construed
as a recommendation by such holder of the investment quality of the Company's
debt or equity securities covered thereby and that such holding does not imply
that such holder will assist in meeting any future financial requirements of the
Company, or (b) in the event that such reference to such holder by name or
otherwise is not required by the Securities Act or any rules and regulations
promulgated thereunder, the deletion of the reference to such holder.
2.7 Indemnification.
---------------
(a) Indemnification by the Company. In the event of any
------------------------------
registration of any securities of the Company under the Securities Act,
the Company will, and hereby does agree to, indemnify and hold harmless
(i) in the case of any registration statement filed pursuant to section
2.1 or 2.2, the holder of any Registrable Securities covered by such
registration statement and its partners, if any, its and their respective
directors, officers, partners, agents and Affiliates, each other Person
who participates as an underwriter in the offering or sale of such
securities and each other Person, if any, who controls such holder or any
such underwriter within the meaning of the Securities Act, and (ii) in
the case of any registration statement of the Company, any Requesting
Holder and its partners, if any, its and their respective directors,
officers, partners, agents and Affiliates and each other Person, if any,
who controls such Requesting Holder within the meaning of the Securities
Act, against any losses, claims, damages or liabilities, joint or
several, to which such holder or Requesting Holder or partner thereof or
any such director or officer or partner or agent or
17
<PAGE>
Affiliate or underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the Company will
reimburse such holder, such Requesting Holder, their respective partners and
each such director, officer, partner, agent, Affiliate, underwriter and
controlling person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding, provided, that the Company shall not be liable
--------
in any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in reliance upon
and in conformity with written information furnished to the Company through an
instrument duly executed by such holder or Requesting Holder, as the case may
be, specifically stating that it is for use in the preparation thereof. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such holder or such Requesting Holder or partner thereof
or any such director, officer, partner, agent, Affiliate, underwriter or
controlling person and shall survive the transfer of such securities by such
holder. The indemnity agreement contained in this section 2.7(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability, action
or proceeding if such settlement is effected without the consent of the Company.
(b) Indemnification by the Sellers. The Company may require, as a
------------------------------
condition to including any Registrable Securities in any registration
statement filed pursuant to section 2.3, that the Company shall have
received an undertaking reasonably satisfactory to it from the
prospective seller of such Registrable Securities, to indemnify severally
and hold harmless (in the same manner and to the same extent as set forth
in subsection (a) of this section 2.7) the Company, each director of the
Company, each officer of the Company and each other person, if any, who
controls the Company within the meaning of the Securities Act, with
respect to any statement or alleged statement in or omission or alleged
omission from such registration statement, any preliminary prospectus,
final
18
<PAGE>
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, if such statement or alleged statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by such
seller specifically stating that it is for use in the preparation of such
registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement. Any such indemnity shall remain in full
force and effect, regardless of any investigation made by or on behalf of the
Company or any such director, officer or controlling person and shall survive
the transfer of such securities by such seller. The indemnity agreement provided
for in this section 2.7(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability, action or proceeding if such settlement is
effected without the consent of such seller (which consent shall not be
unreasonably withheld). The parties hereto hereby acknowledge and agree that,
unless otherwise expressly agreed to in writing by holders of Registrable
Securities to the contrary, for all purposes of this Agreement the only
information furnished or to be furnished to the Company for use in any
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto are
statements specifically relating to (i) transactions between such holder and its
Affiliates, on the one hand, and the Company, on the other hand, (ii) the
beneficial ownership of shares of Common Stock by such holders and its
Affiliates,(iii) the name and address of such holder and (iv) solely in
offerings that are underwritten offerings, the method or methods of distribution
of such holders. The indemnity provided for under this section 2.7(b) shall be
limited in amount to the net amount of proceeds actually received by such seller
from the sale of Registrable Securities pursuant to such registration statement.
(c) Notices of Claims, etc. Promptly after receipt by an
-----------------------
indemnified party of notice of the commencement of any action or
proceeding involving a claim referred to in the preceding subsections of
this section 2.7, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party, give written notice
to the latter of the commencement of such action, provided that the
--------
failure of any indemnified party to give notice as provided herein shall
not relieve the indemnifying party of its obligations under the preceding
subsections of this section 2.7, except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice.
