SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
SCHEDULE TO/A
TENDER OFFER STATEMENT UNDER SECTION 14(D)1 OR 13(E)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
AMENDMENT NO. 1
WESLEY JESSEN VISIONCARE, INC.
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(Name of Subject Company)
DYLAN ACQUISITION INC.
BAUSCH & LOMB INCORPORATED
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(Name of Filing Person - Offeror)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
PREFERRED SHARE PURCHASE RIGHTS
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(Title of Class of Securities)
951018100
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(CUSIP Number of Class of Securities)
ROBERT B. STILES
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
BAUSCH & LOMB INCORPORATED
ONE BAUSCH & LOMB PLACE
ROCHESTER, NEW YORK 14604-2701
TELEPHONE: (716) 338-6000
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(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on Behalf of Filing Persons)
Copy to:
STEVEN A. COHEN, ESQ.
WACHTELL, LIPTON, ROSEN & KATZ
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019
TELEPHONE: (212) 403-1000
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CHECK THE APPROPRIATE BOXES BELOW TO DESIGNATE ANY TRANSACTIONS TO WHICH THE
STATEMENT RELATES:
[ X ] third-party tender offer subject to Rule 14d-1.
[ ] issuer tender offer subject to Rule 13e-4.
[ ] going-private transaction subject to Rule 13e-3.
[ ] amendment to Schedule 13D under Rule 13d-2.
Check the following box if the filing is a final amendment reporting the results
of the tender offer: [ ]
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This Amendment No. 1 amends and supplements the Tender Offer
Statement on Schedule TO filed with the Securities and Exchange Commission (the
"Commission") on April 3, 2000 (the "Schedule TO") by Bausch & Lomb
Incorporated, a New York corporation ("Bausch & Lomb"), and Dylan Acquisition
Inc., a New York corporation and a wholly-owned subsidiary of Bausch & Lomb (the
"Purchaser"). The Schedule TO relates to the offer by the Purchaser to purchase
all outstanding shares of common stock, par value $0.01 per share, including
associated preferred share purchase rights (together, the "Shares"), of Wesley
Jessen VisionCare, Inc., a Delaware corporation ("Wesley Jessen"), at $34.00 per
Share, net to the seller in cash, upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated April 3, 2000 (the "Offer to
Purchase"), and in the related Letter of Transmittal. Capitalized terms used and
not defined herein shall have the meanings assigned such terms in the Offer to
Purchase and the Schedule TO.
ITEM 11. ADDITIONAL INFORMATION
On April 3, 2000, Bausch & Lomb commenced litigation against
Wesley Jessen, its board of directors and Ocular Sciences in the Court of
Chancery of the State of Delaware, where both Wesley Jessen and Ocular Sciences
are incorporated. Bausch & Lomb's complaint states that the Wesley Jessen/Ocular
Sciences merger was entered into in breach of the Wesley Jessen board's
fiduciary duties to act on a fully informed basis and to advance the best
interests of Wesley Jessen shareholders. The complaint seeks injunctive relief
against the OS merger agreement, seeks to require the Wesley Jessen board to
redeem the preferred share purchase rights to permit shareholders to accept the
Offer and requests a declaration that any break-up fee Ocular Sciences receives
it holds as a constructive trustee. The foregoing summary is qualified in its
entirety by reference to the complaint, which is filed as Exhibit (a)(9) hereto
and incorporated herein by reference.
ITEM 12. EXHIBITS
(a)(9) Complaint filed by Bausch & Lomb filed in the Court of Chancery
of the State of Delaware on April 3, 2000.
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SIGNATURE
---------
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: April 4, 2000
DYLAN ACQUISITION INC.
By: /s/ Robert B. Stiles
------------------------------------
Name: Robert B. Stiles
Title: Vice President and Secretary
BAUSCH & LOMB INCORPORATED
By: /s/ Robert B. Stiles
------------------------------------
Name: Robert B. Stiles
Title: Senior Vice President and
General Counsel
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EXHIBIT INDEX
*(a)(1) Offer to Purchase, dated April 3, 2000.
*(a)(2) Form of Letter of Transmittal.
*(a)(3) Form of Notice of Guaranteed Delivery.
*(a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
*(a)(5) Form of Letter to Clients for use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees
*(a)(6) Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9.
*(a)(7) Form of summary advertisement, dated April 3, 2000.
*(a)(8) Text of press release issued by Bausch & Lomb, dated April 3,
2000
(a)(9) Complaint filed by Bausch & Lomb filed in the Court of Chancery
of the State of Delaware on April 3, 2000
(d) None.
(g) None.
(h) Not applicable
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* Previously filed.
