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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION
14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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LIFE TECHNOLOGIES, INC.
(NAME OF SUBJECT COMPANY)
LIFE TECHNOLOGIES, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
53217 270 1
(CUSIP NUMBER OF CLASS OF SECURITIES)
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JOSEPH C. STOKES, JR.
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
LIFE TECHNOLOGIES, INC.
9800 MEDICAL CENTER DRIVE
ROCKVILLE, MARYLAND 20850
(301) 610-8000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICE AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
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With a Copy To:
CARL E. KAPLAN, ESQ.
MARA H. ROGERS, ESQ.
FULBRIGHT & JAWORSKI L.L.P.
666 FIFTH AVENUE
NEW YORK, NEW YORK 10103
(212) 318-3000
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Life Technologies, Inc., a Delaware
corporation (the "Company"). The address of the principal executive offices of
the Company is 9800 Medical Center Drive, Rockville, Maryland 20850. The title
of the class of equity securities to which this Statement relates is the
common stock, par value $.01 per share (the "Company Common Stock" or the
"Shares"), of the Company.
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to the unsolicited tender offer by Dexter
Corporation, a Connecticut corporation ("Dexter"), and Dexter Acquisition
Delaware, Inc., a Delaware corporation and a wholly owned subsidiary of Dexter
(the "Purchaser"), to purchase all of the Shares currently outstanding and not
owned directly or indirectly by the Purchaser or Dexter (the "Publicly Held
Shares") at $37.00 per Share, net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated November
2, 1998 (the "Offer to Purchase"), and in the related Letter of Transmittal
(which, together with the Offer to Purchase, as each may be amended and
supplemented from time to time, constitutes the "Offer"). The Offer is
disclosed in a Tender Offer Statement on Schedule 14D-1 dated November 2,
1998, as amended by Amendment No. 1 on Schedule 14D-1/A dated November 5, 1998
and Amendment No. 2 on Schedule 14D-1/A dated November 12, 1998 (as amended
and supplemented from time to time, the "Schedule 14D-1") and in a Rule 13e-3
Transaction Statement on Schedule 13E-3, dated November 2, 1998, as amended by
Amendment No. 1 on Schedule 13E-3/A dated November 5, 1998 and Amendment No. 2
on Schedule 13E-3/A dated November 12, 1998, which have been filed with the
Securities and Exchange Commission (the "Commission") pursuant to the
Securities Exchange Act of 1934, as amended, and the rules promulgated by the
Commission thereunder. As set forth in the Schedule 14D-1, the address of the
principal executive offices of Dexter and the Purchaser is One Elm Street,
Windsor Locks, Connecticut 06096.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person filing
this Statement, are set forth in Item 1 above. All information contained in
this Statement or incorporated herein by reference concerning the Purchaser or
Dexter was provided by the Purchaser or Dexter, and the Company takes no
responsibility for such information. Information contained in this Statement
or incorporated herein by reference concerning the former members of the
Special Committee (as defined in Item 3(b) below) and their advisors has been
provided by the former members of the Special Committee and their advisors,
and the Company takes no responsibility for such information, other than as it
relates to corporate actions or their status with the Company. As set forth in
Item 4(a), information relating to the position of Thomas H. Adams, Ph.D., has
been provided by Dr. Adams, and the Company takes no responsibility for such
information.
(b) Except as described in this Item 3(b), to the knowledge of the Company,
as of the date hereof there are no material contracts, agreements,
arrangements or understandings or any actual or potential conflicts of
interest between the Company or its affiliates and (i) the Company, its
executive officers, directors or affiliates or (ii) the Purchaser or Dexter or
their respective executive officers, directors or affiliates.
Composition of the Board of Directors. The Company's Board of Directors (the
"Board") is currently composed of the following seven members:
Thomas H. Adams, Ph.D., who is neither an officer or director of Dexter
nor an officer of the Company;
Bruce H. Beatt, who is Vice President, General Counsel and Secretary of
Dexter and Secretary of the Purchaser;
Kathleen Burdett, who is Vice President and Chief Financial Officer of
Dexter and Treasurer of the Purchaser;
Peter G. Kelly, who is a director of Dexter;
J. Stark Thompson, Ph.D., who is the President and Chief Executive
Officer of the Company;
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K. Grahame Walker, who is Chairman of the Company, Chairman, Chief
Executive Officer and a director of Dexter and President of the Purchaser;
and
George M. Whitesides, Ph.D., who is a director of Dexter.
Frank E. Samuel, Jr. and Iain C. Wylie, neither of whom was an officer or
director of Dexter nor an officer of the Company, resigned as directors of the
Company on November 3, 1998. See Item 4 below.
Certain material contracts, agreements, arrangements and understandings
between the Company or its affiliates and (i) certain of the Company's
executive officers, directors and affiliates or (ii) Dexter, its executive
officers, directors and affiliates are described at pages 3 through 5 and 11
through 22 of the Company's Proxy Statement dated March 16, 1998 relating to
its 1998 Annual Meeting of Stockholders (the "Proxy Statement") in the
sections entitled "Beneficial Ownership of Common Stock," "Executive
Compensation," "Report of the Compensation and Organization Committee on
Executive Compensation," "Compensation Committee Interlocks and Insider
Participation," "Compensation of Directors" and "Certain Relationships and
Related Transactions." A copy of such pages of the Proxy Statement is filed as
Exhibit 1 hereto and those portions of the Proxy Statement are hereby
incorporated herein by reference.
The Company is a party to an indemnity agreement with each of its directors
and executive officers.
As set forth in the Offer to Purchase, as of January 1, 1998, Mr. John D.
Thompson (Senior Vice President, Strategic and Business Development of Dexter)
beneficially owned 42,124 shares of Company Common Stock and may be deemed to
have owned beneficially 33,469 shares of Company Common Stock owned by his
wife and 1,500 shares of Company Common Stock owned by his son; Mr. Dale J.
Ribaudo (Treasurer of Dexter) may be deemed to have owned beneficially 200
shares of Company Common Stock owned by his wife; and Mr. Peter G. Kelly
beneficially owned 5,194 shares of common stock of Dexter.
Each non-employee director of the Company (except Mr. Walker, Mr. Beatt and
Ms. Burdett) receives a $10,000 annual retainer fee which is paid quarterly,
an additional fee of $1,000 for each Board meeting attended, and $1,000 for
each committee meeting attended (with the chairman of each committee receiving
$2,000). Pursuant to the terms of the Company's Non-Employee Directors' Annual
Retainer Plan, each non-employee director (except Mr. Walker, Mr. Beatt and
Ms. Burdett who elected not to participate in the Plan) receives a grant of
150 shares of Company Common Stock on each October 1 and April 1. Each non-
employee director may elect to receive up to 100% of his or her Board retainer
fee in Company Common Stock rather than in cash. Pursuant to the terms of the
Company's 1996 Non-Employee Directors' Stock Option Plan (the "1996 Plan"),
each non-employee director (except Mr. Walker, Mr. Beatt and Ms. Burdett who
elected not to participate in the 1996 Plan) was granted an option to purchase
6,750 shares of Company Common Stock on October 1, 1998 at a price per share
of $33.25 (the fair market value on that date). In addition, in April 1998 and
August 1998, respectively, Dr. Whitesides and Mr. Kelly were granted options
to purchase 6,750 shares of Company Common Stock pursuant to the 1996 Plan at
the fair market value on the date of grant. Grants under the 1996 Plan become
exercisable in three equal installments on the first, second and third
anniversary of the date of the grant, subject to acceleration in the event of
a Change of Control (as defined in the 1996 Plan).
In connection with a proposal announced by Dexter on July 7, 1998 to
acquire, subject to the approval of the Board (including the approval of the
directors not affiliated with Dexter), all of the Publicly Held Shares at a
price of $37.00 per Share in cash (the "Proposal"), the Board appointed a
special committee (the "Special Committee") of directors who were not also
directors or executive officers of Dexter (directors of the Company who are
not also directors or executive officers of Dexter are herein referred to as
"Unaffiliated Directors") to evaluate the Proposal. The Special Committee,
which was disbanded by action of the Board on October 27, 1998, as described
under Item 4(a), after Dexter announced its intention to withdraw the Proposal
and commence the Offer, consisted of Dr. Adams and Messrs. Samuel and Wylie.
Messrs. Samuel and Wylie subsequently resigned from the Board under the
circumstances described below in Item 4(a). In connection with their services
as members of the Special Committee, Dr. Adams, who served as chairman,
received $75,000 and Messrs. Samuel
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and Wylie each received $50,000, in each case in lieu of any additional fees
for attending meetings of the Special Committee. In addition, the Board agreed
to reimburse the members of the Special Committee for their expenses and to
pay all their other customary fees and expenses incurred as members of the
Board (other than fees for attending meetings of the Special Committee).
The Company has received the benefit of certain services performed by Dexter
corporate personnel, including insurance, risk management advice and internal
audit. Dexter also purchases principally all insurance for the Company, for
which the Company is charged its pro rata share of the cost of such insurance.
There is no outstanding intercompany balance for such services as of the date
hereof.
The Company can borrow up to $8.0 million under a revolving line of credit
from Dexter to finance short-term capital needs. There have been no amounts
outstanding under this line of credit since prior to 1995.
As described under the caption "Special Factors--Background of the Offer" in
the Offer to Purchase, on June 30, 1998, Mr. Walker, Chairman of the Company
and Chairman and Chief Executive Officer of Dexter, advised Dr. Thompson, the
Company's President and Chief Executive Officer, that if Dexter were to
consummate an acquisition proposal with respect to the Company, Dexter would
wish Dr. Thompson to continue as the Company's Chief Executive Officer and
would be interested in nominating Dr. Thompson to become a member and Vice
Chairman of Dexter's board of directors. Dr. Thompson did not make any
commitment or state any intention in response to Mr. Walker's statement.
Joseph C. Stokes, Jr., the Company's Senior Vice President, Chief Financial
Officer, Secretary and Treasurer, was employed by Dexter prior to 1989 and, as
a consequence, participates in a supplemental retirement plan and a deferred
compensation plan of Dexter.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) NO RECOMMENDATION.
BACKGROUND. On July 7, 1998, Dexter announced its Proposal to acquire all of
the Publicly Held Shares at a price of $37.00 per Share in cash, subject to
the approval of the Board and the Unaffiliated Directors, execution of a
definitive agreement and to other conditions customary in transactions of this
type. Dexter also stated that it was not interested in selling its controlling
interest in the Company to a third party. The Board appointed the Special
Committee, consisting of Messrs. Adams, Samuel and Wylie, to consider and
respond to the Proposal. The Special Committee selected Goldman, Sachs & Co.
("Goldman Sachs") as its financial advisor and Wachtell, Lipton, Rosen & Katz
as its counsel. After evaluating the Company and the Proposal with the
assistance of its legal and financial advisors, the Special Committee
determined that the price to be offered in the Proposal would not adequately
compensate the holders of Publicly Held Shares (the "Public Shareholders") for
the inherent value of their Shares. Consequently, the Special Committee was
unwilling to recommend that the Public Shareholders accept Dexter's Proposal.
On October 27, 1998, at a meeting of the Board, the Special Committee informed
the Board that the Special Committee was not prepared to recommend the
Proposal to the Public Shareholders. Mr. Walker then disclosed to the Board
Dexter's withdrawal of the Proposal and its intention to commence the Offer.
Following this disclosure, the Board disbanded the Special Committee, over the
objection of its three members, because, in the view of the five Dexter-
affiliated directors who voted to disband the Special Committee, there
appeared to be no purpose in continuing the Special Committee's existence
following Dexter's withdrawal of the Proposal. On November 2, 1998, Dexter
commenced the Offer. On November 3, 1998, Messrs. Samuel and Wylie, two of the
three members of the disbanded Special Committee, resigned from the Board.
POSITION OF THE COMPANY. At a meeting of the Board held on November 10,
1998, the Board determined that the Company would not make a recommendation as
to whether the Public Shareholders should tender their Shares pursuant to the
terms of the Offer. As described above in Item 3(b), five of the seven members
of the Board are also officers or directors of Dexter. Because a majority of
the Board is affiliated with Dexter, the Board
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has determined that the Company will express no position and will remain
neutral with respect to the Offer. The Board has not voted to approve or
disapprove the Offer or to recommend that the Public Shareholders tender or
refuse to tender their Shares in the Offer. At the November 10, 1998 meeting,
the Board also determined that each Unaffiliated Director was encouraged to
include in this Statement any information, recommendation or other statement
deemed necessary or appropriate by such Unaffiliated Director to assist the
Public Shareholders in determining whether or not to accept the Offer.
POSITIONS OF DR. ADAMS AND THE FORMER SPECIAL COMMITTEE. As described above
under the caption "Background," the Special Committee of the Board formed to
evaluate Dexter's July 7, 1998 Proposal determined that the price to be
offered in the Proposal would not adequately compensate the Public
Shareholders for the inherent value of their Shares. Consequently, the Special
Committee was unwilling to recommend that the Public Shareholders accept the
Proposal. Following the disbandment of the Special Committee at the October
27, 1998 Board meeting, on November 3, 1998, Messrs. Samuel and Wylie tendered
their resignations. Had Messrs. Samuel and Wylie not resigned, unvested
options granted to each of them under the 1996 Plan would have vested in the
event of a Change of Control (as defined in the 1996 Plan). Based upon the
price in the Offer, the unvested options had a value of approximately
$80,156.25 to each of Messrs. Samuel and Wylie.
