FILED PURSUANT TO RULE NO. 424(b)(3)
REGISTRATION NO. 333-53394
[LOGO OF BINDLEY WESTERN]
January 11, 2001
Dear Shareholder:
You are cordially invited to attend a special meeting of shareholders of
Bindley Western Industries, Inc. to be held on February 14, 2001, at 9:00 a.m.,
Indianapolis time, at the Embassy Suites, 3912 Vincennes Road, in Indianapolis,
Indiana.
At the special meeting, you will have a chance to vote on the merger of
Bindley Western with a wholly owned subsidiary of Cardinal Health, Inc., a
leading provider of products and services supporting the health care industry.
The Bindley Western board of directors and management believe that the
combination of Bindley Western with Cardinal will create a stronger, more
competitive company with a continued commitment to high growth.
The Bindley Western board of directors has determined that the merger is
fair to and in the best interests of Bindley Western and the shareholders of
Bindley Western and has approved the merger agreement and the merger. YOUR
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF
THE MERGER AGREEMENT AND THE MERGER AT THE SPECIAL MEETING.
If the merger is completed, Bindley Western will become a wholly owned
subsidiary of Cardinal, and each of your Bindley Western common shares, par
value $0.01 per share, will be converted into the right to receive 0.4275 of a
Cardinal common share, no par value. We estimate that in the merger and in
connection with subsequent exercises of Bindley Western stock options, which
will become exercisable for Cardinal common shares, Cardinal will issue
approximately 19 million common shares. Both the Cardinal common shares and the
Bindley Western common shares are quoted on the New York Stock Exchange. The
Cardinal common shares are quoted under the symbol "CAH" and the Bindley
Western common shares are quoted under the symbol "BDY." On January 10, 2001,
the closing price of a Cardinal common share on the New York Stock Exchange
composite tape was $93.81 and the closing price of a Bindley Western common
share was $40.13, but you should obtain current prices for the Bindley Western
and Cardinal common shares.
The accompanying notice of meeting and proxy statement/prospectus explain
the merger and provide specific information concerning the special meeting.
Please read these materials carefully. YOU SHOULD ALSO CAREFULLY CONSIDER THE
RISK FACTORS RELATING TO THE MERGER DESCRIBED BEGINNING ON PAGE 21.
Your vote is very important. To be certain that your shares are voted at the
special meeting, please sign, date and return the enclosed proxy card as soon
as possible, whether or not you plan to attend the special meeting in person.
You can also vote your shares through the Internet or by telephone by following
the instructions on the accompanying proxy card.
Cordially,
/s/ William E. Bindley
William E. Bindley
Chairman, President
and Chief Executive Officer
---------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED OR
DETERMINED IF THIS PROXY STATEMENT/PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THIS PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ANY SECURITIES IN ANY JURISDICTION WHERE AN OFFER OR
SOLICITATION WOULD BE ILLEGAL.
---------------
This proxy statement/prospectus is dated January 11, 2001
and is first being mailed to shareholders on or about January 12, 2001.
REFERENCES TO ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and
financial information about Cardinal and Bindley Western from documents that
are not included with this proxy statement/prospectus. This information is
available to you, without charge, upon your written or oral request. You can
obtain documents incorporated by reference in this proxy statement/prospectus
(with the exception of certain exhibits to those documents) by requesting them
in writing or by telephone from the appropriate company at the following
address:
Cardinal Health, Inc. Bindley Western Industries, Inc.
7000 Cardinal Place 8909 Purdue Road
Dublin, Ohio 43017 Indianapolis, Indiana 46268
(614) 757-5000 (317) 704-4000
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY FEBRUARY 7, 2001 IN
ORDER TO RECEIVE THEM BEFORE THE SPECIAL MEETING. SEE "WHERE YOU CAN FIND MORE
INFORMATION" ON PAGE 95.
IMPORTANT NOTE
WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH ANY INFORMATION OR TO MAKE
ANY REPRESENTATION ABOUT THE MERGER OR OUR COMPANIES THAT DIFFERS FROM OR ADDS
TO THE INFORMATION CONTAINED IN THIS DOCUMENT OR IN ANY OTHER DOCUMENTS FILED
PUBLICLY WITH THE SECURITIES AND EXCHANGE COMMISSION. THEREFORE, YOU SHOULD NOT
RELY ON ANY DIFFERENT OR ADDITIONAL INFORMATION.
IF YOU LIVE IN A JURISDICTION WHERE IT IS UNLAWFUL TO OFFER TO EXCHANGE OR
SELL, OR TO ASK FOR OFFERS TO EXCHANGE OR BUY, THE SECURITIES OFFERED BY THIS
DOCUMENT, OR TO ASK FOR PROXIES, OR IF YOU ARE A PERSON TO WHOM IT IS UNLAWFUL
TO DIRECT SUCH ACTIVITIES, THEN THE OFFER PRESENTED AND PROXY SOLICITATION MADE
BY THIS DOCUMENT DO NOT EXTEND TO YOU.
THE INFORMATION CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS SPEAKS ONLY AS
OF THE DATE INDICATED ON THE COVER OF THIS DOCUMENT, UNLESS THE INFORMATION
SPECIFICALLY INDICATES THAT ANOTHER DATE APPLIES, OR, IN THE CASE OF DOCUMENTS
INCORPORATED BY REFERENCE, THE DATES OF THOSE DOCUMENTS. SEE "FORWARD-LOOKING
STATEMENTS" IMMEDIATELY FOLLOWING THE "NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS."
WITH RESPECT TO THE INFORMATION CONTAINED IN THIS PROXY
STATEMENT/PROSPECTUS, CARDINAL HAS SUPPLIED THE INFORMATION CONCERNING CARDINAL
AND BRICK MERGER CORP., AND BINDLEY WESTERN HAS SUPPLIED THE INFORMATION
CONCERNING BINDLEY WESTERN.
IN ADDITION, IF YOU HAVE ANY QUESTIONS ABOUT THE MERGER OR VOTING
PROCEDURES, YOU MAY CONTACT:
[MacKenzie LOGO]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
E-mail: proxy@mackenziepartners.com
or
CALL TOLL-FREE (800) 322-2885
BINDLEY WESTERN INDUSTRIES, INC.
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
FEBRUARY 14, 2001
TO THE SHAREHOLDERS OF BINDLEY WESTERN:
A special meeting of shareholders of Bindley Western Industries, Inc. will
be held on February 14, 2001, at 9:00 a.m., Indianapolis time, at the Embassy
Suites, 3912 Vincennes Road, in Indianapolis, Indiana. The purposes of the
special meeting are to:
1. Vote on a proposal to approve the Agreement and Plan of Merger, dated
as of December 2, 2000, among Cardinal Health, Inc., Brick Merger Corp., a
wholly owned subsidiary of Cardinal, and Bindley Western, pursuant to
which, among other things, Brick Merger Corp. will merge with and into
Bindley Western upon the terms and subject to the conditions set forth in
the merger agreement, as more fully described in the proxy
statement/prospectus that follows this notice. If the merger agreement is
approved and the merger and the related transactions contemplated by the
merger agreement are consummated, each Bindley Western common share will be
converted into the right to receive 0.4275 of a Cardinal common share.
2. Adjourn the special meeting, if necessary, to permit further
solicitation of proxies in the event there are not sufficient votes at the
time of the special meeting to approve the merger proposal.
3. Act on any other matters that may properly come before the special
meeting.
Your board of directors has fixed the close of business on January 11, 2001,
as the record date for determining shareholders entitled to notice of and to
vote at the special meeting. The merger proposal requires the affirmative vote
of the holders of a majority of the outstanding Bindley Western common shares
entitled to vote thereon. Shareholders owning approximately 18.7% of the
outstanding Bindley Western common shares have already agreed in writing to
vote in favor of the approval of the merger agreement and the merger.
You are cordially invited to attend the special meeting. Whether or not you
plan on attending the special meeting, please vote by signing, dating and
returning the enclosed proxy card or submitting a proxy through the Internet or
by telephone. Completing a proxy now will not prevent you from being able to
vote at the special meeting by attending in person and casting a vote. However,
if you do not return the proxy or vote in person at the special meeting, the
effect will be the same as a vote against the merger.
By Order of the Board of Directors
/s/ Michael D. McCormick
Michael D. McCormick
Executive Vice President, General
Counsel and Secretary
January 11, 2001
Indianapolis, Indiana
FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus (including information included or
incorporated by reference) contains a number of forward-looking statements with
respect to the financial condition, results of operations, plans, objectives,
future performance and business of each of Cardinal and Bindley Western, as
well as certain information relating to the merger, including, among others:
(1) statements relating to the synergies and cost savings and accretion to
reported earnings estimated to result from the merger;
(2) statements relating to revenues estimated to result from the merger;
(3) statements relating to integration costs estimated to be incurred in
connection with the merger; and
(4) statements preceded by, followed by or that include "believes,"
"expects," "anticipates," "estimates" or similar words or expressions.
These forward-looking statements involve various risks and uncertainties.
Actual results may differ materially from those contemplated, projected or
implied by these forward-looking statements due to, among others, the following
factors and events (the order of which does not necessarily reflect their
relative significance):
. costs or difficulties related to the integration of the businesses of
Cardinal and Bindley Western, or other acquired businesses, are greater
than expected;
. expected synergies and cost savings from the merger are not fully
realized or are not realized within the expected time frame or
additional or unexpected costs are incurred;
. dependence on key personnel to manage the integration of the two
companies;
. the loss of key customers or suppliers;
. technological changes are more difficult or expensive than anticipated;
. revenues following the merger are lower than expected;
. increased competitive pressures in the industry or markets in which
Cardinal and Bindley Western operate;
. fluctuations in interest rates affecting the combined company's floating
rate debt;
. changes in general economic conditions or in political or competitive
forces;
. changes in the securities markets;
. changes in the regulatory environment;
. difficulties and delays in obtaining regulatory approval of the merger
or other future transactions under relevant laws and regulations
(including antitrust laws, if applicable), including those of other
nations;
. the risk that our analyses of these risks and forces could be incorrect
and/or that the strategies developed to address them could be
unsuccessful; and
. the general risks that occur in the day-to-day businesses of Cardinal
and Bindley Western, including those discussed in Bindley Western's and
Cardinal's Annual Reports on Form 10-K (including any amendments),
Quarterly Reports on Form 10-Q (including any amendments) and exhibits
to those reports.
Because these forward-looking statements are subject to risks and
uncertainties, actual results may differ materially from those expressed,
projected or implied by these forward-looking statements. You should not place
undue reliance on these statements, which speak only as of the date of this
proxy statement/prospectus or, in the case of documents incorporated by
reference, the dates of those documents.
All subsequent written and oral forward-looking statements attributable to
Cardinal or Bindley Western or any person acting on their behalf are expressly
qualified in their entirety by the cautionary statements contained or referred
to in this section. Neither Cardinal nor Bindley Western undertakes any
obligation to release publicly any revisions to these forward-looking
statements to reflect events or circumstances after the date of this proxy
statement/prospectus or to reflect the occurrence of unanticipated events,
except as may be required under applicable securities laws.
To find any one of the principal sections of this proxy statement/prospectus
identified below, simply bend the document slightly to expose the black tabs
and open the document to the tab which corresponds to the title of the section
you wish to read.
TABLE OF CONTENTS
QUESTIONS & ANSWERS
SUMMARY
RISK FACTORS
SPECIAL MEETING
THE MERGER
THE MERGER AGREEMENT
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
THE COMPANIES
PRO FORMA FINANCIAL INFORMATION
DESCRIPTION OF CARDINAL CAPITAL STOCK
COMPARISON OF SHAREHOLDER RIGHTS
OTHER INFORMATION
ANNEXES
i
TABLE OF CONTENTS
PAGE
----
REFERENCES TO ADDITIONAL INFORMATION
FORWARD-LOOKING STATEMENTS
QUESTIONS AND ANSWERS ABOUT THE CARDINAL/BINDLEY WESTERN MERGER............ 1
SUMMARY.................................................................... 4
Selected Historical Financial Information.................................. 12
Selected Unaudited Pro Forma Combined Financial Information................ 15
Comparative Per Common Share Information................................... 17
Comparative Market Price and Dividend Data................................. 20
RISK FACTORS............................................................... 21
The Market Value of Cardinal Common Shares Will Vary..................... 21
Uncertainties Exist in Integrating Our Business Operations............... 21
There Are Risks Associated with Cardinal's Acquisition Strategy.......... 21
We May Fail to Achieve the Benefits Anticipated in the Merger............ 21
SPECIAL MEETING............................................................ 23
Time and Place of the Meeting............................................ 23
Matters to be Considered at the Special Meeting.......................... 23
Record Date.............................................................. 23
Share Ownership.......................................................... 23
Quorum................................................................... 24
Vote Required............................................................ 24
Voting and Revocation of Proxies......................................... 24
Solicitation of Proxies.................................................. 24
THE MERGER................................................................. 26
Background of the Merger................................................. 26
Reasons for the Merger;
Recommendation of the Board of Directors................................. 27
Opinion of Bindley Western's Financial Advisor........................... 30
Interests of Bindley Western's Directors and Officers in the Merger...... 36
Accounting Treatment..................................................... 39
Appraisal Rights......................................................... 39
Regulatory Approvals..................................................... 39
Federal Securities Law Consequences...................................... 40
Stock Option Agreement................................................... 41
Support/Voting Agreements................................................ 44
PAGE
----
THE MERGER AGREEMENT....................................................... 46
The Merger............................................................... 46
Merger Consideration; Conversion of Securities........................... 46
Exchange Procedures...................................................... 46
Representations and Warranties........................................... 47
Covenants................................................................ 49
Acquisition Proposals.................................................... 53
Bindley Western Termination Right........................................ 54
Conditions............................................................... 55
Stock Options............................................................ 58
Bindley Western Employee Benefits and Plans.............................. 58
Termination.............................................................. 58
Effect of Termination.................................................... 59
Amendment and Waiver..................................................... 61
Fees and Expenses........................................................ 61
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES.............................. 62
THE COMPANIES.............................................................. 63
Business of Bindley Western.............................................. 63
Business of Cardinal..................................................... 63
Brick Merger Corp........................................................ 65
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION............... 66
Unaudited Pro Forma Condensed Combined Balance Sheet..................... 67
Unaudited Pro Forma Condensed Combined Statements of Earnings............ 68
Notes to Pro Forma Condensed Combined Financial Information.............. 73
DESCRIPTION OF CARDINAL CAPITAL STOCK...................................... 75
Authorized and Outstanding Shares........................................ 75
Voting................................................................... 75
Board of Directors....................................................... 75
Anti-Takeover Provisions of Ohio Revised Code............................ 76
Transfer Agent and Registrar............................................. 76
COMPARISON OF SHAREHOLDER RIGHTS........................................... 77
Authorized Capital Shares................................................ 77
Size of the Board of Directors........................................... 77
Classes of Directors..................................................... 77
Nomination of Directors for Election..................................... 78
ii
PAGE
----
Vacancies of the Board................................................. 78
Removal of Directors................................................... 79
Provisions Affecting Control Share Acquisitions and Business
Combinations.......................................................... 79
Mergers, Acquisitions, Share Purchases and Other Transactions.......... 82
Notice of Shareholder Meetings......................................... 83
Submission of Shareholder Proposals.................................... 84
Special Meeting of Shareholders........................................ 84
Shareholder Action Without a Meeting................................... 85
Cumulative Voting...................................................... 85
Voting Rights.......................................................... 85
Shareholder Class Voting Rights........................................ 86
Rights of Preferred and Special Shareholders........................... 86
Dividends.............................................................. 87
Rights of Dissenting Shareholders...................................... 87
Shareholder Preemptive Rights.......................................... 88
Inspection of Shareholder Lists........................................ 88
Liability of Directors and Officers.................................... 90
Duties of Directors.................................................... 90
Indemnification of Directors and Officers.............................. 90
Amendment of Charter Documents......................................... 92
Amendment and Repeal of Bylaws and Regulations......................... 92
PAGE
----
OTHER ACTION TO BE TAKEN AT THE BINDLEY WESTERN SPECIAL MEETING............ 93
Bindley Western Adjournment Proposal..................................... 93
LEGAL MATTERS.............................................................. 94
INDEPENDENT PUBLIC ACCOUNTANTS............................................. 94
OTHER MATTERS.............................................................. 94
SHAREHOLDER PROPOSALS...................................................... 94
WHERE YOU CAN FIND MORE INFORMATION........................................ 95
Agreement and Plan of Merger, dated December 2, 2000, by and among
Cardinal Health, Inc., Brick Merger Corp. and Bindley Western
Industries, Inc. .................................................... Annex A
Stock Option Agreement, dated December 2, 2000, between Cardinal
Health, Inc. and Bindley Western Industries, Inc. ................... Annex B
Opinion of Salomon Smith Barney Inc., dated December 2, 2000.......... Annex C
iii
QUESTIONS AND ANSWERS ABOUT THE CARDINAL/BINDLEY WESTERN MERGER
We intend the following questions and answers to provide brief answers to
frequently asked questions concerning the merger. These questions and answers
do not, and are not intended to, address all the questions that may be
important to Bindley Western shareholders. You should read the summary and the
remainder of this document and all of the annexes carefully.
Q: WHY ARE CARDINAL AND BINDLEY WESTERN MERGING?
A: Our companies are proposing to merge because we believe the combination will
make us stronger and more diversified. We expect the merger to provide
significant benefits to both shareholders and customers by achieving
opportunities to streamline and rationalize our distribution infrastructure,
reduce duplicative costs in the administration of our businesses, broaden
our product portfolios and strengthen our position as a competitor in the
rapidly changing health care services industry through sharing of best
practices. Both companies are growth-oriented and innovative and have a
proven record of financial discipline and performance. We anticipate
significant synergies and cost savings of approximately $100 million on an
annual basis beginning in the third year following completion of the merger
through facilities rationalization, elimination of redundant overhead,
improved inventory and capital usage, and expanded product merchandising.
See "The Merger--Reasons for the Merger; Recommendation of the Board of
Directors" and "Forward-Looking Statements."
Q: WHAT HAPPENS TO MY BINDLEY WESTERN COMMON SHARES IN THE MERGER?
A: You will receive 0.4275 of a Cardinal common share for each Bindley Western
common share you own. You will also receive cash in lieu of any fractional
shares.
For example, a holder
of 100 Bindley Western
common shares will
receive 42 Cardinal
common shares, plus a
cash payment with
respect to 0.75 of a
fractional Cardinal
common share.
The Cardinal common shares you receive will be listed on the New York Stock
Exchange, where Bindley Western and Cardinal common shares currently trade.
Q: WHAT DO I HAVE TO DO IN CONNECTION WITH THE MERGER?
A: We cannot complete the merger unless, among other things, the shareholders
of Bindley Western vote to approve it. Bindley Western is holding a special
meeting at which you are entitled to vote on the merger. You may choose one
of the following ways to cast your vote:
. by completing the accompanying proxy card and returning it in the
enclosed postage-paid envelope;
. through the Internet or by telephone, as outlined on the accompanying
proxy card; or
. by appearing and voting in person at the special meeting.
Q: ARE THERE RISKS ASSOCIATED WITH THE MERGER THAT I SHOULD CONSIDER IN
DECIDING HOW TO VOTE?
A: Yes. There are risks associated with all business combinations, including
the proposed merger. In particular, you should be aware that the number of
Cardinal common shares you will receive in return for each Bindley Western
common share you own is fixed and will not change as the market prices of
Bindley Western common shares and Cardinal common shares fluctuate.
Accordingly, the value of the Cardinal common shares that you will receive
in return for your Bindley Western common shares may be either less than or
more than the current market price of the corresponding number of Cardinal
common shares. In addition, there is a risk that we will not realize the
synergies and cost savings we expect to obtain from the merger to the extent
that, or as promptly as, we currently anticipate. There are also a number of
1
other risks that are discussed and incorporated by reference in this
document. You should review the section of this document entitled "Risk
Factors" with particular care.
Q: WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A: We expect to complete the merger as quickly as possible once all the
conditions to the merger, including obtaining the approval of Bindley
Western shareholders at the special meeting, are fulfilled. Fulfilling some
of these conditions is not entirely within our control. We currently expect
to complete the merger in the first quarter of calendar 2001.
Q: SHOULD I SEND IN MY BINDLEY WESTERN STOCK CERTIFICATES NOW?
A: No. After the merger is completed, we will send you written instructions,
including a letter of transmittal, that explain how to exchange your Bindley
Western stock certificates for stock certificates representing Cardinal
common shares. Please do not send in any Bindley Western stock certificates
until you receive these written instructions and the letter of transmittal.
Q: HOW DO I VOTE MY SHARES IF MY SHARES ARE HELD IN "STREET NAME"?
A: You should contact your broker. Your broker can give you directions on how
to vote your shares. Your broker cannot vote your shares unless he receives
appropriate instructions from you.
Q: MAY I CHANGE MY VOTE EVEN AFTER SUBMITTING A PROXY?
A: Yes. If you want to change your vote, you may do so at any time before the
special meeting by sending to the Corporate Secretary of Bindley Western a
written notice saying that you are revoking your proxy or by submitting a
later dated proxy by mail or telephone or through the Internet with your new
vote; alternatively, you can attend the special meeting in person and vote
your shares yourself at the special meeting.
Q: WILL BINDLEY WESTERN SHAREHOLDERS HAVE TO PAY ADDITIONAL TAX BECAUSE OF THE
MERGER?
A: Most shareholders of Bindley Western will not recognize gain or loss for
U.S. federal income tax purposes as a result of exchanging their Bindley
Western common shares for Cardinal common shares, other than with respect to
any cash received in lieu of fractional shares. The holding period of
Cardinal common shares received by Bindley Western shareholders in the
merger, which determines how any gain or loss should be treated for U.S.
federal income tax purposes upon future sales of such shares, will generally
include the holding period of the Bindley Western common shares exchanged in
the merger. See "United States Federal Income Tax Consequences."
Nevertheless, the tax consequences to you of the merger will depend on your
individual circumstances and may differ from those explained here. You
should consult with your own tax advisor to ascertain the tax consequences
that the merger will have for you.
Q: AM I ENTITLED TO EXERCISE ANY DISSENTERS' OR APPRAISAL RIGHTS IN CONNECTION
WITH THE MERGER?
A: Under Indiana law, Bindley Western shareholders are not entitled to
dissenters' rights in connection with the merger.
Q: HOW DO THE RIGHTS OF CARDINAL SHAREHOLDERS COMPARE TO THOSE OF BINDLEY
WESTERN SHAREHOLDERS?
A: The rights of Cardinal shareholders are governed by Ohio law and by
Cardinal's articles of incorporation and code of regulations, in each case
as amended and restated, while the rights of Bindley Western shareholders
are governed by Indiana law and Bindley Western's articles of incorporation
and bylaws, in each case as amended and restated. For a summary of
significant differences between the rights of Cardinal shareholders and
Bindley Western shareholders, see "Comparison of Shareholder Rights."
2
Q: WILL DIVIDENDS BE PAID ON CARDINAL COMMON SHARES AFTER THE MERGER?
A: Cardinal currently expects that, after the merger is completed, Cardinal
will continue to pay quarterly cash dividends. Cardinal's current quarterly
dividend is $0.03 per share. The Cardinal board of directors, however, has
discretion to decide upon the timing and amount of any future dividends.
Whether or not Cardinal will pay such dividends (and if so, how much such
dividends will be) will depend on Cardinal's future earnings, financial
condition, capital requirements and other factors. See "Summary--Comparative
Market Price and Dividend Data" and "Comparison of Shareholder Rights--
Dividends."
Q: IF I HAVE MORE QUESTIONS ABOUT THE MERGER, WHERE CAN I FIND ANSWERS?
A: In addition to reading this proxy statement/prospectus, its annexes and the
documents we have incorporated in this proxy statement/prospectus by
reference, you can find more information about the merger in our companies'
public filings with the Securities and Exchange Commission and the New York
Stock Exchange. See "Where You Can Find More Information." If you require
assistance in changing or revoking a proxy or if you have any other
questions about the merger, please contact:
[MacKenzie LOGO]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
E-mail: proxy@mackenziepartners.com
or
CALL TOLL-FREE (800) 322-2885
3
SUMMARY
This brief summary highlights selected information from this proxy
statement/prospectus. It does not contain all of the information that is
important to you. You should carefully read the entire proxy
statement/prospectus, including annexes, and the other documents to which this
document refers to fully understand the merger. See "Where You Can Find More
Information" on page 95. Each item in this summary includes a page reference
directing you to a more complete description of that item in this proxy
statement/prospectus.
THE COMPANIES (PAGE 63)
BINDLEY WESTERN INDUSTRIES, INC.
8909 Purdue Road
Indianapolis, Indiana 46268
(317) 704-4000
Bindley Western is the fifth largest distributor of pharmaceuticals and
related products in the United States. It provides an array of cost-effective
pharmaceutical and supply chain management products. Customers include retail
chain and independent pharmacies, supermarkets and mass retailers with their
own pharmacies, hospitals, clinics, health maintenance organizations and
managed care organizations, all of which are dedicated to lowering the cost of
health care and improving the quality of patient care. Bindley Western is
headquartered in Indianapolis, Indiana, employs approximately 2,000 people and
has annual revenues of about $8.5 billion.
CARDINAL HEALTH, INC.
7000 Cardinal Place
Dublin, Ohio 43017
(614) 757-5000
Cardinal is one of the country's leading providers of products and services
supporting the health care industry. It provides innovative, cost-effective
pharmaceutical services that improve the medication use process for a broad
base of customers nationwide. These services include pharmaceutical
distribution, hospital pharmacy management, automated dispensing systems
manufacturing, drug delivery systems, pharmaceutical packaging, retail pharmacy
franchising and clinical information systems development. Cardinal also
manufactures and distributes medical, surgical and laboratory products through
its wholly owned subsidiary, Allegiance Corporation. Cardinal, which is
headquartered in Dublin, Ohio, employs more than 42,000 people on five
continents and produces annualized revenues approaching $30 billion.
BRICK MERGER CORP.
7000 Cardinal Place
Dublin, Ohio 43017
(614) 757-5000
Brick Merger Corp. is a newly formed, wholly owned subsidiary of Cardinal
formed for the purpose of effecting the merger.
THE SPECIAL MEETING (PAGE 23)
The special meeting will be held on February 14, 2001 at 9:00 a.m.,
Indianapolis time, at the Embassy Suites, 3912 Vincennes Road, in Indianapolis,
Indiana. At the special meeting, you will be asked to approve the merger
agreement and the merger.
4
RECORD DATE; VOTE REQUIRED (PAGES 23 AND 24)
You can vote at the special meeting if you owned Bindley Western common
shares at the close of business on the record date of January 11, 2001. On that
date, there were about 35,851,042 Bindley Western common shares outstanding and
entitled to vote. You can cast one vote for each Bindley Western common share
you then owned. In order to approve the merger, the holders of a majority of
all outstanding Bindley Western common shares entitled to vote thereon must
vote in favor of doing so.
Four Bindley Western senior executives, who together own approximately 18.7%
of the outstanding common shares of Bindley Western, have already agreed to
vote in favor of the merger. See "--Support/Voting Agreements." As of the
record date, the directors and executive officers of Bindley Western and their
affiliates held shares representing approximately 19.5% of all outstanding
Bindley Western common shares eligible to vote at the Bindley Western special
meeting, and the directors and executive officers of Cardinal and their
affiliates did not hold any Bindley Western common shares.
OUR REASONS FOR THE MERGER (PAGE 27)
We believe that combining our companies will provide significant benefits to
our shareholders and customers. In bringing our various businesses together,
customers will receive the benefits of a significantly broader line of products
and services, and Bindley Western's customers will gain access to a
sophisticated, established e-commerce infrastructure. We believe the merger
will benefit shareholders by:
. providing a premium to Bindley Western shareholders based on market
prices for the Bindley Western common shares immediately prior to the
signing of the merger agreement and producing an immediate accretion to
earnings for Cardinal and its shareholders;
. producing significant cost saving opportunities and anticipated synergies
of approximately $100 million on an annualized basis by the end of the
third year following the completion of the merger;
. improving asset utilization of current distribution infrastructure and
technology and creating a platform to support high growth segments, such
as the nuclear pharmacy business;
. diversifying our businesses with broader product offerings and a wider
customer base; and
. combining two high-growth companies with a similar service orientation
and innovative culture.
THE MERGER (PAGES 26 AND 46)
The merger agreement is included as Annex A to this proxy
statement/prospectus. Please read the merger agreement. The merger agreement is
the legal document that governs the merger.
General
We propose a combination in which Bindley Western will merge with Brick
Merger Corp., a wholly owned subsidiary of Cardinal, with the result that,
after the merger, Bindley Western will become a wholly owned subsidiary of
Cardinal. In exchange for your Bindley Western common shares, you will have the
right to receive 0.4275 of a Cardinal common share for each Bindley Western
common share you own (with cash paid in lieu of fractional shares). After the
merger, both Cardinal shareholders and Bindley Western shareholders will be
shareholders of Cardinal.
Merger Consideration; Conversion of Shares (page 46)
When we complete the merger, your Bindley Western common shares will be
exchanged for Cardinal common shares. Each Bindley Western common share will
automatically be converted into the right to receive 0.4275 of a Cardinal
common share. The total number of Cardinal common shares you will receive will
therefore be equal to the number of Bindley Western common shares you own
multiplied by 0.4275 with cash being paid in place of any fractional shares.
5
Because the number of Cardinal common shares that you will receive in the
merger is determined by the fixed exchange ratio of 0.4275, the value of the
Cardinal common shares you will receive in the merger will fluctuate as the
price of Cardinal common shares changes.
Bindley Western Stock Options (page 58)
When we complete the merger, stock options to purchase Bindley Western
common shares granted to Bindley Western employees under Bindley Western's
stock option plans that are outstanding and not yet exercised will become
options to purchase Cardinal common shares. In addition, under the terms of
Bindley Western's stock option plans (other than stock option plans for non-
employee directors), the outstanding options generally will vest upon
shareholder approval of the merger. The number of Cardinal common shares
subject to such stock options and the exercise price of such stock options will
be adjusted according to the exchange ratio so that the stock options have the
same value immediately before and immediately after the merger. After the
merger, these options will continue to be governed by the terms of Bindley
Western's stock option plans as in effect at the time of grant of each such
option.
Management and Operations after the Merger (page 51)
After the merger, the Cardinal board of directors will continue to manage
the business of Cardinal, which will then include the business of Bindley
Western as a wholly owned subsidiary. In connection with the merger, however,
Cardinal will, as soon as the merger is completed, take all steps necessary to
elect to the Cardinal board of directors William E. Bindley, the Chairman,
President and Chief Executive Officer of Bindley Western. In addition, much of
Bindley Western's current management is expected to remain in place. Over time,
following completion of the merger, Bindley Western's operations will be
combined with Cardinal's.
Bindley Western's Recommendations to Shareholders (page 27)
The Bindley Western board of directors believes that the merger is fair to
you and in your best interests, and it unanimously recommends that you vote
"FOR" approval of the merger agreement and the merger.
Opinion of Bindley Western's Financial Advisor (page 30)
In connection with the merger, the Bindley Western board of directors
received a written opinion from Salomon Smith Barney Inc. as to the fairness,
from a financial point of view and as of the date of the opinion, of the
exchange ratio provided for in the merger. The full text of Salomon Smith
Barney's written opinion, dated December 2, 2000, is included in this document
as Annex C. We encourage you to read this opinion in its entirety carefully for
a description of the assumptions made, matters considered and limitations on
the review undertaken.
Salomon Smith Barney's opinion is addressed to the Bindley Western board of
directors and does not constitute a recommendation to any shareholder with
respect to any matters relating to the proposed merger.
Conditions to Completion of the Merger (page 55)
The completion of the merger depends on a number of conditions being met. In
addition to customary conditions relating to our compliance with the merger
agreement, these include the following:
. approval of the merger agreement by the holders of a majority of the
outstanding Bindley Western common shares;
. receipt of all antitrust and other requisite governmental approvals;
. approval of Cardinal common shares to be issued in the merger for listing
on the New York Stock Exchange, which has been obtained;
6
. receipt of an opinion from Bindley Western's legal counsel, which has
already been delivered, to the effect that, for U.S. federal income tax
purposes, the exchange of Bindley Western common shares for Cardinal
common shares generally will not cause Bindley Western shareholders to
recognize any gain or loss other than in connection with any cash
received in lieu of fractional shares;
. receipt of a letter from Arthur Andersen LLP stating that the merger will
be treated as a pooling of interests for accounting purposes;
. receipt of a letter from PricewaterhouseCoopers LLP concurring with
Bindley Western's management that there are no conditions precluding
Bindley Western from being a party to a business combination transaction
for which pooling-of-interests accounting treatment would be available;
. absence of any injunction or legal restraint blocking the merger or
seeking to prevent Cardinal or Bindley Western from exercising full
rights of ownership and control, or of any proceedings by a government
authority trying to block the merger;
. receipt of an opinion from Bindley Western's legal counsel in connection
with the spin-off of Priority Healthcare Corporation to the effect that
the transactions contemplated by the merger agreement should not cause
Bindley Western to recognize gain or loss on the spin-off of Priority
Healthcare Corporation by reason of Section 355(e) of the Internal
Revenue Code of 1986, as amended; and
. absence of any event that has had or is likely to have a material adverse
effect on Cardinal or Bindley Western.
Bindley Western and Cardinal may each waive any condition intended for its
benefit other than the need to obtain shareholder approval and any other
condition required as a matter of law.
Termination of the Merger (page 58)
We can agree at any time to terminate the merger agreement without
completing the merger, even if the shareholders of Bindley Western have
approved it. Also, either of us can decide, without the consent of the other,
to terminate the merger agreement in various circumstances, including the
following:
. if there is any law or regulation that makes the merger illegal or if any
governmental entity issues a final, non-appealable order blocking the
merger;
. if the merger has not been completed by August 30, 2001 (unless the
failure to complete the merger by that time is due to a violation of the
merger agreement by the party that wants to terminate the agreement);
. if the other party breaches our agreement in a way that would entitle the
party seeking to terminate the agreement to not consummate the merger,
and the breaching party does not correct the breach promptly (as long as
the party seeking to terminate has not itself materially breached the
merger agreement);
. if at the special meeting or any adjournment thereof, the requisite vote
of the Bindley Western shareholders needed to approve the merger
agreement is not obtained; or
. if at any time the other party shall have taken any action that prevents
the merger from qualifying as a pooling of interests and Arthur Andersen
LLP advises Cardinal that the merger cannot be accounted for as a pooling
of interests.
In addition, Cardinal may, without the consent of Bindley Western, decide to
terminate the merger agreement in various circumstances, including the
following:
. if the Bindley Western board withdraws, modifies or changes its
recommendation in favor of the merger in a manner adverse to Cardinal, or
if the Bindley Western board approves or recommends a competing business
combination or similar transaction for Bindley Western with a third
party, or if the Bindley Western board refuses to affirm its
recommendation of the merger within 15 business days of a written request
from Cardinal; or
7
. if Bindley Western materially breaches any of its obligations under the
stock option agreement (described below).
In addition, Bindley Western may, without the consent of Cardinal, decide to
terminate the merger agreement if: (1) the Bindley Western board determines in
good faith, after consultation with its financial and legal advisors, that a
written proposal from a third party for a competing business combination or
similar transaction with Bindley Western (which Bindley Western did not solicit
or encourage) is more favorable to the Bindley Western shareholders from a
financial point of view than is the merger; (2) the Bindley Western board
determines in good faith, after consultation with its legal counsel, that its
failure to enter into the competing business combination or similar transaction
with the third party would constitute a breach of its fiduciary duties under
applicable law; and (3) Bindley Western pays Cardinal the fees described below.
In those circumstances, Bindley Western may enter into an agreement with the
third party proposing the competing business combination or similar
transaction.
Termination Fees (page 59)
Bindley Western must pay Cardinal a termination fee of $53 million and up to
$6 million of Cardinal's costs related to the merger if:
. the merger agreement is terminated by Bindley Western in order to pursue
a competing business combination;
. the merger agreement is terminated upon mutual consent after the
announcement of a competing business combination;
. the Bindley Western board has withdrawn or modified its recommendation to
the Bindley Western shareholders in a manner adverse to Cardinal; or the
Bindley Western board has recommended a competing business combination or
similar transaction to the Bindley Western shareholders; or if the
Bindley Western board refuses to affirm its recommendation of the merger
within 15 business days of a written request from Cardinal;
. the merger is not completed by August 30, 2001 as a result of Bindley
Western's willful failure to perform any material covenant or obligation
of the merger agreement;
. Bindley Western has materially breached its obligations under the stock
option agreement; or
. the merger agreement is terminated because the Bindley Western
shareholders do not approve the merger at the Bindley Western special
meeting, and prior to such termination a third party had made or
disclosed a proposal for a competing business combination with Bindley
Western, and within 12 months of the termination Bindley Western enters
into an agreement with respect to a competing business combination.
Bindley Western must pay Cardinal a termination fee of $20 million and up to
$6 million of Cardinal's costs related to the merger if:
. the merger agreement is terminated because the Bindley Western
shareholders do not approve the merger at the Bindley Western special
meeting, and prior to such termination a third party had made or
disclosed a proposal for a competing business combination with Bindley
Western.
Bindley Western must pay Cardinal a termination fee of $20 million if:
. the merger agreement is terminated because the Bindley Western
shareholders do not approve the merger at the Bindley Western special
meeting, and no proposal for a competing business combination with
Bindley Western has been made or disclosed by any third party, but
Bindley Western enters into an agreement with respect to a business
combination within six months of the termination.
In addition, some of these termination events will also entitle Cardinal to
exercise its option under the stock option agreement as described below.
Cardinal and Bindley Western will split the amount of filing fees and other
expenses incurred in connection with the cost of filing, printing and
distributing this proxy statement/prospectus. Except as stated above, we will
each pay our own fees and expenses.
8
Amendment and Waiver (page 61)
We may jointly amend the merger agreement, and each of us may waive our
right to require the other party to adhere to the terms and conditions of the
agreement, to the extent legally permissible. However, we may amend the
agreement after the Bindley Western shareholders approve the merger only if the
amendment does not require the further approval of the Bindley Western
shareholders under applicable law or if the Bindley Western shareholders
approve the amendment.
Accounting Treatment (page 39)
We expect the merger to qualify as a pooling of interests. This means that,
for accounting and financial reporting purposes, we will treat our companies as
if they had always been one. We have conditioned our obligations to complete
the merger on Cardinal's receipt of a letter from its independent public
accountants stating that the merger will qualify as a pooling of interests and
Bindley Western's receipt of a letter from its independent public accountants
stating that Bindley Western is qualified to be a party to a pooling-of-
interests transaction.
STOCK OPTION AGREEMENT (PAGE 41)
As an inducement to Cardinal to enter into the merger agreement, Bindley
Western has entered into a stock option agreement that grants to Cardinal an
option to purchase Bindley Western common shares under certain circumstances.
The most Bindley Western common shares that can be purchased if the option is
exercised is 19.9% of the outstanding Bindley Western common shares. The
purchase price per Bindley Western common share under the option granted by
Bindley Western is $42.54, or the exchange ratio of the merger times the
average of the closing prices of the Cardinal common shares for the five
trading days before the option is exercised, whichever is lower. In certain
circumstances, Cardinal may require Bindley Western to repurchase the option
(and any Bindley Western common shares purchased under the option) at a
predetermined price. In addition, Bindley Western may require Cardinal to sell
the option (and/or any Bindley Western common shares purchased under the
option) back to Bindley Western at a price determined by a formula set forth in
the stock option agreement. However, Cardinal's profit from exercising the
option or selling the option (or Bindley Western common shares purchased under
the option) to Bindley Western may not exceed an aggregate of $80 million when
combined with any termination fees it receives (excluding reimbursement of
expenses) in connection with the termination of the merger agreement.
Cardinal may not exercise the option unless specific events occur. These
events generally are business combinations or acquisition transactions relating
to Bindley Western and certain related activities (other than the merger we are
proposing in this proxy statement/prospectus) such as a merger or the sale of a
substantial amount of assets or stock. The stock option agreement is included
as Annex B to this proxy statement/ prospectus. We do not know of any event
that has occurred as of the date of this proxy statement/prospectus that would
permit Cardinal to exercise the option.
Bindley Western granted the option to Cardinal to increase the likelihood
that we would complete the merger. The stock option agreement could discourage
other companies from trying or proposing to combine with Bindley Western before
we complete the merger.
SUPPORT/VOTING AGREEMENTS (PAGE 44)
In connection with the merger, Cardinal and Bindley Western have entered
into support/voting agreements with William E. Bindley, Thomas J. Salentine,
Michael D. McCormick and Keith W. Burks, all of whom are executive officers of
Bindley Western. As of the record date, January 11, 2001, these executive
officers held approximately 6,716,637 Bindley Western common shares,
representing approximately 18.7% of the outstanding Bindley Western common
shares. Pursuant to the support/voting agreements, each of these executive
officers has agreed to vote all their shares in favor of the merger agreement
and the merger at the special meeting.
9
INTERESTS OF BINDLEY WESTERN'S DIRECTORS AND OFFICERS IN THE MERGER THAT ARE
DIFFERENT FROM YOUR INTERESTS (PAGE 36)
Some of Bindley Western's directors and officers have interests in the
merger that are different from, or in addition to, their interests as
shareholders of Bindley Western. These interests exist because of rights these
directors and officers hold under agreements with Bindley Western or under
Bindley Western employee benefit plans. Some of Bindley Western's directors and
officers have the following interests in the merger that are different from
your and their interests as shareholders:
. Cardinal will indemnify the directors and officers of Bindley Western and
its subsidiaries after the merger to the same extent as they were
indemnified before the merger, and generally maintain director and
officer liability insurance for six years after completion of the merger.
. Under the terms of Bindley Western's stock option plans (other than the
stock option plan for non-employee directors), all outstanding Bindley
Western stock options will become fully vested and exercisable upon
shareholder approval of the merger. In addition, following shareholder
approval of the merger, all amounts in each executive officer's account
under Bindley Western's supplemental deferred compensation plans will be
distributed to him.
. Any stock options not exercised before the merger will be converted into
options to purchase Cardinal common shares, with appropriate adjustments
to reflect the exchange ratio.
. Messrs. Bindley, Salentine, McCormick and Burks were also covered by
termination benefit agreements under which they are entitled to change-
in-control payments. Upon completion of the merger, the termination
benefit agreements will be replaced by executive agreements between
Cardinal, Bindley Western and the executives, providing for lump sum
payments upon completion of the merger and other matters.
Additional interests of Bindley Western directors and executive officers are
described further in "The Merger--Interests of Bindley Western's Directors and
Officers in the Merger" on pages 36 through 38.
The Bindley Western board of directors knew about these additional
interests, and considered them, when it approved the merger and recommended
that Bindley Western shareholders approve the merger agreement.
APPRAISAL RIGHTS (PAGE 39)
Under Indiana law, Bindley Western shareholders are not entitled to any
dissenters' rights of appraisal in connection with the merger.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES (PAGE 62)
We expect that for U.S. federal income tax purposes, the exchange of Bindley
Western common shares for Cardinal common shares generally will not cause
Bindley Western shareholders to recognize any gain or loss. Bindley Western
shareholders will, however, have to recognize gain or loss in connection with
any cash received in lieu of fractional shares.
Bindley Western has received a legal opinion from its counsel that the U.S.
federal income tax treatment will be as we have described it in this proxy
statement/prospectus. This opinion will not bind the Internal Revenue Service,
which could take a different view.
THIS TAX TREATMENT MAY NOT APPLY TO ALL BINDLEY WESTERN SHAREHOLDERS.
DETERMINING THE ACTUAL TAX CONSEQUENCES OF THE MERGER TO YOU MAY BE
COMPLICATED. THEY WILL DEPEND ON YOUR SPECIFIC SITUATION AND ON VARIABLES NOT
WITHIN OUR CONTROL. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR FOR A FULL
UNDERSTANDING OF THE MERGER'S TAX CONSEQUENCES FOR YOU.
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SIGNIFICANT DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS (PAGE 77)
The rights of Bindley Western shareholders are currently governed by the
Indiana Business Corporation Law and Bindley Western's amended and restated
articles of incorporation and bylaws, as amended and restated. The rights of
Cardinal shareholders are governed by the Ohio General Corporation Law and
Cardinal's amended and restated articles of incorporation and restated code of
regulations, each as amended. Upon our completing the merger, shareholders of
Cardinal and shareholders of Bindley Western will both be shareholders of
Cardinal, and your rights will be governed by the Ohio General Corporation Law
and by Cardinal's amended and restated articles of incorporation and restated
code of regulations, each as amended. Neither Cardinal's amended and restated
articles of incorporation nor its restated code of regulations, each as
amended, will be affected by the merger.
REGULATORY APPROVALS (PAGE 39)
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and the applicable rules of the U.S. Federal Trade Commission, we may not
complete the merger unless we make certain filings with the Antitrust Division
of the U.S. Department of Justice and the U.S. Federal Trade Commission and
certain waiting periods expire or are earlier terminated. Bindley Western and
Cardinal have submitted the required filings to the Antitrust Division of the
Department of Justice and the Federal Trade Commission. The waiting period
under the Hart-Scott-Rodino Act expired on January 7, 2001 without being
extended by a Request for Additional Information or Documentary Materials.
The New York Stock Exchange has approved the listing of the Cardinal common
shares to be issued in the merger on the New York Stock Exchange, subject to
official notice of issuance.
In connection with the merger, Cardinal may be required to give
notifications to and/or receive consents from the United States Drug
Enforcement Administration, the United States Nuclear Regulatory Commission,
state nuclear regulatory agencies, state boards of pharmacy and governmental
agencies under numerous licenses and permits held by Bindley Western and its
subsidiaries. Although we do not expect that obtaining any required consents
from these agencies will prevent us from completing the merger, we cannot be
certain that we will obtain all required regulatory clearances.
Other than as we describe in this document, the merger does not require the
approval or clearance of any federal, state or foreign agency. We will,
however, be required to make certain filings with federal and state
governmental authorities to complete the merger.
FORWARD-LOOKING STATEMENTS (IMMEDIATELY FOLLOWING THE "NOTICE OF SPECIAL
MEETING OF SHAREHOLDERS")
We have each made forward-looking statements in this document (and in
documents to which we refer you in this document) that are subject to risks and
uncertainties. These forward-looking statements include information about
possible or assumed future results of our operations or the performance of the
combined company after the merger is completed. Also, when we use any of the
words "believes," "expects," "anticipates," "estimates" or similar expressions,
we are making forward-looking statements. Many possible events or factors could
affect the future financial results and performance of each of our companies
and the combined company after the merger and could cause those results or that
performance to differ materially from those expressed in our forward-looking
statements. See "Forward-Looking Statements" immediately following the "Notice
of Special Meeting of Shareholders."
11
SELECTED HISTORICAL FINANCIAL INFORMATION
The following financial information is to aid you in your analysis of the
financial aspects of the merger. We present below selected historical financial
data of Bindley Western for each of the five years ended December 31, 1999 and
for the nine months ended September 30, 2000 and 1999, and of Cardinal for each
of the five years ended June 30, 2000 and for the three months ended September
30, 2000 and 1999. The income statement of Bindley Western for the nine months
ended September 30, 2000 and 1999 and the balance sheet data as of September
30, 2000 and 1999 are derived from the unaudited financial statements
incorporated by reference in this proxy statement/prospectus. The income
statement of Cardinal for the three months ended September 30, 2000 and 1999
and the balance sheet data as of September 30, 2000 and 1999 are derived from
the unaudited financial statements incorporated by reference in this proxy
statement/prospectus.
We derived the income statement data for Bindley Western for the years ended
December 31, 1999, 1998 and 1997, and the balance sheet data as of December 31,
1999 and 1998, from audited consolidated financial statements, which we have
incorporated by reference into this proxy statement/prospectus. We derived the
income statement data for Bindley Western for the years ended December 31, 1996
and 1995 and the balance sheet data as of December 31, 1997, 1996 and 1995 from
audited consolidated financial statements, which, in accordance with Securities
and Exchange Commission rules, we have not incorporated by reference into this
proxy statement/prospectus.
We derived the income statement data for Cardinal for the years ended June
30, 2000, 1999 and 1998, and the balance sheet data as of June 30, 2000 and
1999, from audited consolidated financial statements, which we have
incorporated by reference into this proxy statement/prospectus. We derived the
income statement data for Cardinal for the years ended June 30, 1997 and 1996
and the balance sheet data as of June 30, 1998, 1997 and 1996 from audited
consolidated financial statements, which, in accordance with Securities and
Exchange Commission rules, we have not incorporated by reference into this
proxy statement/prospectus.
----------------
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The historical financial data that appears below is only a summary, and you
should read it in conjunction with the historical financial statements and
related notes of Bindley Western. Bindley Western's historical financial
statements are included in documents filed with the Securities and Exchange
Commission. See "Where You Can Find More Information" on page 95.
BINDLEY WESTERN INDUSTRIES, INC.
(In millions, except per share amounts)
NINE MONTHS ENDED
AT OR FOR THE FISCAL YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------------- -----------------
1995 1996 1997 1998(1) 1999 1999 2000(2)
-------- -------- -------- -------- -------- -------- --------
EARNINGS DATA:
Revenue:
Net sales from stock.. $1,928.7 $2,127.3 $2,760.2 $4,124.0 $5,010.9 $3,687.9 $4,760.6
Net brokerage sales... 2,741.4 3,190.2 4,549.7 3,497.4 3,468.4 2,470.7 2,466.2
-------- -------- -------- -------- -------- -------- --------
Total net revenue....... $4,670.1 $5,317.5 $7,309.9 $7,621.4 $8,479.3 $6,158.6 $7,226.8
Net earnings............ $ 16.4 $ 18.0 $ 23.7 $ 19.1 $ 36.7 $ 26.8 $ 14.0
Earnings per common
share:(3)
Basic................. $ 0.84 $ 0.89 $ 1.04 $ 0.67 $ 1.16 $ 0.87 $ 0.40
Diluted............... 0.72 0.76 0.89 0.63 1.07 0.79 0.38
Cash dividends declared
per common share....... $ 0.080 $ 0.080 $ 0.080 $ 0.080 $ 0.065 $ 0.050 $ 0.055
BALANCE SHEET DATA:
Total assets............ $ 848.7 $ 941.2 $1,287.8 $1,286.6 $1,766.2 $1,581.0 $1,988.9
Long-term obligations,
less current portion... 69.5 99.8 32.1 0.6 38.7 13.8 38.3
Shareholders' equity.... $ 200.8 $ 222.1 $ 342.4 $ 333.3 $ 426.2 $ 411.3 $ 444.9
- --------
(1) On December 31, 1998, Bindley Western distributed to the holders of Bindley
Western common shares all of the 10,214,286 shares of Priority Healthcare
Corporation Class A common stock owned by Bindley Western in the form of a
dividend. As a result of the distribution, Priority ceased to be a
subsidiary of Bindley Western as of December 31, 1998 and as such, its
assets, liabilities and equity are not included in the balance sheet data
as of December 31, 1998. However, Priority's results of operations, net of
minority interest, for the year ended December 31, 1998 are included in
Bindley Western's earnings statement data as of December 31, 1998 as
Priority was a subsidiary of Bindley Western for the full year of fiscal
1998. During fiscal 1998, Bindley Western recorded a one-time charge of
approximately $18.8 million ($14.0 million, net of tax) in connection with
the Priority distribution. See Notes 2, 7, 10, 12, 13 and 17 of the "Notes
to Consolidated Financial Statements" incorporated by reference to Bindley
Western's 1999 Form 10-K/A for further discussion.
(2) The amounts included in the nine months ended September 30, 2000 include
the impact of a one-time charge of $21.3 million ($20.8 million, net of
tax) related to a legal settlement. See Note 3 of the "Notes to
Consolidated Financial Statements" incorporated by reference to Bindley
Western's September 2000 10-Q/A for further discussion.
(3) Net earnings per common share have been adjusted to retroactively reflect
all stock dividends and stock splits through September 30, 2000.
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The historical financial data that appears below is only a summary, and you
should read it in conjunction with the historical financial statements and
related notes of Cardinal. Cardinal's historical financial statements are
included in documents filed with the Securities and Exchange Commission. See
"Where You Can Find More Information" on page 95.
CARDINAL HEALTH INC.
(In millions, except per share amounts)
THREE MONTHS ENDED
AT OR FOR THE FISCAL YEAR ENDED JUNE 30,(1) SEPTEMBER 30,(1)
--------------------------------------------------- -------------------
1996 1997 1998(2) 1999(2) 2000 1999 2000
--------- --------- --------- --------- ---------- --------- ---------
EARNINGS DATA:
Revenue:
Operating revenue..... $14,449.6 $15,995.9 $18,084.6 $21,558.5 $ 25,246.9 $ 5,829.3 $ 6,983.2
Bulk deliveries to
customer warehouses.. 2,178.5 2,469.1 2,991.4 3,553.0 4,623.7 954.4 1,751.4
--------- --------- --------- --------- ---------- --------- ---------
Total revenue........... $16,628.1 $18,465.0 $21,076.0 $25,111.5 $ 29,870.6 $ 6,783.7 $ 8,734.6
Net earnings (loss)..... $ (310.2) $ 351.0 $ 448.5 $ 481.0 $ 679.7 $ 122.0 $ 173.2
Earnings (loss) per
common share:(3).......
Basic................. $ (1.17) $ 1.29 $ 1.61 $ 1.73 $ 2.44 $ 0.44 $ 0.62
Diluted............... (1.17) 1.26 1.58 1.68 2.39 0.43 0.61
Cash dividends declared
per common share(3).... $ 0.053 $ 0.063 $ 0.073 $ 0.100 $ 0.105 $ 0.025 $ 0.030
BALANCE SHEET DATA:
Total assets............ $ 6,555.7 $ 6,636.9 $ 7,596.6 $ 8,404.5 $ 10,264.9 $ 9,437.3 $11,224.6
Long-term obligations,
less current portion... 1,593.3 1,321.0 1,330.0 1,223.9 1,485.8 1,519.6 1,973.3
Shareholders' equity.... $ 2,294.2 $ 2,717.9 $ 3,055.1 $ 3,569.6 $ 3,981.2 $ 3,681.0 $ 4,230.3
- --------
(1) Amounts reflect business combinations in all periods presented. Fiscal
2000, 1999, 1998, 1997 and 1996 and the three months ended September 30,
2000 and 1999 amounts reflect the impact of merger-related costs and other
special charges. See Note 2 of "Notes to Consolidated Financial Statements"
incorporated by reference to Cardinal's Form 10-K for the fiscal year ended
June 30, 2000 for a further discussion of merger-related costs and other
special charges affecting fiscal 2000, 1999, and 1998. Fiscal 1997 amounts
reflect the impact of merger-related charges of $50.9 million ($36.6
million, net of tax). Fiscal 1996 amounts reflect the impact of the write-
down of goodwill of $550.0 million ($550.0 million, net of tax) due to the
change by Allegiance Corporation in its method of assessing goodwill. In
addition, fiscal 1996 amounts reflect the impact of merger-related charges
and facility rationalizations of $178.5 million ($122.8 million, net of
tax). See Note 5 of "Notes to Condensed Consolidated Financial Statements"
incorporated by reference to Cardinal's September Form 10-Q for the three
months ended September 30, 2000 for further discussion of merger-related
costs and other special charges affecting the three months ended September
30, 2000 and 1999.
(2) Amounts above do not reflect the impact of pro forma adjustments related to
Automatic Liquid Packaging, Inc. taxes (see Notes 1 and 2 of "Notes to
Consolidated Financial Statements" incorporated by reference to Cardinal's
Form 10-K for the fiscal year ended June 30, 2000). For the fiscal years
ended June 30, 1999 and 1998, the pro forma adjustment for Automatic Liquid
Packaging taxes would have reduced net earnings by $9.3 million and $4.6
million, respectively. The pro forma adjustment would have decreased
diluted earnings per common share by $0.03 to $1.65 for fiscal year 1999
and by $0.02 to $1.56 for fiscal year 1998.
(3) Net earnings and cash dividends per common share have been adjusted to
retroactively reflect all stock dividends and stock splits through
September 30, 2000.
14
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Cardinal's historical fiscal year ends on June 30, but Bindley Western's
historical fiscal year ends on December 31. For purposes of combining Bindley
Western's historical financial information with Cardinal's in the pro forma
condensed combined statements of earnings herein, the financial information of
Cardinal for the fiscal years ended June 30, 2000, 1999 and 1998 have been
combined with Bindley Western's financial information for the fiscal years
ended December 31, 1999, 1998 and 1997. Cardinal's financial information for
the three months ended September 30, 2000 and 1999 have been combined with
Bindley Western's financial information for the three months ended September
30, 2000 and March 31, 1999.
