<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 19, 1997
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
---------------
MCKESSON CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 5122 94-3207296
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
OF INCORPORATION OR CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
ORGANIZATION)
</TABLE>
MCKESSON PLAZA
ONE POST STREET
SAN FRANCISCO, CALIFORNIA 94104
(415) 983-8300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
NANCY A. MILLER
VICE PRESIDENT AND CORPORATE SECRETARY
MCKESSON CORPORATION
MCKESSON PLAZA
ONE POST STREET
SAN FRANCISCO, CALIFORNIA 94104
(415) 983-8300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
---------------
COPIES TO:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
IVAN D. MEYERSON, ESQ. STEPHEN FRAIDIN, P.C. TERESA T. CICCOTELLI, ESQ. CRAIG L. GODSHALL, ESQ.
MCKESSON CORPORATION FRIED, FRANK, HARRIS, VICE PRESIDENT, GENERAL DECHERT, PRICE & RHOADS
VICE PRESIDENT AND SHRIVER & JACOBSON COUNSEL 1717 ARCH STREET
GENERAL COUNSEL ONE NEW YORK PLAZA AND SECRETARY PHILADELPHIA, PENNSYLVANIA
ONE POST STREET NEW YORK, NEW YORK AMERISOURCE HEALTH 19103
SAN FRANCISCO, CALIFORNIA 10004 CORPORATION (215) 994-4000
94104 (212) 859-8000 300 CHESTER FIELD PARKWAY
(415) 983-8300 MALVERN, PENNSYLVANIA 19355
(610) 296-4480
</TABLE>
---------------
Approximate date of commencement of proposed sale to public: As soon as
practicable after the Registration Statement becomes effective and all other
conditions to the merger (the "Merger") of Patriot Acquisition Corp., a wholly
owned subsidiary of McKesson Corporation ("McKesson"), with and into
AmeriSource Health Corporation ("AmeriSource") pursuant to the Agreement and
Plan of Merger, dated as of September 22, 1997, described in the enclosed
Joint Proxy Statement/Prospectus, have been satisfied or waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
---------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED(1)(2) PER SHARE OFFERING PRICE(2) REGISTRATION FEE(2)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$0.01 per share, of
McKesson.............. 16,936,498 N/A $1,435,070,056 $434,870
- --------------------------------------------------------------------------------------------------
Rights to Purchase
Preferred Stock(3).... 16,936,498 N/A N/A N/A
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Represents 23,854,223 outstanding shares of common stock of AmeriSource on
November 17, 1997, multiplied by the exchange ratio of 0.71 (1.42 after
the two-for-one stock split of McKesson Common Stock distributable January
2, 1998).
(2) Reflects the market price of the common stock of AmeriSource to be
converted into common stock of the Registrant in connection with the
Merger computed in accordance with Rule 457(f) and Rule 457(c) under the
Securities Act of 1933, as amended, based upon the average of the high and
low sale prices of the capital stock of AmeriSource as reported by the New
York Stock Exchange, Inc. on November 13, 1997. The proposed maximum
aggregate offering price is estimated solely to determine the registration
fee.
(3) Associated with the Common Stock are Rights to purchase Series A Preferred
Stock that will not be exercisable or evidenced separately from the Common
Stock prior to the occurrence of certain events.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PRELIMINARY COPY--SUBJECT TO COMPLETION--DATED NOVEMBER 19, 1997
[MCKESSON CORPORATION LOGO]
, 1997
To Our Stockholders:
You are cordially invited to attend a special meeting (the "Special Meeting")
of stockholders (the "Stockholders") of McKesson Corporation ("McKesson"), to
be held on , , 1998, at , San Francisco,
California, at 9:00 a.m., local time.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve the issuance (the "Stock Issuance") of common stock, par
value $0.01 per share, of McKesson ("McKesson Common Stock") in connection with
the transactions contemplated by the Agreement and Plan of Merger dated as of
September 22, 1997, as amended (the "Merger Agreement"), by and among McKesson,
Patriot Acquisition Corp., a newly formed, wholly owned subsidiary of McKesson
("Merger Sub"), and AmeriSource Health Corporation ("AmeriSource"). Subject to
the terms and conditions of the Merger Agreement, Merger Sub will be merged
with and into AmeriSource (the "Merger"), and each share of common stock, par
value $0.01 per share, of AmeriSource outstanding immediately prior to the
effective time of the Merger will be converted into 0.71 (1.42 after the two-
for-one stock split effective January 2, 1998) of a share of McKesson Common
Stock (the "Exchange Ratio") together with associated preferred stock purchase
rights pursuant to the Rights Agreement dated as of October 21, 1994 between
McKesson and First Chicago Trust Company of New York. Upon consummation of the
Merger, AmeriSource will become a wholly owned subsidiary of McKesson.
After careful consideration, the Board of Directors of McKesson has
determined that the Merger Agreement and the transactions contemplated thereby,
including the Merger, are fair to and in the best interests of McKesson and its
stockholders and has approved the Merger Agreement. In connection with the
proposed transactions, the Board retained as financial advisor Peter J. Solomon
Company Limited ("PJSC"), which firm has delivered to the Board of Directors
its written opinion dated as of September 22, 1997, to the effect that the
Exchange Ratio is fair as of the date thereof to McKesson from a financial
point of view. A copy of the PJSC opinion letter, which sets forth the
assumptions made, matters considered and the scope of review undertaken in
connection therewith, is set forth as Appendix C to the accompanying Joint
Proxy Statement/Prospectus, and should be read carefully in its entirety.
The Board of Directors recommends that you vote in favor of the Stock
Issuance.
All Stockholders are invited to attend the Special Meeting in person.
Stockholders of record at the close of business on [date] will be entitled to
one vote for each share of McKesson Common Stock held. The affirmative vote of
the holders of a majority of the shares of McKesson Common Stock present in
person or represented by proxy at the Special Meeting and entitled to vote on
the Stock Issuance will be necessary for approval of the Stock Issuance. Your
vote is important to us no matter how many shares you hold.
The Merger, the Merger Agreement and the Stock Issuance are described in the
accompanying Joint Proxy Statement/Prospectus which you should read carefully.
If you have any questions or require additional information about the Special
Meeting or the Merger, please call Georgeson & Company, Inc., our proxy
solicitor/information agent, at (800) 223-2064.
Sincerely,
/s/ Mark A. Pulido /s/ Alan Seelenfreund
Mark A. Pulido Alan Seelenfreund
President and Chairman of the Board
Chief Executive Officer
<PAGE>
PRELIMINARY COPY--SUBJECT TO COMPLETION--DATED NOVEMBER 19, 1997
[AMERISOURCE LOGO]
, 1997
TO THE STOCKHOLDERS OF AMERISOURCE HEALTH CORPORATION:
You are cordially invited to attend a special meeting (the "Special
Meeting") of stockholders of AmeriSource Health Corporation ("AmeriSource")
scheduled to be held on , , 1998 at 9:00 a.m., local time, at
. A notice of the Special Meeting, a proxy card and a Joint Proxy
Statement/Prospectus containing important information about the matters to be
acted upon at the Special Meeting are enclosed.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve an Agreement and Plan of Merger (the "Merger Agreement"),
dated as of September 22, 1997, as amended, by and among AmeriSource, McKesson
Corporation ("McKesson") and Patriot Acquisition Corp., a newly formed, wholly
owned subsidiary of McKesson ("Merger Sub"), which provides for the merger of
Merger Sub with and into AmeriSource (the "Merger") whereby AmeriSource, as
the surviving corporation in the Merger, will become a wholly owned subsidiary
of McKesson.
If the Merger Agreement is approved, upon consummation of the Merger, each
issued and outstanding share of AmeriSource common stock (regardless of class)
will be converted into the right to receive 0.71 (1.42 after the two-for-one
stock split of McKesson's common stock distributable January 2, 1998) of a
share (the "Exchange Ratio") of McKesson's common stock together with
associated preferred stock purchase rights pursuant to the Rights Agreement
dated as of October 21, 1994 between McKesson and First Chicago Trust Company
of New York (the "Rights"). The accompanying Joint Proxy Statement/Prospectus
and the Appendices thereto provide you with detailed information concerning,
among other things, the Merger Agreement (a copy of which is included therein
as Appendix A) and McKesson's common stock. Please give all of this
information your careful attention.
The Board of Directors has carefully reviewed and considered the terms of
the Merger Agreement. In addition, the Board retained as financial advisors
Goldman, Sachs & Co. ("Goldman Sachs") which has delivered to the Board of
Directors its written opinion dated as of September 22, 1997 to the effect
that, as of the date of the Merger Agreement, the Exchange Ratio is fair from
a financial point of view to the holders of common stock of AmeriSource. A
copy of the Goldman Sachs opinion letter, which sets forth the assumptions
made, matters considered and the scope of review undertaken in connection
therewith, is set forth as Appendix D to the accompanying Joint Proxy
Statement/Prospectus, and should be read carefully in its entirety.
THE BOARD HAS DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE MERGER, ARE FAIR TO AND IN THE BEST
INTERESTS OF THE AMERISOURCE STOCKHOLDERS. ACCORDINGLY, THE BOARD HAS APPROVED
THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY AND RECOMMENDS
THAT YOU VOTE IN FAVOR THEREOF.
Approval of the Merger Agreement by the requisite vote of stockholders of
AmeriSource entitled to vote thereon is a condition to the consummation of the
Merger. Only holders of shares of Class A Common Stock, par value $.01 per
share, of AmeriSource ("Class A Common Stock") who are holders of record at
the close of business on [date] will be entitled to vote at the Special
Meeting; those holders will be entitled to one vote for each share of Class A
Common Stock held. The Merger Agreement and the transactions contemplated
thereby must be approved by the holders of a majority of outstanding shares of
Class A Common Stock. Your vote is important no matter how many shares you
hold.
<PAGE>
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED PREPAID
ENVELOPE AS SOON AS POSSIBLE. You may revoke your proxy in writing if you so
desire at any time before it is voted. If you attend the Special Meeting, you
may vote in person, whether or not you have sent in your proxy.
IF YOU DO NOT VOTE AT THE SPECIAL MEETING AND DO NOT SEND IN YOUR PROXY, IT
WILL HAVE THE SAME EFFECT AS IF YOU VOTE AGAINST THE MERGER.
Promptly after the Merger is consummated, you will be sent a letter of
transmittal which will include instructions as to the procedures to be used in
exchanging your shares of AmeriSource common stock for shares of McKesson's
common stock and the associated Rights. PLEASE DO NOT SEND YOUR STOCK
CERTIFICATES WITH THE ENCLOSED PROXY CARD.
If you have any questions or require additional information, please contact
, our proxy solicitor/information agent, at (800) - .
Sincerely,
R. David Yost
President and Chief Executive
Officer
<PAGE>
PRELIMINARY COPY--SUBJECT TO COMPLETION--DATED NOVEMBER 19, 1997
MCKESSON CORPORATION
----------------
ONE POST STREET
SAN FRANCISCO, CALIFORNIA 94104
(415) 983-8300
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD , 1998
A special meeting (the "Special Meeting") of stockholders of McKesson
Corporation, a Delaware corporation ("McKesson"), will be held at
, San Francisco, California, on ,
, 1998, at 9:00 a.m., local time, to consider and vote upon a proposal to
approve the issuance of shares of McKesson common stock, par value $0.01 per
share (the "McKesson Common Stock"), in the merger (the "Merger") of Patriot
Acquisition Corp., a newly formed, wholly owned subsidiary of McKesson
("Merger Sub"), with and into AmeriSource Health Corporation ("AmeriSource"),
in accordance with the Agreement and Plan of Merger (the "Merger Agreement")
dated as of September 22, 1997, as amended, by and among McKesson, Merger Sub
and AmeriSource (the "McKesson Proposal").
A copy of the Merger Agreement is attached to the accompanying Joint Proxy
Statement/Prospectus as Appendix A.
Stockholders of record at the close of business on , 1997 are
entitled to notice of, and to vote at, the Special Meeting and at any and all
adjournments or postponements thereof. Reference is made to the attached Joint
Proxy Statement/Prospectus for a more complete description of the Merger
Agreement and the transactions contemplated thereby, including the Merger. A
complete list of the holders of record of McKesson Common Stock entitled to
vote at the Special Meeting will be open to examination, during ordinary
business hours, at McKesson's corporate headquarters, for the ten days
preceding the Special Meeting by any McKesson stockholder for any purpose
germane to the Special Meeting.
It is important that your shares of McKesson Common Stock be represented at
the Special Meeting, regardless of the number of shares you hold. You are
urged to specify your voting preference by marking, dating and signing the
enclosed proxy card and returning it in the enclosed business reply envelope.
No postage is required if mailed in the United States. If you wish to vote in
accordance with the recommendation of the McKesson Board of Directors, all you
need to do is date and sign the proxy card and return it in the enclosed
envelope. If you receive more than one form of proxy, it is an indication that
your shares are registered in more than one account. All proxy forms received
by you should be signed and returned promptly to ensure that all of your
shares are voted.
If your shares are not registered in your own name and you plan to attend
the Special Meeting and vote your shares in person, you will need to ask the
broker, trust company, bank or other nominee that holds your shares to provide
you with evidence of your share ownership on , 1998 and bring that
evidence to the Special Meeting.
Please complete and return your proxy card whether or not you plan to attend
the Special Meeting.
By order of the Board of Directors,
/s/ Nancy A. Miller
Nancy A. Miller
Vice President and Corporate
Secretary
, 1997
<PAGE>
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE TO APPROVE THE MCKESSON
PROPOSAL WHICH IS DESCRIBED IN DETAIL IN THE ACCOMPANYING JOINT PROXY
STATEMENT/PROSPECTUS. YOUR VOTE IS IMPORTANT. THE AFFIRMATIVE VOTE OF THE
HOLDERS OF A MAJORITY OF THE SHARES OF MCKESSON COMMON STOCK PRESENT IN PERSON
OR REPRESENTED BY PROXY AT THE SPECIAL MEETING AND ENTITLED TO VOTE IS
REQUIRED TO APPROVE THE MCKESSON PROPOSAL. YOU ARE URGED TO COMPLETE, SIGN,
DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE,
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING. IF YOU ATTEND THE
SPECIAL MEETING, YOU MAY, IF YOU WISH, REVOKE ANY PREVIOUSLY SUBMITTED PROXY
CARD AND VOTE IN PERSON.
<PAGE>
PRELIMINARY COPY--SUBJECT TO COMPLETION--DATED NOVEMBER 19, 1997
AMERISOURCE HEALTH CORPORATION
----------------
300 CHESTER FIELD PARKWAY
MALVERN, PENNSYLVANIA 19355
(610) 296-4480
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD , 1998
TO THE STOCKHOLDERS OF AMERISOURCE HEALTH CORPORATION:
NOTICE IS HEREBY GIVEN that a special meeting (the "Special Meeting") of
stockholders of AmeriSource Health Corporation, a Delaware corporation
("AmeriSource"), will be held at , ,
Pennsylvania on , , 1998, at 9:00 a.m., local time, to
consider and vote upon the following proposal:
1. To approve the Agreement and Plan of Merger, dated as of September 22,
1997, as amended (the "Merger Agreement"), among McKesson Corporation
("McKesson"), Patriot Acquisition Corp., a newly formed, wholly owned
subsidiary of McKesson ("Merger Sub"), and AmeriSource and the
transactions contemplated by the Merger Agreement, including the merger
of Merger Sub with and into AmeriSource (the "Merger"). Pursuant to the
Merger, AmeriSource stockholders (regardless of class) will receive for
each share of AmeriSource common stock held, 0.71 (1.42 after the two-
for-one stock split of McKesson's common stock distributable January 2,
1998) of a share of McKesson's common stock, par value $0.01 per share,
together with associated preferred stock purchase rights pursuant to the
Rights Agreement dated as of October 21, 1994 between McKesson and First
Chicago Trust Company of New York (the "AmeriSource Proposal"); and
2. To transact any other business which may be properly brought before the
Special Meeting or any adjournment thereof.
Only holders of record of Class A Common Stock at the close of business on
, 1997 are entitled to vote at the Special Meeting and at any and
all adjournments or postponements thereof. Reference is made to the attached
Joint Proxy Statement/Prospectus for a more complete description of the Merger
Agreement and the transactions contemplated thereby, including the Merger. A
list of the holders of Class A Common Stock will be available at the Special
Meeting and, during the ten-day period prior to the Special Meeting, at the
offices of AmeriSource, 300 Chester Field Parkway, Malvern, Pennsylvania
19355, during ordinary business hours for any purpose germane to the Special
Meeting.
Stockholders are cordially invited to attend the Special Meeting. It is
important that your shares of Class A Common Stock of AmeriSource be
represented at the Special Meeting regardless of the number of shares you
hold. You are urged to cast your vote by marking, dating and signing the
enclosed proxy card and returning it in the enclosed business reply envelope.
No postage is required if mailed in the United States. If you wish to vote in
accordance with the recommendation of the AmeriSource Board of Directors, all
you need to do is date and sign the proxy card and return it in the enclosed
envelope. If you receive more than one form of proxy, it is an indication that
your shares are registered in more than one account. All proxy forms received
by you should be signed and returned promptly to ensure that all your shares
are voted.
<PAGE>
If your shares are held in the name of a broker, trust, bank or other
nominee and you plan to attend the Special Meeting and vote your shares in
person, you will need to bring with you to the Special Meeting a proxy or
letter from the broker, trustee, bank or nominee confirming your beneficial
ownership of the shares.
By order of the Board of Directors,
Teresa T. Ciccotelli
Vice President, General Counsel and
Secretary
, 1997
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE TO APPROVE THE AMERISOURCE
PROPOSAL WHICH IS DESCRIBED IN DETAIL IN THE ACCOMPANYING JOINT PROXY
STATEMENT/PROSPECTUS. YOUR VOTE IS IMPORTANT. THE AFFIRMATIVE VOTE OF THE
HOLDERS OF A MAJORITY OF ALL VOTES ENTITLED TO BE CAST BY ALL HOLDERS OF THE
CLASS A COMMON STOCK OF AMERISOURCE IS REQUIRED TO APPROVE THE AMERISOURCE
PROPOSAL. YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND
THE SPECIAL MEETING. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY, IF YOU WISH,
REVOKE ANY PREVIOUSLY SUBMITTED PROXY CARD AND VOTE IN PERSON.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DATED NOVEMBER 19, 1997
PRELIMINARY COPY
MCKESSON CORPORATION
AND
AMERISOURCE HEALTH CORPORATION
JOINT PROXY STATEMENT
FOR
SPECIAL MEETINGS OF STOCKHOLDERS
TO BE HELD , 1998
-----------
MCKESSON CORPORATION
PROSPECTUS
-----------
This Joint Proxy Statement/Prospectus constitutes the proxy statement of each
of McKesson Corporation, a Delaware corporation ("McKesson"), and AmeriSource
Health Corporation, a Delaware corporation ("AmeriSource"), relating to the
solicitation of proxies for use at the special meetings of stockholders of each
of McKesson and AmeriSource scheduled to be held on , 1998, and at
any adjournments or postponements thereof (respectively, the "McKesson Special
Meeting" and the "AmeriSource Special Meeting" and, collectively, the "Special
Meetings"). This Joint Proxy Statement/Prospectus relates to the Agreement and
Plan of Merger (the "Merger Agreement"), dated as of September 22, 1997, as
amended, among McKesson, Patriot Acquisition Corp., a newly formed, wholly
owned subsidiary of McKesson ("Merger Sub"), and AmeriSource, pursuant to which
Merger Sub will merge with and into AmeriSource (the "Merger") (the combined
company after the Merger is sometimes referred to herein as the "Surviving
Corporation"), and AmeriSource will become a wholly owned subsidiary of
McKesson. In the Merger, each AmeriSource stockholder will receive 0.71 (1.42
after the two-for-one stock split described herein) of a share (the "Exchange
Ratio") of common stock, par value $0.01 per share, of McKesson common stock
(the "McKesson Common Stock"), together with the associated preferred stock
purchase rights ("Rights") pursuant to the Rights Agreement dated as of October
21, 1994 between McKesson and First Chicago Trust Company of New York (the
"Rights Agreement"), for each share of Class A Common Stock, Class B Common
Stock or Class C Common Stock, each $0.01 par value per share, of AmeriSource
(the "AmeriSource Class A Common Stock," "AmeriSource Class B Common Stock" and
"AmeriSource Class C Common Stock," respectively, and collectively, the
"AmeriSource Common Stock") held by such AmeriSource stockholder. Cash will be
paid in lieu of any fractional share of McKesson Common Stock.
The consummation of the Merger is subject to (i) the approval of the issuance
of shares of McKesson Common Stock in the Merger in accordance with the terms
of the Merger Agreement (the "Stock Issuance") by the affirmative vote of the
holders of a majority of the shares of McKesson Common Stock present in person
or represented by proxy and entitled to vote on the matter at the McKesson
Special Meeting; (ii) the approval of the Merger Agreement and the transactions
contemplated thereby, including the Merger, by holders of a majority of the
shares of AmeriSource Class A Common Stock outstanding; and (iii) certain other
conditions. A copy of the Merger Agreement is attached hereto as Appendix A.
This Joint Proxy Statement/Prospectus also constitutes the prospectus of
McKesson with respect to the McKesson Common Stock to be issued to AmeriSource
stockholders in the Merger. A registration statement has been filed with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Securities Act"), with respect to the shares of
McKesson Common Stock to be so issued. Based on the current number of shares of
AmeriSource Common Stock outstanding, McKesson will issue approximately
16,936,498 million shares of McKesson Common Stock in the aggregate to
AmeriSource stockholders in the Merger, which shares would
(continued on following page)
This Joint Proxy Statement/Prospectus and the accompanying forms of proxy are
first being mailed to stockholders of each of McKesson and AmeriSource on or
about , 1997.
SEE "RISK FACTORS" BEGINNING ON PAGE 20 FOR A DISCUSSION OF CERTAIN MATTERS
THAT SHOULD BE CONSIDERED BY STOCKHOLDERS OF EACH OF MCKESSON AND AMERISOURCE
IN CONNECTION WITH THE MERGER.
-----------
THE SECURITIES TO BE ISSUED PURSUANT TO THIS JOINT PROXY STATEMENT/ PROSPECTUS
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Joint Proxy Statement/Prospectus is , 1997.
<PAGE>
(continued from prior page)
have an aggregate value of approximately $1,435,070,056 based on the average
of the high and low stock price of AmeriSource Class A Common Stock on
November 13, 1997 as reported on the New York Stock Exchange Composite Tape.
As a result of and immediately following the Stock Issuance, AmeriSource
stockholders will hold approximately 27%, and the current McKesson
stockholders will hold approximately 73%, of all of the outstanding McKesson
Common Stock after the Merger. In addition, at the effective time of the
Merger (the "Effective Time"), each option outstanding under AmeriSource's
stock option plans to purchase shares of AmeriSource Common Stock (an
"AmeriSource Option") will be automatically converted into an option to
purchase that number of shares of McKesson 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 multiplied by the Exchange Ratio,
with an exercise price per share equal to the exercise price per share of the
AmeriSource Option immediately prior to the Effective Time divided by the
Exchange Ratio and with other terms and conditions that are the same as those
of the AmeriSource Option. As of the date of this Joint Proxy
Statement/Prospectus, there were outstanding AmeriSource Options to purchase
an aggregate of approximately 1,243,943 shares of AmeriSource Common Stock,
which would be converted into options to purchase an aggregate of
approximately 883,200 shares of McKesson Common Stock (approximately 1,766,399
shares of McKesson Common Stock after the two-for-one stock split described
herein). The shares of McKesson Common Stock that may be issued pursuant to
the Merger or upon exercise of outstanding AmeriSource Options will be
authorized for listing, subject to official notice of issuance, on the New
York Stock Exchange, Inc. (the "NYSE") and the Pacific Exchange, Inc. ("PE")
prior to the Effective Time.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IN CONNECTION WITH THE SOLICITATION OF PROXIES OR THE
OFFERING OF SECURITIES MADE BY THIS JOINT PROXY STATEMENT/PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY MCKESSON OR AMERISOURCE. NEITHER THE DELIVERY OF
THIS JOINT PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN SINCE THE DATE OF THIS
JOINT PROXY STATEMENT/PROSPECTUS. THIS JOINT PROXY STATEMENT/PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES, OR THE SOLICITATION OF A PROXY, BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO
WHOM IT IS UNLAWFUL TO MAKE SUCH SOLICITATION.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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AVAILABLE INFORMATION..................................................... 1
INCORPORATION OF DOCUMENTS BY REFERENCE................................... 2
McKesson Commission Filings............................................. 2
AmeriSource Commission Filings.......................................... 2
SUMMARY................................................................... 3
The Companies........................................................... 3
Special Meetings........................................................ 3
The Merger and the Merger Agreement..................................... 5
Market Price and Dividend Information................................... 12
Comparative Per Share Data.............................................. 13
Summary Selected Historical Consolidated Financial Data of McKesson..... 15
Summary Selected Historical Consolidated Financial Data of AmeriSource.. 17
Summary Selected Unaudited Pro Forma Combined Consolidated Financial
Data of McKesson and AmeriSource....................................... 18
RISK FACTORS.............................................................. 20
Risk Factors Relating to the Merger..................................... 20
THE SPECIAL MEETINGS...................................................... 21
General................................................................. 21
Voting Securities and Record Date....................................... 21
Purpose of Special Meetings............................................. 21
Proxies................................................................. 22
THE COMPANIES............................................................. 23
THE MERGER................................................................ 24
General................................................................. 24
Background of the Merger................................................ 24
Reasons for the Merger; Recommendations of the Boards................... 25
Opinion of McKesson's Financial Advisor................................. 26
Opinion of AmeriSource's Financial Advisor.............................. 30
Anticipated Accounting Treatment........................................ 34
Board and Management of the Surviving Corporation Following the Merger.. 34
Board of Directors and Officers of McKesson Following the Merger........ 34
Regulatory Approvals.................................................... 35
Interests of Certain Persons in the Merger.............................. 35
No Dissenters' Rights................................................... 36
Stock Exchange Listing.................................................. 36
Delisting and Deregistration of AmeriSource Stock....................... 36
Treatment of Stock Certificates......................................... 36
Tax Free Reorganization................................................. 37
THE MERGER AGREEMENT...................................................... 38
The Merger.............................................................. 38
Exchange Procedures..................................................... 38
Corporate Organization and Governance................................... 40
Stockholders' Meetings.................................................. 40
Representations and Warranties.......................................... 40
Certain Covenants....................................................... 41
No Solicitation of Transactions......................................... 43
</TABLE>
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<TABLE>
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<S> <C>
Benefit Plans........................................................... 44
Indemnification and Insurance........................................... 44
Conditions.............................................................. 45
Resale Restrictions..................................................... 46
Termination............................................................. 46
Termination Fee......................................................... 47
Expenses................................................................ 48
Amendment............................................................... 48
THE STOCK OPTION AGREEMENT................................................ 49
General................................................................. 49
Certain Covenants....................................................... 49
Repurchase.............................................................. 50
Registration Rights..................................................... 50
Listing................................................................. 50
Certain Adjustments..................................................... 50
Additional Option....................................................... 51
Termination............................................................. 51
THE VOTING/SUPPORT AGREEMENTS............................................. 52
Voting/Support Agreement with VPI -- General............................ 52
Agreement Not to Transfer............................................... 52
Certain Covenants of VPI................................................ 52
Termination............................................................. 53
Voting/Support Agreements with Certain Executives of AmeriSource........ 53
THE REGISTRATION RIGHTS AGREEMENT......................................... 54
THE EMPLOYMENT AGREEMENTS................................................. 55
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER..................... 57
COMPARATIVE RIGHTS OF STOCKHOLDERS........................................ 59
Classified Board of Directors........................................... 59
Stockholder Rights Plan................................................. 59
Number of Directors; Removal; Filling Vacancies......................... 60
No Stockholder Action by Written Consent; Special Meetings.............. 60
Fair Price Provisions................................................... 61
Advance Notice Provisions for Stockholder Nominations and Stockholder
Proposals.............................................................. 63
Common Stock............................................................ 64
Preferred Stock......................................................... 64
Amendment of the Certificate of Incorporation and By-laws............... 65
Business Combinations................................................... 65
Limitation of Liability of Directors.................................... 65
Indemnification of Directors and Officers............................... 66
Significant Stockholders................................................ 66
MARKET PRICE AND DIVIDEND INFORMATION..................................... 67
BENEFICIAL OWNERSHIP OF McKESSON COMMON STOCK............................. 69
BENEFICIAL OWNERSHIP OF AMERISOURCE COMMON STOCK.......................... 71
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF McKESSON............... 72
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF AMERISOURCE............ 74
UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL DATA OF McKESSON AND
AMERISOURCE.............................................................. 75
EXPERTS................................................................... 84
LEGAL MATTERS............................................................. 84
STOCKHOLDER PROPOSALS..................................................... 84
</TABLE>
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APPENDICES:
A -- Merger Agreement, including amendment thereto
B -- Stock Option Agreement
C -- Fairness Opinion of Peter J. Solomon Company Limited
D -- Fairness Opinion of Goldman, Sachs & Co.
E -- VPI Voting/Support Agreement
F -- Form of AmeriSource Executive Voting/Support Agreement
G -- Registration Rights Agreement
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<PAGE>
AVAILABLE INFORMATION
Each of McKesson and AmeriSource is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the following Regional Offices of the
Commission: Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and 7 World Trade Center, Suite 1300, New York, New York
10048. Copies of such material may also be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington D.C. 20549, at
prescribed rates. The Commission also maintains a World Wide Web site that
contains reports, proxy and information statements and other information
regarding registrants (including McKesson and AmeriSource) that file
electronically with the Commission (at http://www.sec.gov). The McKesson
Common Stock is listed on each of the NYSE and the PE, and the AmeriSource
Common Stock is listed on the NYSE. Reports, proxy statements and other
information relating to each of McKesson and AmeriSource can be inspected at
the offices of the NYSE, 20 Broad Street, New York, New York 10005 or, in the
case of McKesson, at the offices of the PE, 301 Pine Street, San Francisco,
California 94104.
This Joint Proxy Statement/Prospectus does not contain all of the
information set forth in the Registration Statement on Form S-4 (the
"Registration Statement") under the Securities Act filed with the Commission
by McKesson, certain parts of which are omitted in accordance with the rules
and regulations of the Commission. Reference is made to the Registration
Statement and the exhibits thereto for further information. Exhibits to the
Registration Statement that are omitted from this Joint Proxy
Statement/Prospectus may also be obtained at the Commission's World Wide Web
site described above. Statements contained or incorporated by reference herein
concerning the provisions of any agreement or other document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission
are not necessarily complete, and readers are referred to the copy so filed
for more detailed information, each such statement being qualified in its
entirety by such reference.
Each of McKesson and AmeriSource has supplied all information contained or
incorporated by reference in this Joint Proxy Statement/Prospectus relating to
McKesson and AmeriSource, respectively.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS
THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF SUCH DOCUMENTS
(OTHER THAN EXHIBITS THERETO WHICH ARE NOT SPECIFICALLY INCORPORATED BY
REFERENCE HEREIN) ARE AVAILABLE, WITHOUT CHARGE, TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER OF SHARES OF McKESSON COMMON STOCK OR AMERISOURCE COMMON
STOCK TO WHOM THIS JOINT PROXY STATEMENT/PROSPECTUS IS SENT, UPON WRITTEN OR
ORAL REQUEST TO, IN THE CASE OF DOCUMENTS RELATING TO McKESSON, NANCY A.
MILLER, VICE PRESIDENT AND CORPORATE SECRETARY, McKESSON CORPORATION, ONE POST
STREET, SAN FRANCISCO, CALIFORNIA 94104, TELEPHONE (415) 983-8300, AND, IN THE
CASE OF DOCUMENTS RELATING TO AMERISOURCE, TERESA T. CICCOTELLI, VICE
PRESIDENT, GENERAL COUNSEL AND SECRETARY, AMERISOURCE HEALTH CORPORATION, 300
CHESTER FIELD PARKWAY, MALVERN, PENNSYLVANIA 19355, TELEPHONE (610) 296-4480.
IN ORDER TO ENSURE DELIVERY OF DOCUMENTS PRIOR TO THE APPLICABLE SPECIAL
MEETING, ANY SUCH REQUEST SHOULD BE MADE NOT LATER THAN , 1998.
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INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents heretofore filed with the Commission pursuant to the
Exchange Act are incorporated herein by reference and shall be deemed a part
hereof:
MCKESSON COMMISSION FILINGS (FILE NO. 001-13252)
1. Definitive Proxy Statement on Schedule 14A dated June 18, 1997;
2. Annual Report on Form 10-K for the fiscal year ended March 31, 1997;
3. Quarterly Reports on Form 10-Q for the quarters ended June 30, 1997 and
September 30, 1997;
4. Current Reports on Form 8-K dated November 22, 1996 (as amended by
Amendment No. 1 on Form 8-K/A filed on January 21, 1997 as further amended
by Amendment No. 2 on Form 8-K/A filed on April 28, 1997), April 7, 1997,
June 13, 1997, June 24, 1997, September 5, 1997, September 24, 1997 and
October 31, 1997;
5. The description of McKesson's capital stock contained in its Registration
Statement on Form 10 and the Rights Agreement dated as of October 21, 1994
between McKesson and First Chicago Trust Company of New York, as Rights
Agent, filed as Exhibit 4.1 to Amendment No. 3 to McKesson's Registration
Statement on Form 10;
6. Schedule 13D filed on October 2, 1997; and
7. Schedule 13D-1 filed on October 28, 1997.
AMERISOURCE COMMISSION FILINGS (FILE NO. 000-20485)
1. Definitive Proxy Statement on Schedule 14A dated January 14, 1997;
2. Annual Report on Form 10-K for the fiscal year ended September 30, 1996;
3. Quarterly Reports on Form 10-Q for the quarters ended December 31, 1996,
March 31, 1997 and June 30, 1997; and
4. Current Report on Form 8-K dated September 24, 1997.
All reports and other documents filed by either McKesson or AmeriSource
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent
to the date of this Joint Proxy Statement/Prospectus and prior to the date of
its Special Meeting shall be deemed to be incorporated by reference herein and
to be a part hereof from the dates of filing of such reports and documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Joint Proxy Statement/Prospectus to the extent that a
statement contained herein, or in any other subsequently filed document that
also is incorporated or deemed to be incorporated by reference herein,
modifies or supersedes the earlier statement. Any statement so modified shall
not be deemed, except as so modified, to constitute a part of this Joint Proxy
Statement/Prospectus, and any statement so superseded shall not be deemed to
constitute a part of this Joint Proxy Statement/Prospectus.
---------------------
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SUMMARY
The following is a summary of certain information contained elsewhere in this
Joint Proxy Statement/Prospectus. Reference is made to, and this summary is
qualified in its entirety by, the more detailed information contained elsewhere
or incorporated by reference in this Joint Proxy Statement/Prospectus and in
the appendices hereto including, but not limited to, the Merger Agreement set
forth as Appendix A hereto. Unless otherwise defined, capitalized terms used in
this summary have the respective meanings ascribed to them elsewhere in this
Joint Proxy Statement/Prospectus. Stockholders of McKesson and AmeriSource are
urged to read carefully this Joint Proxy Statement/Prospectus and the
appendices hereto, and the documents incorporated by reference herein, in their
entirety.
THE COMPANIES
McKesson. McKesson is one of the leading health care supply management
companies in North America. McKesson also develops and manages innovative
marketing programs for pharmaceutical manufacturers and, through McKesson Water
Products Company, processes and markets pure drinking water.
McKesson's principal executive offices are located at One Post Street, San
Francisco, California 94104, and its telephone number at that address is (415)
983-8300.
AmeriSource. AmeriSource, through its direct wholly owned subsidiary
AmeriSource Corporation, is the fourth largest full-service wholesale
distributor of pharmaceutical products and related health care services in the
United States.
AmeriSource's principal executive offices are located at 300 Chester Field
Parkway, Malvern, Pennsylvania 19355, and its telephone number at that address
is (610) 296-4480.
Merger Sub. Merger Sub is a newly formed, wholly owned subsidiary of
McKesson, incorporated in Delaware on September 19, 1997 for the sole purpose
of effecting the Merger and the other transactions contemplated by the Merger
Agreement. Prior to the consummation of the Merger, Merger Sub will not engage
in any activity other than activities related to the transactions contemplated
by the Merger Agreement. Merger Sub's principal executive offices are located
at One Post Street, San Francisco, California 94104, and its telephone number
at that address is (415) 983-8300.
SPECIAL MEETINGS
DATE, TIME AND PLACE
McKesson. The McKesson Special Meeting will be held on ,
1998, at , commencing at 9:00 a.m. local time. See "The
Special Meetings -- General."
AmeriSource. The AmeriSource Special Meeting will be held on
, 1998, at , commencing at 9:00 a.m.
local time. See "The Special Meetings -- General."
PURPOSE OF THE SPECIAL MEETINGS
McKesson. The purpose of the McKesson Special Meeting is to consider and vote
upon a proposal to approve the Stock Issuance (the "McKesson Proposal"). See
"The Special Meetings -- Purpose of Special Meetings -- McKesson."
AmeriSource. The purpose of the AmeriSource Special Meeting is (i) to
consider and vote upon a proposal to approve the Merger Agreement and the
transactions contemplated thereby, including the Merger (the "AmeriSource
Proposal") and (ii) to transact such other business as may properly come before
the AmeriSource Special Meeting and at any and all adjournments or
postponements thereof. See "The Special Meetings -- Purpose of Special Meetings
- -- AmeriSource."
3
<PAGE>
RECORD DATES; SHARES ENTITLED TO VOTE
McKesson. Each share of McKesson Common Stock will be entitled to one vote on
each matter to be acted upon at the McKesson Special Meeting. See "The Special
Meetings -- Voting Securities and Record Date." Only holders of record of
shares of McKesson Common Stock at the close of business on ,
1997 (the "McKesson Record Date") are entitled to notice of and to vote at the
McKesson Special Meeting. On such date, there were shares of McKesson
Common Stock outstanding. On October 29, 1997, the McKesson Board of Directors
(the "McKesson Board") declared a two-for-one split of the McKesson Common
Stock (the "McKesson Stock Split") to be effected in the form of a stock
dividend distributable January 2, 1998, to stockholders of record on December
1, 1997.
AmeriSource. Only holders of record of shares of AmeriSource Class A Common
Stock at the close of business on , 1997 (the "AmeriSource Record
Date") are entitled to vote at the AmeriSource Special Meeting. On such date,
there were shares of AmeriSource Class A Common Stock outstanding. Each
share of AmeriSource Class A Common Stock will be entitled to one vote on each
matter to be acted upon at the AmeriSource Special Meeting. See "The Special
Meetings -- Voting Securities and Record Date."
QUORUM; VOTE REQUIRED
McKesson. The presence, in person or by proxy, at the McKesson Special
Meeting of the holders of a majority of the shares of McKesson Common Stock
outstanding and entitled to vote at the McKesson Special Meeting is necessary
to constitute a quorum for the transaction of business at the meeting. The
affirmative vote of the holders of a majority of the shares of McKesson Common
Stock present in person or represented by proxy at the McKesson Special Meeting
and entitled to vote on the Stock Issuance is required to approve the Stock
Issuance, provided that there is a quorum. An abstention or a failure to vote
with respect to the McKesson Proposal will have the effect of a vote cast
against the McKesson Proposal. Brokers who hold shares of McKesson Common Stock
as nominees will not have discretionary authority to vote such shares in the
absence of instructions from the beneficial owners thereof. Any votes which are
not cast by a nominee-broker will have no effect on the outcome of the vote on
the McKesson Proposal. See "The Special Meetings -- Voting Securities and
Record Date -- McKesson" and "The Special Meeting -- Proxies."
AmeriSource. The presence, in person or by proxy, at the AmeriSource Special
Meeting of the holders of a majority of the shares of AmeriSource Class A
Common Stock outstanding and entitled to vote at the AmeriSource Special
Meeting is necessary to constitute a quorum at the meeting. The affirmative
vote of the holders of a majority of all votes entitled to be cast by all
holders of AmeriSource Class A Common Stock is required to approve the Merger
Agreement and the transactions contemplated thereby, including the Merger. An
abstention or a failure to vote with respect to the AmeriSource Proposal will
have the effect of a vote cast against the AmeriSource Proposal. Brokers who
hold shares of AmeriSource Class A Common Stock as nominees will not have
discretionary authority to vote such shares in the absence of instructions from
the beneficial owners thereof. Any votes which are not cast by a nominee-broker
will have the effect of votes cast against the Merger. See "The Special
Meetings -- Voting Securities and Record Date -- AmeriSource" and "The Special
Meeting-- Proxies."
Security Ownership of Management. As of the McKesson Record Date, the
directors and executive officers of McKesson and their affiliates owned an
aggregate of approximately % of the outstanding shares of McKesson Common
Stock entitled to vote at the McKesson Special Meeting. As of the AmeriSource
Record Date, the directors and executive officers of AmeriSource and their
affiliates owned an aggregate of approximately % of the outstanding shares of
AmeriSource Class A Common Stock entitled to vote at the AmeriSource Special
Meeting. Three senior executives of AmeriSource, one of whom is an AmeriSource
director, have entered into Voting/Support Agreements with McKesson and Merger
Sub pursuant to which each of these executives granted to Merger Sub an
irrevocable proxy to vote all of his shares of AmeriSource Class A Common Stock
in favor of the Merger Agreement and the transactions contemplated thereby,
including the Merger, and to vote against a Competing Transaction (as defined
in the Merger Agreement). These three
4
<PAGE>
executives hold, in the aggregate, shares representing approximately 1.4% of
the voting power of AmeriSource. Each of the other directors and executive
officers of McKesson and AmeriSource, other than one AmeriSource director, has
advised the respective companies that he or she plans to vote or to direct the
vote of all shares of McKesson Common Stock or AmeriSource Stock, as the case
may be, owned by him or her and entitled to vote in favor of the McKesson
Proposal, in the case of McKesson, and in favor of AmeriSource Proposal, in the
case of AmeriSource.
Security Ownership of 399 Venture Partners, Inc. 399 Venture Partners, Inc.
("VPI") has entered into a Voting/Support Agreement with McKesson and Merger
Sub pursuant to which it granted to Merger Sub an irrevocable proxy to vote all
of its shares of AmeriSource Class A Common Stock in favor of the Merger
Agreement and the transactions contemplated thereby, including the Merger, and
to vote against a Competing Transaction. VPI holds shares representing
approximately 1.4% of the voting power and approximately 28% of the equity of
AmeriSource and, pursuant to the provisions of the VPI Voting/Support
Agreement, is in the process of converting certain of its non-voting shares
into voting shares. Upon completion of such conversion, VPI's shares will
represent approximately 19% of the outstanding voting shares of AmeriSource and
approximately 28% of the equity of AmeriSource. See "The Voting/Support
Agreements."
THE MERGER AND THE MERGER AGREEMENT
GENERAL
The Merger Agreement is attached as Appendix A to this Joint Proxy
Statement/Prospectus and is incorporated herein by reference.
The Merger will become effective upon the filing of a Certificate of Merger
(the "Certificate of Merger") with the Secretary of State of the State of
Delaware. The filing of the Certificate of Merger will occur as soon as
practicable following the satisfaction or waiver (where permissible) of the
conditions set forth in the Merger Agreement, including receipt of requisite
regulatory and stockholder approvals. See "The Merger Agreement -- Conditions."
In the Merger Agreement and herein, the time at which the Merger becomes
effective is called the "Effective Time."
At the Effective Time, Merger Sub will be merged with and into AmeriSource,
with AmeriSource (sometimes referred to as the "Surviving Corporation")
surviving the Merger as a wholly owned subsidiary of McKesson. In the Merger,
each share of AmeriSource Common Stock issued and outstanding immediately prior
to the Effective Time (excluding those held in the treasury of AmeriSource),
without any action on the part of the holder thereof, will be converted into
and represent 0.71 (1.42 after the McKesson Stock Split) of a share of McKesson
Common Stock together with associated Rights issued pursuant to the Rights
Agreement. Cash will be paid in lieu of any fractional share of McKesson Common
Stock. See "The Merger Agreement -- The Merger."
OWNERSHIP OF MCKESSON FOLLOWING THE MERGER
The shares of McKesson Common Stock issued to AmeriSource stockholders in the
Merger will constitute approximately 27% of all of the outstanding McKesson
Common Stock after the Merger, and the current McKesson stockholders will hold
approximately 73% of all of the outstanding McKesson Common Stock after the
Merger.
At the Effective Time, each outstanding AmeriSource Option will be
automatically converted into an option to purchase that number of shares of
McKesson Common Stock (each, a "Parent Exchange Option") equal to the number of
shares of AmeriSource Common Stock issuable immediately prior to the Effective
Time upon exercise of the AmeriSource Option multiplied by the Exchange Ratio,
with an exercise price per share equal to the exercise price per share of the
AmeriSource Option immediately prior to the Effective Time divided by the
Exchange Ratio, and with other terms and conditions that are the same as those
of the AmeriSource Option. Approximately 883,200 shares of McKesson Common
Stock (approximately 1,766,399 shares of McKesson Common Stock after the
McKesson Stock Split) will be issuable upon exercise of Parent Exchange Options
based on the number of shares of AmeriSource Common Stock issuable upon
exercise of the existing AmeriSource Options multiplied by the Exchange Ratio.
5
<PAGE>
REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARDS
To McKesson Stockholders:
THE MCKESSON BOARD BELIEVES THAT THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE MERGER, ARE FAIR TO AND IN THE BEST
INTERESTS OF MCKESSON AND MCKESSON'S STOCKHOLDERS AND, ACCORDINGLY, HAS
APPROVED THE MERGER AGREEMENT AND HAS RESOLVED TO RECOMMEND THAT THE
STOCKHOLDERS OF MCKESSON VOTE FOR APPROVAL OF THE STOCK ISSUANCE. In arriving
at its conclusions, the McKesson Board, in consultation with McKesson's
management and its legal and financial advisors, considered, among other
things, (i) the ability of the Merger to enhance McKesson's corporate strategy
to remain the distributor of choice and to lead in developing health care
supply management services, (ii) the accretive impact of the Merger on the
earnings of McKesson even before synergies, (iii) the operating efficiencies,
synergies and reductions in working capital that would be realized by the
combined entity following the Merger, (iv) the leveraging of complementary
capabilities of McKesson and AmeriSource and (v) the achievements to date with
the integration of the pharmaceutical distribution business of FoxMeyer
Corporation into McKesson and McKesson's demonstrated ability to develop and
implement an effective integration plan for companies that it acquires.
See "The Merger -- Reasons for the Merger; Recommendations of the Boards" and
"The Merger -- Background of the Merger."
To AmeriSource Stockholders:
THE BOARD OF DIRECTORS OF AMERISOURCE (THE "AMERISOURCE BOARD") BELIEVES THAT
THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE
MERGER, ARE FAIR TO AND IN THE BEST INTERESTS OF AMERISOURCE'S STOCKHOLDERS.
ACCORDINGLY, THE AMERISOURCE BOARD HAS APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY AND HAS RESOLVED TO RECOMMEND THAT THE
STOCKHOLDERS OF AMERISOURCE VOTE FOR APPROVAL OF THE AMERISOURCE PROPOSAL. In
arriving at its conclusions, the AmeriSource Board, in consultation with
AmeriSource's management and its legal and financial advisors, considered,
among other things, (i) the complementary customer bases and geographic
customer concentrations of AmeriSource and McKesson, (ii) the opportunities for
economies of scale and synergies available through a combination of AmeriSource
and McKesson, (iii) the opportunities presented by the stronger balance sheet
of the post-Merger combined entity, (iv) McKesson's record of post-acquisition
integration and (v) enhanced cross-selling opportunities available to the post-
Merger combined entity.
See "The Merger -- Reasons for the Merger; Recommendations of the Boards" and
"The Merger -- Background of the Merger."
OPINIONS OF FINANCIAL ADVISORS
In determining whether to approve the Merger, the McKesson Board and the
AmeriSource Board considered opinions from their respective financial advisors
as to the fairness of the Exchange Ratio. McKesson received a written opinion
(the "PJSC Opinion") from its financial advisor, Peter J. Solomon Company
Limited ("PJSC"), to the effect that, as of the date of such opinion, the
Exchange Ratio was fair to McKesson from a financial point of view. AmeriSource
received a written opinion (the "Goldman Opinion") from its financial advisor,
Goldman, Sachs & Co. ("Goldman Sachs"), to the effect that, as of the date of
such opinion, the Exchange Ratio was fair from a financial point of view to the
stockholders of AmeriSource. The PJSC Opinion and the Goldman Opinion are
attached as Appendices C and D, respectively, to this Joint Proxy
Statement/Prospectus. Stockholders are strongly encouraged to read these
opinions.
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ACCOUNTING TREATMENT
Both McKesson and AmeriSource believe that the Merger will qualify as a
pooling of interests for accounting purposes. The obligation of each of
AmeriSource and McKesson to consummate the Merger is conditioned upon the
receipt by McKesson of a letter from McKesson's independent auditors stating
that they concur with the conclusion of McKesson's management that the Merger
will qualify for pooling of interests accounting treatment. See "The Merger --
Anticipated Accounting Treatment" and "The Merger Agreement-- Conditions."
FEDERAL INCOME TAX CONSEQUENCES
The parties intend that the Merger be treated for federal income tax purposes
as a so-called "tax free reorganization" pursuant to Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and the obligation of
AmeriSource to consummate the Merger is conditioned on the receipt of an
opinion of its counsel, Dechert Price & Rhoads, to the effect that the Merger
will be treated as such. If so, no gain or loss will be recognized by
AmeriSource stockholders upon the receipt of McKesson Common Stock in exchange
for AmeriSource Common Stock except with respect to cash received in lieu of a
fractional interest in McKesson Common Stock. See "Certain Federal Income Tax
Consequences of the Merger" and "The Merger Agreement -- Conditions."
GOVERNANCE FOLLOWING THE MERGER
If the Merger is consummated, holders of AmeriSource Common Stock will become
stockholders of McKesson, which will be under the direction of the McKesson
Board and management of McKesson. At the Effective Time, the directors and
officers of Merger Sub immediately prior to the Effective Time will become the
directors and officers, respectively, of the Surviving Corporation.
Immediately following the Effective Time, the McKesson Board will take all
action necessary to elect the following persons, who are currently serving on
the Board of Directors of AmeriSource, to the McKesson Board: (i) James Urry,
who will be assigned to the class of directors whose term of office expires at
McKesson's first annual meeting of stockholders after the Effective Time, (ii)
Michael Delaney, who will be assigned to the class of directors whose term of
office expires at McKesson's second annual meeting of stockholders after the
Effective Time, and (iii) R. David Yost, who will be assigned to the class of
directors whose term of office expires at McKesson's third annual meeting of
stockholders after the Effective Time. The McKesson Board also will appoint R.
David Yost as Group President of the AmeriSource Services Group and as a
corporate Vice President, effective as of the Effective Time.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the AmeriSource Board with respect to
the Merger Agreement and the transactions contemplated thereby, stockholders
should be aware that certain members of the management of AmeriSource and
certain members of the AmeriSource Board have interests in the Merger that are
in addition to the interests of stockholders of AmeriSource generally
(including, without limitation, the entering into of employment agreements with
AmeriSource and new employment agreements with McKesson and the acceleration of
stock options). See "The Merger -- Interests of Certain Persons in the Merger,"
"The Merger Agreement -- Indemnification and Insurance," and "The Employment
Agreements."
CONDITIONS
The obligations of McKesson and AmeriSource to consummate the Merger are
subject to the satisfaction of certain conditions, including, among others, (i)
obtaining requisite stockholder approvals; (ii) the expiration or termination
of the waiting period applicable to the consummation of the Merger under the
Hart-Scott-Rodino
7
<PAGE>
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
thereunder (the "HSR Act"); (iii) the effectiveness of the Registration
Statement and the absence of a stop order suspending such effectiveness; (iv)
the absence of any suit, claim, action, proceeding, audit or investigation (an
"Action") by any governmental or regulatory body, agency or authority (a
"Governmental Authority") challenging or seeking to prohibit consummation of
the Merger or any of the other transactions contemplated by the Merger
Agreement; (v) the absence of any Applicable Law (as defined in the Merger
Agreement), or judgment, injunction, order or decree prohibiting consummation
of the Merger or any of the other transactions contemplated by the Merger
Agreement; (vi) the listing on the NYSE, subject only to official notice of
issuance, of the shares of McKesson Common Stock and the Rights to be issued in
the Merger; (vii) the absence of any change in the business, assets,
liabilities, results of operations or financial condition of either McKesson or
AmeriSource which individually or in the aggregate would reasonably be expected
to have a Material Adverse Effect (as defined in the Merger Agreement) on that
party; (viii) the receipt of certain legal opinions with respect to the federal
income tax consequences of the Merger; and (ix) the receipt of an accountants'
letter with respect to qualification of the Merger as a pooling of interests.
See "The Merger Agreement -- Conditions," "Certain Federal Income Tax
Consequences of the Merger," and "The Merger -- Anticipated Accounting
Treatment."
EFFECTIVE TIME OF THE MERGER
McKesson and AmeriSource have agreed to cause the Merger to be consummated
concurrently with the closing of the transactions contemplated by the Merger
Agreement (the "Closing"), by filing the Certificate of Merger with the
Delaware Secretary of State. Subject to the satisfaction or waiver (where
permissible) of the other conditions to the obligations of McKesson and
AmeriSource to consummate the Merger, it is currently expected that the Merger
will be consummated immediately following the Special Meetings or as soon
thereafter as such other conditions are satisfied.
EXCHANGE OF AMERISOURCE COMMON STOCK CERTIFICATES
Upon consummation of the Merger, each holder of a stock certificate
representing shares of AmeriSource Common Stock outstanding immediately prior
to the Merger will, upon the surrender thereof (duly endorsed, if required) to
First Chicago Trust Company of New York (the "Exchange Agent"), be entitled to
receive a stock certificate representing the number of whole shares of McKesson
Common Stock into which such shares of AmeriSource Common Stock will have been
automatically converted as a result of the Merger. After the consummation of
the Merger, the Exchange Agent will mail a letter of transmittal with
instructions to all holders of record of AmeriSource Common Stock as of the
Effective Time for use in surrendering their stock certificates in exchange for
stock certificates representing shares of McKesson Common Stock. STOCK
CERTIFICATES SHOULD NOT BE SURRENDERED UNTIL THE LETTER OF TRANSMITTAL AND
INSTRUCTIONS ARE RECEIVED. See "The Merger Agreement -- Exchange Procedures."
NO DISSENTERS' RIGHTS
Holders of McKesson Common Stock and holders of AmeriSource Common Stock are
not entitled to dissenters' rights in connection with the Merger.
RESALE RESTRICTIONS
All shares of McKesson Common Stock received by AmeriSource stockholders in
the Merger will be freely transferable, except that shares of McKesson Common
Stock received by persons who are deemed to be "affiliates" (as such term is
defined under the Securities Act) of AmeriSource at the time of the AmeriSource
Meeting may be resold by them only in certain permitted circumstances. See "The
Merger Agreement -- Resale Restrictions."
8
<PAGE>
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time (notwithstanding any approval of the Merger
Agreement by the stockholders of AmeriSource (except as provided below) and the
stockholders of McKesson): (i) by mutual written consent of McKesson and
AmeriSource; (ii) by either McKesson or AmeriSource if any Applicable Law
(other than Antitrust Laws (as defined in the Merger Agreement)), as supported
by written opinion of outside legal counsel, makes consummation of the Merger
illegal or otherwise prohibited, or if there shall be a final non-appealable
judgment, injunction, order or decree enjoining McKesson or AmeriSource from
consummating the Merger; (iii) by either McKesson or AmeriSource if the Merger
has not been consummated by May 31, 1998 (subject to extension to June 7, 1998
or to June 30, 1998 in certain circumstances); (iv) by McKesson if the
AmeriSource Board withdraws or changes its recommendation of the Merger in a
manner adverse to McKesson, or if the AmeriSource Board refuses to affirm its
recommendation as promptly as practicable (but in any case within ten business
days) after receipt of any written request from McKesson which request is made
on a reasonable basis; (v) by McKesson or AmeriSource if at the AmeriSource
Special Meeting the requisite vote of the stockholders of AmeriSource to
approve the Merger Agreement and the transactions contemplated thereby,
including the Merger, is not obtained; (vi) by McKesson or AmeriSource if at
the McKesson Special Meeting the requisite vote of the stockholders of McKesson
to approve the issuance of shares of McKesson Common Stock in the Merger is not
obtained; (vii) by AmeriSource, prior to approval by the AmeriSource
stockholders, if the AmeriSource Board enters into a Competing Transaction in
compliance with the terms of the Merger Agreement (as described below in "The
Merger Agreement -- No Solicitation of Transactions") and pays the fees and
expenses described below under "-- Termination Fee; Reimbursement of Expenses";
(viii) by McKesson if there has been a breach by AmeriSource, or by AmeriSource
if there has been a breach by McKesson, of its representation that it has not
taken any actions that would prevent McKesson from accounting for the Merger as
a pooling of interests; (ix) by McKesson or AmeriSource, in certain
circumstances where there has been a breach by the other party of its
representations and warranties, or in certain circumstances in which the other
party has a change in business conditions that would reasonably be expected to
have a Material Adverse Effect on it; (x) by McKesson or AmeriSource (but only
for a limited period of time specified in the Merger Agreement) if either party
receives any communication from the Federal Trade Commission or the Antitrust
Division of the Department of Justice (the "Antitrust Division") indicating
that it has authorized the institution of litigation challenging the
transactions contemplated by the Merger 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 the
Merger Agreement; (xi) by McKesson if AmeriSource has breached in any material
respect any of its obligations under the Stock Option Agreement; or (xii) by
AmeriSource on March 31, 1998 if the transaction has not yet been cleared under
federal Antitrust Laws, unless, prior to that date, AmeriSource had the
opportunity to terminate the Merger Agreement as described in clause (x) above
and declined to do so. See "The Merger Agreement -- Termination."