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IN THE COURT OF CHANCERY IN THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
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BAUSCH & LOMB INCORPORATED, )
)
Plaintiff, )
)
v. )
) Civil Action No. ______
WESLEY JESSEN VISIONCARE, INC., KEVIN RYAN, MICHAEL )
D'AMATO, EDWARD KELLEY, ADAM KIRSCH, SOL LEVINE, JOHN )
MAKI, JOHN O'MALLEY, STEPHEN PAGLIUCA AND OCULAR )
SCIENCES INC., )
)
Defendants. )
)
)
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COMPLAINT
---------
Plaintiff Bausch & Lomb Incorporated ("Bausch & Lomb"), by its
undersigned attorneys, for its complaint against defendants Wesley Jessen
VisionCare, Inc. ("Wesley Jessen"), Kevin Ryan, Michael D'Amato, Edward Kelley,
Adam Kirsch, Sol Levine, John Maki, John O'Malley, Stephen Pagliuca and Ocular
Sciences Inc. ("Ocular"), alleges upon knowledge as to itself and its own acts,
and upon information and belief as to all other matters, as follows:
NATURE OF THE ACTION
--------------------
1. This action presents an extraordinary factual circumstance. In
November 1999 Wesley Jessen solicited from Bausch & Lomb a business combination
proposal. After several meetings and partial due diligence, Bausch & Lomb told
Wesley Jessen that it was interested in acquiring Wesley Jessen in a cash
transaction and identified a price range substantially above the existing
market. Wesley Jessen never rejected that proffered price range
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and never objected to a cash transaction. Wesley Jessen did respond that it
would get back to Bausch & Lomb about the proposal. It never did. Instead,
without any effort to determine specifically how much Bausch & Lomb would be
prepared to pay, Wesley Jessen abruptly announced that it had entered into a
stock-for-stock merger agreement with Ocular that provides no premium for the
Wesley Jessen shareholders, does provide a premium for Ocular's shareholders --
including Ocular's chairman, who individually controls 20 percent of its
shares-- and contains virtually every defensive provision known: termination
fees, a stock option that precludes "pooling of interests" accounting by a
competing bidder, "no shop" provisions, a severe limitation on giving a
competing bidder access to Wesley Jessen information -- information that might
justify an increased price -- and a provision that obligates Wesley Jessen not
to lift its Rights Plan for any proposal other than the merger with Ocular.
2. Bausch & Lomb was astonished by the merger announcement and
promptly responded by publicly offering $34 per share in cash for all Wesley
Jessen shares, 37 percent above the market, and far above the value attributed
to Wesley Jessen shares in the merger. The Wesley Jessen board of directors
continued to refuse to negotiate with Bausch & Lomb or provide any information
to Bausch & Lomb that might justify a possible increase in the price.
Accordingly, Bausch & Lomb has taken its offer directly to the shareholders of
Wesley Jessen by commencing a cash tender offer for all Wesley Jessen's shares
at $34 per share (the "Tender Offer"). However, the Wesley Jessen shareholders,
who are being asked to vote on the Ocular merger, are at the same time being
precluded from considering and accepting the Tender Offer on its merits by the
hastily-arrived-at, grossly inferior Ocular merger agreement with its array of
"protective" provisions.
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3. Defendants intend to force a vote upon the Ocular merger
without allowing the shareholders a free choice to accept the vastly more
valuable alternative, the Tender Offer. Further, if the shareholders of Wesley
Jessen should vote against the merger, Wesley Jessen and its shareholders will
suffer penalties aggregating between $10 million and $25 million. All of this
has been done to "protect" a merger which provides substantially inferior value
for the Wesley Jessen shareholders and to "defend" against a proposal which
Wesley Jessen solicited and pursued until aborting negotiations with Bausch &
Lomb without explanation. These facts present a paradigm case of a
disproportionate response to a non-existent "threat" that precludes a free and
voluntary shareholder choice between competing proposals.
4. Plaintiff brings this action seeking judicial relief to (i)
enjoin the merger agreement that was the product of hasty and ill-informed
decision by the individual defendants, (ii) enjoin the various "protective"
provisions in the merger agreement, and (iii) allow the shareholders of Wesley
Jessen to make a free and unhindered choice between the Ocular merger and the
Bausch & Lomb Tender Offer.
PARTIES, JURISDICTION AND VENUE
-------------------------------
5. Plaintiff Bausch & Lomb is a New York corporation with its
principal place of business located in Rochester, New York. Bausch & Lomb is a
world leader in technology-based healthcare for the eye. Its core businesses
include soft and rigid gas permeable contact lenses, lens-care products and
ophthalmic surgical and pharmaceutical products. Founded in 1853 in Rochester,
where it continues to have its headquarters, the company has annual revenues of
approximately $1.8 billion and employs approximately 12,000 people in 35
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countries. Bausch & Lomb products are available in more than 100 countries
around the world. Bausch & Lomb owns 200 shares of Wesley Jessen.