As a result of the combination of financial information discussed above, the
financial results of Bindley Western for the six months ended June 30, 2000 are
excluded from the pro forma financial statements. Bindley Western's net
revenues and net loss for the six months ended June 30, 2000 were approximately
$4.9 billion and $2.8 million. We have included this unaudited pro forma
condensed combined summary information only for the purposes of illustration,
and it does not necessarily indicate what the operating results or financial
position would have been if the merger between Cardinal and Bindley Western had
been completed at the dates indicated. Moreover, this information does not
necessarily indicate what the future operating results or financial position of
the combined company will be. Upon consummation of the merger, the actual
financial position and results of operations will differ, perhaps
significantly, from the pro forma information due to a variety of factors,
including changes in operating results between the dates of the pro forma
information and the date the merger is consummated and thereafter, as well as
factors discussed under "Risk Factors." You should read this selected unaudited
pro forma combined financial information in conjunction with the "Unaudited Pro
Forma Condensed Combined Financial Information" included elsewhere in this
document. This unaudited pro forma condensed combined summary financial
information does not reflect any adjustments to conform accounting practices or
to reflect any cost savings or other synergies anticipated as a result of the
merger or any future merger-related expenses, as discussed in Note 3 below and
in Note 2 to the "Unaudited Pro Forma Condensed Combined Financial Information"
presented elsewhere in this proxy statement/prospectus.
AT OR FOR THE
AT OR FOR THE FISCAL YEAR THREE MONTHS ENDED
ENDED JUNE 30,(1)(2) SEPTEMBER 30,(1)(2)
----------------------------- -------------------
1998 1999 2000 1999 2000
--------- --------- --------- -------- ----------
(IN MILLIONS, EXCEPT PER SHARE DATA)
EARNINGS DATA:
Revenue:
Operating revenue......... $20,844.8 $25,682.5 $30,257.8 $7,045.9 $ 8,510.9
Bulk deliveries to
customer warehouses...... 7,541.1 7,050.4 8,092.1 1,712.8 2,529.0
--------- --------- --------- -------- ----------
Total revenue............... $28,385.9 $32,732.9 $38,349.9 $8,758.7 $ 11,039.9
Net earnings, excluding
estimated merger
expenses(3)................ $ 472.2 $ 500.1 $ 716.4 $ 131.0 $ 190.0
Earnings per common share,
excluding estimated merger
expenses:(3)(4)(5)
Basic..................... $ 1.64 $ 1.72 $ 2.45 $ 0.45 $ 0.65
Diluted................... 1.60 1.68 2.40 0.44 0.63
Cash dividends declared per
common share(6)............ $ 0.073 $ 0.100 $ 0.105 $ 0.025 $ 0.030
BALANCE SHEET DATA:
Total assets................ $ 13,213.5
Long-term obligations, less
current portion............ 2,011.6
Shareholders' equity(3)..... $ 4,675.2
15
(1) Amounts reflect business combinations in all periods presented.
(2) Amounts include the effect of historical merger-related costs and other
special charges recorded by Cardinal in the fiscal years ended June 30,
2000, 1999 and 1998 and the three-month periods ended September 30, 2000
and 1999 as discussed in Note 1 of "Selected Historical Financial
Information--Cardinal Health, Inc.," and by Bindley Western in fiscal year
ended December 31, 1998 as discussed in Note 1 of the "Selected Historical
Financial Information--Bindley Western Industries, Inc." Amounts included
in the three-month period ended September 30, 2000 include the impact of a
one-time reversal recorded by Bindley Western of a legal accrual of $5.0
million ($5.0 million, net of tax) as a result of a legal settlement. See
Note 3 of the "Notes to Consolidated Financial Statements" incorporated by
reference to Bindley Western's September 2000 10-Q/A for further
discussion.
Amounts do not reflect the impact of the pro forma adjustment related to
Automatic Liquid Packaging taxes as discussed in Note 2 of "Selected
Historical Financial Information--Cardinal Health, Inc."
The following table summarizes the impact of the merger-related costs and
special charges, as well as the impact of the pro forma adjustments related
to Automatic Liquid Packaging taxes on pro forma net earnings and diluted
net earnings per common share in the periods in which they were recorded
(in millions, except per share amounts):
FOR THE FISCAL YEAR FOR THE THREE MONTHS ENDED
ENDED JUNE 30, SEPTEMBER 30,
----------------------- ----------------------------
1998 1999 2000 1999 2000
------ ------- ------ ------------- -------------
IMPACT ON PRO FORMA:
Net earnings............ $(19.5) $(122.3) $(49.8) $ (29.7) $ (6.0)
Diluted earnings per
common share........... $(0.06) $ (0.41) $(0.16) $ (0.10) $ (0.02)
(3) Amount does not reflect the pro forma effect of future merger expenses for
the merger. In connection with the merger, our companies expect to incur
investment banking, legal, accounting and other related transaction costs
and fees. Additionally, our companies expect to incur other merger-related
costs associated with the integration of the separate companies and
institution of efficiencies anticipated as a result of the merger. The
merger-related expenses will be charged to operating expense in the period
which the merger is consummated, or in subsequent periods when incurred.
Since the merger has not yet been consummated and transition plans are
being currently developed, the merger expenses cannot be reasonably
estimated at this time.
The accounting policies of Cardinal and Bindley Western are currently being
studied to determine how they should be conformed. The impact of conforming
accounting policies (if any) is not presently estimable. If conforming
adjustments are required, they will be recorded as part of the restatement
of prior periods, as required by the pooling-of-interests accounting
method.
(4) Net earnings per common share have been adjusted to give retroactive effect
to all stock dividends and stock splits through September 30, 2000.
(5) Net earnings per common share amounts assume the conversion of each Bindley
Western common share into 0.4275 of a Cardinal common share, based on the
exchange ratio. See "The Merger Agreement --Merger Consideration;
Conversion of Securities."
(6) Cash dividends declared per common share represent the historical dividends
of Cardinal for the periods presented and exclude all dividends paid by
Bindley Western and all entities with which Cardinal has merged. Cash
dividends declared per common share have been adjusted to give retroactive
effect to all stock dividends and stock splits through September 30, 2000.
16
COMPARATIVE PER COMMON SHARE INFORMATION
We have set forth below information concerning earnings, cash dividends
declared and book value per share data for Cardinal and Bindley Western on both
historical and pro forma combined bases and on a per share equivalent pro forma
basis for Bindley Western. We have derived the pro forma combined earnings per
share from the "Unaudited Pro Forma Condensed Combined Financial Information"
presented elsewhere in this document (which gives effect to the merger under
the pooling-of-interests accounting method). Pro forma combined cash dividends
declared per share reflect Cardinal cash dividends per share declared in the
periods indicated and exclude all dividends paid by all entities with which
Cardinal has merged. Book value per share for the pro forma combined
presentation is based upon outstanding Cardinal common shares, adjusted to
include the estimated number of Cardinal common shares to be issued in the
merger for outstanding Bindley Western common shares at the time the merger is
completed. The per share equivalent pro forma combined data for Bindley Western
common shares is based on the assumed conversion of each Bindley Western common
share into 0.4275 of a Cardinal common share based upon the exchange ratio. See
"The Merger Agreement--Merger Consideration; Conversion of Securities." You
should read the information set forth below in conjunction with the respective
audited and unaudited financial statements of Cardinal and Bindley Western
incorporated by reference and the "Unaudited Pro Forma Condensed Combined
Financial Information" and the notes thereto presented elsewhere in this proxy
statement/prospectus. See "Where You Can Find More Information."
AT OR FOR THE AT OR FOR THE
FISCAL YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31, SEPTEMBER 30,
-------------------- --------- -------------
1997 1998 1999 1999 2000
------ ------ ------ --------- -------------
BINDLEY WESTERN--HISTORICAL
Net earnings per common
share:(1)........................
Basic............................ $ 1.04 $ 0.67 $ 1.16 $ 0.30 $ 0.48
Diluted.......................... 0.89 0.63 1.07 0.27 0.44
Cash dividends declared per common
share............................ 0.080 0.080 0.065 0.015 0.020
Book value per share.............. 12.53 12.59
AT OR FOR THE AT OR FOR THE
FISCAL YEAR ENDED THREE MONTHS ENDED
JUNE 30, SEPTEMBER 30,
-------------------- -----------------------
1998 1999 2000 1999 2000
------ ------ ------ --------- -------------
CARDINAL--HISTORICAL
Net earnings per common share:(1)
Basic............................ $ 1.61 $ 1.73 $ 2.44 $ 0.44 $ 0.62
Diluted.......................... 1.58 1.68 2.39 0.43 0.61
Cash dividends declared per common
share............................ 0.073 0.100 0.105 0.025 0.030
Book value per share.............. 14.40 15.17
CARDINAL AND BINDLEY WESTERN--PRO
FORMA COMBINED
Net earnings per common share,
excluding estimated merger
expenses:(1)(2)(3)(4)............
Basic............................ $ 1.64 $ 1.72 $ 2.45 $ 0.45 $ 0.65
Diluted.......................... 1.60 1.68 2.40 0.44 0.63
Cash dividends declared per common
share(4)......................... 0.073 0.100 0.105 0.025 0.030
Book value per share(2)(3)........ 15.14 15.90
EQUIVALENT PRO FORMA COMBINED PER
BINDLEY WESTERN SHARE
Net earnings per common share,
excluding estimated merger
expenses:(1)(2)(3)(4)............
Basic............................ $ 0.70 $ 0.74 $ 1.05 $ 0.19 $ 0.28
Diluted.......................... 0.68 0.72 1.03 0.19 0.27
Cash dividends declared per common
share(4)......................... 0.031 0.043 0.045 0.011 0.013
Book value per share(2)(3)........ 6.47 6.80
17
(1) Bindley Western's historical net earnings per common share, Cardinal's
historical net earnings per common share, Cardinal's and Bindley Western's
Pro Forma Combined net earnings per common share and the Equivalent Pro
Forma Combined net earnings per common share reflect the effect of merger-
related costs and other special charges. Amounts include the effect of
merger-related costs and other special charges recorded by Cardinal in
fiscal years ended June 30, 2000, 1999 and 1998 and the three-month periods
ended September 30, 2000 and 1999 as discussed in Note 2 of "Selected
Historical Financial Information--Cardinal Health, Inc.," and by Bindley
Western in fiscal year ended December 31, 1998 as discussed in Note 1 of
the "Selected Historical Financial Information--Bindley Western Industries,
Inc." Bindley Western's historical net earnings per common share included
in the three-month period ended September 30, 2000 include the impact of a
one-time reversal of a legal accrual of $5.0 million ($5.0 million, net of
tax) as a result of a legal settlement. See Note 3 of the "Notes to
Consolidated Financial Statements" incorporated by reference to Bindley
Western's September 2000 10-Q/A for further discussion.
Amounts do not reflect the impact of the pro forma adjustment related to
Automatic Liquid Packaging taxes as discussed in Note 2 of "Selected
Historical Financial Information--Cardinal Health, Inc."
The following table summarizes the impact of the merger-related costs and
special charges, as well as the impact of the pro forma adjustments related
to Automatic Liquid Packaging taxes on pro forma combined diluted net
earnings per common share in the periods in which they were recorded:
FOR THE THREE
FOR THE FISCAL YEAR MONTHS ENDED
ENDED JUNE 30, SEPTEMBER 30,
---------------------- --------------
1998 1999 2000 1999 2000
------ ------ ------ ------ ------
Cardinal and Bindley Western--Pro
Forma Combined diluted net
earnings per common share....... $(0.06) $(0.41) $(0.16) $(0.10) $(0.02)
The following table summarizes the impact of the merger-related costs and
special charges, as well as the impact of the pro forma adjustments related
to Automatic Liquid Packaging taxes on equivalent pro forma diluted net
earnings per common share in the periods in which they were recorded:
FOR THE THREE
FOR THE FISCAL YEAR MONTHS ENDED
ENDED JUNE 30, SEPTEMBER 30,
------------------------- ----------------
1998 1999 2000 1999 2000
------- ------- ------- ------- -------
Equivalent Pro Forma per
Bindley Western Share Diluted
net earnings per common
share........................ $ (0.03) $ (0.18) $ (0.07) $ (0.04) $ (0.01)
(2) The Pro Forma Combined and the Equivalent Pro Forma Combined information
(excluding the book value per share information) presents the combination
of Cardinal for the fiscal years ended June 30, 2000, 1999 and 1998 with
Bindley Western for the fiscal years ending December 31, 1999, 1998 and
1997, respectively. In addition, the financial information of Cardinal for
the three months ended September 30, 2000 and 1999 is combined with that of
Bindley Western for the three months ended September 30, 2000 and March 31,
1999, respectively. The book value per share information as of June 30,
2000 is calculated based on the Cardinal balance sheet as of June 30, 2000
and the Bindley Western balance sheet as of December 31, 1999. The book
value per share information as of September 30, 2000 is calculated based on
the Cardinal and Bindley Western balance sheets as of September 30, 2000.
(3) Amount does not reflect the pro forma effect of future merger expenses for
the merger. In connection with the merger, our companies expect to incur
investment banking, legal, accounting and other related transaction costs
and fees. Additionally, our companies expect to incur other merger-related
costs associated with the integration of the separate companies and
institution of efficiencies anticipated as a result of the merger. The
merger-related expenses will be charged to operating expense in the period
which
18
the merger is consummated, or in subsequent periods when incurred. Since
the merger has not yet been consummated and transition plans are being
currently developed, the merger expenses cannot be reasonably estimated at
this time.
The accounting policies of Cardinal and Bindley Western are currently being
studied to determine how they should be conformed. The impact of conforming
accounting policies (if any) is not presently estimable. If conforming
adjustments are required, they will be recorded as part of the restatement
of prior periods, as required by the pooling-of-interests accounting
method.
(4) Pro Forma Combined cash dividends declared per common share represent the
historical dividends of Cardinal for all periods presented and exclude all
dividends paid by Bindley Western and all entities with which Cardinal has
merged. Cardinal's and Bindley Western's Pro Forma Combined cash dividends
declared per common share have been adjusted to give retroactive effect to
all stock dividends and stock splits through September 30, 2000.
19
COMPARATIVE MARKET PRICE AND DIVIDEND DATA
On the table below, we present the range of the reported high and low
closing per share sale prices (as shown on the New York Stock Exchange
Composite Tape) of the Cardinal common shares and the Bindley Western common
shares, as well as the per share dividends paid on those shares, for the
calendar quarters indicated. We have adjusted the share price information in
the table to reflect retroactively all applicable stock splits.
CARDINAL BINDLEY WESTERN
COMMON SHARES COMMON SHARES
------------------------ -----------------------
CALENDAR YEAR HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
- ------------- ------- ------ --------- ------ ------ ---------
1998:
First quarter................ $ 58.80 $46.67 $0.020 $11.17 $ 7.95 $0.020
Second quarter............... 64.17 57.08 0.020 12.97 10.14 0.020
Third quarter................ 71.00 55.67 0.025 13.51 10.32 0.020
Fourth quarter............... 75.88 54.83 0.025 19.38 10.19 0.020
1999:
First quarter................ $ 80.50 $66.00 $0.025 $23.84 $17.69 $0.020
Second quarter............... 71.88 56.88 0.025 23.81 20.81 0.015
Third quarter................ 69.94 52.00 0.025 23.88 13.44 0.015
Fourth quarter............... 56.38 37.50 0.025 15.06 11.96 0.015
2000:
First quarter................ $ 59.38 $37.19 $0.025 $18.08 $12.97 $0.015
Second quarter............... 74.00 45.88 0.030 26.41 12.85 0.020
Third quarter................ 95.06 67.91 0.030 34.35 25.59 0.020
Fourth quarter .............. 103.88 88.56 0.030 43.56 28.38 0.020
2001:
First quarter (through
January 10)................. $ 97.25 $88.00 -- $40.81 $37.19 --
On December 1, 2000, the last trading day prior to our signing and
announcing the merger agreement, the closing price of Cardinal common shares
was $99.50 and the closing price of Bindley Western common shares was $33.00,
as reported on the New York Stock Exchange Composite Tape. Based on the
exchange ratio provided in the merger agreement, the value of Bindley Western
common shares on December 1, 2000 was $42.54. On January 10, 2001, the most
recent date prior to the mailing of this document to you, the last sale prices
of Cardinal common shares and Bindley Western common shares were $93.81 per
share and $40.13 per share, respectively, as reported on the New York Stock
Exchange Composite Tape. We encourage you to obtain current market quotations
for the Cardinal common shares and the Bindley Western common shares.
The New York Stock Exchange has approved the listing of the Cardinal common
shares that Bindley Western shareholders will receive in the merger on the New
York Stock Exchange, subject to official notice of issuance.
On November 1, 2000, the Cardinal board of directors declared a dividend on
Cardinal common shares of $0.03 per share, payable on January 15, 2001 to
holders of record on January 1, 2001. Cardinal anticipates that it will
continue to pay quarterly cash dividends. The Cardinal board of directors,
however, has discretion to decide upon the timing and amount of any future
dividends, and whether or not Cardinal will pay such dividends (and if so, how
much such dividends will be) will depend on Cardinal's future earnings,
financial condition, capital requirements and other factors.
In the merger agreement, Bindley Western agreed that, until the merger is
completed or the merger agreement is otherwise terminated, Bindley Western will
not make, declare or pay any dividend or distribution on the Bindley Western
common shares other than its regularly quarterly dividend of $0.02 per share.
20
RISK FACTORS
In considering whether to vote in favor of the merger between our companies,
you should consider all of the information we have included in this proxy
statement/prospectus and its annexes and all of the information included in the
documents incorporated by reference. In addition, you should pay particular
attention to the following risk factors related to the merger. These factors
are important, and we have not been able to quantify their potential effects on
the combined company. These factors are in addition to the risks faced by
Cardinal and Bindley Western in their day-to-day business operations and are
not presented in order of magnitude or importance.
THE MARKET VALUE OF CARDINAL COMMON SHARES WILL VARY.
The exchange ratio is a fixed ratio that will not be adjusted as a result of
any increase or decrease in the price of either Cardinal common shares or
Bindley Western common shares. The price of Cardinal common shares at the time
the merger is completed may be higher or lower than the price on the date of
this proxy statement/prospectus or on the date of the special meeting of
shareholders. Changes in the business, operations or prospects of Cardinal or
Bindley Western, market assessments of the likelihood that the merger will be
completed, regulatory considerations, general market and economic conditions or
other factors may affect the prices of the Cardinal common shares, the Bindley
Western common shares or both. Most of these factors are beyond our control.
Since the merger will be completed only after all the conditions to the merger
are satisfied or waived, including the holding of the special meeting of
Bindley Western shareholders, there is no way to be sure that the price of the
Cardinal common shares on the date of the special meeting will be indicative of
the price at the time the merger is completed. You should obtain current market
quotations for both the Cardinal common shares and the Bindley Western common
shares.
UNCERTAINTIES EXIST IN INTEGRATING OUR BUSINESS OPERATIONS.
In deciding that the merger is in the best interests of its shareholders,
the Bindley Western board of directors considered the potential complementary
effects of combining our companies' assets, personnel and operational
expertise. Integrating businesses, however, involves a number of special risks,
including:
. the possibility that management may be distracted from regular business
concerns by the need to integrate operations,
. unforeseen difficulties in integrating operations and systems,
. customer reactions to proposed changes,
. problems in assimilating and retaining the employees of the acquired
company,
. challenges in retaining customers, and
. potential adverse short-term or long-term effects on operating results.
THERE ARE RISKS ASSOCIATED WITH CARDINAL'S ACQUISITION STRATEGY.
An important element of Cardinal's growth strategy is to pursue strategic
acquisitions that either expand or complement its business, and Cardinal
routinely reviews acquisition opportunities. Acquisitions involve a number of
special risks, including the risks pertaining to integrating acquired
businesses as noted above under "--Uncertainties exist in integrating our
business operations" and below under "--We may fail to achieve the benefits
anticipated in the merger." In addition, Cardinal may incur debt to finance
future acquisitions, and Cardinal may issue securities in connection with
future acquisitions that may dilute the holdings of current and future Cardinal
shareholders. If Cardinal is unable to successfully complete and integrate
strategic acquisitions in a timely manner, Cardinal's growth strategy may be
impaired.
WE MAY FAIL TO ACHIEVE THE BENEFITS ANTICIPATED IN THE MERGER.
We believe that significant business opportunities and cost savings are
achievable as a result of the merger. Our estimates of cost savings are based
upon many assumptions, including future sales levels and other
21
operating results, the availability of funds for capital expenditures, the
timing of certain events, as well as general industry and business conditions
and other matters, many of which are beyond the control of the combined
company. Our estimates are also based on a management consensus as to what
levels of sales and similar efficiencies should be achievable by an entity the
size of the combined company. Our estimates of potential cost savings and
revenue enhancements are forward-looking statements that are inherently
uncertain. The combined company's actual cost savings and revenue enhancements,
if any, could differ from those projected and such differences could be
material. Therefore, you should not rely too definitively on our estimates as
predictors of actual cost savings and revenue enhancements. We cannot assure
you that unforeseen costs and expenses or other factors (whether arising in
connection with the integration of the two companies' operations or otherwise)
will not offset the estimated cost savings and revenue enhancements or other
components of the combined company's plan or result in delays in the
realization of certain projected cost savings. See "Forward-Looking Statements"
immediately following the "Notice of Special Meeting of Shareholders."
22
SPECIAL MEETING
The Bindley Western board of directors is soliciting proxies from the
holders of Bindley Western common shares for use at the special meeting and at
any adjournments or postponements of the special meeting. This proxy
statement/prospectus, together with the form of proxy, is expected to be mailed
to holders of Bindley Western common shares on or about January 12, 2001.
TIME AND PLACE OF THE MEETING
The time and place of the special meeting of Bindley Western shareholders
is:
Wednesday, February 14, 2001
9:00 a.m., Indianapolis time
Embassy Suites
3912 Vincennes Road
Indianapolis, Indiana
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
The special meeting of Bindley Western shareholders will be held to:
1. Vote on a proposal to approve the Agreement and Plan of Merger, dated
as of December 2, 2000, among Bindley Western, Cardinal and Brick Merger
Corp., a wholly owned subsidiary of Cardinal. The agreement and plan of
merger is included in this proxy statement/prospectus as Annex A. The
merger agreement provides for the merger of Brick Merger Corp. with and
into Bindley Western, with Bindley Western, as the surviving corporation in
the merger, becoming a wholly owned subsidiary of Cardinal.
2. Adjourn the special meeting, if necessary, to permit further
solicitation of proxies in the event there are not sufficient votes at the
time of the special meeting to approve the merger proposal.
3. Act on any other matters that may properly come before the special
meeting.
RECORD DATE
The Bindley Western board of directors has established January 11, 2001, as
the record date for the special meeting. Only holders of record of Bindley
Western common shares on the record date are entitled to attend and vote at the
special meeting or at any adjournment or postponements of the special meeting.
As of the close of business on January 11, 2001, there were about 35,851,042
Bindley Western common shares outstanding and entitled to vote for purposes of
the general vote at the special meeting of Bindley Western shareholders.
SHARE OWNERSHIP
Bindley Western. At the record date for the special meeting, all of Bindley
Western's directors, executive officers and their affiliates as a group
beneficially owned a total of 6,993,898 of the outstanding Bindley Western
common shares, representing approximately 19.5% of the voting power at the
special meeting. Each of these directors and officers is expected to vote the
Bindley Western common shares beneficially owned by him or her in favor of the
merger. Four of Bindley Western's executive officers who own approximately
18.7% of the outstanding shares on the record date have executed voting/support
agreements with Cardinal agreeing to vote in favor of the merger.
Cardinal. At the record date, Cardinal and its subsidiaries beneficially
owned 17 Bindley Western common shares. At the same date, all of Cardinal's
directors, executive officers and their affiliates as a group did not hold any
Bindley Western common shares.
23
QUORUM
A quorum for the general vote, consisting of the holders of a majority of
the aggregate votes represented by Bindley Western common shares outstanding at
the record date, must be present in person or represented by proxy for the
transaction of business at the special meeting. Shares held by brokers or
nominees as to which instructions have not been received from the beneficial
owners or persons entitled to vote and for which the broker or nominee does not
have discretionary power to vote on a particular matter are referred to as
"broker non-votes." These "broker non-votes" and shares represented by proxies
that reflect abstentions will be treated as shares that are present and
entitled to vote for purposes of determining the presence of a quorum.
VOTE REQUIRED
Approval of the merger agreement and the merger at the special meeting
requires the affirmative vote of a majority of the outstanding Bindley Western
common shares. Each shareholder will have one vote for each common share held
on the record date.
Because approval of the merger requires the affirmative vote of a specified
percentage of outstanding shares, not voting on the proposal, or failing to
instruct your broker on how to vote shares held for you by the broker, will
have the same effect as voting against the merger.
You may vote your shares in one of the following ways:
(1) by completing and returning the accompanying proxy card;
(2) through the Internet or by telephone, as outlined on the
accompanying proxy card; or
(3) by appearing and voting in person at the special meeting.
Four Bindley Western executive officers have already agreed to vote in favor
of the merger agreement at the special meeting. As of the record date, January
11, 2001, they held approximately 18.7% of the outstanding Bindley Western
common shares.
VOTING AND REVOCATION OF PROXIES
All Bindley Western common shares represented at the special meeting by a
properly executed proxy will be voted in accordance with the instructions
indicated on the proxy, unless the proxy is revoked before a vote is taken. If
you sign and return a proxy without voting instructions, and do not revoke the
proxy, the proxy will be voted "FOR" the proposal to approve the merger
agreement and "FOR" any other matters that may properly come before the special
meeting.
You may revoke your proxy at any time before it is voted. A proxy may be
revoked prior to the vote at the special meeting in any of the following ways:
(1) by submitting a written revocation to the Corporate Secretary of
Bindley Western at 8909 Purdue Road, Indianapolis, Indiana 46268;
(2) by submitting a later dated proxy by mail or telephone or through
the Internet; or
(3) by voting in person at the special meeting.
However, simply attending the special meeting will not revoke a proxy.
If you do not hold your Bindley Western common shares in your own name, you
may revoke a previously given proxy by following the revocation instructions
provided by the bank, broker or other party who is the registered owner of the
shares.
SOLICITATION OF PROXIES
Bindley Western will bear the costs of soliciting proxies to vote on the
merger at the special meeting, and Cardinal and Bindley Western will split the
amount of the filing fees and other expenses incurred in connection
24
with the cost of filing, printing and distributing this proxy
statement/prospectus. MacKenzie Partners, Inc. has been retained by Bindley
Western to assist in the solicitation of proxies for the special meeting and
will receive a fee of up to $7,500, plus reasonable out-of-pocket expenses.
In addition to solicitation by mail, directors, officers and employees of
Bindley Western and its subsidiaries may solicit proxies from Bindley Western
shareholders, either personally, through the Internet or by telephone or other
form of communication. None of the foregoing persons who solicit proxies will
be specifically compensated for such services. Bindley Western does not
anticipate that any other persons will be specifically engaged to solicit
proxies or that special compensation will be paid for that purpose, but Bindley
Western reserves the right to do so should it conclude that such efforts are
necessary or advisable. Nominees, fiduciaries and other custodians will be
requested to forward soliciting materials to beneficial owners and will be
reimbursed for their reasonable expenses incurred in sending proxy material to
beneficial owners.
25
THE MERGER
BACKGROUND OF THE MERGER
As part of its strategy, Cardinal continually maintains a variety of
contacts with potential candidates for combination within the health care
industry. Bindley Western has also from time to time considered potential
candidates for business combinations within various segments of the health
services and health care industry. However, as a result of its spin-off of
Priority Healthcare on December 31, 1998, Bindley Western was precluded from
pursuing certain business combinations either due to potential negative tax
implications arising from the Priority Healthcare spin-off or because of
limitations under applicable generally accepted accounting principles with
respect to accounting for transactions as a pooling of interests.
In mid-September 2000, Robert D. Walter, the Chairman and Chief Executive
Officer of Cardinal, telephoned William E. Bindley, the Chairman and Chief
Executive Officer of Bindley Western, to set up a meeting to discuss potential
strategic matters involving the two companies. At this meeting, which occurred
in mid-September between Mr. Walter and another senior Cardinal executive and
Mr. Bindley and another senior Bindley Western executive, a number of potential
strategic business matters were discussed, but a potential business combination
was not among the issues addressed. At a subsequent meeting in late September
between Messrs. Walter and Bindley, the possibility of a business combination
transaction involving the two companies was raised for the first time.
During late September and early October, there were contacts between several
of Cardinal's senior executives and several of Bindley Western's senior
executives to discuss certain due diligence matters on a preliminary basis. In
late October, at the direction of Bindley Western, a representative of Salomon
Smith Barney, Bindley Western's financial advisor, contacted a senior Cardinal
executive to initiate preliminary discussions concerning various aspects of a
potential transaction and, subsequently, discussions continued among senior
executives at both companies. These preliminary discussions included an
examination of the strategic implications of such a business combination, the
respective business and management philosophies and goals and a preliminary
review of the opportunities such a business combination could afford the
combined companies. In addition, Cardinal and Bindley Western each separately
began to identify the potential synergies, efficiencies and cost savings that
could potentially be achieved through a combination of Cardinal's and Bindley
Western's businesses. During this period, Cardinal retained Credit Suisse First
Boston as its financial advisor.
In early November, at Cardinal's regular quarterly board of directors
meeting, the board was apprised as to the discussions between the two companies
to date and management presented its rationale for a business combination. No
action with respect to any potential transaction was taken at this meeting.
During the first half of November, discussions continued among representatives
of Cardinal and Bindley Western regarding the proposed form of transaction, the
potential value range for such a transaction and the deal protection that
Cardinal would require as part of any such transaction. In mid-November,
Bindley Western announced that it was delaying the filing of its quarterly
report on Form 10-Q for the quarter ended September 30, 2000 to permit a
restatement of its financial statements to account for its August 31, 1999
acquisition of Central Pharmacy Services under the purchase method of
accounting. This Form 10-Q was filed on November 20, 2000 (and subsequently
amended by a Form 10-Q/A filed on December 21, 2000). Beginning in mid-
November, Bindley Western permitted Cardinal and its advisors to undertake a
comprehensive due diligence investigation of Bindley Western and Bindley
Western and its advisors were given access to Cardinal to undertake a similar
process.
Beginning in mid-November and continuing through the execution of the merger
agreement in early December 2000, Cardinal and Bindley Western, along with
their respective legal advisors, negotiated the terms of a definitive merger
agreement, a stock option agreement, support/voting agreements and executive
agreements. During this period, there were a series of discussions between
Messrs. Walter and Bindley concerning, among other matters, Cardinal's
requirement for a stock option agreement as part of any potential transaction
as well as considering the appropriate exchange ratio for a possible business
combination. During this period, the parties and their legal and financial
advisors also continued their due diligence investigations of each other's
businesses.
26
On November 30, 2000, a special meeting of the Cardinal board of directors
occurred at which the potential business combination with Bindley Western was
considered and approved, with the Cardinal board of directors delegating
certain matters to the executive committee of its board of directors, if
necessary.
On November 30, 2000, a special meeting of the Bindley Western board of
directors was held at which the proposed business combination with Cardinal was
discussed. At this meeting, Bindley Western's management and its legal and
financial advisors discussed with the Bindley Western board the terms and
provisions of the proposed business combination as they then stood, including
the exchange ratio and the terms of the merger agreement, the support/voting
agreements, the executive agreements and the proposed stock option agreement.
Bindley Western's legal counsel reviewed with the Bindley Western board the
structure for the business combination, as well as legal and regulatory issues
that would be involved in any such combination. Bindley Western's financial
advisor reviewed with the Bindley Western board its financial analysis of the
exchange ratio, as summarized below under the caption "Opinion of Bindley
Western's Financial Advisor." After discussing the proposed business
combination, the Bindley Western board directed management and its advisors to
continue negotiations with Cardinal and to determine whether Cardinal was
willing to proceed with the merger without the proposed stock option agreement.
Between the November 30, 2000 and December 2, 2000 Bindley Western board
meetings, Cardinal indicated that the stock option agreement was an essential
part of the proposed transaction and the two companies and their legal advisors
discussed the terms under which Bindley Western would be prepared to enter into
a stock option agreement in connection with the proposed transaction.
Thereafter, the terms of the definitive documentation were finalized.
At a special meeting of the Bindley Western board of directors on December
2, 2000, the Bindley Western board received updates from Bindley Western's
management and its legal and financial advisors regarding the terms of the
merger agreement, the support/voting agreements, the stock option agreement and
the executive agreements. Bindley Western's board also received the oral
opinion of Salomon Smith Barney, which opinion was confirmed by delivery of a
written opinion, dated December 2, 2000, to the effect that, as of that date
and based on and subject to the matters described in its opinion, the exchange
ratio was fair, from a financial point of view, to the holders of Bindley
Western common shares. After due consideration, the Bindley Western board
approved in advance, for purposes of the business combination provisions of the
Indiana Business Corporation Law, Cardinal's acquisition of beneficial
ownership of Bindley Western common shares in the merger and under the stock
option agreement and support/voting agreements. The Bindley Western board also
amended its bylaws to opt out of the control share acquisition provisions of
the Indiana Business Corporation Law in order to exempt the proposed
transaction from those provisions. Thereafter, the Bindley Western board
considered and approved the merger agreement, the support/voting agreements,
the stock option agreement and the executive agreements.
Subsequently, Cardinal and Bindley Western entered into the merger agreement
and the stock option agreement and Cardinal and each of the four senior
executives of Bindley Western entered into the support/voting agreements. On
such date, the executive agreements among Cardinal, Bindley Western and each of
Bindley Western's four senior executives were also executed. See "--Interests
of Bindley Western's Directors and Officers in the Merger."
On December 4, 2000, the parties issued a joint press release announcing the
merger.
REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS
Considerations and Recommendation of Bindley Western's Board of
Directors. After careful consideration, Bindley Western's board of directors
unanimously determined the merger to be fair to the shareholders of Bindley
Western and in the best interests of Bindley Western and its shareholders.
Bindley Western's board of directors unanimously approved the merger agreement
and the merger and unanimously recommends your approval of the merger agreement
and the merger.
27
In evaluating the merger, Bindley Western's board consulted with Bindley
Western's management and legal and financial advisors, and considered a number
of factors, including the following positive factors:
. the fact that the exchange ratio of 0.4275 of a Cardinal common share
to be received for each Bindley Western common share as consideration
in the merger represented a substantial premium over the recent market
prices of Bindley Western common shares prior to the announcement of
the execution of the merger agreement; based upon the closing price of
Cardinal common shares on the last trading day before such
announcement, the premium to be received by Bindley Western
shareholders was approximately 29% over the closing price of the
Bindley Western common shares on that date;
. the Bindley Western board believes that Cardinal common shares
represent an attractive investment opportunity for Bindley Western's
shareholders based on the abilities and performance of Cardinal's
senior management and Cardinal's record of consistently generating
significant sales and earnings growth and stock price appreciation; in
the opinion of Bindley Western's board and management, Cardinal's
prospects for continued significant growth in sales and earnings are
strong and will be enhanced as a result of the merger;
. the strategic fit between Bindley Western and Cardinal, including the
opportunity for synergies and cost savings through facilities
rationalization, elimination of redundant overhead, improved inventory
and capital usage and expanded product merchandising;
. the opportunity for Bindley Western's shareholders to continue as
shareholders of a combined company that has greater financial strength
than Bindley Western alone, has a focus on generating shareholder
value, and has strategic objectives and an operating philosophy
compatible with those of Bindley Western's management;
. the assessment of Bindley Western's strategic alternatives to the
merger, including remaining an independent public company, continuing
its pursuit of acquisitions, or merging or consolidating with a party or
parties other than Cardinal;
. the financial presentation of Salomon Smith Barney, including its
opinion dated December 2, 2000 to Bindley Western's board of directors
as to the fairness, from a financial point of view and as of the date of
the opinion, of the exchange ratio provided for in the merger, as more
fully described under "--Opinion of Bindley Western's Financial
Advisor;"
. the terms and conditions of the merger agreement, including
-- the nature of the parties' representations, warranties, covenants
and agreements, which the board believed would provide a reasonable
degree of certainty that the merger would be completed; and
-- the circumstances under which the merger agreement could be
terminated by Bindley Western and the size and impact of the
termination fees associated with a termination;
. the fact that the merger is expected to be a tax-free transaction for
Bindley Western's shareholders, except for cash received in lieu of
fractional shares, and that it is expected to be accounted for using the
pooling-of-interests method of accounting;
. the combination of Bindley Western's and Cardinal's seasoned management
teams;
. the enhanced opportunities for advancement for Bindley Western employees
in the combined company;
. the combination will provide Bindley Western's customers access to a
significantly broader line of products and services, as well as a
sophisticated, established e-commerce infrastructure;
. Cardinal's agreement to appoint William E. Bindley to the Cardinal board
of directors following the merger; and
. the fact that the merger likely will be completed, including the
likelihood that the merger will receive the necessary regulatory
approvals.
28
The Bindley Western board of directors also considered a variety of
potentially negative factors concerning the merger, including the following:
. the difficulties and management distractions inherent in completing the
merger and then integrating the operations of the two companies;
. the risk that the potential benefits sought in the merger might not be
fully achieved;
. the risk that the merger might not be consummated, and the possible
adverse implications to customers, investor relations and employee
morale under such circumstances;
. the risk that, although Bindley Western has the right to terminate the
merger agreement if a third party makes a superior proposal for a
business combination, the termination fee provisions of the merger
agreement would have the effect of discouraging such a proposal, and the
risk that the stock option agreement would have the effect of precluding
any alternative business combination with Bindley Western from being
accounted for as a pooling of interests, which could be an impediment to
certain alternative business combination proposals; Bindley Western's
board accepted these provisions as a means to obtain other terms in the
merger, principally the exchange ratio, that are favorable to Bindley
Western's shareholders, and did not believe these favorable terms could
otherwise have been obtained in the negotiations with Cardinal; and
. the time, management resources and expenses required to be incurred by
Bindley Western in connection with the merger.
The Bindley Western board considered these negative factors together with
its consideration of the continued operation of Bindley Western as an
independent company, but decided that the merger provided a more advisable
alternative in light of the positive factors set forth above.
This discussion of the information and factors considered by the Bindley
Western board is not intended to be exhaustive, but includes the material
factors considered. In light of the number of factors and variety of
information the board considered, it did not find it practicable to, and did
not, assign any specific or relative weights to the factors listed above. In
addition, individual Bindley Western directors may have given differing weights
to different factors. The Bindley Western board considered all these factors as
a whole, and overall considered them to be favorable to and to support its
determination to approve the merger agreement and the merger.
In considering the recommendation of the Bindley Western board of directors,
you should be aware that some of Bindley Western's directors and officers have
interests in the merger that are different from, or are in addition to, the
interests of Bindley Western shareholders generally. The board recognized these
interests and determined that they neither supported nor detracted from the
advisability of the merger to Bindley Western shareholders. For a discussion of
these interests, see "--Interests of Bindley Western's Directors and Officers
in the Merger."
FOR THE REASONS DISCUSSED ABOVE, THE BINDLEY WESTERN BOARD HAS DETERMINED
THAT THE TERMS OF THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, BINDLEY
WESTERN AND BINDLEY WESTERN SHAREHOLDERS. ACCORDINGLY, THE BINDLEY WESTERN
BOARD RECOMMENDS THAT BINDLEY WESTERN SHAREHOLDERS VOTE FOR THE APPROVAL OF THE
MERGER AGREEMENT AND THE MERGER.
Considerations of Cardinal's Board of Directors. In the course of reaching
its decision to approve the merger agreement and the transactions contemplated
thereby, the Cardinal board of directors consulted with Cardinal's legal and
financial advisors as well as with Cardinal's management, and considered a
number of factors, including among others:
. management's expectation that the merger will be accretive to earnings
of the combined company, as compared to Cardinal's stand-alone earnings
expectations, before consideration of any synergies;
29
. the strategic and cultural fit between Bindley Western and Cardinal;
. the opportunity for synergies and cost savings through facilities
rationalization, elimination of redundant overhead, improved inventory
and capital usage, particularly by creating higher-volume, state-of-the-
art distribution centers in place of lower volume, less efficient
distribution centers;
. the opportunity to reduce marginal operating costs for the combined
company below levels which either party could achieve independently,
enabling it to share these savings in the form of greater value and
enhanced services to its customers, while maintaining an acceptable
level of profitability;
. the opportunity to build more effective pharmaceutical purchasing
alliances with a larger customer base through Cardinal's e-procurement
platform, making the combined company a more attractive trading partner
to pharmaceutical manufacturers and enabling it to negotiate more
favorable merchandising programs and price discounts on behalf of its
customers;
. the complementary nature of Cardinal's broader service offerings (such
as pharmacy automation, pharmacy management, specialty packaging, health
care information software and health care cost-management services) and
Bindley Western's broader product offerings (such as
radiopharmaceuticals), enabling the combined company to offer a broader
choice to its customers and accelerating the number of meaningful
opportunities to cross-sell these ancillary products and services;
. the addition of Bindley Western's innovative and proven management team;
and
. the opportunity to enter into the high growth nuclear pharmacy business
through Bindley Western's Central Pharmacy unit.
The Cardinal board also considered the fact that it is a condition to the
consummation of the merger that the merger be treated as a pooling of interests
for financial reporting and accounting purposes, therefore, adding no goodwill
relating to this transaction to Cardinal's balance sheet. The foregoing
discussion of the factors considered by the Cardinal board is not intended to
be exhaustive. In view of the wide variety of factors considered in connection
with its evaluation of the merger, the Cardinal board did not find it
practicable to, and did not, quantify or otherwise attempt to assign relative
weights to the specific factors considered in reaching its determinations. In
addition, individual Cardinal directors may have given differing weights to
different factors. The Cardinal board of directors considered all these factors
as a whole, and overall considered them to be favorable to and to support its
determination to approve the merger.
OPINION OF BINDLEY WESTERN'S FINANCIAL ADVISOR
Bindley Western retained Salomon Smith Barney to act as its exclusive
financial advisor in connection with the proposed merger. In connection with
this engagement, Bindley Western requested that Salomon Smith Barney evaluate
the fairness, from a financial point of view, to the holders of Bindley Western
common shares of the exchange ratio provided for in the merger. On December 2,
2000, at a meeting of the Bindley Western board of directors held to evaluate
the proposed merger, Salomon Smith Barney delivered to the Bindley Western
board of directors an oral opinion, which opinion was confirmed by delivery of
a written opinion dated December 2, 2000, to the effect that, as of that date
and based on and subject to the matters described in its opinion, the exchange
ratio was fair, from a financial point of view, to the holders of Bindley
Western common shares.
In arriving at its opinion, Salomon Smith Barney:
. reviewed the merger agreement and related documents;
. held discussions with senior officers, directors and other
representatives and advisors of Bindley Western and with senior officers
and other representatives and advisors of Cardinal concerning the
businesses, operations and prospects of Bindley Western and Cardinal;
30
. examined and discussed with the managements of Bindley Western and
Cardinal publicly available business and financial information relating
to Bindley Western and Cardinal, including publicly available financial
forecasts;
. discussed with the managements of Bindley Western and Cardinal other
information relating to Bindley Western and Cardinal, including
information relating to strategic implications and operational benefits
anticipated to result from the merger;
. reviewed the financial terms of the merger as described in the merger
agreement in relation to, among other things, current and historical
market prices and trading volumes of Bindley Western common shares and
Cardinal common shares, the financial condition and historical and
projected earnings and other operating data of Bindley Western and
Cardinal, and the capitalization and financial condition of Bindley
Western and Cardinal;
. considered, to the extent publicly available, the financial terms of
other similar transactions recently effected which it considered
relevant in evaluating the merger;
. analyzed financial, stock market and other publicly available
information relating to the businesses of other companies whose
operations it considered relevant in evaluating those of Bindley Western
and Cardinal;
. evaluated the potential pro forma financial impact of the merger on
Cardinal; and
. conducted other analyses and examinations and considered other
financial, economic and market criteria as it deemed appropriate in
arriving at its opinion.
In rendering its opinion, Salomon Smith Barney assumed and relied, without
independent verification, on the accuracy and completeness of all financial and
other information and data publicly available or furnished to or otherwise
reviewed by or discussed with Salomon Smith Barney. With respect to publicly
available financial forecasts and other information and data provided to or
otherwise reviewed by or discussed with Salomon Smith Barney, the managements
of Bindley Western and Cardinal advised Salomon Smith Barney that such
forecasts and other information and data represented reasonable estimates and
judgments as to the future financial performance of Bindley Western and
Cardinal.
Salomon Smith Barney assumed, with Bindley Western's consent, that the
merger will be treated as a tax-free reorganization for U.S. federal income tax
purposes and will be accounted for as a pooling of interests under generally
accepted accounting principles. Salomon Smith Barney's opinion relates to the
relative values of Bindley Western and Cardinal. Salomon Smith Barney did not
express any opinion as to what the value of Cardinal common shares actually
will be when issued in the merger or the prices at which Cardinal common shares
will trade after the merger. Salomon Smith Barney did not make and was not
provided with an independent evaluation or appraisal of the assets or
liabilities, contingent or otherwise, of Bindley Western or Cardinal, and
Salomon Smith Barney did not make any physical inspection of the properties or
assets of Bindley Western or Cardinal.
In connection with its engagement, Salomon Smith Barney was not requested
to, and did not, solicit third party indications of interest in the possible
acquisition of all or part of Bindley Western. Salomon Smith Barney expressed
no view as to, and its opinion does not address, the relative merits of the
merger as compared to any alternative business strategies that might exist for
Bindley Western or the effect of any other transaction in which Bindley Western
might engage. Salomon Smith Barney's opinion was necessarily based on
information available, and financial, stock market and other conditions and
circumstances existing and disclosed to Salomon Smith Barney, as of the date of
its opinion. Although Salomon Smith Barney evaluated the exchange ratio from a
financial point of view, Salomon Smith Barney was not asked to and did not
recommend the specific consideration payable in the merger, which was
determined through negotiations between Bindley Western and Cardinal. No other
instructions or limitations were imposed by Bindley Western on Salomon Smith
Barney with respect to the investigations made or procedures followed by
Salomon Smith Barney in rendering its opinion.
31
THE FULL TEXT OF SALOMON SMITH BARNEY'S WRITTEN OPINION DATED DECEMBER 2,
2000, WHICH DESCRIBES THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS
ON THE REVIEW UNDERTAKEN, IS ATTACHED TO THIS PROXY STATEMENT/PROSPECTUS AS
ANNEX C AND IS INCORPORATED INTO THIS PROXY STATEMENT/PROSPECTUS BY REFERENCE.
SALOMON SMITH BARNEY'S OPINION IS DIRECTED TO THE BINDLEY WESTERN BOARD OF
DIRECTORS AND RELATES ONLY TO THE FAIRNESS OF THE EXCHANGE RATIO FROM A
FINANCIAL POINT OF VIEW, DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGER OR ANY
RELATED TRANSACTION AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER
WITH RESPECT TO ANY MATTER RELATING TO THE MERGER.
In preparing its opinion, Salomon Smith Barney performed a variety of
financial and comparative analyses, including those described below. The
summary of these analyses is not a complete description of the analyses
underlying Salomon Smith Barney's opinion. The preparation of a fairness
opinion is a complex analytical process involving various determinations as to
the most appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances and, therefore, a
fairness opinion is not readily susceptible to summary description.
Accordingly, Salomon Smith Barney believes that its analyses must be considered
as a whole and that selecting portions of its analyses and factors or focusing
on information presented in tabular format, without considering all analyses
and factors or the narrative description of the analyses, could create a
misleading or incomplete view of the processes underlying its analyses and
opinion.
In its analyses, Salomon Smith Barney considered industry performance,
general business, economic, market and financial conditions and other matters
existing as of the date of its opinion, many of which are beyond the control of
Bindley Western and Cardinal. No company, transaction or business used in those
analyses as a comparison is identical to Bindley Western, Cardinal or the
proposed merger, and an evaluation of those analyses is not entirely
mathematical. Rather, the analyses involve complex considerations and judgments
concerning financial and operating characteristics and other factors that could
affect the acquisition, public trading or other values of the companies,
business segments or transactions analyzed.
The estimates contained in Salomon Smith Barney's analyses and the valuation
ranges resulting from any particular analysis are not necessarily indicative of
actual values or predictive of future results or values, which may be
significantly more or less favorable than those suggested by its analyses. In
addition, analyses relating to the value of businesses or securities do not
necessarily purport to be appraisals or to reflect the prices at which
businesses or securities actually may be sold. Accordingly, Salomon Smith
Barney's analyses and estimates are inherently subject to substantial
uncertainty.
Salomon Smith Barney's opinion and analyses were only one of many factors
considered by the Bindley Western board of directors in its evaluation of the
merger and should not be viewed as determinative of the views of the Bindley
Western board of directors or management with respect to the exchange ratio or
the proposed merger.
The following is a summary of the material financial analyses performed by
Salomon Smith Barney in connection with the rendering of its opinion dated
December 2, 2000. THE FINANCIAL ANALYSES SUMMARIZED BELOW INCLUDE INFORMATION
PRESENTED IN TABULAR FORMAT. IN ORDER TO FULLY UNDERSTAND SALOMON SMITH
BARNEY'S FINANCIAL ANALYSES, THE TABLES MUST BE READ TOGETHER WITH THE TEXT OF
EACH SUMMARY. THE TABLES ALONE DO NOT CONSTITUTE A COMPLETE DESCRIPTION OF THE
FINANCIAL ANALYSES. CONSIDERING THE DATA SET FORTH IN THE TABLES BELOW WITHOUT
CONSIDERING THE FULL NARRATIVE DESCRIPTION OF THE FINANCIAL ANALYSES, INCLUDING
THE METHODOLOGIES AND ASSUMPTIONS UNDERLYING THE ANALYSES, COULD CREATE A
MISLEADING OR INCOMPLETE VIEW OF SALOMON SMITH BARNEY'S FINANCIAL ANALYSES.
Implied Exchange Ratio Analysis
Introduction. Using a "Selected Companies Analysis" and "Discounted Cash
Flow Analysis" for each of Bindley Western and Cardinal, Salomon Smith Barney
derived implied equity reference ranges for Bindley Western and Cardinal from
each analysis as described below. Based on these implied equity reference
ranges,
32
Salomon Smith Barney then calculated implied exchange ratio reference ranges
for Bindley Western common shares and Cardinal common shares. Salomon Smith
Barney also calculated an implied exchange ratio reference range for Bindley
Western common shares and Cardinal common shares based on an "Historical
Exchange Ratio Analysis" as described below. These implied exchange ratio
reference ranges were then compared with the exchange ratio provided for in the
merger. The "Selected Companies Analysis" and "Discounted Cash Flow Analysis"
for each of Bindley Western and Cardinal and the "Historical Exchange Ratio
Analysis" performed by Salomon Smith Barney for purposes of its "Implied
Exchange Ratio Analysis" are described below:
Selected Companies Analysis
Bindley Western. Salomon Smith Barney compared financial and stock
market information for Bindley Western and the following four selected
publicly held companies mainly in the pharmaceutical distribution industry:
. AmeriSource Health Corporation
. Bergen Brunswig Corporation
. Cardinal
. McKesson HBOC, Inc.
Salomon Smith Barney reviewed enterprise values, calculated as equity
market value, plus debt, less cash and other customary adjustments, as a
multiple of estimated calendar years 2000 and 2001 earnings before
interest, taxes, depreciation and amortization, commonly referred to as
EBITDA. Salomon Smith Barney also reviewed equity market values as a
multiple of estimated calendar years 2000 and 2001 net income. Salomon
Smith Barney then applied a range of selected multiples of estimated
calendar years 2000 and 2001 EBITDA and net income derived from the
selected companies to corresponding financial data of Bindley Western. All
multiples were based on closing stock prices on November 29, 2000.
Estimated financial data for the selected companies were based on publicly
available research analysts' estimates. Estimated financial data for
Bindley Western were based on publicly available research analysts'
estimates and discussions with Bindley Western management. This analysis
indicated an implied equity reference range for Bindley Western of
approximately $30.00 to $36.00 per share.
Cardinal. Salomon Smith Barney also compared financial and stock market
information for Cardinal and the following 14 selected publicly held
companies in selected sectors of the health care industry:
PHARMACEUTICAL DISTRIBUTION SECTOR: MEDICAL-SURGICAL PRODUCTS SECTOR:
. AmeriSource Health Corporation . Abbott Laboratories
. Bergen Brunswig Corporation . Baxter International Inc.
. Bindley Western . Johnson & Johnson
. McKesson HBOC, Inc. . Medtronic, Inc.
MEDICAL-SURGICAL PRODUCTS DISTRIBUTION SECTOR:
DRUG DELIVERY SECTOR:
. Henry Schein, Inc. . ALZA Corporation
. Owens & Minor, Inc. . Andrx Corporation
. PSS World Medical, Inc. . Biovail Corp.
Salomon Smith Barney reviewed enterprise values as a multiple of
estimated calendar years 2000 and 2001 EBITDA and equity market values as a
multiple of estimated calendar years 2000 and 2001 net income. Salomon
Smith Barney then applied a range of selected multiples of estimated
calendar years 2000 and 2001 EBITDA and net income derived from the
selected companies to corresponding financial data of Cardinal. All
multiples were based on closing stock prices on November 29, 2000.
Estimated
33
financial data for the selected companies were based on publicly available
research analysts' estimates. Estimated financial data for Cardinal were
based on publicly available research analysts' estimates and discussions
with Cardinal management. This analysis indicated an implied equity
reference range for Cardinal of approximately $85.00 to $97.00 per share.
Based on the implied equity reference ranges for Bindley Western and
Cardinal described above, this analysis indicated the following implied
exchange ratio reference range for Bindley Western common shares and
Cardinal common shares, as compared with the exchange ratio provided for in
the merger:
IMPLIED EXCHANGE RATIO REFERENCE RANGE EXCHANGE RATIO IN THE MERGER
0.309-0.424 0.4275
Discounted Cash Flow Analysis
Bindley Western. Salomon Smith Barney performed a discounted cash flow
analysis of Bindley Western to estimate the present value of the unlevered,
after-tax free cash flows that Bindley Western could generate over fiscal
years 2001 through 2005. Estimated financial data for Bindley Western were
based on publicly available research analysts' estimates and discussions
with Bindley Western management. Salomon Smith Barney calculated a range of
estimated EBITDA terminal values by applying terminal value multiples
ranging from 11.0x to 13.0x to Bindley Western's estimated fiscal year 2005
EBITDA. The present value of the cash flows and terminal values were
calculated using discount rates ranging from 9.0% to 10.0%. This analysis
indicated an implied equity reference range for Bindley Western of
approximately $36.00 to $47.00 per share.
Cardinal. Salomon Smith Barney also performed a discounted cash flow
analysis of Cardinal to estimate the present value of the unlevered, after-
tax free cash flows that Cardinal could generate over fiscal years 2001
through 2005. Estimated financial data for Cardinal were based on publicly
available research analysts' estimates and discussions with Cardinal
management. Salomon Smith Barney calculated a range of estimated EBITDA
terminal values by applying terminal value multiples ranging from 13.0x to
15.0x to Cardinal's estimated fiscal year 2005 EBITDA. The present value of
the cash flows and terminal values were calculated using discount rates
ranging from 9.5% to 10.5%. This analysis indicated an implied equity
reference range for Cardinal of approximately $108.00 to $129.00 per share.