TERMINATION FEE; REIMBURSEMENT OF EXPENSES
In connection with certain of the termination rights discussed above,
AmeriSource will be obligated to pay to McKesson a termination fee of $65
million and to reimburse McKesson's expenses, up to $12 million. In connection
with other termination rights discussed above, McKesson or AmeriSource, as
applicable, may be obligated to reimburse the other party for the other party's
costs and expenses up to a specified maximum. See "The Merger Agreement --
Termination Fee."
REGULATORY APPROVAL
Under the HSR Act, the Merger cannot be consummated until notifications and
certain information have been furnished to the Federal Trade Commission and the
Antitrust Division and specified waiting period requirements have been
satisfied. McKesson and AmeriSource each filed notification and report forms
under the HSR Act on September 24, 1997. Because a request for additional
information and documentary material (a
9
<PAGE>
"Second Request") was timely received by McKesson and AmeriSource from the
Federal Trade Commission, the waiting period will not terminate until 20 days
(or such later date as the parties may agree) after McKesson and AmeriSource
have each "substantially complied" (as such term is defined under the HSR Act)
with such request unless the Federal Trade Commission voluntarily terminates
the waiting period prior to substantial compliance. McKesson and AmeriSource
are in the process of responding to the Second Request.
STOCK OPTION AGREEMENT
Pursuant to the Stock Option Agreement dated as of September 22, 1997 by and
between McKesson and AmeriSource (the "Stock Option Agreement"), AmeriSource
has granted McKesson an irrevocable option (the "Option") to purchase from
AmeriSource, under certain circumstances, up to 3,418,601 authorized and
unissued shares of either AmeriSource Class A Common Stock or AmeriSource Class
B Common Stock, or a combination thereof, at a price of $70.87 per share (which
was 0.71 of the closing price of a share of McKesson Common Stock on the
trading day immediately preceding the execution of the Merger Agreement). The
Option will be increased to cover an additional 1,325,939 shares of AmeriSource
Class B Common Stock if the NYSE advises McKesson that the Option may be so
increased without approval by AmeriSource stockholders. See "The Stock Option
Agreement -- General," "The Merger Agreement -- Termination" and "The Merger
Agreement -- Amendment." A copy of the Stock Option Agreement is attached as
Appendix B to this Joint Proxy Statement/Prospectus.
VOTING/SUPPORT AGREEMENTS
McKesson has entered into Voting/Support Agreements with R. David Yost, Kurt
J. Hilzinger, David M. Flowers and VPI pursuant to which each granted Merger
Sub an irrevocable proxy to vote his or its shares in favor of the Merger
Agreement and the transactions contemplated thereby, including the Merger, and
to vote his or its shares against a Competing Transaction. As of September 30,
1997, Messrs. Yost, Hilzinger and Flowers owned in the aggregate approximately
1.4% of the outstanding voting shares of AmeriSource. As of September 30, 1997,
VPI owned approximately 1.4% of the outstanding voting shares of AmeriSource.
However, VPI is contractually bound to take all necessary steps to convert
shares of AmeriSource Class B Common Stock (nonvoting stock) held by it into
shares of AmeriSource Class A Common Stock such that it would hold 19% of the
outstanding voting shares of AmeriSource, and it is in the process of doing so.
It is anticipated that the conversion will be completed before the record date
for determining which stockholders are entitled to vote at the AmeriSource
Special Meeting. See "The Voting/Support Agreements."
COMPARATIVE STOCKHOLDER RIGHTS
The rights of holders of AmeriSource Common Stock are currently governed by
Delaware law, AmeriSource's Certificate of Incorporation and AmeriSource's By-
laws. If the Merger is consummated and becomes effective pursuant to the terms
of the Merger Agreement, the rights of former AmeriSource stockholders who
become McKesson stockholders pursuant to the Merger will be governed by
Delaware law, McKesson's Restated Certificate of Incorporation (the "McKesson
Certificate") and McKesson's Restated By-laws (the "McKesson By-laws"). The
rights of McKesson stockholders differ in certain respects from those of the
AmeriSource stockholders. See "Comparative Rights of Stockholders" for a
description of such differences.
THE MCKESSON STOCK SPLIT; EFFECT ON EXCHANGE RATIO
On October 29, 1997, the McKesson Board declared a two-for-one split of
McKesson Common Stock to be effected in the form of a stock dividend of one
additional share of McKesson Common Stock for each share held of record as of
December 1, 1997, distributable on January 2, 1998. The Merger Agreement
provides that as of the Effective Time each issued and outstanding share of
AmeriSource Common Stock will be converted into 0.71 of a share of McKesson
Common Stock but that if the McKesson Board declares a stock split on the
10
<PAGE>
outstanding shares of McKesson Common Stock with a record date that is prior to
the Effective Time, the Exchange Ratio will be appropriately adjusted. The
record date for determining the McKesson stockholders entitled to receive the
stock dividend is December 1, 1997. Accordingly, the Exchange Ratio will be
adjusted to 1.42 following the McKesson Stock Split.
RISK FACTORS
STOCKHOLDERS OF MCKESSON AND OF AMERISOURCE SHOULD CONSIDER CAREFULLY THE
FACTORS DISCUSSED UNDER "RISK FACTORS" IN EVALUATING THE PROPOSED MERGER AND
THE TRANSACTIONS CONTEMPLATED THEREBY.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Joint Proxy Statement/Prospectus contains or incorporates by reference
forward-looking statements that are subject to risks and uncertainties.
Forward-looking statements include information concerning possible or assumed
future results of operations of McKesson and AmeriSource such as certain
statements set forth under "Risk Factors," "The Merger -- Background of the
Merger," "The Merger -- Reasons for the Merger," "The Merger -- Opinion of
McKesson's Financial Advisor" and "The Merger -- Opinion of AmeriSource's
Financial Advisor," and those preceded by, followed by or that include the
words "believes," "expects," "anticipates" or similar expressions. The
following important factors, in addition to those discussed elsewhere in this
Joint Proxy Statement/Prospectus and in the documents which are incorporated
herein by reference, could affect the future results of the health care
industry in general, and McKesson and/or AmeriSource in particular, and could
cause future results to differ materially from those expressed in forward-
looking statements: the speed of integration of acquired businesses, continued
competitive pressures, success of strategic initiatives, the changing United
States health care environment, the effect of existing and future regulatory
actions, any supplier and/or customer actions in response to the Merger or
industry consolidation in general, and a significant delay in the expected
closing of the Merger.
11
<PAGE>
MARKET PRICE AND DIVIDEND INFORMATION
The McKesson Common Stock is listed and traded on the NYSE and the PE and the
AmeriSource Class A Common Stock is listed and traded on the NYSE. The
following table sets forth the high and low trading prices per share of each of
the McKesson Common Stock (without adjustment for the McKesson Stock Split) and
AmeriSource Class A Common Stock on the NYSE for the periods indicated as
reported on the NYSE Composite Tape, and the dividends paid per share for such
periods by McKesson (AmeriSource did not pay any dividends during the periods):
<TABLE>
<CAPTION>
MCKESSON AMERISOURCE
COMMON STOCK MCKESSON COMMON STOCK
PRICES DIVIDENDS PAID PRICES
-------------- PER COMMON -------------
HIGH LOW SHARE HIGH LOW
------- ------ -------------- ------ ------
<S> <C> <C> <C> <C> <C>
1994
First Quarter.................... $ 68.50 $52.50 $ 0.42 -- --
Second Quarter................... 87.00 58.50 0.42 -- --
Third Quarter.................... 103.63 70.75 0.42 -- --
Fourth Quarter................... 109.25 30.13 76.25(1) -- --
1995
First Quarter.................... 40.75 31.88 0.25 -- --
Second Quarter................... 47.38 37.25 0.25 $24.50 $20.75
Third Quarter.................... 46.63 42.63 0.25 27.75 19.75
Fourth Quarter................... 53.25 44.88 0.25 34.25 25.25
1996
First Quarter.................... 55.63 46.50 0.25 34.00 28.00
Second Quarter................... 51.38 44.00 0.25 37.50 31.63
Third Quarter.................... 48.38 39.00 0.25 44.50 27.88
Fourth Quarter................... 57.00 45.38 0.25 48.25 37.63
1997
First Quarter.................... 69.63 51.75 0.25 53.00 42.50
Second Quarter................... 80.13 63.00 0.25 51.38 41.25
Third Quarter.................... 106.25 76.50 0.25 65.25 45.13
Fourth Quarter (through ,
1997)...........................
</TABLE>
- --------
(1) In November 1994 McKesson completed a plan of merger and a reorganization
and distribution agreement providing for the acquisition by Eli Lilly and
Company of McKesson's pharmaceutical benefits management business ("PCS"),
which was primarily operated by PCS Health Systems, Inc. and Clinical
Pharmaceuticals, Inc., both of which were wholly owned subsidiaries of
McKesson, for approximately $4 billion. As a result of the sale of PCS,
each existing McKesson stockholder received a cash payment of $76.00 per
share representing the proceeds from the sale of PCS and one share of
McKesson Common Stock representing such stockholder's continuing interest
in the businesses retained by McKesson.
On September 22, 1997, the last full trading day prior to the first public
announcement of the execution of the Merger Agreement, the reported high and
low sale prices per share and closing price per share of McKesson Common Stock
and AmeriSource Class A Common Stock on the NYSE were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 22, 1997
------------------------
HIGH LOW CLOSE
-------- ------- -------
<S> <C> <C> <C>
McKesson....................................... $ 100.31 $ 99.25 $ 99.81
AmeriSource.................................... 54.00 53.50 53.69
</TABLE>
On , 1997, the last full trading day prior to the date of this
Joint Proxy Statement/Prospectus, the reported high and low sale prices per
share and closing price per share of McKesson Common Stock and AmeriSource
Class A Common Stock on the NYSE were as follows:
<TABLE>
<CAPTION>
, 1997
--------------
HIGH LOW CLOSE
---- --- -----
<S> <C> <C> <C>
McKesson.................................................
AmeriSource..............................................
</TABLE>
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR SHARES OF
MCKESSON COMMON STOCK AND AMERISOURCE CLASS A COMMON STOCK.
12
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth certain per share data for McKesson and
AmeriSource on both historical and pro forma combined bases and on a per share
equivalent pro forma basis for AmeriSource after giving effect to the proposed
Merger on a pooling of interests basis at the Exchange Ratio of 0.71 (1.42
after the McKesson Stock Split) of a share of McKesson Common Stock for each
share of AmeriSource Stock. The data should be read in conjunction with the
selected historical consolidated financial data and the unaudited pro forma
combined consolidated financial data included in this Joint Proxy
Statement/Prospectus and the separate historical consolidated financial
statements of McKesson and AmeriSource and the notes thereto incorporated by
reference in this Joint Proxy Statement/Prospectus. The unaudited pro forma
combined and equivalent financial data are not necessarily indicative of the
operating results or financial position of the combined entities had the Merger
been consummated at the beginning of the earliest period presented nor should
they be construed as indicative of future results of operations or financial
position.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, YEAR ENDED MARCH 31,
---------------- ---------------------------
1997 1996 1997 1996 1995
-------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C>
HISTORICAL - MCKESSON
Earnings (loss) per common
share
Continuing operations
Fully diluted............... $ 1.58 $ 0.10 $ 0.13 $ 2.59 $ (3.34)
Primary..................... 1.61 0.10 0.12 2.59 (3.52)
Net income
Fully diluted............... 1.58 0.22 2.98 2.90 8.86
Primary..................... 1.61 0.22 3.01 2.90 9.20
Cash dividends declared per
common share................ 0.50 0.50 1.00 1.00 1.34
Cash distribution from sale
of PCS per common share..... 76.00
Book value per common share.. 28.82 27.53
Earnings (loss) per common
share--adjusted to reflect
McKesson Stock Split (1)
Continuing operations
Fully diluted............... $ 0.79 $ 0.05 $ 0.06 $ 1.29 $ (1.67)
Primary..................... 0.81 0.05 0.06 1.29 (1.76)
Net income
Fully diluted............... 0.79 0.11 1.49 1.45 4.43
Primary..................... 0.81 0.11 1.51 1.45 4.60
Cash dividends declared per
common share................ 0.25 0.25 0.50 0.50 0.67
Cash distribution from sale
of PCS per common share..... 38.00
Book value per common share.. 14.41 13.76
<CAPTION>
NINE MONTHS ENDED
JUNE 30, YEAR ENDED SEPTEMBER 30,
----------------- ---------------------------
1997 1996 1996 1995 1994
-------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C>
HISTORICAL - AMERISOURCE
Earnings (loss) per common
share
Before extraordinary items
and cumulative effect of
accounting changes
Fully diluted............... $ 1.29 $ 1.29 $1.84 $ 1.53 $ (11.69)
Primary..................... 1.29 1.29 1.85 1.54 (11.69)
Net income
Fully diluted............... 1.21 0.97 1.53 0.55 (14.08)
Primary..................... 1.21 0.97 1.54 0.56 (14.08)
Book value per common share.. (0.25) (1.55)
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, YEAR ENDED MARCH 31,
-------------------------------------
1997 1996 1997 1996 1995
-------- -------------- ------ -------
<S> <C> <C> <C> <C> <C>
PRO FORMA COMBINED
Earnings (loss) per common share
Continuing operations
Fully diluted...................... $ 1.49 $ 0.41 $ 0.84 $ 2.54 $ (5.79)
Primary............................ 1.51 0.41 0.84 2.54 (6.02)
Net income
Fully diluted...................... 1.46 0.38 2.77 2.68 3.90
Primary............................ 1.48 0.38 2.79 2.68 4.01
Cash dividends declared per common
share............................... 0.50 0.50 1.00 1.00 1.34
Book value per common share.......... 20.96
PRO FORMA COMBINED--ADJUSTED TO
REFLECT MCKESSON STOCK SPLIT (1)
Earnings (loss) per common share
Continuing operations
Fully diluted...................... $ 0.75 $ 0.20 $ 0.42 $ 1.27 $ (2.90)
Primary............................ 0.76 0.20 0.42 1.27 (3.01)
Net income
Fully diluted...................... 0.73 0.19 1.38 1.34 1.95
Primary............................ 0.74 0.19 1.39 1.34 2.01
Cash dividends declared per common
share............................... 0.25 0.25 0.50 0.50 0.67
Book value per common share.......... 10.47
EQUIVALENT PRO FORMA COMBINED PER
AMERISOURCE SHARE
Earnings (loss) per common share
Continuing operations
Fully diluted...................... $ 1.06 $ 0.29 $ 0.60 $ 1.80 $ (4.11)
Primary............................ 1.07 0.29 0.60 1.80 (4.27)
Net income
Fully diluted...................... 1.04 0.27 1.97 1.90 2.77
Primary............................ 1.05 0.27 1.98 1.90 2.85
Cash dividends declared per common
share............................... 0.36 0.36 0.71 0.71 0.95
Book value per common share.......... 14.88
</TABLE>
- --------
(1) Reflects the pro forma effect of the McKesson two-for-one stock split
declared October 29, 1997, distributable January 2, 1998 to stockholders of
record on December 1, 1997.
14
<PAGE>
SUMMARY SELECTED HISTORICAL CONSOLIDATED
FINANCIAL DATA OF MCKESSON
The following table sets forth summary selected historical consolidated
financial data of McKesson for each of the five years in the period ended March
31, 1997 and for the six-month periods ended September 30, 1997 and 1996. Such
data have been derived from, and should be read in conjunction with, the
audited consolidated financial statements and other financial information
contained in McKesson's Annual Report on Form 10-K for the year ended March 31,
1997 and the unaudited consolidated interim financial information contained in
McKesson's Quarterly Report on Form 10-Q for the six months ended September 30,
1997, including the notes thereto, incorporated by reference herein. The
selected financial data as of September 30, 1997 and for the six-month periods
ended September 30, 1997 and 1996, reflect all adjustments (consisting only of
normal recurring adjustments except for the item discussed in Note 2 recorded
in the six-month period ended September 30, 1996) necessary for a fair
presentation of the results for such periods. The results for the six-month
periods are not indicative of the results to be expected for the full year or
for any other interim period, due in part to the adjustment described in Note
2. See "Available Information" and "Incorporation of Documents by Reference."
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, YEAR ENDED MARCH 31,
------------------ -------------------------------------------------------------
1997 1996 1997 1996 1995 1994 1993
-------- -------- --------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenues.................. $8,810.5 $5,401.5 $12,886.7 $9,953.7 $9,438.7 $8,520.8 $7,991.8
Costs and expenses
Cost of sales............ 8,078.0 4,938.6 11,849.4 9,038.2 8,630.5 (1) 7,737.2 7,214.6
Selling, distribution and
administration.......... 554.9 404.7 (2) 944.5 (3) 674.2 817.2 (1) 630.0 (4) 620.7
Interest................. 48.1 21.1 55.7 44.4 44.5 39.3 47.5
-------- -------- --------- -------- -------- -------- --------
Total................... 8,681.0 5,364.4 12,849.6 9,756.8 9,492.2 8,406.5 7,882.8
-------- -------- --------- -------- -------- -------- --------
Income (loss) before
income taxes and
dividends on convertible
preferred securities of
subsidiary trust......... 129.5 37.1 (2) 37.1 (3) 196.9 (53.5)(1) 114.3 (4) 109.0
Income taxes.............. (49.2) (32.7) (31.3) (76.2) (96.6)(5) (45.0) (42.2)
Dividends on convertible
preferred securities of
subsidiary trust, net of
tax benefit.............. (3.1) (0.7)
-------- -------- --------- -------- -------- -------- --------
Income (loss) after taxes
Continuing operations.... 77.2 4.4 (2) 5.1 (3) 120.7 (150.1)(1)(5) 69.3 (4) 66.8
Discontinued operations.. 5.6 8.6 14.7 (23.1) 55.1 47.9
Discontinued operations--
Gain on sale/donation of
Armor All stock (6).... 120.2 1.0 32.7
Gain on sale of PCS..... 576.7
Extraordinary item....... (4.2)
Cumulative effect of ac-
counting changes........ (16.7)
-------- -------- --------- -------- -------- -------- --------
Net income ............... $ 77.2 $ 10.0 $ 133.9 $ 135.4 $ 404.5 $ 136.2 $ 114.7
======== ======== ========= ======== ======== ======== ========
Fully diluted earnings
(loss) per common share
Continuing operations.... $ 1.58 $ 0.10 $ 0.13 $ 2.59 $ (3.34) $ 1.49 $ 1.44
Discontinued operations.. 0.12 0.19 0.31 (0.51) 1.25 1.07
Discontinued operations--
Gain on sale/donation of
Armor All stock........ 2.66 0.02 0.74
Gain on sale of PCS..... 12.69
Extraordinary item....... (0.10)
Cumulative effect of ac-
counting changes........ (0.38)
-------- -------- --------- -------- -------- -------- --------
Total................... $ 1.58 $ 0.22 $ 2.98 $ 2.90 $ 8.86 $ 3.00 $ 2.51
======== ======== ========= ======== ======== ======== ========
Fully diluted shares...... 50.8 44.6 45.1 46.7 45.5 44.1 44.8
Primary earnings (loss)
per common share
Continuing operations.... $ 1.61 $ 0.10 $ 0.12 $ 2.59 $ (3.52) $ 1.53 $ 1.49
Discontinued operations.. 0.12 0.19 0.31 (0.53) 1.35 1.20
Discontinued operations--
Gain on sale/donation of
Armor All stock........ 2.70 0.02 0.80
Gain on sale of PCS..... 13.23
Extraordinary item....... (0.10)
Cumulative effect of ac-
counting changes........ (0.41)
-------- -------- --------- -------- -------- -------- --------
Total................... $ 1.61 $ 0.22 $ 3.01 $ 2.90 $ 9.20 $ 3.17 $ 2.69
======== ======== ========= ======== ======== ======== ========
Primary shares............ 47.8 44.6 44.5 46.6 43.6 40.8 40.0
Cash dividends declared
per common share......... $ 0.50 $ 0.50 $ 1.00 $ 1.00 $ 1.34 $ 1.66 $ 1.60
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, YEAR ENDED MARCH 31,
----------------- --------------------------------
1997 1996 1997 1996 1995 1994 1993
-------- -------- ----- ----- ------ ----- -----
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings (loss) per share--
adjusted to reflect
McKesson Stock Split (7)
Fully diluted earnings
(loss) per common share
Continuing operations..... $ 0.79 $ 0.05 $0.06 $1.29 $(1.67) $0.74 $0.72
Discontinued operations... 0.06 0.10 0.16 (0.25) 0.63 0.53
Discontinued operations--
Gain on sale/donation of
Armor All stock......... 1.33 0.01 0.37
Gain on sale of PCS...... 6.34
Extraordinary item........ (0.05)
Cumulative effect of
accounting changes....... (0.19)
-------- -------- ----- ----- ------ ----- -----
Total................... $ 0.79 $ 0.11 $1.49 $1.45 $ 4.43 $1.50 $1.25
======== ======== ===== ===== ====== ===== =====
Fully diluted shares...... 101.6 89.3 90.2 93.5 90.9 88.2 89.6
Primary earnings (loss)
per common share
Continuing operations..... $ 0.81 $ 0.05 $0.06 $1.29 $(1.76) $0.76 $0.75
Discontinued operations... 0.06 0.10 0.16 (0.27) 0.68 0.60
Discontinued operations--
Gain on sale/donation of
Armor All stock......... 1.35 0.01 0.40
Gain on sale of PCS...... 6.62
Extraordinary item........ (0.05)
Cumulative effect of
accounting changes....... (0.21)
-------- -------- ----- ----- ------ ----- -----
Total................... $ 0.81 $ 0.11 $1.51 $1.45 $ 4.60 $1.58 $1.35
======== ======== ===== ===== ====== ===== =====
Primary shares............ 95.7 89.2 89.1 93.3 87.1 81.6 80.1
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
SEPTEMBER 30, -----------------------------------------------
1997 1997 1996 1995 1994 1993
------------- -------- -------- -------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Cash, cash equivalents
and marketable
securities............. $ 176.3(8) $ 229.8(8) $ 456.2 $ 670.4 $ 62.7 $ 77.5
Working capital......... 1,121.2 1,123.9 820.5 879.0 301.4 191.4
Total assets............ 5,235.5 5,172.8 3,360.2 3,260.2 2,676.6 2,458.4
Total debt (9).......... 1,205.5 985.2 398.3 425.1 499.0 397.6
Convertible preferred
securities of
subsidiary trust....... 195.1 194.8
Stockholders' equity.... 1,331.5 1,260.8 1,064.6 1,013.5 678.6 619.4
</TABLE>
- -------
(1) Includes $59.4 million in compensation costs (classified in administration
expense) related to the sale of PCS and $139.5 million in charges for asset
impairment, restructuring and other operating items ($35.9 million included
in cost of sales and $103.6 million included in administration expense),
$130.6 million after-tax in the aggregate.
(2) Includes a $48.2 million write-off for in-process technology related to the
acquisition of McKesson Automated Healthcare, Inc.
(3) Includes $98.8 million in charges for restructuring, asset impairment and
other operating items and $48.2 million for the write-off of in-process
technology related to the acquisition of McKesson Automated Healthcare,
Inc. (see Note 2), $109.5 million after-tax in the aggregate.
(4) Includes a $13.4 million loss ($8.2 million after-tax) on the termination
of interest rate swap arrangements.
(5) Includes $107.0 million of income tax expense related to the sale of PCS.
(6) Includes $1.0 million and $0.4 million of income after-tax from donations
of Armor All common stock to the McKesson Foundation in fiscal 1995 and
1994, respectively, $32.3 million after-tax from the sale of Armor All
common stock to the public in fiscal 1994 and $120.2 million after-tax from
the sale of the Company's equity interest in Armor All in fiscal 1997.
(7) Reflects the pro forma effect of the two-for-one stock split declared
October 29, 1997, distributable January 2, 1998 to stockholders of record
on December 1, 1997.
(8) Includes $86.6 million at September 30, 1997 and $109.8 million at March
31, 1997 of after-tax proceeds from the sale of Armor All shares which were
placed in a trust as exchange property for McKesson's exchangeable
debentures.
(9) Total debt includes all interest-bearing debt of McKesson and consolidated
subsidiaries, including the current portion and capital lease obligations.
16
<PAGE>
SUMMARY SELECTED HISTORICAL CONSOLIDATED
FINANCIAL DATA OF AMERISOURCE
The following table sets forth summary selected historical consolidated
financial data for AmeriSource for each of the five years in the period ended
September 30, 1996 and for the nine-month periods ended June 30, 1997 and 1996.
Such data have been derived from, and should be read in conjunction with, the
audited consolidated financial statements and other financial information
contained in AmeriSource's Annual Report on Form 10-K for the year ended
September 30, 1996 and the unaudited consolidated interim financial information
contained in AmeriSource's Quarterly Report on Form 10-Q for the nine months
ended June 30, 1997, including the notes thereto, incorporated by reference
herein. The selected financial data as of June 30, 1997 and for the nine-month
periods ended June 30, 1997 and 1996, reflect all adjustments (consisting only
of normal recurring adjustments, except for the item described in Note 2)
necessary for a fair presentation of the results for such periods. The results
for the nine-month periods are not necessarily indicative of the results to be
expected for the full year or for any other interim period. See "Available
Information" and "Incorporation of Documents by Reference."
<TABLE>
<CAPTION>
NINE MONTHS
ENDED JUNE 30, YEAR ENDED SEPTEMBER 30,
--------------------- ---------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenues.................. $5,596.6 $4,064.6 $5,551.7 $4,668.9 $4,182.2 $3,658.9 $3,237.7
Costs and expenses
Cost of sales............ 5,317.1 3,836.2 5,249.2 (1) 4,402.6 3,947.0 3,449.4 3,038.0
Selling, distribution and
administration.......... 196.9 (2) 150.0 204.5 168.5 337.2 (3) 143.9 138.9
Interest................. 31.0 28.1 36.0 52.3 62.6 66.7 71.0
-------- -------- -------- -------- -------- -------- --------
Total................... 5,545.0 4,014.3 5,489.7 4,623.4 4,346.8 3,660.0 3,247.9
-------- -------- -------- -------- -------- -------- --------
Income (loss) before tax-
es, extraordinary items
and cumulative effect of
accounting changes....... 51.6 (2) 50.3 62.0 (1) 45.5 (164.6)(3) (1.1) (10.2)
Income taxes.............. (20.3) (21.0) (19.3)(4) (17.3) (7.8) (6.4) (2.6)
-------- -------- -------- -------- -------- -------- --------
Income (loss) after taxes
Before extraordinary
items and cumulative ef-
fect of accounting
changes................. 31.3 (2) 29.3 42.7 (1)(4) 28.2 (172.4)(3) (7.5) (12.8)
Extraordinary items...... (2.0) (7.2) (7.3) (18.0) (0.7) (11.1) 6.3
Cumulative effect of ac-
counting changes........ (34.6)(5)
-------- -------- -------- -------- -------- -------- --------
Net income (loss)......... $ 29.3 $ 22.1 $ 35.4 $ 10.2 $ (207.7) $ (18.6) $ (6.5)
======== ======== ======== ======== ======== ======== ========
Fully diluted earnings
(loss) per common share
Before extraordinary
items and cumulative ef-
fect of accounting
changes................. $ 1.29 $ 1.29 $ 1.84 $ 1.53 $ (11.69) $ (0.51) $ (0.87)
Extraordinary items...... (0.08) (0.32) (0.31) (0.98) (0.04) (0.75) 0.43
Cumulative effect of ac-
counting changes........ (2.35)
-------- -------- -------- -------- -------- -------- --------
Total................... $ 1.21 $ 0.97 $ 1.53 $ 0.55 $ (14.08) $ (1.26) $ (0.44)
======== ======== ======== ======== ======== ======== ========
Fully diluted shares...... 24.3 22.7 23.2 18.4 14.8 14.8 14.8
Primary earnings (loss)
per common share
Before extraordinary
items and cumulative ef-
fect of accounting
changes................. $ 1.29 $ 1.29 $ 1.85 $ 1.54 $ (11.69) $ (0.51) $ (0.87)
Extraordinary items...... (0.08) (0.32) (0.31) (0.98) (0.04) (0.75) 0.43
Cumulative effect of ac-
counting changes........ (2.35)
-------- -------- -------- -------- -------- -------- --------
Total................... $ 1.21 $ 0.97 $ 1.54 $ 0.56 $ (14.08) $ (1.26) $ (0.44)
======== ======== ======== ======== ======== ======== ========
Primary shares............ 24.3 22.7 23.0 18.3 14.8 14.8 14.8
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
JUNE 30, ------------------------------------------
1997 1996 1995 1994 1993 1992
-------- -------- ------- ------- ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Cash and cash equiva-
lents................... $ 92.4 $ 71.2 $ 46.8 $ 25.3 $ 27.1 $ 13.8
Working capital.......... 418.4 329.3 243.2 133.4 217.2 268.4
Total assets............. 1,502.3 1,188.0 838.7 711.6 867.9 848.5
Long-term debt........... 532.3 433.7 435.8 487.7 549.3 588.0
Stockholders' deficit.... (6.1) (36.8) (135.7) (300.7) (93.0) (74.7)
</TABLE>
- -------
(1) Includes a one-time cumulative non-cash charge of $10.9 million, $7.1
million after-tax.
(2) Includes a $6.4 million charge to consolidate facilities and restructure
the sales force and a $5.2 million charge related to executive management
changes, $7.1 million after-tax in the aggregate.
(3) Includes the effect of a $179.8 million write-off of goodwill.
(4) Reflects a reduction of $7.1 million due to a favorable settlement of an
Internal Revenue Service audit.
(5) Represents the cumulative effect of accounting changes for income taxes of
$33.4 million and postretirement benefits other than pensions of $1.2
million.
17
<PAGE>
SUMMARY SELECTED UNAUDITED PRO FORMA
COMBINED CONSOLIDATED FINANCIAL DATA OF MCKESSON AND AMERISOURCE
The following table sets forth summary selected unaudited pro forma combined
consolidated financial data of McKesson and AmeriSource for each of the three
years in the period ended March 31, 1997, and for the six-month periods ended
September 30, 1997 and 1996, under the pooling of interests accounting method
and assumes that the Merger had occurred at the beginning of the earliest
period presented. The unaudited pro forma combined consolidated financial data
reflect preliminary estimated adjustments necessary to conform inventory
accounting policies of the separate companies, but do not reflect any cost
savings or other synergies anticipated by McKesson management as a result of
the Merger nor any Merger-related expenses and are not necessarily indicative
of the actual results of operations or the actual financial position of the
combined entities had the Merger been consummated at the beginning of the
earliest period presented, nor are the data necessarily indicative of future
results of operations or financial position. The summary selected unaudited pro
forma combined consolidated financial data should be read in conjunction with
the historical consolidated financial statements of McKesson and AmeriSource
and the Unaudited Pro Forma Combined Consolidated Financial Data of McKesson
and AmeriSource, including the notes thereto, incorporated by reference or
appearing elsewhere in this Joint Proxy Statement/Prospectus. See "Available
Information," "Incorporation of Documents by Reference" and "Unaudited Pro
Forma Combined Consolidated Financial Data of McKesson and AmeriSource."
<TABLE>
<CAPTION>
SIX MONTHS
ENDED SEPTEMBER 30, (1) YEAR ENDED MARCH 31, (1)
----------------------------- ---------------------------------------
1997 1996 1997 1996 1995
------------ ----------- --------- --------- ---------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenues.................. $ 12,660.1 $ 8,183.6 $19,326.2 $14,960.1 $13,874.6
Costs and expenses
Cost of sales............ 11,731.2 7,562.5 17,958.4 (2) 13,761.5 12,816.6 (3)
Selling, distribution and
administration.......... 694.6 (4) 509.4 (5) 1,170.4 (6) 857.4 1,162.4 (3)
Interest expense......... 69.8 40.1 93.0 83.7 107.0
------------ ----------- --------- --------- ---------
Total................... 12,495.6 8,112.0 19,221.8 14,702.6 14,086.0
------------ ----------- --------- --------- ---------
Income (loss) before
income taxes and
dividends on convertible
preferred securities of
subsidiary trust......... 164.5 (4) 71.6 (5) 104.4 (2)(6) 257.5 (211.4)(3)
Income taxes.............. (62.8) (47.0) (51.9)(7) (98.6) (111.0)(8)
Dividends on convertible
preferred securities of
subsidiary trust, net of
tax benefit.............. (3.1) (0.7)
------------ ----------- --------- --------- ---------
Income (loss) after taxes
Continuing operations.... 98.6 (4) 24.6 (5) 51.8 (2)(6) 158.9 (322.4)(3)(8)
(7)
Discontinued operations.. 5.6 8.6 14.7 (23.1)
Discontinued operations--
gains on sales/donation. 120.2 577.7
Extraordinary items...... (2.0) (7.2) (9.2) (6.2) (11.9)
------------ ----------- --------- --------- ---------
Net income................ $ 96.6 $ 23.0 $ 171.4 $ 167.4 $ 220.3
============ =========== ========= ========= =========
Fully diluted earnings
(loss) per common share
Continuing operations.... $ 1.49 $ 0.41 $ 0.84 $ 2.54 $ (5.79)
Discontinued operations.. 0.09 0.14 0.24 (0.41)
Discontinued operations--
gains on sales/donation. 1.94 10.31
Extraordinary items...... (0.03) (0.12) (0.15) (0.10) (0.21)
------------ ----------- --------- --------- ---------
Total................... $ 1.46 $ 0.38 $ 2.77 $ 2.68 $ 3.90
============ =========== ========= ========= =========
Fully diluted shares (9).. 68.1 60.8 62.1 62.5 56.0
Primary earnings (loss)
per common share
Continuing operations.... $ 1.51 $ 0.41 $ 0.84 $ 2.54 $ (6.02)
Discontinued operations.. 0.09 0.14 0.24 (0.43)
Discontinued operations--
gains on sales/donation. 1.96 10.68
Extraordinary items...... (0.03) (0.12) (0.15) (0.10) (0.22)
------------ ----------- --------- --------- ---------
Total................... $ 1.48 $ 0.38 $ 2.79 $ 2.68 $ 4.01
============ =========== ========= ========= =========
Primary shares (9)........ 65.1 60.8 61.5 62.4 54.1
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
SEPTEMBER 30, (1) YEAR ENDED MARCH 31, (1)
------------------ --------------------------
1997 1996 1997 1996 1995
-------- -------- ------- ------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Fully diluted earnings (loss)
per common share--adjusted to
reflect McKesson Stock Split
(10)
Continuing operations........ $ 0.75 $ 0.20 $ 0.42 $ 1.27 $ (2.90)
Discontinued operations...... 0.05 0.07 0.12 (0.21)
Discontinued operations--
gains on sales/donation..... 0.97 5.16
Extraordinary items.......... (0.02) (0.06) (0.08) (0.05) (0.10)
-------- -------- ------- ------- --------
Total....................... $ 0.73 $ 0.19 $ 1.38 $ 1.34 $ 1.95
======== ======== ======= ======= ========
Fully diluted shares......... 136.1 121.7 124.3 125.2 111.9
Primary earnings (loss) per
common share--adjusted to
reflect McKesson Stock Split
(10)
Continuing operations........ $ 0.76 $ 0.20 $ 0.42 $ 1.27 $ (3.01)
Discontinued operations...... 0.05 0.07 0.12 (0.21)
Discontinued operations--
gains on sales/donation..... 0.98 5.34
Extraordinary items.......... (0.02) (0.06) (0.08) (0.05) (0.11)
-------- -------- ------- ------- --------
Total....................... $ 0.74 $ 0.19 $ 1.39 $ 1.34 $ 2.01
======== ======== ======= ======= ========
Primary shares............... 130.2 121.6 123.0 124.8 108.1
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997 (1)
-------------
(IN MILLIONS)
<S> <C>
BALANCE SHEET DATA
Cash, cash equivalents and marketable securities...... $ 268.7(11)
Working capital....................................... 1,534.9
Total assets.......................................... 6,733.5
Total debt............................................ 1,737.8
Convertible preferred securities of subsidiary trust.. 195.1
Stockholders' equity.................................. 1,320.7
</TABLE>
- --------
(1) Includes AmeriSource's results of operations for the respective six-month
periods ended June 30, 1997 and 1996 and the twelve-month periods ended
March 31, 1997, 1996 and 1995 and balance sheet data as of June 30, 1997.
AmeriSource's operating results for the three months ended March 31, 1997
and 1996 have been reported in both the statements of income for the fiscal
years ended March 31, 1997 and 1996, and the statements of income for the
six-month periods ended September 30, 1997 and 1996.
(2) Includes a one-time cumulative non-cash charge by AmeriSource of $10.9
million, $7.1 million after-tax.
(3) Includes $59.4 million in compensation costs (classified in administration
expense) related to the sale by McKesson of PCS and $139.5 million in
charges by McKesson for asset impairment, restructuring and other operating
items ($35.9 million included in cost of sales and $103.6 million included
in administration expense), $130.6 million after-tax in the aggregate. Also
includes a $179.8 million write-off of AmeriSource goodwill (classified in
administration expense).
(4) Includes a $6.4 million charge by AmeriSource to consolidate facilities and
restructure the sales force and a $5.2 million charge by AmeriSource
related to executive management changes, $7.1 million after-tax in the
aggregate.
(5) Includes a $48.2 million write-off for in-process technology related to the
acquisition of McKesson Automated Healthcare, Inc.
(6) Includes $98.8 million in charges for restructuring, asset impairment and
other operating items and $48.2 million for the write-off of in-process
technology related to the acquisition of McKesson Automated Healthcare,
Inc. (see note 5), $109.5 million after-tax in the aggregate.
(7) Reflects a reduction of $7.1 million due to a favorable settlement of an
Internal Revenue Service audit of AmeriSource's federal income tax return.
(8) Includes $107.0 million of income tax expense related to the sale by
McKesson of PCS.
(9) Reflects the effect of the Exchange Ratio of 0.71 of a share of McKesson
Common Stock for each share of AmeriSource Common Stock.
(10) Reflects the effect of the Exchange Ratio of 1.42 shares of McKesson
Common Stock for each share of AmeriSource Common Stock after giving
effect to the McKesson two-for-one stock split declared October 29, 1997,
distributable January 2, 1998 to stockholders of record on December 1,
1997.
(11) Includes $86.6 million held in trust as exchange property for McKesson's
exchangeable subordinated debentures and $8.4 million deposited in trust
pursuant to AmeriSource's trade receivables securitization program.
19
<PAGE>
RISK FACTORS
In considering whether to vote in favor of the McKesson Proposal or the
AmeriSource Proposal, as the case may be, the stockholders of McKesson and of
AmeriSource should consider, in conjunction with the other information
included in this Joint Proxy Statement/Prospectus, the following matters:
RISK FACTORS RELATING TO THE MERGER
Fixed Exchange Ratio Despite Change in Relative Stock Prices
The Exchange Ratio is a fixed ratio and will not be adjusted in the event of
any increase or decrease in the price of either McKesson Common Stock or
AmeriSource Common Stock. The price of McKesson Common Stock at the Effective
Time may be higher or lower than its price at the date of this Joint Proxy
Statement/Prospectus or at the date of the Special Meetings. Such variations
may be the result of changes in the business, operations or prospects of
McKesson or AmeriSource, market assessments of the likelihood that the Merger
will be consummated and the timing thereof, regulatory considerations, general
market and economic conditions or other factors. Because the Effective Time
will occur on a date later than the Special Meetings, there can be no
assurance that the price of McKesson Common Stock on the date of the Special
Meetings will be indicative of its price at the Effective Time. The Effective
Time will occur as soon as practicable following the Special Meetings and the
satisfaction or waiver (where permissible) of the other conditions set forth
in the Merger Agreement. Stockholders of McKesson and AmeriSource are urged to
obtain current market quotations for McKesson Common Stock and AmeriSource
Class A Common Stock. See "The Merger Agreement -- Conditions."
Uncertainties in Integrating Business Operations
In determining that the Merger is in the best interests of McKesson or
AmeriSource, as the case may be, each of the McKesson Board and the
AmeriSource Board considered the potential complementary effects of combining
the respective companies' assets, personnel and operational expertise. The
integration of businesses, however, involves a number of special risks,
including the diversion of management's attention to the assimilation of the
operations from other business concerns, difficulties in the integration of
operations and systems, delays or difficulties in opening and operating larger
distribution centers in an integrated distribution network, the assimilation
and retention of the personnel of the acquired companies, challenges in
retaining the customers of the combined businesses and potential adverse
short-term effects on operating results.
Changing United States Health Care Environment
In recent years, the health care industry has undergone significant change
driven by various efforts to reduce costs, including potential national health
care reform, trends toward managed care, cuts in Medicare, consolidation of
pharmaceutical and medical/surgical supply distributors and the development of
large, sophisticated purchasing groups. This industry is expected to continue
to undergo significant changes for the foreseeable future. Changes in
governmental support of health care services, the method by which such
services are delivered or the prices for such services, or other legislation
or regulations governing such services or mandated benefits, or changes in
pharmaceutical manufacturers' pricing or distribution policies, may have a
material adverse effect on McKesson's and AmeriSource's results of operations.
Interests of Certain Persons in the Merger
In considering the recommendation of the Merger by the AmeriSource Board,
the stockholders of McKesson and AmeriSource should be aware that certain
directors and executive officers of AmeriSource may be deemed to have
conflicts of interest with respect to the Merger in that, pursuant to the
Merger Agreement, and, in the case of the three senior executives, pursuant to
new employment agreements entered into with McKesson concurrently with the
execution of the Merger Agreement, they will have positions with McKesson
after the Effective Time. In addition, certain of such persons have entered
into employment agreements pursuant to which they may receive benefits after
the Merger and certain of such persons hold options the vesting of which will
accelerate as a result of the Merger. Such interests, together with other
relevant factors, were considered by the AmeriSource Board in recommending the
Merger to the stockholders of AmeriSource and approving the Merger Agreement.
See "The Merger -- Interests of Certain Persons in the Merger" and "The
Employment Agreements."
20
<PAGE>
THE SPECIAL MEETINGS
GENERAL
The McKesson Special Meeting will be held at 9:00 a.m., local time, on
, , 1998, at for the purpose set forth in the
Notice of McKesson Special Meeting and as described below. The AmeriSource
Special Meeting will be held at 9:00 a.m. local time, on , , 1998,
at for the purposes set forth in the Notice of the AmeriSource
Special Meeting and as described below. This Joint Proxy Statement/Prospectus
is furnished in connection with the solicitation by the Board of Directors of
each of McKesson and AmeriSource of proxies to be used at their respective
Special Meetings and at any and all adjournments of the Special Meetings. Any
person executing a proxy card may revoke it prior to its exercise by filing
with the Secretary of McKesson or AmeriSource, as the case may be, prior to or
at the applicable Special Meeting, at the address specified in the last
paragraph of "Available Information," either an instrument revoking the proxy
or a duly executed proxy bearing a later date.
VOTING SECURITIES AND RECORD DATE
McKesson. At the close of business on , 1997 there were
shares of McKesson Common Stock outstanding and entitled to vote
at the Special Meeting and no shares of Preferred Stock outstanding. Each
share of McKesson Common Stock outstanding on such date entitles the
stockholder of record thereof to one vote on each matter to be voted upon at
the Special Meeting. The presence, in person or by proxy, at the McKesson
Special Meeting of the holders of a majority of the outstanding shares of
McKesson Common Stock is necessary to constitute a quorum for the transaction
of business at the McKesson Special Meeting. Abstentions and broker non-votes
will be counted for the purpose of determining the existence of a quorum. The
affirmative vote of the holders of a majority of the shares of McKesson Common
Stock present in person or represented by proxy at the McKesson Special
Meeting and entitled to vote on the Stock Issuance is required to approve the
Stock Issuance, provided there is a quorum. Abstentions will have the same
practical effect as a negative vote on the Stock Issuance. A broker non-vote
or a failure to vote with respect to the McKesson Proposal will not be
included in the calculations (other than, in the case of a broker non-vote,
for purposes of determining the existence of a quorum) and therefore will have
no effect on the outcome of the vote. See "-- Proxies."
AmeriSource. Only those persons who are holders of record of shares of
AmeriSource Class A Common Stock at the close of business on , 1997
are entitled to vote at the AmeriSource Special Meeting. On , 1997,
there were outstanding shares of AmeriSource Class A Common
Stock. Each share of AmeriSource Class A Common Stock is entitled to one vote.
The presence, in person or by proxy, at the AmeriSource Special Meeting of the
holders of a majority of the shares of AmeriSource Class A Common Stock
outstanding and entitled to vote at the AmeriSource Special Meeting is
necessary to constitute a quorum at the AmeriSource Special Meeting.
Abstentions and broker non-votes will be counted for the purpose of
determining the existence of a quorum. The affirmative vote of the holders of
a majority of the outstanding shares of AmeriSource Class A Common Stock is
required to approve the AmeriSource Proposal. In addition, an abstention, a
broker non-vote or a failure to vote with respect to the AmeriSource Proposal
will have the effect of a vote cast against the AmeriSource Proposal. See "--
Proxies."
PURPOSE OF SPECIAL MEETINGS
McKesson. The purpose of the McKesson Special Meeting is to consider and
vote upon the issuance of McKesson Common Stock to AmeriSource stockholders in
exchange for their shares of AmeriSource Common Stock in the Merger. A copy of
the Merger Agreement is attached hereto as Appendix A.
AmeriSource. The purpose of the AmeriSource Special Meeting is (i) to
consider and vote to approve the Merger Agreement and the transactions
contemplated thereby, including the Merger, and (ii) to transact such other
business as may properly come before the AmeriSource Special Meeting and at
any and all adjournments or postponements thereof. A copy of the Merger
Agreement is attached hereto as Appendix A.
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PROXIES
All shares of McKesson Common Stock represented by properly executed proxies
received prior to or at the McKesson Special Meeting, and not duly and timely
revoked, and all shares of AmeriSource Class A Common Stock represented by
properly executed proxies received prior to or at the AmeriSource Special
Meeting, and not duly and timely revoked, will be voted in accordance with the
instructions indicated on such proxies. If no instructions are indicated on a
properly executed returned proxy, such proxies will be voted FOR the approval
of the McKesson Proposal or AmeriSource Proposal, as the case may be.
A properly executed proxy marked "ABSTAIN," although counted for purposes of
determining whether there is a quorum and for purposes of determining the
aggregate voting power and number of shares represented and entitled to vote
at the applicable Special Meeting, will not be voted. Accordingly, since the
affirmative vote of the holders of a majority of shares present in person or
represented by proxy and entitled to vote on the McKesson Proposal at the
McKesson Special Meeting is required for approval of the McKesson Proposal, a
proxy marked "ABSTAIN" will have the effect of a vote against the McKesson
Proposal. Similarly, since the affirmative vote of a majority of all votes
entitled to be cast by all holders of AmeriSource Class A Common Stock is
required for approval of the AmeriSource Proposal, a proxy marked "ABSTAIN"
will have the effect of a vote against the AmeriSource Proposal. IN ACCORDANCE
WITH NYSE RULES, BROKERS AND NOMINEES WHO HOLD SHARES OF STOCK IN THEIR NAMES
BUT ARE NOT THE BENEFICIAL OWNERS OF SUCH SHARES ARE PRECLUDED FROM EXERCISING
THEIR VOTING DISCRETION WITH RESPECT TO SUCH SHARES. THUS, BROKERS AND
NOMINEES ARE NOT EMPOWERED TO VOTE SHARES OF MCKESSON COMMON STOCK OR
AMERISOURCE CLASS A COMMON STOCK HELD BY THEM WITH RESPECT TO THE APPROVAL OF
THE MCKESSON PROPOSAL OR THE AMERISOURCE PROPOSAL, AS THE CASE MAY BE, ABSENT
SPECIFIC INSTRUCTIONS FROM THE BENEFICIAL OWNERS OF SUCH SHARES. Because
shares represented by "broker non-votes" will be counted for purposes of
determining the existence of a quorum at a Special Meeting but will not be
included in vote totals, they will have no effect on the outcome of the
McKesson Proposal but will have the effect of a vote against the AmeriSource
Proposal.
Any proxy given pursuant to this solicitation may be revoked at any time
before the proxy is voted. Attendance at the McKesson Special Meeting or the
AmeriSource Special Meeting will not in and of itself constitute a revocation
of a proxy.
The AmeriSource Board is not currently aware of any business to be
transacted at the AmeriSource Special Meeting other than as described herein.
If, however, other matters are properly brought before the AmeriSource Special
Meeting, or any adjournments or postponements thereof, the persons appointed
as proxies will have discretion to vote or act thereon according to their
judgment. Such adjournments may be for the purpose of soliciting additional
proxies. Shares represented by proxies voting against the approval of the
McKesson Proposal or AmeriSource Proposal will be voted against a proposal to
adjourn the respective Special Meeting for the purpose of soliciting
additional proxies. Neither McKesson nor AmeriSource currently intends to seek
an adjournment of its Special Meeting.
In addition to the use of the mail, arrangements will be made with brokerage
houses and other custodians, nominees and fiduciaries to send proxy material
to the beneficial owners of stock held of record by such persons, and McKesson
and AmeriSource will, upon request, reimburse their respective stockholders
for their reasonable expenses in so doing. McKesson has retained Georgeson &
Company, Inc. and AmeriSource has retained to aid in the solicitation
of proxies and to verify certain records related to the solicitation at a
maximum fee of $7,000 and $ , respectively, plus out-of-pocket costs and
expenses. To the extent necessary in order to ensure sufficient representation
at its Special Meeting, McKesson or AmeriSource may request by telephone or
telegram the return of proxy cards. The extent to which this will be necessary
depends entirely upon how promptly proxy cards are returned. Stockholders are
urged to send in their proxies without delay.
AMERISOURCE STOCKHOLDERS SHOULD NOT SEND IN ANY STOCK CERTIFICATES WITH
THEIR PROXY CARDS. A TRANSMITTAL FORM WITH INSTRUCTIONS FOR THE SURRENDER OF
STOCK CERTIFICATES FOR AMERISOURCE COMMON STOCK WILL BE MAILED BY THE EXCHANGE
AGENT AS SOON AS PRACTICABLE AFTER THE CONSUMMATION OF THE MERGER.
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THE COMPANIES
McKesson. McKesson operates its business in two segments: the McKesson
Health Care Services segment and the McKesson Water Products Company.
Through its Health Care Services segment, McKesson is one of the leading
distributors of ethical and proprietary drugs and health and beauty care
products in North America. In fiscal 1997, the McKesson Health Care Services
segment generated approximately 98% of McKesson's annual sales and
approximately 73% of McKesson's operating profits from continuing operations
(approximately 85% before charges for restructuring, asset impairment, write-
off of in-process technology and other operating items).
The U.S. operations of the McKesson Health Care Services segment also
include Healthcare Delivery Systems, Inc. and McKesson Bioservices
Corporation, through which McKesson provides marketing and other support
services to pharmaceutical manufacturers; McKesson Automated Healthcare, Inc.,
a business that specializes in the manufacture and sale of automated
pharmaceutical dispensing systems for hospitals; Zee Medical, Inc., a
distributor of first-aid and safety products and supplies to industrial and
commercial customers; and McKesson General Medical, the nation's leading
supplier of medical-surgical supplies. International operations include Medis
Health and Pharmaceutical Services Inc., a wholly owned subsidiary and the
largest pharmaceutical distributor in Canada; and the Company's 22.7% equity
interest in Nadro, S.A. de C.V., the largest pharmaceutical distributor in
Mexico.
Through McKesson Water Products Company, McKesson processes and markets pure
drinking water and is one of the leading providers in the bottled water
industry. The Water Products segment of McKesson generated approximately 2% of
McKesson's annual sales in fiscal 1997.
McKesson's principal executive offices are located at One Post Street, San
Francisco, California 94104, and its telephone number at that address is (415)
983-8300.
AmeriSource. AmeriSource, through its direct wholly owned subsidiary
AmeriSource Corporation, is the fourth largest full-service wholesale
distributor of pharmaceutical products and related health care services in the
United States. AmeriSource serves its customers nationwide through 19 drug
distribution facilities and two specialty products distribution facilities.
AmeriSource is typically the primary source of supply to its customers and
offers a broad range of services designed to enhance the operating
efficiencies and competitive position of its customers and suppliers.
AmeriSource benefits from a diverse customer base that includes hospitals and
managed care facilities (47%), independent community pharmacies (33%), and
chain drug stores including pharmacy departments of supermarkets and mass
merchandisers (20%).
AmeriSource's principal executive offices are located at 300 Chester Field
Parkway, Malvern, Pennsylvania 19355, and its telephone number at that address
is (619) 296-4480.
Merger Sub. Merger Sub is a newly formed wholly owned subsidiary of
McKesson, incorporated in Delaware on September 19, 1997 for the sole purpose
of effecting the Merger and the other transactions contemplated by the Merger
Agreement. Prior to the consummation of the Merger, Merger Sub will not engage
in any activity other than activities related to the transactions contemplated
by the Merger Agreement. Merger Sub's principal executive offices are located
at One Post Street, San Francisco, California 94104, and its telephone number
at that address is (415) 983-8300.
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THE MERGER
GENERAL
At the Effective Time of the Merger, Merger Sub will be merged with and into
AmeriSource, with AmeriSource surviving the Merger as a wholly owned
subsidiary of McKesson. In the Merger, each share of AmeriSource Common Stock
issued and outstanding immediately before the Effective Time (excluding those
held in the treasury of AmeriSource and those owned by McKesson or Merger
Sub), without any action on the part of the holder thereof, will be converted
into the right to receive 0.71 (1.42 after the McKesson Stock Split) of a
share of McKesson Common Stock. Each share of McKesson Common Stock issued to
holders of AmeriSource Common Stock in the Merger will be issued together with
an associated preferred stock purchase right issued pursuant to the Rights
Agreement. See "Comparative Rights of Stockholders -- Stockholder Rights Plan"
for a description of the Rights. Cash will be paid in lieu of fractional
shares of McKesson Common Stock. The Merger will become effective at the
Effective Time when the Certificate of Merger has been filed with the Delaware
Secretary of State or at such later time as may be agreed upon by McKesson and
AmeriSource and specified in the Certificate of Merger.
The shares of McKesson Common Stock issued to AmeriSource stockholders in
the Merger will constitute approximately 27% of all of the outstanding
McKesson Common Stock after the Merger and the current McKesson stockholders
will hold approximately 73% of all of the outstanding McKesson Common Stock
after the Merger.
Each outstanding and unexercised AmeriSource Option to purchase shares of
AmeriSource Common Stock will be converted into an option to purchase shares
of McKesson Common Stock. Approximately million shares of McKesson Common
Stock (approximately million shares after the McKesson Stock Split) will be
subject to such converted options based on the number of shares of AmeriSource
Common Stock subject to the existing AmeriSource Options multiplied by the
Exchange Ratio. The exercise price with respect thereto will equal the
exercise price under the AmeriSource Options divided by the Exchange Ratio.
BACKGROUND OF THE MERGER
McKesson has pursued a two-part corporate strategy: (i) to remain the
distributor of choice, and (ii) to lead in developing health care supply
management services to meet customer needs, capturing growth opportunities in
the market and improving its profit margins. AmeriSource has focused on
opportunities to increase its service offerings to its customers and lower its
operating cost structure and has consistently evaluated strategic alternatives
over the years to further these goals.
