AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 6, 2002
REGISTRATION NO. 333-100564
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
---------------------
FORM S-4
POST-EFFECTIVE AMENDMENT NO. 1
TO
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
CARDINAL HEALTH, INC.
(Exact name of registrant as specified in its charter)
OHIO 5122 31-0958666
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
PAUL S. WILLIAMS, ESQ.
EXECUTIVE VICE PRESIDENT, CHIEF LEGAL OFFICER AND
SECRETARY
7000 CARDINAL PLACE CARDINAL HEALTH, INC.
DUBLIN, OHIO 43017 7000 CARDINAL PLACE, DUBLIN, OHIO 43017
(614) 757-5000 (614) 757-5000
(Address and telephone number of Registrant's (Name, address and telephone number
principal executive offices) of agent for service)
COPIES TO:
PAUL T. SCHNELL, ESQ.
DAVID A. KATZ, ESQ. RICHARD J. GROSSMAN, ESQ.
WACHTELL, LIPTON, ROSEN & KATZ SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
51 WEST 52ND STREET FOUR TIMES SQUARE
NEW YORK, NY 10019-6150 NEW YORK, NEW YORK 10036
(212) 403-1000 (212) 735-3000
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Post-Effective Amendment to the
Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the
"Securities Act"), check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
---------------------
CALCULATION OF REGISTRATION FEE
-----------------------------------------------------------------------------------------------------------------------
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PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE(1) OFFERING PRICE(1) FEE(2)
-----------------------------------------------------------------------------------------------------------------------
Common Shares, without par value... 13,762,764 $54.8723 $755,195,030.25 $69,477.94
-----------------------------------------------------------------------------------------------------------------------
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(1) Pursuant to Rule 457(f)(1) and 457(c) promulgated under the Securities Act
and estimated solely for purposes of calculating the registration fee, the
proposed maximum aggregate offering price is $755,195,030.25, which equals
the average of the high and low prices of the common stock, par value $0.05
per share ("Syncor Common Stock"), of Syncor International Corporation
("Syncor"), of $25.79, as reported on The Nasdaq National Market on December
2, 2002, multiplied by the total number of shares of Syncor Common Stock
(including shares issuable pursuant to the exercise of options to purchase
shares of Syncor Common Stock) to be cancelled in the merger (the "Merger")
of a subsidiary of Cardinal Health, Inc. ("Cardinal Health") with and into
Syncor. The proposed maximum offering price per common share, without par
value, of Cardinal Health ("Cardinal Health Common Share") is equal to the
proposed maximum aggregate offering price determined in the manner described
in the preceding sentence divided by the maximum number of Cardinal Health
Common Shares that could be issued in the Merger based on an exchange ratio
of 0.47.
(2) A fee of $60,080.19 was previously paid pursuant to Rule 14a-6(i)
promulgated under the Securities Exchange Act of 1934, as amended, in
connection with the filing of the preliminary proxy statement/prospectus on
July 18, 2002. An additional fee of $38,359.12 was paid on October 16, 2002
in connection with the filing of the registration statement.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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--------------------------------------------------------------------------------
SUBJECT TO COMPLETION -- DECEMBER 6, 2002
[SYNCOR LOGO]
December [ ], 2002
Dear Stockholder:
We are writing to advise you of the following important developments
relating to the special meeting of stockholders of Syncor International
Corporation to consider the proposed merger agreement with Cardinal Health:
- The special meeting, which was originally scheduled to be held on
November 19, 2002 and was later postponed until December 6, 2002, has
been adjourned to and will reconvene on, Monday, December 30, 2002. The
adjourned meeting will now be held at 2:00 p.m., California time, at the
Warner Center Hilton Hotel, 6360 Canoga Avenue in Woodland Hills,
California.
- Syncor and Cardinal Health have entered into an amendment to their merger
agreement which, among other things, reduces the portion of a Cardinal
Health common share that you will receive for each Syncor share that you
own from 0.52 of a Cardinal Health common share to 0.47 of a Cardinal
Health common share. You will continue to receive cash in lieu of
fractional Cardinal Health common shares.
- The reduced exchange ratio in the merger was the result of negotiations
between Cardinal Health and Syncor which began following the announcement
by Syncor of the findings of an investigation by a special committee of
three outside directors of Syncor into the propriety of certain payments
made by international subsidiaries of Syncor to customers in several
foreign jurisdictions.
- Syncor has reached agreements with both the U.S. Department of Justice
and the staff of the U.S. Securities and Exchange Commission resolving
claims that these governmental authorities have against Syncor in
connection with the matters that are the subject of the special
committee's investigation. These settlements are described in more detail
in the accompanying document.
- The Syncor board of directors has unanimously approved (with Monty Fu,
who has been on paid leave pending completion of the investigation, not
participating) the revised terms of the merger agreement and the merger
and continues to believe that the merger agreement and the transactions
contemplated by the merger agreement are advisable and fair to and in the
best interests of the Syncor stockholders. ACCORDINGLY, THE SYNCOR BOARD
OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF THE AMENDED
MERGER AGREEMENT AT THE RECONVENED SPECIAL MEETING. YOUR VOTE IS VERY
IMPORTANT.
- If you have already voted and wish to change your vote as a result of
these developments or otherwise, you may do so by using the enclosed new
proxy card or by voting via the internet or by telephone. If you have
already voted and do not wish to change your vote, your original vote
will be counted.
ii
The accompanying document contains important supplemental information
concerning these recent developments and related matters since the mailing to
you on October 17, 2002 of the Notice of Special Meeting and Proxy Statement.
Cordially,
[/s/ Bernard Puckett] [/s/ Robert G. Funari]
BERNARD PUCKETT ROBERT G. FUNARI
Lead Director of the Board 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 DOCUMENT IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. THIS DOCUMENT 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 document is dated December [], 2002 and is first being mailed to
stockholders on or about December [], 2002. You should read this document
carefully and together with the Notice of Special Meeting and Proxy Statement
mailed to you on or about October 17, 2002 and the Supplemental Notice of
Postponement of Special Meeting of Stockholders and related attachments mailed
to you on November 25, 2002.
iii
REFERENCES TO ADDITIONAL INFORMATION
This document incorporates important business and financial information
about Cardinal Health and Syncor from documents that are not included with this
document. This information is available to you, without charge, upon your
written or oral request. You can obtain documents incorporated by reference in
this document (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. Syncor International Corporation
7000 Cardinal Place 6464 Canoga Avenue
Dublin, Ohio 43017 Woodland Hills, California 91367-2407
(614) 757-5000 (818) 737-4000
Attention: Vice President -- Investor Attention: Director -- Investor Relations
Relations
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY DECEMBER 23, 2002
IN ORDER TO RECEIVE THEM BEFORE THE SPECIAL MEETING. SEE "WHERE YOU CAN FIND
MORE INFORMATION" ON PAGE 47.
IMPORTANT NOTE
WE HAVE NOT AUTHORIZED ANY PERSON TO PROVIDE YOU WITH ANY INFORMATION OR TO
MAKE ANY REPRESENTATION ABOUT THE PROPOSED 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 UNITED STATES 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 THESE ACTIVITIES, THEN THE OFFER PRESENTED AND PROXY SOLICITATION MADE
BY THIS DOCUMENT DO 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, OR, IN THE CASE OF DOCUMENTS INCORPORATED
BY REFERENCE, THE DATES OF THOSE DOCUMENTS. SEE "FORWARD-LOOKING STATEMENTS" ON
PAGE 20 OF THIS DOCUMENT.
WITH RESPECT TO THE INFORMATION CONTAINED IN THIS DOCUMENT, CARDINAL HEALTH
HAS SUPPLIED THE INFORMATION CONCERNING CARDINAL HEALTH AND MUDHEN MERGER CORP.,
AND SYNCOR HAS SUPPLIED THE INFORMATION CONCERNING SYNCOR.
IN ADDITION, IF YOU HAVE ANY QUESTIONS ABOUT THE MERGER OR VOTING
PROCEDURES, YOU MAY CONTACT:
[MACKENZIE PARTNERS, INC. LOGO]
105 MADISON AVENUE
NEW YORK, NEW YORK 10016
(212) 929-5500 (CALL COLLECT)
E-MAIL: proxy@mackenziepartners.com
or
CALL TOLL-FREE (800) 322-2885
iv
SYNCOR INTERNATIONAL CORPORATION
---------------------
SUPPLEMENTAL NOTICE
OF SPECIAL MEETING OF STOCKHOLDERS
To the Stockholders of Syncor:
The special meeting of the stockholders of Syncor International
Corporation, a Delaware corporation, was postponed from Tuesday, November 19,
2002, to Friday, December 6, 2002. On December 6, 2002, the meeting was convened
and then adjourned. The adjourned special meeting will be reconvened at 2:00
p.m., California time, on December 30, 2002 at the Warner Center Hilton Hotel,
6360 Canoga Avenue, in Woodland Hills, California. The purposes of the special
meeting are to:
1. Vote on a proposal to approve the Agreement and Plan of Merger,
dated as of June 14, 2002, among Cardinal Health, Inc., Mudhen Merger
Corp., a wholly owned subsidiary of Cardinal Health, and Syncor, as amended
on November 22, 2002 and December 3, 2002. Pursuant to the amended merger
agreement, Mudhen Merger Corp. will merge with and into Syncor upon the
terms and subject to the conditions set forth in the amended merger
agreement, as more fully described in this document and in the Notice of
Special Meeting and related materials mailed to you on or about October 17,
2002, which we refer to as the original proxy statement/prospectus, and the
Supplemental Notice of Postponement of Special Meeting and Proxy Statement
mailed to you on or about November 25, 2002, which we refer to as the first
proxy statement supplement. If the amended merger agreement is approved and
the merger and the related transactions contemplated by the amended merger
agreement are consummated, each Syncor share will become the right to
receive 0.47 of a Cardinal Health 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 amended merger agreement
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 October 9, 2002,
as the record date for determining stockholders entitled to notice of and to
vote at the special meeting. The amended merger agreement proposal requires the
affirmative vote of the holders of a majority of the outstanding Syncor shares
entitled to vote on the merger agreement proposal. Stockholders owning
approximately 6.8% of the outstanding Syncor shares as of the record date
already have agreed in writing to vote in favor of the approval of the merger
agreement proposal.
On October 17, 2002, Syncor mailed the original proxy statement/prospectus
to stockholders of record for a special meeting of stockholders which was
originally scheduled to be held on November 19, 2002, for the purpose of, among
other things, voting on the proposed merger agreement with Cardinal Health. On
November 6, 2002, Syncor announced that a committee of three outside directors
of Syncor, working together with outside counsel and an independent forensic
accounting firm, was investigating the propriety of certain payments made by
international subsidiaries of Syncor to customers in several foreign countries
and that the special meeting scheduled for November 19, 2002 was being postponed
until December 6, 2002. On November 25, 2002, Syncor mailed the first proxy
statement supplement more fully describing the status of those events as of
November 25, 2002. In light of the developments and in order to provide
additional time to complete the investigation of its overseas operations and to
make appropriate disclosure to stockholders, Syncor postponed the special
meeting until 10:00 a.m., California time, on Friday, December 6, 2002. On
December 4, 2002, Syncor and Cardinal Health announced the terms of the amended
merger agreement. On December 6, 2002, Syncor announced that the December 6,
2002 meeting, when adjourned, would be reconvened at 2:00 p.m., California time,
on December 30, 2002.
We describe the special meeting, the amended merger agreement and related
matters in the original proxy statement/prospectus and in this document. The
accompanying document describes several recent
v
developments since the mailing to you of the original proxy statement/prospectus
and the first proxy statement supplement. This document modifies certain
information in the original proxy statement/prospectus and the first proxy
statement supplement and should be read together with those documents.
You are cordially invited to attend the special meeting. Enclosed is a new
proxy card. The proxy cards that accompanied the original proxy
statement/prospectus and the first proxy statement supplement will remain valid.
Therefore, any of these proxy cards can be used to submit your vote. If you
already returned either proxy card that you received previously, your vote will
be recorded unless you submit a subsequent proxy changing your vote or you
revoke your proxy. If you have not voted or wish to change your vote, please
mark, date and execute the enclosed proxy card and mail it promptly in the
enclosed postage-paid envelope.
Whether or not you plan on attending the special meeting, please vote by
signing, dating and returning the proxy card included with this document, with
the original proxy statement/prospectus or the first proxy statement supplement
or by 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.
IF YOU HAVE ALREADY SUBMITTED A PROXY CARD, YOU DO NOT NEED TO SUBMIT THE
ACCOMPANYING CARD UNLESS YOU WISH TO CHANGE YOUR VOTE. HOWEVER, IF YOU DO NOT
RETURN OR SUBMIT A PROXY CARD, VOTE BY SUBMITTING A PROXY THROUGH THE INTERNET
OR BY TELEPHONE, OR VOTE IN PERSON AT THE SPECIAL MEETING, THE EFFECT WILL BE
THE SAME AS A VOTE AGAINST THE MERGER AGREEMENT PROPOSAL.
By Order of the Board of Directors
[/s/ EDWIN A. BURGOS]
EDWIN A. BURGOS
Secretary
December [ ], 2002
Woodland Hills, California
vi
TABLE OF CONTENTS
PAGE
----
REFERENCES TO ADDITIONAL INFORMATION........................ iv
SUPPLEMENTAL NOTICE OF SPECIAL MEETING OF STOCKHOLDERS...... v
QUESTIONS AND ANSWERS ABOUT THE CARDINAL HEALTH/SYNCOR
MERGER TRANSACTION........................................ 1
SUMMARY..................................................... 3
SELECTED HISTORICAL FINANCIAL INFORMATION................... 6
COMPARATIVE PER COMMON SHARE INFORMATION.................... 11
COMPARATIVE MARKET PRICE AND DIVIDEND DATA.................. 13
RISK FACTORS................................................ 15
FORWARD-LOOKING STATEMENTS.................................. 20
RECENT DEVELOPMENTS......................................... 22
THE MERGER.................................................. 27
Update to Background of the Merger........................ 27
Reasons for Amending the Merger Agreement; Recommendation
of the Syncor Board of Directors....................... 29
Interests of Syncor's Directors and Officers in the
Merger................................................. 34
Opinion of Syncor's Financial Advisor..................... 34
THE MERGER AGREEMENT AMENDMENTS............................. 41
Exchange Ratio............................................ 41
Additional Condition to the Obligations of Cardinal Health
and Mudhen Merger Corp. to Complete Merger............. 41
Material Adverse Effect................................... 41
Termination............................................... 42
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES............... 44
OTHER ACTION TO BE TAKEN AT THE RECONVENED SPECIAL
MEETING................................................... 45
Syncor Adjournment Proposal............................... 45
LEGAL MATTERS............................................... 46
EXPERTS..................................................... 46
WHERE YOU CAN FIND MORE INFORMATION......................... 47
APPENDIX A -- AMENDMENT No. 1 TO AGREEMENT AND PLAN OF
MERGER
APPENDIX B -- AMENDMENT No. 2 TO AGREEMENT AND PLAN OF
MERGER
APPENDIX C -- CONFORMED AGREEMENT AND PLAN OF MERGER
APPENDIX D -- OPINION OF SALOMON SMITH BARNEY INC.
vii
INTRODUCTION
Except as described in this document, the information we provided in the
original proxy statement/prospectus and the first proxy statement supplement
previously mailed to you continues to apply. To the extent information in this
document differs from, updates or conflicts with information contained in the
original proxy statement/prospectus or the first proxy statement supplement, the
information in this document is more current. If you need another copy of the
original proxy statement/prospectus and/or the first proxy statement supplement,
please call our proxy solicitor, MacKenzie Partners, Inc. at (800) 322-2885
(toll-free) or (212) 929-5500 (call collect). The original proxy
statement/prospectus and the first proxy statement supplement may also be found
on the internet at www.syncor.com.
QUESTIONS AND ANSWERS ABOUT THE CARDINAL HEALTH/SYNCOR
MERGER TRANSACTION
We intend the following questions and answers to provide brief answers to
frequently asked questions concerning the proposed merger. These questions and
answers do not, and are not intended to, address all the questions that may be
important to Syncor stockholders. You should read the summary and the remainder
of this document and the original proxy statement/prospectus, the first proxy
statement supplement and all of the annexes to all documents carefully.
Q: WHAT DO I HAVE TO DO IN CONNECTION WITH THE MERGER?
A: We cannot complete the merger, unless, among other things, Syncor
stockholders vote to approve the amended merger agreement. Syncor is holding
a special meeting at which you are entitled to vote on the amended merger
agreement.
You may choose one of the following ways to cast your vote:
- by completing and returning the accompanying proxy card 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.
If the merger agreement is approved by Syncor stockholders and the other
conditions to the proposed merger are satisfied, you will receive additional
information with respect to your shares of Syncor common stock.
Q: HOW DO I VOTE MY SYNCOR SHARES OR CHANGE MY VOTE IF MY SYNCOR SHARES ARE HELD
IN "STREET NAME"?
A: You should contact your broker. Your broker can give you directions on how to
vote your Syncor shares or change your vote. Your broker cannot vote your
Syncor shares unless he or she receives appropriate instructions from you.
Q: I VOTED PREVIOUSLY. MAY I CHANGE MY VOTE?
A: Yes. If you were the record owner of your Syncor shares on the October 9,
2002 record date and you want to change your vote, you may do so at any time
before the special meeting by sending to the Secretary of Syncor 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
Syncor shares yourself at the special meeting.
Q: I VOTED PREVIOUSLY. DO I HAVE TO VOTE AGAIN IF I DO NOT WANT TO CHANGE MY
ORIGINAL VOTE?
A: No. If you have already voted and do not wish to change your vote, there is
no need to vote again. You should, however, carefully read all of the
information in this document before you make any determination as to whether
or not you wish to change your vote.
Q: WHEN DO YOU EXPECT TO COMPLETE THE PROPOSED MERGER?
A: We expect to complete the proposed merger as quickly as possible once all the
conditions to the merger, including obtaining the approval of Syncor
stockholders, are fulfilled. Fulfilling some of these conditions is not
entirely within
1
our control. We currently expect to complete the proposed merger in either
late December 2002 or January 2003.
Q: IF I HAVE MORE QUESTIONS ABOUT THE PROPOSED MERGER, WHERE CAN I FIND ANSWERS?
A: In addition to reading this document, its annexes and the documents we have
incorporated in it by reference, you can find more information about the
proposed merger in the original proxy statement/prospectus and the first
proxy statement supplement, each of which should be read together with this
document as well as Cardinal Health's and Syncor's public filings with the
U.S. Securities and Exchange Commission, which we refer to as the SEC, the
New York Stock Exchange and The Nasdaq National Market. 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 PARTNERS, INC. LOGO]
105 Madison Avenue
New York, New York 10016
(212) 929-5500 (Call Collect)
or
CALL TOLL-FREE (800) 322-2885
or
E-mail: proxy@mackenziepartners.com
2
SUMMARY
This brief summary, together with the summary contained in the original
proxy statement/prospectus, highlights what we believe is the most important
information about the merger transaction. You should carefully read this
document, the original proxy statement/prospectus, the first proxy statement
supplement and the information incorporated by reference in those documents for
a complete understanding of the transactions and our companies' businesses. We
have provided a page reference for each item in this summary so that you can
easily find additional information about that item.
RECENT DEVELOPMENTS (PAGE 22)
We bring the following recent developments to your attention:
- As a result of negotiations between Cardinal Health and Syncor, which
began following the announcement by Syncor of the findings of an
investigation by a special committee of Syncor's board of directors into
the propriety of certain payments made by international subsidiaries of
Syncor to customers in several foreign jurisdictions, Cardinal Health and
Syncor entered into an amendment to the merger agreement, which, among
other things, reduces the portion of a Cardinal Health common share you
will receive for each Syncor share in the merger from 0.52 to 0.47.
- Syncor has reached agreements with both the U.S. Department of Justice,
which we refer to as the DOJ, and the staff of the SEC, resolving claims
that these governmental authorities have against Syncor in connection
with the matters that are the subject of the investigation of the special
committee of Syncor's board of directors.
For a more complete discussion of these and other recent developments which
have occurred relating to Syncor and the proposed merger with Cardinal Health,
please see page 22.
RECORD DATE; VOTE REQUIRED (PAGES 17 AND 18)
You can vote at the special meeting if you owned Syncor shares at the close
of business on the record date of October 9, 2002. On the record date, there
were approximately 26,103,945 Syncor shares outstanding and entitled to vote.
You can cast one vote for each Syncor share you then owned. In order to approve
the merger agreement, the holders of a majority of all outstanding Syncor shares
entitled to vote with respect to the merger agreement must vote in favor of the
merger agreement.
Each of the officers and directors of Syncor, owning in the aggregate
approximately 8.5% of the Syncor shares entitled to vote, are expected to vote
in favor of the merger, which includes the 6.8% that have agreed to vote in
favor of the merger agreement. Cardinal Health's directors and executive
officers and their affiliates do not hold any Syncor shares.
OUR REASONS FOR THE MERGER (PAGE 29 OF THIS DOCUMENT AND PAGE 24 OF THE ORIGINAL
PROXY STATEMENT/PROSPECTUS)
To understand the reasons why the boards of directors for both companies
recommended the merger, including the reduction in the exchange ratio from 0.52
to 0.47, the merger, see the factors discussed on page 29 of this document and
page 24 of the original proxy statement/prospectus.
OPINION OF SYNCOR'S FINANCIAL ADVISOR (PAGE 34)
In connection with the revised terms of the merger, the Syncor board of
directors received a written opinion from Salomon Smith Barney Inc., Syncor's
financial advisor, as to the fairness, from a financial point of view, of the
revised exchange ratio provided for in the amended merger agreement.
We have included the full text of Salomon Smith Barney's written opinion
dated December 3, 2002 as Appendix D to this document. We encourage you to read
this opinion carefully in its entirety for a description of the assumptions
made, procedures followed, matters considered and limitations on the review
undertaken. Salomon Smith Barney's opinion is addressed to the Syncor board of
directors and does not constitute a recommendation to any stockholder with
respect to any matters relating to the proposed merger.
3
APPRAISAL RIGHTS (PAGE 37 OF THE ORIGINAL PROXY STATEMENT/PROSPECTUS)
Under Delaware law, Syncor stockholders are not entitled to any appraisal
or dissenters' rights in connection with the merger.
MERGER CONSIDERATION; CONVERSION OF SHARES (PAGE 11)
When we complete the proposed merger, your Syncor shares will be exchanged
for Cardinal Health common shares. Each Syncor share will become the right to
receive 0.47 of a Cardinal Health common share with cash being paid in place of
any fractional shares. Based on the closing per share sale price of Cardinal
Health common shares as of December 5, 2002, the value of the Cardinal Health
common shares to be received by all of the Syncor stockholders in connection
with the merger is approximately $806 million.
For example, a holder of 110 shares of Syncor common stock will receive 51
Cardinal Health common shares, plus a cash payment with respect to 0.7 of a
Cardinal Health common share.
Since the number of Cardinal Health common shares that you will receive in
the merger is determined by a fixed exchange ratio, the value of what you will
receive in the merger will fluctuate.
SYNCOR STOCK OPTIONS (PAGE 41 OF THIS DOCUMENT AND PAGE 39 OF THE ORIGINAL PROXY
STATEMENT/PROSPECTUS)
The stock options owned by Syncor employees will be exchanged for stock
options of Cardinal Health, subject to adjustments in exercise price and the
number of shares to reflect the exchange ratio of the merger of 0.47. Options
awarded to Syncor employees before June 14, 2002 will become exercisable
immediately upon approval of the merger by Syncor stockholders. Subject to
limited exceptions, all other options are subject to the same timing
restrictions contained in the original grant.
MANAGEMENT AND OPERATIONS AFTER THE MERGER (PAGE 62 OF THE ORIGINAL PROXY
STATEMENT/PROSPECTUS)
After the merger, the Cardinal Health board of directors will continue to
manage the business of Cardinal Health, which then will include the business of
Syncor as a wholly owned subsidiary. After completion of the merger, Syncor will
be part of the Pharmaceutical Technologies and Services division of Cardinal
Health.
CONDITIONS TO COMPLETION OF THE MERGER (PAGE 41)
The completion of the merger requires Cardinal Health and Syncor to satisfy
a number of conditions including:
- each of the representations and warranties of the two companies in the
merger agreement being true and correct;
- approval of the merger agreement by the holders of a majority of the
outstanding Syncor shares;
- absence of any governmental or judicial body enjoining the merger;
- an opinion of counsel to the effect that the merger will constitute a
reorganization and no gain or loss will be recognized by Syncor
stockholders except with respect to cash received in lieu of a fractional
Cardinal Health common share;
- the absence of any event that is likely to have a material adverse
effect, exclusive of certain matters, including those relating to the
investigation of Syncor's international operations; and
- the entry of a guilty plea by Syncor Taiwan, Inc. in accordance with the
agreement reached by Syncor with the DOJ relating to the matters that are
the subject of the investigation of the special committee of Syncor's
board of directors.
The conditions, other than Syncor stockholder approval, may be waived at the
election of the relevant company.
TERMINATION OF THE MERGER AGREEMENT (PAGE 42)
Under certain circumstances, one of the companies may be able to terminate
the merger agreement without completing the merger, even if Syncor stockholders
have approved the merger agreement. The most important examples follow:
- it becomes illegal to complete the merger;
- the merger is not completed by the earlier of 23 business days after the
SEC declares this document effective or March 21, 2003;
4
- one of the companies breaches an important provision of the merger
agreement; and
- the Syncor board of directors changes its recommendation supporting the
merger or does not reaffirm its support of the merger within 20 business
days after being asked by Cardinal Health to do so.
SUPPORT/VOTING AGREEMENTS (PAGE 55 OF THE ORIGINAL PROXY STATEMENT/PROSPECTUS)
In connection with the merger, Cardinal Health has entered into
support/voting agreements with Monty Fu, Chairman of the Board of Syncor, who
has been on paid leave of absence, and Robert G. Funari, President, Chief
Executive Officer and a director of Syncor. As of the record date, these
directors of Syncor beneficially owned approximately 3,008,210 million Syncor
shares representing approximately 11% of the outstanding Syncor shares. Of this
amount, 41% were unexercised Syncor options. Under the support/voting
agreements, each of these directors has agreed to vote all of his Syncor shares
in favor of the merger agreement, but the directors are not required to exercise
their Syncor options.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES (PAGE 44)
Counsel has opined that the merger will be a reorganization for U.S.
federal income tax purposes, if completed in the manner expected, meaning that
Syncor stockholders will not recognize gain or loss for U.S. federal income tax
purposes in the merger, except for gain or loss recognized because of cash
received instead of fractional Cardinal Health common shares and possibly with
respect to Syncor shares contributed to the capital of Syncor under the Fu
letter agreement.
5
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 Syncor as of and for each of the five years ended December 31, 2001 and
as of and for the nine months ended September 30, 2002 and 2001, and of Cardinal
Health as of and for each of the five years ended June 30, 2002 and as of and
for the three months ended September 30, 2002 and 2001. The historical statement
of operations of Syncor for the nine months ended September 30, 2002 and 2001,
and the historical balance sheet data as of September 30, 2002 are derived from
the unaudited financial statements incorporated by reference in this document.
The historical balance sheet data of Syncor as of September 30, 2001, is derived
from unaudited financial statements which, in accordance with SEC rules, we have
not incorporated by reference in this document. The income statement of Cardinal
Health for the three months ended September 30, 2002 and 2001, and the balance
sheet data as of September 30, 2002, are derived from the unaudited financial
statements incorporated by reference in this document. The balance sheet data of
Cardinal Health as of September 30, 2001, are derived from unaudited financial
statements which, in accordance with SEC rules, we have not incorporated by
reference in this document.
We derived the historical statement of operations data, as restated for
discontinued operations, for Syncor for the years ended December 31, 2001, 2000
and 1999, and the historical balance sheet data, as restated for discontinued
operations, as of December 31, 2001 and 2000, from audited consolidated
financial statements, which we have incorporated by reference in this document.
We derived the historical statement of operations data, as restated for
discontinued operations, for Syncor for the years ended December 31, 1998 and
1997, and the historical balance sheet data, as restated for discontinued
operations, as of December 31, 1999, 1998 and 1997, from audited consolidated
financial statements, which, in accordance with SEC rules, we have not
incorporated by reference in this document.
We derived the income statement data for Cardinal Health for the years
ended June 30, 2002, 2001 and 2000, and the balance sheet data as of June 30,
2002 and 2001, from audited consolidated financial statements, which we have
incorporated by reference in this document. We derived the income statement data
for Cardinal Health for the years ended June 30, 1999 and 1998, and the balance
sheet data as of June 30, 2000, 1999 and 1998, from audited consolidated
financial statements, which, in accordance with SEC rules, we have not
incorporated by reference in this document.
6
The historical financial data, as restated for discontinued operations,
that appear below are only a summary, and you should read them in conjunction
with the historical financial statements and related notes of Syncor. The
following data has been restated to allow for comparability due to the
announcement on June 14, 2002 of the discontinuation of certain operations,
including our U.S. medical imaging business operated by Comprehensive Medical
Imaging, Inc., which we refer to as CMI (previously a separate segment for
reporting purposes), certain overseas locations and our brachytherapy seeds
manufacturing operations. The financial data presented are consistent with the
Form 10-K/A-1 for the year ended December 31, 2001 and the Form 10-Q for the
period ended September 30, 2002, filed with the SEC by Syncor on October 11,
2002 and November 19, 2002, respectively. Syncor's historical financial
statements are included in documents filed with the SEC. See "Where You Can Find
More Information" on page 47.
SYNCOR INTERNATIONAL CORPORATION
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
AT OR FOR THE
NINE MONTHS
ENDED
AT OR FOR THE FISCAL YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------- ----------------
1997 1998 1999(2) 2000(2) 2001(2) 2001 2002(2)
------ ------ ------- ------- ------- ------ -------
EARNINGS DATA:
Total revenue from continuing
operations........................... $379.9 $410.5 $457.2 $517.6 $598.1 $434.3 $555.1
Net earnings (loss):
-- Continuing operations............. $ 10.4 $ 13.9 $ 18.2 $ 28.0 $ 34.5 $ 26.7 $ 22.5
-- Discontinued operations, net of
taxes.............................. 0.7 -- 1.0 1.5 3.4 2.3 (55.1)
------ ------ ------ ------ ------ ------ ------
-- Net earnings (loss)............... $ 11.1 $ 13.9 $ 19.2 $ 29.5 $ 37.9 $ 29.0 $(32.6)
Earnings (loss) per share of Syncor
common stock:(1)
Basic
-- Continuing operations............. $ 0.51 $ 0.65 $ 0.78 $ 1.17 $ 1.40 $ 1.09 $ 0.90
-- Discontinued operations, net of
taxes.............................. 0.04 -- 0.04 0.06 0.14 0.09 (2.20)
------ ------ ------ ------ ------ ------ ------
-- Net income (loss)................. $ 0.55 $ 0.65 $ 0.82 $ 1.23 $ 1.54 $ 1.18 $(1.30)
Diluted
-- Continuing operations............. $ 0.50 $ 0.61 $ 0.71 $ 1.05 $ 1.28 $ 0.99 $ 0.83
-- Discontinued operations, net of
taxes.............................. 0.04 -- 0.04 0.06 0.12 0.08 (2.04)
------ ------ ------ ------ ------ ------ ------
-- Net income (loss)................. $ 0.54 $ 0.61 $ 0.75 $ 1.11 $ 1.40 $ 1.07 $(1.21)
Cash dividends declared per share of
Syncor common stock.................. $ -- $ -- $ -- $ -- $ -- $ -- $ --
BALANCE SHEET DATA:
Total assets:
-- Continuing operations............. $163.7 $161.7 $180.8 $260.1 $304.7 $292.4 $346.1
-- Discontinued operations........... 0.9 94.9 131.8 210.6 283.1 278.4 235.8
------ ------ ------ ------ ------ ------ ------
-- Total assets...................... $164.6 $256.6 $312.6 $470.7 $587.8 $570.8 $581.9
Long-term obligations, less current
portion:
-- Continuing operations............. $ 17.3 $ 6.5 $ -- $ 18.4 $ 35.1 $ 50.3 $ 18.9
-- Discontinued operations........... -- 63.8 76.3 119.5 175.5 169.9 164.0
------ ------ ------ ------ ------ ------ ------
-- Total long-term obligations, less
current portion................... $ 17.3 $ 70.3 $ 76.3 $137.9 $210.6 $220.2 $182.9
Stockholders' equity................... $ 87.4 $111.4 $140.3 $185.9 $234.8 $228.3 $223.4
---------------
(1) Net earnings (loss) per share of Syncor common stock have been adjusted to
retroactively reflect all stock splits through September 30, 2002.
7
(2) In July 2001, the Financial Accounting Standards Board, which we refer to as
the FASB, issued Statement of Accounting Standards, which we refer to as
SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other
Intangible Assets." SFAS No. 141 requires that the purchase method of
accounting be used for all business combinations completed after June 30,
2001, clarifies the recognition of intangible assets separately from
goodwill and requires that unallocated negative goodwill be written off
immediately as an extraordinary gain. SFAS No. 142, which was effective for
fiscal years beginning after December 15, 2001, requires that ratable
amortization of goodwill be replaced with periodic tests of goodwill
impairment and that intangible assets, other than goodwill, which have
determinable useful lives, be amortized over their useful lives. Syncor has
adopted these accounting standards effective January 1, 2002. There were no
adjustments to identifiable intangible assets' useful lives or recorded
balances as a result of the adoption of SFAS No. 142. We will perform an
annual impairment analysis of goodwill in the fourth quarter of 2002 as
required by SFAS No. 142.
During the quarter ended September 30, 2002, we recorded an impairment
charge of $31.3 million net of taxes in discontinued operations for the CMI
imaging business assets (goodwill) due to receiving bids for this business
under the current carrying values of these assets. The charge was not a
transitional charge under SFAS No. 142; therefore, the charge was recorded
in discontinued operations for the quarter ended September 30, 2002.
The following table displays Syncor's net earnings and per share amounts
for fiscal years 1999, 2000 and 2001 as adjusted for amortization of intangible
assets and goodwill.
FOR THE FISCAL YEAR ENDED
DECEMBER 31,
---------------------------
1999 2000 2001
------- ------- -------
(IN MILLIONS, EXCEPT
PER SHARE AMOUNTS)
Net earnings........................................... $21.6 $31.8 $41.7
Basic earnings per share............................... $0.93 $1.33 $1.70
Diluted earnings per share............................. $0.85 $1.19 $1.54
8
The historical financial data that appear below are only a summary, and you
should read them in conjunction with the historical financial statements and
related notes of Cardinal Health. Cardinal Health's historical financial
statements are included in documents filed with the SEC. See "Where You Can Find
More Information" on page 47.
CARDINAL HEALTH, INC.
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
AT OR FOR THE THREE MONTHS
AT OR FOR THE FISCAL YEAR ENDED JUNE 30,(1) ENDED SEPTEMBER 30,
--------------------------------------------------------- ---------------------------
1998(2) 1999(2) 2000 2001 2002 2001 2002
--------- --------- --------- --------- --------- ------------ ------------
EARNINGS DATA:
Revenue:
Operating revenue.......... $20,844.8 $25,682.5 $30,257.8 $38,660.1 $44,394.3 $ 9,865.4 $11,416.6
Bulk deliveries to customer
warehouses and other..... 7,541.1 7,050.4 8,092.1 9,287.5 6,741.4 1,908.0 1,669.5
--------- --------- --------- --------- --------- --------- ---------
Total revenue.............. $28,385.9 $32,732.9 $38,349.9 $47,947.6 $51,135.7 $11,773.4 $13,086.1
Earnings before cumulative
effect change in
accounting............... $ 474.3 $ 499.3 $ 717.8 $ 857.4 $ 1,126.3 $ 246.4 $ 288.3
Cumulative effect of change
in accounting(5)......... -- -- -- -- 70.1 70.1 --
--------- --------- --------- --------- --------- --------- ---------
Net earnings............... $ 474.3 $ 499.3 $ 717.8 $ 857.4 $ 1,056.2 $ 176.3 $ 288.3
Basic earnings per common
share(3)
Before cumulative effect
of change in
accounting............. $ 1.10 $ 1.14 $ 1.64 $ 1.93 $ 2.50 $ 0.55 $ 0.65
Cumulative effect of
change in
accounting(5).......... -- -- -- -- (0.16) (0.16) --
--------- --------- --------- --------- --------- --------- ---------
Net basic earnings per
common share............. $ 1.10 $ 1.14 $ 1.64 $ 1.93 $ 2.34 $ 0.39 $ 0.65
Diluted earnings per common
share(3)
Before cumulative effect
of change in
accounting............. $ 1.07 $ 1.12 $ 1.60 $ 1.88 $ 2.45 $ 0.53 $ 0.64
Cumulative effect of
change in
accounting(5).......... -- -- -- -- (0.15) (0.15) --
--------- --------- --------- --------- --------- --------- ---------
Net diluted earnings per
common share............. $ 1.07 $ 1.12 $ 1.60 $ 1.88 $ 2.30 $ 0.38 $ 0.64
Cash dividends declared per
Cardinal Health common
share(3)(4).............. $ 0.049 $ 0.067 $ 0.070 $ 0.085 $ 0.100 $ 0.025 $ 0.025
BALANCE SHEET DATA:
Total assets............... $ 8,876.8 $ 9,682.7 $12,024.1 $14,642.4 $16,438.0 $15,721.5 $16,235.2
Long-term obligations, less
current portion.......... $ 1,362.2 $ 1,224.5 $ 1,524.5 $ 1,871.0 $ 2,207.0 $ 2,288.6 $ 2,237.8
Shareholders' equity....... $ 3,389.9 $ 3,894.6 $ 4,400.4 $ 5,437.1 $ 6,393.0 $ 5,670.1 $ 6,353.7
---------------
(1) Amounts reflect business combinations and the impact of merger-related costs
and other special charges in all periods presented. See Note 2 of "Notes to
Consolidated Financial Statements" incorporated by reference to Cardinal
Health's 10-K for the fiscal year ended June 30, 2002 for a further
discussion of merger-related costs and other special charges affecting
fiscal 2000, 2001 and 2002. Fiscal 1998 amounts reflect the impact of
merger-related charges and other special charges of $57.8 million ($19.5
million, net of tax). Fiscal 1999 amounts reflect the impact of
merger-related charges and other special charges of
9
$165.4 million ($122.3 million, net of tax). See Note 4 of "Notes to
Condensed Consolidated Financial Statements" incorporated by reference to
Cardinal Health's Form 10-Q for the three months ended September 30, 2002
for further discussion of merger-related costs and other special charges
affecting the three months ended September 30, 2001 and 2002.