Based on the implied equity reference ranges for Bindley Western and
Cardinal described above, this analysis indicated the following implied
exchange ratio reference range for Bindley Western common shares and
Cardinal common shares, as compared with the exchange ratio provided for in
the merger:
IMPLIED EXCHANGE RATIO REFERENCE RANGE EXCHANGE RATIO IN THE MERGER
0.279-0.435 0.4275
Historical Exchange Ratio Analysis
Salomon Smith Barney performed an historical exchange ratio analysis by
dividing the daily closing prices for Bindley Western common shares by the
corresponding prices for Cardinal common shares over the 12-month period
preceding November 29, 2000 in order to calculate daily exchange ratios for
that period. Salomon Smith Barney then calculated the daily exchange ratios
over the 12-month period preceding November 29, 2000 in order to derive an
implied exchange ratio reference range for Bindley Western common shares
and Cardinal common shares. This analysis indicated the following implied
exchange ratio reference range for Bindley Western common shares and
Cardinal common shares, as compared with the exchange ratio provided for in
the merger:
IMPLIED EXCHANGE RATIO REFERENCE RANGE EXCHANGE RATIO IN THE MERGER
0.245-0.464 0.4275
34
Selected Precedent Transactions Analysis
Salomon Smith Barney reviewed the purchase prices and implied transaction
multiples in the following nine selected transactions in the health care
industry:
ACQUIROR TARGET DATE ANNOUNCED
-------- ------ --------------
.AmeriSource Health
Corporation C.D. Smith Healthcare, Inc. April 1999
.Bergen Brunswig
Corporation PharMerica, Inc. January 1999
.Cardinal Allegiance Corporation October 1998
.McKesson Corporation AmeriSource Health Corporation (not completed) September 1997
.Cardinal Bergen Brunswig Corporation (not completed) August 1997
.AmeriSource Health
Corporation Walker Drug Company, L.L.C. January 1997
.McKesson HBOC, Inc. FoxMeyer Corporation's Health Care Business October 1996
.Cardinal Medicine Shoppe International, Inc. August 1995
.Cardinal Distribution,
Inc. Whitmire Distribution Corporation October 1993
Salomon Smith Barney reviewed enterprise values in the selected
transactions as a multiple of latest 12 months EBITDA and equity market values
as a multiple of one-year forward net income. All multiples for the selected
transactions were based on publicly available information at the time of
announcement of the relevant transaction. Estimated financial data for Bindley
Western were based on publicly available research analysts' estimates and
discussions with Bindley Western's management. Salomon Smith Barney then
applied a range of selected multiples of latest 12 months EBITDA and one-year
forward net income to Bindley Western's latest 12 months EBITDA and estimated
calendar year 2001 net income in order to derive an implied equity reference
range for Bindley Western. This analysis indicated the following implied
equity reference range for Bindley Western, as compared with the equity value
for Bindley Western implied in the merger based on the exchange ratio provided
for in the merger and the closing price of Cardinal common shares on November
29, 2000:
IMPLIED EQUITY VALUE PER SHARE BASED ON
EXCHANGE RATIO AND CLOSING PRICE OF
IMPLIED EQUITY REFERENCE RANGE PER SHARE CARDINAL COMMON SHARES ON 11/29/00
---------------------------------------- ---------------------------------------
$36.00-42.00 $42.91
Contribution Analysis
Salomon Smith Barney compared the relative contributions of Bindley Western
and Cardinal to the EBITDA, earnings before interest and taxes, commonly
referred to as EBIT, and net income of the combined company for the latest 12
months and estimated calendar years 2000 and 2001. Estimated financial data
for Bindley Western and Cardinal were based on publicly available research
analysts' estimates and discussions with the managements of Bindley Western
and Cardinal. Salomon Smith Barney then derived implied exchange ratios based
on the relative contributions of each of Bindley Western and Cardinal. This
analysis indicated the following implied exchange ratio reference range for
Bindley Western common shares and Cardinal common shares, as compared with the
exchange ratio provided for in the merger:
IMPLIED EXCHANGE RATIO REFERENCE RANGE EXCHANGE RATIO IN THE MERGER
-------------------------------------- ----------------------------
0.416-0.556 0.4275
Other Factors
In rendering its opinion, Salomon Smith Barney also reviewed and considered
other factors, including:
. the historical trading prices and trading volumes for Bindley Western
common shares and Cardinal common shares, including the trading price
ranges for Bindley Western common shares and Cardinal common shares
during the 12-month period preceding November 29, 2000;
. the relationship between movements in Bindley Western common shares and
Cardinal common shares, movements in the common shares of the selected
companies in the pharmaceutical distribution industry and movements in
the S&P 500 index;
35
. the implied EBITDA and net income multiples and implied premiums payable
in the merger;
. selected analysts' reports on Bindley Western and Cardinal; and
. the potential pro forma financial impact of the merger on Cardinal's
earnings per share for estimated calendar year 2001 and latest 12 months
credit statistics based on publicly available research analysts'
estimates and discussions with Cardinal's management.
Miscellaneous
Under the terms of its engagement, Bindley Western has agreed to pay Salomon
Smith Barney for its financial advisory services upon completion of the merger
an aggregate fee based on a percentage of the total consideration, including
liabilities assumed, payable in the merger. It is currently estimated that the
aggregate fee payable to Salomon Smith Barney will be approximately $10
million. Bindley Western also has agreed to reimburse Salomon Smith Barney for
reasonable travel and other out-of-pocket expenses incurred by Salomon Smith
Barney in performing its services, including reasonable fees and expenses of
its legal counsel, and to indemnify Salomon Smith Barney and related persons
against liabilities, including liabilities under the federal securities laws,
arising out of its engagement.
In the ordinary course of business, Salomon Smith Barney and its affiliates
may actively trade or hold the securities of Bindley Western and Cardinal for
their own account or for the account of customers and, accordingly, may at any
time hold a long or short position in those securities. Salomon Smith Barney
and its affiliates in the past have provided services to Bindley Western and
Cardinal unrelated to the proposed merger, for which services Salomon Smith
Barney and its affiliates have received compensation. However, no such
compensation has been received for services in the past two years. In addition,
Salomon Smith Barney and its affiliates, including Citigroup Inc. and its
affiliates, may maintain relationships with Bindley Western, Cardinal and their
respective affiliates.
Salomon Smith Barney is an internationally recognized investment banking
firm and was selected by Bindley Western based on its experience and expertise.
Salomon Smith Barney regularly engages in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive bids, secondary distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and other
purposes.
INTERESTS OF BINDLEY WESTERN'S DIRECTORS AND OFFICERS IN THE MERGER
General
Members of Bindley Western's board of directors and Bindley Western's
management have interests in the merger that are different from or in addition
to your interests as Bindley Western shareholders. The Bindley Western board
recognized these interests and determined that these interests neither
supported nor detracted from the fairness of the merger to you.
Bindley Western directors and executive officers beneficially owned, as of
the record date, approximately 19.5% of the outstanding Bindley Western common
shares, excluding Bindley Western common shares subject to outstanding stock
options. In connection with the execution of the merger agreement, Messrs.
Bindley, Burks, McCormick and Salentine each executed a support/voting
agreement in which each agreed to vote the Bindley Western common shares that
he owns or controls in favor of the merger. See "The Merger--Support/Voting
Agreements."
Executive Agreements
On April 1, 1996, Bindley Western entered into a termination benefits
agreement with each of Messrs. Bindley, Burks, McCormick and Salentine.
Generally, the termination benefits agreements provided for payments to the
executive of 2.9 times the average of the executive's last five years'
includable compensation,
36
as defined in Section 280G of the Internal Revenue Code of 1986, as amended,
paid by Bindley Western, if, following a change in control as defined in the
agreements, the executive is terminated for any reason other than death,
disability, normal retirement or by Bindley Western for cause. The executive
would also be entitled to the payment if, following the change in control, the
executive terminates his employment with Bindley Western in response to certain
actions by Bindley Western which include, among other things, a substantial
reduction in his duties or responsibilities, a reduction in the level of salary
payable to him, the failure by Bindley Western to continue to provide him with
benefits substantially similar to those previously provided to him, his
required relocation, or the breach by Bindley Western of any of the provisions
of the termination benefits agreement. Pursuant to the termination benefits
agreements, the executive would also be entitled to an additional amount to
cover any excise tax imposed upon his payment pursuant to Section 4999 of the
Internal Revenue Code. Shareholder approval of the merger is a change in
control as defined in the termination benefits agreements.
However, in connection with the execution of the merger agreement, Bindley
Western, Cardinal and each of Messrs. Bindley, Burks, McCormick and Salentine
entered into an executive agreement that modified that executive's termination
benefits agreement and will replace it upon completion of the merger. The
executive agreements provide that if the executive remains an employee of
Bindley Western, with certain exceptions, through the completion of the merger,
then immediately after that time, Bindley Western will pay a specified amount
to each executive. These amounts are as follows: Mr. Bindley--$16,300,000, Mr.
Burks--$8,200,000, Mr. McCormick--$8,120,000, and Mr. Salentine--$6,620,000.
These payments replace the amounts that the executives would have received
under their termination benefits agreement, and generally are higher than the
amounts under the termination benefits agreements because the executives agree
in the executive agreements to comply with additional covenants, as described
in the next paragraph. Under the executive agreements, as was the case with the
termination benefits agreements, the executive will be entitled to an
additional amount to cover any excise tax imposed upon his payment pursuant to
Section 4999 of the Internal Revenue Code. If the merger is not completed, the
executive agreements will terminate and the termination benefits agreements
will continue in effect pursuant to their terms in their entirety.
The executive agreements contain non-competition provisions which, among
other things, restrict the executives, for a two-year period following any
termination of their employment or, in the case of Mr. Bindley, if later, the
termination of his service as a member of Cardinal's board, from engaging in
certain specified competitive businesses. During that period, the executives
are also prohibited from soliciting employees and significant customers of
Bindley Western or Cardinal.
Stock Options
Cardinal has agreed to assume all outstanding Bindley Western stock options.
At the time the merger is completed, each outstanding Bindley Western option
will be converted into an option to purchase Cardinal common shares on the same
terms as in effect immediately prior to the completion of the merger, except
that the number of shares of Cardinal common shares issuable upon the exercise
of the option and the exercise price per share will be adjusted based on the
exchange ratio. Under the terms of Bindley Western's employee stock option
plans, all outstanding Bindley Western options will become fully vested and
exercisable upon shareholder approval of the merger. Accordingly, shareholder
approval of the merger will accelerate the vesting of options held by Bindley
Western's executive officers to purchase an aggregate of 1,282,265 Bindley
Western common shares that were not previously exercisable, held as follows:
Mr. Bindley--371,557, Mr. Burks--269,930, Mr. McCormick--269,930, Mr.
Salentine--269,930, Gregory S. Beyerl--50,459 and Michael L. Shinn--50,459.
These six executive officers currently hold options to purchase an aggregate of
3,216,868 other Bindley Western common shares, which are already exercisable.
All of the outstanding options held by Bindley Western's non-employee directors
are already exercisable in accordance with the terms of Bindley Western's
outside directors stock option plan. All of the outstanding options held by
Bindley Western's non-employee directors represent the right to purchase an
aggregate of 29,269 Bindley Western common shares and will also be converted,
based upon the exchange ratio, into options for Cardinal common shares.
37
Benefit Arrangements
Bindley Western has a profit sharing excess plan and a 401(k) excess plan,
both of which are unfunded, nonqualified deferred compensation plans that
benefit Bindley Western's management and highly compensated employees.
Currently, the only participants in these excess plans are Messrs. Bindley,
Burks, McCormick and Salentine. Under the excess plans, contributions are
credited to participants' accounts in amounts that could not be contributed on
their behalf to Bindley Western's qualified profit sharing plan without
exceeding the federal law limits on elective deferrals, compensation and total
contributions. In addition, deemed earnings are credited to participants based
on their election among "measurement funds" that correspond to fund choices
available under Bindley Western's qualified profit sharing plan. Both excess
plans provide that, upon a change in control as defined in those plans, the
excess plans will terminate and all participants' accounts will be distributed
to them in single lump sum payments within 30 days after the change in control.
Shareholder approval of the merger will be a change in control as defined in
the excess plans. As of January 11, 2001, the amounts in each participant's
excess plans accounts were: Mr. Bindley--$1,051,109, Mr. Burks--$307,116,
Mr. McCormick--$290,556 and Mr. Salentine--$2,997,912.
See also "The Merger Agreement--Bindley Western Employee Benefits and
Plans."
Directors' and Officers' Indemnification and Insurance
Under the merger agreement, Cardinal has agreed to cause Bindley Western,
after the completion of the merger, to indemnify and hold harmless the present
and former officers and directors of Bindley Western in respect of acts or
omissions occurring before the completion of the merger to the extent provided
under Bindley Western's articles of incorporation and bylaws, and under the
indemnification agreements between Bindley Western and each of its directors.
In addition, Cardinal will use all reasonable efforts to cause itself or
Bindley Western to obtain and maintain, for a period of six years, policies of
directors' and officers' liability insurance with respect to acts or omissions
occurring before the completion of the merger. These policies will be
comparable to those currently maintained by Bindley Western. However, neither
Cardinal nor Bindley Western will be required to pay an aggregate premium for
this coverage in excess of 300% of the annual premiums that Bindley Western
currently pays.
Continued Employment
Mr. Bindley's executive agreement provides that after the completion of the
merger, he shall serve as a part-time employee of Cardinal for two years,
although either Mr. Bindley or Cardinal may terminate his employment after 18
months. Mr. McCormick and Mr. Salentine's executive agreements provide that
after the completion of the merger, each of them shall serve as a part-time
employee of Cardinal for 18 months, although either the executive or Cardinal
may terminate the employment after one year. Cardinal will pay the following
annual salaries under these arrangements: Mr. Bindley--$75,000, Mr. McCormick--
$50,000 and Mr. Salentine--$50,000. In addition, each executive will be
entitled to participate in Cardinal's profit sharing, retirement and savings
plan.
Although Mr. Burks' executive agreement does not contain provisions
regarding his continued employment with Cardinal, Mr. Burks and Cardinal have
orally agreed that Mr. Burks will serve as a full-time employee of Cardinal
after the completion of the merger. No period of employment or specific amount
of compensation has been set, but Cardinal has agreed that Mr. Burks' salary
will be at least equal to what he received from Bindley Western before the
merger.
Board of Directors
Pursuant to the terms of the merger agreement, immediately after the
completion of the merger, Cardinal's board of directors will take all necessary
action to elect Mr. Bindley to Cardinal's board of directors. No other director
of Bindley Western will be added to the Cardinal board of directors.
38
ACCOUNTING TREATMENT
The merger is intended to qualify as a pooling of interests for accounting
and financial reporting purposes. Consummation of the merger is conditioned on
Cardinal's receipt of a letter, in form and substance reasonably satisfactory
to Cardinal, from Arthur Andersen LLP, dated the closing date of the merger,
stating that it concurs with the conclusion of Cardinal's management that the
merger will qualify as a transaction to be accounted for by Cardinal in
accordance with the pooling-of-interests method of accounting, and Bindley
Western shall have received a letter from PricewaterhouseCoopers LLP, dated the
closing date, stating that it concurs with the conclusion of Bindley Western's
management that no conditions exist that would preclude Bindley Western from
being a party to a business combination for which the pooling-of-interests
method of accounting would be available. In addition, pursuant to the merger
agreement, Cardinal and Bindley Western agree that they will not, and will not
permit any of their respective subsidiaries to, take any actions which would,
or would be reasonably likely to, prevent Cardinal from accounting for the
merger in accordance with the pooling-of-interests method of accounting.
Under the pooling-of-interests method of accounting, the recorded assets and
liabilities of Cardinal and Bindley Western will be carried forward to the
combined company at their historical recorded amounts, income of the combined
company will include income of Bindley Western and Cardinal for the entire
fiscal year in which the combination occurs, and the reported income of the
separate companies for previous periods will be combined and restated as income
of the combined company. See "The Merger Agreement--Conditions" and "Summary--
Selected Unaudited Pro Forma Combined Financial Information."
Pursuant to the merger agreement, Bindley Western is required to obtain
written undertakings from each person who may be at the completion of the
merger or was on the date of the merger agreement an "affiliate" of Bindley
Western for purposes of Rule 145 under the Securities Act of 1933, as amended,
to the effect that, among other things, such person will not sell, transfer or
otherwise dispose of, or direct or cause the sale, transfer or other
disposition of, any Bindley Western common shares or Bindley Western stock
options beneficially owned thereby during the thirty days prior to the
effective time of the merger and will not sell, transfer or otherwise dispose
of, or direct or cause the sale, transfer or other disposition of, any Cardinal
common shares or stock options (or Cardinal common shares issuable upon
exercise thereof) beneficially owned thereby as a result of the merger or
otherwise until after such time as Cardinal shall have publicly released a
report in the form of a quarterly earnings report, registration statement filed
with the Securities and Exchange Commission, a report filed with the Securities
and Exchange Commission or any other public filing, statement or announcement
which includes the combined financial results of Cardinal and Bindley Western
for a period of at least thirty days of combined operations of Cardinal and
Bindley Western following the effective time of the merger.
APPRAISAL RIGHTS
Under Indiana law, Bindley Western shareholders are not entitled to any
dissenters' rights of appraisal in connection with the merger.
REGULATORY APPROVALS
Under the Hart-Scott-Rodino Act, the merger may not be consummated unless
certain filings have been submitted to the Antitrust Division of the U.S.
Department of Justice and the Federal Trade Commission and certain waiting
period requirements have expired or are otherwise earlier terminated by the
Federal Trade Commission and the Antitrust Division. Bindley Western and
Cardinal have submitted the required filings to the Antitrust Division and the
Federal Trade Commission. The waiting period under the Hart-Scott-Rodino Act
expired on January 7, 2001 without being extended by a Request for Additional
Information or Documentary Materials.
39
The Antitrust Division and the Federal Trade Commission frequently
scrutinize the legality under the antitrust laws of transactions such as the
merger. At any time before or after the consummation of the merger, the
Antitrust Division or the Federal Trade Commission could take such action under
the antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the consummation of the merger or seeking the
divestiture of substantial assets of Bindley Western or Cardinal. Bindley
Western and Cardinal believe that the consummation of the merger will not
violate the antitrust laws. There can be no assurance, however, that a
challenge to the merger on antitrust grounds will not be made, or, if such a
challenge is made, what the result will be. In 1998, the Federal Trade
Commission successfully blocked two proposed transactions in the drug wholesale
distribution industry, the acquisition by Cardinal of Bergen Brunswig
Corporation and the acquisition by McKesson Corporation of AmeriSource Health
Corporation. Both Bergen Brunswig and AmeriSource are substantially larger
competitors than Bindley Western. Cardinal and Bindley Western do not believe
that such a challenge could be successfully made.
Bindley Western and Cardinal expect that the merger will not generally
require filings, approvals or clearances with foreign antitrust regulatory
authorities under foreign antitrust laws.
The New York Stock Exchange has approved the listing of the Cardinal common
shares to be issued in the merger on the New York Stock Exchange, subject to
official notice of issuance.
In connection with the merger, Cardinal may be required to give
notifications to and/or receive consents from the United States Drug
Enforcement Administration, the United States Nuclear Regulatory Commission,
state nuclear regulatory agencies, state boards of pharmacy and governmental
agencies under numerous licenses and permits held by Bindley Western and its
subsidiaries. Although we do not expect that obtaining any required consents
from these agencies will prevent us from completing the merger, we cannot be
certain that we will obtain all required regulatory clearances.
Other than as described in this proxy statement/prospectus, the merger does
not require the approval of any federal, state or foreign agency. We will,
however, be required to make certain filings with state and federal
governmental authorities to complete the merger.
FEDERAL SECURITIES LAW CONSEQUENCES
All Cardinal common shares issued in connection with the merger will be
freely transferable, except that any Cardinal common shares received in the
merger by persons who are deemed to be affiliates (as such term is defined
under the Securities Act of 1933) of Cardinal or Bindley Western prior to the
merger may be sold by them only in transactions permitted by the resale
provisions of Rule 145 under the Securities Act, or Rule 144 under the
Securities Act with respect to persons who are or become affiliates of
Cardinal, or as otherwise permitted under the Securities Act. Persons who may
be deemed to be affiliates of Cardinal or Bindley Western generally include
individuals or entities that control, are controlled by or are under common
control with, Cardinal or Bindley Western, as the case may be, and generally
include the executive officers and directors of the companies as well as their
principal shareholders.
Affiliates may not sell their Cardinal common shares acquired in connection
with the merger, except pursuant to an effective registration statement under
the Securities Act covering such shares or in compliance with Rule 145 (or Rule
144 in the case of persons who become affiliates of Cardinal) or another
applicable exemption from the registration requirements of the Securities Act.
In general, Rule 145 provides that for one year following the completion of the
merger an affiliate (together with certain related persons) would be entitled
to sell Cardinal common shares acquired in connection with the merger only
through unsolicited "broker transactions" or in transactions directly with a
"market maker" (as these terms are defined in Rule 144 under the Securities
Act). Additionally, the number of Cardinal common shares to be sold by an
affiliate (together with certain related persons and certain persons acting in
concert) within any three-month period for purposes of Rule 145 may not exceed
the greater of 1% of the outstanding Cardinal common shares or the average
weekly trading volume of such shares during the four calendar weeks preceding
such sale. Rule 145 will remain available to affiliates if Cardinal remains
current with its informational filings with the
40
Securities and Exchange Commission under the Securities Exchange Act of 1934.
One year after the effective time of the merger, an affiliate will be able to
sell such Cardinal common shares without being subject to such manner of sale
or volume limitations provided that Cardinal is current with its informational
filings under the Securities Exchange Act and such affiliate is not then an
affiliate of Cardinal. Two years after the effective time of the merger, an
affiliate will be able to sell such Cardinal common shares without any
restrictions so long as the affiliate had not been an affiliate of Cardinal for
at least three months prior to the date of the sale.
Under the letters with the affiliates of Bindley Western, Cardinal has
agreed that, for so long as any affiliate agreeing to an affiliate letter holds
any Cardinal common shares as to which such affiliate is subject to the
limitations of Rule 145 under the Securities Act, Cardinal will use its
reasonable efforts to file all reports required to be filed by it pursuant to
the Securities Exchange Act so as to satisfy the requirements of paragraph (c)
of Rule 144 that there be available current public information with respect to
Cardinal, and to that extent to make available to such affiliate the exemption
afforded by Rule 145 with respect to the sale, transfer or other disposition of
the Cardinal common shares. See "The Merger--Accounting Treatment."
STOCK OPTION AGREEMENT
In connection with the execution of the merger agreement, Cardinal and
Bindley Western entered into a stock option agreement, dated as of December 2,
2000, pursuant to which Bindley Western granted Cardinal an option to purchase
from Bindley Western, under various circumstances and subject to adjustments,
up to 7,071,185 authorized and unissued Bindley Western common shares at a
price per share equal to the lower of:
. $42.54, or
. 0.4275 multiplied by the average of the closing prices (or if such
securities do not trade on any trading day, the average of the bid and
ask prices therefor on such day) of Cardinal common shares as reported
on the New York Stock Exchange Composite Tape during the five
consecutive trading days ending on (and including) the trading day
immediately prior to such date (or, if such Cardinal common shares are
not traded on the New York Stock Exchange, on such other exchange or
quotation system on which such Cardinal common shares are then traded).
Termination
The option is exercisable, in whole or in part, at any time or from time to
time if a purchase event has occurred and the merger agreement has been
terminated; provided, however, that, to the extent the option has not been
exercised, it will terminate and be of no further force and effect upon the
earliest to occur of:
. the effective time of the merger;
. the termination of the merger agreement if no purchase event has
occurred and the merger agreement is terminated:
-- by mutual written consent, prior to the public announcement of a
competing transaction with another party,
-- because the condition that there be no laws, regulations or orders
that make consummation of the merger illegal or otherwise prohibited
cannot be satisfied,
-- because the merger has not occurred by August 30, 2001, unless
Cardinal has terminated the merger agreement and Bindley Western's
willful failure to perform any material covenant or obligation under
the merger agreement has been the cause of or resulted in the
failure of the merger to occur on or before August 30, 2001,
-- by one party because the other party has breached its
representations, warranties or covenants in a manner that would have
a material adverse effect on its business,
-- because the condition that the merger be accounted for as a pooling
of interests cannot be satisfied, or
41
-- because the merger proposal is not approved by the shareholders of
Bindley Western and no proposal regarding a competing transaction
shall have been made to Bindley Western by a party capable of
completing such a competing transaction, and no proposal or
expression of interest by a third party regarding a competing
transaction shall have been publicly disclosed, at any time prior to
such termination;
. 5:00 p.m. New York City time on the date which is 12 months after the
merger agreement is terminated because the Bindley Western shareholders
do not approve the merger at the special meeting and a proposal
regarding a competing transaction shall have been made to Bindley
Western by a party capable of completing such a competing transaction,
or a proposal or expression of interest by a third party regarding a
competing transaction shall have been publicly disclosed, at any time
prior to such termination; or
. 5:00 p.m. New York City time, on the date that is 125 days following the
occurrence of a purchase event, other than termination of the merger
agreement because the merger is not approved by the shareholders of
Bindley Western, provided further, that if the option cannot be
exercised before its date of termination as a result of any injunction,
order or similar restraint issued by a court of competent jurisdiction,
the option will expire on the tenth business day after such injunction,
order or restraint shall have been dissolved or when such injunction,
order or restraint shall have become permanent and no longer subject to
appeal, as the case may be, but in no event later than 12 months after
the occurrence of a purchase event.
As of the date of the mailing of this proxy statement/prospectus, no event
had occurred that would permit Cardinal to exercise the option.
Purchase Event
Under the stock option agreement, a "purchase event" means:
. any person (other than Cardinal or any of its subsidiaries) has
commenced, as such term is defined in Rule 14d-2 of the Securities
Exchange Act of 1934, as amended, or has filed a registration statement
under the Securities Act of 1933, as amended, with respect to, a tender
offer or exchange offer to purchase any Bindley Western common shares
such that, upon consummation of such offer, such person would own or
control 25% or more of the outstanding Bindley Western common shares;
. Bindley Western or any of its subsidiaries shall enter into, authorize,
recommend, propose or publicly announce an intention to enter into, any
agreement, arrangement or understanding with any person (other than
Cardinal or any of its subsidiaries) pursuant to which such person
shall:
-- consummate a competing business combination with Bindley Western,
-- purchase, lease or otherwise acquire 25% or more of the assets of
Bindley Western or any of its subsidiaries, or
-- become the beneficial owner, or shall acquire the right to become
the beneficial owner, of 25% or more of outstanding Bindley Western
common shares or the securities of any of its subsidiaries;
. any person (other than Cardinal or any of its subsidiaries) becomes the
beneficial owner, or shall acquire the right to become the beneficial
owner, of 25% or more of outstanding Bindley Western common shares;
. the Bindley Western board of directors withdraws, modifies or changes
its recommendation on the merger in a manner adverse to Cardinal, or
fails to affirm it within 15 business days of any written request from
Cardinal; or
. the merger agreement is terminated:
-- because the Bindley Western shareholders do not approve the merger
at the special meeting and a proposal regarding a competing
transaction shall have been made to Bindley Western by a
42
party capable of completing such a competing transaction, or a
proposal or expression of interest by a third party regarding a
competing transaction shall have been publicly disclosed, at any time
prior to such termination,
-- by Cardinal because of a willful failure by Bindley Western or an
affiliate of Bindley Western to perform any material covenant or
obligation under the merger agreement which failure has been the
cause of or resulted in the failure of the merger to occur on or
before August 30, 2001,
-- by Cardinal if the Bindley Western board of directors approves or
recommends any competing transaction,
-- by Bindley Western pursuant to Section 5.3(e) of the merger
agreement, which provides that Bindley Western may terminate the
merger agreement in certain circumstances related to proposals from
third parties for business combinations or similar transactions with
Bindley Western; see "The Merger Agreement--Acquisition Proposals"
and "--Bindley Western Termination Right," or
-- by Cardinal if Bindley Western shall have breached in any material
respect any of its obligations under the stock option agreement.
Cardinal Repurchase Right
At the request of Cardinal, at any time from and after the occurrence of a
purchase event and ending 125 days immediately thereafter, Bindley Western (or
any successor entity thereof) shall repurchase the option from Cardinal
together with all (but not less than all) Bindley Western common shares
purchased by Cardinal pursuant thereto with respect to which Cardinal then has
beneficial ownership, at a price equal to the sum of:
(1) the difference between (a) the "market/tender offer price" for
Bindley Western common shares and (b) the purchase price (subject to
adjustment for changes in Bindley Western common shares by reason of stock
dividends, split-ups, recapitalizations and the like), multiplied by the
number of Bindley Western common shares with respect to which the option
has not been exercised, but only if such "market/tender offer price" is
greater than such exercise price;
(2) the exercise price paid by Cardinal for any Bindley Western common
shares acquired pursuant to the option;
(3) the difference between the "market/tender offer price" and the
exercise price paid by Cardinal for any Bindley Western common shares
purchased pursuant to the exercise of the option, multiplied by the number
of shares so purchased, but only if such "market/tender offer price" is
greater than such exercise price; and
(4) Cardinal's out-of-pocket expenses incurred in connection with
pursuing the transactions contemplated by the merger agreement or the stock
option agreement, provided that Cardinal's reimbursement for costs does not
exceed $6 million.
The "market/tender offer price" is the higher of (1) the highest price per
share at which a tender or exchange offer has been made for Bindley Western
common shares or (2) the highest closing price per share of Bindley Western
common shares as reported by the New York Stock Exchange Composite Tape for
any day within that portion of the Cardinal repurchase period that precedes
the date Cardinal gives notice of the required repurchase as described above.
Bindley Western Repurchase Right
Except to the extent that Cardinal shall have previously exercised its
rights described in the preceding paragraphs, during the six months after the
period of time that Cardinal may exercise a repurchase right, Bindley Western
may repurchase from Cardinal, and Cardinal shall sell to Bindley Western, all
(but not less than all) of the Bindley Western common shares acquired by
Cardinal pursuant to the option and with respect
43
to which Cardinal has beneficial ownership at the time of the repurchase at a
price per share equal to the greater of
(1) 110% of the "market/tender offer price" per share (calculated in the
manner described above but utilizing the period beginning on the occurrence
of a purchase event and ending on the date Bindley Western exercises its
repurchase right),
(2) the repurchase price calculated in the manner described above for
Cardinal's repurchase, or
(3) the sum of (a) the aggregate purchase price of the shares so
repurchased, plus (b) interest on the aggregate purchase price paid for the
shares so repurchased from the date of purchase by Cardinal to the date of
repurchase at the highest rate of interest announced by Chase Manhattan
Bank, New York as its prime or base lending or reference rate during such
period, less any dividends received on the shares repurchased.
Cap on Cardinal's Profit
The sum of (1) all amounts received by Cardinal for the repurchase of all or
part of the unexercised portion of the option by Bindley Western, (2) the
amount received by Cardinal pursuant to the sale of option shares less
Cardinal's purchase price for such option shares and (3) all amounts received
by Cardinal pursuant to the termination provisions of the merger agreement
(excluding reimbursement of expenses) may not exceed $80 million.
Registration Right
Pursuant to the stock option agreement, at any time after a closing of the
purchase and sale of Bindley Western common shares pursuant to the option,
Bindley Western will be obligated, under certain circumstances, to file a
registration statement under the Securities Act of 1933 if necessary in order
to permit the sale or other disposition of the Bindley Western common shares
that have been acquired upon exercise of the option. Bindley Western is not
required to file more than two such registration statements under the stock
option agreement.
The foregoing is a summary of material provisions of the stock option
agreement, a copy of which is attached as Annex B to this proxy
statement/prospectus. This summary is qualified in its entirety by reference to
the stock option agreement, which is incorporated by reference.
SUPPORT/VOTING AGREEMENTS
Concurrently with the execution of the merger agreement, Cardinal executed
with each of William E. Bindley, Thomas J. Salentine, Michael D. McCormick and
Keith W. Burks a support/voting agreement pursuant to which each of the
executives agreed that:
. he will cause any company, trust or other entity controlled by him to,
and will cause his controlled affiliates ("controlled affiliates,"
"controlled" and "affiliate" being defined as under the Securities
Exchange Act of 1934) to, cooperate fully with Cardinal in connection
with the merger agreement and the transactions contemplated thereby;
. during the term of the support/voting agreement, he will not, and will
not permit any such company, trust or other entity to, and will not
permit any of his controlled affiliates to, directly or indirectly
(including through its directors, officers, employees or other
representatives), solicit, initiate, encourage or facilitate, or furnish
or disclose non-public information in furtherance of, any inquiries or
the making of any proposal with respect to any recapitalization, merger,
consolidation or other business combination involving Bindley Western,
or acquisition of any capital stock (other than upon exercise of Bindley
Western stock options that are outstanding as of the date of the
support/voting agreements) or a material amount of the assets of Bindley
Western and its subsidiaries, taken as a whole, in a single transaction
or a series of related transactions, or any acquisition by Bindley
44
Western of any material assets or capital stock of any other person
(other than acquisitions of capital stock or assets of any other person
that are not, individually or in the aggregate, material to Bindley
Western and its subsidiaries, taken as a whole), or any combination of
the foregoing, which is generally referred to as a "competing
transaction," or negotiate, explore or otherwise engage in discussions
with any person (other than Cardinal, Brick Merger Corp. or their
respective directors, officers, employees, agents and representatives)
with respect to any competing transaction or enter into any agreement,
arrangement or understanding with respect to any competing transaction
or agree to or otherwise assist in the effectuation of any competing
transaction; provided, however, that nothing shall prevent him from
taking any action, after having notified Cardinal, or omitting to take
any action solely as a member of the Bindley Western board of directors
required so as not to violate his fiduciary obligations as a director of
Bindley Western after consultation with outside counsel;
. all of the Bindley Western common shares beneficially owned by him or
his controlled affiliates (except, in each case, Bindley Western common
shares subject to unexercised Bindley Western options), or over which he
or any of his controlled affiliates has voting power or control,
directly or indirectly (including any Bindley Western common shares
acquired after the date of his support/voting agreement), at the record
date for any meeting of Bindley Western shareholders called to consider
and vote to approve the merger and the merger agreement and/or the
transactions contemplated thereby will be voted by him or his controlled
affiliates in favor of the merger and the merger agreement and the
transactions contemplated thereby; and
. he will, upon Cardinal's request, execute an irrevocable proxy
appointing Cardinal as his attorney and proxy to vote in favor of the
merger and the merger agreement and the transactions contemplated
thereby.
Each of the support/voting agreements may be terminated at the option of
any party to the agreement at any time upon the earlier of (1) the date on
which the merger agreement is terminated and (2) the effective time of the
merger. The number of Bindley Western common shares beneficially held
(excluding stock options) by Messrs. Bindley, Salentine, McCormick and Burks
as of January 11, 2001 were 6,110,862 shares, 218,257 shares, 187,893 shares
and 199,625 shares, respectively, which represent approximately 18.7% of the
outstanding Bindley Western common shares as of such date.
The foregoing is a summary of the material provisions of the support/voting
agreements of Messrs. Bindley, Salentine, McCormick and Burks, copies of which
are filed as exhibits to the registration statement of which this proxy
statement/prospectus forms a part. This summary is qualified in its entirety
by reference to the actual voting/support agreements which are incorporated by
reference.
45
THE MERGER AGREEMENT
The following is a summary of material provisions of the merger agreement, a
copy of which is attached as Annex A to this proxy statement/prospectus. This
summary is qualified in its entirety by reference to the merger agreement,
which is incorporated by reference.
THE MERGER
The merger agreement provides that Brick Merger Corp. will be merged with
and into Bindley Western, with the result that Bindley Western, as the
surviving corporation, will be a wholly owned subsidiary of Cardinal, subject
to the requisite approval of Bindley Western shareholders and the satisfaction
or waiver of the other conditions to the merger. See "--Conditions." The merger
will become effective upon the filing of duly executed articles of merger with
the Indiana Secretary of State or at such later time as shall be specified in
the articles of merger. This filing will be made as promptly as possible
following the closing of the merger, which shall occur as soon as practicable
(but in any event within ten business days) following the date upon which all
conditions set forth in the merger agreement have been satisfied or waived, or
such other time or date as agreed to by the parties to the merger agreement. It
is currently anticipated that the effective time of the merger will occur
shortly after the date of the special meeting of Bindley Western shareholders,
assuming the merger agreement and the merger are approved at the special
meeting and all other conditions to the merger have been satisfied or waived.
MERGER CONSIDERATION; CONVERSION OF SECURITIES
Exchange Ratio. Upon consummation of the merger, pursuant to the merger
agreement, each Bindley Western common share issued and outstanding immediately
prior to the effective time of the merger (other than Bindley Western common
shares held in treasury by Bindley Western, if any, which will be cancelled and
retired) will be converted into the right to receive 0.4275, the exchange
ratio, of a Cardinal common share.
Fractional Shares. No certificates for fractional Cardinal common shares
will be issued in the merger, and, to the extent that an outstanding Bindley
Western common share would otherwise have become a fractional Cardinal common
share, the holder will be entitled to receive a cash payment therefor in an
amount equal to the value (determined with reference to the closing price of
Cardinal common shares on the New York Stock Exchange Composite Tape on the
last full trading day immediately prior to the closing date of the merger) of
such fractional interest.
Conversion of Brick Merger Corp. Common Shares. Each common share, without
par value, of Brick Merger Corp. issued and outstanding immediately prior to
the effective time of the merger will be converted into and become one common
share, without par value, of the surviving corporation. These newly issued
shares will thereafter constitute all of the issued and outstanding capital
stock of the surviving corporation.
EXCHANGE PROCEDURES
DO NOT SEND IN YOUR BINDLEY WESTERN SHARE CERTIFICATES UNTIL YOU RECEIVE A
LETTER OF TRANSMITTAL.
As soon as practicable after the effective time of the merger, a letter of
transmittal will be mailed to each holder of record of a certificate or
certificates that immediately prior to the effective time of the merger
represented outstanding Bindley Western common shares whose shares were
converted into the right to receive Cardinal common shares. Such letter of
transmittal will be accompanied by instructions specifying other details of the
exchange. This letter of transmittal must be used in forwarding share
certificates for surrender in exchange for certificates evidencing Cardinal
common shares to which a holder of Bindley Western common shares prior to the
effective time of the merger has become entitled and, if applicable, cash in
lieu of any fractional Cardinal common share. After receipt of this letter of
transmittal, each holder of share certificates should surrender such share
certificates to EquiServe Trust Company or another financial institution as may
46
be designated by Cardinal as the exchange agent for the merger, pursuant to and
in accordance with the instructions accompanying such letter of transmittal,
and each such holder will receive in exchange therefor a certificate evidencing
the whole number of Cardinal common shares to which such holder is entitled and
a check representing the amount of cash payable in lieu of any fractional
Cardinal common share and unpaid dividends and distributions, if any, which
such holder has the right to receive pursuant to the merger agreement, after
giving effect to any required withholding tax. Share certificates surrendered
for exchange by any person who is an "affiliate" of Bindley Western for
purposes of Rule 145(c) under the Securities Act of 1933 will not be exchanged
until Cardinal has received an executed "affiliate letter" from such person as
prescribed under the merger agreement.
After the effective time of the merger, each Bindley Western share
certificate, until so surrendered and exchanged, will be deemed, for all
purposes, to represent only the right to receive, upon surrender, a certificate
representing Cardinal common shares and cash in lieu of fractional shares, if
any, and unpaid dividends and distributions, if any, as provided above. The
holder of such share certificates will not be entitled to receive any dividends
or other distributions declared or made by Cardinal having a record date after
the effective time of the merger until the share certificate is surrendered.
Subject to applicable law, upon surrender of such share certificates, such
dividends and distributions, if any, will be paid without interest and less the
amount of any withholding taxes that may be required thereon.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains customary representations and warranties.
These customary representations and warranties made by each of Cardinal, Brick
Merger Corp. and Bindley Western relate to:
. corporate organization and good standing or existence;
. corporate power and authority to enter into the merger agreement;
. capitalization;
. absence of certain conflicts between the merger agreement on the one
hand and governing corporate documents, certain credit agreements and
other contracts, and laws and regulations on the other;
. consents and approvals required to enter into the merger agreement or to
consummate the transactions contemplated thereby;
. brokerage and finders' fees;
. absence of actions that would prevent the parties from using the
pooling-of-interests method to account for the merger or prevent the
merger from receiving certain tax treatment under the Internal Revenue
Code of 1986;
. accuracy of information contained in certain filings with the Securities
and Exchange Commission;
. accuracy of information supplied for inclusion in the registration
statement of which this proxy statement/prospectus forms a part;
. compliance with applicable laws;
. absence of undisclosed material litigation; and
. no material adverse change in the business, results of operations or
financial conditions of the parties and their subsidiaries taken as a
whole, or any event, occurrence or development that would reasonably be
expected to have a material adverse effect on the parties or a material
adverse effect on the parties' ability to consummate the transactions
contemplated by the merger agreement.
In addition, Bindley Western makes customary representations and warranties
that relate to:
. subsidiaries;
. payment of taxes;
47
. intellectual property;
. title to and condition of properties;
. employee benefit plans;
. material contracts;
. labor matters;
. absence, since the filing of certain documents with the Securities and
Exchange Commission, of undisclosed liabilities that would have a
material adverse effect on Bindley Western, except for liabilities
incurred in the ordinary course of business consistent with prior
practice and not prohibited by the merger agreement;
. operation of Bindley Western's business and relationships with customers
and suppliers;
. permits;
. environmental matters;
. receipt by the Bindley Western board of directors of an opinion from an
investment banker as to the fairness, from a financial point of view, of
the exchange ratio;
. unanimous Bindley Western board of directors vote and recommendation to
shareholders in connection with the merger agreement;
. Bindley Western board of directors votes required to exempt the
transactions under Indiana's control share acquisition and business
combination statutes;
. accounts receivable and inventories; and
. insurance.
Bindley Western also represents and warrants in the merger agreement that
the new executive agreements with William E. Bindley, Thomas J. Salentine,
Michael D. McCormick and Keith W. Burks have not been amended or terminated.
The representations and warranties made by the parties to the merger
agreement will not survive the effective time of the merger, although it is a
condition of each of Cardinal's and Brick Merger Corp.'s, on the one hand, and
Bindley Western's, on the other hand, obligations under the merger agreement
that the other parties' representations and warranties shall be true and
correct in all respects (but without regard to any materiality qualifications
or references to material adverse effect contained in any specific
representation or warranty) on the date of the merger agreement and on and as
of the closing date of the merger as though made on and as of that date (except
for representations and warranties made as of a specified date, the accuracy of
which will be determined as of the specified date), except where any such
failure of the representations and warranties in the aggregate to be true and
correct in all respects would not reasonably be expected to have a material
adverse effect on the representing or warranting party.
In the merger agreement, a "material adverse effect" with respect to any
party to the merger agreement is considered to exist if any event, change or
effect, individually or in the aggregate with all such other events, changes or
effects, has occurred which has a material adverse effect on the business,
assets (including intangible assets), liabilities (contingent or otherwise),
results of operations or financial condition of such party and its subsidiaries
taken as a whole; provided, however, that a material adverse effect does not
include:
. with respect to any party, any change in or effect upon the assets
(including intangible assets), liabilities (contingent or otherwise),
financial condition, or results of operations of such party or any of
its subsidiaries, directly or indirectly, arising out of or attributable
to any decrease in the market price of Cardinal common shares in the
case of Cardinal or Bindley Western common shares in the case of Bindley
Western (but in either case not any change or effect underlying such
decrease to the extent such change or effect would otherwise constitute
a material adverse effect on such party);
. with respect to any party, any change in or effect upon the assets
(including intangible assets), liabilities (contingent or otherwise),
financial condition, or results of operations of such party or any
48
of its subsidiaries directly or indirectly arising out of or
attributable to conditions, events, or circumstances generally affecting
the wholesale drug distribution industry; and
. with respect to Bindley Western, any change in or effect upon the assets
(including intangible assets), liabilities (contingent or otherwise),
financial condition, or results of operations of Bindley Western or any
of its subsidiaries directly or indirectly arising out of or
attributable to the loss by Bindley Western (and its subsidiaries) of
any of its customers (including business of such customers), suppliers
or employees (including, without limitation, any financial consequence
of such loss of customers (including business of such customers),
suppliers or employees) due primarily to the transactions contemplated
by the merger agreement or the public announcement of the merger
agreement, in each case arising after the date of the merger agreement.
In the merger agreement, the term "subsidiary" when used with respect to any
party means any corporation or other organization, incorporated or
unincorporated,
. of which such party or another subsidiary of such party is a general
partner (excluding partnerships, the general partnership interests of
which held by such party or any subsidiary of such party do not have 50%
or more of the voting interests in such partnership) or
. 50% or more of the securities or other interests of which having by
their terms ordinary voting power to elect at least 50% of the board of
directors or others performing similar functions with respect to such
corporation or other organization is, directly or indirectly, owned or
controlled by such party or one or more of its subsidiaries (or, if
there are no such voting securities or interests, 50% or more of the
equity interests of which is, directly or indirectly, owned or
controlled by such party or one or more of its subsidiaries).
COVENANTS
Mutual Covenants. Pursuant to the merger agreement, each of Cardinal,
Bindley Western and Brick Merger Corp. has agreed that:
. Each of Cardinal and Bindley Western shall make or cause to be made the
filings required of such party or any of its subsidiaries or affiliates
under the Hart-Scott-Rodino Act, with respect to the transactions
contemplated by the merger agreement as promptly as practicable and in
any event within five business days after the date of the merger
agreement and comply at the earliest practicable date with any request
for additional information, documents, or other materials received by
such party or any of its subsidiaries from the Federal Trade Commission
or the Antitrust Division or any other governmental authority in respect
of such filings or such transactions.
. Each of Cardinal and Bindley Western shall use all reasonable efforts to
resolve such objections, if any, as may be asserted by any governmental
authority with respect to the transaction contemplated by the merger
agreement under the Hart-Scott-Rodino Act, the Sherman Act, as amended,
the Clayton Act, as amended, the Federal Trade Commission Act, as
amended, and any other federal, state or foreign statues, rules,
regulations, orders, decrees, administrative or judicial doctrines or
other laws that are designed to prohibit, restrict or regulate actions
having the purpose or effect of monopolization or restraint of trade.
. Each of the parties shall use all reasonable efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the merger and other transactions
contemplated by the merger agreement including:
-- the obtaining of all other necessary actions or nonactions, waivers,
consents, licenses, permits, authorizations, orders and approvals
from governmental authorities and the making of all other necessary
registrations and filings,
49
-- the obtaining of all consents, approvals or waivers from third
parties related to or required in connection with the merger that
are necessary to consummate the merger and the transactions
contemplated by the merger agreement or required to prevent a
material adverse effect on Cardinal or Bindley Western from
occurring prior to or after the effective time of the merger, and
-- taking all action necessary to ensure that it is a "poolable entity"
eligible to participate in a transaction to be accounted for as a
pooling of interests for financial reporting purposes.
. Notwithstanding anything to the contrary in the merger agreement, no
party to the merger agreement nor any of its subsidiaries shall be
required to hold separate (including by trust or otherwise) or to divest
any of their respective businesses or assets, or to take or agree to
take any action or agree to any limitation that could reasonably be
expected to have a material adverse effect, in the case of Bindley
Western, on Bindley Western and its subsidiaries taken as a whole, or in
the case of Cardinal, a material adverse effect on the assets,
liabilities, results of operations or financial condition of Cardinal
combined with the surviving corporation after the effective time of the
merger, or that would reasonably be expected to impair the benefits
expected as of the date of the merger agreement to be realized from the
consummation of the merger nor shall any party be required to waive any
condition to the merger intended for its benefit. See "--Conditions."
. Each of the parties shall not, and shall not permit any of its
subsidiaries to, take any actions that would, or would be reasonably
likely to, prevent Cardinal from accounting, and shall use its best
efforts (including, without limitation, providing appropriate
representation letters to Cardinal's accountants) to allow Cardinal to
account, for the merger in accordance with the pooling-of-interests
method of accounting, and to obtain a letter, in form and substance
reasonably satisfactory to Cardinal, from Arthur Andersen LLP dated the
closing date of the merger stating that they concur with management's
conclusion that the merger will qualify as a transaction to be accounted
for by Cardinal in accordance with the pooling-of-interests method of
accounting, and to allow Bindley Western to obtain a letter from
PricewaterhouseCoopers LLP, dated the closing date, stating that it
concurs with the conclusion of Bindley Western's management that no
conditions exist that would preclude Bindley Western from being a party
to a business combination for which the pooling-of-interests method of
accounting would be available.
. Each of the parties shall use its best efforts to cause the merger to
constitute a tax-free "reorganization" under Section 368(a) of the
Internal Revenue Code of 1986, as amended, and to cooperate with one
another in obtaining an opinion from Baker & Daniels, counsel to Bindley
Western, to the effect that:
(1) the merger will constitute a reorganization under section 368(a) of
the Internal Revenue Code of 1986, as amended,
(2) Bindley Western, Cardinal and Brick Merger Corp. will each be a
party to that reorganization, and
(3) no gain or loss will be recognized by the shareholders of Bindley
Western upon the receipt of Cardinal common shares in exchange for
Bindley Western common shares pursuant to the merger except with
respect to cash received in lieu of fractional share interests in
Cardinal common shares. In connection therewith, each of Cardinal
and Bindley Western shall deliver to Baker & Daniels representation
letters and Bindley Western shall use all reasonable efforts to
obtain representation letters from appropriate shareholders of
Bindley Western and shall deliver any such letters obtained to
Baker & Daniels, in each case, in form and substance reasonably
satisfactory to Baker & Daniels.
. Unless otherwise required by applicable laws or requirements of the New
York Stock Exchange (and, in that event, only if time does not permit),
at all times prior to the earlier of the effective time of the merger or
termination of the merger agreement, Cardinal and Bindley Western shall
consult with each other before issuing any press release with respect to
the merger and shall not issue any such press release prior to such
consultation.
50
Covenants of Cardinal. Cardinal has covenanted in the merger agreement:
. to maintain the effectiveness of the registration statement related to
this proxy statement/prospectus through the effective time of the
merger;
. to use its reasonable efforts during the period from the date of the
merger agreement to the effective time of the merger to maintain and
preserve its business organization and to retain the services of its
officers and key employees and maintain relationships with customers,
suppliers and other third parties to the end that their goodwill and
ongoing business shall not be impaired in any material respect; and
. to use reasonable efforts to cause the Cardinal common shares issuable
pursuant to the merger (including to holders of Bindley Western options)
to be approved for listing on the New York Stock Exchange, subject to
official notice of issuance, prior to the effective time of the merger
(which approval has been obtained).
Cardinal has agreed to cause the surviving corporation to indemnify and hold
harmless the present and former officers and directors of Bindley Western in
respect of acts or omissions occurring prior to the effective time of the
merger to the extent provided under Bindley Western's restated articles of
incorporation, bylaws and indemnification agreements, and for a period of six
years after the effective time of the merger, to use all reasonable efforts to
cause the surviving corporation or Cardinal to obtain policies of directors'
and officers' liability insurance at no cost to the beneficiaries thereof with
respect to acts or omissions occurring prior to the effective time of the
merger with substantially the same coverage and containing substantially
similar terms and conditions as existing policies, although Cardinal will not
be required to pay an aggregate premium for their coverage in excess of 300% of
the annual premiums that Bindley Western currently pays.
Cardinal has agreed to take all action necessary to cause Brick Merger Corp.
to perform its obligations under the merger agreement and to consummate the
merger on the terms and conditions set forth in the merger agreement. Brick
Merger Corp. has covenanted in the merger agreement that, prior to the
effective time of the merger, Brick Merger Corp. shall not conduct any business
or make any investments other than as specifically contemplated by the merger
agreement and will not have any assets (other than a de minimis amount of cash
paid to Brick Merger Corp. for the issuance of its shares to Cardinal) or any
material liabilities.
Cardinal has agreed that the Cardinal board of directors shall take all
action necessary immediately following the effective time of the merger to
elect William E. Bindley as a director of Cardinal.
Covenants of Bindley Western. Bindley Western has covenanted in the merger
agreement that, during the period from the date of the merger agreement to the
effective time of the merger, it will not (except as expressly contemplated or
permitted by the merger agreement or to the extent that Cardinal shall
otherwise consent in writing):
. do or effect any of the following actions with respect to its
securities:
(1) adjust, split, combine or reclassify its capital stock,
(2) make, declare or pay any dividend (other than regular quarterly
dividends on Bindley Western common shares of $0.02 per share with
record and payment dates consistent with past practice) or
distribution on, or directly or indirectly redeem, purchase or
otherwise acquire, any shares of its capital stock or any
securities or obligations convertible into or exchangeable for any
shares of its capital stock,
(3) grant any person any right or option to acquire any shares of its
capital stock (except grants of stock options to employees in the
ordinary course of business consistent with past practices provided
that Bindley Western must consult with Cardinal prior to making any
such grants or making any recommendation to the Bindley Western
board of directors with respect to such grants),
51
(4) issue, deliver or sell or agree to issue, deliver or sell any
additional shares of its capital stock or any securities or
obligations convertible into or exchangeable or exercisable for any
shares of its capital stock or such securities (except pursuant to
the exercise of Bindley Western stock options that are outstanding
as of the date of the merger agreement), or
(5) enter into any agreement, understanding or arrangement with respect
to the sale, voting, registration or repurchase of its capital
stock;
. directly or indirectly sell, transfer, lease, pledge, mortgage, encumber
or otherwise dispose of any of its property or assets other than in the
ordinary course of business;
. make or propose any changes in its restated articles of incorporation or
bylaws;
. merge or consolidate with any other person;
. acquire a material amount of assets or capital stock of any other person
other than in the ordinary course of business consistent with past
practice;
. incur, create, assume or otherwise become liable for any indebtedness
for borrowed money or assume, guarantee, endorse or otherwise as an
accommodation become responsible or liable for the obligations of any
other individual, corporation or other entity other than in the ordinary
course of business, consistent with past practice;
. create any subsidiaries;
. enter into or modify any employment, severance, termination or similar
agreements or arrangements with, or grant any bonuses, salary increases,
severance or termination pay to, any officer, director, consultant or
employee other than in the ordinary course of business consistent with
past practice with respect to non-officer employees (except for
severance agreements, which, in all cases, shall require the prior
written consent of Cardinal), or otherwise increase the compensation or
benefits provided to any officer, director, consultant or employee
except as may be required by applicable law, or grant, reprice, or
accelerate the exercise or payment of any Bindley Western options or
other equity-based awards (except for grants to the extent otherwise
permitted under the merger agreement);
. enter into, adopt or amend any employee benefit or similar plan, except
as may be required by applicable law;
. take any action that could give rise to severance benefits payable to
any officer or director of Bindley Western as a result of consummation
of the transactions contemplated by the merger agreement;
. change any method or principle of accounting in a manner that is
inconsistent with past practice except to the extent required by
generally accepted accounting principles based on the advice of Bindley
Western's regular independent public accountants;
. settle any actions, whether pending on the date of the merger agreement
or thereafter made or brought involving, individually or in the
aggregate, an amount in excess of $1 million;
. modify, amend or terminate, or waive, release or assign any material
rights or claims with respect to any material contract or
confidentiality agreement to which Bindley Western is a party;
. enter into any confidentiality agreements or arrangements other than in
the ordinary course of business consistent with past practice (other
than as permitted in the merger agreement);
. write up, write down or write off the book value of any assets,
individually or in the aggregate, in excess of $750,000 except for
depreciation and amortization in accordance with generally accepted
accounting principles consistently applied;
. incur or commit to any capital expenditures in excess of $1 million
individually or $5 million in the aggregate;
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. make any payments in respect of policies of directors' and officers'
liability insurance (premiums or otherwise) other than premiums paid in
respect of its policies in effect on the date of the merger agreement,
or renewed or replacement policies;
. take any action to exempt or make not subject to (1) various takeover
provisions of the Indiana Business Corporation Law or (2) any other
state takeover law or state law that purports to limit or restrict
business combinations or the ability to acquire or vote shares, any
person or entity (other than Cardinal or its subsidiaries) or any action
taken thereby, which person, entity or action would have otherwise been
subject to the restrictive provisions thereof and not exempt therefrom;
. take any action that would likely result in the representations and
warranties set forth in the merger agreement becoming false or
inaccurate in any material respect;
. enter into or carry out any other transaction other than in the ordinary
and usual course of business;
. permit or cause any subsidiary to do any of the foregoing or agree or
commit to do any of the foregoing; or
. agree in writing or otherwise to take any of the foregoing actions.
Bindley Western has agreed to permit representatives of Cardinal to have
appropriate access at all reasonable times to Bindley Western's premises,
properties, books, records, contracts, documents, customers and suppliers.
Cardinal has agreed to keep all this information confidential and shall cause
its directors, officers and employees and representatives or advisors who
receive any portion of this information to keep it confidential, except as may
otherwise be required by law.
Bindley Western has agreed to consult with Cardinal prior to making publicly
available its financial results for any period after the date of the merger
agreement and prior to filing any documents with the Securities and Exchange
Commission after the date of the merger agreement.
ACQUISITION PROPOSALS
Under the merger agreement, Bindley Western agreed as of the date of the
merger agreement to immediately cease all existing activities, discussions and
negotiations with any parties conducted before with respect to any proposal for
a competing transaction and request the return of all confidential information
regarding Bindley Western provided to any such parties whether pursuant to the
terms of any confidentiality agreements or otherwise.