At the request of Dr. Adams, who is an Unaffiliated Director and was the
chairman of the former Special Committee, the letters of resignation of
Messrs. Samuel and Wylie and the attachments thereto, including the Joint
Statement of the Former Members of the Special Committee of Independent
Directors of Life Technologies, Inc. (the "Joint Statement"), are set forth in
their entirety in Item 4(b) below. Dr. Adams has advised the Company that he
recommends that the Public Shareholders reject the Offer and not tender their
Shares. See Item 4(b) below.
POSITIONS OF THE DEXTER-AFFILIATED DIRECTORS. Because they are affiliated
with Dexter, Messrs. Walker, Beatt and Kelly, Dr. Whitesides and Ms. Burdett,
who constitute a majority of the Board, are taking no position on the Offer as
directors of the Company. The Offer to Purchase sets forth Dexter's position
with respect to the Offer, including as to the fairness of the price.
A copy of a letter to all shareholders, which communicates the Company's
neutrality and the position of Dr. Adams with respect to the Offer, is filed
as Exhibit 2 to this Statement and is hereby incorporated herein by reference.
EXCEPT FOR DR. ADAMS, WHO RECOMMENDS THAT THE PUBLIC SHAREHOLDERS REJECT THE
OFFER AND NOT TENDER THEIR SHARES, NO PERSON OR ENTITY, INCLUDING THE COMPANY,
ANY PRESENT OR FORMER MEMBERS OF THE BOARD AND THE LEGAL OR FINANCIAL ADVISORS
TO ANY PRESENT OR FORMER MEMBERS OF THE BOARD OR THE SPECIAL COMMITTEE, IS
MAKING ANY RECOMMENDATION TO THE PUBLIC SHAREHOLDERS IN THIS SCHEDULE 14D-9 AS
TO WHETHER THEY SHOULD TENDER OR REFRAIN FROM TENDERING SHARES IN THE OFFER.
CONSEQUENTLY, EACH PUBLIC SHAREHOLDER MUST DECIDE, IN THE MANNER IN WHICH SUCH
PUBLIC SHAREHOLDER WISHES TO DO SO, WHETHER TO TENDER SHARES AND, IF SO, HOW
MANY SHARES TO TENDER. THE BOARD STRONGLY URGES THE PUBLIC SHAREHOLDERS TO
MAKE THEIR DECISIONS AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES
BASED ON ALL OF THE AVAILABLE INFORMATION, INCLUDING THE INFORMATION SET FORTH
IN THIS SCHEDULE 14D-9.
(b) REASONS FOR DR. ADAMS' POSITION WITH RESPECT TO THE OFFER AND FOR THE
FORMER SPECIAL COMMITTEE'S POSITION WITH RESPECT TO THE PROPOSAL.
At the request of Dr. Adams, set forth below in their entirety are the
letters of resignation of Messrs. Samuel and Wylie, two of the three members
of the former Special Committee, and the attachments thereto, including the
Joint Statement. The Joint Statement sets forth the former Special Committee's
position with respect to the
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Proposal. Dr. Adams has also requested that the Company include a summary of
the analyses provided to the Special Committee by Goldman Sachs. Dr. Adams has
advised the Company that, with respect to the Offer, he recommends that the
Public Shareholders reject the Offer and not tender their Shares for the
reasons set forth in the Joint Statement with respect to the Proposal (which
was at the same price as in the Offer) and based in part, on the work done by
Goldman Sachs for the Special Committee.
Set forth below is the resignation letter of Frank E. Samuel, Jr.:
Frank E. Samuel, Jr.
Suite 300
11000 Cedar Avenue
Cleveland, Ohio 44106
November 3, 1998
Board of Directors
Life Technologies, Inc.
9800 Medical Center Drive
Rockville, Maryland 20850
Dear Fellow Board Members:
On October 27, 1998, the representatives of Dexter Corporation
serving on our Board of Directors took the extraordinary step of
disbanding the Special Committee of independent directors--apparently
in response to the Special Committee's refusal to approve a transaction
between LTI and Dexter Corporation at a price that the Special
Committee believed was not fair to LTI's public stockholders. This
inappropriate act, taken upon the motion of the Chairman of the Board,
who is also the Chairman of the Board of Dexter Corporation, occurred
without discussion (even though discussion was requested by myself, an
independent director), and over the objection of all three members of
the Special Committee. This act, together with the events of the past
several months and the behavior of those directors who represent Dexter
Corporation on this Board, has made it impossible for me to fulfill my
primary obligation as a director: to represent and act in the best
interest of LTI's stockholders. Consequently, I hereby resign from the
Board of Directors of Life Technologies, Inc., effective immediately.
My decision to resign is made with the greatest reluctance. I have
served as a director of LTI since April of 1996. I am proud of my
association with the Company, its outstanding management team and its
many achievements. Consequently, my decision to resign, and Dexter's
heavy-handed activities over an extended period of time that led to it,
leave me not only with a profound sense of disappointment, but, more
importantly, with deep concern as to the fairness of the treatment that
LTI's public stockholders can expect to receive in the future from the
Dexter majority on this Board.
A joint statement of the members of the Special Committee, which
outlines in greater detail the reasons for the Special Committee's
conclusion that $37 per share is not an appropriate valuation for LTI,
is attached as Annex A to this letter. As that statement makes clear,
Dexter and the Special Committee appeared to have substantial
disagreements as to the proper approach for determining an appropriate
value for the Company. In particular, the Special Committee strongly
believed that in arriving at its $37 per share price, Dexter had not
given sufficient credit to, or had ignored, important components of
LTI's overall value, including the value of the products in LTI's R&D
pipeline. The Special Committee, calling upon its expert advisors as
well as each member's individual expertise, spent a great deal of time
studying these issues.
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I am troubled by several features of the situation as it unfolded:
Dexter's refusal to consider or even discuss the issues relating to
LTI's value raised by the Special Committee, the termination of the
Special Committee by the Chairman of the Board and his conflicted
colleagues, and Dexter's coercive attempt to buy out the LTI public
stockholders at a price which, I believe, deprives these stockholders
of the significant inherent values to which they are rightfully
entitled. This is particularly troubling because, as has been discussed
by LTI Board members from time to time, LTI is a difficult company to
value without intensive study. This is both because a significant part
of the value of LTI is in its R&D pipeline, the details of which are
not fully public, and because LTI receives very little analyst coverage
from Wall Street due to Dexter's majority position.
These are points, indeed, about which I had written earlier this year
to Grahame Walker, chairman of the Dexter and LTI boards (a copy of my
letter to Grahame is attached as Annex B). The analysis performed by
Goldman, Sachs & Co. (the Special Committee's financial advisor) was
probably the first time that a rigorous, independent study of LTI and
its prospects had ever been undertaken. It was not surprising to me--
for reasons reflected in my letter to Grahame--that Goldman Sachs'
analysis supported a higher value than had been attributed to LTI by
the market prior to the Dexter proposal. I now fully expect that, once
LTI is wholly owned by Dexter, the "New Dexter", without the former LTI
public stockholders, will find Goldman Sachs' analysis to be persuasive
as it tells LTI's promising story to its investors.
In summary, with the termination of the Special Committee, I believe
that I am no longer able to represent the interests of and protect the
public stockholders--the constituency the Special Committee was charged
with protecting. Consequently, I have no choice but to resign from the
LTI Board of Directors. Pursuant to the federal securities laws, I
hereby request that this letter and my disagreement with the actions
taken by the Dexter representatives on the Board of Directors be
disclosed to LTI's public stockholders by filing this letter (including
the attachments) as an exhibit to an LTI Form 8-K filed with the
Securities and Exchange Commission. Any questions regarding this matter
should be directed to my counsel, David A. Katz of Wachtell, Lipton,
Rosen & Katz.
Sincerely,
/s/ Frank E. Samuel, Jr.
Frank E. Samuel, Jr.
Attachments
cc: David A. Katz
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ANNEX A
JOINT STATEMENT OF THE
FORMER MEMBERS OF THE SPECIAL COMMITTEE OF INDEPENDENT DIRECTORS OF
LIFE TECHNOLOGIES, INC.
SUMMARY.
For the reasons described below under "Reasons for the Special
Committee's Recommendation," the Special Committee of Independent
Directors of Life Technologies, Inc. ("LTI") determined that Dexter
Corporation's proposal to purchase all of the shares of LTI that it
does not already own at a price of $37 per share in cash would not
adequately compensate LTI's public stockholders for the inherent value
of their LTI shares. Consequently, the Special Committee was unwilling
to recommend that LTI's public stockholders accept Dexter's $37 per
share proposal.
BACKGROUND OF THE COMMITTEE'S ACTIVITIES.
In May 1998, LTI's scheduled share repurchase was suspended by order
of Dexter Corporation without notice to the LTI Board. This repurchase
program had been the subject of extensive discussion by the LTI Board
over many months--in fact, the Chairman of the Board had specifically
directed that the share repurchase be pursued expeditiously--but the
LTI Board was not informed that the repurchase program was suspended,
and no public announcement was ever made.
On July 7, 1998, Dexter Corporation, which at that time owned
approximately 52% of the outstanding shares of common stock of LTI,
publicly announced its proposal to acquire the remaining 48% of LTI
that it did not already own at a price of $37 per share in cash. As was
the case with the canceling of the share repurchase, Dexter made this
announcement without advance notice to or consultation with the LTI
Board. At a meeting of the LTI Board that day, the LTI Board appointed
directors Thomas H. Adams, Frank E. Samuel, Jr., and Iain C. Wylie as a
Special Committee of independent directors charged with evaluating and
responding to Dexter's proposal on behalf of LTI's public stockholders.
Messrs. Adams, Samuel and Wylie were the only independent members of
the LTI Board; each of the other directors was either an officer of
LTI, or an officer or director of Dexter.* In addition, each of Messrs.
Adams, Samuel and Wylie possess significant expertise in the life
sciences which all but one of the Dexter representatives do not. The
Special Committee engaged Wachtell, Lipton, Rosen & Katz as its counsel
and, after interviewing a number of financial advisory firms, engaged
Goldman, Sachs & Co. as its financial advisor.
Shortly thereafter, the Special Committee and its legal and financial
advisors commenced their effort to respond to the Dexter proposal. This
effort began with an intensive, cooperative effort among the Special
Committee, Goldman Sachs and senior management of the Company to
analyze and understand the various contributing factors to LTI's
inherent value. As has been discussed by the LTI Board from time to
time in the past, LTI is a difficult company to value without intensive
study for at least two reasons: first, because a significant part of
its future success and value is dependent upon the success and value of
products that currently are only under development--the so-called "R&D
pipeline"--the details of which are not fully public for competitive
and other reasons (although Dexter has been well aware of them for some
time); and second, because LTI receives very little analyst
--------
* Subsequently, an independent director (who was not a member of the
Special Committee) resigned to pursue other opportunities (unrelated
to the Dexter proposal), and the Chairman of the Board recommended
that another director affiliated with Dexter be appointed to the LTI
Board of Directors to replace the resigning director. A replacement
director for the resigning director was required in order to keep the
LTI Board at the size required by LTI's certificate of incorporation.
However, there was no requirement that the replacement director be
affiliated with Dexter. Since there was no reason to give Dexter
clear control of the LTI Board (i.e., five of nine directors) or to
appoint another Dexter-affiliated director in the context of an
interested party transaction, the two members of the Special
Committee who were present at the relevant meeting voted against
electing the new director.
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coverage from Wall Street, primarily due to Dexter's majority position.
Because there is substantial information relating to the value of LTI
that has not been made available to the public stockholders, the
Special Committee felt a special obligation to evaluate these assets in
order to ensure that Dexter not unfairly profit from its inside status
at the expense of the public stockholders.
The Special Committee began by attempting to understand and evaluate
the Company's strategic plan, including a highly detailed analysis of
the Company's R&D pipeline. In this connection, with the assistance of
Goldman Sachs and senior management of the Company, the Special
Committee reviewed all of the Company's major assets, including
sequencing technologies, transgenics, and the cDNA library, and then
analyzed the R&D pipeline on a product-by-product basis in order to
understand the success probabilities of each of the products and the
implications for LTI, the LTI stockholders, and the financial
projections contained in the base strategic plan. Among other things,
the analysis indicated that the commercialization of some of the major
products in the R&D pipeline could be expected to lead to an expansion
of the Company's earnings growth trajectory. The Special Committee and
its advisors then thoroughly analyzed LTI's financial projections,
including spending a significant amount of time questioning and
pressing management on the viability and achievability of the
projections reflected in the strategic plan, as well as separately
analyzing the R&D pipeline.
Based on this work, in August and early September Goldman Sachs and
the Special Committee broke its valuation analysis into two components:
(1) the ongoing operations of the Company, and (2) the R&D pipeline.
Application of standard valuation techniques to these two components by
Goldman Sachs indicated discounted cash flow value ranges for the
ongoing operations and for the R&D pipeline which, when added together,
supported values significantly in excess of $37 per share. In the case
of the R&D pipeline, Goldman Sachs based its analysis on a product by
product probability-of-success analysis, with each probability supplied
by management. In addition, in its discounted cash flow analyses,
Goldman Sachs applied significantly higher discount rates to the R&D
pipeline than it did to the ongoing operations. Consequently, the
Special Committee believed, based in part on Goldman Sachs' work, that
the results indicated by the R&D pipeline analysis were conservative
and not speculative.
