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Delaware | 5912 | 45-2884094 | ||
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
Lou R. Kling Howard L. Ellin Kenneth M. Wolff Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036 (212) 735-3000 | Thomas M. Moriarty, General Counsel, Secretary and President, Global Pharmaceutical Strategies Medco Health Solutions, Inc. 100 Parsons Pond Drive Franklin Lakes, New Jersey 07417 (201) 269-3400 | James C. Morphy Matthew G. Hurd Sullivan & Cromwell LLP 125 Broad Street New York, New York 10004 (212) 558-4000 |
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
Proposed Maximum | Proposed Maximum | |||||||||||||||||||
Title of Each Class of | Amount to | Offering Price | Aggregate | Amount of | ||||||||||||||||
Securities to be Registered | be Registered(1) | Per Share | Offering Price(2) | Registration Fee(3) | ||||||||||||||||
Common Stock, par value $0.01 per share | 895,701,365 | Not Applicable | $ | 25,918,690,261.07 | $ | 2,970,281.90 | ||||||||||||||
(1) | The number of shares of common stock, par value $0.01 per share, of the registrant (“Aristotle Holding Common Stock”) being registered is based upon the sum of (i) the product obtained by multiplying (x) 502,124,869 shares of common stock, par value $0.01 per share, of Express Scripts, Inc. (“Express Common Stock”), the maximum number of shares of Express Common Stock that may be canceled and exchanged in the Express merger by (y) the exchange ratio of 1.0 per share of Aristotle Holding Common Stock for each share of Express Common Stock, plus (ii) the product obtained by multiplying (a) 485,896,908 shares of common stock, par value $0.01 per share, of Medco Health Solutions, Inc. (“Medco Common Stock”), the maximum number of shares of Medco Common Stock that may be canceled and exchanged in the Medco merger by (b) the exchange ratio of 0.81 per share of Aristotle Holding Common Stock for each share of Medco Common Stock. | |
(2) | Pursuant to Rules 457(f)(1) and 457(c) under the Securities Act and solely for the purpose of calculating the registration fee, the proposed maximum aggregate offering price is the sum of (i) the product obtained by multiplying (x) $35.39 (the average of the high and low prices of Express Common Stock on October 4, 2011), by (y) 502,124,869 shares of Express Common Stock (the maximum number of shares of Express Common Stock that may be canceled and exchanged in the Express merger, plus (ii) the product obtained by multiplying (a) $45.57 (the average of the high and low prices of Medco Common Stock on October 4, 2011), by (b) 485,896,908 shares of Medco Common Stock (the maximum number of shares of Medco Common Stock that may be canceled and exchanged in the Medco merger), minus (iii) $13,993,830,950.40 (the estimated amount of cash to be paid by the registrant to Medco’s stockholders in the Medco merger). | |
(3) | Calculated by multiplying the estimated aggregate offering price of securities to be registered by 0.00011460. |
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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 document shall not constitute an offer to sell or the solicitation of any offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. |
Express Scripts, Inc. | Medco Health Solutions, Inc. |
MERGER PROPOSAL — YOUR VOTE IS VERY IMPORTANT
[SIGNATURE] | [SIGNATURE] | |
George Paz | David B. Snow, Jr. | |
President, Chief Executive Officer, and | Chairman of the Board and Chief Executive Officer | |
Chairman of the Board | Medco Health Solutions, Inc. | |
Express Scripts, Inc. |
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Express Scripts, Inc. One Express Way Saint Louis, Missouri, 63121 Attention: Investor Relations (314) 810-3115 www.express-scripts.com (“Investor Information” tab) | Medco Health Solutions, Inc. 100 Parsons Pond Drive, Mail Stop F3-3 Franklin Lakes, New Jersey 07417 Attention: Investor Relations (201) 269-4279 www.medcohealth.com (“Investors” tab) |
If you are an Express Scripts stockholder: MacKenzie Partners Inc. 105 Madison Avenue New York, NY 10016 (800) 322-2885 (call toll free) (212) 929-5500 (call collect) E-mail: [ ]@mackenziepartners.com | If you are a Medco stockholder: D.F. King & Co., Inc. 48 Wall Street, 22nd Floor New York, NY 10005 (800) 967-4612 (call toll free) or (212) 269-5550 (call collect) E-mail: [ ]@dfking.com |
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and Corporate Secretary
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Global Pharmaceutical Strategies
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ANNEX A | Agreement and Plan of Merger | A-1 | ||
ANNEX B | Opinion of J.P. Morgan Securities, LLC | B-1 | ||
ANNEX C | Opinion of Lazard Frères & Co. LLC | C-1 | ||
ANNEX D | Opinion of Credit Suisse Securities (USA) LLC | D-1 | ||
ANNEX E | Opinion of Citigroup Global Markets Inc. | E-1 | ||
ANNEX F | Form of Amended and Restated Certificate of Incorporation of Aristotle Holding, Inc. | F-1 | ||
ANNEX G | Form of Amended and Restated Bylaws of Aristotle Holding, Inc. | G-1 | ||
ANNEX H | Section 262 of the General Corporation Law of the State of Delaware | H-1 |
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Q: | Why am I receiving this joint proxy statement/prospectus? | |
A: | Express Scripts and Medco have entered into the merger agreement providing for the combination of Express Scripts and Medco under a new holding company named Aristotle Holding, Inc. (which we refer to as New Express Scripts). Pursuant to the merger agreement, Medco Merger Sub will be merged with and into Medco, and Express Scripts Merger Sub will be merged with and into Express Scripts. As a result, Medco and Express Scripts will each become wholly owned subsidiaries of New Express Scripts. As a result of the transactions contemplated by the merger agreement, former Medco and Express Scripts stockholders will own stock in New Express Scripts, which is expected to be listed for trading on the NASDAQ. We refer to these mergers as the Medco merger and the Express Scripts merger, respectively, and together as the mergers. | |
Medco is holding a special meeting of stockholders, which we refer to as the Medco special meeting, in order to obtain the stockholder approval necessary to adopt the merger agreement, which we refer to as the Medco stockholder approval. Medco stockholders will also be asked to approve the adjournment of the Medco special meeting (if it is necessary or appropriate to solicit additional proxies if there are not sufficient votes to adopt the merger agreement) and to approve, by non-binding, advisory vote, certain compensation arrangements for Medco’s named executive officers in connection with the mergers. | ||
Express Scripts is holding a special meeting of stockholders, which we refer to as the Express Scripts special meeting, in order to obtain the stockholder approval necessary to adopt the merger agreement. We refer to this approval as the Express Scripts stockholder approval. Express Scripts stockholders will also be asked to approve the adjournment of the Express Scripts special meeting (if it is necessary or appropriate to solicit additional proxies if there are not sufficient votes to adopt the merger agreement). | ||
We will be unable to complete the mergers unless both the Express Scripts stockholder approval and the Medco stockholder approval are obtained at the respective special meetings. |
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We have included in this joint proxy statement/prospectus important information about the mergers, the merger agreement (a copy of which is attached as Annex A) and the Express Scripts and Medco special meetings. You should read this information carefully and in its entirety. The enclosed voting materials allow you to vote your shares without attending the applicable special meeting. Your vote is very important and we encourage you to submit your proxy as soon as possible. | ||
Q: | What will Medco stockholders receive in the Medco merger? | |
A: | Upon completion of the Medco merger, each share of common stock of Medco, par value $0.01 per share, which we refer to as Medco common stock, will be converted into (i) the right to receive $28.80 in cash, without interest and (ii) 0.81 shares of validly issued, fully paid and non-assessable New Express Scripts common stock, par value $0.01 per share, which we refer to collectively as the Medco merger consideration. Shares of Medco common stock held in a Medco employee benefit plan will be converted into the Medco merger consideration. However, shares held by Medco as treasury stock or that are owned by Medco, Medco Merger Sub or any wholly owned subsidiary of Medco and shares with respect to which appraisal rights are properly exercised and not withdrawn, which we collectively refer to as the Medco excluded shares, will not receive the Medco merger consideration. Shares held by Medco as treasury stock or that are owned by Medco, Medco Merger Sub or any wholly owned subsidiary of Medco will be canceled. | |
Medco stockholders will not receive any fractional shares of New Express Scripts common stock in the Medco merger. Instead of receiving any fractional shares, each holder of Medco common stock will be paid an amount in cash, without interest, rounded down to the nearest cent, equal to the product of (i) the amount of the fractional share interest in a share of New Express Scripts common stock to which such holder would otherwise be entitled (rounded to three decimal places) and (ii) an amount equal to the average of the closing sale prices of Express Scripts common stock on the NASDAQ Stock Market, which we refer to as the NASDAQ, for each of the 15 consecutive trading days ending with the fourth complete trading day prior to the date on which the closing of the mergers takes place, which we refer to as the closing date. | ||
Q: | What will Express Scripts stockholders receive in the Express Scripts merger? | |
A: | Upon completion of the Express Scripts merger, each share of common stock of Express Scripts, par value $0.01 per share, which we refer to as Express Scripts common stock, will be converted into one share of New Express Scripts common stock, which we refer to as the Express Scripts merger consideration. Shares held by Express Scripts as treasury stock or that are owned by Express Scripts, Express Scripts Merger Sub or any other wholly owned subsidiary of Express Scripts, which we refer to as the Express Scripts excluded shares, will not receive the Express Scripts merger consideration and will be canceled. | |
Q: | Should I send in my share certificates now for the exchange? | |
A: | Medco Stockholders: No. Medco stockholders should keep any share certificates they hold at this time. After the mergers are completed, Medco stockholders holding Medco share certificates will receive from New Express Scripts’ exchange agent a letter of transmittal and instructions on how to obtain the Medco merger consideration. | |
Express Scripts Stockholders: No. Express Scripts stockholders should keep any Express Scripts share certificates they hold both now and after the mergers are completed. As of the effective time of the Express Scripts merger, holders of Express Scripts common stock will be deemed to have received shares of New Express Scripts common stock (without the requirement to surrender any certificate previously representing shares of Express Scripts common stock or the issuance of new certificates representing New Express Scripts common stock). | ||
Q: | What equity stake will former Medco stockholders and Express Scripts stockholders hold in New Express Scripts? | |
A: | Upon completion of the mergers, it is anticipated that Express Scripts stockholders, on the one hand, and Medco stockholders, on the other hand, will hold approximately 60% and 40%, respectively, of the shares |
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of common stock of New Express Scripts issued and outstanding immediately after the consummation of the mergers. | ||
Q: | How do I calculate the value of the Medco merger consideration? | |
A: | Because New Express Scripts will issue a fixed number of shares of New Express Scripts common stock in exchange for each share of Medco common stock, the value of the Medco merger consideration that Medco stockholders will receive in the Medco merger for each share of Medco common stock will depend on the price per share of Express Scripts common stock at the time the merger is completed. That price will not be known at the time of the Medco special meetings and may be greater or less than the current price of Express Scripts common stock or the price of Express Scripts common stock at the time of the special meetings. | |
Based on the closing price of $52.54 per share of Express Scripts common stock on the NASDAQ on July 20, 2011, the date of the execution of the merger agreement and the last trading day before the public announcement of the merger agreement, the Medco merger consideration represented approximately $71.36 per share of Medco common stock, a premium of 27.9% over the closing price of $55.78 per share of Medco common stock on the New York Stock Exchange, which we refer to as the NYSE, on July 20, 2011. Based on the closing price of $[ ] per share of Express Scripts common stock on the NASDAQ on [ ], 2011, the latest practicable date before the printing of this joint proxy statement/prospectus, the Medco merger consideration represented approximately $[ ] per share of Medco common stock. | ||
Q: | How do I calculate the value of the Express Scripts merger consideration? | |
A: | Because New Express Scripts will issue a fixed number of shares of New Express Scripts common stock in exchange for each share of Express Scripts common stock, the value of the Express Scripts merger consideration that Express Scripts stockholders will receive in the Express Scripts merger for each share of Express Scripts common stock will depend on the price per share of Express Scripts common stock at the time the merger is completed. That price will not be known at the time of the Express Scripts special meetings and may be greater or less than the current price or the price at the time of the special meetings. | |
Based on the closing price of $52.54 per share of Express Scripts common stock on the NASDAQ on July 20, 2011, the date of the execution of the merger agreement and the last trading day before the public announcement of the merger agreement, the Express Scripts merger consideration represented $52.54 per share of Express Scripts common stock. Based on the closing price of $[ ] per share of Express Scripts common stock on the NASDAQ on [ ], 2011, the latest practicable date before the printing of this joint proxy statement/prospectus, the Express Scripts merger consideration represented approximately $[ ] per share of Express Scripts common stock. | ||
Q: | What conditions must be satisfied to complete the mergers? | |
A: | Express Scripts and Medco are not required to complete the merger unless a number of conditions are satisfied or waived. These conditions include, among others: (i) receipt of both the Express Scripts stockholder approval and Medco stockholder approval; (ii) that the shares of New Express Scripts common stock have been approved for listing on the NASDAQ, subject to official notice of issuance; (iii) absence of any injunctions, orders or laws that would prohibit, restrain or make illegal the mergers; (iv) effectiveness of the registration statement onForm S-4, of which this joint proxy statement/prospectus forms a part, and the absence of any stop order; and (v) receipt of certain regulatory approvals and the completion of certain regulatory filings, including expiration or termination of the waiting period (and any extensions thereof) under theHart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, and the rules and regulations promulgated thereunder, which we refer to as the HSR Act, and unless they are not received prior to the fifth business day prior to the outside date, without giving any effect to any extension thereof, certain approvals from, and filings with, the Centers for Medicare & Medicaid Services and certain state insurance departments relating to Express Scripts’ and Medco’s insurance company subsidiaries. Additionally, Express Scripts is not required to complete the mergers unless (i) there are no legal proceedings commenced by a governmental entity seeking an order that would prohibit, restrain or make illegal the |
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consummation of the mergers under U.S. antitrust laws; (ii) there are no motions by a governmental entity pending in a United States Court of Appeals, seeking an expedited appeal of the matters set forth in clause (i) that have been granted; (iii) no request for any such expedited appeal by a governmental entity has been made; and (iv) all deadlines to make any request referred to in clause (iii) have passed, except in the cases of clauses (iii) and (iv), to the extent any such request or petition has been subsequently denied; provided that the conditions summarized in clauses (iii) and (iv) will cease to be conditions from and after the 5th business day preceding the outside date (as the outside date may be extended pursuant to the terms of the merger agreement) (as more fully described in the section titled “— Termination of the Merger Agreement”). | ||
For a more complete summary of the conditions that must be satisfied or waived prior to completion of the mergers, see “The Merger Agreement — Conditions to the Merger” beginning on page [ ]. | ||
Q: | What constitutes a quorum? | |
A: | Express Scripts Special Meeting: Holders of a majority in voting power of the Express Scripts common stock issued and outstanding and entitled to vote at the Express Scripts special meeting, present in person or represented by proxy, constitutes a quorum. In the absence of a quorum, a majority of the Express Scripts stockholders, present in person or represented by proxy, will have power to adjourn the special meeting. As of the record date for the Express Scripts special meeting, [ ] shares of Express Scripts common stock would be required to achieve a quorum. | |
Medco Special Meeting: Holders of one-third of the outstanding shares of Medco common stock entitled to vote at the Medco special meeting, present in person or represented by proxy, constitutes a quorum. In the absence of a quorum, the chairman of the meeting or a majority of the Medco stockholders, present in person or represented by proxy, will have the power to adjourn the special meeting. As of the record date for the Medco special meeting, [ ] shares of Medco common stock would be required to achieve a quorum. | ||
Q: | What vote is required to approve each Medco proposal? | |
A: | Proposal to Adopt the Merger Agreement by Medco stockholders: Adopting the merger agreement requires the affirmative vote of holders of a majority of the shares of Medco common stock outstanding and entitled to vote.Accordingly, a Medco stockholder’s failure to submit a proxy card or to vote in person at the special meeting, an abstention from voting, or the failure of a Medco stockholder who holds his or her shares in “street name” through a broker or other nominee to give voting instructions to such broker or other nominee, which we refer to as a broker non-vote, will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement. | |
Proposal to Adjourn the Medco Special Meeting by Medco stockholders: Approving the adjournment of the special meeting (if it is necessary or appropriate to solicit additional proxies if there are not sufficient votes to adopt the merger agreement) requires the affirmative vote of holders of a majority of the shares of Medco common stock present, in person or represented by proxy, at the special meeting and entitled to vote on the adjournment proposal.Accordingly, abstentions will have the same effect as a vote “AGAINST” the proposal to adjourn the special meeting, while broker non-votes and shares not in attendance at the special meeting will have no effect on the outcome of any vote to adjourn the special meeting. | ||
Proposal Regarding Certain Medco Merger-Related Executive Compensation Arrangements: In accordance with Section 14A of the Securities Exchange Act of 1934 (as amended), which we refer to as the Exchange Act, Medco is providing stockholders with the opportunity to approve, by non-binding, advisory vote, certain compensation payments for Medco’s named executive officers in connection with the mergers, as reported in the section of this joint proxy statement/prospectus entitled “Advisory Vote on Merger-Related Compensation for Medco Named Executive Officers” beginning on page [ ]. Approving this merger-related executive compensation requires the affirmative vote of holders of a majority of the shares of Medco common stock present, in person or represented by proxy, at the special meeting and entitled to vote on the proposal to approve such merger-related compensation.Accordingly, abstentions will have |
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the same effect as a vote “AGAINST” the proposal to approve the merger-related executive compensation, while broker non-votes and shares not in attendance at the special meeting will have no effect on the outcome of any vote to approve the merger-related executive compensation. | ||
Q: | What vote is required to approve each Express Scripts proposal? | |
A: | Proposal to Adopt the Merger Agreement by Express Scripts stockholders: Adopting the merger agreement requires the affirmative vote of holders of a majority of the shares of Express Scripts common stock outstanding and entitled to vote.Accordingly, an Express Scripts stockholder’s failure to submit a proxy card or to vote in person at the special meeting, an abstention from voting, or the failure of an Express Scripts stockholder who holds his or her shares in “street name” through a broker or other nominee to give voting instructions to such broker or other nominee, will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement. | |
Proposal to Adjourn the Express Scripts Special Meeting by Express Scripts Stockholders: Approving the adjournment of the special meeting (if it is necessary or appropriate to solicit additional proxies if there are not sufficient votes to adopt the merger agreement) requires the affirmative vote of holders of a majority of the shares of Express Scripts common stock present, in person or represented by proxy, at the special meeting and entitled to vote on the adjournment proposal, regardless of whether a quorum is present.Accordingly, abstentions will have the same effect as a vote “AGAINST” the proposal to adjourn the special meeting, while broker non-votes and shares not in attendance at the special meeting will have no effect on the outcome of any vote to adjourn the special meeting. | ||
Q: | What are the recommendations of the Medco board of directors? | |
A: | The Medco board of directors, which we refer to as the Medco board, has unanimously (i) approved the merger agreement and consummation of the Medco merger upon the terms and subject to the conditions set forth in the merger agreement, (ii) determined that the terms of the merger agreement, the Medco merger and the other transactions contemplated by the merger agreement are fair to, and in the best interests of, Medco and its stockholders, (iii) directed that the merger agreement be submitted to Medco stockholders for adoption at the Medco special meeting, (iv) recommended that Medco’s stockholders adopt the merger agreement and (v) declared that the merger agreement is advisable. | |
The Medco board unanimously recommends that Medco stockholders vote: |
See “The Mergers — Recommendation of the Medco Board; Medco’s Reasons for the Merger” beginning on page [ ]. | ||
Q: | What are the recommendations of the Express Scripts board of directors? | |
A: | The Express Scripts board has unanimously (i) approved the merger agreement and the consummation of the transactions contemplated by the merger agreement upon the terms and subject to the conditions set forth in the merger agreement, (ii) determined that the terms of the Express Scripts merger and the other transactions contemplated by the merger agreement are fair to, and in the best interests of, Express Scripts and its stockholders, (iii) directed that the merger agreement be submitted to Express Scripts stockholders for adoption, (iv) recommended that Express Scripts stockholders adopt the merger agreement and (v) declared that the merger agreement is advisable. |
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The Express Scripts board unanimously recommends that Express Scripts stockholders vote: |
See “The Mergers — Recommendation of the Express Scripts Board; Express Scripts’ Reasons for the Mergers” beginning on page [ ]. | ||
Q: | When do you expect the mergers to be completed? | |
A: | Express Scripts and Medco are working to complete the mergers as quickly as possible, and we anticipate that they will be completed in the first half of 2012. However, the mergers are subject to various regulatory approvals and other conditions which are described in more detail in this joint proxy statement/prospectus, and it is possible that factors outside the control of both companies could result in the mergers being completed at a later time, or not at all. | |
Q: | What are my U.S. Federal income tax consequences as a result of the mergers? | |
A: | It is anticipated that the Express Scripts merger and the Medco merger, taken together, will qualify as an exchange described in Section 351 of the Internal Revenue Code of 1986, as amended, which we refer to as the Code. It is a condition to Medco’s obligation to complete the Medco merger that Medco receive a written opinion of its counsel, Sullivan & Cromwell LLP, which we refer to as Sullivan & Cromwell, to the effect that the Express Scripts merger and the Medco merger, taken together, will qualify as an exchange described in Section 351 of the Code. It is a condition to Express Scripts’ obligation to complete the Express Scripts merger that New Express Scripts receive an opinion of its counsel, Skadden, Arps, Slate, Meagher & Flom LLP, which we refer to as Skadden, to the effect that the Express Scripts merger and the Medco merger, taken together, will qualify as an exchange described in Section 351 of the Code. If the Express Scripts merger and the Medco merger, taken together, qualify as an exchange described in Section 351, then: | |
• U.S. holders (as defined in the section entitled “The Mergers — Material U.S. Federal Income Tax Consequences”) of Express Scripts common stock will not recognize gain or loss for U.S. federal income tax purposes as a result of the exchange of Express Scripts common stock for New Express Scripts common stock; and | ||
• U.S. holders of Medco common stock generally will recognize gain, but not loss, on the exchange of Medco common stock for a combination of New Express Scripts common stock and cash (excluding any cash received in lieu of a fractional shares) equal to the lesser of: | ||
• the excess of (i) the sum of the fair market value of New Express Scripts common stock received in the Medco merger and the amount of cash received in the Medco merger over (ii) the stockholder’s tax basis in the Medco common stock surrendered in the Medco merger, and | ||
• the amount of cash received by such stockholder in the Medco merger. | ||
You are strongly urged to consult with a tax advisor to determine the particular U.S. federal, state or local or foreign income or other tax consequences of the mergers to you. See “The Mergers — Material U.S. Federal Income Tax Consequences” on page [ ]. | ||
Q: | Are Medco stockholders entitled to appraisal rights? | |
A: | Under Delaware law, holders of shares of Medco common stock that meet certain requirements will have the right to obtain payment in cash for the fair value of their shares of Medco common stock, as determined by the Delaware Court of Chancery, rather than the Medco merger consideration. To exercise appraisal rights, Medco stockholders must strictly follow the procedures prescribed by Delaware law. These procedures are summarized under the section entitled “The Mergers — Appraisal Rights” beginning |
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on page [ ]. In addition, the text of the applicable appraisal rights provisions of Delaware law is included as Annex H to this joint proxy statement/prospectus. | ||
Q: | Are Express Scripts stockholders entitled to appraisal rights? | |
A: | No. Under Delaware law, holders of shares of Express Scripts common stock will not have the right to obtain payment in cash for the fair value of their shares of Express Scripts common stock, as determined by the Delaware Court of Chancery, rather than the Express Scripts merger consideration. | |
Q: | If the mergers are completed, when can I expect to receive the Medco merger consideration for my shares of Medco common stock? | |
A: | Certificated Shares: As soon as reasonably practicable after the effective time of the Medco merger, New Express Scripts will cause an exchange agent to mail to each holder of certificated shares of Medco common stock a form of letter of transmittal and instructions for use in effecting the exchange of Medco common stock for the Medco merger consideration. After receiving the proper documentation from a holder of Medco common stock, the exchange agent will deliver to such holder the cash and New Express Scripts common stock to which such holder is entitled under the merger agreement. More information on the documentation a holder of Medco common stock is required to deliver to the exchange agent may be found under the section entitled “The Mergers — Conversion of Shares; Exchange of Certificates; No Fractional Shares” beginning on page [ ]. | |
Book Entry Shares: Each holder of record of one or more book entry shares of Medco common stock whose shares will be converted into the right to receive the Medco merger consideration will automatically, upon the effective time of the Medco merger, be entitled to receive, and New Express Scripts will cause the exchange agent to deliver to such holder as promptly as practicable after the effective time, the cash and New Express Scripts common stock to which such holder is entitled under the merger agreement. Holders of book entry shares will not be required to deliver a certificate or an executed letter of transmittal to the exchange agent in order to receive the Medco merger consideration. | ||
Q: | If the mergers are completed, when can I expect to receive the New Express Scripts common stock for my shares of Express Scripts common stock? | |
The conversion of shares of Express Scripts common stock into shares of New Express Scripts common stock will occur automatically at the effective time of the Express Scripts merger. As of the effective time of the Express Scripts merger, holders of Express Scripts common stock will be deemed to have received shares of New Express Scripts common stock (without the requirement to surrender any certificate previously representing shares of Express Scripts common stock or the issuance of new certificates representing New Express Scripts common stock). Additional information may be found under the section entitled “The Mergers — Conversion of Shares; Exchange of Certificates; No Fractional Shares” beginning on page [ ]. | ||
Q: | What happens if I sell my shares of Medco common stock or Express Scripts common stock before the applicable special meeting? | |
A: | The record dates for the Medco special meeting, which we refer to as the Medco record date, and for the Express Scripts special meeting, which we refer to as the Express Scripts record date, are earlier than the date of the special meetings and the date that the mergers are expected to be completed. If you transfer your shares after the applicable record date, but before the applicable special meeting, unless the transferee requests a proxy, you will retain your right to vote at such special meeting, but will have transferred the right to receive the Medco merger consideration or the Express Scripts merger consideration, as applicable, in the mergers. In order to receive the Medco merger consideration or the Express Scripts merger consideration, as applicable, you must hold your shares through completion of the mergers. | |
Q: | What happens if I sell my shares of Medco common stock or Express Scripts common stock after the applicable special meeting, but before the applicable effective time? | |
A: | If you transfer your shares after the applicable special meeting, but before the applicable effective time, you will have transferred the right to receive Medco merger consideration or Express Scripts merger |
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consideration, as applicable, in the mergers. In order to receive the Medco merger consideration or the Express Scripts merger consideration, you must hold your shares of Medco or Express Scripts, as applicable. through completion of the mergers. |
Q: | When and where will the Medco and Express Scripts special meetings be held? | |
A: | Medco: The Medco special meeting will be held at [ ] on [ ], 2011, at [ ], Eastern time, unless the special meeting is adjourned or postponed. | |
Express Scripts: The Express Scripts special meeting will be held at the principal executive offices of Express Scripts, One Express Way, Saint Louis, Missouri 63121 on [ ], 2011, at [ ], Central time, unless the special meeting is adjourned or postponed. | ||