Bindley Western has further agreed that during the term of the merger
agreement, it shall not, and shall not authorize or permit any of its
subsidiaries or any of its or its subsidiaries' directors, officers, employees,
agents or representatives, directly or indirectly,
. to solicit, initiate, encourage or facilitate, or furnish or disclose
non-public information in furtherance of, any inquiries or the making of
any proposal with respect to any recapitalization, merger, consolidation
or other business combination involving Bindley Western, or acquisition
of any capital stock (other than upon exercise of Bindley Western
options which are outstanding as of the date of the merger agreement) or
a material amount of the assets of Bindley Western and its subsidiaries,
taken as a whole, in a single transaction or a series of related
transactions, or any acquisition by Bindley Western of any material
assets or capital stock of any other person (other than acquisitions of
capital stock or assets of any other person that are not, individually
or in the aggregate, material to Bindley Western and its subsidiaries,
taken as a whole), or any combination of the foregoing, generally
referred to in this section as a "competing transaction," or
. negotiate, explore or otherwise engage in discussions with any person
(other than Cardinal, Brick Merger Corp. or their respective directors,
officers, employees, agents and representatives) with respect to any
competing transaction or enter into any agreement, arrangement or
understanding requiring it to abandon, terminate or fail to consummate
the merger or any other transactions contemplated by the merger
agreement;
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provided that,
. at any time prior to the approval of the merger by the Bindley Western
shareholders, Bindley Western may furnish information to, and negotiate
or otherwise engage in discussions with, any party who delivers a
written proposal for a competing transaction which
-- was not solicited or encouraged after the date of the merger
agreement,
-- the board of directors of Bindley Western determines in good faith
by resolution duly adopted after consultation with its outside
counsel (who may be its regularly engaged outside counsel) that the
failure to take such action would reasonably be expected to
constitute a breach of its fiduciary duties under applicable law,
and
-- the board of directors of Bindley Western determines that such a
proposal is, after consulting with a nationally recognized
investment banking firm, more favorable to Bindley Western's
shareholders from a financial point of view than the transactions
contemplated by the merger agreement (including any adjustment to
the terms and conditions proposed by Cardinal in response to such
competing transaction).
In addition, Bindley Western must promptly, but in any event within one
calendar day, advise Cardinal, in writing, if the board of directors of Bindley
Western shall make any such determination.
In the event Bindley Western receives such a superior proposal and the board
of directors of Bindley Western determines in good faith by resolution duly
adopted after consultation with its outside counsel (who may be its regularly
engaged outside counsel) that the failure to take such action would reasonably
be expected to constitute a breach of its fiduciary duties under applicable
law, the board of directors of Bindley Western may (subject to this and the
following sentences) withdraw, modify or change, in a manner adverse to
Cardinal, the Bindley Western board of directors recommendation and comply with
Rule 14e-2 promulgated under the Securities Exchange Act of 1934 with respect
to a competing transaction, provided that it must give Cardinal three business
days prior written notice of its intention to do so. Cardinal's right to
terminate the merger agreement at such time will not be affected.
Any such withdrawal, modification or change of the Bindley Western board
recommendation shall not change the approval of the board of directors of
Bindley Western for purposes of causing any state takeover statute or other
state law to be inapplicable to the transactions contemplated hereby, including
the merger, the stock option agreement or the voting/support agreements or
change the obligation of Bindley Western to present the merger for approval at
the special meeting. From and after the execution of the merger agreement,
Bindley Western must promptly, but in any event within one calendar day, advise
Cardinal in writing of the receipt, directly or indirectly, of any inquiries,
discussions, negotiations, or proposals relating to a competing transaction
(including the specific terms thereof and the identity of the other party or
parties involved) and promptly furnish to Cardinal a copy of any such written
proposal in addition to any information provided to or by any third party
relating thereto.
BINDLEY WESTERN TERMINATION RIGHT
If, prior to the approval of the merger by the Bindley Western shareholders,
the board of directors of Bindley Western determines in good faith, after
consultation with its financial and legal advisors, that any written proposal
from a third party for a competing transaction received after the date of the
merger agreement that was not solicited or encouraged by Bindley Western or any
of its subsidiaries or affiliates in violation of the merger agreement
. is more favorable to the Bindley Western shareholders from a financial
point of view than the transactions contemplated by the merger agreement
(including any adjustment to the terms and conditions of such
transaction proposed in writing by Cardinal in response to such
competing transaction),
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. is in the best interest of the Bindley Western shareholders, and
. the board of directors of Bindley Western determines in good faith by
resolution duly adopted after consultation with its outside counsel (who
may be its regularly engaged outside counsel) that the failure to enter
into such a competing transaction would constitute a breach of its
fiduciary duties under applicable law,
Bindley Western may terminate the merger agreement and enter into a letter of
intent, agreement-in-principle, acquisition agreement or other similar
agreement with respect to such competing transaction.
However, prior to any such termination,
(1) Bindley Western must have provided Cardinal written notice that it
intends to terminate the merger agreement, identifying the competing
transaction then determined to be more favorable and the parties
thereto and delivering a copy of the acquisition agreement for such
competing transaction in the form to be entered into, and
(2) at least five full business days after Bindley Western has provided the
notice referred to in clause (1) above, Bindley Western must have
delivered to Cardinal
. a written notice of termination of the merger agreement pursuant to
the terms of the merger agreement,
. a check in the amount of up to $6 million of Cardinal's costs as the
same may have been estimated by Cardinal in good faith prior to the
date of such delivery (subject to an adjustment payment between the
parties upon Cardinal's definitive determination of such costs),
plus the amount of the termination fee,
. a written acknowledgment from Bindley Western that
-- the termination of the merger agreement and the entry into the
acquisition agreement for the competing transaction will be a
"purchase event" as defined in the Bindley Western stock option
agreement, and
-- the stock option agreement shall be honored in accordance with
its terms, and
. a written acknowledgment from each other party to such competing
transaction that it is aware of the substance of Bindley Western's
acknowledgment above and waives any right it may have to contest the
matters thus acknowledged by Bindley Western.
CONDITIONS
Mutual Conditions. The obligations of Cardinal, Brick Merger Corp. and
Bindley Western to effect the merger are subject to satisfaction or waiver of
the following conditions:
. Approval of the merger by the Bindley Western shareholders.
. Any applicable waiting periods under the Hart-Scott-Rodino Act relating
to the merger and the transactions contemplated by the merger agreement
have expired or been terminated and any other approvals of any
governmental authority have been obtained.
. No provision of any applicable law or regulation and no judgment,
injunction, order or decree prohibits or enjoins the consummation of the
merger or the transactions contemplated by the merger agreement or
limits the ownership or operation by Cardinal, Bindley Western or any of
their respective subsidiaries of any material portion of the business or
assets of Cardinal or Bindley Western.
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. There is no pending action instituted by any governmental authority:
-- challenging or seeking to restrain or prohibit the consummation of
the merger or any of the other transactions contemplated by the
merger agreement,
-- except to the extent consistent with the covenants of Bindley
Western and Cardinal under the merger agreement, seeking to prohibit
or limit the ownership or operation by Cardinal, Bindley Western or
any of their respective subsidiaries of, or to compel Cardinal,
Bindley Western or any of their respective subsidiaries to dispose
of or hold separate, any material portion of the business or assets
of Cardinal, Bindley Western or any of their respective
subsidiaries, as a result of the merger or any of the other
transactions contemplated by the merger agreement,
-- seeking to impose limitations on the ability of Cardinal to acquire
or hold, or exercise full rights of ownership of, any shares of
capital stock of the surviving corporation, including the right to
vote such capital stock on all matters properly presented to the
shareholders of the surviving corporation, or
-- seeking to prohibit Cardinal or any subsidiary of Cardinal from
effectively controlling in any material respect the business or
operations of Cardinal or the subsidiaries of Cardinal.
. The Securities and Exchange Commission has declared the registration
statement of which this proxy statement/prospectus forms a part
effective under the Securities Act of 1933, and no stop order or similar
restraining order suspending the effectiveness of the registration
statement of which this proxy statement/prospectus forms a part is in
effect and no proceedings for such purpose are pending before or
threatened by the Securities and Exchange Commission or any state
securities administrator.
. The Cardinal common shares to be issued in the merger (including to
holders of Bindley Western stock options) have been approved for listing
on the New York Stock Exchange, subject to official notice of issuance.
. Cardinal has received a letter, in form and substance reasonably
satisfactory to Cardinal, from Arthur Andersen LLP dated the closing
date of the merger stating that it concurs with management's conclusion
that the merger will qualify as a transaction to be accounted for by
Cardinal in accordance with the pooling-of-interests method of
accounting.
. Bindley Western has received a letter from PricewaterhouseCoopers LLP
dated the closing date stating that it concurs with the conclusion of
Bindley Western's management that no conditions exist that would
preclude Bindley Western from being a party to a business combination
for which the pooling-of-interests method of accounting would be
available.
. Bindley Western and Cardinal have received an opinion of Fried, Frank,
Harris, Shriver & Jacobson, special counsel to Bindley Western, in a
form reasonably acceptable to each of them, to the effect that the
transactions contemplated by the merger agreement should not result in
the shares of common stock of Priority Healthcare Corporation failing to
qualify as qualified property for purposes of Section 355(c)(2) of the
Internal Revenue Code of 1986, by reason of Section 355(e) of the
Internal Revenue Code of 1986.
Conditions to Obligations of Bindley Western to Consummate the Merger. The
obligations of Bindley Western to effect the merger and the transactions
contemplated by the merger agreement are subject to the satisfaction of, or
waiver by Bindley Western of, the following conditions:
. Each of the representations and warranties of each of Cardinal and Brick
Merger Corp. set forth in the merger agreement is true and correct in
all respects (but without regard to any materiality qualifications or
references to "material adverse effect" contained in any specific
representation or warranty) on the date of the merger agreement and on
and as of the closing date of the merger as though made on and as of the
closing date of the merger (except for representations and warranties
made as of a specified date, the accuracy of which will be determined as
of the specified date), except where any such failure of the
representations and warranties in the aggregate to be true and correct
in all respects could not reasonably be expected to have a material
adverse effect on Cardinal.
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. Each of Cardinal and Brick Merger Corp. has performed in all material
respects all obligations and agreements and has complied in all material
respects with all covenants to be performed and complied with by it
under the merger agreement at or prior to the effective time of the
merger.
. Each of Cardinal and Brick Merger Corp. has furnished Bindley Western
with a certificate dated the closing date of the merger signed on behalf
of it by the chairman, president or vice president of Cardinal or Brick
Merger Corp., as the case may be, to the effect that the foregoing
conditions have been satisfied.
. Bindley Western has received the opinion of Baker & Daniels, dated on or
prior to the effective date of the registration statement of which this
proxy statement/prospectus forms a part, to the effect that
(1) the merger will constitute a reorganization under Section 368(a) of
the Internal Revenue Code of 1986, as amended,
(2) Bindley Western, Cardinal and Brick Merger Corp. will each be a
party to that reorganization, and
(3) no gain or loss will be recognized by the shareholders of Bindley
Western upon the receipt of Cardinal common shares in exchange for
Bindley Western common shares pursuant to the merger except with
respect to cash received in lieu of fractional share interests in
Cardinal common shares.
. There has not been any change in the assets, liabilities, results of
operations or financial condition of Cardinal and its subsidiaries taken
as a whole which would constitute a material adverse effect on Cardinal
or any event, occurrence or development which could reasonably be
expected to have a material adverse effect on the ability of Cardinal to
consummate the transactions contemplated by the merger agreement.
Conditions to Obligations of Cardinal and Brick Merger Corp. to Consummate
the Merger. The obligations of Cardinal and Brick Merger Corp. to effect the
merger and the other transactions contemplated by the merger agreement are
subject to the satisfaction of, or waiver by Cardinal, of the following
conditions:
. Each of the representations and warranties of Bindley Western set forth
in the merger agreement (other than the representations and warranties
of Bindley Western regarding its capitalization) is true and correct in
all respects (but without regard to any materiality qualifications or
references to material adverse effect contained in any specific
representation or warranty) on the date of the merger agreement and on
and as of the closing date of the merger as though made on and as of the
closing date of the merger (except for representations and warranties
made as of a specified date, the accuracy of which will be determined as
of the specified date), except where any such failure of the
representations and warranties in the aggregate to be true and correct
in all respects would not reasonably be expected to have a material
adverse effect on Bindley Western.
. The representations and warranties of Bindley Western regarding its
capitalization are true and correct in all material respects on the date
of the merger agreement and on and as of the closing date of the merger
as though made on and as of the closing date of the merger.
. Bindley Western has performed in all material respects all obligations
and agreements and has complied in all material respects with all
covenants to be performed and complied with by it under the merger
agreement at or prior to the effective time of the merger.
. Bindley Western has furnished Cardinal with a certificate dated the
closing date of the merger signed on its behalf by its chairman,
president or vice president to the effect that the foregoing conditions
have been satisfied.
. There has not been any change in the assets, liabilities, results of
operations or financial condition of Bindley Western and its
subsidiaries taken as a whole which would constitute a material adverse
effect on Bindley Western or any event, occurrence or development which
could reasonably be expected to have a material adverse effect on the
ability of Bindley Western to consummate the transactions contemplated
by the merger agreement.
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STOCK OPTIONS
Cardinal and Bindley Western have covenanted in the merger agreement to take
all such actions as may be necessary to cause each unexpired and unexercised
outstanding Bindley Western stock option granted or issued under stock option
plans of Bindley Western in effect on the date of the merger agreement to be
automatically converted at the effective time of the merger into an option to
purchase Cardinal common shares by multiplying the number of Bindley Western
common shares subject to the Bindley Western option by the exchange ratio and
dividing the exercise price of the Bindley Western option by the exchange
ratio. However, with respect to any Bindley Western option that is an
"incentive stock option" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended, the foregoing conversion shall be carried out
in a manner satisfying the requirements of Section 424(a) of the Internal
Revenue Code of 1986, as amended.
In connection with the issuance of Cardinal options, Cardinal shall
(1) reserve for issuance the number of Cardinal common shares that will
become subject to Cardinal options pursuant to the merger agreement and
(2) from and after the effective time of the merger, upon exercise of
Cardinal options, make available for issuance all Cardinal common
shares covered thereby, subject to the terms and conditions applicable
thereto.
Cardinal has also agreed to use its reasonable efforts to file with the
Securities and Exchange Commission, within five business days after the closing
date of the merger, a registration statement on Form S-8 or other appropriate
form under the Securities Act of 1933 to register Cardinal common shares
issuable upon exercise of these former Bindley Western stock options and to use
its reasonable efforts to cause such registration statement to remain effective
until the exercise or expiration of such options. See "The Merger--Interests of
Bindley Western's Directors and Officers in the Merger."
BINDLEY WESTERN EMPLOYEE BENEFITS AND PLANS
Cardinal has agreed to treat all service with Bindley Western and its
predecessors prior to the effective time of the merger by persons who are, as
of the effective time, employees of Bindley Western, as service with Cardinal
(except for purposes of benefit accrual under defined benefit pension plans or
to the extent such treatment would result in duplicative accrual on or after
the closing date of the merger of benefits for the same period of service).
Cardinal has also agreed to waive pre-existing condition exclusions and
actively-at-work requirements under any medical or dental benefit plan in which
Bindley Western employees participate after the effective time, and to take
into account any covered expenses incurred before the merger during the plan
year of the applicable Bindley Western employee benefit plan by a Bindley
Western employee or covered dependent for purposes of satisfying applicable
deductible, coinsurance and maximum out-of-pocket provisions after the merger.
TERMINATION
The merger agreement may be terminated and the merger may be abandoned at
any time prior to the effective time of the merger (notwithstanding any
approval of the merger agreement by Bindley Western shareholders):
. by mutual written consent of Cardinal and Bindley Western;
. by either Cardinal or Bindley Western if there is any law or regulation
that makes consummation of the merger illegal or otherwise prohibited,
or if any judgment, injunction, order or decree of a court or other
competent governmental authority enjoining Cardinal or Bindley Western
from consummating the merger shall have been entered and such judgment,
injunction, order or decree shall have become final and nonappealable;
. by either Cardinal or Bindley Western if the merger is not consummated
before August 30, 2001, provided, however, that such termination right
shall not be available to any party whose failure or whose affiliate's
failure to perform any material covenant or obligation under the merger
agreement has been the cause of, or resulted in, the failure of the
merger to occur on or before such date;
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. by Cardinal if the Bindley Western board of directors withdraws,
modifies or changes its recommendation of the merger in a manner adverse
to Cardinal, or refuses to affirm its recommendation within 15 business
days of any written request from Cardinal, or if the Bindley Western
board of directors approves or recommends any competing transaction;
. by Cardinal or Bindley Western if, at the Bindley Western shareholders
meeting (including any adjournment or postponement thereof), the
requisite vote of the Bindley Western shareholders to approve the merger
and the transactions contemplated by the merger agreement has not been
obtained;
. by Bindley Western pursuant to its termination rights in the event of a
superior proposal;
. by Cardinal if Bindley Western has materially breached any of its
obligations under the stock option agreement;
. by Cardinal or Bindley Western, if at any time the other party's
representation and warranties on the availability of the pooling-of-
interests method of accounting shall not be true and correct and
Cardinal shall have been advised in writing by Arthur Andersen LLP that
the condition regarding the merger qualifying as a transaction to be
accounted for by Cardinal in accordance with the pooling-of-interests
method of accounting is not capable of being satisfied;
. by Cardinal or Bindley Western if there has been a material breach by
the other of any of its covenants or agreements contained in the merger
agreement and such breach shall not have been cured within 30 days after
notice thereof shall have been received by the party alleged to be in
breach; or
. by Cardinal or Bindley Western if the other party has breached any of
its representations and warranties in the merger agreement and as a
result, the condition with respect to the accuracy of its
representations and warranties could not be satisfied.
EFFECT OF TERMINATION
Pursuant to the merger agreement, Cardinal and Bindley Western have agreed
that, in the event of the termination of the merger agreement for any reason
outlined above, the merger agreement, except for the provisions in Section
5.3(g) of the merger agreement regarding the confidentiality of information
obtained by each party, Section 7.2 of the merger agreement regarding the
effect of termination and Section 8.11 of the merger agreement regarding
expenses, will become null and void and have no effect, without liability on
the part of any party or its directors, officers or shareholders. However, no
party will be relieved of liability for a material breach of any provision of
the merger agreement, and, if it shall be judicially determined that the
termination of the merger agreement was caused by an intentional breach of the
merger agreement, then, in addition to other remedies at law or equity for
breach of the merger agreement, the party so found to have intentionally
breached the merger agreement shall indemnify and hold harmless the other
parties to the merger agreement for their costs, which include their respective
out-of-pocket costs, fees and expenses of their counsel, accountants, financial
advisors and other experts and advisors as well as for their respective fees
and expenses incident to negotiation, preparation and execution of the merger
agreement and related documentation and the special meeting of Bindley Western
shareholders.
If the merger agreement is terminated,
. by mutual written consent following public announcement of a competing
transaction,
. because the merger has not been consummated before August 30, 2001 due
to Bindley Western's willful failure to perform a material covenant or
obligation under the merger agreement,
. because the Bindley Western board of directors withdraws, modifies or
changes its recommendation on the merger in a manner adverse to
Cardinal, or shall have refused to affirm its recommendation within 15
business days of any written request from Cardinal, or the Bindley
Western board of directors approves or recommends any competing
transaction,
. by Bindley Western in order to pursue a competing transaction, or
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. because Bindley Western has breached in any material respect its
obligations under the stock option agreement,
then, Bindley Western will, in the case of a termination by Cardinal, within
three days following any such termination, or, in the case of termination by
Bindley Western, concurrently with such termination, pay to Cardinal in cash by
wire transfer in immediately available funds to an account designated by
Cardinal,
. in reimbursement for Cardinal's expenses an amount in cash equal to the
aggregate amount of Cardinal's costs incurred in connection with
pursuing the transactions contemplated by the merger agreement,
including, without limitation, legal, accounting and investment banking
fees, up to but not in excess of an amount equal to $6 million in the
aggregate, and
. a termination fee in an amount equal to $53 million.
If the merger agreement is terminated because the requisite vote of the
Bindley Western shareholders to approve the merger and the transactions
contemplated by the merger agreement shall not have been obtained, and
. at any time prior to such termination a proposal regarding a competing
transaction shall have been made to Bindley Western by a party capable
of completing such a competing transaction, or any proposal or
expression of interest by a third party regarding a competing
transaction shall have been publicly disclosed, then Bindley Western
will, in the case of a termination by Cardinal, within three business
days following any such termination or, in the case of a termination by
Bindley Western, concurrently with such termination, pay to Cardinal in
cash by wire transfer in immediately available funds to an account
designated by Cardinal,
(1) in reimbursement for Cardinal's expenses an amount in cash equal to
the aggregate amount of Cardinal's costs incurred in connection
with pursuing the transactions contemplated by the merger
agreement, including, legal, accounting and investment banking
fees, up to but not in excess of an amount equal to $6 million in
the aggregate,
(2) a termination fee in an amount equal to $20 million, and
(3) if within 12 months after the date of such termination Bindley
Western enters into an acquisition agreement for a business
combination (as defined below) or consummates a business
combination, Bindley Western will, prior to the earlier of
consummation of a business combination or execution of a definitive
agreement with respect thereto, pay to Cardinal in cash by wire
transfer in immediately available funds to an account designated by
Cardinal an additional termination fee in an amount equal to $33
million; or
. no proposal regarding a competing transaction with respect to Bindley
Western shall have been made to Bindley Western by a party capable of
completing such a competing transaction, and no proposal or expression
of interest by a third party regarding a competing transaction shall
have been publicly disclosed, at any time prior to such termination and
within six months after the date of such termination Bindley Western
enters into an acquisition agreement for a business combination or
consummates a business combination, then Bindley Western will, prior to
the earlier of consummation of a business combination or execution of a
definitive agreement with respect thereto, pay to Cardinal in cash by
wire transfer in immediately available funds to an account designated by
Cardinal a termination fee in an amount equal to $20 million.
A "business combination" includes:
. a merger, consolidation, share exchange, business combination or similar
transaction involving Bindley Western as a result of which the Bindley
Western shareholders prior to such transaction in the aggregate cease to
own at least 70% of the voting securities of the entity surviving or
resulting from such transaction (or the ultimate parent entity thereof),
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. a sale, lease, exchange, transfer or other disposition of more than 25%
of the assets of Bindley Western and its subsidiaries, taken as a whole,
in a single transaction or a series of related transactions, or
. the acquisition, by a person (other than Cardinal or any affiliate
thereof) or group (as such term is defined under Section 13(d) of the
Securities Exchange Act of 1934) of beneficial ownership (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934) of more than 25%
of the Bindley Western common shares whether by tender or exchange offer
or otherwise.
AMENDMENT AND WAIVER
The merger agreement may be amended in writing by the parties thereto, by
action taken or authorized by their respective boards of directors, at any time
before or after adoption of the merger agreement by Bindley Western
shareholders, but after any such approval, no amendment shall be made that by
law requires further approval or authorization by the Bindley Western
shareholders without such further approval or authorization.
At any time prior to the effective time of the merger, Cardinal (with
respect to Bindley Western) and Bindley Western (with respect to Cardinal and
Brick Merger Corp.) by action taken or authorized by their respective boards of
directors, may, to the extent legally permitted,
. extend the time for the performance of any of the obligations or other
acts of such party,
. waive any inaccuracies in the representations and warranties contained
in the merger agreement or in any document delivered pursuant to the
merger agreement, and
. waive compliance with any of the agreements or conditions contained in
the merger agreement.
Any agreement on the part of a party to the merger agreement to any such
extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of such party.
FEES AND EXPENSES
Other than as described under "--Termination" and "--Effect of Termination,"
all costs and expenses incurred in connection with the merger agreement and the
transactions contemplated thereby will be paid by the party incurring such
expenses, except Cardinal and Bindley Western will split the amount of the
filing fees and other expenses incurred in connection with the cost of filing,
printing and distributing this proxy statement/prospectus.
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UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following general discussion is intended only as a summary of the
material U.S. federal income tax consequences of the merger and does not
purport to be a complete analysis or listing of all potential tax effects
relative to a decision whether to vote for the approval of the merger. The
discussion does not address all aspects of U.S. federal income taxation that
may be applicable to certain Bindley Western shareholders subject to special
U.S. federal income tax treatment, including, without limitation, foreign
persons, insurance companies, tax-exempt entities, retirement plans and persons
who acquired their Bindley Western common shares pursuant to the exercise of
employee stock options or otherwise as compensation. The discussion addresses
neither the effect of applicable state, local or foreign tax laws, nor the
effect of any U.S. federal tax laws other than those pertaining to U.S. federal
income tax. The discussion below applies to Bindley Western shareholders who
hold their Bindley Western common shares as a capital asset within the meaning
of Section 1221 of the Internal Revenue Code of 1986, as amended. The
discussion is not binding on the Internal Revenue Service. It is based upon the
Internal Revenue Code of 1986, as amended, regulations, rulings and decisions
in effect as of the date of this document, all of which are subject to change,
possibly with retroactive effect.
Bindley Western has received an opinion from Baker & Daniels, counsel to
Bindley Western, dated on or prior to the effective date of this document, to
the effect that the merger will constitute a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended, each of
Bindley Western, Cardinal and Brick Merger Corp. will be a party to that
reorganization and no gain or loss will be recognized by the holders of Bindley
Western common shares upon the receipt of Cardinal common shares in exchange
for Bindley Western common shares except with respect to cash received in lieu
of fractional share interests in Cardinal common shares. The opinion is based
on customary assumptions and representations made by, among others, Cardinal
and Bindley Western. An opinion of counsel represents counsel's best legal
judgment and is not binding on the Internal Revenue Service or any court. No
ruling has been, or will be, sought from the Internal Revenue Service as to the
U.S. federal income tax consequences of the merger.
If, in accordance with the opinion referred to above, the merger constitutes
a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended, Bindley Western shareholders who exchange their
Bindley Western common shares solely for Cardinal common shares in the merger
will not recognize gain or loss for federal income tax purposes, except with
respect to cash, if any, received in lieu of a fractional Cardinal common
share. The aggregate tax basis of the Cardinal common shares received by a
Bindley Western shareholder in the merger will be equal to the aggregate tax
basis of the Bindley Western common shares exchanged therefor, reduced by any
amount of any tax basis allocable to fractional share interests for which cash
is received. The holding period of the Cardinal common shares received by a
Bindley Western shareholder in the merger will include the holding period of
the Bindley Western common shares exchanged therefor.
A Bindley Western shareholder who receives cash in lieu of a fractional
Cardinal common share will recognize gain or loss equal to the difference
between the amount of cash received and his tax basis in the Cardinal common
share that is allocable to the fractional share. That gain or loss generally
will constitute capital gain or loss. In the case of an individual shareholder,
any such capital gain generally will be subject to a maximum U.S. federal
income tax rate of 20% if the individual has held his Bindley Western common
shares for more than 12 months on the date of the merger. The deductibility of
capital losses is subject to limitations for both individuals and corporations.
THE FOREGOING DISCUSSION OF MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES IS
FOR GENERAL INFORMATION PURPOSES ONLY AND IS NOT TAX ADVICE. THE OPINION OF
BAKER & DANIELS IS NOT BINDING ON THE INTERNAL REVENUE SERVICE. BECAUSE OF THE
COMPLEXITY OF THE TAX LAWS, AND BECAUSE THE TAX CONSEQUENCES OF THE MERGER FOR
ANY PARTICULAR SHAREHOLDER MAY BE AFFECTED BY MATTERS NOT DISCUSSED HEREIN,
EACH BINDLEY WESTERN SHAREHOLDER IS URGED TO CONSULT HIS OWN TAX ADVISER WITH
RESPECT TO HIS OWN PARTICULAR CIRCUMSTANCES AND WITH RESPECT TO THE SPECIFIC
TAX CONSEQUENCES OF THE MERGER TO HIM, INCLUDING THE APPLICABILITY AND EFFECT
OF STATE, LOCAL AND FOREIGN TAX LAWS, ESTATE TAX LAWS AND PROPOSED CHANGES IN
APPLICABLE TAX LAWS.
62
THE COMPANIES
BUSINESS OF BINDLEY WESTERN
Bindley Western is the fifth largest distributor of pharmaceuticals and
related products in the United States. Bindley Western was founded by William
E. Bindley in 1968 and became a public company in 1983. Bindley Western sells
ethical (prescription) pharmaceuticals, health and beauty care products, and
homecare merchandise to chain drug companies that operate their own warehouses
as well as independent and chain drug stores, hospitals, clinics, health
maintenance organizations and other managed care providers, the United States
government and state agencies. Bindley Western operates from 17 distribution
centers in 14 states, serving customers located throughout the United States.
Bindley Western sells to chain warehouses and direct store delivery
customers. Bindley Western believes that technological innovation and emphasis
on customer service is critical to Bindley Western's ability to serve chain
warehouse customers. Since 1987, Bindley Western has focused significant
resources on increasing sales to direct store delivery customers. Direct store
delivery sales increased from $171 million in 1987 to $4.9 billion in 1999. To
complement its internal growth and strengthen its position in the northeastern
and southeastern United States, Bindley Western purchased J.E. Goold in 1992,
Kendall Drug in 1994, Tennessee Wholesale Drug in 1997 and Central Pharmacy
Services in 1999. Bindley Western's sales of $8.5 billion for 1999 represented
the 31st consecutive year of record sales, equating to a compound growth rate
of approximately 20% since its inception in 1968. Bindley Western's growth has
resulted from acquisitions, expansion into new geographic areas and increased
market share.
Central Pharmacy. On August 31, 1999, Bindley Western acquired Central
Pharmacy Services, Inc. Headquartered in Atlanta, Georgia, Central Pharmacy
operates centralized nuclear pharmacies that prepare and deliver
radiopharmaceuticals for use in nuclear imaging procedures in hospitals and
clinics. Central Pharmacy operates 32 specialized pharmacies located in 15
states. Central Pharmacy's revenues increased from $4.4 million in 1993 to
$43.9 million in 1999, an average annual compound growth rate of 47%.
Spin-off of Priority Healthcare Corporation. On December 31, 1998, Bindley
Western distributed to its shareholders the remaining 82% interest that Bindley
Western then owned in its subsidiary, Priority Healthcare Corporation. Bindley
Western formed Priority in 1994 to focus on distributing products and providing
services to the growing alternate site component of the healthcare industry.
The net cost of the acquisitions which created Priority was approximately $7
million. The total market capitalization of the Priority shares distributed to
Bindley Western shareholders exceeded $500 million. The spin-off resulted in
the removal of $107.5 million of assets and $37.2 million of liabilities from
Bindley Western's consolidated balance sheet as of December 31, 1998. The
results of operations for Priority, net of minority interest, for 1998 and
earlier periods are included in Bindley Western's consolidated statement of
earnings because Priority was a subsidiary through December 31, 1998.
Bindley Western has its principal executive offices at 8909 Purdue Road,
Indianapolis, Indiana 46268, and its telephone number is (317) 704-4000.
Additional information regarding Bindley Western is contained in its filings
with the Securities and Exchange Commission pursuant to the Securities Exchange
Act of 1934. See "Where You Can Find More Information."
BUSINESS OF CARDINAL
Cardinal, a holding company operating through a number of operating
subsidiaries, is a leading health care service company, offering an array of
value-added pharmaceutical distribution services and pharmaceutical related
products and services to a broad base of customers. It is one of the nation's
largest wholesale distributors of pharmaceutical and related health care
products to independent and chain drug stores, hospitals, alternative care
centers and the pharmacy departments of supermarkets and mass merchandisers
located
63
throughout the continental United States. Its Allegiance Corporation subsidiary
offers a broad range of medical and laboratory products and provides cost-
saving services for hospitals and other health care providers, including online
procurement, supply-chain management and other professional consulting
services. Through its Pyxis Corporation subsidiary, Cardinal develops,
manufactures, leases, sells and services unique point-of-use systems which
automate the distribution, management and control of medications and supplies
in hospitals and alternative care facilities. Cardinal is also the largest
franchisor of independent retail pharmacies in the United States through its
Medicine Shoppe International, Inc. subsidiary. In addition, through its Owen
Healthcare, Inc. subsidiary, Cardinal provides pharmacy management and
information services to hospitals. PCI Services Inc., another one of Cardinal's
subsidiaries, is also a leading international provider of integrated packaging
services to pharmaceutical manufacturers. Cardinal's R.P. Scherer Corporation
subsidiary is an international developer and manufacturer of drug delivery
systems.
As a full-service wholesale distributor, Cardinal complements its
distribution activities by offering a broad range of value-added support
services to assist Cardinal's customers and suppliers in maintaining and
improving their market positions and to strengthen Cardinal's role in the
channel of distribution. These support services include computerized order
entry and order confirmation systems, customized invoicing, generic sourcing
programs, product movement and management reports, consultation on store
operation and merchandising, and customer training. Cardinal's proprietary
software systems feature customized databases specially designed to help its
customers order more efficiently, contain costs, and monitor their purchases
which are covered by group contract purchasing arrangements.
Cardinal operates several specialty health care businesses which offer
value-added services to Cardinal's customers and suppliers while providing
Cardinal with additional opportunities for growth and profitability. For
example, Cardinal operates a pharmaceutical repackaging program for both
independent and chain drugstore customers and serves as a distributor of
therapeutic plasma products and other specialty pharmaceuticals to hospitals,
clinics and other managed care facilities on a nationwide basis through the
utilization of telemarketing and direct mail programs. These specialty
distribution activities are part of Cardinal's overall strategy of developing
diversified products and services to enhance the profitability of its business
and that of its customers and suppliers.
On November 13, 1995, Cardinal completed a merger with Medicine Shoppe
International, Inc., a St. Louis, Missouri-based franchisor of independent
apothecary-style retail pharmacies in the United States and abroad. On May 7,
1996, Cardinal completed a merger with Pyxis Corporation, a San Diego,
California-based designer, manufacturer, marketer and servicer of unique,
point-of-use systems which automate the distribution, management and control of
medications and supplies in hospitals and other health care facilities. On
October 11, 1996, Cardinal completed a merger with PCI Services Inc., a
Philadelphia, Pennsylvania-based provider of integrated packaging services to
pharmaceutical manufacturers. On March 18, 1997, Cardinal completed a merger
with Owen, a Houston, Texas-based provider of fully integrated pharmacy
management and information services to hospitals. On February 18, 1998,
Cardinal completed its acquisition of MediQual Systems, Inc., a leading
supplier of clinical information management systems and services to the health
care industry. On August 7, 1998, Cardinal completed a merger with R.P. Scherer
Corporation, an international developer and manufacturer of drug delivery
systems. On February 3, 1999, Cardinal completed a merger transaction with
Allegiance Corporation, a McGaw Park, Illinois-based distributor and
manufacturer of medical, surgical and laboratory products and a provider of
cost-saving services. On September 10, 1999, Cardinal completed a merger
transaction with Automatic Liquid Packaging, Inc., a Woodstock, Illinois-based
custom manufacturer of sterile liquid pharmaceuticals and other healthcare
products. On August 16, 2000, Cardinal completed the purchase of Bergen
Brunswig Medical Corporation, a distributor of medical, surgical and laboratory
supplies to doctors' offices, long-term care and nursing centers, hospitals and
other providers of care. Cardinal has also completed a number of smaller
acquisition transactions during the last five years, including the acquisitions
of Comprehensive Reimbursement Consultants, Inc.; Pharmacists: prn, Inc.; The
Enright Group, Inc.; Pharmaceutical Packaging Specialties, Inc.; Pacific
Surgical Innovations, Inc.; Herd Mundy Richardson Limited; TriMaras Printing
Company, Inc.; Helpmate Robotics, Inc.; and Contract Health Professionals, Inc.
64
Cardinal and Brick Merger Corp. each have their principal executive office
at 7000 Cardinal Place, Dublin, Ohio 43017, and their telephone number is (614)
757-5000. Additional information concerning Cardinal and its subsidiaries is
included in the Cardinal documents filed with the Securities and Exchange
Commission, which are incorporated by reference herein. See "Where You Can Find
More Information" on page 95.
BRICK MERGER CORP.
Brick Merger Corp. is a newly formed, wholly owned subsidiary of Cardinal
formed for the purpose of effecting the merger.
65
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial information
should be read in conjunction with the historical consolidated financial
statements, including the notes thereto, of Cardinal and Bindley Western which
are incorporated by reference in this proxy statement/prospectus. The unaudited
pro forma information is presented for illustration purposes only in accordance
with the assumptions set forth below, and is not necessarily indicative of the
operating results or financial position that would have occurred if the merger
had been consummated nor is it necessarily indicative of future operating
results of financial position of the combined enterprise. The unaudited pro
forma condensed combined financial information does not reflect any adjustments
to conform accounting practices or to reflect any cost savings or other
synergies anticipated as a result of the merger or any merger-related expenses.
See Note 2 for further discussion.
66
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
The following unaudited pro forma combined balance sheet presents, under the
pooling-of-interests accounting method, the consolidated balance sheets of
Cardinal and Bindley Western combined as of September 30, 2000.
CARDINAL &
BINDLEY BINDLEY
CARDINAL WESTERN WESTERN PRO
SEPTEMBER 30, SEPTEMBER 30, PRO FORMA FORMA
2000 2000 ADJUSTMENTS BALANCES(1)
------------- ------------- ----------- -----------
(IN MILLIONS)
ASSETS
Current assets:
Cash and equivalents..... $ 491.1 $ 82.2 $ -- $ 573.3
Trade receivables........ 1,904.2 619.7 2,523.9
Current portion of net
investment in sales-type
leases.................. 198.5 -- 198.5
Inventories(3)........... 4,468.4 1,077.1 5,545.5
Prepaid expenses and
other................... 677.5 26.7 704.2
--------- -------- ----- ---------
Total current assets... 7,739.7 1,805.7 -- 9,545.4
--------- -------- ----- ---------
Property and equipment--at
cost...................... 3,025.1 133.5 3,158.6
Accumulated depreciation
and amortization.......... (1,370.8) (33.6) (1,404.4)
--------- -------- ----- ---------
Property and equipment--
net....................... 1,654.3 99.9 -- 1,754.2
Other assets:
Net investment in sales-
type lease, less current
portion................. 579.7 -- 579.7
Goodwill and other
intangibles............. 1,045.4 83.3 1,128.7
Other.................... 205.5 -- 205.5
--------- -------- ----- ---------
Total.................. $11,224.6 $1,988.9 $ -- $13,213.5
========= ======== ===== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable--banks and
other short-term
obligations............. $ 10.5 $ 400.0 $ -- $ 410.5
Current portion of long-
term obligations........ 10.6 -- 10.6
Accounts payable......... 3,429.4 1,050.0 4,479.4
Other accrued
liabilities(2).......... 1,058.8 39.8 1,098.6
--------- -------- ----- ---------
Total current
liabilities........... 4,509.3 1,489.8 -- 5,999.1
--------- -------- ----- ---------
Long-term obligations--
less current portion.... 1,973.3 38.3 2,011.6
Deferred tax and other
liabilities............. 511.7 15.9 527.6
Shareholders' equity:
Common shares--without
par value............... 1,324.5 290.7 1,615.2
Retained earnings(2)..... 3,337.9 177.2 3,515.1
Common shares in
treasury, at cost....... (315.8) (19.6) (335.4)
Other comprehensive
income.................. (107.8) -- (107.8)
Other.................... (8.5) (3.4) (11.9)
--------- -------- ----- ---------
Total shareholders'
equity................ 4,230.3 444.9 -- 4,675.2
--------- -------- ----- ---------
Total.................. $11,224.6 $1,988.9 $ -- $13,213.5
========= ======== ===== =========
See accompanying notes to the unaudited pro forma condensed combined financial
information.
67
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF EARNINGS
The following unaudited pro forma condensed combined statements of earnings
present, under the pooling-of-interests accounting method, the consolidated
statements of earnings of Cardinal for the fiscal years ended June 30, 2000,
1999 and 1998 combined with the statements of earnings of Bindley Western for
the fiscal years ended December 31, 1999, 1998 and 1997, respectively.
Cardinal's financial information for the three months ended September 30, 2000
and 1999 have been combined with Bindley Western's financial information for
the three months ended September 30, 2000 and March 31, 1999, respectively.
The financial results of Bindley Western for the six months ended June 30,
2000 are excluded from the pro forma data. Bindley Western's net revenue and
net loss for the six months ended June 30, 2000 were approximately $4.9 billion
and $2.8 million, respectively.
FISCAL YEAR ENDED
-------------------------------
JUNE 30, 2000 DECEMBER 31, 1999
------------- ----------------- PRO FORMA PRO FORMA
CARDINAL BINDLEY WESTERN ADJUSTMENTS RESULTS(1)
------------- ----------------- ----------- ----------
(IN MILLIONS, EXCEPT PER SHARE DATA)
Revenue:
Operating revenue..... $25,246.9 $5,010.9 $ -- $30,257.8
Bulk deliveries to
customer warehouses.. 4,623.7 3,468.4 8,092.1
--------- -------- ----- ---------
Total revenue(3).... 29,870.6 8,479.3 -- 38,349.9
Cost of products sold:
Operating cost of
products sold........ 22,360.1 4,806.1 27,166.2
Cost of products
sold--bulk
deliveries........... 4,623.4 3,466.5 8,089.9
--------- -------- ----- ---------
Total cost of
products sold(3)... 26,983.5 8,272.6 35,256.1
--------- -------- ----- ---------
Gross margin............ 2,887.1 206.7 -- 3,093.8
Selling, general and
administrative
expenses............... 1,627.4 123.6 1,751.0
Special charges:
Merger-related costs--
prior mergers(4)..... 64.7 -- 64.7
Other special
charges.............. -- -- --
--------- -------- ----- ---------
Total special
charges............ 64.7 -- -- 64.7
Operating earnings...... 1,195.0 83.1 -- 1,278.1
Interest expense and
other.................. 117.2 21.5 138.7
--------- -------- ----- ---------
Earnings before income
taxes.................. 1,077.8 61.6 -- 1,139.4
Provision for income
taxes.................. 398.1 24.9 423.0
--------- -------- ----- ---------
Net earnings--excluding
estimated merger
expenses(2)(4)......... $ 679.7 $ 36.7 $ -- $ 716.4
========= ======== ===== =========
Earnings per common
share, excluding
estimated merger
expenses(2)(4)(5)......
Basic................. $ 2.44 $ 2.45
Diluted............... 2.39 2.40
Weighted average number
of common shares
outstanding:(5)
Basic................. 279.1 292.6
Diluted............... 284.4 299.1
See accompanying notes to the unaudited pro forma condensed combined financial
information.
68
FISCAL YEAR ENDED
-------------------------------
JUNE 30, 1999 DECEMBER 31, 1998
------------- ----------------- PRO FORMA PRO FORMA
CARDINAL BINDLEY WESTERN ADJUSTMENTS RESULTS(1)
------------- ----------------- ----------- ----------
(IN MILLIONS, EXCEPT PER SHARE DATA)
Revenue:
Operating Revenue..... $21,558.5 $4,124.0 $ -- $25,682.5
Bulk deliveries to
customer warehouses.. 3,553.0 3,497.4 7,050.4
--------- -------- ----- ---------
Total revenue(3).... 25,111.5 7,621.4 -- 32,732.9
Cost of products sold:
Operating cost of
products sold........ 18,931.5 3,934.7 22,866.2
Cost of products
sold--bulk
deliveries........... 3,553.0 3,495.1 7,048.1
Merger-related costs.. 4.0 -- 4.0
--------- -------- ----- ---------
Total cost of
products sold(3)... 22,488.5 7,429.8 29,918.3
--------- -------- ----- ---------
Gross margin............ 2,623.0 191.6 -- 2,814.6
Selling, general and
administrative
expenses............... 1,580.9 116.3 1,697.2
Special charges:
Merger-related costs--
prior mergers(4)..... 142.6 -- 142.6
Other special
charges.............. -- 18.8 18.8
--------- -------- ----- ---------
Total special
charges............ 142.6 18.8 -- 161.4
Operating earnings...... 899.5 56.5 -- 956.0
Interest expense and
other.................. 114.2 18.7 132.9
--------- -------- ----- ---------
Earnings before income
taxes.................. 785.3 37.8 -- 823.1
Provision for income
taxes.................. 304.3 18.7 323.0
--------- -------- ----- ---------
Net earnings--excluding
estimated merger
expenses(2)(4)......... $ 481.0 $ 19.1 $ -- $ 500.1
========= ======== ===== =========
Earnings per common
share, excluding
estimated merger
expenses(2)(4)(5)......
Basic................. $ 1.73 $ 1.72
Diluted............... 1.68 1.68
Weighted average number
of common shares
outstanding:(5)
Basic................. 277.7 290.0
Diluted............... 285.2 298.1
See accompanying notes to the unaudited pro forma condensed combined financial
information.
69
FISCAL YEAR ENDED
-------------------------------
JUNE 30, 1998 DECEMBER 31, 1997
------------- ----------------- PRO FORMA PRO FORMA
CARDINAL BINDLEY WESTERN ADJUSTMENTS RESULTS(1)
------------- ----------------- ----------- ----------
(IN MILLIONS, EXCEPT PER SHARE DATA)
Revenue:
Operating revenue..... $18,084.6 $2,760.2 $ -- $20,844.8
Bulk deliveries to
customer warehouses.. 2,991.4 4,549.7 7,541.1
--------- -------- ----- ---------
Total revenue(3).... 21,076.0 7,309.9 -- 28,385.9
Cost of products sold:
Operating cost of
products sold........ 15,823.5 2,619.4 18,442.9
Cost of products
sold--bulk
deliveries........... 2,991.4 4,547.9 7,539.3
--------- -------- ----- ---------
Total cost of
products sold(3)... 18,814.9 7,167.3 25,982.2
--------- -------- ----- ---------
Gross margin............ 2,261.1 142.6 -- 2,403.7
Selling, general and
administrative
expenses............... 1,403.0 88.5 1,491.5
Special charges:
Merger-related costs--
prior mergers(4)..... 49.2 -- 49.2
Other special
charges.............. 8.6 -- 8.6
--------- -------- ----- ---------
Total special
charges............ 57.8 -- -- 57.8
Operating earnings...... 800.3 54.1 -- 854.4
Interest expense and
other.................. 108.9 14.6 123.5
--------- -------- ----- ---------
Earnings before income
taxes.................. 691.4 39.5 -- 730.9
Provision for income
taxes.................. 242.9 15.8 258.7
--------- -------- ----- ---------
Net earnings--excluding
estimated merger
expenses(2)(4)......... $ 448.5 $ 23.7 $ -- $ 472.2
========= ======== ===== =========
Earnings per common
share, excluding
estimated merger
expenses(2)(4)(5)......
Basic................. $ 1.61 $ 1.64
Diluted............... 1.58 1.60
Weighted average number
of common shares
outstanding:(5)
Basic................. 277.9 287.6
Diluted............... 284.6 296.8
See accompanying notes to the unaudited pro forma condensed combined financial
information.
70
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 2000
------------------ ------------------ PRO FORMA PRO FORMA
CARDINAL BINDLEY WESTERN ADJUSTMENTS RESULTS(1)
------------------ ------------------ ----------- ----------
(IN MILLIONS, EXCEPT PER SHARE DATA)
Revenue:
Operating revenue..... $6,983.2 $1,527.7 $ -- $ 8,510.9
Bulk deliveries to
customer warehouses.. 1,751.4 777.6 2,529.0
-------- -------- ----- ---------
Total revenue(3).... 8,734.6 2,305.3 -- 11,039.9
Cost of products sold:
Operating cost of
products sold........ 6,246.8 1,460.3 7,707.1
Cost of products
sold--bulk
deliveries........... 1,751.4 777.2 2,528.6
-------- -------- ----- ---------
Total cost of
products sold(3)... 7,998.2 2,237.5 10,235.7
-------- -------- ----- ---------
Gross margin............ 736.4 67.8 -- 804.2
Selling, general and
administrative
expenses............... 426.1 41.3 467.4
Special charges:
Merger-related costs--
prior mergers(4)..... 17.3 -- 17.3
Other special
charges.............. -- (5.0) (5.0)
-------- -------- ----- ---------
Total special
charges............ 17.3 (5.0) -- 12.3
Operating earnings...... 293.0 31.5 -- 324.5
Interest expense and
other.................. 27.0 6.7 33.7
-------- -------- ----- ---------
Earnings before income
taxes.................. 266.0 24.8 -- 290.8
Provision for income
taxes.................. 92.8 8.0 100.8
-------- -------- ----- ---------
Net earnings--excluding
estimated merger
expenses(2)(4)(5)...... $ 173.2 $ 16.8 $ -- $ 190.0
======== ======== ===== =========
Earnings per common
share, excluding
estimated merger
expenses(2)(4)(5)......
Basic................. $ 0.62 $ 0.65
Diluted............... 0.61 0.63
Weighted average number
of common shares
outstanding:(5)
Basic................. 277.6 292.6
Diluted............... 284.4 300.6
See accompanying notes to the unaudited pro forma condensed combined financial
information.
71
THREE MONTHS
THREE MONTHS ENDED ENDED
SEPTEMBER 30, 1999 MARCH 31, 1999
------------------ --------------
BINDLEY PRO FORMA PRO FORMA
CARDINAL WESTERN ADJUSTMENTS RESULTS(1)
------------------ -------------- ----------- ----------
(IN MILLIONS, EXCEPT PER SHARE DATA)
Revenue:
Operating revenue..... $5,829.3 $1,216.6 $ -- $7,045.9
Bulk deliveries to
customer warehouses.. 954.4 758.4 1,712.8
-------- -------- ----- --------
Total revenue(3).... 6,783.7 1,975.0 -- 8,758.7
Cost of products sold:
Operating cost of
products sold........ 5,174.5 1,169.9 6,344.4
Cost of products
sold--bulk
deliveries........... 954.4 757.9 1,712.3
-------- -------- ----- --------
Total cost of
products sold(3)... 6,128.9 1,927.8 8,056.7
-------- -------- ----- --------
Gross margin............ 654.8 47.2 -- 702.0
Selling, general and
administrative
expenses............... 391.3 27.3 418.6
Special charges:
Merger-related costs--
prior mergers(4)..... 36.8 -- 36.8
Other special
charges.............. -- -- --
-------- -------- ----- --------
Total special
charges............ 36.8 -- -- 36.8
Operating earnings...... 226.7 19.9 -- 246.6
Interest expense and
other.................. 24.9 5.0 29.9
-------- -------- ----- --------
Earnings before income
taxes.................. 201.8 14.9 -- 216.7
Provision for income
taxes.................. 79.8 5.9 85.7
-------- -------- ----- --------
Net earnings--excluding
estimated merger
expenses(2)(4)......... $ 122.0 $ 9.0 $ -- $ 131.0
======== ======== ===== ========
Earnings per common
share, excluding
estimated merger
expenses(2)(4)(5)......
Basic................. $ 0.44 $ 0.45
Diluted............... 0.43 0.44
Weighted average number
of common shares
outstanding:(5)
Basic................. 280.0 292.9
Diluted............... 286.2 300.3
See accompanying notes to the unaudited pro forma condensed combined financial
information.
72
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(UNAUDITED)
(1) CARDINAL AND BINDLEY WESTERN HISTORICAL FISCAL YEARS
Cardinal's historical fiscal year ends on June 30 and Bindley Western's
historical fiscal year ends on December 31. For purposes of combining Bindley
Western's historical financial information with Cardinal's financial
information in the pro forma condensed combined statements of earnings herein,
the financial information of Cardinal for the fiscal years ended June 30, 2000,
1999 and 1998 have been combined with Bindley Western's financial information
for the fiscal years ended December 31, 1999, 1998 and 1997. Cardinal's
financial information for the three months ended September 30, 2000 and 1999
have been combined with Bindley Western's financial information for the three
months ended September 30, 2000 and March 31, 1999.
The financial results of Bindley Western for the six months ended June 30,
2000 are excluded in the pro forma data. Bindley Western's net revenues and net
loss for the six months ended June 30, 2000 were approximately $4.9 billion and
$2.8 million, respectively.
In addition, certain amounts in the historical financial statements of
Bindley Western have been reclassified for the pro forma presentation.
(2) HISTORICAL MERGER-RELATED EXPENSES
In connection with the merger, the companies expect to incur investment
banking, legal, accounting and other related transaction costs and fees.
Additionally, the companies expect to incur other historical merger-related
costs associated with the integration of the separate companies and institution
of efficiencies anticipated as a result of the merger. The historical merger-
related expenses will be charged to operating expense in the period in which
the merger is consummated, or in subsequent periods when incurred. Since the
merger has not yet been consummated and transition plans are being developed,
the merger expenses cannot be reasonably estimated at this time.
The accounting policies of Cardinal and Bindley Western are currently being
studied to determine how they should be conformed. The impact of conforming
accounting policies (if any) is not presently estimable. If conforming
adjustments are required, they will be recorded as part of the restatement of
prior periods as required by the pooling-of-interests accounting method.
(3) TRANSACTIONS BETWEEN CARDINAL AND BINDLEY WESTERN
Cardinal and Bindley Western purchased pharmaceuticals from each other
during the periods covered by the pro forma financial statements. At September
30, 2000, Cardinal's unsold inventory related to purchases from Bindley Western
and Bindley Western's unsold inventory related to purchases from Cardinal were
not significant. The amounts arising from these transactions are not material
and, accordingly, the unaudited pro forma statements of earnings do not include
adjustments for these items.
(4) EFFECT OF MERGER-RELATED COSTS AND OTHER SPECIAL CHARGES
Amounts reflect the impact of merger-related costs and other special charges
recorded by Cardinal. Amounts in fiscal 1998 and 1999 do not reflect the impact
of the pro forma adjustment related to Automatic Liquid Packaging taxes. See
Notes 1 and 2 of the "Notes to Consolidated Financial Statements" incorporated
by reference to Cardinal's Form 10-K for the fiscal year ended June 30, 2000
for further discussion of these charges and adjustments in fiscal 2000, 1999
and 1998. See Note 5 of "Notes to Condensed Consolidated Financial Statements"
incorporated by reference to Cardinal's Form 10-Q for the three months ended
September 30, 2000 for further discussion of merger-related costs and other
special charges affecting the three months ended September 30, 2000 and 1999.
Amounts reflect the impact of special charges recorded by Bindley Western
during the year ended December 31, 1998 and the three months ended September
30, 2000. See Notes 2, 7, 10, 12, 13 and 17 of the
73
"Notes to Consolidated Financial Statements" incorporated by reference to
Bindley Western's Form 10-K/A for the year ended December 31, 1999 for further
discussion of the charges in the year ended December 31, 1998. See Note 3 of
the "Notes to Consolidated Financial Statements" incorporated by reference to
Bindley Western's Form 10-Q/A for the nine months ended September 30, 2000 for
further discussion of the charges during the three months ended September 30,
2000.
Bindley Western's historical net earnings per common share included in the
three-month period ended September 30, 2000 include the impact of a one-time
reversal of a legal accrual of $5.0 million ($5.0 million, net of tax) as a
result of a legal settlement.
The following table summarizes the impact of the historical merger-related
costs and special charges, as well as the impact of the pro forma adjustments
related to Automatic Liquid Packaging taxes on pro forma net earnings and pro
forma diluted net earnings per common share in the periods in which they were
recorded (in millions, except per share amounts):
THREE MONTHS ENDED
FISCAL YEAR SEPTEMBER 30,
----------------------- --------------------
1998 1999 2000 1999 2000
------ ------- ------ --------- ---------
IMPACT ON PRO FORMA:
Net earnings................... $(19.5) $(122.3) $(49.8) $ (29.7) $ (6.0)
Diluted net earnings per common
share......................... (0.06) (0.41) (0.16) (0.10) (0.02)
(5) EARNINGS PER SHARE
The pro forma net earnings per share reflect: (a) the weighted average
number of Cardinal common shares that would have been outstanding had the
merger occurred at the beginning of the periods presented based upon an
exchange ratio of 0.4275 of a Cardinal common share to be issued for each
Bindley Western common share outstanding (excluding Bindley Western common
shares held in treasury, which will be canceled or retired), and (b) the
dilutive impact of stock options and warrants using the treasury stock method.
All Bindley Western stock options are assumed to be converted into Cardinal
stock options at the exchange ratio of 0.4275 Cardinal common shares for each
Bindley Western common share before application of the treasury stock method.
74
DESCRIPTION OF CARDINAL CAPITAL STOCK
The following is a summary of certain rights of the holders of Cardinal
common shares. Reference is made to Cardinal's amended and restated articles of
incorporation and Cardinal's restated code of regulations, each as amended,
copies of which are filed as exhibits to the registration statement of which
this prospectus is a part and are incorporated into this prospectus by
reference. See "Where You Can Find More Information" on page 95 of this proxy
statement/prospectus for information on how to obtain a copy of the articles of
incorporation or code of regulations.