In addition to the discounted cash flow analyses, the Special
Committee also considered (i) LTI's recent and historical stock price
performance, (ii) LTI's investor base and investment positions, (iii)
LTI's historical business and financial performance and prospects, (iv)
comparable public company stock values, (v) a review of premiums paid
in prior life sciences industry acquisitions, and (vi) a review of
premiums paid in prior minority buy-out transactions.
In September, after more than six weeks of this intensive work by the
Special Committee and its legal and financial advisors, the Special
Committee informed Dexter that, based on the work done as of that time,
the Special Committee had concluded that $37 per share was not an
appropriate valuation, and that the Special Committee was not prepared
to recommend Dexter's offer to LTI's public stockholders. In
particular, the Special Committee told Dexter that the analytical work
performed by the Special Committee and its advisors had led it to
conclude that Dexter's $37 per share offer appropriately reflected
neither the substantial values indicated in the Company's base
strategic plan nor the incremental value of the Company's R&D pipeline.
The Special Committee chose to engage in private discussions, rather
than public negotiations, with Dexter in order to attempt to minimize
any potential harm to LTI from the process which Dexter initiated. The
Special Committee believed that a public disagreement on the values
inherent in LTI's base business as well as its very attractive R&D
pipeline would ill serve the constituencies that the Special Committee
was charged with protecting.
The Special Committee also informed Dexter that the Special Committee
had been approached by a third party interested in acquiring all of LTI
at a price in excess of Dexter's $37 offer. Because Dexter has
previously stated that it is not interested in reducing its position in
LTI, the Special Committee could not respond to this third-party
contact. Nevertheless, the Special Committee found it
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highly significant that the values indicated in the third party
approach exceeded the value Dexter offered even though the third party
did not have access to the substantial inside information (including
with respect to the R&D pipeline) to which Dexter has had continued
access, both through its board representation and in connection with
the proposed transaction.
Based on the work it had done as of that time, the Special Committee
believed that the differing valuation approaches applied by Goldman
Sachs and by Merrill Lynch, Dexter's financial advisor, together with
Merrill Lynch's admitted failure to attribute any meaningful value to
the R&D pipeline, accounted for the gap between Dexter and the Special
Committee. In particular, the Special Committee believed that both the
R&D pipeline and LTI's current product portfolio could be valued
objectively, and that once Dexter and Merrill Lynch understood the
significance and value of the R&D pipeline and the current product
portfolio, a common ground eventually could be found for a transaction
that would provide fair value to LTI's public stockholders. Dexter
agreed that Merrill Lynch and Goldman Sachs should meet to discuss
their respective valuation analyses. To this end, the Special Committee
continued its work for an additional five weeks and, among other
things, (1) instructed Goldman Sachs to meet with Merrill Lynch in
order to see if a common approach to valuing LTI could be agreed upon,
and (2) arranged meetings among the Special Committee, Goldman Sachs,
Merrill Lynch and the Company's senior management to review the R&D
pipeline and other components of LTI's strategic plan.
During one of these meetings in late October, Merrill Lynch raised
certain issues concerning several of the important assumptions
underlying the analysis performed by the Special Committee and its
financial advisor. These issues included (1) the impact of recent
economic developments in international markets; (2) the impact of
current stock market conditions; (3) whether LTI can maintain market
share growth without sacrificing margins; and (4) the Company's ability
to successfully commercialize the products in the R&D pipeline.
Although the Special Committee had considered each of these issues, the
Special Committee asked Goldman Sachs to do additional work and perform
additional analyses directly related to these issues, and the Special
Committee personally questioned the Company's senior management on
these matters (other than issue (2), with respect to which management
was presumed to have no particular expertise). The result of our
investigation of these issues was to reinforce rather than to diminish,
our view that Dexter's $37 per share offer did not fully reflect the
values inherent in LTI. Among other things, the Special Committee
determined or was informed by LTI's management:
. with respect to the impact of recent economic developments: (i)
international economic conditions had negatively impacted only
Asia and Latin America, which constitute very small parts of
LTI's overall business; (ii) the expectation that a weakening
dollar relative to European currencies will generate greater
income and larger margins for the European region, which
represents more than one-third of LTI's business, and the belief
that LTI management has positioned LTI to take advantage of this
situation; (iii) customer orders have held firm and LTI has a
lengthy list of new customers; and (iv) the National Institutes
of Health has increased, not decreased its budget;
. with respect to market share gain: (i) base case growth is
projected to be strongest in high margin products; and (ii) LTI
plans to continue necessary cost restructuring to maintain
margins; and
. with respect to the Company's ability to successfully
commercialize the products in the R&D pipeline: (i) the Company
has several recent examples of new products that have been
developed and commercialized effectively, including Custom
Primers and Platinum Paq, and has had significant success in new
product introductions; and (ii) the Company has assigned
dedicated experienced teams to its major commercialization
efforts, including to the Gateway line and Amplification program.
In addition, on October 22, 1998, Goldman Sachs presented the Special
Committee with an update to its September valuation analysis. Among
other things, Goldman Sachs' presentation indicated
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discounted cash flow value ranges for the ongoing operations and for
the R&D pipeline that, when added together, indicated a total Company
value range of $36.32 to $51.81. Goldman Sachs also noted for the
Special Committee that the assumptions used in arriving at the
discounted cash flow value range for the R&D pipeline were more
conservative than those used in the September presentation and included
sensitivity analyses that significantly discounted management's actual
expectations. Similarly, the discounted cash flow ranges for the
Company as a whole reflected sensitivities to potential softness in
market and economic conditions.
Based on this reaffirmation of its view that $37 per share would not
appropriately compensate LTI's public stockholders, the Special
Committee instructed Goldman Sachs to convey its responses to the
issues raised by Merrill Lynch to Merrill Lynch in the hope that
productive discussions leading to a fair transaction could result. Such
discussions occurred on October 26, 1998. But prior to that time, K.
Grahame Walker, exercising his power as chairman of the Board of LTI,
called a special meeting of the Board of Directors of LTI on October
27, 1998. No agenda was provided for this meeting, but Mr. Walker
indicated to one member of the Special Committee that he expected to
receive an update from the Special Committee.
At the October 27 Board meeting, the Special Committee informed the
Board that Dexter had so far failed to convince the Special Committee
that $37 per share is an appropriate valuation and that, based on its
work and the information provided by Dexter and the Company, the
Special Committee was not prepared to recommend Dexter's offer to LTI's
public stockholders. The Special Committee also made clear, however,
that it and its advisors stood ready to review any additional
information and to consider any revised proposal that Dexter cared to
make. Mr. Walker instead demanded that Dr. Adams, the Special
Committee's chairman, state a price that the Special Committee would be
willing to approve. Dr. Adams declined to do so, and instead reiterated
the Special Committee's offer to consider additional information or a
new proposal from Dexter. Following Mr. Walker's repeated requests for
a specific price the Special Committee would be willing to approve, Dr.
Adams informed the Board of the same information that Goldman Sachs had
conveyed to Merrill Lynch earlier in the day, namely (i) that the
Special Committee saw the logic of a price in the $50+ range per share
but believed Dexter would be unwilling to offer such a price, (ii) that
the Special Committee was not prepared to recommend the $37 per share
price in Dexter's proposal or any price in the $30s, and (iii) that the
Special Committee was willing to consider any new proposal. Finding Dr.
Adams' response unacceptable, Mr. Walker stated that the Special
Committee's usefulness had ended and disclosed that Dexter would
announce that it had withdrawn its proposal and that Dexter had decided
to proceed directly with a tender offer to LTI's stockholders. He then
proposed to the LTI Board that the Special Committee be disbanded.
Overruling a direct request from an independent director that the
wisdom of such an action be discussed prior to such a vote, the five
Dexter representatives on the LTI Board approved the disbanding of the
Special Committee, with all three members of the Special Committee
voting against disbanding.
REASONS FOR THE SPECIAL COMMITTEE'S RECOMMENDATION.
The former members of the Special Committee unanimously agree that
Dexter Corporation's proposal to purchase all of the shares of LTI that
it does not already own at a price of $37 per share in cash would not
adequately compensate LTI's public stockholders for the inherent value
of their LTI shares. Consequently, the Special Committee was unwilling
to recommend that LTI's public stockholders accept Dexter's $37 per
share proposal.
In particular, the Special Committee believes that Dexter Corporation
has ignored or omitted from its $37 per share value significant
components to LTI's long term inherent value and earning power.
Foremost among these is the value of the products in LTI's R&D pipeline
that have not yet been commercialized. Even using conservative
assumptions and probability discounts to account for the probabilities
of success associated with these products, the Special Committee
determined that the
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R&D pipeline has significant value that LTI's public stockholders are
entitled to be compensated for and that are not reflected in Dexter's
$37 per share offer.
In addition to the foregoing, in reaching its conclusions, the former
members of the Special Committee considered the following material
factors:
(i) the Special Committee's expectation of LTI's operating and
financial performance on a "status quo" (no change in Dexter
ownership) basis, taking into account, among other things:
. historical information concerning the business, operations,
financial condition and operating results of LTI; and
. certain projections provided by LTI management concerning the
prospects and financial and operating performance of LTI;
(ii) certain stock market and related financial indicators,
including:
. the recent and historical trading prices and market multiples
of LTI common stock;
. LTI's investor base and investment positions;
. comparable public company stock values;
. a review of premiums paid in prior life sciences industry
acquisitions; and
. a review of premiums paid in prior minority buy-out
transactions;
(iii) the multiple presentations by senior management of LTI
concerning the products under development in LTI's R&D pipeline,
including management's product by product assessment of the
potential revenue associated with each such product and the
probability of success or failure of each such product, and Goldman
Sachs' comprehensive analysis of the R&D pipeline information
provided by management, including the application of appropriate
probability discounts and the presentation of informative
probability and sensitivity analyses;
(iv) the fact that each of the members of the Special Committee
has significant expertise and professional experience in the life
sciences, whereas all but one of the Dexter-affiliated directors do
not;
(v) the fact that the details of the R&D pipeline had not been
made fully public (for competitive and other reasons) and therefore
was not fully reflected in LTI's stock price, together with the fact
that Dexter, unlike the public stockholders, had had access to such
information for some time;
(vi) the fact that, because a significant part of the value of LTI
is in its R&D pipeline, the details of which are not fully public,
and because LTI receives very little analyst coverage from Wall
Street due to Dexter's majority position, mere application of a
premium to current trading prices would not be a sufficient approach
to valuing LTI, and that intensive, rigorous study--of the type
performed by the Special Committee with the assistance of Goldman
Sachs--would be required;
(vii) the bullet points following the tenth paragraph above under
"Background of the Committee's Activities";
(viii) the unsolicited views of certain significant LTI
stockholders who believed that $37 per share was not a fair price
and that a higher price was required to properly compensate the LTI
public stockholders.
In view of the variety of factors and the amount of information
considered, the former members of the Special Committee 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.
<TABLE>
<S> <C> <C>
/s/ Thomas H. Adams /s/ Frank E. Samuel, Jr. /s/ Iain C. Wylie
Thomas H. Adams, Ph. D., Frank E. Samuel, Jr. Iain C. Wylie
Chairman
</TABLE>
11
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ANNEX B
EDISON BIOTECHNOLOGY CENTER
June 2, 1998
Personal and Confidential
Mr. K. Grahame Walker
Chairman of the Board
Life Technologies, Inc.
One Elm Street
Windsor Locks, CT 06096
Dear Grahame:
At the conclusion of the LTI Board lunch in April, you suggested that
I reconsider my opposition to the stock re-purchase plan in light of
the "overwhelming" approval of the plan by the shareholders, whom I was
elected to represent. I have done so, and see no new factor that would
require me to change my position. Let me say that I have always assumed
that the plan would receive majority support from the LTI shareholders.
Thus, for me, it is only the size of the majority vote that is now
known.
My analysis proceeds as follows.
First, there are special factors relating to the Dexter holding
that I shall set aside for the moment.
Second, when Dexter's 52% interest is subtracted from the 88% of
the total votes cast in favor of the re-purchase, 36% of LTI shares
were voted to approve the plan. 14% were either voted against the
plan or abstained. This is obviously still a large majority, but not
so overwhelming as to render a minority view irrational.
Third, philosophical tenets about the general importance of
minority views aside, the minority view in this case is persuasive,
for the following reasons.
1) Internal growth does not appear to provide the prospect of
appropriate increase in LTI shareholder value. Acquisitions are,
consequently, essential to greater shareholder value. Given the
existence of a majority shareholding, LTI begins the acquisition
hunt at a disadvantage--in spite of its high share price, which
in ordinary situations would endow the company with an extremely
attractive medium with which to finance acquisitions--compared
to other potential acquirers because it cannot effectively use
its shares as consideration for an acquisition. Therefore, cash
is of greater relative importance to its prospects for
increasing shareholder value than it otherwise would be.
Accumulating cash has, therefore, an overwhelming importance for
increasing shareholder value. Anything that applies cash to
purposes other than acquisitions or significant opportunities
for enhancing internal growth has, therefore, a low priority.
This includes, in my view, not only share re-purchases, but
dividends as well, but I will not argue this point in view of
LTI's history of paying dividends.
2) Share re-purchases have two aspects: the signal to the
market that the Board believes the shares at current prices are
undervalued and increases in share value and earnings that occur
because of actual re-purchases. In this case, there may be some
value from the signal, even though LTI stock is trading near its
high--not, by the way, an ordinary case for a stock buyback.