(2) In April 1998, Automatic Liquid Packaging, Inc. ("ALP") had elected
S-Corporation status for income tax purposes. As a result of the merger with
Cardinal Health, ALP terminated its S-Corporation election. Amounts above do
not reflect the impact of pro forma adjustments related to ALP taxes, as if
ALP had been subject to federal income taxes during the periods presented.
For the fiscal years ended June 30, 1998 and 1999, the pro forma adjustment
for ALP taxes would have reduced net earnings by $4.6 million and $9.3
million, respectively. The pro forma adjustment would have decreased diluted
earnings per Cardinal Health common share by $0.01 to $1.06 for fiscal 1998
and by $0.02 to $1.10 for fiscal 1999.
(3) Net basic earnings, net diluted earnings and cash dividends declared per
Cardinal Health common share have been adjusted to retroactively reflect all
stock dividends and stock splits through September 30, 2002.
(4) Cash dividends declared per Cardinal Health common share exclude dividends
paid by all entities which Cardinal Health has acquired by merger.
(5) In the first quarter of fiscal 2002, the method of recognizing revenue for
pharmacy automation equipment was changed from recognizing revenue when the
units were delivered to the customer to recognizing revenue when the units
are installed at the customer site. For more information regarding the
change in accounting see Note 14 of "Notes to Consolidated Financial
Statements" incorporated by reference to Cardinal Health's Form 10-K for the
fiscal year ended June 30, 2002.
10
COMPARATIVE PER COMMON SHARE INFORMATION
We have set forth below information concerning earnings, cash dividends
declared and book value per share data for Cardinal Health on an historical and
a pro forma combined basis and for Syncor on an historical basis adjusted for
discontinued operations (see Note 1 below) and a pro forma combined basis
restated for discontinued operations for Syncor. Book value per share for the
pro forma combined presentation is based on outstanding Cardinal Health common
shares, adjusted to include the estimated number of Cardinal Health common
shares to be issued in the merger for outstanding Syncor shares at the time the
merger is completed. The per share equivalent pro forma combined data for Syncor
shares is based on the conversion of each Syncor share into 0.47 of a Cardinal
Health common share using the revised negotiated exchange ratio. See "The Merger
Agreement Amendments -- Exchange Ratio." Based on the closing per share sale
price of Cardinal Health common shares as of December 5, 2002, the value of the
Cardinal Health common shares to be received by all of the Syncor stockholders
in connection with the merger is approximately $806 million.
You should read the information set forth below in conjunction with the
respective audited and unaudited financial statements of Cardinal Health and
Syncor incorporated by reference in this document. See "Where You Can Find More
Information" on page [46].
AT OR FOR THE AT OR FOR THE
TWELVE MONTHS THREE MONTHS
ENDED ENDED
JUNE 30, 2002 SEPTEMBER 30, 2002
------------- ------------------
SYNCOR INTERNATIONAL -- HISTORICAL RESTATED FOR DISCONTINUED
OPERATIONS
Net earnings per share of Syncor common stock from
continuing operations(1):
Basic..................................................... $1.36 $0.14
Diluted................................................... 1.26 0.13
Cash dividends declared per share of Syncor common stock.... -- --
Book value per share(6)..................................... 9.29 8.56
AT OR FOR THE AT OR FOR THE
FISCAL YEAR THREE MONTHS
ENDED ENDED
JUNE 30, 2002 SEPTEMBER 30, 2002
------------- ------------------
CARDINAL HEALTH -- HISTORICAL
Net earnings per Cardinal Health common share before
cumulative effect of change in accounting(2):
Basic..................................................... $ 2.50 $ 0.65
Diluted................................................... 2.45 0.64
Cash dividends declared per Cardinal Health common share.... 0.10 0.025
Book value per share........................................ 14.24 14.33
CARDINAL HEALTH AND SYNCOR -- PRO FORMA COMBINED
Net earnings per common share from continuing operations
before cumulative effect of change in
accounting(1)(2)(3)(4):
Basic..................................................... $ 2.51 0.64
Diluted................................................... 2.45 0.63
Cash dividends declared per common share(5)................. 0.10 0.025
Book value per share(3)(4)(6)............................... 14.38 14.43
11
AT OR FOR THE AT OR FOR THE
TWELVE MONTHS THREE MONTHS
ENDED ENDED
JUNE 30, 2002 SEPTEMBER 30, 2002
------------- ------------------
EQUIVALENT PRO FORMA COMBINED PER SHARE OF SYNCOR
COMMON STOCK
Net earnings per common share of Syncor from continuing
operations before cumulative effect of change in
accounting(1)(2)(3)(4):
Basic..................................................... $ 1.18 $ 0.30
Diluted................................................... 1.15 0.30
Cash dividends declared per common share(5)................. 0.047 0.012
Book value per share(3)(4)(6)............................... 6.76 6.78
---------------
(1) Syncor's historical net earnings per share of Syncor common stock from
continuing operations at or for the twelve months ended June 30, 2002, and
at or for the three months ended September 30, 2002, exclude the
discontinued operations related to Syncor's planned sale of CMI, closure or
sale of certain international locations and disposal of Syncor's
brachytherapy seeds production business announced by Syncor on June 14,
2002.
(2) Cardinal Health's historical net earnings per Cardinal Health common share
before cumulative effect of change in accounting, Cardinal Health's and
Syncor's Pro Forma Combined net earnings per common share from continuing
operations before cumulative effect of change in accounting and the
Equivalent Pro Forma Combined net earnings per common share from continuing
operations before cumulative effect of change in accounting 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 Health in the fiscal year ended June 30, 2002 and the three-month
period ended September 30, 2002. See Note 2 of "Notes to Consolidated
Financial Statements" incorporated by reference to Cardinal Health's Form
10-K for the fiscal year ended June 30, 2002 for a further discussion of
merger-related costs and other special charges affecting fiscal year ended
June 30, 2002. See Note 4 of "Notes to Condensed Consolidated Financial
Statements" incorporated by reference to Cardinal Health's Form 10-Q for the
three months ended September 30, 2002 for further discussion of the
merger-related costs and other special charges affecting the three months
ended September 30, 2002.
(3) The Pro Forma Combined and the Equivalent Pro Forma Combined information
(excluding the book value per share information) presents the combination of
Cardinal Health for the fiscal year ended June 30, 2002 with Syncor for the
twelve months ended June 30, 2002. In addition, the financial information of
Cardinal Health for the three months ended September 30, 2002 is combined
with that of Syncor for the same time period. The book value per share
information as of June 30, 2002 is calculated based on the Cardinal Health
balance sheet at June 30, 2002 and the Syncor balance sheet at June 30,
2002. The book value per share information at September 30, 2002 is
calculated based on the Cardinal Health and Syncor balance sheets as of
September 30, 2002.
(4) Amount does not reflect the pro forma effect of future merger-related costs.
In connection with the merger, Cardinal Health expects to incur investment
banking, legal, accounting and other related costs and fees. These costs
will be included as part of the cost of the acquisition. Additionally,
Cardinal Health and Syncor expect to incur other merger-related costs
associated with the integration of the 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 when incurred.
Since the merger has not yet been completed and transition plans currently
are being developed, the merger-related costs cannot be reasonably estimated
at this time.
(5) Pro Forma Combined cash dividends declared per Cardinal Health common share
represent the historical dividends of Cardinal Health for all periods
presented and exclude all dividends paid by Syncor and all entities which
Cardinal Health has acquired by merger. Cardinal Health's and Syncor'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, 2002.
(6) Syncor's book value per share at September 30, 2002 included the effect of
an asset impairment charge recorded in the quarter ended September 30, 2002.
See Note 2 of "Notes to Condensed Consolidated Financial Statements"
incorporated by reference to Syncor's Form 10-Q for the quarter ended
September 30, 2002 for a further discussion of the asset impairment charge
recorded in that time period.
12
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 of Cardinal Health common shares as shown on the
New York Stock Exchange Composite Tape and Syncor shares as reported on The
Nasdaq National Market, as well as the per share dividends declared 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 HEALTH COMMON SHARE SYNCOR COMMON STOCK
------------------------------ ---------------------------
CALENDAR YEAR HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
------------- ------- ------- ---------- ------ ------ ---------
1999
First Quarter.......................... $53.67 $44.00 $0.0167 $17.25 $12.25 --
Second Quarter......................... 47.92 37.92 0.0167 18.00 12.96 --
Third Quarter.......................... 46.63 34.67 0.0167 20.00 14.50 --
Fourth Quarter......................... 37.58 25.00 0.0167 20.36 13.37 --
2000
First Quarter.......................... $39.58 $24.79 $0.0167 $16.50 $11.02 --
Second Quarter......................... 49.33 30.58 0.0200 36.00 13.00 --
Third Quarter.......................... 63.38 45.27 0.0200 43.94 32.75 --
Fourth Quarter......................... 69.25 59.04 0.0200 39.06 23.75 --
2001
First Quarter.......................... $68.35 $58.67 $0.0200 $38.81 $27.25 --
Second Quarter......................... 77.00 61.78 0.0250 42.29 26.64 --
Third Quarter.......................... 75.30 67.28 0.0250 38.74 26.63 --
Fourth Quarter......................... 76.60 61.50 0.0250 33.31 26.03 --
2002
First Quarter.......................... $70.89 $60.80 $0.0250 $29.15 $21.70 --
Second Quarter......................... 73.00 61.41 0.0250 34.12 27.72 --
Third Quarter.......................... 68.19 49.08 0.0250 35.15 25.11 --
Fourth Quarter (through December 5).... 71.16 61.04 0.0250 36.86 18.37 --
The following table sets forth the closing price per Cardinal Health common
share as reported on the New York Stock Exchange Composite Tape and the closing
price per Syncor share as reported on The Nasdaq National Market on June 13,
2002, the last full trading day before we announced the proposed merger, on
December 3, 2002, the last full trading day before we announced the amendment to
the exchange ratio for the proposed merger, and on December 5, 2002, the last
full trading day before the date of this document each based on the original
exchange ratio of 0.52. This table also shows the implied value of one Syncor
share which we calculated by multiplying the closing price per Cardinal Health
common share on those dates by 0.47, the revised exchange ratio.
IMPLIED VALUE OF IMPLIED VALUE OF
ONE SHARE OF ONE SHARE OF
CARDINAL HEALTH SYNCOR SYNCOR
SYNCOR COMMON COMMON STOCK COMMON STOCK
COMMON STOCK SHARES (0.47 EXCHANGE RATIO) (0.52 EXCHANGE RATIO)
------------ --------------- --------------------- ---------------------
June 13, 2002.............. $28.21 $62.35 $29.30 32.42
December 3, 2002........... $26.12 $62.25 $29.26 32.37
December 5, 2002........... $29.54 $63.01 $29.61 32.77
We encourage you to obtain current market quotations for Cardinal Health
common shares and Syncor shares. Based on the closing per share sale price of
Cardinal Health common shares as of December 5, 2002, the value of the Cardinal
Health common shares to be received by all of the Syncor stockholders in
connection with the merger is approximately $806 million.
13
The Cardinal Health common shares that Syncor stockholders will receive in
the merger have been approved for listing on the New York Stock Exchange.
Cardinal Health anticipates that it will continue to pay quarterly cash
dividends. The Cardinal Health board of directors, however, has discretion to
decide upon the timing and amount of any future dividends, and whether or not
Cardinal Health will pay dividends (and, if so, how much the dividends will be)
will depend on Cardinal Health's future earnings, financial condition, capital
requirements and other factors.
14
RISK FACTORS
In considering whether to vote in favor of the merger agreement with
Cardinal Health, you should consider all of the information we have included in
this document and its annexes and all of the information included in the
documents incorporated by reference in this document (including the risk factors
contained in Cardinal Health's Form 10-K for the fiscal year 2002 beginning on
page 8 of that document). In addition, you should pay particular attention to
the following risk factors related to the merger.
THE MARKET VALUE OF CARDINAL HEALTH COMMON SHARES WILL VARY AND THE SHARES YOU
WILL RECEIVE IF THE MERGER IS COMPLETED MAY HAVE A LOWER PRICE AFTER COMPLETION
OF THE MERGER THAN THEY CURRENTLY HAVE.
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 Health common shares
or Syncor common stock. The price of Cardinal Health common shares at the time
the merger is completed may be higher or lower than the price on the date of
this document or on the date of the special meeting. For example, since the
merger was announced on June 14, 2002 until December 5, 2002, the closing per
share price of Cardinal Health common shares was as high as $73.00 per share and
as low as $49.08. Changes in the business, operations or prospects of Cardinal
Health or Syncor, market assessments of the likelihood that the proposed merger
will be completed, regulatory considerations, general market and economic
conditions or other factors may affect the prices of Cardinal Health common
shares, Syncor shares or both. Most of these factors are beyond our control.
Since the proposed merger will be completed only after all the conditions to the
merger are satisfied or waived, including the approval of the amended merger
agreement at the Syncor special meeting, there is no way to be sure that the
price of Cardinal Health common shares on any date prior to completion of the
merger will be indicative of the price at the time the merger is completed. You
should obtain current market quotations for both Cardinal Health common shares
and Syncor shares.
IF WE FAIL TO ACHIEVE THE BENEFITS ANTICIPATED IN THE MERGER OR FAIL TO
SUCCESSFULLY INTEGRATE THE COMPANIES' RESPECTIVE OPERATIONS, CARDINAL HEALTH'S
RESULTS FROM OPERATIONS MAY BE LOWER THAN ONE MIGHT EXPECT FROM THE COMBINED
COMPANY.
We believe that the proposed merger presents us with an opportunity to
reduce marginal operating costs for the combined company below levels that
either Cardinal Health or Syncor could achieve independently and the opportunity
to negotiate more favorable merchandising programs and price discounts on behalf
of its customers. Additionally, we believe the acquisition of Syncor by Cardinal
Health will be accretive to earnings and cash flow of the combined company and
that the transaction presents Cardinal Health with an opportunity to increase
its presence in the high-growth nuclear pharmacy business, providing us an
opportunity to enhance our revenues. We based our expectations of cost savings
on many assumptions, including future sales levels and other operating results
from the combined company's nuclear pharmacy businesses, the availability of
funds for capital expenditures, the timing of certain events (including the
planned dispositions of certain of Syncor's operations), as well as general
industry and business conditions and other matters. Many of these factors are
beyond the control of the combined company. Our estimates also are 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 by their nature uncertain. The combined company's resulting cost
savings and revenue improvements, if any, could materially differ from those
projected and cannot be reliably estimated. It is possible that unforeseen costs
and expenses or other factors will offset the estimated cost savings and revenue
improvements or other components of the combined company's plan or result in
delays in the realization of certain projected cost savings.
In addition, there are a number of other risks that may arise in attempting
to integrate Syncor's operations with those of Cardinal Health, including:
- the possibility that Cardinal Health's or Syncor's management may be
distracted from regular business concerns by the need to integrate
operations,
- unforeseen difficulties in integrating Syncor's and Cardinal Health's
operations and systems,
15
- problems or difficulties in assimilating and retaining the employees of
the operations that are being combined, and
- challenges in retaining customers and suppliers.
If we fail to efficiently manage these risks, we could experience potential
adverse short-term or long-term effects on our nuclear pharmacy business'
operating results as well as that of Cardinal Health's other businesses.
Although Cardinal Health has not previously encountered material difficulties in
integrating acquisitions, we cannot be certain that we will be able to
successfully integrate Cardinal Health's Central Pharmacy Services nuclear
pharmacy business with that of Syncor.
Additionally, Syncor announced, on June 14, 2002, that it is exiting the
imaging business and is entertaining offers for its Comprehensive Medical
Imaging division. This transaction may occur before or after the completion of
the merger, or may not occur at all if terms acceptable to Syncor and/or
Cardinal Health cannot be successfully negotiated (See "Recent
Developments -- CMI Sale Process").
16
THE SPECIAL MEETING
The Syncor board of directors is soliciting proxies from Syncor
stockholders for use at the reconvened special meeting and at any adjournments
or postponements of the special meeting. This document, together with the form
of proxy, is being mailed to Syncor stockholders on or about December [ ],
2002.
TIME AND PLACE OF THE MEETING
The time and place of the special meeting is:
Monday, December 30, 2002
2:00 p.m., California time
Warner Center Hilton Hotel
6360 Canoga Avenue
Woodland Hills, California
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
The special meeting will be held to:
(1) Vote on a proposal to approve the Agreement and Plan of Merger,
dated as of June 14, 2002, among Cardinal Health, Inc., Mudhen Merger
Corp., a wholly owned subsidiary of Cardinal Health, and Syncor, as amended
on November 22, 2002 and December 3, 2002, which we refer to collectively
as the merger agreement. Pursuant to the merger agreement, Mudhen Merger
Corp. will merge with and into Syncor upon the terms and subject to the
conditions set forth in the merger agreement, as more fully described in
this document and in the original proxy statement/prospectus and the first
proxy statement supplement. If the merger agreement is approved and the
merger and the related transactions contemplated by the merger agreement
are consummated, each Syncor share will become the right to receive 0.47 of
a Cardinal Health 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 agreement proposal; and
(3) Act on any other matters that may properly come before the special
meeting.
RECORD DATE
The Syncor board of directors has established October 9, 2002 as the record
date for the special meeting. Only holders of record of Syncor shares on the
record date are entitled to attend and vote at the special meeting or at any
adjournments or postponements of the special meeting.
As of the close of business on the record date, there were approximately
26,103,945 Syncor shares outstanding and entitled to vote for purposes of the
general vote at the special meeting.
SHARE OWNERSHIP
Syncor. On the record date, all Syncor directors, executive officers and
their affiliates, as a group, beneficially owned a total of 2,210,839
outstanding Syncor shares, representing approximately 8.5% of the voting power
at the special meeting. Each of these Syncor directors and officers is expected
to vote the outstanding Syncor shares beneficially, owned by him or her in favor
of the merger agreement. Monty Fu, Chairman of the Board of Syncor, who has been
on paid leave of absence, and Robert G. Funari, President and Chief Executive
Officer of Syncor, who, together, beneficially own (excluding Syncor stock
options) approximately 6.8% of the outstanding shares on the record date, have
executed support/voting agreements with Cardinal Health agreeing to vote in
favor of the merger agreement.
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Cardinal Health. At the record date, Cardinal Health and its subsidiaries
did not beneficially own any Syncor shares. At the same date, all of Cardinal
Health's directors, executive officers and their affiliates as a group did not
hold any Syncor shares.
QUORUM
A quorum consisting of the holders of a majority of the voting power of the
issued and outstanding Syncor shares at the record date must be present in
person or represented by proxy for the transaction of business at the special
meeting. Syncor 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,
if any, and Syncor shares represented by proxies that reflect abstentions will
be treated as Syncor shares that are present and entitled to vote for purposes
of determining the presence of a quorum.
VOTE REQUIRED
Approval of the merger agreement at the special meeting requires the
affirmative vote of holders representing a majority of the voting power of the
issued and outstanding Syncor shares. Each Syncor stockholder will have one vote
for each Syncor share held on the record date.
Because approval of the merger agreement requires the affirmative vote of a
specified percentage of outstanding Syncor shares, abstaining, not voting on the
proposal, or failing to instruct your broker on how to vote Syncor shares held
for you by the broker, will have the same effect as voting against the merger
agreement.
Approval of the adjournment proposal at the special meeting requires the
affirmative vote of holders representing a majority of the voting power of the
issued and outstanding Syncor shares present, in person or by proxy, at the
special meeting.
You may vote your Syncor 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.
VOTING PROCEDURES
FOR STOCKHOLDERS WHO HAVE ALREADY VOTED
We have enclosed a new proxy card (and a return envelope) for your use, in
case you wish to change your vote. If you have already submitted your proxy and
you do not wish to change your vote, you do not need to return this new proxy
card. If we receive the enclosed proxy card, duly executed and dated, prior to
the date of the special meeting, any proxy previously granted by you will be,
without further action on your part, revoked, and the enclosed proxy card will
be voted as indicated.
All Syncor 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 merger agreement proposal, "FOR" the adjournment proposal,
and in the discretion of the named proxies on any other matters that may
properly come before the special meeting.
FOR STOCKHOLDERS WHO HAVE NOT ALREADY VOTED
Enclosed for your convenience is a new proxy card (and a return envelope)
for your use. You may use either of the proxy cards which were previously sent
to you with the original proxy statement/prospectus and the first proxy
statement supplement, or you may use the new proxy card enclosed with this
document.
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All Syncor 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 merger agreement proposal, "FOR" the adjournment proposal,
and in the discretion of the named proxies on any other matters that may
properly come before the special meeting.
FOR STOCKHOLDERS WHO WISH TO REVOKE THEIR PREVIOUSLY SUBMITTED PROXY
You may revoke your proxy at any time before it is voted. A proxy may be
revoked in any of the following ways:
(1) by submitting a written revocation to the Secretary of Syncor at
6464 Canoga Avenue, Woodland Hills, California 91367-2407 (which must be
received by the Secretary of Syncor prior to the special meeting);
(2) by submitting a later-dated proxy by mail or telephone or through
the internet (which must be received by the Secretary of Syncor prior to
the special meeting); or
(3) by voting in person at the special meeting.
However, simply attending the special meeting (without voting) will not
revoke a proxy.
If you do not hold your Syncor shares in your own name, you may revoke a
previously given proxy by following the revocation instructions provided by the
bank, broker or other person who is the registered owner of your Syncor shares.
SOLICITATION OF PROXIES
Syncor will pay the costs of soliciting proxies to vote on the merger
agreement at the special meeting, and each of us will pay our own expenses
incurred in connection with the cost of filing, printing and distributing this
document. We have retained MacKenzie Partners, Inc. to assist in the
solicitation of proxies for the special meeting. MacKenzie Partners will receive
a fee of up to $10,000, plus reasonable out-of-pocket expenses.
In addition to solicitation by mail, directors, officers and employees of
Syncor and its subsidiaries may solicit proxies from Syncor stockholders, either
personally, through the internet or by telephone or other form of communication.
None of the foregoing persons who solicit proxies will be separately compensated
for these services. Except as described above, Syncor does not anticipate that
any other persons will be specifically asked to solicit proxies or that special
compensation will be paid for that purpose. However, Syncor reserves the right
to do so if it concludes that these efforts are necessary or advisable.
Nominees, fiduciaries and other custodians will be requested to forward
soliciting materials to beneficial owners of Syncor common stock and will be
reimbursed for their reasonable expenses incurred in sending proxy material to
beneficial owners of Syncor common stock.
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FORWARD-LOOKING STATEMENTS
This document, the original proxy statement/prospectus, the proxy
statement/supplement and the information included or incorporated by reference
contain a number of forward-looking statements with respect to our financial
condition, results of operations, plans, objectives, future performance and
business, as well as certain information relating to the proposed merger,
including, among others:
(1) statements relating to the synergies and cost savings and
accretion/dilution to reported earnings estimated to result from the
proposed merger;
(2) statements relating to revenues estimated to result from the
proposed merger;
(3) statements relating to integration costs estimated to be incurred
in connection with the proposed merger; and
(4) statements preceded by, followed by or that include the terms
"believes," "expects," "anticipates," "estimates" or similar words or
expressions.
These forward-looking statements involve various risks and uncertainties.
You should not place undue reliance on these statements, which speak only as of
the date of the relevant document. 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:
- costs or difficulties related to the integration of our businesses, or
other acquired businesses, are greater than expected;
- the outcome of the litigation described in the section of this document
entitled "Recent Developments -- Certain Litigation";
- the outcome of any existing or future governmental proceedings described
in the section of this document entitled "Recent
Developments -- Investigation of Foreign Operations; Agreements with the
United States Department of Justice and the Securities and Exchange
Commission";
- the outcome of the investigation into Syncor's foreign operations and
certain limited aspects of Syncor's domestic U.S. operations described in
the section of this document entitled "Recent
Developments -- Investigation of Foreign Operations; Agreements with the
United States Department of Justice and the Securities and Exchange
Commission";
- expected or anticipated synergies and cost savings from the proposed
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 integration and our ongoing
operation after the proposed merger;
- the loss of customers or suppliers;
- technological changes are more difficult and/or more expensive than
anticipated;
- revenues following the proposed merger are lower than expected;
- increased competitive pressures in the industries or markets in which we
operate;
- changes in general economic conditions or in political or competitive
forces;
- changes in the securities markets;
- changes in the regulatory environment;
- difficulties and/or delays in selling certain operations of Syncor that
are contemplated to be sold to third parties;
- 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
20
- the general risks that occur in Syncor's and Cardinal Health's day-to-day
businesses, including those discussed in their respective Annual Reports
on Form 10-K, Quarterly Reports on Form 10-Q, and exhibits or amendments
to those reports.
The order of the items listed above does not necessarily reflect the order
of their significance.
You should not place undue reliance on these forward-looking statements,
which speak only as of the date of this document, 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 Health or Syncor or any person acting on their behalf are expressly
qualified by the cautionary statements contained or referred to in this section.
Neither Cardinal Health nor Syncor undertakes any obligation to release publicly
any revisions to these forward-looking statements to reflect events or
circumstances after the date of this document or to reflect the occurrence of
unanticipated events, except as may be required under applicable law.
21
RECENT DEVELOPMENTS
INVESTIGATION OF FOREIGN OPERATIONS; AGREEMENTS WITH THE UNITED STATES
DEPARTMENT OF JUSTICE AND THE SECURITIES AND EXCHANGE COMMISSION
During late October 2002, Cardinal Health informed Syncor that, in the
course of Cardinal Health's ongoing post-signing due diligence relating to the
previously announced planned merger of the two companies pursuant to the merger
agreement, Cardinal Health had learned of potential improprieties relating to
certain payments made by international subsidiaries of Syncor to customers in
several foreign jurisdictions.
Upon receipt of this information from Cardinal Health, Syncor established a
special committee of outside directors, advised by outside counsel and an
independent forensic accounting firm, for the purpose of investigating the
propriety of the payments. As further described below, the findings of the
special committee reported on November 19, 2002 indicated that some or all of
the payments made to state-owned and private healthcare facilities in certain
foreign jurisdictions appear to have violated foreign and U.S. law, including
the Foreign Corrupt Practices Act of 1977, which we refer to as the FCPA. The
investigation has not yet concluded.
In a press release issued on November 6, 2002, which we refer to as the
November 6 press release, Syncor announced that a newly established committee of
three outside directors, together with outside counsel, had been investigating
the propriety of certain payments made by international subsidiaries to certain
customers in various foreign countries, and would also investigate Syncor's
other foreign operations. Syncor said that the payments were brought to its
attention by Cardinal Health. Syncor also announced that its representatives had
met with the DOJ and the staff of the SEC to discuss the matter and that it
intended to cooperate fully with the authorities.
The November 6 press release also stated that Mr. Monty Fu, Chairman of
Syncor, and his brother, Mr. Moses Fu, Director, Asia Region -- Syncor Overseas
LTD., had gone on paid leave pending completion of an investigation into their
involvement in the payments, and that Monty Fu had agreed to suspend his
participation as a director of Syncor pending completion of the investigation.
In the November 6 press release, Syncor also announced that its board of
directors had elected Mr. Bernard Puckett, a director and Chair of the special
committee conducting the investigation, as lead director of the Syncor board of
directors.
The November 6 press release further stated that in order to provide
additional time to complete the investigation of the foreign operations and make
appropriate disclosures to stockholders, Syncor had postponed its special
meeting of stockholders to vote on the pending merger from its originally
scheduled date of November 19, 2002 until December 6, 2002. The December 6, 2002
special meeting was subsequently adjourned until December 30, 2002.
Immediately following issuance of the November 6 press release, Cardinal
Health issued a press release in which it stated, among other things, that it
"will continue to carefully monitor the Syncor situation and assess the results
of the Syncor special committee's ongoing investigation as well as the results
of Cardinal Health's continuing due diligence review." Cardinal Health further
stated that it had not yet concluded whether the conditions to the merger would
be satisfied but that it intended to fully comply with its obligations under the
merger agreement. Cardinal Health also stated that "there can be no assurance
that the transaction involving the acquisition of Syncor by Cardinal Health will
be completed."
Later on November 6, 2002, in response to inquiries from The Nasdaq
National Market, Syncor stated in a press release, which we refer to as the
subsequent press release, among other things, that, based on the preliminary
results of the investigation, it did not believe as of such date that the
amounts of the questionable payments were material to the financial results of
Syncor. Syncor further stated that it needed to await completion of the
investigation to be able to determine the full impact on its financial results.
Syncor also stated in the subsequent press release that it did not believe
as of such date, based on the information it had obtained, that it would fail to
satisfy the conditions to the proposed merger. Syncor noted, however, that no
definitive determination as to the impact of the results of its investigation on
Syncor or the proposed merger could be made until the investigation is
completed.
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The subsequent press release also noted that, for Syncor's most recent
fiscal year ended December 31, 2001 and for the nine months ended September 30,
2002, continuing international operations in total generated approximately 6% of
its overall revenues and 7% of its gross profits, respectively.
On November 6, 2002, at the direction of the special committee, Syncor
management ordered all of the managers of its international operations to cease
making payments or providing gifts of any kind to any customer or any employee
or agent of any customer.
On November 19, 2002, Syncor announced that the special committee, working
together with outside counsel and an independent forensic accounting firm,
believed it has substantially completed its gathering of facts in connection
with the investigation of all of Syncor's foreign operations (other than Israel
where Syncor has only a licensing arrangement and no operations). The special
committee also noted that it is investigating certain limited aspects of
Syncor's domestic U.S. operations. The investigation included on-site reviews by
representatives of the special committee in every foreign country in which
Syncor has operations. The special committee is also investigating the knowledge
and/or involvement of certain employees of Syncor and its subsidiaries,
including Monty Fu and Moses Fu, in the matters subject to the investigation.
The investigation has not yet been completed.
The following is a summary of the findings of the special committee
reported on November 19, 2002 based on the information it had gathered at that
time. The investigation is continuing and there can be no assurance that
additional issues will not be found or that the findings below will be
confirmed.
- The special committee found that questionable payments have been made
over a substantial period of time to customers, including state-owned and
private healthcare facilities and certain of their employees, in Taiwan.
Based on information gathered at the time the findings of the special
committee were reported, some or all of the payments appear to have
violated U.S. law, including various provisions of the FCPA. In addition,
some or all of the payments appear to have violated local Taiwan law.
Over the past five years, these payments to state-owned facilities and
certain of their employees appear to have totaled an estimated $500,000.
- The special committee also found questionable payments and other
transactions at Syncor operations in at least six other countries in
Asia, Latin America and Europe that also appear to have violated U.S.
law, including the payment, record-keeping and controls provisions of the
FCPA. In addition, some or all of these payments appear to have violated
local laws in the relevant jurisdiction.
- During the course of its investigation of Syncor's foreign operations,
the special committee identified a number of additional instances where
activities of Syncor or of its subsidiaries or representatives may have
constituted violations of local laws and regulations relating to, among
other things, tax, competition and regulatory matters.
While the special committee and its advisors are continuing the
investigation, based on the information available at this time, Syncor does not
expect that any of these payments, transactions or other matters will be
material to the financial results of Syncor or will result in an adjustment or
restatement of Syncor's historical financial statements. The special committee
intends to complete the investigation as promptly as practicable. A final
determination as to the full impact of the investigation on Syncor and Syncor's
financial statements is subject to completion of the investigation, which is
continuing.
Representatives of Syncor have met with the DOJ and the staff of the SEC to
discuss the matters that have been the subject of the special committee's
investigations, and are cooperating fully with the authorities. Cardinal Health
also participated in these discussions. As a result of these discussions, on
December 4, 2002, Syncor announced that it had reached separate agreements with
the DOJ and the SEC staff to resolve claims that the SEC and the DOJ may have
against Syncor in connection with the matters that are the subject of the
special committee's investigation relating to the previously disclosed improper
payments made by Syncor subsidiaries in certain foreign countries. Pursuant to
the terms of the agreement with the SEC staff, Syncor will be charged in an
administrative proceeding with violations of the foreign payments, books and
records, and internal controls provisions of the FCPA and, without admitting or
denying any findings, will be ordered to cease and desist from committing or
causing future violations of those provisions. In addition, the SEC will file
23
a civil action alleging the same conduct and Syncor will consent to entry of a
judgment that will impose a $500,000 civil penalty. Syncor's board of directors
will be required to appoint an independent consultant (acceptable to the SEC) to
(1) evaluate Syncor's internal controls, financial reporting and disclosure
processes as they relate to compliance with the foreign payment provisions and
related books and records and internal control provisions of the FCPA, (2)
report its findings to the board of directors and the SEC, (3) make
recommendations to improve Syncor's internal controls, financial reporting and
disclosure processes, and (4) report to the board of directors and the SEC about
Syncor's implementation of the consultant's recommendations. In the event that
the merger is completed before Syncor complies with these obligations, the
obligations of Syncor after the merger will apply only to Syncor as a wholly
owned subsidiary of Cardinal Health and only as to Syncor's board of directors
as it may be constituted after the transaction is completed. This agreement with
the SEC staff is subject to approval by the SEC and the civil penalty is subject
to court approval. Pursuant to the terms of the plea agreement with the DOJ,
Syncor's Taiwan subsidiary, Syncor Taiwan, Inc., will plead guilty to a one
count violation of the FCPA and pay a $2.0 million fine. Pursuant to a separate
agreement, the DOJ will not take any action against Syncor International
Corporation related to these matters. The plea agreement with the DOJ is subject
to court approval. Syncor obtained the consent of Cardinal Health prior to
entering into these separate agreements with the DOJ and the staff of the SEC.
CERTAIN LITIGATION
Since the November 6 press release, seven purported class action lawsuits
have been filed against Syncor, one of which was served on Syncor December 5,
2002, and certain of its officers and directors, asserting claims under the
federal securities laws, which we refer to as the federal securities actions.
All seven federal securities actions were filed in the United States District
Court for the Central District of California. These cases include Richard Bowe
v. Syncor Int'l Corp., et al., No. CV 02-8560 LGB (RCx) (C.D. Cal.), Alan Kaplan
v. Syncor Int'l Corp., et al., No. CV 02-8575 CBM (MANx) (C.D. Cal.), Franklin
Embon, Jr. v. Syncor Int'l Corp., et al., No. CV 02-8687 DDP (AJWx) (C.D. Cal.),
Jonathan Alk v. Syncor Int'l Corp., et al., No. CV 02-8841 GHK (RZx) (C.D.
Cal.), Joyce Oldham v. Syncor Int'l Corp., et al., No. CV 02-8972 FMC (RCx)
(C.D. Cal.) West Virginia Laborers Pension Trust Fund v. Syncor Int'l Corp., et
al., No. CV 02-9076 NM (RNBx) (C.D. Cal.) and Brad Lookingbill v. Syncor Int'l
Corp., et al., CV02-9248 RSWL (C.D. Cal.).
The federal securities actions purport to be brought on behalf of all
purchasers of Syncor shares during various periods, beginning as early as March
30, 2000, and ending as late as November 5, 2002. The federal securities actions
allege, among other things, that the defendants violated Section 10(b) of the
Securities Exchange Act of 1934, which we refer to as the Exchange Act, and SEC
Rule 10b-5 promulgated thereunder and Section 20(a) of the Exchange Act, by
issuing a series of press releases and public filings disclosing significant
sales growth in Syncor's international business, but omitting mention of certain
allegedly improper payments to Syncor's foreign customers, thereby artificially
inflating the price of Syncor shares. The federal securities actions are in
their early stages and it is impossible to predict the outcome of these
proceedings or their impact on Syncor at this time. However, management believes
that Syncor and its directors and officers have meritorious defenses to the
claims asserted in the federal securities actions and Syncor intends to contest
these actions vigorously.
On November 14, 2002, two additional actions were filed by individual
stockholders of Syncor in the Court of Chancery of the State of Delaware, which
we refer to as the Delaware actions, against seven of Syncor's nine directors,
whom we refer to as the director defendants. The complaints in the Delaware
actions, which were identical, alleged that the director defendants breached
their fiduciary duties to Syncor by failing to maintain adequate controls,
practices and procedures to ensure that Syncor's employees and representatives
did not engage in improper and unlawful conduct. Both complaints asserted a
single derivative claim, for and on behalf of Syncor, seeking to recover all of
the costs and expenses that Syncor incurred as a result of the allegedly
improper payments (including the costs of the federal securities actions
described above), and a single purported class action claim seeking to recover
damages on behalf of all holders of Syncor shares in the amount of any losses
that they may sustain in the event that the pending merger with Cardinal Health
does not occur or the consideration received in the merger by Syncor
stockholders was reduced. On November 22, 2002, the plaintiff in one of the two
Delaware Actions filed an amended complaint adding Cardinal Health, its
24
subsidiary Mudhen Merger Corp. and the remaining two Syncor directors, who are
hereafter included as director defendants, as defendants and asserting an
additional derivative claim seeking a declaratory judgment that the original
merger agreement remains in full force and effect and is enforceable according
to its terms, notwithstanding the allegedly improper payments, which the
plaintiff claims were not material to Syncor's financial results and do not
represent a basis for terminating or renegotiating the merger agreement. The
Delaware actions are also in their early stages and it is impossible to predict
their outcome or their impact on Syncor or Cardinal Health at this time.
However, Syncor understands that the individual director defendants deny
liability for the claims asserted in the Delaware actions, believe they have
meritorious defenses and intend to vigorously contest such actions. Cardinal
Health also believes the allegations made in the complaint are without merit and
intends to vigorously contest such actions. These cases include Alan Kaplan v.
Monty Fu, et al., Case No. 20026-NC (Del. Ch.) and Richard Harman v. Monty Fu,
et al., Case No. 20027-NC (Del. Ch.).
On November 18, 2002, two additional actions were filed by individual
stockholders of Syncor in the Superior Court of California for the County of Los
Angeles, which we refer to as the California actions, against the director
defendants. The complaints in the California actions allege that the director
defendants breached their fiduciary duties to Syncor by failing to maintain
adequate controls, practices and procedures to ensure that Syncor's employees
and representatives did not engage in improper and unlawful conduct. Both
complaints asserted a single derivative claim, for and on behalf of Syncor,
seeking to recover costs and expenses that Syncor incurred as a result of the
allegedly improper payments. The California actions are also in their earliest
stages and it is impossible to predict their outcome or their impact on Syncor
at this time. However, Syncor understands that the individual director
defendants deny liability for the claims asserted in the California actions,
believe they have meritorious defenses and intend to vigorously contest such
actions. These cases include Joseph Famularo v. Monty Fu, et al., Case No.
BC285478 (Cal. Sup. Ct., Los Angeles Cty.) and Mark Stroup v. Robert G. Funari,
et al., Case No. BC285480 (Cal. Sup. Ct., Los Angeles Cty.).