In case any such action is brought against an indemnified party, unless
in such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist in respect of
such claim, the indemnifying party shall be entitled to participate in
and to assume the defense thereof, jointly with any other indemnifying
19
<PAGE>
party similarly notified, to the extent that the indemnifying party may
wish, with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party for any legal or other expenses
subsequently incurred by the latter in connection with the defense
thereof other than reasonable costs of investigation. No indemnifying
party shall, without the consent of the indemnified party, consent to
entry of any judgment or enter into any settlement of any such action
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all
liability, or a covenant not to sue, in respect to such claim or
litigation. No indemnified party shall consent to entry of any judgment
or enter into any settlement of any such action the defense of which has
been assumed by an indemnifying party without the consent of such
indemnifying party.
(d) Indemnification Payments. The indemnification required by this
------------------------
section 2.7 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
(e) Contribution. If the indemnification provided for in the
------------
preceding subsections of this section 2.7 is unavailable to an
indemnified party in respect of any expense, loss, claim, damage or
liability referred to therein, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such expense, loss,
claim, damage or liability in such proportion as is appropriate to
reflect the relative benefits and the relative fault of the Company on
the one hand and the holder or underwriter, as the case may be, on the
other in connection with the distribution of the Registrable Securities
and the statements or omissions which result in any expense, loss, damage
or liability, as well as any other relevant equitable considerations. The
relative fault of the Company on the one hand and of the holder or
underwriter, as the case may be, on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or omission to state a material fact relates
to information supplied by the Company, by the holder or by the
underwriter and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission.
The Company and the holders of Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this
subsection (e) were determined by pro rata allocation (even if the
holders, Requesting Holders and any underwriters
20
<PAGE>
were treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations referred
to in the immediately preceding paragraph. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages and liabilities
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth in the preceding sentence and subsection
(c) of this section 2.7, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim.
Notwithstanding the provisions of this subsection (e), no holder of
Registrable Securities or underwriter shall be required to contribute any
amount in excess of the amount by which (i) in the case of any such
holder the net proceeds received by such holder from the sale of
Registrable Securities or (ii) in the case of an underwriter, the total
price at which the Registrable Securities purchased by it and distributed
to the public were offered to the public exceeds, in any such case, the
amount of any damages that such holder or underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. No party shall be liable for contribution under this
section 2.7 except to the extent and under such circumstances as such
party would have been liable to indemnify under this section 2.7 if such
indemnification were enforceable under applicable law.
3. Definitions. As used herein, unless the context otherwise
-----------
requires, the following terms have the following respective meanings.
Affiliate: As defined in Rule 12b-2 promulgated under the Exchange Act.
---------
Beneficially Own or Beneficial Ownership: With respect to any
---------------- --------------------
securities shall mean having "beneficial ownership" of such
securities (as determined pursuant to rule 13d-3 under the Exchange
Act), including pursuant to any agreement, arrangement or
understanding, whether or not in writing. Without duplicative
counting of the same securities by the same holder, securities
Beneficially Owned by a person shall include securities
Beneficially Owned by all Affiliates of such Person and all other
Persons with whom such person would constitute a "group" within the
meaning of Section 13 (d) of the Exchange Act and the rules
promulgated thereunder.
21
<PAGE>
Commission: The Securities and Exchange Commission or any other
----------
Federal agency at the time administering the Securities Act.
Common Stock: As defined in section 1.
------------
Company: As defined in the introductory paragraph of this Agreement.
-------
Delay Period: As defined in section 2.1(g).
------------
Demand Request: As defined in section 2.1(a).
--------------
Effective Time: As defined in the Merger Agreement.
--------------
Exchange Act: The Securities Exchange Act of 1934, or any similar
------------
Federal Statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Exchange Act of
1934 shall include a reference to the comparable Section, if any,
of any such similar federal statute.
Initiating Holder: Holders of at least 50% of the Registrable Securities.
-----------------
Merger Agreement: As defined in section 1.