Q: | Who is entitled to vote at the Medco and Express Scripts special meetings? | |
A: | Medco Special Meeting: Medco has fixed [ ], 2011 as the Medco record date. If you were a Medco stockholder at the close of business on the Medco record date, you are entitled to vote on matters that come before the Medco special meeting. However, a Medco stockholder may only vote his or her shares if he or she is present in person or is represented by proxy at the Medco special meeting. | |
Express Scripts Special Meeting: Express Scripts has fixed [ ], 2011 as the Express Scripts record date. If you were an Express Scripts stockholder at the close of business on the Express Scripts record date, you are entitled to vote on matters that come before the Express Scripts special meeting. However, an Express Scripts stockholder may only vote his or her shares if he or she is present in person or is represented by proxy at the Express Scripts special meeting. | ||
Q: | How many votes do I have? | |
A: | Medco: Medco stockholders are entitled to one vote at the Medco special meeting for each share of Medco common stock held of record as of the Medco record date. As of the close of business on the Medco record date, there were [ ] outstanding shares of Medco common stock. | |
Express Scripts: Express Scripts stockholders are entitled to one vote at the Express Scripts special meeting for each share of Express Scripts common stock held of record as of the Express Scripts record date. As of the close of business on the Express Scripts record date, there were [ ] outstanding shares of Express Scripts common stock. | ||
Q: | What if I hold shares in both Express Scripts and Medco? | |
A: | If you are a stockholder of both Express Scripts and Medco, you will receive two separate packages of proxy materials. A vote as a Medco stockholder for the proposal to adopt the merger agreement will not constitute a vote as an Express Scripts stockholder for the proposal to adopt the merger agreement, or vice versa.THEREFORE, PLEASE MARK, SIGN, DATE AND RETURN ALL PROXY CARDS THAT YOU RECEIVE, WHETHER FROM EXPRESS SCRIPTS OR MEDCO, OR SUBMIT A PROXY AS BOTH AN EXPRESS SCRIPTS AND MEDCO STOCKHOLDER OVER THE INTERNET OR BY TELEPHONE. | |
Q: | My shares are held in “street name” by my broker. Will my broker automatically vote my shares for me? | |
A: | No. If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the “beneficial holder” of the shares held for you in what is known as “street name.” If this is the case, this joint proxy statement/prospectus has been forwarded to you by your brokerage firm, bank or other nominee, or its agent. As the beneficial holder, you have the right to direct your broker, bank or other nominee as to how to vote your shares. If you do not provide voting instructions to your broker on a particular proposal on which your broker does not have discretionary authority to vote, your shares will not be voted on that proposal. This is called a “broker non-vote.” |
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We believe that (i) under the DGCL, broker non-votes will be counted for purposes of determining the presence or absence of a quorum at the Express Scripts special meeting and the Medco special meeting and (ii) under the current rules of the NYSE and the NASDAQ, brokers do not have discretionary authority to vote on either of the Express Scripts proposals or on any of the Medco proposals. To the extent that there are any broker non-votes, a broker non-vote will have the same effect as a vote“AGAINST”the proposal to adopt the merger agreement but will have no effect on the other proposals. | ||
Q: | What do I need to do now? | |
A: | Read and consider the information contained in this joint proxy statement/prospectus carefully, and then please vote your shares as soon as possible so that your shares may be represented at your special meeting. | |
Q: | How do I vote? | |
A: | You can vote in person by completing a ballot at the special meeting, or you can vote by proxy before the special meeting. Even if you plan to attend your company’s special meeting, we encourage you to vote your shares by proxy as soon as possible. After carefully reading and considering the information contained in this joint proxy statement/prospectus, please submit your proxy by telephone or over the Internet in accordance with the instructions set forth on the enclosed proxy card, or mark, sign and date the proxy card, and return it in the enclosed postage-paid envelope as soon as possible so that your shares may be voted at your company’s special meeting. For detailed information, see “The Express Scripts Special Meeting — How to Vote” beginning on page [ ] and “The Medco Special Meeting — How to Vote” beginning on page [ ].YOUR VOTE IS VERY IMPORTANT. | |
Q: | As a participant in a Medco or Express Scripts 401(k) plan or employee stock purchase plan, how do I vote shares held in my plan account? | |
A: | If you are a participant in the Express Scripts Inc. Employee Stock Purchase Plan, you should have received separate proxy voting instruction cards from the plan trustees and you have the right to provide voting directions to the plan trustee by submitting your voting instruction card for those shares of Express Scripts common stock that are held by the plan and allocated to your plan account. | |
Participants in the Medco Health Solutions, Inc. 401(k) Savings Plan will receive separate voting instruction cards covering their shares held in the plan. The plan trustee will not vote shares of Medco common stock for which no voting instructions are received from plan participants. Shares of Medco common stock purchased through a Medco employee stock purchase plan, including the employee stock purchase program previously maintained for employees of Accredo Health, Incorporated under the Accredo Health, Incorporated 2002 Long-Term Incentive Plan, are held in brokerage accounts and are treated the same as other beneficially owned shares. | ||
Q: | Can I change my vote after I have submitted a proxy by telephone or over the Internet or submitted my completed proxy card? | |
A: | Yes. You can change your vote by revoking your proxy at any time before it is voted at the Medco or Express Scripts special meeting, as applicable. You can do this in one of four ways: (1) submit a proxy again by telephone or over the Internet prior to midnight on the night before the special meeting; (2) sign another proxy card with a later date and return it prior to midnight on the night before the special meeting; (3) attend the applicable special meeting and complete a ballot; or (4) send a written notice of revocation to the secretary of Medco or Express Scripts, as applicable, so that it is received prior to midnight on the night before the special meeting. | |
If you have instructed a broker to vote your shares, you must follow directions received from your broker to change your vote. |
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Q: | What should stockholders do if they receive more than one set of voting materials for a special meeting? | |
A: | You may receive more than one set of voting materials for a special meeting, including multiple copies of this joint proxy statement/prospectus and multiple proxy cards or voting instruction cards. Please complete, sign, date and return each proxy card and voting instruction card that you receive. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. | |
Q: | Who should I call if I have questions about the proxy materials or voting procedures? | |
A: | If you have questions about the merger, or if you need assistance in submitting your proxy or voting your shares or need additional copies of this joint proxy statement/prospectus or the enclosed proxy card, you should contact the proxy solicitation agent for the company in which you hold shares. | |
If you are a Medco stockholder, you should contact D.F. King & Co., Inc., the proxy solicitation agent for Medco, by mail at 48 Wall Street, 22nd Floor, New York, NY 10005 by telephone at(800) 967-4612 (toll free) or(212) 269-5550 (collect), or by email at [ ]@dfking.com. | ||
If you are an Express Scripts stockholder, you should contact MacKenzie Partners Inc., the proxy solicitation agent for Express Scripts, by mail at 105 Madison Avenue, New York, NY 10016, by telephone at(800) 322-2885 (toll free) or(212) 929-5500 (collect), or bye-mail at [ ]@mackenziepartners.com. | ||
If your shares are held in a stock brokerage account or by a bank or other nominee, you should contact your broker, bank or other nominee for additional information. |
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Medco | Express Scripts | Value Per Share of | ||||||||||
Common Stock | Common Stock | Medco Common Stock | ||||||||||
July 20, 2011 | $ | 55.78 | $ | 52.54 | $ | 71.36 | ||||||
[ ], 2011 | $ | [ ] | $ | [ ] | $ | [ ] |
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• | a proposal to adopt the merger agreement; | |
• | a proposal to approve the adjournment of the Medco special meeting (if it is necessary or appropriate to solicit additional proxies if there are not sufficient votes to adopt the merger agreement); and | |
• | a proposal to approve, by non-binding advisory vote, certain compensation arrangements for Medco’s named executive officers in connection with the mergers contemplated by the merger agreement. |
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• | a proposal to adopt the merger agreement; and | |
• | a proposal to approve the adjournment of the special meeting (if it is necessary or appropriate to solicit additional proxies if there are not sufficient votes to adopt the merger agreement) |
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• | “FOR” THE PROPOSAL TO ADOPT THE MERGER AGREEMENT; | |
• | “FOR” THE PROPOSAL TO APPROVE THE ADJOURNMENT OF THE SPECIAL MEETING (IF IT IS NECESSARY OR APPROPRIATE TO SOLICIT ADDITIONAL PROXIES IF THERE ARE NOT SUFFICIENT VOTES TO ADOPT THE MERGER AGREEMENT); AND | |
• | “FOR” THE PROPOSAL TO APPROVE, BY NON-BINDING, ADVISORY VOTE, CERTAIN COMPENSATION ARRANGEMENTS FOR MEDCO’S NAMED EXECUTIVE OFFICERS IN CONNECTION WITH THE MERGERS CONTEMPLATED BY THE MERGER AGREEMENT. |
• | “FOR” THE PROPOSAL TO ADOPT THE MERGER AGREEMENT; AND | |
• | “FOR” THE PROPOSAL TO APPROVE THE ADJOURNMENT OF THE SPECIAL MEETING (IF IT IS NECESSARY OR APPROPRIATE TO SOLICIT ADDITIONAL PROXIES IF THERE ARE NOT SUFFICIENT VOTES TO ADOPT THE MERGER AGREEMENT). |
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• | the divestiture or disposition of one mail order dispensing facility of Express Scripts, Medco or any of their respective subsidiaries; provided that it is not the Express Scripts facility located in St. Louis, Missouri; | |
• | the divestiture or disposition of the property, plant and equipment associated with specialty pharmacy dispensing or infusion facilities of Express Scripts, Medco or any of their respective subsidiaries having a net book value not in excess of $30 million in the aggregate; provided that it not include the property, plant or equipment at the Express Scripts facility located in Indianapolis, Indiana; and | |
• | the divestiture, disposition, termination, expiration, assignment, delegation, novation or transfer of contracts of Express Scripts, Medco or their respective subsidiaries which generated, collectively, EBITDA not in excess of $115 million during the most recently available 12 calendar month period ending on the applicable date of such agreement; provided, that in the case of pharmacy benefits management customer contracts, the aggregate annual number of adjusted prescription drug claims subject to this obligation will not exceed 35 million (where “adjusted prescription drug claims” means (x) retail prescription drug claims, plus the product of (y)(i) mail prescription drug claims multiplied by (ii) three, such calculation to be performed using claims made during the preceding 12 calendar month period) and “EBITDA” means EBITDA as calculated by Express Scripts in a manner consistent with the methodology utilized in the earnings releases Express Scripts has publicly filed with the Securities and Exchange Commission, which we refer to as the SEC). |
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• | Medco has obtained the Medco stockholder approval, and Express Scripts has obtained the Express Scripts stockholder approval; | |
• | the shares of New Express Scripts common stock issuable pursuant to the merger agreement have been approved for listing on the NASDAQ subject to official notice of issuance; | |
• | the absence of any order which prohibits, restrains or makes illegal the consummation of the mergers; | |
• | effectiveness of the registration statement for the New Express Scripts common stock being issued in the mergers and the absence of any stop order suspending such effectiveness; and | |
• | receipt of certain regulatory approvals and the completion of certain regulatory filings, including expiration or termination of the waiting period under the HSR Act (and any extensions thereof) and, unless they are not received prior to the fifth business day prior to the outside date, without giving effect to any extension thereof, certain approvals from, and filings with, the Centers for Medicare & Medicaid Services and certain state insurance departments relating to Express Scripts’ and Medco’s insurance company subsidiaries. |
• | Medco’s representations and warranties are true and correct as of the date of the merger agreement and the closing date, subject to certain materiality or “material adverse effect” qualifications described in the merger agreement, and Express Scripts has received a certificate from officers of Medco to that effect; | |
• | Medco has performed in all material respects all of its obligations under the merger agreement, and Express Scripts has received a certificate from officers of Medco to that effect; | |
• | the receipt by New Express Scripts of a tax opinion from Skadden to the effect that the Express Scripts merger and the Medco merger, taken together, will qualify as an exchange described in Section 351 of the Code; and | |
• | the (i) absence of any legal proceedings commenced by a governmental entity seeking an order that would prohibit, restrain or make illegal the consummation of the mergers under U.S. antitrust laws; (ii) the absence of any motions by a governmental entity pending in a United States Court of Appeals, seeking an expedited appeal of the matters set forth in clause (i) that have been granted; (iii) the absence of any request for any such expedited appeal by a governmental entity; and (iv) all deadlines to make any request referred to in clause (iii) have passed without any request for such expedited appeal having been made or filed by any governmental entity, except in the cases of clauses (iii) and (iv), to the extent any such request or petition has been subsequently denied; provided that the conditions summarized in clauses (iii) and (iv) will cease to be conditions from and after the fifth business day |
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preceding the outside date (as it may be extended) (as more fully described in the section titled “— Termination of the Merger Agreement”). |
• | New Express Scripts’, Express Scripts’ and the Merger Subs’ representations and warranties are true and correct as of the date of the merger agreement and the closing date, subject to certain materiality or “material adverse effect” qualifications described in the merger agreement, and Medco has received a certificate from officers of Express Scripts to that effect; | |
• | Express Scripts has performed in all material respects all of its obligations under the merger agreement, and Medco has received a certificate from officers of Express Scripts to that effect; and | |
• | the receipt by Medco of a tax opinion from Sullivan & Cromwell to the effect that the Express Scripts merger and the Medco merger, taken together, will qualify as an exchange described in Section 351 of the Code. |
• | by the mutual written consent of Express Scripts and Medco; | |
• | by either of Medco or Express Scripts: |
• | if any governmental entity has issued an order permanently restraining, enjoining or otherwise prohibiting the mergers and such order has become final and non-appealable. | |
• | if the mergers have not been consummated by April 20, 2012, which we refer to as the outside date; provided, that if the conditions relating to (i) the absence of any order of a governmental entity prohibiting the mergers, (ii) obtaining the required governmental consents and (iii) the absence of legal proceedings seeking to prohibit the mergers have not been satisfied (or deemed satisfied) or waived by the fifth business day prior to April 20, 2012, either Express Scripts or Medco may extend the outside date from time to time to a date not later than July 20, 2012, and if such conditions have not been satisfied (or deemed satisfied) or waived by the fifth business day prior to July 20, 2012, either Express Scripts or Medco may extend the outside date from time to time to a date not later than October 22, 2012. This right of termination is not available to a party if its action or failure to act constitutes a material breach or violation of its covenants, agreements or other obligations under the merger agreement and such material breach or violation is the principal cause of, or directly resulted in, (x) the failure to satisfy the conditions to the obligations of the terminating party to consummate the merger prior to the outside date (as it may be extended) or (y) the failure of the closing to occur by the outside date (as it may be extended). |
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• | if the Express Scripts stockholder approval has not been obtained upon a vote taken at the duly convened Express Scripts special meeting or at any adjournment or postponement of such meeting. | |
• | if the Medco stockholder approval has not been obtained upon a vote taken at the duly convened Medco special meeting or at any adjournment or postponement of such meeting. |
• | By Medco: |
• | if (i) the Express Scripts board or any committee thereof makes, prior to the Express Scripts special meeting, an adverse recommendation change (as summarized in the section entitled “The Mergers — No Solicitation” beginning on page [ ]); (ii) the Express Scripts board or any committee fails to include the Express Scripts recommendation in this joint proxy statement/prospectus; (iii) a tender offer or exchange offer is commenced and the Express Scripts board fails to recommend against acceptance of such tender offer or exchange offer by Express Scripts stockholders; (iv) the Express Scripts board or any committee refuses to affirm publicly the Express Scripts recommendation following any reasonable written request by Medco; or (v) the Express Scripts board formally resolves to take or publicly announces an intention to take any of the foregoing summarized actions; | |
• | prior to the receipt of the Express Scripts stockholder approval, if Express Scripts is in willful breach of its obligation to make and not withdraw the Express Scripts recommendation or its non-solicitation obligations (for purposes of the merger agreement, “willful breach” means (i) with respect to any breach of a representation or warranty contained in the merger agreement, a material breach of such representation or warranty that has been made with the knowledge of the breaching party, (ii) with respect to any breaches or failures to perform any of the covenants or other agreements contained in the merger agreement, a material breach, or failure to perform, that is a consequence of an act or omission undertaken by the breaching party with the knowledge that the taking of, or failure to take, such act would, or would be reasonably expected to, cause a material breach of the merger agreement and (iii) the failure by any party to consummate the mergers after all of the conditions to the mergers have been satisfied or waived (by the party entitled to waive any such applicable conditions)); | |
• | if Express Scripts breaches or fails to perform any of its representations, warranties, covenants or agreements set forth in the merger agreement, and such breach or failure to perform (i) would give rise to the failure of a closing condition regarding the accuracy of Express Scripts’ representations and warranties or Express Scripts’ compliance with its covenants and agreements and (ii) is incapable of being cured by Express Scripts by the outside date (as it may be extended); or | |
• | prior to the receipt of the Medco stockholder approval, so that Medco may enter into a definitive agreement providing for a superior proposal. |
• | By Express Scripts: |
• | if (i) the Medco board or any committee thereof makes, prior to the Medco special meeting, an adverse recommendation change; (ii) the Medco board or any committee fails to include the Medco recommendation in this joint proxy statement/prospectus; (iii) a tender offer or exchange offer is commenced and the Medco board fails to recommend against acceptance of such tender offer or exchange offer by Medco stockholders; (iv) the Medco board or any committee refuses to affirm publicly the Medco recommendation following any reasonable written request by Express Scripts; or (v) the Medco board formally resolves to take or publicly announces an intention to take any of the foregoing summarized actions; | |
• | prior to the receipt of the Medco stockholder approval, if Medco is in willful breach of its obligation to make and not withdraw the Medco recommendation or its non-solicitation obligations; | |
• | if Medco breaches or fails to perform any of its representations, warranties, covenants or agreements set forth in the merger agreement, and such breach or failure to perform (i) would give rise to the failure of a closing condition regarding the accuracy of Medco’s representations and warranties or Medco’s compliance with its covenants and agreements and (ii) is incapable of being cured by Medco by the outside date (as it may be extended); or |
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• | prior to the receipt of the Express Scripts stockholder approval, so that Express Scripts may enter into a definitive agreement providing for a superior proposal. |
• | the parties have agreed to share equally (i) the filing fee under the HSR Act and any fees for similar filings under foreign laws, (ii) the expenses in connection with printing and mailing this joint proxy statement/prospectus, (iii) all SEC filing fees paid or payable relating to the transactions contemplated by the merger agreement; | |
• | in the event that the merger agreement is terminated due to a failure to obtain the Express Scripts stockholder approval at the Express Scripts special meeting, or any adjournment or postponement thereof, Express Scripts will pay to Medco all documented, out of pocket expenses of Medco (including financing expenses) not to exceed $225 million; and | |
• | in the event that the merger agreement is terminated due to a failure to obtain the Medco stockholder approval at the Medco special meeting, or any adjournment or postponement thereof, Medco will pay to Express Scripts all documented, out of pocket expenses of Express Scripts (including financing expenses) not to exceed $225 million. |
• | the merger agreement is terminated by Express Scripts, or could have been terminated by Express Scripts because: (i) the Medco board or any committee thereof makes, prior to the Medco special meeting, an adverse recommendation change, (ii) the Medco board or any committee fails to include the Medco recommendation in this joint proxy statement/prospectus, (iii) a tender offer or exchange offer is commenced and the Medco board fails to recommend against acceptance of such tender offer or exchange offer by Medco stockholders, (iv) the Medco board or any committee refuses to affirm publicly the Medco recommendation following any reasonable written request by Express Scripts or (v) or the Medco board formally resolves to take or publicly announces an intention to take any of the foregoing summarized actions; | |
• | the merger agreement is terminated by Express Scripts, or at the time of termination could have been terminated by Express Scripts because, prior to the receipt of the Medco stockholder approval, Medco is in willful breach of its obligation to make and not withdraw the Medco recommendation or its non-solicitation obligations; or | |
• | the merger agreement is terminated by Medco prior to the receipt of the Medco stockholder approval, so that Medco may enter into a definitive agreement providing for a superior proposal. |
• | a failure to consummate the mergers prior to the outside date (as it may be extended), and a takeover proposal (substituting “40%” for “15%” in the definition of “takeover proposal” in the merger agreement) for Medco is publicly disclosed prior to the date of termination and the vote seeking the Medco stockholder approval had not been taken prior to the seventh business day prior to the outside date (as it may be extended); or | |
• | a failure to obtain the Medco stockholder approval at the Medco special meeting, and a takeover proposal (substituting “40%” for “15%” in the definition of “takeover proposal”) is publicly disclosed prior to the date of the Medco special meeting. |
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• | the merger agreement is terminated by Medco, or could have been terminated by Medco because: (i) the Express Scripts board or any committee thereof makes, prior to the Express Scripts special meeting, an adverse recommendation change, (ii) the Express Scripts board or any committee fails to include the Express Scripts recommendation in this joint proxy statement/prospectus, (iii) a tender offer or exchange offer is commenced and the Express Scripts board fails to recommend against acceptance of such tender offer or offer by Express Scripts stockholders, (iv) the Express Scripts board or any committee refuses to affirm publicly the Express Scripts recommendation following any reasonable written request by Medco or (v) or the Express Scripts board formally resolves to take or publicly announces an intention to take any of the foregoing summarized actions; | |
• | the merger agreement is terminated by Medco, or at the time of termination could have been terminated by Medco because, prior to the receipt of the Express Scripts stockholder approval, Express Scripts is in willful breach of its obligation to make and not withdraw the Express Scripts recommendation or its non-solicitation obligations; or | |
• | the merger agreement is terminated by Express Scripts prior to the receipt of the Express Scripts stockholder approval, so that Express Scripts may enter into a definitive agreement providing for a superior proposal. |
• | a failure to consummate the mergers prior to the outside date (as it may be extended), and a takeover proposal (substituting “40%” for “15%” in the definition of “takeover proposal” in the merger agreement) for Express Scripts is publicly disclosed prior to the date of termination and the vote seeking the Express Scripts stockholder approval had not been taken prior to the seventh business day prior to the outside date (as it may be extended); or | |
• | a failure to obtain the Express Scripts stockholder approval at the Express Scripts special meeting, and a takeover proposal (substituting “40%” for “15%” in the definition of “takeover proposal”) is publicly disclosed prior to the date of the Express Scripts special meeting. |
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• | U.S. holders (as defined in the section entitled “The Mergers — Material U.S. Federal Income Tax Consequences” beginning on page [ ]) of Express Scripts common stock will not recognize gain or loss for U.S. federal income tax purposes as a result of the exchange of Express Scripts common stock for New Express Scripts common stock; and | |
• | U.S. holders of Medco common stock generally will recognize gain, but not loss, on the exchange of Medco common stock for a combination of New Express Scripts common stock and cash (excluding any cash received in lieu of a fractional shares) equal to the lesser of: |
• | the excess of (i) the sum of the fair market value of New Express Scripts common stock received in the Medco merger and the amount of cash received in the Medco merger over (ii) the stockholder’s tax basis in the Medco common stock surrendered in the Medco merger, and | |
• | the amount of cash received by such stockholder in the Medco merger. |
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As of and for the | ||||||||||||||||||||||||||||
Six Months Ended | ||||||||||||||||||||||||||||
June 30, | As of and for the Year Ended December 31, | |||||||||||||||||||||||||||
(in millions, except per share data) | 2011 | 2010 | 2010 | 2009(1) | 2008(2) | 2007(3) | 2006 | |||||||||||||||||||||
Statement of Operations Data | ||||||||||||||||||||||||||||
Revenues(4) | $ | 22,455.9 | $ | 22,427.2 | $ | 44,973.2 | $ | 24,722.3 | $ | 21,941.2 | $ | 21,788.9 | $ | 21,532.1 | ||||||||||||||
Net income from continuing operations | 660.7 | 567.9 | 1,204.6 | 826.6 | 775.9 | 598.0 | 473.1 | |||||||||||||||||||||
Net income | 660.7 | 550.1 | 1,181.2 | 827.6 | 776.1 | 567.8 | 474.4 | |||||||||||||||||||||
Basic earnings (loss) per share: (5) | ||||||||||||||||||||||||||||
Continued operations | $ | 1.28 | $ | 1.04 | $ | 2.24 | $ | 1.57 | $ | 1.56 | $ | 1.15 | $ | 0.85 | ||||||||||||||
Discontinuing operations(6) | — | (0.03 | ) | (0.04 | ) | — | — | (0.06 | ) | — | ||||||||||||||||||
Net earnings | 1.28 | 1.01 | 2.19 | 1.57 | 1.56 | 1.09 | 0.85 | |||||||||||||||||||||
Diluted earnings (loss) per share: (5) | ||||||||||||||||||||||||||||
Continued operations | $ | 1.27 | $ | 1.03 | $ | 2.21 | $ | 1.55 | $ | 1.54 | $ | 1.13 | $ | 0.83 | ||||||||||||||
Discontinuing operations(6) | — | (0.03 | ) | (0.04 | ) | — | — | (0.06 | ) | — | ||||||||||||||||||
Net earnings | 1.27 | 0.99 | 2.17 | 1.56 | 1.54 | 1.08 | 0.84 | |||||||||||||||||||||
Common stock dividends declared | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
Weighted average number of shares: (5) | ||||||||||||||||||||||||||||
Basic | 515.7 | 547.1 | 538.5 | 527.0 | 497.8 | 520.8 | 559.2 | |||||||||||||||||||||
Diluted | 520.3 | 552.9 | 544.0 | 532.2 | 503.6 | 528.0 | 568.0 | |||||||||||||||||||||
Balance Sheet Data | ||||||||||||||||||||||||||||
Total Assets | $ | 10,237.9 | $ | 11,483.6 | $ | 10,557.8 | $ | 11,931.2 | $ | 5,509.2 | $ | 5,256.4 | $ | 5,108.1 | ||||||||||||||
Debt: | ||||||||||||||||||||||||||||
Short-term debt | 999.8 | 980.1 | 0.1 | 1,340.1 | 420.0 | 260.1 | 180.1 | |||||||||||||||||||||
Long-term debt | 3,088.7 | 2,493.1 | 2,493.7 | 2,492.5 | 1,340.3 | 1,760.3 | 1,270.4 | |||||||||||||||||||||
Stockholders’ Equity | 1,828.0 | 3,646.8 | 3,606.6 | 3,551.8 | 1,078.2 | 696.4 | 1,124.9 |
(1) | Includes the acquisition of certain subsidiaries of WellPoint that provide pharmacy benefit management services (“NextRx”) effective December 1, 2009. | |
(2) | Includes the acquisition of the Pharmacy Services Division of MSC — Medical Services Company (“MSC”) effective July 22, 2008. | |
(3) | Includes the acquisition of ConnectYourCare (“CYC”) effective October 10, 2007. |
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(4) | Includes retail pharmacy co-payments of $2,983.6 and $3,209.9 for the six months ended June 30, 2011 and 2010, respectively and $6,181.4, $3,132.1, $3,153.6, $3,554.5, and $4,012.7 for the years ended December 31, 2010, 2009, 2008, 2007, and 2006, respectively. We changed our accounting policy for member co-payments during the third quarter of 2008 to include member co-payments to retail pharmacies in revenue and cost of revenue. The table reflects the change in our accounting policy for all periods presented. | |
(5) | Earnings per share and weighted average shares outstanding have been restated to reflect thetwo-for-one stock splits effective June 8, 2010 and June 22, 2007, respectively. | |
(6) | Primarily consists of the results of operations from the discontinued operations of Phoenix Marketing Group line of business (“PMG”) and Infusion Pharmacy (“IP”), which were classified as a discontinued operation in the second quarter of 2010 and the fourth quarter of 2007, respectively. |
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As of and for the Fiscal | ||||||||||||||||||||||||||||
Six Months Ended | As of and for the Fiscal Years Ended | |||||||||||||||||||||||||||
June 25, | June 26, | December 25, | December 26, | December 27, | December 29, | December 30, | ||||||||||||||||||||||
2011 | 2010(1) | 2010(1) | 2009 | 2008(2) | 2007(3) | 2006(4) | ||||||||||||||||||||||
(in millions, except per share data) | ||||||||||||||||||||||||||||
Statement of Operations Data | ||||||||||||||||||||||||||||
Revenues(5) | $ | 34,093.5 | $ | 32,718.4 | $ | 65,968.3 | $ | 59,804.2 | $ | 51,258.0 | $ | 44,506.2 | $ | 42,543.7 | ||||||||||||||
Net income | 675.9 | 677.4 | 1,427.3 | 1,280.3 | 1,102.9 | 912.0 | 630.2 | |||||||||||||||||||||
Basic earnings per share: (6) | ||||||||||||||||||||||||||||
Net earnings | $ | 1.68 | $ | 1.47 | $ | 3.22 | $ | 2.66 | $ | 2.17 | $ | 1.66 | $ | 1.06 | ||||||||||||||
Diluted earnings per share: (6) | ||||||||||||||||||||||||||||