In light of McKesson's strategy, senior management of McKesson had, from
time to time, considered and had preliminary discussions with AmeriSource's
management regarding the possibility of a business combination between
McKesson and AmeriSource. The discussions that culminated in the proposed
Merger began in late August with meetings among executives of AmeriSource and
McKesson. Subsequent contacts and due diligence meetings among the senior
management of McKesson and AmeriSource and their respective financial and
legal advisors explored the strategic and operational synergies of a possible
transaction. A telephonic meeting of the McKesson Board on August 29, 1997
acquainted the Board members with the opportunity and gained consensus that
McKesson management should continue to evaluate a possible combination with
AmeriSource on an expedited basis. A second telephonic meeting of the McKesson
Board on September 5, 1997 updated the directors on the status of negotiations
and reviewed the strategic and financial implications of a possible
transaction with AmeriSource. The results of the due diligence efforts led
McKesson management to conclude that the proposed acquisition of AmeriSource
should be pursued. The Chief Executive Officer of AmeriSource began informal
discussions with members of the AmeriSource Board on August 29, 1997, and the
AmeriSource Board held a series of meetings, with the first on September 4,
1997, to review the advantages and disadvantages of the potential transaction
and to review the status of negotiations.
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REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS
Reasons for the Merger--McKesson
At a telephonic meeting on September 20, 1997, the McKesson Board approved
the Merger Agreement and the transactions contemplated thereby and resolved to
recommend that the McKesson stockholders approve the Stock Issuance. The
McKesson Board believes that the Merger is in the best interests of McKesson
and its stockholders and recommends that McKesson's stockholders vote "FOR"
approval of the Stock Issuance.
In reaching its determination, the McKesson Board consulted with McKesson's
management, as well as its financial and legal advisors, and considered the
following material factors:
The McKesson Board considered the Merger to have strong potential for
reinforcing and accelerating the Corporation's dual strategy discussed above
and for providing a broader platform for delivering health care supply
management services. Further, the results of financial analyses indicated that
the Merger would be accretive to earnings before synergies, would result in
operating efficiencies, synergies and reductions in working capital, and would
leverage complementary capabilities of McKesson and AmeriSource. The McKesson
Board also recognized McKesson's achievements to date in the FoxMeyer
integration and McKesson management's demonstrated ability to develop and
implement an effective integration plan.
The foregoing discussion sets forth the material information and factors
considered and given weight by the McKesson Board. In view of the variety of
factors considered in connection with its evaluation of the Merger, the
McKesson Board did not find it practicable or necessary to and did not
quantify or otherwise assign relative weights to the specific factors
considered in reaching its determination. In addition, individual members of
the McKesson Board may have given different weights to different factors.
THE BOARD OF DIRECTORS OF McKESSON RECOMMENDS THAT THE HOLDERS OF McKESSON
COMMON STOCK VOTE FOR APPROVAL OF THE STOCK ISSUANCE.
Reasons for the Merger -- AmeriSource
At a meeting on September 21, 1997, the AmeriSource Board approved, by a
vote of seven to one, the Merger Agreement and the transactions contemplated
thereby and resolved to recommend that the AmeriSource stockholders approve
the AmeriSource Proposal. The AmeriSource Board believes that the Merger
Agreement and the transactions contemplated thereby, including the Merger, are
fair to and in the best interests of AmeriSource's stockholders. The
AmeriSource Board recommends that the stockholders of AmeriSource vote "FOR"
approval of the AmeriSource Proposal.
In arriving at its conclusions, the AmeriSource Board consulted with
AmeriSource's management and its legal and financial advisors. The factors
considered by the AmeriSource Board included, among other things, (i) the
complementary customer bases and geographic customer concentrations of
AmeriSource and McKesson, (ii) the opportunities for economies of scale and
synergies available through a combination of AmeriSource and McKesson, (iii)
the opportunities presented by the stronger balance sheet of the post-Merger
combined entity, (iv) McKesson's record of post-acquisition integration and
(v) enhanced cross-selling opportunities available to the post-Merger combined
entity.
The foregoing discussion sets forth the material information and factors
considered and given weight by the AmeriSource Board. In view of the variety
of factors considered in connection with its evaluation of the Merger
Agreement and the Merger, the AmeriSource Board did not find it practicable or
necessary to and did not quantify or otherwise assign relative weights to the
specific factors considered in reaching its determination, and individual
members of the AmeriSource Board may have given different weight to different
factors.
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THE BOARD OF DIRECTORS OF AMERISOURCE RECOMMENDS THAT THE HOLDERS OF
AMERISOURCE CLASS A COMMON STOCK VOTE FOR APPROVAL OF THE MERGER AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER.
OPINION OF MCKESSON'S FINANCIAL ADVISOR
PJSC has acted as financial advisor to McKesson in connection with the
Merger. At the September 20, 1997 meeting of the McKesson Board, PJSC
delivered its oral opinion to the McKesson Board, subsequently confirmed in a
written opinion dated September 22, 1997 (the "PJSC Opinion"), to the effect
that, based upon and subject to various considerations set forth in such
opinion, as of September 22, 1997, the Exchange Ratio is fair to McKesson from
a financial point of view. No limitations were imposed by the McKesson Board
upon PJSC with respect to investigations made or procedures followed by PJSC
in rendering the PJSC Opinion.
THE FULL TEXT OF THE PJSC OPINION, WHICH SETS FORTH ASSUMPTIONS MADE,
PROCEDURES FOLLOWED, MATTERS CONSIDERED, LIMITATIONS ON AND SCOPE OF THE
REVIEW BY PJSC IN RENDERING THE PJSC OPINION, IS ATTACHED TO THIS JOINT PROXY
STATEMENT/PROSPECTUS AS APPENDIX C AND IS INCORPORATED BY REFERENCE HEREIN.
THE PJSC OPINION IS DIRECTED ONLY TO THE FAIRNESS OF THE EXCHANGE RATIO TO
McKESSON FROM A FINANCIAL POINT OF VIEW, HAS BEEN PROVIDED TO THE McKESSON
BOARD IN CONNECTION WITH ITS EVALUATION OF THE MERGER, DOES NOT ADDRESS ANY
OTHER ASPECT OF THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
HOLDER OF McKESSON COMMON STOCK AS TO HOW TO VOTE AT THE McKESSON SPECIAL
MEETING. THE SUMMARY OF THE PJSC OPINION SET FORTH IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL
TEXT OF SUCH OPINION. HOLDERS OF McKESSON COMMON STOCK ARE URGED TO READ THE
PJSC OPINION CAREFULLY AND IN ITS ENTIRETY.
In connection with the PJSC Opinion, PJSC: (i) reviewed certain publicly
available financial statements and other information of McKesson and
AmeriSource, respectively; (ii) reviewed certain internal financial statements
and other financial and operating data concerning McKesson and AmeriSource
prepared by the management of McKesson and AmeriSource, respectively; (iii)
reviewed certain financial projections for McKesson and AmeriSource, including
estimates of certain potential benefits of the proposed business combination,
prepared by the management of McKesson and AmeriSource, respectively; (iv)
discussed the past and current operations, financial condition and prospects
of McKesson and AmeriSource with management of McKesson and AmeriSource,
respectively; (v) reviewed the reported prices and trading activity of
McKesson Common Stock and AmeriSource Common Stock; (vi) compared the
financial performance and condition of McKesson and AmeriSource and the
reported prices and trading activity of McKesson Common Stock and AmeriSource
Common Stock with those of certain other comparable publicly traded companies;
(vii) reviewed publicly available information regarding the financial terms of
certain transactions comparable, in whole or in part, to the Merger; (viii)
participated in certain discussions among representatives of each of McKesson
and AmeriSource; (ix) reviewed the Merger Agreement; and (x) performed such
other analyses as PJSC deemed appropriate for purposes of arriving at and
preparing the PJSC Opinion.
In rendering the PJSC Opinion, PJSC assumed and relied upon the accuracy and
completeness of the information reviewed by PJSC for the purposes of the PJSC
Opinion and PJSC did not assume any responsibility for independent
verification of such information. With respect to the financial projections,
including, but not limited to, the estimates made by McKesson's and
AmeriSource's management of certain potential benefits of the proposed
business combination, PJSC assumed that the financial projections were
reasonably prepared in good faith and on bases reflecting the best currently
available estimates and judgments of the future financial performance of
McKesson and AmeriSource, respectively. PJSC expresses no view as to, and
assumes no responsibility for, such projections or the assumptions on which
they are based. PJSC did not assume any responsibility for any independent
valuation or appraisal of the assets or liabilities of McKesson or
AmeriSource, nor was PJSC furnished with any such valuation or appraisal. The
PJSC Opinion was necessarily prepared and
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delivered based on economic, market and other conditions as in effect on, and
the information made available to PJSC as of, September 19, 1997. Although
subsequent developments may affect the PJSC Opinion, PJSC does not have any
obligation to update, revise or reaffirm its opinion.
The forecasts or projections furnished to PJSC for McKesson and AmeriSource
were prepared by the management of McKesson and AmeriSource. As a matter of
policy, McKesson and AmeriSource do not publicly disclose internal management
forecasts, projections or estimates of the type furnished to PJSC in
connection with its analysis of the Merger, and such forecasts, projections
and estimates were not prepared with a view towards public disclosure. These
forecasts, projections and estimates were based on numerous variables and
assumptions which are inherently uncertain and which may not be within the
control of the management of McKesson and AmeriSource, including, without
limitation, general economic, regulatory and competitive conditions.
Accordingly, actual results could vary materially from those set forth in such
forecasts, projections and estimates. See "Summary -- Cautionary Statement
Concerning Forward-Looking Statements."
The following summarizes the significant financial analyses performed by
PJSC and reviewed with the McKesson Board on September 20, 1997 in connection
with the delivery of the PJSC Opinion:
AmeriSource Common Stock Performance. PJSC reviewed the closing prices and
trading volumes of AmeriSource Common Stock from April 4, 1995 (the date of
AmeriSource's initial public offering) to September 19, 1997. During the
period from April 4, 1995 to September 19, 1997, the high closing price for
AmeriSource Common Stock was $55.94 per share and the low closing price was
$20.00 per share. The price per share of AmeriSource Common Stock to be paid
pursuant to the Merger Agreement (based on the Exchange Ratio of 0.71 and the
closing price of McKesson Common Stock on September 19, 1997 of $99.31 per
share) of $70.51 (the "Implied Price") represented a premium of 30.9% based on
the September 19, 1997 closing price of $53.88 per share of AmeriSource Common
Stock.
McKesson Common Stock Performance. PJSC reviewed the closing prices and
trading volumes of McKesson Common Stock from November 10, 1994 to September
19, 1997 and McKesson's indexed price performance from April 4, 1995 to
September 19, 1997 relative to the S&P 400 index and AmeriSource's indexed
performance. During the period from November 10, 1994 to September 19, 1997,
the high closing price for McKesson Common Stock was $99.31 per share and the
low closing price was $30.50 per share.
Historical Stock Price Ratio Analysis. PJSC reviewed the ratios determined
by dividing the closing prices of AmeriSource Common Stock by the closing
prices of McKesson Common Stock (the "Stock Price Ratio") for a range of
periods prior to and including September 19, 1997. Such analysis indicated
that for the 30 days ending September 19, 1997 the average Stock Price Ratio
was 0.549, for the 60 days ending September 19, 1997 the average Stock Price
Ratio was 0.552, for the 90 days ending September 19, 1997 the average Stock
Price Ratio was 0.572, for the 180 days ending September 19, 1997 the average
Stock Price Ratio was 0.603, and for the 365 days ending on September 19, 1997
the average Stock Price Ratio was 0.707.
Analysis of Selected Publicly Traded Comparable Companies. Using publicly
available information, PJSC reviewed and compared selected financial data of
AmeriSource with similar data of the following group of publicly traded
companies engaged in the wholesale pharmaceutical distribution industry:
Bergen Brunswig Corporation ("Bergen"), Bindley Western Industries, Inc.,
Cardinal Health, Inc. ("Cardinal"), D&K Wholesale Drug, Inc. and McKesson (the
"PJSC Comparable Companies").
PJSC calculated and compared various financial multiples and ratios,
including, among other things, the stock price per share as a multiple of
earnings per share ("EPS") for the latest twelve months ("LTM") and estimated
EPS for the twelve months ended March 31, 1998 ("March 1998") and March 31,
1999 ("March 1999"), based upon EPS estimates from First Call Investment
Research as of September 19, 1997, and enterprise value (which represents
total equity value plus book values of total debt, preferred stock and
minority interests less cash) ("Enterprise Value") as a multiple of LTM
revenues, earnings before interest and taxes ("EBIT") and earnings before
interest, taxes, depreciation and amortization ("EBITDA"). As of September 19,
1997, this
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analysis resulted in (i) a range of closing stock prices to LTM EPS of 18.3x
to 35.9x for the PJSC Comparable Companies compared to 33.4x for AmeriSource
at the Implied Price; (ii) a range of closing stock prices to March 1998
estimated EPS of 15.0x to 29.3x for the PJSC Comparable Companies compared to
28.6x for AmeriSource at the Implied Price; (iii) a range of closing stock
prices to March 1999 estimated EPS of 11.3x to 24.0x for the PJSC Comparable
Companies compared to 23.6x for AmeriSource at the Implied Price; (iv) a range
of Enterprise Value to LTM net sales of 8.2% to 69.9% for the PJSC Comparable
Companies compared to 30.6% for AmeriSource at the Implied Price; (v) a range
of Enterprise Value to LTM EBIT of 10.7x to 22.0x for the PJSC Comparable
Companies compared to 17.4x for AmeriSource at the Implied Price; and (vi) a
range of Enterprise Value to LTM EBITDA of 9.0x to 17.3x for the PJSC
Comparable Companies compared to 15.9x for AmeriSource at the Implied Price.
The multiples were based on closing stock prices as of September 19, 1997 for
all of the PJSC Comparable Companies except for Bergen which was based on a
closing stock price on August 22, 1997, the trading day prior to the
announcement of the merger between Cardinal and Bergen.
Analysis of Selected Comparable Transactions. Using publicly available
information, PJSC reviewed certain mergers and acquisitions transactions in
the wholesale pharmaceutical distribution industry and determined that the
only relevant comparable transaction was the pending merger between Cardinal
and Bergen (the "Cardinal/Bergen Transaction") which was announced on August
24, 1997. The Cardinal/Bergen Transaction is the only selected negotiated
transaction involving a stock-for-stock exchange in the wholesale
pharmaceutical distribution industry in the United States, as determined
through publicly available information, with a transaction value in excess of
$1.0 billion during the past five years. PJSC calculated the per share price
paid by Cardinal for Bergen (based on the exchange ratio in the
Cardinal/Bergen Transaction of 0.775x and Cardinal's closing stock price on
August 22, 1997) as a multiple of LTM EPS and March 1998 and March 1999
estimated EPS (based on First Call estimates), and the Enterprise Value paid
by Cardinal for Bergen as a multiple of LTM revenues, EBIT and EBITDA. This
analysis resulted in (i) a per share price to LTM EPS multiple of 29.6x for
Bergen compared to 33.4x for AmeriSource at the Implied Price; (ii) a per
share price to March 1998 estimated EPS multiple of 26.6x for Bergen compared
to 28.6x for AmeriSource at the Implied Price; (iii) a per share price to
March 1999 estimated EPS multiple of 23.1x for Bergen compared to 23.6x for
AmeriSource at the Implied Price; (iv) an Enterprise Value to LTM net sales
multiple of 25.4x for Bergen compared to 30.6x for AmeriSource at the Implied
Price; (v) an Enterprise Value to LTM EBIT multiple of 16.9x for Bergen
compared to 17.4x for AmeriSource at the Implied Price; and (vi) an Enterprise
Value to LTM EBITDA multiple of 13.7x for Bergen compared to 15.9x for
AmeriSource at the Implied Price. PJSC noted that AmeriSource had an LTM
operating income margin (calculated as LTM EBIT divided by LTM revenues) of
1.8% compared to a 1.5% LTM operating income margin for Bergen. PJSC further
noted that, for the period from the fiscal year ended September 1995 to the
estimated fiscal year ended September 1997, AmeriSource had experienced
compound annual EBIT growth of 16.0% and compound annual net income growth of
38.9%, compared to compound annual EBIT growth of 12.1% and compound annual
net income growth of 15.4% for Bergen over the same time period.
Discounted Cash Flow Analysis. PJSC performed a discounted cash flow
analysis to calculate the net present value per share of AmeriSource Common
Stock based on the financial projections for AmeriSource as prepared by the
management of McKesson for the fiscal years (ended September) 1998 to 2001. In
performing its discounted cash flow analysis, PJSC considered various
assumptions that it deemed appropriate based on a review with the management
of McKesson of AmeriSource's prospects and risks. PJSC believed it appropriate
to utilize various discount rates ranging from 11.0% to 13.0% and EBITDA
terminal value multiples ranging from 10.0x to 14.0x to apply to forecasted
EBITDA for the fiscal year 2001.
Based on the foregoing, in PJSC's judgment, this analysis yielded a range of
net present values from $51.43 to $83.84 per share for AmeriSource if
AmeriSource were to perform on a stand alone basis, without giving effect to
any cost savings or synergies and integration or one-time costs as estimated
by the management of McKesson to be realized in the Merger (the "Cost Savings
and One-Time Costs"). The analysis showed a range of net present values from
$87.88 to $138.41 per share for AmeriSource assuming the Cost Savings and One-
Time Costs. The analysis showed a range of net present values from $66.98 to
$108.39 per share for AmeriSource assuming 50% of the Cost Savings and One-
Time Costs.
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Contribution Analysis. PJSC reviewed the relative contributions of McKesson
and AmeriSource with respect to revenues, EBIT, EBITDA and fully-diluted net
income on a pro forma basis assuming the companies had been combined for the
LTM period ended June 30, 1997 and for the projected twelve months ended March
1998, based on the financial projections for McKesson and AmeriSource as
prepared by the management of McKesson and assuming no Cost Savings and One-
Time Costs. This analysis showed that McKesson would have contributed 67.3%
and 68.5%, respectively, to pro forma combined LTM and March 1998 revenues,
68.1% and 72.4%, respectively, to pro forma combined LTM and March 1998 EBIT,
71.5% and 74.7%, respectively, to pro forma combined LTM and March 1998
EBITDA, 71.3% and 74.6%, respectively, to pro forma combined LTM and March
1998 fully-diluted net income. PJSC noted that based on the Exchange Ratio,
McKesson's total equity value would represent 74.3% of the combined equity
value and McKesson's Enterprise Value would represent 74.5% of the combined
Enterprise Value.
Pro Forma Merger Analysis. PJSC analyzed certain pro forma effects of the
Merger on McKesson's EPS for the fiscal years ended March 31, 1999, 2000 and
2001 assuming the Merger had been completed on March 31, 1998. Such analysis
was based upon the stand alone financial projections for McKesson and
AmeriSource as prepared by the management of McKesson. PJSC analyzed the
impact of the Merger both with and without giving effect to the Cost Savings
and One-Time Costs. The analysis demonstrated that the Merger would be
accretive by 1.0%, 0.6% and 0.3% to McKesson's 1999, 2000 and 2001 EPS,
respectively, without the Cost Savings and One-Time Costs, and that the Merger
would be accretive by 8.2%, 18.4% and 21.8% to McKesson's 1999, 2000 and 2001
EPS, respectively, with the Cost Savings and One-Time Costs.
In arriving at the Fairness Opinion, PJSC performed a variety of financial
analyses, the material portions of which are summarized above. The preparation
of a fairness opinion is a complex process involving various determinations as
to the most appropriate and relevant methods of financial analyses and the
application of those methods to the particular circumstances and, therefore,
such an opinion is not necessarily susceptible to a partial analysis or
summary description. In arriving at its opinion, PJSC did not attribute any
particular weight to any analysis or factor considered by it, but rather made
qualitative judgments as to significance and relevance of each analysis and
factor. Accordingly, PJSC believes that its analysis must be considered as a
whole and that selecting portions of its analysis, without considering all
such analyses, could create an incomplete view of the process underlying the
PJSC Opinion.
In performing its analyses, PJSC relied on numerous assumptions made by the
management of McKesson and AmeriSource and made numerous judgments of its own
with regard to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of McKesson and
AmeriSource. Actual values will depend upon several factors, including changes
in interest rates, dividend rates, market conditions, general economic
conditions and other factors that generally influence the price of securities.
The analyses performed by PJSC are not necessarily indicative of actual values
or actual future results, which may be significantly more or less favorable
than suggested by such analyses. Such analyses were prepared solely as a part
of PJSC's analysis of the fairness of the Exchange Ratio to McKesson from a
financial point of view and were provided to the McKesson Board in connection
with the delivery of the PJSC Opinion. The analyses do not purport to be
appraisals or necessarily reflect the prices at which businesses or securities
might actually be sold, which are inherently subject to uncertainty. Since
such estimates are inherently subject to uncertainty, none of McKesson,
AmeriSource, PJSC or any other person assumes responsibility for their
accuracy. With regard to the comparable public company analysis and the
comparable transactions analysis summarized above, PJSC selected comparable
public companies on the basis of various factors; however, no public company
or transaction utilized as a comparison is identical to AmeriSource or the
Merger. Accordingly, an analysis of the foregoing is not mathematical; rather,
it involves complex considerations and judgments concerning differences in
financial and operating characteristics of the comparable companies and other
factors that could affect the acquisition or public trading value of the
comparable companies and transactions to which AmeriSource and the Merger are
being compared. In addition, as described above, the PJSC Opinion and the
information provided by PJSC to the McKesson Board was one of many factors
taken into consideration by the McKesson Board in making its determination to
approve the Merger. Consequently, the PJSC analyses described above should not
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be viewed as determinative of the opinion of the McKesson Board or the view of
McKesson management with respect to the value of AmeriSource.
As part of its investment banking activities, PJSC is regularly engaged in
the evaluation of businesses and their securities in connection with mergers
and acquisitions, restructurings and valuations for corporate or other
purposes. In the past, PJSC has provided investment banking services to
McKesson for which services PJSC has received customary fees.
Pursuant to the terms of a letter agreement dated September 17, 1997 (the
"PJSC Engagement Letter"), PJSC was retained by McKesson as its exclusive
financial advisor and to render an opinion to the McKesson Board with respect
to the Merger. Under the PJSC Engagement Letter, McKesson has paid PJSC
$500,000 upon signing the Merger Agreement and a fairness opinion fee of
$2,500,000. Upon consummation of the Merger, McKesson has agreed to pay PJSC a
transaction fee (the "Transaction Fee") equal to a percentage, ranging from
0.458% at $2.0 billion to 0.438% at $2.5 billion, of the aggregate
consideration paid in the Merger; provided, however, that the Transaction Fee
shall not be lower than $9,500,000 or greater than $11,500,000. For purpose of
the PJSC Engagement Letter, "aggregate consideration" includes the total
consideration paid (including amounts paid to holders of options, warrants and
convertible securities), plus the principal amount of all indebtedness less
the cash outstanding as set forth on the most recent consolidated balance
sheet of AmeriSource prior to the consummation of the Merger. Such Transaction
Fee will be reduced by the $3,000,000 already paid by McKesson to PJSC.
McKesson has also agreed to reimburse PJSC for reasonable expenses incurred by
PJSC and to indemnify PJSC and its affiliates, counsel and other professional
advisors, and their respective directors, officers, controlling persons,
agents and employees against certain liabilities and expenses, including
certain liabilities under the federal securities laws, relating to or arising
out of such engagement.
OPINION OF AMERISOURCE'S FINANCIAL ADVISOR
On September 20, 1997, Goldman Sachs delivered its oral opinion
(subsequently confirmed by delivery of a written opinion) to the AmeriSource
Board that as of the date of such opinion the Exchange Ratio pursuant to the
Merger Agreement was fair from a financial point of view to the holders of
AmeriSource Common Stock other than McKesson or any of its subsidiaries.
Goldman Sachs subsequently confirmed its earlier opinion by delivery of its
written opinion, dated September 22, 1997, that, based upon the facts and
assumptions described in such opinion, as of the date thereof the Exchange
Ratio pursuant to the Merger Agreement is fair from a financial point of view
to the holders of AmeriSource Common Stock (other than McKesson or any of its
subsidiaries).
THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS DATED AS OF SEPTEMBER
22, 1997, WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS OF
THE REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED HERETO AS
APPENDIX D AND IS INCORPORATED HEREIN BY REFERENCE. HOLDERS OF SHARES OF
AMERISOURCE COMMON STOCK ARE URGED TO, AND SHOULD, READ SUCH OPINION IN ITS
ENTIRETY. GOLDMAN SACHS' WRITTEN OPINION IS ADDRESSED TO THE AMERISOURCE BOARD
AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY AMERISOURCE STOCKHOLDER AS TO
HOW SUCH STOCKHOLDER SHOULD VOTE AT THE AMERISOURCE SPECIAL MEETING, AND
SHOULD NOT BE RELIED UPON BY ANY STOCKHOLDER AS SUCH. THE SUMMARY OF THE
WRITTEN OPINION OF GOLDMAN SACHS SET FORTH IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL
TEXT OF SUCH OPINION.
In connection with its opinion, Goldman Sachs reviewed, among other things,
the Merger Agreement; the Annual Reports to Stockholders and Annual Reports on
Form 10-K of AmeriSource for the two fiscal years ended September 30, 1996;
the Annual Reports on Form 10-K of AmeriSource Distribution Corporation (the
predecessor corporation to AmeriSource) for the fiscal year ended September
30, 1994; the Annual Reports on Form 10-K of Alco Health Distribution
Corporation (the predecessor corporation to AmeriSource Distribution
Corporation) for the two fiscal years ended September 30, 1993; the Annual
Reports to Stockholders and Annual
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Reports on Form 10-K of McKesson for the five fiscal years ended March 31,
1997; certain interim reports to stockholders and Quarterly Reports on Form
10-Q of AmeriSource and McKesson; certain other communications from
AmeriSource and McKesson to their respective stockholders; and certain
internal financial analyses and forecasts for AmeriSource and McKesson
prepared by their respective managements. Goldman Sachs also has held
discussions with members of the senior managements of AmeriSource and McKesson
regarding the strategic rationale for, and the potential benefits of, the
transaction contemplated by the Agreement and the past and current business
operations, financial condition and future prospects of their respective
companies. In addition, Goldman Sachs reviewed the reported price and trading
activity for the AmeriSource Common Stock and for the McKesson Common Stock,
compared certain financial and stock market information for AmeriSource and
McKesson with similar information for certain other companies the securities
of which are publicly traded, reviewed the financial terms of certain recent
business combinations in the drug distribution industry specifically and in
other industries generally, and performed such other studies and analyses as
Goldman Sachs considered appropriate.
Goldman Sachs relied, without independent verification, upon the accuracy
and completeness of all of the financial and other information reviewed by it
for the purposes of its opinion. With respect to financial forecasts and
projections provided by the respective managements of AmeriSource and
McKesson, Goldman Sachs assumed, with the consent of the AmeriSource Board,
that such financial forecasts and projections were reasonably prepared on
bases reflecting the best available estimates and judgments as to the future
financial and other performance of AmeriSource and McKesson, as applicable.
Goldman Sachs further assumed, with the consent of the AmeriSource Board, that
obtaining any necessary regulatory or third-party approvals for the
transactions contemplated by the Merger Agreement will not have an adverse
effect on AmeriSource or McKesson, as applicable. Goldman Sachs has not made
an independent evaluation or appraisal of the assets and liabilities of
AmeriSource or McKesson or any of their respective subsidiaries and Goldman
Sachs has not been furnished with any such evaluation or appraisal.
The following is a summary of certain of the financial analyses used by
Goldman Sachs believed by it to be material in connection with providing its
oral opinion (subsequently confirmed in writing) to the AmeriSource Board on
September 20, 1997. Goldman Sachs utilized substantially the same type of
financial analyses in connection with providing the written opinion attached
hereto as Appendix D.
(i) Historical Stock Trading Analysis. Goldman Sachs reviewed the
historical trading prices and volumes for the AmeriSource Common Stock and
the relationship between movements of the AmeriSource Common Stock and
McKesson Common Stock and movements in the S&P 500 Index and the common
stock of Bergen and Cardinal. This analysis indicated that for the period
from April 4, 1995 (the date of AmeriSource's initial public offering)
through September 16, 1997, both the AmeriSource Common Stock and the
McKesson Common Stock outperformed the S&P 500 Index by 26% and 29%
respectively, the common stock of Bergen by 17% and 20% respectively and
the common stock of Cardinal by 5% and 7% respectively. Over the same
period, the AmeriSource Common Stock closed at a high of $55.94 per share
and a low of $20 per share, and McKesson Common Stock closed at a high of
$97 per share and a low of $37.75 per share.
(ii) Selected Companies Analysis. Goldman Sachs reviewed and compared
certain actual and estimated financial information relating to AmeriSource
and McKesson to corresponding financial information, ratios and public
market multiples for three publicly-traded drug distribution companies (the
"Selected Drug Distribution Companies"): Bergen, Cardinal and Bindley
Western Industries, Inc. (collectively with AmeriSource and McKesson, the
"GS Comparable Companies"). The Selected Drug Distribution Companies were
chosen because they are publicly-traded companies with operations that for
purposes of this analysis may be considered similar to AmeriSource and
McKesson. Goldman Sachs calculated and compared various financial multiples
and ratios for each of AmeriSource, McKesson and the GS Comparable
Companies. The multiples and ratios of GS Comparable Companies were
calculated using closing market prices on September 16, 1997, publicly
reported financial results and publicly available information and
estimates.
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Goldman Sachs considered for the GS Comparable Companies the levered
market capitalization (defined as equity value (share price times latest
reported total shares outstanding) plus straight debt, minority interest,
straight preferred stock, all out-of-the-money convertible instruments,
less investments in unconsolidated affiliates and excess cash) as a
multiple of LTM sales, LTM EBITDA and LTM EBIT for each of the GS
Comparable Companies. Goldman Sachs' analysis for the GS Comparable
Companies indicated multiples of LTM sales which ranged from 0.08x to
0.76x, with a median of 0.25x, compared to 0.25x and 0.39x for AmeriSource
and McKesson respectively; multiples of levered market capitalization to
LTM EBITDA which ranged from 8.3x to 19.6x, with a median of 15.2x,
compared to 15.2x and 19.1x for AmeriSource and McKesson respectively; and
multiples of levered market capitalization to LTM EBIT which ranged from
9.5x to 25.5x, with a median of 17.2x, compared to 17.2x and 25.5x for
AmeriSource and McKesson respectively.
Goldman Sachs also considered for each GS Comparable Company the ratios
of current stock prices to projected earnings per share ("EPS") for the
current (1997) and next (1998) calendar years (based on Institutional
Broker Estimate Systems' ("IBES") estimates as of September 16, 1997). The
ratios of current stock prices to projected 1997 EPS ranged from 17.3x to
29.9x, with a median of 25.2x, compared to 23.5x and 29.3x for AmeriSource
and McKesson respectively. The ratios of current stock prices to projected
1998 EPS ("1998 P/E") ranged from 15.8x to 24.6x, with a median of 21.8x,
compared to 19.4x and 23.5x for AmeriSource and McKesson respectively.
Goldman Sachs also considered for each GS Comparable Company the ratio of
estimated 1998 P/E to the estimated future earnings growth rate ("LT Growth
Rate") as projected by IBES. The ratio of estimated 1998 P/E to the LT
Growth Rate ranged from 0.97x to 1.62x, with a median of 1.31x for the GS
Comparable Companies, compared to 0.97x and 1.62x for AmeriSource and
McKesson respectively.
(iii) Historical Exchange Ratio. Goldman Sachs reviewed certain
historical trading prices for the shares of AmeriSource Common Stock and
the shares of McKesson Common Stock over the period from April 4, 1995 (the
date of AmeriSource's initial public offering) through September 16, 1997.
Such analysis demonstrated a range of exchange ratios (calculated by
dividing the price per share of AmeriSource Common Stock by the price per
share of McKesson Common Stock) from 0.482x to 0.954x and an exchange ratio
of 0.575x as of September 16, 1997 (based on the closing per share prices
of $55.50 per share of AmeriSource Common Stock and $96.50 per share of
McKesson Common Stock on September 16, 1997).
(iv) Contribution Analysis. Goldman Sachs calculated the percentage
contribution by AmeriSource and McKesson to the pro forma combined company,
without regard to any cost reductions or other earnings enhancements that
might accrue through the combination. The calculations were based on
September 16, 1997 market values, March 31, 1997 financial information and
AmeriSource and McKesson managements' financial forecasts for each
respective company. This analysis showed that AmeriSource would contribute
22.9% of market capitalization, 23.6% of levered market capitalization,
33.3% of fiscal year 1997 sales, 31.8% of estimated fiscal year 1998 sales,
29.9% of fiscal year 1997 EBITDA, 25.9% of estimated fiscal year 1998
EBITDA, 33.9% of fiscal year 1997 EBIT, 24.1% of estimated fiscal year 1998
EBIT, 28.7% of fiscal year 1997 net income, 25.9% of estimated fiscal year
1998 net income and 26.2% of estimated fiscal year 1999 net income of the
pro forma combined company. By comparison, based on the Exchange Ratio,
AmeriSource stockholders would hold approximately 25.5% of the pro forma
equity.
(v) Pro Forma Merger Analysis. Goldman Sachs prepared pro forma analyses
of the financial impact of the Merger on holders of shares of AmeriSource
Common Stock. Using EPS estimates of IBES for McKesson and for AmeriSource
for the fiscal years 1999, 2000 and 2001, Goldman Sachs, among other
things, compared the estimated EPS of AmeriSource Common Stock, on a stand-
alone basis, to the estimated EPS of the combined company's common stock on
a pro forma basis. Goldman Sachs performed this analysis based on certain
assumptions and financial forecasts (as provided by AmeriSource and
McKesson management and IBES). Based on such analysis and a closing
McKesson Common Stock Price of $96.50 on September 16, 1997, the proposed
Merger would be accretive to AmeriSource's stockholders
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on an EPS basis in the fiscal years ended March 31, 1999, 2000 and 2001 at
levels of 1.2%, 1.8% and 1.8% respectively, before synergies. Goldman Sachs
also performed a sensitivity analysis assuming various levels of synergies
realized in the combined company.
(vi) Selected Transactions Analysis. Goldman Sachs analyzed certain
information relating to fifty-two selected merger and acquisition
transactions in the drug distribution industry since 1984 (the "Selected
Transactions"). Such analysis indicated, among other things, that for the
Selected Transactions the premium over market value ranged from (3.8)% to
118.0%, with a median of 46.6%, compared to a 23.5% premium over the market
value of the AmeriSource Common Stock in the Merger (based on the September
16, 1997 closing prices); multiple of levered consideration to LTM EBITDA
ranged from 5.5x to 22.9x, with a median of 10.1x, compared to 15.4x for
the Merger; multiple of levered consideration to LTM EBIT ranged from 6.4x
to 76.8, with a median of 11.7x, compared to 16.9x for the Merger; multiple
of levered consideration to LTM sales ranged from 0.01x to 16.3x, with a
median of 0.24x, compared to 0.29x for the Merger; and multiple of levered
consideration to LTM net income ranged from 11.2x to 60.2x, with a median
of 21.6x, compared to 29.9x for the Merger. For the purposes of the
analysis set forth in this paragraph, LTM EBITDA, LTM EBIT, LTM sales and
LTM net income for the Merger were based on estimates provided by
AmeriSource management for the twelve months ending September 30, 1997.
Goldman Sachs also analyzed certain information relating to the pending
combination of Cardinal and Bergen. Goldman Sachs calculated, among other
things, the total consideration paid to Bergen as a multiple of estimated
sales, estimated EBITDA, estimated EBIT and estimated EPS for fiscal year 1997
as well as estimated EPS for fiscal years 1998 and 1999. Such analysis
indicated multiples that, when applied to the same financial information for
AmeriSource, implied an Exchange Ratio ranging from 0.607 to 0.753 and 0.624
to 0.765 based on Donaldson, Lufkin & Jenrette Research/IBES estimates and
AmeriSource managements' projections, respectively. By comparison, the
Exchange Ratio pursuant to the Merger Agreement is 0.710.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without
considering the analyses as a whole, could create an incomplete view of the
processes underlying Goldman Sachs' opinion. In arriving at its fairness
determination, Goldman Sachs considered the results of all such analyses,
taken as a whole. Furthermore, in arriving at its fairness opinion, Goldman
Sachs did not attribute any particular weight to any analysis or factor
considered by it; rather, Goldman Sachs made its determination as to fairness
on the basis of qualitative judgments as to the significance and relevance of
the financial and comparative analyses and factors described above, taken as a
whole. No company or transaction used in the above analyses as a comparison is
identical to AmeriSource or McKesson or the contemplated transaction. The
analyses were prepared solely for purposes of Goldman Sachs in providing its
opinion to the AmeriSource Board as to the fairness from a financial point of
view of the Exchange Ratio to the holders of shares of AmeriSource Common
Stock and do not purport to be appraisals or necessarily reflect the prices at
which businesses or securities actually may be sold. Analyses based upon
forecasts of future results are not necessarily indicative of actual future
results, which may be significantly more or less favorable than suggested by
such analyses. Because such analyses are inherently subject to uncertainty,
being based upon numerous factors or events beyond the control of the parties
or their respective advisors, none of AmeriSource, McKesson, Goldman Sachs or
any other person assumes responsibility if future results are materially
different from those forecast.
As described above, Goldman Sachs' opinion to the AmeriSource Board was one
of many factors taken into consideration by the AmeriSource Board in making
its determination to approve the Merger Agreement. Although Goldman Sachs
evaluated the fairness of the Exchange Ratio to the holders of shares of
AmeriSource Common Stock, the specific Exchange Ratio was determined by
McKesson and AmeriSource through arm's-length negotiation. The foregoing
summary does not purport to be a complete description of the analyses
performed by Goldman Sachs and is qualified by reference to the written
opinion of Goldman Sachs set forth in Appendix D hereto.
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Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. AmeriSource selected
Goldman Sachs as its financial advisor because it is a nationally recognized
investment banking firm that has substantial experience in transactions
similar to the Merger. Goldman Sachs is familiar with AmeriSource, having
provided certain investment banking services to AmeriSource from time to time,
including acting as an underwriter of the public offering of 4.5 million
shares of AmeriSource Common Stock in May 1996, and having acted as its
financial advisor in connection with, and having participated in certain of
the negotiations leading to, the Merger Agreement.
Goldman Sachs provides a full range of financial, advisory and brokerage
services and in the course of its normal trading activities may from time to
time effect transactions and hold positions in the securities or options on
securities of AmeriSource or McKesson for its own account and for the account
of customers.
Pursuant to a letter agreement dated August 29, 1997 (the "Engagement
Letter"), AmeriSource engaged Goldman Sachs to act as its exclusive financial
advisor in connection with the possible merger or sale of all or a portion of
AmeriSource. Pursuant to the terms of the Engagement Letter, AmeriSource has
agreed to pay Goldman Sachs a fee of 0.50% of the Merger Consideration (valued
as described in the Engagement Letter). AmeriSource has agreed to pay $500,000
of that fee upon the rendering of the opinion of Goldman Sachs as to the
fairness from a financial point of view of the Merger Consideration to be
received by the holders of AmeriSource Common Stock. AmeriSource has agreed to
reimburse Goldman Sachs for its reasonable out-of-pocket expenses, including
attorneys' fees, and to indemnify Goldman Sachs against certain liabilities,
including certain liabilities under the federal securities laws.
ANTICIPATED ACCOUNTING TREATMENT
The Merger is expected to be accounted for as a pooling of interests in
accordance with generally accepted accounting principles. Under this
accounting method, the historical financial information of McKesson and
AmeriSource will be restated to reflect the combined financial position and
operations of both companies. The combined financial position and operations
will be adjusted to conform the accounting practices of the companies.
Pursuant to the Merger Agreement, each of McKesson and AmeriSource will use
its best efforts to cause the Merger to qualify for "pooling of interests"
accounting treatment. The obligations of each of AmeriSource and McKesson to
consummate the Merger are conditioned upon the receipt by McKesson of a letter
from McKesson's independent auditors stating that they concur with the
conclusion of McKesson's management that the Merger will qualify for pooling
of interests accounting treatment.
BOARD AND MANAGEMENT OF THE SURVIVING CORPORATION FOLLOWING THE MERGER
If the Merger is consummated, holders of AmeriSource Common Stock will
become stockholders of McKesson, which will be under the direction of the
Board of Directors and management of McKesson. The directors of Merger Sub
immediately prior to the Effective Time will be the directors of the Surviving
Corporation and the officers of Merger Sub immediately prior to the Effective
Time will be the officers of the Surviving Corporation.
BOARD OF DIRECTORS AND OFFICERS OF MCKESSON FOLLOWING THE MERGER
Immediately following the Effective Time, the McKesson Board will take all
action necessary to elect the following persons, who are currently serving on
the AmeriSource Board, to the McKesson Board: (i) James Urry, who will be
assigned to the class of directors whose term of office expires at McKesson's
first annual meeting of stockholders after the Effective Time, (ii) Michael
Delaney, who will be assigned to the class of directors whose term expires at
McKesson's second annual meeting of stockholders after the Effective Time, and
(iii) R. David Yost, who will be assigned to the class of directors whose term
of office expires at McKesson's third annual meeting of stockholders after the
Effective Time. The McKesson Board will appoint Mr. Yost as Group President of
the AmeriSource Services Group and as a corporate Vice President, effective as
of the Effective Time. Messrs. Urry and Delaney are officers of VPI.
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REGULATORY APPROVALS
Under the HSR Act and the rules promulgated thereunder by the Federal Trade
Commission, the Merger may not be consummated until Premerger Notification and
Report Forms (the "HSR Forms") have been submitted and certain information has
been furnished by McKesson and AmeriSource to the Federal Trade Commission and
the Antitrust Division, and required waiting periods have expired or been
terminated. The initial waiting period is 30 days from the date the HSR Forms
are submitted, but is extended, if the Federal Trade Commission or the
Antitrust Division issues a so-called "second request" for further
information, until 20 days after the "second request" is "substantially
complied with" (as such term is defined in the HSR Act).
McKesson and AmeriSource agreed in the Merger Agreement to use their
respective best efforts to file as promptly as practicable the HSR Forms with
the Federal Trade Commission and the Antitrust Division, and to respond as
promptly as practicable to any requests for additional information made by
either the Federal Trade Commission or the Antitrust Division. McKesson and
AmeriSource each filed Premerger Notification and Report Forms with the
Federal Trade Commission and the Antitrust Division on September 24, 1997. The
initial statutory waiting period was to have expired for McKesson and
AmeriSource on October 23, 1997. On October 23, 1997, McKesson and AmeriSource
received a Second Request from the Federal Trade Commission and accordingly,
the waiting period will not terminate until 20 days (or such later date as the
parties may agree) after McKesson and AmeriSource have each "substantially
complied" with such request, unless the Federal Trade Commission voluntarily
terminates the waiting period prior to substantial compliance. McKesson and
AmeriSource are in the process of responding to the Second Request.
At any time before or after the consummation of the Merger and
notwithstanding the expiration or termination of the HSR Act waiting period,
any federal or state antitrust authorities could take action under the
antitrust laws as they deem necessary or desirable in the public interest.
Such action could include seeking to enjoin the consummation of the Merger or
seeking divestiture of all or part of the assets of McKesson or AmeriSource.
Private parties may also seek to take legal action under the Antitrust Laws,
if circumstances permit. In the Merger Agreement McKesson and AmeriSource have
each agreed: (i) to use its best efforts to resolve any objections to the
Merger under the Antitrust Laws that may be asserted by any Governmental
Authority; (ii) to use its best efforts to contest any legal proceedings
challenging the Merger under the Antitrust Laws unless both parties agree that
litigation is not in their respective best interests; and (iii) if required to
avoid the institution of litigation challenging the Merger under the Antitrust
Laws (or if required to settle such a litigation), to agree to divest or
otherwise hold separate, or take such other action with respect to, any of its
assets and properties as may be necessary to avoid (or settle) the litigation,
unless, in the reasonable opinion of the McKesson Board, the divestiture or
other action would reasonably be expected to have a material adverse effect on
the business, assets, liabilities, results of operations or financial
condition of McKesson combined with AmeriSource after the Effective Time or
reduce or render more uncertain the financial or strategic benefits expected,
as of the date of the Merger Agreement, to be realized from the consummation
of the Merger.
IF THE FEDERAL TRADE COMMISSION, OR ANY OTHER FEDERAL OR STATE ANTITRUST
AUTHORITY, WERE TO CHALLENGE THE MERGER, THE CLOSING COULD BE POSTPONED BEYOND
MAY 31, 1998, IN WHICH EVENT, EITHER MCKESSON OR AMERISOURCE MAY TERMINATE THE
MERGER AGREEMENT, PURSUANT TO ITS TERMS, AT ANY TIME AFTER MAY 31, 1998,
SUBJECT TO EXTENSIONS IN CERTAIN CASES. See "The Merger Agreement --
Conditions" and "The Merger Agreement -- Termination."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the AmeriSource Board with respect to
the Merger Agreement and the transactions contemplated thereby, stockholders
should be aware that certain members of the management of
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AmeriSource and the AmeriSource Board have certain interests in the Merger
that are in addition to the interests of stockholders of AmeriSource
generally.
For example, simultaneously with the execution of the Merger Agreement,
McKesson entered into employment agreements with R. David Yost, David M.
Flowers and Kurt J. Hilzinger, each of whom is an executive of AmeriSource.
Under these agreements, the three executives will have positions with McKesson
after the Merger, and will receive certain stock options and restricted stock
awards of McKesson Common Stock, as well as other benefits, including
severance benefits. The execution of these agreements was a condition to
McKesson's entering into the Merger Agreement. The AmeriSource Board
considered the commitment of these executives to continue in the employ of
McKesson after consummation of the Merger, and concluded that their industry
experience would serve to strengthen the management of the post-Merger
combined entity. See "The Employment Agreements."
Moreover, McKesson has agreed to elect Messrs. Urry, Delaney and Yost to the
McKesson Board following the Merger. Messrs. Urry and Delaney are officers of
VPI.
Certain members of the management of AmeriSource have AmeriSource Options
that become immediately exercisable upon satisfaction of certain conditions
after the occurrence of a change of control of AmeriSource. According to the
terms of the AmeriSource Options, upon a Change of Control (as defined in the
Stock Option Agreement) each AmeriSource Option becomes fully exercisable so
long as (i) the grantee is employed by AmeriSource at the time of the Change
of Control and (ii) either (A) the grantee is employed by AmeriSource on the
first anniversary of the Change of Control, (B) the grantee's employment is
terminated by AmeriSource other than for cause during the one-year period
following the Change of Control, (C) the grantee voluntarily terminates
employment with AmeriSource during the one-year period following the Change of
Control as a result of a "constructive termination" (as defined in the
agreements governing the AmeriSource Options) or (D) the grantee's employment
with AmeriSource terminates on account of death or disability during the one-
year period following the Change of Control.
Additionally, pursuant to the Merger Agreement, McKesson has agreed to
indemnify the directors and officers of AmeriSource and its subsidiaries
against certain types of claims, and has agreed to maintain AmeriSource's
existing directors' and officers' liability insurance policy or policies of
substantially similar coverage for the six-year period after the Effective
Date. See "The Merger Agreement -- Indemnification and Insurance."
NO DISSENTERS' RIGHTS
No holder of McKesson Common Stock or AmeriSource Stock will have any
dissenters' rights in connection with, or as a result of, the matters to be
acted upon at the Special Meetings.
STOCK EXCHANGE LISTING
It is a condition to the Merger that, upon consummation of the Merger, the
shares of McKesson Common Stock and the Rights to be issued by McKesson in
connection with the Merger be authorized for listing on the NYSE, subject to
official notice of issuance. The shares of McKesson Common Stock will also be
listed on the PE subject to official notice of issuance.
DELISTING AND DEREGISTRATION OF AMERISOURCE STOCK
If the Merger is consummated, the AmeriSource Class A Common Stock will be
delisted from the NYSE and deregistered under the Exchange Act.
TREATMENT OF STOCK CERTIFICATES
After the Effective Time, each stock certificate previously representing
shares of AmeriSource Common Stock will automatically, with no further action
by the holder thereof, represent the right to receive 0.71 (1.42
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after the McKesson Stock Split) of a share of McKesson Common Stock, together
with the associated Rights pursuant to the Rights Agreement, for each share of
AmeriSource Common Stock represented by the stock certificate. Promptly after
the Effective Time, the Exchange Agent will mail a letter of transmittal with
instructions to each holder of record of AmeriSource Common Stock outstanding
immediately prior to the Effective Time for use in exchanging, by book-entry
transfer or otherwise, stock certificates formerly representing shares of
AmeriSource Common Stock for stock certificates representing shares of
McKesson Common Stock. No stock certificates should be surrendered by any
holder of AmeriSource Common Stock until he or she has received the letter of
transmittal and instructions from the Exchange Agent.
THE RESPECTIVE BOARDS OF DIRECTORS OF MCKESSON AND AMERISOURCE RECOMMEND A
VOTE "FOR" THE APPROVAL OF THE MCKESSON PROPOSAL AND THE AMERISOURCE PROPOSAL,
RESPECTIVELY.
TAX FREE REORGANIZATION
It is a condition to the Merger that AmeriSource receive an opinion of
Dechert Price & Rhoads that the Merger will qualify as a "tax free
reorganization" and that, accordingly, the holders of AmeriSource stock will
recognize no gain or loss in connection with the Merger for federal income tax
purposes, except to the extent that cash is received in lieu of a fractional
share of McKesson Common Stock. See "Certain Federal Income Tax Consequences
of the Merger."
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THE MERGER AGREEMENT
The following is a brief summary of certain provisions of the Merger
Agreement, a copy of which is attached as Appendix A to this Proxy
Statement/Prospectus and is incorporated herein by reference. This summary is
qualified in its entirety by reference to the full text of the Merger
Agreement. Capitalized terms that are used in this section and are not defined
have the respective meanings given to them in the Merger Agreement.
THE MERGER
Pursuant to the Merger Agreement, upon the satisfaction or (where
permissible) waiver of the conditions that are contained in the Merger
Agreement (see "-- Conditions" below), Merger Sub will be merged with and into
AmeriSource, so that AmeriSource will continue as the Surviving Corporation
and will become a wholly owned subsidiary of McKesson. The parties will cause
the Merger to be accomplished by filing a Certificate of Merger with the
Delaware Secretary of State in accordance with Section 251 of the Delaware
General Corporation Law (the "DGCL"). The Merger will become effective at the
time the Certificate of Merger has been filed with the Delaware Secretary of
State or at such later time as may be agreed upon by McKesson and AmeriSource
and specified in the Certificate of Merger. That time is called the "Effective
Time." The Merger will have the effects specified below and in the DGCL.
Except as described below, as a result of the Merger and without any action
on the part of the AmeriSource stockholders, at the Effective Time each share
of AmeriSource Common Stock issued and outstanding immediately prior to the
Effective Time will be converted into and represent 0.71 (1.42 after the
McKesson Stock Split) of a share of McKesson Common Stock (subject to
adjustment) (the "Exchange Ratio"), together with the associated preferred
stock purchase rights issued pursuant to the Rights Agreement (see
"Comparative Rights of Stockholders -- Stockholder Rights Plan"). Each share
of AmeriSource Common Stock will, by virtue of the Merger, cease to be
outstanding and will be canceled and retired, and each holder of a stock
certificate representing shares of AmeriSource Common Stock will thereafter
cease to have any rights with respect to those shares of AmeriSource Common
Stock except the right to receive, without interest, upon surrender of his or
her stock certificate, shares of McKesson Common Stock, cash for fractional
interests of McKesson Common Stock and any dividends paid by McKesson on its
shares of Common Stock in the interval between the Effective Time and the date
of surrender of the stock certificate (see "-- Exchange Procedures" below).
At the Effective Time, each AmeriSource Option then outstanding under the
stock option plans of AmeriSource will be automatically converted into a
McKesson stock option (a "Parent Exchange Option") to purchase that number of
shares of McKesson 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 multiplied by the Exchange Ratio, with an exercise
price per share equal to the exercise price per share of the AmeriSource
Option immediately prior to the Effective Time divided by the Exchange Ratio,
and with other terms and conditions that are the same as those of the
AmeriSource Option. McKesson has agreed to use its reasonable efforts to file
with 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 McKesson Common Stock issuable upon
exercise of the Parent Exchange Options and to use its reasonable efforts to
cause the registration statement to remain effective until the exercise or
expiration of the options.
EXCHANGE PROCEDURES
McKesson has retained First Chicago Trust Company of New York to act as the
Exchange Agent. As soon as practicable after the Effective Time, the Exchange
Agent will mail to each person who was, at the Effective Time, a holder of
record of shares of AmeriSource Common Stock, a letter of transmittal to be
used by the holder in either forwarding his or her AmeriSource Common Stock
certificates or completing the procedure for delivery by book-entry transfer
of such shares, together with the instructions for effecting the surrender of
the stock certificates in exchange for stock certificates representing shares
of McKesson Common Stock.
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AMERISOURCE STOCKHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL
THEY RECEIVE THE LETTER OF TRANSMITTAL AND INSTRUCTIONS FROM THE EXCHANGE
AGENT, WHICH WILL NOT OCCUR UNLESS AND UNTIL THE MERGER HAS TAKEN PLACE.
Upon surrender to the Exchange Agent of his or her stock certificate for
cancellation, together with the letter of transmittal, the holder of the stock
certificate will be entitled to receive a stock certificate representing that
number of whole shares of McKesson Common Stock equal to the number of shares
of AmeriSource Common Stock evidenced by the stock certificate surrendered
multiplied by the Exchange Ratio. Under the Merger Agreement, the Exchange
Ratio is 0.71 of a share of McKesson Common Stock for each share of
AmeriSource Common Stock, subject to adjustment to reflect any stock split,
stock dividend or other change with respect to the McKesson Common Stock made
before the Effective Time. Accordingly, the Exchange Ratio will be adjusted to
1.42 following the McKesson Stock Split.
No fractional shares of McKesson Common Stock will be issued and any holder
of shares of AmeriSource Common Stock entitled under the Merger Agreement to
receive a fractional share will receive a cash payment in lieu of the
fractional share, in an amount equal to the value (determined with reference
to the closing price of a share of McKesson Common Stock as reported on the
NYSE Composite Tape on the last full trading day immediately prior to the
Closing Date) of such fractional interest. If more than one stock certificate
is surrendered by the same stockholder, the number of shares of AmeriSource
Common Stock represented by all of the certificates surrendered will be
aggregated for purposes of calculating how many shares of McKesson Common
Stock will be issued in exchange for such certificates.
Any dividends declared after the Effective Time on shares of McKesson Common
Stock will be paid to holders of AmeriSource Common Stock only after the stock
certificates representing the AmeriSource shares have been surrendered to the
Exchange Agent for exchange.
No interest will be paid or accrued on cash in lieu of fractional shares, if
any, and unpaid dividends and distributions, if any.
Stock certificates that are surrendered for exchange by any person
constituting an "affiliate" of AmeriSource for purposes of Rule 145(c) under
the Securities Act will not be exchanged until McKesson has received written
undertakings from such person in the form attached to the Merger Agreement.
Once the Effective Time has occurred, there will be no further registration
of transfers on the transfer books of AmeriSource of shares of AmeriSource
Common Stock which were outstanding immediately prior to the Effective Time.
Any portion of the Exchange Fund which remains undistributed to holders of
AmeriSource Common Stock one year after the Exchange Agent's mailing of the
letter of transmittal will be delivered to McKesson, and any stockholder of
AmeriSource who has not complied with the exchange procedures in the Merger
Agreement by that time will thereafter have to look to McKesson to receive his
or her shares of McKesson Common Stock, cash in lieu of fractional shares, and
any unpaid dividends and distributions on shares of McKesson Common Stock.
None of AmeriSource, McKesson and the Exchange Agent will be liable to any
person in respect of shares of McKesson Common Stock or cash delivered to a
public official pursuant to applicable abandoned property, escheat or similar
laws.
If any stock certificates representing AmeriSource Common Stock have not
been surrendered within seven years after the Effective Time (or within such
earlier date on which any shares of McKesson Common Stock, any dividends or
distributions with respect thereto, or any cash in lieu of fractional shares
would otherwise escheat to or become the property of any Governmental
Authority), any such McKesson shares, dividends or distributions or cash in
lieu of fractional shares that would otherwise be payable in respect of such
stock certificate will, to the extent permitted by Applicable Laws, become the
property of McKesson, free and clear of all claims or interest of any person
previously entitled thereto.
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If any stock certificate has been lost, stolen or destroyed, then, upon the
making of an affidavit of that fact by the person claiming such stock
certificate to be lost, stolen or destroyed and the posting by that person of
an appropriate indemnity or surety bond, the Exchange Agent will issue in
exchange for the lost, stolen or destroyed stock certificate the shares of
McKesson Common Stock (including the associated Rights, and any dividends and
distributions with respect thereto) and cash in lieu of fractional shares, as
described above.