More important, actual re-purchases deplete cash in return for
modest EPS gains; an objective that is inconsistent with the
cash retention objectives that are for LTI the key to increasing
shareholder value.
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3) LTI is penalized in the market by the narrow float caused
by the Dexter holding. Because trading is thin, the company is
followed by second tier analysts and receives inadequate
investor attention in comparison to its key position in the
biotechnology field. Any reduction of the float would only serve
to exacerbate these problems. The result of more analyst and
investor attention to the company's fundamentals could only
increase share price.
Fourth, I recognize that current shareholders might conclude that
the value of their shares would be increased by a share re-purchase.
There are a variety of reasons for this conclusion that are
plausible. Current financial shareholders would, in general, favor
any move that increased the price at which they could sell their
shares. They may well have given insufficient consideration to how a
narrower float would affect analyst and future investor attention to
the company's stock and thus its longer term prospects in the
market. Or there may have been "group think": if it's good for GE,
it must be good for LTI. Whatever the reasons for current
stockholders to approve a re-purchase, the LTI Board should take a
view that ensures a market in which investors can profitably buy and
sell LTI shares over time. Benefitting current shareholders is a
factor, but not the only one, that the LTI Board should take into
account.
Fifth, As I indicated above, the majority Dexter shareholding is
worth separate consideration. You have clearly stated to the LTI
Board that, wearing your Dexter hat, you would never allow Dexter's
ownership to drop below 50%, a situation that would have occurred in
the near term without the share re-purchase. I do not know the
reasons for this position, but it appears to be unrelated to any
factor that is intended to increase LTI shareholder value,
specifically including the value of LTI stock to The Dexter
Corporation as an LTI shareholder. Indeed, the position seems to
conflict with the objective of increasing shareholder value, because
it suggests that LTI assets will be used to maintain Dexter's
majority holding without respect to alternative deployment of those
assets. In this case, because Dexter's 52% holding was voted in
favor of the re-purchase plan principally in order to maintain
Dexter's majority interest--a reason that is essentially different
from that of any other shareholder--I do not count it in considering
whether the majority vote was so large as to preclude another view.
In summary, having reviewed the results of the shareholder vote, I
find nothing to cause me to change my mind: the re-purchase remains a
misuse of LTI cash, and I would vote against it again were it to come
before the Board.
But there is a final consideration. As you correctly pointed out,
majorities of both the Board and the shareholders voted to approve the
buy-back, and the company announced its intention to pursue that
course. Indeed, as I recall, the Board minutes include a statement that
the buy-back would be pursued expeditiously. Much as I disagree with
the intended course, I nevertheless believe that the company now has no
choice but to proceed in accord with its stated intentions. I also
think that the Board should be kept abreast of implementation of the
repurchase plan and shall look forward to reports from management from
time to time.
As a last point: one hardly needs the news of the American
Home/Monsanto acquisition to know that significant consolidation is
underway among our customers and competitors. I remain concerned that
LTI is hobbled in aggressive pursuit of acquisition targets. Unless we
change our intensity, I fear that the value of the LTI business may
slowly wither, as others are more successful in playing the
consolidation game. This would serve well no one involved with the
company.
Sincerely,
/s/ Frank E. Samuel, Jr.
Frank E. Samuel Jr.
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Set forth below is the resignation letter of Iain C. Wylie:
31, High Point,
Pirton Road,
Hitchin, Herts,
SG5 2BH,
England
The Board of Directors,
Life Technologies, Inc.,
9800 Medical center Drive,
Rockville, Maryland 20850, U.S.A.
3 November, 1998.
Dear Members of the Board,
Following the decision on October 27 of the Dexter members on the LTI
Board to disband the Special Committee, apparently in response to our
refusal to recommend Dexter's $37 per share offer to the minority
public shareholders, I feel I am now unable to fulfill my obligation to
these shareholders. This makes my position as an LTI Director
untenable, and I must regretfully tender my resignation effective
immediately.
I say regretfully sincerely, as I consider LTI to be an outstanding
Company with an exceptional management team and tremendous potential.
It has been a privilege and a pleasure to serve as a Board member.
A definitive statement regarding the Special Committee's Process is
attached, but I would just like to comment that, while I intentionally
approached my Special Committee responsibility with no preconceptions
as to the fairness of the Dexter offer, the intensive due diligence
carried out during the past months has convinced me that LTI has
significant value, both in its base business and the R+D Pipeline,
which is not reflected in the Dexter Board's current bid.
I am sure you are aware that LTI's present share price reflects (1)
the lack of following by significant Wall Street Analysts and (2) the
fact that LTI has operated for some years in Dexter's 'shadow' as the
majority shareholder.
However, the Special Committee's remit was to examine the underlying
value of the Company, not its short-term share price. The Committee and
its advisers were genuinely deeply committed to this Process; it has
been hard for me to understand Dexter's unwillingness to become
involved in the evaluation of what is likely to be its major business
in the future and to continually ignore the bases for our conclusions.
As an example, I believe the detailed development and evaluation of the
R+D Pipeline to be of major value to the future direction of LTI. In
its dealings with Dexter's advisers, the Special Committee took Merrill
Lynch's questions and comments very seriously as a sign that they were
interested in discussing our findings, put significant effort into
researching answers, and gave Merrill clear value ranges on several
occasions that resulted from our work. The fact that these were
discounted without serious discussion or consideration both troubled
and mystified me. I was led to conclude from their comments and
comparables that the Dexter advisers were less familiar with this
complex and sophisticated field of biotechnology than we could have
hoped. Certainly three of the main assumptions in their advice to
Dexter seemed to indicate this. These were: a less than credible R+D
programme in spite of detailed, conservative and fully substantiated
presentations by Management, a questionable LTI track record, while its
historical performance has been exemplary, and general decline in
business markets, of which there is no significant evidence in this
specialist area.
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Whatever the reasons were for this uncooperative approach with an
otherwise constructive process, and for the summary disbanding without
discussion of the Special Committee, sadly I feel that the climate
created has made it impossible for me to contribute effectively as a
Director of LTI. I would therefore respectfully request that this
letter with the attached statement be filed as an exhibit to an LTI
Form 8-K filed with the SEC. Please direct any questions to my counsel,
David Katz of Wachtell, Lipton, Rosen & Katz.
Yours sincerely,
/s/ Iain C. Wylie
Iain C. Wylie
(A copy of the Joint Statement was attached to
Mr. Wylie's letter of resignation, but is not reproduced here.)
ANALYSES OF GOLDMAN SACHS
Goldman Sachs was engaged to act as financial advisor to the Special
Committee pursuant to a letter agreement dated July 24, 1998 (the "Engagement
Letter") with respect to the Proposal made by Dexter on July 7, 1998. As of
October 27, 1998, when the Special Committee was disbanded, the Special
Committee had not asked for, nor had Goldman Sachs provided, any opinion to
the Special Committee. Goldman Sachs presented certain analyses to the Special
Committee on September 10, 1998. Following such presentations, at the request
of the Special Committee, Goldman Sachs presented certain analyses to Dexter's
financial advisor, Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch"), on September 17, 1998. Following such meetings, Goldman
Sachs presented certain analyses to the Special Committee on October 22, 1998.
Goldman Sachs did not perform or present any analyses following the
dissolution of the Special Committee on October 27, 1998. In addition, the
analyses prepared by Goldman Sachs were not definitive and Goldman Sachs
rendered no final determination, recommendation or opinion to the Special
Committee. The analyses provided to the Special Committee referred to herein
were provided for the exclusive information and sole assistance of the Special
Committee in connection with its consideration of the Dexter Proposal and the
negotiation of the terms thereof and do not constitute a recommendation to any
holder of the Company Common Stock as to whether or not any shareholder should
tender their Shares to Dexter in the Offer.
In connection with its analyses, Goldman Sachs reviewed, among other things,
(i) the Annual Reports to Stockholders and Annual Reports on Form 10-K of the
Company for the three years ended December 31, 1997; (ii) certain interim
reports to stockholders and Quarterly Reports on Form 10-Q of the Company;
(iii) certain other communications from the Company to its stockholders; and
(iv) certain internal financial forecasts for the Company (the "Base Case"),
certain internal financial forecasts relating to the Company's research and
development pipeline not already incorporated into the Base Case (the "R&D
Pipeline") and certain internal financial forecasts that combine the Base Case
and the R&D Pipeline for the Company (the "Company Case"), in each case
prepared by the management of the Company. Goldman Sachs also held discussions
with members of the senior management of the Company regarding the past and
current business operations, financial condition, and future prospects of the
Company. In addition, Goldman Sachs reviewed the reported price and trading
activity for the Company Common Stock, compared certain financial and stock
market information for the Company with similar information for certain other
companies the securities of which are publicly traded, reviewed the financial
terms of certain recent business combinations and performed such other studies
and analyses as it considered appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information reviewed by it and assumed accuracy and
completeness for purposes of preparing its analyses. In that regard, Goldman
Sachs assumed, with the consent of the Special Committee, that the financial
forecasts prepared by the management of the Company were reasonably prepared
on a basis reflecting the best available judgments and estimates of the
Company. Analyses based upon forecasts of future results are not necessarily
indicative of actual future results, which may be significantly more or less
favorable than suggested by such analyses. Because such
15
<PAGE>
analyses are inherently subject to uncertainty, being based upon numerous
factors or events beyond the control of the parties or their respective
advisors, none of the Company, the Special Committee, Goldman Sachs or any
other person assumes responsibility if future results are materially different
from those forecast. Goldman Sachs did not make an independent evaluation or
appraisal of the assets and liabilities of the Company or any of its
subsidiaries and was not furnished with any evaluation or appraisal.
The following is a summary of certain of the financial analyses presented by
Goldman Sachs to the Special Committee on September 10, 1998.
(i) Price Analysis. Goldman Sachs reviewed the historical trading prices
and volumes for the shares of Common Stock of the Company. For the six
months ended September 4, 1998, the highest daily closing price for the
Company was $38.8125 and the lowest daily closing price for the Company was
$30.75. For the year ended September 4, 1998, the highest daily closing
price for the Company was $38.8125 and the lowest daily closing price for
the Company was $28.50.
(ii) Selected Companies Analysis. Goldman Sachs reviewed and compared
certain financial information relating to the Company to corresponding
financial information, ratios and public market multiples for fifteen
publicly traded corporations: Nycomed Amersham plc, Qiagen N.V., Cambrex
Corporation, Sigma Aldrich Corporation, Fisher Scientific International
Inc., The Perkin Elmer Corporation, Affymetrix, Inc., Axys Pharmaceuticals,
Inc., Curagen Corporation, Gene Logic, Inc., Genset, Human Genome Sciences,
Inc., Hyseq, Inc., InCyte Pharmaceuticals, Inc. and Millennium
Pharmaceuticals, Inc. (the "Selected Companies"). Goldman Sachs calculated
and compared various financial multiples and ratios. The multiples of the
Company were calculated using a price of $35.25 per share, the closing
price of the Shares on the Nasdaq National Market on September 9, 1998, and
$37.00 per Share, the price in the Proposal. The multiples and ratios for
the Company were based on information provided by the Company's management
and the multiples for each of the Selected Companies were based on the most
recent publicly available information. With respect to the Selected
Companies, Goldman Sachs considered levered market capitalization (i.e.,
market value of common equity plus estimated market value of debt less
cash) as a multiple of sales for the latest twelve months ("LTM") and as a
multiple of LTM earnings before interest and taxes ("EBIT"). Goldman Sachs'
analyses of the Selected Companies indicated levered multiples of LTM
sales, which ranged from 0.6x to 16.2x (with a median of 2.5x and a mean of
4.6x), and LTM EBIT, which ranged from 11.6x to 90.0x (with a median of
16.7x and a mean of 27.4x), compared to levered multiples of 2.3x and 2.5x
LTM sales and 15.3x and 16.1x LTM EBIT for the Company. Goldman Sachs also
considered for the Selected Companies estimated calendar year 1998
price/earnings ratios, which ranged from 15.2x to 73.8x (with a median of
23.2x and a mean of 28.4x) compared to 22.6x and 23.7x for the Company;
estimated calendar year 1999 price/earnings ratios, which ranged from 13.9x
to 54.1x (with a median of 16.4x and a mean of 22.4x) compared to 19.7x and
20.7x for the Company; a five-year earnings per share ("EPS") growth rate
(provided by Institutional Brokers Estimate System except for the Company,
which was provided by the Company, and Qiagen N.V., which was provided by
Goldman Sachs Equity Research) ranging from 12.0% to 42.0% (with a median
of 15.0% and a mean of 22.4%) compared to 14.3% for the Company (based on
the Base Case); and the 1998 price/earnings/growth rate ratio ranging from
0.6x to 1.8x (with a median and mean of 1.3x) compared to 1.6x and 1.7x for
the Company.
(iii) Discounted Cash Flow Analysis. Goldman Sachs performed a discounted
cash flow analysis for the following three scenarios: (a) using the Base
Case, (b) using the R&D Pipeline and (c) using the R&D Pipeline and
applying a Monte Carlo simulation using probabilities of achieving sales
figures provided by the Company (the "R&D Pipeline--Monte Carlo Scenario").
