EXHIBIT (d)(4)
MEMORANDUM OF UNDERSTANDING
This MEMORANDUM OF UNDERSTANDING is entered into as of June 14, 2004,
among the plaintiffs in Gehrer v. Alaris Medical Systems, Inc., et al., ALARIS
Medical Systems, Inc. ("ALARIS"), the members of the ALARIS board of directors
(collectively, the "Individual Defendants"), Cardinal Health, Inc. and Xxxxxx X.
Xxxxxxx (and certain affiliates), by their undersigned attorneys.
WHEREAS, on May 19, 2004, ALARIS and Cardinal Health, Inc. ("Cardinal
Health") announced that, together with a subsidiary of Cardinal Health, they had
entered into a definitive merger agreement, dated as of May 18, 2004, under
which XXXXXX would become a wholly-owned subsidiary of Cardinal Health and
holders of the outstanding shares of ALARIS common stock would receive $22.35 in
cash for each share of ALARIS common stock that they owned (the "Merger
Agreement"). The Merger Agreement contemplated that Cardinal Health (through a
wholly-owned subsidiary) would make a cash tender offer for all outstanding
shares of ALARIS common stock at a purchase price of $22.35 per share (the
"Offer") and holders of untendered shares would receive $22.35 per share in cash
in a merger (the "Merger") that would follow the Offer, all of which
transactions to be subject to conditions that were set forth in the Merger
Agreement (together, the "Transaction"); and
WHEREAS, in connection with the Merger Agreement, Cardinal Health
entered into a separate Support/Tender Agreement dated May 18, 2004 (the
"Support Agreement") with Xxxxxx X. Xxxxxxx and certain affiliated entities,
Decisions Incorporated, JD Partnership, L.P. and JA Special Partnership Limited
(collectively,
"Picower"), who through such entities owns a majority of ALARIS's outstanding
common stock; and
WHEREAS, on May 28, 2004, Cardinal Health filed a Schedule TO with
respect to the Transaction and mailed to stockholders an Offer to Purchase in
connection with the Offer, and on the same date ALARIS filed and mailed to
stockholders a Schedule 14D-9 with respect to the Offer; and
WHEREAS, on May 21, 2004, a putative stockholder of XXXXXX filed a
complaint in the Superior Court for the State of California, San Diego County,
purportedly on behalf of a class of the common stockholders of ALARIS, captioned
Xxxxxxx Xxxxxx v. Alaris Medical Systems, Inc., et al., Case No. GIC 830324,
that named as defendants XXXXXX and the members of its board of directors. The
complaint sought to proceed as a class action and alleged that the directors
breached their fiduciary duties to ALARIS stockholders in agreeing to the Merger
Agreement. It sought declaratory and injunctive relief against the closing of
the Offer and the consummation of the Merger, in addition to seeking plaintiff's
costs and attorneys' fees in bringing the action; and
WHEREAS, on June 2, 2004, plaintiff's counsel served an ex parte
application for limited expedited discovery, which indicated that plaintiff
intended to seek Court approval for a schedule of discovery in anticipation of a
motion for a temporary restraining order to enjoin the closing of the Offer,
which closing was scheduled to occur on June 25, 2004. At a hearing on
plaintiff's ex parte application on June 3, 2004, the Court directed the parties
to meet and confer in an effort to reach agreement on the scope and timing of
expedited discovery and on such other matters as the parties could agree upon;
and
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WHEREAS, in the ex parte application, in correspondence with the
ALARIS board of directors and in communications with counsel for the defendants,
plaintiff's counsel conveyed their views concerning the alleged shortcomings in
the disclosures provided in the Offer to Purchase and the Schedule 14D-9 and
specific ways in which such disclosures could be supplemented, as well as other
proposals to modify the terms of the proposed transactions; and
WHEREAS, each defendant, as well as Cardinal Health and Xxxxxxx,
denies having committed or having attempted to commit any violation of law or
breach of duty, including breach of any duty to ALARIS stockholders or
self-dealing as alleged in the complaint, or otherwise having acted in any
improper manner and believes that their respective actions have at all times
complied with their legal obligations and fiduciary duties and otherwise have
been proper and appropriate; and
WHEREAS, notwithstanding their beliefs in the strength on the merits
of their respective positions in the Gehrer action, the parties have agreed in
principle to a proposed settlement based on the agreement set forth below (the
"Settlement"), and all of the parties believe that the proposed Settlement is in
the best interests of the stockholders of ALARIS;
NOW THEREFORE, IT IS XXXXXX AGREED IN PRINCIPLE AS FOLLOWS:
1. Settlement. While XXXXXX and the Individual Defendants deny that
plaintiffs' claims of incomplete or misleading disclosure have any merit, they
have taken plaintiffs' suggestions into account in preparing an amendment to the
ALARIS Schedule 14D-9 that is to be filed no later than June 15, 2004 in which
certain
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additional disclosures are to be provided. The disclosures that will be included
in that amendment at plaintiff's request include a description of the analyses
underlying the fairness opinions that were provided to the ALARIS board of
directors by its financial advisors in connection with the board's approval and
adoption of the Merger Agreement and the Transaction.