On November 8, 2002, a complaint was filed by a purported Cardinal Health
shareholder against Cardinal Health and its directors in the Court of Common
Pleas, Delaware County, Ohio, as a purported derivative action alleging breach
of fiduciary duties and corporate waste in connection with the alleged failure
by the Cardinal Health board of directors to renegotiate or terminate Cardinal
Health's proposed acquisition of Syncor. Among other matters, the complaint
requests that Cardinal Health's transaction with Syncor be enjoined and that
damages be awarded against defendants in an unspecified amount. Cardinal Health
believes the allegations made in the complaint are without merit and intends to
vigorously contest such action. This case is Doris Staehr v. Robert D. Walter,
et al., No. 02-CVG-11-639 (Ohio Ct. of Common Pleas, Delaware County).
DEVELOPMENTS IN MEDICARE REIMBURSEMENT
On October 31, 2002, the Centers for Medicare and Medicaid Services, which
we refer to as CMS, published the final rule governing reimbursement to be made
in calendar year 2003 under the Outpatient Prospective Payment System, which we
refer to as OPPS, the system used by Medicare and Medicaid to reimburse
hospitals for services rendered to their patients in hospital outpatient
settings. The final rule changes the manner in which CMS will reimburse
providers for radiopharmaceuticals. Previously, CMS had reimbursed
radiopharmaceuticals using a pass-through methodology based on manufacturers'
prices for the drugs. CMS has discontinued pass-through reimbursement for
radiopharmaceuticals effective in 2003, and will instead reimburse providers
based on the Ambulatory Payment Classification, which we refer to as APC, to
which a particular radiopharmaceutical is assigned. Reimbursement under the APC
system is generally lower than that made according to the pass-through
methodology. Syncor's sales of radiopharmaceuticals are made to hospitals and
clinics, so we are paid by those providers and not CMS. However, the use of APCs
to reimburse for radiopharmaceuticals could have an impact on the prices that
customers will be willing to pay for the radiopharmaceuticals they purchase from
Syncor, and that impact, in turn, could negatively affect Syncor's revenues and
results of operations, although the potential effect cannot be determined at
this time.
25
STOCK OPTION GRANTS TO BROAD BASE OF EMPLOYEES
On October 17, 2002, the compensation committee of the Syncor board granted
approximately 420,000 options to acquire Syncor shares to a broad base of
employees under Syncor's 2000 Master Stock Incentive Plan. None of the executive
officers of Syncor was a recipient of the stock option grants.
AGREEMENT WITH MONTY FU
On December 3, 2002, Syncor entered into a letter agreement, which we refer
to as the Fu letter agreement, with Monty Fu regarding his status with Syncor.
Syncor and Mr. Fu have mutually agreed that, immediately prior to the completion
of the merger, Mr. Fu will cease to be an officer and employee of Syncor and
will resign as a director of Syncor. Mr. Fu has also agreed to surrender to
Syncor shares of Syncor common stock having a value of $2.5 million. This amount
equals the total fines and monetary penalties agreed to by Syncor in separate
agreements with the DOJ and the staff of the SEC. See "Recent
Developments -- Investigation of Foreign Operations; Agreements with the United
States Department of Justice and the Securities and Exchange Commission". In
addition, Mr. Fu has agreed to waive his right to receive a cash severance
payment valued at approximately $2.1 million to which he would have been
entitled, under the terms of the Severance Agreement, dated August 24, 2001, and
the terms of the Employment Agreement, dated as of January 1, 2000, both between
Syncor and Mr. Fu, if Mr. Fu's employment was terminated after completion of the
merger. See "Interests of Syncor's Directors and Officers in the Merger" on page
34 of the original proxy statement/prospectus for a description of Mr. Fu's
severance arrangements. Syncor has confirmed that, based on the information
known at this time, it would comply with its pre-existing contractual
obligations pursuant to Article VI, Section 4 of Syncor's By-laws and Section 7
of the Indemnitee Agreement, dated as of June 20, 1996, between Syncor and Mr.
Fu, to advance to Mr. Fu his reasonable expenses incurred in connection with the
matters subject to the special committee's investigation and related
proceedings. In consideration of any such advances, Mr. Fu has agreed to
undertake in writing to promptly repay Syncor the full amount of expenses so
advanced if it is ultimately determined that Mr. Fu is not entitled to be
indemnified by Syncor.
CMI SALE PROCESS
On June 14, 2002, Syncor announced that it intended to exit the medical
imaging industry and divest itself of its Comprehensive Medical Imaging, Inc.
(CMI) business unit. Since that time, Syncor has been actively attempting to
sell CMI, both by entertaining bids for the sale of the entire CMI business and
by pursuing a regional divestiture strategy. At the present time, Syncor is in
active negotiations with a number of bidders who are seeking to acquire various
individual regional interests of CMI. In addition, on October 11, 2002, Syncor
recorded a special charge to earnings net after-tax of $31.3 million, or $1.14
per fully diluted share, in the third quarter ended September 30, 2002. Syncor
took the asset impairment charge based on its review of the offers it received
from potential buyers for CMI, and Syncor's assessment of the probable loss to
Syncor upon the sale of CMI.
26
THE MERGER
UPDATE TO BACKGROUND OF THE MERGER
The following disclosure updates the information in the original proxy
statement/prospectus on pages 21 to 24.
In early November 2002, following a request of the audit committee of the
Syncor board of directors, the Syncor board met telephonically and authorized
the creation of a new special committee of the board of directors to, among
other things, oversee an investigation of Syncor's foreign operations. See
"Recent Developments -- Investigation of Foreign Operations; Agreements with the
United States Department of Justice and the Securities and Exchange Commission"
on page 20.
At a regularly scheduled board meeting held on November 6, 2002, the
Cardinal Health board of directors was apprised of the results of Cardinal
Health's due diligence to date and the potential significance of the improper
payments made by certain of Syncor's foreign subsidiaries.
The special committee of Syncor's board of directors met several times
during the month of November through November 20, 2002 and afterwards, as
described below. At these meetings the special committee discussed with Skadden,
Arps, Slate, Meagher & Flom LLP, special counsel to the special committee, the
ongoing investigation of Syncor's foreign operations, ongoing discussions with
the DOJ and the staff of the SEC pertaining to the investigation, and the
potential impact of the investigation on Syncor's merger with Cardinal Health.
The audit committee of Syncor's board of directors also held several
meetings during this period. At these meetings, the audit committee discussed
with Skadden, Arps continuing developments related to the ongoing investigation
of Syncor's foreign operations and discussed the possible effect of these
developments on Syncor's financial statements. The audit committee also met with
Syncor's independent accountants, KPMG LLP, to discuss KPMG's review of Syncor's
Form 10-Q for the quarter ended September 30, 2002, which we refer to as
Syncor's Third Quarter 10-Q. In light of the ongoing internal investigation and
in order to give KPMG the chance to confirm that the results of the previously
announced investigation did not impact Syncor's financial statements, Syncor's
audit committee determined that it was advisable for Syncor to file a
Notification of Late Filing on Form 12b-25 in order to obtain an automatic five
day extension to file its Third Quarter 10-Q. On November 19, 2002, Syncor filed
its Third Quarter 10-Q and issued a press release disclosing its third quarter
financial results and the status of the special committee's investigation (see
"Recent Developments -- Investigation of Foreign Operations; Agreements with the
United States Department of Justice and the Securities and Exchange
Commission").
The Syncor board of directors met five times between November 5, 2002 and
November 21, 2002. At these meetings, the special committee, with the assistance
of Skadden, Arps, updated the board of directors on the investigation of
Syncor's foreign operations and the status of discussions with the DOJ and the
staff of the SEC. During this time, the board of directors, based on the
recommendation of the special committee, determined to postpone the special
meeting of stockholders originally scheduled to be held on November 19, 2002
until December 6, 2002. The board of directors also considered the effect of
developments since late October 2002 on the transaction with Cardinal Health
and, at a meeting held on November 20, 2002, asked Skadden, Arps and Mr. Bernard
Puckett, the lead director of Syncor's board and chairman of the special
committee, to explore Syncor's options in response to certain discussions
initiated by Cardinal Health regarding a possible amendment of the original
merger agreement.
On November 21, 2002, Syncor announced that Cardinal Health had initiated
discussions with Syncor regarding the possible modification of the terms of the
previously announced merger agreement under which Cardinal Health would acquire
Syncor.
In the discussions that followed, Cardinal Health initially proposed that
the original exchange ratio of 0.52 would be maintained but that, among other
things, the Syncor stockholders would place 10% of the Cardinal Health common
shares to be received in the merger in a separate escrow fund. Cardinal Health
proposed that this escrow fund would be used, among other things, to pay for all
costs, judgments, settlements, fines, penalties and other expenses incurred by
Syncor or Cardinal Health in connection with the matters being investigated by
the special committee of the Syncor board of directors, including all costs of
the
27
investigation and costs associated with the renegotiation of the merger
agreement, which we collectively refer to as the escrow claims. Cardinal Health
also requested that Syncor ask Monty Fu to contribute more than his pro-rata
share to the escrow and to forego any rights to indemnification in connection
with the matters being investigated by the special committee and to waive
certain other contractual arrangements.
At a meeting of the Syncor board of directors held on the afternoon of
November 21, 2002, Mr. Puckett and representatives of Skadden, Arps described
Cardinal Health's preliminary proposal relating to the escrow arrangement.
Following a discussion of the proposed escrow arrangement and for the reasons
described below under "Reasons for Amending the Merger Agreement; Recommendation
of the Syncor Board of Directors", the Syncor board instructed Mr. Puckett to
determine whether Cardinal Health would be receptive to a fixed reduction in the
exchange ratio in lieu of the escrow arrangement.
From November 21, 2002 through December 3, 2002, Mr. Puckett and
representatives of Syncor continued to have exploratory discussions with
representatives of Cardinal Health regarding the possible reduction of the
exchange ratio, as well as the other terms of a proposed amendment to the merger
agreement.
On November 22, 2002, Syncor and Cardinal Health entered into amendment no.
1 to the merger agreement to extend the date after which either party may
unilaterally elect to terminate the transaction from December 31, 2002 to
January 15, 2003 and issued a related press release. On Sunday, November 24,
2002, Wachtell, Lipton, Rosen & Katz, outside counsel to Cardinal Health,
furnished Skadden, Arps with a proposed draft of a second amendment to the
merger agreement. Wachtell, Lipton and Skadden, Arps continued negotiations
regarding a proposed second amendment to the original merger agreement through
December 3, 2002.
On November 25, 2002, Syncor's board of directors held a special meeting
telephonically to ratify amendment no. 1 to the merger agreement and to discuss
a proposed further amendment to the merger agreement. Representatives of
Skadden, Arps discussed in detail fiduciary and other legal considerations that
the Syncor board of directors should consider in their deliberations regarding
the proposed amendment to the merger agreement. Representatives of Skadden, Arps
also updated the Syncor board regarding the proposed settlement discussions with
the DOJ and the staff of the SEC. Syncor's financial advisor, Salomon Smith
Barney, informed the Syncor board of directors that it was continuing its
financial review. The Syncor board of directors also discussed with Syncor's
management and Salomon Smith Barney the potential risks and advantages of Syncor
remaining as an independent company in light of recent developments.
On November 26, 2002, the Syncor board of directors met telephonically and
received updates from the special committee of the Syncor board of directors and
Skadden, Arps with respect to the proposed settlement discussions with the DOJ
and the staff of the SEC and a possible second amendment to the original merger
agreement.
On November 26, 2002, a special telephonic meeting of the Cardinal Health
board of directors was held. The proposed terms of the Syncor settlements with
the DOJ and the staff of the SEC were discussed and Cardinal Health management
and outside counsel apprised the board of developments since November 6, 2002.
At this meeting, the Cardinal Health board of directors ratified amendment no. 1
to the merger agreement and approved the terms of a proposed amendment no. 2 to
the merger agreement, subject to satisfactory resolution of Syncor's settlement
discussions with the DOJ and the staff of the SEC, as well as other matters
relating to Monty Fu.
On December 1, 2002, the special committee of Syncor's board of directors
met telephonically. Representatives of Skadden, Arps reviewed with the committee
the terms of the proposed agreements with the DOJ and the staff of the SEC as
described above under "Recent Developments -- Investigation of Foreign
Operations; Agreements with the United States Department of Justice and the
Securities and Exchange Commission." The special committee considered the SEC
and DOJ proposals and voted unanimously to instruct Skadden, Arps to seek to
execute settlements with the DOJ and the staff of the SEC on the terms discussed
with the special committee, subject to the receipt of a consent to these
agreements from Cardinal Health which was subsequently received.
28
Commencing the morning of December 3, 2002 and continuing in the late
afternoon and evening of December 3, 2002, the Syncor board of directors met
telephonically and received an update from the special committee of the Syncor
board of directors and legal and financial advisors as to developments since the
last Syncor board meeting. Mr. Puckett and representatives of Skadden, Arps
reviewed the outcome of negotiations on the issues in the draft amendment to the
merger agreement. Salomon Smith Barney reviewed its financial analysis of the
revised exchange ratio provided for in the amended merger agreement and rendered
to the Syncor board of directors its oral opinion, confirmed by delivery of a
written opinion dated December 3, 2002, to the effect that, as of the date of
the opinion and based on and subject to the matters described in its opinion,
the revised exchange ratio was fair, from a financial point of view, to holders
of Syncor common stock. See "Opinion of Syncor's Financial Advisor". After
deliberations and for the reasons described below under "Reasons for Amending
the Merger Agreement; Recommendation of the Syncor Board of Directors", the
Syncor board of directors unanimously determined (with Monty Fu absent and not
participating) that the terms of the amended merger agreement, including the
merger, are advisable and fair to and in the best interests of Syncor and its
stockholders and in furtherance of the long-term business strategies and goals
of Syncor. The Syncor board of directors approved the amended merger agreement
and resolved to recommend that Syncor stockholders approve the amended merger
agreement.
From late November 2002 until December 3, 2002, representatives of Monty Fu
held discussions with representatives of Syncor and the special committee of the
Syncor board of directors regarding Mr. Fu's status with the company and his
agreement to surrender $2.5 million of Syncor shares and to waive his right to
receive cash severance payments of approximately $2.1 million if the proposed
merger with Cardinal Health is completed. On the evening of December 3, 2002,
Mr. Fu and Syncor signed an agreement with the consent of Cardinal Health. See
"Recent Developments -- Agreement with Monty Fu".
On the evening of December 3, 2002, Cardinal Health and Syncor executed
amendment no. 2 to the merger agreement, and on the morning of December 4, 2002,
Syncor and Cardinal Health announced the terms of the amended merger agreement
and Syncor's agreements with the DOJ and the staff of the SEC. On December 4,
2002 Syncor separately announced the terms of the Fu letter agreement.
REASONS FOR AMENDING THE MERGER AGREEMENT; RECOMMENDATION OF THE SYNCOR BOARD OF
DIRECTORS
The following disclosure is in addition to the information set forth on
pages 24 to 27 of the original proxy statement/prospectus.
In light of events that have come to the attention of the Syncor board of
directors since late October 2002, the Syncor board of directors has approved
the amended merger agreement which provides for, among other things, a 9.6%
reduction in the exchange ratio in the original merger agreement such that each
Syncor stockholder will receive 0.47 of a Cardinal Health common share (instead
of 0.52 of a Cardinal Health common share) for each Syncor share held by that
stockholder. The Syncor board of directors has determined that the amended
merger agreement and the transactions contemplated by the amended merger
agreement, including the merger, as described in the original proxy
statement/prospectus, are advisable and are in the best interests of Syncor and
its stockholders and in furtherance of the long-term business strategies and
goals of Syncor. In addition to the factors considered by the Syncor board of
directors in unanimously approving (with Monty Fu absent and not participating)
the original merger agreement, as described in the original proxy
statement/prospectus, the Syncor board of directors has considered additional
factors in deciding, in light of the events occurring since late October 2002,
to enter into the amended merger agreement, and to recommend that Syncor
stockholders approve the terms of the amended merger agreement, including,
without limitation, the following:
- the value to Syncor stockholders of the revised terms of the merger with
Cardinal Health, including the fairness to stockholders of the revised
exchange ratio in the amended merger agreement; and
- the terms of the amended merger agreement and other details of the
proposed amended merger with Cardinal Health.
29
The deliberations of the Syncor board of directors included consideration
of the following positive factors:
- the understanding of the Syncor board of directors, based on its
discussions with the management of Cardinal Health and public statements
made by Cardinal Health since November 6, 2002, that Cardinal Health
would not commit to proceeding with the merger under the terms set forth
in the original merger agreement and the potentially costly, protracted
and disruptive dispute (including litigation) that likely would have
resulted regarding the parties' obligations to proceed with the
transaction under the terms of the original merger agreement in the event
that the amended merger agreement was not executed; in that regard, the
board noted that there could be no assurance that Syncor would prevail in
any such dispute with Cardinal Health;
- the possibility that consummating the merger in a relatively short period
of time will help alleviate the disruption to Syncor's business and
distraction to management that has resulted from the events surrounding
the special committee's investigation and Cardinal Health's reaction to
such events; in that regard, the Syncor board of directors believed that
consummating the merger at the earliest practicable time with the highest
degree of certainty of closing would be in the best interests of Syncor's
stockholders;
- the revised exchange ratio (based on the closing price per Cardinal
Health common share on December 3, 2002) implied a value of $29.26 per
Syncor share, representing a premium of 12.0% over the closing price per
Syncor share on December 3, 2002, the last trading day before the
announcement of the amended merger agreement, and a premium of
approximately 20.1% over the average closing price per Syncor share from
the announcement on November 6, 2002 of the establishment of the special
committee through December 3, 2002;
- the fact that since the original merger agreement was announced, Cardinal
Health's share price has remained relatively stable as compared to the
decline in the market prices of Cardinal Health's peers;
- the financial presentation of Syncor's financial advisor, Salomon Smith
Barney, including its opinion dated December 3, 2002, to the Syncor board
of directors as to the fairness, from a financial point of view and as of
the date of the opinion, of the revised exchange ratio provided for in
the amended merger agreement, as more fully described under "Opinion of
Syncor's Financial Advisor";
- the more uncertain prospects of Syncor's international operations as a
result of the matters uncovered by the special committee's investigation;
- the possibility of damage to Syncor's business and reputation as a result
of the matters subject to the investigation by the special committee of
the Syncor board of directors;
- the potential risks associated with the rule change announced by the
Centers for Medicare and Medicaid Services on October 31, 2002, relating
to the system used by Medicare and Medicaid to reimburse hospitals for
services rendered to their patients in hospital outpatient settings, and
the potential resulting impact, which could negatively affect Syncor's
revenues and results of operations;
- the risk that Syncor will not find a buyer for its CMI business (or that
any such sale will be on terms that are not favorable to Syncor), and the
likelihood that any sale of CMI will result in a loss on disposal to
Syncor as reflected by the special charge to earnings net after-tax of
$31.3 million recorded in the third quarter ended September 30, 2002;
- the agreement of Cardinal Health in the amended merger agreement to treat
certain matters arising out of the information disclosed prior to the
date of the amended merger agreement as a result of the investigation by
the special committee of the Syncor board of directors of Syncor's
foreign operations as excluded for purposes of determining whether a
"Material Adverse Effect" has occurred under the terms of the amended
merger agreement;
- the agreement of Cardinal Health in the amended merger agreement to
extend the termination date in the merger agreement to the earlier of
March 21, 2003 and 23 business days following the effectiveness of the
amendment to Cardinal Health's registration statement relating to this
document, thereby
30
addressing Syncor's increasing concern that Cardinal Health might
unilaterally terminate the merger agreement following the original
termination date of December 31, 2002;
- the fact that since Syncor announced the original merger agreement no
other party has made an offer or proposed to engage in an alternative
transaction with Syncor;
- the uncertain potential impact on Syncor and Syncor's financial
statements of any findings of the continuing investigation regarding
actions by or on behalf of Syncor or its subsidiaries or representatives;
- the potential imposition of fines, penalties or other remedies or
sanctions on Syncor by the SEC, the DOJ or any other foreign or domestic
governmental authorities relating to the matters being investigated by
the special committee;
- the possibility that the agreements between Syncor and the DOJ and the
staff of the SEC described above under "Recent
Developments -- Investigation of Foreign Operations; Agreements with the
United States Department of Justice and the Securities and Exchange
Commission" may not result in definitive resolution of these matters with
the SEC or the DOJ on terms satisfactory to Syncor or Cardinal Health;
and
- the potential costs and uncertainty relating to litigation already
commenced (see "Recent Developments -- Certain Litigation") or which may
be commenced as a result of the findings of the special committee of the
Syncor board of directors.
The Syncor board of directors also identified and considered the following
potentially negative factors in its deliberations:
- the reduced exchange ratio represents a reduction in the consideration to
Syncor stockholders when compared to the original merger agreement; and
- the continued strong financial results, including net sales and operating
income, of Syncor's U.S. Pharmacy Services business as reflected in the
reported results for the third quarter ended September 30, 2002.
In its consideration of the proposed amendment to the exchange ratio, the
Syncor board of directors also considered an alternative possible proposal from
Cardinal Health to effect a reduction of the consideration to be received by
Syncor's stockholders whereby the Syncor stockholders would place 10% of the
Cardinal Health common shares they would receive in the merger (calculated using
the original exchange ratio of 0.52) in an escrow fund which would be used to
pay for the Escrow Claims. Under this proposal, any shares remaining in escrow
after a number of years (to be agreed to) and the satisfaction of all Escrow
Claims would have been released to the Syncor stockholders following the final
resolution of all present and any future litigation or proceedings relating to
these matters. The Syncor board of directors determined that this alternative
proposal was not the best course of action after careful consideration of
numerous factors, including, without limitation, the following:
- the negotiation of the terms of the escrow arrangement would be unduly
complex and could lead to further disputes between the parties since the
parties would be required to determine, among other things, (i) a precise
definition of the Escrow Claims which would be satisfied by the Cardinal
Health common shares held in the escrow fund, (ii) who would control
litigation and proceedings relating to the Escrow Claims, (iii) the
length of time the Cardinal Health common shares would be held under the
escrow arrangement, and (iv) the mechanisms required to run and maintain
the escrow fund;
- the negotiation of the terms of the escrow arrangement, and the
preparation, review and mailing of required disclosures to stockholders
relating to such arrangement, could delay significantly the consummation
of the merger for a prolonged and uncertain period of time, which delay
could potentially jeopardize the consummation of the merger and have an
adverse effect on Syncor, its employees and its business;
- the difficulty in reaching agreement with Cardinal Health on how to treat
potential future discoveries resulting from the continuing investigation
by the special committee of the Syncor board of directors;
31
- the difficulties and administrative complexities inherent in applying the
escrow arrangement to stock options held by officers, directors and
employees of Syncor, as compared to a reduction in the exchange ratio
that would apply equally to all holders of Syncor equity securities,
including holders of stock options;
- the lack of any recent precedent for using an escrow arrangement in a
stock-for-stock merger between two public companies to deal with the
potential impact of a specific contingent liability and the difficulty in
determining the likely results from using such a structure;
- the difficulty in determining the intrinsic value of that portion of the
consideration subject to an escrow arrangement whereby 10% of the
Cardinal Health common shares issuable in the merger would be held in
escrow and not be released to the stockholders for a prolonged and
potentially undeterminable period of time, if ever;
- the likelihood that the market would ascribe a relatively low value to
the Cardinal Health common shares placed in escrow; and
- the fact that the reduced exchange ratio under the amended merger
agreement provides for a slightly smaller discount to the original
exchange ratio than the 10% of the consideration that would have been
placed in escrow under the escrow arrangement.
Although the foregoing discussion (and the related discussion in the
original proxy statement/ prospectus) sets forth all of the material factors
considered by the Syncor board of directors in reaching its recommendation, it
may not include all of the factors considered by the Syncor board of directors,
and each director may have considered different factors. In view of the variety
of factors and the amount of information considered, the Syncor board of
directors did not find it practicable to, and did not, make specific assessments
of, quantify or otherwise assign relative weights to the specific factors
considered in reaching its determination. The determination was made after
consideration of all of the factors as a whole.
IN LIGHT OF EVENTS THAT HAVE COME TO THE ATTENTION OF THE SYNCOR BOARD OF
DIRECTORS SINCE LATE OCTOBER 2002, THE SYNCOR BOARD OF DIRECTORS HAS APPROVED
THE AMENDED MERGER AGREEMENT WHICH PROVIDES FOR, AMONG OTHER THINGS, A 9.6%
REDUCTION IN THE EXCHANGE RATIO SET FORTH IN THE ORIGINAL MERGER AGREEMENT SUCH
THAT EACH SYNCOR STOCKHOLDER WILL RECEIVE 0.47 OF A CARDINAL HEALTH COMMON SHARE
(INSTEAD OF 0.52 OF A CARDINAL HEALTH COMMON SHARE) FOR EACH SYNCOR SHARE HELD
BY SUCH STOCKHOLDER. THE SYNCOR BOARD OF DIRECTORS HAS DETERMINED THAT THE
AMENDED MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THE AMENDED MERGER
AGREEMENT, INCLUDING THE MERGER, AS DESCRIBED IN THE ORIGINAL PROXY
STATEMENT/PROSPECTUS, ARE ADVISABLE AND ARE IN THE BEST INTERESTS OF SYNCOR AND
ITS STOCKHOLDERS AND IN FURTHERANCE OF THE LONG-TERM BUSINESS STRATEGIES AND
GOALS OF SYNCOR. ACCORDINGLY, THE SYNCOR BOARD OF DIRECTORS RECOMMENDS THAT THE
SYNCOR STOCKHOLDERS VOTE "FOR" APPROVAL OF THE AMENDED MERGER AGREEMENT.
In considering the recommendation of the Syncor board of directors with
respect to the amended merger agreement, you should be aware that certain
directors and officers of Syncor have arrangements that cause them to have
interests in the transaction that are different from, or are in addition to, the
interests of Syncor stockholders generally. These potentially conflicting
interests were disclosed in the original proxy statement/prospectus.
Considerations of the Cardinal Health Board of Directors. In light of
events that have come to the attention of the Cardinal Health board of directors
since late October 2002, the Cardinal Health board of directors approved the
amended merger agreement which provides, among other things, for a reduction in
the exchange ratio from that agreed at the time the original merger agreement
was signed. In addition to the factors considered by the Cardinal Health board
of directors in unanimously approving the original merger agreement, as
described on pages 27 and 28 of the original proxy statement/prospectus, the
Cardinal Health board of directors consulted with Cardinal Health's legal
advisors as well as with Cardinal Health's
32
management the reduced exchange ratio results in fewer shares being issued; and
considered a number of positive factors, including among others:
- management's expectation that, with a lower exchange ratio, the merger
will be accretive to earnings and cash flow of the combined company, as
compared to Cardinal Health's stand-alone earnings and cash flow
expectations, without giving effect to any potential synergies;
- the fact that Syncor's core U.S. pharmacy services business continued to
show strong year-to-date financial performance, including a 28 percent
increase in net sales from continuing operations and a 53 percent
increase in operating income during Syncor's third quarter 2002 as
compared with the same period of 2001;
- Mr. Fu agreement to contribute Syncor shares having a value of $2.5
million and forego his severance payment valued at approximately $2.1
million, which he may have been entitled;
- the avoidance of a potentially costly, protracted and disruptive dispute
that likely would have resulted regarding the parties obligation to
proceed with the transaction under the terms of the amended merger
agreement in the event that the amended merger agreement was not executed
(including the risk of litigation and the fact that there could be no
assurances that Cardinal Health would prevail in that litigation);
- the belief that as a result of the investigation, including Cardinal
Health's extensive and ongoing due diligence, the issues were addressed
with the SEC and DOJ; and
- the belief that Syncor's core U.S. pharmacy services business continued
to represent an attractive fit with Cardinal Health's existing nuclear
pharmacy services offering that would provide Cardinal Health with
opportunities to enhance its relationship with pharmaceutical
manufacturers and biotech companies.
The Cardinal Health board of directors believed that the positive factors
mentioned above outweighed the following negative factors:
- the time and resources required to complete the merger, with the
completion of the merger being subject to certain conditions (see "The
Merger Agreement -- Conditions to the Obligations of Each
Party; -- Conditions to the Obligations of Syncor; -- Conditions to the
Obligations of Cardinal Health and Mudhen Merger Corp." on pages 49 to 51
of the original proxy statement/prospectus) and the time and resources
necessary to integrate Syncor's operations with Cardinal Health's
operations;
- the time and resources required to resolve the issues resulting from the
internal investigations at Syncor and its subsidiaries and the
developments related to Syncor's agreements with the DOJ and the staff of
the SEC (see "Recent Developments -- Investigation of Foreign Operations;
Agreements with the United States Department of Justice and the
Securities and Exchange Commission");
- the potential fines and penalties that may be levied on Syncor and its
subsidiaries by the U.S. government and foreign authorities as a result
of the findings of the internal investigations (see "Recent
Developments -- Investigation of Foreign Operations; Agreements with the
United States Department of Justice and the Securities and Exchange
Commission");
- the costs associated with defending the litigation against Syncor and
Cardinal Health arising out of the subject matter of the internal
investigations (see "Recent Developments -- Certain Litigation");
- negative publicity and potential impact to Cardinal Health's reputation
resulting from Syncor's agreements with the DOJ and the staff of the SEC
and the related allegations (see "Recent Developments -- Investigation of
Foreign Operations; Agreements with the United States Department of
Justice and the Securities and Exchange Commission");
- the fact that all of the conditions to the merger may not be satisfied
until the first calendar quarter of 2003;
33
- the time and resources required to explore options to shut down or sell
Syncor's foreign operations if this course of action is pursued by
Cardinal Health;
- the potential additional delay in selling CMI (see "Recent
Developments -- CMI Sale Process");
- potential difficulties inherent in integrating two geographically diverse
businesses and the risk that the benefits expected to be obtained in the
merger might not be fully realized; and
- the cost associated with retaining Syncor's management team and
possibility that Cardinal Health may be unable to retain these
individuals.
The Cardinal Health board considered that the costs associated with the
recent developments and determined that the benefits of the transaction coupled
with the adjustment to the exchange ratio outweighed the additional negative
factors resulting from those developments.
The Cardinal Health board of directors also considered Syncor's anticipated
divestiture of CMI and found this plan to be consistent with Cardinal Health's
strategic direction, although there can be no assurances that any transaction
involving CMI will occur. The foregoing discussion of the factors considered by
the Cardinal Health board of directors 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 Health board of directors 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 Health directors may have given differing weights to
different factors. The Cardinal Health 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 amended merger agreement.
INTERESTS OF SYNCOR'S DIRECTORS AND OFFICERS IN THE MERGER
Certain members of the Syncor board of directors and certain of Syncor's
executive officers may be deemed to have interests that are different from, or
are in addition to, the interests of Syncor stockholders generally. The
following interests are in addition to the interests identified on pages 34
through 37 of the original proxy statement/prospectus. The Syncor board of
directors was aware of the interests and considered them, among other matters,
in approving the amended merger agreement.
Cardinal Health is continuing discussions with each of Robert G. Funari and
Rodney E. Boone regarding the terms of his employment relationship with the
combined companies following the merger. These discussions may result in
renegotiation of their employment and/or severance agreements.
In recognition of the extraordinary work and effort required in connection
with his service as lead director of the Syncor board of directors and chairman
of the special committee to the board beginning on November 6, 2002, the Syncor
board of directors has authorized payments to Mr. Bernard Puckett of $3,000 per
day for each day that he spends significant time working in his capacity as lead
director or as chairman of the special committee. As of the date of this
document, these payments total approximately $ . These payments are in
addition to the payments that each member of the Syncor board of directors is
entitled to receive as a member of the board and of any committee thereof.
OPINION OF SYNCOR'S FINANCIAL ADVISOR
Syncor retained Salomon Smith Barney to act as its financial advisor in
connection with the proposed merger. In connection with this engagement, Syncor
requested that Salomon Smith Barney evaluate the fairness, from a financial
point of view, to the holders of Syncor common stock of the exchange ratio
provided for in the merger. On December 3, 2002, at a meeting of the Syncor
board of directors held to evaluate the amended merger agreement, Salomon Smith
Barney delivered to the Syncor board of directors an oral opinion, which opinion
was confirmed by delivery of a written opinion dated the same date, to the
effect that, as of that date and based on and subject to the matters described
in its opinion, the revised exchange ratio was fair, from a financial point of
view, to the holders of Syncor common stock.
34
In arriving at its opinion, Salomon Smith Barney:
- reviewed the amended to the merger agreement and related documents;
- held discussions with Syncor's senior officers, directors and other
representatives and advisors and with Cardinal Health's senior officers
and other representatives and advisors concerning Syncor's and Cardinal
Health's businesses, operations and prospects;
- examined publicly available business and financial information relating
to Syncor and Cardinal Health;
- examined financial forecasts and other information and data for Syncor
and publicly available financial forecasts and other information and data
for Cardinal Health which were provided to or otherwise discussed with
Salomon Smith Barney by Syncor's and Cardinal Health's managements,
including information relating to the potential strategic implications
and operational benefits anticipated by Syncor's management to result
from the merger;
- reviewed the financial terms of the merger as described in the amended
merger agreement in relation to, among other things, current and
historical market prices and trading volumes of Syncor common stock and
Cardinal Health common shares, the historical and projected earnings and
other operating data of Syncor and Cardinal Health, and the
capitalization and financial condition of Syncor and Cardinal Health;
- considered, to the extent publicly available, the financial terms of
other transactions effected that 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 Syncor and Cardinal Health;
- evaluated the potential pro forma financial impact of the merger on
Cardinal Health; 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 it. With respect to financial forecasts and other
information and data relating to Syncor provided to or otherwise discussed with
Salomon Smith Barney and used in its analysis, Syncor's management advised
Salomon Smith Barney that the forecasts and other information and data were
reasonably prepared on bases reflecting the best currently available estimates
and judgments of Syncor's management as to the future financial performance of
Syncor. With respect to the publicly available financial forecasts and other
information and data relating to Cardinal Health provided to or otherwise
discussed with Salomon Smith Barney and used in its analysis, Cardinal Health's
management advised Salomon Smith Barney that the forecasts and other information
and data represented reasonable estimates as to the future financial performance
of Cardinal Health.
Salomon Smith Barney assumed, with Syncor's consent, that the merger will
be completed in accordance with its terms without waiver, modification or
amendment of any material term, condition or agreement and that, in the course
of obtaining the necessary regulatory or third-party approvals and consents for
the merger, no delay, limitation, restriction or condition will be imposed other
than as specified in the amended merger agreement and related documents. Salomon
Smith Barney also assumed, with Syncor's consent, that the merger will be
treated as a reorganization for federal income tax purposes. Salomon Smith
Barney did not express any opinion as to what the value of Cardinal Health
common shares actually will be when issued in the merger or the prices at which
Cardinal Health common shares will trade or otherwise be transferable at any
time. 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 Syncor or Cardinal Health, and Salomon Smith Barney did not make any physical
inspection of the properties or assets of Syncor or Cardinal Health.
35
In connection with its engagement, and at Syncor's request, Salomon Smith
Barney held preliminary discussions with selected third parties prior to the
date on which the original merger agreement was executed regarding the
acquisition of Syncor. Salomon Smith Barney's opinion does not address the
relative merits of the merger as compared to any alternative business strategies
that might exist for Syncor or the effect of any other transaction in which
Syncor 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 revised 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 Syncor and Cardinal Health. Syncor
imposed no other instructions or limitations on Salomon Smith Barney with
respect to the investigations made or procedures followed by Salomon Smith
Barney in rendering its opinion.
The full text of Salomon Smith Barney's written opinion dated December 3,
2002, which describes the assumptions made, matters considered and limitations
on the review undertaken, is included as Appendix D to this document and is
incorporated in this document by reference. Salomon Smith Barney's opinion is
directed to the Syncor board of directors and relates only to the fairness of
the revised 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 Syncor stockholder with respect to any matters relating to
the proposed 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, but rather describes the material financial
analyses underlying the 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
Syncor and Cardinal Health. No company, business or transaction used in those
analyses as a comparison is identical to Syncor, Cardinal Health 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 or business
segments 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 Syncor board of directors in its evaluation of the merger, and
should not be viewed as determinative of the views of the Syncor board of
directors or Syncor's management with respect to the revised 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 3, 2002. 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
36
constitute a complete description of the financial analyses. Considering the
data 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. Internal estimates of Syncor's management used in
the analyses described below exclude Syncor's wholly owned subsidiary, CMI,
which Syncor has publicly announced it intends to sell, and assumes that a
portion of the after-tax net proceeds of that sale will be used to repay a
significant portion of Syncor's total debt outstanding.
Selected Companies Analysis. Salomon Smith Barney compared financial,
operating and stock market data of Syncor to corresponding financial, operating
and stock market data of Cardinal Health and the following six publicly traded
companies in the broad-based distributors and medical/surgical distributors
sectors of the health care industry:
BROAD-BASED DISTRIBUTORS MEDICAL/SURGICAL DISTRIBUTORS
------------------------------- --------------------------------------
- AmeriSourceBergen Corporation - Fisher Scientific International Inc.
- D&K Healthcare Resources Inc. - Henry Schein, Inc.
- McKesson Corporation - Owens & Minor, Inc.
Salomon Smith Barney also compared financial, operating and stock market
data of the three publicly traded companies listed above in the broad-based
distributors sector to corresponding financial, operating and stock market data
of Cardinal Health. The selected companies that were reviewed distinctly for
Syncor are referred to as the Syncor selected companies and the selected
companies that were reviewed distinctly for Cardinal Health are referred to as
the Cardinal Health selected companies.
Salomon Smith Barney reviewed firm values, calculated as equity value, plus
debt, minority interest and preferred stock, less cash and cash equivalents, as
a multiple of, among other things, latest 12 months' and estimated calendar year
2002 earnings before interest, taxes, depreciation and amortization, commonly
known as EBITDA. Salomon Smith Barney reviewed equity values as a multiple of
latest 12 months' and estimated calendar years 2002 and 2003 net income.
Estimated financial data for Syncor were based on internal estimates of Syncor's
management and estimated financial data for Cardinal Health were based on
publicly available research analysts' estimates and discussions with Cardinal
Health's management. Estimated financial data for the selected companies were
based on publicly available research analysts' estimates. All multiples were
based on per share closing stock prices on December 2, 2002. Salomon Smith
Barney applied a range of selected multiples of latest 12 months' and estimated
calendar year 2002 EBITDA and latest 12 months' and estimated calendar years
2002 and 2003 net income derived from the Syncor selected companies to
corresponding financial data of Syncor, and applied a range of selected
multiples of estimated calendar year 2002 EBITDA and latest 12 months' and
estimated calendar years 2002 and 2003 net income derived from the Cardinal
Health selected companies to corresponding financial data of Cardinal Health, in
order to derive implied equity reference ranges for Syncor and Cardinal Health.