AUTHORIZED AND OUTSTANDING SHARES
Cardinal's articles of incorporation authorize us to issue up to 750,000,000
common shares. On December 1, 2000, 279,329,887 common shares were issued and
outstanding, approximately 7,323,041 were held in treasury, approximately
22,884,223 were reserved for issuance under stock incentive and deferred
compensation plans and approximately 4,200,000 were reserved for issuance under
an equity shelf registration statement. The articles of incorporation also
authorize Cardinal to issue up to 5,000,000 Class B common shares, none of
which is outstanding, and 500,000 nonvoting preferred shares, none of which is
outstanding. From time to time, Cardinal may issue additional authorized but
unissued common shares for share dividends, stock splits, employee benefit
programs, financing and acquisition transactions, and other general purposes.
Those common shares will be available for issuance without action by Cardinal's
shareholders, unless such action is required by applicable law or the rules of
the New York Stock Exchange or any other stock exchange on which common shares
may be listed in the future. All of the outstanding common shares are fully
paid and nonassessable. Holders of the common shares do not have preemptive
rights and have no rights to convert their common shares into any other
security. All common shares are entitled to participate equally and ratably in
dividends, when and as declared by the board of directors.
VOTING
Holders of Cardinal common shares are entitled to one vote per share for the
election of directors and upon all matters on which shareholders are entitled
to vote. Holders of Class B common shares (if any are issued in the future) are
entitled to one-fifth of one vote per share in the election of directors and
upon all matters on which shareholders are entitled to vote. Under certain
circumstances, holders of Class B common shares have a separate class vote.
Under Ohio law, Cardinal shareholders are afforded the right to vote their
common shares cumulatively for the election of nominees to fill the particular
class of directors to be elected at each annual meeting, subject to compliance
with certain procedural requirements.
BOARD OF DIRECTORS
Cardinal's board of directors currently consists of 13 members, divided into
two classes of four members each and a third class of five members. Following
the appointment of William E. Bindley to the board of directors upon completion
of the merger, the board will consist of 14 directors. The code of regulations
provides that the number of directors may be increased or decreased by action
of the board of directors upon the majority vote of the board, but in no case
may the number of directors be fewer than 9 or more than 16 without an
amendment approved by the affirmative vote of the holders of not less than 75%
of the shares having voting power with respect to that proposed amendment. The
code of regulations requires that any proposal to either remove a director
during his term of office or to further amend the code of regulations relating
to the classification or removal of directors be approved by the affirmative
vote of the holders of not less than 75% of the shares having voting power with
respect to such proposal. The board of directors may fill any vacancy with a
person who shall serve until the shareholders hold an election to fill the
vacancy. The purpose of these provisions is to prevent directors from being
removed from office prior to the expiration of their respective terms, thus
protecting the safeguards inherent in the classified board structure unless
dissatisfaction with the performance of one or more directors is widely shared
by Cardinal's shareholders. These provisions could also have the effect of
increasing from one year to two or three years (depending upon the number of
common shares held) the amount of time required for an acquiror to obtain
control of Cardinal
75
by electing a majority of the board of directors and may also make the removal
of incumbent management more difficult and discourage or render more difficult
certain mergers, tender offers, proxy contests, or other potential takeover
proposals.
ANTI-TAKEOVER PROVISIONS OF OHIO REVISED CODE
Chapter 1704 of the Ohio Revised Code provides generally that any person who
acquires 10% or more of a corporation's voting stock (thereby becoming an
"interested shareholder") may not engage in a wide range of "business
combinations" with the corporation for a period of three years following the
date the person became an interested shareholder, unless the directors of the
corporation have approved the transactions or the interested shareholder's
acquisition of shares of the corporation prior to the date the interested
shareholder became a shareholder of the corporation. These restrictions on
interested shareholders do not apply under certain circumstances, including,
but not limited to, the following:
. if the corporation's original articles of incorporation contain a
provision expressly electing not to be governed by Chapter 1704 of the
Ohio Revised Code;
. if the corporation, by action of its shareholders, adopts an amendment
to its articles of incorporation expressly electing not to be governed
by Chapter 1704 of the Ohio Revised Code; or
. if, on the date the interested shareholder became a shareholder of the
corporation, the corporation did not have a class of voting shares
registered or traded on a national securities exchange.
The Cardinal articles of incorporation do not contain a provision electing
not to be governed by Chapter 1704. Under Section 1701.831 of the Ohio Revised
Code, unless the articles of incorporation or regulations of a corporation
otherwise provide, any "control share acquisition" of an "issuing public
corporation" can be made only with the prior approval of the corporation's
shareholders. A "control share acquisition" is defined as any acquisition of
shares of a corporation that, when added to all other shares of that
corporation owned by the acquiring person, would enable that person to exercise
levels of voting power in any of the following ranges: at least 20% but less
than 33 1/3%, at least 33 1/3% but less than 50%, or 50% or more. Cardinal
falls within the definition of issuing public corporation, but its regulations
expressly provide that the provisions of Section 1701.831 of the Ohio Revised
Code do not apply to Cardinal.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Cardinal common shares is EquiServe
Trust Company, Jersey City, New Jersey.
76
COMPARISON OF SHAREHOLDER RIGHTS
As a result of the merger, Bindley Western shareholders will receive
Cardinal common shares in exchange for their Bindley Western common shares.
The following is a summary of certain material differences between the rights
of holders of Bindley Western common shares and the rights of holders of
Cardinal common shares. These differences arise in part from the differences
between Indiana law governing business corporations, including the Indiana
Business Corporation Law, generally referred to as the IBCL, and Ohio law
governing business corporations, including the Ohio General Corporation Law,
generally referred to as the OGCL. Additional differences arise from the
governing instruments of the two companies (in the case of Bindley Western,
the Bindley Western articles of incorporation and the Bindley Western bylaws,
and, in the case of Cardinal, the Cardinal articles of incorporation and the
Cardinal code of regulations). Although it is impractical to compare all of
the aspects in which Indiana law and Ohio law and Bindley Western's and
Cardinal's governing instruments differ with respect to shareholders' rights,
the following discussion summarizes certain significant differences between
them.
AUTHORIZED CAPITAL SHARES
Cardinal Bindley Western
. 750,000,000 common shares . 53,333,333 common shares
. 5,000,000 Class B common shares . 1,000,000 special shares
. 500,000 nonvoting preferred shares
SIZE OF THE BOARD OF DIRECTORS
Cardinal Bindley Western
The OGCL provides that the board The IBCL provides that the board
of directors of an Ohio corporation of directors of an Indiana
must consist of three or more corporation must consist of one or
individuals, with the number more individuals, with the number
specified in or fixed in accordance specified in or fixed in accordance
with the articles of incorporation with the articles of incorporation
or code of regulations. Cardinal's or bylaws. Under Bindley Western's
code of regulations provides that articles of incorporation, the
the number of directors shall not be number of directors shall be fixed
fewer than 9 nor greater than 16. in the bylaws and may be changed
Cardinal's code of regulations from time to time by amendment to
currently fixes the number of the bylaws. The bylaws currently fix
directors of Cardinal at 13. the number of directors of Bindley
Western at 11.
CLASSES OF DIRECTORS
A classified board of directors is one in which some, but not all, of the
directors are elected on a rotating basis each year. The purpose of staggering
the terms of members of a board of directors is to promote stability and
continuity within the board of directors. However, staggering the terms of
directors also has the effect of decreasing the number of directors that may
otherwise be elected by shareholders in a given year and, therefore, may have
the effect of precluding a contest for the election of directors or may delay,
prevent or make more difficult changes in control of a corporation.
Cardinal Bindley Western
The OGCL permits, but does not The IBCL provides that the
require, an Ohio corporation to articles of incorporation of an
provide in its articles of Indiana corporation or, if the
incorporation or code of regulations articles of incorporation so
for a classified board of directors. authorize, the bylaws, may provide
Cardinal's code of regulations for staggering the terms of
directors.
77
divides the board of directors into Bindley Western's articles of
three classes, as nearly equal in incorporation do not provide for a
number as possible, with each class classified board.
of directors serving a staggered
term of three years.
NOMINATION OF DIRECTORS FOR ELECTION
Cardinal Bindley Western
The OGCL provides that only those Under Bindley Western's bylaws,
persons nominated may be elected as the board of directors or any
directors. Cardinal's code of shareholder entitled to vote in the
regulations does not specify advance election of directors who complies
notice requirements for nominating with the notice procedures in
directors. Bindley Western's bylaws may
nominate one or more persons for
Bindley Western's board of
directors. The notice procedures in
Bindley Western's bylaws require
shareholders to give notice to
Bindley Western:
For an annual meeting:
. not less than 70 nor more than
90 days prior to the first
anniversary of the prior
year's annual meeting (for
elections to be held at an
annual meeting), or
. if the date of the annual
meeting is more than 30 days
earlier or more than 60 days
later than such anniversary
date, not earlier than the
90th day prior to the annual
meeting and not later than the
70th day prior to the meeting
or the 10th day following
public announcement of the
date of the meeting, whichever
occurs later.
For a special meeting:
. not earlier than the 90th day
prior to the special meeting
and not later than the 60th
day prior to the meeting or
the 10th day following the
date on which notice of a
special meeting is first given
to shareholders, whichever is
later (for elections to be
held at a special meeting).
The notice must include
information on the nominating
shareholder and information
regarding the nominee required by
the proxy rules of the Securities
and Exchange Commission.
VACANCIES OF THE BOARD
Cardinal Bindley Western
The OGCL provides that vacancies, The IBCL provides that vacancies,
including vacancies resulting from including vacancies resulting from
an increase in the number of an increase in the number of
directors, on a corporation's board directors, on a corporation's board
of directors may be filled by a of directors may be filled by the
majority of the remaining directors remaining directors of the
of corporation
78
the corporation unless the governing unless the governing documents of
documents of the corporation provide the corporation provide otherwise.
otherwise. If the remaining If the remaining directors
directors constitute less than a constitute less than a quorum of the
quorum of the board, then the board, then the remaining directors
remaining directors may fill may fill vacancies by a majority
vacancies by a majority vote. The vote. Bindley Western's articles of
Cardinal code of regulations incorporation provide that vacancies
provides that vacancies on the shall be filled in the manner
Cardinal board of directors may be provided in the bylaws. Bindley
filled by the Cardinal board of Western's bylaws provide that the
directors until Cardinal remaining members of the board of
shareholders hold a meeting to fill directors, whether or not they
such vacancy. In addition, Cardinal constitute a quorum of the board,
shareholders may elect a director to may fill vacancies, including
fill a vacancy (including any vacancies resulting from an increase
vacancy that previously had been in the number of directors; provided
filled by the directors) at any however, if no members remain or the
meeting of Cardinal shareholders remaining members cannot agree on a
called for that purpose. successor, such vacancy may be
filled at a special meeting of
shareholders called for that
purpose.
REMOVAL OF DIRECTORS
Cardinal Bindley Western
The OGCL provides that directors Under the IBCL, directors of an
may be removed, with or without Indiana corporation may be removed
cause, by the affirmative vote of in any manner provided in the
the holders of a majority of the corporation's articles of
voting power of a corporation, incorporation. In addition, the IBCL
except that, unless all the provides that, unless the articles
directors or all the directors of a of incorporation provide otherwise,
particular class are removed, no the shareholders or directors may
individual director may be removed remove one or more directors with or
if the votes of a sufficient number without cause. Bindley Western's
of shares are cast against such articles of incorporation provide
director's removal that, if that directors may be removed, with
cumulatively voted at an election of or without cause, only at a meeting
all the directors, or all the of the shareholders called for that
directors of a particular class, as purpose, by the affirmative vote of
the case may be, would be sufficient the holders of outstanding shares
to elect at least one director representing at least a majority of
unless the corporation's governing all the votes then entitled to be
documents provide otherwise. The cast at an election of directors.
Cardinal code of regulations
provides that removal of a director
requires the affirmative votes of
holders of at least 75% of the
voting power. In addition, the
Cardinal code of regulations
provides that any director may be
removed by the Cardinal board of
directors for certain causes
specified in Section 1701.58(B) of
the OGCL (if a director is found by
order of court to be of unsound
mind, if such director is
adjudicated a bankrupt, or if such
director fails to meet any
qualifications for office).
PROVISIONS AFFECTING CONTROL SHARE ACQUISITIONS AND BUSINESS COMBINATIONS
Cardinal Bindley Western
Chapter 1704 of the Ohio state The IBCL restricts the ability of
statutes prohibits an "interested a "resident domestic corporation" to
shareholder" from engaging in a wide engage in any combination with an
range of business combinations (such "interested shareholder" for five
as mergers and significant asset years after the interested
sales) with an "issuing public shareholder's date of acquiring
shares
79
corporation" for three years after unless the combination or the
the interested shareholder's "share purchase of shares by the interested
acquisition date," unless the shareholder on the interested
directors of the corporation shareholder's date of acquiring
approved the transaction or the shares is approved by the board of
share purchase by the interested directors of the resident domestic
shareholder prior to the share corporation before that date. If the
acquisition date. If the transaction combination was not previously
was not previously approved, the approved, the interested shareholder
interested shareholder may effect a may effect a combination after the
transaction after the three-year five-year period only if the
period only if that shareholder shareholder receives approval from a
receives approval by the affirmative majority of the disinterested shares
vote of two-thirds of the voting or the offer meets certain fair
power of the corporation (which must price criteria. A corporation may
include the affirmative vote of the elect out of these provisions in an
holders of at least a majority of amendment to its articles of
the disinterested shareholders) or incorporation approved by a majority
the offer meets certain fair price of the disinterested shares. Such an
criteria. amendment, however, would not become
effective for 18 months after its
. "Issuing public corporation" passage and would apply only to
means an Ohio corporation with stock acquisitions occurring after
50 or more shareholders that its effective date. Bindley
has its principal place of Western's articles of incorporation
business, principal executive do not elect out of these
offices, assets having provisions.
substantial value, or a
substantial portion of its . "Resident domestic corporation"
assets within the state of means an Indiana corporation that
Ohio. has 100 or more shareholders.
. "Interested shareholder" means . "Interested shareholder" means
any person who, directly or any person, other than the
indirectly, exercises or resident domestic corporation or
directs the exercise of 10% or its subsidiaries, who is:
more of the voting power of
the corporation in the -- the beneficial owner, directly
election of directors. or indirectly, of 10% or more
of the voting power of the
. "Share acquisition date" means outstanding voting shares of
the date on which a the resident domestic
shareholder becomes an corporation, or
interested shareholder.
-- an affiliate or associate of
Chapter 1704 restrictions do not the resident domestic
apply if a corporation, by action of corporation and at any time
its shareholders holding at least within the five-year period
two-thirds of the voting power of immediately before the date in
the corporation, adopts an amendment question was the beneficial
to its articles of incorporation owner of 10% or more of the
specifying that Chapter 1704 of the voting power of the
Ohio law shall not be applicable to outstanding shares of the
the corporation. No such amendment resident domestic corporation.
has been adopted by Cardinal.
Bindley Western's board of
Cardinal's articles of directors has approved in advance
incorporation provide that any Cardinal's acquisition of beneficial
action requiring a supermajority ownership of Bindley Western common
vote under Ohio law may be taken by shares in the merger and under the
the vote of the holders of shares stock option agreement and the
entitling them to exercise a support/voting agreements.
majority of the voting power of
Cardinal. The IBCL's control share
acquisition provisions give the
Under Section 1701.831 of the disinterested shareholders of
OGCL, unless the articles of certain Indiana corporations a right
incorporation or code of regulations to vote collectively on whether to
of a corporation otherwise provide, accord voting power to shares that
any "control share acquisition" of would give their acquirer a
an "issuing public corporation" can significant level of influence or
only be made with the prior approval control over the future governance
of the shareholders of the of the corporation. Under the IBCL,
corporation. A "control share an acquiring person who makes a
acquisition" is defined as any "control
acquisition of shares of
80
a corporation that, when added to share acquisition" in an "issuing
all other shares of that corporation public corporation" may not exercise
owned by the acquiring person, would voting rights on any "control
enable a person to exercise levels shares" unless such voting rights
of voting power in any of the are conferred by a majority vote of
following ranges: at least 20% but the disinterested shareholders of
less than 33 1/3%; at least 33 1/3% the issuing public corporation at a
but less than 50%; 50% or more. The special meeting of such shareholders
Cardinal articles of incorporation held upon the request and at the
expressly provide that the expense of the acquiring person.
provisions of Section 1701.831 of Unless otherwise provided in a
the OGCL shall not apply. corporation's articles of
incorporation or bylaws before a
control share acquisition has
occurred, in the event that control
shares acquired in a control share
acquisition are accorded full voting
rights and the acquiring person
acquires control shares with a
majority or more of all voting
power, all shareholders of the
issuing public corporation have
dissenters' rights to receive the
fair value of their shares.
. "Control shares" means shares
acquired by a person that, when
added to all other shares of the
issuing public corporation owned
by that person or in respect of
which that person may exercise or
direct the exercise of voting
power, would otherwise entitle
that person to exercise voting
power of the issuing public
corporation in the election of
directors within any of the
following ranges:
-- one-fifth or more but less
than one-third,
-- one-third or more but less
than a majority, or
-- a majority or more.
. "Control share acquisition"
means, subject to certain
exceptions, the acquisition,
directly or indirectly, by any
person of ownership of, or the
power to direct the exercise of
voting power with respect to,
issued and outstanding control
shares. Shares acquired within 90
days or pursuant to a plan to
make a control share acquisition
are considered to have been
acquired in the same acquisition.
. "Issuing public corporation"
means a corporation which is
organized in Indiana, has 100 or
more shareholders, its principal
place of business, its principal
office or substantial assets
within Indiana and one of the
following:
-- more than 10% of its
shareholders resident in
Indiana,
81
-- more than 10% of its shares
owned by Indiana residents, or
-- 10,000 shareholders resident
in Indiana.
These control share acquisition
provisions do not apply if, before a
control share acquisition is made,
the corporation's articles of
incorporation or bylaws (including a
board-adopted bylaw) provide that
they do not apply. Prior to signing
the merger agreement, Bindley
Western's articles of incorporation
and bylaws did not exclude Bindley
Western from the restrictions
imposed by these provisions. Bindley
Western's bylaws were amended prior
to signing of the merger agreement,
to remove application of these
provisions effective at 12:01 a.m.
on December 2, 2000.
Bindley Western's articles of
incorporation opt into a provision
of the IBCL that allows Bindley
Western to redeem an acquiring
person's control shares under
certain circumstances, including the
person's failure to file an
acquiring person statement regarding
the control shares.
MERGERS, ACQUISITIONS, SHARE PURCHASES AND OTHER TRANSACTIONS
Cardinal Bindley Western
The OGCL generally requires Under the IBCL, in order for a
approval of mergers, dissolutions, merger or share exchange to be
dispositions of all or substantially approved, the board of directors
all of a corporation's assets, and must recommend the plan of merger or
majority share acquisitions and share exchange to the shareholders,
combinations involving issuance of unless the board of directors
shares representing one-sixth or determines that because of conflict
more of the voting power of the of interest or other special
corporation immediately after the circumstances it should make no
consummation of the transaction recommendation and communicates the
(other than so-called "parent- basis for its determination to the
subsidiary" mergers), by two-thirds shareholders. Approval by the
of the voting power of a shareholders requires the vote of a
corporation, unless the articles of majority of the shares entitled to
incorporation specify a different vote on a proposed plan of merger or
proportion (not less than a share exchange, unless any class or
majority). The Cardinal articles of series of shares is entitled to vote
incorporation provide that the vote separately as a class on the plan.
of a majority of the voting power of However, the vote of the
Cardinal (or majority of each class, shareholders of the surviving
if applicable) is required to corporation on a plan of merger is
approve such actions. not required if:
. the articles of incorporation of
the surviving corporation will
not differ from its articles
before the merger;
. each shareholder of the surviving
corporation whose shares were
outstanding immediately before
the effective date of the merger
will hold the same number of
shares proportionate to the
82
number of shares held by all such
shareholders (except for shares
of the surviving corporation
received solely as a result of
the shareholder's proportionate
shareholdings in the other
corporation party to the merger),
with identical designations,
preferences, limitations and
relative rights, immediately
after the merger;
. the number of voting shares
outstanding immediately after the
merger, plus the number of voting
shares issuable as a result of
the merger (either by the
conversion of securities issued
pursuant to the merger or the
exercise of rights and warrants
issued pursuant to the merger),
will not exceed by more than 20%
the total number of voting shares
of the surviving corporation
outstanding immediately before
the merger; and
. the number of participating
shares outstanding immediately
after the merger, plus the number
of participating shares issuable
as a result of the merger (either
by the conversion of securities
issued pursuant to the merger or
the exercise of rights and
warrants issued pursuant to the
merger), will not exceed by more
than 20% the total number of
participating shares of the
surviving corporation outstanding
immediately before the merger.
"Participating shares" means
shares that entitle their holders
to participate without limitation
in distributions.
Bindley Western's shareholders
are required to vote to approve the
merger agreement with Cardinal.
NOTICE OF SHAREHOLDER MEETINGS
Cardinal Bindley Western
The OGCL requires Ohio The IBCL requires Indiana
corporations to notify shareholders corporations to notify shareholders
of the time, place, and purposes of of the date, time and place of each
shareholder meetings at least 7 days annual and special shareholders'
but no more than 60 days prior to meeting at least 10 days, but not
the date of the meeting, unless the more than 60 days, before the
articles or regulations specify a meeting date. Unless another
longer period. Upon request of a provision of the IBCL or the
person entitled to call a special articles of incorporation require
shareholders meeting, the otherwise, Indiana corporations are
corporation shall give shareholders required to give notice only to
notice of the special meeting to be shareholders entitled to vote at the
held no less than 7 nor more than 60 meeting. Bindley Western's bylaws
days after receipt of the request. provide that Bindley Western will
If notice is not given within 15 notify all shareholders of record
days of receipt of the request (or who do not waive notice at least 10
such shorter or longer period as the days but not more than 60 days
articles or regulations specify), before any meeting. In the event of
the persons calling the meeting may a special meeting required to be
fix the time for the called as the result of a
83
meeting and give notice to the other demand made by shareholders, notice
shareholders. Cardinal's code of shall be given no later than the
regulations does not alter these 60th day after Bindley Western's
statutory provisions. receipt of the demand requiring the
meeting to be called.
Bindley Western's bylaws provide
that notice of a meeting will be
given to shareholders not entitled
to vote, but only if a purpose for
the meeting is to vote on any
amendment to Bindley Western's
articles of incorporation, merger,
share exchange, sale of its assets,
dissolution, or consideration of
voting rights to be accorded to
shares acquired in a control share
acquisition.
SUBMISSION OF SHAREHOLDER PROPOSALS
Cardinal Bindley Western
No provision for the submission Bindley Western's bylaws provide
of shareholder proposals is made in that in order for a shareholder to
the OGCL or Cardinal's articles of bring business before the annual
incorporation or code of meeting, the shareholder must give
regulations. timely notice of the proposal to
Bindley Western. To be considered
timely, the shareholder must have
given written notice to Bindley
Western not less than 70 days nor
more than 90 days prior to the
anniversary date of the immediately
preceding annual meeting. If the
annual meeting is more than 30 days
earlier or more than 60 days later
than that anniversary date, however,
notice by the shareholder must be
delivered or received not earlier
than the 90th day prior to the
annual meeting and not later than
the 70th day prior to the meeting or
the 10th day following the day on
which public announcement of the
date of the meeting is first made,
whichever is later.
SPECIAL MEETING OF SHAREHOLDERS
Cardinal Bindley Western
The OGCL provides that holders of The IBCL provides that an Indiana
at least 25% of the outstanding corporation with more than 50
shares of a corporation (unless the shareholders must hold a special
corporation's code of regulations meeting of shareholders on demand of
specifies another percentage, which its board of directors or the
may in no case be greater than 50%), persons specifically authorized to
the directors by action at a meeting make such a demand by the articles
or a majority of the directors of incorporation or bylaws. Bindley
acting without a meeting, the Western's bylaws provide that the
chairman of the board, and the board of directors or the chairman
president (or, in case of the of the board of directors may call a
president's death or disability, the special meeting of shareholders.
vice president authorized to Further, the board of directors will
exercise the authority of the call a special
84
president) have the authority to meeting of the shareholders upon the
call special meetings of receipt of a written request
shareholders. The Cardinal code of describing in reasonable detail the
regulations expressly provides that purpose of the meeting from the
special meetings of Cardinal holders of shares representing at
shareholders may be called by the least 25% of all the votes entitled
chairman of the board, the to be cast on any issue proposed to
president, a majority of directors be considered at the proposed
acting with or without a meeting, or special meeting.
the holders of shares entitling them
to exercise at least 25% of the
voting power of Cardinal entitled to
be voted at the meeting.
SHAREHOLDER ACTION WITHOUT A MEETING
Cardinal Bindley Western
The OGCL provides that any action Under the IBCL, action required
that may be taken by shareholders of or permitted to be taken at a
a corporation at a meeting of shareholders' meeting of an Indiana
shareholders may be taken without a corporation may be taken without a
meeting with the unanimous written meeting if the action is taken by
consent of all shareholders entitled all the shareholders entitled to
to vote thereat. Cardinal's code of vote on the action. The action must
regulations contains an identical be evidenced by one or more written
provision. consents describing the action
taken, signed by all the
shareholders entitled to vote on the
action, and delivered to the
corporation for inclusion with the
minutes or filing with the corporate
records. Bindley Western's articles
of incorporation contain provisions
substantially similar to the IBCL.
CUMULATIVE VOTING
Cumulative voting entitles each shareholder to cast an aggregate number of
votes equal to the number of voting shares held, multiplied by the number of
directors to be elected. Each shareholder may cast all of his or her votes for
one nominee or distribute them among two or more nominees. The candidates (up
to the number of directors to be elected) receiving the highest number of
votes are elected.
Cardinal Bindley Western
The OGCL provides that each Under the IBCL, shareholders of
shareholder of a corporation has the Indiana corporations do not have the
right to vote cumulatively in the right to cumulate their votes in the
election of directors if certain election of directors unless that
notice requirements are satisfied right is granted in the articles of
unless the articles of incorporation incorporation. Bindley Western's
of a corporation are amended to articles of incorporation do not
eliminate cumulative voting for confer cumulative voting rights.
directors following their initial
filing with the Ohio Secretary of
State. The Cardinal articles of
incorporation expressly permit
shareholders to cumulate their votes
in accordance with the statute.
VOTING RIGHTS
Cardinal Bindley Western
Under the OGCL, except to the Under the IBCL, unless the
extent that the express terms of the articles of incorporation provide
shares of any class provide otherwise, shareholders of an
otherwise, each outstanding share Indiana corporation are entitled to
regardless of class shall entitle one vote per share on each matter to
the holder to one vote on each be voted upon by the shareholders.
matter
85
properly submitted to the Bindley Western's articles of
shareholders for their vote. incorporation do not provide
Cardinal's articles of incorporation otherwise.
expressly provide that each Cardinal
common share entitles the holder to
one vote and each Cardinal Class B
common share entitles the holder to
one-fifth of one vote.
SHAREHOLDER CLASS VOTING RIGHTS
Cardinal Bindley Western
The OGCL provides that holders of Under the IBCL, the holders of
a particular class of shares are the outstanding shares of a class
entitled to vote as a separate class are entitled to vote as a separate
if the rights of that class are voting group, only if shareholder
affected in certain respects by voting is otherwise required by the
mergers, consolidations, or IBCL, on a proposed amendment to an
amendments to the articles of Indiana corporation's articles of
incorporation. incorporation that would affect that
class in any of several specified
Cardinal's articles of ways. The ways include, among
incorporation permit holders of others, increasing or decreasing the
Class B common shares to vote as a aggregate number of authorized
separate class on any amendment to shares of the class; changing the
the articles of incorporation that designations, rights, preferences or
alters the shares' voting rights; on limitations of all or part of the
the issuance in the aggregate by shares of the class; and creating a
Cardinal of additional Class B new class of shares having rights or
common shares in excess of the preferences with respect to
number of Class B common shares held distributions or to dissolution that
by Chemical Equity Associates and are prior, superior or substantially
its affiliates or issuable pursuant equal to the shares of the class.
to the provisions of the articles of Holders of outstanding shares of a
incorporation governing the class are also entitled to vote as a
conversion of common shares and separate voting group on a
Class B common shares; and any resolution granting voting rights to
amendment, repeal, or modification control shares if a proposed control
of Cardinal's articles of share acquisition would, if fully
incorporation that adversely affects carried out, result in any of the
the powers, preferences, or special changes to that class referred to
rights of the holders of Class B above. Holders of outstanding shares
common shares. of a class are also entitled to vote
as a separate voting group on a plan
of merger if that plan contains a
provision that, if contained in a
proposed amendment to the articles
of incorporation, would require
action by one or more separate
voting groups. In addition, holders
of outstanding shares are entitled
to vote as a separate voting group
on a plan of share exchange by each
class or series of shares included
in the exchange, with each series
constituting a separate voting
group.
RIGHTS OF PREFERRED AND SPECIAL SHAREHOLDERS
Cardinal Bindley Western
Cardinal's articles of Bindley Western's articles of
incorporation authorize the board of incorporation authorize the board of
directors to issue up to 500,000 directors to issue up to 1,000,000
nonvoting preferred shares in special shares in multiple series
multiple series, without shareholder without shareholder approval. Prior
approval. Prior to issuance, the to issuance, the board of directors
board of directors would determine would determine the preferences,
the designations, preferences, limitations and relative voting and
limitations, and relative and other other rights of the special shares
rights of the preferred shares. No by adoption of an amendment to the
shares of Cardinal preferred stock articles of incorporation. Depending
are currently outstanding. Depending upon the terms
86
upon the terms of the preferred of the special shares issued, an
shares issued, an issuance may issuance may dilute the voting
dilute the voting rights of common rights of common shareholders and
shareholders and any other preferred any other special shareholders who
shareholders who hold shares with hold shares with preferences and
preferences and rights superior to rights superior to the rights of
the rights of common shareholders. common shareholders. The authorized
The authorized preferred shares may special shares may also have
also have possible antitakeover possible antitakeover effects,
effects, because Cardinal could use because Bindley Western could use
the shares in the adoption of a the shares in the adoption of a
shareholder rights plan or other shareholder rights plan or other
defensive measure. defensive measure.
DIVIDENDS
Cardinal Bindley Western
The OGCL provides that dividends Under the IBCL, Indiana
may be paid in cash, property or corporations may not pay dividends
shares of a corporation's capital or make other distributions if,
stock. after giving effect to the
distribution, the corporation would
The OGCL provides that a not be able to pay its debts as they
corporation may pay dividends out of become due in the usual course of
surplus in certain circumstances and business, or if the corporation's
must notify its shareholders if a total assets would be less than the
dividend is paid out of capital sum of its total liabilities plus
surplus. (unless the articles of
incorporation permit otherwise) the
amount that would be needed, if the
corporation were to be dissolved at
the time of the distribution, to
satisfy the preferential rights upon
dissolution of shareholders whose
preferential rights are superior to
those receiving the distribution.
Bindley Western's articles of
incorporation provide that
determination of the company's
ability to make distributions shall
be made without reference to any
amounts that would be needed, if the
company were to be dissolved at the
time of the distribution, to satisfy
the preferential rights upon
dissolution of shareholders whose
preferential rights are superior to
those of the holders of the shares
receiving the dividend or other
distribution, unless otherwise
expressly provided with respect to a
series of special shares.
Under the IBCL, the board of
directors may base its determination
of whether the corporation may make
distributions either on financial
statements prepared on the basis of
accounting practices and principles
that are reasonable in the
circumstances or on a fair valuation
or other method that is reasonable
in the circumstances.
RIGHTS OF DISSENTING SHAREHOLDERS
Cardinal Bindley Western
Under the OGCL, dissenting The IBCL provides shareholders of
shareholders are entitled to an Indiana corporation that is
appraisal rights in connection with involved in certain mergers, share
the lease, sale, exchange, transfer exchanges or sales or exchanges of
or other disposition of all or substantially
87
all or substantially all of the all of its property the right to
assets of a corporation and in dissent from that action and obtain
connection with certain amendments payment of the fair value of their
to a corporation's articles of shares. However, dissenters' rights
incorporation. Shareholders of an are not available to holders of
Ohio corporation being merged into shares listed on a national
or consolidated with another securities exchange or traded on the
corporation are also entitled to Nasdaq National Market or a similar
appraisal rights. In addition, market. Dissenters' rights are not
shareholders of an acquiring available to the Bindley Western
corporation are entitled to shareholders with respect to the
appraisal rights in any merger, merger with Cardinal because Bindley
combination or majority share Western's common shares are traded
acquisition in which such on the New York Stock Exchange.
shareholders are entitled to voting
rights. The OGCL provides
shareholders of an acquiring
corporation with voting rights if
the acquisition (a "majority share
acquisition") involves the transfer
of shares of the acquiring
corporation entitling the recipients
thereof to exercise one-sixth or
more of the voting power of such
acquiring corporation immediately
after the consummation of the
transaction.
The OGCL provides that a
shareholder's written demand must be
delivered to a corporation not later
than 10 days after the taking of the
vote on the matter giving rise to
appraisal rights.
SHAREHOLDER PREEMPTIVE RIGHTS
Cardinal Bindley Western
The OGCL provides that the The IBCL provides that
shareholders of an Ohio corporation shareholders of an Indiana
do not have a preemptive right to corporation do not have a preemptive
acquire the corporation's unissued right to acquire the corporation's
shares except to the extent the unissued shares except to the extent
articles of incorporation permit. the articles of incorporation so
The Cardinal articles of provide. Bindley Western's articles
incorporation expressly eliminate of incorporation expressly state
any preemptive rights. that shareholders do not have
preemptive rights to acquire shares.
INSPECTION OF SHAREHOLDER LISTS
Cardinal Bindley Western
Under the OGCL, shareholders have The IBCL permits any shareholder
the right, upon written demand who gives at least five business
stating the purpose, to examine at days' written notice to the
any reasonable time and for any corporation to have the right to
reasonable and proper purpose the inspect and copy during normal
articles of the corporation, its business hours, at the principal
books and records of account, office of the corporation, the
minutes, records of shareholders, following books and records of the
and voting trust agreements, if any, corporation:
on file with the corporation, and to
make copies of such items. . the articles of incorporation and
Cardinal's code of regulations the by-laws;
authorizes the board of directors to
make reasonable rules and . resolutions adopted by the board
regulations prescribing under what of directors with respect to one
conditions the books, records, or more classes or series of
accounts, and documents of Cardinal shares and fixing their relative
shall be open to inspection by rights, preferences and
shareholders. limitations, if shares issued
under the resolutions are
outstanding;
88
The OGCL requires that upon the . the minutes of all shareholders'
request of a shareholder at any meetings and executed written
meeting of shareholders, the consents evidencing all action
corporation shall produce at the taken by the shareholders without
meeting an alphabetically arranged a meeting for the past three
list, or classified lists, of the years;
shareholders of record as of the
applicable record date who are . all written communications to
entitled to vote. shareholders generally within the
past three years, including the
annual financial statements
furnished as provided in IBCL
Section 23-1-53-1;
. the names and business addresses
of the corporation's current
directors and officers; and
. the most recent annual report of
the corporation filed with the
Indiana Secretary of State.
Under the IBCL, a shareholder
also has a right, subject to the
limitations described below, upon at
least five business days' written
notice to the corporation, to
inspect and copy, during normal
business hours, at a reasonable
location specified by the
corporation, the following records
of the corporation:
. excerpts from minutes of any
meeting of the board, records of
any action of a committee of the
board while acting for the board,
minutes of any meetings of
shareholders, and records of
action taken by shareholders or
the board without a meeting, to
the extent not subject to
inspection under the provisions
described in the immediately
preceding paragraph;
. accounting records of the
corporation; and
. the record of shareholders.
The right to inspect and copy
described in this paragraph is
limited to instances where:
. the shareholder's demand is made
in good faith and for a proper
purpose;
. the shareholder describes with
reasonable particularity the
shareholder's purpose and the
records the shareholder desires
to inspect; and
. the records are directly
connected with the shareholder's
purpose.
89
LIABILITY OF DIRECTORS AND OFFICERS
Cardinal Bindley Western
The OGCL provides no comparable The IBCL provides that a director
provision limiting the liability of is not liable for any action taken
officers, employees or agents of a as a director, or any failure to
corporation and the Cardinal act, unless the director has
articles of incorporation contain no breached or failed to perform the
such provision. However, under the duties of the director's office in
OGCL, a director is not liable for compliance with the IBCL and the
monetary damages unless it is proved breach or failure to perform
by clear and convincing evidence constitutes willful misconduct or
that such director's action or recklessness. Subject to this
failure to act was undertaken with standard, a director who votes for
deliberate intent to cause injury to or assents to distributions in
the corporation or with reckless violation of the IBCL is personally
disregard for the best interests of liable to the corporation for the
the corporation. amount of the illegal distribution
and is entitled to contribution from
the other directors who voted for or
assented to such distribution and
the shareholders who received the
distribution. Bindley Western's
articles of incorporation do not
contain any provisions that would
alter the statutory provisions.
DUTIES OF DIRECTORS
Cardinal Bindley Western
The OGCL requires a director to Under Indiana law, a director
perform his duties as a director: must discharge his duties as a
director:
. in good faith,
. in good faith,
. with the care an ordinarily
prudent person in a like position . with the care an ordinarily
would exercise under similar prudent person in a like position
circumstances, and would exercise under similar
circumstances, and
. in a manner the director
reasonably believes to be in or . in a manner the director
not opposed to the best interests reasonably believes to be in the
of the corporation. best interests of the
corporation.
Under Ohio law, actions taken by
directors in connection with a Actions taken by directors in
proposed acquisition of control of connection with a proposed
the corporation in the good faith acquisition of control of the
exercise of their business judgment corporation in the good faith
are not subject to a different or exercise of their business judgment
higher degree of scrutiny than other are not subject to a different or
actions of the directors. higher degree of scrutiny than other
actions of the directors.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Cardinal Bindley Western
The OGCL provides that a Under the IBCL, an Indiana
corporation may indemnify directors, corporation is obligated to
officers, employees and agents indemnify officers and directors in
within prescribed limits, and must connection with liabilities arising
indemnify them under certain from legal proceedings resulting
circumstances. The OGCL does not from that person's service to the
authorize payment by a corporation corporation in certain
of judgments against a director, circumstances. An Indiana
officer, employee or agent after a corporation may also voluntarily
finding of negligence or misconduct undertake to indemnify certain
in a derivative suit absent a court persons acting on its behalf in
order. Indemnification is required, certain circumstances.
90
however, to the extent such person . The IBCL requires Indiana
succeeds on the merits. In all other corporations, unless limited by
cases, if it is determined that a their articles of incorporation,
director, officer, employee, or to indemnify any director or
agent acted in good faith and in a officer against reasonable
manner such person reasonably expenses incurred in connection
believed to be in or not opposed to with any proceeding to which such
the best interests of the person was a party if the
corporation, or, with respect to a individual is wholly successful
criminal proceeding, he or she had on the merits or otherwise.
no reasonable cause to believe that
his or her conduct was unlawful, . The IBCL authorizes corporations
indemnification is discretionary, to indemnify any director against
except as otherwise provided by a liability incurred in such a
corporation's articles of proceeding generally if the
incorporation, or code of director's conduct was in good
regulations, or by contract, and faith and he or she reasonably
except with respect to the believed, in the case of conduct
advancement of expenses to directors in the director's official
(as discussed in the next capacity, that his or her conduct
paragraph). The statutory right to was in the corporation's best
indemnification is not exclusive in interests and in all other cases
Ohio, and Ohio corporations may, that his or her conduct was not
among other things, purchase opposed to the best interests of
insurance to indemnify such persons. such corporation, and in the case
of any criminal proceeding, the
The OGCL provides that a director director either had reasonable
(but not an officer, employee, or cause to believe his or her
agent) is entitled to mandatory conduct was lawful or had no
advancement of expenses, including reasonable cause to believe his
attorneys' fees, incurred in or her conduct was unlawful.
defending any action, including
derivative actions, brought against . The IBCL further authorizes any
the director, provided that the court of competent jurisdiction,
director agrees to cooperate with unless the articles of
the corporation concerning the incorporation provide otherwise,
matter and to repay the amount to order indemnification
advanced if it is proved by clear generally if the court determines
and convincing evidence that such a director or officer of a
director's act or failure to act was corporation is entitled to
done with deliberate intent to cause mandatory indemnification or is
injury to the corporation or with otherwise fairly and reasonably
reckless disregard for the entitled to indemnification in
corporation's best interests. view of all the relevant
circumstances.
The Cardinal code of regulations
provides for indemnification by . The IBCL also authorizes
Cardinal to the fullest extent corporations to advance
expressly permitted by the OGCL of reasonable expenses to a director
any person made or threatened to be in advance of final disposition
made a party to any action, suit, or of a proceeding generally if the
proceeding by reason of the fact director affirms in writing a
that such person is or was a good faith belief that he or she
director, officer, employee or agent satisfies the standard of conduct
of Cardinal or of any other for permissive indemnification,
corporation for which such person he or she undertakes in a signed
was serving as a director, officer, writing to repay the advance if
employee, or agent at the request of it is determined he or she does
Cardinal. not satisfy the standard of
conduct for permissive
indemnification, and the
corporation determines that the
facts then known do not preclude
indemnification.
. The IBCL further authorizes
Indiana corporations, unless
their articles of incorporation
provide otherwise, to indemnify
and advance expenses to an
officer, employee or agent of the
corporation to the same extent as
to a director.
91
. Finally, the IBCL authorizes
further indemnification to the
extent that the corporation may
provide in its articles of
incorporation, bylaws, a
resolution of the board of
directors or the shareholders or
any other authorization adopted
after notice by a majority vote
of holders of all the voting
shares then issued and
outstanding.
Bindley Western's articles of
incorporation and bylaws do not
contain provisions altering the
statutory provisions.
AMENDMENT OF CHARTER DOCUMENTS
Cardinal Bindley Western
To amend an Ohio corporation's The IBCL provides that, unless a
articles of incorporation, the OGCL greater vote is required under a
requires the approval of specified provision of the IBCL or
shareholders holding two-thirds of by a corporation's articles of
the voting power of the corporation incorporation or its board of
or, in cases in which class voting directors, a corporation may amend
is required, of shareholders holding its articles of incorporation upon
two-thirds of the voting power of the affirmative vote of the holders
such class, unless otherwise of a greater number of shares cast
specified in such corporation's in favor of the amendment than the
articles of incorporation. The holders of shares cast against the
Cardinal articles of incorporation amendment, unless the amendment
specify that the holders of a would create dissenters' rights in
majority of the voting power of which case a favorable vote of the
Cardinal, or, when appropriate, any holders of a majority of the
class of shareholders, may amend the outstanding shares entitled to vote
Cardinal articles of incorporation. is required. Under the IBCL, a
corporation's board of directors may
condition its submission of a
proposed amendment to the
shareholders of the corporation on
any basis, including the requirement
of the affirmative vote of holders
of a greater percentage of the
voting shares of the corporation
than otherwise would be required
under the IBCL.
AMENDMENT AND REPEAL OF BYLAWS AND REGULATIONS
Cardinal Bindley Western
The OGCL provides that only Under the IBCL, unless the
shareholders of a corporation have articles of incorporation provide
the power to amend and repeal that otherwise, only the board of
corporation's code of regulations. directors of an Indiana corporation
The Cardinal code of regulations may amend or repeal the
requires that such amendments be corporation's bylaws. Bindley
approved by the affirmative vote of Western's articles of incorporation
the holders of a majority of the do not provide otherwise. Bindley
voting power entitled to vote on Western's bylaws expressly state
such matter, except that the that the bylaws may be amended or
affirmative vote of the holders of waived by the affirmative vote of a
not less than 75% of the shares majority of the entire number of
having voting power is required to directors.
amend, change, adopt any provision
inconsistent with, or repeal
provisions of the Cardinal code of
regulations regarding the number and
classification of directors, the
term of office of directors, the
removal of directors, or amendments
to the Cardinal code of regulations.
92
OTHER ACTION TO BE TAKEN AT THE BINDLEY WESTERN SPECIAL MEETING
BINDLEY WESTERN ADJOURNMENT PROPOSAL
Bindley Western is submitting a proposal to the Bindley Western
shareholders to authorize the named attorneys-in-fact to vote in favor of the
adjournment proposal at the special meeting of shareholders in the event that
there are not sufficient votes to approve the merger proposal at the time of
the special meeting. Even though a quorum may be present at the special
meeting, it is possible that Bindley Western may not have received sufficient
votes to approve the merger proposal. In that event, we would need to adjourn
the special meeting in order to solicit additional proxies.
To allow the proxies that have been received by Bindley Western at the time
of the special meeting of shareholders to be voted for such adjournment, if
necessary, Bindley Western has submitted the question of adjournment under
such circumstances, and only under such circumstances, to the Bindley Western
shareholders for their consideration. Approval of the adjournment proposal
requires that the number of votes cast in favor of the proposal exceed the
number of votes cast against the proposal.
The Bindley Western board of directors recommends that the Bindley Western
shareholders vote their proxies in favor of the Bindley Western adjournment
proposal so that their proxies may be used for such purpose, should it become
necessary. Properly executed proxies will be voted in favor of the adjournment
proposal unless otherwise noted thereon. If it is necessary to adjourn the
special meeting, no notice of the time and place of the adjourned meeting is
required to be given to shareholders other than an announcement of such time
and place at the special meeting. The adjournment proposal relates only to an
adjournment occurring for purposes of soliciting additional proxies for
approval of the merger proposal in the event that there are insufficient votes
to approve the merger proposal at the special meeting. Any other adjournment
(e.g., an adjournment required because of the absence of a quorum) would be
voted upon pursuant to the discretionary authority granted by the proxy.
The Bindley Western board of directors retains full authority to postpone
the special meeting prior to such meeting being convened, without the consent
of any shareholder.
THE BINDLEY WESTERN BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE
ADJOURNMENT PROPOSAL.
93
LEGAL MATTERS
The validity of the Cardinal common shares to be issued in the merger will
be passed upon for Cardinal by Wachtell, Lipton, Rosen & Katz, special counsel
to Cardinal.
Baker & Daniels, counsel to Bindley Western, has rendered the opinion
referred to under "United States Federal Income Tax Consequences."
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated financial statements and the related financial statement
schedules of Cardinal and its consolidated subsidiaries as of June 30, 2000 and
1999, and for each of the three years in the period ended June 30, 2000 have
been incorporated in this proxy statement/prospectus by reference from
Cardinal's annual report on Form 10-K for the fiscal year ended June 30, 2000.
The consolidated financial statements and schedules of Cardinal and its
subsidiaries as of and for the year ended June 30, 2000 have been audited by
Arthur Andersen LLP as stated in their report which is incorporated herein by
reference from the Cardinal Form 10-K for the fiscal year ended June 30, 2000.
The consolidated financial statements and schedules of Cardinal and its
subsidiaries, except the financial statements of Allegiance Corporation and of
R.P. Scherer Corporation, as of and for each of the two years in the period
ended June 30, 1999 have been audited by Deloitte & Touche LLP as stated in
their report which is incorporated herein by reference from the Cardinal
Form 10-K for the fiscal year ended June 30, 2000. The financial statements of
Allegiance as of June 30, 1999 and for each of the two years in the period
ended June 30, 1999 have been audited by PricewaterhouseCoopers LLP and the
financial statements of R.P. Scherer as of June 30, 1999 and for the years
ended June 30, 1999 and March 31, 1998 have been audited by Arthur Andersen
LLP, as stated in their reports which are incorporated herein by reference from
Cardinal's Form 10-K for the fiscal year ended June 30, 2000.
The consolidated financial statements of Bindley Western and its
consolidated subsidiaries as of December 31, 1999 and 1998 and for each of the
three years in the period ended December 31, 1999, incorporated into this proxy
statement/prospectus by reference have been audited by PricewaterhouseCoopers
LLP, independent accountants, as stated in their report (which contains an
explanatory paragraph relating to Bindley Western's restatement for purchase
accounting as described in Note 3 to the financial statements) appearing
therein.
OTHER MATTERS
Representatives of PricewaterhouseCoopers LLP are expected to be present at
the Bindley Western special meeting with the opportunity to make statements if
they so desire. Such representatives are also expected to be available to
respond to appropriate questions.
SHAREHOLDER PROPOSALS
The deadline for shareholder submission of proposals to be included in the
proxy statement and form of proxy relating to the Bindley Western 2001 annual
meeting of shareholders was November 30, 2000. Bindley Western is not required
to include in its proxy statement a form of proxy or shareholder proposal which
is received after that date or which otherwise fails to meet the requirements
for shareholder proposals established by regulations of the Securities and
Exchange Commission. If the merger is consummated before the date of such
meeting, there will be no 2001 Annual Meeting of Bindley Western shareholders.
94
WHERE YOU CAN FIND MORE INFORMATION
Cardinal has filed with the Securities and Exchange Commission a
registration statement under the Securities Act of 1933, as amended, that
registers the distribution to Bindley Western shareholders of the Cardinal
common shares to be issued in connection with the merger. The registration
statement, including the attached exhibits and schedules, contains additional
relevant information about Cardinal and Bindley Western. The rules and
regulations of the Securities and Exchange Commission allow us to omit certain
information included in the registration statement from this proxy
statement/prospectus.
In addition, Cardinal and Bindley Western file reports, proxy statements and
other information with the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended. Please call the Securities and
Exchange Commission at 1-800-SEC-0330 for further information on the public
reference rooms. You may read and copy this information at the following
locations of the Securities and Exchange Commission:
Public
Reference
Room New York Regional Office Chicago Regional Office
450 Fifth
Street,
N.W. 7 World Trade Center Citicorp Center, Suite 1400
Room 1024 Suite 1300 500 West Madison Street
Washington,
D.C. 20549 New York, New York 10048 Chicago, Illinois 60661-2511
You may also obtain copies of this information by mail from the Public
Reference Section of the Securities and Exchange Commission, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. The Commission
also maintains an Internet world wide web site that contains reports, proxy
statements and other information about issuers, like Cardinal and Bindley
Western, who file electronically with the Securities and Exchange Commission.
The address of that site is http://www.sec.gov. You can also inspect reports,
proxy statements and other information about Cardinal and Bindley Western at
the offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005.
The Securities and Exchange Commission allows Cardinal and Bindley Western
to "incorporate by reference" information into this proxy statement/prospectus.
This means that the companies can disclose important information to you by
referring you to another document filed separately with the Securities and
Exchange Commission. The information incorporated by reference is considered to
be a part of this proxy statement/prospectus, except for any information that
is superseded by information that is included directly in this document.
This proxy statement/prospectus incorporates by reference the documents
listed below that Cardinal and Bindley Western have previously filed with the
Securities and Exchange Commission. They contain important information about
our companies and their financial condition.
CARDINAL COMMISSION FILINGS (FILE
NO. 0-12591) DESCRIPTION OR PERIOD/AS OF DATE
- --------------------------------- --------------------------------
Annual Report on Form 10-K Year ended June 30, 2000
Quarterly Report on Form 10-Q Quarter ended September 30, 2000
Proxy Statement For Cardinal's 2000 annual meeting of
shareholders held November 1, 2000
Registration Statement on Form 8-A, Description of Cardinal common shares
dated August 19, 1994 contained therein and any amendment or
report filed for the purpose of updating
such description
95
BINDLEY WESTERN COMMISSION FILINGS
(FILE NO. 001-11519) DESCRIPTION OR PERIOD/AS OF DATE
- ---------------------------------- --------------------------------
Annual Report on Form 10-K/A Year ended December 31, 1999
Quarterly Reports on Form 10-Q/A Quarters ended March 31, 2000,
June 30, 2000 and September 30, 2000
Current Report on Form 8-K November 15, 2000
Proxy Statement For Bindley Western's annual meeting of
shareholders held May 18, 2000
Registration Statement on Form 8-A, Description of Bindley Western common
filed with the Commission on July 24, shares contained therein and any
1995 amendment or report filed for the
purpose of updating such description
Cardinal and Bindley Western incorporate by reference additional documents
that either company may file with the Securities and Exchange Commission
between the date of this proxy statement/prospectus and the date of the special
meeting of Bindley Western shareholders. These documents include periodic
reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q
and Current Reports on Form 8-K, as well as proxy statements.
You can obtain any of the documents incorporated by reference in this proxy
statement/prospectus through Cardinal or Bindley Western, as the case may be,
or from the Securities and Exchange Commission through the Securities and
Exchange Commission's web site at the address described above. Documents
incorporated by reference are available from the companies without charge,
excluding any exhibits to those documents unless the exhibit is specifically
incorporated by reference as an exhibit in this proxy statement/prospectus. You
can obtain documents incorporated by reference in this proxy
statement/prospectus by requesting them in writing or by telephone from the
appropriate company at the following addresses:
FOR CARDINAL
SHAREHOLDERS: FOR BINDLEY WESTERN SHAREHOLDERS:
Cardinal Health, Inc. Bindley Western Industries, Inc.
7000 Cardinal Place 8909 Purdue Road
Dublin, Ohio 43017 Indianapolis, Indiana 46268
Attention: Director--
Investor Relations Attention: Director--Investor Relations
(614) 757-5000 (317) 704-4000
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY FEBRUARY 7, 2001 TO
RECEIVE THEM BEFORE THE SPECIAL MEETING. If you request any incorporated
documents from us, we will mail them to you by first class mail, or another
equally prompt means, within one business day after we receive your request.
Shareholders who require assistance in changing or revoking a proxy should
contact the solicitation agent Bindley Western has hired in connection with the
special meeting:
[MacKenzie LOGO]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
E-mail: proxy@mackenziepartners.com
or
CALL TOLL-FREE (800) 322-2885
WE HAVE AUTHORIZED NO ONE TO GIVE YOU ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ABOUT THE MERGER OR OUR COMPANIES THAT DIFFERS FROM OR ADDS TO
THE INFORMATION CONTAINED IN THIS DOCUMENT OR IN
96
THE DOCUMENTS OUR COMPANIES HAVE PUBLICLY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION. THEREFORE, IF ANYONE SHOULD GIVE YOU ANY DIFFERENT OR
ADDITIONAL INFORMATION, YOU SHOULD NOT RELY ON IT.
IF YOU LIVE IN A JURISDICTION WHERE IT IS UNLAWFUL TO OFFER TO EXCHANGE OR
SELL, OR TO ASK FOR OFFERS TO EXCHANGE OR BUY, THE SECURITIES OFFERED BY THIS
DOCUMENT, OR TO ASK FOR PROXIES, OR IF YOU ARE A PERSON TO WHOM IT IS UNLAWFUL
TO DIRECT SUCH ACTIVITIES, THEN THE OFFER PRESENTED BY THIS DOCUMENT DOES NOT
EXTEND TO YOU.
THE INFORMATION CONTAINED IN THIS DOCUMENT SPEAKS ONLY AS OF THE DATE
INDICATED ON THE COVER OF THIS DOCUMENT UNLESS THE INFORMATION SPECIFICALLY
INDICATES THAT ANOTHER DATE APPLIES.
WITH RESPECT TO THE INFORMATION CONTAINED IN THIS DOCUMENT, CARDINAL HAS
SUPPLIED THE INFORMATION CONCERNING CARDINAL AND BRICK MERGER CORP., AND
BINDLEY WESTERN HAS SUPPLIED THE INFORMATION CONCERNING BINDLEY WESTERN.
97
ANNEX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
AMONG
CARDINAL HEALTH, INC.
("CARDINAL"),
BRICK MERGER CORP.
A WHOLLY OWNED DIRECT SUBSIDIARY OF CARDINAL
("SUBCORP"),
AND
BINDLEY WESTERN INDUSTRIES, INC.