CORPORATE ORGANIZATION AND GOVERNANCE
Certificate of Incorporation and By-laws of AmeriSource
At the Effective Time, the Certificate of Incorporation and By-laws of
Merger Sub, as in effect immediately prior to the Effective Time, will be the
Certificate of Incorporation and By-laws, respectively, of AmeriSource as the
Surviving Corporation.
Board of Directors and Officers of AmeriSource
From and after the Effective Time, the directors and officers of Merger Sub
will be the directors and officers, respectively, of AmeriSource as the
Surviving Corporation until their respective successors are duly elected or
appointed and qualified.
Board of Directors and Officers of McKesson
Immediately following the Effective Time, McKesson will take all action
necessary to elect the following persons who are currently directors of
AmeriSource to the McKesson Board: (i) James Urry, who will be assigned to the
class of directors whose term of office expires at McKesson's first annual
meeting of stockholders after the Effective Time, (ii) Michael Delaney, who
will be assigned to the class of directors whose term of office expires at
McKesson's second annual meeting of stockholders after the Effective Time, and
(iii) R. David Yost, who will be assigned to the class of directors whose term
of office expires at McKesson's third annual meeting of stockholders after the
Effective Time. McKesson's Board of Directors will also appoint Mr. Yost as
Group President of the AmeriSource Services Group and as a corporate Vice
President, effective after the Effective Time. Messrs. Urry and Delaney are
officers of VPI.
STOCKHOLDERS' MEETINGS
The Merger Agreement obligates McKesson and AmeriSource each to take all
action necessary in accordance with Applicable Law and its Certificate of
Incorporation and By-laws to convene a meeting of its stockholders to be held
and completed on the earliest practical date determined by McKesson, subject
to the consent of AmeriSource, to consider and vote upon (i) in the case of
McKesson, the approval, by the vote of the holders of a majority of the shares
of McKesson Common Stock present in person or represented by proxy and
entitled to vote on the matter, of the issuance of the shares of McKesson
Common Stock contemplated by the Merger Agreement and (ii) in the case of
AmeriSource, the approval, by the vote of the holders of a majority of the
shares of AmeriSource Class A Common Stock outstanding, of the Merger, the
Merger Agreement and the transactions contemplated thereby. The stockholders'
meetings of McKesson and AmeriSource are currently scheduled to be held on
, 1998 and , 1998, respectively.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of
McKesson, AmeriSource and Merger Sub, relating, among other things, to the
following: (i) their due incorporation, existence, good standing, corporate
power and similar corporate matters; (ii) their capitalization; (iii) their
authorization, execution, delivery and performance and the enforceability of
the Merger Agreement and Stock Option Agreement and related matters; (iv) the
absence of any conflicts, violations and defaults under their respective
Certificates of Incorporation and By-laws and certain other agreements and
documents or any need for third-party consents by
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reason of execution of the Merger Agreement; (v) the reports and other
documents filed with the Commission (including this Joint Proxy
Statement/Prospectus) and the accuracy and completeness of the financial and
other information contained therein; (vi) the absence of certain material
changes or events since September 30, 1996, in the case of AmeriSource, or
March 31, 1997, in the case of McKesson; (vii) the absence of pending or
threatened investigations or litigation; (viii) the absence of undisclosed
liabilities or obligations of any nature which would have a Material Adverse
Effect on either party, as applicable; (ix) the operation of the respective
businesses of McKesson and AmeriSource in the ordinary course; (x) the receipt
of fairness opinions from financial advisors; (xi) compliance with law; (xii)
matters relating to qualification of the Merger as a tax free "reorganization"
within the meaning of the Code and the availability of "pooling of interests"
accounting treatment; and (xiii) the approval of the Merger by the respective
Boards of McKesson, Merger Sub and AmeriSource, their recommendation to their
respective stockholders and their determination that the Merger is fair to
their respective stockholders. AmeriSource made additional representations and
warranties in the Merger Agreement, including as to: (i) environmental
matters; (ii) employee benefit matters; (iii) tax matters; (iv) intellectual
property matters; (v) material contracts; and (vi) the execution by three
senior executives of AmeriSource of new employment agreements to take effect
at the Effective Time.
All representations and warranties of McKesson, AmeriSource and Merger Sub
will expire at the Effective Time.
CERTAIN COVENANTS
AmeriSource and McKesson have agreed that neither AmeriSource nor McKesson
will, nor will they permit their subsidiaries to, take any actions which
would, or would be reasonably likely to, prevent McKesson from accounting, and
will use their best efforts to allow McKesson to account, for the Merger as a
"pooling of interests." McKesson, AmeriSource and Merger Sub have further
agreed to use their best efforts to cause the Merger to constitute a
"reorganization" within the meaning of Section 368(a) of the Code.
AmeriSource and McKesson have each agreed: (i) to cooperate in the prompt
preparation and filing with the Commission of this Joint Proxy
Statement/Prospectus and the Registration Statement, (ii) to use its best
efforts to obtain and deliver to the other party certain letters from persons
who are "affiliates" under applicable accounting releases relating to pooling
of interests accounting treatment, and in the case of AmeriSource, from
persons who are "affiliates" under Rule 145 under the Securities Act, and
(iii) to use all reasonable efforts to cause to be delivered to the other
party letters of its independent accountants, dated a date within two business
days before the date on which the Registration Statement becomes effective,
the date this Joint Proxy Statement/Prospectus is mailed to stockholders and
the date of the other party's stockholders meeting, customary in scope and
substance for letters delivered by independent accountants in connection with
registration statements similar to the Registration Statement.
With respect to obtaining approval under the HSR Act, Merger Agreement
McKesson and AmeriSource have each agreed: (i) to comply at the earliest
practicable date with any request under the HSR Act for additional
information, documents or other materials; (ii) to cooperate with the other
party in connection therewith; (iii) to use its best efforts to resolve any
objections to the Merger under the Antitrust Laws that may be asserted by any
Governmental Authority; (iv) to use its best efforts to contest any legal
proceedings challenging the Merger under the Antitrust Laws unless both
parties agree that litigation is not in their respective best interests; and
(v) if required to avoid the institution of litigation challenging the Merger
under the Antitrust Laws (or if required to settle such a litigation), to
agree to divest or otherwise hold separate, or take such other action with
respect to, any of its assets and properties as may be necessary to avoid (or
settle) the litigation, unless, in the reasonable opinion of the McKesson
Board, the divestiture or other action would reasonably be expected to have a
material adverse effect on the business, assets, liabilities, results of
operations or financial condition of McKesson combined with AmeriSource after
the Effective Time or reduce or render more uncertain the financial or
strategic benefits expected, as of the date of the Merger Agreement, to be
realized from the consummation of the Merger.
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McKesson has further agreed, among other things, that during the period
between the signing of the Merger Agreement and the consummation of the
Merger, it will use all reasonable efforts to retain the services of its
officers and key employees and to maintain its business organization and its
relationships with customers, suppliers and other third parties to the end
that its goodwill and ongoing business will not be impaired in any material
respect, and that it will not, except as otherwise expressly contemplated by
the Merger Agreement, 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; (ii) take any action that could likely result in its
representations and warranties set forth in the Merger Agreement to become
inaccurate in any material respect; (iii) make any changes in the McKesson
Certificate or the McKesson By-laws that would adversely affect in any
material respect the rights and preferences of the holders of shares of
McKesson Common Stock or make any changes in the Certificate of Incorporation
or By-laws of Merger Sub; (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 or (B) any other business, in each case
without giving AmeriSource prior written notice of the acquisition; provided
that, in the case of acquisitions described in clause (A), no such acquisition
shall be made at all if either McKesson's outside antitrust counsel or
AmeriSource's outside antitrust counsel delivers its written opinion that the
acquisition would materially and adversely affect the ability of the parties
to obtain approval of the Merger under the Antitrust Laws, and in the case of
acquisitions described in clause (B), no such acquisition shall be made if it
would materially and adversely affect the ability of the parties to obtain
approval of the Merger under the Antitrust Laws; (v) declare or pay certain
non-cash dividends or any cash dividends other than regular quarterly cash
dividends not to exceed 110% of the previous year's cash dividends; (vi)
permit or cause any subsidiary to do any of the foregoing; or (vii) agree in
writing to do any of the foregoing.
McKesson has further agreed, among other things, that, prior to the
Effective Time, it (i) will use its best efforts to cause the shares of
McKesson Common Stock issuable pursuant to the Merger (including the shares
issuable upon any exercise of the Parent Exchange Options) to be approved for
listing on the NYSE; (ii) will not, nor will its subsidiaries, purchase any
shares of AmeriSource Common Stock other than pursuant to the Stock Option
Agreement; and (iii) 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, will 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 following the
Effective Time.
Merger Sub has agreed not to conduct any business or make any investments
prior to the Effective Time other than as contemplated by the Merger
Agreement, and not to have any assets (other than a de minimis amount of cash
received by it from the issuance of its stock to McKesson) or any material
liabilities.
AmeriSource has agreed, among other things, that during the period between
the signing of the Merger Agreement and the consummation of the Merger, it
will conduct its operations in the ordinary course and will use all reasonable
efforts to retain the services of its officers and key employees and to
maintain its business organization and its relationships with customers,
suppliers and other third parties to the end that its goodwill and ongoing
business will not be impaired in any material respect, and that it will not,
except as otherwise expressly contemplated by the Merger Agreement, without
the prior written consent of McKesson: (i) adjust, split, combine or
reclassify its capital stock, (ii) declare or pay any dividend or redeem or
otherwise acquire any shares of its capital stock or any securities
convertible into or exchangeable for any shares of its capital stock, (iii)
grant any person any right or option to acquire any shares of its capital
stock (except, in certain circumstances, employee stock options), (iv) issue
any additional shares of its capital stock or any other securities convertible
into or exchangeable for any shares of its capital stock (except upon the
exercise of AmeriSource Options), (v) enter into any agreement, understanding
or arrangement with respect to the sale, voting, registration or repurchase of
its capital stock, (vi) adopt a so-called "poison pill" or adopt or enter into
a stockholder rights plan or similar plan, (vii) dispose of or encumber any of
its property or assets other than in the ordinary course of business; (viii)
amend its Certificate of Incorporation or By-laws; (ix) merge or consolidate
with any other
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person; (x) 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,
(A) AmeriSource will not acquire (1) any entity engaged in the U.S.
pharmaceutical distribution business at all, regardless of the size of the
transaction, if either AmeriSource's outside antitrust counsel or McKesson's
outside antitrust counsel delivers its written opinion that the acquisition
would materially and adversely affect the ability of the parties to obtain
approval of the Merger under the Antitrust Laws, or (2) any other business at
all, regardless of the size of the transaction, if the acquisition would
materially and adversely affect the ability of the parties to obtain approval
of the Merger under the Antitrust Laws; (xi) except pursuant to existing
credit arrangements previously disclosed, incur any indebtedness for borrowed
money, other than in the ordinary course of business consistent with past
practice; (xii) except as previously disclosed, enter into or modify any
employment, severance or similar 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, 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; (xiii) enter into or amend any employee benefit
or similar plan except as may be required by Applicable Law; (xiv) change any
method or principle of accounting in any manner that is inconsistent with past
practice, or make any material Tax election (unless required by law or
consistent with past practice) or settle any material Tax liability which is
the subject of dispute between AmeriSource and a Governmental Authority unless
McKesson is given reasonable prior written notice thereof; (xv) except in
certain cases, amend or terminate, or waive or assign any material rights or
claims with respect to, any Contract; (xvi) enter into any confidentiality,
standstill, or non-compete agreements which after the Effective Time would
apply to McKesson or any of its subsidiaries other than AmeriSource; (xvii)
incur or commit any capital expenditures in excess of the amounts agreed to in
the Merger Agreement; (xviii) take any action that would likely result in its
representations and warranties set forth in the Merger Agreement becoming
inaccurate in any material respect; (xix) permit or cause any subsidiary to do
any of the foregoing; or (xx) agree in writing to do any of the foregoing.
NO SOLICITATION OF TRANSACTIONS
AmeriSource has agreed that it will not, and will not 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) 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 any acquisition by
AmeriSource of any material assets or capital stock of any other person (other
than to the extent specifically permitted by the Merger Agreement), or any
combination of the foregoing (a "Competing Transaction"), or negotiate or
otherwise engage in discussions with any person 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. The
Merger Agreement provides however 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 the Merger Agreement if and so
long as the AmeriSource Board 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 AmeriSource Board under Applicable Law and determines, after
consulting with Goldman Sachs (or any other nationally recognized investment
banking firm), that such a proposal is more favorable to AmeriSource's
stockholders from a financial point of view than the transactions contemplated
by the Merger Agreement (including any adjustment to the terms and conditions
that may be proposed by McKesson in response to the Competing Transaction).
If, prior to the approval of the Merger by the stockholders of AmeriSource,
the AmeriSource Board determines in good faith by a majority vote, after
consultation with and receipt of advice from outside legal
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counsel, that failure to do so would constitute a breach of the fiduciary
duties of the AmeriSource Board under Applicable Law, the AmeriSource Board
may withdraw, modify or change, in a manner adverse to McKesson, the
AmeriSource Board's recommendation of the Merger 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, provided
AmeriSource uses all reasonable efforts to give McKesson two days prior
written notice of its intention to do so. The Merger Agreement provides that
AmeriSource must immediately advise McKesson 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 McKesson an accurate description of all material terms of any such written
proposal (including any changes in such terms as a result of negotiations or
otherwise). AmeriSource must also immediately advise McKesson, in writing, if
the AmeriSource Board makes any determination as to any Competing Transaction
as contemplated by the above provisions.
In addition, if, prior to the approval of the Merger by the stockholders of
AmeriSource, AmeriSource receives an offer for a Competing Transaction that
was not solicited in violation of the Merger Agreement, and its Board of
Directors determines in good faith, after consultation with its financial and
legal advisors, that the Competing Transaction is more favorable to the
stockholders of AmeriSource from a financial point of view than the Merger
(including any adjustments to the terms thereof proposed by McKesson in
response to the Competing Transaction) and that failure to enter into the
Competing Transaction would constitute a breach of the fiduciary duties of the
AmeriSource Board under Applicable Law, and if AmeriSource's outside legal
counsel concurs that a breach of fiduciary duty would occur, and AmeriSource
receives a written opinion from Goldman Sachs (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 the Merger Agreement, then AmeriSource
may terminate the Merger Agreement and enter into an Acquisition Agreement
with respect to such Competing Transaction, provided that AmeriSource, prior
to terminating the Merger Agreement, (i) provides McKesson with written notice
that it intends to terminate the Merger Agreement, identifying the Competing
Transaction and delivering an accurate description of all material terms of
the Acquisition Agreement to be entered into for the Competing Transaction,
and (ii) at least three full business days later, AmeriSource delivers to
McKesson a written notice of termination, a check in the amount of McKesson's
costs and expenses and the Termination Fee, and a written acknowledgment that
termination of the Merger Agreement will be a "Purchase Event" as defined in
the Stock Option Agreement and that the Stock Option Agreement will be
honored, together with a written acknowledgment from the other party to the
Competing Transaction waiving any right that it may have to contest
AmeriSource's acknowledgment.
BENEFIT PLANS
McKesson has agreed that it will treat all service by AmeriSource Employees
with AmeriSource and its predecessors prior to the Effective Time as service
with McKesson for eligibility and vesting purposes under McKesson's employee
benefits plans. McKesson has further agreed that it will 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. McKesson has generally agreed to waive any pre-existing
condition exclusions and actively-at-work requirements and to take into
account expenses incurred prior to the Effective Time for purposes of
satisfying deductible, coinsurance, and maximum out-of-pocket provisions of
McKesson benefit plans providing medical or dental welfare benefits.
INDEMNIFICATION AND INSURANCE
McKesson has agreed to, and has agreed to cause AmeriSource to, indemnify
any person who has been, at any time prior to the Effective Time, a director
or officer of AmeriSource or any of its subsidiaries against all Claims 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
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AmeriSource or any of its subsidiaries as a director or officer of another
enterprise; or (y) the Merger Agreement or any of the transactions
contemplated thereby, 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 the Claim is asserted prior to, at or
after the Effective Time, to the full extent permitted under the DGCL or
AmeriSource's Certificate of Incorporation or By-laws. McKesson has agreed
that if any director or officer becomes involved in any Claim after the
Effective Time, McKesson or AmeriSource will periodically advance to that
person his or her legal and other expenses subject to receipt of an
undertaking from that person to reimburse McKesson or AmeriSource, as
applicable, all amounts advanced if it is ultimately determined that the
person is not entitled to indemnification.
McKesson has agreed that it or AmeriSource will, for a period of not less
than six years after the Effective Time, maintain AmeriSource's existing
directors' and officers' liability insurance policy or policies of
substantially similar coverage (with comparable carriers) containing terms no
less advantageous to the directors or officers. If the existing D&O Insurance
expires or is canceled during the six-year period, McKesson or AmeriSource
must use its reasonable efforts to obtain substantially similar D&O Insurance,
provided that McKesson and AmeriSource will 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 of the Merger Agreement, but in that
case must purchase as much coverage as possible for that amount.
The Indemnified Person will have the right to control the defense of any
Claim with counsel selected by the Indemnified Person and reasonably
acceptable to McKesson. McKesson and AmeriSource will be permitted to
participate in the defense of any Claim at their own expense.
CONDITIONS
The obligations of McKesson, AmeriSource and Merger Sub to effect the Merger
are subject, among other things, to the fulfillment, or, where permissible,
waiver, of certain conditions, including without limitation: (i) approval of
the Merger Agreement and the transactions contemplated hereby, including the
Merger, by the requisite vote of the stockholders of AmeriSource and approval
of the issuance of shares of McKesson Common Stock by the requisite vote of
the stockholders of McKesson; (ii) the expiration or termination of any
waiting period applicable to the consummation of the Merger under the HSR Act;
(iii) the effectiveness of the Registration Statement and the absence of a
stop order suspending such effectiveness; (iv) the absence of any Action by
any Governmental Authority (1) challenging or seeking to prohibit the
consummation of the Merger or any of the other transactions contemplated by
the Merger Agreement, (2) except to the extent consistent with the obligations
of AmeriSource and McKesson described above under "-- Certain Covenants,"
seeking to prohibit or limit the ownership or operation by McKesson,
AmeriSource or any of their respective subsidiaries of, or to compel McKesson,
AmeriSource or any of their respective subsidiaries to dispose of or hold
separate, any material portion of the business or assets of McKesson,
AmeriSource or any of their respective subsidiaries, as a result of the Merger
or any of the other transactions contemplated by the Merger Agreement, (3)
seeking to impose limitations on the ability of McKesson to acquire or hold,
or exercise full rights of ownership (including voting rights) of, any shares
of capital stock of the Surviving Corporation, or (4) seeking to prohibit
McKesson or any subsidiary of McKesson from effectively controlling in any
material respect the business or operations of McKesson or its subsidiaries;
(v) the absence of any Applicable Law, or judgment, injunction, order or
decree prohibiting the consummation of the Merger or the transactions
contemplated by the Merger Agreement; (vi) the listing on the NYSE, subject
only to official notice of issuance, of the shares of McKesson Common Stock to
be issued in the Merger; and (vii) receipt by McKesson of a letter from
Deloitte & Touche LLP stating that such accounting firm concurs with the
conclusion of McKesson's management that the Merger will qualify for "pooling
of interests" accounting treatment.
The obligations of AmeriSource to effect the Merger are subject to the
fulfillment of certain additional conditions, including (i) with respect to
the continued accuracy of the representations and warranties of McKesson and
Merger Sub and the performance of the obligations and covenants of McKesson
and Merger Sub
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contained in the Merger Agreement, (ii) the receipt of an opinion from
Dechert, Price & Rhoads that the Merger will be treated as a so-called "tax
free reorganization" for federal income tax purposes, and (iii) the absence of
any change in the business, assets, liabilities, results of operations or
financial condition of McKesson which individually or in the aggregate would
reasonably be expected to have a Material Adverse Effect on McKesson.
The obligations of McKesson and Merger Sub to effect the Merger are subject
to the fulfillment of certain additional conditions, including (i) with
respect to the continued accuracy of the representations and warranties of
AmeriSource and the performance of the obligations and covenants of
AmeriSource contained in the Merger Agreement, (ii) the absence of 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, (iii)
the absence of any amendment or termination of the Employee Agreements
previously entered into with three senior executives of AmeriSource, and (iv)
the absence of any material breach of the Stock Option Agreement.
RESALE RESTRICTIONS
All shares of McKesson Common Stock received by AmeriSource stockholders in
the Merger will be freely transferable, except that shares of McKesson Common
Stock received by persons who are deemed to be "affiliates" (as such term is
defined under the Securities Act) of AmeriSource prior to the Merger may be
resold by them only in transactions permitted by the resale provisions of Rule
145 promulgated under the Securities Act (or Rule 144 under the Securities Act
in the case of such persons who become affiliates of McKesson) or as otherwise
permitted under the Securities Act. Persons who may be deemed to be affiliates
of AmeriSource or McKesson generally include individuals or entities that
control, are controlled by, or are under common control with, such party and
may include certain officers and directors of such party as well as principal
stockholders of such party. The Merger Agreement requires AmeriSource to use
its best efforts to cause each of its affiliates to execute a written
agreement to the effect that such affiliate will not offer to sell, transfer
or otherwise dispose of any of the shares of McKesson Common Stock issued to
such person in or pursuant to the Merger unless (a) such sale, transfer or
other disposition has been registered under the Securities Act, (b) such sale,
transfer or other disposition is made in conformity with Rule 145 under the
Securities Act or (c) in the opinion of counsel reasonably acceptable to
McKesson or a "no-action" letter obtained from the staff of the Commission,
such sale, transfer or other disposition is exempt from registration under the
Securities Act. Each such agreement further provides that the AmeriSource
affiliate will not, during the 30 days prior to the Effective Time and until
after such time as combined financial results covering at least 30 days of
combined operations of McKesson and AmeriSource have been published by
McKesson in a public filing or announcement (the "Prohibited Period"), sell,
transfer or otherwise dispose of or reduce such affiliate's risk (as
contemplated by the Securities and Exchange Commission Accounting Series
Release No. 135) with respect to any shares of the capital stock of McKesson
or AmeriSource that such affiliate may hold. Similarly, the Merger Agreement
requires McKesson to use its best efforts to cause each of its affiliates to
execute a written agreement to the effect that the affiliate will not, during
the Prohibited Period, sell, transfer or otherwise dispose of or reduce the
affiliate's risk with respect to any shares of the capital stock of McKesson
or AmeriSource that the affiliate may hold. See "The Merger -- Anticipated
Accounting Treatment."
TERMINATION
The Merger Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time (notwithstanding any approval of the
Merger Agreement by the stockholders of AmeriSource and the stockholders of
McKesson): (i) by mutual written consent of McKesson and AmeriSource; (ii) by
either McKesson or AmeriSource if any Applicable Law (other than Antitrust
Laws), as supported by written opinion of outside legal counsel, makes
consummation of the Merger illegal or otherwise prohibited, or if there shall
be a final non-appealable judgment, injunction, order or decree enjoining
McKesson or AmeriSource from consummating the Merger; (iii) by either McKesson
or AmeriSource if the Merger has not been consummated by May 31, 1998 (subject
to extension to June 7, 1998 or to June 30, 1998, in certain circumstances);
(iv) by McKesson if the AmeriSource Board withdraws its recommendation of the
Merger or changes it in a manner
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adverse to McKesson, or if the AmeriSource Board refuses to affirm its
recommendation as promptly as practicable (but in any case within ten business
days) after receipt of any written request from McKesson which request is made
on a reasonable basis; (v) by McKesson or AmeriSource if at the AmeriSource
Special Meeting the requisite vote of the stockholders of AmeriSource to
approve the Merger Agreement and the transactions contemplated thereby,
including the Merger, is not obtained; (vi) by McKesson or AmeriSource if at
the McKesson Special Meeting the requisite vote of the stockholders of
McKesson to approve the issuance of shares of McKesson Common Stock in the
Merger is not obtained; (vii) by AmeriSource, prior to approval by the
AmeriSource stockholders, if the AmeriSource Board enters into a Competing
Transaction in compliance with the terms of the Merger Agreement (as described
above in "-- No Solicitation of Transactions") and pays the fees and expenses
described below under "-- Termination Fee"; (viii) by McKesson if there has
been a breach by AmeriSource, or by AmeriSource if there has been a breach by
McKesson, of its representation that it will not take any actions that would
prevent McKesson from accounting for the Merger as a pooling of interests;
(ix) by McKesson or AmeriSource, in certain circumstances where there has been
a breach by the other party of its representations and warranties or in
certain circumstances where the other party has a change in business
conditions that would reasonably be expected to have a Material Adverse Effect
on it; (x) by McKesson or AmeriSource (but only for a limited period of time
specified in the Merger Agreement) if either party receives any communication
from the Federal Trade Commission or the Antitrust Division indicating that it
has authorized the institution of litigation challenging the transactions
contemplated by the Merger 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 the Merger
Agreement; (xi) by McKesson if AmeriSource has breached in any material
respect any of its obligations under the AmeriSource Stock Option Agreement;
or (xii) by AmeriSource on March 31, 1998 if the transaction has not yet been
cleared under federal Antitrust Laws, unless, prior to that date, AmeriSource
had the opportunity to terminate the Merger Agreement as described in clause
(x) above and declined to do so.
TERMINATION FEE
McKesson is entitled to receive a termination fee of $65 million as well as
reimbursement of its costs and expenses not in excess of $12 million, in the
event that the Merger Agreement is terminated under any of the following
circumstances: (i) AmeriSource terminates the Merger Agreement to enter into a
Competing Transaction, (ii) McKesson terminates the Merger Agreement because
the AmeriSource Board adversely changes its recommendation of the Merger,
(iii) AmeriSource or McKesson terminates the Merger Agreement because the
stockholders of AmeriSource fail to approve the Merger, and at the time there
is a publicly announced or disclosed Competing Transaction with respect to
AmeriSource, and, within 12 months after termination of the Merger Agreement,
AmeriSource enters into an Acquisition Agreement for a Business Combination or
consummates a Business Combination, (iv) AmeriSource or McKesson terminates
the Merger Agreement, because the stockholders of AmeriSource failed to
approve the Merger and, within three months after termination of the Merger
Agreement, AmeriSource enters into an Acquisition Agreement for a Business
Combination or consummates a Business Combination, (v) McKesson terminates the
Merger Agreement because AmeriSource is in breach of the Stock Option
Agreement, or (vi) AmeriSource terminates the Merger Agreement on March 31,
1998 and either (x) at the time of such termination a Competing Transaction
had been publicly announced or disclosed to the AmeriSource Board and within
six months after such termination, AmeriSource enters into an Acquisition
Agreement with the party involved in that Competing Transaction or (y) within
six months after such termination AmeriSource effects a leveraged
recapitalization.
Pursuant to the Merger Agreement, McKesson and AmeriSource each have the
right to terminate the Merger Agreement if either receives notification from
an HSR Authority that the HSR Authority is instituting an Antitrust
Litigation. If McKesson exercises that right and AmeriSource does not, then
McKesson will reimburse AmeriSource for its transaction expenses up to $12
million, plus the cost to AmeriSource of establishing new Stay Pay
Arrangements, up to a maximum reimbursement of $20 million in the aggregate.
Similarly, if AmeriSource elects to exercise its right to terminate the
Merger Agreement after receipt of notification of an Antitrust Litigation, and
McKesson does not, then AmeriSource will reimburse McKesson for its
transaction expenses, up to a maximum reimbursement of $12 million.
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McKesson has agreed in the Stock Option Agreement entered into concurrently
with the execution of the Merger Agreement that if AmeriSource shall have paid
McKesson a Termination Fee pursuant to the Merger Agreement, then McKesson
shall pay to AmeriSource its Net Profit up to a maximum (including any prior
Net Profit paid) of $65 million. Net Profit is defined generally as the profit
realized by McKesson in respect of the AmeriSource Stock Option Agreement. See
"The Stock Option Agreement."
EXPENSES
Subject to the provisions of Section 7.2 of the Merger Agreement and the
Stock Option Agreement, all costs and expenses incurred in connection with the
Merger Agreement and the transactions contemplated thereby will be paid by the
party incurring such expenses, except that the expenses incurred in connection
with filing, printing and mailing the Registration Statement and this Joint
Proxy Statement/Prospectus (including filing fees related thereto) will be
shared equally by McKesson and AmeriSource.
AMENDMENT
The Merger Agreement may be amended by AmeriSource, McKesson or Merger Sub,
by action taken by their respective Boards of Directors, at any time before or
after adoption of the Merger Agreement by stockholders of AmeriSource, but
after stockholder approval, no amendment will be made which by law requires
further approval by the stockholders of AmeriSource without such further
approval.
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THE STOCK OPTION AGREEMENT
The following is a brief summary of certain provisions of the Stock Option
Agreement, dated as of September 22, 1997, by and between McKesson and
AmeriSource (the "Stock Option Agreement"), a copy of which is attached as
Appendix B to this Joint Proxy Statement/Prospectus and is incorporated
herein. This summary is qualified in its entirety by reference to the full
text of the Stock Option Agreement. Capitalized terms that are used in this
section and are not otherwise defined have the respective meanings given to
them in the Stock Option Agreement.
GENERAL
Concurrently with the execution of the Merger Agreement, McKesson and
AmeriSource entered into the Stock Option Agreement pursuant to which
AmeriSource granted McKesson an irrevocable option to purchase from
AmeriSource, under certain circumstances, at an exercise price of $70.87 per
share, up to 3,418,601 authorized and unissued shares of either AmeriSource
Class A Common Stock or AmeriSource Class B Common Stock, or a combination
thereof (which represents 16.6% of the outstanding AmeriSource Class A Common
Stock and 12.5% of the outstanding capital stock of AmeriSource, assuming for
purposes of the calculation that (i) the Option to purchase such shares had
been exercised, (ii) such exercise had been entirely for AmeriSource Class A
Common Stock and (iii) the number of shares outstanding immediately prior to
such exercise had been the same as the number outstanding on September 15,
1997). The Option becomes exercisable only upon certain events set forth in
the AmeriSource Stock Option Agreement (each, a "Purchase Event"). A "Purchase
Event" includes (i) the AmeriSource Board's changing its recommendation in a
manner adverse to McKesson, or its failure to reaffirm such recommendation;
(ii) the failure by the AmeriSource stockholders to approve the Merger
Agreement or the transactions contemplated thereby, if at the time of such
vote there is a publicly announced or disclosed Competing Transaction, and
within 12 months after termination of the Merger Agreement AmeriSource enters
into an Acquisition Agreement for a Business Combination or consummates a
Business Combination; (iii) the failure by the AmeriSource stockholders to
approve the Merger Agreement or the transactions contemplated thereby, if
within three months after termination of the Merger Agreement AmeriSource
enters into an Acquisition Agreement for a Business Combination or consummates
a Business Combination; (iv) AmeriSource's breach, in any material respect, of
its obligations contained in the Stock Option Agreement; or (v) AmeriSource's
termination of the Merger Agreement and entering into a Competing Transaction
as described in the "The Merger Agreement -- No Solicitation of Transactions."
The Stock Option Agreement was executed as an inducement to McKesson to enter
into the Merger Agreement and is intended, together with the Termination Fee
payable by AmeriSource as described under "The Merger Agreement -- Termination
Fee," to compensate McKesson in the event that the Merger Agreement is
terminated under certain circumstances. In addition, as discussed below,
certain aspects of the Stock Option Agreement may discourage other persons
from considering or proposing a business combination with AmeriSource. The
terms of the Stock Option Agreement are the result of arm's-length
negotiations between AmeriSource and McKesson. The exercise price of the
Option is equivalent to the value of 0.71 of a share of McKesson Common Stock,
utilizing the closing price of a share of McKesson Common Stock on September
22, 1997, the date of the Merger Agreement and the Stock Option Agreement.
Certain aspects of the Stock Option Agreement (including the fact that the
exercise by McKesson of the Option would render AmeriSource ineligible for
"pooling of interests" accounting treatment for any business combination that
would trigger the exercisability of the Option) may have the effect of
discouraging persons who might now or prior to the Effective Time be
interested in acquiring all of or a significant interest in, or otherwise
effecting a business combination with, AmeriSource, from considering or
proposing such a transaction.
CERTAIN COVENANTS
Pursuant to the Stock Option Agreement, AmeriSource covenanted that: (i) if
at any time after exercise of the Option and purchase of any shares of
AmeriSource Common Stock pursuant to the Option (the
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"Option Shares"), McKesson desires to convert any AmeriSource Class B Common
Stock comprising Option Shares purchased into AmeriSource Class A Common Stock
(or vice versa), and if prior notification to or approval of any Governmental
Authority is required in connection with such conversion, McKesson and, if
applicable, AmeriSource will promptly file the required notice or application
for approval and will expeditiously process the same (and AmeriSource will
cooperate with McKesson 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 Common
Stock, until such AmeriSource Class B Common Stock is converted into
AmeriSource Class A Common Stock, neither the AmeriSource Certificate nor any
other instrument governing the rights of the AmeriSource Class A Common Stock
or the AmeriSource Class B Common Stock will be amended to adversely affect
the right of holders of AmeriSource Class B Common Stock to convert such
shares into AmeriSource Class A Common Stock; and (iii) any rights agreement,
plan or other instrument which may be adopted or entered into governing any
Rights will 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
will trigger any of the provisions of any such rights agreement.
REPURCHASE
The Stock Option Agreement provides that upon the written request of
McKesson, at any time during certain specified periods, AmeriSource will
repurchase the Option from McKesson together with all (but not less than all)
of the Option Shares purchased by McKesson pursuant to the Option with respect
to which McKesson 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 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 Class A Common Stock as reported by the NYSE Composite Tape, in
each case, for any day within a specified period preceding the date McKesson
gives notice of the required repurchase) and (B) the exercise price of the
Option, 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 exercise price paid for any Option Shares acquired upon exercise of the
Option, multiplied by the number of Option Shares so acquired.
REGISTRATION RIGHTS
AmeriSource has further agreed that at any time after a closing under the
Stock Option Agreement, it will, 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. The registration will be at AmeriSource's expense except for
underwriting commissions and the fees and disbursements of such Holder's
counsel attributable to the registration of such Option Shares.
LISTING
AmeriSource agreed that 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 McKesson, 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.
CERTAIN ADJUSTMENTS
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 or securities subject to the Option and the exercise price will be
adjusted appropriately. In the event any additional shares of AmeriSource
Common Stock are issued after the date of the Stock Option Agreement (other
then pursuant to options granted under employee benefit plans), the number of
shares subject to the Option will be adjusted so that it equals at least 19.9%
of the number of shares of AmeriSource Common Stock then issued and
outstanding.
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ADDITIONAL OPTION
The Stock Option Agreement provides that it will be automatically amended so
that the Option covers an additional 1,325,939 shares of AmeriSource Class B
Common Stock if the NYSE advises McKesson that the Option can be so increased
without approval of AmeriSource stockholders. If the Stock Option Agreement is
so amended, McKesson agreed not to convert any Option Shares acquired by the
augmented Option from shares of AmeriSource Class B Common Stock into shares
of AmeriSource Class A Common Stock.
TERMINATION
The Stock Option Agreement will terminate, if no Purchase Event has occurred
prior thereto, upon the occurrence of any of the following: (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 caused by (A) the
AmeriSource Board's changing its recommendation in a manner adverse to
McKesson, or its failure to reaffirm such recommendation, (B) AmeriSource's
breach, in any material respect, of its obligations contained in the Stock
Option Agreement, (C) the failure of AmeriSource to obtain the requisite vote
of stockholders of AmeriSource to approve the Merger, the Merger Agreement and
the transactions contemplated thereby, and (D) AmeriSource entering into a
Competing Transaction prior to the approval of the Merger by the AmeriSource
stockholders, if the AmeriSource Board determines, in good faith after
consultation with legal advisors and upon receipt of a written opinion from
Goldman Sachs that the Competing Transaction is more favorable from a
financial point of view to the AmeriSource stockholders, that failure to enter
into a Competing Transaction would constitute a breach of the duties of the
AmeriSource Board; or (iii) on the one-year anniversary date of the
termination of the Merger Agreement caused by the failure of AmeriSource to
obtain the requisite vote of stockholders of AmeriSource to approve the
Merger, the Merger Agreement and the transactions contemplated thereby, 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) on the three-month
anniversary date of the termination of the Merger Agreement pursuant caused by
the failure of AmeriSource to obtain the requisite vote of stockholders of
AmeriSource to approve the Merger, the Merger Agreement and the transactions
contemplated thereby, if clause (iii) above is not applicable.
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THE VOTING/SUPPORT AGREEMENTS
The following is a brief summary of certain provisions of the Voting/Support
Agreements with VPI and with each of three AmeriSource executives
(collectively the "Voting/Support Agreements"), copies of which agreements are
attached as Appendix E and Appendix F to this Joint Proxy/Prospectus and are
incorporated herein by reference. This summary is qualified in its entirety by
reference to the full text of the Voting/Support Agreements. Capitalized terms
that are used in this section and not defined have the respective meaning
given to them in the Voting/Support Agreements.
VOTING/SUPPORT AGREEMENT WITH VPI -- GENERAL
In connection with McKesson's entering into the Merger Agreement, VPI
entered into a Voting/Support Agreement, dated as of September 22, 1997, with
McKesson and Merger Sub (the "VPI Voting/Support Agreement") pursuant to
which, among other matters, VPI granted to Merger Sub an irrevocable proxy to
vote all of the shares of AmeriSource Class A Common Stock owned by VPI (i) in
favor of the Merger and the Merger Agreement (but not in favor of any
"Material Adverse Amendment" (as defined in the VPI Voting/Support Agreement)
to the Merger Agreement), (ii) against any Competing Transaction, (iii)
against any action or agreement the purpose or effect of which would 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 its
representations, warranties, covenants or agreements in the Merger Agreement
or in the Stock Option Agreement. On all other matters, such shares may be
voted by VPI in the manner determined by VPI. Other than certain surviving
obligations, the VPI Voting/Support Agreement terminates upon termination of
the Merger Agreement or upon the occurrence of a Material Adverse Amendment.
VPI owns approximately 28% of the outstanding shares of AmeriSource Common
Stock, which ownership is composed of 234,926 shares (approximately 1.4% of
the outstanding shares) of AmeriSource Class A Common Stock and 6,486,147
shares (approximately 99.9% of the outstanding shares) of AmeriSource Class B
Common Stock (together, the "VPI Shares"). In the VPI Voting/Support
Agreement, VPI agreed to take all necessary steps, at the request of McKesson,
to convert shares of AmeriSource Class B Common Stock held by it into shares
of AmeriSource Class A Common Stock such that it would hold 19% of the
outstanding AmeriSource Class A Common Stock. McKesson has made the request of
VPI and, accordingly, it is expected that on the record date with respect to
the AmeriSource Special Meeting, VPI will hold (and the proxy granted to
McKesson will therefore cover) approximately 19% of the outstanding
AmeriSource Class A Common Stock. See "-- Certain Covenants of VPI."
AGREEMENT NOT TO TRANSFER
The VPI Voting/Support Agreement provides that VPI will not at any time
during the term of the 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 VPI Shares, or grant or purport to grant to any
person any proxy or voting right or any right to acquire any of the VPI
Shares, or enter into any voting agreement with any person with respect to any
of the Shares, or deposit any of the VPI Shares into a voting trust.
CERTAIN COVENANTS OF VPI
Pursuant to the VPI Voting/Support Agreement, VPI covenanted, among other
things, that until the Agreement terminates, (a) it 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; (b) it will 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 use its best
efforts to cause such meeting to be held and completed on the date scheduled
for such meeting; (c) it will, at the request of McKesson,
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take all actions (including, without limitation, making or causing to be made
all necessary filings with all appropriate Governmental Authorities) necessary
for the VPI Shares that are AmeriSource Class B Common Stock, or such portion
thereof as McKesson may request (subject to the 19% limitation) to be
converted into AmeriSource Class A Common Stock; (d) it 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 Securities and Exchange Commission
Accounting Series Release No. 135) with respect to the VPI Shares or shares of
McKesson Common Stock that it may hold and, after the Effective Time, it will
not sell, transfer or otherwise dispose of or reduce its risk (as contemplated
by Securities and Exchange Commission Accounting Series Release No. 135) with
respect to any McKesson Common Stock received by it in the Merger or any other
shares of McKesson Common Stock that it may hold until after such time as
combined financial results covering at least 30 days of combined operations of
AmeriSource and McKesson have been published by McKesson; and (e) it 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.
In addition, pursuant to the VPI Voting/Support Agreement McKesson
covenanted that (1) 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 will 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,
(2) if the Merger is consummated, the McKesson Board will take all action
necessary to elect to the McKesson Board (i) James Urry, who would 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 would be assigned to the class of directors whose term of office
expires at McKesson's second annual meeting of stockholders after the
Effective Time.
The VPI Voting/Support Agreement also provides that, if the Merger is
consummated and if at any time VPI owns less than 60% of the shares of
McKesson Common Stock received by it in the Merger, then VPI, upon the written
request of McKesson, will cause James Urry promptly to resign from the
McKesson Board, and if at any time VPI owns less than 30% of the shares of
McKesson Common Stock received by it in the Merger, then VPI, upon the written
request of McKesson, will cause Michael Delaney promptly to resign from the
McKesson Board.
TERMINATION
Except for certain surviving covenants contained therein, the VPI
Voting/Support Agreement terminates at the earliest of (i) the Effective Time,
(ii) the termination of the Merger Agreement pursuant to its terms and (iii)
the occurrence of a Material Adverse Amendment.
VOTING/SUPPORT AGREEMENTS WITH CERTAIN EXECUTIVES OF AMERISOURCE
McKesson and Merger Sub also entered into Voting/Support Agreements (copies
of which are attached as Appendix F) with each of R. David Yost, David M.
Flowers and Kurt J. Hilzinger, each an executive of AmeriSource, pursuant to
which Merger Sub was granted an irrevocable proxy, substantially similar to
the proxy granted by VPI, to vote all of the shares of AmeriSource Class A
Common Stock owned by them. As of September 30, 1997, these executives owned
in the aggregate approximately 1.4% of the outstanding AmeriSource Class A
Common Stock.
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THE REGISTRATION RIGHTS AGREEMENT
The following is a brief summary of certain provisions of the Registration
Rights Agreement, a copy of which is attached as Appendix G to this Proxy
Statement/Prospectus and is incorporated herein by reference. This summary is
qualified in its entirety by reference to the full text of the Registration
Rights Agreement. Capitalized terms that are used in this section and are not
defined have the respective meanings given to them in the Registration Rights
Agreement.
In connection with the execution of the Merger Agreement, McKesson entered
into a Registration Rights Agreement dated as of September 22, 1997 (the
"Registration Rights Agreement"). Pursuant to the Registration Rights
Agreement, VPI was accorded certain registration rights with respect to the
shares of McKesson Common Stock it would be receiving in the Merger.
Specifically, at VPI's request, McKesson will use its best efforts to effect
the registration of the McKesson Common Stock held by VPI. VPI has the right
to request registration twice, and each request must be for at least 25% of
the outstanding McKesson Common Stock held by VPI or any person to whom VPI
has transferred any of its shares (referred to as "holders of Registrable
Securities"). The Registration Rights Agreement agreement terminates at such
time as VPI and any other holder of Registrable Securities own in the
aggregate less than 25% of the Registrable Securities owned by such holders at
the Effective Time.
The Registration Rights Agreement will become effective as of the Effective
Time and will supersede an existing registration rights agreement between VPI
and AmeriSource, to which McKesson would have become subject under the terms
of that agreement.
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THE EMPLOYMENT AGREEMENTS
Simultaneously with the execution of the Merger Agreement, McKesson entered
into employment agreements (the "Employment Agreements") with each of R. David
Yost; David M. Flowers; and Kurt J. Hilzinger (the "Executives") and
AmeriSource. Each Employment Agreement will become effective as of the
Effective Time and will, upon becoming effective, supersede all prior
agreements between the Executives and AmeriSource.
Each Employment Agreement has a term of three years. During the term, the
Executives will perform such services as may be assigned from time to time by
McKesson's Chief Executive Officer. In addition, Mr. Yost will serve as Group
President of McKesson's AmeriSource Services Group and as a corporate Vice
President. For services in each of these three years, each Executive will
receive an annual base salary and annual cash bonus. The annual base salary
for Messrs. Yost, Flowers and Hilzinger will be, respectively, $350,000,
$260,000 and $250,000 and may be increased by McKesson upon periodic review.
The annual cash bonus will be determined based upon McKesson's policy of
providing for bonuses based on individual and corporate performance. In
addition, the Executives will be eligible for stock option grants and
restricted stock awards at such times as other similarly situated executives
in accordance with McKesson's customary practices. McKesson has agreed to
continue Mr. Yost's split dollar life insurance as was in effect with
AmeriSource on the date of the signing of the Merger Agreement and to
establish such arrangements for Messrs. Hilzinger and Flowers. The Executives
will also participate in all compensation or employee benefit plans or
programs (other than termination pay programs) for which salaried employees of
McKesson are generally eligible and will also receive reimbursement of certain
perquisites and business and relocation expenses.
Each Employment Agreement provides that, at the Effective Time, McKesson
will make awards of stock options and restricted McKesson Common Stock to each
Executive. Mr. Yost will be granted options to acquire 50,000 shares of
McKesson Common Stock, and Messrs. Flowers and Hilzinger will each be granted
options to acquire 25,000 shares of McKesson Common Stock. The exercise price
in respect of such options will be based on the fair market value of McKesson
stock as of the Effective Time, and the options will vest and become
exercisable in 25% increments per year commencing on the first anniversary of
the Effective Time. Mr. Yost will also be awarded 20,000 shares of restricted
McKesson Common Stock, and Messrs. Flowers and Hilzinger will each be awarded
10,000 shares of restricted McKesson Common Stock. The restrictions on such
awards of McKesson Common Stock will lapse on the second anniversary of the
Effective Time, provided that, upon such date, McKesson and each Executive
agree that such Executive has satisfied performance goals to be established by
the Executive and the Chief Executive Officer of McKesson. The foregoing
awards of stock options and restricted McKesson Common Stock will be subject
to the provisions of McKesson's 1994 Stock Option and Restricted Stock Plan to
the extent not inconsistent with the terms of the Employment Agreements. Upon
a "Without Cause Termination" (defined as any termination of employment of the
Executive by McKesson other than a "Termination for Cause" (defined below)) of
the Executive during the term of the Employment Agreement, all options will
immediately vest and become exercisable for the 90 days following such
termination, and the restrictions on all shares of restricted McKesson Common
Stock will immediately lapse provided that all performance goals have been met
as of the date of termination. Upon a Termination for Cause of the Executive
by McKesson, all options will immediately lapse (whether or not previously
vested), and all shares of restricted McKesson Common Stock will immediately
be forfeited (whether or not previously vested). "Termination for Cause" is
defined as a termination of the Executive by McKesson upon (i) the Executive's
misconduct, habitual neglect, dishonesty or other knowing violation of
McKesson policies and procedures, (ii) actions (or failures to act) of the
Executive taken in bad faith and to the detriment of the McKesson or (iii) a
material breach of the Employment Agreement.
Each Employment Agreement also provides that McKesson will, at or following
the Effective Time, make a housing loan to be used by the Executive for the
purchase of a principal residence upon the Executive's relocation to San
Francisco, California. For Mr. Yost, the amount of the housing loan is
$500,000, and for each of Messrs. Flowers and Hilzinger, the amount of the
housing loan is $250,000. Each housing loan will be evidenced by a note
secured by such residence. Each housing loan will bear no interest prior to
maturity and will
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be repaid upon the earliest of (i) 60 days after termination of the
Executive's employment, (ii) sale or transfer of the property, (iii) use of
the property other than as a principal residence or (iv) the tenth anniversary
of the housing loan. In connection with a housing loan to an Executive,
McKesson will establish a deferred compensation account for such Executive and
will make ten annual credits to such account. For Mr. Yost, this credit will
be $50,000 per annum, and, for Messrs. Flowers and Hilzinger, this credit will
be $25,000 per annum. An Executive will forfeit all amounts credited to the
deferred compensation account maintained on his behalf if his employment with
McKesson is terminated for any reason prior to the fifth anniversary of the
date of the housing loan. The balance of such account will be released to the
Executive (or, at McKesson's election, applied to the balance of the housing
loan) upon the earlier of maturity of the loan or the tenth anniversary of the
date of first credit to such account.
Each Employment Agreement provides for payment of "Severance Benefits"
(specified below) to an Executive whose employment is terminated (i) by
McKesson during the term due to a Without Cause Termination or (ii) by the
Executive during the 30 days commencing following the second anniversary of
the Effective Time. Severance Benefits include three years of coverage under
McKesson's employee welfare benefit plans (or, at the election of the
Executive, a lump sum equivalent of cash) and a lump sum equal to three times
the sum of highest annual base salary in effect during the term of the
Employment Agreement and highest bonus paid to the Executive during the four
years prior to termination. Severance Benefits will be in lieu of any
severance, termination or similar payment under any program, plan or practice
of McKesson, as well as in lieu of any further payment or benefit under the
Employment Agreement. The Employment Agreements provide for the reduction of
Severance Benefits otherwise payable to the extent that any payments or
benefits to an Executive upon termination of employment would be subject to an
excise tax under Section 4999 of the Code. Upon the termination of employment
of an Executive, the Executive will receive earned but unpaid salary as of the
date of termination and any benefits due the Executive to which he is entitled
as a former employee of McKesson. Mr. Yost's Employment Agreement provides
that, upon termination of employment for any reason, he will voluntarily
resign from McKesson's Board of Directors. The Employment Agreements also
contain customary confidentiality, noncompetition, nonsolicitation and
arbitration provisions.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a general discussion of the material federal income tax
consequences of the receipt of McKesson Common Stock by a holder of
AmeriSource Common Stock pursuant to the Merger and is not intended to
constitute advice regarding the federal income tax consequences of the Merger
to any such holder. This summary only applies to U.S. Holders (as defined
below) who hold AmeriSource Common Stock as capital assets and does not deal
with special classes of investors, such as insurance companies, tax-exempt
organizations, financial institutions, dealers in securities, foreign persons,
persons who acquired shares of AmeriSource Common Stock pursuant to an
exercise of employee stock options or rights or otherwise as compensation,
persons that hold shares of AmeriSource Common Stock as part of a position in
a "straddle" or as part of a "hedging" or "conversion" transaction for federal
income tax purposes, and persons with a "functional currency" other than the
U.S. dollar.
A "U.S. Holder" means a holder of shares of AmeriSource Common Stock who is
(i) a citizen or resident of the United States, (ii) a corporation or
partnership created in or organized under the laws of the United States or
state thereof (including the District of Columbia), (iii) an estate the income
of which is subject to U.S. federal income tax regardless of its source, or
(iv) a trust if (x) a U.S. court can exercise primary supervision over the
administration of such trust, and (y) one or more U.S. fiduciaries have the
authority to control all of the substantial decisions of such trust.
This discussion is based on current law and the opinions and advice of
[Dechert, Price & Rhoads.] Future legislative, judicial or administrative
changes or interpretations, which may be retroactive, could alter or modify
the statements set forth herein. Neither McKesson nor AmeriSource will request
any ruling from the Internal Revenue Service ("IRS") as to the U.S. federal
income tax consequences of the Merger. Opinions of counsel are not binding on
the IRS or the courts, and the IRS or the courts are not precluded from taking
contrary positions.
EACH HOLDER OF SHARES OF AMERISOURCE COMMON STOCK IS URGED TO CONSULT HIS OR
HER OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO HIM OR HER OF THE
TRANSACTIONS DESCRIBED HEREIN, INCLUDING THE APPLICABILITY AND EFFECT OF ANY
STATE, LOCAL OR FOREIGN TAX LAWS, AND OF CHANGES IN APPLICABLE TAX LAWS.
GENERAL
It is a condition to the consummation of the Merger that AmeriSource receive
an opinion of its tax counsel, Dechert Price & Rhoads, that the Merger will
qualify as a so-called "tax free reorganization." That opinion will be based
on certain assumptions described therein, as well as on certain
representations of the management of both AmeriSource and McKesson.
TAX CONSEQUENCES TO HOLDERS OF AMERISOURCE COMMON STOCK
Provided the Merger qualifies as a tax-free reorganization, a holder of
AmeriSource Common Stock will recognize no gain or loss on the exchange of
AmeriSource Common Stock for McKesson Common Stock pursuant to the Merger
(except as described below with respect to cash issued in lieu of fractional
shares). The holder's tax basis in the shares of McKesson Common Stock
received will be equal to the holder's tax basis in the shares of AmeriSource
Common Stock surrendered in the Merger (except to the extent that basis is
assigned to a fractional share that is considered to be sold to McKesson in a
redemption, as described below). The holder's holding period for the shares of
McKesson Common Stock received in the Merger will include the holding period
for the shares of AmeriSource Common Stock surrendered in the Merger.
A holder will be taxed on the receipt of cash in lieu of a fractional share
of McKesson Common Stock. The holder will be treated as if he or she had
received the fractional share in the Merger (with an appropriate amount of tax
basis assigned to such fractional share), and then as if the fractional share
were redeemed by McKesson.
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Such redemption will be treated as a sale of such fractional share (resulting
in capital gain or loss to the holder), unless it is determined to be
essentially equivalent to a dividend to the holder applying the rules of
Section 302 of the Code (in which case the cash will be taxed as a dividend
and the basis allocated to such fractional share will be reassigned to the
remaining shares of McKesson Common Stock held by such holder). Capital gain
recognized in connection with such redemption will, under recently enacted
legislation, be subject to a 20% maximum rate of tax if the AmeriSource Common
Stock surrendered in the Merger was held for more than 18 months, or a 28%
maximum rate of tax if the AmeriSource Common Stock was held for more than one
year but not more than 18 months.
Rights to purchase McKesson preferred stock under the terms of the Rights
Agreement should not be treated as a separate item of property for federal
income tax purposes, and therefore the receipt of those Rights in connection
with the Merger should not affect the conclusions described above.
If the Merger is not treated as a tax free reorganization for federal income
tax purposes, AmeriSource stockholders would recognize gain or loss for
federal income tax purposes measured by the difference between the fair market
value of the McKesson Common Stock received and the holder's tax basis in the
AmeriSource Common Stock surrendered in the Merger. Such gain or loss would be
capital gain or loss, with gain subject to taxation, as described above.
Capital losses may generally be used to offset capital gain, but are subject
to certain limitations as to their use as an offset to ordinary income.
TAX CONSEQUENCES TO MCKESSON AND AMERISOURCE
No gain or loss will be recognized by McKesson or AmeriSource as a result of
the Merger.
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COMPARATIVE RIGHTS OF STOCKHOLDERS
As a result of the Merger, holders of AmeriSource Common Stock will become
stockholders of McKesson and the rights of all such former AmeriSource
stockholders will thereafter be governed by McKesson Certificate, the McKesson
By-laws and the DGCL. The rights of the holders of AmeriSource Common Stock
are currently governed by the Restated Certificate of Incorporation of
AmeriSource (the "AmeriSource Certificate"), the By-laws of AmeriSource (the
"AmeriSource By-laws") and the DGCL. The following summary, which does not
purport to be a complete statement of the general differences between the
rights of the stockholders of McKesson and AmeriSource, sets forth certain
difference between the McKesson Certificate and the AmeriSource Certificate
and between the McKesson By-laws and the AmeriSource By-laws. This summary is
qualified in its entirety by reference to the full text of each of such
documents and the DGCL. For information as to how such documents may be
obtained, see "Available Information."
CLASSIFIED BOARD OF DIRECTORS
The DGCL provides that a corporation's board of directors may be divided
into various classes with staggered terms of office. The McKesson Certificate
provides that the McKesson Board is divided into three classes of directors,
with each class consisting of one-third of the total number of directors, with
any remaining directors included in such group or groups as the Board
designates. One class of directors is elected each year for a three-year term.
Classification of directors has the effect of making it more difficult for
stockholders to change the composition of the McKesson Board. At least two
annual meetings of stockholders, instead of one, will generally be required to
effect a change in the majority of the McKesson Board. Such a delay may help
ensure that McKesson's directors, if confronted by a holder attempting to
force a proxy contest, a tender or exchange or other extraordinary corporate
transaction, would have had sufficient time to review the proposal as well as
any available alternatives to the proposal and to act in what they believe to
be the best interests of the stockholders.
The classification provisions could also have the effect of discouraging a
third party from initiating a proxy contest, making a tender offer or
otherwise attempting to obtain control of McKesson, even though such a
transaction could be beneficial to McKesson and its stockholders. The
classification of the McKesson Board might also increase the likelihood that
incumbent directors will retain their positions.
The AmeriSource Certificate does not provide for a classified board.