This analysis indicated the following implied per share equity reference range
for Syncor, as compared to the per share equity value of Syncor implied by the
revised exchange ratio provided for in the merger based on the per share closing
price of Cardinal Health common shares on December 2, 2002:
IMPLIED PER SHARE EQUITY PER SHARE EQUITY VALUE FOR
REFERENCE RANGE FOR SYNCOR SYNCOR IMPLIED BY REVISED EXCHANGE RATIO
-------------------------- ----------------------------------------
$24.00 - $29.00 $29.14
This analysis also indicated an implied per share equity reference range
for Cardinal Health of approximately $55.00 to $64.00, as compared to the per
share closing price of Cardinal Health common shares on December 2, 2002 of
$61.99. The implied per share equity reference ranges for Syncor and Cardinal
Health were then used to calculate an implied exchange ratio range of
approximately 0.375x to 0.527x, as compared to the revised exchange ratio in the
merger of 0.47x.
Discounted Share Price Analysis. Salomon Smith Barney reviewed Syncor's
and Cardinal Health's calendar year estimated 2005 earnings per share, commonly
referred to as EPS, and derived implied hypothetical future share prices for
Syncor and Cardinal Health by applying to their calendar year estimated
37
2005 EPS one-year forward EPS multiples ranging from 15.5x to 17.0x in the case
of Syncor and 19.0x to 21.0x in the case of Cardinal Health. Estimated financial
data for Syncor were based on internal estimates of Syncor's management and
estimated financial data for Cardinal Health were based on publicly available
research analysts' estimates and discussions with Cardinal Health's management.
These hypothetical future share prices were then discounted to present value
using discount rates based on Syncor's and Cardinal Health's cost of equity.
This analysis indicated the following implied per share equity reference range
for Syncor, as compared to the per share equity value of Syncor implied by the
revised exchange ratio provided for in the merger based on the per share closing
price of Cardinal Health common shares on December 2, 2002:
IMPLIED PER SHARE EQUITY PER SHARE EQUITY VALUE FOR
REFERENCE RANGE FOR SYNCOR SYNCOR IMPLIED BY REVISED EXCHANGE RATIO
-------------------------- ----------------------------------------
$23.94 - $27.35 $29.14
This analysis also indicated an implied per share equity reference range
for Cardinal Health of approximately $69.76 to $79.21, as compared to the per
share closing price of Cardinal Health common shares on December 2, 2002 of
$61.99. The implied per share equity reference ranges for Syncor and Cardinal
Health were then used to calculate an implied exchange ratio range of
approximately 0.302x to 0.392x, as compared to the revised exchange ratio in the
merger of 0.47x.
Precedent Transactions Analysis. Salomon Smith Barney reviewed the
aggregate transaction values and implied transaction multiples in the following
eight selected merger and acquisition transactions in the health care industry
completed since July 1992:
ACQUIROR TARGET
-------------------------------- -------------------------------------
- AmeriSource Health Corporation - Bergen Brunswig Corporation
- Cardinal Health, Inc. - Bindley Western Industries, Inc.
- AmeriSource Health Corporation - C.D. Smith Healthcare, Inc.
- AmeriSource Health Corporation - Walker Drug Company
- McKesson Corporation - FoxMeyer Corporation
- Cardinal Health, Inc. - Medicine Shoppe International, Inc.
- Cardinal Distribution, Inc. - Whitmire Distribution Corp.
- Bergen Brunswig Corporation - Durr-Fillauer Medical, Inc.
Salomon Smith Barney compared firm values in the selected transactions as a
multiple of latest 12 months' EBITDA. Salomon Smith Barney compared equity
values in the selected transactions as a multiple of latest 12 months' and
one-year forward net income. Estimated financial data for Syncor were based on
internal estimates of Syncor's management. All multiples for the selected
transactions were based on publicly available information at the time of
announcement of the relevant selected transaction as adjusted based on the
percentage increase/(decrease) in the Standard & Poors 500 Index from the date
of announcement of each transaction through December 2, 2002. Salomon Smith
Barney applied a range of selected multiples derived from the financial data
described above for the selected transactions to corresponding financial data of
Syncor in order to derive an implied equity reference range for Syncor. This
analysis indicated the following implied per share equity reference range for
Syncor, as compared to the per share equity value of Syncor implied by the
revised exchange ratio provided for in the merger based on the per share closing
price of Cardinal Health common shares on December 2, 2002:
IMPLIED PER SHARE EQUITY PER SHARE EQUITY VALUE FOR
REFERENCE RANGE FOR SYNCOR SYNCOR IMPLIED BY REVISED EXCHANGE RATIO
-------------------------- ----------------------------------------
$26.00 - $38.00 $29.14
The implied per share equity reference range for Syncor was then used,
together with the implied per share equity reference range derived for Cardinal
Health from the selected companies analysis described above, to calculate an
implied exchange ratio range of approximately 0.406x to 0.691x, as compared to
the revised exchange ratio in the merger of 0.47x.
38
Discounted Cash Flow Analysis. Salomon Smith Barney calculated the
estimated present value of the stand-alone, unlevered, after-tax free cash flows
that Syncor could produce for calendar years 2003 to 2005. Salomon Smith Barney
also calculated the estimated present value of the stand-alone, unlevered,
after-tax free cash flows that Cardinal Health could produce for the third and
fourth fiscal quarters of fiscal year 2003 and for fiscal years 2004 to 2006.
Estimated financial data for Syncor were based on internal estimates of Syncor's
management and estimated financial data for Cardinal Health were based on
publicly available research analysts' estimates and discussions with Cardinal
Health's management. Salomon Smith Barney calculated a range of estimated
terminal values for Syncor and Cardinal Health by applying, in the case of
Syncor, a range of terminal EBITDA multiples of 6.75x to 9.75x to Syncor's
calendar year 2005 estimated EBITDA and, in the case of Cardinal Health, a range
of terminal EBITDA multiples of 11.5x to 12.5x to Cardinal Health's fiscal year
2006 estimated EBITDA. The estimated free cash flows and terminal values for
each of Syncor and Cardinal Health then were discounted to present value using
discount rates ranging from 9.0% to 10.0% in the case of Syncor and 8.5% to 9.5%
in the case of Cardinal Health. This analysis indicated the following implied
per share equity reference range for Syncor, as compared to the per share equity
value of Syncor implied by the revised exchange ratio provided for in the merger
based on the per share closing price of Cardinal Health common shares on
December 2, 2002:
IMPLIED PER SHARE EQUITY PER SHARE EQUITY VALUE FOR
REFERENCE RANGE FOR SYNCOR SYNCOR IMPLIED BY REVISED EXCHANGE RATIO
-------------------------- ----------------------------------------
$27.55 - $37.57 $29.14
This analysis also indicated an implied per share equity reference range
for Cardinal Health of between $89.00 to $98.39, as compared to the per share
closing price of Cardinal Health common shares on December 2, 2002 of $61.99.
The implied per share equity reference ranges for Syncor and Cardinal Health
were then used to calculate an implied exchange ratio range of approximately
0.280x to 0.422x, as compared to the revised exchange ratio in the merger of
0.47x.
Other Factors. In the course of preparing its opinion, Salomon Smith
Barney also reviewed and considered other information and data, including:
- trading characteristics and stock price performance of Syncor shares,
Cardinal Health common shares and the common stock of selected companies
in the health care industry (including during the period since the
announcement of the original merger agreement), including a comparison of
price to earnings growth and, in the case of Cardinal Health, forward
year price to earnings multiples;
- implied multiples for Syncor both on a stand-alone basis and in the
merger based on various operational and financial metrics;
- the potential pro forma effect of the merger on Cardinal Health's
earnings per common share, without taking into account potential cost
savings or other synergies from the merger, as estimated for fiscal years
2003 and 2004; and
- publicly available research analysts' reports for Cardinal Health common
shares.
MISCELLANEOUS
Under the terms of its engagement, Syncor 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, which fee is estimated to be
approximately $4.9 million. Syncor 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 the reasonable fees
and expenses of its legal counsel, and to indemnify Salomon Smith Barney and
related persons against liabilities, including liabilities under the U.S.
federal securities laws, arising out of its engagement.
Salomon Smith Barney and its affiliates in the past have provided, and
currently are providing, services to Syncor unrelated to the proposed merger,
for which services Salomon Smith Barney and its affiliates have received, and
expect to receive, compensation. Salomon Smith Barney and its affiliates also in
the past have
39
provided, and may in the future provide, services to Cardinal Health unrelated
to the proposed merger, for which services Salomon Smith Barney and its
affiliates have received, and may receive, compensation. In the ordinary course
of business, Salomon Smith Barney and its affiliates may actively trade or hold
the securities of Syncor and Cardinal Health 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. In addition, Salomon Smith Barney and its
affiliates, including Citigroup Inc. and its affiliates, may maintain
relationships with Syncor, Cardinal Health and their affiliates.
Salomon Smith Barney is an internationally recognized investment banking
firm, and was selected by Syncor based on its reputation, experience and
familiarity with Syncor and its business. 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.
40
THE MERGER AGREEMENT AMENDMENTS
The following is a summary of material provisions of the merger agreement
amendments, copies of which are included as Appendix A and Appendix B to this
document. The merger agreement as signed on June 14, 2002 and conformed to give
effect to amendment no. 1 and amendment no. 2 is included as Appendix C to this
document. This summary is qualified in its entirety by reference to the merger
agreement and the amendments, which are incorporated by reference in this
document. Except as described below, the terms of the merger agreement are as
described on pages 39 through 54 of the original proxy statement/prospectus.
EXCHANGE RATIO
At the effective time of the merger, each share of Syncor common stock
issued and outstanding immediately prior to the effective time of the merger
will be converted into the right to receive 0.47 of a Cardinal Health common
share. Prior to amending the merger agreement, the exchange ratio was equal to
0.52 of a Cardinal Health common share.
This revised exchange ratio of 0.47 will also be used in determining the
number of options to purchase Cardinal Health common shares a holder of a Syncor
stock option will have as a result of the merger. Prior to the effective time of
the merger, Cardinal Health and Syncor will take all necessary actions to cause
each unexpired and unexercised outstanding option granted or issued under
Syncor's stock option or equity-incentive plans to be automatically converted at
the effective time of the merger into a fully-vested option to purchase that
number of Cardinal Health common shares equal to the number of Syncor shares
subject to the Syncor option immediately prior to the effective time of the
merger multiplied by the revised exchange ratio of 0.47 (and rounded to the
nearest share), with an exercise price per share equal to the exercise price per
share of the Syncor option divided by the revised exchange ratio of 0.47 (and
rounded to the nearest whole cent), and with other terms and conditions that are
the same as the terms and conditions of the Syncor option immediately before the
effective time of the merger. Adjustments may be made, as necessary, to preserve
the tax treatment of incentive stock options. Subject to limited exceptions
described in the original proxy statement/prospectus, Syncor options granted by
Syncor between June 14, 2002, and the completion of the merger will not vest and
will be converted into unvested options to purchase Cardinal Health common
shares as described above. These Cardinal Health options will vest pursuant to
the terms of the Syncor options as in effect at the time of the merger.
Based on the exchange ratio of 0.47 and the closing per share sale price of
Cardinal Health common shares as of December 5, 2002, the value of the Cardinal
Health common shares to be received by all of the Syncor stockholders in
connection with the merger is approximately $806 million.
ADDITIONAL CONDITION TO THE OBLIGATIONS OF CARDINAL HEALTH AND MUDHEN MERGER
CORP. TO COMPLETE MERGER
In addition to conditions to the obligations of Cardinal Health and Mudhen
Merger Corp. listed on page 51 of the original proxy statement/prospectus, the
obligations of Cardinal Health and Mudhen Merger Corp. to consummate the merger
and the transactions contemplated by the amended merger agreement are subject to
Syncor Taiwan, Inc. entering into a guilty plea pursuant to the agreement, dated
December 3, 2002, between counsel for Syncor and the DOJ and the plea agreement,
dated December 3, 2002, between Syncor Taiwan and the DOJ. The plea must be
without modification to its terms except for any modification that would not be
materially adverse to Cardinal or have a material adverse effect (as defined
below) on Syncor.
MATERIAL ADVERSE EFFECT
A "material adverse effect" with respect to any party to the amended merger
agreement will be deemed to occur if there will have been a material adverse
effect on the business, financial condition or results of
41
operations of that party to the amended merger agreement and that party's
subsidiaries, taken as a whole, except to the extent that the adverse effect
results from:
- changes (1) in prevailing interest rates in the United States or
financial market conditions in the United States, (2) in general economic
conditions in the United States, or (3) in GAAP;
- any developments, changes or consequences relating to or that could arise
from the actual or prospective renewal of (or failure to renew) Syncor's
agreement with Dupont Merck Pharmaceutical Company (and Bristol-Myers, as
successor), dated December 19, 1993, as amended (prior to June 14, 2002),
which we refer to as the BMS contract, any new terms that may be
negotiated in any proposed or actual amended or new BMS contract, any
negotiations with Bristol-Myers (or the substitute counterparty) directly
relating to the BMS contract or any amendment to the BMS contract, or a
new BMS contract, in each case, regardless of whether or not
Bristol-Myers owns the product covered by the BMS contract;
- any developments, changes or consequences relating to the process for the
possible sale of all or a portion of the business of CMI, including the
failure to sell all or any portion of the CMI business, the level of
interest of any parties in pursuing a sale or the value or other terms
for a sale indicated by those parties, and the pricing or other terms of
any sale, or the effect of any accounting charges, adjustments and
changes previously disclosed to Cardinal Health. For the purposes of the
amended merger agreement, in determining whether there has been a
material adverse effect on Syncor, any changes to or developments
regarding the CMI business will be measured solely against the actual
results of the CMI business for the fiscal year ended December 31, 2001;
- the Syncor Disclosure Matter, which is defined as:
- the information set forth in the written reports prepared by Ernst &
Young LLP; Skadden, Arps, Slate, Meagher & Flom LLP; and
PricewaterhouseCoopers LLP relating to Syncor's and its subsidiaries'
operations outside of the continental United States, Alaska and Hawaii
as disclosed to each of the DOJ, the SEC and Cardinal Health (or its
outside legal counsel),
- any suit, claim, action, proceeding, hearing, notice of violation,
demand letter or investigation, judgment, settlement, fine, penalty or
order by or before any governmental authority, whether existing,
pending, threatened or hereafter arising (and including the terms and
status thereof), arising from the matters identified in the preceding
bullet point or the disclosure, fiduciary, contractual or other
obligations of the parties and their subsidiaries and their respective
directors, officers, employees and representatives relating to the
matters identified in the preceding bullet point, and
- any costs, fees and expenses of Syncor or its subsidiaries relating to
the investigation of the matters identified in the two bullet points
above; the renegotiation of the merger agreement; the solicitation of
proxies after December 3, 2002; and any pre-existing indemnity rights of
any directors, officers, employees and representatives of Syncor or of
any of its subsidiaries in connection with any of the matters identified
in the two preceding bullet points.
TERMINATION
The amendments have the effect of permitting the merger agreement to be
terminated and the merger to be abandoned at any time prior to the effective
time of the merger (notwithstanding any approval of the merger agreement by
Syncor stockholders):
1. by mutual written consent of Cardinal Health and Syncor;
2. by either Cardinal Health or Syncor if there will be any law or
regulation that makes completion 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 Health or Syncor
from completing the merger will have been entered and the judgment,
injunction, order or decree will have become final and nonappealable;
provided that the party seeking to terminate the merger agreement pursuant
to this
42
provision of the merger agreement will have used its reasonable best
efforts to remove the order, decree, ruling or injunction;
3. by either Cardinal or Syncor if the merger shall not have been
consummated before the date that is the earlier of (1) the date that is 23
business days (within the meaning of Rule 14d-1(g)(3) of the Securities
Exchange Act of 1934) following the date that the SEC declares the final
post-effective amendment to the registration statement effective, and (2)
March 21, 2003; provided, further, that the right to terminate the merger
agreement under this provision is not available to any party whose failure
or whose affiliate's failure to perform any material covenant or obligation
under the agreement is the primary cause of or resulted in the failure of
the merger to occur on or before that date;
4. by Cardinal Health (a) if there has been a withdrawal, modification
or change in the Syncor board of directors' recommendation in a manner
adverse to Cardinal Health or (b) if the Syncor board of directors refuses
to affirm the Syncor board of directors' recommendation within 20 days of
any written request from Cardinal Health;
5. by Cardinal Health or Syncor if, at the special meeting, the
requisite vote of Syncor stockholders to approve the merger agreement is
not obtained;
6. by Cardinal Health if there has been a violation or breach by
Syncor of any agreement, covenant, representation or warranty contained in
the amended merger agreement that has prevented or would prevent, the
satisfaction of the condition that (1) the representations and warranties
of Syncor are true and correct in all respects as of the date of the
original merger agreement and as of the closing date of the merger, unless
the failure would not be reasonably expected to have a material adverse
effect on Syncor or (2) Syncor has performed its obligations and agreements
and complied with its covenants under the amended merger agreement in all
material respects, at the time of the breach or violation and the breach or
violation has not been waived by Cardinal Health nor cured by Syncor prior
to the earlier of (a) 20 business days after the giving of written notice
to Syncor of the breach and (b) March 21, 2003; or
7. by Syncor if there has been a violation or breach by Cardinal
Health of any agreement, covenant, representation or warranty contained in
the merger agreement that has prevented or would prevent, the satisfaction
of the condition that (1) the representations and warranties of Cardinal
Health are true and correct in all respects as of the date of the original
merger agreement and as of the closing date of the merger, unless the
failure would not be reasonably expected to have a material adverse effect
on Cardinal Health or (2) Cardinal Health has performed its obligations and
agreements and complied with its covenants under the amended merger
agreement in all material respects at the time of the breach or violation,
and the breach or violation has not been waived by Syncor nor cured by
Cardinal Health prior to the earlier of (a) 20 business days after the
giving of written notice to Syncor of the breach and (b) March 21, 2003.
43
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
The following general discussion summarizes the anticipated material U.S.
federal income tax consequences of the merger to Syncor stockholders that
exchange their Syncor shares for Cardinal Health common shares in the merger.
This discussion addresses only those Syncor stockholders that hold their Syncor
common stock as a capital asset, and does not address all of the U.S. federal
income tax consequences that may be relevant to particular Syncor stockholders
in light of their individual circumstances or to Syncor stockholders that are
subject to special rules, such as:
- financial institutions;
- mutual funds;
- tax-exempt organizations;
- insurance companies;
- dealers in securities or foreign currencies;
- traders in securities that elect to apply a mark-to-market method of
accounting;
- foreign holders;
- persons that hold their Syncor shares as part of a hedge, straddle,
constructive sale or conversion transaction; or
- Syncor stockholders that acquired their shares upon the exercise of
Syncor options or otherwise as compensation.
The following discussion is not binding on the Internal Revenue Service. It
is based upon the Internal Revenue Code of 1986, as amended, which we refer to
as the Code, laws, regulations, rulings and decisions in effect as of the date
of this document, all of which are subject to change, possibly with retroactive
effect. Tax consequences under state, local and foreign laws and U.S. federal
laws other than U.S. federal income tax laws, are not addressed.
Syncor stockholders are urged to consult their tax advisors as to the
specific tax consequences to them of the merger, including the applicability and
effect of U.S. federal, state and local and foreign income and other tax laws in
their particular circumstances.
Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to Syncor, has
delivered a new opinion, a copy of which has been filed as an exhibit to the
registration statement, to the effect that, provided the merger is consummated
in the manner described in the merger agreement (1) the merger will constitute a
"reorganization" (within the meaning of Section 368(a) of the Code) and (2) no
gain or loss will be recognized by Syncor stockholders upon the receipt of
Cardinal Health common shares in exchange for Syncor shares pursuant to the
merger, except with respect to cash received in lieu of fractional share
interests in Cardinal Health common shares and possibly with respect to Syncor
shares contributed pursuant to the Fu letter agreement as described below. It is
a condition to the completion of the merger that Syncor receive an opinion,
dated the closing date of the merger, to the same effect. 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.
Based on and subject to the above opinion, Syncor stockholders that
exchange their Syncor common stock solely for Cardinal Health common shares in
the merger will not recognize gain or loss for U.S. federal income tax purposes,
except with respect to cash, if any, they receive in lieu of a fractional
Cardinal Health common share and possibly with respect to Syncor shares
contributed pursuant to the Fu letter agreement as described below. Each
holder's aggregate tax basis in Cardinal Health common shares received in the
merger will be the same as that holder's aggregate tax basis in Syncor common
stock surrendered in the merger, decreased by the amount of any tax basis
allocable to any fractional share interest for which cash is received.
44
The holding period of Cardinal Health common shares received in the merger by a
holder of Syncor common stock will include the holding period of Syncor common
stock that the holder surrendered in the merger.
A holder of Syncor common stock that receives cash in lieu of a fractional
Cardinal Health common share will recognize gain or loss equal to the difference
between the amount of cash received and that holder's tax basis in Cardinal
Health common shares that is allocable to the fractional Cardinal Health common
share. That gain or loss generally will constitute capital gain or loss and will
constitute long-term capital gain or loss if the Syncor stockholder has held the
shares for more than 12 months on the date of the merger.
It is possible that Mr. Fu's contribution to Syncor of Syncor common stock
pursuant to the Fu letter agreement could have an adverse effect on Syncor
stockholders who receive Cardinal Health common shares in the merger. The
Internal Revenue Service might contend that, for federal income tax purposes,
Cardinal Health common shares should be treated as having been issued in the
merger based on Syncor stockholders' ownership of Syncor common stock prior to
the contribution, followed by a transfer by Mr. Fu to the other stockholders of
an amount of value equal to the excess of the amount received by the other
stockholders over the amount that such stockholders would have received if Mr.
Fu had not made the contribution. Under this theory, each Syncor stockholder
(other than Mr. Fu) could recognize income equal to the value of such
stockholder's pro rata share of approximately 39,700 Cardinal Health common
shares, or approximately $0.09 per Syncor share (based on the closing per share
sale price of Cardinal Health common shares and Syncor shares as of December 5,
2002). While special counsel believes the better view is that no such income
should be recognized, in light of the absence of controlling authority directly
on point, no assurance can be given as to whether the Internal Revenue Service
would take such a position or, if it did, whether it would prevail.
The foregoing discussion of material U.S. federal income tax consequences
is for general information purposes only and may not apply to all Syncor
stockholders. The opinion of Skadden, Arps, Slate, Meagher & Flom LLP 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 Syncor
stockholder may be affected by matters not discussed in this document, each
Syncor stockholder is urged to consult his own tax adviser with respect to the
Syncor stockholder's own particular circumstances and with respect to the
specific tax consequences of the merger to the Syncor stockholder, including the
applicability and effect of U.S. state and local and foreign tax laws, estate
tax laws and proposed changes in applicable tax laws.
OTHER ACTION TO BE TAKEN AT THE RECONVENED SPECIAL MEETING
SYNCOR ADJOURNMENT PROPOSAL
Syncor is submitting a proposal to Syncor stockholders to authorize the
named proxies to vote in favor of the adjournment proposal at the reconvened
special meeting of stockholders in the event that there are not sufficient votes
to approve the merger agreement proposal at the time of the reconvened special
meeting. Even though a quorum may be present at the reconvened special meeting,
it is possible that Syncor may not have received sufficient votes to approve the
merger agreement proposal. In that event, we would need to adjourn the
reconvened special meeting in order to solicit additional proxies.
To allow the proxies that have been received by Syncor at the time of the
reconvened special meeting to be voted for the adjournment, if necessary, Syncor
has submitted the question of adjournment under those circumstances, and only
under those circumstances, to Syncor stockholders for their consideration.
Approval of the adjournment proposal requires the affirmative vote of the
holders of a majority of the voting power of Syncor shares present in person or
represented by proxy at the reconvened special meeting.
The Syncor board of directors recommends that the Syncor stockholders vote
their proxies "FOR" the adjournment proposal so that their proxies may be used
for that purpose, should it become necessary. Properly executed proxies will be
voted "FOR" the adjournment proposal, unless otherwise noted on the proxies. If
it is necessary to adjourn the reconvened special meeting, no notice of the time
and place of the adjourned special meeting is required to be given to Syncor
stockholders other than an announcement of the time and place at the special
meeting, unless the adjournment is for more than 30 days, or, if, after the
adjournment, a new
45
record date is set. The adjournment proposal relates only to an adjournment of
the special meeting occurring for purposes of soliciting additional proxies for
approval of the merger agreement proposal in the event that there are
insufficient votes to approve the merger agreement proposal at the reconvened
special meeting. Any other adjournment of the special meeting (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 Syncor board of directors retains full authority to postpone the
reconvened special meeting prior to the special meeting being convened, without
the consent of any Syncor stockholder.
THE SYNCOR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE
ADJOURNMENT PROPOSAL.
OTHER MATTERS
As of the date of this document, the Syncor board of directors does not
know of any matters that will be presented for consideration at the reconvened
special meeting other than as described in this document. If any other matters
do properly come before the special meeting or any adjournments or postponements
of the reconvened special meeting and are voted upon, the enclosed proxy will be
deemed to confer discretionary authority on the individuals named as proxies to
vote Syncor shares represented by those proxies as to any of those matters.
LEGAL MATTERS
The validity of Cardinal Health common shares to be issued in the merger
will be passed upon for Cardinal Health by Wachtell, Lipton, Rosen & Katz,
special counsel to Cardinal Health.
Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to Syncor, will
render the opinion referred to under "Material U.S. Federal Income Tax
Consequences."
EXPERTS
The consolidated financial statements and the related consolidated
financial statement schedule of Cardinal Health and its subsidiaries as of June
30, 2002 and 2001, and for each of the three years in the period ended June 30,
2002, have been incorporated in this document by reference from Cardinal
Health's Annual Report on Form 10-K for the fiscal year ended June 30, 2002.
The consolidated financial statements and schedule as of and for the year
ended June 30, 2002, have been audited by Ernst & Young LLP, independent
accountants, as stated in their report which is incorporated in this document by
reference from the Cardinal Health Annual Report on Form 10-K for the fiscal
year ended June 30, 2002.
The consolidated financial statements and schedule as of June 30, 2001 and
for each of the two years in the period ended June 30, 2001, except the
financial statements of Bindley Western Industries, Inc. and its subsidiaries
("Bindley") as of and for the year ended December 31, 1999, have been audited by
Arthur Andersen LLP, independent accountants, as stated in their reports which
are incorporated in this document by reference from the Cardinal Health Annual
Report on Form 10-K for the fiscal year ended June 30, 2002.
The consolidated financial statements of Syncor as of December 31, 2001 and
2000, and for each of the three years in the period ended December 31, 2001,
have been audited by KPMG LLP, independent accountants, as stated in their
report which is incorporated by reference in this document from Syncor's Annual
Report on Form 10-K/A-1 for the fiscal year ended December 31, 2001.
Such consolidated financial statements and supporting schedule of Cardinal
Health and its subsidiaries and Syncor as described above are incorporated
herein by reference in reliance upon the reports of the respective firms and
upon the authority of the respective firms as experts in accounting and auditing
in respect to the entities and for the periods they have audited. All of the
foregoing firms are independent public auditors with respect to the entities and
for the periods they have audited.
46
The consolidated financial statements of Bindley as of and for the year
ended December 31, 1999, not separately presented or incorporated by reference
in this document, have been audited by PricewaterhouseCoopers LLP, independent
accountants. Such financial statements, to the extent they have been included in
the financial statements of Cardinal Health, have been so included in reliance
on the report of such independent accountants (such report is included in
Cardinal Health's Annual Report on Form 10-K for the fiscal year ended June 30,
2002 and incorporated by reference in this document) given on the authority of
said firm as experts in auditing and accounting.
As previously disclosed in Cardinal Health's 8-K filed on May 9, 2002,
Cardinal Health dismissed Arthur Andersen LLP as its independent public
accountants and announced that Cardinal Health had appointed Ernst & Young LLP
to replace Arthur Andersen LLP as its independent public accountants. On July 3,
2002, Arthur Andersen LLP publicly announced that it had commenced the closure
of its Columbus, Ohio office. Solely due to the closure of Arthur Andersen LLP's
Columbus office, after reasonable efforts, Cardinal Health has been unable to
obtain Arthur Andersen LLP's written consent to name Arthur Andersen LLP as
experts or to include Arthur Andersen LLP's reports on Cardinal Health's
financial statements which are incorporated by reference into this document.
Under these circumstances, this document is permitted to be filed without a
written consent from Arthur Andersen LLP in accordance with Rule 437a of the
Securities Act of 1933. The absence of this consent may limit recovery against
Arthur Andersen LLP under Section 11 of the Securities Act. In addition, as a
practical matter, the ability of Arthur Andersen LLP to satisfy any claims
(including claims arising from Andersen's provision of auditing and other
services to Cardinal Health and Arthur Andersen LLP's other clients) may be
limited due to the recent events regarding Arthur Andersen LLP, including
without limitation its conviction on federal obstruction of justice charges
arising from the federal government's investigation of Enron Corp.
WHERE YOU CAN FIND MORE INFORMATION
Cardinal Health will file with the SEC a registration statement under the
Securities Act that registers the distribution to Syncor stockholders of the
Cardinal Health common shares to be issued in connection with the merger. The
registration statement, including the attached exhibits and schedules, will
contain additional relevant information about Cardinal Health and Syncor. The
rules and regulations of the SEC allow us to omit certain information included
in the registration statement from this document.
In addition, Cardinal Health and Syncor file reports, proxy statements and
other information with the SEC under the Exchange Act. Please call the SEC 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 SEC:
Public Reference Room
450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549
You also may obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. The SEC also maintains an Internet world wide
web site that contains reports, proxy statements and other information about
issuers, like Cardinal Health and Syncor, who file electronically with the SEC.
The address of that site is http://www.sec.gov. You also can inspect reports,
proxy statements and other information about Cardinal Health at the offices of
the New York Stock Exchange, 20 Broad Street, New York, New York 10005.
The SEC allows Cardinal Health and Syncor to "incorporate by reference"
information in this document. This means that Cardinal Health and Syncor can
disclose important information to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is considered
to be a part of this document, except for any information that is superseded by
information that is included directly in this document.
47
This document incorporates by reference the documents listed below that
Cardinal Health and Syncor previously have filed with the SEC. They contain
important information about Cardinal Health and Syncor and their financial
condition.
CARDINAL HEALTH SEC FILINGS
(FILE NO. 1-11373) DESCRIPTION OR PERIOD/AS OF DATE
--------------------------- ---------------------------------------------
Annual Report on Form 10-K Year ended June 30, 2002
Quarterly Report on Form 10-Q Quarter ended September 30, 2002
Current Report on Form 8-K October 22, 2002 and November 6, 2002
Proxy Statement For the Cardinal Health annual meeting of
shareholders held November 6, 2002
Registration Statement on Form 8-A, dated Description of Cardinal Health common shares
August 19, 1994 contained therein and any amendment or report
filed for the purpose of updating that
description
SYNCOR SEC FILINGS
(FILE NO. 000-08640) DESCRIPTION OR PERIOD/AS OF DATE
-------------------- ---------------------------------------------
Annual Report on Form 10-K, as amended by Year ended December 31, 2001
Form 10-K/A-1
Quarterly Report on Form 10-Q, as amended by Quarters ended March 31, 2002 and June 30,
Form 10-Q/A-1 2002
Quarterly Report on Form 10-Q Quarter ended September 30, 2002
Current Report on Form 8-K June 21, 2002, November 6, 2002, November 13,
2002, November 20, 2002, November 21, 2002,
November 25, 2002, December 4, 2002 and
December 6, 2002
Proxy Statement For the Syncor annual meeting of stockholders
held June 17, 2002
Registration Statement on Form 8-A, filed Description of Syncor shares contained
with the SEC on October 29, 1981 therein and any amendment or report filed for
the purpose of updating that description
Registration Statement on Form 8-A, filed Description of the rights associated with
with the SEC on October 20, 1999, as Syncor shares contained therein and any
amended by Form 8-A/A, filed with the SEC amendment or report filed for the purpose of
on June 19, 2002 updating that description
Cardinal Health and Syncor incorporate by reference additional documents
that either Cardinal Health or Syncor may file with the SEC between the date of
this document and the date of the special meeting. 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
document through Cardinal Health or Syncor, as the case may be, or from the SEC
through the SEC's web site at the address described above. Documents
incorporated by reference are available from Cardinal Health or Syncor, as the
case may be, without charge, excluding any exhibits to those documents, unless
the exhibit is specifically incorporated by reference as an exhibit in this
document. You can obtain documents incorporated by reference in this
48
document by requesting them in writing or by telephone from the appropriate
company at the following addresses:
CARDINAL HEALTH: SYNCOR:
Cardinal Health, Inc. Syncor International Corporation
7000 Cardinal Place 6464 Canoga Avenue
Dublin, Ohio 43017 Woodland Hills, California 91367-2407
Attention: Vice President-Investor Relations Attention: Director-Investor Relations
(614) 757-5000 (818) 737-4000
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY DECEMBER 23, 2002
TO RECEIVE THEM BEFORE THE SPECIAL MEETING. If you request any documents
incorporated by reference in this document 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. Syncor stockholders that require assistance in changing
or revoking a proxy should contact the solicitation agent Syncor and Cardinal
Health have hired in connection with the special meeting:
[MACKENZIE PARTNERS, INC. LOGO]
105 Madison Avenue
New York, New York 10016
(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 THE DOCUMENTS OUR COMPANIES
HAVE PUBLICLY FILED WITH THE SEC. 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 THESE 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 HEALTH
HAS SUPPLIED THE INFORMATION CONCERNING CARDINAL HEALTH AND MUDHEN MERGER CORP.,
AND SYNCOR HAS SUPPLIED THE INFORMATION CONCERNING SYNCOR.
49
APPENDIX A
AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER
AMENDMENT NO. 1, dated as of November 22, 2002 (this "Amendment"), to the
Agreement and Plan of Merger, dated as of June 14, 2002 (the "Merger
Agreement"), by and among Cardinal Health, Inc., an Ohio corporation
("Cardinal"), Mudhen Merger Corp., a Delaware corporation and a wholly owned
subsidiary of Cardinal ("Subcorp"), and Syncor International Corporation, a
Delaware corporation ("Syncor," and, together with Cardinal and Subcorp, the
"Parties"). Capitalized terms not otherwise defined herein have the respective
meanings set forth in the Merger Agreement.
W I T N E S S E T H:
WHEREAS, the Parties desire to exercise their right pursuant to Section
7.3 of the Merger Agreement to amend the Merger Agreement to extend the
termination date set forth in Sections 7.1(c), (f) and (g) thereof from December
31, 2002 to January 15, 2003 as set forth below.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, the Parties hereby agree as follows:
1. Amendment to Sections 7.1(c), (f) and (g) of the Merger Agreement.
Sections 7.1(c), (f) and (g) of the Merger Agreement are hereby amended
to change the references to "December 31, 2002" in such Sections to
"January 15, 2003".
2. Miscellaneous.
(a) From and after the date hereof, all references in the Merger
Agreement to "this Agreement" shall be deemed to mean the Merger
Agreement as amended by this Amendment.
(b) This Amendment shall be governed by and construed in accordance
with the laws of the State of Delaware without regard to the
principles of conflicts of laws thereof. All actions and
proceedings arising out of or relating to this Amendment shall
be heard and determined in any state or federal court sitting in
the State of Delaware.
(c) This Amendment may be executed in counterparts, which together
shall constitute one and the same Amendment. The Parties to this
Amendment may execute more than one copy of this Amendment, each
of which shall constitute an original.
A-1
IN WITNESS WHEREOF, Cardinal, Subcorp and Syncor have executed this
Amendment No. 1 to the Merger Agreement or caused this Amendment No. 1 to the
Merger Agreement to be executed by their respective officers thereunto duly
authorized as of the date first written above.
CARDINAL HEALTH, INC.
By /s/ BRENDAN A. FORD
-----------------------------------
Name: Brendan A. Ford
Title: Executive Vice-President --
Corporate Development
MUDHEN MERGER CORP.
By /s/ BRENDAN A. FORD
-----------------------------------
Name: Brendan A. Ford
Title: Executive Vice-President --
Corporate Development
SYNCOR INTERNATIONAL CORPORATION
By /s/ ROBERT G. FUNARI
-----------------------------------
Name: Robert G. Funari
Title: President and Chief
Executive Officer
A-2
APPENDIX B
AMENDMENT NO. 2 TO AGREEMENT AND PLAN OF MERGER
AMENDMENT NO. 2, dated as of December 3, 2002 (this "Amendment No. 2"),
to the Agreement and Plan of Merger, dated as of June 14, 2002 (as amended by
Amendment No. 1 to Agreement and Plan of Merger, dated as of November 22, 2002
("Merger Agreement Amendment No. 1"), the "Merger Agreement") by and among
Cardinal Health, Inc., an Ohio corporation ("Cardinal"), Mudhen Merger Corp., a
Delaware corporation and a wholly owned subsidiary of Cardinal ("Subcorp"), and
Syncor International Corporation, a Delaware corporation ("Syncor," and,
together with Cardinal and Subcorp, the "Parties"). Capitalized terms not
otherwise defined herein have the respective meanings set forth in the Merger
Agreement.
W I T N E S S E T H:
WHEREAS, the Parties desire to exercise their right pursuant to Section
7.3 of the Merger Agreement to amend the Merger Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, the Parties hereby agree as follows:
1. Amendment to Preliminary Statement C. Preliminary Statement C of the
Merger Agreement is hereby amended to change the reference to "Section
368(a)(1)(B)" in such Section to "Section 368(a)".
2. Amendment to Sections 2.2(a). Section 2.2(a) of the Merger Agreement is
hereby amended to change the reference to "0.52" in such Section to
"0.47", it being understood that all references to the term "Exchange
Ratio" in the Merger Agreement shall refer to "0.47", as provided by
this Amendment No. 2.
3. Amendment to Section 4.24. Section 4.24 of the Merger Agreement is
hereby amended and supplemented to include the following sentence at the
end:
As of December 3, 2002, the Board of Directors of Syncor has received
the oral opinion, to be confirmed in writing, of Salomon Smith Barney,
Syncor's financial advisor, to the effect that, as of December 3, 2002,
the Exchange Ratio is fair to the holders of Syncor Common Stock from a
financial point of view. Syncor will provide a written copy of such
opinion to Cardinal solely for informational purposes promptly after
receipt by Syncor of such opinion, and, on December 3, 2002, such
opinion has not been withdrawn or revoked or otherwise modified in any
material respect.