----------------
Person: A corporation, an association, a partnership, an
------
organization, business, an individual, a governmental or political
subdivision thereof or a governmental agency.
Registrable Securities: The Common Stock issued pursuant to the
----------------------
transactions contemplated by the Merger Agreement and any
securities issued or issuable with respect to any Common Stock by
way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or
other reorganization or otherwise. As to any particular Registrable
Securities, once issued, such securities shall cease to be
Registrable Securities when (a) a registration statement with
respect to the sale of such securities shall have become effective
under the
22
<PAGE>
Securities Act and such securities have been disposed of in accordance
with such registration statement, (b) they shall have been distributed to
the public pursuant to Rule 144 (or any successor provision) under the
Securities Act, (c) they shall have ceased to be outstanding.
Registration Expenses: All expenses incident to the Company's
---------------------
performance of or compliance with section 2, including, without
limitation, all registration, filing and NASD fees, all stock
exchange listing fees, all fees and expenses of complying with
securities or blue sky laws, all word processing, duplicating and
printing expenses, messenger and delivery expenses, the fees and
disbursements of counsel for the Company and of its independent
public accountants, including the expenses of any special audits or
"cold comfort" letters required by or incident to such performance
and compliance, and any fees and disbursements of underwriters
customarily paid by issuers or sellers or securities, but excluding
underwriting discounts and commissions and transfer taxes, if any.
Requesting Holder: As defined in section 2.6.
-----------------
Securities Act: The Securities Act of 1933, or any similar Federal
--------------
statute, and the rules and regulations of the Commission
thereunder, all as of the same shall be in effect at the time.
References to a particular section of the Securities Act of 1933
shall include a reference to the comparable Section, if any, of any
such similar Federal Statute.
4. Rule 144. The Company shall timely file the reports required to
--------
be filed by it under the Securities Act and the Exchange Act (including
but not limited to the reports under sections 13 and 15(d) of the
Exchange Act referred to in subparagraph (c) of Rule 144 adopted by the
Commission under the Securities Act) and the rules and regulations
adopted by the Commission thereunder and will take such further action as
any holder of Registrable Securities may reasonably request, all to the
extent required from time to time to enable such holder to sell
Registrable Securities without registration under the
23
<PAGE>
Securities Act within the limitation of the exemptions provided by (a) Rule 144
under the Securities Act, as such Rule may be amended from time to time, or (b)
any similar rule or regulation hereafter adopted by the Commission. Upon the
request of any holder of Registrable Securities, the Company will (a) deliver to
such holder a written statement as to whether it has complied with the
requirements of this section 4 or (b) take such action as is necessary to allow
transfer of such Registrable Securities in accordance with the provisions of
Rule 144(k) (or any successor provision) under the Securities Act including
without limitation, if necessary, the issuance of new certificates for such
Registrable Securities bearing a legend restricting further transfer.
5. Amendments and Waivers. This Agreement may be amended and the
----------------------
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the holder or
holders of more than 50% of the shares of Registrable Securities and in the case
of any such amendment, action or omission to act in respect of the first
sentence of Section 4, the written consent of each holder affected thereby. Each
holder of any Registrable Securities at the time or thereafter outstanding shall
be bound by any consent authorized by this section 5, whether or not such
Registrable Securities shall have been marked to indicate such consent.
6. No Inconsistent Agreements. The Company will not enter into any
--------------------------
agreement which is inconsistent with or violates the rights granted to the
holders of Registrable Securities in this Agreement.
7. Nominees for Beneficial Owners. In the event that any
------------------------------
Registrable Securities are held by a nominee for the beneficial owner
thereof, the beneficial owner thereof may, at its election, be treated as
the holder of such Registrable Securities for purposes of any request or
other action by any holder or holders of Registrable Securities pursuant
to this Agreement or any determination of any number or percentage of
shares of Registrable Securities held by any holder or holders of
Registrable Securities contemplated by this Agreement. If the beneficial
owner of any Registrable Securities so elects, the Company may require
assurances reasonably satisfactory to it of such owner's beneficial
ownership of such Registrable Securities.