Net earnings | $ | 1.65 | $ | 1.44 | $ | 3.16 | $ | 2.61 | $ | 2.13 | $ | 1.63 | $ | 1.04 | ||||||||||||||
Common stock dividends declared | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
Weighted average number of shares: (6) | ||||||||||||||||||||||||||||
Basic | 401.6 | 460.4 | 443.0 | 481.1 | 508.6 | 550.2 | 594.5 | |||||||||||||||||||||
Diluted | 409.6 | 470.1 | 451.8 | 490.0 | 518.6 | 560.9 | 603.3 | |||||||||||||||||||||
Balance Sheet Data | ||||||||||||||||||||||||||||
Total Assets | $ | 15,990.8 | $ | 16,240.0 | $ | 17,097.3 | $ | 17,915.5 | $ | 17,010.9 | $ | 16,217.9 | $ | 14,388.1 | ||||||||||||||
Debt: | ||||||||||||||||||||||||||||
Short-term debt | 31.9 | 19.1 | 23.6 | 15.8 | 600.0 | 600.0 | 325.0 | |||||||||||||||||||||
Current portion of long-term debt | 2,000.0 | — | — | — | — | — | 75.3 | |||||||||||||||||||||
Long-term debt | 3,004.2 | 4,004.8 | 5,003.6 | 4,000.1 | 4,002.9 | 2,894.4 | 866.4 | |||||||||||||||||||||
Stockholders’ Equity | 3,444.2 | 4,925.3 | 3,986.8 | 6,387.2 | 5,957.9 | 6,875.3 | 7,503.5 |
(1) | The consolidated data for 2010 includes the operating results of United BioSource Corporation (“UBC”) commencing on the September 16, 2010 acquisition date. | |
(2) | The consolidated data for 2008 includes the operating results of Europa Apotheek Venlo B.V. (“Europa Apotheek”) commencing on the April 28, 2008 acquisition date. | |
(3) | The consolidated data for 2007 includes the operating results of PolyMedica Corporation (“PolyMedica”) and Critical Care Systems, Inc. (“Critical Care”) commencing on the October 31, 2007 and November 14, 2007 acquisition dates, respectively. |
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(4) | The consolidated data for 2006 includes a pre-tax legal settlements charge of $162.6 million recorded in the first quarter of 2006, with a $99.9 million after-tax effect, or $0.17 per diluted share on a split-adjusted basis (see note (6) below). | |
(5) | Includes retail co-payments of $4,768 and $4,750 in the first six months of 2011 and 2010, respectively and $9,241 million for 2010, $8,661 million for 2009, $7,666 million for 2008, $7,553 million for 2007, and $7,394 million for 2006. | |
(6) | Common share and per share amounts have been retrospectively adjusted for thetwo-for-one stock split, which became effective on January 24, 2008. |
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Unaudited Pro Forma Combined | ||||||||
Six Months Ended | Fiscal Year Ended | |||||||
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
(in millions, except per share amounts) | ||||||||
Statement of Operations Data: | ||||||||
Net revenues | $ | 56,389.9 | $ | 110,675.3 | ||||
Net earnings | 815.2 | 1,532.3 | ||||||
Average number of common shares outstanding — basic | 841.0 | 897.3 | ||||||
Average number of common shares outstanding — diluted | 852.1 | 910.0 | ||||||
Earnings per common share: | ||||||||
Basic | $ | 0.97 | $ | 1.71 | ||||
Diluted | 0.96 | 1.68 | ||||||
Balance Sheet Data: | ||||||||
Cash and cash equivalents | $ | 133.4 | — | |||||
Total assets | 49,639.0 | — | ||||||
Long-term debt | 19,579.1 | — | ||||||
Total stockholders’ equity | 13,765.7 | — | ||||||
Per share cash dividends | — | — |
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Year Ended | ||||||||
Six Month Ended | December 31, | |||||||
June 30, 2011 | 2010 (Express | |||||||
(Express Scripts) | Scripts) and | |||||||
and June 25, | December 25, | |||||||
2011 (Medco) | 2010 (Medco) | |||||||
Express Scripts historical data | ||||||||
Earnings per share: | ||||||||
Basic | $ | 1.28 | $ | 2.19 | ||||
Diluted | 1.27 | 2.17 | ||||||
Book value per share | 3.74 | 6.83 | ||||||
Medco historical data | ||||||||
Earnings per share: | ||||||||
Basic | 1.68 | 3.22 | ||||||
Diluted | 1.65 | 3.16 | ||||||
Book value per share | 8.80 | 9.71 | ||||||
Express Scripts unaudited pro forma equivalent data | ||||||||
Earnings per share: | ||||||||
Basic | 0.97 | 1.71 | ||||||
Diluted | 0.96 | 1.68 | ||||||
Book value per share | 17.17 | N/A | ||||||
Medco unaudited pro forma equivalent data | ||||||||
Earnings per share: | ||||||||
Basic | 0.79 | 1.39 | ||||||
Diluted | 0.78 | 1.36 | ||||||
Book value per share | 13.91 | — |
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Express Scripts | ||||||||||||||||
Common Stock(1) | Medco Common Stock | |||||||||||||||
High | Low | High | Low | |||||||||||||
Fiscal Year 2011 | ||||||||||||||||
First Quarter | $ | 58.77 | $ | 50.91 | $ | 65.39 | $ | 51.80 | ||||||||
Second Quarter | 60.89 | 52.27 | 64.92 | 53.11 | ||||||||||||
Third Quarter | 57.47 | 37.06 | 66.38 | 47.78 | ||||||||||||
Fourth Quarter (through October 4, 2011) | 37.71 | 34.47 | 49.66 | 44.60 | ||||||||||||
Fiscal Year 2010 | ||||||||||||||||
First Quarter | 51.62 | 41.38 | 66.94 | 58.96 | ||||||||||||
Second Quarter | 54.00 | 37.75 | 65.35 | 53.46 | ||||||||||||
Third Quarter | 49.69 | 41.55 | 57.82 | 43.45 | ||||||||||||
Fourth Quarter | 55.68 | 47.23 | 64.24 | 50.36 | ||||||||||||
Fiscal Year 2009 | ||||||||||||||||
First Quarter | 29.82 | 21.38 | 48.95 | 36.46 | ||||||||||||
Second Quarter | 34.71 | 22.53 | 48.00 | 37.93 | ||||||||||||
Third Quarter | 39.91 | 31.80 | 56.82 | 44.53 | ||||||||||||
Fourth Quarter | 44.94 | 37.50 | 66.00 | 53.11 |
(1) | Prices of Express Scripts common stock adjusted to reflecttwo-for-one stock split effective June 8, 2010. |
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• | Medco may be required, under certain circumstances, to pay Express Scripts a termination fee of either $950 million or $332.5 million (depending on the specific circumstances). Medco may also be required, under certain circumstances, to pay the out of pocket expenses of Express Scripts up to a maximum amount of either $100 million or $225 million (depending on the specific circumstances) under the merger agreement. Notwithstanding the foregoing, in no event shall Express Scripts’ expenses or the full amount of the termination fee be paid more than once, nor shall Express Scripts be paid an aggregate amount pursuant to the expense reimbursement and termination fee provisions of the merger agreement in excess of the full amount of the termination fee; | |
• | Express Scripts may be required, under certain circumstances, to pay Medco a termination fee of either $950 million or $332.5 million (depending on the specific circumstances). Express Scripts may also be required, under certain circumstances, to pay the out of pocket expenses of Medco up to a maximum amount of either $100 million or $225 million (depending on the specific circumstances). Notwithstanding the foregoing, in no event shall Medco’s expenses or the full amount of the termination fee be paid more than once, nor shall Medco be paid an aggregate amount pursuant to the expense reimbursement and termination fee provisions of the merger agreement in excess of the full amount of the termination fee; | |
• | Medco and Express Scripts will be required to pay certain costs relating to the mergers, whether or not the mergers are completed, such as significant fees and expenses relating to financing arrangements and legal, accounting, financial advisor and printing fees; | |
• | Express Scripts may be required to pay significant fees and expenses relating to financing arrangements, whether or not the mergers are completed, which may include investment banking fees and commissions, commitment fees, early termination or redemption premiums, interest on debt financing between the date of incurrence and the date of repayment, professional fees and other costs and expenses; | |
• | under the merger agreement, each of Express Scripts and Medco is subject to certain restrictions on the conduct of its business prior to completing the mergers which may adversely affect its ability to execute certain of its business strategies; and | |
• | matters relating to the mergers may require substantial commitments of time and resources by Express Scripts and Medco management, which could otherwise have been devoted to other opportunities that may have been beneficial to Express Scripts and Medco as independent companies, as the case may be. |
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• | require New Express Scripts to dedicate a greater percentage (compared with Medco and Express Scripts on a stand-alone basis) of its cash flow from operations to payments on its debt, thereby reducing the availability of cash flow to fund capital expenditures, pursue other acquisitions or investments in new technologies, make stock repurchases, pay dividends and for general corporate purposes; | |
• | increase New Express Scripts’ vulnerability to general adverse economic conditions, including increases in interest rates if the borrowings bear interest at variable rates or if such indebtedness is refinanced at a time when interest rates are higher; and | |
• | limit New Express Scripts’ flexibility in planning for, or reacting to, changes in or challenges relating to its business and industry. |
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June 30, 2011
Express | Reclassifications | Pro Forma | ||||||||||||||||||
Scripts | Medco | for Consistent | Pro Forma | Combined | ||||||||||||||||
(in millions) | June 30, 2011 | June 25, 2011 | Presentation(1) | Adjustments | June 30, 2011 | |||||||||||||||
Assets | ||||||||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 291.0 | $ | 92.4 | $ | — | $ | (250.0 | )(A) | $ | 133.4 | |||||||||
Restricted cash and investments | 15.9 | 8.2 | — | — | 24.1 | |||||||||||||||
Receivables, net | 1,939.4 | — | 4,395.4 | — | 6,334.8 | |||||||||||||||
Manufacturer accounts receivable, net | — | 1,911.9 | (1,911.9 | ) | — | — | ||||||||||||||
Client accounts receivable, net | — | 2,483.5 | (2,483.5 | ) | — | — | ||||||||||||||
Inventories | 331.6 | 833.0 | — | — | 1,164.6 | |||||||||||||||
Deferred taxes | 43.3 | 248.3 | — | — | 291.6 | |||||||||||||||
Prepaid expenses and other current assets | 75.3 | 83.6 | — | (3.5 | )(B) | 155.4 | ||||||||||||||
Total current assets | 2,696.5 | 5,660.9 | — | (253.5 | ) | 8,103.9 | ||||||||||||||
Property and equipment, net | 369.8 | 1,001.9 | — | — | (C) | 1,371.7 | ||||||||||||||
Goodwill | 5,486.8 | 6,956.6 | — | 14,160.5 | (D) | 26,603.9 | ||||||||||||||
Other intangible assets, net | 1,656.2 | 2,285.6 | — | 9,515.5 | (D) | 13,457.3 | ||||||||||||||
Other assets | 28.6 | 85.8 | — | (12.2 | )(B) | 102.2 | ||||||||||||||
Total assets | $ | 10,237.9 | $ | 15,990.8 | $ | — | $ | 23,410.3 | $ | 49,639.0 | ||||||||||
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Express | Reclassifications | Pro Forma | ||||||||||||||||||
Scripts | Medco | for Consistent | Pro Forma | Combined | ||||||||||||||||
(in millions) | June 30, 2011 | June 25, 2011 | Presentation(1) | Adjustments | June 30, 2011 | |||||||||||||||
Liabilities and Stockholders’ Equity | ||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||
Claims and rebates payable | $ | 2,530.9 | — | $ | 4,651.2 | $ | — | $ | 7,182.1 | |||||||||||
Accounts payable | 745.6 | — | 993.9 | — | 1,739.5 | |||||||||||||||
Claims and other accounts payable | — | 3,384.8 | (3,384.8 | ) | — | — | ||||||||||||||
Client rebates and guarantees payable | — | 2,260.3 | (2,260.3 | ) | — | — | ||||||||||||||
Accrued expenses | 487.2 | 683.6 | — | — | 1,170.8 | |||||||||||||||
Short-term debt | — | 31.9 | — | — | 31.9 | |||||||||||||||
Current maturities of long-term debt | 999.8 | 2,000.0 | — | (2,000.0 | )(B) | 999.8 | ||||||||||||||
Total current liabilities | 4,763.5 | 8,360.6 | — | (2,000.0 | ) | 11,124.1 | ||||||||||||||
Long-term debt | 3,088.7 | 3,004.2 | — | 13,486.2 | (B) | 19,579.1 | ||||||||||||||
Deferred tax liabilities | — | 980.6 | (980.6 | ) | — | — | ||||||||||||||
Other liabilities | 557.7 | 201.2 | 980.6 | 3,430.6 | (E) | 5,170.1 | ||||||||||||||
Total liabilities | 8,409.9 | 12,546.6 | — | 14,916.8 | 35,873.3 | |||||||||||||||
Stockholders’ equity: | ||||||||||||||||||||
Preferred stock | — | — | — | — | — | |||||||||||||||
Common stock | 6.9 | 6.7 | — | (3.0 | )(F) | 10.6 | ||||||||||||||
Additional paid-in capital | 2,406.8 | 8,653.5 | — | 3,452.5 | (F) | 14,512.8 | ||||||||||||||
Accumulated other comprehensive income (loss) | 20.7 | (25.9 | ) | — | 25.9 | (F) | 20.7 | |||||||||||||
Retained earnings | 6,030.5 | 7,312.8 | — | (7,484.8 | )(F) | 5,858.5 | ||||||||||||||
8,464.9 | 15,947.1 | — | (4,009.4 | ) | 20,402.6 | |||||||||||||||
Common stock in treasury at cost | (6,636.9 | ) | (12,502.9 | ) | — | 12,502.9 | (F) | (6,636.9 | ) | |||||||||||
Total stockholders’ equity | 1,828.0 | 3,444.2 | — | 8,493.5 | 13,765.7 | |||||||||||||||
Total liabilities and stockholders’ equity | $ | 10,237.9 | $ | 15,990.8 | $ | — | $ | 23,410.3 | $ | 49,639.0 | ||||||||||
(1) | See Note 1 — Basis of Presentation for explanation of reclassifications. |
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For the Fiscal Year Ended December 31, 2010
Express | Reclassifications | Pro Forma | ||||||||||||||||||
Scripts | Medco | for Consistent | Pro Forma | Combined | ||||||||||||||||
(in millions, except per share data) | December 31, 2010 | December 25, 2010 | Presentation(1) | Adjustments | December 31, 2010 | |||||||||||||||
Revenues | $ | 44,973.2 | $ | 65,968.3 | $ | — | $ | (266.2 | )(G) | $ | 110,675.3 | |||||||||
Cost of revenues | 42,015.0 | 61,633.2 | (101.5 | ) | (266.2 | )(G) | 103,280.5 | |||||||||||||
Gross profit | 2,958.2 | 4,335.1 | 101.5 | — | 7,394.8 | |||||||||||||||
Selling, general and administrative | 887.3 | 1,550.4 | 388.9 | 1,265.8 | (H) | 4,092.4 | ||||||||||||||
Amortization of intangibles | — | 287.4 | (287.4 | ) | — | — | ||||||||||||||
Operating income | 2,070.9 | 2,497.3 | — | (1,265.8 | ) | 3,302.4 | ||||||||||||||
Other income (expense): | ||||||||||||||||||||
Interest income and other income | 4.9 | 9.4 | — | — | 14.3 | |||||||||||||||
Interest expense | (167.1 | ) | (172.5 | ) | — | (506.9 | )(I) | (846.5 | ) | |||||||||||
(162.2 | ) | (163.1 | ) | — | (506.9 | ) | (832.2 | ) | ||||||||||||
Income before income taxes | 1,908.7 | 2,334.2 | — | (1,772.7 | ) | 2,470.2 | ||||||||||||||
Provision for income taxes | 704.1 | 906.9 | — | (673.1 | )(J) | 937.9 | ||||||||||||||
Net income from continuing operations | $ | 1,204.6 | $ | 1,427.3 | $ | — | $ | (1,099.6 | ) | $ | 1,532.3 | |||||||||
Weighted average number of common | ||||||||||||||||||||
shares outstanding during the period: | ||||||||||||||||||||
Basic: | 538.5 | 443.0 | — | (84.2 | )(K) | 897.3 | ||||||||||||||
Diluted: | 544.0 | 451.8 | — | (85.8 | )(K) | 910.0 | ||||||||||||||
Basic earnings per share from continuing operations | $ | 2.24 | $ | 3.22 | $ | 1.71 | ||||||||||||||
Diluted earnings per share from continuing operations | $ | 2.21 | $ | 3.16 | $ | 1.68 |
(1) | See Note 1 — Basis of Presentation for explanation of reclassifications. |
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For the Six Months Ended June 30, 2011
Express | Reclassifications | Pro Forma | ||||||||||||||||||
Scripts | Medco | for Consistent | Pro Forma | Combined | ||||||||||||||||
(in millions, except per share data) | June 30, 2011 | June 25, 2011 | Presentation(1) | Adjustments | June 30, 2011 | |||||||||||||||
Revenues | $ | 22,455.9 | $ | 34,093.5 | $ | — | $ | (159.5 | )(G) | $ | 56,389.9 | |||||||||
Cost of revenues | 20,926.3 | 31,917.8 | (49.6 | ) | (159.5 | )(G) | 52,635.0 | |||||||||||||
Gross profit | 1,529.6 | 2,175.7 | 49.6 | — | 3,754.9 | |||||||||||||||
Selling, general and administrative | 397.9 | 807.4 | 196.0 | 589.0 | (H) | 1,990.3 | ||||||||||||||
Amortization of intangibles | — | 146.4 | (146.4 | ) | — | — | ||||||||||||||
Operating income | 1,131.7 | 1,221.9 | — | (589.0 | ) | 1,764.6 | ||||||||||||||
Other income (expense): | ||||||||||||||||||||
Interest income and other income (expense) | 1.9 | (4.3 | ) | — | — | (2.4 | ) | |||||||||||||
Interest expense | (90.0 | ) | (104.2 | ) | — | (252.4 | )(I) | (446.6 | ) | |||||||||||
(88.1 | ) | (108.5 | ) | — | (252.4 | ) | (449.0 | ) | ||||||||||||
Income before income taxes | 1,043.6 | 1,113.4 | — | (841.4 | ) | 1,315.6 | ||||||||||||||
Provision for income taxes | 382.9 | 437.5 | — | (320.0 | )(J) | 500.4 | ||||||||||||||
Net income from continuing operations | $ | 660.7 | $ | 675.9 | $ | — | $ | (521.4 | ) | $ | 815.2 | |||||||||
Weighted average number of common shares outstanding during the period: | ||||||||||||||||||||
Basic: | 515.7 | 401.6 | — | (76.3 | )(K) | 841.0 | ||||||||||||||
Diluted: | 520.3 | 409.6 | — | (77.8 | )(K) | 852.1 | ||||||||||||||
Basic earnings per share from continuing operations | $ | 1.28 | $ | 1.68 | $ | 0.97 | ||||||||||||||
Diluted earnings per share from continuing operations | $ | 1.27 | $ | 1.65 | $ | 0.96 |
(1) | See Note 1 — Basis of Presentation for explanation of reclassifications. |
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Note 1 — | Basis of Presentation |
Six Months Ended | Twelve Months Ended | |||||||
(in millions) | June 30, 2011 | December 31, 2010 | ||||||
Reclassify bad debt expense(1) | $ | (65.0 | ) | $ | (130.5 | ) | ||
Reclassify labor and benefits expense(2) | (5.6 | ) | (11.6 | ) | ||||
Allocation of IT related expenses(3) | 21.0 | 40.6 | ||||||
Net adjustment to cost of revenues | $ | (49.6 | ) | $ | (101.5 | ) | ||
Reclassify bad debt expense(1) | $ | 65.0 | $ | 130.5 | ||||
Reclassify labor and benefits expense(2) | 5.6 | 11.6 | ||||||
Allocation of IT related expenses(3) | (21.0 | ) | (40.6 | ) | ||||
Medco historical amortization of intangibles(4) | 146.4 | 287.4 | ||||||
Net adjustment to selling, general and administrative | $ | 196.0 | $ | 388.9 |
(1) | Bad debt expense recorded by Medco has been reclassified from cost of revenues to selling, general and administrative expenses for consistent presentation in the unaudited pro forma condensed combined statements of operations. | |
(2) | Medco allocates a portion of the labor and benefits expenses for certain employees who manage its relationships with retail pharmacies and pharmaceutical manufacturers to cost of revenues. The allocated amount of these labor and benefits expenses has been reclassified to selling, general and administrative expense for consistent presentation in the unaudited pro forma condensed combined statements of operations. | |
(3) | Adjustments have been made to allocate a portion of Medco’s pharmacy technology expenses from selling, general and administrative expense to cost of revenues for consistent presentation in the unaudited pro forma condensed combined statements of operations. | |
(4) | Amortization of intangibles, presented as a separate line item in Medco’s historical financial statements, has been condensed into selling, general and administrative expense for consistent presentation. |
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Note 2 — | Preliminary Purchase Price |
Estimated Purchase Price Including Debt Assumed (in millions): | ||||
Cash to be paid to Medco stockholders(1) | $ | 11,139.5 | ||
Value of shares of New Express Scripts common stock to be issued to Medco stockholders(2) | 11,614.0 | |||
Value of New Express Scripts restricted stock units to be issued to holders of Medco restricted stock units(3) | 155.2 | |||
Value of New Express Scripts stock options to be issued to holders of Medco stock options(3)(4) | 340.5 | |||
Consideration to be transferred | 23,249.2 | |||
Debt assumed | 5,359.7 | |||
Total purchase price | $ | 28,608.9 | ||
(1) | Equals Medco outstanding shares multiplied by $28.80 per share. | |
(2) | Equals Medco outstanding shares multiplied by the exchange ratio of 0.81, multiplied by the Express Scripts closing share price at September 30, 2011 of $37.07. | |
(3) | In accordance with applicable accounting guidance, the fair value of replacement awards attributable to precombination service is recorded as part of the consideration transferred in the mergers, while the fair value of replacement awards attributable to postcombination service is recorded separately from the business combination and recognized as compensation cost in the post-acquisition period over the remaining service period. The portion of Medco stock options attributable to precombination and postcombination service is estimated based on the ratio of vested to unvested stock options and the average vesting period. These postcombination compensation costs have been recorded as adjustments to the unaudited pro forma condensed combined statements of operations for the year ended December 31, 2010 and the six months ended June 30, 2011. See Note 4 — Unaudited Pro Forma Adjustments (H) for adjustment amounts. Various estimates were used in this calculation, including average remaining vesting period. These estimates could differ significantly from actual amounts calculated at the date of the mergers, and such differences could have a material impact on the total purchase price. | |
(4) | The fair value of the New Express Scripts equivalent stock options was estimated as of September 30, 2011 using the Black-Scholes valuation model utilizing various assumptions. The expected volatility of the New Express Scripts common stock price is based on the average historical volatility over the expected term based on daily closing stock prices of Express Scripts common stock. The expected term of the option is based on Medco historical employee stock option exercise behavior as well as the remaining contractual exercise term. The stock price volatility and expected term are based on Express Scripts’ best estimates at this time, both of which impact the fair value of the option calculated under the Black-Scholes methodology and, ultimately, the total consideration that will be recorded at the effective time of the merger. These estimates are subject to change with market conditions and other circumstances, and these changes may have a material impact on the fair value of stock options used to calculate the total purchase price. |
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Note 3 — | Preliminary Purchase Price Allocation |
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Tangible assets acquired: | ||||
Current assets | $ | 5,657.4 | ||
Property and equipment, net | 1,001.9 | |||
Other non-current assets | 73.6 | |||
Total tangible assets acquired | 6,732.9 | |||
Value assigned to intangible assets acquired | 11,700.0 | |||
Liabilities assumed, excluding debt | (7,510.5 | ) | ||
Deferred tax liability related to acquired intangible assets and replacement stock awards included in the purchase price | (3,430.6 | ) | ||
Total assets acquired in excess of liabilities assumed | 7,491.8 | |||
Goodwill | 21,117.1 | |||
Total purchase price | 28,608.9 | |||
Less debt assumed | (5,359.7 | ) | ||
Total payments to Medco stockholders | $ | 23,249.2 | ||
Note 4 — | Unaudited Pro Forma Adjustments |
(in millions) | ||||
Sources of funds: | ||||
Express Scripts cash on hand at June 30, 2011 | $ | 250.0 | ||
Term loan | 4,000.0 | |||
Bridge financing | 9,162.6 | |||
Total sources of funds | $ | 13,412.6 | ||
Use of funds: | ||||
Cash payments to Medco stockholders | $ | 11,139.5 | ||
Payment of Medco 2012 term loan and revolving credit facility | 2,000.0 | |||
Express Scripts transaction costs(1) | 172.0 | |||
New debt issuance costs | 101.1 | |||
Total use of funds | $ | 13,412.6 | ||
(1) | In accordance with applicable accounting guidance, the transaction costs are expensed as they are incurred. |
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Financing incurred in connection with the mergers | $ | 13,162.6 | ||
Adjust Medco pre-merger fixed rate debt to fair value | 323.6 | |||
Total adjustment to long-term debt | $ | 13,486.2 | ||
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Purchase price allocation to goodwill (Note 3) | $ | 21,117.1 | ||
Elimination of pre-merger Medco goodwill | (6,956.6 | ) | ||
Total adjustment to goodwill | $ | 14,160.5 | ||
New intangibles recorded: | ||||
Value assigned to intangible assets acquired(1) | $ | 11,700.0 | ||
Debt issuance costs(2) | 101.1 | |||
Elimination of Medco pre-merger other intangibles | (2,285.6 | ) | ||
Total adjustment to other intangible assets | $ | 9,515.5 | ||
(1) | Based on the preliminary valuation, intangible assets acquired is comprised of $9.4 billion of customer contracts and $2.3 billion of trade names. | |
(2) | These represent deferred financing fees incurred in connection with the bridge facility, the term loan, and the revolving credit facility. Amounts incurred in relation to the bridge facility are being amortized over nine months, and amounts incurred in relation to the term loan and the revolving credit facility are being amortized over the five year term of the facility. |
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Accumulated | Common | |||||||||||||||||||
Additional | Other | Stock in | ||||||||||||||||||
Common | Paid-In | Comprehensive | Retained | Treasury at | ||||||||||||||||
Stock | Capital | Income | Earnings | Cost | ||||||||||||||||
Elimination of pre-merger Medco equity balances | $ | (6.7 | ) | $ | (8,653.5 | ) | $ | 25.9 | $ | (7,312.8 | ) | $ | 12,502.9 | |||||||
Impact of shares to be issued to Medco stockholders | 3.7 | 12,106.0 | — | — | — | |||||||||||||||
Estimated transaction fees | — | — | — | (172.0 | ) | — | ||||||||||||||
Total pro forma adjustment | $ | (3.0 | ) | $ | 3,452.5 | $ | 25.9 | $ | (7,484.8 | ) | $ | 12,502.9 | ||||||||
Six Months Ended | Twelve Months Ended | |||||||
(in millions) | June 30, 2011 | December 31, 2010 | ||||||
Intangible asset amortization(1) | $ | 553.6 | $ | 1,112.6 | ||||
Post combination stock compensation expense (Note 2) | 36.5 | 154.6 | ||||||
Elimination of amortization of prior service costs and actuarial gain/loss related to pension and other post-retirement benefit plans(2) | (1.1 | ) | (1.4 | ) | ||||
Net adjustment to selling, general and administrative | $ | 589.0 | $ | 1,265.8 | ||||
(1) | As of the effective time of the mergers, identifiable intangible assets are required to be measured at fair value and these acquired assets could include assets that are not intended to be used or sold or that are intended to be used in a manner other than their highest and best use. For purposes of these unaudited pro forma condensed combined financial statements, it is assumed that all assets will be used and that all assets will be used in a manner that represents the highest and best use of those assets. Adjustments have been included in the unaudited pro forma condensed combined statements of operations to record the estimated net increase in amortization expense for other intangible assets. The incremental additional expense was calculated on a straight-line basis using a preliminary estimated useful life of 10 years for customer contracts and 5 years for trade names to amortize the preliminary estimated value of $11.7 billion assigned to identifiable intangible assets. Express Scripts is still considering a modified pattern of benefit method of amortization over ten years for customer contracts. A modified pattern of benefit method of amortization would result in a greater portion of the expense recorded in the first 5 years to better reflect the expected cash flows under the mergers, resulting in greater amortization expense during the early years. Further assessments will also be performed regarding the appropriate amortization method for trade names and |
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any other definite-lived intangible assets identified. A determination will be made as Express Scripts is able to perform a more detailed review of Medco’s records. | ||
(2) | In January 2011, Medco amended its postretirement healthcare benefit plan, discontinuing the benefit for all active non-retirement eligible employees. Medco had previously reduced and capped the benefit through a 2003 plan amendment, the effect of which resulted in a prior service credit reflected as a component of accumulated other comprehensive loss in stockholders’ equity. As this amount is being eliminated on the unaudited pro forma condensed combined balance sheet in connection with the elimination of Medco’s pre-merger equity, adjustments have been made to eliminate the corresponding amortization of pension and postretirement prior service costs and actuarial gains and losses from selling, general and administrative expenses. |
Six Months Ended | Twelve Months Ended | |||||||
June 30, 2011 | December 31, 2010 | |||||||
Interest expense on the bridge facility and term loan | $ | 298.3 | $ | 528.0 | ||||
Amortization associated with increase in pre-merger Medco debt to fair value, amortized over the remaining life of each obligation | (38.3 | ) | (76.6 | ) | ||||
Amortization of deferred financing costs recorded in connection with the bridge facility and term loan (See (B) above) | 3.6 | 72.2 | ||||||
Historical interest cost — debt to be repaid | (11.2 | ) | (16.7 | ) | ||||
Total adjustment to interest expense | $ | 252.4 | $ | 506.9 | ||||
Impact of 1/8% increase in interest rates | $ | 8.2 | $ | 16.5 |
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• | our ability to remain profitable in a very competitive marketplace is dependent upon our ability to attract and retain clients while maintaining our margins, to differentiate our products and services from others in the marketplace, and to develop and cross-sell new products and services to our existing clients; | |
• | our failure to anticipate and appropriately adapt to changes in the rapidly changing health care industry; | |
• | changes in applicable laws or regulations, or their interpretation or enforcement, or the enactment of new laws or regulations, which apply to our business practices (past, present or future) or require us to spend significant resources in order to comply; | |
• | changes to the health care industry designed to manage health care costs or alter health care financing practices; | |
• | changes relating to our participation in Medicare Part D, the loss of Medicare Part D eligible members, or our failure to otherwise execute on our strategies related to Medicare Part D; | |
• | a failure in the security or stability of our technology infrastructure, or the infrastructure of one or more of our key vendors, or a significant failure or disruption in service within our operations or the operations of such vendors; | |
• | our failure to effectively execute on strategic transactions, or to integrate or achieve anticipated benefits from any acquired businesses; | |
• | the termination, or an unfavorable modification, of our relationship with one or more key pharmacy providers, or significant changes within the pharmacy provider marketplace; | |
• | the termination, or an unfavorable modification, of our relationship with one or more key pharmaceutical manufacturers, or the significant reduction in payments made or discounts provided by pharmaceutical manufacturers; | |
• | changes in industry pricing benchmarks; | |
• | results in pending and future litigation or other proceedings which would subject us to significant monetary damages or penaltiesand/or require us to change our business practices, or the costs incurred in connection with such proceedings; | |
• | our failure to execute on, or other issues arising under, certain key client contracts; | |
• | the impact of our debt service obligations on the availability of funds for other business purposes, and the terms and our required compliance with covenants relating to our indebtedness; our failure to attract and retain talented employees, or to manage succession and retention for our Chief Executive Officer or other key executives; |
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• | failure to realize the anticipated benefits of the mergers, including as a result of a delay in completing the mergers or a delay or difficulty in integrating the businesses of Express Scripts and Medco; | |
• | uncertainty as to the long-term value of New Express Scripts common shares; | |
• | uncertainty as to whether Express Scripts and Medco will be able to consummate the mergers on the terms set forth in the merger agreement; | |
• | the ability to obtain governmental approvals of the mergers; | |
• | uncertainty as to the market value of the Express Scripts merger consideration and the stock component of the Medco merger consideration; | |
• | limitation on the ability of Express Scripts and New Express Scripts to incur new debt in connection with the mergers; | |
• | the expected amount and timing of cost savings and operating synergies; and | |
• | failure to receive the approval of the stockholders of either Express Scripts or Medco for the mergers. |
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• | a proposal to adopt the merger agreement; | |
• | a proposal to approve the adjournment of the Medco special meeting (if it is necessary or appropriate to solicit additional proxies if there are not sufficient votes to adopt the merger agreement); and | |
• | a proposal to approve, by non-binding advisory vote, certain compensation arrangements for Medco’s named executive officers in connection with the mergers contemplated by the merger agreement. |
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• | enter a new vote by telephone, over the Internet, or by signing and returning another proxy card at a later date; | |
• | provide written notice of the revocation to our Corporate Secretary or deliver another duly executed proxy or voter instruction form dated subsequent to the date thereof to the addressee named in the proxy or voter instruction form; or | |
• | attend the Medco special meeting and vote in person. |
Medco Health Solutions, Inc.