4. Amendment to Section 4.25. (a) Section 4.25 of the Merger Agreement is
hereby amended by replacing the first sentence of such Section set forth
in the Merger Agreement with the following:
The Board of Directors of Syncor, at a meeting duly called and held,
has, by unanimous vote of those directors present (who constituted all
of the directors then in office other than Monty Fu), (a) determined
that this Agreement and the transactions contemplated by this Agreement,
including the Merger, are advisable and fair to and in the best
interests of the Syncor Stockholders, and (b) resolved, as of December
3, 2002, to recommend that the Syncor Stockholders approve this
Agreement (the "Syncor Board Recommendation").
(b) It is expressly agreed that the actions of the Board of Directors of
Syncor described in Section 4(a) of this Amendment No. 2 shall not
constitute a "Change in Recommendation" for purposes of the Merger
Agreement.
5. Amendment to Section 5.3(f). Section 5.3(f) of the Merger Agreement is
hereby amended and supplemented to include the following sentence at the
end:
Syncor acknowledges that Cardinal intends to continue its due diligence
efforts until the Closing Date and Syncor agrees that it will provide
its full cooperation in order to give Cardinal a level of access
consistent with that provided during the investigation related to the
Syncor Disclosure Matter (defined
B-1
below) and with the preceding four sentences of Section 5.3(f) so that
Cardinal may complete as much of its due diligence as reasonably
possible prior to the Syncor Stockholder Meeting, it being agreed that
the level of access provided prior to December 3, 2002 during the
investigation related to the Syncor Disclosure Matter has been
consistent with the preceding four sentences of Section 5.3(f) and that
level of access accorded by Syncor during the investigation related to
the Syncor Disclosure Matter shall be the level of access to be
provided in connection with Cardinal's continued due diligence efforts.
6. Amendment to Section 6.3. Section 6.3 of the Merger Agreement is hereby
amended by adding a new subsection (e) to read as follows:
(e) a guilty plea (the "Plea") shall have been entered into by
Syncor Taiwan, Inc. pursuant to the agreement (the "Agreement"), dated
December 3, 2002, between counsel for Syncor and the United States
Department of Justice (the "DOJ") and the plea agreement, dated
December 3, 2002 (together with the Agreement, the "DOJ Agreement"),
between Syncor Taiwan, Inc. and the DOJ, and the DOJ Agreement shall
have remained in effect without modification to the terms thereof;
except any such modification that would not (i) be materially adverse
to Cardinal or (ii) have a Material Adverse Effect on Syncor;
7. Amendment to Section 6.3(b). Section 6.3(b) is hereby amended and
supplemented to include the following clause at the end:
; it being agreed that any failure to so perform or comply with (x)
Section 5.3(c) of the Merger Agreement prior to December 3, 2002 or (y)
after December 3, 2002, to the extent permitted pursuant to Annex I to
Amendment No. 2, in each case, as a result of the Syncor Disclosure
Matter, shall not be included in determining whether the condition set
forth in this Section 6.3(b) has been satisfied.
8. Amendment to Section 7.1(c). Section 7.1(c) of the Merger Agreement is
hereby amended and restated in its entirety to read as follows:
by either Cardinal or Syncor if the Merger shall not have been
consummated before the date that is the earlier of (x) the date that is
23 business days (within the meaning of Rule 14d-1(g)(3) of the
Securities Exchange Act of 1934) following the date that the Commission
declares the final post-effective amendment to the Registration
Statement effective and (y) March 21, 2003; provided, further, that the
right to terminate this Agreement under this Section 7.1(c) shall not
be available to any party to this Agreement whose failure or whose
affiliate's failure to perform any material covenant or obligation
under this Agreement (a "Material Failure") has been the primary cause
of or resulted in the failure of the Merger to occur on or before such
date, it being agreed that any failure to perform or comply with (i)
Section 5.3(c) of the Merger Agreement prior to December 3, 2002, or
(ii) after December 3, 2002, to the extent permitted by Annex I to
Amendment No. 2, in each case, as a result of the Syncor Disclosure
Matter, shall not be deemed a Material Failure;
9. Amendment to Sections 7.1(f) and 7.1(g). Sections 7.1(f) and 7.1(g) of
the Merger Agreement are hereby amended to change the references to
"January 15, 2003" in such Sections to "March 21, 2003".
10. Amendment to Section 8.2(b). Section 8.2(b) of the Merger Agreement is
hereby amended to change the reference in such Section to "Monty Fu
Chairman" to "Robert G. Funari President and Chief Executive Officer".
11. Amendment to Sections 8.3.
(a) The fourth sentence of Section 8.3 of the Merger Agreement is
hereby amended and restated in its entirety to read as
follows:
A "Material Adverse Effect" with respect to any party to this
Agreement shall be deemed to occur if there shall have been a
material adverse effect on the business, financial condition
or results of operations of such party to this Agreement and
its subsidiaries, taken as a whole, except to the extent that
such adverse effect results from (a) changes (i) in prevailing
interest
B-2
rates in the United States or financial market conditions in
the United States, (ii) in general economic conditions in the
United States or (iii) in GAAP; (b) any developments, changes
or consequences relating to or that could arise from the
actual or prospective renewal of (or failure to renew) the BMS
Contract, any new terms that may be negotiated in any proposed
or actual amended or new BMS Contract, any negotiations with
BMS (or the substitute counterparty) directly relating to the
BMS Contract or any amendment to the BMS Contract or a new BMS
Contract, in each case, regardless of whether or not BMS owns
the product covered by the BMS Contract; (c) any developments,
changes or consequences relating to the process for the
possible sale of all or a portion of the business of CMI (the
"CMI Business"), including the failure to sell all or any
portion of the CMI Business, the level of interest of any
parties in pursuing a sale or the value or other terms for a
sale indicated by such parties, and the pricing or other terms
of any such sale, or the effect of any accounting charges,
adjustments and changes ("CMI Changes") set forth in Section
5.3(c) to the Syncor Disclosure Schedule; or (d) the Syncor
Disclosure Matter.
(b) Section 8.3 of the Merger Agreement is hereby amended and
supplemented to include the following sentence at the end:
The "Syncor Disclosure Matter" shall mean (x) the information
set forth in the written reports prepared by Ernst & Young
LLP; Skadden, Arps, Slate, Meagher & Flom LLP; and
PricewaterhouseCoopers LLP relating to Syncor's and its
subsidiaries' operations outside of the continental United
States, Alaska and Hawaii as disclosed to each of the DOJ, the
Commission and Cardinal (or its outside legal counsel), (y)
any Actions, judgments, settlements, fines, penalties or
orders by or before any Governmental Authority, whether
existing, pending, threatened or hereafter arising (and
including the terms and status thereof), arising from the
matters identified in clause (x) above or the disclosure,
fiduciary, contractual or other obligations of the Parties and
their subsidiaries and their respective directors, officers,
employees and representatives relating to the matters
identified in clause (x) above, including the Actions listed
on Annex II to Amendment No. 2, and (z) any costs, fees and
expenses of Syncor or its subsidiaries relating to the
investigation of the matters identified in clauses (x) and (y)
above; the renegotiation of the Merger Agreement; the
solicitation of proxies after December 3, 2002; and any
pre-existing indemnity rights of any directors, officers,
employees and representatives of Syncor or of any of its
subsidiaries in connection with any of the matters identified
in clauses (x) and (y).
12. Miscellaneous.
(a) From and after the date hereof, all references in the Merger
Agreement to "this Agreement" shall be deemed to mean the
Merger Agreement as amended by Merger Agreement Amendment No.
1 and this Amendment No. 2.
(b) The section headings in this Amendment No. 2 are intended
solely for convenience and shall be given no effect in the
construction and interpretation hereof.
(c) This Amendment No. 2 shall be governed by and construed in
accordance with the laws of the State of Delaware without
regard to the principles of conflicts of laws thereof. All
actions and proceedings arising out of or relating to this
Amendment No. 2 shall be heard and determined in any state or
federal court sitting in the State of Delaware.
(d) This Amendment No. 2 may be executed in counterparts, which
together shall constitute one and the same Amendment No. 2.
The Parties to this Amendment No. 2 may execute more than one
copy of this Amendment No. 2, each of which shall constitute
an original.
B-3
IN WITNESS WHEREOF, Cardinal, Subcorp and Syncor have executed this
Amendment No. 2 to the Merger Agreement or caused this Amendment No. 2 to the
Merger Agreement to be executed by their respective officers thereunto duly
authorized as of the date first written above.
CARDINAL HEALTH, INC.
By /s/ BRENDAN A. FORD
------------------------------------
Name: Brendan A. Ford
Title: Executive Vice-President -- Corporate
Development
MUDHEN MERGER CORP.
By /s/ BRENDAN A. FORD
------------------------------------
Name: Brendan A. Ford
Title: Executive Vice-President -- Corporate
Development
SYNCOR INTERNATIONAL
CORPORATION
By /s/ ROBERT G. FUNARI
------------------------------------
Name: Robert G. Funari
Title: President and Chief
Executive Officer
B-4
APPENDIX C
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CARDINAL HEALTH, INC.
("CARDINAL"),
MUDHEN MERGER CORP.
A WHOLLY OWNED DIRECT SUBSIDIARY OF CARDINAL
("SUBCORP"),
AND
SYNCOR INTERNATIONAL CORPORATION
("SYNCOR")
JUNE 14, 2002
AS AMENDED THROUGH DECEMBER 3, 2002
Explanatory Note: This document is a conformed version of the original merger
agreement dated as of June 14, 2002, as amended by Amendment
No. 1 to the Merger Agreement, dated as of November 25, 2002,
as further amended by Amendment No. 2 to the Merger Agreement,
dated as of December 3, 2002, and is provided for information
purposes only. The merger agreement has not been restated and
the official versions are the original merger agreement, which
was included in the original proxy statement/prospectus as
Annex A, Amendment No. 1, which appears as Annex A to this
document, and Amendment No. 2, which appears as Annex B to
this document.
TABLE OF CONTENTS
PAGE
-----
PRELIMINARY STATEMENTS................................................... C-1
ARTICLE I. THE MERGER................................................... C-1
1.1. The Merger...................................................... C-1
1.2. Effective Time.................................................. C-1
1.3. Effects of the Merger........................................... C-2
1.4. Certificate of Incorporation and By-laws........................ C-2
1.5. Directors and Officers of the Surviving Corporation............. C-2
1.6. Additional Actions.............................................. C-2
ARTICLE II. CONVERSION OF SECURITIES.................................... C-2
2.1. Conversion of Capital Stock..................................... C-2
2.2. Exchange Ratio; Fractional Shares; Adjustments.................. C-3
2.3. Exchange of Certificates........................................ C-3
C-3
(a) Exchange Agent..............................................
C-4
(b) Exchange Procedures.........................................
C-4
(c) Distributions with Respect to Unexchanged Shares............
C-5
(d) No Further Ownership Rights in Syncor Common Stock..........
C-5
(e) Termination of Exchange Fund................................
C-5
(f) No Liability................................................
C-5
(g) Investment of Exchange Fund.................................
C-5
(h) Withholding Rights..........................................
2.4. Treatment of Stock Options...................................... C-5
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF CARDINAL AND SUBCORP..... C-6
3.1. Organization and Standing....................................... C-6
3.2. Corporate Power and Authority................................... C-7
3.3. Capitalization of Cardinal and Subcorp.......................... C-7
3.4. Conflicts; Consents and Approval................................ C-7
3.5. Brokerage and Finder's Fees..................................... C-8
3.6. Reorganization.................................................. C-8
3.7. Cardinal SEC Documents.......................................... C-8
3.8. Registration Statement.......................................... C-9
3.9. Compliance with Law............................................. C-9
3.10. Litigation...................................................... C-9
3.11. No Material Adverse Change...................................... C-9
3.12. Subcorp's Operations............................................ C-9
3.13. Undisclosed Liabilities......................................... C-10
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SYNCOR.................... C-10
4.1. Organization and Standing....................................... C-10
4.2. Subsidiaries.................................................... C-10
4.3. Corporate Power and Authority................................... C-11
4.4. Capitalization of Syncor........................................ C-11
4.5. Conflicts; Consents and Approvals............................... C-11
C-i
PAGE
-----
4.6. Brokerage and Finder's Fees..................................... C-12
4.7. Reorganization.................................................. C-12
4.8. Syncor SEC Documents............................................ C-12
4.9. Registration Statement; Proxy Statement......................... C-12
4.10. Compliance with Law............................................. C-13
4.11. Litigation...................................................... C-13
4.12. No Material Adverse Change...................................... C-13
4.13. Taxes........................................................... C-13
4.14. Intellectual Property........................................... C-15
4.15. Title to and Condition of Properties............................ C-15
4.16. Employee Benefit Plans.......................................... C-15
4.17. Contracts....................................................... C-18
4.18. Labor Matters................................................... C-19
4.19. Undisclosed Liabilities......................................... C-19
4.20. Operation of Syncor's Business; Relationships................... C-19
4.21. Permits; Compliance............................................. C-19
4.22. Environmental Matters........................................... C-20
4.23. Insurance....................................................... C-20
4.24. Opinion of Financial Advisor.................................... C-20
4.25. Board Recommendation; Required Vote............................. C-21
4.26. Section 203 of the DGCL; Rights Agreement....................... C-21
ARTICLE V. COVENANTS OF THE PARTIES..................................... C-21
5.1. Mutual Covenants................................................ C-21
C-21
(a) HSR Act Filings; Reasonable Efforts; Notification...........
C-23
(b) Tax-Free Treatment..........................................
C-23
(c) Public Announcements........................................
C-23
(d) Obligations of Cardinal and of Syncor.......................
C-23
(e) Conveyance Taxes............................................
5.2. Covenants of Cardinal........................................... C-24
C-24
(a) Preparation of Registration Statement.......................
C-24
(b) Conduct of Cardinal's Operations............................
C-25
(c) Indemnification; Directors' and Officers' Insurance.........
C-25
(d) Subcorp.....................................................
C-25
(e) NYSE Listing................................................
C-25
(f) Employees and Employee Benefits.............................
5.3. Covenants of Syncor............................................. C-26
C-26
(a) Syncor Stockholders Meeting.................................
C-27
(b) Information for the Registration Statement and Preparation
of Proxy Statement..........................................
C-27
(c) Conduct of Syncor's Operations..............................
C-29
(d) No Solicitation.............................................
C-31
(e) Affiliates of Syncor........................................
C-31
(f) Access......................................................
C-31
(g) Subsequent Financial Statements.............................
C-ii
PAGE
-----
ARTICLE VI. CONDITIONS.................................................. C-32
6.1. Conditions to the Obligations of Each Party..................... C-32
6.2. Conditions to Obligations of Syncor............................. C-32
6.3. Conditions to Obligations of Cardinal and Subcorp............... C-33
ARTICLE VII. TERMINATION AND AMENDMENT.................................. C-34
7.1. Termination..................................................... C-34
7.2. Effect of Termination........................................... C-34
7.3. Amendment....................................................... C-35
7.4. Extension; Waiver............................................... C-36
ARTICLE VIII. MISCELLANEOUS............................................. C-36
8.1. Survival of Representations and Warranties...................... C-36
8.2. Notices......................................................... C-36
8.3. Interpretation.................................................. C-37
8.4. Counterparts.................................................... C-38
8.5. Entire Agreement................................................ C-38
8.6. Third-Party Beneficiaries....................................... C-38
8.7. Governing Law................................................... C-38
8.8. Consent to Jurisdiction; Venue.................................. C-38
8.9. Specific Performance............................................ C-38
8.10. Assignment...................................................... C-39
8.11. Expenses........................................................ C-39
8.12. Severability.................................................... C-39
EXHIBITS
Exhibit A -- Form of Syncor Affiliate Letter
Exhibit B -- Form of Syncor Support Agreement
C-iii
INDEX OF DEFINED TERMS
DEFINED TERM SECTION
------------ -------
Action...................................................... 3.10
Agreement................................................... Preamble
Antitrust Laws.............................................. 5.1(a)(ii)
Applicable Laws............................................. 3.9
BMS......................................................... 4.17
BMS Contract................................................ 4.17
Business Combination........................................ 7.2
Cardinal.................................................... Preamble
Cardinal Articles........................................... 3.1
Cardinal Code of Regulations................................ 3.1
Cardinal Common Shares...................................... 3.3(a)
Cardinal Disclosure Schedule................................ 3.3(a)
Cardinal Exchange Option.................................... 2.4(a)
Cardinal SEC Documents...................................... 3.7
Certificate of Merger....................................... 1.2
Certificates................................................ 2.2(c)
Closing..................................................... 1.2
Closing Date................................................ 1.2
CMI......................................................... 5.2(d)
CMI Business................................................ 8.3
Code........................................................ Preliminary Statement C
Commission.................................................. 2.4(b)
Competing Transaction....................................... 5.3(d)
Confidentiality Agreement................................... 5.3(d)
Contract.................................................... 4.17
Controlled Group Liability.................................. 4.16(a)
Costs....................................................... 7.2
DGCL........................................................ 1.1
Delaware Secretary of State................................. 1.2
DOJ......................................................... 6.3(e)
DOJ Agreement............................................... 6.3(e)
Effective Time.............................................. 1.2
Environmental Laws.......................................... 4.22
Environmental Permit........................................ 4.22
ERISA....................................................... 4.16(a)
ERISA Affiliate............................................. 4.16(a)
ESOP........................................................ 4.16(n)
Exchange Act................................................ 2.4(c)
Exchange Agent.............................................. 2.3(a)
Exchange Fund............................................... 2.3(a)
Exchange Ratio.............................................. 2.2(a)
GAAP........................................................ 3.7
C-iv
DEFINED TERM SECTION
------------ -------
Governmental Authority...................................... 3.4(d)
Hazardous Materials......................................... 4.22
HSR Act..................................................... 3.4(d)
Intellectual Property....................................... 4.14
Limitations................................................. 5.1(a)(iv)
Material Adverse Effect..................................... 8.3
Material Failure............................................ 7.1(c)
Merger...................................................... Preliminary Statement A
Multiemployer Plan.......................................... 4.16(f)
Multiple Employer Plan...................................... 4.16(f)
NYSE........................................................ 2.2(c)
Plans....................................................... 4.16(a)
Plea........................................................ 6.3(e)
Proxy Statement............................................. 3.8
Qualified Plan.............................................. 4.16(c)
Registration Statement...................................... 3.8
Regulatory Material Adverse Effect.......................... 5.1(a)(iv)
Salomon Smith Barney........................................ 4.6
Section 16.................................................. 2.4(c)
Securities Act.............................................. 2.3(d)
Subcorp..................................................... Preamble
Subcorp By-laws............................................. 1.4
Subcorp Common Stock........................................ 2.1(a)
Subcorp Certificate of Incorporation........................ 1.4
subsidiary.................................................. 8.3
Superior Proposal........................................... 5.3(d)
Support Agreements.......................................... 4.26
Surviving Corporation....................................... 1.1
Syncor...................................................... Preamble
Syncor Affiliate Letter..................................... 5.3(e)
Syncor Board Recommendation................................. 4.25
Syncor By-laws.............................................. 4.1
Syncor Certificate.......................................... 4.1
Syncor Change in Recommendation............................. 5.3(a)
Syncor Common Stock......................................... 4.4
Syncor Disclosure Matter.................................... 8.3
Syncor Disclosure Schedule.................................. 4.1
Syncor Employees............................................ 5.2(f)
Syncor ESPP................................................. 5.2(f)(v)
Syncor Option............................................... 2.4(a)
Syncor Permits.............................................. 4.21(a)
Syncor Rights Agreement..................................... 4.26
Syncor SEC Documents........................................ 4.8
Syncor Stockholders......................................... Preliminary Statement B
C-v
DEFINED TERM SECTION
------------ -------
Syncor Stockholders Meeting................................. 5.3(a)
Tax Returns................................................. 4.13(i)
Taxes....................................................... 4.13(j)
C-vi
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made and entered
into as of the 14th day of June 2002, by and among Cardinal Health, Inc., an
Ohio corporation ("Cardinal"), Mudhen Merger Corp., a Delaware corporation and a
wholly owned subsidiary of Cardinal ("Subcorp"), and Syncor International
Corporation, a Delaware corporation ("Syncor").
PRELIMINARY STATEMENTS
A. Cardinal desires to combine its businesses with the businesses operated
by Syncor through the merger of Subcorp with and into Syncor, with Syncor as the
surviving corporation (the "Merger"), pursuant to which each share of Syncor
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 in this
Agreement.
B. The Board of Directors of Syncor has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of Syncor,
and Syncor desires to combine its businesses with the businesses operated by
Cardinal and for the holders of shares of Syncor Common Stock ("Syncor
Stockholders") to have a continuing equity interest in the combined
Cardinal/Syncor businesses through the ownership of Cardinal Common Shares.
C. The parties to this Agreement intend that the Merger constitute a
"reorganization" (within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (together with the rules and regulations thereunder,
the "Code")) and this Agreement be adopted as a plan of reorganization for the
purposes of Section 368 of the Code.
D. Concurrently with the execution of this Agreement, and as a condition
and inducement to Cardinal's willingness to enter into this Agreement, certain
Syncor Stockholders are entering into Support Agreements (as defined in Section
4.26) with Cardinal in the form of Exhibit B to this Agreement.
E. The respective Boards of Directors of Cardinal, Subcorp and Syncor have
determined the Merger in the manner contemplated in this Agreement to be
advisable and in the best interests of their respective shareholders or
stockholders, as the case may be, 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 set forth in this Agreement, the parties to this Agreement
agree as follows:
ARTICLE I.
THE MERGER
1.1. The Merger. Upon the terms and subject to the conditions of this
Agreement, and in accordance with the provisions of the Delaware General
Corporation Law (the "DGCL"), Subcorp shall be merged with and into Syncor at
the Effective Time. As a result of the Merger, the separate corporate existence
of Subcorp shall cease and Syncor shall continue its existence under the laws of
the State of Delaware as a wholly owned subsidiary of Cardinal. Syncor, in its
capacity as the corporation surviving the Merger, is sometimes referred to as
the "Surviving Corporation."
1.2. Effective Time. As promptly as possible on the Closing Date (as
defined below), the parties to this Agreement shall cause the Merger to be
consummated by filing with the Secretary of State of the State of Delaware (the
"Delaware Secretary of State") a certificate of merger (the "Certificate of
Merger") in such form as is required by and executed in accordance with Section
251 of the DGCL. The Merger shall become effective when the Certificate of
Merger has been filed with the Delaware Secretary of State or at such later
C-1
time as shall be agreed upon by Cardinal and Syncor and specified in the
Certificate of Merger (the "Effective Time"). Prior to the filing referred to in
this Section 1.2, a closing (the "Closing") shall be held at the offices of
Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York, or such
other place as the parties to this Agreement may agree on, as soon as
practicable (but in any event within three 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 Syncor may agree; provided that the Closing shall be
delayed if and only for so long as necessary if a banking moratorium, act of
terrorism or war (whether or not declared) affecting United States banking or
financial markets generally prevents the Closing. The date on which the Closing
takes place is referred to as the "Closing Date." For all Tax (as defined in
Section 4.13(j)) 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 as provided for in this Agreement and the applicable
provisions of the DGCL, including those set forth in Section 259 of the DGCL.
1.4. Certificate of Incorporation and By-laws. The Certificate of Merger
shall provide that, at the Effective Time, (a) the Certificate 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 to the Effective Time in
the Certificate of Incorporation of Subcorp (the "Subcorp Certificate of
Incorporation"), except for Article I of the Subcorp Certificate of
Incorporation, which shall continue to read "The name of the corporation is
'SYNCOR INTERNATIONAL CORPORATION'," and (b) the By-laws of Subcorp (the
"Subcorp By-laws") in effect immediately prior to the Effective Time shall be
the By-laws of the Surviving Corporation, in each case, until amended in
accordance with the DGCL.
1.5. Directors and Officers of the Surviving Corporation. From and after
the Effective Time, the officers of Syncor 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, Syncor shall deliver to
Cardinal evidence satisfactory to Cardinal of the resignations of the directors
of Syncor, 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 Syncor or (b) otherwise carry out the provisions of this
Agreement, Syncor and the officers and directors of Syncor shall be deemed to
have granted to the Surviving Corporation an irrevocable power of attorney, and
the Surviving Corporation and the officers and directors of the Surviving
Corporation will be authorized in the name of and on behalf of Syncor 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 Syncor 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 Syncor or
their respective shareholders and stockholders, as applicable:
(a) Each share of common stock, $0.01 par value, of Subcorp ("Subcorp
Common Stock") issued and outstanding immediately prior to the Effective
Time shall be converted into one validly issued, fully paid and
nonassessable share of common stock, $0.01 par value, of the Surviving
Corporation. Such newly issued shares shall thereafter constitute all of
the issued and outstanding capital stock of the Surviving Corporation.
C-2
(b) Subject to the other provisions of this Article II, each share of
Syncor 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)).
(c) Each share of capital stock of Syncor held in the treasury of
Syncor 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 "0.47."
(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, each holder of a
certificate or certificates that immediately prior to the Effective Time
represented outstanding shares of Syncor Common Stock (the "Certificates") that
would otherwise have been entitled to a fraction of a Cardinal Common Share upon
surrender of Certificates (determined after taking into account all Certificates
delivered by such Syncor Stockholder) shall be paid upon such surrender cash
(without interest) in an amount equal to such Syncor Stockholder's proportionate
interest in the net proceeds from the sale or sales in the open market by the
Exchange Agent, on behalf of all such Syncor Stockholders, of the aggregate
fractional Cardinal Common Shares issued pursuant to this Article II. As soon as
practicable following the Effective Date, the Exchange Agent shall determine the
excess of (i) the number of full Cardinal Common Shares delivered to the
Exchange Agent by Cardinal over (ii) the aggregate number of full Cardinal
Common Shares to be distributed to Syncor Stockholders (such excess, the "Excess
Shares"), and the Exchange Agent, as agent for the former Syncor Stockholders,
shall sell the Excess Shares at the prevailing prices on the New York Stock
Exchange, Inc. (the "NYSE"). The sale of the Excess Shares by the Exchange Agent
shall be executed on the NYSE through one or more member firms of the NYSE and
shall be executed in round lots to the extent practicable. All commissions,
stock transfer Taxes and other out-of-pocket transaction costs, including the
expenses and compensation of the Exchange Agent, incurred in connection with
such sale of Excess Shares shall be paid by the Surviving Corporation. The
Exchange Agent shall determine the portion of the proceeds of such sale to which
each Syncor Stockholder shall be entitled, if any, by multiplying the amount of
the proceeds of such sale by a fraction the numerator of which is the amount of
fractional share interests to which such Syncor Stockholder is entitled (after
taking into account all shares of Syncor Common Stock held at the Effective Time
by such Syncor Stockholders) and the denominator of which is the aggregate
amount of fractional share interests to which all Syncor Stockholders are
entitled. Until the proceeds of such sale have been distributed to the former
Syncor Stockholders, the Exchange Agent will hold such proceeds in trust for
such former Syncor Stockholders. As soon as practicable after the determination
of the amount of cash to be paid to such Syncor Stockholder in lieu of any
fractional interests, the Exchange Agent shall make available in accordance with
this Agreement such amounts to such former Syncor Stockholder.
(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, reorganization, recapitalization, combination or other like
change with respect to Cardinal Common Shares having a record date or effective
date prior to the Effective Time, the Exchange Ratio set forth in this Section
2.2 shall be adjusted to reflect fully such dividend, distribution, stock split,
reclassification, reorganization, recapitalization, combination or other like
change.
2.3. Exchange of Certificates.
(a) Exchange Agent. Promptly following the Effective Time, Cardinal shall
deposit with EquiServe Trust Company or such other nationally-recognized
exchange agent as may be designated by Cardinal (the "Exchange Agent"), for the
benefit of Syncor Stockholders, for exchange in accordance with this Section
2.3, certificates representing Cardinal Common Shares issuable pursuant to
Section 2.1 in exchange for outstand-
C-3
ing shares of Syncor Common Stock (such Cardinal Common Shares, 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 in customary form (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 (in consultation with
Syncor) 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 the
Certificate shall be entitled to receive in exchange therefor (i) a certificate
or certificates representing that whole number of Cardinal Common Shares that
the Syncor Stockholder has the right to receive pursuant to Section 2.1 in such
denominations and registered in such names as the Syncor Stockholder 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 the Syncor
Stockholder has the right to receive pursuant to the provisions of this Article
II, after giving effect to any required withholding Tax. The shares of Syncor
Common Stock represented by the Certificates 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
Syncor Stockholders. In the event of a transfer of ownership of shares of Syncor
Common Stock that is not registered on the transfer records of Syncor, 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 the transferee if
the Certificate held by the transferee is presented to the Exchange Agent,
accompanied by all documents reasonably required to evidence and effect the
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 the Certificate to be lost, stolen or destroyed and,
if required by Cardinal, the posting by the person of a bond in such reasonable
and customary amount as Cardinal may direct as indemnity against any claim that
may be made against it with respect to the Certificate, the Exchange Agent will
deliver in exchange for the 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 Syncor Common Stock formerly represented by the Certificate, and
unpaid dividends and distributions on Cardinal Common Shares, if any, as
provided in this Article II. Receipt by the Exchange Agent of such affidavit in
reasonably acceptable form and posting of such a bond, if required, shall be
deemed delivery and/or surrender of a Certificate with respect to the relevant
shares of Syncor Common Stock for purposes of 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 the
Certificate as provided in this Section 2.3. Subject to the effect of Applicable
Laws (as defined in Section 3.9), following surrender of the 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 that may be required thereon.
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(d) No Further Ownership Rights in Syncor Common Stock. All Cardinal
Common Shares issued upon surrender of Certificates in accordance with the terms
of this Agreement (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 Syncor Common Stock represented thereby, and, as of the Effective
Time, the stock transfer books of Syncor shall be closed and there shall be no
further registration of transfers on the stock transfer books of Syncor of
shares of Syncor 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 identified
pursuant to Section 5.3(e) as an "affiliate" of Syncor 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 Syncor Stockholders 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 that 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, or any other
consideration pursuant to this Agreement.
(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 Syncor
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 Syncor
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
balances in the Exchange Fund as a result of Section 2.2(c), as directed by
Cardinal, on a daily basis; provided that no such investment shall affect
Cardinal's obligation to deposit the full amount of cash required from time to
time under Section 2.3(a). 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 Syncor Stockholder 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 Syncor Stockholders 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 Syncor shall take all such
actions as may be necessary to cause each unexpired and unexercised outstanding
option granted or issued under Syncor stock option or equity-incentive plans in
effect on the date of this Agreement (each, a "Syncor Option") to be
automatically converted at the Effective Time into a fully-vested option (a
"Cardinal Exchange Option") to purchase that number of Cardinal Common Shares
equal to the number of shares of Syncor Common Stock subject to the Syncor
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 Syncor Option
divided by the Exchange Ratio (and rounded to the nearest whole cent), and with
other terms and conditions that are the same as the terms and conditions of the
Syncor Option
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immediately before the Effective Time; provided that, with respect to any Syncor
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 by Cardinal Exchange Options, subject to the terms and
conditions applicable to Cardinal Exchange Options.
(b) Cardinal will file with the Securities and Exchange Commission (the
"Commission"), within ten days after the Effective Time, such registration
statements on Form S-8 or other appropriate forms under the Securities Act to
register Cardinal Common Shares necessary to fulfill Cardinal's obligation
pursuant to this Section 2.4, including those Cardinal Common Shares issuable
upon exercise of Cardinal Exchange Options and to use its reasonable efforts to
cause such registration statements to remain effective until the exercise or
expiration of all Cardinal Exchange Options.
(c) Prior to the Effective Time: (i) the Board of Directors of Cardinal, or
an appropriate committee of non-employee directors of Cardinal, shall adopt a
binding resolution consistent with the interpretive guidance of the Commission
so that the acquisition by any officer or director of Syncor who may become a
covered person of 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 Syncor, or an appropriate
committee of non-employee directors of Syncor, shall adopt a binding resolution
consistent with the interpretive guidance of the Commission so that the
disposition by any officer or director of Syncor who is a covered person of
Syncor for purposes of Section 16 of shares of Syncor Common Stock or Syncor
Options pursuant to this Agreement and the Merger shall be an exempt transaction
for purposes of Section 16.
(d) Cardinal shall be permitted to make additional grants of equal amounts
under the Syncor stock option plans following the Effective Time for an amount
of Cardinal Common Shares equal to the number of shares under the Syncor stock
option plans immediately prior to the Effective Time that are not subject to
outstanding awards, multiplied by the Exchange Ratio.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF CARDINAL AND SUBCORP
In order to induce Syncor to enter into this Agreement, Cardinal and
Subcorp hereby represent and warrant to Syncor that, subject to the
qualifications, limitations and exceptions set forth in this Agreement, the
statements contained in this Article III are true and correct:
3.1. Organization and Standing. Each of Cardinal and Subcorp is a
corporation duly organized, validly existing and 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 Amended and Restated Articles of Incorporation of Cardinal, as
amended (the "Cardinal Articles") or the Restated Code of Regulations of
Cardinal, as amended (the "Cardinal Code of Regulations"), and Subcorp is not in
default in the performance, observance or fulfillment of any provisions of the
Subcorp Certificate of Incorporation or the Subcorp By-laws. Subcorp has, prior
to the date of this
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Agreement, furnished or made available to Syncor complete and correct copies of
the Subcorp Certificate of Incorporation and the Subcorp By-laws.
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 under this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated by this
Agreement 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, assuming
this Agreement constitutes a valid and binding obligation of Syncor, constitutes
the legal, valid and binding obligation of Cardinal and Subcorp enforceable
against each of them in accordance with its terms.
3.3. Capitalization of Cardinal and Subcorp.
(a) As of June 12, 2002, Cardinal's authorized capital stock consisted
solely of (i) 750,000,000 common shares, without par value ("Cardinal Common
Shares"), of which (A) 450,657,143 shares were issued and outstanding, (B)
10,218,008 shares were issued and held in treasury (which does not include
Cardinal Common Shares reserved for issuance or issued and held in treasury as
set forth in subclause (a)(i)(C) below), (C) 81,547,145 shares were reserved for
issuance pursuant to equity based plans for employees and directors for Cardinal
and its subsidiaries or upon the exercise or conversion of options, warrants or
convertible securities granted or issuable by Cardinal and (D) shares will be
issued pursuant to equity based plans or upon the exercise or conversion of
options granted or issuable by Cardinal in connection with the anticipated
closing of the acquisition of Boron, LePore & Associates, Inc. in an amount
determined in accordance with the formula set forth in Section 3.3 to the
disclosure schedule delivered by Cardinal to Syncor and dated the date of this
Agreement (the "Cardinal Disclosure Schedule"), (ii) 5,000,000 Class B common
shares, without par value, none of which was issued and outstanding or reserved
for issuance, and (iii) 500,000 non-voting preferred shares, without par value,
none of which was issued and outstanding or reserved for issuance or issued and
held in treasury. Each outstanding share of capital stock of Cardinal is, and
all Cardinal Common Shares to be issued in connection with the Merger or upon
exercise of any Cardinal Exchange Option will be, duly authorized and validly
issued, fully paid and nonassessable, and each outstanding share of capital
stock of Cardinal has not been, and all Cardinal Common Shares to be issued in
connection with the Merger or upon exercise of any Cardinal Exchange Option will
not be, issued in violation of any preemptive or similar rights. As of the date
of this Agreement, other than as set forth in the first sentence of this Section
3.3(a) or in Section 3.3 to the Cardinal 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 capital stock of Cardinal and
Cardinal has no obligation of any kind to issue any additional securities. The
Cardinal Common Shares (including Cardinal Common Shares to be issued in the
Merger or, subject to Section 2.4, upon exercise of any Cardinal Exchange
Option) are registered under the Exchange Act. Except as set forth in Section
3.3 to the Cardinal Disclosure Schedule, as of the date of this Agreement,
Cardinal has not agreed to register any securities under the Securities Act or
under any state securities law or granted registration rights to any individual
or entity (which rights are currently exercisable).
(b) The authorized capital stock of Subcorp consists solely of 1,000 shares
of Subcorp Common Stock, of which, as of the date of this Agreement, 100 were
issued and outstanding and none were reserved for issuance or issued and held in
treasury. All of the outstanding shares of Subcorp Common Stock are owned by
Cardinal free and clear of any liens, claims or encumbrances.
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 by this Agreement 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
Certificate of Incorporation or the Subcorp By-laws;
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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 person (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) 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 multinational court, arbitral
tribunal, administrative agency or commission or other governmental or
regulatory body, agency, instrumentality or authority, in each case, of
competent jurisdiction (a "Governmental Authority"), other than (i)
authorization for inclusion of Cardinal Common Shares to be issued in the
Merger and the transactions contemplated by this Agreement 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 United States federal and
state securities laws as are contemplated by this Agreement, (iv) filing of
the Certificate of Merger and (v) 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) above 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 this
Agreement to consummate the transactions contemplated by this Agreement.
3.5. Brokerage and Finder's Fees. Except as set forth in Section 3.5 to
the Cardinal Disclosure Schedule, none of Cardinal, any of its affiliates or any
shareholder, director, officer or employee of Cardinal has incurred or will
incur on behalf of Cardinal any brokerage, finder's, financial advisory or
similar fee in connection with the transactions contemplated by this Agreement.
3.6. Reorganization. To the best knowledge of Cardinal (including the
executive officers and directors of Cardinal), after due investigation, neither
Cardinal 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 Syncor or
any of its affiliates) would prevent the Merger from constituting a
"reorganization" (within the meaning 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, 1999 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 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
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United States generally accepted accounting principles ("GAAP") 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 in all material respects (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 (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 and the proxy
statement and form of proxies relating to the vote of Syncor Stockholders with
respect to this Agreement (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
Syncor Stockholders Meeting (as defined in Section 5.3(a)) to consider the
Merger and the transactions contemplated by this Agreement, 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 of the
Registration Statement and Proxy Statement that relate only to Syncor, each will
comply as to form in all material respects with the provisions of the Securities
Act and the Exchange Act.
3.9. Compliance with Law. Except as set forth in Section 3.9 to the
Cardinal Disclosure Schedule, Cardinal is in compliance with, and at all times
since January 1, 1999 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. Except as set forth in Section 3.9 to the
Cardinal Disclosure Schedule, no investigation or review by any Governmental
Authority with respect to Cardinal or its subsidiaries is pending, or, to the
knowledge of 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
(each, an "Action") pending, or, to the knowledge of Cardinal, threatened,
against Cardinal or any executive officer or director of Cardinal 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 by this Agreement.