("BWI")
DECEMBER 2, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
----
PRELIMINARY STATEMENTS.................................................... 1
ARTICLE I.THE MERGER...................................................... 1
1.1 The Merger..................................................... 1
1.2 Effective Time................................................. 1
1.3 Effects of the Merger.......................................... 2
1.4 Articles of Incorporation and Bylaws........................... 2
1.5 Directors and Officers of the Surviving Corporation............ 2
1.6 Additional Actions............................................. 2
ARTICLE II.CONVERSION OF SECURITIES....................................... 2
2.1 Conversion of Capital Stock.................................... 2
2.2 Exchange Ratio; Fractional Shares; Adjustments................. 3
2.3 Exchange of Certificates....................................... 3
(a)Exchange Agent.............................................. 3
(b)Exchange Procedures......................................... 3
(c)Distributions with Respect to Unexchanged Shares............ 4
(d)No Further Ownership Rights in BWI Common Stock............. 4
(e)Termination of Exchange Fund................................ 4
(f)No Liability................................................ 5
(g)Investment of Exchange Fund................................. 5
(h)Withholding Rights.......................................... 5
2.4 Treatment of Stock Options..................................... 5
ARTICLE III.REPRESENTATIONS AND WARRANTIES OF CARDINAL AND SUBCORP........ 6
3.1 Organization and Standing...................................... 6
3.2 Corporate Power and Authority.................................. 6
3.3 Capitalization of Cardinal and Subcorp......................... 6
3.4 Conflicts; Consents and Approval............................... 7
3.5 Brokerage and Finders' Fees.................................... 7
3.6 Accounting Matters; Reorganization............................. 7
3.7 Cardinal SEC Documents......................................... 8
3.8 Registration Statement......................................... 8
3.9 Compliance with Law............................................ 8
3.10 Litigation..................................................... 9
3.11 No Material Adverse Change..................................... 9
ARTICLE IV.REPRESENTATIONS AND WARRANTIES OF BWI.......................... 9
4.1 Organization and Standing...................................... 9
4.2 Subsidiaries................................................... 9
4.3 Corporate Power and Authority.................................. 10
4.4 Capitalization of BWI.......................................... 10
4.5 Conflicts; Consents and Approvals.............................. 10
4.6 Brokerage and Finders' Fees.................................... 11
4.7 Accounting Matters; Reorganization............................. 11
4.8 BWI SEC Documents.............................................. 11
4.9 Registration Statement; Proxy Statement........................ 12
PAGE
----
4.10 Compliance with Law.......................................... 12
4.11 Litigation; Products Liability............................... 12
4.12 No Material Adverse Change................................... 12
4.13 Taxes........................................................ 13
4.14 Intellectual Property........................................ 14
4.15 Title to and Condition of Properties......................... 15
4.16 Employee Benefit Plans....................................... 15
4.17 Contracts.................................................... 17
4.18 Labor Matters................................................ 18
4.19 Undisclosed Liabilities...................................... 18
4.20 Operation of BWI's Business; Relationships................... 18
4.21 Permits; Compliance.......................................... 18
4.22 Environmental Matters........................................ 19
4.23 Opinion of Financial Advisor................................. 20
4.24 Board Recommendation; Required Vote.......................... 20
4.25 Chapters 42 and 43 of IBCL................................... 20
4.26 Accounts Receivable and Inventories.......................... 20
4.27 Insurance.................................................... 20
4.28 Executive Agreement.......................................... 21
ARTICLE V.COVENANTS OF THE PARTIES...................................... 21
5.1 Mutual Covenants............................................. 21
(a)HSR Act Filings; Reasonable Efforts; Notification......... 21
(b)Pooling of Interests...................................... 22
(c)Tax-Free Treatment........................................ 23
(d)Public Announcements...................................... 23
5.2 Covenants of Cardinal........................................ 23
(a)Preparation of Registration Statement..................... 23
(b)Conduct of Cardinal's Operations.......................... 23
(c)Indemnification; Directors' and Officers' Insurance....... 23
(d)Merger Sub................................................ 24
(e)NYSE Listing.............................................. 24
(f)Board of Directors of Cardinal............................ 24
(g)Employees and Employee Benefits........................... 24
5.3 Covenants of BWI............................................. 24
(a)BWI Shareholders Meeting.................................. 24
(b)Information for the Registration Statement and Preparation
of Proxy Statement........................................... 25
(c)Conduct of BWI's Operations............................... 25
(d)No Solicitation........................................... 27
(e)Termination Right......................................... 28
(f)Affiliates of BWI......................................... 28
(g)Access.................................................... 28
(h)Subsequent Financial Statements........................... 29
ARTICLE VI.CONDITIONS................................................... 29
6.1 Conditions to the Obligations of Each Party.................. 29
6.2 Conditions to Obligations of BWI............................. 30
6.3 Conditions to Obligations of Cardinal and Subcorp............ 30
ii
PAGE
----
ARTICLE VII.TERMINATION AND AMENDMENT..................................... 31
7.1 Termination.................................................... 31
7.2 Effect of Termination.......................................... 32
7.3 Amendment...................................................... 33
7.4 Extension; Waiver.............................................. 33
ARTICLE VIII.MISCELLANEOUS................................................ 33
8.1 Survival of Representations and Warranties..................... 33
8.2 Notices........................................................ 34
8.3 Interpretation................................................. 34
8.4 Counterparts................................................... 35
8.5 Entire Agreement............................................... 35
8.6 Third-Party Beneficiaries...................................... 35
8.7 Governing Law.................................................. 35
8.8 Consent to Jurisdiction; Venue................................. 35
8.9 Specific Performance........................................... 36
8.10 Assignment..................................................... 36
8.11 Expenses....................................................... 36
EXHIBITS
Exhibit A--Form of BWI Affiliate Letter
iii
INDEX OF DEFINED TERMS
DEFINED TERM SECTION PAGE NO.
------------ ------- --------
Acquisition Agreement.......................... 5.3(e) 36
Action......................................... 3.10 11
Agreement...................................... Preamble 1
Antitrust Laws................................. 5.1(a)(ii) 28
APB No. 16..................................... 5.1(b) 29
Applicable Laws................................ 3.9 11
Articles of Merger............................. 1.2 2
Bindley Western................................ Preamble 1
BWI............................................ Preamble 1
BWI Affiliate Letter........................... 5.3(f) 36
BWI Articles................................... 4.1 12
BWI Bylaws..................................... 4.1 12
BWI Board Recommendation....................... 4.24 26
BWI Common Stock............................... 4.4 13
BWI Disclosure Schedule........................ 4.1 12
BWI Employees.................................. 5.2(g) 31
BWI Option..................................... 2.4(a) 6
BWI Permits.................................... 4.21(a) 24
BWI SEC Documents.............................. 4.8 15
BWI Shareholders............................... Preliminary Statement B 1
BWI Shareholders Meeting....................... 5.3(a) 31
BWI Stock Option Agreement..................... 4.4 13
Business Combination........................... 7.2 42
Cardinal....................................... Preamble 1
Cardinal Articles.............................. 3.1 8
Cardinal Code of Regulations................... 3.1 8
Cardinal Common Shares......................... 3.3(a) 8
Cardinal Disclosure Schedule................... 3.3(a) 8
Cardinal Exchange Option....................... 2.4(a) 6
Cardinal SEC Documents......................... 3.7 10
Certificates................................... 2.2(c) 3
Closing........................................ 1.2 2
Closing Date................................... 1.2 2
Code........................................... Preliminary Statement C 1
Commission..................................... 2.4(c) 7
Competing Transaction.......................... 5.3(d) 35
Contract....................................... 4.17 22
Controlled Group Liability..................... 4.16(a) 19
Costs.......................................... 7.2 41
Effective Time................................. 1.2 2
Environmental Laws............................. 4.22 25
Environmental Permit........................... 4.22 25
ERISA.......................................... 4.16(a) 19
ERISA Affiliate................................ 4.16(a) 19
Exchange Act................................... 2.4(d) 7
Exchange Agent................................. 2.3(a) 4
Exchange Fund.................................. 2.3(a) 4
Exchange Ratio................................. 2.2(a) 3
FDA............................................ 4.21(b)(ii) 24
iv
DEFINED TERM SECTION PAGE NO.
------------ ------- --------
Governmental Authority......................... 3.4(d) 9
Hazardous Materials............................ 4.22 25
HSR Act........................................ 3.4(d) 9
IBCL........................................... 1.1 2
Indiana Secretary of State..................... 1.2 2
Intellectual Property.......................... 4.14(a)(ii) 18
knowledge...................................... 8.3 45
Material Adverse Effect........................ 8.3 44
Merger......................................... Preliminary Statement A 1
Multiemployer Plan............................. 4.16(f) 20
Multiple Employer Plan......................... 4.16(f) 20
NRC............................................ 4.21(b)(ii) 24
NYSE........................................... 2.2(c) 4
NYSE Composite Tape............................ 2.2(c) 4
Option Schedule................................ 4.4 13
Order.......................................... 5.1(a)(ii) 28
Priority Healthcare............................ 4.17 23
Priority Spin-Off.............................. 4.17 23
Plans.......................................... 4.16(a) 19
Prospectus..................................... 3.8 10
Proxy Statement................................ 3.8 10
PwC............................................ 5.1(b) 29
Qualified Plan................................. 4.16(c) 20
Registration Statement......................... 3.8 10
Section 16..................................... 2.4(d) 7
Securities Act................................. 2.3(d) 5
SSB............................................ 4.6 14
Subcorp........................................ Preamble 1
Subcorp Common Stock........................... 2.1(a) 3
subsidiary..................................... 8.3 45
Superior Proposal.............................. 5.3(d) 35
Support Agreements............................. 4.25 26
Surviving Corporation.......................... 1.1 2
Tax Returns.................................... 4.13(d) 17
Taxes.......................................... 4.13(e) 17
v
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made and entered
into as of the 2nd day of December, 2000, by and among Cardinal Health, Inc.,
an Ohio corporation ("Cardinal"), Brick Merger Corp., an Indiana corporation
and a wholly owned subsidiary of Cardinal ("Subcorp"), and Bindley Western
Industries, Inc., an Indiana corporation ("BWI" or "Bindley Western").
PRELIMINARY STATEMENTS
A. Cardinal desires to combine its businesses with the businesses operated
by BWI through the merger of Subcorp with and into BWI, with BWI as the
surviving corporation (the "Merger"), pursuant to which each share of BWI
Common Stock (as defined in Section 4.4) outstanding at the Effective Time (as
defined in Section 1.2) will be converted into the right to receive Cardinal
Common Shares (as defined in Section 3.3(a)), all as more fully provided
herein.
B. The Board of Directors of BWI has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of BWI
and BWI desires to combine its businesses with the businesses operated by
Cardinal and for the holders of shares of BWI Common Stock ("BWI Shareholders")
to have a continuing equity interest in the combined Cardinal/BWI businesses
through the ownership of Cardinal Common Shares.
C. The parties intend that the Merger constitute a tax-free "reorganization"
within the meaning of Section 368(a)(1)(A) of the Internal Revenue Code of
1986, as amended (together with the rules and regulations thereunder, the
"Code"), by reason of Section 368(a)(2)(E) of the Code.
D. The parties intend that the Merger be accounted for as a pooling of
interests for financial reporting purposes.
E. The respective Boards of Directors of Cardinal, Subcorp and BWI have
determined the Merger in the manner contemplated herein to be desirable and in
the best interests of their respective shareholders and, by resolutions duly
adopted, have approved and adopted this Agreement.
AGREEMENT
Now, therefore, in consideration of these premises and the mutual and
dependent promises hereinafter set forth, the parties hereto agree as follows:
ARTICLE I.
THE MERGER
1.1. The Merger. Upon the terms and subject to the conditions hereof, and in
accordance with the provisions of the Indiana Business Corporation Law (the
"IBCL"), Subcorp shall be merged with and into BWI at the Effective Time. As a
result of the Merger, the separate corporate existence of Subcorp shall cease
and BWI shall continue its existence under the laws of the State of Indiana.
BWI, in its capacity as the corporation surviving the Merger, is hereinafter
sometimes referred to as the "Surviving Corporation".
1.2. Effective Time. As promptly as possible on the Closing Date (as defined
below), the parties shall cause the Merger to be consummated by filing with the
Secretary of State of the State of Indiana (the "Indiana Secretary of State")
articles of merger (the "Articles of Merger") in such form as is required by
and executed in accordance with Section 23-1-40-5 of the IBCL. The Merger shall
become effective (the "Effective Time")
when the Articles of Merger have been filed with the Indiana Secretary of State
or at such later time as shall be agreed upon by Cardinal and BWI and specified
in the Articles of Merger. Prior to the filing referred to in this Section 1.2,
a closing (the "Closing") shall be held at the offices of Cardinal, 7000
Cardinal Place, Dublin, Ohio 43017, or such other place as the parties may
agree on, as soon as practicable (but in any event within ten business days)
following the date upon which all conditions set forth in Article VI that are
capable of being satisfied prior to the Closing have been satisfied or waived,
or at such other date as Cardinal and BWI may agree; provided that the
conditions set forth in Article VI have been satisfied or waived at or prior to
such date. The date on which the Closing takes place is referred to herein as
the "Closing Date". For all tax purposes, the Closing shall be effective at the
end of the day on the Closing Date.
1.3. Effects of the Merger. From and after the Effective Time, the Merger
shall have the effects set forth in Section 23-1-40-6 of the IBCL.
1.4. Articles of Incorporation and Bylaws. The Articles of Merger shall
provide that at the Effective Time (i) the Articles of Incorporation of the
Surviving Corporation as in effect immediately prior to the Effective Time
shall be amended as of the Effective Time so as to contain the provisions, and
only the provisions, contained immediately prior thereto in the Articles of
Incorporation of Subcorp, except for Article I thereof, which shall continue to
read "The name of the corporation is "Bindley Western Industries, Inc."," and
(ii) the Bylaws of Subcorp in effect immediately prior to the Effective Time
shall be the Bylaws of the Surviving Corporation; in each case, until amended
in accordance with the IBCL.
1.5. Directors and Officers of the Surviving Corporation. From and after the
Effective Time, the officers of BWI shall be the officers of the Surviving
Corporation and the directors of Subcorp shall be the directors of the
Surviving Corporation, in each case, until their respective successors are duly
elected and qualified. On or prior to the Closing Date, BWI shall deliver to
Cardinal evidence satisfactory to Cardinal of the resignations of the directors
of BWI, such resignations to be effective as of the Effective Time.
1.6. Additional Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any further deeds,
assignments or assurances in law or any other acts are necessary or desirable
to (a) vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of BWI, or (b) otherwise carry out the provisions of this
Agreement, BWI and its officers and directors shall be deemed to have granted
to the Surviving Corporation an irrevocable power of attorney to execute and
deliver all such deeds, assignments or assurances in law and to take all acts
necessary, proper or desirable to vest, perfect or confirm title to and
possession of such rights, properties or assets in the Surviving Corporation
and otherwise to carry out the provisions of this Agreement, and the officers
and directors of the Surviving Corporation are authorized in the name of BWI or
otherwise to take any and all such action.
ARTICLE II.
CONVERSION OF SECURITIES
2.1. Conversion of Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of Cardinal, Subcorp or BWI or their
respective shareholders:
(a) Each share of common stock, without par value, of Subcorp ("Subcorp
Common Stock") issued and outstanding immediately prior to the Effective
Time shall be converted into one share of common stock, without par value,
of the Surviving Corporation. Such newly issued shares shall thereafter
constitute all of the issued and outstanding capital stock of the Surviving
Corporation.
(b) Subject to the other provisions of this Article II, each share of
BWI Common Stock issued and outstanding immediately prior to the Effective
Time shall be converted into and represent the right to receive a number of
Cardinal Common Shares equal to the Exchange Ratio (as defined in Section
2.2(a)).
A-2
(c) Each share of capital stock of BWI held in the treasury of BWI shall
be cancelled and retired and no payment shall be made in respect thereof.
2.2. Exchange Ratio; Fractional Shares; Adjustments.
(a) The "Exchange Ratio" shall be equal to 0.4275.
(b) No certificates for fractional Cardinal Common Shares shall be issued as
a result of the conversion provided for in Section 2.1(b) and such fractional
share interests will not entitle the owner thereof to vote or have any rights
of a holder of Cardinal Common Shares.
(c) In lieu of any such fractional Cardinal Common Shares, the holder of a
certificate or certificates (the "Certificates") that immediately prior to the
Effective Time represented outstanding shares of BWI Common Stock whose shares
were converted into the right to receive Cardinal Common Shares pursuant to
Section 2.1(b), upon presentation of such fractional interest represented by an
appropriate certificate for BWI Common Stock to the Exchange Agent (as defined
in Section 2.3(a)) pursuant to Section 2.3, shall be entitled to receive a cash
payment therefor in an amount equal to the value (determined with reference to
the closing price of Cardinal Common Shares as reported on the New York Stock
Exchange, Inc. (the "NYSE") Composite Tape (the "NYSE Composite Tape") on the
last full trading day immediately prior to the Closing Date) of such fractional
interest. Such payment with respect to fractional shares is merely intended to
provide a mechanical rounding off of, and is not a separately bargained for,
consideration. If more than one Certificate shall be surrendered for the
account of the same holder, the number of Cardinal Common Shares for which
Certificates have been surrendered shall be computed on the basis of the
aggregate number of shares represented by the Certificates so surrendered.
(d) In the event that prior to the Effective Time Cardinal shall declare a
stock dividend or other distribution payable in Cardinal Common Shares or
securities convertible into Cardinal Common Shares, or effect a stock split,
reclassification, combination or other change with respect to Cardinal Common
Shares, the Exchange Ratio set forth in this Section 2.2 shall be adjusted to
reflect such dividend, distribution, stock split, reclassification, combination
or other change.
2.3. Exchange of Certificates.
(a) Exchange Agent. Promptly following the Effective Time, Cardinal shall
deposit with EquiServe Trust Company or such other exchange agent as may be
designated by Cardinal (the "Exchange Agent"), for the benefit of BWI
Shareholders, for exchange in accordance with this Section 2.3, certificates
representing Cardinal Common Shares issuable pursuant to Section 2.1 in
exchange for outstanding shares of BWI Common Stock and shall from time to time
deposit cash in an amount reasonably expected to be paid pursuant to Section
2.2 (such Cardinal Common Shares and cash, together with any dividends or
distributions with respect thereto, the "Exchange Fund").
(b) Exchange Procedures. As soon as practicable after the Effective Time,
the Exchange Agent shall mail to each holder of record of a Certificate, (i) a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of
the Certificates to the Exchange Agent, and shall be in such form and have such
other customary provisions as Cardinal may reasonably specify) and (ii)
instructions for effecting the surrender of the Certificates in exchange for
certificates representing Cardinal Common Shares. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with a duly
executed letter of transmittal, the holder of such Certificate shall be
entitled to receive in exchange therefor (i) a certificate or certificates
representing that whole number of Cardinal Common Shares which such holder has
the right to receive pursuant to Section 2.1 in such denominations and
registered in such names as such holder may request and (ii) a check
representing the amount of cash in lieu of fractional shares, if any, and
unpaid dividends and distributions, if any, which such holder has the right to
receive pursuant to the provisions of this Article II, after giving effect to
any required
A-3
withholding tax. The shares represented by Certificate so surrendered shall
forthwith be cancelled. No interest will be paid or accrued on the cash in lieu
of fractional shares, if any, and unpaid dividends and distributions, if any,
payable to holders of shares of BWI Common Stock. In the event of a transfer of
ownership of shares of BWI Common Stock that is not registered on the transfer
records of BWI, a certificate representing the proper number of Cardinal Common
Shares, together with a check for the cash to be paid in lieu of fractional
shares, if any, and unpaid dividends and distributions, if any, may be issued
to such transferee if the Certificate representing such shares of BWI Common
Stock held by such transferee is presented to the Exchange Agent, accompanied
by all documents required to evidence and effect such transfer and to evidence
that any applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.3, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon surrender
a certificate representing Cardinal Common Shares and cash in lieu of
fractional shares, if any, and unpaid dividends and distributions, if any, as
provided in this Article II. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by Cardinal,
the posting by such person of a bond in such reasonable amount as Cardinal may
direct as indemnity against any claim that may be made against it with respect
to such Certificate, the Exchange Agent will deliver in exchange for such lost,
stolen or destroyed Certificate, a certificate representing the proper number
of Cardinal Common Shares, together with a check for the cash to be paid in
lieu of fractional shares, if any, with respect to the shares of BWI Common
Stock formerly represented thereby, and unpaid dividends and distributions on
Cardinal Common Shares, if any, as provided in this Article II.
(c) Distributions with Respect to Unexchanged Shares. Notwithstanding any
other provisions of this Agreement, no dividends or other distributions
declared or made after the Effective Time with respect to Cardinal Common
Shares having a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate, and no cash payment in lieu of
fractional shares shall be paid to any such holder, until the holder shall
surrender such Certificate as provided in this Section 2.3. Subject to the
effect of Applicable Laws (as defined in Section 3.9), following surrender of
any such Certificate, there shall be paid to the holder of the certificates
representing whole Cardinal Common Shares issued in exchange therefor, without
interest, (i) at the time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Time theretofore payable
with respect to such whole Cardinal Common Shares and not paid, less the amount
of any withholding taxes that may be required thereon, and (ii) at the
appropriate payment date subsequent to surrender, the amount of dividends or
other distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole Cardinal Common Shares, less the amount of any withholding taxes
which may be required thereon.
(d) No Further Ownership Rights in BWI Common Stock. All Cardinal Common
Shares issued upon surrender of Certificates in accordance with the terms
hereof (including any cash paid pursuant to this Article II) shall be deemed to
have been issued in full satisfaction of all rights pertaining to such shares
of BWI Common Stock represented thereby, and, as of the Effective Time, the
stock transfer books of BWI shall be closed and there shall be no further
registration of transfers on the stock transfer books of BWI of shares of BWI
Common Stock outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be cancelled and exchanged as provided in this Section 2.3.
Certificates surrendered for exchange by any person constituting an "affiliate"
of BWI for purposes of Rule 145(c) under the Securities Act of 1933, as amended
(together with the rules and regulations thereunder, the "Securities Act"),
shall not be exchanged until Cardinal has received written undertakings from
such person in the form attached as Exhibit A to this Agreement.
(e) Termination of Exchange Fund. Any portion of the Exchange Fund that
remains undistributed to BWI Shareholders six months after the date of the
mailing required by Section 2.3(b) shall be delivered to Cardinal, upon demand
thereby, and holders of Certificates who have not theretofore complied with
this Section 2.3 shall thereafter look only to Cardinal for payment of any
claim to Cardinal Common Shares, cash in lieu of fractional shares thereof, or
dividends or distributions, if any, in respect thereof.
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(f) No Liability. None of Cardinal, the Surviving Corporation or the
Exchange Agent shall be liable to any person in respect of any shares of BWI
Common Stock (or dividends or distributions with respect thereto) or cash from
the Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certificates shall not have
been surrendered prior to seven years after the Effective Time (or immediately
prior to such earlier date on which any cash, any cash in lieu of fractional
shares or any dividends or distributions with respect to whole shares of BWI
Common Stock in respect of such Certificate would otherwise escheat to or
become the property of any Governmental Authority (as defined in Section
3.4(d))), any such cash, dividends or distributions in respect of such
Certificate shall, to the extent permitted by Applicable Laws, become the
property of Cardinal, free and clear of all claims or interest of any person
previously entitled thereto.
(g) Investment of Exchange Fund. The Exchange Agent shall invest any cash
included in the Exchange Fund, as directed by Cardinal, on a daily basis. Any
interest and other income resulting from such investments shall be paid to
Cardinal upon termination of the Exchange Fund pursuant to Section 2.3(e).
(h) Withholding Rights. Each of the Surviving Corporation and Cardinal shall
be entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of shares of BWI Common Stock such
amounts as it is required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld by the Surviving Corporation or
Cardinal, as the case may be, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the shares of
BWI Common Stock in respect of which such deduction and withholding was made by
the Surviving Corporation or Cardinal, as the case may be.
2.4. Treatment of Stock Options.
(a) Prior to the Effective Time, Cardinal and BWI shall take all such
actions as may be necessary to cause each unexpired and unexercised outstanding
option granted or issued under stock option plans of BWI in effect on the date
hereof (each, a "BWI Option") to be automatically converted at the Effective
Time into an option (a "Cardinal Exchange Option") to purchase that number of
Cardinal Common Shares equal to the number of shares of BWI Common Stock
subject to the BWI Option immediately prior to the Effective Time multiplied by
the Exchange Ratio (and rounded to the nearest share), with an exercise price
per share equal to the exercise price per share that existed under the
corresponding BWI Option divided by the Exchange Ratio (and rounded to the
nearest cent), and with other terms and conditions that are the same as the
terms and conditions of such BWI Option immediately before the Effective Time;
provided that, with respect to any BWI Option that is an "incentive stock
option" within the meaning of Section 422 of the Code, the foregoing conversion
shall be carried out in a manner satisfying the requirements of Section 424(a)
of the Code. In connection with the issuance of Cardinal Exchange Options,
Cardinal shall (i) reserve for issuance the number of Cardinal Common Shares
that will become subject to Cardinal Exchange Options pursuant to this Section
2.4 and (ii) from and after the Effective Time, upon exercise of Cardinal
Exchange Options, make available for issuance all Cardinal Common Shares
covered thereby, subject to the terms and conditions applicable thereto.
(b) BWI agrees to issue treasury shares of BWI, to the extent available,
upon the exercise of BWI Options prior to the Effective Time.
(c) Cardinal agrees to use its reasonable efforts to file with the
Securities and Exchange Commission (the "Commission") within five business days
after the Closing Date a registration statement on Form S-8 or other
appropriate form under the Securities Act to register Cardinal Common Shares
issuable upon exercise of the Cardinal Exchange Options and to use its
reasonable efforts to cause such registration statement to remain effective
until the exercise or expiration of such Cardinal Exchange Options.
(d) Prior to the Effective Time: (i) the Board of Directors of Cardinal, or
an appropriate committee of non-employee directors thereof, shall adopt a
resolution consistent with the interpretive guidance of the Commission so that
the acquisition by any officer or director of BWI who may become a covered
person of
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Cardinal for purposes of Section 16 (together with the rules and regulations
thereunder, "Section 16") of the Securities Exchange Act of 1934, as amended
(together with the rules and regulations thereunder, the "Exchange Act") of
Cardinal Common Shares or Cardinal Exchange Options pursuant to this Agreement
and the Merger shall be an exempt transaction for purposes of Section 16; and
(ii) the Board of Directors of BWI, or an appropriate committee of non-employee
directors thereof, shall adopt a resolution consistent with the interpretive
guidance of the Commission so that the disposition by any officer or director
of BWI who is a covered person of BWI for purposes of Section 16 of shares of
BWI Common Stock or BWI Options pursuant to this Agreement and the Merger shall
be an exempt transaction for purposes of Section 16.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF CARDINAL AND SUBCORP
In order to induce BWI to enter into this Agreement, Cardinal and Subcorp
hereby represent and warrant to BWI that the statements contained in this
Article III are true, correct and complete.
3.1. Organization and Standing. Each of Cardinal and Subcorp is a
corporation duly organized, validly existing and, where applicable, in good
standing under the laws of its state of incorporation with full corporate power
and authority to own, lease, use and operate its properties and to conduct its
business as and where now owned, leased, used, operated and conducted. Each of
Cardinal and Subcorp is duly qualified to do business and in good standing in
each jurisdiction in which the nature of the business conducted by it or the
property it owns, leases or operates, requires it to so qualify, except where
the failure to be so qualified or in good standing in such jurisdiction would
not have a Material Adverse Effect (as defined in Section 8.3) on Cardinal or
Subcorp, as the case may be. Cardinal is not in default in the performance,
observance or fulfillment of any provision of the Cardinal Amended and Restated
Articles of Incorporation, as amended (the "Cardinal Articles"), or the
Cardinal Restated Code of Regulations, as amended (the "Cardinal Code of
Regulations"), and Subcorp is not in default in the performance, observance or
fulfillment of any provisions of its Articles of Incorporation or Bylaws.
3.2. Corporate Power and Authority. Each of Cardinal and Subcorp has all
requisite corporate power and authority to enter into and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby by
Cardinal and Subcorp have been duly authorized by all necessary corporate
action on the part of each of Cardinal and Subcorp. This Agreement has been
duly executed and delivered by each of Cardinal and Subcorp, and constitutes
the legal, valid and binding obligation of each of Subcorp and Cardinal
enforceable against each of them in accordance with its terms.
3.3. Capitalization of Cardinal and Subcorp.
(a) As of December 1, 2000, Cardinal's authorized capital stock consisted
solely of (A) 750,000,000 common shares, without par value ("Cardinal Common
Shares"), of which (i) 279,329,887 shares were issued and outstanding, (ii)
7,323,041 shares were issued and held in treasury (which does not include
Cardinal Common Shares reserved for issuance as set forth in clause (a)(iii)
below) and (iii) 22,884,223 shares were reserved for issuance upon the exercise
or conversion of options, warrants or convertible securities granted or
issuable by Cardinal, (B) 5,000,000 Class B common shares, without par value,
none of which was issued and outstanding or reserved for issuance, and (C)
500,000 Non-Voting Preferred Shares, without par value, none of which was
issued and outstanding or reserved for issuance. Each outstanding share of
Cardinal capital stock is, and all Cardinal Common Shares to be issued in
connection with the Merger will be, duly authorized and validly issued, fully
paid and nonassessable, and each outstanding share of Cardinal capital stock
has not been, and all Cardinal Common Shares to be issued in connection with
the Merger will not be, issued in violation of any preemptive or similar
rights. As of the date hereof, other than as set forth in the first sentence
hereof or in Section 3.3 to the disclosure schedule delivered by Cardinal to
BWI and dated the date hereof (the "Cardinal
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Disclosure Schedule"), there are no outstanding subscriptions, options,
warrants, puts, calls, agreements, understandings, claims or other commitments
or rights of any type relating to the issuance, sale, repurchase, transfer or
registration by Cardinal of any equity securities of Cardinal, nor are there
outstanding any securities that are convertible into or exchangeable for any
shares of Cardinal capital stock and Cardinal has no obligation of any kind to
issue any additional securities. The Cardinal Common Shares (including those
Cardinal Common Shares to be issued in the Merger) are registered under the
Exchange Act. Except as set forth in Section 3.3 to the Cardinal Disclosure
Schedule, as of the date hereof, Cardinal has not agreed to register any
securities under the Securities Act or under any state securities law or
granted registration rights to any person or entity (which rights are currently
exercisable).
(b) Subcorp's authorized capital stock consists solely of 1,000 shares of
Subcorp Common Stock, of which, as of the date hereof, 100 were issued and
outstanding and none were reserved for issuance. As of the date hereof, all of
the outstanding shares of Subcorp Common Stock are owned free and clear of any
liens, claims or encumbrances by Cardinal.
3.4. Conflicts; Consents and Approval. Neither the execution and delivery of
this Agreement by Cardinal or Subcorp nor the consummation of the transactions
contemplated hereby will:
(a) conflict with, or result in a breach of any provision of the
Cardinal Articles or the Cardinal Code of Regulations or the Subcorp
Articles of Incorporation or Bylaws;
(b) violate, or conflict with, or result in a breach of any provision
of, or constitute a default (or an event that, with the giving of notice,
the passage of time or otherwise, would constitute a default) under, or
entitle any party (with the giving of notice, the passage of time or
otherwise) to terminate, accelerate, modify or call a default under, or
result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of Cardinal or any of its
subsidiaries under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, contract, undertaking,
agreement, lease or other instrument or obligation to which Cardinal or any
of its subsidiaries is a party;
(c) to the knowledge of Cardinal, violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Cardinal or any of its
subsidiaries or their respective properties or assets; or
(d) require any action or consent or approval of, or review by, or
registration or filing by Cardinal or any of its affiliates with, any third
party or any local, domestic, foreign or multi-national court, arbitral
tribunal, administrative agency or commission or other governmental or
regulatory body, agency, instrumentality or authority (a "Governmental
Authority"), other than (i) authorization for inclusion of the Cardinal
Common Shares to be issued in the Merger and the transactions contemplated
hereby on the NYSE, subject to official notice of issuance, (ii) actions
required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (together with the rules and regulations thereunder, the "HSR
Act"), (iii) registrations or other actions required under federal and
state securities laws as are contemplated by this Agreement, or (iv)
consents or approvals of any Governmental Authority set forth in Section
3.4 to the Cardinal Disclosure Schedule;
except in the case of clauses (b), (c) and (d) for any of the foregoing that
would not, individually or in the aggregate, have a Material Adverse Effect on
Cardinal or a material adverse effect on the ability of the parties to
consummate the transactions contemplated hereby.
3.5. Brokerage and Finders' Fees. Except as set forth in Section 3.5 of the
Cardinal Disclosure Schedule, neither Cardinal nor any shareholder, director,
officer or employee thereof has incurred or will incur on behalf of Cardinal
any brokerage, finders' or similar fee in connection with the transactions
contemplated by this Agreement.
3.6. Accounting Matters; Reorganization. To the best knowledge of Cardinal
(including its executive officers and directors) after due investigation,
except as set forth in Section 3.6 of the Cardinal Disclosure Schedule, neither
Cardinal nor any of its affiliates has taken or agreed to take any action that
(without giving
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effect to any actions taken or agreed to be taken by BWI or any of its
affiliates) would (a) prevent Cardinal from accounting for the business
combination to be effected by the Merger as a pooling of interests for
financial reporting purposes or (b) prevent the Merger from constituting a
"reorganization" qualifying under the provisions of Section 368(a) of the Code.
3.7. Cardinal SEC Documents. Cardinal has timely filed with the Commission
all forms, reports, schedules, statements and other documents required to be
filed by it since January 1, 1997 under the Exchange Act or the Securities Act
(such documents, as supplemented and amended since the time of filing,
collectively, the "Cardinal SEC Documents"). The Cardinal SEC Documents,
including, without limitation, any financial statements or schedules included
in the Cardinal SEC Documents, at the time filed (and, in the case of
registration statements and proxy statements, on the dates of effectiveness and
the dates of mailing, respectively and, in the case of any Cardinal SEC
Document amended or superseded by a filing prior to the date of this Agreement,
then on the date of such amending or superseding filing) (a) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be.
The financial statements of Cardinal included in the Cardinal SEC Documents at
the time filed (and, in the case of registration statements and proxy
statements, on the dates of effectiveness and the dates of mailing,
respectively, and, in the case of any Cardinal SEC Document amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such amending or superseding filing) complied as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the Commission with respect thereto, were prepared in
accordance with generally accepted accounting principles applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto or, in the case of unaudited statements, as permitted by Form 10-
Q of the Commission), and fairly present (subject, in the case of unaudited
statements, to normal, recurring audit adjustments) the consolidated financial
position of Cardinal and its consolidated subsidiaries as at the dates thereof
and the consolidated results of their operations and cash flows for the periods
then ended.
3.8. Registration Statement. None of the information provided in writing by
Cardinal for inclusion in the registration statement on Form S-4 (such
registration statement as amended, supplemented or modified, the "Registration
Statement") to be filed with the Commission by Cardinal under the Securities
Act, including the prospectus relating to Cardinal Common Shares to be issued
in the Merger (as amended, supplemented or modified, the "Prospectus") and the
proxy statement and form of proxies relating to the vote of BWI Shareholders
with respect to the Merger (as amended, supplemented or modified, the "Proxy
Statement"), at the time the Registration Statement becomes effective or, in
the case of the Proxy Statement, at the date of mailing and at the date of the
BWI Shareholders Meeting (as defined in Section 5.3(a)) to consider the Merger
and the transactions contemplated thereby, will contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Registration
Statement and Proxy Statement, except for such portions thereof that relate
only to BWI, will each comply as to form in all material respects with the
provisions of the Securities Act and the Exchange Act.
3.9. Compliance with Law. Cardinal is in compliance with, and at all times
since January 1, 1997 has been in compliance with, all applicable laws,
statutes, orders, rules, regulations, policies or guidelines promulgated, or
judgments, decisions or orders entered by any Governmental Authority
(collectively, "Applicable Laws") relating to Cardinal or its business or
properties, except where the failure to be in compliance with such Applicable
Laws, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect on Cardinal or where such noncompliance has been
cured and is expected to have no material impact on the future business or
operations of Cardinal. No investigation or review by any Governmental
Authority with respect to Cardinal or its subsidiaries is pending, or, to the
knowledge of
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Cardinal, threatened, nor has any Governmental Authority indicated in writing
an intention to conduct the same, other than those the outcome of which would
not reasonably be expected to have a Material Adverse Effect on Cardinal.
3.10. Litigation. Except as set forth in Section 3.10 to the Cardinal
Disclosure Schedule or in the Cardinal SEC Documents, there is no suit, claim,
action, proceeding, hearing, notice of violation, demand letter or
investigation (an "Action") pending, or, to the knowledge of Cardinal,
threatened, against Cardinal or any executive officer or director that,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on Cardinal or a material adverse effect on the ability
of Cardinal to consummate the transactions contemplated hereby. Cardinal is not
subject to any outstanding order, writ, injunction or decree that, individually
or in the aggregate, insofar as can be reasonably foreseen, would have a
Material Adverse Effect on Cardinal or a material adverse effect on the ability
of Cardinal to consummate the transactions contemplated hereby. Except as set
forth in Section 3.10 to the Cardinal Disclosure Schedule, since January 1,
1997, Cardinal has not been subject to any outstanding order, writ, injunction
or decree relating to Cardinal's method of doing business or its relationship
with past, existing or future users or purchasers of any goods or services of
Cardinal.
3.11. No Material Adverse Change. Since December 31, 1999, there has been no
material adverse change in the assets, liabilities, results of operations or
financial condition of Cardinal and its subsidiaries taken as a whole or any
event, occurrence or development that would reasonably be expected to have a
material adverse effect on the ability of Cardinal to consummate the
transactions contemplated hereby.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BWI
In order to induce Subcorp and Cardinal to enter into this Agreement, BWI
hereby represents and warrants to Cardinal and Subcorp that the statements
contained in this Article IV are true, correct and complete.
4.1. Organization and Standing. BWI is a corporation duly organized and
validly existing under the laws of the State of Indiana with full corporate
power and authority to own, lease, use and operate its properties and to
conduct its business as and where now owned, leased, used, operated and
conducted. Each of BWI and each subsidiary of BWI is duly qualified to do
business and is in good standing in each jurisdiction in which the nature of
the business conducted by it or the property it owns, leases or operates
requires it to so qualify, except where the failure to be so qualified or in
good standing in such jurisdiction would not have a Material Adverse Effect on
BWI. BWI is not in default in the performance, observance or fulfillment of any
provision of its Amended and Restated Articles of Incorporation (the "BWI
Articles"), or its Bylaws, as in effect on the date hereof (the "BWI Bylaws").
BWI has heretofore furnished to Cardinal complete and correct copies of the BWI
Articles and the BWI Bylaws. Listed in Section 4.1 to the disclosure schedule
delivered by BWI to Cardinal and dated the date hereof (the "BWI Disclosure
Schedule") is each jurisdiction in which BWI or a subsidiary of BWI is
qualified to do business and, whether BWI (or the subsidiaries of BWI) is in
good standing as of the date of the Agreement.
4.2. Subsidiaries. BWI does not own, directly or indirectly, any equity or
other ownership interest in any corporation, partnership, joint venture or
other entity or enterprise, except for the subsidiaries set forth in Section
4.2 to the BWI Disclosure Schedule. Except as set forth in Section 4.2 to the
BWI Disclosure Schedule, BWI is not subject to any obligation or requirement to
provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any such entity or any other person. Except as
set forth in Section 4.2 to the BWI Disclosure Schedule, BWI owns, directly or
indirectly, each of the outstanding shares of capital stock (or other ownership
interests having by their terms ordinary voting power to elect a majority of
directors or others performing similar functions with respect to such
subsidiary) of each of BWI's subsidiaries. Each of the outstanding shares of
capital stock of each of BWI's subsidiaries is duly authorized, validly issued,
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fully paid and nonassessable, and is owned, directly or indirectly, by BWI free
and clear of all liens, pledges, security interests, claims or other
encumbrances. The following information for each subsidiary of BWI is set forth
in Section 4.2 to the BWI Disclosure Schedule, as applicable: (i) its name and
jurisdiction of incorporation or organization; (ii) its authorized capital
stock or share capital; and (iii) the number of issued and outstanding shares
of capital stock or share capital and the record owner(s) thereof. Other than
as set forth in Section 4.2 to the BWI Disclosure Schedule, there are no
outstanding subscriptions, options, warrants, puts, calls, agreements,
understandings, claims or other commitments or rights of any type relating to
the issuance, sale or transfer of any securities of any subsidiary of BWI, nor
are there outstanding any securities that are convertible into or exchangeable
for any shares of capital stock of any subsidiary of BWI, and neither BWI nor
any subsidiary of BWI has any obligation of any kind to issue any additional
securities of any subsidiary of BWI or to pay for or repurchase any securities
of any subsidiary of BWI or any predecessor thereof.
4.3. Corporate Power and Authority. BWI has all requisite corporate power
and authority to enter into and deliver this Agreement, to perform its
obligations hereunder and, subject to approval of the Merger and the
transactions contemplated hereby by BWI Shareholders, to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement by BWI have been duly authorized by all necessary corporate action on
the part of BWI, subject to approval of the Merger and the transactions
contemplated hereby by BWI Shareholders. This Agreement has been duly executed
and delivered by BWI and constitutes the legal, valid and binding obligation of
BWI enforceable against it in accordance with its terms.
4.4. Capitalization of BWI. As of December 1, 2000, BWI's authorized capital
stock consisted solely of (a) 53,333,333 shares of common stock, par value $.01
per share ("BWI Common Stock"), of which (i) 35,533,595 shares were issued and
outstanding, (ii) 181,155 shares were issued and held in treasury (which does
not include the shares reserved for issuance set forth in clause (iii) below),
(iii) 7,008,437 shares were reserved for issuance upon the exercise of
outstanding BWI Options, and (iv) 7,071,185 shares of BWI Common Stock were
reserved for future issuance under the Stock Option Agreement dated December 2,
2000 between Cardinal and BWI (the "BWI Stock Option Agreement"); and (b)
1,000,000 special shares, par value $.01 per share, of which (i) none was
issued and outstanding, and (ii) 1,050 shares which have been designated as
Class A Preferred Stock. Each outstanding share of BWI capital stock is duly
authorized and validly issued, fully paid and nonassessable, and has not been
issued in violation of any preemptive or similar rights. Other than as set
forth in the first sentence hereof, in the Option Schedule (as defined below),
in Section 4.4 to the BWI Disclosure Schedule or as contemplated by the BWI
Stock Option Agreement, there are no outstanding subscriptions, options,
warrants, puts, calls, agreements, understandings, claims or other commitments
or rights of any type relating to the issuance, sale, repurchase or transfer by
BWI of any securities of BWI, nor are there outstanding any securities which
are convertible into or exchangeable for any shares of BWI capital stock, and
neither BWI nor any subsidiary of BWI has any obligation of any kind to issue
any additional securities or to pay for or repurchase any securities of BWI or
any predecessor. The issuance and sale of all of the shares of capital stock
described in this Section 4.4 have been in compliance in all material respects
with federal and state securities laws. BWI has previously delivered to
Cardinal a certified schedule (the "Option Schedule") accurately setting forth
as of November 29, 2000 the names of all holders of options to purchase BWI
capital stock, the number of shares of each class issuable to each such holder
upon exercise of such option, and the exercise price and vesting schedule with
respect thereto. Except as set forth in Section 4.4 to the BWI Disclosure
Schedule, BWI has not agreed to register any securities of BWI or any of its
subsidiaries under the Securities Act or under any state securities law or
granted registration rights to any person or entity (other than agreements with
respect to registration rights that are no longer in effect as of the date of
this Agreement); complete and correct copies of all such agreements have
previously been provided to Cardinal.
4.5. Conflicts; Consents and Approvals. Neither the execution and delivery
of this Agreement or the BWI Stock Option Agreement by BWI, nor the
consummation of the transactions contemplated hereby or thereby will:
(a) conflict with, or result in a breach of any provision of, the BWI
Articles or the BWI Bylaws;
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(b) violate, or conflict with, or result in a breach of any provision
of, or constitute a default (or an event that, with the giving of notice,
the passage of time or otherwise, would constitute a default) under, or
entitle any party (with the giving of notice, the passage of time or
otherwise) to terminate, accelerate, modify or call a default under, or
result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of BWI or any of its
subsidiaries under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, contract, undertaking,
agreement, lease or other instrument or obligation to which BWI or any of
its subsidiaries is a party;
(c) to the knowledge of BWI, violate any order, writ, injunction,
decree, statute, rule or regulation applicable to BWI or any of its
subsidiaries or any of their respective properties or assets; or
(d) require any action or consent or approval of, or review by, or
registration or filing by BWI or any of its affiliates with, any third
party or any Governmental Authority, other than (i) approval of the Merger
and the transactions contemplated hereby by BWI Shareholders, (ii) actions
required by the HSR Act, (iii) registrations or other actions required
under federal and state securities laws as are contemplated by this
Agreement and (iv) consents or approvals of any Governmental Authority set
forth in Section 4.5 to the BWI Disclosure Schedule;
except in the case of clause (b) which is set forth in Section 4.5(b) to the
BWI Disclosure Schedule or which would not be material to the business and
operations of BWI and its subsidiaries, taken as a whole, and in the case of
clauses (c) and (d) for any of the foregoing that would not, individually or in
the aggregate, have a Material Adverse Effect on BWI or a material adverse
effect on the ability of the parties to consummate the transaction contemplated
hereby.
4.6. Brokerage and Finders' Fees. Except for BWI's obligations to Salomon
Smith Barney Inc. ("SSB"), neither BWI nor any stockholder, director, officer
or employee thereof, has incurred or will incur on behalf of BWI, any
brokerage, finders' or similar fee in connection with the transactions
contemplated by this Agreement. Copies of all written agreements relating to
BWI's obligations to SSB have previously been provided to Cardinal and all
other agreements relating to such obligations have been described in Section
4.6 to the BWI Disclosure Schedule.
4.7. Accounting Matters; Reorganization. To the best knowledge of BWI
(including its executive officers and directors) after due investigation,
except as set forth in Section 4.7 to the BWI Disclosure Schedule, neither BWI
nor any of its affiliates has taken or agreed to take any action that (without
giving effect to any actions taken or agreed to be taken by Cardinal or any of
its affiliates) would (a) prevent Cardinal from accounting for the business
combination to be effected by the Merger as a pooling of interests for
financial reporting purposes or (b) prevent the Merger from constituting a
"reorganization" qualifying under the provisions of Section 368(a) of the Code.
4.8. BWI SEC Documents. Except as set forth in Section 4.8 to the BWI
Disclosure Schedule, BWI has timely filed with the Commission all forms,
reports, schedules, statements and other documents required to be filed by it
since January 1, 1997 under the Exchange Act or the Securities Act (such
documents, as supplemented and amended since the time of filing, collectively,
the "BWI SEC Documents"). Except as set forth in Section 4.8 to the BWI
Disclosure Schedule, the BWI SEC Documents, including, without limitation, any
financial statements or schedules included in the BWI SEC Documents, at the
time filed (and, in the case of registration statements and proxy statements,
on the dates of effectiveness and the dates of mailing, respectively and, in
the case of any BWI SEC Document amended or superseded by a filing prior to the
date of this Agreement, then on the date of such amending or superseding
filing) (a) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading, and (b) complied in all material respects with the
applicable requirements of the Exchange Act and the Securities Act, as the case
may be. Except as set forth in Section 4.8 to the BWI Disclosure Schedule, the
financial statements of BWI included in the BWI SEC Documents at the time filed
(and, in the case of registration statements and
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proxy statements, on the dates of effectiveness and the dates of mailing,
respectively and, in the case of any BWI SEC Document amended or superseded by
a filing prior to the date of this Agreement, then on the date of such amending
or superseding filing) complied as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the Commission with respect thereto, were prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as may be indicated in the notes thereto or, in
the case of unaudited statements, as permitted by Form 10-Q of the Commission),
and fairly present (subject, in the case of unaudited statements, to normal,
recurring audit adjustments) the consolidated financial position of BWI and its
consolidated subsidiaries as at the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended. No subsidiary of
BWI is subject to the periodic reporting requirements of the Exchange Act or
required to file any form, report or other document with the Commission, the
NYSE, any other stock exchange or any other comparable Governmental Authority.
4.9. Registration Statement; Proxy Statement. None of the information
provided in writing by BWI for inclusion in the Registration Statement at the
time it becomes effective or, in the case of the Proxy Statement, at the date
of mailing and at the date of the BWI Shareholders Meeting, will contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
Registration Statement and Proxy Statement, except for such portions thereof
that relate only to Cardinal and its subsidiaries, will each comply as to form
in all material respects with the provisions of the Securities Act and the
Exchange Act.
4.10. Compliance with Law. Except as set forth in Section 4.10 to the BWI
Disclosure Schedule, BWI is in compliance, and at all times since January 1,
1997 has been in compliance, with all Applicable Laws relating to BWI or its
business or properties, except where the failure to be in compliance with such
Applicable Laws (individually or in the aggregate) would not reasonably be
expected to have a Material Adverse Effect on BWI or where such noncompliance
has been cured and is expected to have no material impact on the future
business or operations of BWI. Except as disclosed in Section 4.10 to the BWI
Disclosure Schedule, no investigation or review by any Governmental Authority
with respect to BWI is pending, or, to the knowledge of BWI, threatened, nor
has any Governmental Authority indicated in writing an intention to conduct the
same, other than those the outcome of which would not reasonably be expected to
have a Material Adverse Effect on BWI.
4.11. Litigation; Products Liability. Except as set forth in Section 4.11 to
the BWI Disclosure Schedule, there is no Action pending, or, to the knowledge
of BWI, threatened, against BWI or any executive officer or director of BWI
which, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on BWI or a material adverse effect on the ability of
BWI to consummate the transactions contemplated hereby. BWI is not subject to
any outstanding order, writ, injunction or decree which, individually or in the
aggregate, insofar as can be reasonably foreseen, would have a Material Adverse
Effect on BWI or a material adverse effect on the ability of BWI to consummate
the transactions contemplated hereby. Except as set forth in Section 4.11 to
the BWI Disclosure Schedule, since January 1, 1997, BWI has not been subject to
any outstanding order, writ, injunction or decree relating to BWI's method of
doing business or its relationship with past, existing or future users or
purchasers of any goods or services of BWI. Except as set forth in Section 4.11
to the BWI Disclosure Schedule, there is no action presently pending or, to the
knowledge of BWI (or its executive officers or directors), threatened against
BWI relating to any alleged hazard or alleged defect in design, manufacture,
materials or workmanship, including, without limitation, any failure to warn or
alleged breach of express or implied warranty or representation, relating to
any product manufactured, distributed or sold by or on behalf of BWI, which if
adversely determined, could have a Material Adverse Effect on BWI. Except as
set forth in Section 4.11 to the BWI Disclosure Schedule, BWI has not extended
to its customers any written non-uniform product warranties, indemnifications
or guarantees.
4.12. No Material Adverse Change. Except as set forth in Section 4.12 to the
BWI Disclosure Schedule, since December 31, 1999, there has been no material
adverse change in the assets, liabilities, results
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of operations or financial condition of BWI and its subsidiaries taken as a
whole or any event, occurrence or development that would reasonably be expected
to have a Material Adverse Effect on BWI or a material adverse effect on the
ability of BWI to consummate the transactions contemplated hereby.
4.13. Taxes.
(a) Except as set forth in Section 4.13 to the BWI Disclosure Schedule, BWI
and its subsidiaries have duly filed all material federal, state, local and
foreign income, franchise, excise, real and personal property and other Tax
Returns (as defined below) and reports (including, but not limited to, those
filed on a consolidated, combined or unitary basis) required to have been filed
by BWI or its subsidiaries prior to the date hereof. All of the foregoing Tax
Returns and reports are true and correct (except for such inaccuracies which
are individually, or in the aggregate, not material), and BWI and its
subsidiaries have within the time and manner prescribed by Applicable Law paid
or, prior to the Effective Time, will pay all Taxes, interest and penalties
required to be paid in respect of the periods covered by such returns or
reports or otherwise due to any federal, state, foreign, local or other taxing
authority. Except as disclosed on Section 4.13 to the BWI Disclosure Schedule,
neither BWI nor any of its subsidiaries have any material liability for any
Taxes in excess of the amounts so paid or reserves so established and neither
BWI nor any of its subsidiaries is delinquent in the payment of any material
Tax. None of them has requested or filed any document having the effect of
causing any extension of time within which to file any returns in respect of
any fiscal year which have not since been filed. Neither BWI nor its
subsidiaries has received notice of any deficiencies for any material Tax from
any taxing authority, against BWI or any of its subsidiaries for which there
are not adequate reserves. Except as set forth in Section 4.13 to the BWI
Disclosure Schedule, neither BWI nor any of its subsidiaries is the subject of
any currently ongoing Tax audit. As of the date of this Agreement, there are no
pending requests for waivers of the time to assess any material Tax, other than
those made in the ordinary course and for which payment has been made or there
are adequate reserves. With respect to any taxable period ended prior to
December 31, 1997, all federal income Tax Returns including BWI or any of its
subsidiaries have been audited by the Internal Revenue Service or are closed by
the applicable statute of limitations. Neither BWI nor any of its subsidiaries
has waived any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency. There are no
liens with respect to Taxes upon any of the properties or assets, real or
personal, tangible or intangible of BWI or any of its subsidiaries (other than
liens for Taxes not yet due). Except as set forth in Section 4.13 to the BWI
Disclosure Schedule, no claim has ever been made in writing by an authority in
a jurisdiction where none of BWI and its subsidiaries files Tax Returns that
BWI or any of its subsidiaries is or may be subject to taxation by that
jurisdiction. BWI has not filed an election under Section 341(f) of the Code to
be treated as a consenting corporation.
(b) Except as set forth in Section 4.13 to the BWI Disclosure Schedule,
neither BWI nor any of its subsidiaries is obligated by any contract, agreement
or other arrangement to indemnify any other person with respect to material
Taxes. Neither BWI nor any of its subsidiaries are now or have ever been a
party to or bound by any agreement or arrangement (whether or not written and
including, without limitation, any arrangement required or permitted by law)
binding BWI or any of its subsidiaries that (i) requires BWI or any of its
subsidiaries to make any Tax payment to or for the account of any other person,
(ii) affords any other person the benefit of any net operating loss, net
capital loss, investment Tax credit, foreign Tax credit, charitable deduction
or any other credit or Tax attribute which could reduce Taxes (including,
without limitation, deductions and credits related to alternative minimum
Taxes) of BWI or any of its subsidiaries, or (iii) requires or permits the
transfer or assignment of income, revenues, receipts or gains to BWI or any of
its subsidiaries, from any other person.
(c) BWI and its subsidiaries have withheld and paid all material Taxes
required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, shareholder or other
third party.
(d) "Tax Returns" means returns, reports and forms required to be filed with
any Governmental Authority of the United States or any other jurisdiction
responsible for the imposition or collection of Taxes.
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(e) "Taxes" means (i) all taxes (whether federal, state, local or foreign)
based upon or measured by income and any other tax whatsoever, including,
without limitation, gross receipts, profits, sales, use, occupation, value
added, ad valorem, transfer, franchise, withholding, payroll, employment,
excise, or property taxes, together with any interest or penalties imposed with
respect thereto and (ii) any obligations under any agreements or arrangements
with respect to any taxes described in clause (i) above.
4.14. Intellectual Property.
(a) Set forth in Section 4.14 to the BWI Disclosure Schedule is a true and
complete list of (i) all of BWI's foreign and domestic material patents, patent
applications, invention disclosures, trademarks, service marks, trade names
(and any registrations or applications for registration for any of the
foregoing trademarks, service marks and trade names) and all material copyright
applications and registrations and (ii) all agreements to which BWI is a party
which concern any of the material Intellectual Property ("Intellectual
Property" means all intellectual property or other proprietary rights of every
kind, including, all domestic or foreign patents, domestic or foreign patent
applications, inventions (whether or not patentable), processes, products,
technologies, discoveries, copyrightable and copyrighted works, apparatus,
trade secrets, trademarks, trademark registrations and applications, service
marks, service mark registrations and applications, trade names, trade dress,
copyright registrations, customer lists, marketing and customer information,
licenses, technical information (whether confidential or otherwise), software,
and all documentation thereof). Other than the Intellectual Property set forth
in Section 4.14 to the BWI Disclosure Schedule, no name, patent, invention,
tradesecret, proprietary right, computer software, trademark, service mark,
trade name, logo, copyright, franchise, license, sublicense, or other such
right is necessary for the operation of the business of BWI in substantially
the same manner as such business is presently conducted. Except as set forth in
Section 4.14 to the BWI Disclosure Schedule (i) BWI owns, free and clear of any
liens, claims or encumbrances, the material Intellectual Property listed
thereon; (ii) no written claim of invalidity or ownership with respect to any
material Intellectual Property has been made by a third party and such
Intellectual Property is not the subject of any threatened or pending Action;
(iii) no person or entity has asserted in writing that, with respect to the
material Intellectual Property, BWI or a licensee of BWI is infringing or has
infringed any domestic or foreign patent, trademark, service mark, trade name,
or copyright or design right, or has misappropriated or improperly used or
disclosed any trade secret, confidential information or know-how; (iv) to the
knowledge of BWI all fees, annuities, royalties, honoraria and other payments
which are due from BWI on or before the date of this Agreement for any of the
Intellectual Property and agreements related to the Intellectual Property have
been paid; (v) the making, using, selling, manufacturing, marketing, licensing,
reproduction, distribution, or publishing of any process, machine, manufacture,
composition of matter, or material related to any part of the Intellectual
Property, does not and will not infringe in any material respect any domestic
or foreign patent, trademark, service mark, trade name, copyright or other
intellectual property right of any third party, and does not and will not
involve the misappropriation or improper use or disclosure of any trade
secrets, confidential information or know-how of any third party; (vi) to the
knowledge of BWI, no unexpired foreign or domestic patents or patent
applications exist that are adverse to the material interests of BWI; (vii) to
the knowledge of BWI there exists no (A) prior act that would void or
invalidate any of the Intellectual Property or (B) conduct or use by BWI or any
third party that would void or invalidate any of the Intellectual Property; and
(viii) the execution, delivery and performance of this Agreement by BWI, and
the consummation of the transactions contemplated thereby, will not breach,
violate or conflict with any material instrument or agreement governing or
contained within any of the Intellectual Property, will not cause the
forfeiture or termination or give rise to a right of forfeiture or termination
of any of the material Intellectual Property or in any way impair the right of
Cardinal or the Surviving Corporation to make, use, sell, license or dispose
of, or to bring any action for the infringement of, any material Intellectual
Property.