100 Parsons Pond Drive, Mail Stop F3-3
Franklin Lakes, New Jersey 07417
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• | a proposal to adopt the merger agreement; and | |
• | a proposal to approve the adjournment of the Express Scripts special meeting (if it is necessary or appropriate to solicit additional proxies if there are not sufficient votes to adopt the merger agreement). |
• | “FOR” the proposal to adopt the merger agreement; and | |
• | “FOR” the proposal to approve the adjournment of the special meeting (if it is necessary or appropriate to solicit additional proxies if there are not sufficient votes to adopt the merger agreement). |
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• | By attending the special meeting and voting in person by ballot; | |
• | By visiting the Internet at www.proxyvote.com; | |
• | By calling toll-free (within the U.S. or Canada)1-800-690-6903; or | |
• | By completing, dating, signing and returning the enclosed proxy card in the accompanying prepaid reply envelope. |
• | enter a new vote by telephone, over the Internet, or by signing and returning another proxy card at a later date; | |
• | provide written notice of the revocation to our Corporate Secretary or deliver another duly executed proxy or voter instruction form dated subsequent to the date thereof to the addressee named in the proxy or voter instruction form; or | |
• | attend the Express Scripts special meeting and vote in person. |
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• | the Medco board’s knowledge of Medco’s business, financial condition, results of operations, on both historical and prospective bases, and its understanding of Express Scripts’ business, financial condition, results of operations and prospects; | |
• | the current industry, economic and market conditions and the risks for Medco on a stand-alone basis in a consolidating, competitive industry; | |
• | the need to be proactive in responding to current and contemplated healthcare reform initiatives; | |
• | the facts that the cost savings synergies anticipated to result from the combination of Medco’s and Express Scripts’ businesses are expected to be at least $1 billion, that the combined company is estimated to be able to deliver more than $4 billion of annual cash from operations, and that the 0.81 fixed exchange ratio provides Medco stockholders with participation in the earnings of the combined company, which will be enhanced as synergies and other efficiencies arising from the mergers are realized over time and the combined company pursues and capitalizes on strategic opportunities that can be achieved with its substantial cash flows; | |
• | the Medco board’s evaluation, over the course of nine (9) telephonic and in person meetings from February 1, 2011 to July 20, 2011, of all feasible alternatives to a sale to Express Scripts, including senior management’s stand-alone plan and potential business combinations and joint ventures with other parties, which alternatives the Medco board evaluated with the assistance of its antitrust legal advisors and its financial advisors, J.P. Morgan and Lazard, and determined were likely to be less favorable to |
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Medco’s stockholders than the transaction with Express Scripts, given the potential risks, rewards and uncertainties associated with those alternatives; |
• | input from the Medco M&A committee, which consisted of five (5) independent directors and met, along with Medco’s financial and legal advisors, in person or telephonically, five (5) times between April 4, 2011 and June 30, 2011; | |
• | the value of the Medco merger consideration, which, based on the $52.54 per share closing price for Express Scripts common stock on July 20, 2011, represented a notional value of $71.36 per share of Medco common stock and represented: |
• | a 28% premium to the closing price per share for Medco common stock on July 20, 2011; | |
• | a 29% premium to the average closing price for Medco common stock on the NYSE for the one (1) month preceding July 20, 2011; | |
• | a 22% premium to the average closing price for Medco common stock on the NYSE for the three (3) months preceding July 20, 2011; and | |
• | a 21% premium to the average closing price for Medco common stock on the NYSE for the six (6) months preceding July 20, 2011. |
• | the fact that Medco common stock has been trading at a lowerprice-to-earnings multiple than some of its peers, including Express Scripts, and the likelihood that such discount would make it challenging for Medco to compete with Express Scripts and other third parties in acquisitions of potential target companies in the pharmacy benefit management industry; | |
• | the probability that it could take a considerable period of time before the trading price of the Medco common stock on a stand-alone basis would reach and sustain at least the $71.36 notional value of the per share Medco merger consideration, as adjusted for present value; | |
• | the fact that the $28.80 per share of cash consideration provides Medco stockholders with a degree of value certainty with respect to that portion of the Medco merger consideration; | |
• | the continued participation of Medco stockholders in a combined company that will be able to provide an attractive mix of services to customers via increased mail order penetration and greater utilization of generics and the expectation that the combined company will capitalize on a diversified customer base covering the spectrum from large managed care organizations to small- to medium-sized employers and the complementary strengths of Express Scripts and Medco in clinical, specialty pharmacy services, research, the behavioral sciences, pharmacy technology, and overall patient care; | |
• | Express Scripts’ and Medco’s records of successfully integrating past acquisitions without sacrificing growth; | |
• | the analyses of J.P. Morgan and the oral opinion of J.P. Morgan, rendered on July 20, 2011 and subsequently confirmed in writing on the same day, to the Medco board that, as of July 20, 2011 and subject to the assumptions, procedures, factors, qualifications and limitations set forth in the written opinion, the Medco merger consideration was fair, from a financial point of view, to Medco’s stockholders. See “— Opinions of Financial Advisors to Medco”, below; | |
• | the analyses of Lazard and the opinion of Lazard, rendered on July 20, 2011 and subsequently confirmed in writing, to the Medco board that, subject to the assumptions, procedures, factors, qualifications and limitations set forth in the written opinion, the Medco merger consideration was fair, from a financial point of view, to Medco’s stockholders (with no opinion expressed as to Medco subsidiaries and certain other Medco-affiliated holders). See “— Opinions of Financial Advisors to Medco”, below; |
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• | the likelihood that the transactions contemplated by the merger agreement will be consummated, based on, among other things: |
• | the closing conditions to the transactions contemplated by the merger agreement, including the fact that the obligations of Express Scripts under the merger agreement are not subject to a financing condition; | |
• | the fact that Express Scripts had obtained committed debt financing for the transactions contemplated by the merger agreement with limited conditions to financing from reputable financing sources and the obligation of Express Scripts pursuant to the merger agreement to use its reasonable best efforts to obtain the debt financing; and | |
• | the commitments made by Express Scripts in the merger agreement with respect to obtaining regulatory clearances, including with respect to theHart-Scott-Rodino Antitrust Improvements Act of 1976, and the absence of other significant required regulatory approvals necessary to consummate the transactions contemplated by the merger agreement. |
• | the Medco board’s view, after consultation with its legal counsel, concerning the likelihood that regulatory approvals and clearances necessary to consummate the transactions contemplated by the merger agreement would be obtained; | |
• | the terms and conditions of the merger agreement and the course of negotiations of the merger agreement, including, among other things: |
• | the ability of the Medco board, under certain circumstances, to change, qualify, withhold, withdraw or modify its recommendation to stockholders concerning the transactions contemplated by the merger agreement; and | |
• | the ability of the Medco board to terminate the merger agreement to enter into a superior proposal, subject to certain conditions (including certain rights of Express Scripts to have an opportunity to match the superior proposal) and the payment of the termination fee, as described under “The Merger Agreement — Termination Fees; Expenses” beginning on page [ ]; and | |
• | the rights of Medco stockholders who are entitled to demand and properly demand appraisal of their shares pursuant to, and who comply in all respects with, Section 262 of the Delaware General Corporation Law to receive payment of the “fair value” of such shares. |
• | the fact that because a substantial portion of the Medco merger consideration is New Express Scripts stock and the exchange ratio is fixed, Medco stockholders will be adversely affected by any decrease in the sale price of Express Scripts common stock between the announcement and the completion of the transactions contemplated by the merger agreement; | |
• | the restrictions on the conduct of Medco’s business prior to the completion of the proposed merger, which may delay or prevent Medco from undertaking business opportunities that may arise or other actions it would otherwise take with respect to the operations of Medco pending completion of the proposed merger; | |
• | the difficulty inherent in integrating diverse businesses and the risk that the cost savings, synergies and other benefits expected to be obtained in the transactions contemplated by the merger agreement might not be fully realized; | |
• | the fact that the termination fee to be paid to Express Scripts under the circumstances specified in the merger agreement, which as a percentage of the equity value of Medco is within a customary range for similar transactions, may discourage other parties that might otherwise have an interest in a business combination with, or an acquisition of, Medco (see the section entitled “The Merger Agreement — Termination Fees; Expenses” beginning on page [ ] of this joint proxy statement/prospectus); |
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• | the terms of the merger agreement placing limitations on the ability of Medco to solicit alternative business combination transactions and to provide confidential due diligence information to, or engage in discussions with, a third party interested in pursuing an alternative business combination transaction (see the section entitled “The Merger Agreement — No Solicitation” beginning on page [ ] of this joint proxy statement/prospectus); | |
• | the amount of time it could take to complete the mergers, including the fact that completion of the mergers depends on factors outside of Medco’s control; | |
• | the possibility of significant costs and delays resulting from seeking regulatory approvals necessary to consummate the transactions contemplated by the merger agreement, the possibility of non-consummation of such transactions if such approvals are not obtained, and the potential negative impacts on Medco, its business and its stock price in the event that such approvals are not obtained; | |
• | the fact that if the proposed merger is not completed, Medco will be required to pay its own expenses associated with the merger agreement and the transactions contemplated thereby, and may be required to reimburse certain of Express Scripts’ expensesand/or pay the termination fee under certain circumstances, as described under “The Merger Agreement — Termination Fees; Expenses” beginning on page [ ]; and | |
• | the risks described in the section entitled “Cautionary Note Concerning Forward-Looking Information” beginning on page [ ] of this joint proxy statement/prospectus. |
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• | reviewed a draft dated July 19, 2011 of the merger agreement; | |
• | reviewed certain publicly available business and financial information concerning Medco and Express Scripts and the industries in which they operate; | |
• | compared the proposed financial terms of the transactions contemplated by the merger agreement with the publicly available financial terms of certain transactions involving companies J.P. Morgan deemed relevant and the consideration paid for such companies; | |
• | compared the financial and operating performance of Medco and Express Scripts with publicly available information concerning certain other companies J.P. Morgan deemed relevant and reviewed the current and historical market prices of Medco’s common stock and of Express Scripts’ common stock and certain publicly traded securities of such other companies; | |
• | reviewed certain internal financial analyses and forecasts prepared by or at the direction of the managements of Medco and Express Scripts relating to their respective businesses (with internal financial analyses and forecasts with respect to Express Scripts from 2015 through 2021 being provided by Medco’s management based on guidance provided by Express Scripts’ management), as well as the estimated amount and timing of the cost savings and related expenses and synergies expected to result from the transactions contemplated by the merger agreement, which we refer to in this section as the synergies (for more information see the section entitled “The Mergers — Certain Financial Forecasts” beginning on page [ ]); and | |
• | performed such other financial studies and analyses and considered such other information as J.P. Morgan deemed appropriate for the purposes of this opinion. |
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• | Medco* | |
• | Express Scripts* | |
• | CVS Caremark* | |
• | SXC Health Solutions | |
• | Catalyst Health Solutions |
Low | High | |||||||
CY12E Cash P/E | $ | 50.25 | $ | 61.25 | ||||
CY13E Cash P/E | $ | 51.25 | $ | 61.50 |
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Selected Transactions | Announcement Date | |
• Catalyst/WHI | March 9, 2011 | |
• Express Scripts/WellPoint NextRx* | April 13, 2009 | |
• Express Scripts/Caremark* | December 18, 2006 | |
• CVS/Caremark* | November 1, 2006 | |
• Caremark/AdvancePCS* | September 2, 2003 | |
• Express Scripts/NPA | April 12, 2002 |
Low | High | |||
$59.75 | $ | 73.75 |
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Low | High | |||
$62.75 | $ | 87.50 |
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Cash-Adjusted Implied Exchange Ratios | ||||||||
Analysis | Low | High | ||||||
52-Week VWAP Range | 0.35x | 0.64x | ||||||
Public Trading — Cash P/E 2012 | 0.47x | 0.58x | ||||||
Public Trading — Cash P/E 2013 | 0.48x | 0.58x | ||||||
Discounted Cash Flow | 0.57x | 0.72x |
Cash-Adjusted Implied | ||||
Time Period | Exchange Ratio | |||
1-day closing price | 0.484x | |||
1-day VWAP | 0.483x | |||
1-week VWAP | 0.486x | |||
2-week VWAP | 0.493x | |||
3-week VWAP | 0.496x | |||
4-week VWAP | 0.491x | |||
12-week VWAP | 0.529x | |||
26-week VWAP | 0.532x | |||
52-week VWAP | 0.513x | |||
2-year VWAP | 0.590x |
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• | Reviewed the financial terms and conditions of a draft, dated July 19, 2011, of the merger agreement; | |
• | Reviewed certain publicly available historical business and financial information relating to Medco and Express Scripts; | |
• | Reviewed various financial forecasts and other data provided to Lazard by Medco relating to the business of Medco, various financial forecasts and other data provided to Lazard by Express Scripts and Medco relating to the business of Express Scripts and certain publicly available financial forecasts and other data relating to the business of Express Scripts and Medco (for more information see the section entitled “The Mergers — Certain Financial Forecasts” beginning on page [ ]; | |
• | Held discussions with members of the senior managements of Medco and Express Scripts with respect to the businesses and prospects of Medco and Express Scripts, respectively and reviewed the projected synergies and other benefits, including the amount and timing thereof, anticipated by the management of Medco and Express Scripts to be realized from the mergers; | |
• | Reviewed public information with respect to certain other companies in lines of business Lazard believes to be generally relevant in evaluating the businesses of Medco and Express Scripts, respectively; | |
• | Reviewed the financial terms of certain business combinations involving companies in lines of business Lazard believes to be generally relevant in evaluating the business of Medco; | |
• | Reviewed historical stock prices and trading volumes of Medco common stock and Express Scripts common stock; | |
• | Reviewed the potential pro forma financial impact of the transactions contemplated by the merger agreement on Express Scripts based on the financial forecasts referred to above relating to Medco and Express Scripts; and | |
• | Conducted such other financial studies, analyses and investigations as Lazard deemed appropriate. |
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• | Express Scripts* | |
• | CVS Caremark Corp. | |
• | Catalyst Health | |
• | SXC Health Solutions Corp. | |
• | McKesson Corp. | |
• | Cardinal Health, Inc. | |
• | AmeriSourceBergen Corp. | |
• | Omnicare, Inc. | |
• | Health Management Associates, Inc. | |
• | UnitedHealth Group Inc. | |
• | WellPoint, Inc. | |
• | Aetna Inc. | |
• | CIGNA Corp. | |
• | Humana Inc. | |
• | Coventry Health Care, Inc. |
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Date | Acquiror | Target | ||
April 13, 2009 | Express Scripts | NextRx* | ||
March 11, 2007 | UnitedHealth | Sierra Health Services | ||
March 7, 2007 | Express Scripts | Caremark * | ||
March 8, 2007 | CVS | Caremark * | ||
September 27, 2005 | WellPoint | WellChoice | ||
July 6, 2005 | UnitedHealth | Pacificare |
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• | the strategic and transformative nature of the transaction, which will combine Express Scripts’ and Medco’s respective businesses to create a new company which will be one of the leading enterprises for pharmacy benefit management, with pro forma combined revenues of over $110 billion; | |
• | the fact that, because Express Scripts stockholders would hold approximately 60% of the New Express Scripts common stock upon completion of the mergers, Express Scripts stockholders would have the opportunity to participate in the future performance of the combined company; | |
• | that the combined company would be led by a strong, experienced management team with a demonstrated record of integrating acquisitions, including most recently the acquisition of WellPoint’s PBM business; | |
• | the fact that the combined company would have a strong balance sheet and the ability to generate substantial cash flow to finance future expansion as well as to invest in improving and adding new technology, services and products for customers; and | |
• | Express Scripts’ view of the likelihood that the required regulatory approvals would be obtained, notwithstanding the length of time that obtaining such approvals may require, without a material adverse impact on the respective businesses of Express Scripts, Medco or New Express Scripts. |
• | the review and analysis of Express Scripts’ and Medco’s businesses, historical financial performance and condition, operations, properties, assets, regulatory issues, competitive positions, prospects and management, including the results of the business, financial, accounting and legal due diligence investigations of Medco; | |
• | the current and prospective economic and competitive environment facing the pharmacy benefit management industry and Express Scripts; | |
• | the strong strategic fit between Express Scripts and Medco; | |
• | the historical market prices, volatility and trading information with respect to Medco common stock and Express Scripts common stock; | |
• | the terms of the proposed financing for the transaction; | |
• | the ability of the combined company to service and pay down any indebtedness incurred in connection with the mergers; | |
• | the views of Express Scripts’ management and financial advisors as to the likelihood that Express Scripts will be able to obtain the necessary financing and that the full proceeds of the financing will be available to Express Scripts, in each case subject to the terms of the debt commitment letter; |
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• | the terms and conditions of the merger agreement, including (i) the nature and scope of the closing conditions, as well as the likelihood of satisfaction of these conditions, and (ii) the circumstances under which a termination fee is payable by Medco and the size of the termination fees payable by Medco; | |
• | that because the exchange ratio under the merger agreement is fixed (i.e., it will not be adjusted for fluctuations in the market price of Express Scripts common stock or Medco common stock), Express Scripts has certainty as to the number of shares of New Express Scripts common stock to be issued; | |
• | that because the exchange ratio under the merger agreement is fixed, the value of the equity consideration payable to Express Scripts stockholders in the mergers could change between the signing of the merger agreement and the completion of the mergers as a result of, among other things: (1) a change in the value of the respective businesses of Express Scripts and Medco, (2) the amount of cash generated by Express Scripts and Medco prior to closing, (3) the amount of revenue synergies and cost savings anticipated to be obtained as a result of the mergers, (4) changes in the equity markets, (5) changes in the financial markets, including changes in borrowing costs and (6) changes in the regulatory environment and the political outlook insofar they effect market perspectives on regulatory initiatives; | |
• | the separate opinions and financial presentations of Credit Suisse and Citigroup, each dated July 20, 2011, to the Express Scripts board as to the fairness, from a financial point of view and as of the date of the opinion, to Express Scripts of the Medco merger consideration to be issued and paid by New Express Scripts, as more fully described below (see “The Mergers — Opinions of Financial Advisors to Express Scripts”); | |
• | that the mergers would provide for significant opportunities for cost saving by eliminating duplicative activities, including consolidating corporate governance, reducing public company costs, reducing procurement expenses, reducing labor expenses and realizing synergies between the businesses of Medco and Express Scripts, while at the same time realizing significant revenue growth opportunities, thereby driving meaningful and long-term stockholder value; the Express Scripts board reviewed potential net transaction synergies anticipated to result from the combination of Medco’s and Express Scripts’ businesses, including potential synergies as initially estimated by Express Scripts’ management of approximately $1.1 billion, referred to as the initial estimated synergies, as well as a revised and more conservative estimate discussed by such management with the Express Scripts board at its July 20, 2011 meeting of approximately $1.0 billion, referred to as the revised estimated synergies. The Express Scripts board considered the fact that the discounted cash flow analyses of Medco, which was one of a number of financial analyses performed and reviewed at the July 20, 2011 board meeting by Credit Suisse and Citigroup in connection with their respective opinions, incorporated the initial estimated synergies of $1.1 billion that had been provided by Express Scripts’ management to Express Scripts’ financial advisors at the time of preparation of such analyses. Following Express Scripts’ management’s discussion at the July 20, 2011 board meeting of the revised estimated synergies of $1.0 billion, each of Credit Suisse and Citigroup discussed with the Express Scripts board its belief that had it used the revised estimated synergies as part of its discounted cash flow analysis of Medco, such change would not have, subject to the assumptions, matters considered and limitations described therein, altered its opinion and, thereafter, Credit Suisse memorialized its discussion by providing the Express Scripts board with a discounted cash flow analysis of Medco incorporating the revised estimated synergies (for a discussion of the financial analyses and opinions of Express Scripts’ financial advisors, see the section entitled “The Mergers — Opinions of Financial Advisors to Express Scripts”); | |
• | the anticipation that the portion of the consideration to be received by Express Scripts stockholders in the Express Scripts merger in the form of shares of New Express Scripts common stock will be tax-free to Express Scripts stockholders for U.S. federal income tax purposes (see “The Mergers — Material U.S. Federal Income Tax Consequences” ); and | |
• | the potential impact of pending legislation and potential regulatory changes. |
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• | the dilution associated with the shares that New Express Scripts could be required to issue under the mergers; | |
• | the risk that the mergers might not be consummated in a timely manner or that the closing of the mergers might not occur despite the companies’ efforts, including by reason of a failure to obtain the approval of either of the Express Scripts stockholder or the Medco stockholders, the failure by Express Scripts to obtain financing or the failure of the parties to obtain the applicable regulatory approvals; | |
• | the potential length of the regulatory approval process and the period of time during which Express Scripts may be subject to the merger agreement; | |
• | the possibility that regulatory or governmental authorities might seek to impose conditions or divestitures on or otherwise prevent or delay the mergers, including the risk that they might seek an injunction in Federal courtand/or commence an administrative proceeding seeking to prevent the parties from completing the transaction; | |
• | the risks and costs to Express Scripts if the mergers are not completed, including the potential diversion of management and employee attention, potential employee attrition and the potential effect on business and customer relationships; | |
• | the risk that the potential benefits of the mergers may not be fully or partially realized, recognizing the many potential management and regulatory challenges associated with successfully combining the businesses of Express Scripts and Medco, including the potential for client losses and the possibility that anticipated cost savings from the mergers may not be realized; | |
• | the risk of diverting management focus and resources from other strategic opportunities and from operational matters, and potential disruption associated with the mergers and integrating the companies; | |
• | the risk that certain key employees of Express Scripts or Medco might not choose to remain with the combined company; | |
• | the potential challenges and difficulties relating to integrating the operations of Express Scripts and Medco; | |
• | the restrictions on the conduct of Express Scripts’ business prior to the completion of the mergers, requiring Express Scripts to conduct its business in the ordinary course, subject to specific limitations, which may delay or prevent Express Scripts from undertaking business opportunities that may arise pending completion of the mergers; | |
• | the limitations imposed in the merger agreement on the solicitation or consideration by Express Scripts of alternative business combinations; | |
• | the fact that Express Scripts may be required to pay Medco, under certain circumstances, a termination fee of up to $950 million and expense reimbursement of up to $225 million if the merger agreement were to be terminated (see “The Merger Agreement — Termination”); | |
• | Medco’s right to terminate to enter into a transaction representing a superior proposal; | |
• | the various contingent liabilities, including pending legal proceedings, to which Medco is subject; | |
• | that some officers and directors of Express Scripts have interests in the mergers that may be different from, in addition to or in conflict with the interests of Express Scripts stockholders (see “The Mergers — Interests of Express Scripts Officers and Directors in the Transaction”); | |
• | the risk that the additional debt incurred in connection with the mergers could have a negative impact on Express Scripts’ ratings and operational flexibility; |
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• | in light of turbulence in the credit markets, the possibility that the financing for the transaction may not be available and that Express Scripts could be liable for damages under the merger agreement if it failed to consummate the merger agreement when it would otherwise be required to do so; | |
• | the fees and expenses associated with completing the transaction; and | |
• | various other risks associated with the mergers and the business of Express Scripts, Medco and the combined company described under “Risk Factors.” |
• | reviewed the merger agreement; | |
• | reviewed certain publicly available business and financial information relating to Express Scripts and Medco; | |
• | reviewed certain other information relating to Express Scripts and Medco provided to or discussed with Credit Suisse by Express Scripts and Medco, including financial forecasts relating to Express Scripts and relating to Medco prepared by the respective managements of Express Scripts and Medco (as adjusted, in the case of Medco, by Express Scripts’ management); | |
• | met with the managements of Express Scripts and Medco to discuss the respective businesses and prospects of Express Scripts and Medco; | |
• | considered certain financial and stock market data of Express Scripts and Medco, and Credit Suisse compared that data with similar data for other publicly held companies in businesses Credit Suisse deemed similar to that of Express Scripts and Medco; |
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• | considered, to the extent publicly available, the financial terms of certain other business combinations and transactions which have been effected or announced; and | |
• | considered such other information, financial studies, analyses and investigations and financial, economic and market criteria which Credit Suisse deemed relevant. |
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• | Catalyst Health Solutions, Inc. | |
• | CVS Corporation | |
• | Express Scripts | |
• | SXC Health Solutions Corp. |
Implied Per Share | Implied Medco | |||
Reference Range | Merger Consideration | |||
$51.00 — $64.00 | $ | 70.80 |
Acquiror | Target | |
• Catalyst Health Solutions, Inc. | • Walgreens Health Initiatives, Inc. (unit of Walgreen Co.) | |
• Catalyst Health Solutions, Inc. | • FutureScripts, LLC (unit of Independence Blue Cross, Inc.) | |
• Express Scripts | • NextRx (business of Wellpoint, Inc.) | |
• Express Scripts | • Pharmacy Services Division of Medical Services Company | |
• HealthExtras, Inc. | • HospiScript Services, LLC | |
• SXC Health Solutions Corp. | • National Medical Health Card Systems, Inc. | |
• CVS Corporation | • Caremark Rx, Inc. | |
• Caremark Rx, Inc. | • AdvancePCS | |
• Express Scripts | • National Prescription Administrators, Inc. | |
• Advance Paradigm, Inc. | • PCS Health Systems, Inc. (unit of Rite Aid Corporation) | |
• Merck & Co., Inc. | • ProVantage Health Services, Inc. (unit of ShopKo Stores, Inc.) | |
• Advance Paradigm, Inc. | • Foundation Health Pharmaceutical Services, Inc. | |
• Express Scripts | • Diversified Pharmaceutical Services, Inc. (unit of SmithKline Beecham Corporation) | |
• Rite Aid Corporation | • PCS Health Systems, Inc. (unit of Eli Lilly and Company) | |
• Express Scripts | • ValueRx (unit of Columbia / HCA Healthcare Corporation) |
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Implied Per Share | Implied Medco | |||
Reference Range | Merger Consideration | |||
$61.00 — $89.00 | $ | 70.80 |
Implied Per Share | ||||
Reference Range | Implied Medco | |||
(Excluding Synergies) | Merger Consideration | |||
$64.00 — $83.00 | $ | 70.80 |
Implied Per Share Reference Range (Including Synergies) | Implied Medco | |||||||
Initial Estimated Synergies | Revised Estimated Synergies | Merger Consideration | ||||||
$85.00 — $110.00 | $ | 84.00 — $108.00 | $ | 70.80 |
• | Catalyst Health Solutions, Inc. | |
• | CVS Corporation |
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• | Medco | |
• | SXC Health Solutions Corp. |
Implied Per Share | Express Scripts Closing | |||
Reference Range | Stock Price on July 19, 2011 | |||
$44.00 — $55.00 | $ | 51.85 |
Implied Per Share | Express Scripts Closing | |||
Reference Range | Stock Price on July 19, 2011 | |||
$67.00 — $85.00 | $ | 51.85 |
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Discounted Cash | Discounted Cash | |||||||
Discounted Cash | Flow Analysis | Flow Analysis | ||||||
Flow Analysis | (Including Initial | (Including Revised | Medco Merger | |||||
Selected | (Excluding | Estimated | Estimated | Stock Consideration | ||||
Companies Analysis | Synergies) | Synergies) | Synergies) | Exchange Ratio | ||||
0.4155 — 0.8123 | 0.4153 — 0.8167 | 0.5638 — 1.0538 | 0.5528 — 1.0356 | 0.81 |
• | illustrative discounted cash flow analyses of each of Medco and Express Scripts based on estimates from publicly available Wall Street research analyst reports, which indicated a range of illustrative per share values for Medco, both excluding and including the estimated present value of potential synergies anticipated by Express Scripts’ management to result from the mergers, of approximately $64.00 to $82.00 (excluding synergies), $85.00 to $108.00 (including initial estimated synergies) and $83.00 to $106.00 (including revised estimated synergies) and a range of illustrative per share values for Express Scripts of approximately $66.00 to $85.00; | |
• | one-year forward per share price targets for Medco common stock and Express Scripts common stock in publicly available Wall Street research analyst reports, which indicated low and high per share price targets for Medco of $53.00 to $77.00 and low and high per share price targets for Express Scripts of $53.00 to $71.00; | |
• | illustrative exchange ratios of Express Scripts common stock to Medco common stock based on the respective low and high per share price targets for Express Scripts and Medco described above (adjusted downward, in the case of Medco, by the amount of the $28.80 per share cash consideration to be paid in the Medco merger), which indicated a range of illustrative exchange ratios of approximately 0.3408 to 0.9094; | |
• | historical trading prices of Medco common stock and Express Scripts common stock during the 52-week period ended July 19, 2011, which reflected low and high per share prices for Medco during such period of approximately $43.00 to $65.00 and low and high per share prices for Express Scripts during such period of approximately $42.00 to $61.00; and | |
• | premiums paid in selected transactions generally, and premiums paid in selected transactions specifically in the healthcare industry, with transaction values of $1 billion or more and $10 billion or more announced between January 1, 2005 and July 19, 2011, which, after applying a selected range of premiums derived from the closing stock prices of the target companies in such transactionsone-day, one-week and one-month prior to public announcement of the relevant transactions of approximately 24% to 32%, 24% to 34% and 26% to 40%, respectively, to Medco’s closing stock price on July 19, 2011 indicated an implied per share reference range for Medco of approximately $68.00 to $79.00. |
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• | reviewed the merger agreement; | |
• | held discussions with certain senior officers, directors and other representatives and advisors of Express Scripts and certain senior officers and other representatives and advisors of Medco concerning the businesses, operations and prospects of Express Scripts and Medco and the effects of the mergers on the financial condition and future prospects of Express Scripts; | |
• | examined certain publicly available business and financial information relating to Express Scripts and Medco; | |
• | examined certain financial forecasts and other information and data relating to Express Scripts and Medco (certain of which information relating to Medco was adjusted by Express Scripts’ management, and Citigroup was instructed by Express Scripts to use such information as adjusted for purposes of its analysis), respectively, which were provided to or discussed with Citigroup by the respective managements of Express Scripts and Medco, including information relating to the potential strategic implications and operational benefits (including the amount, timing and achievability thereof) anticipated by the management of Express Scripts (with input from the management of Medco) to result from the mergers, which are further described in the section entitled “The Mergers — Certain Financial Forecasts” beginning on page [ ]; | |
• | reviewed the financial terms of the mergers as set forth in the merger agreement in relation to, among other things, current and historical market prices of Express Scripts common stock and Medco’s common stock, the historical and projected earnings and other operating data of Express Scripts and Medco and the capitalization and financial condition of Express Scripts and Medco; | |