STOCKHOLDER RIGHTS PLAN
McKesson entered into the Rights Agreement, which was designed to protect
McKesson stockholders from coercive or unfair takeover tactics. Pursuant to
the Rights Agreement, the Board of Directors of McKesson declared a dividend
distribution of one Right for each then outstanding share of McKesson Common
Stock and authorized the issuance of one Right for each share of McKesson
Common Stock issued after the date of the Rights Agreement, but prior to the
triggering of the Right. One Right will be issued with respect to each share
of McKesson Common Stock issued pursuant to the Merger. Each Right entitles a
registered holder to purchase, upon the occurrence of certain specified
events, a unit consisting of one one-hundredth of a share of McKesson Series A
Junior Participating Preferred Stock at a purchase price of $100 per unit. The
description and terms of the Rights are set forth in the Rights Agreement. In
general, pursuant to the Rights Agreement, upon the occurrence of specified
triggering events, such as the acquisition by any person (other than McKesson
or any of its subsidiaries) of the beneficial ownership of securities
representing 15% or more of the outstanding McKesson Common Stock, without the
prior approval of the McKesson Board, each holder of a Right shall have the
right to receive that amount of McKesson Common Stock having a value equal to
two times the exercise price of the Right. The Rights Agreement further
provides that if McKesson is acquired in a merger or other business
combination or McKesson sells more than 50% of its assets and such transaction
is not approved by the McKesson Board, McKesson's stockholders shall have the
right to receive, with respect to each Right, common stock of the acquiring
company having a value equal to two times the exercise price of the Right.
Under certain
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circumstances, McKesson may redeem the Rights for a redemption price of $.01
per Right, which will otherwise expire on the tenth anniversary of the
adoption of the Rights Agreement. The effect of the Rights Agreement may be to
render more difficult a change in control of McKesson.
AmeriSource presently does not have a stockholder rights plan.
NUMBER OF DIRECTORS; REMOVAL; FILLING VACANCIES
The McKesson Certificate provides that, subject to any rights of holders of
McKesson Series Preferred Stock to elect directors, the holders of McKesson
Common Stock shall have the exclusive right to elect directors. There are no
shares of Preferred Stock currently outstanding. The McKesson By-laws provide
that the number of directors shall be fixed from time to time by the By-laws,
but in no event shall be less than three. The McKesson By-laws also provide
that until the By-laws are further amended, the number of directors shall be
nine. In addition, the McKesson By-laws provide that any vacancy occurring in
the McKesson Board for any reason other than an increase in the number of
directors may be filled by a majority of the remaining members of the McKesson
Board or by the stockholders. Any vacancy occurring by reason of an increase
in the number of directors may be filled by action of a majority of the entire
McKesson Board or by the stockholders. At the Effective Time, the McKesson
Board will be increased by three to accommodate the election of three new
directors who are currently serving on the AmeriSource Board. See "The Merger
Agreement -- Corporate Organization and Governance."
Under the DGCL, unless otherwise provided in the certificate of
incorporation, directors serving on a classified board may only be removed by
the stockholders for cause. The McKesson By-laws provide that directors may be
removed only for cause. The McKesson By-laws further provide that any
amendment to the McKesson By-laws to permit a director to be removed without
cause must be approved by either the holders of all shares of stock entitled
to vote thereon or by a vote of a majority of the entire McKesson Board.
Directors elected by the Series Preferred Stock, should any such stock be
outstanding, are subject to removal as provided in the McKesson Certificate or
as provided by law.
The AmeriSource By-laws provide that the number of directors constituting
the AmeriSource Board shall be determined by the AmeriSource Board. The
AmeriSource Board currently consists of nine directors.
Neither the AmeriSource Certificate nor the AmeriSource By-laws provide for
the removal of directors from the AmeriSource Board or the filling of
vacancies on the AmeriSource Board. Pursuant to the DGCL, where a board is not
classified, directors may be removed, with or without cause, by the holders of
a majority of the shares entitled to vote. In addition, pursuant to the DGCL,
newly created directorships resulting from an increase in the authorized
number of directors and vacancies created by resignation may be filled by a
majority of the directors then in office.
NO STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS
The McKesson Certificate provides that stockholder action can be taken only
at an annual or special meeting of stockholders or by unanimous written
consent. The McKesson By-laws provide that special meetings of stockholders
can be called only by the Chairman of the Board, the President or the McKesson
Board. Stockholders are not permitted to call a special meeting or to require
that the McKesson Board call a special meeting of stockholders.
As a result of the foregoing provisions, a stockholder may not force
stockholder consideration of a proposal over the opposition of the Chairman of
the Board, the President and the McKesson Board by calling a special meeting
of stockholders prior to the time the Chairman of the Board, the President or
the McKesson Board believes such consideration to be appropriate.
The AmeriSource By-laws provide that special meetings of the stockholders
may be called at any time by either (i) the president, (ii) the board of
directors or (iii) the holders of a majority of the shares of stock entitled
to vote at the meeting.
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Neither the AmeriSource Certificate nor the AmeriSource By-laws covers
actions of stockholders without a meeting. Pursuant to the DGCL, absent any
provision to the contrary in a company's certificate of incorporation, any
action required or permitted to be taken at any annual or special meeting of
stockholders may be taken without a meeting, without prior notice and without
a vote, if a consent in writing, setting forth the action so taken, is signed
by the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. Prompt
notice of the taking of any corporate action without a meeting by less than
unanimous written consent must be given to those stockholders who did not
consent in writing and who would have been entitled to notice if the action
had been taken at a meeting.
FAIR PRICE PROVISIONS
The McKesson Certificate contains a "fair price" provision, requiring that,
in addition to any other vote required by the McKesson Certificate or the
DGCL, certain "Business Combination" transactions be recommended by the Board
of Directors and approved by the affirmative vote of at least: (a) 80 percent
of the votes entitled to be cast by outstanding shares of voting stock of
McKesson, voting together as a single voting group; and (b) two-thirds of the
votes entitled to be cast by holders of voting stock other than voting stock
held by an Interested Stockholder who is (or whose Affiliate is) a party to a
Business Combination or an Affiliate or Associate of the Interested
Stockholder, voting together as a single voting group.
For purposes of the "fair price" provision only, certain terms are defined
as follows (other capitalized terms used in this section below having the
respective meanings ascribed to them in the McKesson Certificate):
"Business Combination" means:
(i) Unless the transaction does not alter the contract rights of the
stock or change or convert in whole or in part the outstanding shares of
stock of McKesson, any merger or consolidation of McKesson or any
Subsidiary with (A) any Interested Stockholder or (B) any other corporation
(whether or not itself an Interested Stockholder) which is, or after the
merger or consolidation, would be, an Affiliate of an Interested
Stockholder that was an Interested Stockholder prior to the transaction.
(ii) Any sale, lease, transfer or other disposition, other than in the
ordinary course of business, in one transaction or a series of transactions
in any 12-month period, to any Interested Stockholder or any Affiliate of
any Interested Stockholder (other than McKesson or any of its Subsidiaries)
of any assets of McKesson or any Subsidiary having, measured at the time
the transaction or transactions are approved by the Board of Directors of
McKesson, an aggregate book value as of the end of McKesson's most recently
ended fiscal quarter of 10 percent or more of the total Market Value (as
defined in the McKesson Certificate) of the outstanding stock of McKesson
or of its net worth as of the end of its most recently ended fiscal
quarter;
(iii) The issuance by McKesson, or any Subsidiary, in one transaction or
a series of transactions, of any Equity Securities of McKesson or any
Subsidiary which have an aggregate Market Value of 5 percent or more of the
total Market Value of the outstanding stock of McKesson to any Interested
Stockholder or any Affiliate of any Interested Stockholder (other than
McKesson or any of its Subsidiaries) except pursuant to the exercise of
warrants or rights to purchase securities offered pro rata to all holders
of McKesson voting stock or any other method affording substantially
proportionate treatment to the holders of Voting Stock;
(iv) The adoption of any plan or proposal for the liquidation or
dissolution of McKesson in which anything other than cash will be received
by an Interested Stockholder or any Affiliate of any Interested
Stockholder; or
(v) Any reclassification of securities (including any reverse stock
split), or recapitalization of McKesson, or any merger or consolidation, of
McKesson with any of its Subsidiaries which has the effect, directly or
indirectly, in one transaction or a series of transactions, of increasing
by 5 percent or more of the
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<PAGE>
total number of outstanding shares, the proportionate amount of the
outstanding shares of any class of Equity Securities of McKesson or any
Subsidiary which is directly or indirectly owned by any Interested
Stockholder or any Affiliate of any Interested Stockholder.
"Interested Stockholder" means any person (other than McKesson or any
Subsidiary) that:
(i) Is the beneficial owner, directly or indirectly, of 10 percent or
more of the voting power of the outstanding voting stock of McKesson; or
(ii) Is an Affiliate of McKesson and at any time within the two-year
period immediately prior to the date in question was the beneficial owner,
directly or indirectly, of ten percent or more of the voting power of the
then outstanding voting stock of McKesson.
The required vote referred to above does not apply to a Business Combination
if each of the following conditions, among others, is met:
(i) The aggregate amount of the cash and the Market Value as of the
Valuation Date of consideration other than cash to be received per share by
holders of McKesson Common Stock in the Business Combination are at least
equal to the highest of the following:
(A) The highest per share price (including any brokerage commissions,
transfer taxes and soliciting dealer's fees) paid by the Interested
Stockholder for any shares of McKesson Common Stock acquired by it: (x)
within the two-year period immediately prior to the Announcement Date
of the proposal of the Business Combination; or (y) in the transaction
in which it became an Interested Stockholder, whichever is higher; or
(B) The Market Value per share of McKesson Common Stock on the
Announcement Date or on the Determination Date, whichever is higher; or
(C) The price per share equal to the Market Value per share of
McKesson Common Stock determined pursuant to subparagraph(i)(B) of this
paragraph (a), multiplied by the fraction of: (x) the highest per share
price (including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by the Interested Stockholder for any
shares of McKesson Common Stock acquired by it within the two year
period immediately prior to the Announcement Date, over (y) the Market
Value per share of McKesson Common Stock on the first day in such two-
year period on which the Interested Stockholder acquired any shares of
McKesson Common Stock.
(ii) After the Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business Combination:
(A) There shall have been: (x) no reduction in the annual rate of
dividends paid on any class or series of stock of McKesson that is not
preferred stock (except as necessary to reflect any subdivision of the
stock); (y) an increase in such annual rate of dividends as necessary
to reflect any reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction which has
the effect of reducing the number of outstanding shares of the stock;
and (z) the Interested Stockholder did not become the beneficial owner
of any additional shares of stock of McKesson except as part of the
transaction which resulted in such Interest Stockholder becoming an
Interested Stockholder or by virtue of proportionate stock splits or
stock dividends.
(B) The provisions of clauses (x) and (y) of subparagraph (ii)(A) do
not apply if no Interested Stockholder or an Affiliate or Associate of
the Interested Stockholder voted as a director of McKesson in a manner
inconsistent with such clauses and the Interested Stockholder, within
ten days after any act or failure to act inconsistent with such
clauses, notifies the McKesson Board in writing that the Interested
Stockholder disapproves thereof and requests in good faith that the
McKesson Board rectify such act or failure to act.
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<PAGE>
The "fair price" provision is intended to ensure that all stockholders
receive equal treatment in the event of a tender or exchange offer and to
protect stockholders against coercive or two-tiered takeover bids. The
provision could also have the effect of discouraging a third party from making
a tender or exchange offer for McKesson, even though such an offer might be
beneficial to McKesson and its stockholders.
The AmeriSource Certificate and the AmeriSource By-laws contain no "fair
price" provision.
ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS AND STOCKHOLDER
PROPOSALS
The McKesson By-laws establish an advance notice procedure for stockholders
to make nominations of candidates for election as directors, or bring other
business before an annual meeting of stockholders of McKesson (the
"Stockholder Notice Procedure").
The Stockholder Notice Procedure provides that only persons who are
nominated at the direction of the McKesson Board, by any nominating committee
or person appointed by the McKesson Board, or by a stockholder who has given
timely written notice to the Secretary of McKesson prior to the meeting at
which directors are to be elected, will be eligible for election as a director
of McKesson. The Stockholder Notice Procedure provides that at an annual
meeting only such business may be conducted as has been brought before the
meeting by or at the direction of the McKesson Board or by a stockholder who
has given timely written notice to the Secretary of McKesson of such
stockholder's intention to bring such business before such meeting. Under the
Stockholder Notice Procedure, to be timely, notice of stockholder nominations
or proposals to be made at an annual meeting must be received by McKesson no
less than 60 days nor more than 90 days prior to the scheduled date of the
meeting (or, if less than 70 days' notice or prior public disclosure of the
date of the meeting is given, the tenth day following the earlier of (i) the
date such notice was mailed or (ii) the date such public disclosure was made).
Under the Stockholder Notice Procedure, a stockholder's notice to McKesson
proposing to nominate a person for election as a director must contain certain
information, including, without limitation, the identity and address of the
proposed nominee, the class and number of shares of stock of McKesson which
are beneficially owned by the proposed nominee, the principal occupation of
the proposed nominee and all information regarding the proposed nominee that
would be required to be included in a proxy statement soliciting proxies for
the proposed nominee. Under the Stockholder Notice Procedure, a stockholder's
notice relating to the conduct of business other than the nomination of
directors must contain certain information about such business and about the
proposing stockholder, including, without limitation, a brief description of
the business the stockholder proposes to bring before the meeting, the reasons
for conducting such business at such meeting, the name and address of such
stockholder, the class and number of shares of stock of McKesson beneficially
owned by such stockholder, any material interest of such stockholder in the
business so proposed and a representation that the stockholder intends to
appear at the meeting in person or by proxy. If the nomination or business was
not brought before the meeting in accordance with the Stockholder Notice
Procedure, such person will not be eligible for election as a director or such
business will not be conducted at such meeting, as the case may be.
By requiring advance notice of nominations by stockholders, the Stockholder
Notice Procedure affords the McKesson Board an opportunity to consider the
qualifications of the proposed nominees and, to the extent deemed necessary or
desirable by the McKesson Board, to inform stockholders about such
qualifications. By requiring advance notice of other proposed business, the
Stockholder Notice Procedure also provides a more orderly procedure for
conducting annual meetings of stockholders and, to the extent deemed necessary
or desirable by the McKesson Board, provides the McKesson Board with an
opportunity to inform stockholders, prior to such meetings, of any business
proposed to be conducted at such meetings, together with any recommendations
as to the McKesson Board's position regarding action to be taken with respect
to such business, so that stockholders can better decide whether to attend the
meeting or to grant a proxy regarding the disposition of any such business.
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<PAGE>
The foregoing provisions may have the effect of precluding a contest for the
election of directors or the consideration of stockholder proposals if the
proper procedures are not followed, and of discouraging or deterring a third
party from conducting a solicitation of proxies to elect its own slate of
directors or to approve its own proposal, without regard to whether
consideration of such nominees or proposals might be harmful or beneficial to
McKesson and its stockholders.
The AmeriSource Certificate and the AmeriSource By-laws do not contain
provisions requiring advance notice for the nomination of directors or of
business to be brought before a stockholders' meeting by a stockholder.
COMMON STOCK
The holders of McKesson Common Stock are entitled to one vote for each share
on all matters and, except as otherwise provided in McKesson's Certificate
with respect to the Series Preferred Stock, will have the exclusive right to
vote for the election of directors and for all other purposes.
AmeriSource's authorized capital consists of shares of AmeriSource Class A
Common Stock, AmeriSource Class B Common Stock and AmeriSource Class C Common
Stock. The rights of the holders of AmeriSource Class B Common Stock and
AmeriSource Class C Common Stock and holders of AmeriSource Class A Common
Stock, are substantially identical and entitle the holders to the same rights,
privileges, benefit, and notices, except that holders of AmeriSource Class B
Common Stock and AmeriSource Class C Common Stock do not posses the right to
vote on any matters to be voted on by stockholders of AmeriSource, except as
provided by law. Holders of AmeriSource Class B Common Stock may elect at any
time to convert any and all of those shares into AmeriSource Class A Common
Stock, on a share-for-share basis, to the extent the holder is not prohibited
from owning additional voting securities by virtue of applicable law.
AmeriSource Class C Common Stock automatically converts into AmeriSource Class
A Common Stock (a) immediately prior to its sale in a future public offering
or (b) at such time as the underlying shares of AmeriSource Class C Common
Stock have been sold publicly in a transaction that complied with certain
maximum quantity limitations.
PREFERRED STOCK
Pursuant to the McKesson Certificate, the McKesson Board is authorized to
provide for the issuance of shares of McKesson preferred stock, in one or more
classes or series (including the Series A Junior Participating Preferred
Stock), and to fix the designations, powers, preferences and rights of the
shares of each such series, and any qualifications, limitations or
restrictions thereof. See "-- Stockholder Rights Plan."
McKesson believes that the ability of the McKesson Board to issue one or
more series of McKesson Preferred Stock provides McKesson with flexibility in
structuring possible future financings and acquisitions, and in meeting other
corporate needs that might arise.
Although the McKesson Board has no intention at the present time of doing
so, it could issue a series of McKesson Preferred Stock that could, depending
on the terms of such series, impede the completion of a merger, tender offer
or other takeover attempt. The McKesson Board will make any determination to
issue such shares based on its judgment as to the best interests of McKesson
and its stockholders. The McKesson Board, in so acting, could issue McKesson
Preferred Stock having terms that discourage an acquisition attempt through
which an acquirer may be able to change the composition of the McKesson Board,
including a tender offer or other transaction that some of McKesson's
stockholders might believe to be in their best interests or in which
stockholders might receive a premium for their stock over the then current
market price of such stock.
The AmeriSource Certificate does not authorize the AmeriSource Board to
provide for the issuance of preferred stock.
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<PAGE>
AMENDMENT OF THE CERTIFICATE OF INCORPORATION AND BY-LAWS
The McKesson Certificate provides that the McKesson Board is expressly
authorized to adopt, alter and repeal the McKesson By-laws. The McKesson By-
laws may also be adopted, altered and repealed by the affirmative vote of the
holders of at least 75% of the voting power of the outstanding McKesson Common
Stock. An amendment to the McKesson By-laws to shorten the term of any
director holding office, to permit any director to be removed without cause,
or to increase the number of directors in any class, requires the approval of
the holders of all shares entitled to vote thereon or a vote of the entire
McKesson Board. These provisions make it more difficult for stockholders to
make changes to the McKesson By-laws, including changes designed to facilitate
the exercise of control over McKesson.
The AmeriSource Certificate requires the vote of a majority of all of the
directors or a vote of a majority of the outstanding stock entitled to vote to
amend its By-laws.
BUSINESS COMBINATIONS
Section 203 of the DGCL provides that, subject to certain exceptions
specified therein, a corporation shall not engage in any business combination
with any "interested stockholder" for a three-year period following the date
that such stockholder becomes an interested stockholder unless (i) prior to
such date, the board of directors of the corporation approved either the
business combination or the transaction which resulted in the stockholder
becoming an interested stockholder, (ii) upon consummation of the transaction
which resulted in the stockholder becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced (excluding
shares held by directors who are also officers and employee stock purchase
plans in which employee participants do not have the right to determine
confidentially whether plan shares will be tendered in a tender or exchange
offer) or (iii) on or subsequent to such date, the business combination is
approved by the board of directors of the corporation and by the affirmative
vote at an annual or special meeting, and not by written consent, of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder. Except as specified in Section 203 of the DGCL, an interested
stockholder is defined to include (a) any person that is the owner of 15% or
more of the outstanding voting stock of the corporation or is an affiliate or
associate of the corporation and was the owner of 15% or more of the
outstanding voting stock of the corporation, at any time within three years
immediately prior to the relevant date and (b) the affiliates and associates
of any such person.
Under certain circumstances, Section 203 of the DGCL may make it more
difficult for a person who would be an "interested stockholder" to effect
various business combinations with a corporation for a three-year period,
although the corporation's certificate of incorporation or stockholders may
elect to exclude a corporation from the restrictions imposed thereunder. The
McKesson Certificate does not exclude McKesson from the restrictions imposed
under Section 203 of the DGCL. However, the AmeriSource Certificate does
exclude AmeriSource from the restrictions imposed under Section 203(a). It is
anticipated that the provisions of Section 203 of the DGCL may encourage
companies interested in acquiring McKesson to negotiate in advance with the
McKesson Board, since the stockholder approval requirement would be avoided if
a majority of the directors then in office approve either the business
combination or the transaction which results in the stockholder becoming an
interested stockholder.
LIMITATION OF LIABILITY OF DIRECTORS
The DGCL permits a corporation to include a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director or
officer to the corporation or its stockholders for damages for a breach of the
director's fiduciary duty, subject to certain limitations. The McKesson
Certificate includes such a provision to the maximum extent permitted by law.
The AmeriSource Certificate contains a similar provision.
While these provisions provide directors with protection from awards for
monetary damages for breaches of their duty of care, they do not eliminate
such duty. Accordingly, these provisions will have no effect on the
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<PAGE>
availability of equitable remedies such as an injunction or rescission based
on a director's breach of his or her duty of care.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The DGCL permits a corporation to indemnify officers, directors, employees
and agents for actions taken in good faith and in a manner they reasonably
believed to be in, or not opposed to, the best interests of the corporation,
and with respect to any criminal action, which they had no reasonable cause to
believe was unlawful. The DGCL provides that a corporation may advance
expenses of defense (upon receipt of a written undertaking to reimburse the
corporation if indemnification is not appropriate) and must reimburse a
successful defendant for expenses, including attorneys' fees, actually and
reasonably incurred, and permits a corporation to purchase and maintain
liability insurance for its directors and officers. The DGCL provides that
indemnification may be made for any claim, issue or matter as to which a
person has been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable to the corporation, unless
and only to the extent a court determines that the person is entitled to
indemnity for such expenses as the court deems proper.
The McKesson By-laws provide that each person who is involved in any actual
or threatened action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he or she is or
was a director or officer of McKesson, or is or was serving at the request of
the corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan, will be
indemnified by McKesson to the full extent permitted by the DGCL if he or she
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of McKesson. The indemnification rights
conferred by the McKesson By-laws are not exclusive of any other right to
which persons seeking indemnification may be entitled under any law, bylaw,
agreement, vote of stockholders or disinterested directors or otherwise.
McKesson is authorized to purchase and maintain (and McKesson maintains)
insurance on behalf of its directors and officers.
The AmeriSource By-laws contain similar provisions relating to
indemnification and insurance, and AmeriSource likewise maintains insurance on
behalf of its directors, officers, [employees and agents.] The Merger
Agreement requires that AmeriSource's existing directors and officers
insurance be maintained by McKesson for a period of at least six years from
the Effective Time, subject to certain limitations. The Merger Agreement
further provides that the directors and officers of AmeriSource should
continue after the Merger to be entitled to indemnification to the full extent
permitted under the DGCL, the AmeriSource Certificate or AmeriSource By-laws.
See "The Merger Agreement -- Indemnification and Insurance."
SIGNIFICANT STOCKHOLDERS
Other than the McKesson Profit-Sharing Investment Plan (which, as of June 2,
1997, owned 22.06%) and Wellington Management Company, LLP (which, as of
December 31, 1996, owned 5.20%), no McKesson stockholder is known by McKesson
to own in excess of 5% of the McKesson Common Stock and the directors and
officers as a group owned (as of June 2, 1997) 3.8% of the McKesson Common
Stock.
As of September 30, 1997, VPI owned 1.4%, and, on the record date to
determine which stockholders will be entitled to vote at the AmeriSource
Special Meeting, VPI is expected to own 19%, of the outstanding voting shares
of AmeriSource and 28% of the equity of AmeriSource. See "The Voting/Support
Agreements." After the Merger, VPI will own approximately 7% of the
outstanding shares of McKesson Common Stock. Under the Registration Rights
Agreement, VPI has been granted the right to request, two times, registration
of the McKesson Common Stock held by VPI. See "The Registration Rights
Agreement."
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<PAGE>
MARKET PRICE AND DIVIDEND INFORMATION
The McKesson Common Stock is listed and traded on the NYSE and the PE and
the AmeriSource Class A Common Stock is listed and traded on the NYSE. The
following table sets forth the high and low trading prices per share of each
of the McKesson Common Stock (without adjustment for the McKesson Stock Split)
and AmeriSource Class A Common Stock on the NYSE for the periods indicated as
reported on the NYSE Composite Tape, and the dividends paid per share for such
periods by McKesson (AmeriSource did not pay any dividends during the
periods):
<TABLE>
<CAPTION>
AMERISOURCE
MCKESSON CLASS A
COMMON STOCK MCKESSON COMMON STOCK
PRICES DIVIDENDS PAID PRICES
-------------- PER COMMON -------------
HIGH LOW SHARE HIGH LOW
------- ------ -------------- ------ ------
<S> <C> <C> <C> <C> <C>
1994
First Quarter.................... $ 68.50 $52.50 $0.42 -- --
Second Quarter................... 87.00 58.50 0.42 -- --
Third Quarter.................... 103.63 70.75 0.42 -- --
Fourth Quarter................... 109.25 30.13 76.25(1) -- --
1995
First Quarter.................... 40.75 31.88 0.25 -- --
Second Quarter................... 47.38 37.25 0.25 $24.50 $20.75
Third Quarter.................... 46.63 42.63 0.25 27.75 19.75
Fourth Quarter................... 53.25 44.88 0.25 34.25 25.25
1996
First Quarter.................... 55.63 46.50 0.25 34.00 28.00
Second Quarter................... 51.38 44.00 0.25 37.50 31.63
Third Quarter.................... 48.38 39.00 0.25 44.50 27.88
Fourth Quarter................... 57.00 45.38 0.25 48.25 37.63
1997
First Quarter.................... 69.63 51.75 0.25 53.00 42.50
Second Quarter................... 80.13 63.00 0.25 51.38 41.25
Third Quarter.................... 106.25 76.50 0.25 65.25 45.13
Fourth Quarter (through ,
1997)...........................
</TABLE>
- --------
(1) In November 1994 McKesson completed a plan of merger and a reorganization
and distribution agreement providing for the acquisition by Eli Lilly and
Company of PCS, which was primarily operated by PCS Health Systems, Inc.
and Clinical Pharmaceuticals, Inc. both of which were wholly owned
subsidiaries of McKesson, for approximately $4 billion. As a result of the
sale of PCS, each existing McKesson stockholder received a cash payment of
$76.00 per share representing the proceeds from the sale of PCS and one
share of McKesson Common Stock representing such stockholder's continuing
interest in the business retained by McKesson.
On September 22, 1997, the last full trading day prior to the first public
announcement of the execution of the Merger Agreement, the reported high and
low sale prices per share and closing price per share of McKesson Common Stock
and AmeriSource Class A Common Stock on the NYSE were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 22, 1997
---------------------
HIGH LOW CLOSE
------- ------ ------
<S> <C> <C> <C>
McKesson............................................ $100.31 $99.25 $99.81
AmeriSource......................................... 54.00 53.50 53.69
</TABLE>
On , 1997, the last full trading day prior to the date of this
Joint Proxy Statement/Prospectus, the reported high and low sale prices per
share and closing price per share of McKesson Common Stock and AmeriSource
Class A Common Stock on the NYSE were as follows:
<TABLE>
<CAPTION>
, 1997
--------------------
HIGH LOW CLOSE
------ ------ ------
<S> <C> <C> <C>
McKesson.............................................
AmeriSource..........................................
</TABLE>
67
<PAGE>
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR SHARES OF
MCKESSON COMMON STOCK AND AMERISOURCE CLASS A COMMON STOCK.
THE MCKESSON STOCK SPLIT; EFFECT ON EXCHANGE RATIO
On October 29, 1997, the McKesson Board declared a two-for-one split of
McKesson Common Stock to be effected in the form of a stock dividend
distributable January 2, 1998. The Merger Agreement provides that as of the
Effective Time each issued and outstanding share of AmeriSource Common Stock
will be converted into 0.71 of a share of McKesson Common Stock but that if
the McKesson Board declares a stock split on the outstanding shares of
McKesson Common Stock with a record date that is prior to the Effective Time,
the Exchange Ratio will be appropriately adjusted. The record date for
determining the McKesson stockholders entitled to receive the dividend is
December 1, 1997. Accordingly, the Exchange Ratio will be adjusted to 1.42
following the McKesson Stock Split.
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<PAGE>
BENEFICIAL OWNERSHIIP OF MCKESSON COMMON STOCK
The following table sets forth information (as of the respective dates
indicated) about the only known beneficial owners of more than 5% of McKesson
Common Stock.
<TABLE>
<CAPTION>
NUMBER PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OF SHARES OF CLASS
- ------------------------------------ ---------- --------
<S> <C> <C>
The Chase Manhattan Bank, N.A., as Trustee for the 10,126,057(1) 22.06%
McKesson..............................................
Corporation Profit-Sharing Investment Plan
1 Chase Manhattan Plaza
New York, NY 10081
Wellington Management Company, LLP..................... 2,179,500(2) 5.2%
75 State Street
Boston, MA 02109
</TABLE>
- --------
(1) Information is as of June 2, 1997. These shares are held in trust for the
benefit of participants in McKesson's Profit Sharing Investment Plan
("PSIP") for which The Chase Manhattan Bank, N.A. is the Trustee. Shares
that have been allocated to the individual accounts of participants in the
PSIP are voted by the Trustee as instructed by PSIP participants. Shares
allocated to participants' PAYSOP accounts for which no voting
instructions are received will not be voted. The PSIP provides that all
other shares for which no voting instructions are received from
participants and unallocated shares of McKesson Common Stock held in the
leveraged employee stock ownership plan established as part of the PSIP,
will be voted by the Trustee in the same proportion as shares as to which
voting instructions are received.
(2) This information is based on a schedule 13G filed with the Commission
reporting that as of December 31, 1996, Wellington Management Company, LLP
("WMC") in its capacity as a registered investment adviser, had shared
voting power as to 586,000 shares and shared dispositive power as to
2,179,500 shares. These shares are owned of record by clients of WMC, no
one of which has an interest that relates to more than 5% of the class.
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<PAGE>
The following table sets forth the amount and percentage of McKesson Common
Stock beneficially owned as of June 2, 1997 by each director of McKesson, by
the Chief Executive Officer and each of the four other most highly compensated
executive officers of McKesson and by all directors and executive officers of
McKesson as a group. Beneficial ownership has been determined in accordance
with Rule 13d-3 under the Exchange Act, and does not necessarily bear on the
economic incidents of ownership or the right to transfer such shares.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP PERCENT STOCK
NAME OF INDIVIDUAL OF SHARES OF CAPITAL STOCK(1) OF CLASS UNITS(2)(3)
- ------------------ ----------------------------- -------- -----------
<S> <C> <C> <C>
Mary G.F. Bitterman...... 5,500(4)(5) * 322
Tully M. Friedman........ 12,000(5)(6) * 1,367
John M. Pietruski........ 11,000(5) * 2,085
David S. Pottruck........ 500 * --
Mark A. Pulido........... 160,168(5)(7)(8) * --
Carl E. Reichardt........ 5,000(5)(9) * 321
Alan Seelenfreund........ 515,388(5)(7)(8) 1.12% --
Jane E. Shaw............. 9,181(5)(9) * 3,461
Robert H. Waterman, Jr... 9,000(5)(9) * 1,843
John H. Hammergren....... 40,110(5)(7)(8) * --
Richard H. Hawkins....... 105,966(5)(8) * --
David L. Mahoney......... 159,544(5)(8) * --
All directors and execu- 3.80% 9,399
tive officers as a group 1,744,043(4)(5)(6)(7)
(22 persons)............ (8)(9)(10)
</TABLE>
- --------
* Less than 1%
(1) Represents shares held as of June 2, 1997 directly and with sole voting
and investment power (or with voting and investment power shared with a
spouse) unless otherwise indicated. The number of shares of McKesson
Common Stock owned by each director or executive officer represents less
than 1% of the outstanding shares of such class. All directors and
executive officers as a group own 3.8% of the outstanding shares of
McKesson Common Stock.
(2) Includes restricted stock units accrued under the 1997 Non-Employee
Directors' Equity Compensation and Deferral Plan as follows: Dr.
Bitterman, 322 units; Mr. Friedman, 1,058 units; Mr. Pietruski, 2,085
units; Mr. Reichardt, 321 units; Dr. Shaw, 966 units; Mr. Waterman, 1,843
units; and all non-employee Directors as a group, 6,595 units. Directors
have neither voting nor investment powers in respect of such units.
(3) Includes common stock units accrued under the Directors' Deferred
Compensation Plan as follows: Mr. Friedman, 309 units; Dr. Shaw, 2,495
units; and those directors as a group, 2,804 units. Participating
directors have neither voting nor investment powers in respect of such
units.
(4) Includes 1,000 shares held by Dr. Bitterman's husband through an
Individual Retirement Account, for which beneficial ownership is
disclaimed.
(5) Includes shares that may be acquired by exercise of stock options within
60 days after June 2, 1997 as follows: Dr. Bitterman, 4,500; Mr. Friedman,
5,000; Mr. Pietruski, 5,000; Mr. Pulido, 50,000; Mr. Reichardt, 0; Mr.
Seelenfreund, 420,812; Dr. Shaw, 5,000; Mr. Waterman, 5,000; Mr.
Hammergren, 10,000; Mr. Hawkins, 83,291; Mr. Mahoney, 142,375; and all
directors and executive officers as a group, 1,229,999.
(6) Includes 6,000 shares held in a revocable trust established by and for the
benefit of Mr. Friedman who is the sole Trustee of such trust.
(7) Includes shares subject to possible forfeiture under the terms of
McKesson's 1994 Stock Option and Restricted Stock Plan and the 1988
Restricted Stock Plan of McKesson Corporation, the predecessor of
McKesson, as follows: Mr. Pulido, 20,000 shares; Mr. Seelenfreund, 22,586
shares; Mr. Hammergren, 20,000 shares; and all directors and executive
officers as a group, 86,587 shares.
(8) Includes shares held under the PSIP as to which the participant has sole
voting but no investment power, as follows: Mr. Seelenfreund, 8,796; Mr.
Pulido, 186; Mr. Hammergren, 110; Mr. Hawkins, 2,675; Mr. Mahoney, 1,669;
and all directors and executive officers as a group, 36,459.
(9) Includes shares held by family trusts as to which each of the following
named directors and their respective spouses have shared voting and
investment power: Mr. Reichardt, 5,000 shares; Dr. Shaw, 4,000 shares; Mr.
Waterman, 3,000 shares; and those directors as a group, 12,000 shares.
(10) Includes 2,200 shares held by members of the group as custodians for
their minor children.
70
<PAGE>
BENEFICIAL OWNERSHIP OF AMERISOURCE COMMON STOCK
The following table reflects the holdings of the only persons known to
AmeriSource to own beneficially 5% or more of AmeriSource Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
NATURE OF COMMON STOCK ON
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP SEPTEMBER 30, 1997
- ------------------------------------ -------------------- ------------------
<S> <C> <C>
399 Venture Partners, Inc. (1)......... 6,721,073 28.18%
1209 Orange Street
Wilmington, DE 19801
</TABLE>
- --------
(1) Includes 6,486,147 shares of AmeriSource Class B Common Stock, which is
convertible into AmeriSource Class A Common Stock, owned by VPI. VPI
disclaims beneficial ownership as to shares of Common Stock held by
investors currently or previously affiliated with VPI. VPI is a wholly
owned, indirect subsidiary of Citicorp.
The following table sets forth the amount and percentage of AmeriSource
Common Stock beneficially owned as of December 30, 1996 by each director of
AmeriSource, by the Chief Executive Officer and each of the four other most
highly compensated executive officers of AmeriSource and by all directors and
executive officers of AmeriSource as a group. Beneficial ownership has been
determined in accordance with Rule 13d-3 under the Exchange Act, and does not
necessarily bear on the economic incidents of ownership or the right to
transfer such shares.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
NAME OF INDIVIDUAL OF SHARES OF CAPITAL STOCK PERCENT OF CLASS
------------------ -------------------------- ----------------
<S> <C> <C>
John F. McNamara............. 350,700 1.5%
David M. Flowers............. 112,900 *
R. David Yost................ 233,650 *
Kurt J. Hilzinger............ 101,750 *
Bruce C. Bruckmann........... 63,320 *
Michael A. Delaney........... 0 *
Richard C. Gozon............. 15,000 *
Lawrence C. Karlson.......... 15,000 *
George H. Strong............. 10,000 *
James A. Urry................ 0 *
Barton J. Winokur............ 29,750 *
All directors and executive
officers as a group (11
persons).................... 932,070 3.9%
</TABLE>
- --------
* Less than 1%.
71
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF MCKESSON
The following table sets forth selected historical consolidated financial
data of McKesson for each of the five years in the period ended March 31, 1997
and for the six-month periods ended September 30, 1997 and 1996. Such data
have been derived from, and should be read in conjunction with, the audited
consolidated financial statements and other financial information contained in
McKesson's Annual Report on Form 10-K for the year ended March 31, 1997 and
the unaudited consolidated interim financial information contained in
McKesson's Quarterly Report on Form 10-Q for the six months ended September
30, 1997, including the notes thereto, incorporated by reference herein. The
selected consolidated financial data as of September 30, 1997 and for the six-
month periods ended September 30, 1997 and 1996, reflect all adjustments
(consisting only of normal recurring adjustments except for the item discussed
in Note 2 recorded in the six-month period ended September 30, 1996) necessary
for a fair presentation of the results for such periods. The results for the
six-month periods are not indicative of the results to be expected for the
full year or for any other interim period, due in part to the adjustment
described in Note 2. See "Available Information" and "Incorporation of
Documents by Reference."
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, YEAR ENDED MARCH 31,
------------------ -------------------------------------------------------------
1997 1996 1997 1996 1995 1994 1993
-------- -------- --------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenues.................. $8,810.5 $5,401.5 $12,886.7 $9,953.7 $9,438.7 $8,520.8 $7,991.8
Costs and expenses
Cost of sales............ 8,078.0 4,938.6 11,849.4 9,038.2 8,630.5 (1) 7,737.2 7,214.6
Selling, distribution and
administration.......... 554.9 404.7 (2) 944.5 (3) 674.2 817.2 (1) 630.0 (4) 620.7
Interest................. 48.1 21.1 55.7 44.4 44.5 39.3 47.5
-------- -------- --------- -------- -------- -------- --------
Total................... 8,681.0 5,364.4 12,849.6 9,756.8 9,492.2 8,406.5 7,882.8
-------- -------- --------- -------- -------- -------- --------
Income (loss) before
income taxes and
dividends on convertible
preferred securities of
subsidiary trust......... 129.5 37.1 (2) 37.1 (3) 196.9 (53.5)(1) 114.3 (4) 109.0
Income taxes.............. (49.2) (32.7) (31.3) (76.2) (96.6)(5) (45.0) (42.2)
Dividends on convertible
preferred securities of
subsidiary trust, net of
tax benefit.............. (3.1) (0.7)
-------- -------- --------- -------- -------- -------- --------
Income (loss) after taxes
Continuing operations.... 77.2 4.4 (2) 5.1 (3) 120.7 (150.1)(1)(5) 69.3 (4) 66.8
Discontinued operations.. 5.6 8.6 14.7 (23.1) 55.1 47.9
Discontinued operations--
Gain on sale/donation of
Armor All stock(6)..... 120.2 1.0 32.7
Gain on sale of PCS..... 576.7
Extraordinary item....... (4.2)
Cumulative effect of ac-
counting changes........ (16.7)
-------- -------- --------- -------- -------- -------- --------
Net income ............... $ 77.2 $ 10.0 $ 133.9 $ 135.4 $ 404.5 $ 136.2 $ 114.7
======== ======== ========= ======== ======== ======== ========
Fully diluted earnings
(loss) per
common share
Continuing operations.... $ 1.58 $ 0.10 $ 0.13 $ 2.59 $ (3.34) $ 1.49 $ 1.44
Discontinued operations.. 0.12 0.19 0.31 (0.51) 1.25 1.07
Discontinued operations--
Gain on sale/donation of
Armor All stock........ 2.66 0.02 0.74
Gain on sale of PCS..... 12.69
Extraordinary item....... (0.10)
Cumulative effect of ac-
counting changes........ (0.38)
-------- -------- --------- -------- -------- -------- --------
Total................... $ 1.58 $ 0.22 $ 2.98 $ 2.90 $ 8.86 $ 3.00 $ 2.51
======== ======== ========= ======== ======== ======== ========
Fully diluted shares...... 50.8 44.6 45.1 46.7 45.5 44.1 44.8
Primary earnings (loss)
per common share
Continuing operations.... $ 1.61 $ 0.10 $ 0.12 $ 2.59 $ (3.52) $ 1.53 $ 1.49
Discontinued operations.. 0.12 0.19 0.31 (0.53) 1.35 1.20
Discontinued operations--
Gain on sale/donation of
Armor All stock........ 2.70 0.02 0.80
Gain on sale of PCS..... 13.23
Extraordinary item....... (0.10)
Cumulative effect of ac-
counting changes........ (0.41)
-------- -------- --------- -------- -------- -------- --------
Total................... $ 1.61 $ 0.22 $ 3.01 $ 2.90 $ 9.20 $ 3.17 $ 2.69
======== ======== ========= ======== ======== ======== ========
Primary shares............ 47.8 44.6 44.5 46.6 43.6 40.8 40.0
Cash dividends declared
per common share......... $ 0.50 $ 0.50 $ 1.00 $ 1.00 $ 1.34 $ 1.66 $ 1.60
</TABLE>
72
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED MARCH 31,
------------- --------------------------------
1997 1996 1997 1996 1995 1994 1993
------ ------ ----- ----- ------ ----- -----
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings (loss) per share--
adjusted to reflect McKesson
Stock Split (7)
Fully diluted earnings (loss)
per common share
Continuing operations......... $ 0.79 $ 0.05 $0.06 $1.29 $(1.67) $0.74 $0.72
Discontinued operations....... 0.06 0.10 0.16 (0.25) 0.63 0.53
Discontinued operations--
Gain on sale/donation of
Armor All stock............. 1.33 0.01 0.37
Gain on sale of PCS.......... 6.34
Extraordinary item............ (0.05)
Cumulative effect of account-
ing changes.................. (0.19)
------ ------ ----- ----- ------ ----- -----
Total....................... $ 0.79 $ 0.11 $1.49 $1.45 $ 4.43 $1.50 $1.25
====== ====== ===== ===== ====== ===== =====
Fully diluted shares.......... 101.6 89.3 90.2 93.5 90.9 88.2 89.6
Primary earnings (loss) per
common share
Continuing operations......... $ 0.81 $ 0.05 $0.06 $1.29 $(1.76) $0.76 $0.75
Discontinued operations....... 0.06 0.10 0.16 (0.27) 0.68 0.60
Discontinued operations--
Gain on sale/donation of
Armor All stock............. 1.35 0.01 0.40
Gain on sale of PCS.......... 6.62
Extraordinary item............ (0.05)
Cumulative effect of account-
ing changes.................. (0.21)
------ ------ ----- ----- ------ ----- -----
Total....................... $ 0.81 $ 0.11 $1.51 $1.45 $ 4.60 $1.58 $1.35
====== ====== ===== ===== ====== ===== =====
Primary shares................ 95.7 89.2 89.1 93.3 87.1 81.6 80.1
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
SEPTEMBER 30, -----------------------------------------------
1997 1997 1996 1995 1994 1993
------------- -------- -------- -------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Cash, cash equivalents and marketable
securities................................ $ 176.3(8) $ 229.8(8) $ 456.2 $ 670.4 $ 62.7 $ 77.5
Working capital............................ 1,121.2 1,123.9 820.5 879.0 301.4 191.4
Total assets............................... 5,235.5 5,172.8 3,360.2 3,260.2 2,676.6 2,458.4
Total debt(9).............................. 1,205.5 985.2 398.3 425.1 499.0 397.6
Convertible preferred securities of
subsidiary trust.......................... 195.1 194.8
Stockholders' equity....................... 1,331.5 1,260.8 1,064.6 1,013.5 678.6 619.4
</TABLE>
- --------
(1) Includes $59.4 million in compensation costs (classified in administration
expense) related to the sale of PCS and $139.5 million in charges for
asset impairment, restructuring and other operating items ($35.9 million
included in cost of sales and $103.6 million included in administration
expense), $130.6 million after-tax in the aggregate.
(2) Includes a $48.2 million write-off for in-process technology related to
the acquisition of McKesson Automated Healthcare, Inc.
(3) Includes $98.8 million in charges for restructuring, asset impairment and
other operating items and $48.2 million for the write-off of in-process
technology related to the acquisition of McKesson Automated Healthcare,
Inc. (see Note 2), $109.5 million after-tax in the aggregate.
(4) Includes a $13.4 million loss ($8.2 million after-tax) on the termination
of interest rate swap arrangements.
(5) Includes $107.0 million of income tax expense related to the sale of PCS.
(6) Includes $1.0 million and $0.4 million of income after-tax from donations
of Armor All common stock to the McKesson Foundation in fiscal 1995 and
1994, respectively, $32.3 million after-tax from the sale of Armor All
common stock to the public in fiscal 1994 and $120.2 million after-tax
from the sale of the Company's equity interest in Armor All in fiscal
1997.
(7) Reflects the pro forma effect of the two-for-one stock split declared
October 29, 1997, distributable January 2, 1998 to stockholders of record
on December 1, 1997.
(8) Includes $86.6 million at September 30, 1997 and $109.8 million at March
31, 1997 of after-tax proceeds from the sale of Armor All shares which
were placed in a trust as exchange property for McKesson's exchangeable
debentures.
(9) Total debt includes all interest-bearing debt of McKesson and consolidated
subsidiaries, including the current portion and capital lease obligations.
73
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF AMERISOURCE
The following table sets forth selected historical consolidated financial
data for AmeriSource for each of the five years in the period ended September
30, 1996 and for the nine-month periods ended June 30, 1997 and 1996. Such
data have been derived from, and should be read in conjunction with, the
audited consolidated financial statements and other financial information
contained in AmeriSource's Annual Report on Form 10-K for the year ended
September 30, 1996 and the unaudited consolidated interim financial
information contained in AmeriSource's Quarterly Report on Form 10-Q for the
nine months ended June 30, 1997, including the notes thereto, incorporated by
reference herein. The selected financial data as of June 30, 1997 and for the
nine-month periods ended June 30, 1997 and 1996, reflect all adjustments
(consisting only of normal recurring adjustments, except for the item
described in Note 2) necessary for a fair presentation of the results for such
periods. The results for the nine-month periods are not necessarily indicative
of the results to be expected for the full year or for any other interim
period. See "Available Information" and "Incorporation of Documents by
Reference."
<TABLE>
<CAPTION>
NINE MONTHS
ENDED JUNE 30, YEAR ENDED SEPTEMBER 30,
--------------------- ---------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenues.................. $5,596.6 $4,064.6 $5,551.7 $4,668.9 $4,182.2 $3,658.9 $3,237.7
Costs and expenses
Cost of sales............ 5,317.1 3,836.2 5,249.2 (1) 4,402.6 3,947.0 3,449.4 3,038.0
Selling, distribution and
administration ......... 196.9 (2) 150.0 204.5 168.5 337.2 (3) 143.9 138.9
Interest................. 31.0 28.1 36.0 52.3 62.6 66.7 71.0
-------- -------- -------- -------- -------- -------- --------
Total................... 5,545.0 4,014.3 5,489.7 4,623.4 4,346.8 3,660.0 3,247.9
-------- -------- -------- -------- -------- -------- --------
Income (loss) before tax-
es, extraordinary items
and cumulative effect of
accounting changes....... 51.6 (2) 50.3 62.0 (1) 45.5 (164.6)(3) (1.1) (10.2)
Income taxes.............. (20.3) (21.0) (19.3)(4) (17.3) (7.8) (6.4) (2.6)
-------- -------- -------- -------- -------- -------- --------
Income (loss) after taxes
Before extraordinary
items and cumulative ef-
fect of accounting
changes ................ 31.3 (2) 29.3 42.7 (1)(4) 28.2 (172.4)(3) (7.5) (12.8)
Extraordinary items...... (2.0) (7.2) (7.3) (18.0) (0.7) (11.1) 6.3
Cumulative effect of ac-
counting changes........ (34.6)(5)
-------- -------- -------- -------- -------- -------- --------
Net income (loss)......... $ 29.3 $ 22.1 $ 35.4 $ 10.2 $ (207.7) $ (18.6) $ (6.5)
======== ======== ======== ======== ======== ======== ========
Fully diluted earnings
(loss) per common share
Before extraordinary
items and cumulative ef-
fect of accounting
changes................. $ 1.29 $ 1.29 $ 1.84 $ 1.53 $ (11.69) $ (0.51) $ (0.87)
Extraordinary items...... (0.08) (0.32) (0.31) (0.98) (0.04) (0.75) 0.43
Cumulative effect of ac-
counting changes........ (2.35)
-------- -------- -------- -------- -------- -------- --------
Total................... $ 1.21 $ 0.97 $ 1.53 $ 0.55 $ (14.08) $ (1.26) $ (0.44)
======== ======== ======== ======== ======== ======== ========
Fully diluted shares...... 24.3 22.7 23.2 18.4 14.8 14.8 14.8
Primary earnings (loss)
per common share
Before extraordinary
items and cumulative ef-
fect of accounting
changes................. $ 1.29 $ 1.29 $ 1.85 $ 1.54 $ (11.69) $ (0.51) $ (0.87)
Extraordinary items...... (0.08) (0.32) (0.31) (0.98) (0.04) (0.75) 0.43
Cumulative effect of ac-
counting changes........ (2.35)
-------- -------- -------- -------- -------- -------- --------
Total................... $ 1.21 $ 0.97 $ 1.54 $ 0.56 $ (14.08) $ (1.26) $ (0.44)
======== ======== ======== ======== ======== ======== ========
Primary shares............ 24.3 22.7 23.0 18.3 14.8 14.8 14.8
</TABLE>
74
<PAGE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
JUNE 30, --------------------------------------------
1997 1996 1995 1994 1993 1992
-------- -------- ------- ------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Cash and cash equiva-
lents.................. $ 92.4 $ 71.2 $ 46.8 $ 25.3 $ 27.1 $ 13.8
Working capital......... 418.4 329.3 243.2 133.4 217.2 268.4
Total assets............ 1,502.3 1,188.0 838.7 711.6 867.9 848.5
Long-term debt.......... 532.3 433.7 435.8 487.7 549.3 588.0
Stockholder's deficit... (6.1) (36.8) (135.7) (300.7) (93.0) (74.7)
</TABLE>
- --------
(1) Includes a one-time cumulative non-cash charge of $10.9 million, $7.1
million after-tax.
(2) Includes a $6.4 million charge to consolidate facilities and restructure
the sales force and a $5.2 million charge related to executive management
changes, $7.1 million after-tax in the aggregate.
(3) Includes the effect of a $179.8 million write-off of goodwill.
(4) Reflects a reduction of $7.1 million due to a favorable settlement of an
Internal Revenue Service audit.
(5) Represents the cumulative effect of accounting changes for income taxes of
$33.4 million and post-retirement benefits other than pensions of $1.2
million.
75
<PAGE>
UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL DATA OF
MCKESSON AND AMERISOURCE
The following unaudited pro forma combined consolidated financial data
present, under the pooling of interests accounting method, the combined
condensed balance sheet of McKesson and AmeriSource as of September 30, 1997
and the combined condensed statements of income of McKesson and AmeriSource
for the six-month periods ended September 30, 1997 and 1996 and the fiscal
years ended March 31, 1997, 1996 and 1995. The unaudited pro forma combined
consolidated financial data reflect preliminary estimated adjustments
necessary to conform inventory accounting policies of the separate companies
but do not reflect any cost savings and other synergies anticipated by
McKesson management as a result of the Merger or any Merger-Related expenses
and are not necessarily indicative of the actual results of operations or the
financial position of the combined entities had the Merger been consummated at
the beginning of the earliest period presented, nor are they necessarily
indicative of future results of operations or financial position.
McKesson's fiscal year ends on March 31. AmeriSource's fiscal year ends on
September 30. For purposes of combining AmeriSource's historical financial
data with McKesson's historical financial data in the unaudited pro forma
combined consolidated financial data in this Joint Proxy Statement/Prospectus,
the financial information of AmeriSource has been reported using the twelve-
month periods ended March 31, 1997, 1996 and 1995. The pro forma combined
condensed statements of income for the six-month periods ended September 30,
1997 and 1996, include AmeriSource's operating results for the six-month
periods ended June 30, 1997 (the most recent results filed on Form 10-Q) and
1996, respectively. AmeriSource's operating results for the three months ended
March 31, 1997 and 1996 have been reported in both the pro forma combined
condensed statements of income for the fiscal years ended March 31, 1997 and
1996, and the pro forma combined condensed statements of income for the six-
month periods ended September 30, 1997 and 1996. For the three-month periods
ended March 31, 1997 and 1996, AmeriSource's revenues were $1,785.5 million
and $1,362.1 million, respectively, and income from continuing operations was
$13.1 million and $10.1 million, respectively. The pro forma combined
condensed balance sheet as of September 30, 1997 includes AmeriSource's
balance sheet as of June 30, 1997, the most recent balance sheet filed on Form
10-Q.
The unaudited pro forma combined consolidated financial data should be read
in conjunction with the historical audited and unaudited consolidated
financial statements of McKesson and AmeriSource and the notes to the
Unaudited Pro Forma Combined Consolidated Financial Data of McKesson and
AmeriSource, incorporated by reference or appearing elsewhere in this Joint
Proxy Statement/Prospectus. See "Available Information," and "Incorporation of
Documents by Reference."
76
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
SIX-MONTH PERIOD ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL HISTORICAL ---------------------------
MCKESSON AMERISOURCE ADJUSTMENTS COMBINED
---------- ----------- ----------- ---------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues.................. $8,810.5 $3,849.6 $ $12,660.1
Costs and expenses
Cost of sales............ 8,078.0 3,656.3 (3.1)(1) 11,731.2
Selling, distribution and
administration.......... 554.9 139.7 (2) 694.6
Interest................. 48.1 21.7 69.8
-------- -------- -------- ---------
Total................... 8,681.0 3,817.7 (3.1) 12,495.6
-------- -------- -------- ---------
Income before income taxes
and dividends on
convertible preferred
securities of subsidiary
trust.................... 129.5 31.9 (2) 3.1 (1) 164.5
Income taxes.............. (49.2) (12.4) (1.2)(3) (62.8)
Dividends on convertible
preferred securities of
subsidiary trust, net of
tax benefit.............. (3.1) (3.1)
-------- -------- -------- ---------
Income (loss) after taxes
Continuing operations.... 77.2 19.5 (2) 1.9 (1)(3) 98.6
Extraordinary item....... (2.0) (2.0)
-------- -------- -------- ---------
Net income.............. $ 77.2 $ 17.5 $ 1.9 $ 96.6
======== ======== ======== =========
Earnings (loss) per common
share
Fully diluted
Continuing operations.... $ 1.58 $ 0.80 $ 1.49
Extraordinary item....... (0.08) (0.03)
-------- -------- ---------
Total................... $ 1.58 $ 0.72 $ 1.46
======== ======== =========
Primary
Continuing operations.... $ 1.61 $ 0.80 $ 1.51
Extraordinary item....... (0.08) (0.03)
-------- -------- ---------
Total................... $ 1.61 $ 0.72 $ 1.48
======== ======== =========
Shares on which earnings
(loss) per common share
were base
Fully diluted............ 50.8 24.3 (7.0)(4) 68.1
Primary.................. 47.8 24.3 (7.0)(4) 65.1
Earnings (loss) per common
share--adjusted to
reflect McKesson Stock
Split
Fully diluted
Continuing operations.... $ 0.79 $ 0.80 $ 0.75
Extraordinary item....... (0.08) (0.02)
-------- -------- ---------
Total................... $ 0.79 $ 0.72 $ 0.73
======== ======== =========
Primary
Continuing operations.... $ 0.81 $ 0.80 $ 0.76
Extraordinary item....... (0.08) (0.02)
-------- -------- ---------
Total................... $ 0.81 $ 0.72 $ 0.74
======== ======== =========
Shares on which earnings
(loss) per common share
were based
Fully diluted............ 101.6 24.3 10.2 (5) 136.1
Primary.................. 95.7 24.3 10.2 (5) 130.2
</TABLE>
See Notes to Unaudited Pro Forma Combined Consolidated Financial Data of
McKesson and AmeriSource
- -------
(1) Reflects the estimated adjustment necessary to conform inventory
accounting policies of the separate companies.
(2) Includes a $6.4 million charge to consolidate facilities and restructure
the sales force and a $5.2 million charge related to executive management
changes, $7.1 million after-tax in the aggregate.
(3) Adjusts the historical provision for income taxes to give effect to the
pro forma adjustment discussed above.