2. Stipulation of Settlement. The parties will negotiate in good faith
to agree upon and execute an appropriate Stipulation of Settlement (the
"Stipulation") and such other documentation as may be required in order to
obtain Final Court Approval (as defined below) of the Settlement and the
dismissal of the Gehrer action upon the terms set forth in this Memorandum of
Understanding (collectively, the "Settlement Documents"). The parties will use
their best efforts to agree upon and execute the Settlement Documents within 60
days of the execution of this Memorandum of Understanding. The Stipulation will
expressly provide, inter alia, (i) for certification by the Superior Court of
the State of California for the County of San Diego (the "Court") of a non-opt
out settlement class of ALARIS stockholders and their successors in interest and
transferees, immediate and remote, from May 18, 2004, through and including the
date of the consummation of the Merger (other than defendants) (the "Class");
(ii) for dismissal of the Gehrer action with prejudice and a complete release
and settlement by the Class of all claims (excluding properly perfected rights
of appraisal to the extent available under Delaware law and claims for
enforcement of the Settlement), whether asserted directly, derivatively or
otherwise, against ALARIS, any of the Individual Defendants (whether in their
personal or representative capacities), Cardinal Health, Picower, or any of
their families, parent entities, affiliates, subsidiaries, predecessors,
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successors or assigns, and each and all of their respective past or present
officers, directors, associates, stockholders, members, controlling persons,
representatives, employees, attorneys, counselors, financial or investment
advisors, dealer managers, consultants, accountants, investment bankers,
commercial bankers, engineers, advisors or agents, heirs, executors, trustees,
general or limited partners or partnerships, personal representatives, estates
or administrators (collectively, the "Releasees"), whether known or unknown and
whether arising under federal, state or any other law (including, without
limitation, the federal securities laws), which have been, or could have been,
asserted in any court or forum against any of the Releasees and relating to the
Offer, the Merger, the Merger Agreement, the Support Agreement, the Transaction
or the related disclosure materials and any related matters (the "Settled
Claims"); (iii) that upon Final Court Approval of the Settlement, the members of
the Class shall be deemed to have waived the provisions, rights and benefits of
California Civil Code ss. 1542, which provides that:
A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have
materially affected his settlement with the debtor,
and the provisions, rights and benefits conferred by any law of any state or
territory of the United States, or principle of common law, which is similar,
comparable or equivalent to Civil Code ss. 1542. A member of the Class may
thereafter discover facts in addition to or different from those which he, she
or it now knows or believes to be true with respect to the subject matter of the
Settled Claims, but each shall be deemed to have fully, finally and forever
settled and released any and all Settled Claims, as provided above; (iv) that
each of the defendants and the other Releasees has denied and continues to deny
having committed or attempted to commit any violations of law or breaches of any
duty of any
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kind; (v) that defendants are entering into the Stipulation solely because the
proposed Settlement would eliminate the burden, risk and expense of further
litigation, and is in the best interests of ALARIS and its stockholders; and
(vi) that any of the defendants shall have the right to withdraw from the
proposed Settlement in the event that (A) any state or federal action asserting
any of the Settled Claims that is now pending or is hereafter commenced against
any Releasee prior to Final Court Approval (as defined below) of the Settlement
has not been withdrawn, dismissed, or stayed in contemplation of dismissal in
response to a motion for such relief by the parties to the Settlement, or (B)
any of the additional conditions set forth in paragraph 4 below shall not have
been satisfied.