Goldman Sachs calculated a range of values for the Company using the
Company's terminal values in the year 2002 based on (i) multiples ranging
from 10.0x to 20.0x EBIT for the Base Case and 15.0x to 20.0x EBIT for the
R&D Pipeline and the R&D Pipeline--Monte Carlo Scenario and (ii) multiples
ranging from 18.0x net income to 28.0x net income for the Base Case, the
R&D Pipeline and the R&D Pipeline--Monte Carlo Scenario. These terminal
values were then discounted to present value using discount rates ranging
from 8.0% to 14.0% for the Base Case and 20.0% to 35.0% for the R&D
Pipeline and the R&D Pipeline--Monte Carlo Scenario. Using the Company's
terminal values and the discount rates described above, (i) the implied per
Share values based
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on EBIT ranged from $28.77 to $64.85 in the Base Case, from $7.74 to $17.34
in the R&D Pipeline Case and from $7.74 to $17.33 in the R&D Pipeline--
Monte Carlo Scenario and (ii) the implied per Share values based on net
income ranged from $32.77 to $59.72 for the Base Case, $6.03 to $15.78 for
the R&D Pipeline and $6.02 to $15.77 for the R&D Pipeline--Monte Carlo
Scenario.
(iv) Selected Transactions Analysis. Goldman Sachs analyzed certain
information relating to selected transactions in the life sciences industry
since 1993 (the "Selected Transactions"). Such analysis indicated that for
the Selected Transactions (i) aggregate consideration as a multiple of LTM
sales ranged from 1.0x to 23.4x, (ii) aggregate consideration as a multiple
of LTM EBIT ranged from 10.0x to 112.1x, (iii) aggregate consideration as a
multiple of LTM net income ranged from 22.0x to 158.0x and (iv) the
percentage premium paid over the stock price four weeks prior to the
transaction ranged from 23.4% to 142.9%.
(v) Minority Buyout Premia. Goldman Sachs also performed an analysis of
minority buyout premia for transactions since 1988. Representative initial
premia over the market price one day prior to announcement, where the bid
was for less than 35% of the shares outstanding, had a median of 12.7% and
a mean of 13.7%; representative initial premia over the market price one
day prior to announcement, where the bid was for greater than 35% of the
shares outstanding, had a median of 14.3% and a mean of 21.8%;
representative final premia over the market price one day prior to
announcement, where the bid was for less than 35% of the shares
outstanding, had a median of 22.1% and a mean of 23.5%; representative
initial premia over the market price one day prior to announcement, where
the bid was for greater than 35% of the shares outstanding, had a median of
19.5% and a mean of 24.6%.
The following is a summary of certain of the financial analyses discussed by
Goldman Sachs with Merrill Lynch on September 17, 1998 at the request of the
Special Committee.
(i) Discounted Cash Flow Analysis. Goldman Sachs presented a discounted
cash flow analysis based upon the analyses presented to the Special
Committee on September 10, 1998. Goldman Sachs presented the Company's
terminal values in the year 2002 based on multiples ranging from 14.0x to
16.0x EBIT for the Base Case and 17.0x to 18.0x EBIT for the R&D Pipeline
and the R&D Pipeline--Monte Carlo Scenario. These terminal values were then
discounted to present value using discount rates ranging from 10.0% to
12.0% for the Base Case and 25.0% to 35.0% for the R&D Pipeline and the R&D
Pipeline--Monte Carlo Scenario. Using the Company's terminal values and the
discount rates described above, the implied per share values ranged from
$40.83 to $49.32 for the Base Case, from $10.37 to $13.05 for the R&D
Pipeline and from $10.36 to $13.04 for the R&D Pipeline--Monte Carlo
Scenario.
(ii) Selected Companies Analysis. Goldman Sachs presented an analysis
based upon the analysis presented to the Special Committee on September 10,
1998 for the Selected Companies using a price of $37.00 per Share, the
price in the Proposal, and divided in two groups: Nycomed Amersham plc,
Qiagen N.V., Cambrex Corporation, Sigma Aldrich Corporation, Fisher
Scientific International Inc. and The Perkin Elmer Corporation (the
"Chemical Suppliers, Scientific Instruments and Biotechnology Suppliers
Group") and Affymetrix, Inc., Axys Pharmaceuticals, Inc., Curagen
Corporation, Gene Logic, Inc., Genset, Human Genome Sciences, Inc., Hyseq,
Inc., InCyte Pharmaceuticals, Inc. and Millennium Pharmaceuticals, Inc.
(the "Genomics Group"). Goldman Sachs' analyses of the Chemical Suppliers,
Scientific Instruments and Biotechnology Suppliers Group of the Selected
Companies indicated levered multiples of LTM sales, which ranged from 0.6x
to 11.0x (with a median of 2.2x and a mean of 3.4x), and LTM EBIT, which
ranged from 11.6x to 90.0x (with a median of 15.4x and a mean of 27.3x),
compared to levered multiples of 2.5x LTM sales and 16.1x LTM EBIT for the
Company. Goldman Sachs' analyses of the Genomics Group of the Selected
Companies indicated levered multiples of LTM sales, which ranged from 0.9x
to 16.2x (with a median of 3.7x and a mean of 5.5x), and LTM EBIT, which
had a value, median and mean of 27.9x, compared to levered multiples of
2.5x LTM sales and 16.1x LTM EBIT for the Company. Goldman Sachs also
considered for the Chemical Suppliers, Scientific Instruments and
Biotechnology Suppliers Group of the Selected Companies estimated calendar
year 1998 price/earnings ratios, which ranged from 15.2x to 73.8x (with a
median of 21.1x and a mean of 28.7x) compared to 23.7x for the Company;
estimated calendar year 1999 price/earnings ratios, which ranged from 13.9x
to 54.1x (with a median of 16.3x and a mean of
17
<PAGE>
22.8x) compared to 20.7x for the Company; a five-year EPS growth rate
(provided by Institutional Brokers Estimate System except for the Company,
which was provided by the Company, and Qiagen N.V., which was provided by
Goldman Sachs Equity Research) ranging from 12.0% to 42.0% (with a median
of 14.6% and a mean of 19.2%) compared to 14.3% for the Company (based on
the Base Case); and the 1998 price/earnings/growth rate ratio ranging from
1.1x to 1.8x (with a median and mean of 1.4x) compared to 1.7x for the
Company. Goldman Sachs also considered for the Genomics Group of the
Selected Companies estimated calendar year 1998 price/earnings ratios,
which had a value, median and mean of 26.6.x compared to 23.7x for the
Company; estimated calendar year 1999 price/earnings ratios, which had a
value, median and mean of 20.3x compared to 20.7x for the Company; a five-
year EPS growth rate (provided by Institutional Brokers Estimate System
except for the Company, which was provided by the Company) with a value,
median and mean of 42.0% compared to 14.3% for the Company (based on the
Base Case); and the 1998 price/earnings/growth rate ratio with a value,
median and mean of 0.6x compared to 1.7x for the Company.
(iii) Selected Transactions Analysis. Goldman Sachs also presented to
Merrill Lynch the Selected Transactions Analysis it had presented to the
Special Committee on September 10, 1998.
Following the series of meetings with Dexter, Merrill Lynch and Dexter's
counsel, Jones Day, Reavis & Pogue, Goldman Sachs was asked to update certain
of its analyses for the Special Committee. The following is a summary of
certain of the financial analyses presented by Goldman Sachs to the Special
Committee on October 22, 1998.
(i) Premium Analysis. Goldman Sachs reviewed prices from $37.00 to $50.00
in relation to $31.00, the closing price of the Company Common Stock on the
Nasdaq National Market on July 7, 1998. Such analysis indicated premia
ranging from 19.4% to 61.3% over the July 7, 1998 closing price.
(ii) Public Market Valuation Analysis. Goldman Sachs reviewed and
compared certain financial information relating to the Company to
corresponding financial information, ratios and public market multiples for
five publicly traded companies: Nycomed Amersham plc, Cambrex Corporation,
Sigma Aldrich Corporation, Fisher Scientific International Inc. and The
Perkin Elmer Corporation (the "Selected Public Companies"). Representative
trading range multiples were (i) 18.0x to 25.0x of 1998 estimated net
income, (ii) 16.0x to 23.0x of 1999 estimated net income, (iii) 1.8x to
2.6x of LTM revenue and 1998 estimated revenue and (iv) 13.6x to 17.6x of
LTM EBIT and 1998 estimated EBIT. Applying such multiples to comparable
information for the Company resulted in per Share values of $26.68 to
$43.79.
(iii) Private Market Valuation Analysis. Goldman Sachs reviewed and
compared certain financial information relating to the Company to
corresponding financial information, ratios and public market multiples for
four acquisition of control transactions: The Perkin Elmer
Corporation/PerSeptive Biosystems, Inc., Arris Pharmaceutical
Corporation/Sequana Therapeutics Incorporated, Cambrex Corporation/
BioWhittaker, Inc. and Thermo Instrument Systems, Inc./Life Sciences
International plc (the "Selected Private Companies"). Representative
trading range multiples were (i) 22.0x to 23.4x of LTM net income, (ii)
35.0% to 50.0% premium to stock price four weeks prior to announcement,
(iii) 1.7x to 2.3x of LTM sales and (iv) 13.3x to 24.9x of LTM EBIT.
Applying such multiples to comparable information for the Company resulted
in per Share values of $25.24 to $56.07.
(iv) Discounted Cash Flow Analysis. Goldman Sachs performed a discounted
cash flow analysis for the Company Case. For values attributable to the
Company Case, Goldman Sachs calculated the Company's terminal values in the
year 2002 based on multiples ranging from 10.0x to 20.0x EBIT. These
terminal values were then discounted to present value using discount rates
ranging from 10.0% to 20.0%. Using the Company's terminal values and the
discount rates described above, the implied per Share values attributable
to the Company Case ranged from $32.61 to $86.01. Goldman Sachs highlighted
for the Special Committee a range of values for the Company using the
Company Case, multiples ranging from 10.0x to 14.0x EBIT and a 17.5%
discount rate, which resulted in a range of per Share values from $35.43 to
$47.50. Goldman Sachs also performed separate discounted cash flow analyses
for the Base Case and for the R&D Pipeline. Goldman Sachs performed a
sensitivity analysis based on a range of variances in the revenue growth
rate
18
<PAGE>
for the Base Case of negative 6.0% to positive 2.0% and a 10.0% and a 12.0%
discount rate. Using these assumptions, the implied per Share values
attributable to the Base Case ranged from $23.70 to $61.57 at a 12.0%
discount rate and $25.39 to $66.23 at a 10.0% discount rate. Goldman Sachs
highlighted for the Special Committee a range of values for the Company
using the Base Case, multiples ranging from 10.0x to 14.0x EBIT, a discount
rate of 12.0% and variances in revenue growth rate from 0.0% to negative
2.0%, which resulted in a range of implied per Share values of $28.47 to
$41.21. For the value attributable to the R&D Pipeline, Goldman Sachs
performed a sensitivity analysis based on percentage reductions in the
probabilities assumed in the R&D Pipeline of 0.0% to 40.0% and a 25.0%
discount rate and a 30.0% discount rate. Within that range of reductions in
probabilities and assuming a range of terminal EBIT multiples of 14.0x to
20.0x, the implied per Share values attributable to the R&D Pipeline ranged
from $5.23 to $12.48 at a 30.0% discount rate and $6.20 to $14.78 at a
25.0% discount rate. Goldman Sachs highlighted for the Special Committee a
range of values for the Company using the R&D Pipeline, multiples ranging
from 14.0x to 17.0x EBIT, a 30.0% discount rate and a 0.0% to 10.0%
reduction in probabilities assumed in the R&D Pipeline, which resulted in a
range of implied per Share values of $7.85 to $10.60.
(v) Selected Companies Analysis. Goldman Sachs provided an analysis based
on the analysis presented to the Special Committee on September 10, 1998
for the Selected Companies using a price of $33.75 per Share, the closing
price of the Shares on the Nasdaq National Market on October 21, 1998, and
$37.00 per Share, the price in the Proposal, and divided into two groups:
Cambrex Corporation, Sigma Aldrich Corporation, Fisher Scientific
International Inc. and The Perkin Elmer Corporation (the "Chemical
Suppliers and Scientific Instruments Group") and Nycomed Amersham plc,
Qiagen N.V., Affymetrix, Inc., Axys Pharmaceuticals, Inc., Curagen
Corporation, Gene Logic, Inc., Genset, Human Genome Sciences, Inc., Hyseq,
Inc., InCyte Pharmaceuticals, Inc. and Millennium Pharmaceuticals, Inc.