6. Defendant Wesley Jessen is a Delaware corporation with its
principal place of business located in Des Plaines, Illinois. Wesley Jessen
manufactures and sells traditional and disposable soft contact lenses as well as
rigid gas permeable contact lenses. From 1980 to 1995, Wesley Jessen operated as
a wholly-owned subsidiary of Schering-Plough Corporation. In 1995, Bain Capital
Inc. ("Bain Capital") and Wesley Jessen's management acquired Wesley Jessen in a
leveraged buyout. In 1997, Wesley Jessen completed an initial public offering at
$15 per share.
7. Defendant Kevin Ryan is Chairman of the Board, President and
Chief Executive Officer of Wesley Jessen.
8. Defendants Michael D'Amato, Edward Kelley, Adam Kirsch, Sol
Levine, John Maki, John O'Malley and Stephen Pagliuca are directors of Wesley
Jessen.
9. Defendant Ocular is a Delaware corporation with its principal
place of business located in South San Francisco, California. Ocular is engaged
in the design, manufacture and distribution of contact lenses. John D. Fruth is
the chairman of the board of directors of Ocular and is its single largest
shareholder owning 20 percent of the outstanding Ocular shares.
BACKGROUND OF THE ACTION
------------------------
Negotiations between Bausch & Lomb and Wesley Jessen
----------------------------------------------------
10. In mid-November 1999, a financial advisor representing Wesley
Jessen inquired as to Bausch & Lomb's interest in discussing a possible business
combination with
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Wesley Jessen. On November 30, 1999, the same financial advisor inquired again,
this time in writing, as to Bausch & Lomb's interest in a meeting with defendant
Kevin Ryan, chairman and chief executive officer of Wesley Jessen, to discuss a
possible business combination with Wesley Jessen.
11. Bausch & Lomb was decidedly interested and, in early
December, its Vice President of Business Development, Alan Farnsworth, contacted
Mr. Ryan to confirm that William Carpenter, Chairman and Chief Executive Officer
of Bausch & Lomb, wished to meet with Mr. Ryan to discuss a possible business
combination. Mr. Ryan expressed interest in such a meeting, and Messrs.
Carpenter and Ryan met on February 3, 2000, in Rochester, New York. The meeting
went well, and further discussions ensued.
12. In mid-February, Messrs. Carpenter and Ryan agreed to convene
a small working group to discuss potential synergies achievable in a business
combination. This group, consisting of Mr. Farnsworth, Carl Sassano, President
and Chief Operating Officer of Bausch & Lomb, Efrain Rivera, Vice President and
Controller of Bausch & Lomb's Global Vision Care business, and defendants Ryan
and Kelley, the chief financial officer of Wesley Jessen, met on February 28,
2000, to explore areas of potential synergies in a possible transaction. The
group concluded that approximately $30 million of annual cost savings might be
achievable. Contemporaneously with this meeting, the two companies entered into
a confidentiality agreement covering confidential information to be provided to
each other in connection with such discussions.
13. Bausch & Lomb's internal review led it to the conclusion
that an acquisition of Wesley Jessen would be highly desirable for both
companies. A Bausch &
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Lomb/Wesley Jessen combination would create a combined company which could
offer a broader line of products on a cost-effective basis and would be a
stronger participant in the highly competitive global market. Moreover,
because of Bausch & Lomb's strong financial position, it would be able to commit
to a cash transaction without exposing Wesley Jessen's stockholders to any
financing uncertainty or contingency.
14. Accordingly, Mr. Carpenter called Mr. Ryan on March 7, 2000,
to report Bausch & Lomb's conclusion that there appeared to be a strong fit
between Bausch & Lomb and Wesley Jessen and to recommend that the parties move
ahead on further due diligence and discussions of a business combination. Mr.
Carpenter stated that a business combination would need to be a cash transaction
that was nondilutive to Bausch & Lomb. He further stated that, while Bausch &
Lomb would have to "stretch" to do so, Bausch & Lomb would offer a cash
transaction in the high thirties range per Wesley Jessen share if the parties
could continue the collaborative efforts, find further synergies and assure the
business fit. Mr. Ryan did not reject the suggested price range or object to a
cash transaction, and stated that he would consider the matter, speak to his
board of directors and get back to Mr. Carpenter.
15. On March 8, 2000, Mr. Carpenter left on a previously-planned
trip to Asia. On March 9, Mr. Ryan attempted to reach Mr. Carpenter. Mr. Ryan
reached Mr. Carpenter in Asia on March 13. He asked Mr. Carpenter to confirm
what he had stated in their conversation of March 7, which Mr. Carpenter did.
Mr. Ryan again stated that he would get back to Mr. Carpenter, who indicated
that he would be back in Rochester on March 18. It was Bausch & Lomb's
expectation, based upon Mr. Ryan's conduct, that there would be further
discussions between Bausch & Lomb and Wesley Jessen about the proposed business
combination. Instead, as next explained, there were none.