3. Notice and Court Approval. Subject to prior Court approval of the
form of the Settlement Documents, counsel for the parties will present the
Settlement Documents to the Court for its approval as soon as practicable
following dissemination of appropriate notice of the proposed Settlement to the
Class. ALARIS or its successor shall disseminate such notice and pay the costs
and expenses related to providing such notice. As used herein, "Final Court
Approval" of the Settlement means that the Court has entered an order and
judgment approving the Settlement and dismissing the Gehrer action with
prejudice, and that such order is finally affirmed on appeal or is no longer
subject to appeal or re-argument. Defendants and Cardinal Health agree to an
award of plaintiff's attorneys' fees and expenses in the aggregate amount of
$750,000, subject to Court approval, to be paid by XXXXXX or its successor (but
not by any of the Individual Defendants) to Lerach Xxxxxxxx Xxxxx & Xxxxxxx LLP,
as receiving agent for plaintiff's counsel, upon either (x) Final Court Approval
of the Settlement, or (y) if no objection has been made to the Settlement,
within five business days after entry of the Court's order
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and judgment approving the Settlement (subject to repayment by plaintiffs'
counsel to ALARIS or its successor in the event that the Court or an appellate
court later vacates or reverses the order approving the Settlement or the fee
award). These fees and expenses will not come out of moneys that otherwise would
have been paid to the stockholders of ALARIS.
4. Other Conditions. The consummation of the Settlement is subject to:
(a) consummation of the Transaction as contemplated under the Merger Agreement;
(b) the drafting and execution of the Settlement Documents and the other
agreements necessary to effectuate the terms of the proposed Settlement; (c) the
conclusion by plaintiff's counsel following completion of appropriate
confirmatory discovery as agreed to by the parties reasonably satisfactory to
plaintiff's counsel that the proposed Settlement is fair and reasonable; (d) the
entry by the Court, as soon as reasonably practicable, of an order staying all
further proceedings in the Gehrer action in contemplation of dismissal on the
terms contemplated to be included in the Stipulation; (e) dismissal, withdrawal
or the stay in contemplation of dismissal of any other litigation referred to in
paragraph 6 below; and (f) Final Court Approval (as defined above) of the
Settlement and dismissal of the Gehrer action with prejudice and without
awarding costs to any party, except as provided herein. This Memorandum of
Understanding shall be null and void and of no force and effect if (i) any of
these conditions are not met, or (ii) plaintiff's counsel determine, following
completion of confirmatory discovery as referred to above, that the Settlement
is not fair and reasonable. In any such event, this Memorandum of Understanding
shall not be deemed to prejudice in any way the positions of the parties in the
Gehrer action or any other actions relating to the subject
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matter of that action or to prejudice the positions of the parties regarding the
fairness, adequacy, timing or any other aspect of the Transaction, and shall not
entitle any party to recover any fees, costs or expenses incurred in connection
with the implementation of this Memorandum of Understanding.
5. Interim Stay of Litigation. The parties agree that, except as
expressly provided herein, further litigation among them shall be stayed pending
submission of the proposed Settlement to the Court for its consideration. All
defendants' time to answer or otherwise respond to the complaint or discovery
requests (other than requests relating to confirmatory discovery contemplated
hereunder) that have been filed to date, or that are contemplated to be filed,
is extended without date. Counsel shall enter into such documentation as shall
be required to effectuate the foregoing agreements.