Cardinal is not subject to any outstanding order, writ, injunction or decree
specifically applicable to, or having a disproportionate effect on, Cardinal and
its subsidiaries 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 by
this Agreement. Except as set forth in Section 3.10 to the Cardinal Disclosure
Schedule, since January 1, 1999, Cardinal has not been subject to any
outstanding material 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. Except as set forth in Section 3.11 to
the Cardinal Disclosure Schedule, from March 31, 2002 through the date of this
Agreement, (i) the businesses of Cardinal and its subsidiaries have been
conducted in all material respects in the ordinary course of business and (ii)
there has been no Material Adverse Effect on Cardinal or a material adverse
effect on the ability of Cardinal to consummate the transactions contemplated by
this Agreement.
3.12. Subcorp's Operations. Subcorp is a direct wholly owned subsidiary
of Cardinal that was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement, and has not (i) engaged in any
business activities, (ii) conducted any operations other than in connection with
the
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transactions contemplated by this Agreement, or (iii) incurred any liabilities
other than in connection with the transactions contemplated by this Agreement.
Cardinal, as Subcorp's sole stockholder, has approved Subcorp's execution of
this Agreement.
3.13. Undisclosed Liabilities. Except (a) as and to the extent disclosed
or reserved against on the balance sheet of Cardinal as of March 31, 2002
included in the Cardinal SEC Documents, (b) as incurred after the date thereof
in the ordinary course of business consistent with prior practice and, if
incurred after the date of this Agreement, not prohibited by this Agreement, or
(c) as set forth in Section 3.13 to the Cardinal Disclosure Schedule, Cardinal
and its subsidiaries do not have any liabilities or obligations of any nature,
whether known or unknown, absolute, accrued, contingent or otherwise and whether
due or to become due, that, individually or in the aggregate, have or would
reasonably be expected to have a Material Adverse Effect on Cardinal.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SYNCOR
In order to induce Subcorp and Cardinal to enter into this Agreement,
Syncor hereby represents and warrants to Cardinal and Subcorp that, subject to
the qualifications, limitations and exceptions set forth in this Agreement, the
statements contained in this Article IV are true and correct:
4.1. Organization and Standing. Syncor is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
with full corporate power and authority to own, lease, use and operate its
properties and to conduct its business as and where now owned, leased, used,
operated and conducted. Each of Syncor and each of its subsidiaries 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 Syncor. Syncor is not in default in the performance, observance or
fulfillment of any provision of the Syncor Amended and Restated Certificate of
Incorporation (the "Syncor Certificate"), or the By-laws of Syncor, as in effect
on the date of this Agreement (the "Syncor By-laws"). Syncor has heretofore
furnished to Cardinal complete and correct copies of the Syncor Certificate and
the Syncor By-laws. Listed in Section 4.1 to the disclosure schedule delivered
by Syncor to Cardinal and dated the date of this Agreement (the "Syncor
Disclosure Schedule") is each jurisdiction in which Syncor or its subsidiaries
is qualified to do business and, whether Syncor (or its subsidiaries) is in good
standing as of the date of this Agreement.
4.2. Subsidiaries. Syncor does not own, directly or indirectly, any
material 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 Syncor Disclosure Schedule. Except as set forth in
Section 4.2 to the Syncor Disclosure Schedule, Syncor 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 would, individually or in the aggregate, not be material
funds or investments. Except as set forth in Section 4.2 to the Syncor
Disclosure Schedule, Syncor 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 its
subsidiaries. Each of the outstanding shares of capital stock of each of
Syncor's subsidiaries is duly authorized, validly issued, fully paid and
nonassessable, and is owned, directly or indirectly, by Syncor free and clear of
all liens, pledges, security interests, claims or other encumbrances. The
following information for each of Syncor's subsidiaries is set forth in Section
4.2 to the Syncor 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 Syncor 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 of Syncor's
subsidiaries, nor are there outstanding any securities that are convertible into
or exchangeable for any shares of capital stock of
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any of Syncor's subsidiaries, and neither Syncor nor any of its subsidiaries has
any obligation of any kind to issue any additional securities or to pay for or
repurchase any securities of any of Syncor's subsidiaries or any predecessors
thereof.
4.3. Corporate Power and Authority. Syncor has all requisite corporate
power and authority to enter into and deliver this Agreement, to perform its
obligations under this Agreement, and, subject to approval of this Agreement by
Syncor Stockholders, to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by Syncor have been duly
authorized by all necessary corporate action on the part of Syncor, subject to
approval of this Agreement by Syncor Stockholders. This Agreement has been duly
executed and delivered by Syncor, and, assuming this Agreement constitutes a
valid and binding obligation of Cardinal and Subcorp, constitutes the legal,
valid and binding obligation of Syncor enforceable against it in accordance with
its terms.
4.4. Capitalization of Syncor. As of June 12, 2002, the authorized
capital stock of Syncor consisted solely of 200,000,000 shares of common stock,
par value $.05 per share ("Syncor Common Stock"), of which (i) 24,798,473 shares
were issued and outstanding, (ii) 3,749,968 shares were issued and held in
treasury (which number does not include the shares reserved for issuance or
issued and held in treasury set forth in clause (iii) below), (iii) 7,817,586
shares were reserved for issuance upon the exercise of outstanding Syncor
Options and (iv) 28,548,441 shares were reserved for issuance pursuant to the
rights issued under the Syncor Rights Agreement (as defined in Section 4.26).
Each outstanding share of capital stock of Syncor 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
of this Section 4.4, in Section 4.4 to the Syncor Disclosure Schedule or as
granted after June 14, 2002 as permitted by this 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 of any securities of Syncor, nor are
there outstanding any securities that are convertible into or exchangeable for
any shares of capital stock of Syncor, and neither Syncor nor any of its
subsidiaries has any obligation of any kind to issue any additional securities
or to pay for or repurchase any securities of Syncor or any predecessors of
Syncor. The issuance and sale of all of the shares of capital stock of Syncor
described in this Section 4.4 have been in compliance with United States federal
and state securities laws. Section 4.4 to the Syncor Disclosure Schedule sets
forth the names of, and the number of shares of each class (including the number
of shares of Syncor Common Stock issuable upon exercise of Syncor Options and
the exercise price and vesting schedule with respect thereto) and the number of
options held by, all holders of options to purchase capital stock of Syncor.
Syncor has not agreed to register any securities under the Securities Act or
under any state securities law or granted registration rights to any individual
or entity; to the extent any such agreements exist, complete and correct copies
of any such agreements have previously been provided to Cardinal.
4.5. Conflicts; Consents and Approvals. Except as set forth in Section
4.5 to the Syncor Disclosure Schedule, neither the execution and delivery of
this Agreement by Syncor, nor the consummation of the transactions contemplated
by this Agreement will:
(a) conflict with, or result in a breach of any provision of, the
Syncor Certificate or the Syncor By-laws;
(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 person (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 material properties or assets of Syncor 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
Syncor or any of its subsidiaries is a party other than any that is,
individually or in the aggregate, not a material note, bond, mortgage,
indenture, deed of trust, license, contract, undertaking, agreement, lease
or other instrument or obligation;
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(c) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Syncor 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 Syncor or any of its affiliates with, any third
party or any Governmental Authority, other than (i) approval of this
Agreement by Syncor Stockholders, (ii) actions required by the HSR Act,
(iii) registrations or other actions required under United States federal
and state securities laws as are contemplated by this Agreement, (iv)
filing of the Certificate of Merger, and (v) consents or approvals of any
Governmental Authority set forth in Section 4.5 to the Syncor Disclosure
Schedule;
except in the case of clause (b) above, which is set forth in Section 4.5(b) to
the Syncor Disclosure Schedule, and, in the case of clauses (c) and (d) above,
for any of the foregoing that would not, individually or in the aggregate, have
a Material Adverse Effect on Syncor or a material adverse effect on the ability
of the parties to this Agreement to consummate the transactions contemplated by
this Agreement.
4.6. Brokerage and Finder's Fees. Except for Syncor's obligations to
Salomon Smith Barney Inc. ("Salomon Smith Barney") (copies of all agreements
relating to such obligations having previously been provided to Cardinal), none
of Syncor or its subsidiaries, any of their respective affiliates or any
director, officer or employee of Syncor or its subsidiaries, has incurred or
will incur on behalf of Syncor or its subsidiaries, any brokerage, finder's,
financial advisory or similar fee in connection with the transactions
contemplated by this Agreement.
4.7. Reorganization. To the best knowledge of Syncor (including the
executive officers and directors of Syncor), after due investigation, neither
Syncor 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 prevent the Merger from constituting a
"reorganization" (within the meaning of Section 368(a) of the Code).
4.8. Syncor SEC Documents. Syncor has timely filed with the Commission
all forms, reports, schedules, statements and other documents required to be
filed by it since January 1, 1999 under the Exchange Act or the Securities Act
(such documents, as supplemented and amended since the time of filing,
collectively, the "Syncor SEC Documents"). The Syncor SEC Documents, including
any financial statements or schedules included in the Syncor 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 Syncor 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 Syncor included in the
Syncor 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 Syncor 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 GAAP 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 in
all material respects (subject, in the case of unaudited statements, to normal,
recurring audit adjustments) the consolidated financial position of Syncor and
its consolidated subsidiaries as at the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended. None of
Syncor's subsidiaries is separately subject to the periodic reporting
requirements of the Exchange Act, or is required to file separately any form,
report or other document with the Commission, The Nasdaq National Market, any
stock exchange or any other comparable Governmental Authority.
4.9. Registration Statement; Proxy Statement. None of the information
provided in writing by Syncor for inclusion in the Registration Statement, at
the time it becomes effective, or, in the case of the Proxy
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Statement, at the date of mailing and at the date of the Syncor Stockholders
Meeting, will contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Registration Statement and Proxy Statement, except for such
portions of the Registration Statement and the Proxy Statement that relate only
to Cardinal and its subsidiaries, each will 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
Syncor Disclosure Schedule, Syncor and its subsidiaries are in compliance, and
at all times since January 1, 1999 have been in compliance, with all Applicable
Laws relating to Syncor and its subsidiaries or their respective business or
properties, except where the failure to be in compliance with Applicable Laws,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on Syncor. Except as disclosed in Section 4.10 to the
Syncor Disclosure Schedule, no investigation or review by any Governmental
Authority with respect to Syncor and its subsidiaries are pending, or, to the
knowledge of Syncor, 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 Syncor.
4.11. Litigation. Except as set forth in Section 4.11 to the Syncor
Disclosure Schedule, there is no Action pending, or, to the knowledge of Syncor,
threatened, against Syncor or its subsidiaries or any executive officer or
director of Syncor or its subsidiaries that, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect on Syncor or a
material adverse effect on the ability of Syncor to consummate the transactions
contemplated by this Agreement. Neither Syncor nor its subsidiaries are subject
to any outstanding order, writ, injunction or decree specifically applicable to,
or having a disproportionate effect on, Syncor and its subsidiaries that,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on Syncor or a material adverse effect on the ability of
Syncor to consummate the transactions contemplated by this Agreement. Except as
set forth in Section 4.11 to the Syncor Disclosure Schedule, since January 1,
1999, neither Syncor nor its subsidiaries, have been subject to any outstanding
material order, writ, injunction or decree relating to their respective method
of doing business or its relationship with past, existing or future users or
purchasers of any goods or services of Syncor or its subsidiaries.
4.12. No Material Adverse Change. Except as set forth in Section 4.12 to
the Syncor Disclosure Schedule, from March 31, 2002 through the date of this
Agreement, (a) the businesses of Syncor and its subsidiaries have been conducted
in all material respects in the ordinary course of business and (b) there has
been no Material Adverse Effect on Syncor or a material adverse effect on the
ability of Syncor to consummate the transactions contemplated by this Agreement.
4.13. Taxes. Except as set forth in Section 4.13 to the Syncor Disclosure
Schedule:
(a) Syncor and its subsidiaries have duly filed all material United
States federal, state and local and foreign income, franchise, excise, real
and personal property and other Tax Returns (as defined in Section 4.13(i))
(including those Tax Returns filed on a consolidated, combined or unitary
basis) required to have been filed by Syncor or its subsidiaries prior to
the date of this Agreement. All of the foregoing Tax Returns are true and
correct (except for such inaccuracies that are, individually or in the
aggregate, not material), and Syncor and its subsidiaries have, within the
time and manner prescribed by Applicable Laws, paid or, prior to the
Effective Time, will pay all material Taxes required to be paid in respect
of the periods covered by such Tax Returns or otherwise due to any United
States federal, state or local, foreign or other taxing authority.
(b) Neither Syncor nor any of its subsidiaries has any material
liability for any Taxes in excess of the amounts so paid or reserves so
established, and neither Syncor 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 Tax Returns in respect of any fiscal year that have not since been
filed. No deficiencies for any material Tax have been proposed in writing,
asserted or assessed (tentatively or definitely), in each case, by any
taxing authority, against Syncor or any of its subsidiaries for which there
are not adequate reserves.
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(c) Neither Syncor 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, 1998, all United States federal income Tax Returns
including Syncor or any of its subsidiaries have been audited by the
Internal Revenue Service or are closed by the applicable statute of
limitations. Neither Syncor 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, or tangible or intangible, of Syncor or any of its subsidiaries
(other than liens for Taxes not yet due or for which adequate reserves have
been established). No claim has ever been made in writing by an authority
in a jurisdiction where none of Syncor and its subsidiaries files Tax
Returns that Syncor or any of its subsidiaries is or may be subject to
taxation by that jurisdiction. Syncor has not filed an election under
Section 341(f) of the Code to be treated as a consenting corporation.
(d) Neither Syncor 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 Syncor nor any of its subsidiaries are
now or have ever been a party to or bound by any agreement or arrangement
that (i) requires Syncor 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 that could reduce Taxes (including deductions and credits related
to alternative minimum Taxes) of Syncor or any of its subsidiaries, or
(iii) requires or permits the transfer or assignment of income, revenues,
receipts or gains to Syncor or any of its subsidiaries, from any other
person.
(e) Syncor has not constituted either a "distributing corporation" or
a "controlled corporation" (within the meaning of Section 355(a)(1)(A) of
the Code) in a distribution of stock intended to qualify for tax-free
treatment under Section 355 of the Code (i) in the two years prior to the
date of this Agreement (or will constitute such a corporation in the two
years prior to the Closing Date) or (ii) in a distribution that otherwise
constitutes part of a "plan" or "series of related transactions" (within
the meaning of Section 355(e) of the Code) in conjunction with the Merger.
(f) Syncor 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,
stockholder or other third party.
(g) None of Syncor's foreign subsidiaries has been a member of any
group that has filed a combined, consolidated or unitary Tax Return, other
than such Tax Returns for which the period of assessment has expired
(taking into account any extension or waiver thereof). None of Syncor's
foreign subsidiaries is (i) engaged in a United States trade or business
for United States federal income tax purposes, (ii) a "passive foreign
investment company" or a "shareholder, directly or indirectly, in a passive
foreign investment company" (within the meaning of the Code), or (iii) a
"foreign investment company" (within the meaning of Section 1246(b) of the
Code).
(h) Syncor would not be required to include more than $500,000, in the
aggregate, in gross income with respect to any of its foreign subsidiaries
pursuant to Section 951 of the Code if the taxable year of each such
foreign subsidiary were deemed to end on the Closing Date after the
Effective Time.
(i) "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.
(j) "Taxes" means (i) all taxes (whether United States federal, state
or local or foreign) based upon or measured by income and any other tax
whatsoever, including 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.
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4.14. Intellectual Property. Set forth in Section 4.14 to the Syncor
Disclosure Schedule is a true and complete list of (i) all of Syncor's and
its subsidiaries' U.S. patents, trademark registrations and applications,
and copyright applications and registrations, in each case, material to the
business of Syncor and its subsidiaries taken as a whole as presently
conducted, and (ii) all material agreements to which Syncor or its
subsidiaries are a party granting or obtaining any rights under, or by
their terms expressly restricting Syncor's or any of its subsidiaries'
rights to use, any Intellectual Property, other than generic or standard
agreements (including agreements for commercially-available, off-the-shelf
software) pursuant to which any such Intellectual Property is licensed to
Syncor or its subsidiaries. "Intellectual Property" means all material
intellectual property or other proprietary rights of every kind, including
all material United States or foreign patents, United States or foreign
patent applications, inventions (whether or not patentable), copyrighted
works, trade secrets, trademarks, trademark registrations and applications,
service marks, service mark registrations and applications, trade names,
trade dress, copyright registrations, customer lists, licenses of
intellectual property, and software, in each case, used in the business of
Syncor or its subsidiaries as presently conducted. Either Syncor or its
subsidiaries own, license or otherwise have the right to use the
Intellectual Property free and clear of any liens, claims or encumbrances
as is necessary for the operation of the business of Syncor or its
subsidiaries, as the case may be, in substantially the same manner as such
business is presently conducted, except as set forth in Section 4.14 to the
Syncor Disclosure Schedule or except for failures to so own, license or
otherwise have the right to use that would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect on
Syncor. Except as set forth in Section 4.14 to the Syncor Disclosure
Schedule, (i) no written claim of invalidity or ownership with respect to
any Intellectual Property has been made by a third party, and, to the
knowledge of Syncor, such Intellectual Property is not the subject of any
threatened or pending Action; (ii) to the knowledge of Syncor, no
individual or entity has asserted in writing that, with respect to the
Intellectual Property, Syncor or its subsidiaries or a licensee of Syncor
or its subsidiaries are infringing or has infringed any United States or
foreign patent, trademark, service mark, trade name, copyright or other
intellectual property right of any third party, or has misappropriated or
improperly used or disclosed any trade secret, confidential information or
know-how of any third party; (iii) to the knowledge of Syncor, the use of
the Intellectual Property by Syncor or its subsidiaries does not infringe
in any material respect any United States or foreign patent, trademark,
service mark, trade name, copyright or other intellectual property right of
any third party, and does not involve the misappropriation or improper use
or disclosure of any trade secrets, confidential information or know-how of
any third party; and (iv) except as would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect on
Syncor, neither Syncor nor its subsidiaries have taken any action that
would result in the voiding or invalidation of any of the Intellectual
Property.
4.15. Title to and Condition of Properties. Syncor or its subsidiaries
own or hold under valid leases or other rights to use all real property, plants,
machinery and equipment necessary for the conduct of the business of Syncor and
its subsidiaries 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 Syncor. Except as set forth in Section 4.15 to the Syncor Disclosure
Schedule, the material buildings, plants, machinery and equipment necessary for
the conduct of the businesses of Syncor and its subsidiaries as presently
conducted are structurally sound, are in good operating condition and repair and
are adequate for the uses to which they are being put, in each case, taken as a
whole, and none of such buildings, plants, machinery or equipment is in need of
maintenance or repairs, except for ordinary, routine maintenance and repairs
that are not material in nature or cost.
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 (as defined below), (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 601 et seq. of the Code and
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Section 601 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 (as defined below).
"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 Syncor or to any beneficiary or dependent
thereof, and whether covering one individual or more than one individual,
sponsored or maintained by Syncor or any of its subsidiaries or to which
Syncor 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 plan or program, severance pay plan, agreement, arrangement or
policy (including statutory severance and termination indemnity plans),
practice or agreement, employment agreement, severance agreement,
consulting agreements, retiree medical benefits plan and each other
employee benefit plan, program or arrangement including each "employee
benefit plan" (within the meaning of Section 3(3) of ERISA).
(b) Section 4.16 to the Syncor Disclosure Schedule lists all Plans. With
respect to each Plan, Syncor has provided or 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), 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 disclosed in Section 4.16(b) to the Syncor
Disclosure Schedule, there are no amendments to any Plan that have been adopted
or approved nor has Syncor or any of its subsidiaries undertaken to make any
such amendments or to adopt or approve any new Plan, except as required by
Applicable Laws.
(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 all
applicable foreign qualifications or registration requirements have been
satisfied with respect to any Plan maintained outside the United States. To the
knowledge of Syncor, no circumstances exist that would be reasonably be expected
to adversely affect the qualified status of any Qualified Plan or the related
trust or the qualified or registered status of any Plan or trust maintained
outside the United States.
(d) All contributions required to be made by Syncor 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, and
all premiums due or payable with respect to insurance policies funding any Plan,
for any period through the date of this Agreement have been timely made or paid
in full and through the Closing Date will be timely made or paid in full. To the
extent applicable, all Plans and related trusts maintained outside the United
States are fully funded and/or fully book reserved on a projected benefit
obligation basis in accordance with Applicable Laws and GAAP.
(e) Syncor 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 (including any local
Applicable Laws) applicable to the Plans. Each Plan has been operated in
material compliance with its terms. There is not now, and, to the knowledge of
Syncor, there are no existing circumstances that would reasonably be expected to
give rise to, any requirement for the posting of security
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with respect to a Plan or the imposition of any pledge, lien, security interest
or encumbrance on the assets of Syncor or any of its subsidiaries or any of
their respective ERISA Affiliates under ERISA or the Code, or similar Applicable
Laws of foreign jurisdictions.
(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 Syncor or any of its subsidiaries or any of their respective ERISA
Affiliates, at any time within six years before the date of this Agreement,
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 Syncor or any of its subsidiaries
following the Closing. Without limiting the generality of the foregoing, neither
Syncor 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 Syncor Disclosure Schedule, neither Syncor 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 Syncor, there has been no communication to employees of Syncor
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 Syncor Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated by this Agreement 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
Syncor or any of its subsidiaries (either alone or in conjunction with any other
event). Without limiting the generality of the foregoing, except as set forth in
Section 4.16(i) to the Syncor Disclosure Schedule, no amount paid or payable by
Syncor or any of its subsidiaries in connection with the transactions
contemplated by this Agreement, either solely as a result thereof or as a result
of such transactions in conjunction with any other events, will be an "excess
parachute payment" (within the meaning of Section 280G of the Code).
(j) Except as disclosed in Section 4.16(j) to the Syncor Disclosure
Schedule, there are no pending, or, to the knowledge of Syncor threatened,
Actions (other than claims for benefits in the ordinary course) 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 result in any material liability of
Syncor or any of its subsidiaries to the Pension Benefit Guaranty Corporation,
the United States Department of Treasury, the United States Department of Labor
or any Multiemployer Plan, or to comparable entities or Plans under Applicable
Laws of jurisdictions outside the United States.
(k) Section 4.16(k) to the Syncor Disclosure Schedule sets forth the
liability of Syncor and its subsidiaries for deferred compensation under any
deferred compensation plan, excess plan or similar arrangement (other than
pursuant to Qualified Plans) to each director, officer and employee of Syncor
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 (i) for compensation disclosed on Internal Revenue
Service Form W-2 for individuals whose compensation is not discussed in the
Syncor SEC Documents, (ii) for compensation paid or provided pursuant to any
Plan, (iii) except as specifically disclosed in the Syncor SEC Documents and
(iv) other than compensation for services provided in the ordinary course of
employment, no officer, director, or employee of Syncor or any of its other
affiliates, or any immediate family member of any of the foregoing, provides or
causes to be provided to Syncor any material assets, services or facilities, and
Syncor does not provide or cause to be provided to any such officer, director,
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employee or affiliates, or any immediate family member of any of the foregoing,
any material assets, services or facilities.
(l) Except as disclosed in Section 4.16(l) to the Syncor Disclosure
Schedule, no Plan is subject to the laws of any jurisdiction outside of the
United States.
(m) No disallowance of a deduction under Section 162(m) of the Code for
employee reimbursement of any amount paid or payable by Syncor or any of its
subsidiaries has occurred or is reasonably expected to occur.
(n) The Syncor Employees' Savings and Stock Ownership Plan (the "ESOP") is
an "employee stock ownership plan" (within the meaning of Section 4975(e)(7) of
the Code). Neither Syncor (including any of its subsidiaries) nor the ESOP has
any outstanding indebtedness in connection with or with respect to the ESOP as
of the date of this Agreement.
(o) All equity and equity-based compensation plans of Syncor and its
subsidiaries that are governed by the laws of a jurisdiction other than United
States are in compliance with in all material respects and have been
administered in all material respects in accordance with, all Applicable Laws.
4.17. Contracts. Section 4.17 to the Syncor Disclosure Schedule lists, as
of the date of this Agreement, all written or oral contracts, agreements,
guarantees, leases and executory commitments (other than Plans) (each, a
"Contract") to which Syncor or its subsidiaries are a party and that fall within
any of the following categories: (a) Contracts not entered into in the ordinary
course of Syncor's and its subsidiaries' business other than those that are not
material to Syncor's business or that of its subsidiaries, (b) joint venture,
partnership and similar agreements, (c) Contracts that are service contracts or
equipment leases involving payments by Syncor or its subsidiaries of more than
$750,000 per year, (d) Contracts containing covenants purporting by their
express terms to limit the freedom of Syncor or its subsidiaries to compete in
any line of business in any geographic area or to hire any individual or group
of individuals, (e) Contracts that, after the Effective Time, would have the
effect of limiting the freedom of Cardinal or its subsidiaries (other than
Syncor 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
that contain minimum purchase conditions in excess of $750,000 or requirements
or other terms that restrict or limit the purchasing relationships of Syncor or
its affiliates, or any customer, licensee or lessee thereof, (g) Contracts
relating to any outstanding commitment for capital expenditures in excess of
$1,000,000, (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 $500,000 and not cancelable by Syncor or its subsidiaries (without
premium or penalty) within 60 days, (i) Contracts with any labor organization or
union, (j) indentures, mortgages, promissory notes, loan agreements, guarantees
of borrowed money in excess of $500,000, letters of credit or other agreements
or instruments of Syncor or its subsidiaries or commitments for the borrowing or
the lending of amounts in excess of $500,000 by Syncor or its subsidiaries or
providing for the creation of any charge, security interest, encumbrance or lien
upon any of the assets of Syncor or its subsidiaries, (k) Contracts involving
annual revenues to the business of Syncor and its subsidiaries in excess of 2.5%
of the annual revenues of Syncor and its subsidiaries taken as a whole, (l)
Contracts providing for "earn-outs," "savings guarantees," "performance
guarantees" or other contingent payments by Syncor or its subsidiaries involving
more than $500,000 over the term of the Contract, (m) Contracts with or for the
benefit of any of Syncor's affiliates or immediate family member thereof (other
than Syncor's subsidiaries) involving more than $100,000 in the aggregate per
affiliate and (n) Contracts involving payments by Syncor or its subsidiaries of
more than $2,000,000 per year. All such Contracts and all other Contracts that
are material to the business or operations of Syncor and its subsidiaries taken
as a whole are valid and binding obligations of Syncor or its subsidiaries, as
the case may be, and, to the knowledge of Syncor, the valid and binding
obligation of each other party thereto, except such Contracts that, if not so
valid and binding, would not, individually or in the aggregate, have a Material
Adverse Effect on Syncor. As of the date of this Agreement, except for the
notice of non-renewal received on June 7, 2001 and except as set forth in
Section 4.17 to the Syncor Disclosure Schedule, neither Syncor nor its
subsidiaries have received an additional notice of non-renewal or a notice of
termination or any written indication of an intent to terminate the agreement
with Dupont Merck Pharmaceutical Company (and Bristol Myers-Squibb Co. ("BMS"),
as
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successor), dated December 19, 1993, as amended (prior to the date of this
Agreement) (the "BMS Contract") nor, to the knowledge of Syncor, has BMS
indicated that it is generally not willing to continue the relationship with
Syncor and its subsidiaries on substantially the same terms as it is presently
conducted. Neither Syncor or its subsidiaries, nor, to the knowledge of Syncor,
any other party thereto, is in violation of or in default in respect of, nor has
there occurred an event or condition, that 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 material to the business or
operations of Syncor and its subsidiaries taken as a whole, except such
violations or defaults under or terminations that, individually or in the
aggregate, would not have a Material Adverse Effect on Syncor.
4.18. Labor Matters. Except as set forth in Section 4.18 to the Syncor
Disclosure Schedule, neither Syncor nor its subsidiaries have any labor
contracts or collective bargaining agreements with any individuals employed by
Syncor or its subsidiaries or any individuals otherwise performing services
primarily for Syncor or its subsidiaries. There is no labor strike, dispute or
stoppage pending, or, to the knowledge of Syncor, threatened, against Syncor or
its subsidiaries, and neither Syncor nor any of its subsidiaries has experienced
any labor strike, dispute or stoppage or other material labor difficulty
involving its employees since January 1, 1999. To the knowledge of Syncor, since
January 1, 1999, no campaign or other attempt for recognition has been made by
any labor organization or employees with respect to employees of Syncor or any
of its subsidiaries.
4.19. Undisclosed Liabilities. Except (a) as and to the extent disclosed
or reserved against on the balance sheet of Syncor as of March 31, 2002 included
in the Syncor SEC Documents, (b) as incurred after the date thereof in the
ordinary course of business consistent with prior practice, and, if incurred
after the date of this Agreement, not prohibited by this Agreement, or (c) as
set forth in Section 4.19 to the Syncor Disclosure Schedule, Syncor and its
subsidiaries do not have any liabilities or obligations of any nature, whether
known or unknown, absolute, accrued, contingent or otherwise and whether due or
to become due, that, individually or in the aggregate, have or would reasonably
be expected to have a Material Adverse Effect on Syncor.
4.20. Operation of Syncor's Business; Relationships.
(a) Except as set forth in Section 4.20(a) to the Syncor Disclosure
Schedule, since March 31, 2002 through the date of this Agreement, neither
Syncor nor any of its subsidiaries have engaged in any transaction that, if done
after execution of this Agreement, would violate Section 5.3(c).
(b) Except as set forth in Section 4.20(b) to the Syncor Disclosure
Schedule, since March 31, 2002, as of the date of this Agreement, to the
knowledge of Syncor, no material customer of Syncor or any of its subsidiaries
has indicated that it will stop or materially decrease purchasing materials,
products or services from Syncor or its subsidiaries, and no material supplier
of Syncor or its subsidiaries has indicated that it will stop or materially
decrease the supply of materials, products or services to Syncor or its
subsidiaries or is otherwise involved in, or is threatening, a material dispute
with Syncor or its subsidiaries.
4.21. Permits; Compliance.
(a) Syncor and its subsidiaries are 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 substantially in the
same manner as it is now being conducted (collectively, the "Syncor Permits"),
and there is no Action pending, or, to the knowledge of Syncor, threatened,
regarding any of the Syncor Permits, except for any Actions that, individually
or in the aggregate, would not reasonably be expected to have a Material Adverse
Effect on Syncor. Except as set forth in Section 4.21(a) to the Syncor
Disclosure Schedule, neither Syncor nor any of its subsidiaries is in conflict
with, or in default or violation of any of the Syncor Permits, except for any
such conflicts, defaults or violations that, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect on Syncor.
(b) Except as set forth in Section 4.21(b) to the Syncor Disclosure
Schedule or as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Syncor, all
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necessary clearances or approvals from Governmental Authorities for all drug and
device products that are manufactured, distributed and/or sold by Syncor and its
subsidiaries have, to the knowledge of Syncor, been obtained, and Syncor and its
subsidiaries are in substantial compliance with the most current form of each
applicable clearance or approval with respect to the manufacture, storage,
transportation, distribution, promotion and sale by Syncor and its subsidiaries
of such drug and device products.
4.22. Environmental Matters. Except for matters disclosed in Section 4.22
to the Syncor Disclosure Schedule, (a) the properties, operations and activities
of Syncor and its subsidiaries are in compliance in all material respects with
all applicable Environmental Laws (as defined below) and all past material
noncompliance of Syncor or any of its subsidiaries with any Environmental Laws
or Environmental Permits (as defined below) has been resolved without any
pending, ongoing or future material obligation, cost or liability; (b) Syncor
and its subsidiaries and the properties and operations of Syncor and its
subsidiaries are not subject to any existing, pending, or, to the knowledge of
Syncor, 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 Syncor or its
subsidiaries or in connection with their current or former properties or
operations; and (d) there has been no material exposure of any person or
property to any Hazardous Material in connection with the current or former
properties, operations and activities of Syncor and its subsidiaries.
"Environmental Laws" means all United States federal, state or local or foreign
laws relating to pollution or protection of human health or the environment
(including ambient air, surface water, groundwater, land surface or subsurface
strata), including 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 material authorizations, codes, decrees, demands or demand
letters, injunctions, judgments, licenses, notices, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder. "Environmental
Permit" means any permit, approval, grant, consent, exemption, certificate
order, easement, variance, franchise, license or other authorization required
under or issued pursuant to any applicable Environmental Law.
4.23. Insurance. Section 4.23 to the Syncor Disclosure Schedule lists all
material insurance policies and binders and programs of self-insurance owned,
held or maintained by Syncor and its subsidiaries on the date this Agreement
that afford or afforded, as the case may be, coverage to Syncor or its
subsidiaries, or the respective assets or businesses of Syncor or its
subsidiaries. Syncor'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 that, with the giving of notice or lapse of time or both, would constitute
a default thereunder. All premiums under Syncor's and its subsidiaries'
insurance policies have been paid in full to date. Syncor and its subsidiaries
have not been refused any insurance, nor has the coverage of Syncor or any of
its subsidiaries been limited, by any insurance carrier to which it has applied
for insurance or with which it has carried insurance during the past three
years. Syncor or its covered subsidiary is a "named insured" or an "insured"
under such insurance policies. Except as set forth in Section 4.23 to the Syncor
Disclosure Schedule, the policies of fire, theft, liability and other insurance
maintained with respect to the assets or businesses of Syncor and its
subsidiaries may be continued by Syncor or its subsidiaries, as the case may be,
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 4.23
to the Syncor Disclosure Schedule. Set forth in Section 4.23 to the Syncor
Disclosure Schedule is the amount of the annual premium currently paid by Syncor
for its directors' and officers' liability insurance.
4.24. Opinion of Financial Advisor. The Board of Directors of Syncor has
received the oral opinion, to be confirmed in writing, of Salomon Smith Barney,
Syncor's financial advisor, to the effect that, as of the date of this
Agreement, the Exchange Ratio is fair to the holders of Syncor Common Stock from
a financial point of view. Syncor will provide a written copy of such opinion to
Cardinal solely for informational purposes promptly after receipt by Syncor of
such opinion, and, on the date of this Agreement, such opinion has not been
withdrawn or revoked or otherwise modified in any material respect. As of
December 3, 2002, the Board of Directors of Syncor has received the oral
opinion, to be confirmed in writing, of Salomon Smith Barney,
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Syncor's financial advisor, to the effect that, as of December 3, 2002, the
Exchange Ratio is fair to the holders of Syncor Common Stock from a financial
point of view. Syncor will provide a written copy of such opinion to Cardinal
solely for informational purposes promptly after receipt by Syncor of such
opinion, and, on December 3, 2002, such opinion has not been withdrawn or
revoked or otherwise modified in any material respect.
4.25. Board Recommendation; Required Vote. The Board of Directors of
Syncor, at a meeting duly called and held, has, by unanimous vote of those
directors present (who constituted all of the directors then in office other
than Monty Fu), (a) determined that this Agreement and the transactions
contemplated by this Agreement, including the Merger, are advisable and fair to
and in the best interests of the Syncor Stockholders, and (b) resolved, as of
December 3, 2002, to recommend that the Syncor Stockholders approve this
Agreement (the "Syncor Board Recommendation"). The affirmative vote of holders
of a majority of the outstanding shares of Syncor Common Stock to approve this
Agreement is the only vote of the holders of any class or series of Syncor
Common Stock necessary to approve this Agreement and the transactions
contemplated by this Agreement.
4.26. Section 203 of the DGCL; Rights Agreement. Prior to the date of
this Agreement, the Board of Directors of Syncor has taken all action necessary
to exempt under or make not subject to (a) the provisions of Section 203 of the
DGCL and (b) 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 and the Support/Voting Agreements, dated as of June
14, 2002, between Cardinal and certain Syncor Stockholders (collectively, the
"Support Agreements"), (ii) the Merger and (iii) the transactions contemplated
by this Agreement and the Support Agreements. The Rights Agreement, dated as of
September 28, 1999, by and between Syncor and American Stock Transfer and Trust
Company, as Rights Agent (the "Syncor Rights Agreement"), has been amended so
that (a) each of Cardinal and Subcorp is exempt from the definition of
"Acquiring Person" (as defined in the Syncor Rights Agreement), (b) no "Stock
Acquisition Date," "Distribution Date" or "Triggering Event" (as such terms are
defined in the Syncor Rights Agreement) will occur as a result of the execution
of this Agreement or the consummation of the Merger pursuant to this Agreement
and (c) the Syncor Rights Agreement will expire immediately prior to the
Effective Time. The Syncor Rights Agreement, as amended in accordance with the
preceding sentence, has not been further amended or modified. Copies of all such
amendments to the Syncor Rights Agreement have been previously provided to
Cardinal.
ARTICLE V.
COVENANTS OF THE PARTIES
The parties to this Agreement agree that:
5.1. Mutual Covenants.
(a) HSR Act Filings; Reasonable Efforts; Notification.
(i) Each of Cardinal and Syncor shall (A) make or cause to be made the
filings required of such party to this Agreement or any of its subsidiaries or
affiliates under the HSR Act with respect to the transactions contemplated by
this Agreement as promptly as practicable and in any event the initial filing
with respect to this Agreement shall be made within ten business days after the
date of this Agreement, (B) comply at the earliest practicable date with any
request under the HSR Act for additional information, documents, or other
materials received by such party to this Agreement or any of its subsidiaries
from the United States Federal Trade Commission or the United States Department
of Justice or any other Governmental Authority in respect of such filings or
such transactions, and (C) act in good faith and reasonably 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 reasonably 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.
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To the extent not prohibited by Applicable Laws, each party to this Agreement
shall use all reasonable best efforts to furnish to each other all information
required for any application or other filing to be made pursuant to any
Applicable Laws in connection with the Merger and the other transactions
contemplated by this Agreement. Each party to this Agreement shall give the
other parties to this Agreement reasonable prior notice of any communication
with, and any proposed understanding, undertaking, or agreement with, any
Governmental Authority regarding any such filings or any such transaction. None
of the parties to this Agreement shall independently participate in any meeting,
or engage in any substantive conversation, with any Governmental Authority in
respect of any such filings, investigation, or other inquiry without giving the
other parties to this Agreement prior notice of the meeting or conversation and,
unless prohibited by such Governmental Authority, the opportunity to attend
and/or participate. The parties to this Agreement 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 to this Agreement in connection with proceedings under or
relating to the HSR Act or other Antitrust Laws.