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THE MERGER AGREEMENT WITH OCULAR
--------------------------------
16. Two days later, on March 20, 2000, with no further contact
with either Mr. Ryan or any other representative of Bausch & Lomb, Wesley Jessen
announced that it had entered into a merger agreement with defendant Ocular. As
announced, the Ocular transaction was a stock-for-stock merger, was valued at
approximately $413 million and provided no premium to Wesley Jessen's
shareholders. In response to the announcement, the market price of the Wesley
Jessen common stock did not increase and essentially remained flat.
17. Under the terms announced on March 20, 2000, Wesley Jessen
would exchange 0.721 shares of its stock for each share of Ocular stock. Since
the closing price of the Ocular stock on Friday, March 17, the last trading day
before the announcement of the merger, was $16.94, the Ocular merger valued
Wesley Jessen's stock at $23.50 per share. By Friday, March 31, 2000, the day
before this complaint was filed, the closing price of Ocular stock had declined
to $15.73, thus reducing the deemed value of Wesley Jessen stock to $21.82 per
share.
18. Prior to entering into the Ocular merger agreement, neither
Mr. Ryan nor any other representative of Wesley Jessen had: (a) responded to the
price range per share of Wesley Jessen's stock indicated by Bausch & Lomb or
made any effort to negotiate price, (b) supplied the synergies information that
Mr. Carpenter had referred to in his March 7 conversation with Mr. Ryan, on
which Bausch & Lomb's ultimate pricing would depend, (c) asked Mr. Carpenter or
any other representative of Bausch & Lomb what the best price was that it might
be willing to offer, or (d) advised Mr. Carpenter or any other representative of
Bausch & Lomb that it was about to enter into a purportedly binding agreement
for an alternative transaction
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that would be "protected" by a battery of contract provisions designed to
frustrate a premium cash offer by Bausch & Lomb or even an alternative
stock-for-stock transaction.
19. Wesley Jessen's March 20 announcement of the Ocular
transaction was not accompanied by public disclosure of the Ocular merger
agreement, or by any public disclosure of provisions that might inhibit a bid by
Bausch & Lomb or any other bidder. Not until ten days later, on March 29, did
Wesley Jessen disclose the actual merger agreement terms, and it did so only
after several fruitless requests for the merger agreement by Bausch & Lomb. When
the agreement was finally released, the reasons for Wesley Jessen's reticence
were apparent: as detailed below, to "protect" this non-premium transaction,
defendants had built into the agreement a series of provisions which,
individually and cumulatively, are designed to inhibit stockholders from
evaluating the merger on its merits, and to hinder and obstruct Bausch & Lomb's
- -- or anyone else's -- attempt to offer a premium for Wesley Jessen's shares.
20. The merger agreement also evidences that the Ocular
transaction was arrived at in haste. Thus, for example, in section 3.1(g) of the
merger agreement, Wesley Jessen represents and warrants that the affirmative
vote of the majority of shareholders present at a special meeting would be the
only shareholder vote required to approve the merger with Ocular. The merger
agreement contemplates, however, an amendment of Wesley Jessen's certificate of
incorporation (see, e.g., section 1.5(b) of the merger agreement). Such
amendment will require an affirmative vote of a majority of all outstanding
shares of Wesley Jessen's stock, not just those present at the special meeting.
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THE BAUSCH & LOMB ACQUISITION PROPOSAL
--------------------------------------
21. On March 23, 2000, Bausch & Lomb reacted to the Ocular
transaction in a publicly released letter by Mr. Carpenter to Mr. Ryan. Bausch &
Lomb stated:
In light of our discussions over the past few weeks with
you and the clear willingness we demonstrated to pay a
substantial premium to the shareholders of Wesley Jessen, we fail
to understand why you would enter into a business combination
transaction without any premium to the shareholders of Wesley
Jessen, rather than a transaction with Bausch & Lomb which not
only makes greater business sense for your company but offers
vastly superior economics to your shareholders.
Based upon the persuasive business rationale for
combining our companies and on the exciting synergy opportunities
presented, both of which you and your team embraced emphatically
at our meeting on February 28, 2000, we have concluded that the
strategic and financial advantages of combining our two companies
are too compelling to ignore. We believe that the interests of
every Wesley Jessen constituency would be enhanced by a
transaction with Bausch & Lomb: your shareholders would obtain
the best possible price for their shares in the company, your
customers would reap the benefits of our complementary product
offerings and heightened efficiencies, and your business
partners, suppliers and the communities you support would enjoy a
continued and strengthened relationship with a stronger, dynamic
and creative company, a proven global leader in the vision care
field.
22. Bausch & Lomb's letter offered to acquire Wesley Jessen for
$34 per share in cash, for a total value of approximately $600 million. At the
time this cash offer was announced, it represented a 37 percent premium over
Wesley Jessen's trading price, and a 45 percent premium over the deemed value of
Wesley Jessen shares in the Ocular merger. Bausch & Lomb's proposal was not
subject to any financing contingency.