• | considered, to the extent publicly available, the financial terms of certain other transactions which Citigroup considered relevant in evaluating the mergers; | |
• | analyzed certain financial, stock market and other publicly available information relating to the businesses of other companies whose operations Citigroup considered relevant in evaluating those of Express Scripts and Medco; | |
• | evaluated certain potential pro forma financial effects of the mergers on Express Scripts based on the information provided to Citigroup by the management of Express Scripts; and | |
• | conducted such other analyses and examinations and considered such other information and financial, economic and market criteria as Citigroup deemed appropriate in arriving at its opinion. |
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Selected Per Share Equity Reference Range | Medco Merger | |||
for Medco’s Common Stock | Consideration | |||
$61.14 — $80.93 | $ | 70.69 |
• | firm value as a multiple of estimated EBITDA for each of the following periods, Last Twelve Months (LTM), calendar years 2011 and 2012; and | |
• | stock price per share as a multiple of estimated earnings per share, for each of calendar years 2011 and 2012. |
Firm Value/EBITDA | Price/Earnings Per Share | |||||||||||||||||||
LTM | 2011E | 2012E | 2011E | 2012E | ||||||||||||||||
Median | 11.1 | x | 10.3 | x | 8.8 | x | 16.2 | x | 13.2 | x | ||||||||||
Mean | 11.7 | 10.9 | 9.4 | 16.3 | 14.2 |
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Announcement Date | Acquiror | Target | ||
March 2011 | Catalyst Health Solutions, Inc. | Walgreen Health Initiatives. Inc. | ||
April 2009 | Express Scripts | WellPoint Inc.’s NextRx subsidiaries | ||
November 2006 | CVS Corporation | Caremark RX, Inc. | ||
September 2003 | Caremark RX, Inc. | AdvancePCS Inc. | ||
February 2002 | Express Scripts | National Prescription Administrators, Inc. |
Implied per Share Equity Value Reference | Medco Merger | |||
Range for Medco | Consideration | |||
$62.64 — $82.07 | $ | 70.69 |
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Implied Per Share Equity | ||||||||
Reference Range for Medco’s | Per Share Medco Merger | |||||||
Case | Common Stock | Consideration | ||||||
Without Synergies | $75.72 — $84.20 | $ | 70.69 | |||||
With Synergies | $91.40 — $102.72 | $ | 70.69 |
• | firm value as a multiple of estimated EBITDA for each of the following periods, LTM, calendar years 2011 and 2012; and | |
• | stock price per share as a multiple of estimated earnings per share, for each of calendar years 2011 and 2012. |
Firm Value/EBITDA | Price/Earnings Per Share | |||||||||||||||||||
LTM | 2011E | 2012E | 2011E | 2012E | ||||||||||||||||
Median | 11.1 | x | 10.3 | x | 8.8 | x | 16.2 | x | 13.2 | x | ||||||||||
Mean | 11.7 | 10.9 | 9.4 | 16.3 | 14.2 |
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Medco Management Forecasts (Stand-Alone, Pre-Merger Basis) | ||||||||||||||||||||
(in millions) | ||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2014 | ||||||||||||||||
Revenue(1) | $ | 65,968.3 | $ | 68,951.4 | $ | 58,931.4 | $ | 56,901.2 | $ | 56,607.6 | ||||||||||
EBITDA(1)(2) | $ | 2,974.2 | $ | 3,112.8 | $ | 3,408.0 | $ | 3,492.3 | $ | 3,967.7 | ||||||||||
Net Income(1) | $ | 1,427.3 | $ | 1,473.2 | $ | 1,626.1 | $ | 1,654.4 | $ | 1,944.0 |
(1) | The amounts presented in the table above for 2011 represent a forecast for operating results, and do not include any merger-related expenses or other potential one-time costs of a non-operating nature. The amounts presented in the table above for 2012 through 2014 are tantamount to Medco’s internal operating plan, and also exclude any merger-related or other one-time costs. Additionally, for 2012 through 2014, the amounts presented in the table above should be viewed as the high end of a performance range that Medco would normally use in providing guidance to investors. | |
(2) | For purposes of the table above, “EBITDA” means earnings before taxes, depreciation and amortization, net interest and other income (expense); or alternatively calculated as operating income plus depreciation and amortization. |
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Express Scripts Management Forecasts (Stand-Alone, Pre-Merger Basis, Prepared in June 2011) | ||||||||||||||||||||
(in millions) | ||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2014 | ||||||||||||||||
Revenue(1) | $ | 45,057.2 | $ | 45,477.4 | $ | 46,546.2 | $ | 48,132.7 | $ | 51,227.7 | ||||||||||
Adj. EBITDA(1) | $ | 2,408.2 | $ | 2,896.0 | $ | 3,353.7 | $ | 3,747.8 | $ | 4,055.4 | ||||||||||
Adj. Net Income(1) | $ | 1,360.6 | $ | 1,625.6 | $ | 1,906.5 | $ | 2,146.8 | $ | 2,351.5 | ||||||||||
Cash Flow from Operations | $ | n/a | $ | 2,250.0 | $ | 2,375.0 | $ | 2,515.0 | $ | 2,650.0 | ||||||||||
EPS(2) | $ | 2.50 | $ | 3.21 | $ | 3.96 | $ | 4.71 | $ | 5.55 |
(1) | We calculated Revenue, Adjusted EBITDA and Net Income, in each case, as adjusted to exclude certain charges recorded each year, such as integration related costs and amortization of intangible assets, as these charges are not considered an indicator of ongoing company performance. | |
(2) | EPS is adjusted earnings per share. |
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Current Director and | ||||
Name | Age | Designee of: | ||
Gary G. Benanav | 65 | Express Scripts | ||
Maura C. Breen | 55 | Express Scripts | ||
William J. DeLaney | 55 | Express Scripts | ||
Nicholas J. LaHowchic | 64 | Express Scripts | ||
Thomas P. Mac Mahon | 64 | Express Scripts | ||
Frank Mergenthaler | 50 | Express Scripts | ||
Woodrow A. Myers Jr., M.D. | 57 | Express Scripts | ||
John O. Parker, Jr. | 67 | Express Scripts | ||
George Paz, Chairman | 56 | Express Scripts | ||
Samuel K. Skinner | 73 | Express Scripts | ||
Seymour Sternberg | 68 | Express Scripts |
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Name | Audit | Compensation | Compliance Committee | Corporate Governance | ||||||||||||
Gary G. Benanav | X | X | ||||||||||||||
Maura C. Breen | X | |||||||||||||||
William J. DeLaney | X | X | ||||||||||||||
Nicholas J. LaHowchic | X | X | ||||||||||||||
Thomas P. Mac Mahon | X | |||||||||||||||
Frank Mergenthaler | X | |||||||||||||||
Woodrow A. Myers Jr., M.D. | X | |||||||||||||||
John O. Parker, Jr. | X | X | ||||||||||||||
George Paz, Chairman | ||||||||||||||||
Samuel K. Skinner | X | |||||||||||||||
Seymour Sternberg | X | X |
Name | Age | Title | ||||
George Paz; | 56 | President, Chief Executive Officer, Chairman | ||||
Jeffrey Hall | 44 | Executive Vice President, Chief Financial Officer | ||||
Patrick McNamee | 51 | Executive Vice President, Chief Operating Officer | ||||
Ed Ignaczak | 46 | Executive Vice President, Sales and Marketing | ||||
Keith Ebling | 43 | Executive Vice President, General Counsel and Secretary |
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• | the divestiture or disposition of one mail order dispensing facility of Express Scripts, Medco or any of their respective subsidiaries (provided that it is not the Express Scripts facility located in St. Louis, Missouri); | |
• | the divestiture or disposition of the property, plant and equipment associated with specialty pharmacy dispensing or infusion facilities of Express Scripts, Medco or any of their respective subsidiaries having a net book value not in excess of $30 million in the aggregate (provided that it not include the property, plant or equipment at the Express Scripts facility located in Indianapolis, Indiana); and | |
• | the divestiture, disposition, termination, expiration, assignment, delegation, novation or other transfer of contracts of Express Scripts, Medco or their respective subsidiaries which generated, collectively, EBITDA not in excess of $115 million during the most recently available 12 calendar month period ending on the applicable date of such agreement; provided, that in the case of pharmacy benefits management customer contracts, the aggregate annual number of adjusted prescription drug claims subject to the foregoing obligation will not exceed 35 million. |
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• | stockholders that are not U.S. holders; | |
• | financial institutions; | |
• | insurance companies; | |
• | tax-exempt organizations; | |
• | dealers in securities or currencies; | |
• | persons whose functional currency is not the U.S. dollar; | |
• | traders in securities that elect to use a mark to market method of accounting; | |
• | persons who own more than 5% of the outstanding stock of Express Scripts or Medco; | |
• | persons that hold Express Scripts common stock or Medco common stock as part of a straddle, hedge, constructive sale or conversion transaction; and | |
• | U.S. holders who acquired their shares of Express Scripts common stock or Medco common stock through the exercise of an employee stock option or otherwise as compensation. |
• | a citizen or resident of the United States; | |
• | a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or any State or the District of Columbia; | |
• | an estate that is subject to U.S. federal income tax on its income regardless of its source; or | |
• | a trust, the substantial decisions of which are controlled by one or more U.S. persons and which is subject to the primary supervision of a U.S. court, or a trust that validly has elected under applicable Treasury regulations to be treated as a U.S. person for U.S. federal income tax purposes. |
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• | the excess of (i) the sum of the fair market value of New Express Scripts common stock received in the Medco merger and the amount of cash received in the Medco merger over (ii) the U.S. holder’s tax basis in the Medco common stock surrendered in the Medco merger, and | |
• | the amount of cash received by such U.S. holder in the Medco merger. |
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• | an effective registration statement under the Securities Act covering the resale of those shares; | |
• | an exemption under paragraph (d) of Rule 145 under the Securities Act; or | |
• | any other applicable exemption under the Securities Act. |
• | The terms of the mergers are not the result of an auction process or active market check, and were arrived at without a full and thorough investigation of strategic alternatives; | |
• | The price of the Medco merger consideration is inadequate and undervalues Medco and its future growth prospects; |
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• | Mr. Snow and other senior Medco executives cannot evaluate the proposed mergers impartially because they stand to receive change in control payments upon consummation of the mergers; and | |
• | The merger agreement contains preclusive deal protection devices that restrain Medco’s ability to solicit or engage in negotiations with third parties regarding a proposal to acquire all or a significant interest in Medco, as well as a termination fee that deters potential bidders from coming forward. |
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• | the due organization, valid existence, good standing and qualification to do business, the corporate power and authority of such party and, in the case of Medco, its subsidiaries; | |
• | the capitalization of such party, including the number of shares of common stock, stock options and other stock-based awards outstanding and the ownership of the capital stock of each of its subsidiaries; | |
• | corporate authorization of the merger agreement and the transactions contemplated by the merger agreement and the valid and binding nature of the merger agreement as to such party; | |
• | the unanimous approval and recommendation by such party’s board of directors of the merger agreement and the transactions contemplated by the merger agreement and the inapplicability of anti-takeover laws; | |
• | the consents and approvals required from governmental entities in connection with the transactions contemplated by the merger agreement; | |
• | the absence of any conflicts with such party’s organizational documents, applicable laws, governmental orders or certain contracts as a result of such party entering into the merger agreement, complying with its terms or consummating the transactions contemplated by the merger agreement; | |
• | the proper filing or furnishing of required documents with the SEC since January 1, 2009; the accuracy of information contained in such documents; the compliance of the consolidated financial statements contained in such documents with the rules and regulations of the SEC applicable thereto and with U.S. GAAP; | |
• | such party’s compliance with the Sarbanes-Oxley Act of 2002; the absence of certain investigations relating to accounting practices; such party’s disclosure controls and procedures relating to financial reporting; the absence of certain undisclosed liabilities; the statutory financial statements of certain of such party’s insurance company subsidiaries; | |
• | such party’s conduct of its businesses in the ordinary course and the absence of a material adverse effect (as described below) since the end of such party’s last fiscal year; |
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• | the accuracy of information supplied by such party in connection with this joint proxy statement/prospectus and the associated registration statement; | |
• | the absence of certain legal proceedings, investigations and governmental orders; | |
• | compliance with applicable laws and governmental orders since January 1, 2008; compliance with the Foreign Corrupt Practices Act of 1977 and the absence of any investigations by governmental entities related to the Foreign Corrupt Practices Act of 1977 since January 1, 2008; | |
• | the possession of and compliance with required permits necessary for the conduct of such party’s business; compliance with applicable health care laws; the absence of certain allegations of violations of health care laws since January 1, 2008; the absence of certain penalties, convictions or legal proceedings relating to certain federal programs and laws since January 1, 2008; compliance with healthcare information laws; | |
• | compliance with certain laws and guidance relating to the operation of pharmacies and the labeling of prescription drugs and the absence of sanctions by governmental entities related to such activities; compliance by certain of such party’s insurance subsidiaries with the reporting requirements promulgated by governmental entities; the receipt of applicable approvals from governmental entities for policy forms and certificates and compliance with laws applicable to such forms and certificates; the performance by certain of such party’s insurance subsidiaries of their obligations under certain insurance agreements; the filing of or receipt of approvals from governmental entities for premium rates, ratings plans and policy terms of certain of such party’s insurance subsidiaries; | |
• | compliance by certain of such party’s insurance subsidiaries with applicable laws since January 1, 2008; the absence of certain charges or investigations by state insurance regulatory authorities or orders by governmental entities relating to such insurance subsidiaries; the authorization of such insurance subsidiaries by certain state insurance regulatory authorities; | |
• | the absence of certain changes relating to such party’s benefits plans; | |
• | ERISA matters; certainnon-U.S. benefit plans; certain compensation, severance and termination pay related to the execution of the merger agreement and the consummation of the transactions contemplated by the merger agreement; | |
• | employment and labor matters, including matters relating to collective bargaining agreements, agreements with works councils and labor practices; | |
• | compliance with environmental laws since January 1, 2008; the absence of certain environmental claims or conditions that could result in such claims; matters relating to materials of environmental concern; | |
• | real property; | |
• | tax matters; | |
• | intellectual property; | |
• | insurance policies with respect to such party’s business and assets; | |
• | broker’s and financial advisors’ fees related to the merger; and | |
• | the ability to make additional representations necessary to obtain certain opinions of tax counsel. |
• | the capitalization of the Merger Subs and New Express Scripts; | |
• | financing, the validity of the debt commitment letter and the sufficiency of the funds to be provided under the debt commitment letters; and | |
• | the receipt of the opinions from Express Scripts’ financial advisors. |
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• | the validity of, enforceability of and compliance with, certain material contracts; and | |
• | the receipt of the opinions from Medco’s financial advisors. |
• | any changes in general United States or global economic conditions, except in the event that such changes in conditions have greater adverse materially disproportionate effect on such party and its subsidiaries, taken as a whole, relative to the adverse effect such changes have on others operating in the industries in which such party and any of its subsidiaries operate; | |
• | any changes in conditions generally affecting any of the industries in which such party and its subsidiaries operate, except in the event that such changes in conditions have a greater adverse materially disproportionate effect on such party and its subsidiaries, taken as a whole, relative to the adverse effect such changes have on others operating in such industries; | |
• | any decline in the market price or trading volume of the common stock of such party (it being understood that the facts or occurrences giving rise to or contributing to such decline may be taken into account in determining whether there has been or would be a material adverse effect); | |
• | any regulatory, legislative or political conditions or securities, credit, financial or other capital markets conditions, in each case in the United States or any foreign jurisdiction, except in the event that such conditions have a greater adverse materially disproportionate effect on such party and its subsidiaries, taken as a whole, relative to the adverse effect such changes have on others operating in the industries in which such party and any of its subsidiaries operate; | |
• | any failure, in and of itself, by such party to meet any internal or published projections, forecasts, estimates or predictions in respect of revenues, earnings or other financial or operating metrics for any period (it being understood that the facts or occurrences giving rise to or contributing to such failure may be taken into account in determining whether there has been or would be a material adverse effect); | |
• | the execution and delivery of the merger agreement or the public announcement or pendency of the mergers or any of the other transactions contemplated by the merger agreement, including the impact thereof on the relationships, contractual or otherwise, of such party or any of its subsidiaries with customers, suppliers or partners; | |
• | any change in applicable law, regulation or U.S. GAAP (or authoritative interpretations thereof); | |
• | any geopolitical conditions, the outbreak or escalation of hostilities, any acts of war, sabotage or terrorism, or any escalation or worsening of any such acts of war, sabotage or terrorism threatened or underway as of the date of the merger agreement, except in the event that such conditions or events have a greater adverse materially disproportionate effect on such and its subsidiaries, taken as a whole, relative to the adverse effect such changes have on others operating in the industries in which such party and any of its subsidiaries operate; or | |
• | any action required to be taken pursuant to or in accordance with the merger agreement or taken at the request of the other party. |
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• | conduct its business in the ordinary course consistent with past practice; and | |
• | use reasonable best efforts to (i) preserve intact its business organization, (ii) maintain in effect all necessary foreign, federal, state and local licenses, permits, consents, franchises, approvals and authorizations and (iii) maintain satisfactory relationships with its customers, lenders, suppliers and others having material business relationships with it and with governmental entities with jurisdiction over health care related matters. |
• | amend Medco’s charter or by-laws or other similar organizational documents (whether by merger, consolidation or otherwise); | |
• | issue, sell, grant, dispose of, pledge or otherwise encumber, or authorize or propose the issuance, sale, disposition or pledge or other encumbrance of (A) any additional shares of Medco’s capital stock or any securities or rights convertible into, exchangeable for, or evidencing the right to subscribe for any shares of its capital stock, or any rights, warrants, options, calls, restricted stock units, commitments or any other agreements to acquire any shares of its capital stock or any securities or rights convertible into, exchangeable for, or evidencing the right to subscribe for any shares of the capital stock of Medco or any of its subsidiaries, or (B) any other securities in respect of, in lieu of, or in substitution for, any shares of capital stock or options of Medco or any of its subsidiaries outstanding on the date of the merger agreement, other than the (i) issuance of shares of Medco common stock pursuant to the exercise of Medco stock options, vesting of Medco restricted stock units and Medco performance stock units and vesting, exercise or settlement of Medco deferred stock units under the Medco benefit plans in the ordinary course of business consistent with past practice and (ii) grant of any options or rights under the Medco benefit plans after the date of the merger agreement to purchase or acquire shares of Medco common stock in an amount not in excess of 11,300,000 shares to directors and employees, and to executive officers in the ordinary course of business consistent with past practice (in addition, if the closing date occurs on or after April 1, 2012, Medco is permitted to make (x) annual grants to directors and (y) grants pursuant to the terms of its collective bargaining agreements in effect as of the date of the merger agreement or as entered into in compliance with the terms of the merger agreement); | |
• | accelerate the vesting of any Medco stock options, Medco restricted stock units, Medco performance stock units or Medco deferred stock units, except as may be required pursuant to the terms of the merger agreement or such Medco benefit plans in effect on the date of the merger agreement; redeem, purchase or otherwise acquire, or propose to redeem, purchase or otherwise acquire, any of the outstanding shares of capital stock of Medco or any of its subsidiaries (other than pursuant to the Medco benefit plans); split, combine, subdivide or reclassify any shares of its capital stock or declare, set aside for payment or pay any dividend, or make any other actual, constructive or deemed distribution, in respect of any shares of its capital stock or otherwise make any payments to its stockholders in their capacity as such; | |
• | other than borrowings under Medco’s credit facilities and other lines of credit in existence on the date of the merger agreement and any renewals, refinancings or extensions of certain specified credit |
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facilities and lines of credit that are effected on substantially the same terms and in principal amounts not in excess of such debt refinanced in effect on the date of the merger agreement, incur any new indebtedness for borrowed money or modify in any material respect the terms of any existing indebtedness for borrowed money or assume, guarantee or endorse or otherwise become responsible for any such indebtedness of any person other than a wholly owned subsidiary, make any loans or advances to any person other than a wholly owned subsidiary or issue or sell any debt securities or calls, options, warrants, or other rights to acquire any debt securities of Medco or its subsidiaries or enter into any “keep well” or contract to maintain any financial statement condition of another person other than an affiliate or enter into any agreement having the economic effect of the foregoing, other than the incurrence of unsecured indebtedness or similar obligations less than $75 million individually and $300 million in the aggregate; |
• | redeem, repurchase, prepay, defease or cancel any indebtedness for borrowed money, other than as required in accordance with its terms or in the ordinary course of business consistent with past practice; | |
• | sell, transfer, license or otherwise dispose of by any means, or agree to do any of the foregoing with respect to, any of its material properties, assets, operations, product lines or businesses except for sales, transfers or dispositions by any means, and agreements for any of the foregoing, in the ordinary course of business consistent with past practice, pursuant to contracts in force on the date of the merger agreement, dispositions of obsolete or worthless assets or transfers among Medco and its subsidiaries; | |
• | make any acquisition of, or investment in, a business, by purchase of stock, securities or assets, merger or consolidation, or contributions to capital, in any such case outside the ordinary course of business, other than transactions among Medco and any of its subsidiaries or pursuant to contracts in effect as of the date of the merger agreement with a value or purchase price in excess of $60 million, individually, or $250 million in the aggregate, or that is or would have any reasonable possibility of preventing or delaying the closing beyond the outside date (as it may be extended) or could increase the likelihood of a failure to satisfy the condition that no order prohibiting the mergers has been issued by a governmental entity or the condition that the applicable antitrust waiting periods have expired or have been terminated and the applicable governmental approvals have been received; | |
• | enter into a new line of business directly or indirectly; | |
• | make or authorize any payment of, accrual or commitment for, capital expenditures in any 12 month period in excess of $50 million in the aggregate more than the amount previously budgeted for such period; | |
• | enter into, modify, amend, continue, cancel, renew or terminate any contract or waive, release or assign any material rights or claims thereunder, which would reasonably be expected to prevent or materially delay or impair the ability of Medco and its subsidiaries to consummate the mergers, or materially impair the ability of Medco and its subsidiaries, taken as a whole, to conduct their business in ordinary course consistent with past practice; | |
• | extend, renew or enter into any contracts containing non-compete or exclusivity provisions that would materially restrict or limit the operations of Medco and its subsidiaries, taken as a whole; provided, that, no such non-compete or exclusivity limitations will apply to the affiliates of Medco except in the case of extensions and renewals to existing contracts on the same terms; | |
• | except as required under existing plans and arrangements as of the date of the merger agreement or by applicable law, grant or increase any severance or termination pay or supplemental retirement or post-employment benefit to (or materially amend any existing arrangement with) any director or executive officer; increase benefits payable under any existing severance or termination pay policies or employment agreements; enter into or materially amend certain agreements with any director or executive officer; establish, adopt or materially amend any material bonus, profit-sharing, thrift, pension, retirement, deferred compensation, compensation, stock option, restricted stock or other benefit plan or arrangement covering any director, officer, consultant or employee; increase, grant or award any compensation, bonus or other benefits payable to any director or executive officer, except for merit- |
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based pay increases for 2012 (and, to the extent based on salary, any corresponding increases in annual bonus or long term incentive opportunities) granted in the ordinary course of business consistent with past practice and as otherwise permitted under the merger agreement; enter into any third-party contract with respect to a Medco benefit plan having a term of greater than one year and providing for payments by Medco having an estimated value of greater than $2,000,000, other than a contract that is terminable on less than 180 days notice without penalty, a financial renewal, in the ordinary course of business, of a contract existing as of the date of the merger agreement, or a contract that does not increase Medco’s annual costs by more than 6% over the cost of an analogous contract existing on the date of the merger agreement; |
• | execute, adopt, amend or terminate any collective bargaining contract, except in the ordinary course of business and except for any action which involves the implementation of a new, or new participation in, a defined benefit pension plan, retiree medical plan, multiemployer pension or welfare plan or severance plan or program; | |
• | settle, or offer or propose to settle any litigation or other legal proceeding or dispute for an amount in excess of $50 million or which would include any non-monetary relief that would materially affect Medco, its subsidiaries or its affiliates after the closing date; | |
• | except as required or permitted by U.S. GAAP or as advised by Medco’s regular public independent accountant, make any change in financial accounting methods, principles or practices materially affecting the reported consolidated assets, liabilities or results of operations of Medco; | |
• | authorize or adopt, or publicly propose, a plan or agreement of complete or partial liquidation or dissolution of Medco or any of its material subsidiaries; | |
• | outside the ordinary course of Medco’s administration of its tax matters, adopt or change any material method of tax accounting, make or change any material tax election or file any amended material tax return; | |
• | subject to Medco’s obligations to use reasonable best efforts to obtain any consent, authorization, order or approval of, or any exemption by, any governmental entity which is required, take any action (or omit to take any action) if such action (or omission), at the time of such action (or omission), would reasonably be expected to result in any of the conditions to the mergers not being satisfied; or | |
• | agree, resolve or commit to take any of the foregoing summarized actions. |
• | conduct its business in the ordinary course consistent with past practice; and | |
• | use reasonable best efforts to (i) preserve intact its present business organization, (ii) maintain in effect all necessary foreign, federal, state and local licenses, permits, consents, franchises, approvals and authorizations, (iii) keep available the services of its directors, executive officers and key employees and (iv) maintain satisfactory relationships with its customers, lenders, suppliers and others having material business relationships with it and with governmental entities with jurisdiction over health care related matters. |
• | amend Express Scripts’, New Express Scripts’ or the Merger Subs’ certificates of incorporation, by-laws or other similar organizational documents (whether by merger, consolidation or otherwise) in a |
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manner that would adversely affect the consummation of the mergers or affect the holders of Medco common stock whose shares may be converted into New Express Scripts common stock at the effective time of the Express Scripts merger in a manner different than holders of New Express Scripts common stock prior to the effective time of the Express Scripts merger; |
• | split, combine, subdivide or reclassify any shares of its capital stock or declare, set aside for payment or pay any dividend or distribution, or make any other actual, constructive or deemed distribution, in respect of any shares of its capital stock or otherwise make any payments or distributions to its stockholders in their capacity as such, other than any purchases made by any Express Scripts benefit plan or trusts for the benefit of employees of Express Scripts or its employees, in each case, in the ordinary course of business consistent with past practice; | |
• | enter into any agreement to acquire another business or effect any transaction that would have any reasonable possibility of preventing or delaying the closing beyond the outside date (as it may be extended) or could increase the likelihood of a failure to satisfy the condition that no order prohibiting the mergers has been issued by a governmental entity or the condition that the applicable antitrust waiting periods have expired or have been terminated and the applicable governmental approvals have been received; | |
• | enter into, modify, amend, continue, cancel, renew or terminate any contract or waive, release or assign any material rights or claims thereunder, which if so entered into, modified, amended, terminated, waived, released or assigned would reasonably be expected to prevent or materially delay or impair the ability of Express Scripts and its subsidiaries to consummate the mergers and other transactions contemplated by the merger agreement, or materially impair the ability of Express Scripts and its subsidiaries, taken as a whole, to conduct their business in ordinary course consistent with past practice; | |
• | except as required or permitted by U.S. GAAP or as advised by Express Scripts’ regular public independent accountant, make any change in financial accounting methods, principles or practices materially affecting the reported consolidated assets, liabilities or results of operations of Express Scripts; | |
• | authorize or adopt, or publicly propose, a plan or agreement of complete or partial liquidation or dissolution of New Express Scripts, Express Scripts or any of Express Scripts’ material subsidiaries; | |
• | outside the ordinary course of Express Scripts’ administration of its tax matters, adopt or change any material method of tax accounting, make or change any material tax election or file any amended material tax return; | |
• | subject to Express Scripts’ obligations to use reasonable best efforts to obtain any consent, authorization, order or approval of, or any exemption by, any governmental entity which is required, take any action (or omit to take any action) if such action (or omission), at the time of such action (or omission), would reasonably be expected to result in any of the conditions to the mergers not being satisfied; or | |
• | agree, resolve or commit to take any of the foregoing summarized actions. |
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• | solicit, initiate or knowingly encourage (including by way of furnishing information which has not been previously publicly disclosed), or take any other action designed to facilitate, any inquiries or the making of any proposal which constitutes, or may reasonably be expected to lead to, any takeover proposal; or | |
• | engage in any discussions or negotiations regarding any takeover proposal. |
• | furnish information with respect to Medco or Express Scripts, as applicable, to the party making the takeover proposal pursuant to a confidentiality agreement that contains provisions not less favorable to Medco or Express Scripts, as the case may be, than those contained in the confidentiality agreement between the parties (excluding certain provisions subsequently added) and that in any event does not prohibit or restrain the making of a takeover proposal and, with respect to competitively sensitive information pursuant to a customary “clean-room” arrangement; provided that (1) such confidentiality agreement may not include any provision calling for an exclusive right to negotiate with Medco or Express Scripts, as applicable, and (2) Medco advises Express Scripts or Express Scripts advises Medco, as applicable, of all nonpublic information delivered to such person substantially concurrently with its delivery to the requesting party; and | |
• | engage in discussions or negotiations with such party regarding such takeover proposal. |
• | any direct or indirect acquisition or purchase of 15% or more of the consolidated assets (including equity interests in subsidiaries) of Medco or Express Scripts and its subsidiaries, taken as a whole, or 15% or more of any class of equity securities of Medco or Express Scripts; | |
• | any tender offer or exchange offer that if consummated would result in any person beneficially owning 15% or more of any class of equity securities of Medco or Express Scripts; or | |
• | any merger, consolidation, share exchange, business combination, recapitalization, extraordinary dividend or self tender offer, liquidation, dissolution, or similar transaction involving Medco or Express Scripts or any of their subsidiaries; |
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• | the direct or indirect acquisition or purchase of 50% or more of the consolidated assets (including equity interests in subsidiaries) of Medco or Express Scripts and its subsidiaries, taken as a whole, or 50% or more of any class of equity securities or voting power of Medco or Express Scripts; | |