(4) Reflects the effect of the Exchange Ratio of 0.71 of a share of McKesson
Common Stock for each share of AmeriSource Common Stock.
(5) Reflects the effect of the Exchange Ratio of 1.42 shares of McKesson
Common Stock for each share of AmeriSource Common Stock after giving
effect to the McKesson two-for-one stock split declared October 29, 1997,
distributable January 2, 1998 to stockholders of record on December 1,
1997.
77
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
SIX-MONTH PERIOD ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL HISTORICAL ------------------------
MCKESSON AMERISOURCE ADJUSTMENTS COMBINED
---------- ----------- ----------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues.................... $5,401.5 $2,782.1 $ $8,183.6
Costs and expenses
Cost of sales.............. 4,938.6 2,623.4 0.5 (1) 7,562.5
Selling, distribution and
administration............ 404.7(2) 104.7 509.4
Interest................... 21.1 19.0 40.1
-------- -------- ----- --------
Total..................... 5,364.4 2,747.1 0.5 8,112.0
-------- -------- ----- --------
Income before income taxes.. 37.1(2) 35.0 (0.5)(1) 71.6
Income taxes................ (32.7) (14.5) 0.2 (3) (47.0)
-------- -------- ----- --------
Income (loss) after taxes
Continuing operations...... 4.4(2) 20.5 (0.3)(1)(3) 24.6
Discontinued operations.... 5.6 5.6
Extraordinary item......... (7.2) (7.2)
-------- -------- ----- --------
Net income (loss).......... $ 10.0 $ 13.3 $(0.3) $ 23.0
======== ======== ===== ========
Earnings (loss) per common
share
Fully diluted
Continuing operations...... $ 0.10 $ 0.90 $ 0.41
Discontinued operations.... 0.12 0.09
Extraordinary item......... (0.32) (0.12)
-------- -------- --------
Total..................... $ 0.22 $ 0.58 $ 0.38
======== ======== ========
Primary
Continuing operations...... $ 0.10 $ 0.90 $ 0.41
Discontinued operations.... 0.12 0.09
Extraordinary item......... (0.32) (0.12)
-------- -------- --------
Total...................... $ 0.22 $ 0.58 $ 0.38
======== ======== ========
Shares on which earnings
(loss) per common share
were based
Fully diluted.............. 44.6 22.8 (6.6)(4) 60.8
Primary.................... 44.6 22.8 (6.6)(4) 60.8
Earnings (loss) per common
share--adjusted to reflect
McKesson Stock Split
Fully diluted
Continuing operations...... $ 0.05 $ 0.90 $ 0.20
Discontinued operations.... 0.06 0.05
Extraordinary item......... (0.32) (0.06)
-------- -------- --------
Total..................... $ 0.11 $ 0.58 $ 0.19
======== ======== ========
Primary
Continuing operations...... $ 0.05 $ 0.90 $ 0.20
Discontinued operations.... 0.06 0.05
Extraordinary item......... (0.32) (0.06)
-------- -------- --------
Total..................... $ 0.11 $ 0.58 $ 0.19
======== ======== ========
Shares on which earnings
(loss) per common share
were based
Fully diluted.............. 89.3 22.8 9.6 (5) 121.7
Primary.................... 89.2 22.8 9.6 (5) 121.6
</TABLE>
See Notes to Unaudited Pro Forma Combined Consolidated Financial Data of
McKesson and AmeriSource
- -------
(1) Reflects the estimated adjustment necessary to conform inventory
accounting policies of the separate companies.
(2) Includes a $48.2 million write-off for in-process technology related to
the acquisition of McKesson Automated Healthcare, Inc.
(3) Adjusts the historical provision for income taxes to give effect to the
pro forma adjustment discussed above.
(4) Reflects the effect of the Exchange Ratio of 0.71 of a share of McKesson
Common Stock for each share of AmeriSource Common Stock.
(5) Reflects the effect of the Exchange Ratio of 1.42 shares of McKesson
Common Stock for each share of AmeriSource Common Stock after giving
effect to the McKesson two-for-one stock split declared October 29, 1997,
distributable January 2, 1998 to stockholders of record on December 1,
1997.
78
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FISCAL YEAR ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL HISTORICAL -------------------------
MCKESSON AMERISOURCE ADJUSTMENTS COMBINED
---------- ----------- ----------- ---------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues................... $12,886.7 $6,439.5 $ $19,326.2
Costs and expenses
Cost of sales............. 11,849.4 6,105.9 (1) 3.1 (2) 17,958.4
Selling, distribution and
administration........... 944.5 (3) 225.9 1,170.4
Interest.................. 55.7 37.3 93.0
--------- -------- ----- ---------
Total................... 12,849.6 6,369.1 3.1 19,221.8
--------- -------- ----- ---------
Income before income taxes
and dividends on convert-
ible preferred securities
of subsidiary trust....... 37.1 (3) 70.4 (1) (3.1)(2) 104.4
Income taxes............... (31.3) (21.8)(4) 1.2 (5) (51.9)
Dividends on convertible
preferred securities of
subsidiary trust, net of
tax benefit............... (0.7) (0.7)
--------- -------- ----- ---------
Income (loss) after taxes
Continuing operations..... 5.1 (3) 48.6 (1)(4) (1.9)(2)(5) 51.8
Discontinued operations... 8.6 8.6
Discontinued operations--
gain on sale............. 120.2 120.2
Extraordinary item........ (9.2) (9.2)
--------- -------- ----- ---------
Net income.............. $ 133.9 $ 39.4 $(1.9) $ 171.4
========= ======== ===== =========
Earnings (loss) per common
share
Fully diluted
Continuing operations..... $ 0.13 $ 2.03 $ 0.84
Discontinued operations... 0.19 0.14
Discontinued operations--
gain on sale............. 2.66 1.94
Extraordinary item........ (0.39) (0.15)
--------- -------- ---------
Total................... $ 2.98 $ 1.64 $ 2.77
========= ======== =========
Primary
Continuing operations..... $ 0.12 $ 2.03 $ 0.84
Discontinued operations... 0.19 0.14
Discontinued operations--
gain on sale............. 2.70 1.96
Extraordinary item........ (0.38) (0.15)
--------- -------- ---------
Total................... $ 3.01 $ 1.65 $ 2.79
========= ======== =========
Shares on which earnings
(loss) per common share
were based
Fully diluted............. 45.1 24.0 (7.0)(6) 62.1
Primary................... 44.5 23.9 (6.9)(6) 61.5
Earnings (loss) per common
share--adjusted to reflect
McKesson Stock Split
Fully diluted
Continuing operations..... $ 0.06 $ 2.03 $ 0.42
Discontinued operations... 0.10 0.07
Discontinued operations--
gain on sale............. 1.33 0.97
Extraordinary item........ (0.39) (0.08)
--------- -------- ---------
Total................... $ 1.49 $ 1.64 $ 1.38
========= ======== =========
Primary
Continuing operations..... $ 0.06 $ 2.03 $ 0.42
Discontinued operations... 0.10 0.07
Discontinued operations--
gain on sale............. 1.35 0.98
Extraordinary item........ (0.38) (0.08)
--------- -------- ---------
Total................... $ 1.51 $ 1.65 $ 1.39
========= ======== =========
Shares on which earnings
(loss) per common share
were based
Fully diluted........... 90.2 24.0 10.1 (7) 124.3
Primary................. 89.1 23.9 10.0 (7) 123.0
</TABLE>
See Notes to Unaudited Pro Forma Combined Consolidated Financial Data of
McKesson and AmeriSource
- --------
(1) Includes a one-time, cumulative non-cash charge of $10.9 million, $7.1
million after-tax.
(2) Reflects the estimated adjustment necessary to conform inventory
accounting policies of the separate companies.
(3) Includes $98.8 million in charges for restructuring, asset impairment and
other operating items and $48.2 million for the write-off of in-process
technology related to the acquisition of McKesson Automated Healthcare,
Inc., $109.5 million after-tax in the aggregate.
(4) Reflects a reduction of $7.1 million due to a favorable settlement of an
Internal Revenue Service audit.
(5) Adjusts the historical provision for income taxes to give effect to the
pro forma adjustment discussed above.
(6) Reflects the effect of the Exchange Ratio of 0.71 of a share of McKesson
Common Stock for each share of AmeriSource Common Stock.
(7) Reflects the effect of the Exchange Ratio of 1.42 shares of McKesson
Common Stock for each share of AmeriSource Common Stock after giving
effect to the McKesson two-for-one stock split declared October 29, 1997,
distributable January 2, 1998 to stockholders of record on December 1,
1997.
79
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FISCAL YEAR ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL HISTORICAL -------------------------
MCKESSON AMERISOURCE ADJUSTMENTS COMBINED
---------- ----------- ----------- ---------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues..................... $9,953.7 $5,006.4 $ $14,960.1
Costs and expenses
Cost of sales............... 9,038.2 4,721.0 2.3 (1) 13,761.5
Selling, distribution and
administration............. 674.2 183.2 857.4
Interest.................... 44.4 39.3 83.7
-------- -------- ----- ---------
Total...................... 9,756.8 4,943.5 2.3 14,702.6
-------- -------- ----- ---------
Income before income taxes... 196.9 62.9 (2.3)(1) 257.5
Income taxes................. (76.2) (23.3) 0.9 (2) (98.6)
-------- -------- ----- ---------
Income (loss) after taxes
Continuing operations....... 120.7 39.6 (1.4)(1)(2) 158.9
Discontinued operations..... 14.7 14.7
Extraordinary item.......... (6.2) (6.2)
-------- -------- ----- ---------
Net income................. $ 135.4 $ 33.4 $(1.4) $ 167.4
======== ======== ===== =========
Earnings (loss) per common
share
Fully diluted
Continuing operations....... $ 2.59 $ 1.77 $ 2.54
Discontinued operations..... 0.31 0.24
Extraordinary item.......... (0.27) (0.10)
-------- -------- ---------
Total...................... $ 2.90 $ 1.50 $ 2.68
======== ======== =========
Primary
Continuing operations....... $ 2.59 $ 1.79 $ 2.54
Discontinued operations..... 0.31 0.24
Extraordinary item.......... (0.28) (0.10)
-------- -------- ---------
Total...................... $ 2.90 $ 1.51 $ 2.68
======== ======== =========
Shares on which earnings
(loss) per common share
were based
Fully diluted............... 46.7 22.3 (6.5)(3) 62.5
Primary..................... 46.6 22.2 (6.4)(3) 62.4
Earnings (loss) per common
share--adjusted to reflect
McKesson Stock Split
Fully diluted
Continuing operations....... $ 1.29 $ 1.77 $ 1.27
Discontinued operations..... 0.16 0.12
Extraordinary item.......... (0.27) (0.05)
-------- -------- ---------
Total...................... $ 1.45 $ 1.50 $ 1.34
======== ======== =========
Primary
Continuing operations....... $ 1.29 $ 1.79 $ 1.27
Discontinued operations..... 0.16 0.12
Extraordinary item.......... -- (0.28) (0.05)
-------- -------- ---------
Total...................... $ 1.45 $ 1.51 $ 1.34
======== ======== =========
Shares on which earnings
(loss) per common share
were based
Fully diluted............... 93.5 22.3 9.5 (4) 125.2
Primary..................... 93.3 22.2 9.3 (4) 124.8
</TABLE>
See Notes to Unaudited Pro Forma Combined Consolidated Financial Data of
McKesson and AmeriSource
- --------
(1) Reflects the estimated adjustment necessary to conform inventory
accounting policies of the separate companies.
(2) Adjusts the historical provision for income taxes to give effect to the
pro forma adjustment discussed above.
(3) Reflects the effect of the Exchange Ratio of 0.71 of a share of McKesson
Common Stock for each share of AmeriSource Common Stock.
(4) Reflects the effect of the Exchange Ratio of 1.42 shares of McKesson
Common Stock for each share of AmeriSource Common Stock after giving
effect to the McKesson two-for-one stock split declared October 29, 1997,
distributable January 2, 1998 to stockholders of record on December 1,
1997.
80
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FISCAL YEAR ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL HISTORICAL ---------------------------
MCKESSON AMERISOURCE ADJUSTMENTS COMBINED
---------- ----------- ----------- ---------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues................... $9,438.7 $4,435.9 $ $13,874.6
Costs and expenses
Cost of sales............. 8,630.5 (1) 4,184.3 1.8 (2) 12,816.6
Selling, distribution and
administration........... 817.2 (1) 345.2 (3) 1,162.4
Interest.................. 44.5 62.5 107.0
-------- -------- --------- ---------
Total................... 9,492.2 4,592.0 1.8 14,086.0
-------- -------- --------- ---------
Loss before taxes.......... (53.5)(1) (156.1)(3) (1.8)(2) (211.4)
Income taxes............... (96.6)(4) (15.1) 0.7 (5) (111.0)
-------- -------- --------- ---------
Income (loss) after taxes
Continuing operations..... (150.1)(1)(4) (171.2)(3) (1.1)(2)(5) (322.4)
Discontinued operations... (23.1) (23.1)
Discontinued operations--
gains on sale/donation... 577.7 577.7
Extraordinary item........ (11.9) (11.9)
-------- -------- --------- ---------
Net income (loss)....... $ 404.5 $ (183.1) $ (1.1) $ 220.3
======== ======== ========= =========
Earnings (loss) per common
share
Fully diluted
Continuing operations..... $ (3.34) $ (11.60) $ (5.79)
Discontinued operations... (0.51) (0.41)
Discontinued operations--
gains on sale/donation... 12.71 10.31
Extraordinary item........ (0.81) (0.21)
-------- -------- ---------
Total................... $ 8.86 $ (12.41) $ 3.90
======== ======== =========
Primary
Continuing operations..... $ (3.52) $ (11.60) $ (6.02)
Discontinued operations... (0.53) (0.43)
Discontinued operations--
gains on sale/donation... 13.25 10.68
Extraordinary item........ (0.81) (0.22)
-------- -------- ---------
Total................... $ 9.20 $ (12.41) $ 4.01
======== ======== =========
Shares on which earnings
(loss) per common share
were based
Fully diluted............. 45.5 14.8 (4.3)(6) 56.0
Primary................... 43.6 14.8 (4.3)(6) 54.1
Earnings (loss) per common
share--adjusted to reflect
McKesson Stock Split
Fully diluted
Continuing operations..... $ (1.67) $ (11.60) $ (2.90)
Discontinued operations... (0.25) (0.21)
Discontinued operations--
gains on sale/donation... 6.35 5.16
Extraordinary item........ (0.81) (0.10)
-------- -------- ---------
Total................... $ 4.43 $ (12.41) $ 1.95
======== ======== =========
Primary
Continuing operations..... $ (1.76) $ (11.60) $ (3.01)
Discontinued operations... (0.27) (0.21)
Discontinued operations--
gains on sale/donation... 6.63 5.34
Extraordinary item........ (0.81) (0.11)
-------- -------- ---------
Total................... $ 4.60 $ (12.41) $ 2.01
======== ======== =========
Shares on which earnings
(loss) per
common share were based
Fully diluted............. 90.9 14.8 6.2 (7) 111.9
Primary................... 87.1 14.8 6.2 (7) 108.1
</TABLE>
See Notes to Unaudited Pro Forma Combined Consolidated Financial Data of
McKesson and AmeriSource
- --------
(1) Includes $59.4 million in compensation costs (included in administration
expense) related to the sale of PCS and $139.5 million in charges for
asset impairment, restructuring and other operating items ($35.9 million
included in cost of sales and $103.6 million included in administration
expense), $130.6 million after-tax in the aggregate.
(2) Reflects the estimated adjustment necessary to conform inventory
accounting policies of the separate companies.
(3) Includes a $179.8 million write-off of goodwill.
(4) Includes $107.0 million of income tax expense related to the sale of PCS.
(5) Adjusts the historical provision for income taxes to give effect to the
pro forma adjustment discussed above.
(6) Reflects the effect of the Exchange Ratio of 0.71 of a share of McKesson
Common Stock for each share of AmeriSource Common Stock.
(7) Reflects the effect of the Exchange Ratio of 1.42 shares of McKesson
Common Stock for each share of AmeriSource Common Stock after giving
effect to the McKesson two-for-one stock split declared October 29, 1997,
distributable January 2, 1998 to stockholders of record on December 1,
1997.
81
<PAGE>
PRO FORMA COMBINED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA
MCKESSON AMERISOURCE ------------------------
AT SEPTEMBER 30, 1997 AT JUNE 30, 1997 ADJUSTMENTS COMBINED
--------------------- ---------------- ----------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equiva-
lents.................. $ 79.3 $ 92.4 $ $ 171.7
Marketable securities
available for sale..... 97.0 97.0
Receivables............. 1,332.8 490.6 1,823.4
Inventories............. 2,214.9 795.1 (7.5)(1) 3,002.5
Prepaid expenses........ 53.4 5.2 3.2 (2) 61.8
Property, plant and
equipment--net......... 385.7 65.5 451.2
Goodwill and other in-
tangibles.............. 750.2 35.9 786.1
Other assets............ 322.2 17.6 339.8
-------- -------- ----- --------
Total assets........... $5,235.5 $1,502.3 $(4.3) $6,733.5
======== ======== ===== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Drafts and accounts pay-
able................... $1,866.6 $ 874.3 $ 0.4 (1) $2,741.3
Short-term loans and
current portion of
long-term debt......... 399.4 399.4
Other current liabili-
ties................... 390.2 90.6 480.8
Postretirement obliga-
tions and noncurrent
liabilities............ 246.6 11.2 257.8
Long-term debt.......... 806.1 532.3 1,338.4
Convertible preferred
securities of subsidi-
ary grantor trust...... 195.1 195.1
Stockholders' equity
(deficit).............. 1,331.5 (6.1) (4.7)(1)(2) 1,320.7
-------- -------- ----- --------
Total liabilities and
stockholders' equity.. $5,235.5 $1,502.3 $(4.3) $6,733.5
======== ======== ===== ========
</TABLE>
See Notes to Unaudited Pro Forma Combined Consolidated Financial Data of
McKesson and AmeriSource
- --------
(1) Reflects the estimated adjustment necessary to conform inventory accounting
policies of the separate companies.
(2) Reflects the deferred taxes related to the pro forma adjustment discussed
above.
82
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL DATA OF MCKESSON
AND AMERISOURCE
1.MCKESSON AND AMERISOURCE HISTORICAL FISCAL YEARS
McKesson's fiscal year ends on March 31. AmeriSource's fiscal year ends on
September 30. For purposes of combining AmeriSource's historical financial
data with McKesson's historical financial data in the unaudited pro forma
combined consolidated financial data in this Joint Proxy Statement/Prospectus,
the financial information of AmeriSource has been reported using the twelve-
month periods ended March 31, 1997, 1996 and 1995. The pro forma combined
condensed statements of income for the six-month periods ended September 30,
1997 and 1996 include AmeriSource's operating results for the six-month
periods ended June 30, 1997 (the most recent results filed on Form 10-Q) and
1996, respectively. AmeriSource's operating results for the three months ended
March 31, 1997 and 1996 have been reported in both the pro forma combined
condensed statements of income for the fiscal years ended March 31, 1997 and
1996, and the pro forma combined condensed statements of income for the six-
month periods ended September 30, 1997 and 1996. For the three month periods
ended March 31, 1997 and 1996, AmeriSource's revenues were $1,785.5 million
and $1,362.1 million, respectively, and income from continuing operations was
$13.1 million and $10.1 million, respectively. The pro forma combined balance
sheet as of September 30, 1997 includes AmeriSource's balance sheet as of June
30, 1997, the most recent balance sheet filed on Form 10-Q.
Certain amounts in the historical financial statements of McKesson and
AmeriSource have been reclassified for the pro forma presentation.
Certain adjustments to the historical financial statements of AmeriSource
were necessary to conform inventory accounting policies of the separate
companies. Such preliminary estimated adjustments have been reflected in the
pro forma presentation.
2.MERGER EXPENSES
In connection with the Merger, the companies expect to incur charges between
$90 million and $110 million, after-tax, for merger and integration costs.
Merger costs include investment banking, legal, accounting and other related
costs and fees. Additionally, the companies expect to incur costs related to
the integration of the separate companies and the reconfiguration of the
distribution center network from 61 to 33 facilities. These costs include the
effect of certain employee severance arrangements, costs to exit certain
contractual relationships, revaluation of certain operating assets, and other
merger related and integration costs. These costs will be charged to expense
upon consummation of the merger, or in subsequent periods when incurred. Since
the merger has not yet been consummated, the merger expenses can only be
estimated at this time, and are subject to revision as further information
becomes available.
3.EARNINGS PER SHARE
The pro forma earnings per common share reflect the weighted average number
of shares of McKesson Common Stock that would have been outstanding had the
merger occurred at the beginning of the earliest period presented based upon
the Exchange Ratio of 0.71 of a share of McKesson Common Stock for each share
of AmeriSource Common Stock outstanding and the dilutive impact of McKesson
and AmeriSource stock options using the treasury stock method. All AmeriSource
Options are assumed to be converted into options for McKesson Common Stock at
the Exchange Ratio of 0.71 of a share of McKesson Common Stock for each share
of AmeriSource Stock before application of the treasury stock method. The pro
forma fully diluted earnings per common share for fiscal year 1997 and for the
six months ended September 30, 1997, reflect the assumed conversion of
McKesson's convertible preferred securities.
On October 29, 1997, McKesson declared a two-for-one split of the McKesson
Common Stock. The split will be distributable January 2, 1998 to stockholders
of record on December 1, 1997. Pro forma earnings per share, giving effect to
this split, have been presented in the accompanying Unaudited Pro Forma
Combined Consolidated Financial Data of McKesson and AmeriSource.
83
<PAGE>
EXPERTS
The consolidated financial statements of McKesson and the related financial
statement schedule incorporated in this Joint Proxy Statement/Prospectus by
reference from McKesson's Annual Report on Form 10-K for the year ended March
31, 1997 and the consolidated financial statements of FoxMeyer Corporation for
the year ended March 31, 1996 incorporated in this Joint Proxy
Statement/Prospectus by reference from McKesson's Current Report on Form 8-K/A
filed with the Commission on April 28, 1997 have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports incorporated
herein by reference (which report dated May 16, 1997 on McKesson's
consolidated financial statements expresses an unqualified opinion and which
report on FoxMeyer Corporation's consolidated financial statements dated June
28, 1996 (March 18, 1997 as to paragraph seven of Note Q), expresses an
unqualified opinion and includes an explanatory paragraph relating to the sale
of the principal assets of FoxMeyer Corporation and its Chapter 7 bankruptcy
filing). Such consolidated financial statements and financial statement
schedule have been so incorporated in reliance upon the reports of such firm
given upon their authority as experts in accounting and auditing.
The consolidated financial statements and schedules of AmeriSource at
September 30, 1996 and 1995, and for each of the three years in the period
ended September 30, 1996, incorporated by reference (from the 1996 AmeriSource
10-K) into this Joint Proxy Statement/Prospectus, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon in the
1996 AmeriSource Form 10-K and incorporated by reference herein. Such
consolidated financial statements and schedules are incorporated by reference
herein in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
LEGAL MATTERS
The validity of the McKesson Common Stock to be issued by McKesson pursuant
to the Merger will be passed upon by Fried, Frank, Harris, Shriver & Jacobson
(a partnership including professional corporations). Certain tax matters will
be passed upon by Dechert, Price & Rhoads. Barton J. Winokur, a partner of
Dechert, Price & Rhoads, which performs various legal services for
AmeriSource, is a director of AmeriSource and owns 29,750 shares of
AmeriSource Common Stock.
STOCKHOLDER PROPOSALS
Stockholder proposals for inclusion in the proxy statement of McKesson to be
issued in connection with the 1998 Annual Meeting of McKesson Stockholders
must be mailed to Ms. Nancy A. Miller, Vice President and Corporate Secretary,
McKesson Corporation, One Post Street, San Francisco, California 94104, and
must be received by the Corporate Secretary on or before February 19, 1998.
Proposals of stockholders of AmeriSource intended for presentation at the
annual meeting of stockholders to be held in 1998 had to be received by
AmeriSource on or before October 14, 1997 for inclusion in AmeriSource's proxy
statement with respect to such meeting.
AmeriSource expects to hold an annual meeting of stockholders in the first
calendar quarter of 1999 unless the Merger is completed prior to such period.
In the event that a stockholder desires to have a proposal included in the
proxy statement and form of proxy for the annual meeting of stockholders to be
held in 1999, the proposal must be received by AmeriSource in writing on or
before , 1998, by certified mail, return receipt requested, and must
comply in all respects with applicable rules and regulations of the
Commission, the DGCL, and the By-laws of AmeriSource relating to such
inclusion. Stockholder proposals may be mailed to the Secretary, AmeriSource
Health Corporation, P.O. Box 959, Valley Forge, PA 19482.
84
<PAGE>
APPENDIX A
MERGER AGREEMENT
INCLUDING AMENDMENT THERETO
<PAGE>
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
DATED AS OF
SEPTEMBER 22, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE I THE MERGER...................................................... A-1
1.1 The Merger........................................................ A-2
1.2 Effective Time; Closing........................................... A-2
1.3 Effects of the Merger............................................. A-2
1.4 Certificate of Incorporation and Bylaws........................... A-2
1.5 Directors and Officers of the Surviving Corporation............... A-2
ARTICLE II CONVERSION OF SECURITIES....................................... A-2
2.1 Conversion of Capital Stock....................................... A-2
2.2 Fractional Shares; Adjustments.................................... A-2
2.3 Exchange of Certificates.......................................... A-3
(a) Exchange Agent.................................................... A-3
(b) Exchange Procedures............................................... A-3
(c) Distributions with Respect to Unexchanged Shares.................. A-4
(d) No Further Ownership Rights in AmeriSource Common Stock........... A-4
(e) Termination of Exchange Fund...................................... A-4
(f) No Liability...................................................... A-4
(g) Investment of Exchange Fund....................................... A-4
(h) Missing Certificates.............................................. A-4
2.4 Treatment of Stock Options........................................ A-5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF AMERISOURCE................. A-5
3.1 Organization and Standing......................................... A-5
3.2 Subsidiaries...................................................... A-6
3.3 Corporate Power and Authority..................................... A-6
3.4 Capitalization of AmeriSource..................................... A-6
3.5 Conflicts; Consents and Approvals................................. A-7
3.6 No Material Adverse Change........................................ A-8
3.7 AmeriSource SEC Documents......................................... A-8
3.8 Taxes............................................................. A-8
3.9 Compliance with Law............................................... A-9
3.10 Intellectual Property............................................. A-10
3.11 Title to Properties............................................... A-10
3.12 Registration Statement; Joint Proxy Statement..................... A-10
3.13 Litigation........................................................ A-10
3.14 Brokerage and Finder's Fees; Expenses............................. A-10
3.15 Accounting Matters; Reorganization................................ A-11
3.16 Employee Benefit Plans............................................ A-11
3.17 Contracts......................................................... A-13
3.18 Labor Matters..................................................... A-13
3.19 Undisclosed Liabilities........................................... A-14
3.20 Operation of AmeriSource's Business; Relationships................ A-14
3.21 Permits; Compliance............................................... A-14
3.22 Environmental Matters............................................. A-14
3.23 Opinion of Financial Advisor...................................... A-15
3.24 Board Recommendation.............................................. A-15
3.25 Related Party Transactions........................................ A-15
3.26 Employee Agreements............................................... A-15
3.27 Rights Plan....................................................... A-15
</TABLE>
A-i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
3.28 Voting on Transaction.............................................. A-15
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB........ A-16
4.1 Organization and Standing.......................................... A-16
4.2 Subsidiaries....................................................... A-16
4.3 Corporate Power and Authority...................................... A-16
4.4 Capitalization of Parent ad Merger Sub............................. A-16
4.5 Conflicts; Consents and Approval................................... A-17
4.6 Brokerage and Finder's Fees........................................ A-17
4.7 Accounting Matters; Reorganization................................. A-17
4.8 Parent SEC Documents............................................... A-18
4.9 Registration Statement; Joint Proxy Statement...................... A-18
4.10 Compliance with Law................................................ A-18
4.11 Litigation......................................................... A-18
4.12 Board Recommendation............................................... A-19
4.13 No Material Adverse Change......................................... A-19
4.14 Title to Properties................................................ A-19
4.15 Undisclosed Liabilities............................................ A-19
4.16 Operation of Parent's Business; Relationships...................... A-19
4.17 Opinion of Financial Advisor....................................... A-19
4.18 Beneficial Ownership of Shares..................................... A-19
ARTICLE V COVENANTS OF THE PARTIES........................................ A-20
5.1 Mutual Covenants................................................... A-20
(a) HSR Act Filings; Best Efforts; Notification........................ A-20
(b) Pooling-of-Interests............................................... A-22
(c) Tax-Free Treatment................................................. A-22
(d) Public Announcements............................................... A-22
(e) Joint Proxy Statement; Registration Statement...................... A-22
5.2 Covenants of Parent................................................ A-22
(a) Parent Stockholders Meeting........................................ A-22
(b) Joint Proxy Statement; Registration Statement...................... A-22
(c) Conduct of Parent's Operations..................................... A-23
(d) Indemnification; Directors' and Officers' Insurance................ A-24
(e) Merger Sub......................................................... A-25
(f) NYSE Listing....................................................... A-25
(g) Access............................................................. A-25
(h) Board of Directors and Officers of Parent.......................... A-26
(i) Affiliates of Parent............................................... A-26
(j) Notification of Certain Matters.................................... A-26
(k) Employees and Employee Benefits.................................... A-26
(l) Letters of Parent's Accountants.................................... A-26
(m) Purchases of Common Stock of AmeriSource........................... A-26
(n) Registration Rights................................................ A-27
(o) Publishing Financial Results....................................... A-27
5.3 Covenants of AmeriSource........................................... A-27
(a) AmeriSource Stockholders Meeting................................... A-27
(b) Joint Proxy Statement; Registration Statement...................... A-27
(c) Conduct of AmeriSource's Operations................................ A-27
(d) No Solicitation.................................................... A-30
(e) Termination Right.................................................. A-31
(f) Affiliates of AmeriSource.......................................... A-31
</TABLE>
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<TABLE>
<CAPTION>
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<C> <S> <C>
(g) Access..................................................... A-32
(h) Notification of Certain Matters............................ A-32
(i) Subsequent Financial Statements............................ A-32
(j) Letters of AmeriSource's Accountants....................... A-32
ARTICLE VI CONDITIONS..................................................... A-33
6.1 Conditions to the Obligations of Each Party................ A-33
6.2 Conditions to Obligations of AmeriSource................... A-33
6.3 Conditions to Obligations of Parent and Merger Sub......... A-34
ARTICLE VII TERMINATION AND AMENDMENT..................................... A-35
7.1 Termination................................................ A-35
7.2 Effect of Termination...................................... A-37
7.3 Amendment.................................................. A-39
7.4 Extension; Waiver.......................................... A-39
ARTICLE VIII MISCELLANEOUS................................................ A-40
8.1 No Survival of Representations and Warranties.............. A-40
8.2 Notices.................................................... A-40
8.3 Interpretation; Definitions................................ A-40
8.4 Counterparts............................................... A-41
8.5 Entire Agreement........................................... A-41
8.6 Third Party Beneficiaries.................................. A-41
8.7 Governing Law.............................................. A-41
8.8 Specific Performance....................................... A-42
8.9 Assignment................................................. A-42
8.10 Expenses................................................... A-42
Exhibit A-1 Form of Patriot Affiliate Letter
Exhibit A-2 Form of Parent Affiliate Letter
</TABLE>
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<PAGE>
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 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
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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.
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
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<PAGE>
(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 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 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.
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<PAGE>
(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)
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 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,
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<PAGE>
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.
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.
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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, 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 (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
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<PAGE>
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 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.
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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 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 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
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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.
(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.
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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, 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, 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.
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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:
"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 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.
(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
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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 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.
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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 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
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.
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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 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
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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, 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 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.
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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.
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
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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 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; 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.
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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.
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.
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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 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.
(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.
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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 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
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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
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 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.
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(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 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
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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 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) (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);
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(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
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.
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(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 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.
(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.
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(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 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 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
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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 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 formed
entities, the revenues
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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 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);
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(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 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
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
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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 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
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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
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
letters delivered by independent accountants in connection with
registration statements similar to the Registration Statement.
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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 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:
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(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 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.
(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.
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(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;
(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;
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(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 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 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
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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);
(ii) (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;
(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
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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 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
(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
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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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<PAGE>
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
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),
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<PAGE>
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.
(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.
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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, 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.
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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<PAGE>
November 19, 1997
AmeriSource Health Corporation
300 Chester Field Parkway
Malvern, Pennsylvania 19355
Attn: Teresa T. Ciccotelli, Esq.
Ladies and Gentlemen:
Reference is made to the Agreement and Plan of Merger by and among McKesson
Corporation, Patriot Acquisition Corp. and AmeriSource Health Corporation
dated as of September 22, 1997 (the "Merger Agreement").
This letter is to confirm our agreement as to the following:
(i) the first sentence of Section 5.1(e) of the Merger Agreement is
hereby amended by deleting the words "on a confidential basis" therefrom;
and
(ii) the second sentence of Section 5.2(b) of the Merger Agreement is
hereby amended by deleting the words "as soon as is reasonably practicable
following clearance of the Joint Proxy Statement by the Commission"
therefrom and replacing them with the words "together with the Joint Proxy
Statement,".
Except as specifically modified by this letter agreement, the parties hereto
acknowledge that the Merger Agreement shall remain binding upon them, and all
provisions of the Merger Agreement shall remain in full force and effect. This
letter agreement may be executed in identical counterpart copies, each of
which shall be an original, but all of which taken together shall constitute
one and the same agreement. This letter agreement, to the extent signed and
delivered by means of a facsimile machine, shall be treated in all manner and
respects as an original and shall be considered to have the same binding
effect as if it were the original signed version thereof delivered in person.
Except as expressly provided herein, the execution, delivery and effectiveness
of this letter agreement shall not operate as a waiver of any right, power or
remedy by the parties hereto, nor shall it constitute a waiver of any
provision in the Merger Agreement.
If the foregoing accurately reflects your understanding, please sign this
letter agreement and the enclosed copy and return one of them to us whereupon
this letter agreement will constitute a binding agreement between you and us.
Sincerely yours,
McKESSON CORPORATION
/s/ Ivan D. Meyerson
By: _________________________________
Name: Ivan D. Meyerson
Title: Vice President
PATRIOT ACQUISITION CORP.
/s/ Ivan D. Meyerson
By: _________________________________
Name: Ivan D. Meyerson
Title: Executive Vice President
Agreed to and accepted as of
the date first above written:
AMERISOURCE HEALTH CORPORATION
/s/ Teresa T. Ciccotelli
By: ______________________________________
Name: Teresa T. Ciccotelli
Title: Vice President
CC: G. Daniel O'Donnell, Esq.
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<PAGE>
APPENDIX B
STOCK OPTION AGREEMENT
<PAGE>
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 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
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(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
(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.
(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
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<PAGE>
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."
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
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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 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 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
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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 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.
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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 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.
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
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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 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.
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IN WITNESS WHEREOF, each of the parties hereto has executed this option
Agreement as of the date first written above.
McKESSON CORPORATION
/s/ Ivan D. Meyerson
By: _________________________________
Name: Ivan D. Meyerson
Title: Vice President and General Counsel
AMERISOURCE HEALTH CORPORATION
/s/ David Yost
By: _________________________________
Name: David Yost
Title: President and Chief Executive Officer
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APPENDIX C
FAIRNESS OPINION OF PETER J. SOLOMON COMPANY LIMITED
<PAGE>
September 22, 1997
Board of Directors
McKesson Corporation
One Post Street
San Francisco, CA 94104
Ladies and Gentlemen:
We understand that McKesson Corporation ("McKesson") has entered into an
Agreement and Plan of Merger (the "Agreement"), dated as of September 22,
1997, by and among McKesson, Patriot Acquisition Corp., a wholly owned direct
subsidiary of McKesson ("Merger Sub"), and AmeriSource Health Corporation
("AmeriSource") pursuant to which Merger Sub will be merged with and into
AmeriSource (the "Merger") and AmeriSource will continue as the surviving
corporation and a wholly owned subsidiary of McKesson. Subject to the terms
and conditions of the Agreement, each issued and outstanding share of
AmeriSource's Class A common stock, par value $0.01 per share ("AmeriSource
Class A Stock"), AmeriSource's Class B common stock, par value $0.01 per share
("AmeriSource Class B Stock") and AmeriSource's Class C common stock, par
value $0.01 per share ("AmeriSource Class C Stock" and, with the AmeriSource
Class A Stock and the AmeriSource Class B Stock, the "AmeriSource Common
Stock") will be converted into and represent the right to receive 0.71 shares
(the "Exchange Ratio") of common stock, par value $0.01 per share, of McKesson
("McKesson Common Stock").
You have asked us to advise you with respect to the fairness of the Exchange
Ratio to McKesson from a financial point of view.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of McKesson and AmeriSource, respectively;
(ii) reviewed certain internal financial statements and other financial
and operating data concerning McKesson and AmeriSource prepared by the
management of McKesson and AmeriSource, respectively;
(iii) reviewed certain financial projections for McKesson and
AmeriSource, including estimates of certain potential benefits of the
proposed business combination, prepared by the management of McKesson and
AmeriSource, respectively;
(iv) discussed the past and current operations, financial condition and
prospects of McKesson and AmeriSource with management of McKesson and
AmeriSource, respectively;
(v) reviewed the reported prices and trading activity of McKesson Common
Stock and AmeriSource Common Stock;
(vi) compared the financial performance and condition of McKesson and
AmeriSource and the reported prices and trading activity of McKesson Common
Stock and AmeriSource Common Stock with that of certain other comparable
publicly traded companies;
(vii) reviewed publicly available information regarding the financial
terms of certain transactions comparable, in whole or in part, to the
Merger;
(viii) participated in certain discussions among representatives of each
of McKesson and AmeriSource;
(ix) reviewed the Agreement; and
(x) performed such other analyses as we have deemed appropriate.
We have assumed and relied upon the accuracy and completeness of the
information reviewed by us for the purposes of this opinion and we have not
assumed any responsibility for independent verification of such information.
With respect to the financial projections, including the estimates made by
McKesson's and
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AmeriSource's management of certain potential benefits of the proposed
business combination, we have assumed that the financial projections were
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the future financial performance of McKesson and AmeriSource,
respectively. We have not assumed any responsibility for any independent
valuation or appraisal of the assets or liabilities of McKesson or
AmeriSource, nor have we been furnished with any such valuation or appraisal.
Our opinion is necessarily based on economic, market and other conditions as
in effect on, and the information made available to us as of September 19,
1997.
We have acted as financial advisor to McKesson in connection with this
transaction and will receive a fee for our services, portions of which are
contingent upon closing of the Merger and the delivery of this opinion. In the
past, we have provided financial advisory services to McKesson and have
received fees for rendering these services.
This letter is solely for the information of the Board of Directors of
McKesson and is not on behalf of and is not intended to confer rights or
remedies upon any other entity or persons, and may not be used for any other
purpose without our prior written consent. This letter does not constitute a
recommendation to any holder of McKesson Common Stock as to how any such
holder should vote on the Merger.
Based on, and subject to, the foregoing, we are of the opinion that on the
date hereof, the Exchange Ratio is fair to McKesson from a financial point of
view.
Very truly yours,
/s/ Peter J. Solomon Company Limited
_____________________________________
PETER J. SOLOMON COMPANY LIMITED
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APPENDIX D
FAIRNESS OPINION OF GOLDMAN, SACHS & CO.
<PAGE>
PERSONAL AND CONFIDENTIAL
September 22, 1997
Board of Directors
AmeriSource Health Corporation
300 Chester Field Parkway
Malvern, Pennsylvania 19355
Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of Common Stock, par value $0.01
per share (the "Shares"), of AmeriSource Health Corporation (the "Company") of
the exchange ratio of 0.71 shares (the "Exchange Ratio") of Common Stock, par
value $0.01 per share (the "McKesson Common Stock"), of McKesson Corporation
("McKesson") to be received for each Share pursuant to the Agreement and Plan
of Merger, dated as of September 22, 1997, among McKesson, Patriot Acquisition
Corp., a wholly-owned direct subsidiary of McKesson, and the Company (the
"Agreement").
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and other
purposes. We are familiar with the Company having provided certain investment
banking services to the Company from time to time, including acting as an
underwriter of the public offering of 4.5 million Shares in May 1996, and
having acted as its financial advisor in connection with the Agreement.
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Annual Reports to Stockholders and Annual Reports on Form 10-K
of the Company for the two fiscal years ended September 30, 1996; the Annual
Reports on Form 10-K of AmeriSource Distribution Corporation (the predecessor
corporation to the Company) for the fiscal year ended September 30, 1994; the
Annual Reports on Form 10-K of Alco Health Distribution Corporation (the
predecessor corporation to AmeriSource Distribution Corporation) for the two
fiscal years ended September 30, 1993; the Annual Reports to Stockholders and
Annual Reports on Form 10-K of McKesson for the five fiscal years ended March
31, 1997; certain interim reports to stockholders and Quarterly Reports on
Form 10-Q of the Company and McKesson; certain other communications from the
Company and McKesson to their respective stockholders; and certain internal
financial analyses and forecasts for the Company and McKesson prepared by
their respective managements. We also have held discussions with members of
the senior managements of the Company and McKesson regarding the strategic
rationale for, and the potential benefits of, the transaction contemplated by
the Agreement and the past and current business operations, financial
condition and future prospects of their respective companies. In addition, we
have reviewed the reported price and trading activity for the Shares and the
McKesson Common Stock, compared certain financial and stock market information
for the Company and McKesson with similar information for certain other
companies the securities of which are publicly traded, reviewed the financial
terms of certain recent business combinations in the drug distribution
industry specifically and in other industries generally and performed such
other studies and analyses as we considered appropriate.
We have relied upon the accuracy and completeness of all of the financial
and other information reviewed by us and have assumed such accuracy and
completeness for purposes of rendering this opinion. In addition, we have not
made an independent evaluation or appraisal of the assets and liabilities of
the Company or McKesson or any of their subsidiaries and we have not been
furnished with any such evaluation or appraisal. We have
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assumed, with your consent, that the transaction contemplated by the Agreement
will be accounted for as a pooling of interests under generally accepted
accounting principles. Our advisory services and the opinion expressed herein
are provided for the information and assistance of the Board of Directors of
the Company in connection with its consideration of the transaction
contemplated by the Agreement and such opinion does not constitute a
recommendation as to how any holder of Shares should vote with respect to such
transaction.
Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is our opinion that as of the date hereof the
Exchange Ratio pursuant to the Agreement is fair from a financial point of
view to the holders of the Shares.
Very truly yours,
/s/ Goldman, Sachs & Co.
-------------------------------------
GOLDMAN, SACHS & CO.
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APPENDIX E
VPI VOTING/SUPPORT AGREEMENT
<PAGE>
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
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
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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. 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
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.
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<PAGE>
(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 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 (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.
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<PAGE>
(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.
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
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<PAGE>
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
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 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.
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<PAGE>
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.
IN WITNESS WHEREOF, the parties have caused this agreement to be duly
executed as of the date first above written.
McKESSON CORPORATION
/s/ Ivan D. Meyerson
By___________________________________
/s/ Ivan D. Meyerson
By___________________________________
399 VENTURE PARTNERS, INC.
/s/ James A. Urry
By___________________________________
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<PAGE>
ANNEX A
<TABLE>
<CAPTION>
RECORD AND BENEFICIAL OWNER SECURITIES (IN NUMBER OF SHARES)
--------------------------- ------------------------------------ PERCENTAGE
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
14th Floor Zone 4
NY, NY 10022-4614
</TABLE>
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<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 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:
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<PAGE>
"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
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 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.
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<PAGE>
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
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<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.
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<PAGE>
APPENDIX F
FORM OF AMERISOURCE EXECUTIVE VOTING/SUPPORT AGREEMENT
<PAGE>
FORM OF VOTING/SUPPORT AGREEMENT
AGREEMENT, dated as of October 27, 1997 (this "Agreement"), among McKesson
Corporation, a Delaware corporation ("McKesson"), Patriot Acquisition Corp., a
Delaware corporation ("Merger Sub"), and (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, 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 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
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 he has not heretofore granted any irrevocable proxy with
respect to his 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 R. David Yost 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 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. Agreement Not to Transfer. The Stockholder agrees that he 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
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<PAGE>
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, provided that
the foregoing shall not prohibit the Stockholder from incurring a margin loan
from a bank or brokerage firm. The foregoing is in addition to the
Stockholder's obligations under Section 3(c).
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, 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 his best efforts to
cause such meeting to be held and completed on the date scheduled for such
meeting.
(c) The Stockholder will not, during the 30 days prior to the Effective
Time, sell, transfer or otherwise dispose of or reduce his risk (as
contemplated by the SEC Accounting Series Release No. 135) with respect to the
Shares or shares of Parent Common Stock that he may hold. Provided that
McKesson is not in breach of the provisions of Section 5(b), the Stockholder
will not sell, transfer or otherwise dispose of or reduce his risk (as
contemplated by SEC Accounting Series Release No. 135) with respect to any
Parent Common Stock received by him 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.
(d) 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.
(e) 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.
(f) The Stockholder will execute the AmeriSource Affiliate Letter promptly
upon request therefor, which letter shall be in the form attached to the
Merger Agreement as Exhibit A-1.
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 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 for liens, claims or charges arising from margin
loans from a bank or brokerage firm and 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 presently own
any options to purchase or rights to subscribe for or otherwise acquire any
other shares of AmeriSource Common Stock except as set forth in Annex A.
F-2
<PAGE>
(b) The Stockholder has full right, power and authority to execute and
deliver this Agreement and to perform all of his obligations hereunder.
(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.
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 (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. Termination. (a) This Agreement, other than the obligations set forth in
Sections 3(c), 3(e), 5(b) and 6, shall terminate at the Effective Time.
(b) This Agreement shall terminate (i) upon the termination of the Merger
Agreement pursuant to its terms or (ii) the occurrence of a Material Adverse
Amendment.
7. 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.
8. Expenses. Each of the parties hereto shall pay all costs and expenses
incurred by him or on his behalf in connection with the transactions
contemplated hereunder, including fees and expenses of his own financial
consultants, investment bankers, accountants and counsel, except as otherwise
provided herein.
9. 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,
F-3
<PAGE>
agreements or representations by or between the parties, written and oral,
with respect to the subject matter hereof and thereof.
10. 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.
11. 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
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 his
name on Annex A.
with a copy to
Drinker Biddle & Reath
1000 West Lakes Drive, Suite 300
Berwyn, Pennsylvania 19312
Attn.: Robert H. Strouse, Esq.
Telecopy No.: 610-993-8585
12. 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.
13. Specific Performance. The parties hereto agree that if for any reason
McKesson or the Stockholder shall have failed to perform their 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.
14. 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
F-4
<PAGE>
its respective address set forth in Section 11 shall be effective service of
process for any Action brought against him 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.
15. 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.
16. Duties. McKesson and Merger Sub acknowledge and agree that the
Stockholder has entered into this Agreement in his capacity as a stockholder
of AmeriSource and that this Agreement shall in no way restrict the
Stockholder in his capacity as an officer of AmeriSource and his performance
of his duties to AmeriSource and its stockholders.
17. Additional Shares. Notwithstanding the provisions of Section 15, 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, and Annex A will be deemed
amended accordingly. If the Stockholder acquires additional shares of
AmeriSource Common Stock, he shall promptly notify McKesson in writing of such
acquisition.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
McKesson Corporation
By: _________________________________
Name: Ivan D. Meyerson
Title: Vice President
Patriot Acquisition Corp.
By: _________________________________
Name: Ivan D. Meyerson
Title: Executive Vice President
Stockholder:
By: _________________________________
F-5
<PAGE>
ANNEX A
<TABLE>
<CAPTION>
SECURITIES (IN NUMBER OF SHARES)
------------------------------------
RECORD AND BENEFICIAL OWNER CLASS A CLASS B CLASS C
- --------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
<CAPTION>
OPTIONS TO ACQUIRE THE
FOLLOWING NUMBER OF SHARES
------------------------------------
RECORD AND BENEFICIAL OWNER CLASS A CLASS B CLASS C
- --------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
</TABLE>
F-6
<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 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 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-7
<PAGE>
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
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 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.
F-8
<PAGE>
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:_____________________________
F-9
<PAGE>
APPENDIX G
REGISTRATION RIGHTS AGREEMENT
<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 receive 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 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 a registration statement under Rule 415
G-1
<PAGE>
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 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-2
<PAGE>
(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 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 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
G-3
<PAGE>
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 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 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;
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(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), 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;
(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
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(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 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
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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 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 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
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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 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-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
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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 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
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which such holder or Requesting Holder or partner thereof or any such
director or officer or partner or agent or 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
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.
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(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 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 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
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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.
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 to 399 Venture 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 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, or (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
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<PAGE>
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
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 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
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<PAGE>
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, arrangements 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 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.
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<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
----------------------------------
399 VENTURE PARTNERS, INC.
By: /s/ James A. Urry
----------------------------------
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the DGCL provides that a corporation may indemnify directors
and officers as well as other employees and agents against expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement in
connection with specified actions, suits, proceedings whether civil, criminal,
administrative, or investigative (other than action by or in the right of the
corporation--a "derivative action"), if they acted in good faith and in a
manner they reasonably believed to be in or not opposed to the best interests
of the corporation and, with respect to any criminal action or proceeding, had
no reasonable cause to believe their conduct was unlawful. A similar standard
is applicable in the case of derivative actions, except that indemnification
only extends to expenses (including attorneys' fees) incurred in connection
with the defense or settlement of such action, and the statute requires court
approval before there can be any indemnification where the person seeking
indemnification has been found liable to the corporation. The statute provides
that it is not exclusive of other indemnification that may be granted by a
corporation's charter, by-laws, disinterested director vote, stockholder vote,
agreement, or otherwise.
The McKesson By-laws provide that each person who is involved in any actual
or threatened action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he or she is or
was a director or officer of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan, will
be indemnified by the corporation to the full extent permitted by the DGCL if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of McKesson. The indemnification rights
conferred by the McKesson By-laws are not exclusive of any other right to
which persons seeking indemnification may be entitled under any law, bylaw,
agreement, vote of stockholders or disinterested directors or otherwise.
Section 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability for (i) any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) payment of
unlawful dividends or unlawful stock purchases or redemptions, or (iv) any
transaction from which the director derived an improper personal benefit.
Article VI of McKesson's Certificate provides that to the full extent of the
DGCL, as it now exists or may hereafter be amended, no director of McKesson
shall be liable to McKesson or its stockholders for monetary damages for
breach of fiduciary duty as a director.
McKesson maintains directors' and officers' liability insurance which
provides for payment, on behalf of the directors and officers of McKesson and
its subsidiaries, of certain losses of such persons (other than matters
uninsurable under law) arising from claims, including claims arising under the
Act, for acts or omissions by such persons while acting as directors or
officers of McKesson and/or its subsidiaries, as the case may be.
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<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Set forth below is a list of the exhibits included as part of this
Registration Statement.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
2.1* Merger Agreement, dated as of September 22, 1997, among McKesson,
Merger Sub and AmeriSource (included as Appendix A to the Joint Proxy
Statement/Prospectus)
2.2* Letter Agreement, dated November 19, 1997, among McKesson, AmeriSource
and Merger Sub, amending the Merger Agreement (included in Appendix A
to the Joint Proxy Statement/Prospectus)
3.1 Restated Certificate of Incorporation of McKesson (Exhibit 3.1 (8))
3.2 Restated By-laws of McKesson, as amended through May 30, 1997 (Exhibit
3.1 (20))
4.1 Indenture, dated as of March 11, 1997, by and between McKesson, as
Issuer, and The First National Bank of Chicago, as Trustee (Exhibit
4.4 (19))
4.2 Rights Agreement, dated as of October 21, 1994, by and between
McKesson and First Chicago Trust Company of New York, as Rights Agent
(Exhibit 4.1 (4))
4.3 Amended and Restated Declaration of Trust of McKesson Financing Trust,
dated as of February 20, 1997, among McKesson, as Sponsor, The First
National Bank of Chicago, as Institutional Trustee, First Chicago
Delaware, Inc., as Delaware Trustee and William A. Armstrong, Ivan D.