(ii) Subject to clause (iv) below, each of Cardinal and Syncor shall use
its reasonable best efforts to resolve such objections, if any, as may be
asserted by any Governmental Authority with respect to the transactions
contemplated by this Agreement under the HSR Act, the Sherman Act, as amended,
the Clayton Act, as amended, the Federal Trade Commission Act, as amended, and
any other United States federal or 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 and subject to clause (iv) below, if any administrative or
judicial action or proceeding is instituted (or threatened to be instituted)
challenging any transaction contemplated by this Agreement as inconsistent with
or violative of any Antitrust Law, each of Cardinal and Syncor shall (by
negotiation, litigation or otherwise) cooperate and use its reasonable best
efforts vigorously to contest and resist any such action or proceeding,
including any legislative, administrative or judicial action, and to have
vacated, lifted, reversed, or overturned any decree, judgment, injunction or
other order whether temporary, preliminary or permanent, that is in effect and
that prohibits, prevents, delays or restricts consummation of the Merger or any
other transactions contemplated by this Agreement, including by vigorously
pursuing all available avenues of administrative and judicial appeal and all
available legislative action, unless, by mutual agreement, Cardinal and Syncor
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 the right of a party to this Agreement to
terminate this Agreement pursuant to Section 7.1, so long as such party to this
Agreement has up to then complied in all material respects with its obligations
under this Section 5.1(a). Each of Cardinal and Syncor shall use its reasonable
best 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) Subject to clause (iv) below, each of the parties to this Agreement
agrees to use reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties to this Agreement 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 Syncor
from occurring prior to or after the Effective Time, (C) the preparation of the
Proxy Statement, and the Registration Statement, (D) the execution and delivery
of any additional instruments reasonably necessary to consummate the
transactions contemplated by, and to fully carry out the purposes of, this
Agreement, and (E) the providing of all such information concerning such party,
its subsidiaries, its affiliates and its subsidiaries' and affiliates' officers,
directors, employees and partners as may be reasonably requested in connection
with any of the matters set forth in subclauses (i)-(ii) above or this subclause
(iii).
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(iv) Cardinal and its subsidiaries, and, at the request of Cardinal, Syncor
and its subsidiaries, shall agree to hold separate (including by trust or
otherwise) or to divest, dispose of, discontinue or assign any of their
respective businesses, subsidiaries or assets, or to take or agree to take any
action with respect to (including without limitation, to license or sub-license
or to renegotiate in each case on commercially reasonable terms any arrangement
or agreement regarding), or agree to any limitation on, any of their respective
businesses, subsidiaries or assets (or any interest in the foregoing)
(collectively, "Limitations"); provided that any such Limitation is conditioned
upon the consummation of the Merger, and the failure of such Limitation, when
taken together with any other Limitations, to have, in the aggregate, a
Regulatory Material Adverse Effect on Cardinal or a Regulatory Material Adverse
Effect on Syncor (as defined below). Syncor agrees and acknowledges that,
notwithstanding anything to the contrary in this Section 5.1(a), neither Syncor
nor any of its subsidiaries shall, without Cardinal's prior written consent,
agree to any Limitations or make or agree to make any cash payments to any
suppliers or customers of Cardinal or Syncor (or their respective subsidiaries)
in connection with its obligations under this Section 5.1(a). Notwithstanding
anything to the contrary in this Agreement, Cardinal and its subsidiaries shall
not be required to agree to any Limitations (including making cash payments to
suppliers or customers) with respect to Cardinal and any of its subsidiaries
and/or Syncor and any of its subsidiaries that would reasonably be expected, in
the aggregate, to have a Regulatory Material Adverse Effect on Cardinal or a
Regulatory Material Adverse Effect on Syncor. For purposes of this Section
5.1(a), a "Regulatory Material Adverse Effect" shall be deemed to have occurred
if there are Limitations that would deprive Cardinal of the ownership or
operation of, or the economic benefits (including the making of cash payments)
of owning or operating, assets, subsidiaries or businesses of Cardinal and any
of its subsidiaries and/or Syncor and any of its subsidiaries that generated, in
the aggregate, 2001 calendar year revenues equal to 8.25% or more of the total
2001 calendar year revenues of Syncor and its subsidiaries.
(b) Tax-Free Treatment. Each of the parties to this Agreement shall use
all reasonable best efforts to cause the Merger to constitute a "reorganization"
(within the meaning of Section 368(a) of the Code) and to cooperate with the
other and provide such documentation, information and materials as may be
reasonably necessary, proper and advisable, including in obtaining an opinion
from Skadden, Arps, Slate, Meagher & Flom LLP, counsel to Syncor, as provided
for in Section 6.1(g). In connection therewith, each of Cardinal and Syncor
shall deliver to Skadden, Arps, Slate, Meagher & Flom LLP representation
letters, in each case, in form and substance reasonably satisfactory to Skadden,
Arps, Slate, Meagher & Flom LLP, which such counsel may rely on in rendering
such opinion.
(c) Public Announcements. The initial press release concerning the Merger
and the transactions contemplated by this Agreement shall be a joint press
release. Unless otherwise required by Applicable Laws or requirements of the
NYSE or The Nasdaq National Market (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 Syncor 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.
(d) Obligations of Cardinal and of Syncor. Whenever this Agreement
requires any of Cardinal's subsidiaries (including Subcorp) to take any action,
such requirement shall be deemed to include an undertaking on the part of
Cardinal to cause its subsidiaries to take such action. Whenever this Agreement
requires any of Syncor's subsidiaries to take any action, such requirement shall
be deemed to include an undertaking on the part of Syncor to cause its
subsidiaries to take such action, and, after the Effective Time, on the part of
the Cardinal and the Surviving Corporation to cause such subsidiary to take such
action.
(e) Conveyance Taxes. Cardinal, Subcorp and Syncor shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer or stamp Taxes, any transfer, recording,
registration or other fees or any similar Taxes that become payable in
connection with the transactions contemplated by this Agreement that are
required or permitted to be filed on or before the Effective Time. All such
Taxes shall be paid by the party bearing legal responsibility for such payment.
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5.2. Covenants of Cardinal.
(a) Preparation of Registration Statement. Cardinal and Syncor shall use
all reasonable efforts to prepare the Proxy Statement for filing with the
Commission at the earliest practicable time. The Syncor Stockholders Meeting
shall be called for the earliest practicable date as determined by Syncor in
consultation with Cardinal. 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 reasonable
best 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 Syncor 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 Syncor all
information concerning it as may be required for amending or supplementing the
Proxy Statement. Syncor and Cardinal shall use reasonable best efforts 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 and upon the exercise of the Cardinal Exchange
Options. No filing of, or amendment or supplement to, the Registration Statement
or the Proxy Statement will be made by Cardinal or Syncor without providing the
other with a reasonable opportunity to review and comment thereon. Cardinal will
advise Syncor, promptly after it receives notice thereof, of the time when the
Registration Statement has become effective or any supplement or amendment has
been filed, the issuance of any stop order, the suspension of the qualification
of the Cardinal Common Shares issuable in connection with the Merger for
offering or sale in any jurisdiction, or any request by the Commission for
amendment of the Proxy Statement or the Registration Statement or comments on
the Proxy Statement or the Registration Statement and responses thereto or
requests by the Commission for additional information.
(b) Conduct of Cardinal's Operations. During the period from the date of
this Agreement to the Effective Time or to the date, if any, on which this
Agreement is earlier terminated pursuant to Section 7.1, without the prior
consent of Syncor (which consent will not be unreasonably withheld or delayed),
and except as otherwise (i) contemplated by this Agreement, (ii) required by
Applicable Laws (it being understood that, insofar as less than 100% of the
equity of any of Cardinal's subsidiaries is owned, directly or indirectly, by
Cardinal, nothing in this Section 5.2(b) shall be deemed to require any such of
Cardinal's subsidiaries to take any action, or fail to take any action, which
action or failure would result in a violation of fiduciary duty under Applicable
Laws) or (iii) set forth in Section 5.2(b) to the Cardinal Disclosure Schedule,
Cardinal covenants and agrees that:
(A) Cardinal and its subsidiaries shall continue to operate their
businesses in the ordinary course and shall use their respective reasonable
best efforts to preserve their respective business organizations intact;
provided that Cardinal and its subsidiaries may take any action or omit to
take any action, to the extent permitted by this Agreement (whether or not
such action or omission would be considered taken in the ordinary course);
(B) Cardinal shall not amend or propose to amend the Cardinal Articles
to provide for the issuance of additional classes of capital stock of
Cardinal having superior rights to the Cardinal Common Shares;
(C) Cardinal shall not, and shall not permit any of its subsidiaries
to, make any acquisition of securities, assets or business primarily
involved in the industries in which Syncor operates or that supplies the
radiopharmacy businesses in which Syncor operates (whether by merger,
consolidation, purchase or otherwise) that would reasonably be expected to
cause a meaningful delay or impediment to the completion of the
transactions contemplated by this Agreement or might reasonably be expected
to have a Material Adverse Effect on Cardinal; and
(D) Cardinal shall not, and shall not permit any of its subsidiaries
to, agree, in writing or otherwise, to propose or take any of the foregoing
actions.
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Notwithstanding the foregoing, the limitations set forth in this Section 5.2(b)
shall not apply to any transaction between Cardinal and any of its wholly owned
subsidiaries or between any of Cardinal's wholly owned subsidiaries.
(c) Indemnification; Directors' and Officers' Insurance.
(i) From and after the Effective Time, Cardinal shall cause (including by
providing adequate funding to) the Surviving Corporation (or any successor to
the Surviving Corporation) to indemnify and hold harmless the present and former
officers and directors of Syncor in respect of acts or omissions occurring at or
prior to the Effective Time to the extent provided under the Syncor Certificate
or the Syncor By-laws as in effect as of the date of this Agreement or the
indemnification agreements between Syncor and its directors listed in Section
6.2(a)(i) to the Syncor Disclosure Schedule, as such indemnification agreements
are in effect as of the date of this Agreement. Without limiting the foregoing,
such indemnifying parties also shall advance any costs or expenses as incurred
by such indemnified parties to the fullest extent permitted by Applicable Laws.
In addition, from and after the Effective Time, officers of Syncor or its
subsidiaries who become officers of Cardinal or its subsidiaries will be
entitled to the same indemnity rights and protections as are afforded to
similarly situated officers of Cardinal or its subsidiaries.
(ii) Cardinal shall or shall cause the Surviving Corporation 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 at or 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 200% of the amount for such coverage
set forth in Section 4.23 to the Syncor Disclosure Schedule, but in such case
shall purchase as much coverage as reasonably practicable for 200% of the amount
set forth in Section 4.23 to the Syncor Disclosure Schedule, and, provided,
further, that any substitution or replacement of existing policies shall not
result in any gaps or lapses in coverage with respect to facts, events, acts or
omissions occurring at or prior to the Effective Time.
(iii) It is expressly agreed that the indemnified parties (including their
heirs and representatives) to whom this Section 5.2(c) applies shall be
third-party beneficiaries of this Section 5.2(c). The provisions of this Section
5.2(c) are intended to be for the benefit of, and will be enforceable by, such
third-party beneficiaries.
(d) Subcorp. 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 Subcorp Common Stock to Cardinal) or any
material liabilities.
(e) NYSE Listing. Cardinal shall use its reasonable best efforts to cause
Cardinal Common Shares issuable pursuant to the Merger or upon the exercise of
Cardinal Exchange Options to be approved for listing on the NYSE, subject to
official notice of issuance, prior to the Effective Time.
(f) Employees and Employee Benefits.
(i) Cardinal shall use its reasonable best efforts to make the Syncor
Employees (as defined below) eligible to participate in Cardinal employee
benefit plans not later than July 1, 2003. Without limiting the foregoing, from
and after the Effective Time and until July 1, 2003, Cardinal shall provide
Syncor Employees with employee benefit plans, programs, contracts or
arrangements that, in the aggregate, will provide benefits that are not
materially less favorable in the aggregate than the benefits provided to such
Syncor Employees under the Plans (except for Plans providing equity or
equity-based compensation) in effect on the date of this Agreement in accordance
with the terms of such employee benefit plans, programs, contracts or
arrangements, it being understood that, except as otherwise provided by this
Agreement, the foregoing shall not require Cardinal or the Surviving Corporation
to maintain any particular Plan. Syncor Employees shall be entitled to
participate in the applicable Cardinal equity and equity-based plans (except for
the Syncor ESPP (as defined below)) from and after the Effective Time in
accordance with the terms of the applicable Cardinal equity and equity-based
plans. From and after the Effective Time, Cardinal shall treat all service by
Syncor Employees
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with Syncor 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 or to the extent such service is prior to a specific date
before which service would not have been credited for employees of Cardinal),
and, with respect to any medical or dental benefit plan in which Syncor
Employees participate after the Effective Time, Cardinal shall waive or cause to
be waived any preexisting condition exclusions and actively-at-work requirements
(provided, however, that no such waiver shall apply to a preexisting condition
of any Syncor Employee who was, as of the Effective Time, excluded from
participation in a 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 Plan in which the Effective Time occurs
by a Syncor Employee or a Syncor 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(f), "Syncor Employees" means individuals who are, as of the Effective Time,
employees of Syncor that are not subject to collective bargaining agreements for
as long as they remain employees of Cardinal and its subsidiaries.
(ii) Cardinal and Syncor agree that each of their respective option and
other equity-incentive plans shall be amended, if and to the extent necessary,
to reflect the transactions contemplated by this Agreement, including, but not
limited to, the conversion of shares of Syncor Common Stock held or to be
awarded or paid pursuant to such benefit plans, programs or arrangements into
Cardinal Common Shares on a basis consistent with the transactions contemplated
by this Agreement.
(iii) As soon as reasonably practicable after the Effective Time, Cardinal
shall deliver to the holders of Syncor Options appropriate notices setting forth
such holders' rights pursuant to the respective Plans governing such Syncor
Options and the agreements evidencing the grants of such Syncor Options, and
that such Syncor Options and the related agreements shall be assumed by Cardinal
and shall continue in effect on the same terms and conditions (subject to the
adjustments required by Section 2.4 after giving effect to the Merger).
(iv) From and after the Effective Time, Cardinal shall, or shall cause the
Surviving Corporation to, assume and honor all Plans; provided, however, nothing
in this Agreement shall restrict Cardinal's or the Surviving Corporation's
ability to amend or terminate such Plans in accordance with their terms.
Cardinal and Syncor agree that the shareholder approval or the consummation of
the Merger, as applicable, shall constitute a "Change in Control" for all
purposes of the Plans identified and set forth in Section 4.16 to the Syncor
Disclosure Schedule; provided, however, Cardinal and Syncor intend that none of
the shareholder approval, consummation of the Merger or any transactions
contemplated by this Agreement will constitute a "Change of Control" for
purposes of the agreements set forth on Schedule 5.2(f)(iv) to the Syncor
Disclosure Schedule.
(v) With respect to the Syncor International Corporation Employee Stock
Purchase Plan (the "Syncor ESPP"), Syncor shall take all actions necessary to
(A) terminate all open offering periods under the Syncor ESPP as of a date no
later than the end of its last regularly occurring payroll period prior to the
Effective Time and (B) terminate the Syncor ESPP as of a date no later than
immediately prior to the Effective Time.
5.3. Covenants of Syncor.
(a) Syncor Stockholders Meeting. Syncor shall take all action in
accordance with the United States federal securities laws, the DGCL and the
Syncor Certificate and the Syncor By-laws necessary to duly call, give notice
of, convene and hold a special meeting of Syncor Stockholders (the "Syncor
Stockholders Meeting") to be held on the earliest practicable date determined in
consultation with Cardinal to consider and vote upon approval of this Agreement.
Subject to this Section 5.3(a), Syncor shall take all lawful actions to solicit
the approval of this Agreement by the Syncor Stockholders. Syncor shall, except
as provided in this Section 5.3(a) and in Section 5.3(d), through the Board of
Directors of Syncor, recommend to Syncor Stockholders approval of this
Agreement, and, except as expressly permitted by this Agreement, shall not
withdraw, amend or modify in a manner adverse to Cardinal its recommendation.
However, the Board of
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Directors of Syncor shall be permitted to (i) not recommend to Syncor
Stockholders that they give the Syncor Stockholders Approval or (ii) withdraw,
modify or change the Syncor Board Recommendation in a manner adverse to Cardinal
(a "Syncor Change in Recommendation"), and, in such event, not solicit votes in
favor of such approval, if the Board of Directors of Syncor believes in good
faith, based upon the advice of outside legal counsel, that the failure to so
withhold, withdraw or modify its recommendation would reasonably be expected to
cause a failure to comply with its fiduciary duties under Applicable Laws.
Notwithstanding any such Syncor Change in Recommendation, Cardinal shall have
the option, exercisable within 20 days of notice of such Syncor Change in
Recommendation, to terminate this Agreement pursuant to Section 7.1(d). If
Cardinal has not exercised its right to terminate the Agreement within such
20-day period, Cardinal shall no longer be entitled to terminate this Agreement
under Section 7.1(d). Syncor shall ensure that the Syncor Stockholders Meeting
is called, noticed, convened, held and conducted, and that all proxies solicited
in connection with the Syncor Stockholders Meeting are solicited, in compliance
in all material respects with all Applicable Laws. Without limiting the
generality of the foregoing, (i) Syncor agrees that its obligation to duly call,
give notice of, convene and hold the Syncor Stockholders Meeting, as required by
this Section 5.3, shall not be affected by the withdrawal, amendment or
modification of the Syncor Board Recommendation and (ii) Syncor agrees that its
obligations to duly call, give notice of, convene and hold the Syncor
Stockholders Meeting pursuant to this Section 5.3 shall not be affected by the
commencement, public proposal, public disclosure or communication to Syncor of
any Superior Proposal (as defined in Section 5.3(d)).
(b) Information for the Registration Statement and Preparation of Proxy
Statement. Syncor shall promptly furnish Cardinal with all information
concerning it as may be required for inclusion in the Proxy Statement and the
Registration Statement. Syncor shall cooperate with Cardinal in the preparation
of the Proxy Statement and the Registration Statement in a timely fashion and
shall use reasonable best efforts to assist Cardinal in having the Registration
Statement declared effective by the Commission as promptly as practicable
consistent with the timing for the Syncor Stockholders Meeting as determined in
consultation with Cardinal. If, at any time prior to the Effective Time, Syncor
shall obtain knowledge of any information pertaining to Syncor that would
require any amendment or supplement to the Registration Statement or the Proxy
Statement, Syncor 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. Syncor shall use reasonable best efforts to cooperate with Cardinal
in the preparation and filing of the Proxy Statement with the Commission.
Consistent with the timing for the Syncor Stockholders Meeting as determined in
consultation with Cardinal, Syncor shall use all reasonable efforts to mail at
the earliest practicable date to Syncor Stockholders the Proxy Statement, which
Proxy Statement shall include all information required under Applicable Laws to
be furnished to Syncor Stockholders in connection with the Merger and the
transactions contemplated by this Agreement and shall include the Syncor Board
Recommendation to the extent not previously withdrawn in compliance with Section
5.3(a) or Section 5.3(d) and the full text of the written opinion of Salomon
Smith Barney described in Section 4.24.
(c) Conduct of Syncor's Operations. During the period from the date of
this Agreement to the Effective Time or to the date, if any, on which this
Agreement is earlier terminated pursuant to Section 7.1, without the prior
consent of Cardinal (which consent will not be unreasonably withheld or
delayed), and except as otherwise (i) expressly contemplated by this Agreement,
(ii) required by Applicable Laws (it being understood that, insofar as less than
100% of the equity of any of Syncor's subsidiaries is owned, directly or
indirectly, by Syncor, nothing in this Section 5.3(c) shall be deemed to require
any such of Syncor's subsidiaries to take any action, or fail to take any
action, which action or failure would result in a violation of fiduciary duty
under Applicable Laws) or (iii) set forth in Section 5.3(c) to the Syncor
Disclosure Schedule, Syncor covenants and agrees that it and its subsidiaries:
(i) shall conduct its operations in the ordinary course 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
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impaired in any material respect (it being agreed that any action taken by
Syncor or its subsidiaries that is permitted under Section
5.3(c)(ii)-(xxiv) shall not be deemed to be a breach of this Section
5.3(c)(i));
(ii) shall not do or effect any of the following actions with respect
to its securities: (A) adjust, split, combine or reclassify capital stock
of Syncor, (B) make, declare or pay any dividend or distribution on, or,
directly or indirectly, redeem, purchase or otherwise acquire, any shares
of capital stock of Syncor or any securities or obligations convertible
into or exchangeable for any shares of capital stock of Syncor (other than
(I) dividends or distributions from its direct or indirect wholly owned
subsidiary in the ordinary course of business or (II) dividends or
distributions by a subsidiary that is partially owned by Syncor or any of
its subsidiaries in the ordinary course of business; provided that Syncor
or any of its subsidiaries receives or is to receive its proportionate
share thereof), (C) grant any person any right or option to acquire any
shares of capital stock of Syncor, except, after the date of this
Agreement, for the grant of options to purchase up to 100,000 shares of
Syncor Common Stock; provided that, such options are granted either (I) in
the ordinary course of business consistent with past practice after
consultation with Cardinal to new hires (but, in any event, not under the
Syncor ESPP) or (II) pursuant to formula awards as set forth in Section
5.3(c)(ii) to the Syncor Disclosure Schedule; provided that, in each case,
such options will not vest in connection with the transactions contemplated
by this Agreement, (D) issue, deliver or sell or agree to issue, deliver or
sell any additional shares of capital stock of Syncor or any securities or
obligations convertible into or exchangeable or exercisable for any shares
of capital stock of Syncor or such securities (except pursuant to the
exercise of Syncor Options that are outstanding as of the date of this
Agreement), (E) enter into any agreement, understanding or arrangement with
respect to the sale, voting, registration or repurchase of capital stock of
Syncor, or (F) open any offering period or issue any shares of Syncor
capital stock or grant any purchase rights pursuant to the Syncor ESPP;
(iii) shall not directly or indirectly sell, transfer, lease, pledge,
mortgage, encumber or otherwise dispose of any property or assets of Syncor
or its subsidiaries other than sales, transfers, leases, pledges,
mortgages, encumbrances or other dispositions in the ordinary course of
business or that, individually or in the aggregate, are immaterial;
(iv) shall not make or propose any changes in the Syncor Certificate
or the Syncor By-laws;
(v) shall not amend or modify, or propose to amend or modify, the
Syncor Rights Agreement, as amended as of the date of this Agreement;
(vi) shall not merge or consolidate with any other person;
(vii) shall not acquire assets or capital stock of any other person in
excess of $1,000,000 individually or $3,000,000 in the aggregate, other
than the acquisition of inventory in the ordinary course of business,
consistent with past practice;
(viii) shall not incur, create, assume or otherwise become liable for
any indebtedness for borrowed money or, except in the ordinary course of
business, consistent with past practice, assume, guarantee, endorse or
otherwise as an accommodation become responsible or liable for the
obligations of any other individual, corporation or other entity;
(ix) shall not create any subsidiaries;
(x) shall not enter into or modify in any material respect 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 in the ordinary course of business
consistent with past practice or as may be required by Applicable Laws, or
grant, reprice, or accelerate the exercise or payment of any Syncor Options
or other equity-based awards;
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(xi) shall not enter into, adopt or amend in any material respect any
Plan, except as shall be required by Applicable Laws;
(xii) shall not take any action that could give rise to severance
benefits payable to any officer or director of Syncor as a result of
consummation of the transactions contemplated by this Agreement;
(xiii) shall not change any material method or principle of Tax or
financial accounting in a manner that is inconsistent with past practice,
except to the extent required by Applicable Laws or GAAP, as advised by
Syncor's regular independent accountants;
(xiv) shall not, except in the ordinary course of business consistent
with past practice, settle any Actions, whether now pending or made or
brought after the date of this Agreement involving, individually or in the
aggregate, an amount in excess of $1,500,000 individually or $3,000,000 in
the aggregate;
(xv) shall not, except in the ordinary course of business consistent
with past practice, 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 Syncor Disclosure Schedule, any other material Contract
to which Syncor is a party or any confidentiality agreement to which Syncor
is a party;
(xvi) shall not 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));
(xvii) shall not write up, write down or write off the book value of
any assets, individually or in the aggregate, in excess of $300,000, except
for depreciation and amortization in accordance with GAAP consistently
applied and except, following consultation with Cardinal, as required by
Applicable Laws or GAAP;
(xviii) shall not incur or commit to any capital expenditures in
excess of $1,000,000 individually or $3,000,000 in the aggregate;
(xix) shall not 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 policies or a renewal thereof to
the extent set forth in Section 4.23 to the Syncor Disclosure Schedule;
(xx) shall not take any action to exempt or make not subject to (A)
the provisions of Section 203 of the DGCL or (B) 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 individual or entity (other
than Cardinal or its subsidiaries) or any action taken thereby, which
individual, entity or action would have otherwise been subject to the
restrictive provisions thereof and not exempt therefrom;
(xxi) shall not knowingly and intentionally take any action that could
likely result in a violation or breach of any agreement, covenant,
representation or warranty contained in this Agreement that has prevented
or would prevent the satisfaction of the condition set forth in Section
6.3(a) or 6.3(b);
(xxii) shall not, except as, individually or in the aggregate, is not
reasonably likely to have a Material Adverse Effect on Syncor, make, revoke
or amend any Tax election, settle or compromise any claim or assessment
with respect to Taxes, execute or consent to any waivers extending the
statutory period of limitations with respect to the collection or
assessment of any Taxes or amend any material Tax Returns;
(xxiii) shall not permit or cause any of its subsidiaries to do any of
the foregoing or any of the items set forth in Section 5.3(c)(xxiii) to the
Cardinal Disclosure Schedule or agree or commit to do any of the foregoing;
or
(xxiv) except as expressly permitted in this Agreement, shall not
agree in writing or otherwise to take any of the foregoing actions.
(d) No Solicitation. Syncor agrees that, during the term of this
Agreement, it shall not, and shall not authorize and will use best efforts not
to permit any of its subsidiaries or any of its or its subsidiaries' directors,
C-29
officers, employees, agents or representatives, directly or indirectly, to
solicit, initiate, encourage or facilitate, or furnish or disclose nonpublic
information in furtherance of, any inquiries or the making of any proposal with
respect to any recapitalization, merger, consolidation or other business
combination involving Syncor, or acquisition of any capital stock (other than
upon exercise of Syncor Options that are outstanding as of the date of this
Agreement) or a material amount of the assets (other than transactions with
customers in the ordinary course of business consistent with past practice or
the disposition of all or part of the business or operations of Comprehensive
Medical Imaging ("CMI") of Syncor and its subsidiaries, taken as a whole, in a
single transaction or a series of related transactions, 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 this Agreement by Syncor Stockholders,
Syncor may furnish information to, and negotiate or otherwise engage in
discussions with, any person that delivers a written proposal for a Competing
Transaction that was not solicited or encouraged, except to the extent
explicitly permitted by this Section 5.3(d), after the date of this Agreement if
and so long as the Board of Directors of Syncor believes in good faith as
determined by a majority vote, based upon the advice of its outside legal
counsel, that failing to take such action would reasonably be expected to
constitute a breach of its fiduciary duties under Applicable Laws and believes
in good faith, after consulting with a nationally recognized investment banking
firm and Syncor's outside legal counsel, that such proposal would reasonably be
expected to result in a transaction that, if consummated, would be more
favorable to Syncor Stockholders 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"); provided, further, that, prior to
furnishing any information to such person, Syncor shall enter into a
confidentiality agreement that is no less restrictive, in any material respect,
than the confidentiality agreement between Cardinal and Syncor, dated July 9,
2001, as amended on August 29, 2001 and September 5, 2001 (the "Confidentiality
Agreement"). Syncor will immediately cease all existing activities, discussions
and negotiations with any persons conducted to the date of this Agreement with
respect to any proposal for a Competing Transaction and request the return of
all confidential information regarding Syncor provided to any such persons prior
to the date of this Agreement pursuant to the terms of any confidentiality
agreements or otherwise. In the event that, prior to the approval of this
Agreement by the Syncor Stockholders, the Board of Directors of Syncor receives
a Superior Proposal that was not solicited or encouraged, except to the extent
permitted by this Section 5.3(d), after the date of this Agreement and the Board
of Directors of Syncor believes in good faith based upon the advice of its
outside legal counsel that failure to take such action would reasonably be
expected to constitute a breach of the fiduciary duties of the Board of
Directors of Syncor under Applicable Laws, the Board of Directors of Syncor may
(subject to this, the following sentences and Section 5.3(a)) withdraw, modify
or change, in a manner adverse to Cardinal, the Syncor Board Recommendation
and/or comply with Rule 14e-2 under the Exchange Act with respect to a Competing
Transaction, provided that Syncor 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), except as set forth in Section 5.3(a)). Any such
withdrawal, modification or change of the Syncor Board Recommendation shall not
change the approval of the Board of Directors of Syncor for purposes of causing
any state takeover statute or other state law to be inapplicable to the
transactions contemplated by this Agreement, including the Merger or the Support
Agreements, or change the obligation of Syncor to present this Agreement for
approval at the duly called Syncor Stockholders Meeting on the earliest
practicable date determined in consultation with Cardinal. From and after the
execution of this Agreement, Syncor shall promptly advise Cardinal in writing of
the receipt, directly or indirectly, of any inquiries or proposals or the
participation by or on behalf of Syncor in any discussions or negotiations,
relating to a Competing Transaction (including, in each case, the specific terms
and status thereof and the identity of the other person or persons 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. All
information provided to Cardinal under this Section 5.3(d) shall be kept
confidential by Cardinal in accordance with the terms of the Confidentiality
Agreement. In addition, Syncor shall promptly advise
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Cardinal, in writing, if the Board of Directors of Syncor shall make any
determination as to any Competing Transaction as contemplated by the proviso to
the first sentence of this Section 5.3(d). Furthermore, nothing contained in
this Section 5.3(d) shall prohibit Syncor from making disclosure (and such
disclosure in and of itself shall not be deemed to be a Syncor Change in
Recommendation) of the fact that a Competing Transaction has been proposed, the
identity of the person making such proposal or the material terms of such
proposal in the Registration Statement or the Proxy Statement only to the extent
the disclosure of such facts, identity or terms is required under Applicable
Laws and only following prior consultation by Syncor with Cardinal regarding any
such proposed disclosure.
(e) Affiliates of Syncor. Syncor shall use reasonable best efforts to
cause each such person that will be, at the Effective Time or was on the date of
this Agreement, an "affiliate" of Syncor for purposes of Rule 145 under the
Securities Act to execute and deliver to Cardinal, no less than ten days prior
to the date of the Syncor Stockholders Meeting, the written undertakings in the
form attached as Exhibit A to this Agreement (the "Syncor Affiliate Letter"). No
later than 15 days prior to such date, Syncor, after consultation with its
outside legal counsel, shall provide Cardinal with a letter (reasonably
satisfactory to outside legal counsel to Cardinal) specifying all of the
individuals or entities that, in Syncor's opinion, may be deemed to be
affiliates of Syncor under the preceding sentence. The foregoing
notwithstanding, Cardinal shall be entitled to place legends as specified in the
Syncor Affiliate Letter on the certificates evidencing any of the Cardinal
Common Shares to be received by (i) any such affiliate of Syncor specified in
such letter or (ii) any person Cardinal in consultation with its outside legal
counsel reasonably identifies (by written notice to Syncor and following
discussions and consultation with Syncor's outside legal counsel) as being a
person that is an affiliate, 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 Syncor Affiliate
Letters, regardless of whether such person has executed a Syncor Affiliate
Letter and regardless of whether such person's name appears on the letter to be
delivered pursuant to the preceding sentence.
(f) Access. Subject to legal and contractual restrictions (including,
without limitation, under Antitrust Laws), upon reasonable notice throughout the
period prior to the earlier of the Effective Time or the date of termination of
this Agreement, Syncor shall permit representatives of Cardinal to have
reasonable access during normal business hours to Syncor's premises, properties,
books, records, contracts and documents. Cardinal will keep the information
obtained pursuant to this Section 5.3(f) confidential pursuant to the terms of
the Confidentiality Agreement and shall cause its directors, officers and
employees and representatives or advisors who receive any portion thereof to
keep all such information confidential, in accordance with the terms of the
Confidentiality Agreement. Cardinal will use reasonable best efforts to minimize
any disruption to the businesses of Syncor and its subsidiaries that may result
from the requests for access, data and information hereunder. Cardinal shall
afford to Syncor's directors, officers, employees, and representatives or
advisors reasonable access during normal business hours upon reasonable notice,
to its directors, officers, employees, and books and records to the extent
reasonably necessary in connection with the preparation of the Proxy Statement.
No investigation conducted pursuant to this Section 5.3(f) shall affect or be
deemed to modify any representation or warranty made in this Agreement. Syncor
acknowledges that Cardinal intends to continue its due diligence efforts until
the Closing Date and Syncor agrees that it will provide its full cooperation in
order to give Cardinal a level of access consistent with that provided during
the investigation related to the Syncor Disclosure Matter (defined below) and
with the preceding four sentences of Section 5.3(f) so that Cardinal may
complete as much of its due diligence as reasonably possible prior to the Syncor
Stockholder Meeting, it being agreed that the level of access provided prior to
December 3, 2002 during the investigation related to the Syncor Disclosure
Matter has been consistent with the preceding four sentences of Section 5.3(f)
and that level of access accorded by Syncor during the investigation related to
the Syncor Disclosure Matter shall be the level of access to be provided in
connection with Cardinal's continued due diligence efforts.
(g) Subsequent Financial Statements. Syncor 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 Syncor SEC Documents after
the date of this Agreement (other than routine filings pursuant to Rule 425
under the Securities Act or Rule 14a-12 under the Exchange Act).
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ARTICLE VI.
CONDITIONS
6.1. Conditions to the Obligations of Each Party. The obligations of
Syncor, Cardinal and Subcorp to consummate the Merger shall be subject to the
satisfaction (or to the extent legally permissible, waiver) of the following
conditions:
(a) This Agreement, shall have been approved by Syncor Stockholders in
the manner required by Applicable Laws.
(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, except for such approvals (unrelated to
Antitrust Laws) the failure of which to obtain would not, individually or
in the aggregate, result in the imposition of any fine or penalty except in
immaterial amounts.
(c) No provision of any Applicable Law and no judgment, injunction,
order or decree of a Governmental Authority shall prohibit or enjoin the
consummation of the Merger or the transactions contemplated by this
Agreement or limit the ownership or operation by Cardinal, Syncor or any of
their respective subsidiaries of any material portion of the businesses or
assets of Cardinal or Syncor.
(d) There shall not be pending any Action by any Governmental
Authority (i) challenging or seeking to restrain or prohibit the
consummation of the Merger or any of the other transactions contemplated by
this Agreement, (ii) seeking to prohibit or limit in any material respect
the ownership or operation by Cardinal, Syncor or any of their respective
subsidiaries of, or to compel Cardinal, Syncor or any of their respective
subsidiaries to dispose of or hold separate, any material portion of the
business or assets of Cardinal, Syncor or any of their respective
subsidiaries, as a result of the Merger or any of the other transactions
contemplated by this Agreement, except in the case of this clause (ii) for
such prohibitions, limitations, dispositions or holdings that would not be
deemed to constitute a Material Adverse Effect under Section 5.1(a)(iv), or
(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 capital
stock of the Surviving Corporation on all matters properly presented to the
stockholders of the Surviving Corporation.
(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 and upon
exercise of Cardinal Exchange Options shall have been approved for listing
on the NYSE, subject to official notice of issuance.
(g) Syncor shall have received the opinion of Skadden, Arps, Slate,
Meagher & Flom LLP, dated as of the Closing Date, to the effect that (i)
the Merger will constitute a "reorganization" (within the meaning of
Section 368(a) of the Code) and (ii) no gain or loss will be recognized by
Syncor Stockholders upon the receipt of Cardinal Common Shares in exchange
for shares of Syncor Common Stock pursuant to the Merger, except with
respect to cash received in lieu of fractional share interests in Cardinal
Common Shares.
6.2. Conditions to Obligations of Syncor. The obligations of Syncor to
consummate the Merger and the transactions contemplated by this Agreement shall
be subject to the satisfaction of the following conditions unless waived by
Syncor:
(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
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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 would
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 under this Agreement at or prior to the Effective Time.
(c) Each of Cardinal and Subcorp shall have furnished Syncor with a
certificate dated the Closing Date signed on behalf of it by the Chairman,
President or any Vice President of Cardinal and Subcorp, as applicable, to
the effect that the conditions set forth in Sections 6.2(a) and 6.2(b) have
been satisfied.
(d) Since the date of this Agreement, except to the extent
contemplated by Section 3.11 to the Cardinal Disclosure Schedule, there
shall not have been events or occurrences individually or in the aggregate
that would be a Material Adverse Effect on Cardinal.
6.3. Conditions to Obligations of Cardinal and Subcorp. The obligations
of Cardinal and Subcorp to consummate the Merger and the other transactions
contemplated by this Agreement shall be subject to the satisfaction of the
following conditions unless waived by Cardinal:
(a) Each of the representations and warranties of Syncor set forth in
Article IV (other than the representations and warranties of Syncor set
forth in the first three sentences of 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 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 Syncor. The representations
and warranties of Syncor set forth in the first three sentences of Section
4.4 shall be true and correct (subject to de minimis exceptions) 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) Syncor 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 under this
Agreement at or prior to the Effective Time; it being agreed that any
failure to so perform or comply with (x) Section 5.3(c) of the Merger
Agreement prior to December 3, 2002 or (y) after December 3, 2002, to the
extent permitted pursuant to Annex I to Amendment No. 2, in each case, as a
result of the Syncor Disclosure Matter, shall not be included in
determining whether the condition set forth in this Section 6.3(b) has been
satisfied.
(c) Syncor 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 6.3(b) have been satisfied.
(d) Since the date of this Agreement, except to the extent
contemplated by Section 4.12 to the Syncor Disclosure Schedule, there shall
not have been events or occurrences, individually or in the aggregate, that
would be a Material Adverse Effect on Syncor.