• | any tender offer or exchange offer that if consummated would result in any person beneficially owning 50% or more of any class of equity securities or voting power of Medco or Express Scripts; or | |
• | any merger, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or similar transaction involving Medco or Express Scripts or any of their subsidiaries; |
• | the Medco board or the Express Scripts board, as applicable, concludes in good faith, after consultation with its outside financial advisors and outside legal counsel, that such takeover proposal constitutes a superior proposal; | |
• | such board concludes in good faith, after consultation with its outside legal counsel, that the failure to make an adverse recommendation change would be inconsistent with the exercise of its fiduciary duties to its stockholders under applicable laws; | |
• | the board effecting the recommendation change, or seeking to terminate the merger agreement, provides the other party six business days’ prior written notice of its intention to take such action, which notice will include certain information with respect to such superior proposal as summarized below, as well as a copy of such takeover proposal; | |
• | during the six business days following such written notice (or such shorter period as specified below), the board effecting the recommendation change and, if requested by the other party, its representatives have negotiated in good faith with the other party regarding any revisions to the terms of the transactions contemplated by the merger agreement that are proposed by the other party in response to such superior proposal; and | |
• | at the end of the six business day period described in the foregoing bullet point, the Medco board or the Express Scripts board, as applicable. concludes in good faith, after consultation with its outside legal counsel and financial advisors (and taking into account any adjustment or modification of the terms of the merger agreement to which the other party has agreed in writing), that the takeover |
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proposal continues to be a superior proposal and that the failure to make an adverse recommendation change would be inconsistent with the exercise by such board of its fiduciary duties to its stockholders under applicable laws. |
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• | the divestiture or disposition of one mail order dispensing facility of Express Scripts, Medco or any of their respective subsidiaries, provided that it is not the Express Scripts facility located in St. Louis, Missouri; | |
• | the divestiture or disposition of the property, plant and equipment associated with specialty pharmacy dispensing or infusion facilities of Express Scripts, Medco or any of their respective subsidiaries having a net book value not in excess of $30 million in the aggregate, provided that it not include the property, plant or equipment at the Express Scripts facility located in Indianapolis, Indiana; and | |
�� | the divestiture, disposition, termination, expiration, assignment, delegation, novation or transfer of contracts of Express Scripts, Medco or their respective subsidiaries which generated, collectively, EBITDA not in excess of $115 million during the most recently available 12 calendar month period ending on the applicable date of such agreement; provided, that in the case of pharmacy benefits management customer contracts of Express Scripts, Medco or their respective subsidiaries, the aggregate annual number of adjusted prescription drug claims subject to the foregoing obligation will not exceed 35 million. |
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• | reduces the aggregate amount of the financing; or | |
• | imposes new or additional conditions or otherwise expands, amends or modifies any of the conditions to the receipt of any portion of the financing in a manner that would or would reasonably be expected to (i) delay or prevent the closing, (ii) make the funding of the financing materially less likely to occur or (iii) adversely impact the ability of Express Scripts, New Express Scripts or the Merger Subs to enforce their rights against other parties to the debt commitment letter or the definitive agreements with respect to the financing, in any material respect. |
• | maintain in effect the debt commitment letter until the mergers are consummated; | |
• | negotiate and enter into definitive agreements with respect to the financing for the mergers on the terms and conditions contained in the debt commitment letter or on other terms not materially less favorable to Express Scripts, New Express Scripts and the Merger Subs, in the aggregate; | |
• | timely satisfy all conditions to funding in the debt commitment letter that are within its control and consummate the financing for the mergers at or prior to the closing; | |
• | enforce their rights under the debt commitment letter in the event of a breach or other failure to fund the financing required to consummate the mergers on the closing date by the lenders; and | |
• | comply in all material respects with its covenants and other obligations under the debt commitment letter. |
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• | promptly providing the financing sources with all financial information regarding Medco and its subsidiaries required to be delivered pursuant to certain provisions in the debt commitment letter or other information as is reasonably requested by Express Scripts or the financing sources or their respective agents to prepare customary bank information memoranda, lender presentations, offering memoranda, private placement memoranda, registration statements and prospectuses under the Securities Act; | |
• | participating in a reasonable number of meetings, due diligence sessions, presentations, “road shows”, drafting sessions and sessions with the rating agencies; | |
• | reasonably cooperating with the financing sources’ and their respective agents’ due diligence, to the extent not unreasonably interfering with the business of Medco; | |
• | reasonably cooperating with the marketing efforts for any portion of such financing and or refinancing; | |
• | reasonably cooperating with Express Scripts’ preparation of bank information memoranda, prospectuses and similar documents, rating agency presentations, road show presentations and written offering materials, to the extent information contained therein related to the business of Medco and its subsidiaries; | |
• | using reasonable best efforts to cause its certified independent auditors to provide (A) consent to SEC filings and offering memoranda that include or incorporate Medco’s consolidated financial information and their reports thereon, auditors reports and comfort letters in customary form and (B) other documentation (including reasonable assistance in the preparation of pro forma financial statements by New Express Scriptsand/or Express Scripts) with assumptions underlying the pro forma adjustments being the responsibility of Express Scriptsand/or New Express Scripts; | |
• | subject to the actual occurrence of closing, providing customary certificates, legal opinions of internal counsel or other customary closing documents as may be reasonably requested by New Express Scriptsand/or Express Scripts or the financing sources; | |
• | subject to the actual occurrence of closing, entering into one or more credit or other agreements on terms satisfactory to Express Scripts in connection with the financing immediately prior to (but not effective until) the effective times of the mergers; | |
• | subject to the actual occurrence of closing, taking all actions reasonably necessary in connection with the pay off of existing indebtedness of Medco and its subsidiaries on the closing date and the release of related liens on the closing date; and | |
• | subject to the actual occurrence of closing, executing and delivering any pledge and security documents or other definitive financing documents reasonably requested by New Express Scriptsand/or Express Scripts or the financing sources; provided, however, that no obligation of Medco or any of its subsidiaries under any such agreement or instrument will be effective until the effective times of the mergers and, none of Medco or any of its subsidiaries will be responsible for any cost, commitment or other similar fee or incur any other liability in connection with the financing or any refinancing prior to the effective times of the mergers. |
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• | Medco has obtained the Medco stockholder approval, and Express Scripts has obtained the Express Scripts stockholder approval; | |
• | the shares of New Express Scripts common stock issuable to Medco’s stockholders and Express Scripts’ stockholders pursuant to the merger agreement have been approved for listing on the NASDAQ subject to official notice of issuance; | |
• | no order has been promulgated, entered, enforced, enacted or issued or is applicable to the mergers or other transactions contemplated by the merger agreement by any governmental entity which prohibits, restrains or makes illegal the consummation of the mergers or other transactions contemplated by the merger agreement and continues in effect; | |
• | effectiveness of the registration statement for the New Express Scripts common stock being issued in the mergers (of which this joint proxy statement/prospectus forms a part) and the absence of any stop order suspending such effectiveness; and | |
• | (i) the waiting period (and any extensions thereof) under the HSR Act applicable to the mergers has expired or been terminated, certain approvals from the Centers for Medicare & Medicaid Services and certain state insurance departments relating to Express Scripts’ and Medco’s insurance company subsidiaries have been obtained and are in effect, and (ii) all material filings with the Centers for Medicare & Medicaid Services and certain state insurance departments relating to Express Scripts’ and Medco’s insurance company subsidiaries have been made. We refer collectively to the matters addressed in the foregoing clauses (i) and (ii) as the required governmental consents. This condition shall be deemed to be satisfied, insofar as the approvals from and filings with the Centers for Medicare & Medicaid Services and certain state insurance departments are concerned, if not earlier satisfied, on the fifth business day prior to the outside date, without giving effect to any extension thereof. |
• | the representations and warranties of Medco set forth in the merger agreement with respect to (i) the due organization of Medco and its subsidiaries (but, with respect to Medco’s subsidiaries, solely with respect to those subsidiaries which are material to the business of Medco and its subsidiaries, taken as a whole), (ii) capitalization of Medco and its subsidiaries (except to the extent that any inaccuracies would be immaterial, in the aggregate), (iii) due authorization, (iv) the absence of any conflicts with Medco’s or its subsidiaries’ organizational documents, (v) the absence of a Medco material adverse effect since December 25, 2010 and (vi) the opinions of Medco’s financial advisors, in each case, are true and correct in all respects as of the date of the merger agreement and as of the closing date as though made on or as of such date (or, in the case of representations and warranties that address matters only as of a particular date, as of such date); |
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• | all other representations and warranties of Medco set forth in the merger agreement are true and correct in all respects (without giving effect to any materiality or Medco material adverse effect qualifier in such representation or warranty), as of the date of the merger agreement and as of the closing date (or, in the case of representations and warranties that address matters only as of a particular date, as of such date), except to the extent that breaches of such representations or warranties, individually or in the aggregate, have not had, and would not reasonably be expected to have a Medco material adverse effect; | |
• | Express Scripts, New Express Scripts and the Merger Subs have received a certificate validly executed and signed on behalf of Medco by its chief executive officer and chief financial officer certifying that the two conditions above have been satisfied; | |
• | Medco has performed or complied with all of the obligations, agreements and covenants (other than certain notification obligations) required by the merger agreement to be performed or complied with by it in all material respects and Express Scripts, New Express Scripts and the Merger Subs have received a certificate validly executed and signed on behalf of Medco by its chief executive officer and chief financial officer certifying that this condition has been satisfied; | |
• | New Express Scripts has received the opinion of Skadden, in form and substance reasonably satisfactory to New Express Scripts, dated as of the closing date to the effect that the receipt by the holders of the shares of Express Scripts common stock of New Express Scripts common stock in exchange for Express Scripts common stock pursuant to the Express Scripts merger, taken together with the receipt by the holders of the shares of Medco common stock of the New Express Scripts common stock in exchange for Medco common stock pursuant to the Medco merger, will qualify for federal income tax purposes as an “exchange” within the meaning of Section 351 of the Code; and | |
• | there is (i) no legal proceeding pending in a United States District Court commenced by a governmental entity seeking an order that would prohibit, restrain or make illegal the consummation of the mergers or the other transactions contemplated by the merger agreement under the U.S. antitrust laws, (ii) no motion of a governmental entity pending in a United States Court of Appeals, seeking on an expedited basis, appeal, review, rehearing or reconsideration, which we refer to as an expedited appeal, of the matters set forth in clause (i) that has been granted by such United States Court of Appeals, (iii) no request or petition for an expedited appeal that has been made or filed by any governmental entity and (iv) all deadlines for the making or filing of any such request or petition that may be specified by any statute, regulation, court order or guideline have passed without any request or petition for such expedited appeal having been made or filed by such governmental entity, except, in the case of clauses (iii) and (iv), to the extent any such request or petition has been subsequently denied; provided, that, from and after the fifth business day preceding the outside date (as it may be extended), clauses (iii) and (iv) cease to be conditions for any purpose. |
• | the representations and warranties of Express Scripts set forth in the merger agreement with respect to (i) the due organization of Express Scripts, New Express Scripts and the Merger Subs, (ii) capitalization of Express Scripts and its subsidiaries (except to the extent that any inaccuracies would be immaterial, in the aggregate), (iii) due authorization, (iv) the absence of any conflicts with Express Scripts’ or its subsidiaries’ organizational documents, (v) the absence of an Express Scripts material adverse effect since December 25, 2010 and (vi) the opinions of Express Scripts’ financial advisors, in each case, are true and correct in all respects as of the date of the merger agreement and as of the closing date as though made on or as of such date (or, in the case of representations and warranties that address matters only as of a particular date, as of such date); |
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• | all other representations and warranties of Express Scripts, New Express Scripts and the Merger Subs set forth in the merger agreement are true and correct in all respects (without giving effect to any materiality or Express Scripts material adverse effect qualifier in such representation or warranty), as of the date of the merger agreement and as of the closing date as though made on or as of such date (or, in the case of representations and warranties that address matters only as of a particular date, as of such date), except to the extent that breaches of such representations or warranties, individually or in the aggregate, have not had, and would not reasonably be expected to have an Express Scripts material adverse effect; | |
• | Medco has received a certificate validly executed and signed on behalf of Express Scripts by its chief executive officer and chief financial officer certifying that the two conditions above have been satisfied; | |
• | Express Scripts, New Express Scripts and the Merger Subs have performed or complied with, as applicable, all of the obligations, agreements and covenants (other than certain notification obligations) required by the merger agreement to be performed or complied with by each of them in all material respects and Medco has received a certificate validly executed and signed on behalf of Express Scripts by its chief executive officer and chief financial officer certifying that this condition has been satisfied; and | |
• | Medco has received the opinion of Sullivan & Cromwell, counsel to Medco, in form and substance reasonably satisfactory to Medco, dated as of the closing date to the effect that the receipt by the holders of the shares of Medco common stock of New Express Scripts common stock in exchange for Medco common stock pursuant to the Medco merger, taken together with the receipt by the holders of the shares of Express Scripts common stock of New Express Scripts common stock in exchange for Express Scripts common stock pursuant to the Express Scripts merger, will qualify for federal income tax purposes as an “exchange” within the meaning of Section 351 of the Code. |
• | by the mutual written consent of Express Scripts and Medco; | |
• | by either of Medco or Express Scripts: |
• | if any governmental entity of competent jurisdiction has issued an order permanently restraining, enjoining or otherwise prohibiting the mergers and the other transactions contemplated by the merger agreement and such order has become final and non-appealable. | |
• | if the mergers and the other transactions contemplated by the merger agreement have not been consummated by April 20, 2012; provided, however, that if the conditions relating to (i) the absence of any order of a governmental entity prohibiting the mergers, (ii) obtaining the required governmental consents and (iii) the absence of legal proceedings seeking to prohibit the mergers have not been satisfied (or deemed satisfied) or waived by all parties entitled to the benefit of such condition by the fifth business day prior to April 20, 2012, either Express Scripts or Medco may, by written notice delivered to the other party, extend the outside date from time to time to a date not later than July 20, 2012, and if such conditions have not been satisfied (or deemed satisfied) or waived by all parties entitled to the benefit of such condition by the fifth business day prior to July 20, 2012, either Express Scripts or Medco may, by written notice delivered to the other, extend the outside date from time to time to a date not later than October 22, 2012. This right of termination is not available to a party if its action or failure to act constitutes a material breach or violation of its covenants, agreements or other obligations under the merger agreement and such material breach or violation is the principal cause of or directly resulted in (x) the failure to satisfy the conditions to the obligations of the terminating party to consummate the merger prior to the outside date (as it may be extended) or (y) the failure of the closing to occur by the outside date (as it may be extended). |
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• | if the Express Scripts stockholder approval has not been obtained upon a vote taken at the duly convened Express Scripts special meeting or at any adjournment or postponement of such meeting. | |
• | if the Medco stockholder approval has not been obtained upon a vote taken at the duly convened Medco special meeting or at any adjournment or postponement of such meeting. |
• | By Medco: |
• | if (i) the Express Scripts board or any committee thereof makes, prior to the Express Scripts special meeting, an adverse recommendation change, (ii) the Express Scripts board or any committee fails to include the Express Scripts recommendation in this joint proxy statement/prospectus, (iii) a tender offer or exchange offer is commenced and the Express Scripts board fails to recommend against acceptance of such tender offer or exchange offer by Express Scripts stockholders (including by taking any position contemplated byRule 14e-2 of the Exchange Act other than recommending rejection of such tender offer or exchange offer) within 10 business days of the commencement of such tender offer or exchange offer, (iv) the Express Scripts board or any committee refuses to affirm publicly the Express Scripts recommendation following any reasonable written request by Medco to provide such reaffirmation (including in the event of a takeover proposal (other than pursuant to a commenced tender offer or exchange offer) having been publicly disclosed) prior to the earlier of (x) 10 calendar days following such request and (y) five business days prior to the Express Scripts special meeting (provided, in the case of clause (y), that if such request is made less than eight business days prior to such meeting, then, notwithstanding the foregoing, the Express Scripts board or any committee shall have four business days to respond to such request for reaffirmation); provided, that a request for affirmation may only be made if there are events or developments that in the reasonable judgment of Medco call into question whether the Express Scripts stockholder approval will be obtained or (v) the Express Scripts board formally resolves to take or publicly announces an intention to take any of the foregoing summarized actions; provided, that the right to terminate pursuant to clauses (i) through (v) which arises following the commencement or announcement of a takeover proposal will expire if not exercised prior to the 10th business day following the date on which the right to terminate under these circumstances first arose; provided, further, that the foregoing proviso does not apply for purposes of the termination fee and expense reimbursement provisions of the merger agreement; | |
• | prior to the receipt of the Express Scripts stockholder approval, if Express Scripts is in willful breach of its obligation to make and not withdraw the Express Scripts recommendation or its non-solicitation obligations; | |
• | if Express Scripts breaches or fails to perform any of its representations, warranties, covenants or agreements set forth in the merger agreement, and such breach or failure to perform (i) would give rise to the failure of a closing condition regarding the accuracy of Express Scripts’ representations and warranties or Express Scripts’ compliance with its covenants and agreements and (ii) is incapable of being cured by Express Scripts by the outside date (as it may be extended); or | |
• | prior to the receipt of the Medco stockholder approval, so that Medco may enter into a definitive agreement providing for a superior proposal. |
• | By Express Scripts: |
• | if (i) the Medco board or any committee thereof makes, prior to the Medco special meeting, an adverse recommendation change, (ii) the Medco board or any committee fails to include the Medco recommendation in this joint proxy statement/prospectus, (iii) a tender offer or exchange offer is commenced and the Medco board fails to recommend against acceptance of such tender offer or exchange offer by Medco stockholders (including, for these purposes, by taking any position contemplated byRule 14e-2 of the Exchange Act other than recommending rejection of such tender offer or exchange offer) within 10 business days of the commencement of such tender offer or exchange offer, (iv) the Medco board or any committee refuses to affirm publicly the Medco recommendation following any reasonable written request by Express Scripts to provide such |
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reaffirmation (including in the event of a takeover proposal (other than pursuant to a commenced tender offer or exchange offer) having been publicly disclosed) prior to the earlier of (x) 10 calendar days following such request and (y) five business days prior to the Medco special meeting (provided, in the case of clause (y), that if such request is made less than eight business days prior to such meeting, then, notwithstanding the foregoing, the Medco board or any committee shall have four business days to respond to such request for reaffirmation); provided, that a request for affirmation may only be made if there are events or developments that in the reasonable judgment of Medco call into question whether the Express Scripts stockholder approval will be obtained or (v) the Medco board formally resolves to take or publicly announces an intention to take any of the foregoing summarized actions; provided, that the right to terminate the merger agreement pursuant to clauses (i) through (v) which arises following the commencement or announcement of a takeover proposal will expire if not exercised prior to the 10th business day following the date on which a right to terminate under these circumstances first arose; provided, further, that the foregoing proviso does not apply for purposes of the termination fee and expense reimbursement provisions of the merger agreement; |
• | prior to the receipt of the Medco stockholder approval, if Medco is in willful breach of its obligation to make and not withdraw the Medco recommendation or its non-solicitation obligations; | |
• | if Medco breaches or fails to perform any of its representations, warranties, covenants or agreements set forth in the merger agreement, and such breach or failure to perform (i) would give rise to the failure of a closing condition regarding the accuracy of Medco’s representations and warranties or Medco’s compliance with its covenants and agreements and (ii) is incapable of being cured by Medco by the outside date (as it may be extended); or | |
• | prior to the receipt of the Express Scripts stockholder approval, so that Express Scripts may enter into a definitive agreement providing for a superior proposal. |
• | no termination will affect the obligations of the parties contained in the confidentiality agreement; | |
• | no termination will relieve any party from liability for any fraud, willful breach of a representation or warranty or willful breach of any covenant or other agreement contained in the merger agreement; and | |
• | certain other provisions of the merger agreement, including (i) provisions with respect to the ability of Express Scripts and Medco to pursue damages against the other party for a willful breach of the merger agreement and (ii) provisions with respect to the allocation of fees and expenses, including, if applicable, the termination fees and expense reimbursements described below, will survive termination. |
• | the parties have agreed to share equally (i) the filing fee under the HSR Act and any fees for similar filings under foreign laws, (ii) the expenses in connection with printing and mailing this joint proxy statement/prospectus, (iii) all SEC filing fees paid or payable relating to the transactions contemplated by the merger agreement; | |
• | in the event that the merger agreement is terminated due to a failure to obtain the Express Scripts stockholder approval at the Express Scripts special meeting, or any adjournment or postponement thereof, Express Scripts will pay to Medco, by wire transfer of same day funds on the date of such termination, all documented, out of pocket expenses of Medco (including financing expenses) not to exceed $225 million; and |
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• | in the event that the merger agreement is terminated due to a failure to obtain the Medco stockholder approval at the Medco special meeting, or any adjournment or postponement thereof, Medco will pay to Express Scripts, by wire transfer of same day funds on the date of such termination, all documented, out of pocket expenses of Express Scripts (including financing expenses) not to exceed $225 million. |
• | the merger agreement is terminated by Express Scripts, or at the time of termination could have been terminated by Express Scripts for: (i) an adverse recommendation change made by the Medco board or any committee thereof prior to the Medco special meeting, (ii) a failure by Medco to include the Medco recommendation in this joint proxy statement/prospectus, (iii) a failure by the Medco board to recommend against acceptance by its stockholders of a tender offer or exchange offer, (iv) a failure by the Medco board to affirm the Medco recommendation upon any reasonable written request by Express Scripts or (v) or a formal resolution by the Medco board to take or a public announcement of an intention to take any of the foregoing summarized actions; | |
• | the merger agreement is terminated by Express Scripts, or at the time of termination could have been terminated by Express Scripts, for Medco’s willful breach of its obligation to make and not withdraw the Medco recommendation or its non-solicitation obligations; or | |
• | the merger agreement is terminated by Medco prior to receipt of the Medco stockholder approval, so that Medco may enter into a definitive agreement providing for a superior proposal. |
• | a failure to consummate the mergers prior to the outside date (as it may be extended) and a takeover proposal (substituting “40%” for “15%” in the definition of “takeover proposal”) for Medco is publicly disclosed prior to the date of termination and the vote seeking the Medco stockholder approval had not been taken prior to the seventh business day prior to the outside date (as it may be extended); or | |
• | a failure to obtain the Medco stockholder approval at the Medco special meeting and a takeover proposal (substituting “40%” for “15%” in the definition of “takeover proposal”) is publicly disclosed prior to the date of the Medco special meeting. |
• | the merger agreement is terminated by Medco, or at the time of termination could have been terminated by Medco for: (i) an adverse recommendation change made by the Express Scripts board or any committee thereof prior to the Express Scripts special meeting, (ii) a failure by Express Scripts to |
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include the Express Scripts recommendation in this joint proxy statement/prospectus, (iii) a failure by the Express Scripts board to recommend against acceptance by its stockholders of a tender offer or exchange offer, (iv) a failure by the Express Scripts board to affirm the Express Scripts recommendation upon a reasonable request by Medco or (v) or a formal resolution by the Express Scripts board to take or a public announcement of an intention to take any of the foregoing summarized actions; |
• | the merger agreement is terminated by Medco, or at the time of termination could have been terminated by Medco for Express Scripts’ willful breach of its obligation to make and not withdraw the Express Scripts recommendation or its non-solicitation obligations; or | |
• | the merger agreement is terminated by Express Scripts prior to receipt of the Express Scripts stockholder approval, so that Express Scripts may enter into a definitive agreement providing for a superior proposal. |
• | a failure to consummate the mergers prior to the outside date (as it may be extended) and a takeover proposal (substituting “40%” for “15%” in the definition of “takeover proposal”) for Express Scripts is publicly disclosed prior to the date of termination and the vote seeking the Express Scripts stockholder approval had not been taken prior to the seventh business day prior to the outside date (as it may be extended); or | |
• | a failure to obtain the Express Scripts stockholder approval at the Express Scripts special meeting and a takeover proposal (substituting “40%” for “15%” in the definition of “takeover proposal”) is publicly disclosed prior to the date of the Express Scripts special meeting. |
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• | extend the time for the performance of any of the obligations or other acts of the other parties; | |
• | waive any inaccuracies in the representations and warranties contained in the merger agreement or in any document delivered pursuant to the merger agreement; or | |
• | subject to the provisos in the amendment provisions described above, waive compliance with any of the agreements or conditions contained in the merger agreement. |
• | for the provisions of the merger agreement relating to indemnification and exculpation from liability for the directors and officers of Medco, Express Scripts and their subsidiaries, and each of their employees who serves as a fiduciary of a Medco benefit plan or Express Scripts benefit plan; | |
• | for the financing sources, with respect to the provisions of the merger agreement which make the termination fee the sole and exclusive remedy of the parties and the jurisdiction provisions and the waiver of jury trial provisions; and |
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• | that following the effective time of the Medco merger, the provisions of the merger agreement relating to the payment of the Medco merger consideration are enforceable by stockholders of Medco to the extent necessary to receive the Medco merger consideration to which such holder is entitled. |
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Golden Parachute Compensation | ||||||||||||||||||||||||||||
Tax | ||||||||||||||||||||||||||||
Perquisites/ | Reimbursements | |||||||||||||||||||||||||||
Name | Cash ($)(1) | Equity ($)(2) | Pension/NQDC ($) | Benefits ($)(3) | ($) | Other ($) | Total ($) | |||||||||||||||||||||
David B. Snow, Jr. | $ | [ ] | $ | [ ] | — | $ | [ ] | — | — | $ | [ ] | |||||||||||||||||
Kenneth O. Klepper | $ | [ ] | $ | [ ] | — | $ | [ ] | — | — | $ | [ ] | |||||||||||||||||
Richard J. Rubino | $ | [ ] | $ | [ ] | — | $ | [ ] | — | — | $ | [ ] | |||||||||||||||||
Thomas M. Moriarty | $ | [ ] | $ | [ ] | — | $ | [ ] | — | — | $ | [ ] | |||||||||||||||||
Timothy C. Wentworth | $ | [ ] | $ | [ ] | — | $ | [ ] | — | — | $ | [ ] |
(1) | These amounts represent the double-trigger cash severance amounts, which for Mr. Snow are payable in a lump sum and which for Messrs. Klepper, Rubino, Moriarty and Wentworth are payable in installments and include a pro rata bonus for the year of employment termination. | |
(2) | These amounts represent the double-trigger equity vesting as follows: |
Aggregate Value of | ||||||||||||
“in-the-Money” | Aggregate Value of | |||||||||||
Stock Options | RSUs that would | |||||||||||
Name | that would Vest | Vest | Total | |||||||||
David B. Snow, Jr. | $ | [ ] | $ | [ ] | $ | [ ] | ||||||
Kenneth O. Klepper | $ | [ ] | $ | [ ] | $ | [ ] | ||||||
Richard J. Rubino | $ | [ ] | $ | [ ] | $ | [ ] | ||||||
Thomas M. Moriarty | $ | [ ] | $ | [ ] | $ | [ ] | ||||||
Timothy C. Wentworth | $ | [ ] | $ | [ ] | $ | [ ] |
(3) | These amounts represent the value of double-trigger continued health and welfare benefits. |
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• | limitations on non-guarantor subsidiary indebtedness; | |
• | limitations on liens; | |
• | in the event Express Scripts fails to maintain investment grade ratings, limitations on restricted junior payments; | |
• | limitations on fundamental changes; | |
• | limitations on changing the fiscal year of Express Scripts; | |
• | limitations on sale-leaseback transactions; | |
• | limitations on changes in nature of business; and | |
• | limitations on transactions with affiliates. |
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• | limitations on non-guarantor subsidiary indebtedness; | |
• | limitations on liens; | |
• | limitations on fundamental changes; | |
• | limitations on changing the fiscal year of Express Scripts; |
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• | limitations on sale-leaseback transactions; | |
• | limitations on changes in nature of business; and | |
• | limitations on transactions with affiliates. |
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• | Each of Medco’s directors and named executive officers; | |
• | Each of Medco’s directors and executive officers as a group; and | |
• | Each person or group of affiliated persons whom Medco knows to beneficially own more than five percent of the outstanding shares of Medco common stock. |
Percent of | ||||||||||
Shares of | ||||||||||
Amount and Nature of | Common Stock | |||||||||
Name | Position Held | Beneficial Ownership | Outstanding | |||||||
Howard W. Barker, Jr.(2) | Director | 68,300 | * | |||||||
John L. Cassis(3) | Director | 74,900 | * | |||||||
Michael Goldstein(4) | Director | 68,506 | * | |||||||
Charles M. Lillis(5) | Director | 105,300 | * | |||||||
Myrtle S. Potter(6) | Director | 28,300 | * | |||||||
William L. Roper(7) | Director | 28,365 | * | |||||||
David D. Stevens(8) | Director | 36,600 | * | |||||||
Blenda J. Wilson(9) | Director | 69,050 | * | |||||||
David B. Snow, Jr.(10) | Chairman and Chief Executive Officer | 2,450,854 | * | |||||||
Kenneth O. Klepper(11) | President and Chief Operating Officer | 561,863 | * | |||||||
Richard J. Rubino(12) | Senior Vice President, Finance and Chief Financial Officer | 206,936 | * | |||||||
Thomas M. Moriarty(13) | General Counsel, Secretary and President, Global Pharmaceutical Strategies & Solutions | 173,851 | * | |||||||
Timothy C. Wentworth(14) | Group President, Employer & Key Accounts | 174,444 | * | |||||||