8. Notices. Except as otherwise provided in this Agreement, all
-------
notices, requests and other communications to any Person provided for hereunder
shall be in writing and shall be given to such Person (a) in the case of the
Initiating Holder, addressed to 399 Venture Partners, Inc., 399 Park Avenue, New
York, New York 10043 or at such other address as such party shall have furnished
to the Company in
24
<PAGE>
writing, (b) in the case of any other holder of Registrable Securities, at the
address that such holder shall have furnished to the Company in writing, or,
until any such other holder so furnishes to the Company an address, then to and
at the address of the last holder of such Registrable Securities who has
furnished an address to the Company or (c) in the case of the Company, at
McKesson Corporation, One Post Street, San Francisco, California 94104, to the
attention of its General Counsel, or at such other address, or to the attention
of such other officer, as the Company shall have furnished to each holder of
Registrable Securities at the time outstanding. Each such notice, request or
other communication shall be effective (i) if given by mail, 72 hours after such
communication is deposited in the mail with first class postage prepaid,
addressed as aforesaid or (ii) if given by any other means (including without
limitation, by air courier), when delivered at the address specified above,
provided that any such notice, request or communication to any holder of
Registrable Securities shall not be effective until received.
9. Assignment. This Agreement shall be binding upon and inure to
----------
the benefit of and be enforceable by the parties hereto and their
respective successors and assigns. In addition, whether or not any express
assignment has been made, the provisions of this Agreement which are for the
benefit of purchasers or holders of Registrable Securities are also for the
benefit of, and enforceable by, any subsequent holder of Registrable Securities.
10. Descriptive Headings. The descriptive headings of the several
--------------------
sections and paragraphs of this Agreement are inserted for reference only
and shall not limit or otherwise affect the meaning hereof.
11. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED
-------------
IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY,
THE LAWS OF THE STATE OF DELAWARE WITHOUT REFERENCE TO THE PRINCIPLES OF
CONFLICTS OF LAWS.
12. Counterparts. This Agreement may be executed simultaneously in
------------
any number of counterparts, each of which shall be deemed an original,
but all such counterparts shall together constitute one and the same
instrument.
13. Entire Agreement. This Agreement embodies the entire agreement
----------------
and understanding between the Company and each other party hereto relating to
the subject matter hereof and supersedes and replaces all prior agreements and
understandings relating to the subject matter hereof.
This Agreement shall become effective at the Effective Time. At the
Effective Time, the Registration Rights Agreement, dated March 30, 1995, between
399 Venture and AmeriSource Distribution Corporation (now known as AmeriSource
Health Corporation) and all other agreements and understandings with 399
Venture, Citicorp Venture Capital Ltd. or any of their respective affiliates to
register any securities of AmeriSource under the Securities Act or under any
state securities law shall terminate without further action of the parties
thereto.
14. SUBMISSION TO JURISDICTION. ANY LEGAL ACTION OR PROCEEDING WITH
--------------------------
RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF
DELAWARE OR OF THE UNITED STATES OF
25
<PAGE>
AMERICA FOR THE STATE OF DELAWARE AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, THE COMPANY HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS AND
APPELLATE COURTS FROM ANY THEREOF. EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS
TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY ACTION
OR PROCEEDING BY THE MAILING OF COPIES THEREOF TO SUCH PARTY BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, RETURN RECEIPT REQUESTED, TO SUCH PARTY AT ITS
ADDRESS SPECIFIED IN SECTION 8. THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE
TRIAL BY JURY AND ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO
THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENCE WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN
SUCH RESPECTIVE JURISDICTIONS.
15. Severability. If any provision of this Agreement, or the
------------
application of such provisions to any Person or circumstance, shall be
held invalid, the remainder of this Agreement, or the application of such
provisions to Persons or circumstances other than those to which it is
held invalid, shall not be affected thereby.
26
<PAGE>
IN WITNESS WHEREOF, the parties have caused this agreement to be duly
executed as of the date first above written.
MCKESSON CORPORATION
By: /s/ Ivan D. Meyerson
-------------------------------
Ivan D. Meyerson
399 VENTURE PARTNERS, INC.
By:/s/ James A. Urry, V.P.
-------------------------------
James A. Urry, V.P.
27