(e) A guilty plea (the "Plea") shall have been entered into by Syncor
Taiwan, Inc. pursuant to the agreement (the "Agreement"), dated December 3,
2002, between counsel for Syncor and the United States Department of
Justice (the "DOJ") and the plea agreement, dated December 3, 2002
(together with the Agreement, the "DOJ Agreement"), between Syncor Taiwan,
Inc. and the DOJ, and the DOJ Agreement shall have remained in effect
without modification to the terms thereof; except any such
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modification that would not (i) be materially adverse to Cardinal or (ii)
have a Material Adverse Effect on Syncor;
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 Syncor Stockholders):
(a) by mutual written consent of Cardinal and Syncor;
(b) by either Cardinal or Syncor 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 Syncor from
consummating the Merger shall have been entered and such judgment,
injunction, order or decree shall have become final and nonappealable;
provided that the party seeking to terminate this Agreement pursuant to
this Section 7.1(b) shall have used its reasonable best efforts to remove
such order, decree, ruling or injunction;
(c) by either Cardinal or Syncor if the Merger shall not have been
consummated before the date that is the earlier of (x) the date that is 23
business days (within the meaning of Rule 14d-1(g)(3) of the Securities
Exchange Act of 1934) following the date that the Commission declares the
final post-effective amendment to the Registration Statement effective and
(y) March 21, 2003; provided, further, that the right to terminate this
Agreement under this Section 7.1(c) shall not be available to any party to
this Agreement whose failure or whose affiliate's failure to perform any
material covenant or obligation under this Agreement (a "Material Failure")
has been the primary cause of or resulted in the failure of the Merger to
occur on or before such date, it being agreed that any failure to perform
or comply with (i) Section 5.3(c) of the Merger Agreement prior to December
3, 2002, or (ii) after December 3, 2002, to the extent permitted by Annex I
to Amendment No. 2, in each case, as a result of the Syncor Disclosure
Matter, shall not be deemed a Material Failure;
(d) by Cardinal (i) if there shall have been a Syncor Change in
Recommendation or (ii) if the Syncor Board of Directors shall have refused
to affirm the Syncor Board Recommendation within 20 days of any written
request from Cardinal.
(e) by Cardinal or Syncor if, at the Syncor Stockholders Meeting
(including any adjournment or postponement thereof), the requisite vote of
Syncor Stockholders to approve this Agreement shall not have been obtained;
(f) by Cardinal if there has been a violation or breach by Syncor of
any agreement, covenant, representation or warranty contained in this
Agreement that has prevented or would prevent the satisfaction of the
conditions set forth in Sections 6.3(a) and (b) at the time of such breach
or violation and such violation or breach has not been waived by Cardinal
nor cured by Syncor prior to the earlier of (i) 20 business days after the
giving of written notice to Syncor of such breach and (ii) March 21, 2003;
or
(g) by Syncor if there has been a violation or breach by Cardinal of
any agreement, covenant, representation or warranty contained in this
Agreement that has prevented or would prevent the satisfaction of the
conditions set forth in Sections 6.2(a) and (b) at the time of such breach
or violation and such violation or breach has not been waived by Syncor nor
cured by Cardinal prior to the earlier of (i) 20 business days after the
giving of written notice to Cardinal of such breach and (ii) March 21,
2003.
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(f) and the provisions of this Section 7.2 and
Sections 8.7, 8.8 and 8.11, shall become void and have no effect, without any
liability on the part of any party to this Agreement or the directors, officers,
or stockholders or shareholders of any party to this Agreement, as the case may
be. Notwithstanding the foregoing, nothing in this Section 7.2 shall relieve
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any party to this Agreement of liability for an intentional and material breach
of any provision of this Agreement, provided, however, that, if it shall be
judicially determined that termination of this Agreement was caused by an
intentional and material breach of this Agreement, then, in addition to other
remedies at law or equity for breach of this Agreement, the party to this
Agreement so found to have intentionally breached this Agreement shall indemnify
and hold harmless the other parties to this Agreement 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 shareholder meetings and consents (collectively, "Costs"). If
this Agreement is terminated pursuant to Section 7.1(d) or Section 7.1(e), then
Syncor will, within three business days following any such termination by
Cardinal, or, in the case of a termination by Syncor, concurrently with such
termination, pay to Cardinal in cash by wire transfer in immediately available
funds to an account in the United States designated by Cardinal in reimbursement
for Cardinal's actual and documented reasonable Costs, an amount in cash up to
but not in excess of $4,000,000 in the aggregate. If this Agreement is
terminated pursuant to
(a) Section 7.1(d) or Section 7.1(e) and at any time prior to such
termination a bona fide proposal regarding a Competing Transaction with
respect to Syncor shall not have been made to Syncor, nor shall there have
been any public disclosure of any bona fide proposal or expression of
interest by a third party regarding a Competing Transaction, or
(b) Section 7.1(a) or Section 7.1(c) and at any time prior to such
termination a bona fide proposal regarding a Competing Transaction with
respect to Syncor shall have been made to Syncor, or any bona fide proposal
or expression of interest by a third party regarding a Competing
Transaction shall have been publicly disclosed
and within six months after the date of any such termination Syncor enters into
a letter of intent, agreement-in-principle, acquisition agreement or other
similar agreement with respect to, or publicly announces, a Business Combination
(as defined below) or consummates a Business Combination, then Syncor will, upon
consummation of such Business Combination, 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 $24,125,000 (less amounts paid in
reimbursement of Costs). If this Agreement is terminated pursuant to Section
7.1(d) or Section 7.1(e), and at any time prior to such termination a bona fide
proposal regarding a Competing Transaction with respect to Syncor shall have
been made to Syncor, or any bona fide proposal or expression of interest by a
third party regarding a Competing Transaction shall have been publicly
disclosed, then (i) Syncor 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 Syncor, concurrently with such termination, pay to Cardinal in
cash by wire transfer in immediately available funds to an account in the United
States designated by Cardinal a termination fee in an amount equal to
$12,062,500 (less amounts paid in reimbursement of Costs); and, furthermore, if
within 12 months after the date of any such termination Syncor enters into a
letter of intent, agreement-in-principle, acquisition agreement or other similar
agreement with respect to, or publicly announces, a Business Combination or
consummates a Business Combination, then Syncor will, upon the consummation of
such Business Combination, pay to Cardinal in cash by wire transfer in
immediately available funds to an account in the United States designated by
Cardinal an additional termination fee in an amount equal to $12,062,500.
"Business Combination" means (a) a merger, consolidation, share exchange,
business combination or similar transaction involving Syncor as a result of
which Syncor Stockholders, prior to such transaction, in the aggregate, cease to
own at least 60% of the voting securities of the entity surviving or resulting
from such transaction (or the ultimate parent entity thereof), (b) a sale,
lease, exchange, transfer or other disposition of more than 33% of the assets of
Syncor and its subsidiaries, taken as a whole, in a single transaction or a
series of related transactions (other than to customers in the ordinary course
of business or the disposition of all or part of the business or operations of
CMI), or (c) the acquisition, by a person (other than Cardinal or any affiliate
thereof) or "group" (as 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 33% of Syncor Common Stock, whether by tender or exchange offer or
otherwise.
7.3. Amendment. This Agreement may be amended by the parties to this
Agreement, by action taken or authorized by their respective Boards of
Directors, at any time before or after approval of this Agreement by
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Syncor Stockholders, but, after any such approval, no amendment shall be made
that by law requires further approval or authorization by Syncor Stockholders
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 to this Agreement.
7.4. Extension; Waiver. At any time prior to the Effective Time, Cardinal
(with respect to Syncor) and Syncor (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 to this Agreement, (b) waive any
inaccuracies in the representations and warranties contained in this Agreement
or in any document delivered pursuant to this Agreement and (c) waive compliance
with any of the agreements or conditions contained in this Agreement. Any
agreement on the part of a party to this Agreement to any such extension or
waiver shall be valid only if set forth in a written instrument signed on behalf
of such party to this Agreement.
ARTICLE VIII.
MISCELLANEOUS
8.1. Survival of Representations and Warranties. The representations and
warranties made in this Agreement by the parties to this Agreement shall not
survive the Effective Time. This Section 8.1 shall not limit any covenant or
agreement of the parties to this Agreement, which by its terms contemplates
performance after the Effective Time or after the termination of this Agreement.
8.2. Notices. All notices and other communications under this Agreement
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 to this Agreement at the following
addresses (or at such other address for a party to this Agreement as shall be
specified by like notice):
(a) if to Cardinal or Subcorp:
Cardinal Health, Inc.
7000 Cardinal Place
Dublin, Ohio 43017
Attention: Paul S. Williams
Executive Vice President, Chief Legal Officer & 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
C-36
(b) if to Syncor:
Syncor International Corporation
6464 Canoga Avenue
Woodland Hills, CA 91367
Attention: Robert G. Funari
President and Chief Executive Officer
Telecopy No.: (818) 737-4826
with a copy to
Paul T. Schnell, Esq.
Richard J. Grossman, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Telecopy No.: (212) 735-2000
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." A "Material Adverse Effect" with respect to any party to
this Agreement shall be deemed to occur if there shall have been a material
adverse effect on the business, financial condition or results of operations of
such party to this Agreement and its subsidiaries, taken as a whole, except to
the extent that such adverse effect results from (a) changes (i) in prevailing
interest rates in the United States or financial market conditions in the United
States, (ii) in general economic conditions in the United States or (iii) in
GAAP; (b) any developments, changes or consequences relating to or that could
arise from the actual or prospective renewal of (or failure to renew) the BMS
Contract, any new terms that may be negotiated in any proposed or actual amended
or new BMS Contract, any negotiations with BMS (or the substitute counterparty)
directly relating to the BMS Contract or any amendment to the BMS Contract or a
new BMS Contract, in each case, regardless of whether or not BMS owns the
product covered by the BMS Contract; (c) any developments, changes or
consequences relating to the process for the possible sale of all or a portion
of the business of CMI (the "CMI Business"), including the failure to sell all
or any portion of the CMI Business, the level of interest of any parties in
pursuing a sale or the value or other terms for a sale indicated by such
parties, and the pricing or other terms of any such sale, or the effect of any
accounting charges, adjustments and changes ("CMI Changes") set forth in Section
5.3(c) to the Syncor Disclosure Schedule; or (d) the Syncor Disclosure Matter.
For the purposes of this Agreement, in determining whether there has been a
Material Adverse Effect on Syncor, any changes to or developments regarding the
CMI Business shall be measured solely against the actual results of the CMI
Business for the fiscal year ended December 31, 2001. A "subsidiary" means, when
used with respect to any party to this Agreement, any corporation or other
organization, incorporated or unincorporated, (a) of which such party to this
Agreement or any of its subsidiaries is a general partner (excluding
partnerships, the general partnership interests of which held by such party to
this Agreement or any of its subsidiaries do not have 50% or more of the voting
interests in such partnership) or (b) 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 to this Agreement 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 to this Agreement or one or more of its subsidiaries).
With respect to Syncor, "knowledge" shall mean the actual knowledge of the
individuals set forth in Section 8.3 to the Syncor Disclosure Schedule. With
respect to Cardinal, "knowledge" shall mean the actual knowledge of the
individuals set forth in Section 8.3 to the Cardinal Disclosure Schedule. The
"Syncor Disclosure Matter" shall mean (x) the information set forth in
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the written reports prepared by Ernst & Young LLP; Skadden, Arps, Slate, Meagher
& Flom LLP; and PricewaterhouseCoopers LLP relating to Syncor's and its
subsidiaries' operations outside of the continental United States, Alaska and
Hawaii as disclosed to each of the DOJ, the Commission and Cardinal (or its
outside legal counsel), (y) any Actions, judgments, settlements, fines,
penalties or orders by or before any Governmental Authority, whether existing,
pending, threatened or hereafter arising (and including the terms and status
thereof), arising from the matters identified in clause (x) above or the
disclosure, fiduciary, contractual or other obligations of the Parties and their
subsidiaries and their respective directors, officers, employees and
representatives relating to the matters identified in clause (x) above,
including the Actions listed on Annex II to Amendment No. 2, and (z) any costs,
fees and expenses of Syncor or its subsidiaries relating to the investigation of
the matters identified in clauses (x) and (y) above; the renegotiation of the
Merger Agreement; the solicitation of proxies after December 3, 2002; and any
pre-existing indemnity rights of any directors, officers, employees and
representatives of Syncor or of any of its subsidiaries in connection with any
of the matters identified in clauses (x) and (y).
8.4. Counterparts. This Agreement may be executed in counterparts, which
together shall constitute one and the same Agreement. The parties to this
Agreement may execute more than one copy of this Agreement, each of which shall
constitute an original.
8.5. Entire Agreement. This Agreement (including the documents and the
instruments relating to the Merger referred to in this Agreement), the Support
Agreements and the Confidentiality Agreement constitute the entire agreement
among the parties to this Agreement and supersede all prior agreements and
understandings, agreements or representations by or among the parties to this
Agreement, written and oral, with respect to the subject matter of this
Agreement and thereof. With respect to the transactions contemplated by this
Agreement and the subject matter of this Agreement, neither Cardinal and its
affiliates nor Syncor and its affiliates makes any representations or warranties
other than those set forth in this Agreement.
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. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to the
principles of conflicts of laws thereof. 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 the State of Delaware.
8.8. Consent to Jurisdiction; Venue.
(a) Each of the parties to this Agreement irrevocably submits to the
exclusive jurisdiction of the state courts of Delaware and to the jurisdiction
of the United States District Court for the District of Delaware, for the
purpose of any action or proceeding arising out of or relating to this Agreement
and each of the parties to this Agreement irrevocably agrees that all claims in
respect to such action or proceeding may be heard and determined exclusively in
any Delaware state or federal court sitting in the State of Delaware. Each of
the parties to this Agreement agrees that a final non-appealable 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.
(b) Each of the parties to this Agreement 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 to this Agreement.
Nothing in this Section 8.8 shall affect the right of any party to this
Agreement 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 to this Agreement
acknowledges and agrees that, in addition to all other remedies to which it may
be entitled, each of the parties to this Agreement is entitled to the fullest
extent permitted by Applicable Laws to an injunction restraining such breach,
violation or default or threatened breach, violation or default and to any other
equitable relief, including, without limitation, specific performance, without
bond
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or other security being required in the event of a breach or violation of, or a
default under, this Agreement, provided that such party to this Agreement is not
in material default hereunder.
8.10. Assignment. Neither this Agreement nor any of the rights, interests
or obligations under this Agreement shall be assigned by any of the parties to
this Agreement (whether by operation of law or otherwise) without the prior
written consent of the other parties to this Agreement. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties to this Agreement and their respective successors and
assigns.
8.11. Expenses. Subject to the provisions of Section 7.2, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated by this Agreement and thereby shall be paid by the party to this
Agreement incurring such expenses.
8.12. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, such provision shall be interpreted to be only so
broad as is enforceable.
IN WITNESS WHEREOF, Cardinal, Subcorp and Syncor 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
MUDHEN MERGER CORP.
By: /s/ ROBERT D. WALTER
------------------------------------
Name: Robert D. Walter
Title: Chairman
SYNCOR INTERNATIONAL CORPORATION
By: /s/ ROBERT G. FUNARI
------------------------------------
Name: Robert G. Funari
Title: President and Chief
Executive Officer
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EXHIBIT A
, 200
Cardinal Health, Inc.
7000 Cardinal Place
Dublin, Ohio 43017
Gentlemen:
The undersigned acknowledges that the undersigned has been advised, as of
the date hereof, the undersigned may be deemed to be an "affiliate" of Syncor
International Corporation, a Delaware corporation ("Syncor"), as the term
"affiliate" is used in and for purposes paragraphs (c) and (d) of Rule 145
("Rule 145") promulgated by the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (including the rules
and regulations thereunder, the "Securities Act"). Pursuant to the terms and
subject to the conditions of the Agreement and Plan of Merger, dated as of
, 2002 (the "Agreement"), by and among Syncor, Cardinal Health, Inc.,
an Ohio corporation ("Cardinal"), and Mudhen Merger Corp., a Delaware
corporation and a wholly owned subsidiary of Cardinal ("Subcorp"), Subcorp will
be merged with and into Syncor (the "Merger"), all of the outstanding shares of
common stock of Syncor, par value $0.05 per share ("Syncor Common Stock"), will
be converted into common shares, without par value, of Cardinal ("Cardinal
Common Shares"), and all unexpired and unexercised employee options to purchase
capital stock of Syncor will become options to purchase Cardinal Common Shares
("Cardinal Options"). In, or as a result of, the Merger, the undersigned will
(a) receive Cardinal Common Shares in exchange for all of the shares of Syncor
Common Stock owned by the undersigned immediately prior to the time of the
effectiveness of the Merger (the "Effective Time"), and/or (b) receive Cardinal
Options.
The undersigned acknowledges that, if the undersigned is an affiliate under
the Securities Act, the undersigned's ability to sell, assign or transfer
Cardinal Common Shares and Cardinal Options beneficially owned by the
undersigned as a result of the Merger may be restricted unless such transaction
is registered under the Securities Act or an exemption from such registration is
available. The undersigned understands that such exemptions are limited, and, to
the extent the undersigned felt or feels necessary, the undersigned has obtained
or will obtain advice of counsel as to the nature and conditions of such
exemptions, including information with respect to the applicability to the sale,
assignment or transfer of such securities of Rules 144 and 145(d) promulgated
under the Securities Act.
The undersigned agrees with Cardinal that the undersigned will not offer to
sell, sell, transfer or otherwise dispose of any of the Cardinal Common Shares
or Cardinal Options (or shares issuable upon exercise thereof) beneficially
owned by the undersigned as a result of the Merger except (a) in compliance with
the applicable provisions of Rule 145 or (b) pursuant to a registration
statement under the Securities Act or (c) in a transaction that, in the opinion
of Cardinal's general counsel or other independent counsel reasonably
satisfactory to Cardinal or as described in a "no-action" or interpretive letter
from the Staff of the Commission, is not required to be registered under the
Securities Act; provided, however, that, for so long as the undersigned holds
any Cardinal Common Shares as to which the undersigned is subject to the
limitations of Rule 145 and to the extent applicable, Rule 144 promulgated under
the Securities Act, Cardinal will use its reasonable efforts to (i) file all
reports required to be filed by it pursuant to the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder, as the same shall be
in effect at the time, so as to satisfy the requirements of paragraph (c) of
Rule 144 promulgated under the Securities Act that there be available current
public information with respect to Cardinal, and (ii) furnish to the undersigned
upon request a written statement as to whether Cardinal has complied with such
reporting requirements during the 12 months preceding any proposed sale of
Cardinal Common Shares by the undersigned under Rule 145 and to the extent
applicable, Rule 144, and (b) otherwise use its reasonable efforts to make
available to the undersigned the exemption afforded by Rule 145 and, to extend
applicable, Rule 144 promulgated under the Securities Act with respect to the
sale, transfer or other disposition of the Cardinal Common Shares. For purposes
of this letter agreement, the exercise of a Cardinal Option shall not constitute
a "disposition" of such Cardinal Option.
Cardinal Health, Inc.
, 200
Page 2
In the event of a sale or other disposition by the undersigned of Cardinal
Common Shares or Cardinal Options pursuant to Rule 145, if requested by
Cardinal, the undersigned will supply Cardinal with evidence of compliance with
Rule 145, in the form of a letter in the form of Annex I to this letter
agreement or the opinion of counsel or interpretive letter referred to above.
The undersigned understands that Cardinal may instruct its transfer agent to
withhold the transfer of any Cardinal Common Shares or Cardinal Options disposed
of by the undersigned in violation of the terms of this letter agreement, but
that, upon receipt of such evidence of compliance or the availability of an
exemption from registration under the Securities Act, Cardinal shall cause the
transfer agent to effectuate the transfer of Cardinal Common Shares or Cardinal
Options sold.
The undersigned acknowledges and agrees that appropriate legends will be
placed on certificates, if any representing Cardinal Common Shares received by
the undersigned in the Merger or held by a transferee thereof or upon exercise
of a Cardinal Option, Cardinal and the undersigned and agree that any such
legends set forth in this paragraph shall be removed by delivery of substitute
certificates without such legends and/or any transfer instructions will be
lifted (a) if one year shall have elapsed from the date of the Merger and the
provisions of Rule 145(d)(2) promulgated under the Securities Act are then
available to the undersigned, (b) two years shall have elapsed from the date of
the Merger and the provision of Rule 145(d)(3) are then applicable to the
undersigned, or (c) if the undersigned shall have delivered to Cardinal (i) a
copy of a "no action" letter or interpretive letter from the Staff of the
Commission, or an opinion of counsel in form and substance reasonably
satisfactory to Cardinal from independent counsel reasonably satisfactory to
Cardinal, to the effect that such legend is not required for purposes of the
Securities Act or (ii) a written statement that the Cardinal Common Shares
represented by such certificates are being or have been sold in conformity with
the provisions of Rule 145(d) promulgated under the Securities Act or pursuant
to an effective registration statement under the Securities Act.
The undersigned acknowledges that (a) the undersigned has carefully read
this letter agreement and has been advised of and understands the requirements
hereof and the limitations imposed upon the distribution, sale, transfer or
other disposition of Cardinal Common Shares and Cardinal Options, and (b) the
receipt by Cardinal of this letter agreement is an inducement to Cardinal to
enter into the Agreement and consummate the transactions contemplated by the
Agreement. This letter agreement shall expire and be of no force or effect upon
termination of the Agreement prior to the Effective Time.
Cardinal Health, Inc.
, 200
Page 3
Execution of this letter should not be considered an admission on the part
of the undersigned of "affiliate" status as described in the first paragraph of
this letter agreement, or as a waiver of any rights the undersigned may have to
object to any claim that the undersigned is such an affiliate on or after the
date of this letter agreement.
Very truly yours,
--------------------------------------
[Name]
Accepted and agreed this
day of , 200
CARDINAL HEALTH, INC.
By:
--------------------------------------------------------
Name:
Title:
ANNEX I TO
EXHIBIT A
, 200
Cardinal Health, Inc.
7000 Cardinal Place
Dublin, Ohio 43017
Attention: Corporate Secretary
On , 200 , the undersigned sold the securities of Cardinal
Health, Inc. ("Cardinal") described below in the space provided for that purpose
(the "Securities"). The Securities were acquired by the undersigned in
connection with the merger of Mudhen Merger Corp. with and into Syncor
International Corporation.
Based upon the most recent report or statement filed by Cardinal with the
Securities and Exchange Commission, the Securities sold by the undersigned were
within the prescribed limitations set forth in paragraph (e) of Rule 144
promulgated under the Securities Act of 1933, as amended (the "Act").
The undersigned hereby represents to Cardinal that the Securities were sold
in "brokers' transactions" within the meaning of Section 4(4) of the Act or in
transactions directly with a "market maker" as defined in Section 3(a)(38) of
the Securities Exchange Act of 1934, as amended. The undersigned further
represents to Cardinal that the undersigned has not solicited or arranged for
the solicitation of orders to buy the Securities, and that the undersigned has
not made any payment in connection with the offer or sale of the Securities to
any person other than to the broker who executed the order in respect of such
sale.
Very truly yours,
DESCRIPTION OF SECURITIES SOLD:
APPENDIX D
[LETTERHEAD OF SALOMON SMITH BARNEY INC.]
December 3, 2002
The Board of Directors
Syncor International Corporation
6464 Canoga Avenue
Woodland Hills, California 91367
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 Syncor International Corporation
("Syncor") of the Exchange Ratio (defined below) set forth in the Agreement and
Plan of Merger, dated as of June 14, 2002 (the "Original Merger Agreement"), as
amended as of December 3, 2002 (as so amended, the "Amended Merger Agreement"),
among Cardinal Health, Inc. ("Cardinal"), Mudhen Merger Corp., a wholly owned
subsidiary of Cardinal ("Merger Sub"), and Syncor. As more fully described in
the Amended Merger Agreement, (i) Merger Sub will be merged with and into Syncor
(the "Merger") and (ii) each outstanding share of the common stock, par value
$0.05 per share, of Syncor ("Syncor Common Stock") will be converted into the
right to receive 0.47 (the "Exchange Ratio") of a share of the common stock,
without par value, of Cardinal ("Cardinal Common Shares").
In arriving at our opinion, we reviewed the Amended Merger Agreement and
certain related agreements and held discussions with certain senior officers,
directors and other representatives and advisors of Syncor and certain senior
officers and other representatives and advisors of Cardinal concerning the
businesses, operations and prospects of Syncor and Cardinal. We examined certain
publicly available business and financial information relating to Syncor and
Cardinal as well as certain financial forecasts and other information and data
with respect to Syncor and certain publicly available financial forecasts and
other information and data with respect to Cardinal, which were provided to or
otherwise discussed with us by the managements of Syncor and Cardinal, including
certain information relating to the potential strategic implications and
operational benefits anticipated by the management of Syncor to result from the
Merger. We reviewed the financial terms of the Merger as set forth in the
Amended Merger Agreement in relation to, among other things: current and
historical market prices and trading volumes of Syncor Common Stock and Cardinal
Common Shares; historical and projected earnings and other operating data of
Syncor and Cardinal; and the capitalization and financial condition of Syncor
and Cardinal. We considered, to the extent publicly available, the financial
terms of other transactions 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 Syncor and Cardinal. We
also evaluated the potential pro forma financial impact of the Merger on
Cardinal. 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 financial forecasts and other information
and data relating to Syncor provided to or otherwise discussed with us and used
in our analysis, we have been advised by the management of Syncor that such
financial forecasts and other information and data were reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
management of Syncor as to the future financial performance of Syncor. With
respect to publicly available financial forecasts and other information and data
relating to Cardinal provided to or otherwise discussed with us and used in our
analysis, we have been advised by the management of Cardinal that such forecasts
and other information and data represent reasonable estimates as to the future
financial performance of Cardinal. We have assumed, with your consent, that the
Merger will be consummated in accordance with its terms without waiver,
modification or amendment of any material term, condition or agreement and that,
in the course of obtaining the necessary
D-1
The Board of Directors
Syncor International Corporation
December 3, 2002
Page 2
regulatory or third party approvals and consents for the Merger, no delay,
limitation, restriction or condition will be imposed other than as specified in
the Amended Merger Agreement and related documents. We also have assumed, with
your consent, that the Merger will be treated as a reorganization for federal
income tax purposes. We are not expressing 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 or otherwise be transferable at any
time. We have not made or been provided with an independent evaluation or
appraisal of the assets or liabilities (contingent or otherwise) of Syncor or
Cardinal nor have we made any physical inspection of the properties or assets of
Syncor or Cardinal. In connection with our engagement, and at the request of
Syncor, we held preliminary discussions with selected third parties prior to the
date on which the Original Merger Agreement was executed regarding the possible
acquisition of Syncor. Our opinion does not address the relative merits of the
Merger as compared to any alternative business strategies that might exist for
Syncor or the effect of any other transaction in which Syncor 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 financial advisor to Syncor 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, and currently are providing, services to Syncor
unrelated to the proposed Merger, for which services we have received, and
expect to receive, compensation. We and our affiliates also in the past have
provided, and may in the future provide, services to Cardinal unrelated to the
proposed Merger, for which services we have received, and may receive,
compensation. In the ordinary course of our business, we and our affiliates may
actively trade or hold the securities of Syncor and Cardinal 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
Syncor, Cardinal and their respective affiliates.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of Syncor in its evaluation of the
proposed Merger, and our opinion is not intended to be and does not constitute a
recommendation to any stockholder as to how such stockholder should vote or act
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 Syncor Common Stock.
Very truly yours,
/s/ SALOMON SMITH BARNEY INC.
SALOMON SMITH BARNEY INC.
D-2
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1701.13(E) of the Ohio Revised Code sets forth conditions and
limitations governing the indemnification of officers, directors, and other
persons.
Article 6 of Cardinal Health's Code of Regulations contains certain
indemnification provisions adopted pursuant to authority contained in Section
1701.13(E) of the Ohio Revised Code. Cardinal Health's Code of Regulations
provides for the indemnification of its officers, directors, employees, and
agents against all expenses with respect to any judgments, fines, and amounts
paid in settlement, or with respect to any threatened, pending, or completed
action, suit, or proceeding to which they were or are parties or are threatened
to be made parties by reason of acting in such capacities, provided that it is
determined, either by a majority vote of a quorum of disinterested directors of
Cardinal Health or the shareholders of Cardinal Health or otherwise as provided
in Section 1701.13(E) of the Ohio Revised Code, that (1) they acted in good
faith and in a manner they reasonably believed to be in or not opposed to the
best interest of Cardinal Health; (2) in any action, suit, or proceeding by or
in the right of Cardinal Health, they were not, and have not been adjudicated to
have been, negligent or guilty of misconduct in the performance of their duties
to Cardinal Health; and (3) with respect to any criminal action or proceeding,
that they had no reasonable cause to believe that their conduct was unlawful.
Section 1701.13(E) provides that to the extent a director, officer, employee, or
agent has been successful on the merits or otherwise in defense of any such
action, suit, or proceeding, such individual shall be indemnified against
expenses reasonably incurred in connection therewith. Except as set forth in
this Post-Effective Amendment to Cardinal Health's Registration Statement, at
present there are no material claims, actions, suits, or proceedings pending
where indemnification would be required under these provisions, and Cardinal
Health does not know of any such threatened claims, actions, suits, or
proceedings which may result in a request for such indemnification.
Cardinal Health has entered into indemnification contracts with each of its
directors and executive officers. These contracts generally: (1) confirm the
existing indemnity provided to them under Cardinal Health's Code of Regulations
and assure that this indemnity will continue to be provided; (2) provide that if
Cardinal Health does not maintain directors' and officers' liability insurance,
Cardinal Health will, in effect, become a self-insurer of the coverage; (3)
provide that, in addition, the directors and officers shall be indemnified to
the fullest extent permitted by law against all expenses (including legal fees),
judgments, fines, and settlement amounts incurred by them in any action or
proceeding, on account of their service as a director, officer, employee, or
agent of Cardinal Health or at the request of Cardinal Health as a director,
officer, employee, trustee, fiduciary, manager, member or agent of another
corporation, partnership, trust, limited liability company, employee benefit
plan or other enterprise; and (4) provide for the mandatory advancement of
expenses to the executive officer or director in connection with the defense of
any proceedings, provided the executive officer or director agrees to reimburse
Cardinal Health for that advancement if it is ultimately determined that the
executive officer or director is not entitled to indemnification for that
proceeding under the agreement. Coverage under the contracts is excluded: (a) on
account of conduct which is finally adjudged to be knowingly fraudulent,
deliberately dishonest, or willful misconduct; or (b) if a final court of
adjudication shall determine that such indemnification is not lawful; or (c) in
respect of any suit in which judgment is rendered for violation of Section 16(b)
of the Securities and Exchange Act of 1934, as amended, or provisions of any
federal, state, or local statutory law; or (d) on account of any remuneration
paid which is finally adjudged to have been in violation of law; or (e) on
account of conduct occurring prior to the time the executive officer or director
became an officer, director, employee, or agent of Cardinal Health or its
subsidiaries (but in no event earlier than the time such entity became a
subsidiary of Cardinal Health); or (f) with respect to proceedings initiated or
brought voluntarily by the executive officer or director and not by way of
defense, except for proceedings brought to enforce rights under the
indemnification contract. Cardinal Health maintains a directors' and officers'
insurance policy which insures the officers and directors of Cardinal Health
from certain claims arising out of an alleged wrongful act by such persons in
their respective capacities as officers and directors of Cardinal Health.
II-1
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
2.01 Agreement and Plan of Merger, dated as of June 14, 2002, by
and among Cardinal Health, Inc., Mudhen Merger Corp., and
Syncor International Corporation.(1)
2.02 Amendment No. 1 to the Agreement and Plan of Merger, dated
as of November 22, 2002, by and among Cardinal Health, Inc.,
Mudhen Merger Corp. and Syncor International Corporation.(2)
2.03 Amendment No. 2 to the Agreement and Plan of Merger, dated
as of December 3, 2002, by and among Cardinal Health, Inc.,
Mudhen Merger Corp. and Syncor International Corporation.(3)
3.01 Amended and Restated Articles of Incorporation of the
Registrant, as amended.(4) and (5)
3.02 Restated Code of Regulations of the Registrant, as
amended.(6)
4.01 Specimen Certificate for Cardinal Health, Inc. common
shares.(7)
5.01 Opinion of Wachtell, Lipton, Rosen & Katz as to the legality
of the Cardinal Health, Inc. common shares being issued. (1)
8.01 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to
certain tax matters.
10.1 Letter Agreement, dated as of December 3, 2002, between
Monty Fu and Syncor International Corporation.(8)
23.01 Consent of KPMG LLP (Syncor).
23.02 Consent of Ernst & Young LLP (Cardinal Health).
23.03 Solely due to the closure of Arthur Andersen LLP's Columbus,
Ohio office, after reasonable efforts, the Registrant was
unable to obtain the written consent of Arthur Andersen LLP
to incorporate by reference its report dated July 21, 2001
(Cardinal Health).
23.04 Consent of PricewaterhouseCoopers LLP (Bindley).
23.05 Consent of Wachtell, Lipton, Rosen & Katz (included in
Exhibit 5.01).(1)
23.06 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 8.01).
24.01 Power of Attorney (included on signature page).(1)
99.01 Form of Proxy Card of Syncor International Corporation.
99.02 Consent of Salomon Smith Barney Inc.
99.03 Form of Support/Voting Agreement by and between Cardinal
Health, Inc. and each of Messrs. Monty Fu and Robert G.
Funari.(9)
---------------
(1) Previously filed as an exhibit to this Registration Statement on October 16,
2002.
(2) Included as Annex B in the Prospectus/Proxy Statement included as part of
this Registration Statement.
(3) Included as Annex C in the Prospectus/Proxy Statement included as part of
this Registration Statement.
(4) Included as an exhibit to the Registrant's Current Report on Form 8-K filed
November 24, 1998 (File No. 1-11373) and incorporated herein by reference.
(5) Included as an exhibit to the Registrant's Registration Statement on Form
S-4 (File No. 333-53394) and incorporated herein by reference.
(6) Included as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended September 30, 2001 (File No. 1-11373) and incorporated
herein by reference.
(7) Included as an exhibit to the Registrant's Annual Report on Form 10-K for
the fiscal year ended June 30, 2001 (File No. 1-11373) and incorporated
herein by reference.
(8) Included as an exhibit to Syncor International Corporation's Current Report
on Form 8-K filed December 4, 2002 (File No. 0-8640) and incorporated herein
by reference.
(9) Included as an exhibit to Syncor International Corporation's Current Report
on Form 8-K filed June 21, 2002 (File No. 0-8640) and incorporated herein by
reference.
II-2
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(b) (1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is part of this registration statement, by any person or party
who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the information called
for by the applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information called for by the
other items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing this Registration Statement on Form S-4 and has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Dublin, State of Ohio, on
the 6th day of December 2002.
CARDINAL HEALTH, INC.
By: /s/ ROBERT D. WALTER
------------------------------------
Robert D. Walter
Chairman and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the 6th day of December 2002.
SIGNATURE TITLE
--------- -----
/s/ ROBERT D. WALTER Chairman, Chief Executive Officer and Director
------------------------------------------------ (principal executive officer)
Robert D. Walter
/s/ RICHARD J. MILLER Executive Vice President, Chief Financial Officer
------------------------------------------------ (principal financial officer) and Principal
Richard J. Miller Accounting Officer
* Director
------------------------------------------------
William E. Bindley
* Director
------------------------------------------------
Dave Bing
* Director
------------------------------------------------
George H. Conrades
* Director
------------------------------------------------
John F. Finn
* Director
------------------------------------------------
Robert L. Gerbig
* Director
------------------------------------------------
John F. Havens
* Director
------------------------------------------------
J. Michael Losh
* Director
------------------------------------------------
John B. McCoy
II-4
SIGNATURE TITLE
--------- -----
* Director
------------------------------------------------
Richard C. Notebaert
* Director
------------------------------------------------
Michael D. O'Halleran
* Director
------------------------------------------------
David W. Raisbeck
* Director
------------------------------------------------
Jean G. Spaulding
* Director
------------------------------------------------
Matthew D. Walter
*By: /s/ PAUL S. WILLIAMS
------------------------------------------
Paul S. Williams
Attorney-in-Fact
II-5
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
2.01 Agreement and Plan of Merger, dated as of June 14, 2002, by
and among Cardinal Health, Inc., Mudhen Merger Corp., and
Syncor International Corporation.(1)
2.02 Amendment No. 1 to the Agreement and Plan of Merger, dated
as of November 22, 2002, by and among Cardinal Health, Inc.,
Mudhen Merger Corp. and Syncor International Corporation.(2)
2.03 Amendment No. 2 to the Agreement and Plan of Merger, dated
as of December 3, 2002, by and among Cardinal Health, Inc.,
Mudhen Merger Corp. and Syncor International Corporation.(3)
3.01 Amended and Restated Articles of Incorporation of the
Registrant, as amended.(4) and (5)
3.02 Restated Code of Regulations of the Registrant, as
amended.(6)
4.01 Specimen Certificate for Cardinal Health, Inc. common
shares.(7)
5.01 Opinion of Wachtell, Lipton, Rosen & Katz as to the legality
of the Cardinal Health, Inc. common shares being issued.(1)
8.01 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to
certain tax matters.
10.1 Letter Agreement, dated as of December 3, 2002, between
Monty Fu and Syncor International Corporation.(8)
23.01 Consent of KPMG LLP (Syncor).
23.02 Consent of Ernst & Young LLP (Cardinal Health).
23.03 Solely due to the closure of Arthur Andersen LLP's Columbus,
Ohio office, after reasonable efforts, the Registrant was
unable to obtain the written consent of Arthur Andersen LLP
to incorporate by reference its report dated July 21, 2001
(Cardinal Health).
23.04 Consent of PricewaterhouseCoopers LLP (Bindley).
23.05 Consent of Wachtell, Lipton, Rosen & Katz (included in
Exhibit 5.01).(1)
23.06 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 8.01).
24.01 Power of Attorney (included on signature page).(1)
99.01 Form of Proxy Card of Syncor International Corporation.
99.02 Consent of Salomon Smith Barney Inc.
99.03 Form of Support/Voting Agreement by and between Cardinal
Health, Inc. and each of Messrs. Monty Fu and Robert G.
Funari.(9)
---------------
(1) Previously filed as an exhibit to this Registration Statement on October 16,
2002.
(2) Included as Annex B in the Prospectus/Proxy Statement included as part of
this Registration Statement.
(3) Included as Annex C in the Prospectus/Proxy Statement included as part of
this Registration Statement.
(4) Included as an exhibit to the Registrant's Current Report on Form 8-K filed
November 24, 1998 (File No. 1-11373) and incorporated herein by reference.
(5) Included as an exhibit to the Registrant's Registration Statement on Form
S-4 (File No. 333-53394) and incorporated herein by reference.
(6) Included as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended September 30, 2001 (File No. 1-11373) and incorporated
herein by reference.
(7) Included as an exhibit to the Registrant's Annual Report on Form 10-K for
the fiscal year ended June 30, 2001 (File No. 1-11373) and incorporated
herein by reference.
(8) Included as an exhibit to Syncor International Corporation's Current Report
on Form 8-K filed December 4, 2002 (File No. 0-8640) and incorporated herein
by reference.
(9) Included as an exhibit to Syncor International Corporation's Current Report
on Form 8-K filed June 21, 2002 (File No. 0-8640) and incorporated herein by
reference.