This excerpt taken from the CVS 8-K filed Feb 26, 2007.
Pursuant to, and in accordance with, an opinion of the Delaware Court of Chancery issued on February 23, 2007, if the Merger is completed, holders of shares of Caremark common stock are entitled to appraisal rights under Section 262 of the Delaware General Corporation Law, which is referred to as Section 262, provided that they comply with the conditions established by Section 262. Holders exercising appraisal rights in respect of shares of Caremark common stock held as of the dividend record date will be entitled to receive the special cash dividend (the Special Dividend) in the amount of $6.00 per share of Caremark common stock payable contingent upon the Merger and such Special Dividend to be paid at or immediately prior to the Effective Time. The Delaware Court of Chancery in the opinion referred to above ruled that the Special Dividend is fundamentally cash consideration paid to Caremark stockholders in connection with the Merger. As a result, any amount awarded to such a holder should either be reduced by the amount of the Special Dividend paid to such holder or the payment of the Special Dividend should be taken into account in determining the fair value of Caremark at the Effective Time. Any holder of shares of Caremark common stock who has duly demanded and perfected appraisal in compliance with Section 262 will not, after the Effective Time, be entitled to receive any shares of CVS common stock in respect of the Merger. Stockholders who receive cash as a result of the exercise of appraisal rights will recognize taxable gain or loss for federal income tax purposes.
Section 262 is reprinted in its entirety as Appendix A to this supplement. The following discussion is not a complete statement of the law relating to appraisal rights and is qualified in its entirety by reference to Appendix A. This
discussion and Appendix A should be reviewed carefully by any holder who wishes to exercise statutory appraisal rights or who wishes to preserve the right to do so, as failure to comply with the procedures set forth herein or therein will result in the loss of appraisal rights.
A record holder of shares of Caremark common stock who makes the demand described below with respect to such shares, who continuously is the record holder of such shares through the effective time of the Merger (the Effective Time), who otherwise complies with the statutory requirements of Section 262 and who neither votes in favor of the Merger nor consents thereto in writing will be entitled to an appraisal by the Delaware Court of Chancery (the Delaware Court) of the fair value of his or her shares of Caremark common stock. IF YOU HAVE PREVIOUSLY SUBMITTED A PROXY VOTING IN FAVOR OF THE MERGER AND WISH TO EXERCISE APPRAISAL RIGHTS, YOU MUST REVOKE YOUR PREVIOUSLY SUBMITTED PROXY IN ORDER TO VALIDLY EXERCISE APPRAISAL RIGHTS. INSTRUCTIONS FOR REVOKING YOUR PROXY ARE SET FORTH IN THE JOINT PROXY STATEMENT/PROSPECTUS MAILED TO CAREMARK STOCKHOLDERS ON OR ABOUT JANUARY 19, 2007. All references in this summary of appraisal rights to a stockholder or holders of shares of Caremark common stock are to the record holder or holders of shares of Caremark common stock. Except as set forth herein, stockholders of Caremark will not be entitled to appraisal rights in connection with the Merger.
Under Section 262, where a merger is to be submitted for approval at a meeting of stockholders, such as the special meeting of Caremark stockholders to consider the Merger (the Caremark Special Meeting), not less than 20 days prior to the meeting a constituent corporation must notify each of the holders of its stock for whom appraisal rights are available that such appraisal rights are available and include in each such notice a copy of Section 262. This supplement shall constitute such notice to the record holders of Caremark common stock.
Holders of shares of Caremark common stock who desire to exercise their appraisal rights must not vote in favor of the Merger and must deliver a separate written demand for appraisal to Caremark prior to the vote by the Caremark stockholders on the Merger. A demand for appraisal must be executed by or on behalf of the stockholder of record and must reasonably inform Caremark of the identity of the stockholder of record and that such stockholder intends thereby to demand appraisal of the Caremark common stock. A proxy or vote against the Merger will not by itself constitute such a demand. Within ten days after the Effective Time, Caremark must provide notice of the Effective Time to all Caremark stockholders who have complied with Section 262 and who have not voted in favor of or consented to the Merger.
A stockholder who elects to exercise appraisal rights should mail or deliver his or her written demand to Caremarks Corporate Secretary at Caremark Rx, Inc., 211 Commerce Street, Suite 800, Nashville, Tennessee 37201.
A person having a beneficial interest in shares of Caremark common stock that are held of record in the name of another person, such as a broker, fiduciary, depositary or other nominee, must act promptly to cause the record holder to follow the steps summarized herein properly and in a timely manner to perfect appraisal rights. If the shares of Caremark common stock are owned of record by a person other than the beneficial owner, including a broker, fiduciary (such as a trustee, guardian or custodian), depositary or other nominee, such demand must be executed by or for the record owner. If the shares of Caremark common stock are owned of record by more than one person, as in a joint tenancy or tenancy in common, such demand must be executed by or for all joint owners. An authorized agent, including an agent for two or more joint owners, may execute the demand for appraisal for a stockholder of record; however, the agent must identify the record owner and expressly disclose the fact that, in exercising the demand, such person is acting as agent for the record owner. If a stockholder holds shares of Caremark common stock through a broker who in turn holds the shares through a central securities depository nominee such as Cede & Co., a demand for appraisal of such shares must be made by or on behalf of the depository nominee and must identify the depository nominee as record holder.