23. The Bausch & Lomb letter concluded by saying that it was
Bausch & Lomb's "strong preference to negotiate a transaction that has the
support of your Board of
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Directors. Given the clear superiority of our offer to the proposed Ocular
Sciences transaction, we would like to meet with you and your advisors as soon
as possible to finalize a definitive agreement between our companies. We are
committed to bringing a mutually beneficial Bausch & Lomb/Wesley Jessen
combination to a successful conclusion and would be willing to discuss any
aspect of our proposal with you."
24. This invitation for negotiations was simply ignored by Wesley
Jessen and the individual defendants. Thus, without having spoken with Bausch &
Lomb about its offer, and indeed with Mr. Ryan refusing to accept repeated phone
calls from Mr. Carpenter, Wesley Jessen hurriedly issued a press release on
March 23, stating that its "Board of Directors continues to believe in the
merits of and is committed to the strategic merger that we have entered into
with Ocular Sciences. We believe that this transaction is in the best long-term
interests of our shareholders." Although purportedly "committed" to the Ocular
merger, Wesley Jessen continued to withhold from the public any disclosure of
the merger agreement.
25. In a further effort to prompt negotiations, on March 23
Bausch & Lomb made the following statement in response to Wesley Jessen's March
23, 2000 news release: "The Board of Directors of Wesley Jessen should sit down
with us promptly to discuss our superior proposal of $34 per share in cash to
purchase the company." Yet again Wesley Jessen responded with silence. Further
letters and phone calls by Mr. Carpenter to Mr. Ryan and the other individual
defendants were ignored.
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DEFENDANTS' EFFORTS TO FRUSTRATE THE BAUSCH & LOMB PROPOSAL
-----------------------------------------------------------
26. On March 29, Wesley Jessen at last released the merger
agreement and related agreements (which are attached as Exhibit A). Its salient
provisions include the following:
(a) Ocular shares will be converted into shares of Wesley
Jessen at a fixed exchange ratio of 0.721 shares of
Wesley Jessen's stock for each share of Ocular. (Merger
Agreement ss. 1.8) Based upon the $25 per share
market price of Wesley Jessen's stock on March 20, the
price to be paid by Wesley Jessen to the Ocular
shareholders was $18.03 per share of Ocular's stock, a
premium over market. Based upon the $34 per share
Bausch & Lomb had by then publicly offered, Wesley
Jessen is paying $24.51 for each Ocular share, a
premium of 56 percent to Ocular's latest market price.
(b) On the other hand, as described in paragraph 17
above, based on the market price of Ocular stock, the
merger agreement values Wesley Jessen's stock at
between $21.82 and $23.50 a share. Compared with Bausch
& Lomb's $34 per share offer, Wesley Jessen
shareholders are receiving a substantial negative
"premium."
(c) Further, Wesley Jessen will acquire a major
individual shareholder in the merger: John D. Fruth,
the chairman of the board of Ocular who will be the
"non-executive" chairman of Wesley Jessen after the
merger, and will own 14 percent of the combined
company.
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(d) The merger agreement obligates Wesley Jessen to pay
substantial break-up fees. (Merger Agreement ss. 7.2)
Notwithstanding that the Ocular merger provides no
premium to the Wesley Jessen shareholders and was
executed at a time when Bausch & Lomb was expressing an
interest in acquiring Wesley Jessen at a substantial
premium, Wesley Jessen is obligated to pay a $10
million termination fee to Ocular if the Wesley Jessen
shareholders do not approve the transaction (regardless
of whether Bausch & Lomb's alternative proposal is
consummated). If the Wesley Jessen board of directors
withdraws its recommendation of the merger or if an
alternative proposal is consummated, the termination
fee increases to $20 million.
(e) In addition to the termination fee, Wesley Jessen
granted to Ocular an option to acquire 19.9 percent of
the currently outstanding shares of Wesley Jessen.
(Stock Option Agreement ss. 6) This option was granted
to Ocular at $25 per share despite the fact that at the
time it was granted Bausch & Lomb already had expressed
an interest in acquiring Wesley Jessen at a cash price
in the "high $30s" in a cooperative transaction based
on due diligence. The option is structured so that
Ocular is entitled to exercise the option precisely
when Ocular also is entitled to the $20 million
termination fee (Stock Option Agreement ss. 2), albeit
the total value of the "break-up" fee (the termination
fee plus the value of
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the stock option) supposedly is capped at $25 million.
(Stock Option Agreement ss. 10.)
(f) Beyond its economic cost, the option granted by
Wesley Jessen also has the practical effect of
precluding any other bidder who might wish to offer
stock instead of cash for Wesley Jessen from using the
customary and standard "pooling of interests" method of
accounting. The Ocular transaction is to be accounted
for as a pooling. Thus any competing bidder is gravely
disadvantaged compared to the favored Ocular deal.