Meyerson and Nancy A. Miller, as Regular Trustees (Exhibit 4.2 (15))
4.4 McKesson Corporation Preferred Securities Guarantee Agreement, dated
as of February 20, 1997, between McKesson, as Guarantor, and The First
National Bank of Chicago, as Preferred Guarantor Trustee (Exhibit 4.7
(13))
4.5 Registrant agrees to furnish to the Commission upon request a copy of
each instrument defining the rights of security holders with respect
to issues of long-term debt of the Registrant, the authorized
principal amount of which does not exceed 10% of the total assets of
the Registrant
5** Opinion of Fried, Frank, Harris, Shriver & Jacobson
8** Opinion of Dechert, Price & Rhoads re: tax matters
10.1* Stock Option Agreement, dated as of September 22, 1997, between
McKesson Corporation and AmeriSource Health Corporation (included as
Appendix B to the Joint Proxy Statement/Prospectus)
10.2* Voting/Support Agreement by and among McKesson Corporation, Patriot
Acquisition Corp. and 399 Venture Partners, Inc., dated September 22,
1997 (included as Appendix E to the Joint Proxy Statement/Prospectus)
10.3* Form of Voting/Support Agreement by and among McKesson Corporation,
Patriot Acquisition Corp. and certain executives of AmeriSource dated
October 27, 1997 (included as Appendix F to the Joint Proxy
Statement/Prospectus)
10.4* Registration Rights Agreement by and among McKesson Corporation, and
399 Venture Partners, Inc., dated September 22, 1997 (included as
Appendix G to the Joint Proxy Statement/Prospectus)
10.5* Employment Agreement, dated September 22, 1997, between McKesson and
R. David Yost
10.6* Employment Agreement, dated September 22, 1997, between McKesson and
David M. Flowers
10.7* Employment Agreement, dated September 22, 1997, between McKesson and
Kurt J. Hilzinger
10.8 Tax Sharing Agreement, dated as of July 10, 1994, among McKesson, the
predecessor to McKesson, ECO Acquisition Corporation and Ely Lilly and
Company (Exhibit 10.1 (1))
10.9 Non-Competition Agreement, dated as of July 10, 1994, between
McKesson, the predecessor to McKesson, Ely Lilly and Company and ECO
Acquisition Corporation (Exhibit 10.5 (1))
10.10** McKesson Corporation 1994 Stock Option and Restricted Stock Plan (as
amended through July 30, 1997)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.11 McKesson Corporation Supplemental PSIP (Exhibit 10.7 (2))
10.12 McKesson Corporation Deferred Compensation Administration Plan amended
as of March 30, 1994 (Exhibit 10.8 (2))
10.13** McKesson Corporation Deferred Compensation Administration Plan II (as
amended through October 29, 1997)
10.14 McKesson Corporation Directors' Deferred Compensation Plan (Exhibit
10.10 (2))
10.15 McKesson Corporation 1994 Option Gain Deferral Plan (Exhibit 10.12
(3))
10.16 McKesson Corporation Management Deferred Compensation Plan (Exhibit
10.14 (2))
10.17 McKesson Corporation 1984 Executive Benefit Retirement Plan as amended
through May 30, 1997 (Exhibit 10.14 (19))
10.18 McKesson Corporation 1988 Executive Survivor Benefits Plan (Exhibit
10.16 (2))
10.19 McKesson Corporation Executive Medical Plan Summary (Exhibit 10.17
(3))
10.20 McKesson Corporation 1988 Management Survivor Benefits Plan (Exhibit
10.18 (2))
10.21 McKesson Corporation Severance Policy for Executive Employees (amended
and restated as of May 31, 1996) (Exhibit 10.2 (9))
10.22** McKesson Corporation 1989 Management Incentive Plan (as amended
through October 29, 1997)
10.23 McKesson Corporation 1981 Long-Term Incentive Plan (as amended through
January 29, 1997) (Exhibit C (16))
10.24 McKesson Corporation Stock Purchase Plan (as amended and restated
through March 26, 1997) (Exhibit B (16))
10.25 Form of Termination Agreement by and between McKesson and certain
designated Executive Officers (Exhibit 10.23 (7))
10.26 Separation and Mutual General Release Agreement entered into as of
February 12, 1996, by and between McKesson and a former Executive
Officer (Exhibit 10.24 (8))
10.27 Form of Employment Agreement effective as of January 31, 1996, by and
between McKesson and corporate Vice President who is also President of
McKesson's Health Systems unit (Exhibit 10.1 (9))
10.28 Form of Employment Agreement, made effective as of May 20, 1996, by
and between McKesson and its President and Chief Operating Officer
(now Chief Executive Officer) (Exhibit 10.26 (19))
10.29 Agreement and Plan of Merger, dated as of November 26, 1996, by and
among Armor All Products Corporation, The Clorox Company and Shield
Acquisition Corporation (Exhibit 10.1 (11))
10.30 First Amendment to the Agreement and Plan of Merger, dated as of
December 1, 1996, by and among Armor All Products Corporation, The
Clorox Company and Shield Acquisition Corporation (Exhibit 10.2 (11))
10.31 Stockholder Agreement, dated as of November 26, 1996, by and among
McKesson, The Clorox Company and Shield Acquisition Corporation
(Exhibit 10.3 (11))
10.32** McKesson Corporation 1997 Non-Employee Directors' Equity Compensation
and Deferral Plan (as amended through October 29, 1997)
10.33 Form of Consulting Agreement, dated as of March 28, 1997, by and
between McKesson and its Chairman and former Chief Executive Officer
(Exhibit 10.32 (19))
10.34 Credit Agreement entered into as of March 31, 1995, among McKesson,
Medis Health and Pharmaceutical Services Inc., an indirect wholly-
owned subsidiary of McKesson, the several financial institutions from
time to time party to the agreement, Bank of America National Trust
and Savings Association, as Agent for the Banks, Chemical Bank, as Co-
Agent for the Banks and Bank of America Canada, as Canadian
Administrative Agent (the "1995 Credit Agreement") (Exhibit 10.25 (7))
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.35 Custodial Agreement Acknowledgment entered into as of March 31, 1995,
among McKesson and Bank of America National Trust and Savings
Association (the "Custodian") in its capacity as Custodian under the
Custodial Agreement and as Agent for the financial institutions from
time to time party to the 1995 Credit Agreement (Exhibit 10.26 (7))
10.36 Pledge Agreement entered into as of March 31, 1995, among McKesson
(the "Pledgor") and Bank of America National Trust and Savings
Association, as Agent for the financial institutions from time to time
party to the 1995 Credit Agreement (Exhibit 10.27 (7))
10.37 Guaranty entered into as of March 31, 1995, among McKesson (the
"Guarantor"), in favor of and for the benefit of Bank of America
National Trust and Savings Association, as Agent for and
representative of the financial institutions party to the 1995 Credit
Agreement (Exhibit 10.28 (7))
10.38 First Amendment to the 1995 Credit Agreement, dated as of August 31,
1995, among McKesson, Medis Health and Pharmaceutical Services Inc.,
an indirect wholly-owned subsidiary of McKesson, the several financial
institutions party to the 1995 Credit Agreement, Bank of America
Canada as Canadian Administrative Agent, Chemical Bank as co-agent for
the aforementioned financial institutions, the Bank of America
National Trust and Savings Association as agent for the aforementioned
financial institutions (Exhibit 10.37 (19))
10.39 Second Amendment to the 1995 Credit Agreement, dated as of April 10,
1996, among McKesson, Medis Health and Pharmaceutical Services Inc.,
an indirect wholly-owned subsidiary of McKesson, the several financial
institutions party to the 1995 Credit Agreement, Bank of America
Canada as Canadian Administrative Agent, The Chase Manhattan Bank as
co-agent for aforementioned financial institutions, and Bank of
America National Trust and Savings Association as agent for the
aforementioned financial institutions (Exhibit 10.38 (19))
10.40 Third Amendment to the 1995 Credit Agreement, dated as of November 4,
1996, among McKesson, Medis Health and Pharmaceutical Services Inc.,
an indirect wholly-owned subsidiary of McKesson, the several financial
institutions party to the 1995 Credit Agreement, Bank of America
Canada as Canadian Administrative Agent, The Chase Manhattan Bank as
co-agent for the aforementioned financial institutions, and Bank of
America National Trust and Savings Association as agent for the
aforementioned financial institutions (Exhibit 10.39 (19))
10.41 Pledge and Security Agreement entered into as of August 31, 1995,
among Macfor International Finance Company, a wholly-owned subsidiary
of McKesson, and Bank of America National Trust and Savings
Association, as agent for the several financial institutions from time
to time party to the 1995 Credit Agreement (Exhibit 10.40 (19))
10.42 Custody Agreement, dated as of August 14, 1995, between Bank of
America National Trust and Savings Association, as Custodian, and
Macfor International Finance Company, a wholly-owned subsidiary of
McKesson (Exhibit 10.41 (19))
10.43 Custodial Agreement Acknowledgement entered into as of August 31,
1995, between Macfor International Finance Company, a wholly-owned
subsidiary of McKesson, and Bank of America National Trust and Savings
Association, as custodian and as agent for the several financial
institutions from time to time party to the 1995 Credit Agreement
(Exhibit 10.42 (19))
10.44 Credit Agreement entered into as of November 4, 1996, among McKesson,
the several financial institutions from time to time party to the
agreement, The Chase Manhattan Bank as co-agent for the aforementioned
financial institutions, and Bank of America National Trust and Savings
Association as agent for the aforementioned financial institutions
(the "1996 Credit Agreement") (Exhibit 10.43 (19))
10.45 Letter Loan Agreement, dated as of February 21, 1997, between McKesson
and Bank of America National Trust and Savings Association (Exhibit
10.44 (19))
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.46** First Amendment to Credit Agreement, dated as of November 3, 1997,
among McKesson, the several financial institutions from time to time
party to the 1996 Credit Agreement, The Chase Manhattan Bank as co-
agent for the aforementioned financial institutions, and Bank of
America National Trust and Savings Association as agent for the
aforementioned financial institutions
10.47** Credit Agreement entered into as of November 21, 1997, among McKesson,
the several financial institutions from time to time party thereto,
and Bank of America National Trust and Savings Association as agent
for the financial institutions from time to time a party thereto
10.48 Restructuring and Distribution Agreement dated as of July 10, 1994, by
and among McKesson Corporation, a Maryland corporation ("Maryland"),
the predecessor to McKesson, Clinical Pharmaceuticals, Inc. ("CPI"),
PCS Health Systems, Inc. ("PCS") and McKesson (the "Distribution
Agreement") (Exhibit 2.1 (1))
10.49 Amendment, dated as of October 10, 1994, by and among the predecessor
to McKesson, Maryland, CPI, PCS and McKesson, which amends the
Distribution Agreement (Exhibit 2.2 (3))
10.50 Second Amendment, dated November 3, 1994, by and among the predecessor
to McKesson, Maryland, CPI, PCS and McKesson, which amends the
Distribution Agreement (Exhibit 2.5 (5))
10.51 Agreement and Plan of Merger, dated as of July 10, 1994, by and among
the predecessor to McKesson, Eli Lilly and Company and ECO Acquisition
Corporation (the "Merger Agreement") (Exhibit 2.3 (4))
10.52 Amendment, dated as of August 8, 1994, by and among the predecessor to
McKesson, ECO Acquisition Corporation and Eli Lilly and Company, which
amends the Merger Agreement dated July 10, 1994 (Exhibit 2.4 (5))
10.53 HDS Services Agreement, dated as of July 10, 1994, among ECO
Acquisition Corporation, PCS and Healthcare Delivery Systems, Inc.
(Exhibit 10.2 (1))
10.54 Asset Purchase Agreement, dated as of October 3, 1996, by and among
FoxMeyer Corporation, FoxMeyer Drug Company, Health Mart, Inc.,
FoxMeyer Software, Inc., FoxMeyer Funding, Inc., Healthcare
Transportation System, Inc. and Merchandise Coordinator Services
Corporation as Sellers, and McKesson, as Purchaser and FoxMeyer Health
Corporation (Exhibit 2.1 (10))
10.55 First Amendment and Waiver to the Asset Purchase Agreement, dated as
of November 7, 1996, by and among FoxMeyer Health Corporation,
FoxMeyer Corporation, FoxMeyer Drug Company, Healthcare Transportation
System, Inc., FoxMeyer Software, Inc., FoxMeyer Funding, Inc., Health
Mart, Inc., Merchandise Coordinator Services Corporation d/b/a
FoxMeyer Trading Company, and McKesson (Exhibit 2.2 (10))
10.56 Agreement and Plan of Merger, dated as of January 28, 1997, by and
among General Medical Inc., McKesson, Spider Acquisition Corporation
and certain stockholders named therein (Exhibit 2.1 (12))
21 List of Subsidiaries of McKesson (Exhibit 21 (19))
23.1** Consent of Ernst & Young LLP, independent auditors for AmeriSource
Health Corporation
23.2** Consent of Deloitte & Touche LLP, independent auditors for McKesson
Corporation
23.3** Consent of Peter J. Solomon Company Limited
23.4** Consent of Goldman, Sachs & Co.
23.5** Consent of Dechert, Price & Rhoads
23.6** Consent of Fried, Frank, Harris, Shriver & Jacobson
24* Power of Attorney
99.1 Registration Rights Agreement, dated as of March 11, 1997, among
McKesson and the Initial Purchasers (Exhibit 10.1 (6))
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
99.2* Opinion of Peter J. Solomon Company Limited, financial advisor of
McKesson (included as Appendix C to the Joint Proxy
Statement/Prospectus)
99.3* Opinion of Goldman, Sachs & Co., financial advisor of AmeriSource
Health Corporation (included as Appendix D to the Joint Proxy
Statement/Prospectus)
</TABLE>
- --------
* Filed herewith.
** To be filed by amendment to this Registration Statement.
<TABLE>
<C> <S>
(1) Incorporated by reference to designated exhibit to McKesson's
Registration Statement on Form 10 filed with the Commission on July 27,
1994, File No. 1-13252.
(2) Incorporated by reference to designated exhibit to Amendment No. 1 to
McKesson's Registration Statement on Form 10 filed with the Commission on
August 26, 1994, File No. 1-13252.
(3) Incorporated by reference to designated exhibit to Amendment No. 2 to
McKesson's Registration Statement on Form 10 filed with the Commission on
October 11, 1994, File No. 1-13252.
(4) Incorporated by reference to designated exhibit to Amendment No. 3 to
McKesson's Registration Statement on Form 10 filed with the Commission on
October 27, 1994, File No. 1-13252.
(5) Incorporated by reference to designated exhibit to Amendment No. 4 to
McKesson's Registration Statement on Form 10 filed with the Commission on
November 7, 1994, File No. 1-13252.
(6) Incorporated by reference to designated exhibit to McKesson's definitive
Proxy Statement dated June 9, 1995 for the Annual Meeting of Stockholders
held on July 26, 1995.
(7) Incorporated by reference to designated exhibit to McKesson's Annual
Report on Form 10-K for the fiscal year ended March 31, 1995, File No. 1-
13252.
(8) Incorporated by reference to designated exhibit to McKesson's Annual
Report on Form 10-K for the fiscal year ended March 31, 1996, as amended
by Amendment No. 1 on Form 10-K/A, filed on February 13, 1997, File No.
1-13252.
(9) Incorporated by reference to designated exhibit to McKesson's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1996, File No. 1-
13252.
(10) Incorporated by reference to designated exhibit to McKesson's Current
Report on Form 8-K filed with the Commission on November 22, 1996, File
No. 1-13252.
(11) Incorporated by reference to designated exhibit to McKesson's Current
Report on Form 8-K filed with the Commission on December 10, 1996, File
No. 1-13252.
(12) Incorporated by reference to designated exhibit to McKesson's Current
Report on Form 8-K filed with the Commission on February 5, 1997, File
No. 1-13252.
(13) Incorporated by reference to designated exhibit to McKesson's
Registration Statement on Form S-3 filed with the Commission on May 2,
1997, Registration No. 333-26443.
(14) Incorporated by reference to designated exhibit to Amendment No. 1 to
McKesson's Registration Statement on Form S-3 filed with the Commission
on June 9, 1997, Registration No. 333-26103.
(15) Incorporated by reference to designated exhibit to Amendment No. 1 to
McKesson's Registration Statement on Form S-3 filed with the Commission
on June 18, 1997, Registration No. 333-26443.
(16) Incorporated by reference to designated exhibit to McKesson's definitive
Proxy Statement dated June 18, 1997, for the Annual Meeting of
Stockholders to be held on July 30, 1997.
(17) Incorporated by reference to designated exhibit to Amendment No. 1 to
McKesson's Registration Statement on Form S-4 filed with the Commission
on July 22, 1997.
(18) Incorporated by reference to designated exhibit to McKesson's
Registration Statement on Form S-4 filed with the Commission on July 8,
1997.
(19) Incorporated by reference to designated exhibit to McKesson's Annual
Report on Form 10-K for the fiscal year ended March 31, 1997, File No. 1-
13252.
(20) Incorporated by reference to designated exhibit to McKesson's Current
Report on Form 8-K dated June 24, 1997.
</TABLE>
II-6
<PAGE>
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this registration statement; notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) under the Securities Act of
1933 if, in the aggregate, the changes in volume and price represent no
more than a 20% change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or
any material change to such information in this registration statement;
provided, however, that the undertakings set forth in paragraphs (1)(i) and
(ii) above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed by the registrants pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference in
this registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof;
(3) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the Registration Statement through the date of responding
to the request;
(4) That, prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items
of the applicable form;
(5) That every prospectus (i) that is filed pursuant to paragraph (6)
immediately preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof;
II-7
<PAGE>
(6) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the Registration Statement when
it became effective; and
(7) To deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule
14c-3 under the Securities Exchange Act of 1934; and, where interim
financial information required to be presented by Article 3 of Regulation
S-X are not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the
latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of
the registrants pursuant to the foregoing provisions or otherwise, the
registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrants of expenses incurred or paid by a director, officer, or
controlling person of the registrants in the successful defense of any action,
suit, or proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the registrants
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
questions whether such indemnification by them is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Francisco, State of
California, on November 19, 1997.
McKESSON CORPORATION
*
By: _________________________________
Mark A. Pulido
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities indicated
on November 19, 1997
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
* President and Chief Executive Officer and
____________________________________ Director
Mark A. Pulido
* Vice President and Chief Financial
____________________________________ Officer
Richard H. Hawkins
* Controller
____________________________________
Heidi E. Yodowitz
* Director, Chairman of the Board
____________________________________
Alan Seelenfreund
* Director
____________________________________
Mary G.F. Bitterman
* Director
____________________________________
Tully M. Friedman
* Director
____________________________________
John M. Pietruski
* Director
____________________________________
David S. Pottruck
* Director
____________________________________
Carl E. Reichardt
</TABLE>
II-9
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
* Director
____________________________________
Jane E. Shaw
* Director
____________________________________
Robert H. Waterman, Jr.
</TABLE>
/s/ Ivan D. Meyerson
*By: __________________________
Ivan D. Meyerson
Attorney in Fact
II-10
<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
2.1* Merger Agreement, dated as of September 22, 1997, among McKesson,
Merger Sub and AmeriSource (included as Appendix A to the Joint Proxy
Statement/Prospectus)
2.2* Letter Agreement, dated November 19, 1997, among McKesson, AmeriSource
and Merger Sub, amending the Merger Agreement (included in Appendix A
to the Joint Proxy Statement/Prospectus)
3.1 Restated Certificate of Incorporation of McKesson (Exhibit 3.1 (8))
3.2 Restated By-laws of McKesson, as amended through May 30, 1997 (Exhibit
3.1 (20))
4.1 Indenture, dated as of March 11, 1997, by and between McKesson, as
Issuer, and The First National Bank of Chicago, as Trustee (Exhibit
4.4 (19))
4.2 Rights Agreement, dated as of October 21, 1994, by and between
McKesson and First Chicago Trust Company of New York, as Rights Agent
(Exhibit 4.1 (4))
4.3 Amended and Restated Declaration of Trust of McKesson Financing Trust,
dated as of February 20, 1997, among McKesson, as Sponsor, The First
National Bank of Chicago, as Institutional Trustee, First Chicago
Delaware, Inc., as Delaware Trustee and William A. Armstrong, Ivan D.
Meyerson and Nancy A. Miller, as Regular Trustees (Exhibit 4.2 (15))
4.4 McKesson Corporation Preferred Securities Guarantee Agreement, dated
as of February 20, 1997, between McKesson, as Guarantor, and The First
National Bank of Chicago, as Preferred Guarantor Trustee (Exhibit 4.7
(13))
4.5 Registrant agrees to furnish to the Commission upon request a copy of
each instrument defining the rights of security holders with respect
to issues of long-term debt of the Registrant, the authorized
principal amount of which does not exceed 10% of the total assets of
the Registrant
5** Opinion of Fried, Frank, Harris, Shriver & Jacobson
8** Opinion of Dechert, Price & Rhoads re: tax matters
10.1* Stock Option Agreement, dated as of September 22, 1997, between
McKesson Corporation and AmeriSource Health Corporation (included as
Appendix B to the Joint Proxy Statement/Prospectus)
10.2* Voting/Support Agreement by and among McKesson Corporation, Patriot
Acquisition Corp. and 399 Venture Partners, Inc., dated September 22,
1997 (included as Appendix E to the Joint Proxy Statement/Prospectus)
10.3* Form of Voting/Support Agreement by and among McKesson Corporation,
Patriot Acquisition Corp. and certain executives of AmeriSource dated
October 27, 1997 (included as Appendix F to the Joint Proxy
Statement/Prospectus)
10.4* Registration Rights Agreement by and among McKesson Corporation, and
399 Venture Partners, Inc., dated September 22, 1997 (included as
Appendix G to the Joint Proxy Statement/Prospectus)
10.5* Employment Agreement, dated September 22, 1997, between McKesson and
R. David Yost
10.6* Employment Agreement, dated September 22, 1997, between McKesson and
David M. Flowers
10.7* Employment Agreement, dated September 22, 1997, between McKesson and
Kurt J. Hilzinger
10.8 Tax Sharing Agreement, dated as of July 10, 1994, among McKesson, the
predecessor to McKesson, ECO Acquisition Corporation and Ely Lilly and
Company (Exhibit 10.1 (1))
10.9 Non-Competition Agreement, dated as of July 10, 1994, between
McKesson, the predecessor to McKesson, Ely Lilly and Company and ECO
Acquisition Corporation (Exhibit 10.5 (1))
10.10** McKesson Corporation 1994 Stock Option and Restricted Stock Plan (as
amended through July 30, 1997)
10.11 McKesson Corporation Supplemental PSIP (Exhibit 10.7 (2))
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.12 McKesson Corporation Deferred Compensation Administration Plan amended
as of March 30, 1994 (Exhibit 10.8 (2))
10.13** McKesson Corporation Deferred Compensation Administration Plan II (as
amended through October 29, 1997)
10.14 McKesson Corporation Directors' Deferred Compensation Plan (Exhibit
10.10 (2))
10.15 McKesson Corporation 1994 Option Gain Deferral Plan (Exhibit 10.12
(3))
10.16 McKesson Corporation Management Deferred Compensation Plan (Exhibit
10.14 (2))
10.17 McKesson Corporation 1984 Executive Benefit Retirement Plan as amended
through May 30, 1997 (Exhibit 10.14 (19))
10.18 McKesson Corporation 1988 Executive Survivor Benefits Plan (Exhibit
10.16 (2))
10.19 McKesson Corporation Executive Medical Plan Summary (Exhibit 10.17
(3))
10.20 McKesson Corporation 1988 Management Survivor Benefits Plan (Exhibit
10.18 (2))
10.21 McKesson Corporation Severance Policy for Executive Employees (amended
and restated as of May 31, 1996) (Exhibit 10.2 (9))
10.22** McKesson Corporation 1989 Management Incentive Plan (as amended
through October 29, 1997)
10.23 McKesson Corporation 1981 Long-Term Incentive Plan (as amended through
January 29, 1997) (Exhibit C (16))
10.24 McKesson Corporation Stock Purchase Plan (as amended and restated
through March 26, 1997) (Exhibit B (16))
10.25 Form of Termination Agreement by and between McKesson and certain
designated Executive Officers (Exhibit 10.23 (7))
10.26 Separation and Mutual General Release Agreement entered into as of
February 12, 1996, by and between McKesson and a former Executive
Officer (Exhibit 10.24 (8))
10.27 Form of Employment Agreement effective as of January 31, 1996, by and
between McKesson and corporate Vice President who is also President of
McKesson's Health Systems unit (Exhibit 10.1 (9))
10.28 Form of Employment Agreement, made effective as of May 20, 1996, by
and between McKesson and its President and Chief Operating Officer
(now Chief Executive Officer) (Exhibit 10.26 (19))
10.29 Agreement and Plan of Merger, dated as of November 26, 1996, by and
among Armor All Products Corporation, The Clorox Company and Shield
Acquisition Corporation (Exhibit 10.1 (11))
10.30 First Amendment to the Agreement and Plan of Merger, dated as of
December 1, 1996, by and among Armor All Products Corporation, The
Clorox Company and Shield Acquisition Corporation (Exhibit 10.2 (11))
10.31 Stockholder Agreement, dated as of November 26, 1996, by and among
McKesson, The Clorox Company and Shield Acquisition Corporation
(Exhibit 10.3 (11))
10.32** McKesson Corporation 1997 Non-Employee Directors' Equity Compensation
and Deferral Plan (as amended through October 29, 1997)
10.33 Form of Consulting Agreement, dated as of March 28, 1997, by and
between McKesson and its Chairman and former Chief Executive Officer
(Exhibit 10.32 (19))
10.34 Credit Agreement entered into as of March 31, 1995, among McKesson,
Medis Health and Pharmaceutical Services Inc., an indirect wholly-
owned subsidiary of McKesson, the several financial institutions from
time to time party to the agreement, Bank of America National Trust
and Savings Association, as Agent for the Banks, Chemical Bank, as Co-
Agent for the Banks and Bank of America Canada, as Canadian
Administrative Agent (the "1995 Credit Agreement") (Exhibit 10.25 (7))
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.35 Custodial Agreement Acknowledgment entered into as of March 31, 1995,
among McKesson and Bank of America National Trust and Savings
Association (the "Custodian") in its capacity as Custodian under the
Custodial Agreement and as Agent for the financial institutions from
time to time party to the 1995 Credit Agreement (Exhibit 10.26 (7))
10.36 Pledge Agreement entered into as of March 31, 1995, among McKesson
(the "Pledgor") and Bank of America National Trust and Savings
Association, as Agent for the financial institutions from time to time
party to the 1995 Credit Agreement (Exhibit 10.27 (7))
10.37 Guaranty entered into as of March 31, 1995, among McKesson (the
"Guarantor"), in favor of and for the benefit of Bank of America
National Trust and Savings Association, as Agent for and
representative of the financial institutions party to the 1995 Credit
Agreement (Exhibit 10.28 (7))
10.38 First Amendment to the 1995 Credit Agreement, dated as of August 31,
1995, among McKesson, Medis Health and Pharmaceutical Services Inc.,
an indirect wholly-owned subsidiary of McKesson, the several financial
institutions party to the 1995 Credit Agreement, Bank of America
Canada as Canadian Administrative Agent, Chemical Bank as co-agent for
the aforementioned financial institutions, the Bank of America
National Trust and Savings Association as agent for the aforementioned
financial institutions (Exhibit 10.37 (19))
10.39 Second Amendment to the 1995 Credit Agreement, dated as of April 10,
1996, among McKesson, Medis Health and Pharmaceutical Services Inc.,
an indirect wholly-owned subsidiary of McKesson, the several financial
institutions party to the 1995 Credit Agreement, Bank of America
Canada as Canadian Administrative Agent, The Chase Manhattan Bank as
co-agent for aforementioned financial institutions, and Bank of
America National Trust and Savings Association as agent for the
aforementioned financial institutions (Exhibit 10.38 (19))
10.40 Third Amendment to the 1995 Credit Agreement, dated as of November 4,
1996, among McKesson, Medis Health and Pharmaceutical Services Inc.,
an indirect wholly-owned subsidiary of McKesson, the several financial
institutions party to the 1995 Credit Agreement, Bank of America
Canada as Canadian Administrative Agent, The Chase Manhattan Bank as
co-agent for the aforementioned financial institutions, and Bank of
America National Trust and Savings Association as agent for the
aforementioned financial institutions (Exhibit 10.39 (19))
10.41 Pledge and Security Agreement entered into as of August 31, 1995,
among Macfor International Finance Company, a wholly-owned subsidiary
of McKesson, and Bank of America National Trust and Savings
Association, as agent for the several financial institutions from time
to time party to the 1995 Credit Agreement (Exhibit 10.40 (19))
10.42 Custody Agreement, dated as of August 14, 1995, between Bank of
America National Trust and Savings Association, as Custodian, and
Macfor International Finance Company, a wholly-owned subsidiary of
McKesson (Exhibit 10.41 (19))
10.43 Custodial Agreement Acknowledgement entered into as of August 31,
1995, between Macfor International Finance Company, a wholly-owned
subsidiary of McKesson, and Bank of America National Trust and Savings
Association, as custodian and as agent for the several financial
institutions from time to time party to the 1995 Credit Agreement
(Exhibit 10.42 (19))
10.44 Credit Agreement entered into as of November 4, 1996, among McKesson,
the several financial institutions from time to time party to the
agreement, The Chase Manhattan Bank as co-agent for the aforementioned
financial institutions, and Bank of America National Trust and Savings
Association as agent for the aforementioned financial institutions
(the "1996 Credit Agreement") (Exhibit 10.43 (19))
10.45 Letter Loan Agreement, dated as of February 21, 1997, between McKesson
and Bank of America National Trust and Savings Association (Exhibit
10.44 (19))
10.46** First Amendment to Credit Agreement, dated as of November 3, 1997,
among McKesson, the several financial institutions from time to time
party to the 1996 Credit Agreement, The Chase Manhattan Bank as co-
agent for the aforementioned financial institutions, and Bank of
America National Trust and Savings Association as agent for the
aforementioned financial institutions
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.47** Credit Agreement entered into as of November 21, 1997, among McKesson,
the several financial institutions from time to time party thereto,
and Bank of America National Trust and Savings Association as agent
for the financial institutions from time to time a party thereto
10.48 Restructuring and Distribution Agreement dated as of July 10, 1994, by
and among McKesson Corporation, a Maryland corporation ("Maryland"),
the predecessor to McKesson, Clinical Pharmaceuticals, Inc. ("CPI"),
PCS Health Systems, Inc. ("PCS") and McKesson (the "Distribution
Agreement") (Exhibit 2.1 (1))
10.49 Amendment, dated as of October 10, 1994, by and among the predecessor
to McKesson, Maryland, CPI, PCS and McKesson, which amends the
Distribution Agreement (Exhibit 2.2 (3))
10.50 Second Amendment, dated November 3, 1994, by and among the predecessor
to McKesson, Maryland, CPI, PCS and McKesson, which amends the
Distribution Agreement (Exhibit 2.5 (5))
10.51 Agreement and Plan of Merger, dated as of July 10, 1994, by and among
the predecessor to McKesson, Eli Lilly and Company and ECO Acquisition
Corporation (the "Merger Agreement") (Exhibit 2.3 (4))
10.52 Amendment, dated as of August 8, 1994, by and among the predecessor to
McKesson, ECO Acquisition Corporation and Eli Lilly and Company, which
amends the Merger Agreement dated July 10, 1994 (Exhibit 2.4 (5))
10.53 HDS Services Agreement, dated as of July 10, 1994, among ECO
Acquisition Corporation, PCS and Healthcare Delivery Systems, Inc.
(Exhibit 10.2 (1))
10.54 Asset Purchase Agreement, dated as of October 3, 1996, by and among
FoxMeyer Corporation, FoxMeyer Drug Company, Health Mart, Inc.,
FoxMeyer Software, Inc., FoxMeyer Funding, Inc., Healthcare
Transportation System, Inc. and Merchandise Coordinator Services
Corporation as Sellers, and McKesson, as Purchaser and FoxMeyer Health
Corporation (Exhibit 2.1 (10))
10.55 First Amendment and Waiver to the Asset Purchase Agreement, dated as
of November 7, 1996, by and among FoxMeyer Health Corporation,
FoxMeyer Corporation, FoxMeyer Drug Company, Healthcare Transportation
System, Inc., FoxMeyer Software, Inc., FoxMeyer Funding, Inc., Health
Mart, Inc., Merchandise Coordinator Services Corporation d/b/a
FoxMeyer Trading Company, and McKesson (Exhibit 2.2 (10))
10.56 Agreement and Plan of Merger, dated as of January 28, 1997, by and
among General Medical Inc., McKesson, Spider Acquisition Corporation
and certain stockholders named therein (Exhibit 2.1 (12))
21 List of Subsidiaries of McKesson (Exhibit 21 (19))
23.1** Consent of Ernst & Young LLP, independent auditors for AmeriSource
Health Corporation
23.2** Consent of Deloitte & Touche LLP, independent auditors for McKesson
Corporation
23.3** Consent of Peter J. Solomon Company Limited
23.4** Consent of Goldman, Sachs & Co.
23.5** Consent of Dechert, Price & Rhoads
23.6** Consent of Fried, Frank, Harris, Shriver & Jacobson
24* Power of Attorney
99.1 Registration Rights Agreement, dated as of March 11, 1997, among
McKesson and the Initial Purchasers (Exhibit 10.1 (6))
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
99.2* Opinion of Peter J. Solomon Company Limited, financial advisor of
McKesson (included as Appendix C to the Joint Proxy
Statement/Prospectus)
99.3* Opinion of Goldman, Sachs & Co., financial advisor of AmeriSource
Health Corporation (included as Appendix D to the Joint Proxy
Statement/Prospectus)
</TABLE>
- --------
* Filed herewith.
** To be filed by amendment to this Registration Statement.
<TABLE>
<C> <S>
(1) Incorporated by reference to designated exhibit to McKesson's
Registration Statement on Form 10 filed with the Commission on July 27,
1994, File No. 1-13252.
(2) Incorporated by reference to designated exhibit to Amendment No. 1 to
McKesson's Registration Statement on Form 10 filed with the Commission on
August 26, 1994, File No. 1-13252.
(3) Incorporated by reference to designated exhibit to Amendment No. 2 to
McKesson's Registration Statement on Form 10 filed with the Commission on
October 11, 1994, File No. 1-13252.
(4) Incorporated by reference to designated exhibit to Amendment No. 3 to
McKesson's Registration Statement on Form 10 filed with the Commission on
October 27, 1994, File No. 1-13252.
(5) Incorporated by reference to designated exhibit to Amendment No. 4 to
McKesson's Registration Statement on Form 10 filed with the Commission on
November 7, 1994, File No. 1-13252.
(6) Incorporated by reference to designated exhibit to McKesson's definitive
Proxy Statement dated June 9, 1995 for the Annual Meeting of Stockholders
held on July 26, 1995.
(7) Incorporated by reference to designated exhibit to McKesson's Annual
Report on Form 10-K for the fiscal year ended March 31, 1995, File No. 1-
13252.
(8) Incorporated by reference to designated exhibit to McKesson's Annual
Report on Form 10-K for the fiscal year ended March 31, 1996, as amended
by Amendment No. 1 on Form 10-K/A, filed on February 13, 1997, File No.
1-13252.
(9) Incorporated by reference to designated exhibit to McKesson's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1996, File No. 1-
13252.
(10) Incorporated by reference to designated exhibit to McKesson's Current
Report on Form 8-K filed with the Commission on November 22, 1996, File
No. 1-13252.
(11) Incorporated by reference to designated exhibit to McKesson's Current
Report on Form 8-K filed with the Commission on December 10, 1996, File
No. 1-13252.
(12) Incorporated by reference to designated exhibit to McKesson's Current
Report on Form 8-K filed with the Commission on February 5, 1997, File
No. 1-13252.
(13) Incorporated by reference to designated exhibit to McKesson's
Registration Statement on Form S-3 filed with the Commission on May 2,
1997, Registration No. 333-26443.
(14) Incorporated by reference to designated exhibit to Amendment No. 1 to
McKesson's Registration Statement on Form S-3 filed with the Commission
on June 9, 1997, Registration No. 333-26103.
(15) Incorporated by reference to designated exhibit to Amendment No. 1 to
McKesson's Registration Statement on Form S-3 filed with the Commission
on June 18, 1997, Registration No. 333-26443.
(16) Incorporated by reference to designated exhibit to McKesson's definitive
Proxy Statement dated June 18, 1997, for the Annual Meeting of
Stockholders to be held on July 30, 1997.
(17) Incorporated by reference to designated exhibit to Amendment No. 1 to
McKesson's Registration Statement on Form S-4 filed with the Commission
on July 22, 1997.
(18) Incorporated by reference to designated exhibit to McKesson's
Registration Statement on Form S-4 filed with the Commission on July 8,
1997.
(19) Incorporated by reference to designated exhibit to McKesson's Annual
Report on Form 10-K for the fiscal year ended March 31, 1997, File No. 1-
13252.
(20) Incorporated by reference to designated exhibit to McKesson's Current
Report on Form 8-K dated June 24, 1997.
</TABLE>
<PAGE>
EXHIBIT 10.5
------------
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement"), entered into September
22, 1997, by and among McKesson Corporation, a Delaware corporation (the
"Company"), AmeriSource Corporation, a Delaware corporation ("Patriot") and R.
David Yost (the "Executive"), effective as of the Effective Time.
WHEREAS, the Executive is presently employed by Patriot as President
and CEO; and
WHEREAS, the Company, Patriot and a wholly-owned subsidiary of the
Company ("Newco") have entered into an Agreement and Plan of Merger, dated
September 22, 1997 (the "Merger Agreement"), pursuant to which Newco will be
merged with and into Patriot at the Effective Time (as defined in the Merger
Agreement), with Patriot thereafter becoming a wholly-owned subsidiary of the
Company; and
WHEREAS, each of the Company and Patriot has determined that it is in
its best interest and the best interests of its shareholders that the Company
retain the services of the Executive on and following the Effective Time; and
WHEREAS, the Executive is willing to provide services to the Company
on the terms and conditions set forth in this Agreement;
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereby agree as follows:
1. Employment. The Company agrees to employ the Executive, and the
----------
Executive agrees to be employed by the Company, upon the terms and conditions
hereinafter provided in this Agreement, for a period commencing at the Effective
Time and continuing for three years thereafter (the "Term"); provided, however,
that this Agreement shall be of no force and effect unless and until the Closing
(as defined in the Merger Agreement) occurs.
2. Position and Duties. During the Term, the Company agrees to
-------------------
employ the Executive to serve in such executive capacities as may be assigned to
him from time to time by the Company's Chief Executive Officer (the "CEO").
Without limiting the generality of the foregoing, the Executive shall initially
serve
1
<PAGE>
as Group President of the Company's Patriot Services Group and Corporate Vice
President of the Company, and, in such position, Executive will direct the
integration of the Company and Patriot. Thereafter, the Executive shall perform
such other executive services as may be assigned to him from time to time by the
CEO. During the Term, and except for illness or incapacity and reasonable
vacation periods of no more than four weeks in any calendar year (or such other
period as shall be consistent with the Company's policies for other key
executives), the Executive shall devote all of his business time, attention,
skill and efforts exclusively to the business and affairs of the Company and its
affiliates; provided, however, that the Executive may serve on other boards as a
director or trustee, with the prior approval of the CEO, if such service does
not interfere with his ability to discharge his duties and responsibilities to
the Company.
3. Compensation. For all services rendered by the Executive in any
------------
capacity required hereunder during the Term, including, without limitation,
services as an executive, officer, director, or member of any committee of the
Company, or any subsidiary, affiliate or division thereof, the Executive shall
be compensated as follows:
(a) Base Salary. The Company shall pay the Executive a fixed
-----------
salary of $350,000 per annum or such higher annual amount as may be paid from
time to time pursuant to the terms hereof ("Base Salary"). The Base Salary shall
be subject to such periodic review (which shall occur in accordance with Company
policy) and such periodic increases as the Compensation Committee of the Board
of Directors of the Company shall deem appropriate in accordance with the
Company's customary procedures and practices regarding the salaries of senior
officers, provided, that the annual adjustment shall be no less than the
increase in the "Consumer Price Index" now known as the Consumer Price Index for
Urban Wage Earners and Clerical Workers, All Items, Philadelphia, Pennsylvania
(1967=100), as published by the Bureau of Labor, Statistics, United States
Department of Labor. Base Salary shall be payable in accordance with the
customary payroll practices of the Company.
(b) Bonus Awards. The Executive shall be entitled to receive an
------------
annual incentive cash compensation award under the Company's policy of providing
for the payment of incentive cash compensation to key officers based upon the
performance of the Company and the officer's individual performance.
(c) Stock Options and Restricted Stock Awards.
-----------------------------------------
(i) Subject to the terms and conditions of the
2
<PAGE>
Company's 1994 Stock Option and Restricted Stock Plan (the "Plan"), at
the Effective Time, the Company and the Executive will enter into the
Stock Option Award Agreement annexed hereto as Exhibit A. The options
granted pursuant to such agreement shall vest and become exercisable
in installments of twenty-five percent per year commencing on the
first anniversary following the Effective Time, provided that the
Executive is employed by the Company or any of its affiliates on each
such anniversary date. If the Company terminates Executive's
employment during the Term due to a Without Cause Termination, all
such options shall vest and become immediately exercisable for ninety
days following the date of such termination, after which date all
options shall lapse. Upon a Termination for Cause of the Executive by
the Company during the Term, all such options, whether or not
previously vested, shall immediately lapse.
(ii) Subject to the terms and conditions of the Plan, at
the Effective Time, the Company and the Executive will enter into the
Restricted Stock Grant Agreement annexed hereto as Exhibit B.
Restrictions on such restricted shares shall lapse on the second
anniversary following the Effective Time, so long as, on such date,
the Company and the Executive agree that the Executive has satisfied
such performance goals as may be mutually agreed upon by the Executive
and the CEO. If the Company terminates Executive's employment during
the Term due to a Without Cause Termination, all restrictions on such
shares shall immediately lapse, provided that such performance goals
have been satisfied as of the date of termination. Upon a Termination
for Cause of the Executive by the Company during the Term, all such
shares, whether or not previously vested, shall be immediately
forfeited.
(iii) In addition to the grants set forth in Sections
3(c)(i) and 3(c)(ii) of this Section 3, the Executive shall, on and
following the Effective Time, be eligible for consideration for stock
option grants and restricted stock awards at such times as other
similarly situated executives, in accordance with the Company's
customary practice.
(d) Supplemental Insurance. The Executive shall be entitled to
----------------------
such split dollar life insurance policy as was in place between Patriot
3
<PAGE>
and the Executive prior to December 31, 1996.
(e) Additional Benefits. Except as modified by this Agreement,
-------------------
the Executive shall be entitled to participate in all compensation or employee
benefit plans or programs (other than termination pay programs), and to receive
all benefits, perquisites and emoluments, for which salaried employees of the
Company are generally eligible under any plan or program now or hereafter
established and maintained by the Company for senior officers, to the fullest
extent permissible under the general terms and provisions of such plans or
programs and in accordance with the provisions thereof, including, if available,
group hospitalization, health, dental care, life or other insurance, tax-
qualified pension, savings, thrift and profit-sharing plans, sick-leave plans,
travel or accident insurance, disability insurance, automobile allowance or
automobile lease plans, and executive contingent compensation plans, including,
without limitation, if available, capital accumulation programs and stock
purchase, restricted stock and stock option plans. Notwithstanding the
foregoing, nothing in this Agreement shall preclude the amendment or termination
of any such plan or program, provided that such amendment or termination is
applicable generally to the senior officers of the Company or any subsidiary or
affiliate.
(f) Perquisites. Executive shall be entitled for each complete
-----------
twelve-month period that this Agreement is in effect to reimbursement of tax
planning and tax preparation charges, not to exceed $5,000, and to reimbursement
of club dues, not to exceed $10,000.
4. Business Expenses. The Company shall pay or reimburse the
-----------------
Executive for all reasonable travel or other expenses incurred by the Executive
(and his spouse where there is a legitimate business reason for his spouse to
accompany him) in connection with the performance of his duties and obligations
under this Agreement, including, without limitation, expenses for entertainment,
travel (including automobile operating expenses), meals, hotel accommodations
and the like, in accordance with such rules and policies relating thereto as the
Company may from time to time adopt. Reimbursement shall be subject to the
Executive's presentation of appropriate vouchers in accordance with such
procedures as the Company may from time to time establish for senior officers
and to preserve any deductions for federal income taxation purposes to which the
Company may be entitled.
5. Housing Loan and Assistance.
---------------------------
(a) At or following the Effective Time, upon Executive's
relocation to San Francisco, California, the Company shall make a housing loan
to
4
<PAGE>
the Executive in the sum of $500,000 (the "Housing Loan"). The Housing Loan
shall be evidenced by a promissory note (the "Note") in form provided by the
Company, and shall be secured by a deed of trust on Executive's principal
residence (the "Property"). The Housing Loan shall be without interest prior to
"Maturity" (as defined in the Note) and shall be repaid to the Company in full
upon the earliest to occur of any of the following: (i) 60 days after
termination of Executive's employment for any reason, (ii) sale or other
transfer of ownership of the Property, (iii) use of the Property other than as a
principal residence, or (iv) 10 years from the date of the Housing Loan.
(b) Subject to Section 5(c) of this Section 5, the Company shall
establish a deferred compensation account on behalf of the Executive in the
Company's Deferred Compensation Administration Plan, and, so long as Executive
remains in the employment of the Company, the Company shall credit to such
account the amount of $50,000 per annum commencing on the first anniversary of
the Housing Loan, continuing for the duration of Executive's employment through
the tenth anniversary of such date (or a pro rata portion of such amount if the
employment of the Executive is terminated during any such year). Such account
shall bear interest each year at the rate established by the Board of Directors
of the Company (the "Board") (or any duly authorized committee thereof). The
balance of such account shall be released to Executive (or, at the Company's
sole election, applied against the balance, if any of the Housing Loan) upon the
earlier of (i) the Maturity of the Housing Loan following Executive's
termination of employment with the Company, or (ii) ten years from the date of
the first credit to such account.
(c) Notwithstanding any other provision of this Section 5, if
Executive's employment is terminated for any reason prior to the fifth
anniversary of the date of the Housing Loan, Executive shall forfeit the entire
sum of such account.
(d) The Company shall reimburse the Executive, in accordance
with its existing policies, for the following reasonable expenses incurred in
connection with sale of his current residence and purchase of suitable housing
in San Francisco, California: real estate brokerage fees, pest control
inspections, title insurance and escrow fees and moving costs (including
temporary living expenses, if any, while in transit). In addition, the Company
shall reimburse the Executive in an amount up to one-half month of Base Salary
for non-receipted, miscellaneous moving expenses.
6. Effect of Termination of Employment.
-----------------------------------
5
<PAGE>
(a) Termination by the Company During Term. If the Company
--------------------------------------
terminates Executive's employment during the Term due to a Without Cause
Termination, the Company shall provide Severance Benefits to the Executive.
(b) Termination by the Executive During Term. If the Executive
----------------------------------------
terminates his employment during the thirty days commencing immediately
following the second anniversary date of the Effective Time, the Company shall
provide Severance Benefits to the Executive.
(c) All Other Terminations. Upon all terminations other than the
----------------------
terminations referred to in Sections 6(a) and 6(b) of this Section 6 (including,
but not limited to, voluntary retirement and termination upon or following
expiration of the Term), earned but unpaid Base Salary as of the date of
termination of employment shall be paid to the Executive in full, and the
Company shall have no obligation to provide Severance Benefits. In addition, the
Executive shall receive the benefits, if any, to which he is entitled as a
former employee under the employee benefit programs and compensation plans and
programs maintained for the benefit of the Company's officers and employees.
(d) Immediately upon termination of the Executive's employment
for any reason, Executive shall voluntarily resign from the Board.
(e) Definitions. For purposes of this Agreement, the following
-----------
terms have the following meanings:
(i) The term "Termination for Cause" shall mean
termination of the Executive's employment by the Company upon (i)
Executive's misconduct, habitual neglect, dishonesty or other knowing
and material violation of the Company's policies and procedures in
effect from time to time, (ii) actions (or failures to act) by
Executive in bad faith and to the detriment of the Company or any of
its affiliates or (iii) a material breach by the Executive of one or
more terms of this Agreement.
(ii) The term "Without Cause Termination" shall mean a
termination of the Executive's employment by the Company, upon 30
days' notice to the Executive, other than a Termination for Cause.
6
<PAGE>
(iii) The term "Severance Benefits" shall mean:
(A) the Executive's earned but unpaid Base Salary as of
the date of termination of employment;
(B) the benefits, if any, to which the Executive is
entitled as a former employee under the employee benefit programs and
compensation plans and programs maintained for the benefit of the Company's
officers and employees;
(C) continued coverage under the Company's employee
welfare benefit plans (including, but not limited to, group hospitalization,
health, dental care, life or other insurance, travel or accident insurance and
disability insurance) for three years following the date of termination, with
coverage equivalent to the coverage to which the Executive would have been
entitled had the Executive continued in employment with the Company during such
three years at the highest annual rate of Base Salary achieved during the
Executive's period of actual employment with the Company; provided, however,
that the Executive may, upon written notice to the Company, elect to receive the
present value of such coverage in cash in a lump sum; and
(D) an amount equal to three times the sum of the highest
Base Salary in effect during the Term and highest bonus paid to the Executive by
either the Company or Patriot in any of the four years prior to the date of
termination, payable in a lump sum as soon as is practicable following
termination.
Payment of Severance Benefits shall be in lieu of any severance, termination or
similar payment that would otherwise be due to the Executive under any other
severance program, plan or practice of the Company or its subsidiaries and
affiliates. Upon commencement of payment of Severance Benefits, the Executive
shall not be entitled to any other payment or benefit under this Agreement.
(f) Excise Tax Limitation.
---------------------
(i) Notwithstanding anything contained in this Agreement to
the contrary, to the extent that the payments and benefits provided
under this Agreement and benefits provided to, or for the benefit of,
the Executive under any other Company plan or agreement (such payments
or benefits are collectively referred to as the "Payments") would be
subject to the excise tax (the "Excise Tax") imposed under Section
4999 of the Internal Revenue Code of
7
<PAGE>
1986, as amended (the "Code"), the Payments shall be reduced (but not
below zero) if and to the extent necessary so that no Payment to be
made or benefit to be provided to the Executive shall be subject to
the Excise Tax (such reduced amount is hereinafter referred to as the
"Limited Payment Amount"). Unless the Executive shall have given prior
written notice specifying a different order to the Company to
effectuate the foregoing, the Company shall reduce or eliminate the
Payments, by first reducing or eliminating the portion of the Payments
which are not payable in cash and then by reducing or eliminating cash
payments, in each case in reverse order beginning with payments or
benefits which are to be paid the farthest in time from the
Determination (as hereinafter defined). Any notice given by the
Executive pursuant to the preceding sentence shall take precedence
over the provisions of any other plan, arrangement or agreement
governing the Executive's rights and entitlements to any benefits or
compensation.
(ii) The determination of whether the Payments shall be
reduced to the Limited Payment Amount pursuant to this Agreement and
the amount of such Limited Payment Amount shall be made, at the
Company's expense, by an accounting firm selected by the Company which
is one of the six largest accounting firms in the United States (the
"Accounting Firm"). The Accounting Firm shall provide its
determination (the "Determination"), together with detailed supporting
calculations and documentation, to the Company and the Executive
within ten (10) days of the date of termination of the Executive, if
applicable, or such other time as requested by the Company or by the
Executive (provided the Executive reasonably believes that any of the
Payments may be subject to the Excise Tax).
7. Other Duties of Executive During and After Term.
-----------------------------------------------
(a) Confidential Information. Executive acknowledges that by
------------------------
reason of his employment with the Company and Patriot he has and will hereafter,
from time to time during the Term, become exposed to and become knowledgeable
about proposals, plans inventions, practices, systems, programs, formulas,
processes, methods, techniques, research, records, supplier sources, customer
lists, and other forms of business information regarding the Company and its
affiliates which are not known to the Company's competitors and which are not
recognized as being encompassed within standard business or management practices
and which are kept secret and confidential by the Company (the
8
<PAGE>
"Confidential Information"). Executive therefore agrees that at no time during
or after the period of his employment by the Company will he disclose or use the
Confidential Information except, during his employment, as may be required in
the prudent course of business for the benefit of the Company.
(b) Non-Compete. In consideration of the covenants of the
-----------
Company and the Executive hereunder, Executive hereby agrees that, until the
latest of: (i) while Executive is employed during the Term, (ii) during such
time after the Term as Executive is employed by the Company, (iii) while
Executive is receiving Severance Benefits pursuant to this Agreement, or (iv)
for a period of one year after Executive's termination of employment for any
reason, he will not, unless authorized in writing to do so by the Company,
directly or indirectly own, manage, operate, join, control or participate in the
ownership, management, operation or control of, or be employed by or otherwise
connected in any manner with any business which directly or indirectly competes
with any line of business of the Company or any of its affiliates; provided,
that nothing in this paragraph shall prohibit Executive after termination of his
employment from acquiring up to 5% of any class of outstanding equity securities
of any corporation whose equity securities are regularly traded on a national
securities exchange or in the over-the-counter market. Executive agrees that for
a period ending on the second anniversary after Executive's termination of
employment hereunder for any reason, Executive will not (x) recruit any employee
of the Company or any of its affiliates or solicit or induce, or attempt to
solicit or induce, any employee of the Company or any of its affiliates to
terminate his or her employment with, or otherwise cease his or her relationship
with, the Company or any of its affiliates, or (y) solicit, divert or take away,
or attempt to solicit, divert or take away, the business or patronage of any of
the clients, customers or accounts, or prospective clients, customers or
accounts, of the Company or any of its affiliates that were contracted,
solicited or served by the Executive while employed by the Company or any of its
affiliates.
(c) Remedies. The Company and Executive confirm that the
--------
restrictions contained in Sections 7(a) and 7(b) of this Agreement are, in view
of the nature of the business of the Company and its affiliates, reasonable and
necessary to protect the legitimate interests of the Company and its affiliates
and that any violation of any provision of Section 7(a) or 7(b) will result in
irreparable injury to the Company and its affiliates. Executive hereby agrees
that, in the event of any breach or threatened breach of the terms or conditions
of this Agreement by Executive, the Company's remedies at law will be inadequate
and, in any such event, the Company shall be entitled to preliminary or
permanent injunctive relief and other equitable relief in any court of competent
jurisdiction. Executive further
9
<PAGE>
irrevocably consents to the jurisdiction of any Pennsylvania state court or
federal court located in the Commonwealth of Pennsylvania over any suit, action
or proceeding arising out of or relating to this Section 7 and hereby waives, to
the fullest extent permitted by law, any objection that he may now or hereafter
have to such jurisdiction or to the laying of venue of any such suit, action or
preceding has been brought in an inconvenient forum. This Section 7 of this
Agreement shall (x) survive the termination of this Agreement and continue
throughout the duration of the Executive's employment with the Company, except
as amended or modified by written agreement of the parties and (y) survive the
Executive's termination of employment with the Company for any reason.
(d) Modification of Terms. If any restriction in this Section 7
---------------------
of this Agreement is adjudicated to exceed the time, geographic, service or
other limitations permitted by applicable law in any jurisdiction, the Executive
agrees that such may be modified and narrowed, either by a court or the Company,
to the maximum time, geographic, service or other limitations permitted by
applicable law so as to preserve and protect the Company's legitimate business
interest, without negating or impairing any other restrictions or undertaking
set forth in this Agreement.
8. Withholding Taxes. The Company may directly or indirectly
-----------------
withhold from any payments made under this Agreement all federal, state, city or
other taxes as shall be required pursuant to any law or governmental regulation
or ruling.
9. Consolidation, Merger, or Sale of Assets. Nothing in this
----------------------------------------
Agreement shall preclude the Company from consolidating or merging into or with,
or transferring all or substantially all of its assets to, another corporation
which assumes this Agreement and all obligations and undertakings of the Company
hereunder. Upon such a consolidation, merger or transfer of assets and
assumption, the terms "Company" as used herein shall mean such other corporation
and this Agreement shall continue in full force and effect.
10. No Attachment. Except as required by law, no right to receive
-------------
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or
to execution, attachment, levy, or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect; provided, however, that nothing in this Section
10 shall preclude the assumption of such rights by executors,
10
<PAGE>
administrators or other legal representatives of the Executive or his estate and
their assigning any rights hereunder to the person or persons entitled thereto.
11. No Mitigation. The Executive shall not be required to mitigate
-------------
the amount of any payment or benefit provided for in this Agreement by seeking
other employment or otherwise, nor shall the amount of any payment or benefit
provided for in this Agreement be reduced by any compensation earned by other
employment or otherwise.
12. Source of Payment. All payments provided for under this
-----------------
Agreement shall be paid in cash from the general funds of the Company. The
Company shall not be required to establish a special or separate fund or other
segregation of assets to assure such payments, and, if the Company shall make
any investments to aid it in meeting its obligations hereunder, the Executive
shall have no right, title or interest whatever in or to any such investments
except as may otherwise be expressly provided in a separate written instrument
relating to such investments. To the extent that any person acquires a right to
receive payments from the Company hereunder, such right, without prejudice to
rights which employees may have, shall be no greater than the right of an
unsecured creditor of the Company.
13. Severability. If any provision of the Agreement or application
------------
thereof to anyone or under any circumstances is adjudicated to be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect any other provision or application and shall not invalidate or render
unenforceable such provision or application in any other jurisdiction.
14. Contents of Agreement. At the Effective Time, without any
---------------------
further action by the parties, this Agreement shall supersede all prior
agreements between the Executive and Patriot and shall set forth the entire
understanding among the parties hereto with respect to the subject matter
hereof. This Agreement may not be changed, modified, extended or terminated
except upon written amendment approved by the parties hereto. Without limiting
the generality of the foregoing, at the Effective Time, the Employment
Agreement, effective as of August 1, 1997, between the Executive and Patriot,
shall be terminated without any liability of Patriot or the Company thereunder
except for accrued and unpaid base salary and business expenses (if any) as of
the date of termination.
11
<PAGE>
15. Governing Law. The validity, interpretation, performance, and
-------------
enforcement of this Agreement shall be governed by the laws of the Commonwealth
of Pennsylvania, and Executive consents to the jurisdiction of the state and
federal courts of Pennsylvania in any dispute arising under this Agreement.
16. Survival. Any section of this Agreement which provides a benefit
--------
to the Executive and which does not expressly provide for its termination upon
the expiration of the Term shall survive the expiration of the Term, and the
obligation to provide benefits to the Executive as set forth in such section
shall remain binding upon the Company until such time as the Executive's
employment relationship with the Company is terminated and the benefits provided
under such section are paid in full to the Executive.
17. Miscellaneous. All section headings are for convenience only.
-------------
This Agreement may be executed in any number of counterparts, each of which when
executed shall be deemed to be an original and all of which together shall be
deemed to be one and the same instrument. It shall not be necessary in marking
proof of this Agreement or any counterpart hereof to produce or account for any
of the other counterparts.
18. Arbitration. Except with respect to actions for preliminary and
-----------
permanent injunctive relief and other equitable relief under Section 7, any
controversy or claim arising out of or relating to this Agreement, or any breach
thereof, shall be settled by arbitration in accordance with the rules of the
American Arbitration Association, and judgment upon such award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof. The
arbitration shall be held in Philadelphia, Pennsylvania, unless another location
shall be mutually agreed to by the parties at the time of the arbitration. If
Section 6(f) is not applicable, in any dispute between the parties as to which
Executive is sustained on the claims(s) by or against him, the Company shall pay
all reasonable legal fees incurred by Executive in connection with the dispute
over such claim(s). If more than one claim is involved in any dispute and if
Executive is sustained as to one or more of such claims but not as to all of
such claims, there shall be a reasonable allocation of applicable reasonable
legal expenses. The Company will reimburse Executive for those reasonable legal
expenses determined by the arbitrator(s) or by the consent of the parties to be
allocable to the claim or claims as to which Executive is upheld.
IN WITNESS WHEREOF, and intending to be legally bound, the Company and
Patriot have caused this Agreement to be executed by duly authorized officers,
12
<PAGE>
and the Executive has signed this Agreement this 22nd day of September, 1997,
effective as of the Effective Time.
McKESSON CORPORATION
By: /s/ Ivan D. Meyerson
---------------------------
Name: Ivan D. Meyerson
Title: Vice President
AMERISOURCE CORPORATION
By: /s/ Kurt J. Hilzinger
----------------------
Name: Kurt J. Hilzinger
Title: Senior Vice President and
Chief Financial Officer
/s/ R. David Yost
------------------
R. David Yost
183534.08
13
<PAGE>
Exhibit A - Stock Option Award Agreement
----------------------------------------
NOTICE OF GRANT OF STOCK OPTIONS
AND GRANT AGREEMENT
ID:
The following option grant has been awarded to you to purchase McKesson
Corporation Common Stock:
Non-Qualified Stock Option Grant No. ______________
Date of Grant [Closing Date]
Stock Option Plan 1994
Option Price per Share [FMV on Date of Grant]
Total Number of Shares Granted 50,000
Total Price of Shares Granted ____________
You hereby accept the grant of this option subject to the terms and
conditions of the Employment Agreement between you and McKesson
Corporation, dated September __, 1997, and, to the extent not
inconsistent with such Employment Agreement, subject to the terms of
this Agreement, the 1994 Stock Option and Restricted Stock Plan
("Plan") and the Statement of Terms and Conditions Applicable to Stock
Options Granted under the Plan, incorporated herein by reference, and
further acknowledge receipt of copies of such documents, if they have
not already been provided to you. PLEASE RETAIN THIS INFORMATION FOR
YOUR FILES. You should consult your tax advisor concerning the
appropriate reporting requirements regarding this grant. This option
vests and becomes exercisable at the rate of 25% per year beginning
one year after the date of grant.