(b) BWI has taken reasonable and appropriate steps to safeguard and maintain
the secrecy and confidentiality of all material trade secrets, copyrights and
patents contained in the Intellectual Property (including, entering into
appropriate confidentiality, nondisclosure and noncompetition agreements with
all appropriate officers, directors, employees and third-party consultants of
BWI).
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4.15. Title to and Condition of Properties. BWI owns or holds under valid
leases all real property, plants, machinery and equipment necessary for the
conduct of the business of BWI as presently conducted, except where the failure
to own or hold such property, plants, machinery and equipment would not have a
Material Adverse Effect on BWI.
4.16. Employee Benefit Plans.
(a) For purposes of this Section 4.16, the following terms have the
definitions given below:
"Controlled Group Liability" means any and all liabilities (i) under
Title IV of ERISA, (ii) under section 302 of ERISA, (iii) under sections
412 and 4971 of the Code, (iv) resulting from a violation of the
continuation coverage requirements of section 601 et seq. of ERISA and
section 4980B of the Code or the group health plan requirements of sections
701 et seq. of the Code and section 701 et seq. of ERISA, and (v) under
corresponding or similar provisions of foreign laws or regulations, in each
case other than pursuant to the Plans.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, together with the rules and regulations thereunder.
"ERISA Affiliate" means, with respect to any entity, trade or business,
any other entity, trade or business that is a member of a group described
in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of
ERISA that includes the first entity, trade or business, or that is a
member of the same "controlled group" as the first entity, trade or
business pursuant to Section 4001(a)(14) of ERISA.
"Plans" means all employee benefit plans, programs and other
arrangements providing benefits to any employee or former employee in
respect of services provided to BWI or to any beneficiary or dependent
thereof, and whether covering one person or more than one person, sponsored
or maintained by BWI or any of its subsidiaries or to which BWI or any of
its subsidiaries contributes or is obligated to contribute. Without
limiting the generality of the foregoing, the term "Plans" includes any
defined benefit or defined contribution pension plan, profit sharing plan,
stock ownership plan, deferred compensation agreement or arrangement,
vacation pay, sickness, disability or death benefit plan (whether provided
through insurance, on a funded or unfunded basis or otherwise), employee
stock option or stock purchase plan, bonus or incentive plans or programs,
severance pay plan policy, practice or agreement, employment agreement,
retiree medical benefits plan and each other employee benefit plan, program
or arrangement, including, without limitation, each "employee benefit plan"
within the meaning of Section 3(3) of ERISA.
(b) Section 4.16 to the BWI Disclosure Schedule lists all Plans. With
respect to each Plan, BWI has made available to Cardinal a true, correct and
complete copy of the following (where applicable): (i) each writing
constituting a part of such Plan, including without limitation all plan
documents (including amendments and proposed amendments), benefit schedules,
trust agreements, and insurance contracts and other funding vehicles; (ii) the
three most recent Annual Reports (Form 5500 Series) and accompanying schedules,
if any; (iii) the current summary plan description, if any; (iv) the most
recent annual financial report, if any; and (v) the most recent determination
letter from the Internal Revenue Service, if any. Except as specifically
provided in the foregoing documents made available to Cardinal, there are no
amendments to any Plan that have been adopted or approved nor has BWI or any of
its subsidiaries undertaken to make any such amendments or to adopt or approve
any new Plan.
(c) The Internal Revenue Service has issued a favorable determination letter
with respect to each Plan that is intended to be a "qualified plan" within the
meaning of Section 401(a) of the Code (a "Qualified Plan") and, to the
knowledge of BWI, there are no existing circumstances nor any events that have
occurred that could adversely affect the qualified status of any Qualified Plan
or the related trust.
(d) All contributions required to be made by BWI or any of its subsidiaries
or any of their respective ERISA Affiliates to any Plan by Applicable Laws or
by any plan document or other contractual undertaking,
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and all premiums due or payable with respect to insurance policies funding any
Plan, for any period through the date hereof have been timely made or paid in
full and through the Closing Date will be timely made or paid in full.
(e) Except as set forth in Section 4.16(e) to the BWI Disclosure Schedule,
BWI and its subsidiaries and their respective ERISA Affiliates have complied,
and are now in compliance, in all material respects, with all provisions of
ERISA, the Code and all laws and regulations applicable to the Plans. Except as
set forth in Section 4.16(e) to the BWI Disclosure Schedule, each Plan has been
operated in material compliance with its terms. There is not now, and there are
no existing circumstances that would reasonably be expected to give rise to,
any requirement for the posting of security with respect to a Plan or the
imposition of any lien on the assets of BWI or any of its subsidiaries or any
of their respective ERISA Affiliates under ERISA or the Code.
(f) No Plan is subject to Title IV or Section 302 of ERISA or Section 412 or
4971 of the Code. No Plan is a "multiemployer plan" within the meaning of
Section 4001(a)(3) of ERISA (a "Multiemployer Plan") or a plan that has two or
more contributing sponsors at least two of whom are not under common control,
within the meaning of Section 4063 of ERISA (a "Multiple Employer Plan"), nor
has BWI or any of its subsidiaries or any of their respective ERISA Affiliates,
at any time within six years before the date hereof, contributed to or been
obligated to contribute to any Multiemployer Plan or Multiple Employer Plan.
(g) There does not now exist, and there are no existing circumstances that
would reasonably be expected to result in any material Controlled Group
Liability that would be a liability of BWI or any of its subsidiaries following
the Closing. Without limiting the generality of the foregoing, neither BWI nor
any of its subsidiaries nor any of their respective ERISA Affiliates has
engaged in any transaction described in Section 4069 or Section 4204 of ERISA.
(h) Except for health continuation coverage as required by Section 4980B of
the Code or Part 6 of Title I of ERISA and except as set forth in Section
4.16(h) to the BWI Disclosure Schedule, neither BWI nor any of its subsidiaries
has any material liability for life, health, medical or other welfare benefits
to former employees or beneficiaries or dependents thereof. To the knowledge of
BWI, there has been no communication to employees of BWI or its subsidiaries
that would reasonably be expected or interpreted to promise or guarantee such
employees retiree health or life insurance benefits or other retiree death
benefits on a permanent basis.
(i) Except as disclosed in Section 4.16(i) to the BWI Disclosure Schedule,
neither the execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby will result in, cause the accelerated
vesting or delivery of, or increase the amount or value of, any payment or
benefit to any employee, officer, director or consultant of BWI or any of its
subsidiaries. Without limiting the generality of the foregoing, except as set
forth in Section 4.16(i) to the BWI Disclosure Schedule, no amount paid or
payable by BWI or any of its subsidiaries in connection with the transactions
contemplated hereby, either solely as a result thereof or as a result of such
transactions in conjunction with any other events, will be an "excess parachute
payment" within the meaning of Section 280G of the Code. BWI has previously
provided to Cardinal the following information, which is true, complete and
accurate in all material respects: (x) the amounts comprising the "base amount"
for each of the four executives listed in Section 4.16(i) to the BWI Disclosure
Schedule, assuming a "base period" of 1996-1999 (as those terms are defined in
Section 280G of the Code), and an estimate of such individuals' annual
compensation described in Section 280G(d)(1) of the Code for 2000; and (y) a
schedule of all outstanding BWI Options and restricted shares of BWI Common
Stock, showing for each separate grant thereof, the individual to whom they
were granted, the grant date, the vesting schedule (without regard to any
vesting as a result of the transactions contemplated hereby) and, in the case
of BWI Options, the exercise price thereof.
(j) Except as disclosed in Section 4.16(j) to the BWI Disclosure Schedule,
there are no pending or to the knowledge of BWI threatened claims (other than
claims for benefits in the ordinary course), lawsuits or arbitrations that have
been asserted or instituted against the Plans, any fiduciaries thereof with
respect to their duties to the Plans or the assets of any of the trusts under
any of the Plans that would reasonably be expected to
A-16
result in any material liability of BWI or any of its subsidiaries to the
Pension Benefit Guaranty Corporation, the Department of Treasury, the
Department of Labor or any Multiemployer Plan.
(k) Section 4.16(k) to the BWI Disclosure Schedule sets forth the names of
all directors and officers of BWI, the total salary, bonus, and fringe benefits
and perquisites (to the extent such fringe benefits or perquisites would have
to be disclosed under Rule 402(b) of Regulation S-K assuming each such person
was a named executive officer) each will receive in the fiscal year ending
December 31, 2000, and any changes to the foregoing that will occur as a matter
of entitlement subsequent to December 31, 2000. Section 4.16(k) to the BWI
Disclosure Schedule also lists and describes the current compensation of any
other employee of BWI whose total current salary and maximum bonus opportunity
exceeds $150,000 annually. Section 4.16(k) to the BWI Disclosure Schedule also
sets forth the liability of BWI and its subsidiaries for deferred compensation
under any deferred compensation plan, excess plan or similar arrangement (other
than pursuant to Qualified Plans) to each such director, officer and employee
and to all other employees as a group, together with the value, as of the date
specified thereon, of the assets (if any) set aside in any grantor trust(s) to
fund such liabilities. Except as disclosed in Section 4.16(k) to the BWI
Disclosure Schedule, there are no other material forms of compensation paid to
any such director, officer or employee of BWI. Except as set forth in Section
4.16(k) to the BWI Disclosure Schedule, no officer, director, or employee of
BWI or any other affiliate of BWI, or any immediate family member of any of the
foregoing, provides or causes to be provided to BWI any material assets,
services or facilities and BWI does not provide or cause to be provided to any
such officer, director, employee or affiliate, or any immediate family member
of any of the foregoing, any material assets, services or facilities.
(l) No Plan is subject to the laws of any jurisdiction outside of the United
States. Neither BWI nor any of its subsidiaries has any employees who are based
outside of the United States.
4.17. Contracts. Section 4.17 to the BWI Disclosure Schedule lists as of the
date hereof all written or oral contracts, agreements, guarantees, leases and
executory commitments other than Plans (each a "Contract") to which BWI is a
party and which fall within any of the following categories: (a) Contracts not
entered into in the ordinary course of BWI's business other than those that are
not material to the business of BWI, (b) joint venture, partnership and like
agreements, other than those that are, individually or in the aggregate,
immaterial (c) Contracts which are service contracts or equipment leases
involving payments by BWI of more than $1,000,000 per year per contract, (d)
Contracts containing covenants purporting to limit the freedom of BWI to
compete in any line of business in any geographic area or to hire any
individual or group of individuals, (e) Contracts which after the Effective
Time would have the effect of limiting the freedom of Cardinal or its
subsidiaries (other than BWI and its subsidiaries) to compete in any line of
business in any geographic area or to hire any individual or group of
individuals, (f) Contracts which contain minimum purchase conditions in excess
of $600,000 with respect to inventory purchases for resales and $325,000 in the
case of everything else or requirements or other terms that restrict or limit
the purchasing relationships of BWI or its affiliates, or any customer,
licensee or lessee thereof, (g) Contracts relating to any outstanding
commitment for capital expenditures in excess of $1,500,000, (h) Contracts
relating to the lease or sublease of or sale or purchase of real or personal
property involving any annual expense or price in excess of $750,000 and not
cancellable by BWI (without premium or penalty) within one month, (i) Contracts
with any labor organization or union, (j) indentures, mortgages, promissory
notes, loan agreements, guarantees of borrowed money in excess of $1,000,000,
letters of credit or other agreements or instruments of BWI or commitments for
the borrowing or the lending of amounts in excess of $1,000,000 by BWI or
providing for the creation of any charge, security interest, encumbrance or
lien upon any of the assets of BWI with an aggregate value in excess of
$1,000,000, (k) Contracts involving annual revenues to the business of BWI in
excess of 2.5% of BWI's annual revenues, (l) Contracts providing for "earn-
outs", "savings guarantees", "performance guarantees", or other contingent
payments by BWI involving more than $250,000 per year or $750,000 over the term
of the Contract, (m) Contracts with or for the benefit of any affiliate of BWI
or immediate family member thereof (other than subsidiaries of BWI) involving
more than $60,000 in the aggregate per affiliate, (n) Contracts involving
payments by BWI of more than $3,000,000 per year and (o) Contracts involving
the spin-off (the "Priority
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Spin-Off") of Priority Healthcare Corporation ("Priority Healthcare") or
Priority Healthcare's operations following the Priority Spin-Off pursuant to
which BWI has or may have an obligation (including any indemnity obligations)
that could reasonably be expected to involve payments in excess of $250,000.
All such Contracts and all other contracts that are individually material to
the business or operations of BWI are valid and binding obligations of BWI and,
to the knowledge of BWI, the valid and binding obligation of each other party
thereto except such Contracts which if not so valid and binding would not,
individually or in the aggregate, have a Material Adverse Effect on BWI.
Neither BWI nor, to the knowledge of BWI, any other party thereto is in
violation of or in default in respect of, nor has there occurred an event or
condition which with the passage of time or giving of notice (or both) would
constitute a default under or permit the termination of, any such Contract or
of any other Contract that is individually material to the business or
operations of BWI except such violations or defaults under or terminations
which, individually or in the aggregate, would not have a Material Adverse
Effect on BWI. Set forth in Section 4.17 to the BWI Disclosure Schedule is the
amount of the annual premium currently paid by BWI for its directors' and
officers' liability insurance.
4.18. Labor Matters. Except as set forth in Section 4.18 to the BWI
Disclosure Schedule, BWI does not have any labor contracts, collective
bargaining agreements or consulting agreements providing for compensation of
any individual in excess of $150,000 with any persons employed by BWI or any
persons otherwise performing services primarily for BWI. There is no labor
strike, dispute or stoppage pending or, to the knowledge of BWI, threatened
against BWI, and BWI has not experienced any labor strike, dispute or stoppage
or other material labor difficulty involving its employees since January 1,
1997. To the knowledge of BWI, since January 1, 1997, no campaign or other
attempt for recognition has been made by any labor organization or employees
with respect to employees of BWI or any of its subsidiaries.
4.19. Undisclosed Liabilities. Except (i) as and to the extent disclosed or
reserved against on the balance sheet of BWI as of December 31, 1999 included
in the BWI SEC Documents, (ii) as incurred after the date thereof in the
ordinary course of business consistent with prior practice and not prohibited
by this Agreement or (iii) as set forth in Section 4.19 to the BWI Disclosure
Schedule, BWI does not have any liabilities or obligations of any nature,
whether known or unknown, absolute, accrued, contingent or otherwise and
whether due or to become due, that, individually or in the aggregate, have or
would reasonably be expected to have a Material Adverse Effect on BWI.
4.20. Operation of BWI's Business; Relationships.
(a) Since December 31, 1999 through September 30, 2000, BWI has not, except
in the ordinary course of business consistent with past practice, engaged in
any transaction which, if done after execution of this Agreement, would violate
in any material respects Section 5.3(c) except as set forth in Section 4.20(a)
to the BWI Disclosure Schedule. Since September 30, 2000 through the date of
this Agreement, BWI has not engaged in any transaction which, if done after
execution of this Agreement, would violate in any material respects Section
5.3(c) except as set forth in Section 4.20(a) to the BWI Disclosure Schedule.
(b) Except as set forth in Section 4.20(b) to the BWI Disclosure Schedule,
since December 31, 1999, as of the date of this Agreement, no material customer
of BWI has indicated that it will stop or materially decrease purchasing
materials, products or services from BWI and no material supplier of BWI has
indicated that it will stop or materially decrease the supply of materials,
products or services to BWI, in each case, the effect of which would have a
Material Adverse Effect on BWI.
4.21. Permits; Compliance.
(a) BWI is in possession of all material franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its properties and to
carry on its business as it is now being conducted (collectively, the "BWI
Permits"), except where the failure to be in possession of such BWI Permits
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on BWI, and there is no Action pending or, to the
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knowledge of BWI, threatened regarding any of the BWI Permits which, if
successful, would have a Material Adverse Effect on BWI. BWI is not in conflict
with, or in default or violation of any of the BWI Permits, except for any such
conflicts, defaults or violations which, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect on BWI.
(b) Except as set forth in Section 4.21(b) to the BWI Disclosure Schedule or
as would not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on BWI:
(i) all necessary clearances or approvals from Governmental Authorities
for all drug and device products which are manufactured and/or sold by BWI
and its subsidiaries have, to the knowledge of BWI, been obtained and BWI
and its subsidiaries are in substantial compliance with the most current
form of each applicable clearance or approval with respect to the
manufacture, storage, distribution, promotion and sale by BWI and its
subsidiaries of such products;
(ii) none of BWI, or any of its officers, employees or agents (during
the term of such person's employment by BWI or while acting as an agent of
BWI, or, to BWI's actual knowledge, prior to such employment) has made any
untrue statement of a material fact or fraudulent statement to the Food and
Drug Administration, (the "FDA"), the U.S. Nuclear Regulatory Commission
(the "NRC") or any similar Governmental Authorities, failed to disclose a
material fact required to be disclosed to the FDA, NRC or similar
Governmental Authorities, or committed an act, made a statement or failed
to make a statement that would reasonably be expected to provide a basis
for the FDA, NRC or similar Governmental Authorities to invoke its policy
respecting "Fraud, Untrue Statements of Material Facts, Bribery, and
Illegal Gratuities" or similar governmental policy, rule, regulation or
law;
(iii) as to each article of drug, device, cosmetic or vitamin
manufactured (directly or indirectly) and/or, to the knowledge of BWI,
distributed by BWI, such article is not adulterated or misbranded within
the meaning of the Food, Drug and Cosmetic Act or any similar governmental
act or law of any jurisdiction; and
(iv) to the knowledge of BWI, none of BWI or any of its officers,
employees or agents (during the term of such person's employment by BWI or
while acting as an agent of BWI, or, to BWI's knowledge, prior to such
employment), subsidiaries or affiliates has been convicted of any crime or
engaged in any conduct for which debarment or similar punishment is
mandated or permitted by any Applicable Law.
4.22. Environmental Matters. Except for matters disclosed in Schedule 4.22
to the BWI Disclosure Schedule, (a) the properties, operations and activities
of BWI and its subsidiaries are in compliance in all material respects with all
applicable Environmental Laws (as defined below) and all past noncompliance of
BWI or any BWI subsidiary with any Environmental Laws or Environmental Permits
(as defined below) has been resolved without any pending, ongoing or future
obligation, cost or liability; (b) BWI and its subsidiaries and the properties
and operations of BWI and its subsidiaries are not subject to any existing,
pending or, to the knowledge of BWI, threatened Action by or before any court
or Governmental Authority under any Environmental Law; (c) there has been no
material release of any Hazardous Material (as defined below) into the
environment by BWI or its subsidiaries or in connection with their properties
or operations; and (d) to the knowledge of BWI, there has been no material
exposure of any person or property to any hazardous substance, pollutant or
contaminant in connection with the properties, operations and activities of BWI
and its subsidiaries. The term "Environmental Laws" means all federal, state,
local or foreign laws relating to pollution or protection of human health or
the environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or industrial, toxic or hazardous
substances or wastes (collectively, "Hazardous Materials") into the
environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, as well as all authorizations, codes, decrees, demands or
demand letters, injunctions, judgments, licenses, notices, orders, permits,
plans or regulations issued, entered, promulgated or approved
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thereunder. "Environmental Permit" means any permit, approval, license or other
authorization required under or issued pursuant to any applicable Environmental
Law.
4.23. Opinion of Financial Advisor. The Board of Directors of BWI has
received the opinion of SSB, BWI's financial advisor, to the effect that, as of
the date of this Agreement, the Exchange Ratio is fair to the holders of BWI
Common Stock from a financial point of view and such opinion has not been
withdrawn or revoked or otherwise modified in any material respect. BWI will
provide a copy of such opinion to Cardinal solely for informational purposes
after receipt thereof by BWI.
4.24. Board Recommendation; Required Vote. The Board of Directors of BWI, at
a meeting duly called and held, has by unanimous vote of those directors
present (who constituted 100% of the directors then in office) (i) determined
that this Agreement and the transactions contemplated hereby, including the
Merger, and the BWI Stock Option Agreement and the transactions contemplated
thereby, taken together, are fair to and in the best interests of the BWI
Shareholders, and (ii) resolved to recommend that the holders of the shares of
BWI Common Stock approve this Agreement and the transactions contemplated
herein, including the Merger (the "BWI Board Recommendation"). The affirmative
vote of holders of a majority of the outstanding shares of BWI Common Stock to
approve the Merger is the only vote of the holders of any class or series of
BWI Common Stock necessary to adopt the Agreement and approve the transactions
contemplated hereby.
4.25. Chapters 42 and 43 of IBCL. Prior to the execution of this Agreement,
the Board of Directors of BWI has taken all action necessary to exempt under or
make not subject to (x) the provisions of Chapters 42 and 43 of the IBCL and
(y) any other state takeover law or state law that purports to limit or
restrict business combinations or the ability to acquire or vote shares: (i)
the execution of this Agreement, the BWI Stock Option Agreement and the
Support/Voting Agreements dated as of December 2, 2000 between Cardinal and
certain BWI Shareholders (collectively, the "Support Agreements"), (ii) the
Merger and (iii) the transactions contemplated hereby and by the BWI Stock
Option Agreement and the Support Agreements.
4.26. Accounts Receivable and Inventories.
(a) All accounts and notes receivable of BWI have arisen in the ordinary
course of business and the accounts receivable reserve reflected in the balance
sheet of BWI as of September 30, 2000 included in the BWI SEC Documents is as
of such date adequate and established in accordance with generally accepted
accounting principles consistently applied. Since September 30, 2000, there has
been no event or occurrence which would cause such accounts receivable reserve
to be inadequate, and which would reasonably be expected to have a Material
Adverse Effect on BWI.
(b) The BWI assets which are inventories have a net realizable value on
September 30, 2000 at least equal to the FIFO values at which such inventories
are carried on the balance sheet of BWI as of September 30, 2000 included in
the BWI SEC Documents; and have been purchased by BWI directly from the
manufacturer thereof or from an authorized distributor of such products in
accordance with the Federal Prescription Drug Marketing Act, if applicable.
4.27. Insurance. Except as set forth in Section 4.27 to the BWI Disclosure
Schedule, BWI and its subsidiaries are presently insured, and during each of
the past three calendar years has been insured against such risks as companies
engaged in a similar business would, in accordance with good business practice,
customarily be insured. BWI's and its subsidiaries' insurance policies are in
all material respects in full force and effect in accordance with their terms,
no notice of cancellation has been received, and there is no existing default
or event which, with the giving of notice or lapse of time or both, would
constitute a default thereunder. Such policies are in all material respects in
amounts which are customary, adequate and suitable in relation to the business,
assets and liabilities of BWI or its subsidiaries and all premiums to date have
been paid in full. BWI or its covered subsidiary is a "named insured" or an
"insured" under such insurance policies. BWI and its subsidiaries have not been
refused any insurance, nor has the coverage of BWI or any of its subsidiaries
been limited, by any insurance carrier to which it has applied for insurance or
with which it has carried
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insurance during the past three years. Except as set forth in Section 4.27 to
the BWI Disclosure Schedule, the policies of fire, theft, liability and other
insurance maintained with respect to the assets or businesses of BWI and its
subsidiaries provide adequate coverage against loss and may be continued by BWI
without modification or premium increase after the Effective Time and for the
duration of their current terms which terms expire as set forth in Section 4.27
to the BWI Disclosure Schedule.
4.28. Executive Agreement. Each of the four employees of BWI specified in
Section 4.28 to the BWI Disclosure Schedule has duly executed and delivered an
Executive Agreement with BWI and Cardinal, and such Executive Agreements have
not been further amended or terminated. BWI has previously provided to Cardinal
fully executed copies of all such Executive Agreements.
ARTICLE V.
COVENANTS OF THE PARTIES
The parties hereto agree that:
5.1. Mutual Covenants.
(a) HSR Act Filings; Reasonable Efforts; Notification.
(i) Each of Cardinal and BWI shall (A) make or cause to be made the
filings required of such party or any of its subsidiaries or affiliates
under the HSR Act with respect to the transactions contemplated hereby as
promptly as practicable and in any event within five business days after
the date of this Agreement, (B) comply at the earliest practicable date
with any request under the HSR Act for additional information, documents,
or other materials received by such party or any of its subsidiaries from
the Federal Trade Commission or the Department of Justice or any other
Governmental Authority in respect of such filings or such transactions, and
(C) cooperate with the other party in connection with any such filing
(including, with respect to the party making a filing, providing copies of
all such documents to the non-filing party and its advisors prior to filing
and, if requested, to accept all reasonable additions, deletions or changes
suggested in connection therewith) and in connection with resolving any
investigation or other inquiry of any such agency or other Governmental
Authority under any Antitrust Laws (as defined in Section 5.1(a)(ii)) with
respect to any such filing or any such transaction. Each party shall use
all reasonable efforts to furnish to each other all information required
for any application or other filing to be made pursuant to any Applicable
Law in connection with the Merger and the other transactions contemplated
by this Agreement. Each party shall promptly inform the other party of any
communication with, and any proposed understanding, undertaking, or
agreement with, any Governmental Authority regarding any such filings or
any such transaction. Neither party shall independently participate in any
meeting with any Governmental Authority in respect of any such filings,
investigation, or other inquiry without giving the other party prior notice
of the meeting and, to the extent permitted by such Governmental Authority,
the opportunity to attend and/or participate. The parties hereto will
consult and cooperate with one another, in connection with any analyses,
appearances, presentations, memoranda, briefs, arguments, opinions and
proposals made or submitted by or on behalf of any party hereto in
connection with proceedings under or relating to the HSR Act or other
Antitrust Laws.
(ii) Each of Cardinal and BWI shall use all reasonable efforts to
resolve such objections, if any, as may be asserted by any Governmental
Authority with respect to the transaction contemplated by this Agreement
under the HSR Act, the Sherman Act, as amended, the Clayton Act, as
amended, the Federal Trade Commission Act, as amended, and any other
federal, state or foreign statues, rules, regulations, orders, decrees,
administrative or judicial doctrines or other laws that are designed to
prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade (collectively, "Antitrust Laws"). In
connection therewith, if any administrative or judicial action or
proceeding is instituted (or threatened to be instituted) challenging any
transaction contemplated by this Agreement as
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violative of any Antitrust Law, each of Cardinal and BWI shall cooperate
and use all reasonable efforts vigorously to contest and resist any such
action or proceeding, including any legislative, administrative or judicial
action, and to have vacated, lifted, reversed, or overturned any decree,
judgment, injunction or other order whether temporary, preliminary or
permanent (each an "Order"), that is in effect and that prohibits,
prevents, or restricts consummation of the Merger or any other transactions
contemplated by this Agreement, including, without limitation, by
vigorously pursuing all available avenues of administrative and judicial
appeal and all available legislative action, unless by mutual agreement
Cardinal and BWI decide that litigation is not in their respective best
interests. Notwithstanding the foregoing or any other provision of this
Agreement, nothing in this Section 5.1(a) shall limit a party's right to
terminate this Agreement pursuant to Section 7.1, so long as such party has
up to then complied in all material respects with its obligations under
this Section 5.1(a). Each of Cardinal and BWI shall use all reasonable
efforts to take such action as may be required to cause the expiration of
the notice periods under the HSR Act or other Antitrust Laws with respect
to such transactions as promptly as possible after the execution of this
Agreement.
(iii) Each of the parties agrees to use all reasonable efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including (A) the obtaining of all other
necessary actions or nonactions, waivers, consents, licenses, permits,
authorizations, orders and approvals from Governmental Authorities and the
making of all other necessary registrations and filings (including other
filings with Governmental Authorities, if any), (B) the obtaining of all
consents, approvals or waivers from third parties related to or required in
connection with the Merger that are necessary to consummate the Merger and
the transactions contemplated by this Agreement or required to prevent a
Material Adverse Effect on Cardinal or BWI from occurring prior to or after
the Effective Time, (C) the preparation of the Proxy Statement, the
Prospectus and the Registration Statement, (D) the taking of all action
necessary to ensure that it is a "poolable entity" eligible to participate
in a transaction to be accounted for as a pooling of interests for
financial reporting purposes, and (E) the execution and delivery of any
additional instruments necessary to consummate the transaction contemplated
by, and to fully carry out the purposes of, this Agreement.
(iv) Notwithstanding anything to the contrary in this Agreement, (A)
neither Cardinal nor any of its subsidiaries shall be required to hold
separate (including by trust or otherwise) or to divest any of their
respective businesses or assets, or to take or agree to take any action or
agree to any limitation that could reasonably be expected to have a
material adverse effect on the assets, liabilities, results of operations
or financial condition of Cardinal combined with the Surviving Corporation
after the Effective Time, (B) prior to the Effective Time, neither BWI nor
its subsidiaries shall be required to hold separate (including by trust or
otherwise) or to divest any of their respective businesses or assets, or to
take or agree to take any other action or agree to any limitation that
could reasonably be expected to have a Material Adverse Effect on BWI and
its subsidiaries taken as a whole, (C) neither party nor their respective
subsidiaries shall be required to take any action that would reasonably be
expected to substantially impair the benefits expected, as of the date
hereof, to be realized from consummation of the Merger and (D) neither
party shall be required to waive any of the conditions to the Merger set
forth in Article VI as they apply to such party.
(b) Pooling of Interests. Each of the parties agrees that it shall not, and
shall not permit any of its subsidiaries to, take any actions (regardless of
whether such action would otherwise be permitted or not prohibited hereunder)
which would, or would be reasonably likely to, prevent Cardinal from
accounting, and shall use its best efforts (including, without limitation,
providing appropriate representation letters to Cardinal's accountants) to
allow Cardinal to account, for the Merger in accordance with the pooling-of-
interests method of accounting under the requirements of Opinion No. 16
"Business Combinations" of the Accounting Principles Board of the American
Institute of Certified Public Accountants, as amended by applicable
pronouncements by the Financial Accounting Standards Board, and all related
published rules, regulations and policies of the
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Commission ("APB No. 16"), and to obtain a letter, in form and substance
reasonably satisfactory to Cardinal, from Arthur Andersen LLP dated the Closing
Date stating that they concur with management's conclusion that the Merger will
qualify as a transaction to be accounted for by Cardinal in accordance with the
pooling-of-interests method of accounting under the requirements of APB No. 16,
and to allow BWI to obtain a letter from PricewaterhouseCoopers LLP ("PwC")
dated the Closing Date stating that PwC concurs with the conclusion of BWI's
management that no conditions exist that would preclude BWI from being a party
to a business combination for which the pooling-of-interests method of
accounting would be available.
(c) Tax-Free Treatment. Each of the parties shall use its best efforts to
cause the Merger to constitute a tax-free "reorganization" under Section 368(a)
of the Code and to cooperate with one another in obtaining an opinion from
Baker & Daniels, counsel to BWI, as provided for in Section 6.2(d). In
connection therewith, each of Cardinal and BWI shall deliver to Baker & Daniels
representation letters and BWI shall use all reasonable efforts to obtain
representation letters from appropriate shareholders of BWI and shall deliver
any such letters obtained to Baker & Daniels, in each case, in form and
substance reasonably satisfactory to Baker & Daniels.
(d) Public Announcements. The initial press release concerning the Merger
and the transactions contemplated hereby shall be a joint press release. Unless
otherwise required by Applicable Laws or requirements of the NYSE (and in that
event only if time does not permit), at all times prior to the earlier of the
Effective Time or termination of this Agreement pursuant to Section 7.1,
Cardinal and BWI shall consult with each other before issuing any press release
with respect to the Merger and shall not issue any such press release prior to
such consultation.
5.2. Covenants of Cardinal.
(a) Preparation of Registration Statement. Cardinal shall, as soon as is
reasonably practicable, prepare the Proxy Statement for filing with the
Commission. Consistent with the timing for the BWI Shareholders Meeting as
determined by Cardinal after consultation with BWI, Cardinal shall prepare and
file the Registration Statement with the Commission as soon as is reasonably
practicable following clearance of the Proxy Statement by the Commission and
shall use all reasonable efforts to have the Registration Statement declared
effective by the Commission as promptly as practicable and to maintain the
effectiveness of the Registration Statement through the Effective Time. If, at
any time prior to the Effective Time, Cardinal shall obtain knowledge of any
information pertaining to Cardinal contained in or omitted from the
Registration Statement that would require an amendment or supplement to the
Registration Statement or the Proxy Statement, Cardinal will so advise BWI in
writing and will promptly take such action as shall be required to amend or
supplement the Registration Statement and/or the Proxy Statement. Cardinal
shall promptly furnish to BWI all information concerning it as may be required
for supplementing the Proxy Statement. Cardinal shall use all reasonable
efforts to assist BWI in clearing the Proxy Statement with the Staff of the
Commission. Cardinal also shall take such other reasonable actions (other than
qualifying to do business in any jurisdiction in which it is not so qualified)
required to be taken under any applicable state securities laws in connection
with the issuance of Cardinal Common Shares in the Merger.
(b) Conduct of Cardinal's Operations. During the period from the date of
this Agreement to the Effective Time, Cardinal shall use its reasonable efforts
to maintain and preserve its business organization and to retain the services
of its officers and key employees and maintain relationships with customers,
suppliers and other third parties to the end that their goodwill and ongoing
business shall not be impaired in any material respect.
(c) Indemnification; Directors' and Officers' Insurance.
(i) From and after the Effective Time, Cardinal shall cause (including,
to the extent required, providing sufficient funding to enable the
Surviving Corporation to satisfy its obligations under this Section
5.2(c)(i)), the Surviving Corporation to indemnify and hold harmless the
present and former
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officers and directors of BWI in respect of acts or omissions occurring
prior to the Effective Time to the extent provided under the BWI Articles,
the BWI Bylaws and the indemnification agreements for directors identified
in Section 4.17(m) of the BWI Disclosure Schedule, and
(ii) Cardinal shall use all reasonable efforts to cause the Surviving
Corporation or Cardinal to obtain and maintain in effect for a period of
six years after the Effective Time policies of directors' and officers'
liability insurance at no cost to the beneficiaries thereof with respect to
acts or omissions occurring prior to the Effective Time with substantially
the same coverage and containing substantially similar terms and conditions
as existing policies; provided, however, that neither the Surviving
Corporation nor Cardinal shall be required to pay an aggregate premium for
such insurance coverage in excess of 300% of the amount set forth in
Section 4.17 to the BWI Disclosure Schedule.
(d) Merger Sub. Prior to the Effective Time, Subcorp shall not conduct any
business or make any investments other than as specifically contemplated by
this Agreement and will not have any assets (other than a de minimis amount of
cash paid to Subcorp for the issuance of its stock to Cardinal) or any material
liabilities.
(e) NYSE Listing. Cardinal shall use its reasonable efforts to cause the
Cardinal Common Shares issuable pursuant to the Merger to be approved for
listing on the NYSE, subject to official notice of issuance, prior to the
Effective Time.
(f) Board of Directors of Cardinal. The Board of Directors of Cardinal shall
take all action necessary immediately following the Effective Time to elect Mr.
William E. Bindley as a director of Cardinal, for a term expiring at Cardinal's
next annual meeting of stockholders following the Effective Time at which the
term of the class to which such director belongs expires, subject to being
renominated as a director at the discretion of Cardinal's Board of Directors.
(g) Employees and Employee Benefits. From and after the Effective Time,
Cardinal shall treat all service by BWI Employees (as defined below) with BWI
and their respective predecessors prior to the Effective Time for all purposes
as service with Cardinal (except for purposes of benefit accrual under defined
benefit pension plans or to the extent such treatment would result in
duplicative accrual on or after the Closing Date of benefits for the same
period of service), and, with respect to any medical or dental benefit plan in
which BWI Employees participate after the Effective Time, Cardinal shall waive
or cause to be waived any pre-existing condition exclusions and actively-at-
work requirements (provided, however, that no such waiver shall apply to a pre-
existing condition of any BWI Employee who was, as of the Effective Time,
excluded from participation in a BWI Plan by virtue of such pre-existing
condition), and shall provide that any covered expenses incurred on or before
the Effective Time during the plan year of the applicable BWI Plan in which the
Effective Time occurs by a BWI Employee or a BWI Employee's covered dependent
shall be taken into account for purposes of satisfying applicable deductible,
coinsurance and maximum out-of-pocket provisions after the Effective Time to
the same extent as such expenses are taken into account for the benefit of
similarly situated employees of Cardinal and subsidiaries of Cardinal. For
purposes of this Section 5.2(g), "BWI Employees" means persons who are, as of
the Effective Time, employees of BWI.
5.3. Covenants of BWI.
(a) BWI Shareholders Meeting. BWI shall take all action in accordance with
the federal securities laws, the IBCL and the BWI Articles and the BWI Bylaws
necessary to duly call, give notice of, convene and hold a special meeting of
BWI Shareholders (the "BWI Shareholders Meeting") to be held on the earliest
practicable date determined in consultation with Cardinal to consider and vote
upon approval of the Merger, this Agreement and the transactions contemplated
hereby. BWI shall take all lawful actions to solicit the approval of the
Merger, this Agreement and the transactions contemplated hereby, by the BWI
Shareholders, and the Board of Directors of BWI shall recommend approval of the
Merger, this Agreement and the transactions contemplated hereby by the BWI
Shareholders (to the extent not previously withdrawn pursuant to
Section 5.3(d)).
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(b) Information for the Registration Statement and Preparation of Proxy
Statement. BWI shall promptly furnish Cardinal with all information concerning
it as may be required for inclusion in the Proxy Statement and the Registration
Statement. BWI shall cooperate with Cardinal in the preparation of the Proxy
Statement and the Registration Statement in a timely fashion and shall use all
reasonable efforts to assist Cardinal in having the Registration Statement
declared effective by the Commission as promptly as practicable consistent with
the timing for the BWI Shareholders Meeting as determined in consultation with
Cardinal. If, at any time prior to the Effective Time, BWI obtains knowledge of
any information pertaining to BWI that would require any amendment or
supplement to the Registration Statement or the Proxy Statement, BWI shall so
advise Cardinal and shall promptly furnish Cardinal with all information as
shall be required for such amendment or supplement and shall promptly amend or
supplement the Registration Statement and/or Proxy Statement. BWI shall use all
reasonable efforts to cooperate with Cardinal in the preparation and filing of
the Proxy Statement with the Commission. Consistent with the timing for the BWI
Shareholders Meeting as determined in consultation with Cardinal, BWI shall use
all reasonable efforts to mail at the earliest practicable date to BWI
Shareholders the Proxy Statement, which shall include all information required
under Applicable Law to be furnished to BWI Shareholders in connection with the
Merger and the transactions contemplated thereby and shall include the BWI
Board Recommendation to the extent not previously withdrawn in compliance with
Section 5.3(d) and the full text of the written opinion of SSB described in
Section 4.23.
(c) Conduct of BWI's Operations. BWI shall conduct its operations in the
ordinary course except as expressly contemplated by this Agreement and the
transactions contemplated hereby and shall use its reasonable best efforts to
maintain and preserve its business organization and its material rights and
franchises and to retain the services of its officers and key employees and
maintain relationships with customers, suppliers, lessees, licensees and other
third parties, and to maintain all of its operating assets in their current
condition (normal wear and tear excepted), to the end that their goodwill and
ongoing business shall not be impaired in any material respect. Without
limiting the generality of the foregoing, during the period from the date of
this Agreement to the Effective Time, BWI shall not, except as otherwise
expressly contemplated by this Agreement and the transactions contemplated
hereby or as set forth in Section 5.3(c) to the BWI Disclosure Schedule,
without the prior written consent of Cardinal:
(i) do or effect any of the following actions with respect to its
securities: (A) adjust, split, combine or reclassify its capital stock, (B)
make, declare or pay any dividend (other than regular quarterly dividends
on BWI Common Stock of $0.020 per share with record and payment dates
consistent with past practice) or distribution on, or directly or
indirectly redeem, purchase or otherwise acquire, any shares of its capital
stock or any securities or obligations convertible into or exchangeable for
any shares of its capital stock, (C) grant any person any right or option
to acquire any shares of its capital stock (except grants of BWI Options to
BWI employees in the ordinary course of business consistent with past
practices provided that BWI shall consult with Cardinal prior to making any
such grants or making any recommendation to the BWI Board of Directors with
respect to such grants) and (D) issue, deliver or sell or agree to issue,
deliver or sell any additional shares of its capital stock or any
securities or obligations convertible into or exchangeable or exercisable
for any shares of its capital stock or such securities (except pursuant to
the exercise of BWI Options that are outstanding as of the date hereof), or
(E) enter into any agreement, understanding or arrangement with respect to
the sale, voting, registration or repurchase of its capital stock;
(ii) directly or indirectly sell, transfer, lease, pledge, mortgage,
encumber or otherwise dispose of any of its property or assets other than
in the ordinary course of business;
(iii) make or propose any changes in the BWI Articles or the BWI Bylaws;
(iv) merge or consolidate with any other person;
(v) acquire a material amount of assets or capital stock of any other
person outside of the ordinary course of business consistent with past
practice;
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(vi) incur, create, assume or otherwise become liable for any
indebtedness for borrowed money or assume, guarantee, endorse or otherwise
as an accommodation become responsible or liable for the obligations of any
other individual, corporation or other entity, other than in the ordinary
course of business, consistent with past practice;
(vii) create any subsidiaries;
(viii) enter into or modify any employment, severance, termination or
similar agreements or arrangements with, or grant any bonuses, salary
increases, severance or termination pay to, any officer, director,
consultant or employee other than in the ordinary course of business
consistent with past practice with respect to non-officer employees (except
for severance agreements, which in all cases shall require the prior
written consent of Cardinal), or otherwise increase the compensation or
benefits provided to any officer, director, consultant or employee except
as may be required by Applicable Law, or grant, reprice, or accelerate the
exercise or payment of any BWI Options or other equity-based awards (except
for grants to the extent permitted by Section 5.3(c)(i));
(ix) enter into, adopt or amend any Plan, except as may be required by
Applicable Law;
(x) take any action that could give rise to severance benefits payable
to any officer or director of BWI as a result of consummation of the
transaction contemplated by this Agreement;
(xi) change any method or principle of accounting in a manner that is
inconsistent with past practice except to the extent required by generally
accepted accounting principles as advised by BWI's regular independent
accountants;
(xii) settle any Actions, whether now pending or hereafter made or
brought involving, individually or in the aggregate, an amount in excess of
$1,000,000;
(xiii) modify, amend or terminate, or waive, release or assign any
material rights or claims with respect to, any Contract set forth in
Section 4.17 to the BWI Disclosure Schedule, any other material Contract to
which BWI is a party or any confidentiality agreement to which BWI is a
party;
(xiv) enter into any confidentiality agreements or arrangements other
than in the ordinary course of business consistent with past practice
(other than as permitted, in each case, by Section 5.3(d));
(xv) write up, write down or write off the book value of any assets,
individually or in the aggregate, in excess of $750,000 except for
depreciation and amortization in accordance with generally accepted
accounting principles consistently applied;
(xvi) incur or commit to any capital expenditures in excess of
$1,000,000 individually or $5,000,000 in the aggregate;
(xvii) make any payments in respect of policies of directors' and
officers' liability insurance (premiums or otherwise) other than premiums
paid in respect of its current or renewed or replacement policies;
(xviii) take any action to exempt or make not subject to (x) the
provisions of Chapter 42 or Chapter 43 of the IBCL or (y) any other state
takeover law or state law that purports to limit or restrict business
combinations or the ability to acquire or vote shares, any person or entity
(other than Cardinal or its subsidiaries) or any action taken thereby,
which person, entity or action would have otherwise been subject to the
restrictive provisions thereof and not exempt therefrom;
(xix) take any action that could likely result in the representations
and warranties set forth in Article IV becoming false or inaccurate in any
material respect;
(xx) enter into or carry out any other transaction other than in the
ordinary and usual course of business;
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(xxi) permit or cause any subsidiary to do any of the foregoing or agree
or commit to do any of the foregoing; or
(xxii) agree in writing or otherwise to take any of the foregoing
actions.
(d) No Solicitation. BWI agrees that, during the term of this Agreement, it
shall not, and shall not authorize or permit any of its subsidiaries or any of
its or its subsidiaries' directors, officers, employees, agents or
representatives, directly or indirectly, to solicit, initiate, encourage or
facilitate, or furnish or disclose non-public information in furtherance of,
any inquiries or the making of any proposal with respect to any
recapitalization, merger, consolidation or other business combination involving
BWI, or acquisition of any capital stock (other than upon exercise of BWI
Options which are outstanding as of the date hereof) or a material amount of
the assets of BWI and its subsidiaries, taken as a whole, in a single
transaction or a series of related transactions, or any acquisition by BWI of
any material assets or capital stock of any other person (other than
acquisitions of capital stock or assets of any other person that are not,
individually or in the aggregate, material to BWI and its subsidiaries, taken
as a whole), or any combination of the foregoing (a "Competing Transaction"),
or negotiate, explore or otherwise engage in discussions with any person (other
than Cardinal, Subcorp or their respective directors, officers, employees,
agents and representatives) with respect to any Competing Transaction or enter
into any agreement, arrangement or understanding requiring it to abandon,
terminate or fail to consummate the Merger or any other transactions
contemplated by this Agreement; provided that, at any time prior to the
approval of the Merger by the BWI Shareholders, BWI may furnish information to,
and negotiate or otherwise engage in discussions with, any party who delivers a
written proposal for a Competing Transaction which was not solicited or
encouraged after the date of this Agreement if and so long as the Board of
Directors of BWI determines in good faith by resolution duly adopted after
consultation with its outside counsel (who may be its regularly engaged outside
counsel) that the failure to take such action would reasonably be expected to
constitute a breach of its fiduciary duties under Applicable Law and determines
that such a proposal is, after consulting with a nationally recognized
investment banking firm, more favorable to BWI's Shareholders from a financial
point of view than the transactions contemplated by this Agreement (including
any adjustment to the terms and conditions proposed by Cardinal in response to
such Competing Transaction) (a "Superior Proposal"). BWI will immediately cease
all existing activities, discussions and negotiations with any parties
conducted heretofore with respect to any proposal for a Competing Transaction
and request the return of all confidential information regarding BWI provided
to any such parties prior to the date hereof pursuant to the terms of any
confidentiality agreements or otherwise. In the event that prior to the
approval of the Merger by the BWI Shareholders the Board of Directors of BWI
receives a Superior Proposal that was not solicited or encouraged after the
date of this Agreement and the Board of Directors of BWI determines in good
faith by resolution duly adopted after consultation with its outside counsel
(who may be its regularly engaged outside counsel) that the failure to take
such action would reasonably be expected to constitute a breach of its
fiduciary duties under Applicable Law, the Board of Directors of BWI may
(subject to this and the following sentences) withdraw, modify or change, in a
manner adverse to Cardinal, the BWI Board Recommendation and/or comply with
Rule 14e-2 promulgated under the Exchange Act with respect to a Competing
Transaction, provided that it gives Cardinal three business days prior written
notice of its intention to do so (provided that the foregoing shall in no way
limit or otherwise affect Cardinal's right to terminate this Agreement pursuant
to Section 7.1(d) at such time as the requirements of such subsection have been
met). Any such withdrawal, modification or change of the BWI Board
Recommendation shall not change the approval of the Board of Directors of BWI
for purposes of causing any state takeover statute or other state law to be
inapplicable to the transactions contemplated hereby, including the Merger, the
BWI Stock Option Agreement or the Support Agreements or change the obligation
of BWI to present the Merger for approval at a duly called BWI Shareholders
Meeting on the earliest practicable date determined in consultation with
Cardinal. From and after the execution of this Agreement, BWI shall promptly,
but in any event within one calendar day advise Cardinal in writing of the
receipt, directly or indirectly, of any inquiries, discussions, negotiations,
or proposals relating to a Competing Transaction (including the specific terms
thereof and the identity of the other party or parties involved) and promptly
furnish to Cardinal a copy of any such written proposal in addition to any
information provided to or by any third party relating thereto. In
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addition, BWI shall promptly, but in any event within one calendar day advise
Cardinal, in writing, if the Board of Directors of BWI shall make any
determination as to any Competing Transaction as contemplated by the proviso to
the first sentence of this Section 5.3(d).
(e) Termination Right. If, prior to the approval of the Merger by the BWI
Shareholders, the Board of Directors of BWI shall determine in good faith,
after consultation with its financial and legal advisors, that any written
proposal from a third party for a Competing Transaction received after the date
hereof that was not solicited or encouraged by BWI or any of its subsidiaries
or affiliates in violation of this Agreement is more favorable to the BWI
Shareholders from a financial point of view than the transactions contemplated
by this Agreement (including any adjustment to the terms and conditions of such
transaction proposed in writing by Cardinal in response to such Competing
Transaction) and is in the best interest of the BWI Shareholders, and the Board
of Directors of BWI has determined in good faith by resolution duly adopted
after consultation with its outside counsel (who may be its regularly engaged
outside counsel) that the failure to enter into such a Competing Transaction
would constitute a breach of its fiduciary duties under Applicable Law, BWI may
terminate this Agreement and enter into a letter of intent, agreement-in-
principle, acquisition agreement or other similar agreement (each, an
"Acquisition Agreement") with respect to such Competing Transaction, provided
that, prior to any such termination, (i) BWI has provided Cardinal written
notice that it intends to terminate this Agreement pursuant to this Section
5.3(e), identifying the Competing Transaction then determined to be more
favorable and the parties thereto and delivering a copy of the Acquisition
Agreement for such Competing Transaction in the form to be entered into, and
(ii) at least five full business days after BWI has provided the notice
referred to in clause (i) above, BWI delivers to Cardinal (A) a written notice
of termination of this Agreement pursuant to this Section 5.3(e), and (B) a
check in the amount of Cardinal's Costs (as defined in Section 7.2) as the same
may have been estimated by Cardinal in good faith prior to the date of such
delivery (subject to an adjustment payment between the parties upon Cardinal's
definitive determination of such Costs), plus the amount of the termination fee
as provided in Section 7.2, (C) a written acknowledgment from BWI that (x) the
termination of this Agreement and the entry into the Acquisition Agreement for
the Competing Transaction will be a "Purchase Event" as defined in the BWI
Stock Option Agreement and (y) the BWI Stock Option Agreement shall be honored
in accordance with its terms and (D) a written acknowledgment from each other
party to such Competing Transaction that it is aware of the substance of BWI's
acknowledgment under clause (C) above and waives any right it may have to
contest the matters thus acknowledged by BWI.
(f) Affiliates of BWI. BWI shall cause each such person who may be at the
Effective Time or was on the date hereof an "affiliate" of BWI for purposes of
Rule 145 under the Securities Act or applicable accounting releases of the
Commission with respect to pooling-of-interests accounting treatment, to
execute and deliver to Cardinal no less than 30 days prior to the date of the
BWI Shareholders Meeting, the written undertakings in the form attached as
Exhibit A to this Agreement (the "BWI Affiliate Letter"). No later than 45 days
prior to such date, BWI, after consultation with its outside counsel, shall
provide Cardinal with a letter (reasonably satisfactory to outside counsel to
Cardinal) specifying all of the persons or entities who, in BWI's opinion, may
be deemed to be "affiliates" of BWI under the preceding sentence. The foregoing
notwithstanding, Cardinal shall be entitled to place legends as specified in
the BWI Affiliate Letter on the certificates evidencing any of the Cardinal
Common Shares to be received by (i) any such "affiliate" of BWI specified in
such letter or (ii) any person Cardinal reasonably identifies (by written
notice to BWI) as being a person who may be deemed an "affiliate" for purposes
of Rule 145 under the Securities Act or applicable accounting releases of the
Commission with respect to pooling-of-interests accounting treatment, pursuant
to the terms of this Agreement, and to issue appropriate stop transfer
instructions to the transfer agent for the Cardinal Common Shares, consistent
with the terms of the BWI Affiliate Letter, regardless of whether such person
has executed the BWI Affiliate Letter and regardless of whether such person's
name appears on the letter to be delivered pursuant to the preceding sentence.
(g) Access. BWI shall permit representatives of Cardinal to have appropriate
access at all reasonable times to BWI's premises, properties, books, records,
contracts, documents, customers and suppliers. Cardinal will keep the
information obtained pursuant to this Section 5.3(g) or in connection with this
Agreement
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confidential and shall cause its directors, officers and employees and
representatives or advisors who receive any portion thereof to keep all such
information confidential, except as may otherwise be required by law. BWI will
also keep any information obtained with respect to Cardinal in connection with
this Agreement confidential and shall cause its directors, officers and
employees and representatives or advisors who receive any portion thereof to
keep all such information confidential, except as may otherwise be required by
law. No investigation conducted pursuant to this Section 5.3(g) shall affect or
be deemed to modify any representation or warranty made in this Agreement.
(h) Subsequent Financial Statements. BWI shall consult with Cardinal prior
to making publicly available its financial results for any period after the
date of this Agreement and prior to filing any BWI SEC Documents after the date
of this Agreement.
ARTICLE VI.
CONDITIONS
6.1. Conditions to the Obligations of Each Party. The obligations of BWI,
Cardinal and Subcorp to consummate the Merger shall be subject to the
satisfaction of the following conditions:
(a) This Agreement, the Merger and the transactions contemplated hereby
shall have been approved and adopted by BWI Shareholders in the manner
required by any Applicable Law.
(b) Any applicable waiting periods under the HSR Act relating to the
Merger and the transactions contemplated by this Agreement shall have
expired or been terminated and any other approvals of any Governmental
Authority shall have been obtained.
(c) No provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit or enjoin the consummation of
the Merger or the transactions contemplated by this Agreement or limiting
the ownership or operation by Cardinal, BWI or any of their respective
subsidiaries of any material portion of the businesses or assets of
Cardinal or BWI.
(d) There shall not be pending any Action (i) challenging or seeking to
restrain or prohibit the consummation of the Merger or any of the other
transactions contemplated by this Agreement, (ii) except to the extent
consistent with the obligations of BWI and Cardinal under Section 5.1(a),
seeking to prohibit or limit the ownership or operation by Cardinal, BWI or
any of their respective subsidiaries of, or to compel Cardinal, BWI or any
of their respective subsidiaries to dispose of or hold separate, any
material portion of the business or assets of Cardinal, BWI or any of their
respective subsidiaries, as a result of the Merger or any of the other
transactions contemplated by this Agreement, (iii) seeking to impose
limitations on the ability of Cardinal to acquire or hold, or exercise full
rights of ownership of, any shares of capital stock of the Surviving
Corporation, including the right to vote such capital stock on all matters
properly presented to the stockholders of the Surviving Corporation or (iv)
seeking to prohibit Cardinal or any subsidiary of Cardinal from effectively
controlling in any material respect the business or operations of Cardinal
or the subsidiaries of Cardinal.
(e) The Commission shall have declared the Registration Statement
effective under the Securities Act, and no stop order or similar
restraining order suspending the effectiveness of the Registration
Statement shall be in effect and no proceedings for such purpose shall be
pending before or threatened by the Commission or any state securities
administrator.
(f) The Cardinal Common Shares to be issued in the Merger shall have
been approved for listing on the NYSE, subject to official notice of
issuance.
(g) Cardinal shall have received a letter, in form and substance
reasonably satisfactory to Cardinal, from Arthur Andersen LLP dated the
Closing Date stating that they concur with management's conclusion that the
Merger will qualify as a transaction to be accounted for by Cardinal in
accordance with the
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pooling-of-interests method of accounting under the requirements of APB No.