6. Cooperation in Dismissal of Related Litigation. If any action other
than the Gehrer action has been, or is, filed in any state or federal court
asserting any of the Settled Claims against any Releasee prior to Final Court
Approval of the proposed Settlement, plaintiff's counsel shall cooperate with
defendants to obtain the dismissal or withdrawal or stay in contemplation of
dismissal of such a related action, including where appropriate joining in any
motion to dismiss such litigation. If following a motion by defendants to
dismiss or stay in contemplation of dismissal any such action, the requested
relief is not obtained prior to Final Court Approval of the Settlement, each of
the defendants shall have the right to withdraw from the proposed Settlement.
7. Miscellaneous. (a) this Memorandum of Understanding may be executed
by facsimile transmission and in counterparts by any of the signatories hereto
and as so executed shall constitute one agreement; (b) this Memorandum of
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Understanding and the Settlement contemplated by it shall be governed by and
construed in accordance with the laws of the State of California; (c) this
Memorandum of Understanding shall be binding upon and inure to the benefit of
the parties and their respective agents, executors, heirs, successors and
assigns, subject to the conditions set forth herein; (d) each of the attorneys
executing this Memorandum of Understanding has been duly empowered and
authorized by his/her respective client(s) to do so; (e) plaintiff and his
counsel represent and warrant that none of the claims or causes of action
asserted by them has been assigned, encumbered or in any manner transferred, in
whole or in part; (f) except as provided herein, no defendant shall bear any
expense, cost, damages or fees alleged or incurred by any named plaintiff, any
member of the Class or their respective attorneys, experts, advisors, agents or
representatives; and (g) neither the existence of this Memorandum of
Understanding nor the provisions contained herein shall be deemed a presumption,
concession or admission by any defendant, Cardinal Health or Picower of any
breach of duty, liability, default or wrongdoing as to any facts or claims
alleged or asserted in the Gehrer action, or in any other action or proceeding,
nor by any plaintiff as to the lack of merit of any Settled Claims, and the
Memorandum of Understanding shall not be interpreted, construed, deemed,
invoked, offered or received in evidence or otherwise used by any person in the
Gehrer action or in any other action or proceeding of any nature whatsoever.
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8. Cardinal Health and Picower Consent. Although not parties to the
Gehrer action, Cardinal Health and Picower, by their undersigned attorneys,
acknowledge and consent to the undertakings hereunder and they shall be intended
third-party beneficiaries of the Settlement.
LERACH XXXXXXXX XXXXX
& XXXXXXX LLP
By: /s/ Xxxxxxx X. Xxxxx
-------------------------
Of Counsel: Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxx
Xxxx X. Xxxxxx, Esq.
XXXXXX XXXXXX, PLLC 000 X Xxxxxx, Xxxxx 0000
000 X. Xxxxxxx Xxxxxxx, Xxxxx 000 Xxx Xxxxx, Xxxxxxxxxx 00000
Xxxx Xxxxx, Xxxxxxx 00000 (000) 000-0000
(000) 000-0000
Attorneys for Plaintiff
and the Settlement Class
XXXXX XXXXXXX LLP
Of Counsel:
Xxxxxx X. Xxxxxxxxx By: /s/ Xxxx X. Xxxxxx, Xx.
Vice President, General Counsel -------------------------
& Secretary Xxxxxx X. Xxxxxx
ALARIS Medical Systems, Inc. Xxxx X. Xxxxxx, Xx.
00000 Xxxxxxxxxx Xxxxxx Xxxxxx X. Xxxxxx
Xxx Xxxxx, XX 00000-0000
(000) 000-0000 0000 Xxxxxx xx xxx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
(000) 000-0000
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000
Attorneys for
ALARIS Medical Systems, Inc. and its
Board of Directors
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XXXXXXXX, XXXXXX, XXXXX & XXXX
By: /s/ Xxxx X. Xxxx
---------------------------------
Xxxx X. Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000
Attorneys for Cardinal Health, Inc.
XXXXXXX XXXX & XXXXX LLP
By: /s/ Xxxxxxx Xxxxxx
---------------------------------
Xxxxxxx Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000
Attorneys for Xxxxxx X. Xxxxxxx
and Affilated Entities