Please sign the copy of this Agreement and return it to Dana T.
Iapicca, One Post Street, 29/th/ Floor, San Francisco, CA 94104.
___________________________________ _____________________________
For McKesson Corporation Date
___________________________________ _____________________________
Optionee Date
<PAGE>
Exhibit B - Restricted Stock Grant Agreement
--------------------------------------------
RESTRICTED STOCK GRANT AGREEMENT
UNDER THE
McKESSON CORPORATION
1994 STOCK OPTION AND RESTRICTED STOCK PLAN
The Compensation Committee of the Board of Directors has approved a grant
to you of 20,000 shares of Restricted Stock (the "Stock") pursuant to the
McKesson Corporation 1994 Stock Option and Restricted Stock Plan (the "Plan"),
and subject to the terms and conditions of the Employment Agreement between you
and the McKesson Corporation, dated September __, 1997. A certificate for the
Stock has been issued to you effective [as of the Closing Date] and will be
released to you on the second anniversary of the date of grant, i.e., on
[______________], subject to the restrictions set forth in your Employment
Agreement and, to the extent not inconsistent with your Employment Agreement, in
the Plan and the Statement of Terms and Conditions Applicable to Shares of
Restricted Stock Granted pursuant to the 1994 Stock Option and Restricted Stock
Plan, copies of which are attached hereto and incorporated herein by reference,
unless already provided to you.
Please acknowledge your acceptance of this grant by signing your name in
the space provided on the photocopy of this Grant Agreement and return the
photocopy to Dana T. Iapicca, Assistant Secretary, McKesson Corporation, One
Post Street, Suite 2950, San Francisco, CA 94104.
If you elect to recognize gross income on the Stock in the year of grant,
please telephone Dana Iapicca (415-983-8367) for information and a Section 83(b)
election form.
MCKESSON CORPORATION
By:________________________ _________________________
Date
___________________________ _________________________
Grantee Date
<PAGE>
EXHIBIT 10.6
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<PAGE>
EMPLOYMENT AGREEMENT
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THIS EMPLOYMENT AGREEMENT (the "Agreement"), entered into September 22,
1997, by and among McKesson Corporation, a Delaware corporation (the "Company"),
AmeriSource Corporation, a Delaware corporation ("Patriot") and David M. Flowers
(the "Executive"), effective as of the Effective Time.
WHEREAS, the Executive is presently employed by Patriot as Executive Vice
President, Marketing; and
WHEREAS, the Company, Patriot and a wholly-owned subsidiary of the Company
("Newco") have entered into an Agreement and Plan of Merger, dated September 22,
1997 (the "Merger Agreement"), pursuant to which Newco will be merged with and
into Patriot at the Effective Time (as defined in the Merger Agreement), with
Patriot thereafter becoming a wholly-owned subsidiary of the Company; and
WHEREAS, each of the Company and Patriot has determined that it is in its
best interest and the best interests of its shareholders that the Company retain
the services of the Executive on and following the Effective Time; and
WHEREAS, the Executive is willing to provide services to the Company on the
terms and conditions set forth in this Agreement;
NOW THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereby agree as follows:
1. Employment. The Company agrees to employ the Executive, and the
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Executive agrees to be employed by the Company, upon the terms and conditions
hereinafter provided in this Agreement, for a period commencing at the Effective
Time and continuing for three years thereafter (the "Term"); provided, however,
that this Agreement shall be of no force and effect unless and until the Closing
(as defined in the Merger Agreement) occurs.
2. Position and Duties. During the Term, the Company agrees to employ the
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Executive to serve in such executive capacities as may be assigned to him from
time to time by the Company's Chief Executive Officer (the "CEO"). During the
Term, and except for illness or incapacity and reasonable vacation
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periods of no more than four weeks in any calendar year (or such other period as
shall be consistent with the Company's policies for other key executives), the
Executive shall devote all of his business time, attention, skill and efforts
exclusively to the business and affairs of the Company and its affiliates;
provided, however, that the Executive may serve on other boards as a director or
trustee, with the prior approval of the CEO, if such service does not interfere
with his ability to discharge his duties and responsibilities to the Company.
Unless and until otherwise agreed between the Company and the Executive, the
Executive shall be at liberty to maintain his primary residence as of September
22, 1997.
3. Compensation. For all services rendered by the Executive in any
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capacity required hereunder during the Term, including, without limitation,
services as an executive, officer, director, or member of any committee of the
Company, or any subsidiary, affiliate or division thereof, the Executive shall
be compensated as follows:
(a) Base Salary. The Company shall pay the Executive a fixed salary
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of $260,000 per annum or such higher annual amount as may be paid from time to
time pursuant to the terms hereof ("Base Salary"). The Base Salary shall be
subject to such periodic review (which shall occur in accordance with Company
policy) and such periodic increases as the Compensation Committee of the Board
of Directors of the Company shall deem appropriate in accordance with the
Company's customary procedures and practices regarding the salaries of senior
officers, provided, that the annual adjustment shall be no less than the
increase in the "Consumer Price Index" now known as the Consumer Price Index for
Urban Wage Earners and Clerical Workers, All Items, Philadelphia, Pennsylvania
(1967=100), as published by the Bureau of Labor, Statistics, United States
Department of Labor. Base Salary shall be payable in accordance with the
customary payroll practices of the Company.
(b) Bonus Awards. The Executive shall be entitled to receive an
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annual incentive cash compensation award under the Company's policy of providing
for the payment of incentive cash compensation to key officers based upon the
performance of the Company and the officer's individual performance.
(c) Stock Options and Restricted Stock Awards.
-----------------------------------------
(i) Subject to the terms and conditions of the Company's 1994
Stock Option and Restricted Stock Plan (the "Plan"), at the Effective Time,
the Company and the Executive will enter into the Stock Option Award
Agreement annexed hereto as
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Exhibit A. The options granted pursuant to such agreement shall vest and
become exercisable in installments of twenty-five percent per year
commencing on the first anniversary following the Effective Time, provided
that the Executive is employed by the Company or any of its affiliates on
each such anniversary date. If the Company terminates Executive's
employment during the Term due to a Without Cause Termination, all such
options shall vest and become immediately exercisable for ninety days
following the date of such termination, after which date all options shall
lapse. Upon a Termination for Cause of the Executive by the Company during
the Term, all such options, whether or not previously vested, shall
immediately lapse.
(ii) Subject to the terms and conditions of the Plan, at the
Effective Time, the Company and the Executive will enter into the
Restricted Stock Grant Agreement annexed hereto as Exhibit B. Restrictions
on such restricted shares shall lapse on the second anniversary following
the Effective Time, so long as, on such date, the Company and the
Executive agree that the Executive has satisfied such performance goals as
may be mutually agreed upon by the Executive and the CEO. If the Company
terminates Executive's employment during the Term due to a Without Cause
Termination, all restrictions on such shares shall immediately lapse,
provided that such performance goals have been satisfied as of the date of
termination. Upon a Termination for Cause of the Executive by the Company
during the Term, all such shares, whether or not previously vested, shall
be immediately forfeited.
(iii) In addition to the grants set forth in Sections 3(c)(i) and
3(c)(ii) of this Section 3, the Executive shall, on and following the
Effective Time, be eligible for consideration for stock option grants and
restricted stock awards at such times as other similarly situated
executives, in accordance with the Company's customary practice.
(d) Supplemental Insurance. The Executive shall be entitled to such
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split dollar life insurance policy as was in place between Patriot and the
Executive prior to September 22, 1997.
(e) Additional Benefits. Except as modified by this
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Agreement, the Executive shall be entitled to participate in all compensation or
employee benefit plans or programs (other than termination pay programs), and to
receive all benefits, perquisites and emoluments, for which salaried employees
of the Company are generally eligible under any plan or program now or hereafter
established and maintained by the Company for senior officers, to the fullest
extent permissible under the general terms and provisions of such plans or
programs and in accordance with the provisions thereof, including, if available,
group hospitalization, health, dental care, life or other insurance, tax-
qualified pension, savings, thrift and profit-sharing plans, sick-leave plans,
travel or accident insurance, disability insurance, automobile allowance or
automobile lease plans, and executive contingent compensation plans, including,
without limitation, if available, capital accumulation programs and stock
purchase, restricted stock and stock option plans. Notwithstanding the
foregoing, nothing in this Agreement shall preclude the amendment or termination
of any such plan or program, provided that such amendment or termination is
applicable generally to the senior officers of the Company or any subsidiary or
affiliate.
(f) Perquisites. Executive shall be entitled for each complete
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twelve-month period that this Agreement is in effect to reimbursement of tax
planning and tax preparation charges, not to exceed $5,000, and to reimbursement
of club dues, not to exceed $10,000.
4. Business Expenses. The Company shall pay or reimburse the Executive
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for all reasonable travel or other expenses incurred by the Executive (and his
spouse where there is a legitimate business reason for his spouse to accompany
him) in connection with the performance of his duties and obligations under this
Agreement, including, without limitation, expenses for entertainment, travel
(including automobile operating expenses), meals, hotel accommodations and the
like, in accordance with such rules and policies relating thereto as the Company
may from time to time adopt. Reimbursement shall be subject to the Executive's
presentation of appropriate vouchers in accordance with such procedures as the
Company may from time to time establish for senior officers and to preserve any
deductions for federal income taxation purposes to which the Company may be
entitled.
5. Housing Loan and Assistance.
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(a) At or following the Effective Time, upon Executive's relocation to
San Francisco, California, the Company shall make a housing loan to the
Executive in the sum of $250,000 (the "Housing Loan"). The Housing Loan shall
be evidenced by a promissory note (the "Note") in form provided by the Company,
and shall be secured by a deed of trust on Executive's principal
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residence (the "Property"). The Housing Loan shall be without interest prior to
"Maturity" (as defined in the Note) and shall be repaid to the Company in full
upon the earliest to occur of any of the following: (i) 60 days after
termination of Executive's employment for any reason, (ii) sale or other
transfer of ownership of the Property, (iii) use of the Property other than as a
principal residence, or (iv) 10 years from the date of the Housing Loan.
(b) Subject to Section 5(c) of this Section 5, the Company shall
establish a deferred compensation account on behalf of the Executive in the
Company's Deferred Compensation Administration Plan, and, so long as Executive
remains in the employment of the Company, the Company shall credit to such
account the amount of $25,000 per annum commencing on the first anniversary of
the Housing Loan, continuing for the duration of Executive's employment through
the tenth anniversary of such date (or a pro rata portion of such amount if the
employment of the Executive is terminated during any such year). Such account
shall bear interest each year at the rate established by the Board of Directors
of the Company (the "Board") (or any duly authorized committee thereof). The
balance of such account shall be released to Executive (or, at the Company's
sole election, applied against the balance, if any of the Housing Loan) upon the
earlier of (i) the Maturity of the Housing Loan following Executive's
termination of employment with the Company, or (ii) ten years from the date of
the first credit to such account.
(c) Notwithstanding any other provision of this Section 5, if
Executive's employment is terminated for any reason prior to the fifth
anniversary of the date of the Housing Loan, Executive shall forfeit the entire
sum of such account.
(d) The Company shall reimburse the Executive, in accordance with its
existing policies, for the following reasonable expenses incurred in connection
with sale of his current residence and purchase of suitable housing in San
Francisco, California: real estate brokerage fees, pest control inspections,
title insurance and escrow fees and moving costs (including temporary living
expenses, if any, while in transit). In addition, the Company shall reimburse
the Executive in an amount up to one-half month of Base Salary for non-
receipted, miscellaneous moving expenses.
6. Effect of Termination of Employment.
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(a) Termination by the Company During Term. If the Company terminates
--------------------------------------
Executive's employment during the Term due to a Without Cause Termination, the
Company shall provide Severance Benefits to the
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Executive.
(b) Termination by the Executive During Term. If the Executive
----------------------------------------
terminates his employment during the thirty days commencing immediately
following the second anniversary date of the Effective Time, the Company shall
provide Severance Benefits to the Executive.
(c) All Other Terminations. Upon all terminations other than the
----------------------
terminations referred to in Sections 6(a) and 6(b) of this Section 6 (including,
but not limited to, voluntary retirement and termination upon or following
expiration of the Term), earned but unpaid Base Salary as of the date of
termination of employment shall be paid to the Executive in full, and the
Company shall have no obligation to provide Severance Benefits. In addition,
the Executive shall receive the benefits, if any, to which he is entitled as a
former employee under the employee benefit programs and compensation plans and
programs maintained for the benefit of the Company's officers and employees.
(d) Definitions. For purposes of this Agreement, the following terms
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have the following meanings:
(i) The term "Termination for Cause" shall mean termination
of the Executive's employment by the Company upon (i) Executive's
misconduct, habitual neglect, dishonesty or other knowing and material
violation of the Company's policies and procedures in effect from time to
time, (ii) actions (or failures to act) by Executive in bad faith and to
the detriment of the Company or any of its affiliates or (iii) a material
breach by the Executive of one or more terms of this Agreement.
(ii) The term "Without Cause Termination" shall mean a
termination of the Executive's employment by the Company, upon 30 days'
notice to the Executive, other than a Termination for Cause.
(iii) The term "Severance Benefits" shall mean:
(A) the Executive's earned but unpaid Base Salary as of the
date of termination of employment;
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(B) the benefits, if any, to which the Executive is entitled as
a former employee under the employee benefit programs and compensation plans and
programs maintained for the benefit of the Company's officers and employees;
(C) continued coverage under the Company's employee welfare
benefit plans (including, but not limited to, group hospitalization, health,
dental care, life or other insurance, travel or accident insurance and
disability insurance) for three years following the date of termination, with
coverage equivalent to the coverage to which the Executive would have been
entitled had the Executive continued in employment with the Company during such
three years at the highest annual rate of Base Salary achieved during the
Executive's period of actual employment with the Company; provided, however,
that the Executive may, upon written notice to the Company, elect to receive the
present value of such coverage in cash in a lump sum; and
(D) an amount equal to three times the sum of the highest Base
Salary in effect during the Term and highest bonus paid to the Executive by
either the Company or Patriot in any of the four years prior to the date of
termination, payable in a lump sum as soon as is practicable following
termination.
Payment of Severance Benefits shall be in lieu of any severance, termination or
similar payment that would otherwise be due to the Executive under any other
severance program, plan or practice of the Company or its subsidiaries and
affiliates. Upon commencement of payment of Severance Benefits, the Executive
shall not be entitled to any other payment or benefit under this Agreement.
(e) Excise Tax Limitation.
---------------------
(i) Notwithstanding anything contained in this Agreement to the
contrary, to the extent that the payments and benefits provided under this
Agreement and benefits provided to, or for the benefit of, the Executive
under any other Company plan or agreement (such payments or benefits are
collectively referred to as the "Payments") would be subject to the excise
tax (the "Excise Tax") imposed under Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code"), the Payments shall be reduced (but
not below zero) if and to the extent necessary so that no Payment to be
made or benefit to be provided to the Executive shall be subject to the
Excise Tax (such reduced amount is hereinafter referred to as the
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"Limited Payment Amount"). Unless the Executive shall have given prior
written notice specifying a different order to the Company to effectuate
the foregoing, the Company shall reduce or eliminate the Payments, by first
reducing or eliminating the portion of the Payments which are not payable
in cash and then by reducing or eliminating cash payments, in each case in
reverse order beginning with payments or benefits which are to be paid the
farthest in time from the Determination (as hereinafter defined). Any
notice given by the Executive pursuant to the preceding sentence shall take
precedence over the provisions of any other plan, arrangement or agreement
governing the Executive's rights and entitlements to any benefits or
compensation.
(ii) The determination of whether the Payments shall be reduced to
the Limited Payment Amount pursuant to this Agreement and the amount of
such Limited Payment Amount shall be made, at the Company's expense, by an
accounting firm selected by the Company which is one of the six largest
accounting firms in the United States (the "Accounting Firm"). The
Accounting Firm shall provide its determination (the "Determination"),
together with detailed supporting calculations and documentation, to the
Company and the Executive within ten (10) days of the date of termination
of the Executive, if applicable, or such other time as requested by the
Company or by the Executive (provided the Executive reasonably believes
that any of the Payments may be subject to the Excise Tax).
7. Other Duties of Executive During and After Term.
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(a) Confidential Information. Executive acknowledges that by reason
------------------------
of his employment with the Company and Patriot he has and will hereafter, from
time to time during the Term, become exposed to and become knowledgeable about
proposals, plans, inventions, practices, systems, programs, formulas, processes,
methods, techniques, research, records, supplier sources, customer lists, and
other forms of business information regarding the Company and its affiliates
which are not known to the Company's competitors and which are not recognized as
being encompassed within standard business or management practices and which are
kept secret and confidential by the Company (the "Confidential Information").
Executive therefore agrees that at no time during or after the period of his
employment by the Company will he disclose or use the Confidential Information
except, during his employment, as may be required in the prudent course of
business for the benefit of the Company.
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(b) Non-Compete. In consideration of the covenants of the Company and
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the Executive hereunder, Executive hereby agrees that, until the latest of: (i)
while Executive is employed during the Term, (ii) during such time after the
Term as Executive is employed by the Company, (iii) while Executive is receiving
Severance Benefits pursuant to this Agreement, or (iv) for a period of one year
after Executive's termination of employment for any reason, he will not, unless
authorized in writing to do so by the Company, directly or indirectly own,
manage, operate, join, control or participate in the ownership, management,
operation or control of, or be employed by or otherwise connected in any manner
with any business which directly or indirectly competes with any line of
business of the Company or any of its affiliates; provided, that nothing in this
paragraph shall prohibit Executive after termination of his employment from
acquiring up to 5% of any class of outstanding equity securities of any
corporation whose equity securities are regularly traded on a national
securities exchange or in the over-the-counter market. Executive agrees that
for a period ending on the second anniversary after Executive's termination of
employment hereunder for any reason, Executive will not (x) recruit any employee
of the Company or any of its affiliates or solicit or induce, or attempt to
solicit or induce, any employee of the Company or any of its affiliates to
terminate his or her employment with, or otherwise cease his or her relationship
with, the Company or any of its affiliates, or (y) solicit, divert or take away,
or attempt to solicit, divert or take away, the business or patronage of any of
the clients, customers or accounts, or prospective clients, customers or
accounts, of the Company or any of its affiliates that were contracted,
solicited or served by the Executive while employed by the Company or any of its
affiliates.
(c) Remedies. The Company and Executive confirm that the restrictions
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contained in Sections 7(a) and 7(b) of this Agreement are, in view of the nature
of the business of the Company and its affiliates, reasonable and necessary to
protect the legitimate interests of the Company and its affiliates and that any
violation of any provision of Section 7(a) or 7(b) will result in irreparable
injury to the Company and its affiliates. Executive hereby agrees that, in the
event of any breach or threatened breach of the terms or conditions of this
Agreement by Executive, the Company's remedies at law will be inadequate and, in
any such event, the Company shall be entitled to preliminary or permanent
injunctive relief and other equitable relief in any court of competent
jurisdiction. Executive further irrevocably consents to the jurisdiction of any
Pennsylvania state court or federal court located in the Commonwealth of
Pennsylvania over any suit, action or proceeding arising out of or relating to
this Section 7 and hereby waives, to the fullest extent permitted by law, any
objection that he may now or hereafter have to
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such jurisdiction or to the laying of venue of any such suit, action or
preceding has been brought in an inconvenient forum. This Section 7 of this
Agreement shall (x) survive the termination of this Agreement and continue
throughout the duration of the Executive's employment with the Company, except
as amended or modified by written agreement of the parties and (y) survive the
Executive's termination of employment with the Company for any reason.
(d) Modification of Terms. If any restriction in this Section 7 of
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this Agreement is adjudicated to exceed the time, geographic, service or other
limitations permitted by applicable law in any jurisdiction, the Executive
agrees that such may be modified and narrowed, either by a court or the Company,
to the maximum time, geographic, service or other limitations permitted by
applicable law so as to preserve and protect the Company's legitimate business
interest, without negating or impairing any other restrictions or undertaking
set forth in this Agreement.
8. Withholding Taxes. The Company may directly or indirectly withhold
-----------------
from any payments made under this Agreement all federal, state, city or other
taxes as shall be required pursuant to any law or governmental regulation or
ruling.
9. Consolidation, Merger, or Sale of Assets. Nothing in this Agreement
----------------------------------------
shall preclude the Company from consolidating or merging into or with, or
transferring all or substantially all of its assets to, another corporation
which assumes this Agreement and all obligations and undertakings of the Company
hereunder. Upon such a consolidation, merger or transfer of assets and
assumption, the terms "Company" as used herein shall mean such other corporation
and this Agreement shall continue in full force and effect.
10. No Attachment. Except as required by law, no right to receive payments
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under this Agreement shall be subject to anticipation, commutation, alienation,
sale, assignment, encumbrance, charge, pledge, or hypothecation or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null, void
and of no effect; provided, however, that nothing in this Section 10 shall
preclude the assumption of such rights by executors, administrators or other
legal representatives of the Executive or his estate and their assigning any
rights hereunder to the person or persons entitled thereto.
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11. No Mitigation. The Executive shall not be required to mitigate the
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amount of any payment or benefit provided for in this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment or benefit provided
for in this Agreement be reduced by any compensation earned by other employment
or otherwise.
12. Source of Payment. All payments provided for under this Agreement
-----------------
shall be paid in cash from the general funds of the Company. The Company shall
not be required to establish a special or separate fund or other segregation of
assets to assure such payments, and, if the Company shall make any investments
to aid it in meeting its obligations hereunder, the Executive shall have no
right, title or interest whatever in or to any such investments except as may
otherwise be expressly provided in a separate written instrument relating to
such investments. To the extent that any person acquires a right to receive
payments from the Company hereunder, such right, without prejudice to rights
which employees may have, shall be no greater than the right of an unsecured
creditor of the Company.
13. Severability. If any provision of the Agreement or application thereof
------------
to anyone or under any circumstances is adjudicated to be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect any other provision or application and shall not invalidate or render
unenforceable such provision or application in any other jurisdiction.
14. Contents of Agreement. At the Effective Time, without any further
---------------------
action by the parties, this Agreement shall supersede all prior agreements
between the Executive and Patriot and shall set forth the entire understanding
among the parties hereto with respect to the subject matter hereof. This
Agreement may not be changed, modified, extended or terminated except upon
written amendment approved by the parties hereto. Without limiting the
generality of the foregoing, at the Effective Time, the Employment Agreement,
effective as of August 1, 1997, between the Executive and Patriot, shall be
terminated without any liability of Patriot or the Company thereunder except for
accrued and unpaid base salary and business expenses (if any) as of the date of
termination.
15. Governing Law. The validity, interpretation, performance, and
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enforcement of this Agreement shall be governed by the laws of the Commonwealth
of Pennsylvania, and Executive consents to the jurisdiction of the state and
federal courts of Pennsylvania in any dispute arising under this
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Agreement.
16. Survival. Any section of this Agreement which provides a benefit to
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the Executive and which does not expressly provide for its termination upon the
expiration of the Term shall survive the expiration of the Term, and the
obligation to provide benefits to the Executive as set forth in such section
shall remain binding upon the Company until such time as the Executive's
employment relationship with the Company is terminated and the benefits provided
under such section are paid in full to the Executive.
17. Miscellaneous. All section headings are for convenience only. This
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Agreement may be executed in any number of counterparts, each of which when
executed shall be deemed to be an original and all of which together shall be
deemed to be one and the same instrument. It shall not be necessary in marking
proof of this Agreement or any counterpart hereof to produce or account for any
of the other counterparts.
18. Arbitration. Except with respect to actions for preliminary and
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permanent injunctive relief and other equitable relief under Section 7, any
controversy or claim arising out of or relating to this Agreement, or any breach
thereof, shall be settled by arbitration in accordance with the rules of the
American Arbitration Association, and judgment upon such award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof. The
arbitration shall be held in Philadelphia, Pennsylvania, unless another location
shall be mutually agreed to by the parties at the time of the arbitration. If
Section 6(e) is not applicable, in any dispute between the parties as to which
Executive is sustained on the claims(s) by or against him, the Company shall pay
all reasonable legal fees incurred by Executive in connection with the dispute
over such claim(s). If more than one claim is involved in any dispute and if
Executive is sustained as to one or more of such claims but not as to all of
such claims, there shall be a reasonable allocation of applicable reasonable
legal expenses. The Company will reimburse Executive for those reasonable legal
expenses determined by the arbitrator(s) or by the consent of the parties to be
allocable to the claim or claims as to which Executive is upheld.
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IN WITNESS WHEREOF, and intending to be legally bound, the Company and
Patriot have caused this Agreement to be executed by duly authorized officers,
and the Executive has signed this Agreement this 22nd day of September, 1997,
effective as of the Effective Time.
McKESSON CORPORATION
By: /s/ Ivan D. Meyerson
-----------------------------
Name: Ivan D. Meyerson
Title: Vice President
AMERISOURCE CORPORATION
By: /s/ Robert D. Yost
-----------------------------
Name: Robert D. Yost
Title: President and Chief
Executive Officer
/s/ David M. Flowers
------------------------------------
David M. Flowers
183939.02
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Exhibit A - Stock Option Award Agreement
----------------------------------------
NOTICE OF GRANT OF STOCK OPTIONS
AND GRANT AGREEMENT
ID:
The following option grant has been awarded to you to purchase McKesson
Corporation Common Stock:
Non-Qualified Stock Option Grant No. __________
Date of Grant [Closing Date]
Stock Option Plan 1994
Option Price per Share [FMV on Date of Grant]
Total Number of Shares Granted 25,000
Total Price of Shares Granted __________
You hereby accept the grant of this option subject to the terms and conditions
of the Employment Agreement between you and McKesson Corporation, dated
September __, 1997, and, to the extent not inconsistent with such Employment
Agreement, subject to the terms of this Agreement, the 1994 Stock Option and
Restricted Stock Plan ("Plan") and the Statement of Terms and Conditions
Applicable to Stock Options Granted under the Plan, incorporated herein by
reference, and further acknowledge receipt of copies of such documents, if they
have not already been provided to you. PLEASE RETAIN THIS INFORMATION FOR YOUR
FILES. You should consult your tax advisor concerning the appropriate reporting
requirements regarding this grant. This option vests and becomes exercisable at
the rate of 25% per year beginning one year after the date of grant.
Please sign the copy of this Agreement and return it to Dana T. Iapicca, One
Post Street, 29/th/ Floor, San Francisco, CA 94104.
______________________________________ _______________________________________
For McKesson Corporation Date
______________________________________ _______________________________________
Optionee Date
<PAGE>
Exhibit B - Restricted Stock Grant Agreement
--------------------------------------------
RESTRICTED STOCK GRANT AGREEMENT
UNDER THE
McKESSON CORPORATION
1994 STOCK OPTION AND RESTRICTED STOCK PLAN
The Compensation Committee of the Board of Directors has approved a grant
to you of 10,000 shares of Restricted Stock (the "Stock") pursuant to the
McKesson Corporation 1994 Stock Option and Restricted Stock Plan (the "Plan"),
and subject to the terms and conditions of the Employment Agreement between you
and the McKesson Corporation, dated September __, 1997. A certificate for the
Stock has been issued to you effective [as of the Closing Date] and will be
released to you on the second anniversary of the date of grant, i.e., on
[______________], subject to the restrictions set forth in your Employment
Agreement and, to the extent not inconsistent with your Employment Agreement, in
the Plan and the Statement of Terms and Conditions Applicable to Shares of
Restricted Stock Granted pursuant to the 1994 Stock Option and Restricted Stock
Plan, copies of which are attached hereto and incorporated herein by reference,
unless already provided to you.
Please acknowledge your acceptance of this grant by signing your name in
the space provided on the photocopy of this Grant Agreement and return the
photocopy to Dana T. Iapicca, Assistant Secretary, McKesson Corporation, One
Post Street, Suite 2950, San Francisco, CA 94104.
If you elect to recognize gross income on the Stock in the year of grant,
please telephone Dana Iapicca (415-983-8367) for information and a Section 83(b)
election form.
MCKESSON CORPORATION
By: ___________________________ _______________________________
Date
_______________________________ _______________________________
Grantee Date
<PAGE>
EXHIBIT 10.7
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<PAGE>
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement"), entered into September 22,
1997, by and among McKesson Corporation, a Delaware corporation (the "Company"),
AmeriSource Corporation, a Delaware corporation ("Patriot") and Kurt J.
Hilzinger (the "Executive"), effective as of the Effective Time.
WHEREAS, the Executive is presently employed by Patriot as Senior Vice
President, Chief Financial Officer; and
WHEREAS, the Company, Patriot and a wholly-owned subsidiary of the Company
("Newco") have entered into an Agreement and Plan of Merger, dated September 22,
1997 (the "Merger Agreement"), pursuant to which Newco will be merged with and
into Patriot at the Effective Time (as defined in the Merger Agreement), with
Patriot thereafter becoming a wholly-owned subsidiary of the Company; and
WHEREAS, each of the Company and Patriot has determined that it is in its
best interest and the best interests of its shareholders that the Company retain
the services of the Executive on and following the Effective Time; and
WHEREAS, the Executive is willing to provide services to the Company on the
terms and conditions set forth in this Agreement;
NOW THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereby agree as follows:
1. Employment. The Company agrees to employ the Executive, and the
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Executive agrees to be employed by the Company, upon the terms and conditions
hereinafter provided in this Agreement, for a period commencing at the Effective
Time and continuing for three years thereafter (the "Term"); provided, however,
that this Agreement shall be of no force and effect unless and until the Closing
(as defined in the Merger Agreement) occurs.
2. Position and Duties. During the Term, the Company agrees to employ the
-------------------
Executive to serve in such executive capacities as may be assigned to him from
time to time by the Company's Chief Executive Officer (the "CEO"). During the
Term, and except for illness or incapacity and reasonable vacation
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periods of no more than four weeks in any calendar year (or such other period as
shall be consistent with the Company's policies for other key executives), the
Executive shall devote all of his business time, attention, skill and efforts
exclusively to the business and affairs of the Company and its affiliates;
provided, however, that the Executive may serve on other boards as a director or
trustee, with the prior approval of the CEO, if such service does not interfere
with his ability to discharge his duties and responsibilities to the Company.
Unless and until otherwise agreed between the Company and the Executive, the
Executive shall be at liberty to maintain his primary residence as of September
22, 1997.
3. Compensation. For all services rendered by the Executive in any
------------
capacity required hereunder during the Term, including, without limitation,
services as an executive, officer, director, or member of any committee of the
Company, or any subsidiary, affiliate or division thereof, the Executive shall
be compensated as follows:
(a) Base Salary. The Company shall pay the Executive a fixed salary
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of $250,000 per annum or such higher annual amount as may be paid from time to
time pursuant to the terms hereof ("Base Salary"). The Base Salary shall be
subject to such periodic review (which shall occur in accordance with Company
policy) and such periodic increases as the Compensation Committee of the Board
of Directors of the Company shall deem appropriate in accordance with the
Company's customary procedures and practices regarding the salaries of senior
officers, provided, that the annual adjustment shall be no less than the
increase in the "Consumer Price Index" now known as the Consumer Price Index for
Urban Wage Earners and Clerical Workers, All Items, Philadelphia, Pennsylvania
(1967=100), as published by the Bureau of Labor, Statistics, United States
Department of Labor. Base Salary shall be payable in accordance with the
customary payroll practices of the Company.
(b) Bonus Awards. The Executive shall be entitled to receive an
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annual incentive cash compensation award under the Company's policy of providing
for the payment of incentive cash compensation to key officers based upon the
performance of the Company and the officer's individual performance.
(c) Stock Options and Restricted Stock Awards.
-----------------------------------------
(i) Subject to the terms and conditions of the Company's 1994
Stock Option and Restricted Stock Plan (the "Plan"), at the Effective Time,
the Company and the Executive will enter into the Stock Option Award
Agreement annexed hereto as
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Exhibit A. The options granted pursuant to such agreement shall vest and
become exercisable in installments of twenty-five percent per year
commencing on the first anniversary following the Effective Time, provided
that the Executive is employed by the Company or any of its affiliates on
each such anniversary date. If the Company terminates Executive's
employment during the Term due to a Without Cause Termination, all such
options shall vest and become immediately exercisable for ninety days
following the date of such termination, after which date all options shall
lapse. Upon a Termination for Cause of the Executive by the Company during
the Term, all such options, whether or not previously vested, shall
immediately lapse.
(ii) Subject to the terms and conditions of the Plan, at the
Effective Time, the Company and the Executive will enter into the
Restricted Stock Grant Agreement annexed hereto as Exhibit B. Restrictions
on such restricted shares shall lapse on the second anniversary following
the Effective Time, so long as, on such date, the Company and the Executive
agree that the Executive has satisfied such performance goals as may be
mutually agreed upon by the Executive and the CEO. If the Company
terminates Executive's employment during the Term due to a Without Cause
Termination, all restrictions on such shares shall immediately lapse,
provided that such performance goals have been satisfied as of the date of
termination. Upon a Termination for Cause of the Executive by the Company
during the Term, all such shares, whether or not previously vested, shall
be immediately forfeited.
(iii) In addition to the grants set forth in Sections 3(c)(i) and
3(c)(ii) of this Section 3, the Executive shall, on and following the
Effective Time, be eligible for consideration for stock option grants and
restricted stock awards at such times as other similarly situated
executives, in accordance with the Company's customary practice.
(d) Supplemental Insurance. The Company shall obtain, on behalf of
----------------------
Executive, a split dollar life insurance policy on terms generally equivalent to
the arrangement between Patriot and David M. Flowers as in effect on September
22, 1997, but without regard to the current cash value of the Flowers policy or
the relevant differences between Flowers and the Executive (including,
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but not limited to, age and health condition).
(e) Additional Benefits. Except as modified by this Agreement, the
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Executive shall be entitled to participate in all compensation or employee
benefit plans or programs (other than termination pay programs), and to receive
all benefits, perquisites and emoluments, for which salaried employees of the
Company are generally eligible under any plan or program now or hereafter
established and maintained by the Company for senior officers, to the fullest
extent permissible under the general terms and provisions of such plans or
programs and in accordance with the provisions thereof, including, if available,
group hospitalization, health, dental care, life or other insurance, tax-
qualified pension, savings, thrift and profit-sharing plans, sick-leave plans,
travel or accident insurance, disability insurance, automobile allowance or
automobile lease plans, and executive contingent compensation plans, including,
without limitation, if available, capital accumulation programs and stock
purchase, restricted stock and stock option plans. Notwithstanding the
foregoing, nothing in this Agreement shall preclude the amendment or termination
of any such plan or program, provided that such amendment or termination is
applicable generally to the senior officers of the Company or any subsidiary or
affiliate.
(f) Perquisites. Executive shall be entitled for each complete
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twelve-month period that this Agreement is in effect to reimbursement of tax
planning and tax preparation charges, not to exceed $5,000, and to reimbursement
of club dues, not to exceed $10,000.
4. Business Expenses. The Company shall pay or reimburse the Executive
-----------------
for all reasonable travel or other expenses incurred by the Executive (and his
spouse where there is a legitimate business reason for his spouse to accompany
him) in connection with the performance of his duties and obligations under this
Agreement, including, without limitation, expenses for entertainment, travel
(including automobile operating expenses), meals, hotel accommodations and the
like, in accordance with such rules and policies relating thereto as the Company
may from time to time adopt. Reimbursement shall be subject to the Executive's
presentation of appropriate vouchers in accordance with such procedures as the
Company may from time to time establish for senior officers and to preserve any
deductions for federal income taxation purposes to which the Company may be
entitled.
5. Housing Loan and Assistance.
---------------------------
(a) At or following the Effective Time, upon Executive's relocation to
San Francisco, California, the Company shall make a housing loan to
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the Executive in the sum of $250,000 (the "Housing Loan"). The Housing Loan
shall be evidenced by a promissory note (the "Note") in form provided by the
Company, and shall be secured by a deed of trust on Executive's principal
residence (the "Property"). The Housing Loan shall be without interest prior to
"Maturity" (as defined in the Note) and shall be repaid to the Company in full
upon the earliest to occur of any of the following: (i) 60 days after
termination of Executive's employment for any reason, (ii) sale or other
transfer of ownership of the Property, (iii) use of the Property other than as a
principal residence, or (iv) 10 years from the date of the Housing Loan.
(b) Subject to Section 5(c) of this Section 5, the Company shall
establish a deferred compensation account on behalf of the Executive in the
Company's Deferred Compensation Administration Plan, and, so long as Executive
remains in the employment of the Company, the Company shall credit to such
account the amount of $25,000 per annum commencing on the first anniversary of
the Housing Loan, continuing for the duration of Executive's employment through
the tenth anniversary of such date (or a pro rata portion of such amount if the
employment of the Executive is terminated during any such year). Such account
shall bear interest each year at the rate established by the Board of Directors
of the Company (the "Board") (or any duly authorized committee thereof). The
balance of such account shall be released to Executive (or, at the Company's
sole election, applied against the balance, if any of the Housing Loan) upon the
earlier of (i) the Maturity of the Housing Loan following Executive's
termination of employment with the Company, or (ii) ten years from the date of
the first credit to such account.
(c) Notwithstanding any other provision of this Section 5, if
Executive's employment is terminated for any reason prior to the fifth
anniversary of the date of the Housing Loan, Executive shall forfeit the entire
sum of such account.
(d) The Company shall reimburse the Executive, in accordance with its
existing policies, for the following reasonable expenses incurred in connection
with sale of his current residence and purchase of suitable housing in San
Francisco, California: real estate brokerage fees, pest control inspections,
title insurance and escrow fees and moving costs (including temporary living
expenses, if any, while in transit). In addition, the Company shall reimburse
the Executive in an amount up to one-half month of Base Salary for non-
receipted, miscellaneous moving expenses.
6. Effect of Termination of Employment.
-----------------------------------
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(a) Termination by the Company During Term. If the Company terminates
--------------------------------------
Executive's employment during the Term due to a Without Cause Termination, the
Company shall provide Severance Benefits to the Executive.
(b) Termination by the Executive During Term. If the Executive
----------------------------------------
terminates his employment during the thirty days commencing immediately
following the second anniversary date of the Effective Time, the Company shall
provide Severance Benefits to the Executive.
(c) All Other Terminations. Upon all terminations other than the
----------------------
terminations referred to in Sections 6(a) and 6(b) of this Section 6 (including,
but not limited to, voluntary retirement and termination upon or following
expiration of the Term), earned but unpaid Base Salary as of the date of
termination of employment shall be paid to the Executive in full, and the
Company shall have no obligation to provide Severance Benefits. In addition,
the Executive shall receive the benefits, if any, to which he is entitled as a
former employee under the employee benefit programs and compensation plans and
programs maintained for the benefit of the Company's officers and employees.
(d) Definitions. For purposes of this Agreement, the following terms
-----------
have the following meanings:
(i) The term "Termination for Cause" shall mean termination of
the Executive's employment by the Company upon (i) Executive's misconduct,
habitual neglect, dishonesty or other knowing and material violation of the
Company's policies and procedures in effect from time to time, (ii) actions
(or failures to act) by Executive in bad faith and to the detriment of the
Company or any of its affiliates or (iii) a material breach by the
Executive of one or more terms of this Agreement.
(ii) The term "Without Cause Termination" shall mean a
termination of the Executive's employment by the Company, upon 30 days'
notice to the Executive, other than a Termination for Cause.
(iii) The term "Severance Benefits" shall mean:
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(A) the Executive's earned but unpaid Base Salary as of the date
of termination of employment;
(B) the benefits, if any, to which the Executive is entitled as
a former employee under the employee benefit programs and compensation plans and
programs maintained for the benefit of the Company's officers and employees;
(C) continued coverage under the Company's employee welfare
benefit plans (including, but not limited to, group hospitalization, health,
dental care, life or other insurance, travel or accident insurance and
disability insurance) for three years following the date of termination, with
coverage equivalent to the coverage to which the Executive would have been
entitled had the Executive continued in employment with the Company during such
three years at the highest annual rate of Base Salary achieved during the
Executive's period of actual employment with the Company; provided, however,
that the Executive may, upon written notice to the Company, elect to receive the
present value of such coverage in cash in a lump sum; and
(D) an amount equal to three times the sum of the highest Base
Salary in effect during the Term and highest bonus paid to the Executive by
either the Company or Patriot in any of the four years prior to the date of
termination, payable in a lump sum as soon as is practicable following
termination.
Payment of Severance Benefits shall be in lieu of any severance, termination or
similar payment that would otherwise be due to the Executive under any other
severance program, plan or practice of the Company or its subsidiaries and
affiliates. Upon commencement of payment of Severance Benefits, the Executive
shall not be entitled to any other payment or benefit under this Agreement.
(e) Excise Tax Limitation.
---------------------
(i) Notwithstanding anything contained in this Agreement to the
contrary, to the extent that the payments and benefits provided under this
Agreement and benefits provided to, or for the benefit of, the Executive
under any other Company plan or agreement (such payments or benefits are
collectively referred to as the "Payments") would be subject to the excise
tax (the "Excise Tax") imposed under Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code"), the Payments shall be reduced (but
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not below zero) if and to the extent necessary so that no Payment to be
made or benefit to be provided to the Executive shall be subject to the
Excise Tax (such reduced amount is hereinafter referred to as the "Limited
Payment Amount"). Unless the Executive shall have given prior written
notice specifying a different order to the Company to effectuate the
foregoing, the Company shall reduce or eliminate the Payments, by first
reducing or eliminating the portion of the Payments which are not payable
in cash and then by reducing or eliminating cash payments, in each case in
reverse order beginning with payments or benefits which are to be paid the
farthest in time from the Determination (as hereinafter defined). Any
notice given by the Executive pursuant to the preceding sentence shall take
precedence over the provisions of any other plan, arrangement or agreement
governing the Executive's rights and entitlements to any benefits or
compensation.
(ii) The determination of whether the Payments shall be reduced
to the Limited Payment Amount pursuant to this Agreement and the amount of
such Limited Payment Amount shall be made, at the Company's expense, by an
accounting firm selected by the Company which is one of the six largest
accounting firms in the United States (the "Accounting Firm"). The
Accounting Firm shall provide its determination (the "Determination"),
together with detailed supporting calculations and documentation, to the
Company and the Executive within ten (10) days of the date of termination
of the Executive, if applicable, or such other time as requested by the
Company or by the Executive (provided the Executive reasonably believes
that any of the Payments may be subject to the Excise Tax).
7. Other Duties of Executive During and After Term.
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(a) Confidential Information. Executive acknowledges that by reason
------------------------
of his employment with the Company and Patriot he has and will hereafter, from
time to time during the Term, become exposed to and become knowledgeable about
proposals, plans, inventions, practices, systems, programs, formulas, processes,
methods, techniques, research, records, supplier sources, customer lists, and
other forms of business information regarding the Company and its affiliates
which are not known to the Company's competitors and which are not recognized as
being encompassed within standard business or management practices and which are
kept secret and confidential by the Company (the "Confidential Information").
Executive therefore agrees that at no time during or
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after the period of his employment by the Company will he disclose or use the
Confidential Information except, during his employment, as may be required in
the prudent course of business for the benefit of the Company.
(b) Non-Compete. In consideration of the covenants of the Company and
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the Executive hereunder, Executive hereby agrees that, until the latest of: (i)
while Executive is employed during the Term, (ii) during such time after the
Term as Executive is employed by the Company, (iii) while Executive is receiving
Severance Benefits pursuant to this Agreement, or (iv) for a period of one year
after Executive's termination of employment for any reason, he will not, unless
authorized in writing to do so by the Company, directly or indirectly own,
manage, operate, join, control or participate in the ownership, management,
operation or control of, or be employed by or otherwise connected in any manner
with any business which directly or indirectly competes with any line of
business of the Company or any of its affiliates; provided, that nothing in this
paragraph shall prohibit Executive after termination of his employment from
acquiring up to 5% of any class of outstanding equity securities of any
corporation whose equity securities are regularly traded on a national
securities exchange or in the over-the-counter market. Executive agrees that
for a period ending on the second anniversary after Executive's termination of
employment hereunder for any reason, Executive will not (x) recruit any employee
of the Company or any of its affiliates or solicit or induce, or attempt to
solicit or induce, any employee of the Company or any of its affiliates to
terminate his or her employment with, or otherwise cease his or her relationship
with, the Company or any of its affiliates, or (y) solicit, divert or take away,
or attempt to solicit, divert or take away, the business or patronage of any of
the clients, customers or accounts, or prospective clients, customers or
accounts, of the Company or any of its affiliates that were contracted,
solicited or served by the Executive while employed by the Company or any of its
affiliates.
(c) Remedies. The Company and Executive confirm that the restrictions
--------
contained in Sections 7(a) and 7(b) of this Agreement are, in view of the nature
of the business of the Company and its affiliates, reasonable and necessary to
protect the legitimate interests of the Company and its affiliates and that any
violation of any provision of Section 7(a) or 7(b) will result in irreparable
injury to the Company and its affiliates. Executive hereby agrees that, in the
event of any breach or threatened breach of the terms or conditions of this
Agreement by Executive, the Company's remedies at law will be inadequate and, in
any such event, the Company shall be entitled to preliminary or permanent
injunctive relief and other equitable relief in any court of competent
jurisdiction. Executive further irrevocably consents to the jurisdiction of any
Pennsylvania state court or federal
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court located in the Commonwealth of Pennsylvania over any suit, action or
proceeding arising out of or relating to this Section 7 and hereby waives, to
the fullest extent permitted by law, any objection that he may now or hereafter
have to such jurisdiction or to the laying of venue of any such suit, action or
preceding has been brought in an inconvenient forum. This Section 7 of this
Agreement shall (x) survive the termination of this Agreement and continue
throughout the duration of the Executive's employment with the Company, except
as amended or modified by written agreement of the parties and (y) survive the
Executive's termination of employment with the Company for any reason.
(d) Modification of Terms. If any restriction in this Section 7 of
---------------------
this Agreement is adjudicated to exceed the time, geographic, service or other
limitations permitted by applicable law in any jurisdiction, the Executive
agrees that such may be modified and narrowed, either by a court or the Company,
to the maximum time, geographic, service or other limitations permitted by
applicable law so as to preserve and protect the Company's legitimate business
interest, without negating or impairing any other restrictions or undertaking
set forth in this Agreement.
8. Withholding Taxes. The Company may directly or indirectly withhold
-----------------
from any payments made under this Agreement all federal, state, city or other
taxes as shall be required pursuant to any law or governmental regulation or
ruling.
9. Consolidation, Merger, or Sale of Assets. Nothing in this Agreement
----------------------------------------
shall preclude the Company from consolidating or merging into or with, or
transferring all or substantially all of its assets to, another corporation
which assumes this Agreement and all obligations and undertakings of the Company
hereunder. Upon such a consolidation, merger or transfer of assets and
assumption, the terms "Company" as used herein shall mean such other corporation
and this Agreement shall continue in full force and effect.
10. No Attachment. Except as required by law, no right to receive
-------------
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or
to execution, attachment, levy, or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect; provided, however, that nothing in this Section
10 shall preclude the assumption of such rights by executors, administrators or
other legal representatives of the Executive or his estate and their
10
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assigning any rights hereunder to the person or persons entitled thereto.
11. No Mitigation. The Executive shall not be required to mitigate the
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amount of any payment or benefit provided for in this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment or benefit provided
for in this Agreement be reduced by any compensation earned by other employment
or otherwise.
12. Source of Payment. All payments provided for under this Agreement
-----------------
shall be paid in cash from the general funds of the Company. The Company shall
not be required to establish a special or separate fund or other segregation of
assets to assure such payments, and, if the Company shall make any investments
to aid it in meeting its obligations hereunder, the Executive shall have no
right, title or interest whatever in or to any such investments except as may
otherwise be expressly provided in a separate written instrument relating to
such investments. To the extent that any person acquires a right to receive
payments from the Company hereunder, such right, without prejudice to rights
which employees may have, shall be no greater than the right of an unsecured
creditor of the Company.
13. Severability. If any provision of the Agreement or application
------------
thereof to anyone or under any circumstances is adjudicated to be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect any other provision or application and shall not invalidate or render
unenforceable such provision or application in any other jurisdiction.
14. Contents of Agreement. At the Effective Time, without any further
---------------------
action by the parties, this Agreement shall supersede all prior agreements
between the Executive and Patriot and shall set forth the entire understanding
among the parties hereto with respect to the subject matter hereof. This
Agreement may not be changed, modified, extended or terminated except upon
written amendment approved by the parties hereto. Without limiting the
generality of the foregoing, at the Effective Time, the Employment Agreement,
effective as of August 1, 1997, between the Executive and Patriot, shall be
terminated without any liability of Patriot or the Company thereunder except for
accrued and unpaid base salary and business expenses (if any) as of the date of
termination.
15. Governing Law. The validity, interpretation, performance,
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and enforcement of this Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania, and Executive consents to the jurisdiction of the
state and federal courts of Pennsylvania in any dispute arising under this
Agreement.
16. Survival. Any section of this Agreement which provides a benefit to
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the Executive and which does not expressly provide for its termination upon the
expiration of the Term shall survive the expiration of the Term, and the
obligation to provide benefits to the Executive as set forth in such section
shall remain binding upon the Company until such time as the Executive's
employment relationship with the Company is terminated and the benefits provided
under such section are paid in full to the Executive.
17. Miscellaneous. All section headings are for convenience only. This
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Agreement may be executed in any number of counterparts, each of which when
executed shall be deemed to be an original and all of which together shall be
deemed to be one and the same instrument. It shall not be necessary in marking
proof of this Agreement or any counterpart hereof to produce or account for any
of the other counterparts.
18. Arbitration. Except with respect to actions for preliminary and
-----------
permanent injunctive relief and other equitable relief under Section 7, any
controversy or claim arising out of or relating to this Agreement, or any breach
thereof, shall be settled by arbitration in accordance with the rules of the
American Arbitration Association, and judgment upon such award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof. The
arbitration shall be held in Philadelphia, Pennsylvania, unless another location
shall be mutually agreed to by the parties at the time of the arbitration. If
Section 6(e) is not applicable, in any dispute between the parties as to which
Executive is sustained on the claims(s) by or against him, the Company shall pay
all reasonable legal fees incurred by Executive in connection with the dispute
over such claim(s). If more than one claim is involved in any dispute and if
Executive is sustained as to one or more of such claims but not as to all of
such claims, there shall be a reasonable allocation of applicable reasonable
legal expenses. The Company will reimburse Executive for those reasonable legal
expenses determined by the arbitrator(s) or by the consent of the parties to be
allocable to the claim or claims as to which Executive is upheld.
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IN WITNESS WHEREOF, and intending to be legally bound, the Company and
Patriot have caused this Agreement to be executed by duly authorized officers,
and the Executive has signed this Agreement this 22nd day of September, 1997,
effective as of the Effective Time.
McKESSON CORPORATION
By: /s/ Ivan D. Meyerson
--------------------------------
Name: Ivan D. Meyerson
Title: Vice President
AMERISOURCE CORPORATION
By: /s/ R. David Yost
--------------------------------
Name: R. David Yost
Title: President and Chief
Executive Officer
/s/ Kurt J. Hilzinger
---------------------------------------
Kurt J. Hilzinger
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Exhibit A - Stock Option Award Agreement
----------------------------------------
NOTICE OF GRANT OF STOCK OPTIONS
AND GRANT AGREEMENT
ID:
The following option grant has been awarded to you to purchase McKesson
Corporation Common Stock:
Non-Qualified Stock Option Grant No. __________
Date of Grant [Closing Date]
Stock Option Plan 1994
Option Price per Share [FMV on Date of Grant]
Total Number of Shares Granted 25,000
Total Price of Shares Granted __________
You hereby accept the grant of this option subject to the terms and conditions
of the Employment Agreement between you and McKesson Corporation, dated
September __, 1997, and, to the extent not inconsistent with such Employment
Agreement, subject to the terms of this Agreement, the 1994 Stock Option and
Restricted Stock Plan ("Plan") and the Statement of Terms and Conditions
Applicable to Stock Options Granted under the Plan, incorporated herein by
reference, and further acknowledge receipt of copies of such documents, if they
have not already been provided to you. PLEASE RETAIN THIS INFORMATION FOR YOUR
FILES. You should consult your tax advisor concerning the appropriate reporting
requirements regarding this grant. This option vests and becomes exercisable at
the rate of 25% per year beginning one year after the date of grant.
Please sign the copy of this Agreement and return it to Dana T. Iapicca, One
Post Street, 29/th/ Floor, San Francisco, CA 94104.
______________________________________ _______________________________________
For McKesson Corporation Date
______________________________________ _______________________________________
Optionee Date
<PAGE>
Exhibit B - Restricted Stock Grant Agreement
--------------------------------------------
RESTRICTED STOCK GRANT AGREEMENT
UNDER THE
McKESSON CORPORATION
1994 STOCK OPTION AND RESTRICTED STOCK PLAN
The Compensation Committee of the Board of Directors has approved a grant
to you of 10,000 shares of Restricted Stock (the "Stock") pursuant to the
McKesson Corporation 1994 Stock Option and Restricted Stock Plan (the "Plan"),
and subject to the terms and conditions of the Employment Agreement between you
and the McKesson Corporation, dated September __, 1997. A certificate for the
Stock has been issued to you effective [as of the Closing Date] and will be
released to you on the second anniversary of the date of grant, i.e., on
[______________], subject to the restrictions set forth in your Employment
Agreement and, to the extent not inconsistent with your Employment Agreement, in
the Plan and the Statement of Terms and Conditions Applicable to Shares of
Restricted Stock Granted pursuant to the 1994 Stock Option and Restricted Stock
Plan, copies of which are attached hereto and incorporated herein by reference,
unless already provided to you.
Please acknowledge your acceptance of this grant by signing your name in
the space provided on the photocopy of this Grant Agreement and return the
photocopy to Dana T. Iapicca, Assistant Secretary, McKesson Corporation, One
Post Street, Suite 2950, San Francisco, CA 94104.
If you elect to recognize gross income on the Stock in the year of grant,
please telephone Dana Iapicca (415-983-8367) for information and a Section 83(b)
election form.
MCKESSON CORPORATION
By:_____________________________ __________________________________
Date
________________________________ __________________________________
Grantee Date
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS THAT the undersigned directors
and officers of McKesson Corporation, a Delaware corporation (the "Company"), do
hereby constitute and appoint Ivan D. Meyerson and Nancy A. Miller his or her
true and lawful attorney and agent, each with full power and authority (acting
alone and without the other) to execute in the name and on behalf of the
undersigned as such Director and/or Officer, a Registration Statement on Form
S-4 under the Securities Act of 1933, as amended, with respect to the
registration of shares of the Company's Common Stock, that may be issued in
connection with the proposed merger of wholly-owned subsidiary of the Company
into AmeriSource and to execute any and all amendments to such Registration
Statement, whether filed prior or subsequent to the time such Registraton
Statement becomes effective. The undersigned hereby grants unto such attorneys
and agents, and each of them, full power of substitution and revocation in the
premises and hereby ratifies and confirms all that such attorneys and agents may
do or cause to be done by virtue of these presents.
Signature Capacity
--------- --------
/S/ MARK A. PULIDO
- -------------------------------- President and Chief Executive Officer
Mark A. Pulido and Director
/S/ RICHARD H. HAWKINS
- -------------------------------- Vice President and Chief Financial Officer
Richard H. Hawkins
/S/ HEIDI E. YODOWITZ
- -------------------------------- Controller
Heidi E. Yodowitz
/S/ ALAN SEELENFREUND
- -------------------------------- Director, Chairman of the Board
Alan Seelenfreund
/S/ MARY G.F. BITTERMAN
- -------------------------------- Director
Mary G.F. Bitterman
/S/ TULLY M. FRIEDMAN
- -------------------------------- Director
Tully M. Friedman
/S/ JOHN M. PIETRUSKI
- -------------------------------- Director
John M. Pietruski
/S/ DAVID S. POTTRUCK
- -------------------------------- Director
David S. Pottruck
/S/ CARL E. REICHARDS
- -------------------------------- Director
Carl E. Reichards
/S/ JANE E. SHAW
- -------------------------------- Director
Jane E. Shaw
/S/ ROBERT H. WATERMAN, JR.
- -------------------------------- Director
Robert H. Waterman, Jr.
Dated: November 7, 1997