(g) The merger agreement prohibits Wesley Jessen from
freely discussing alternative transactions with
competing bidders, even including Bausch & Lomb with
whom Wesley Jessen had initiated talks. (Merger
Agreement ss. 5.5)
(h) Wesley Jessen agreed to exempt the non-premium
merger with Ocular from the operation of Wesley
Jessen's Rights Plan. (Merger Agreement ss. 3.1)
However, despite knowing of Bausch & Lomb's interest,
Wesley Jessen's board of directors contractually
obligated itself not to exempt any other offer,
including any Bausch & Lomb proposal, from the
operation of the Rights Plan. (Merger Agreement ss.
4.1(l))
(i) The agreement provides that, before Wesley Jessen may
show its business information to a competing bidder,
such as Bausch &
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Lomb, that bidder must execute a confidentiality
agreement which, on information and belief, would
subject the bidder to "stand-still" provisions
precluding an offer without the consent of
the Wesley Jessen board. (Merger Agreement ss. 5.5) In
light of the fact that, as the March 7 conversation
between Messrs. Ryan and Carpenter demonstrates, such
information is necessary to permit Bausch & Lomb to
increase its offer, the effect of this provision is to
prevent a competing bidder from paying the best
possible price.
27. The individual defendants' conduct in causing Wesley Jessen
to subject itself to these provisions, although they knew of and had actually
solicited Bausch & Lomb's pre-existing, active interest in making a premium cash
offer for Wesley Jessen's shares, was a grossly disproportionate defensive
response. Indeed, the "break-up" fees were worse than disproportionate: they
were a gift to Ocular because the Wesley Jessen director could not reasonably
believe that the Wesley Jessen shareholders would approve the Ocular merger
unless the efforts of Wesley Jessen and Ocular to coerce a positive vote are
successful. Further, if any break-up fee could conceivably be justified on the
facts of this case, the $25 million fee the individual defendants agreed to --
which represents over 5 percent of the transaction value and over 5 percent of
the value of Wesley Jessen when it agreed to the Ocular merger -- is
disproportionate under prior decisions of this Court.
28. Nor are the other defensive provisions of the merger
agreement detailed above proportionate responses in the context of this case.
The individual defendants are not permitted to discriminate in their
administration of Wesley Jessen's Rights Plan and are not permitted to contract
away their discretion to exempt a competing bid from its operation. And
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the requirement that Bausch & Lomb tie its hands by means of a stand-still
agreement if it seeks information to justify a higher price demonstrates the
utter indifference of the individual defendants to the best interests of
shareholders.
29. The impact of these provisions is further compounded by the
governance structure of Wesley Jessen -- a structure that was adopted by Wesley
Jessen before it went public, not by the public shareholders who currently own
the company. Wesley Jessen has a staggered board. Consequently, although Bausch
& Lomb has proposed three director nominees for election at the 2000
stockholders meeting, which defendants have stated will be held in May, the
directors' use of the Rights Plan and the other defensive mechanisms cannot be
remedied by electoral means. Even if the shareholders were to expand the size of
the board of directors, the Wesley Jessen certificate of incorporation as
adopted when it was still privately owned vests exclusive power to fill
vacancies and newly-created directorship in the directors, and provides that
such appointees serve for the entire term of the class of directors to which
they are appointed.
FURTHER DEVELOPMENTS
--------------------
30. On March 30, the Wesley Jessen board of directors met for the
purpose of purportedly considering the Bausch & Lomb proposal. After that
meeting, Wesley Jessen issued a statement rejecting the proposal, refusing to
have any communication with Bausch & Lomb, refusing to provide any information
to Bausch & Lomb, and reaffirming the non-premium merger with Ocular. Despite
the fact that Wesley Jessen had solicited an acquisition proposal from Bausch &
Lomb, the Wesley Jessen directors misleadingly asserted that Wesley Jessen "is
not for sale" and that the proposal by Bausch & Lomb was "unsolicited."
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31. Furthermore, on March 31, Wesley Jessen announced that it
agreed to a co-marketing alliance with Alcon Laboratories -- a Bausch & Lomb
competitor in the field of contact lens disinfecting solutions. On information
and belief, that marketing agreement was entered into for the purpose of
creating a potential obstacle to a Bausch & Lomb transaction. Indeed, on March
29, 2000, Mr. Carpenter had sent the individual defendants a letter cautioning
them against taking any such steps that might frustrate stockholder choice in
the future of their company. That letter, like all the others, went unanswered.
32. On April 3, 2000, frustrated with the Wesley Jessen
directors' stubborn refusal to consider the Bausch & Lomb proposal, Bausch &
Lomb decided to commence this action and took its offer directly to the Wesley
Jessen shareholders by commencing a cash tender offer for all Wesley Jessen
common shares at $34 per share (the "Tender Offer").
IRREPARABLE INJURY TO BAUSCH & LOMB AND WESLEY JESSEN SHAREHOLDERS
------------------------------------------------------------------
33. Among other things, plaintiff seeks temporary, preliminary
and permanent injunctive relief preventing the implementation of the defensive
provisions in the Ocular merger agreement discussed above.