16 and BWI shall have received a letter from PwC dated the Closing Date
stating that PwC concurs with the conclusion of BWI's management that no
conditions exist that would preclude BWI from being a party to a business
combination for which the pooling-of-interests method of accounting would
be available.
(h) There shall have been delivered to BWI and Cardinal an opinion of
Fried, Frank, Harris, Shriver & Jacobson , in a form reasonably acceptable
to each of BWI and Cardinal, to the effect that the transactions
contemplated by this Agreement should not result in the shares of common
stock of Priority Healthcare failing to qualify as qualified property for
purposes of Section 355(c)(2) of the Code by reason of Section 355(e) of
the Code. In rendering such opinion counsel shall be entitled to rely on
representations of Cardinal and BWI.
6.2. Conditions to Obligations of BWI. The obligations of BWI to consummate
the Merger and the transactions contemplated hereby shall be subject to the
fulfillment of the following conditions unless waived by BWI:
(a) Each of the representations and warranties of each of Cardinal and
Subcorp set forth in Article III shall be true and correct in all respects
(but without regard to any materiality qualifications or references to
Material Adverse Effect contained in any specific representation or
warranty) on the date of this Agreement and on and as of the Closing Date
as though made on and as of the Closing Date (except for representations
and warranties made as of a specified date, the accuracy of which will be
determined as of the specified date), except where any such failure of the
representations and warranties in the aggregate to be true and correct in
all respects could not reasonably be expected to have a Material Adverse
Effect on Cardinal.
(b) Each of Cardinal and Subcorp shall have performed in all material
respects each obligation and agreement and shall have complied in all
material respects with each covenant to be performed and complied with by
it hereunder at or prior to the Effective Time.
(c) Each of Cardinal and Subcorp shall have furnished BWI with a
certificate dated the Closing Date signed on behalf of it by the Chairman,
President or any Vice President to the effect that the conditions set forth
in Sections 6.2(a) and (b) have been satisfied.
(d) BWI shall have received the opinion of Baker & Daniels, dated on or
prior to the effective date of the Registration Statement, to the effect
that (i) the Merger will constitute a "reorganization" under section 368(a)
of the Code, (ii) BWI, Cardinal and Subcorp will each be a party to that
"reorganization", and (iii) no gain or loss will be recognized by the
shareholders of BWI upon the receipt of Cardinal Common Shares in exchange
for shares of BWI Common Stock pursuant to the Merger except with respect
to cash received in lieu of fractional share interests in Cardinal Common
Shares.
(e) Since the date of this Agreement, except to the extent contemplated
by Section 3.12 to the Cardinal Disclosure Schedule, there shall not have
been any change in the assets, liabilities, results of operations or
financial condition of Cardinal and its subsidiaries taken as a whole which
would constitute a Material Adverse Effect on Cardinal or any event,
occurrence or development which could reasonably be expected to have a
material adverse effect on the ability of Cardinal to consummate the
transactions contemplated hereby.
6.3. Conditions to Obligations of Cardinal and Subcorp. The obligations of
Cardinal and Subcorp to consummate the Merger and the other transactions
contemplated hereby shall be subject to the fulfillment of the following
conditions unless waived by Cardinal:
(a) Each of the representations and warranties of BWI set forth in
Article IV (other than the representations and warranties of BWI set forth
in Section 4.4) shall be true and correct in all respects (but without
regard to any materiality qualifications or references to Material Adverse
Effect contained in any specific representation or warranty) on the date of
this Agreement and on and as of the Closing Date as
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though made on and as of the Closing Date (except for representations and
warranties made as of a specified date, the accuracy of which will be
determined as of the specified date), except where any such failure of the
representations and warranties in the aggregate to be true and correct in
all respects would not reasonably be expected to have a Material Adverse
Effect on BWI. The representations and warranties of BWI set forth in
Section 4.4 shall be true and correct in all material respects on the date
of this Agreement and on and as of the Closing Date as though made on and
as of the Closing Date (except for representations and warranties made as
of a specified date, the accuracy of which will be determined as of the
specified date).
(b) BWI shall have performed in all material respects each obligation
and agreement and shall have complied in all material respects with each
covenant to be performed and complied with by it hereunder at or prior to
the Effective Time.
(c) BWI shall have furnished Cardinal with a certificate dated the
Closing Date signed on its behalf by its Chairman, President or any Vice
President to the effect that the conditions set forth in Sections 6.3(a)
and (b) have been satisfied.
(d) Since the date of this Agreement, except to the extent contemplated
by Section 4.12 to the BWI Disclosure Schedule, there shall not have been
any change in the assets, liabilities, results of operations or financial
condition of BWI and its subsidiaries taken as a whole that would
constitute a Material Adverse Effect on BWI or any event, occurrence or
development which could reasonably be expected to have a material adverse
effect on the ability of BWI to consummate the transactions contemplated
hereby.
ARTICLE VII.
TERMINATION AND AMENDMENT
7.1. Termination. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time (notwithstanding any approval
of this Agreement by BWI Shareholders):
(a) by mutual written consent of Cardinal and BWI;
(b) by either Cardinal or BWI if there shall be any law or regulation
that makes consummation of the Merger illegal or otherwise prohibited, or
if any judgment, injunction, order or decree of a court or other competent
Governmental Authority enjoining Cardinal or BWI from consummating the
Merger shall have been entered and such judgment, injunction, order or
decree shall have become final and nonappealable;
(c) by either Cardinal or BWI if the Merger shall not have been
consummated before August 30, 2001, provided, however, that the right to
terminate this Agreement under this Section 7.1(c) shall not be available
to any party whose failure or whose affiliate's failure to perform any
material covenant or obligation under this Agreement has been the cause of
or resulted in the failure of the Merger to occur on or before such date;
(d) by Cardinal if the Board of Directors of BWI shall withdraw, modify
or change the BWI Board Recommendation in a manner adverse to Cardinal, if
the Board of Directors of BWI approves or recommends any Competing
Transaction, or if the Board of Directors of BWI shall have refused to
affirm the BWI Board Recommendation within fifteen business days of any
written request from Cardinal;
(e) by Cardinal or BWI if at the BWI Shareholders Meeting (including any
adjournment or postponement thereof) the requisite vote of the BWI
Shareholders to approve the Merger and the transactions contemplated hereby
shall not have been obtained;
(f) by BWI pursuant to Section 5.3(e);
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(g) by Cardinal if BWI shall have breached in any material respect its
obligations under the BWI Stock Option Agreement;
(h) by Cardinal if at any time the representations and warranties of BWI
set forth in clause (a) of Section 4.7 shall not be true and correct and
Cardinal shall have been advised by Arthur Andersen LLP that the condition
specified in Section 6.1(g) cannot be satisfied;
(i) by BWI if at any time the representations and warranties of Cardinal
set forth in clause (a) of Section 3.6 shall not be true and correct and
Cardinal shall have been advised by Arthur Andersen LLP that the condition
specified in Section 6.1(g) cannot be satisfied;
(j) by Cardinal or BWI if there shall have been a material breach by the
other of any of its covenants or agreements contained in this Agreement and
such breach shall not have been cured within 30 days after notice thereof
shall have been received by the party alleged to be in breach;
(k) by Cardinal if BWI has breached any of its representations and
warranties in Article IV of this Agreement and as a result thereof, the
condition set forth in Section 6.3(a) could not be satisfied; or
(l) by BWI if Cardinal and Subcorp shall have breached any of their
representations and warranties in Article III of this Agreement and as a
result thereof, the condition set forth in Section 6.2(a) could not be
satisfied.
7.2. Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 7.1, this Agreement, except for the provisions of
the second sentence of Section 5.3(g) and the provisions of Sections 7.2 and
8.11, shall become void and have no effect, without any liability on the part
of any party or its directors, officers or shareholders. Notwithstanding the
foregoing, nothing in this Section 7.2 shall relieve any party to this
Agreement of liability for a material breach of any provision of this Agreement
and provided, however, that if it shall be judicially determined that
termination of this Agreement was caused by an intentional breach of this
Agreement, then, in addition to other remedies at law or equity for breach of
this Agreement, the party so found to have intentionally breached this
Agreement shall indemnify and hold harmless the other parties for their
respective out-of-pocket costs, fees and expenses of their counsel,
accountants, financial advisors and other experts and advisors as well as fees
and expenses incident to negotiation, preparation and execution of this
Agreement and related documentation and shareholders' meetings and consents
("Costs"). If this Agreement is terminated for any reason pursuant to Section
7.1 (other than a termination pursuant to Section 7.1(a) (prior to the public
announcement of a Competing Transaction), 7.1(b), 7.1(c) (other than a
termination by Cardinal pursuant to Section 7.1(c) if BWI's willful failure to
perform any material covenant or obligation under this Agreement has been the
cause of or resulted in the failure of the Merger to occur on or before August
30, 2001), 7.1(e), 7.1(h), 7.1(i), 7.1(j), 7.1(k) or 7.1(l)), then BWI will, in
the case of a termination by Cardinal, within three business days following any
such termination or, in the case of a termination by BWI, concurrently with
such termination, pay to Cardinal in cash by wire transfer in immediately
available funds to an account designated by Cardinal (i) in reimbursement for
Cardinal's expenses an amount in cash equal to the aggregate amount of
Cardinal's Costs incurred in connection with pursuing the transactions
contemplated by this Agreement, including, without limitation, legal,
accounting and investment banking fees, up to but not in excess of an amount
equal to $6,000,000 in the aggregate and (ii) a termination fee in an amount
equal to $53,000,000. If this Agreement is terminated pursuant to Section
7.1(e) and at any time prior to such termination a proposal regarding a
Competing Transaction with respect to BWI shall have been made to BWI by a
party capable of completing such a Competing Transaction, or any proposal or
expression of interest by a third party regarding a Competing Transaction shall
have been publicly disclosed, then (i) BWI will, in the case of a termination
by Cardinal, within three business days following any such termination or, in
the case of a termination by BWI, concurrently with such termination, pay to
Cardinal in cash by wire transfer in immediately available funds to an account
designated by Cardinal (A) in reimbursement for Cardinal's expenses an amount
in cash equal to the aggregate amount of Cardinal's Costs incurred in
connection with pursuing the transactions contemplated by this Agreement,
including, legal,
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accounting and investment banking fees, up to but not in excess of an amount
equal to $6,000,000 in the aggregate and (B) a termination fee in an amount
equal to $20,000,000, and (ii) if within 12 months after the date of such
termination pursuant to Section 7.1(e) BWI enters into an Acquisition Agreement
for a Business Combination (as defined below) or consummates a Business
Combination, BWI will, prior to the earlier of consummation of a Business
Combination or execution of a definitive agreement with respect thereto, pay to
Cardinal in cash by wire transfer in immediately available funds to an account
designated by Cardinal an additional termination fee in an amount equal to
$33,000,000. If this Agreement is terminated pursuant to Section 7.1(e) and no
proposal regarding a Competing Transaction with respect to BWI shall have been
made to BWI by a party capable of completing such a Competing Transaction, and
no proposal or expression of interest by a third party regarding a Competing
Transaction shall have been publicly disclosed, at any time prior to such
termination and within 6 months after the date of such termination BWI enters
into an Acquisition Agreement for a Business Combination or consummates a
Business Combination, then BWI will, prior to the earlier of consummation of a
Business Combination or execution of a definitive agreement with respect
thereto, pay to Cardinal in cash by wire transfer in immediately available
funds to an account designated by Cardinal a termination fee in an amount equal
to $20,000,000. For the purposes of this Section 7.2, "Business Combination"
means (i) a merger, consolidation, share exchange, business combination or
similar transaction involving BWI as a result of which the BWI Shareholders
prior to such transaction in the aggregate cease to own at least 70% of the
voting securities of the entity surviving or resulting from such transaction
(or the ultimate parent entity thereof), (ii) a sale, lease, exchange, transfer
or other disposition of more than 25% of the assets of BWI and its
subsidiaries, taken as a whole, in a single transaction or a series of related
transactions, or (iii) the acquisition, by a person (other than Cardinal or any
affiliate thereof) or group (as such term is defined under Section 13(d) of the
Exchange Act) of beneficial ownership (as defined in Rule 13d-3 under the
Exchange Act) of more than 25% of the BWI Common Stock whether by tender or
exchange offer or otherwise.
7.3. Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after adoption of this Agreement by BWI Shareholders, but after any
such approval, no amendment shall be made that by law requires further approval
or authorization by the BWI Shareholders without such further approval or
authorization. Notwithstanding the foregoing, this Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
7.4. Extension; Waiver. At any time prior to the Effective Time, Cardinal
(with respect to BWI) and BWI (with respect to Cardinal and Subcorp) by action
taken or authorized by their respective Boards of Directors, may, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of such party, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party.
ARTICLE VIII.
MISCELLANEOUS
8.1. Survival of Representations and Warranties. The representations and
warranties made herein by the parties hereto shall not survive the Effective
Time. This Section 8.1 shall not limit any covenant or agreement of the parties
hereto, which by its terms contemplates performance after the Effective Time or
after the termination of this Agreement.
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8.2. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (which is
confirmed) or dispatched by a nationally recognized overnight courier service
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a)if to Cardinal or Subcorp:
Cardinal Health, Inc.
7000 Cardinal Place
Dublin, Ohio 43017
Attention: Steven Alan Bennett
Executive Vice President, Chief Legal Officer and Secretary
Telecopy No.: (614) 757-6948
with a copy to
David A. Katz, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telecopy No.: (212) 403-2000
(b) if to BWI:
Bindley Western Industries, Inc.
8909 Purdue Road
Indianapolis, Indiana 46268
Attention: Michael D. McCormick
Executive Vice President, General Counsel and Secretary
Telecopy No.: (317) 704-4603
with a copy to
James A. Aschleman, Esq.
Baker & Daniels
300 North Meridian Street, Suite 2700
Indianapolis, Indiana 46204
Telecopy No.: (317) 237-1000
8.3. Interpretation. When a reference is made in this Agreement to an
Article or Section, such reference shall be to an Article or Section of this
Agreement unless otherwise indicated. The headings, the table of contents and
the index of defined terms contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include", "includes", or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation". When a reference is made in this Agreement to BWI, such
reference shall be deemed to include any and all subsidiaries of BWI,
individually and in the aggregate, except for Sections 4.1, 4.2, 4.3, 4.4, 4.5,
4.8, 4.12, 4.13, 4.16, 4.23, 4.24, 4.25, 4.27 and 4.28. For the purposes of any
provision of this Agreement, a "Material Adverse Effect" with respect to any
party shall be deemed to occur if any event, change or effect, individually or
in the aggregate with all such other events, changes or effects, has occurred
which has a material adverse effect on the business, assets (including
intangible assets), liabilities (contingent or otherwise), results of
operations or financial condition of such party and its subsidiaries taken as a
whole; provided, however, that a Material Adverse Effect shall not include:
(i) with respect to any party, any change in or effect upon the assets
(including intangible assets), liabilities (contingent or otherwise),
financial condition, or results of operations of such party or any of its
subsidiaries directly or indirectly arising out of or attributable to any
decrease in the market price of
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Cardinal Common Shares in the case of Cardinal or BWI Common Stock in the
case of BWI (but in either case not any change or effect underlying such
decrease to the extent such change or effect would otherwise constitute a
Material Adverse Effect on such party);
(ii) with respect to any party, any change in or effect upon the assets
(including intangible assets), liabilities (contingent or otherwise),
financial condition, or results of operations of such party or any of its
subsidiaries directly or indirectly arising out of or attributable to
conditions, events, or circumstances generally affecting the wholesale drug
distribution industry; and
(iii) with respect to BWI any change in or effect upon the assets
(including intangible assets), liabilities (contingent or otherwise),
financial condition, or results of operations of BWI or any of its
subsidiaries directly or indirectly arising out of or attributable to the
loss by BWI (and its subsidiaries) of any of its customers (including
business of such customers), suppliers or employees (including, without
limitation, any financial consequence of such loss of customers (including
business of such customers), suppliers or employees) due primarily to the
transactions contemplated hereby or the public announcement of this
Agreement, in each case arising after the date of this Agreement.
For purposes of this Agreement, a "subsidiary" when used with respect to any
party means any corporation or other organization, incorporated or
unincorporated, (i) of which such party or another subsidiary of such party is
a general partner (excluding partnerships, the general partnership interests of
which held by such party or any subsidiary of such party do not have 50% or
more of the voting interests in such partnership) or (ii) 50% or more of the
securities or other interests of which having by their terms ordinary voting
power to elect at least 50% of the Board of Directors or others performing
similar functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such party or one or more of its
subsidiaries (or if there are no such voting securities or interests, 50% or
more of the equity interests of which is directly or indirectly owned or
controlled by such party or one or more of its subsidiaries). For purposes of
this Agreement, "knowledge" of a party shall mean the knowledge after
reasonable inquiry of all executive officers, and in addition, with respect to
BWI, the persons set forth in Section 8.3 to the BWI Disclosure Schedule.
8.4. Counterparts. This Agreement may be executed in counterparts, which
together shall constitute one and the same Agreement. The parties may execute
more than one copy of the Agreement, each of which shall constitute an
original.
8.5. Entire Agreement. This Agreement (including the documents and the
instruments referred to herein) and the BWI Stock Option Agreement constitute
the entire agreement among the parties and supersede all prior agreements and
understandings, agreements or representations by or among the parties, written
and oral, with respect to the subject matter hereof and thereof.
8.6. Third-Party Beneficiaries. Except for the agreement set forth in
Section 5.2(c), nothing in this Agreement, express or implied, is intended or
shall be construed to create any third-party beneficiaries.
8.7. Governing Law. Except to the extent that the laws of the jurisdiction
of organization of any party hereto, or any other jurisdiction, are mandatorily
applicable to the Merger or to matters arising under or in connection with this
Agreement, this Agreement shall be governed by the laws of the State of Ohio.
All actions and proceedings arising out of or relating to this Agreement shall
be heard and determined in any state or federal court sitting in Ohio.
8.8. Consent to Jurisdiction; Venue.
(a) Each of the parties hereto irrevocably submits to the exclusive
jurisdiction of the state courts of Ohio and to the jurisdiction of the United
States District Court for the Southern District of Ohio, for the purpose of any
action or proceeding arising out of or relating to this Agreement and each of
the parties hereto irrevocably agrees that all claims in respect to such action
or proceeding may be heard and determined exclusively in any state or federal
court sitting in Ohio. Each of the parties hereto agrees that a final judgment
in any action or
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proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.
(b) Each of the parties hereto irrevocably consents to the service of any
summons and complaint and any other process in any other action or proceeding
relating to the Merger, on behalf of itself or its property, by the personal
delivery of copies of such process to such party. Nothing in this Section 8.8
shall affect the right of any party hereto to serve legal process in any other
manner permitted by law.
8.9. Specific Performance. The transactions contemplated by this Agreement
are unique. Accordingly, each of the parties acknowledges and agrees that, in
addition to all other remedies to which it may be entitled, each of the parties
hereto is entitled to a decree of specific performance, provided such party is
not in material default hereunder.
8.10. Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the
other parties. Subject to the preceding sentence, this Agreement shall be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
8.11. Expenses. Subject to the provisions of Section 7.2 and the BWI Stock
Option Agreement, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby and thereby shall be paid by
the party incurring such expenses.
IN WITNESS WHEREOF, Cardinal, Subcorp and Bindley Western have signed this
Agreement as of the date first written above.
CARDINAL HEALTH, INC.
By: /s/ Robert D. Walter
-----------------------------------
Name: Robert D. Walter
Title: Chairman and
Chief Executive Officer
BRICK MERGER CORP.
By: /s/ Robert D. Walter
-----------------------------------
Name: Robert D. Walter
Title: Chairman
BINDLEY WESTERN INDUSTRIES, INC.
By: /s/ William E. Bindley
-----------------------------------
Name: William E. Bindley
Title: Chairman, President and
Chief Executive Officer
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ANNEX B
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT ("Option Agreement") dated December 2, 2000, between
Cardinal Health, Inc., an Ohio corporation ("Cardinal"), and Bindley Western
Industries, Inc., an Indiana corporation ("BWI").
WITNESSETH:
WHEREAS, the Board of Directors of Cardinal and the Board of Directors of
BWI have approved an Agreement and Plan of Merger dated the date hereof by and
among Cardinal, BWI and a wholly owned subsidiary of Cardinal (the "Merger
Agreement") providing for the merger of the wholly owned subsidiary of
Cardinal with and into BWI;
WHEREAS, as a condition to Cardinal's entering into the Merger Agreement,
Cardinal has required that BWI agree, and BWI has agreed, to grant to Cardinal
the option set forth herein to purchase authorized but unissued shares of BWI
Common Stock;
NOW, THEREFORE, in consideration of the premises herein contained, the
parties agree as follows:
1. Definitions.
Capitalized terms used but not defined herein shall have the same meanings
as in the Merger Agreement.
2. Grant of Option.
Subject to the terms and conditions set forth herein, BWI hereby grants to
Cardinal an option (the "Option") to purchase up to 7,071,185 authorized and
unissued shares of BWI Common Stock (the "Option Shares") at a price per share
equal to the lower of (x) $42.54 or (y) the Exchange Ratio multiplied by the
Closing Price (as defined below) of Cardinal Common Shares on the date of
exercise (the "Purchase Price") payable in cash as provided in Section 4. As
used herein, the term "Closing Price" as of any date with respect to any
Cardinal Common Shares means the average of the closing prices (or, if such
securities should not trade on any trading day, the average of the bid and
asked prices therefor on such day) of such Cardinal Common Shares as reported
on the NYSE Composite Tape during the five consecutive trading days ending on
(and including) the trading day immediately prior to such date (or, if such
Cardinal Common Shares are not traded on the NYSE, on such other exchange or
quotation system on which such Cardinal Common Shares are then traded).
3. Exercise of Option.
(a) Cardinal may exercise the Option, in whole or in part, at any time or
from time to time if a Purchase Event (as defined below) shall have occurred
and the Merger Agreement shall have been terminated; provided, however, that
to the extent the Option shall not have been exercised, it shall terminate and
be of no further force and effect upon the earliest to occur of:
(i) the Effective Time of the Merger,
(ii) 5:00 p.m. New York City time, on the date which is 125 days
following the occurrence of a Purchase Event (other than a Purchase Event
pursuant to Section 3(b)(v) related to Section 7.1(e) of the Merger
Agreement in which case Section 3(a)(iii)(z) shall govern) and
(iii) (x) the termination of the Merger Agreement in accordance with its
terms pursuant to Section 7.1(a) (prior to the public announcement of a
Competing Transaction), Section 7.1(b), Section 7.1(c) (other
than a termination by Cardinal pursuant to Section 7.1(c) if BWI's willful
failure to perform any material covenant or obligation under the Merger
Agreement has been the cause of or resulted in the failure of the Merger to
occur on or before August 30, 2001), Section 7.1(h), Section 7.1(i),
Section 7.1(j), Section 7.1(k) or Section 7.1(l) thereof, in each case
prior to the occurrence of a Purchase Event, (y) the termination of the
Merger Agreement pursuant to Section 7.1(e) if no proposal regarding a
Competing Transaction with respect to BWI shall have been made to BWI by a
party capable of completing such a Competing Transaction, and no proposal
or expression of interest by a third party regarding a Competing
Transaction shall have been publicly disclosed, at any time prior to such
termination, or (z) 5:00 p.m. New York City time, on the date which is 12
months following the termination of the Merger Agreement pursuant to
Section 7.1(e) thereof if a proposal regarding a Competing Transaction with
respect to BWI shall have been made to BWI by a party capable of completing
such a Competing Transaction, or a proposal or expression of interest by a
third party regarding a Competing Transaction shall have been publicly
disclosed, at any time prior to such termination;
and provided, further, that if the Option cannot be exercised before its date
of termination as a result of any injunction, order or similar restraint issued
by a court of competent jurisdiction, the Option shall expire on the 10th
business day after such injunction, order or restraint shall have been
dissolved or when such injunction, order or restraint shall have become
permanent and no longer subject to appeal, as the case may be but in no event
later than 12 months after the occurrence of a Purchase Event.
(b) As used herein, a "Purchase Event" shall mean any of the following
events:
(i) any person (other than Cardinal or any of its subsidiaries) shall
have commenced (as such term is defined in Rule 14d-2 under the Exchange
Act), or shall have filed a registration statement under the Securities
Act, with respect to, a tender offer or exchange offer to purchase any
shares of BWI Common Stock such that, upon consummation of such offer, such
person would own or control 25% or more of the then outstanding BWI Common
Stock;
(ii) BWI or any of its subsidiaries shall or shall have entered into,
authorized, recommended, proposed or publicly announced, an intention to
enter into, authorize, recommend, or propose, an agreement, arrangement or
understanding with any person (other than Cardinal or any of its
subsidiaries) to, or any person (other than Cardinal or any of its
subsidiaries) shall have publicly announced an intention to, (A) consummate
a Competing Transaction, (B) purchase, lease or otherwise acquire 25% or
more of the assets of BWI or any of its subsidiaries or (C) purchase or
otherwise acquire (including by way of merger, consolidation, tender or
exchange offer or similar transaction) Beneficial Ownership (as defined
below) of securities representing 25% or more of the voting power of BWI or
any of its subsidiaries;
(iii) any person (other than Cardinal or any subsidiary of Cardinal)
shall have acquired Beneficial Ownership or the right to acquire Beneficial
Ownership of 25% or more of the voting power of BWI; or
(iv) the Board of Directors of BWI shall have withdrawn, modified or
changed the BWI Board Recommendation in an adverse manner to Cardinal, or
if the Board of Directors of BWI shall have refused to affirm the BWI Board
Recommendation within fifteen business days after receipt of any written
request from Cardinal; or
(v) the Merger Agreement shall have been terminated in accordance with
its terms pursuant to Section 7.1(c) (if the termination is by Cardinal
because of a willful failure by BWI or an affiliate of BWI to perform any
material covenant or obligation under the Merger Agreement which failure
has been the cause of or resulted in the failure of the Merger to occur on
or before August 30, 2001), Section 7.1(d), Section 7.1(e) (if at any time
prior to such termination a proposal regarding a Competing Transaction with
respect to BWI shall have been made to BWI by a party capable of completing
such a Competing Transaction or any proposal or expression of interest by a
third party regarding a Competing Transaction shall have been publicly
disclosed), Section 7.1(f) or Section 7.1(g) thereof.
B-2
(c) As used herein, the terms "Beneficial Ownership", "Beneficial Owner" and
"Beneficially Own" shall have the meanings ascribed to them in Rule 13d-3 under
the Exchange Act. As used herein, "person" shall have the meaning specified in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) In the event Cardinal wishes to exercise the Option, it shall deliver to
BWI a written notice (the date of receipt of which being herein referred to as
the "Notice Date") specifying (i) the total number of shares it intends to
purchase pursuant to such exercise and (ii) a place and date not earlier than
two business days nor later than 60 calendar days from the Notice Date for the
closing of such purchase (the "Option Closing Date"); provided that, if the
closing of the purchase and sale pursuant to the Option (the "Option Closing")
cannot be consummated by reason of any applicable judgment, decree, order, law
or regulation, the period of time that otherwise would run pursuant to this
sentence shall run instead from the date on which such restriction on
consummation has expired or been terminated; and, provided further that,
without limiting the foregoing, if prior notification to or approval of any
regulatory authority is required in connection with such purchase, Cardinal
and, if applicable, BWI shall promptly file the required notice or application
for approval and shall expeditiously process the same (and BWI shall cooperate
with Cardinal in the filing of any such notice or application and the obtaining
of any such approval), and the period of time that otherwise would run pursuant
to this sentence shall run instead from the date on which, as the case may be,
(i) any required notification period has expired or been terminated or (ii)
such approval has been obtained, and in either event, any requisite waiting
period has passed.
(e) In the event (i) Cardinal receives official notice that an approval of
any regulatory authority required for the purchase of Option Shares would not
be issued or granted or (ii) an Option Closing Date shall not have occurred
within 12 months after the related Notice Date due to the failure to obtain any
such required approval, Cardinal shall be entitled to exercise its right as set
forth in Section 7 or, to the extent legally permitted, to exercise the Option
in connection with the resale of BWI Common Stock or other securities pursuant
to a registration statement as provided in Section 9. The provisions of this
Section 3 and Section 6 shall apply with appropriate adjustments to any such
exercise.
4. Payment and Delivery of Certificates.
(a) At the Option Closing referred to in Section 3, on the Option Closing
Date, Cardinal shall pay to BWI the aggregate Purchase Price for the shares of
BWI Common Stock purchased pursuant to the exercise of the Option in
immediately available funds by wire transfer to a bank account designated not
later than one business day prior to the Option Closing Date by BWI.
(b) At such Option Closing, simultaneously with the delivery of cash as
provided in Section 4(a), BWI shall deliver to Cardinal a certificate or
certificates representing the number of shares of BWI Common Stock purchased by
Cardinal, registered in the name of Cardinal or a nominee designated in writing
by Cardinal, which shares shall be fully paid and non-assessable and free and
clear of all liens, claims, charges and encumbrances of any kind whatsoever.
(c) If at the time of issuance of any BWI Common Stock pursuant to any
exercise of the Option, BWI shall have issued any share purchase rights or
similar securities to holders of BWI Common Stock, then each such share of BWI
Common Stock shall also represent rights with terms substantially the same as
and at least as favorable to Cardinal as those issued to other holders of BWI
Common Stock.
(d) Certificates for BWI Common Stock delivered at any closing hereunder
shall be endorsed with a restrictive legend which shall read substantially as
follows:
"The shares represented by this certificate are subject to certain
provisions of an agreement between the registered holder hereof and Bindley
Western Industries, Inc., a copy of which is on file at the principal
office of Bindley Western Industries, Inc. and to resale restrictions
arising under the Securities Act of 1933, as amended, and any applicable
state securities laws. A copy of such agreement will be provided to the
holder hereof without charge upon receipt by Bindley Western Industries,
Inc. of a written request therefor."
B-3
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend in connection with a transfer
or sale if (i) BWI has been furnished with an opinion of counsel, reasonably
satisfactory to counsel for BWI, that such transfer or sale will not violate
the Securities Act or applicable securities laws of any state or (ii) such
transfer or sale shall have been registered and qualified pursuant to the
Securities Act and any applicable state securities laws.
5. Authorization, etc.
(a) BWI hereby represents and warrants to Cardinal that:
(i) BWI has full corporate authority to execute and deliver this Option
Agreement and to consummate the transactions contemplated hereby;
(ii) such execution, delivery and consummation have been authorized by
the Board of Directors of BWI, and no other corporate proceedings are
necessary therefor;
(iii) this Option Agreement has been duly and validly executed and
delivered by BWI and represents a valid and legally binding obligation of
BWI, enforceable against BWI in accordance with its terms; and
(iv) BWI has taken all necessary corporate action to authorize and
reserve and permit it to issue and, at all times from the date hereof
through the date of the exercise in full or the expiration or termination
of the Option, shall have reserved for issuance upon exercise of the
Option, 7,071,185 shares of BWI Common Stock (subject to adjustment as
provided herein), all of which, upon issuance in accordance with the terms
of this Option Agreement, shall be duly authorized, validly issued, fully
paid and nonassessable, and shall be delivered free and clear of all
claims, liens, encumbrances and security interests and not subject to any
preemptive rights of any stockholder of BWI.
(b) BWI hereby agrees that, prior to the termination of the Option pursuant
to Section 3(a), BWI shall not take, or allow to be taken, any action that
could result in the representations and warranties set forth in Section 5(a)
becoming false or inaccurate.
(c) Cardinal hereby represents and warrants to BWI that:
(i) Cardinal has full corporate authority to execute and deliver this
Option Agreement and to consummate the transactions contemplated hereby;
(ii) such execution, delivery and consummation have been authorized by
all requisite corporate action by Cardinal, and no other corporate
proceedings are necessary therefor;
(iii) this Option Agreement has been duly and validly executed and
delivered by Cardinal and represents a valid and legally binding obligation
of Cardinal, enforceable against Cardinal in accordance with its terms; and
(iv) any BWI Common Stock acquired by Cardinal upon exercise of the
Option will be acquired for its own account and not be taken with a view to
the public distribution thereof and will not be transferred or otherwise
disposed of except in compliance with the Securities Act.
(d) Cardinal hereby agrees that, prior to the termination of the Option
pursuant to Section 3(a), Cardinal shall not take, or allow to be taken, any
action that could result in the representations and warranties set forth in
Section 5(c) becoming false or inaccurate.
6. Adjustment upon Changes in Capitalization.
In the event of any change in BWI Common Stock by reason of stock dividends,
split-ups, recapitalizations or the like, the type and number of shares subject
to the Option, and the purchase price per share, as the case may be, shall be
adjusted appropriately. In the event that any additional shares of BWI
B-4
Common Stock are issued after the date of this Option Agreement (other than
pursuant to an event described in the preceding sentence or pursuant to this
Option Agreement or options granted under employee benefit plans), the number
of shares of BWI Common Stock subject to the Option shall be adjusted so that,
after such issuance, it equals at least 19.9% of the number of shares of BWI
Common Stock then issued and outstanding (without considering any shares
subject to or issued pursuant to the Option).
7. Repurchase.
(a) At the request of Cardinal, at any time from and after the occurrence of
a Purchase Event and ending 125 days immediately thereafter (or 12 months
immediately thereafter in the case of a Purchase Event pursuant to Section
3(b)(v) related to Section 7.1(e) of the Merger Agreement) (the "Cardinal
Repurchase Period"), BWI (or any successor entity thereof) shall repurchase the
Option from Cardinal together with all (but not less than all) shares of BWI
Common Stock purchased by Cardinal pursuant thereto with respect to which
Cardinal then has Beneficial Ownership, at a price (when calculated on a per
share basis, the "Per Share Repurchase Price") equal to the sum of:
(i) The difference between (A) the "Market/Tender Offer Price" for
shares of BWI Common Stock (defined as the higher of (x) the highest price
per share at which a tender or exchange offer has been made for shares of
BWI Common Stock or (y) the highest closing price per share of BWI Common
Stock as reported by the NYSE Composite Tape for any day within that
portion of the Cardinal Repurchase Period which precedes the date Cardinal
gives notice of the required repurchase under this Section 7) and (B) the
Purchase Price (subject to adjustment as provided in Section 6), multiplied
by the number of shares of BWI Common Stock with respect to which the
Option has not been exercised, but only if such Market/Tender Offer Price
is greater than such exercise price;
(ii) The exercise price paid by Cardinal for any shares of BWI Common
Stock acquired pursuant to the Option;
(iii) The difference between the Market/Tender Offer Price and the
exercise price paid by Cardinal for any shares of BWI Common Stock
purchased pursuant to the exercise of the Option, multiplied by the number
of shares so purchased, but only if such Market/Tender Offer Price is
greater than such exercise price;
(iv) Cardinal's out-of-pocket expenses incurred in connection with
pursuing the transactions contemplated by the Merger Agreement or this
Agreement, including, without limitation, legal, accounting and investment
banking fees, less any amounts previously paid by BWI to Cardinal solely in
reimbursement for Costs pursuant to Section 7.2 of the Merger Agreement;
provided, however that the amount paid pursuant to this Section 7(a)(iv)
and any amounts previously paid by BWI to Cardinal solely in reimbursement
for Costs pursuant to Section 7.2 of the Merger Agreement shall not exceed
$6,000,000 in the aggregate.
(b) In the event Cardinal exercises its rights under this Section 7, BWI
shall, within 10 business days thereafter, pay the required amount to Cardinal
by wire transfer of immediately available funds to an account designated by
Cardinal and Cardinal shall surrender to BWI the Option and the certificates
evidencing the shares of BWI Common Stock purchased thereunder with respect to
which Cardinal then has Beneficial Ownership.
(c) In determining the Market/Tender Offer Price, the value of any
consideration other than cash shall be determined by an independent nationally
recognized investment banking firm selected by Cardinal.
(d) Notwithstanding any provision to the contrary in this Option Agreement,
Cardinal may not exercise its rights pursuant to this Section 7 in a manner
that would result in Total Profit (as defined below) of more than the Profit
Cap (as defined below); provided, however, that nothing in this sentence shall
limit Cardinal's ability to exercise the Option in accordance with its terms.
As used herein, the term "Total Profit" means the
B-5
aggregate (before income taxes) of the following: (i) all amounts received by
Cardinal or concurrently being paid to Cardinal pursuant to Section 7 for the
repurchase of all or part of the unexercised portion of the Option, (ii) (A)
the amounts received by Cardinal or concurrently being paid to Cardinal
pursuant to the sale of Option Shares (or any other securities into which such
Option Shares are converted or exchanged), including sales made to BWI or
pursuant to a registration statement under the Securities Act or any exemption
therefrom, less (B) Cardinal's purchase price for such Option Shares and (iii)
all amounts received by Cardinal from BWI or concurrently being paid to
Cardinal pursuant to Section 7.2 of the Merger Agreement (other than for
payments with respect to Costs). As used herein, the term "Profit Cap" shall
mean $80,000,000.
8. Repurchase at Option of BWI.
Except to the extent that Cardinal shall have previously exercised its
rights under Section 7, at the request of BWI during the six-month period
commencing on the last day of the Cardinal Repurchase Period, BWI may
repurchase from Cardinal, and Cardinal shall sell to BWI, all (but not less
than all) of the BWI Common Stock acquired by Cardinal pursuant to the Option
and with respect to which Cardinal has Beneficial Ownership at the time of such
repurchase at a price per share equal to the greater of (i) 110% of the
Market/Tender Offer Price per share (calculated in the manner set forth in
Section 7(a)(i) but utilizing the period beginning on the occurrence of a
Purchase Event and ending on the date BWI exercises its repurchase right
pursuant to this Section 8), (ii) the Per Share Repurchase Price or (iii) the
sum of (A) the aggregate Purchase Price of the shares so repurchased, plus (B)
interest on the aggregate Purchase Price paid for the shares so repurchased
from the date of purchase by Cardinal to the date of repurchase at the highest
rate of interest announced by Chase Manhattan Bank, New York as its prime or
base lending or reference rate during such period, less any dividends received
on the shares so repurchased. Any repurchase under this Section 8 shall be
consummated in accordance with Section 7(b).
9. Registration Rights.
At any time after an Option Closing, BWI shall, if requested by any holder
or Beneficial Owner of shares of BWI Common Stock issued upon exercise of the
Option (each a "Holder"), as expeditiously as possible file a registration
statement on a form for general use under the Securities Act if necessary in
order to permit the sale or other disposition of the shares of BWI Common Stock
that have been acquired upon exercise of the Option in accordance with the
intended method of sale or other disposition requested by any such Holder. Each
such Holder shall provide all information reasonably requested by BWI for
inclusion in any registration statement to be filed hereunder. BWI shall use
its best efforts to cause such registration statement first to become effective
and then to remain effective for such period not in excess of 180 days from the
day such registration statement first becomes effective as may be reasonably
necessary to effect such sales or other dispositions. The registration effected
under this Section 9 shall be at BWI's expense except for underwriting
commissions and the fees and disbursements of such Holders' counsel
attributable to the registration of such BWI Common Stock. In no event shall
BWI be required to effect more than two registrations hereunder. The filing of
any registration statement required hereunder may be delayed for such period of
time (not to exceed 90 days) as may reasonably be required to facilitate any
public distribution by BWI of BWI Common Stock, if a special audit of BWI would
otherwise be required in connection therewith during which BWI is in possession
of material information concerning it, its business affairs or a material
transaction in each case the public disclosure of which could have a material
adverse effect on BWI or significantly disrupt such material transaction. If
requested by any such Holder in connection with such registration, BWI shall
become a party to any underwriting agreement relating to the sale of such
shares on terms and including obligations and indemnities which are customary
for parties similarly situated. Upon receiving any request for registration
under this Section 9 from any Holder, BWI agrees to send a copy thereof to any
other person known to BWI to be entitled to registration rights under this
Section 9, in each case by promptly mailing the same, postage prepaid, to the
address of record of the persons entitled to receive such copies.
10. Profit Limitation.
(a) Notwithstanding any other provision of this Agreement, in no event shall
Cardinal's Total Profit exceed the Profit Cap and, if it otherwise would exceed
such amount, Cardinal, at its sole election, shall either
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(i) deliver to BWI for cancellation Option Shares previously purchased by
Cardinal, (ii) pay cash or other consideration to BWI, (iii) reduce the amount
of the fee payable to Cardinal under Section 7.2 of the Merger Agreement (other
than for payments with respect to Costs) or (iv) undertake any combination
thereof, so that Cardinal's Total Profit shall not exceed the Profit Cap after
taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, the Option may
not be exercised for a number of Option Shares that would, as of the Notice
Date, result in a Notional Total Profit (as defined below) of more than the
Profit Cap, and, if exercise of the Option otherwise would exceed the Profit
Cap, Cardinal, at its sole discretion, may increase the Exercise Price for that
number of Option Shares set forth in the Exercise Notice so that the Notional
Total Profit shall not exceed the Profit Cap; provided, however, that nothing
in this sentence shall restrict any exercise of the Option otherwise permitted
by this Section 10(b) on any subsequent date at the Purchase Price set forth in
Section 2 if such exercise would not then be restricted under this Section
10(b). As used herein, the term "Notional Total Profit" means, with respect to
any number of Option Shares as to which Cardinal may propose to exercise the
Option, the Total Profit determined as of the Notice Date assuming that the
Option were exercised on such date for such number of Option Shares and
assuming such Option Shares, together with all other Option Shares held by
Cardinal and its Affiliates as of such date, were sold for cash at the closing
market price for BWI Common Stock as of the close of business on the preceding
trading day (less customary brokerage commissions) and including all amounts
theretofore received or concurrently being paid to Cardinal pursuant to clauses
(i), (ii) and (iii) of the definition of Total Profit.
11. Listing.
If BWI Common Stock or any other securities to be acquired upon exercise of
the Option are then listed on the NYSE or any other national securities
exchange, BWI, upon the request of Cardinal, will promptly file an application
to list the shares of BWI Common Stock or other securities to be acquired upon
exercise of the Option on the NYSE or such other exchange and will use its best
efforts to obtain approval of such listings as soon as practicable.
12. Severability.
Any term, provision, covenant or restriction contained in this Option
Agreement held by a court or other Governmental Authority of competent
jurisdiction to be invalid, void or unenforceable, shall be ineffective to the
extent of such invalidity, voidness or unenforceability, but neither the
remaining terms, provisions, covenants or restrictions contained in this Option
Agreement nor the validity or enforceability thereof in any other jurisdiction
shall be affected or impaired thereby. Any term, provision, covenant or
restriction contained in this Option Agreement that is so found to be so broad
as to be unenforceable shall be interpreted to be as broad as is enforceable.
13. Miscellaneous.
(a) Expenses. Except as otherwise provided in this Agreement, each of the
parties hereto shall pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
(b) Entire Agreement. This Option Agreement and the Merger Agreement
(including the documents and the instruments referred to therein) constitute
the entire agreement among the parties and supersede all prior agreements and
understandings, agreements or representations by or among the parties, written
and oral, with respect to the subject matter hereof and thereof.
(c) Successors; No Third Party Beneficiaries. The terms and conditions of
this Option Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns. Nothing
in this Option Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and
assigns, any rights, remedies, obligations, or liabilities under or by reason
of this Option Agreement, except as expressly provided herein.
B-7
(d) Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered in
accordance with Section 8.2 of the Merger Agreement (which is incorporated
herein by reference).
(e) Counterparts. This Option Agreement may be executed in counterparts, and
each such counterpart shall be deemed to be an original instrument, but both
such counterparts together shall constitute but one agreement.
(f) Further Assurances. In the event of any exercise of the Option by
Cardinal, BWI and Cardinal shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(g) Specific Performance. The parties hereto agree that if for any reason
Cardinal or BWI shall have failed to perform its obligations under this Option
Agreement, then either party hereto seeking to enforce this Option Agreement
against such non-performing party shall be entitled to specific performance and
injunctive and other equitable relief, and the parties hereto further agree to
waive any requirement for the securing or posting of any bond in connection
with the obtaining of any such injunctive or other equitable relief. This
provision is without prejudice to any other rights that either party hereto may
have against the other party hereto for any failure to perform its obligations
under this Option Agreement.
(h) Governing Law. Except to the extent that the laws of the jurisdiction of
organization of any party hereto, or any other jurisdiction, are mandatorily
applicable to matters arising under or in connection with this Option
Agreement, this Option Agreement shall be governed by the laws of the State of
Indiana. All actions and proceedings arising out of or relating to this Option
Agreement shall be heard and determined in any state or federal court sitting
in Indiana.
(i) Consent to Jurisdiction; Venue.
(i) Each of the parties hereto irrevocably submits to the exclusive
jurisdiction of the state courts of Indiana and to the jurisdiction of the
United States District Court for the Southern District of Indiana, for the
purpose of any action or proceeding arising out of or relating to this
Option Agreement and each of the parties hereto irrevocably agrees that all
claims in respect to such action or proceeding may be heard and determined
exclusively in any state or federal court sitting in Indiana. Each of the
parties hereto agrees that a final judgment in any action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on
the judgment or in any other manner provided by law.
(ii) Each of the parties hereto irrevocably consents to the service of
any summons and complaint and any other process in any other action or
proceeding relating hereto, on behalf of itself or its property, by the
personal delivery of copies of such process to such party. Nothing in this
Section 13 shall affect the right of any party hereto to serve legal
process in any other manner permitted by law.
(j) Regulatory Approvals; Section 16(b). If, in connection with the exercise
of the Option under Section 3, prior notification to or approval of any
Governmental Authority is required, then the required notice or application for
approval shall be promptly filed and/or expeditiously processed by BWI and
periods of time that otherwise would run pursuant hereto (if any) shall run
instead from the date on which any such required notification period has
expired or been terminated or such approval has been obtained, and in either
event, any requisite waiting period shall have passed. Periods of time that
otherwise would run pursuant to Sections 3, 7 or 8 shall also be extended to
the extent necessary to avoid liability under Section 16(b) of the Exchange
Act.
(k) Waiver and Amendment. Any provision of this Option Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision. This Option Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
B-8
IN WITNESS WHEREOF, each of the parties hereto has executed this Option
Agreement as of the date first written above.
CARDINAL HEALTH, INC.
By: /s/ Robert D. Walter
-----------------------------------
Name: Robert D. Walter
Title: Chairman and
Chief Executive Officer
BINDLEY WESTERN INDUSTRIES, INC.
By: /s/ William E. Bindley
-----------------------------------
Name: William E. Bindley
Title: Chairman, President and
Chief Executive Officer
B-9
ANNEX C
[LETTERHEAD OF SALOMON SMITH BARNEY INC.]
December 2, 2000
The Board of Directors
Bindley Western Industries, Inc.
8909 Purdue Road
Indianapolis, Indiana 46268
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the common stock of Bindley Western Industries, Inc.
("Bindley Western") of the Exchange Ratio (defined below) provided for in the
Agreement and Plan of Merger, dated as of December 2, 2000 (the "Merger
Agreement"), among Cardinal Health, Inc. ("Cardinal Health"), Brick Merger
Corp., a wholly owned subsidiary of Cardinal Health ("Merger Sub"), and
Bindley Western. The Merger Agreement provides for, among other things, the
merger of Merger Sub with and into Bindley Western (the "Merger") pursuant to
which each outstanding share of the common stock, par value $0.01 per share,
of Bindley Western ("Bindley Western Common Stock") will be converted into the
right to receive 0.4275 (the "Exchange Ratio") of a common share, without par
value, of Cardinal Health ("Cardinal Health Common Shares").
In arriving at our opinion, we reviewed the Merger Agreement and certain
related documents and held discussions with certain senior officers, directors
and other representatives and advisors of Bindley Western and certain senior
officers and other representatives and advisors of Cardinal Health concerning
the businesses, operations and prospects of Bindley Western and Cardinal
Health. We examined and discussed with the managements of Bindley Western and
Cardinal Health certain publicly available business and financial information
relating to Bindley Western and Cardinal Health, including publicly available
financial forecasts. We also discussed with the managements of Bindley Western
and Cardinal Health certain other information relating to Bindley Western and
Cardinal Health, including information relating to certain strategic
implications and operational benefits anticipated to result from the Merger.
We reviewed the financial terms of the Merger as set forth in the Merger
Agreement in relation to, among other things: current and historical market
prices and trading volumes of Bindley Western Common Stock and Cardinal Health
Common Shares; the financial condition and historical and projected earnings
and other operating data of Bindley Western and Cardinal Health; and the
capitalization and financial condition of Bindley Western and Cardinal Health.
We considered, to the extent publicly available, the financial terms of
certain other similar transactions recently effected which we considered
relevant in evaluating the Merger and analyzed certain financial, stock market
and other publicly available information relating to the businesses of other
companies whose operations we considered relevant in evaluating those of
Bindley Western and Cardinal Health. We also evaluated the potential pro forma
financial impact of the Merger on Cardinal Health. In addition to the
foregoing, we conducted such other analyses and examinations and considered
such other financial, economic and market criteria as we deemed appropriate in
arriving at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed
by or discussed with us. With respect to publicly available financial
forecasts and other information and data provided to or otherwise reviewed by
or discussed with us, we have been advised by the managements of Bindley
Western and Cardinal Health that such forecasts and other information and data
represent reasonable estimates and judgments as to the future financial
performance of Bindley Western and Cardinal Health. We have assumed, with your
consent, that the Merger will be treated as a tax-free reorganization for
federal income tax purposes and accounted for as a pooling of interests under
generally accepted accounting principles. Our opinion, as set forth herein,
relates to the relative values of Bindley Western and Cardinal Health. We are
not expressing
The Board of Directors
Bindley Western Industries, Inc.
December 2, 2000
Page 2
any opinion as to what the value of Cardinal Health Common Shares actually
will be when issued in the Merger or the price at which Cardinal Health Common
Shares will trade subsequent to the Merger. We have not made or been provided
with an independent evaluation or appraisal of the assets or liabilities
(contingent or otherwise) of Bindley Western or Cardinal Health nor have we
made any physical inspection of the properties or assets of Bindley Western or
Cardinal Health. In connection with our engagement, we were not requested to,
and we did not, solicit third party indications of interest in the possible
acquisition of all or a part of Bindley Western. We express no view as to, and
our opinion does not address, the relative merits of the Merger as compared to
any alternative business strategies that might exist for Bindley Western or
the effect of any other transaction in which Bindley Western might engage. Our
opinion is necessarily based upon information available to us, and financial,
stock market and other conditions and circumstances existing and disclosed to
us, as of the date hereof.
Salomon Smith Barney Inc. has acted as exclusive financial advisor to Bindley
Western in connection with the proposed Merger and will receive a fee for such
services, a significant portion of which is contingent upon the consummation
of the Merger. We also will receive a fee upon delivery of this opinion. We
and our affiliates in the past have provided services to Bindley Western and
Cardinal Health unrelated to the proposed Merger, for which services we have
received compensation. In the ordinary course of our business, we and our
affiliates may actively trade or hold the securities of Bindley Western and
Cardinal Health for our own account or for the account of our customers and,
accordingly, may at any time hold a long or short position in such securities.
In addition, we and our affiliates (including Citigroup Inc. and its
affiliates) may maintain relationships with Bindley Western, Cardinal Health
and their respective affiliates.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of Bindley Western in its evaluation of
the proposed Merger, and our opinion is not intended to be and does not
constitute a recommendation to any shareholder as to how such shareholder
should vote on the proposed Merger or as to any other matters relating to the
Merger.
Based upon and subject to the foregoing, our experience as investment bankers,
our work as described above and other factors we deemed relevant, we are of
the opinion that, as of the date hereof, the Exchange Ratio is fair, from a
financial point of view, to the holders of Bindley Western Common Stock.
Very truly yours,
/s/ Salomon Smith Barney Inc.
_______________________________
SALOMON SMITH BARNEY INC.
C-2
VOTE BY TELEPHONE
Have your proxy card available when you CALL THE TOLL-FREE NUMBER 1-800-250-
9081 using a Touch-Tone phone. You will be prompted to enter your control
number and then you can follow the simple prompts that will be presented to you
to record your vote.
VOTE BY INTERNET
Have your proxy card available when you ACCESS THE WEBSITE
HTTP://WWW.VOTEFAST.COM. You will be prompted to enter your control number and
then you can follow the simple prompts that will be presented to you to record
your vote.
VOTE BY MAIL
Please mark, sign and date your proxy card and return it in the postage paid
envelope provided or return it to: Stock Transfer Dept. (NC), National City
Bank, P.O. Box 92301, Cleveland, Ohio 44193-0900.
- --------------------------------------------------------------------------------
VOTE BY TELEPHONE VOTE BY INTERNET VOTE BY MAIL
Call TOLL-FREE using a Access the WEBSITE and Return your proxy
Touch-Tone phone Cast your vote in the POSTAGE-PAID
1-800-250-9081 HTTP://WWW.VOTEFAST.COM envelope provided
Vote 24 hours a day, 7 days a week!
Your telephone and internet vote must be received by 11:59 p.m. eastern
standard time on
February 13, 2001 to be counted in the final tabulation.
IF YOU VOTE BY TELEPHONE OR INTERNET, PLEASE DO NOT SEND YOUR PROXY BY MAIL.
YOUR CONTROL NUMBER IS:
(down arrow) DETACH PROXY CARD HERE IF YOU ARE NOT VOTING BY INTERNET OR
TELEPHONE (down arrow)
BINDLEY WESTERN INDUSTRIES, INC.
8909 PURDUE ROAD
INDIANAPOLIS, INDIANA 46268
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE SPECIAL
MEETING OF SHAREHOLDERS OF BINDLEY WESTERN INDUSTRIES, INC. TO BE HELD ON
FEBRUARY 14, 2001. IF NO INSTRUCTIONS TO THE CONTRARY ARE GIVEN, THIS PROXY
WILL BE VOTED "FOR" PROPOSALS 1 AND 2.
The undersigned hereby appoints WILLIAM E. BINDLEY, MICHAEL D. McCORMICK and
THOMAS J. SALENTINE, jointly and severally, proxies, with the power of
substitution and with the authority in each to act in the absence of the
others, to vote all shares the undersigned is entitled to vote at the Special
Meeting of Shareholders to be held at the Embassy Suites, 3912 Vincennes Road,
in Indianapolis, Indiana, on February 14, 2001 at 9:00 a.m., Indianapolis time,
and at any postponements or adjournments thereof, on all matters set forth on
the reverse side hereof.
The undersigned hereby acknowledges receipt of the notice of the special
meeting and the proxy statement/prospectus dated January 11, 2001.
Dated: _______________________, 2001
_____________________________________
(signature)
_____________________________________
(signature if held jointly)
Please sign exactly as your name
appears herein. If shares are held
jointly, all holders should sign.
When signing as attorney, executor,
administrator, trustee or guardian,
please give your full title. If a
corporation, please sign in full
corporate name by president or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person, indicating, where proper,
official position or representative
capacity.
(CONTINUED ON REVERSE SIDE)
PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE.
(down arrow) DETACH PROXY CARD HERE IF YOU ARE NOT VOTING BY INTERNET OR
TELEPHONE (down arrow)
PLEASE MARK YOUR VOTES AS INDICATED IN THIS EXAMPLE:[X]
THE BINDLEY WESTERN INDUSTRIES, INC. BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
PROPOSALS 1 AND 2.
1. Proposal to approve the Agreement and Plan of Merger, dated as of December
2, 2000, by and among Cardinal Health, Inc., Brick Merger Corp., a wholly
owned subsidiary of Cardinal, and Bindley Western, pursuant to which, among
other things, Brick Merger Corp. will merge with and into Bindley Western
upon the terms and subject to the conditions set forth in the merger
agreement, as more fully described in the proxy statement/prospectus that
accompanies this proxy card. If the merger agreement is approved and the
merger and the related transactions contemplated by the merger agreement
are consummated, each Bindley Western common share will be converted into
the right to receive 0.4275 of a Cardinal common share.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
2. Proposal to adjourn the special meeting, if necessary, to permit further
solicitation of proxies in the event there are not sufficient votes at the
time of the special meeting to approve Proposal 1.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
3. By returning this proxy card you are conferring upon management the
authority to vote upon such other business as may properly come before the
Bindley Western special meeting or any postponements or adjournments
thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY
YOU ABOVE. YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICE BY MARKING THE APPROPRIATE
BOX (SEE ABOVE), BUT YOU NEED NOT MARK ANY BOX IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. HOWEVER, THE PROXY
HOLDERS CANNOT VOTE YOUR SHARES UNLESS YOU SIGN, DATE AND RETURN THIS CARD OR
VOTE BY TELEPHONE OR INTERNET AS DESCRIBED ON THE REVERSE SIDE.
(Continued and to be signed on the reverse side)