All Directors and Executive Officers as a group | 5,802,509 | 1.5 | % |
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(*) | Represents less than 1% of outstanding shares of Medco common stock. |
(1) | The number of shares of Medco common stock outstanding as of September 9, 2011 was 386,844,004. | |
(2) | Mr. Barker’s beneficially owned stock includes 30,300 restricted stock units fully vested but deferred until retirement and 38,000 options that are fully vested and exercisable. | |
(3) | Mr. Cassis’ beneficially owned stock includes 28,900 restricted stock units fully vested but deferred until retirement and 46,000 options that are fully vested and exercisable. | |
(4) | Mr. Goldstein’s beneficially owned stock includes 10,706 shares owned outright, 27,800 restricted stock units fully vested but deferred until retirement and 30,000 options that are fully vested and exercisable. | |
(5) | Mr. Lillis’ beneficially owned stock includes 3,500 shares owned outright, 23,800 restricted stock units fully vested but deferred until retirement and 78,000 options that are fully vested and exercisable. | |
(6) | Ms. Potter’s beneficially owned stock includes 4,100 restricted stock units fully vested but deferred until retirement and 24,200 options that are fully vested and exercisable. | |
(7) | Dr. Roper’s beneficially owned stock includes 65 shares owned outright, 4,100 restricted stock units fully vested but deferred until retirement and 24,200 options that are fully vested and exercisable. | |
(8) | Mr. Stevens’ beneficially owned stock includes 1,700 shares owned outright, 4,900 restricted stock units vested but deferred until retirement and 30,000 options that are currently exercisable. | |
(9) | Dr. Wilson’s beneficially owned stock includes 2,500 shares owned outright, 27,800 restricted stock units fully vested but deferred until retirement and 38,750 options that are fully vested and exercisable. | |
(10) | Mr. Snow’s beneficially owned stock includes 220,754 shares owned individually and in a trust, 102,044 fully vested restricted stock units that Mr. Snow has elected to defer receipt of until six months after his termination of employment, and 2,128,056 options that are currently exercisable. | |
(11) | Mr. Klepper’s beneficially owned stock includes 81,447 shares owned outright, 50,000 fully vested restricted stock units that Mr. Klepper has elected to defer receipt of until six months after his termination of employment, and 430,416 options that are currently exercisable. | |
(12) | Mr. Rubino’s beneficially owned stock includes 30,949 shares owned outright, 9,582 shares held in Medco’s 401(k) Plan, and 166,405 options that are currently exercisable. | |
(13) | Mr. Moriarty’s beneficially owned stock includes 14,224 shares owned outright, 7,988 fully vested restricted stock units that Mr. Moriarty has elected to defer receipt of until February 25, 2016, 4,509 shares held in Medco’s 401(k) Plan, and 147,130 options that are currently exercisable. | |
(14) | Mr. Wentworth’s beneficially owned stock includes 15,340 shares owned outright, 35,400 vested restricted stock units that Mr. Wentworth has elected to defer receipt of until six months after his termination of employment, 6,671 shares held in Medco’s 401(k) Plan, and 117,033 options that are currently exercisable. |
Percent of Common | ||||||||
Number of Shares | Stock | |||||||
Name and Address | Beneficially Owned | Outstanding(1) | ||||||
BlackRock, Inc.(2) | 26,468,496 | 6.8 | % | |||||
40 East 52nd Street New York, NY 10022 |
(1) | The number of shares of Medco common stock outstanding as of September 9, 2011 was 386,844,004. | |
(2) | Based on its report on Schedule 13G, as filed February 7, 2011. |
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• | each person known by Express Scripts to own beneficially more than five percent of the outstanding shares of Express Scripts common stock; | |
• | each of Express Scripts’ directors and named executive officers; and | |
• | all of Express Scripts’ current executive officers and directors as a group. |
Shares of | ||||||||||||||||||||
Common | ||||||||||||||||||||
Stock | Stock | |||||||||||||||||||
Beneficially | Options | Shares | ||||||||||||||||||
Owned | Exercisable | Issuable | Other Stock | Total Shares | ||||||||||||||||
Directly or | within 60 | within 60 | -Based | Beneficially | ||||||||||||||||
Name | Indirectly | days | days(1) | Holdings(2) | Owned(3) | |||||||||||||||
George Paz | 1,932,689 | 0 | 0 | 66,370 | 1,999,059 | |||||||||||||||
Gary G. Benanav | 85,980 | 0 | 0 | 0 | 85,980 | |||||||||||||||
Maura C. Breen | 51,240 | 0 | 0 | 0 | 51,240 | |||||||||||||||
Nicholas J. LaHowchic | 71,486 | 0 | 0 | 0 | 71,486 | |||||||||||||||
Thomas P. Mac Mahon | 75,980 | 0 | 0 | 0 | 75,980 | |||||||||||||||
Frank Mergenthaler | 16,656 | 0 | 0 | 0 | 16,656 | |||||||||||||||
Woodrow A. Myers | 34,802 | 0 | 0 | 0 | 34,802 | |||||||||||||||
John O. Parker, Jr. | 69,980 | 0 | 0 | 0 | 69,980 | |||||||||||||||
Samuel K. Skinner | 85,980 | 0 | 0 | 0 | 85,980 | |||||||||||||||
Seymour Sternberg | 77,672 | 0 | 0 | 0 | 77,672 | |||||||||||||||
Jeffrey Hall | 298,953 | 0 | 0 | 0 | 298,953 | |||||||||||||||
Keith Ebling | 366,905 | 7,502 | 1,148 | 0 | 375,555 | |||||||||||||||
Edward Ignaczak | 152,041 | 0 | 0 | 3,457 | 155,498 | |||||||||||||||
Patrick McNamee | 335,232 | 0 | 0 | 1,193 | 336,425 | |||||||||||||||
Directors and Executive Officers as a Group (15 persons) | 3,677,764 | 7,502 | 1,148 | 72,318 | 3,758,732 |
(1) | Includes shares that may be acquired within 60 days of September 12, 2011 upon the lapse of restrictions on restricted stock units (“RSUs”). | |
(2) | Includes phantom shares representing fully-vested investments in the Company Stock fund under the EDCP, as to which no voting or investment power exists. | |
(3) | The total beneficial ownership for any individual, and total for the directors and executive officers as a group is less than 1%, based on 488,205,000 shares of common stock issued and outstanding on June 30, 2011. |
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Percent of | ||||||||
Number of | Common Stock | |||||||
Name and Mailing Address | Shares | Outstanding | ||||||
New York Life Insurance Company; NYLIFE, LLC(1) | 33,291,200 | 6.8 | % | |||||
51 Madison Avenue, New York, NY 10010 | ||||||||
T. Rowe Price Associates, Inc.(2) | 29,785,336 | 6.1 | % | |||||
100 E. Pratt Street, Baltimore, MD 21202 |
(1) | The information with respect to the beneficial ownership of these shares is based on an amendment to Schedule 13G filed February 24, 2011. Such filing reports that the beneficial owner, New York Life Insurance Company, or “New York Life,” shares voting and dispositive power with respect to all of the shares reported, and that NYLIFE LLC, or “NYLife,” a subsidiary of New York Life, owns 33,291,200 of such shares. In August 2001, NYLife entered into a ten-year forward sale contract with respect to up to 36,000,000 of the shares of common stock, and, in June 2007, entered into a forward sale contract with respect to up to 5,600,000 of such 36,000,000 shares of common stock, which will settle concurrently with the 2001 contract. The aggregate number of shares deliverable under such forward sale contracts is limited to 36,000,000. Absent the occurrence of certain accelerating events, New York Life or NYLife, as applicable, retains the right to vote the shares subject to such forward sale contracts, but is subject to restrictions on the transfer of such shares. | |
(2) | Information is based on Schedule 13G filed with the SEC on February 9, 2011 by T. Rowe Price Associates, Inc. (Price Associates). The filing indicates that as of December 31, 2010, Price Associates had sole voting power for 8,890,964 shares, and sole dispositive power for 29,785,336 shares. |
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Express Scripts | Medco | New Express Scripts | ||||
Authorized Capital | The aggregate number of shares which Express Scripts has the authority to issue is (i) 1,000,000,000 shares of Express Scripts common stock, par value $0.01 per share, and (ii) 5,000,000 shares of Express Scripts preferred stock, par value $0.01 per share. The board of directors is authorized to issue the preferred stock in one or more series, to fix the number of shares of any such series, and to fix the designation of any such series as well as the powers, preferences, and rights and the qualifications, limitations, or restrictions of the preferred stock. As of the date of this joint proxy statement/prospectus, no shares of Express Scripts preferred stock are outstanding. | The aggregate number of shares which Medco has the authority to issue (i) 2,000,000,000 shares of Medco common stock, par value of $0.01 and (ii) 10,000,000 shares of Medco preferred stock, par value $0.01 per share issued in one or more series from time to time. The board of directors is expressly authorized to fix by resolution the designations and the powers, preferences and rights, and the qualifications, limitations and restrictions of the shares of each series of preferred stock and issue preferred stock in one or more series from time to time. As of the date of this joint proxy statement/prospectus, no shares of preferred stock are outstanding. | The aggregate number of shares which New Express Scripts has the authority to issue is (i) 2,985,000,000 shares of New Express Scripts common stock, par value $0.01 per share, and (ii) 15,000,000 shares of New Express Scripts preferred stock, par value $0.01 per share. The board of directors is authorized to issue the preferred stock in one or more series, to fix the number of shares of any such series, and to fix the designation of any such series as well as the powers, preferences, and rights and the qualifications, limitations, or restrictions of the preferred stock. As of the date of this joint proxy statement/prospectus, no shares of New Express Scripts preferred stock are outstanding. | |||
Voting Rights | Except as otherwise provided by applicable law or in the certificate of incorporation or in a preferred stock designation, the holders of Express Scripts common stock will have the exclusive right to vote for the election of directors and for all other purposes. | The bylaws of Medco provide that, unless otherwise provided in the certificate of incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by such stockholder which has voting power upon the matter in question. | Same as for Express Scripts | |||
Number and Election of Directors | The Express Scripts board must consist of no less than seven and no more than fifteen directors. The number of directors is determined from time to time by resolution of a majority of the entire board of | The Medco board must consist of no less than three and no more than fifteen directors. The authorized number of directors may be fixed from time to time by resolutions duly adopted by the board of directors. | Same as for Express Scripts | |||
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Express Scripts | Medco | New Express Scripts | ||||
directors then in office, subject to the rights of the holders of any series of preferred stock. No decrease in the number of directors will shorten the term of any incumbent director. At each annual meeting of stockholders, directors are elected to hold office until the next annual meeting and until the election and qualification of their respective successors. Unless the election is contested, each director is elected by the affirmative vote of a majority of the votes cast for or against the director at any meeting for the election of directors at which a quorum is present. In a contested election, directors are elected by a plurality of the votes cast at a meeting of stockholders by the holders of shares entitled to vote in the election. An election is considered contested if there are more nominees for election than positions on the board of directors to be filled by election at the meeting, as determined by the secretary of Express Scripts (i) following the close of the applicable notice of nomination period under the bylaws, if any, or (ii) if later, reasonably promptly following the determination by any court or other tribunal of competent jurisdiction that one or more notice(s) of nomination were timely filed in | No decrease in the number of directors will shorten the term of any incumbent director. Each director is elected by the vote of the majority of the votes cast with respect to that director’s election at any meeting for the election of directors at which a quorum is present, provided that directors are elected by a plurality of the votes cast at any meeting of stockholders at which a quorum is present for which (A) the secretary of Medco receives a notice that a stockholder intends to nominate a person (or persons) for election to the board of directors and (B) such proposed nomination has not been withdrawn by such stockholder prior to the fifth calendar day prior to the date that Medco first mails its notice of meeting for such meeting to stockholders. If directors are to be elected by a plurality of the votes cast, stockholders are not permitted to vote against a nominee. |
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accordance with the bylaws. | ||||||
Vacancies on the Board of Directors and Removal of Directors | The bylaws of Express Scripts provide that, subject to the rights of any holders of any series of preferred stock, if any, newly created directorships resulting from an increase in the number of directors and vacancies occurring in the board of directors for any reason may be filled for the unexpired term by a vote of a majority of the directors then in office, even if less than a quorum exists. Directors may be removed, either with or without cause, by vote of the holders of a majority of the stock having voting power and entitled to vote thereon. | The certificate of incorporation provides that, subject to the rights, if any, of the holders of preferred stock, newly created directorships resulting from any increase in the number of directors, and any vacancies on the board of directors, are filled by the affirmative vote of a majority of the directors then in office. A director elected in accordance with the preceding sentence will hold office for the remainder of the one-year term and until such director’s successor shall have been duly elected and qualified, or until his or her death, resignation, retirement, disqualification, or removal. The bylaws of Medco provide that, subject to the rights, if any, of the holders of preferred stock, newly created directorships resulting from any increase in the number of directors, and any vacancies on the board of directors, will be filled by the affirmative vote of a majority of the directors then in office, even if less than a quorum, or by a sole remaining director in office. Any director elected in accordance with the preceding sentence will hold office for the remainder of the one-year term, or if applicable, the remainder of the full term of the | Same as for Express Scripts |
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class of directors, in which the new directorship was created or the vacancy occurred, and until such director’s successor shall have been duly elected and qualified, or until his or her death, resignation, retirement, disqualification, or removal. | ||||||
Amendments to Certificates of Incorporation | Under Section 242 of the DGCL, unless the certificate of incorporation requires a greater vote, a proposed amendment to the certificate of incorporation must be approved by the affirmative vote of a majority of the voting power of the outstanding stock entitled to vote thereon and a majority of the outstanding stock of each class entitled to vote as a class. | Same as for Express Scripts | Same as for Express Scripts | |||
Amendments to Bylaws | The Express Scripts bylaws may be amended, repealed or adopted by a majority of the entire board of directors. The bylaws may also be amended, repealed or adopted by the vote of the holders of a majority of the voting power of the stock issued and outstanding and entitled to vote thereon. | The Medco certificate of incorporation provides that the board of directors is expressly authorized to adopt, amend or repeal any bylaws of Medco by resolutions duly adopted by a majority of the directors then in office. The Medco certificate of incorporation and bylaws provide that Medco stockholders may adopt additional bylaws and may amend or repeal any bylaw whether or not adopted by them, at a meeting duly called for that purpose, by the affirmative vote of the holders of not less than fifty percent of the voting power of all outstanding shares of | Same as for Express Scripts |
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capital stock of Medco entitled to vote generally in the election of directors, considered for such purposes as a single class. | ||||||
Classified Board | None | None | None | |||
Cumulative Voting | None | None | None | |||
Ability to Call Special Meeting of Stockholders | Special meetings of Express Scripts stockholders may be called by the chairman of the board, the chief executive officer, or by resolution of the board of directors and will be called by the secretary upon the written request of the holders of record representing not less than thirty-five percent of the voting power of all capital stock issued and outstanding and entitled to vote on the matter or matters to be brought before the proposed special meeting. | The Medco certificate of incorporation and bylaws provide that, subject to the rights, if any, of the holders of preferred stock, special meetings of stockholders may be called only by the chairman of the board of directors, the president, the chief executive officer of the corporation or a majority of the board of directors, and shall be called by the secretary of Medco upon the written request of the holders of record of not less than forty percent of the voting power of all outstanding shares of Medco common stock. | Same as for Express Scripts | |||
Notice Required for Stockholder Nominations and other Proposals | Nominations: A stockholder’s notice must be delivered to, or mailed to and received by, the Secretary at the principal executive offices of Express Scripts (i) in the case of an annual meeting, no less than 90 days or more than 120 days in advance of the first anniversary of the preceding year’s annual meeting; provided, that if (A) no annual meeting was held in the previous year or (B) the date of the annual meeting has been advanced by more than 30 days or delayed by more than 60 days from the date of the previous year’s meeting, | Nominations and Other Proposals: A stockholder’s notice must be delivered to the secretary at the principal executive offices of Medco no later than the close of business on the 90th calendar day and no earlier than the close of business on the 120th calendar day prior to the first anniversary of the preceding year’s annual meeting; provided, that if the date of the annual meeting is more than 30 calendar days before or more than 60 calendar days after such anniversary date, notice by the stockholder to be timely must be so delivered no earlier than | Same as for Express Scripts |
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notice by the stockholder to be timely must be received no earlier than the opening of business on the 120th day prior to such annual meeting and no later than the close of business of the 90th day prior to such annual meeting or, if later, the 10th day following the day on which public disclosure of the date of the meeting is first made or (ii) in the event of a special meeting of stockholders at which the board of directors gives notice that directors are to be elected, no earlier than the opening of business on the 120th day prior to such meeting and no later than the close of business on the 90th day prior to such special meeting, or if later, the 10th day following the day on which public disclosure of the date of the meeting and of the nominees proposed by the board of directors to be elected at the meeting was made. Other Proposals: A stockholder’s notice must be delivered to, or mailed to and received by, the secretary at the principal executive offices of Express Scripts not less than 90 days nor more than 120 days in advance of the first anniversary of the preceding year’s annual meeting; provided, that if (i) no annual meeting was held in the previous year or (ii) the date of the annual meeting has been advanced by more than | the close of business on the 120th calendar day prior to such annual meeting and no later than the close of business on later of the 90th calendar day prior to such annual meeting or the 10th calendar day following the calendar day on which public announcement of the date of such meeting is first made by Medco. In the case of a special meeting called by the board of directors for the purpose of electing one or more directors, a stockholder must deliver notice of nomination of a director to the secretary at the principal executive offices of Medco no later than the close of business on the 10th calendar day following the day on which public announcement of the date of such meeting is first made by Medco. |
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30 days or delayed by more than 60 days from the date of the previous year’s meeting, notice by the stockholder to be timely must be received no earlier than the opening of business on the 120th day prior to such annual meeting and no later than the close of business on the later of the 90th day prior to such annual meeting or, if later, the 10th day following the day on which public disclosure of the date of the meeting is first made. | ||||||
Limitation of Personal Liability of Directors and Officers | The Express Scripts certificate of incorporation provides that a person who is or was a director of Express Scripts is not personally liable to Express Scripts or its stockholders for monetary damages for any breach of fiduciary duty in such capacity, except for (i) any breach of the director’s duty of loyalty to Express Scripts or its stockholders; (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) unlawful payments of dividends, certain stock repurchases or redemptions; or (iv) any transaction from which the director derived an improper personal benefit. | The Medco certificate of incorporation provides that no director is personally liable to Medco or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent that such exemption from liability or limitation thereof is not permitted under the DGCL, as currently in effect or as it may later be amended. If the DGCL is amended to authorize further eliminating or limiting the personal liability of directors, then the liability of a director will be eliminated or limited to the fullest extent permitted by the DGCL, as so amended. Section 102 of the DGCL provides that a corporation may include in its certificate of incorporation a provision eliminating or limiting the personal liability of a director to the corporation or its stockholders for | Same as for Express Scripts | |||
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monetary damages for breach of fiduciary duty as a director. However, the provision may not eliminate or limit the liability of a director for; (i) a breach of the duty of loyalty; (ii) acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; (iii) unlawful payments of dividends, certain stock repurchases or redemptions; or (iv) any transaction from which the director derived an improper personal benefit. | ||||||
Indemnification of Directors and Officers | The Express Scripts bylaws provide that Express Scripts will indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she is or was or has agreed to serve at the request of Express Scripts as a director or officer of Express Scripts, or is or was serving or has agreed to serve at the request of Express Scripts as a director or officer (which includes a trustee or similar capacity) of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, only if such person acted in good | The bylaws provide that Medco will, to the fullest extent permitted by the DGCL (as it exists on the date of adoption of the bylaws or as it may be amended, but with respect to any amendment, only to the extent that such amendment provides for broader indemnification), indemnify and hold harmless each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit, or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person or a person of whom such person is the legal representative is or was a director or officer of Medco or is or was serving at the request of Medco as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other | Same as for Express Scripts | |||
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faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of Express Scripts and, with respect to any criminal action, suit or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The indemnification includes expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the indemnitee or on his or her behalf in connection with such action, suit or proceeding and any appeal therefrom. Such indemnification shall include the right to be advanced expenses (including attorneys’ fees) incurred by a director or officer in defending a threatened or pending civil, criminal, administrative or investigative action, suit or proceedings subject to the receipt of an undertaking by the director or officer to repay such amount if it is ultimately determined that he or she is not entitled to be indemnified. Additionally, Express Scripts may elect to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or | enterprise, including service with respect to employee benefit plans maintained or sponsored by Medco, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent; provided, however, that Medco shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Medco board of directors. The indemnification extends to all expense, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith, and such indemnification continues in effect whether or not such person has ceased to be a director, officer, employee or agent of Medco. Such indemnification includes the right to be paid expenses incurred in defending any proceeding in advance of its final disposition, provided, that if required by the DGCL, the payment of such expenses shall only be made upon the receipt of |
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investigative, by reason of the fact that he or she is or was or has agreed to serve at the request of Express Scripts as an employee or agent of Express Scripts or is or was serving or has agreed to serve at the request of Express Scripts as an employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity. | an undertaking by the director or officer to repay such amount if it is ultimately determined that he or she is not entitled to be indemnified. Section 145 of the DGCL provides that, subject to certain limitations in the case of derivative suits brought by a corporation’s stockholders in its name, a corporation may indemnify any person who is made a party to any third-party action, suit or proceeding on account of being a director, officer, employee or agent of the corporation (or was serving at the request of the corporation in such capacity for another corporation, partnership, joint venture, trust or other enterprise) against expenses, including attorney’s fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with the action, suit or proceeding through, among other things, a majority vote of a quorum consisting of directors who were not parties to the suit or proceeding, if the person: (i) acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation; and (ii) in a criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful. | |||||
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Section 145 of the DGCL also permits indemnification by a corporation under similar circumstances for expenses (including attorney fees) actually and reasonably incurred by such persons in connection with the defense or settlement of a derivative action or suit, except that no indemnification may be made in respect of any claim, issue or matter as to which the person is adjudged to be liable to the corporation unless the Delaware Court of Chancery or the court in which the action or suit was brought determines upon application that the person is fairly and reasonably entitled to indemnity for the expenses which the court deems to be proper. To the extent a director, officer, employee or agent is successful in the defense of such an action, suit or proceeding, the corporation is required by Section 145 of the DGCL to indemnify such person for reasonable expenses incurred thereby. Expenses (including attorney fees) incurred by such persons in defending any action, suit or proceeding may be paid in advance of the final disposition of such action, suit or proceeding, provided that if required by the DGCL, the payment of such expenses shall only be made upon receipt of |
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an undertaking by or on behalf of that person to repay the amount if it is ultimately determined that that person is not entitled to be so indemnified. | ||||||
State Anti- Takeover Statutes | Express Scripts has elected not to be governed by Section 203 of the DGCL, which generally prohibits “business combinations,” including mergers, sales and leases of assets, issuances of securities and similar transactions by a corporation or a subsidiary with an interested stockholder who beneficially owns 15% or more of a corporation’s voting stock within three years after the person or entity becomes an interested stockholder, unless: (i) the board of directors of the target corporation has approved, before the acquisition time, either the business combination or the transaction that resulted in the person becoming an interested stockholder; (ii) upon consummation of the transaction that resulted in the person becoming an interested stockholder, the person owns at least 85% of the corporation’s voting stock (excluding shares owned by directors who are officers and shares owned by employee stock plans in which participants do not have the right to determine confidentially whether shares will be tendered in a tender or exchange offer); or (iii) after the person or entity becomes | Medco’s certificate of incorporation does not opt out of the provisions of Section 203 of the DGCL, which generally prohibits “business combinations,” including mergers, sales and leases of assets, issuances of securities and similar transactions by a corporation or a subsidiary with an interested stockholder who beneficially owns 15% or more of a corporation’s voting stock, within three years after the person or entity becomes an interested stockholder, unless: (i) the board of directors of the target corporation has approved, before the acquisition date, either the business combination or the transaction that resulted in the person becoming an interested stockholder; (ii) upon consummation of the transaction that resulted in the person becoming an interested stockholder, the person owns at least 85% of the corporation’s voting stock (excluding shares owned by directors who are officers and shares owned by employee stock plans in which participants do not have the right to determine confidentially whether shares will be tendered in a tender or exchange offer); or (iii) after the | Same as for Express Scripts | |||
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an interested stockholder, the business combination is approved by the board of directors and authorized by the vote of at least 662/3% of the outstanding voting stock not owned by the interested stockholder at an annual or special meeting. | person or entity becomes an interested stockholder, the business combination is approved by the board of directors and authorized by the vote of at least 66 2/3 % of the outstanding voting stock not owned by the interested stockholder at an annual or special meeting. | |||||
Transactions Involving Officers or Directors | Section 143 of the DGCL provides that a corporation may lend money to, or guarantee any obligation incurred by, its officers or directors if, in the judgment of the board of directors, the loan or guarantee may reasonably be expected to benefit the corporation. Section 144 of the DGCL provides that any other contract or transaction between the corporation and one or more of its directors or officers is neither void nor voidable solely because the interested director or officer was present, participates or votes at the board or board committee meeting that authorizes the contract or transaction, if either: (i) the director’s or officer’s interest is made known to the disinterested directors or the stockholders of the corporation, who thereafter approve the transaction in good faith; or (ii) the contract or transaction is fair to the corporation as of the time it is approved or ratified by either the board of directors, a | Medco’s bylaws provide that no contracts or transactions between Medco and one or more of its directors or officers, or between Medco and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, will be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the board of directors or committee thereof which authorizes the contract or transaction, or solely because his or her or their votes are counted for such purposes, if: (i) the material facts as to the officer’s or director’s relationship or interest and as to the contract or transaction are disclosed or are known to the board of directors or committee, and the board of directors or committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though less than a | Same as for Express Scripts | |||
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committee thereof, or the stockholders. | quorum; or (ii) the material facts as to the officer’s or director’s relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (iii) the contract or transaction is fair as to Medco as of the time it is authorized, approved or ratified by the board of directors, a committee thereof, or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the board of directors or of a committee which authorizes the contract or transaction. |
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• | complete and return a written questionnaire with respect to the background and qualification of the nominees and the background of any other person or entity on whose behalf the nomination is being made; and | |
• | provide a written representation and agreement that the nominee: | |
• | will abide by the advance resignation requirements of Express Scripts’ bylaws in connection with director elections; | |
• | is not and will not become a party to (1) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such prospective nominee, if elected as a director, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to us or (2) any Voting Commitment that could limit or interfere with the nominee’s ability to comply, if elected as a director, with the nominee’s fiduciary duties under applicable law; | |
• | is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than us with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed therein; and |
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• | would be in compliance if elected as a director and will comply with all of Express Scripts’ applicable corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines. |
Express Scripts Filings with the SEC | Period and/or Filing Date | |
Annual Report onForm 10-K | Year ended December 31, 2010, as filed February 16, 2011 | |
Quarterly Reports onForm 10-Q | Filed April 25, 2011; Filed July 29, 2011 | |
Definitive Proxy Statement on Schedule 14A | Filed March 21, 2011 | |
Current Reports onForm 8-K | Filed February 22, 2011; Filed March 8, 2011; Filed April 5, 2011; Filed May 10, 2011; Filed June 2, 2011; Filed July 5, 2011; Filed July 21, 2011; the first and third Form 8-Ks filed July 22, 2011; Filed August 9, 2011; Filed August 30, 2011; the first and second Form 8-Ks filed September 2, 2011; Filed September 20, 2011; and Filed October 6, 2011 | |
The description of Express Scripts common stock set forth in a registration statement filed pursuant to Section 12 of the Exchange Act and any amendment or report filed for the purpose of updating those descriptions. |
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Medco Filings with the SEC | Period and/or Filing Date | |
Annual Report onForm 10-K | Year ended December 25, 2010, as filed February 22, 2011 | |
Quarterly Report onForm 10-Q | Filed April 28, 2011; Filed July 26, 2011 | |
Definitive Proxy Statement on Schedule 14A | Filed April 8, 2011 | |
Current Reports onForm 8-K | Filed January 3, 2011; Filed February 7, 2011; Filed March 18, 2011; Filed May 11, 2011; Filed May 26, 2011; Filed May 27, 2011; the secondForm 8-K filed July 21, 2011; Filed July 22, 2011; Filed July 26, 2011; Filed July 29, 2011; Filed August 1, 2011; Filed August 2, 2011; Filed August 8, 2011; Filed August 10, 2011; Filed August 15, 2011; Filed August 19, 2011; Filed August 29, 2011; Filed September 2, 2011; Filed September 6, 2011; Filed September 9, 2011; Filed September 20, 2011; Filed September 21, 2011; Filed September 22, 2011; and Filed September 26, 2011. |
Express Scripts, Inc. One Express Way Saint Louis, Missouri, 63121 Attention: Investor Relations (314) 810-3115 www.express-scripts.com (“Investor Information” tab) | Medco Health Solutions, Inc. 100 Parsons Pond Drive, Mail Stop F3-3 Franklin Lakes, New Jersey 07417 Attention: Investor Relations (201) 269-4279 www.medcohealth.com (“Investors” tab) |
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by and among
EXPRESS SCRIPTS, INC.,
MEDCO HEALTH SOLUTIONS, INC.,
ARISTOTLE HOLDING, INC.,
ARISTOTLE MERGER SUB, INC.