34. Specifically, Bausch & Lomb seeks to invalidate the Ocular
merger agreement which, as detailed above, was entered into hastily, in the
immediate aftermath of an abrupt and unexplained termination of discussions with
Bausch & Lomb and before the Wesley Jessen directors were or could have been
fully informed about Bausch & Lomb's alternative to the Ocular merger. Moreover,
Bausch & Lomb seeks to invalidate the array of protective provisions in the
Ocular merger agreement which, as detailed above, preclude consideration of
Bausch & Lomb's alternative transaction by the Wesley Jessen stockholders solely
on its
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business and financial merits. The Bausch & Lomb Tender Offer is non-coercive
and non-discriminatory and -- given that Bausch & Lomb was actually invited to
make such a proposal -- cannot be claimed to represent a threat to the corporate
policies or effectiveness of Wesley Jessen. Yet the individual defendants rushed
to enter into the grossly imprudent, inferior Ocular merger, which deprives
their stockholder constituents of substantial value, saddles the company with a
14 percent individual shareholder, and punishes competing transactions whether
in cash or in stock for no valid business purpose. Wesley Jessen's stockholders,
including Bausch & Lomb, will suffer irreparable harm unless the defendants are
enjoined from enforcing the Ocular merger agreement with its grossly excessive
and disproportionate defensive provisions.
35. Stockholders, including Bausch & Lomb, will likewise be
irreparably harmed if defendants are not required to lift the Wesley Jessen
Rights Plan for the Bausch & Lomb Tender Offer to permit stockholders to
consider both proposals on a level playing field. No fair consideration of the
Bausch & Lomb Tender Offer is possible when it, but not the competing Ocular
merger proposal, is barred by defendants' discriminatory application of the
Rights Plan.
36. Moreover, Bausch & Lomb, as a potential party to a merger
with Wesley Jessen, will be deprived of the unique opportunity to enter into a
business combination that would provide it with substantial benefits, including
increased efficiency and competitiveness.
37. The resulting injury to Bausch & Lomb will not be compensable
in money damages, and plaintiff, as well as other Wesley Jessen shareholders,
have no adequate remedy at law.
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FIRST CLAIM FOR RELIEF
----------------------
(Breach of Fiduciary Duty)
38. Plaintiff repeats and realleges paragraphs 1 through 37 as if
fully set forth herein.
39. The individual defendants were and are fiduciaries owing
fiduciary duties of care and loyalty to all the stockholders of Wesley Jessen,
including but not limited to the obligation to consider and fairly evaluate all
reasonable offers for control of Wesley Jessen from the third parties, and not
to enter into agreements the only conceivable effect of which is to reduce
shareholder value.
40. The directors of Wesley Jessen have breached their duties of
care and loyalty by, among other actions:
(a) approving the merger agreement with Ocular without
making any attempt to determine whether that agreement,
as opposed to any other offer or potential offer for
control of Wesley Jessen, was in the best interests of
the stockholders;
(b) approving a transaction the terms of which were
designed to inhibit a superior proposal for acquisition
of Wesley Jessen which they knew was imminent;
(c) failing adequately to inform themselves of, or
adequately to consider, potential transactions
available to Wesley Jessen before voting upon and
approving the merger agreement;
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(d) failing to adequately inform themselves, or
adequately to consider, the effect of the merger
agreement upon Wesley Jessen's ability to obtain better
offers and upon the interests of Wesley Jessen's
stockholders;
(e) approving a transaction for the purpose of protecting
their positions as Wesley Jessen's executive officers;
and
(f) conducting its discussions with Bausch & Lomb in
such a way as to avoid full exploration of its superior
proposal for Wesley Jessen.
41. Accordingly, the execution and approval of the merger
agreement violated the Wesley Jessen directors' fiduciary duties of loyalty and
care, and that agreement is thereby unenforceable.
42. Plaintiff has no adequate remedy at law.
SECOND CLAIM FOR RELIEF
-----------------------
(Disproportionate Defense)
43. Plaintiff repeats and alleges paragraphs 1 through 37 as if
fully set forth herein.
44. The various defenses erected by Wesley Jessen to the Bausch &
Lomb proposal are grossly disproportionate, both alone and collectively:
(a) the Bausch & Lomb Tender Offer is not a threat
because (i) it was actively solicited and pursued by
Wesley Jessen until Wesley Jessen aborted negotiations
with Bausch & Lomb without
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explanation and (ii) it is a non-coercive all-cash
offer for all shares at a substantial premium;
(b) the various defensive provisions erected, including the
provision barring the waiver of the Rights Plan, the
termination fee, the "pooling"-killing stock option,
and the provision barring information without a
standstill, are unreasonably disproportionate because
(i) they were adopted before the individual defendants
had informed themselves about the Bausch & Lomb
proposal, (ii) they were adopted in connection with a
merger that provides no premium for the Wesley Jessen
shareholders at a time when an unexplored superior
alternative was available, (iii) they were adopted to
frustrate the ability of the shareholders of Wesley
Jessen to consider a proposal solicited by Wesley
Jessen, (iv) they are being used discriminatorily to
preclude shareholders from considering competing
proposals and to apply coercion to the shareholders'
consideration of the merger, and (v) they impact the
exercise of shareholder voting rights and other
fundamental shareholder rights.