(the "Biotechnology Suppliers and Genomics Group"). Goldman Sachs' analyses
of the Chemical Suppliers and Scientific Instruments Group of the Selected
Companies indicated levered multiples of LTM sales, which ranged from 0.6x
to 2.9x (with a median of 2.2x and a mean of 2.0x), and LTM EBIT, which
ranged from 11.7x to 24.9x (with a median of 16.1x and a mean of 17.2x),
compared to levered multiples of 2.2x and 2.5x LTM sales and 14.6x and
16.1x LTM EBIT for the Company. Goldman Sachs' analyses of the
Biotechnology Suppliers and Genomics Group of the Selected Companies
indicated levered multiples of LTM sales, which ranged from 1.2x to 16.4x
(with a median of 4.4x and a mean of 6.5x), and LTM EBIT, which ranged from
13.6x to 98.3x (with a median of 33.8x and a mean of 48.5x), compared to
levered multiples of 2.2x and 2.5x LTM sales and 14.6x and 16.1x LTM EBIT
for the Company. Goldman Sachs also considered for the Chemical Suppliers
and Scientific Instruments Group of the Selected Companies estimated
calendar year 1998 price/earnings ratios, which ranged from 15.6x to 30.9x
(with a median of 22.1x and a mean of 22.7x) compared to 22.4x and 24.5x
for the Company; estimated calendar year 1999 price/earnings ratios, which
ranged from 13.5x to 22.7x (with a median of 18.6x and a mean of 18.4x)
compared to 20.8x and 20.7x for the Company; a five-year EPS growth rate
(provided by Institutional Brokers Estimate System except for the Company,
which was provided by the Company) ranging from 12.0% to 18.0% (with a
median of 14.3% and a mean of 14.6%) compared to 14.3% for the Company
(based on the Base Case); and the 1998 price/earnings/growth rate ratio
ranging from 1.2x to 1.7x (with a median of 1.6x and a mean of 1.5x)
compared to 1.6x and 1.7x for the Company. Goldman Sachs also considered
for the Biotechnology Suppliers and Genomics Group of the Selected
Companies estimated calendar year 1998 price/earnings ratios, which ranged
from 31.3x to 83.8x (with a median of 33.9x and a mean of 49.7x) compared
to 22.4x and 24.5x for the Company; estimated calendar year 1999
price/earnings ratios, which ranged from 24.0x to 58.9x (with a median of
30.9x and a mean of 37.9x) compared to 20.8x and 20.7x for the Company; a
five-year EPS growth rate (provided by Institutional Brokers Estimate
System except for the Company, which was provided by the Company, and
Qiagen N.V., which was provided by Goldman Sachs Equity Research) ranging
from 14.1% to 42.0% (with a median of 41.0% and a mean of 32.4%) compared
to 14.3% for the Company (based on the Base Case); and the 1998
price/earnings/growth rate ratio ranging from 0.7x to 2.4x (with a median
of 2.0x and a mean of 1.7x) compared to 1.6x and 1.7x for the Company.
(vi) Minority Buyout Premia. Goldman Sachs also performed an analysis of
minority buyout premia for transactions where the bid was for greater than
35% ownership since 1988. Representative initial premia
19
<PAGE>
ranged from 11.5% to 16.0% and representative final premia ranged from
16.6% to 22.6%. The representative initial premia implied values for the
Company of $34.56 to $35.96 and the representative final premia implied
values for the Company of $36.15 to $38.01.
No company or transaction used in the above analyses as a comparison is
directly comparable to the Company or the contemplated transaction. The
analyses provided to the Special Committee were prepared solely for purposes
of Goldman Sachs' providing advice to the Special Committee and do not purport
to be appraisals or necessarily reflect the prices at which businesses or
securities actually may be sold.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements,
and valuations for estate, corporate and other purposes.
Goldman Sachs provides a full range of financial, advisory and brokerage
services and in the course of its normal trading activities may from time to
time effect transactions and hold positions in the securities or options on
securities of the Company and/or Dexter for its own account and for the
account of customers. As of the date hereof, Goldman Sachs holds for its own
account 1,300 shares of Dexter.
Pursuant to the terms of the Engagement Letter, the Company has agreed to
pay Goldman Sachs (a) if at least 25% of the outstanding stock of the Company
is acquired by Dexter or any other person or group, including the Company,
after the date thereof in one or a series of transactions by means of a tender
offer or merger, private or open market purchases of stock or otherwise, or if
all or substantially all of the assets of the Company are transferred, in one
or a series of transactions, by way of a sale, distribution or liquidation to
Dexter and/or another third party, a fee equal to 0.90% of the aggregate value
of all such transactions, (b) if the Company or any other entity formed or
owned in substantial part or controlled by the Company or one or more members
of senior management of the Company or any employee benefit plan of the
Company or any of its subsidiaries or Dexter effects a recapitalization, a fee
equal to 0.90% of the aggregate value of the recapitalization and (c) upon the
earlier of (i) July 28, 1999 in the event that no transaction entitling
Goldman Sachs to a transaction fee under clauses (a) or (b) is consummated by
such date or (ii) the cessation by Dexter of its efforts to acquire the
remaining stock of the Company not already owned by Dexter, a financial
advisory fee of $3.75 million; provided that if such fee is payable prior to
July 28, 1999, $1.875 million shall be payable on such date, with the
remaining $1.875 million to be paid on July 28, 1999. The Company has agreed
to reimburse Goldman Sachs for its reasonable out- of-pocket expenses,
including attorney's fees, and to indemnify Goldman Sachs against certain
liabilities, including certain liabilities under the federal securities laws.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
As described above in Item 4, in connection with Dexter's July 7, 1998
Proposal, Goldman Sachs was retained as financial advisor to the Special
Committee. The terms of the Company's Engagement Letter with Goldman Sachs are
described above in Item 4(b).
Except as disclosed herein, neither the Company nor any person acting on its
behalf has employed, retained or compensated any person to make solicitations
or recommendations to the Company's stockholders on its behalf with respect to
the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) No transactions in the Shares have been effected during the past 60 days
by the Company or, to the best of the Company's knowledge, by any executive
officer, director, affiliate or subsidiary of the Company, except as described
above in Item 3(b) and as follows: Timothy E. Pierce, Vice President and
General Manager--Asia Pacific of the Company, has exercised options for 11,250
Shares at $16.00 per Share, 6,667 Shares at $25.00 per Share and 6,667 Shares
at $34.41 per Share; and Rosemary J. Versteegen, Vice President--Quality
20
<PAGE>
Assurance/Regulatory Compliance of the Company, has exercised options for
3,202 Shares at $13.9167 per Share and for 2,000 Shares at $11.0867 per Share.
(b) According to information set forth in the Offer to Purchase, all of the
Company's directors who are also directors or executive officers of Dexter
intend to tender their Shares in accordance with the Offer. The Company has no
knowledge of whether any other of its directors, executive officers,
affiliates or subsidiaries intend to tender their Shares in accordance with
the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in this Schedule 14D-9 and in the Offer, to the
knowledge of the Company no negotiation is being undertaken or is underway by
the Company in response to the Offer which relates to or would result in (i)
an extraordinary transaction, such as a merger or reorganization, involving
the Company or any affiliate or subsidiary of the Company; (ii) a purchase,
sale or transfer of a material amount of assets by the Company or any
subsidiary of the Company; (iii) a tender offer for or other acquisition of
securities by or of the Company; or (iv) any material change in the present
capitalization or dividend policy of the Company.
(b) Except as described in Items 3 and 4 above (the provisions of which are
hereby incorporated by reference), there are no transactions, board
resolutions, agreements in principle or signed contracts in response to the
Offer which relate to or would result in one or more of the matters referred
to in paragraph (a) of this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
From July 8 to July 10, 1998, several lawsuits purporting to be brought as
class actions on behalf of the Company's public stockholders were filed
against the Company, Dexter and the Company's directors in the Court of
Chancery of the State of Delaware. In September 1998 these lawsuits were
consolidated into a single action, titled In re Life Technologies, Inc.
Shareholders Litigation (Consolidated Civil Action No. 16513). On November 6,
1998, an Amended Consolidated Class Action Complaint, a motion for preliminary
injunction and a motion for expedited proceedings were filed in the Court of
Chancery of the State of Delaware. The amended consolidated complaint alleges,
among other things, that Dexter and the defendant directors of the Company who
are affiliated with Dexter or are officers of the Company have breached their
respective fiduciary duties to the Company's public stockholders. The amended
consolidated complaint seeks to enjoin defendants, preliminarily and
permanently, from consummating a tender offer by Dexter, to require Dexter to
supplement its Offer to Purchase and to recover monetary damages and fees and
expenses of litigation. On November 9, 1998, the Delaware Chancery Court
scheduled a hearing to be held at 9:30 a.m. on November 24, 1998, with respect
to the motion for preliminary injunction filed on November 6, 1998. The action
is now in the discovery phase.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1.
Excerpts from Proxy Statement dated March 16, 1998 relating to the
Company's 1998 Annual Meeting of Stockholders.
Exhibit 2.
Form of Letter to Stockholders of the Company, dated November 16,
1998.*
Exhibit 3.
Amended Consolidated Class Action Complaint filed in the Court of
Chancery of the State of Delaware in In Re Life Technologies, Inc.
Shareholders Litigation (Consolidated Civil Action No. 16513).
- --------
* Included in copies of the Schedule 14D-9 mailed to stockholders.
21
<PAGE>
SIGNATURE
After reasonable 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: November 16, 1998
LIFE TECHNOLOGIES, INC.
By: /s/ Joseph C. Stokes, Jr.
---------------------------------
Name: Joseph C. Stokes, Jr.
Title: Senior Vice President and
Chief Financial Officer
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<PAGE>
EXHIBIT INDEX
Exhibit 1. Excerpts from Proxy Statement dated March 16, 1998 relating to the
Company's 1998 Annual Meeting of Stockholders.
Exhibit 2. Form of Letter to Stockholders of the Company, dated November 16,
1998.*
Exhibit 3. Amended Consolidated Class Action Complaint filed in the Court of
Chancery of the State of Delaware in In Re Life Technologies, Inc.
Shareholders Litigation (Consolidated Civil Action No. 16513).
- --------
* Included in copies of the Schedule 14D-9 mailed to stockholders.
<PAGE>
Exhibit 1
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information as of January 1, 1998 (except as
otherwise noted below) regarding the beneficial ownership of Common Stock of the
Company of (i) each person known by the Company to own beneficially more than
five percent of the Company's outstanding Common Stock; (ii) each director and
nominee for election as a director of the Company; (iii) each executive officer
named in the Summary Compensation Table (see "Executive Compensation"); and (iv)
all directors, nominees and executive officers of the Company as a group. Such
beneficial ownership is reported in accordance with the rules of the Securities
and Exchange Commission (the "SEC") and includes shares of Common Stock which
may be acquired within 60 days upon the exercise of outstanding stock options.
Except as otherwise specified, the named beneficial owner has sole voting and
investment power over the shares listed.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNERSHIP PERCENTAGE OF
BENEFICIAL OWNER OF COMMON STOCK COMMON STOCK
- --------------------------------------- ----------------------- --------------
<S> <C> <C>
The Dexter Corporation 12,246,664 shares (1) 52.5%
One Elm Street
Windsor Locks, CT 06096
State of Wisconsin Investment Board 1,549,500 shares (2) 6.6%
121 East Wilson Street
Madison, Wisconsin 53707
Thomas H. Adams, Ph.D. 2,951 shares (3) *
Bruce H. Beatt 1,000 shares *
Kathleen Burdett 2,500 shares *
Betsy Z. Cohen 4,325 shares (4) *
Rita R. Colwell, Ph.D. 2,951 shares (5) *
Frank E. Samuel, Jr. 2,951 shares (6) *
J. Stark Thompson, Ph.D. 372,740 shares (7) 1.6%
K. Grahame Walker 1,500 shares *
George M. Whitesides, Ph.D. --- --
Iain C. Wylie 4,500 shares (8) *
Thomas M. Coutts 38,167 shares (9) *
Joseph C. Stokes, Jr. 66,531 shares (10) *
John V. Cooper 46,089 shares (11) *
Brian D. Graves 74,564 shares (12) *
All directors, nominees and executive 864,803 shares 3.6%
officers as a group (19 persons)
</TABLE>
[Notes on Next Page]
3
<PAGE>
NOTES:
* Less than 1.0%.
(1) Excludes 23,090, 41,773, 183,887 and 3,265 shares of common stock of The
Dexter Corporation ("Dexter"), an affiliate of the Company, beneficially
owned by Mr. Beatt, Ms. Burdett, Mr. Walker and Dr. Whitesides,
respectively, constituting an aggregate of approximately 1.09% of the
outstanding shares of Dexter, as of January 1, 1998. The shares of Dexter
beneficially owned by Mr. Beatt, Ms. Burdett, Mr. Walker and Dr. Whitesides
include 10,334, 14,334, 86,834 and 0 shares, respectively, which Mr. Beatt,
Ms. Burdett, Mr. Walker and Dr. Whitesides may acquire upon the exercise of
stock options.
(2) This figure is based on information set forth in the Schedule 13G, dated
January 26, 1998, filed by the State of Wisconsin Investment Board with the
SEC.
(3) Includes 2,250 shares of Common Stock which Dr. Adams may acquire upon the
exercise of stock options.
(4) Includes 2,250 shares of Common Stock which Ms. Cohen may acquire upon the
exercise of stock options.
(5) Includes 2,250 shares of Common Stock which Dr. Colwell may acquire upon
the exercise of stock options.
(6) Includes 2,250 shares of Common Stock which Mr. Samuel may acquire upon the
exercise of stock options.
(7) Includes 327,836 shares of Common Stock which Dr. Thompson may acquire upon
the exercise of stock options. Also includes 450 shares owned by Dr.
Thompson's wife and 300 shares owned by Dr. Thompson's son, of which he may
be deemed to be the beneficial owner. Dr. Thompson disclaims beneficial
ownership of these 750 shares.
(8) Includes 2,250 shares of Common Stock which Mr. Wylie may acquire upon the
exercise of stock options.
(9) Includes 38,167 shares of Common Stock which Mr. Coutts may acquire upon
the exercise of stock options.
(10) Includes 41,408 shares of Common Stock which Mr. Stokes may acquire upon
the exercise of stock options. Also includes 4,587 shares owned by Mr.
Stokes' wife, of which Mr. Stokes may be deemed to be beneficial owner.
Mr. Stokes disclaims beneficial ownership of these 4,587 shares.