and
PLATO MERGER SUB, INC.
Dated as of July 20, 2011
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ARTICLE I THE MERGERS | ||||||||
Section 1.1 | The Aristotle Merger | A-1 | ||||||
Section 1.2 | The Plato Merger | A-2 | ||||||
Section 1.3 | Closing | A-2 | ||||||
Section 1.4 | Effective Times | A-2 | ||||||
Section 1.5 | Certificate of Incorporation and By-laws | A-3 | ||||||
Section 1.6 | Directors and Officers of the Surviving Corporations | A-3 | ||||||
ARTICLE II EFFECT ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES | ||||||||
Section 2.1 | Effect on Capital Stock of Aristotle and Aristotle Merger Sub | A-3 | ||||||
Section 2.2 | Effect on Capital Stock of Plato and Plato Merger Sub | A-4 | ||||||
Section 2.3 | Effect on Parent Capital Stock | A-5 | ||||||
Section 2.4 | Certain Adjustments | A-5 | ||||||
Section 2.5 | Fractional Shares | A-5 | ||||||
Section 2.6 | Dissenting Shares | A-5 | ||||||
Section 2.7 | Exchange of Plato Certificates | A-5 | ||||||
Section 2.8 | Further Assurances | A-8 | ||||||
Section 2.9 | Plato Stock Options and Other Stock-Based Awards | A-9 | ||||||
Section 2.10 | Aristotle Stock Options and Other Stock-Based Awards | A-10 | ||||||
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PLATO | ||||||||
Section 3.1 | Corporate Organization | A-12 | ||||||
Section 3.2 | Capitalization | A-12 | ||||||
Section 3.3 | Authority; Execution and Delivery; Enforceability; State Takeover Statutes | A-13 | ||||||
Section 3.4 | Consents and Approvals; No Conflicts | A-14 | ||||||
Section 3.5 | SEC Documents; Financial Statements; Undisclosed Liabilities | A-14 | ||||||
Section 3.6 | Absence of Certain Changes or Events | A-16 | ||||||
Section 3.7 | Information Supplied | A-16 | ||||||
Section 3.8 | Legal Proceedings | A-16 | ||||||
Section 3.9 | Compliance with Laws | A-17 | ||||||
Section 3.10 | Regulatory Compliance | A-17 | ||||||
Section 3.11 | Absence of Changes in Benefit Plans | A-20 | ||||||
Section 3.12 | ERISA Compliance; Excess Parachute Payments | A-20 | ||||||
Section 3.13 | Employee and Labor Matters | A-21 | ||||||
Section 3.14 | Environmental Matters | A-22 | ||||||
Section 3.15 | Properties | A-23 | ||||||
Section 3.16 | Tax Returns and Tax Payments | A-23 | ||||||
Section 3.17 | Material Contracts | A-24 | ||||||
Section 3.18 | Intellectual Property | A-25 | ||||||
Section 3.19 | Insurance | A-26 | ||||||
Section 3.20 | Broker’s Fees | A-26 |
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Section 3.21 | Opinions of Financial Advisors | A-26 | ||||||
Section 3.22 | Certain Additional Representations | A-26 | ||||||
Section 3.23 | No Other Representations or Warranties | A-26 | ||||||
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ARISTOTLE, PARENT, AND THE MERGER SUBS | ||||||||
Section 4.1 | Corporate Organization | A-27 | ||||||
Section 4.2 | Capitalization of Parent and Merger Subs | A-27 | ||||||
Section 4.3 | Aristotle Capitalization | A-28 | ||||||
Section 4.4 | Authority; Execution and Delivery; Enforceability; State Takeover Statutes | A-29 | ||||||
Section 4.5 | Consents and Approvals; No Conflicts | A-29 | ||||||
Section 4.6 | SEC Documents; Financial Statements; Undisclosed Liabilities | A-30 | ||||||
Section 4.7 | Absence of Certain Changes or Events | A-31 | ||||||
Section 4.8 | Information Supplied | A-32 | ||||||
Section 4.9 | Legal Proceedings | A-32 | ||||||
Section 4.10 | Compliance with Laws | A-32 | ||||||
Section 4.11 | Regulatory Compliance | A-32 | ||||||
Section 4.12 | Absence of Changes in Benefit Plans | A-35 | ||||||
Section 4.13 | ERISA Compliance; Excess Parachute Payments | A-35 | ||||||
Section 4.14 | Employee and Labor Matters | A-36 | ||||||
Section 4.15 | Environmental Matters | A-37 | ||||||
Section 4.16 | Properties | A-38 | ||||||
Section 4.17 | Tax Returns and Tax Payments | A-38 | ||||||
Section 4.18 | Intellectual Property | A-39 | ||||||
Section 4.19 | Insurance | A-39 | ||||||
Section 4.20 | Financing | A-39 | ||||||
Section 4.21 | Broker’s Fees | A-40 | ||||||
Section 4.22 | Opinions of Financial Advisors | A-40 | ||||||
Section 4.23 | Certain Additional Representations | A-40 | ||||||
Section 4.24 | No Other Representations or Warranties | A-40 | ||||||
ARTICLE V COVENANTS | ||||||||
Section 5.1 | Plato Conduct of Businesses Prior to the Plato Effective Time | A-41 | ||||||
Section 5.2 | Aristotle Conduct of Businesses Prior to the Plato Effective Time | A-43 | ||||||
Section 5.3 | Preparation of theForm S-4 and the Joint Proxy Statement; Stockholders Meetings | A-44 | ||||||
Section 5.4 | No Solicitation; No-Shop | A-46 | ||||||
Section 5.5 | Publicity | A-48 | ||||||
Section 5.6 | Notification of Certain Matters | A-48 | ||||||
Section 5.7 | Access to Information | A-49 | ||||||
Section 5.8 | Reasonable Best Efforts | A-50 | ||||||
Section 5.9 | Indemnification | A-52 | ||||||
Section 5.10 | Control of Operations | A-53 | ||||||
Section 5.11 | Financing | A-53 | ||||||
Section 5.12 | Employee Benefit Plans | A-56 |
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Section 5.13 | Additional Agreements | A-57 | ||||||
Section 5.14 | Stock Exchange Listing | A-57 | ||||||
Section 5.15 | Section 16 Matters | A-57 | ||||||
ARTICLE VI CONDITIONS TO THE MERGER | ||||||||
Section 6.1 | Conditions to Obligations of Each Party | A-58 | ||||||
Section 6.2 | Conditions to Obligations of Aristotle, Parent and the Merger Subs to Effect the Aristotle Merger | A-58 | ||||||
Section 6.3 | Conditions to Obligations of Plato to Effect the Plato Merger | A-59 | ||||||
ARTICLE VII TERMINATION | ||||||||
Section 7.1 | Termination | A-60 | ||||||
Section 7.2 | Effect of Termination | A-62 | ||||||
Section 7.3 | Termination Fee; Expenses | A-62 | ||||||
Section 7.4 | Procedure for Termination or Amendment | A-64 | ||||||
ARTICLE VIII MISCELLANEOUS | ||||||||
Section 8.1 | Amendment and Modification | A-64 | ||||||
Section 8.2 | Extension; Waiver | A-64 | ||||||
Section 8.3 | Nonsurvival of Representations and Warranties | A-65 | ||||||
Section 8.4 | Notices | A-65 | ||||||
Section 8.5 | Counterparts | A-65 | ||||||
Section 8.6 | Entire Agreement; Third Party Beneficiaries | A-65 | ||||||
Section 8.7 | Severability | A-66 | ||||||
Section 8.8 | Specific Performance | A-66 | ||||||
Section 8.9 | Assignment | A-66 | ||||||
Section 8.10 | Headings; Interpretation | A-66 | ||||||
Section 8.11 | Governing Law | A-67 | ||||||
Section 8.12 | Enforcement; Exclusive Jurisdiction | A-67 | ||||||
Section 8.13 | WAIVER OF JURY TRIAL | A-68 | ||||||
Section 8.14 | Joint Obligations | A-68 | ||||||
Section 8.15 | Definitions | A-68 | ||||||
Exhibit A Form of Aristotle Surviving Corporation Certificate of Incorporation | A-74 | |||||||
Exhibit B Form of Plato Surviving Corporation Certificate of Incorporation | A-76 | |||||||
Exhibit C Form of Parent Charter and Bylaws | A-78 |
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Abatement Period | 8.6 | |||
Affiliate | 8.15(a) | |||
Agreement | Preamble | |||
Alternative Financing | 1.1(e) | |||
Antitrust Counsel Only Material | 1.1(d) | |||
Applicable SAP | 8.15(a) | |||
Appraisal Shares | 2.6 | |||
Aristotle | Preamble | |||
Aristotle Adverse Recommendation Change | 5.3(c) | |||
Aristotle Benefit Plan | 4.12 | |||
Aristotle Board | 4.4(b) | |||
Aristotle Business Personnel | 4.14(a) | |||
Aristotle Capital Stock | 4.3(a) | |||
Aristotle Certificate | 2.1(d) | |||
Aristotle Certificate of Merger | 1.4(a) | |||
Aristotle Common Stock | 2.1 | |||
Aristotle Disclosure Letter | IV | |||
Aristotle Effective Time | 1.4(b) | |||
Aristotle Expenses | 7.3(c) | |||
Aristotle Insurance Company Subsidiary | 8.15(a) | |||
Aristotle Material Adverse Effect | IV | |||
Aristotle Material Intellectual Property | 8.15(a) | |||
Aristotle Merger | 1.1(a) | |||
Aristotle Merger Consideration | 2.1(b) | |||
Aristotle Merger Sub | Preamble | |||
Aristotle Performance Share Award | 2.10(a) | |||
Aristotle Preferred Stock | 4.3(a) | |||
Aristotle Recommendation | 4.4(b) | |||
Aristotle Restricted Stock Awards | 2.10(a) | |||
Aristotle SAR | 2.10(a) | |||
Aristotle SEC Documents | 4.6(a) | |||
Aristotle SEC Financial Statements | 4.6(c) | |||
Aristotle Stock Option | 2.10(a) | |||
Aristotle Stockholder Approval | 4.4(c) | |||
Aristotle Stockholders Meeting | 5.3(c) | |||
Aristotle Subsidiary Insurance Agreements | 8.15(a) | |||
Aristotle Subsidiary SAP Statements | 4.6(h) | |||
Aristotle Surviving Corporation | 1.1(a) | |||
Bonus Plans | 5.12(d) | |||
Business Day | 8.15(a) | |||
Cash Portion Exchange Ratio | 2.9(a) | |||
Closing | 1.3 | |||
Closing Date | 1.3 | |||
Commitment Letter | 1.1(e), 4.20 |
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Confidentiality Agreement | 8.15(a) | |||
Consents | 3.4(a) | |||
Contract | 3.4(b) | |||
Covered Employee | 5.12(a) | |||
Definitive Agreements | 1.1(a) | |||
DGCL | 1.4(a) | |||
Effective Times | 1.4(b) | |||
Environmental Claim | 8.15(a) | |||
Environmental Laws | 8.15(a) | |||
ERISA | 3.11 | |||
Exchange Act | 3.4(a) | |||
Exchange Agent | 2.7(a) | |||
Exchange Fund | 2.7(a) | |||
Exchange Ratio | 2.2(e)(i) | |||
Expedited Appeal | 6.2(d) | |||
Filings | 3.4(a) | |||
Final Offering | 2.9(e) | |||
Financing | 1.1(e), 4.20 | |||
Financing Sources | 8.15(a) | |||
Foreign Corrupt Practices Act | 3.9(b) | |||
Form S-4 | 3.7 | |||
GAAP | 8.15(a) | |||
Governmental Entity | 3.4(a) | |||
Health Care Laws | 3.10(a) | |||
Healthcare Information Laws | 3.10(d) | |||
Healthcare Regulatory Approvals | 3.4(a) | |||
HSR Act | 3.4(a) | |||
Indemnitee | 5.9(a) | |||
Indemnitees | 5.9(a) | |||
Intellectual Property | 8.15(a) | |||
Joint Proxy Statement | 8.15(a) | |||
Knowledge | 8.15(a) | |||
known | 8.15(a) | |||
Laws | 8.15(a) | |||
Liens | 3.2(b) | |||
Marketing Period | 8.15(a) | |||
Material Adverse Effect | 8.15(a) | |||
Material Contracts | 3.17(b)(3) | |||
Materials of Environmental Concern | 8.15(a) | |||
Merger Subs | Preamble | |||
Mergers | 1.2(a) | |||
NASDAQ | 8.15(a) | |||
Non-US Aristotle Benefit Plans | 4.13(e) | |||
Non-US Plato Benefit Plans | 3.12(e) | |||
NYSE | 3.4(a) |
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Order | 8.15(a) | |||
Outside Date | 7.1(b)(i) | |||
Parent | Preamble | |||
Parent Common Stock | 2.2(b) | |||
Parent DSU | 2.9(d) | |||
Parent PSU | 2.9(c) | |||
Parent RSU | 2.9(b) | |||
Parent SAR | 2.10(a) | |||
Parent Stock Option | 2.9(a) | |||
Per Share Cash Amount | 2.2(e)(i) | |||
Permits | 3.10 | |||
Permitted Lien | 8.15(a) | |||
Person | 8.15(a) | |||
Plato | Preamble | |||
Plato Adverse Recommendation Change | 5.3(b) | |||
Plato Benefit Plan | 3.11 | |||
Plato Board | 3.3(b) | |||
Plato Book-Entry Shares | 2.2(c) | |||
Plato Business Personnel | 3.13(a) | |||
Plato By-laws | 3.1 | |||
Plato Capital Stock | 3.2(a) | |||
Plato Certificate | 2.2(c) | |||
Plato Certificate of Merger | 1.4(a) | |||
Plato Charter | 3.1 | |||
Plato Common Stock | 2.2 | |||
Plato Disclosure Letter | III | |||
Plato DSUs | 2.9(d) | |||
Plato Effective Time | 1.4(b) | |||
Plato ESPP | 2.9(e) | |||
Plato Expenses | 7.3(b) | |||
Plato Insurance Company Subsidiary | 8.15(a) | |||
Plato Material Adverse Effect | III | |||
Plato Material Intellectual Property | 8.15(a) | |||
Plato Merger | 1.2(a) | |||
Plato Merger Consideration | 2.2(c) | |||
Plato Merger Sub | Preamble | |||
Plato Preferred Stock | 3.2(a) | |||
Plato PSU | 2.9(c) | |||
Plato Recommendation | 3.3(b) | |||
Plato RSU | 2.9(b) | |||
Plato SEC Documents | 3.5(a) | |||
Plato SEC Financial Statements | 3.5(c) | |||
Plato Stock Option | 2.9(a) | |||
Plato Stock Plans | 2.9(a) | |||
Plato Stockholder Approval | 3.3(c) |
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Plato Stockholders Meeting | 5.3(b) | |||
Plato Subsidiary Insurance Agreements | 8.15(a) | |||
Plato Subsidiary SAP Statements | 3.5(h) | |||
Plato Surviving Corporation | 1.2(a) | |||
Policies | 3.19 | |||
Proceeding | 8.15(a) | |||
Public Statement | 5.5 | |||
Refinancing Sources | 8.15(a) | |||
Refinancing Transaction | 8.15(a) | |||
Regulatory Action | 5.8(e) | |||
Release | 8.15(a) | |||
Replacement Facility | 5.11(b) | |||
Representatives | 5.7(d) | |||
Required Governmental Consents | 6.1(e) | |||
Sarbanes-Oxley Act | 3.5(d) | |||
SEC | 3.4(a) | |||
Section 203 | 3.3(b) | |||
Section 262 | 2.6 | |||
Securities Act | 3.4(a) | |||
Stock Award Exchange Ratio | 2.9(a) | |||
Subsidiary | 8.15(a) | |||
Superior Proposal | 5.4(f)(ii) | |||
Surviving Corporations | 1.2(a) | |||
Takeover Laws | 3.3(b) | |||
Takeover Proposal | 5.4(f)(i) | |||
Tax Return | 8.15(a) | |||
Taxes | 8.15(a) | |||
Termination Fee | 8.15(a) | |||
Transactions | 1.2(a) | |||
Willful Breach | 8.15(a) |
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(a) | if to Aristotle, Parent or the Merger Subs, to: |
(b) | if to Plato, to: |
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By: | /s/ David B. Snow, Jr. |
Title: | Chairman and Chief Executive Officer |
By: | /s/ Jeff Hall |
Title: | Chief Financial Officer |
By: | /s/ Keith Ebling |
Title: | President |
By: | /s/ Keith Ebling |
Title: | President |
By: | /s/ Keith Ebling |
Title: | President |
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• | Aristotle Merger Sub will be merged with and into the Merger Partner, with the Merger Partner resulting as the surviving entity in the merger (the “Aristotle Merger”) and becoming a wholly-owned subsidiary of the Parent, and each outstanding share of common stock, $0.01 par value per share, of Merger Partner (“Merger Partner Common Stock”), other than shares of Merger Partner Common Stock held in treasury or owned by the Parent and its affiliates, will be converted into the right to receive one share of common stock, par value $0.01 per share, of the Parent (“Parent Common Stock”); and | |
• | immediately following the consummation of the Aristotle Merger, Plato Merger Sub will be merged with and into the Company, with the Company resulting as the surviving entity (the “Plato Merger”, and together with the Aristotle Merger, the “Transaction”) and becoming a wholly-owned subsidiary of the Parent, and each outstanding share of Company Common Stock, other than shares of Company Common Stock held in treasury or owned by the Company, Plato Merger Sub or any wholly-owned subsidiaries of the Company and the Appraisal Shares (as defined in the Agreement), but including (a) the Company Common Stock held in a Plato Benefit Plan (as defined in the Agreement) or related trust, (b) the Plato Book-Entry Shares (as defined in the Agreement) and (c) the Company Common Stock purchased using contributions under the Plato Employee Stock Purchase Plan (as defined in the Agreement) pursuant to Section 2.9 of the Agreement, will be converted into the right to receive consideration per share equal to $28.80 in cash (the “Cash Consideration”) and 0.810 shares (the “Stock Consideration”, and, together with the Cash Consideration, the “Consideration”) of Parent Common Stock. |
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(i) | Reviewed the financial terms and conditions of a draft, dated July 19, 2011, of the Agreement; | |
(ii) | Reviewed certain publicly available historical business and financial information relating to Plato and Aristotle; | |
(iii) | Reviewed various financial forecasts and other data provided to us by Plato relating to the business of Plato, various financial forecasts and other data provided to us by Aristotle and Plato relating to the business of Aristotle and certain publicly available financial forecasts and other data relating to the business of Aristotle and Plato; | |
(iv) | Held discussions with members of the senior managements of Plato and Aristotle with respect to the businesses and prospects of Plato and Aristotle, respectively and reviewed the projected synergies and other benefits, including the amount and timing thereof, anticipated by the management of Plato and Aristotle to be realized from the Transaction; | |
(v) | Reviewed public information with respect to certain other companies in lines of business we believe to be generally relevant in evaluating the businesses of Plato and Aristotle, respectively; | |
(vi) | Reviewed the financial terms of certain business combinations involving companies in lines of business we believe to be generally relevant in evaluating the business of Plato; | |
(vii) | Reviewed historical stock prices and trading volumes of Plato Common Stock and Aristotle Common Stock; | |
(viii) | Reviewed the potential pro forma financial impact of the Transaction on Aristotle based on the financial forecasts referred to above relating to Plato and Aristotle; and |
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(ix) | Conducted such other financial studies, analyses and investigations as we deemed appropriate. |
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By | /s/ David Gluckman |
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CERTIFICATE OF INCORPORATION
OF
EXPRESS SCRIPTS HOLDING COMPANY
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By: | /s/ Name: Title: President, Chief Executive Officer and Chairman of the Board |
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BYLAWS
of
EXPRESS SCRIPTS HOLDING COMPANY
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ITEM 20. | INDEMNIFICATION OF DIRECTORS AND OFFICERS. |
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ITEM 21. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. |
Exhibit No. | Description | |||
2 | .1 | Agreement and Plan of Merger, dated as of July 20, 2011, by and among Express Scripts, Inc., Medco Health Solutions, Inc., Aristotle Holding, Inc., Aristotle Merger Sub, Inc., and Plato Merger Sub, Inc. (included as Annex A to the joint proxy statement/prospectus forming a part of this Registration Statement) | ||
3 | .1 | Form of Restated Certificate of Incorporation of Aristotle Holding, Inc. (included as Annex F to the joint proxy statement/prospectus forming a part of this Registration Statement) | ||
3 | .2 | Form of Restated Bylaws of Aristotle Holding, Inc. (included as Annex G to the joint proxy statement/prospectus forming a part of this Registration Statement) |
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Exhibit No. | Description | |||
5 | .1 | Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding legality of securities being registered* | ||
8 | .1 | Opinion of Sullivan & Cromwell LLP regarding certain U.S. federal income tax matters* | ||
8 | .2 | Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding certain U.S. federal income tax matters* | ||
12 | .1 | Statement regarding computation of ratio of earnings to fixed charges | ||
21 | .1 | Subsidiaries of Aristotle Holding, Inc. | ||
23 | .1 | Consent of PricewaterhouseCoopers LLP, independent accountants for Medco Health Solutions, Inc. | ||
23 | .2 | Consent of PricewaterhouseCoopers LLP, independent accountants for Express Scripts, Inc. | ||
23 | .3 | Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included as part of its opinion filed as Exhibit 5.1)* | ||
23 | .4 | Consent of Sullivan & Cromwell LLP (included as part of its opinion filed as Exhibit 8.1)* | ||
23 | .5 | Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included as part of its opinion filed as Exhibit 8.2)* | ||
24 | .1 | Power of Attorney (included on signature page of this Registration Statement onForm S-4) | ||
99 | .1 | Form of Medco Health Solutions, Inc. Proxy Card | ||
99 | .2 | Form of Express Scripts, Inc. Proxy Card | ||
99 | .3 | Consent of J.P. Morgan Securities LLC | ||
99 | .4 | Consent of Lazard Frères & Co. LLC | ||
99 | .5 | Consent of Credit Suisse Securities (USA) LLC | ||
99 | .6 | Consent of Citigroup Global Markets Inc. |
(*) | To be filed by amendment. |
ITEM 22. | UNDERTAKINGS |
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By: | /s/ Jeffrey Hall Name: Jeffrey Hall Title: Executive Vice President and Chief Financial Officer |
Signature | Title | |||
/s/ George Paz | Chairman, President and Chief Executive Officer (Principal Executive Officer) | |||
/s/ Jeffrey Hall | Executive Vice President and Chief Financial Officer (Principal Financial Officer) | |||
/s/ Kelley Elliott | Vice President, Chief Accounting Officer and Corporate Controller (Principal Accounting Officer) | |||
/s/ Gary G. Benavav | Director | |||
/s/ Maura C. Breen | Director | |||
/s/ William J. DeLaney | Director | |||
/s/ Nicholas J. LaHowchic | Director | |||
/s/ Thomas P. Mac Mahon | Director |
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Signature | Title | |||
/s/ Frank Mergenthaler | Director | |||
/s/ Woodrow A. Myers, Jr. | Director | |||
/s/ John O. Parker | Director | |||
/s/ Samuel Skinner | Director | |||
/s/ Seymour Sternberg | Director |
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