45. Plaintiff has no adequate remedy at law.
THIRD CLAIM FOR RELIEF
----------------------
(Discriminatory Application of the Rights Plan)
46. Plaintiff repeats and realleges paragraphs 1 through 37 as if
fully set forth herein.
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47. The individual defendants agreed to exempt the Ocular merger
from the operation of Wesley Jessen's Rights Plan. However, despite knowing of
Bausch & Lomb's interest, Wesley Jessen's board of directors contractually
obligated itself not to exempt any other offer, including any Bausch & Lomb
proposal, from the operation of the Rights Plan.
48. No fair consideration of either the Bausch & Lomb Tender
Offer or the Ocular Merger is possible when the Tender Offer, but not the
competing Ocular merger proposal, is barred by defendants' discriminatory
application of the Rights Plan. If defendants are not required to lift the
Wesley Jessen Rights Plan for the Bausch & Lomb Tender Offer, the stockholders
will be denied an opportunity to consider both proposals on a level playing
field.
49. Plaintiff has no adequate remedy at law.
FOURTH CLAIM FOR RELIEF
-----------------------
(Aiding and Abetting Breach of Fiduciary Duty)
50. Plaintiff repeats and realleges paragraphs 1 through 37 as if
fully set forth herein.
51. Defendant Ocular knowingly aided and abetted Wesley Jessen
and its directors in the breach of their duties described above. Ocular and
Wesley Jessen consciously acted in concert to structure the Ocular merger in a
manner that attempts to preclude other proposals and coerce or pressure the
shareholders of Wesley Jessen to approve the Ocular merger. Ocular accordingly
aided and abetted the Wesley Jessen directors in structuring a transaction that
it knew was unreasonable, and in breach of the duties of Wesley Jessen's
directors. The merger agreement is accordingly unenforceable.
52. Plaintiff has no adequate remedy at law.
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WHEREFORE, plaintiff Bausch & Lomb prays for judgment against
defendants as follows:
A. Declaring that the merger agreement and the stock option
agreement are unlawful and were entered into in breach of the
fiduciary duties of Wesley Jessen directors and enjoining,
temporarily, preliminarily and permanently, the merger between Wesley
Jessen and Ocular or the operation of certain provisions of the merger
agreement.
B. Enjoining preliminarily and permanently the defendants' use of
the Rights Plan to foreclose the shareholders from choosing between
two offers.
C. Declaring that Wesley Jessen's refusal to negotiate in good
faith with Bausch & Lomb toward the execution of a merger agreement is
a breach of the fiduciary duties of the Wesley Jessen directors.
D. Declaring that Wesley Jessen's refusal to provide Bausch &
Lomb its confidential information without a stand-still agreement is a
breach of the fiduciary duties of the Wesley Jessen directors.
E. Declaring that any action taken or to be taken by Wesley
Jessen with the intent or effect of impeding the acceptance of a
transaction that is superior to the Ocular merger, including without
limitation entering into any marketing, licensing, distribution, or
similar agreement with a competitor of Bausch & Lomb, is a breach of
the fiduciary duties of the directors of Wesley Jessen, and enjoining
Wesley Jessen and the individual defendants from taking any such
action.
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F. Requiring Wesley Jessen and its directors to take all steps
necessary to provide the Wesley Jessen shareholders a fair and equal
opportunity to choose between the competing offers.
G. Declaring that any rights purportedly acquired by Ocular in,
or in connection with, the merger agreement, including the termination
fee and the option to acquire Wesley Jessen stock, were procured by
aiding and abetting a breach of fiduciary duty, and that the merger
agreement, including its termination fee provisions, and the stock
option agreement are null and void and of no further effect.
H. Declaring that any money Ocular receives pursuant to the
termination fee provisions of its merger agreement with Wesley Jessen
and the accompanying stock option agreement will be held in
constructive trust.
I. Granting such other and further relief as the court may deem
just and proper.
Dated: Wilmington, Delaware
April 3, 2000
YOUNG CONAWAY STARGATT & TAYLOR, LLP
-------------------------------------
David C. McBride
Bruce L. Silverstein
Martin S. Lessner
11th Floor, Wilmington Trust Center
1100 N. Market Street
P.O. Box 391
Wilmington, Delaware 19899-0391
(302) 571-6600
Attorneys for Plaintiff Bausch & Lomb
Incorporated
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OF COUNSEL:
WACHTELL, LIPTON, ROSEN & KATZ
Michael W. Schwartz
Alexander Shaknes
51 West 52nd Street
New York, New York 10019
(212) 403-1000
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