[Notes Continued on Next Page]
4
<PAGE>
(11) Includes 46,089 shares of Common Stock which Mr. Cooper may acquire upon
the exercise of stock options.
(12) Includes 74,168 shares of Common Stock which Mr. Graves may acquire upon
the exercise of stock options.
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
The Company's certificate of incorporation provides for three classes of
directors, each class to consist of not more than five nor fewer than three
directors, with the term of one class expiring at each annual meeting of
stockholders. The number of directors in each class is determined by the vote of
at least 75% of the directors.
The Company's Board of Directors currently consists of nine members. The
Board of Directors has determined that the total number of directors of the
Company shall be nine, with three in the class whose term will expire in 1999,
three in the class whose term will expire in 2000, and three in the class whose
term will expire in 2001. At the Annual Meeting, three directors are to be
elected for terms expiring in 2001.
Unless otherwise specified, the enclosed proxy will be voted for the
election of Kathleen Burdett, J. Stark Thompson, Ph.D. and George M. Whitesides,
Ph.D. to serve until the 2001 Annual Meeting of Stockholders and until their
successors shall have been duly elected and shall qualify. Ms. Burdett and Dr.
Thompson are currently directors of the Company. All nominees have consented to
be named and have indicated their intent to serve if elected. If for any reason
at the time of the Annual Meeting any nominee should be unable to serve as a
director, a contingency which the Board of Directors does not expect to occur,
discretionary authority is reserved to vote for a substitute.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning the cash compensation
paid or to be paid by the Company, as well as certain other compensation paid or
accrued, during the fiscal years indicated, to the Chief Executive Officer and
each of the four other most highly compensated executive officers of the Company
for services rendered in all capacities to the Company and its subsidiaries
during such period.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------- ------------
SECURITIES
NAME AND UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(1) COMPENSATION(2)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
J. Stark Thompson, Ph.D. 1997 $433,750 $276,154 100,000 $4,338
President, Chief Executive 1996 400,500 330,413 85,000 4,297
Officer & Director 1995 368,750 318,600 112,500 3,687
Thomas M. Coutts 1997 253,750 119,821 45,000 ---
Senior Vice President & 1996 239,000 144,595 35,000 ---
General Manager 1995 220,500 174,636 54,000 ---
Joseph C. Stokes, Jr. 1997 222,750 129,952 45,000 4,750
Senior Vice President & 1996 200,167 138,806 35,000 4,738
Chief Financial Officer, 1995 181,250 117,450 41,250 4,620
Secretary & Treasurer
John V. Cooper 1997 188,500 90,384 25,000 4,750
Vice President & 1996 174,000 99,050 22,000 4,750
General Manager 1995 160,000 108,000 33,750 2,420
Brian D. Graves 1997 186,000 93,193 20,000 4,750
Vice President & 1996 175,000 95,288 20,000 4,750
General Manager 1995 166,500 85,415 33,750 4,620
- ---------------------------------------------------------------------------------------------
</TABLE>
(1) Options granted in 1995 have been adjusted for a 3 for 2 stock split
effected in 1996.
(2) All Other Compensation represents the Company's contributions under an Extra
Savings Plan ("ESP") for the account of each executive officer. The Company
matches one-half of the first 6% of eligible contributions made by each
participant in the ESP up to the maximum elective deferral. Mr. Coutts does not
participate in the ESP.
11
<PAGE>
The following table sets forth, as to each executive officer named in the
Summary Compensation Table, information with respect to stock option grants
during the period January 1, 1997 through December 31, 1997:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------------------
NUMBER PERCENTAGE POTENTIAL
OF OF REALIZABLE VALUE
SECURITIES TOTAL AT ASSUMED
UNDER- OPTIONS ANNUAL RATES
LYING GRANTED TO EXERCISE OR OF STOCK
OPTIONS EMPLOYEES IN BASE PRICE PRICE APPRECIATION
GRANTED FISCAL ($/SHARE) EXPIRATION FOR OPTION TERM(3)
NAME (1) YEAR (2) DATE 5% 10%
- ------------------- --------- ------------ ------------ ---------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
J. Stark Thompson, Ph.D. 100,000 18.1% $34.41 Oct. 14, 2007 $2,163,416 $5,483,095
Thomas M. Coutts 45,000 8.2% $34.41 Oct. 14, 2007 973,537 2,467,393
Joseph C. Stokes, Jr. 45,000 8.2% $34.41 Oct. 14, 2007 973,537 2,467,393
John V. Cooper 25,000 4.5% $34.41 Oct. 14, 2007 540,854 1,370,774
Brian D. Graves 20,000 3.6% $34.41 Oct. 14, 2007 432,683 1,096,619
</TABLE>
- --------------------------------------------------------------------------------
(1) One-third of these options vest on each of the first three anniversary
dates following the date of grant. Options are exercisable within the ten-
year period from the date of grant subject to the vesting schedule.
(2) The exercise price of all options granted during 1997 was equal to the
market value of the underlying Common Stock on the date of grant.
(3) These amounts represent assumed rates of appreciation in the price of the
Company's Common Stock during the terms of the options. Actual gains, if
any, on stock option exercises will depend on the future price of the
Common Stock and overall stock market conditions. There is no
representation that the rates of appreciation reflected in this table will
be achieved.
12
<PAGE>
The following table provides information on option exercises in fiscal year
1997 by the named executive officers and the value of such officers' unexercised
options at December 31, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR END AT FISCAL YEAR END (1)
ACQUIRED -------------------------------- ----------------------
ON VALUE
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. Stark Thompson, Ph.D. 115,997 $2,333,735 327,836 194,166 $6,322,084 $1,114,370
Thomas M. Coutts 34,998 410,118 38,167 86,333 586,315 502,997
Joseph C. Stokes, Jr. 74,175 1,088,213 41,408 82,083 635,898 429,685
John V. Cooper 18,995 277,298 46,089 50,916 787,235 315,057
Brian D. Graves --- --- 74,168 44,584 1,360,648 304,077
</TABLE>
- -------------------------------------------------------------------------------
(1) Calculated on the difference between the stock option exercise price and the
closing price of a share of the Company's Common Stock on the Nasdaq
National Market on December 31, 1997 ($33.25).
PENSION AND RETIREMENT BENEFITS
The Company has a pension plan for certain groups of employees. The Company
makes an annual contribution to the plan which is actuarially determined. Such
contribution cannot be appropriately allocated to individual participants and,
accordingly, is not included in the Summary Compensation Table. The Company's
contribution to the pension plan for 1997 will be $1,839,861, which represents
4.1% of eligible compensation. Employees within the eligible group may
participate in the plan after completing one year of service and attaining age
21. Participating employees become fully vested in the plan after five years of
service. Normal retirement age is 65, and actuarially reduced benefits are
available to participants who are age 55 and have ten years of service.
In general, the participant accrues an annual retirement benefit equal to
1% of the participant's final five-year average compensation (plus an additional
.5% above Social Security covered compensation) times the number of years of
service credited after October 31, 1975. Eligible compensation is defined as
salary, hourly wages, bonus and commissions. Eligible compensation for the
executive officers named in the Summary Compensation Table does not differ by
more than 10 percent from the summary compensation set forth in such table.
13
<PAGE>
The following table illustrates the estimated annual benefit (prior to an
offset for the primary Social Security benefit) which participants are eligible
to receive from the pension plan under a straight life annuity basis with a
retirement age of 65 assuming the individual's compensation remains constant at
the indicated amount for the final five years of service.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Final Five-Year YEARS OF SERVICE
Average -----------------------------------------------------------------------------------
Remuneration 15 Years 20 Years 25 Years 30 Years 35 Years
- ------------------ --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
$700,000 152,813 203,375 254,688 305,625 356,563
600,000 130,313 173,750 217,188 260,625 304,063
500,000 107,813 143,750 179,688 217,625 251,563
400,000 85,313 113,750 142,188 170,625 199,063
300,000 62,813 83,750 104,688 125,625 146,563
200,000 40,313 53,750 67,188 80,625 115,938
</TABLE>
The number of credited years of service as of December 31, 1997, for the
executive officers named in the Summary Compensation Table was nine for J. Stark
Thompson, 17 for Joseph C. Stokes, Jr., six for John V. Cooper and 16 for Brian
D. Graves. Thomas M. Coutts does not participate in the pension plan. As of
December 31, 1997, the estimated benefits payable upon retirement at age 65,
based on the maximum years of service for each individual, were as follows: J.
Stark Thompson, $185,788, Joseph C. Stokes, Jr., $158,833, John V. Cooper,
$96,407 and $96,522 for Brian D. Graves.
Mr. Coutts participates in a pension plan sponsored by the Company in the
United Kingdom. In general, a participant in the plan accrues an annual benefit
of one-sixtieth of his final pensionable salary multiplied by the number of
years of credited service up to a maximum of 40 years. Final pensionable salary
is the average base salary in the three consecutive years out of the last
thirteen which would produce the highest retirement benefit. Eligible
compensation is defined as base salary. An employee is eligible to participate
in the plan upon attainment of age 20 and the completion of one year of service.
A participant becomes fully vested immediately upon entry into the plan. Normal
retirement is age 60 and early retirement is permitted after age 50 at
actuarially reduced benefits. As of December 31, 1997, the number of credited
years of service for Mr. Coutts was 24. The estimated benefit payable as of
December 31, 1997, to Mr. Coutts at normal retirement at age 61 was 87,627
(equivalent to approximately $140,203) based on the maximum number of years of
service allowable.
The Company has a supplemental retirement plan ("SRP") intended to provide
retirement benefits, supplementing those provided under other plans, to certain
officers and key employees. Upon retirement at the age of 65, participants are
entitled to receive an annual benefit equal to 55% of their average annual
compensation (salary and bonus) based on the highest 60 consecutive months of a
participant's last 120 months as a participant in the SRP, less all other
retirement benefits received (including Social Security benefits, other Company
retirement benefits and plans of other employers). The SRP currently has six
participants, including Dr. Thompson and Mr.
14
<PAGE>
Coutts. Since participation in the SRP is not based on a participant's number of
years of service and benefits payable under the SRP would only be payable after
taking into account all other retirement benefits received, payments made under
the SRP are not included in the Pension Plan Table above.
AGREEMENTS WITH EXECUTIVE OFFICERS
The Company or, in the case of Thomas M. Coutts, the Company and a
subsidiary of the Company, has entered into agreements, effective as of
February 13, 1997, with certain of its executive officers, including the
executive officers named in the Summary Compensation Table, which provide
certain severance benefits for them in the event of a termination of their
employment following a Change of Control (as defined in the agreements), in
order to encourage such executives, in the event of a Change of Control of the
Company, to continue to perform their duties in the best interests of the
Company and its stockholders. In most instances these agreements replace and
supersede prior agreements between the Company and the executive officers
entered into between June 23, 1989 and July 16, 1996.
Each agreement provides that, if, within two years following a Change of
Control the Company terminates the employment of the executive other than for
death, disability or Cause (as defined in the agreements, including repeated,
willful and deliberate violations by the executive of his obligations under the
agreement or the commission by the executive of an intentional act of fraud,
embezzlement, theft or misappropriation of confidential information), or the
executive voluntarily terminates his employment for Good Reason (as defined in
the agreements, including a diminution in the executive's position, authority,
duties or responsibilities or a change in the executive's job location of more
than fifty miles or any purported termination in violation of the agreement or
the failure of any successor to comply with the agreement), the executive will
receive his base salary and bonus through the date of termination plus specified
severance benefits. Generally, these severance benefits include, but are not
limited to, (i) a specified multiple (two times in the case of Dr. Thompson, Mr.
Coutts and Mr. Stokes, executive officers named in the Summary Compensation
Table, and one and one-half times for all other executive officers) of an
executive's annual base salary plus the higher of his target bonuses for the
year in which the termination occurs or the average annual bonus for the prior
three years, and (ii) retirement benefits and health insurance and other
benefits for the remainder of the term of the agreement. In addition, the
executive would be entitled to immediate acceleration of the exercisability of
his stock options and accelerated vesting under certain other benefit plans of
the Company.