Within 120 days after the Effective Time, either Caremark or any stockholder who has complied with the required conditions of Section 262 may file a petition in the Delaware Court, with a copy served on Caremark in the case of a petition filed by a stockholder, demanding a determination of the fair value of the shares of all dissenting stockholders. There is no present intent on the part of Caremark to file an appraisal petition and stockholders seeking to exercise appraisal rights should not assume that Caremark will file such a petition or that Caremark will initiate any negotiations with respect to the fair value of such shares. Accordingly, holders of Caremark common stock who desire
to have their shares appraised should initiate any petitions necessary for the perfection of their appraisal rights within the time periods and in the manner prescribed in Section 262. Within 120 days after the Effective Time, any Caremark stockholder who has theretofore complied with the applicable provisions of Section 262 will be entitled, upon written request, to receive from Caremark a statement setting forth the aggregate number of shares of Caremark common stock not voting in favor of the Merger and with respect to which demands for appraisal were received by Caremark and the number of holders of such shares. Such statement must be mailed within ten days after the written request therefor has been received by Caremark.
If a petition for an appraisal is timely filed, at the hearing on such petition, the Delaware Court will determine which stockholders are entitled to appraisal rights. The Delaware Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Delaware Court may dismiss the proceedings as to such stockholder. Where proceedings are not dismissed, the Delaware Court will appraise the shares of Caremark common stock owned by such stockholders, determining the fair value of such shares exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with a fair rate of interest, if any, to be paid upon the amount determined to be the fair value (but taking into account the prior receipt of the Special Dividend).
Although Caremark believes that the CVS common stock to be received as consideration in the Merger (the Merger Consideration) is fair, no representation is made as to the outcome of the appraisal of fair value as determined by the Delaware Court and stockholders should recognize that such an appraisal could result in a determination of a value higher or lower than, or the same as, the Merger Consideration. Moreover, Caremark does not anticipate offering more than the Merger Consideration to any stockholder exercising appraisal rights and reserves the right to assert, in any appraisal proceeding, that, for purposes of Section 262, the fair value of a share of Caremark common stock is less than the Merger Consideration. In determining fair value, the Delaware Court is required to take into account all relevant factors. In Weinberger v. UOP, Inc. the Delaware Supreme Court discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court should be considered and that [f]air price obviously requires consideration of all relevant factors involving the value of a company. The Delaware Supreme Court has stated that in making this determination of fair value the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts which could be ascertained as of the date of the Merger which throw any light on future prospects of the merged corporation. Section 262 provides that fair value is to be exclusive of any element of value arising from the accomplishment or expectation of the merger. In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a narrow exclusion [that] does not encompass known elements of value, but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Delaware Supreme Court construed Section 262 to mean that elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.
The cost of the appraisal proceeding may be determined by the Delaware Court and taxed against the parties as the Delaware Court deems equitable in the circumstances. However, costs do not include attorneys and expert witness fees. Each dissenting stockholder is responsible for his or her attorneys and expert witness expenses, although, upon application of a dissenting stockholder of Caremark, the Delaware Court may order that all or a portion of the expenses incurred by any dissenting stockholder in connection with the appraisal proceeding, including without limitation, reasonable attorneys fees and the fees and expenses of experts, be charged pro rata against the value of all shares of stock entitled to appraisal.
Any holder of shares of Caremark common stock who has duly demanded appraisal in compliance with Section 262 will not, after the Effective Time, be entitled to vote for any purpose any shares subject to such demand or to receive payment of dividends or other distributions on such shares, except for dividends or distributions payable to stockholders of record at a date prior to the Effective Time.
At any time within 60 days after the Effective Time, any stockholder will have the right to withdraw such demand for appraisal and to accept the terms offered in the Merger; after this period, the stockholder may withdraw such demand for appraisal only with the consent of Caremark. If no petition for appraisal is filed with the Delaware Court
within 120 days after the Effective Time, stockholders rights to appraisal shall cease, and all holders of shares of Care-mark common stock will be entitled to receive the Merger Consideration. Inasmuch as Caremark has no obligation to file such a petition, and Caremark has no present intention to do so, any holder of shares of Caremark common stock who desires such a petition to be filed is advised to file it on a timely basis. Any stockholder may withdraw such stockholders demand for appraisal by delivering to Caremark a written withdrawal of his or her demand for appraisal and acceptance of the merger consideration, except (i) that any such attempt to withdraw made more than 60 days after the Effective Time will require written approval of Caremark and (ii) that no appraisal proceeding in the Delaware Court shall be dismissed as to any stockholder without the approval of the Delaware Court, and such approval may be conditioned upon such terms as the Delaware Court deems just.