For purposes of the agreements, a "Change of Control" of the Company
generally means (i) an acquisition or series of acquisitions, other than from
the Company, of beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act) of 20% or more of the Company's then outstanding Common Stock (the
"Outstanding Company Common Stock") or voting securities (the "Outstanding
Company Voting Securities"), provided, however, that any acquisition by the
Company, Dexter or any of their subsidiaries, or by any employee benefit plan
(or related trust) sponsored or maintained by the Company, Dexter or any of
their subsidiaries, or any transaction or series of transactions that results in
any individual, entity or group (within the meaning of Section
15
<PAGE>
13(d)(3) or 14(d)(2) of the Exchange Act) having beneficial ownership of more
than 20% of the Outstanding Company Common Stock, but less than the percentage
of the Outstanding Company Common Stock then beneficially owned by Dexter, and
certain other acquisitions specified in the agreements, shall not constitute a
Change of Control, (ii) certain changes in the composition of a majority of the
Company's board of directors from such composition on December 1, 1996 (the
"Incumbent Board"), except changes approved by a majority of directors
comprising the Incumbent Board, including a majority of the members of the
Incumbent Board who are not Dexter-related Directors (as defined in the
agreements), (iii) approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company, or of the sale or other disposition
of all or substantially all of the assets of the Company, or of a
reorganization, merger or consolidation of the Company, and, in each case,
following such reorganization, merger or consolidation, all or substantially all
of the individuals and entities that beneficially owned the Outstanding Company
Common Stock and Outstanding Company Voting Securities immediately prior to such
reorganization, merger or consolidation do not beneficially own more than 60%
of, respectively, the then outstanding shares of common stock and voting stock
of the corporation resulting from such reorganization, merger or consolidation;
and (iv) so long as Dexter owns 20% or more of the Outstanding Company Common
Stock or Outstanding Company Voting Securities, any of the following events
shall occur (a) the acquisition, other than from Dexter, of beneficial ownership
of 20% or more of Dexter's then outstanding common stock (the "Dexter
Outstanding Common Stock") or voting securities (the "Dexter Outstanding Voting
Securities"), provided that any acquisition by the Company, Dexter or any of
their subsidiaries, or by any employee benefit plan (or related trust) sponsored
or maintained by the Company, Dexter or any of their subsidiaries, or any
acquisition of Dexter by a corporation with respect to which, following such
acquisition, more than 60% of, respectively, the then outstanding shares of such
corporation's common stock and voting power are beneficially owned by all or
substantially all of the individuals or entities who were the beneficial owners,
respectively, of the Outstanding Dexter Common Stock and Outstanding Dexter
Voting Securities immediately prior to such acquisition in substantially the
same proportion as their ownership, immediately prior to such acquisition, of
the Outstanding Dexter Common Stock and Outstanding Dexter Voting Securities, as
the case may be, shall not constitute a Change of Control, (b) certain changes
in the composition of more than a majority of the board of directors of Dexter
from the composition on December 1, 1996, except changes approved by a majority
of the incumbent board of directors of Dexter, or (c) approval by the
stockholders of Dexter of a complete liquidation or dissolution of Dexter, or
the sale or other disposition of all or substantially all of the assets of
Dexter, or of a reorganization, merger or consolidation of Dexter, and, in each
case, following such reorganization, merger or consolidation the individuals and
entities that beneficially owned the Outstanding Dexter Common Stock and
Outstanding Dexter Voting Securities prior to such reorganization, merger or
consolidation do not beneficially own more than 60% of the then outstanding
shares of common stock and voting stock of the resulting corporation.
16
<PAGE>
REPORT OF THE COMPENSATION AND ORGANIZATION COMMITTEE
ON EXECUTIVE COMPENSATION
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Exchange
Act of 1934, as amended, that might incorporate future filings, including this
proxy statement, in whole or in part, the following report of the Compensation
and Organization Committee and the Performance Graph which follows shall not be
incorporated by reference into any such filings, except to the extent that the
Company specifically incorporates this information by reference .
The Compensation and Organization Committee (the "Compensation Committee")
of the Company is responsible for, among other things, establishing and
administering the compensation policies applicable to executive officers. The
Compensation Committee is currently composed of: K. Grahame Walker, chairman,
Thomas H. Adams, Ph.D., Kathleen Burdett and Frank E. Samuel, Jr.
OVERALL POLICY
The Company's executive compensation is designed to be closely linked to
long-term corporate performance and returns to stockholders. To this end, the
Company has developed an overall compensation strategy and specific compensation
plans that tie a significant portion of executive compensation to the Company's
success in meeting specified performance goals and to appreciation in the
Company's stock price over time. The overall objectives of this strategy are to
attract and retain executive talent of the highest quality, to motivate these
executives to achieve the goals inherent in the Company's strategy, to link
executive and stockholder interests through equity-based compensation and to
provide a compensation package that recognizes individual contributions as well
as overall business results.
The Compensation Committee reviews and makes recommendations to the Board
of Directors with respect to the compensation of the most highly compensated
executives, including the individuals named in the Summary Compensation Table,
and reviews the compensation policies and pay practices employed with respect to
all the Company's other executive-level employees. This practice is designed to
ensure consistency throughout the executive compensation program. The key
elements of the Company's executive compensation program consist of base salary,
cash bonuses and stock options. The Compensation Committee's policies with
respect to each of these elements, including the bases for the compensation
awarded to Dr. Thompson, are discussed below.
BASE SALARY
Base salaries for executive officers are initially determined by evaluating
the responsibilities of the position held and the experience of the individual,
and by reference to the competitive marketplace for executive talent, including
a comparison to base salaries for comparable positions at other companies. The
Company has used the Biotechnology Compensation and Benefits Survey conducted by
Radford Associates/Alexander & Alexander Consulting Group and endorsed by the
17
<PAGE>
Biotechnology Industry Association (the "Radford Survey"), which is published
annually, for purposes of comparison of compensation of its executive officers
to compensation of companies which the Company believes reflects the market in
which the Company competes for executive talent. The Committee engaged Frederick
W. Cook & Co., executive compensation consultants, to prepare an executive
compensation review using sixteen companies for comparative purposes.
It has been the Company's policy to target base salaries between the 50th
and 75th percentiles for base pay of similar positions within the defined
competitive group in the Radford Survey, adjusted for sales size. Annual salary
adjustments are determined by evaluating the performance of each executive
officer taking into account new responsibilities as well as the individual's
contribution to the Company's overall performance. Individual performance
ratings take into account such factors as achievement of the strategic plan,
attainment of specific individual objectives, interpersonal managerial skills
and civic involvement.
CASH BONUS
The Company's cash bonus accounts for a significant percentage of each
executive officer's compensation. Executive officers participate in the
Company's Incentive Compensation Plan ("ICP"), which is a pay-for-performance
plan designed to compensate officers for performance that increases stockholder
value. Approximately 700 employees of the Company are eligible to participate in
the ICP. The ICP is approved by the Compensation Committee and is reviewed semi-
annually.
"Performance" is measured by assessing both the Company's performane and
individual performance. The total amount of compensation to be distributed each
year (the "Incentive Pool") is based on Company performance, as measured by
specific measurements defined each year such as sales growth, return on
investment and operating profitability, and threshold, target and maximum
performance levels are established to reflect the Company's operations. Each
participant's ICP payout is based upon his or her contribution to the Company's
performance as well as the Company's overall financial results in the year. The
individual performance ratings in the ICP may range from 0% to 125%. The Company
performance-based factors considered in determining the ICP and the weight given
to those factors in 1997 were as follows: earnings per share, 40%; return on
average stockholders' equity, 20%; and net sales, 40%. These factors are
weighted annually to reflect the assessment of those issues that are in need of
emphasis in accordance with the Company's strategic plan. Once the Incentive
Pool is determined, the Compensation Committee reviews each executive officer's
potential share of the Incentive Pool based on his or her contribution to the
Company's business results, which is a subjective determination. The
Compensation Committee considers a number of factors in determining an executive
officer's contribution to the Company's business results, including the level of
the executive's job responsibilities, the executive's past performance and the
achievement of individual performance objectives. Individual performance
objectives are set at the beginning of each year by the Compensation Committee
and the Chief Executive Officer for the Chief Executive Officer and by the Chief
Executive Officer and each other executive officer for that executive officer.An
18
<PAGE>
executive's individual performance measures take into account such factors as
the attainment of specific individual objectives, leadership and management
skills and civic involvement. No specific weight is assigned to any particular
factor. Bonuses are paid semi-annually, although the amounts paid under the ICP
are based on and adjusted for the Company's annual results.
STOCK OPTIONS
The third component of each executive officer's compensation is the
Company's stock option and long-term incentive compensation plans pursuant to
which the Company has granted to executive officers and other key employees
options to purchase shares of its Common Stock. The Board of Directors of the
Company believes that these plans are an important factor in attracting,
retaining and motivating its officers and key employees. The objective of the
Company's stock option and long-term incentive compensation plans is to advance
the long-term interests of the Company and its stockholders and complement
incentives tied to annual performance. Stock option grants provide rewards to
executives upon the creation of incremental stockholder value. The determination
of the number of stock options granted under the Company's plans is primarily
based upon a review of the value of stock options granted at 16 biotechnology
companies of comparable revenue size which the Company believes reflects the
market in which the Company competes for executive talent, the total
compensation package at these peer companies, and judgments concerning an
individual's performance results and the ability of the individual to impact the
long-term success of the Company, which is a subjective determination. The Board
also considers the number of options outstanding as previously granted, the
number of options held by such officer, and the aggregate number of current
stock options to be granted in determining the number of stock options to be
granted to a participant.
In order to provide the Board with an objective perspective of competitive
stock option programs based on public information, in 1991 the Board of
Directors engaged Frederick W. Cook & Co. to prepare an analysis of the
Company's stock option program in light of competitive stock option programs at
companies deemed to be most comparable to the Company because of the similarity
of their business and size. The 16 peer companies were the same companies
included in the analysis of cash compensation prepared by Frederick W. Cook &
Co. in 1997. The Board considered the consultant's analysis (which has been
updated annually since 1991) in determining its stock option grants.
The stock options granted in 1997 were granted at an exercise price equal
to the market value of the Common Stock on the date of grant and will only have
value if the Company's stock price increases. Generally, grants of stock options
vest in equal amounts over three years and are exercisable within the ten-year
period from the date of grant. This approach is designed to provide further
incentive to create value for the Company's stockholders over the long-term
since the full benefit of the compensation package cannot be realized unless
stock price appreciation occurs over a number of years.
19
<PAGE>
COMPENSATION TO CHIEF EXECUTIVE OFFICER
In 1997, J. Stark Thompson, Ph.D., Chief Executive Officer of the Company,
received a base salary of $433,750, an increase of 8.3% over his 1996 base
salary. In addition, 5.4% of the Company's Incentive Pool, or $276,154, was paid
to Dr. Thompson as a bonus in 1997, compared with 6.1% of the Incentive Pool, or
$330,413 in 1996. Although the Company achieved its performance criteria in
1997, it did not exceed such goals to the same extent as it did in 1996. As a
result, Dr. Thompson's incentive compensation decreased 16.4% in 1997 compared
with the prior year. Dr. Thompson's total compensation in 1997 decreased 2.9%
over 1996. It is our view that total cash compensation paid to Dr. Thompson in
1997 is consistent with the Compensation Committee's compensation philosophy.
In 1997, Dr. Thompson also received options to purchase 100,000 shares of
Common Stock at an exercise price of $34.41 per share. The grants were given to
reinforce the relationship between the Company's performance and the Chief
Executive Officer's future earnings. The Compensation Committee took into
consideration the report prepared by the Company's independent executive
compensation consultant in recommending to the Board the stock option grants for
Dr. Thompson.
DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code of 1986 limits the amount of
compensation a corporation may deduct as a business expense paid to its Chief
Executive Officer or any one of its four other most highly compensated officers
to $1,000,000 in any year except to the extent that such compensation qualifies
as "performance-based compensation" (or meets other exceptions not here
relevant). All compensation payments in 1997 to the five executive officers
named in the Summary Compensation Table will be fully deductible. The
Compensation Committee's present intention is to comply with the requirements of
Section 162(m) unless the Compensation Committee feels that required changes
would not be in the best interests of the Company or its stockholders.
CONCLUSION
The Compensation Committee believes that linking executive compensation to
individual and Company performance results in better alignment of compensation
with corporate business goals and stockholder value. As performance goals are
met or exceeded, resulting in increased value to stockholders, executives are
rewarded commensurately. The Compensation Committee believes that compensation
paid to its executives during 1997, including the Chief Executive Officer,
reflects the Company's compensation goals and policy.
COMPENSATION & ORGANIZATION COMMITTEE
K. Grahame Walker, Chairman
Thomas H. Adams
Kathleen Burdett
Frank E. Samuel, Jr.
20
<PAGE>
PERFORMANCE GRAPH
Note: The total stockholder return (i.e., changes in share price plus
reinvested dividends) shown on the performance graph below is not necessarily
indicative of the future returns on the Company's Common Stock.
Comparison of Five-Year Cumulative Total Return Among Life Technologies, Inc.,
The Nasdaq Stock Market (U.S. & Foreign), Nasdaq Pharmaceutical Stocks and
the Russell 2000
(Assuming an investment of $100 on December 31, 1992)
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
NASDAQ
STOCK
LIFE MARKET NASDAQ
Measurement Period TECHNOLOGIES, (U.S. AND PHARMACEUTICAL RUSSELL
(Fiscal Year Covered) INC. FOREIGN) STOCKS 2000
- --------------------- --------------- --------- -------------- --------------
<S> <C> <C> <C> <C>
Measurement Pt-12/31/1992 $100.0 $100.0 $100.0 $100.0
FYE 12/31/1993 $ 86.0 $115.8 $ 89.1 $118.9
FYE 12/31/1994 $ 91.6 $112.3 $ 67.1 $116.7
FYE 12/31/1995 $129.1 $157.7 $122.7 $149.9
FYE 12/31/1996 $178.9 $193.1 $123.1 $174.7
FYE 12/31/1975 $239.4 $236.2 $127.2 $213.7
</TABLE>
21
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1997, K. Grahame Walker, chairman, Thomas H. Adams, Kathleen
Burdett, and Frank E. Samuel, Jr. served as members of the Company's
Compensation and Organization Committee. No member of the Compensation and
Organization Committee was during the 1997 fiscal year or at any other time an
officer or employee of the Company. No executive officer of the Company served
on the board of directors or compensation committee of another entity that has
one or more executive officers serving as a member of the Company's Board of
Directors or Compensation and Organization Committee.
COMPENSATION OF DIRECTORS
In 1997, each non-employee director of the Company (except Mr. Walker, Mr.
Beatt and Ms. Burdett) received a $10,000 retainer fee which was paid quarterly,
an additional fee of $1,000 for each Board meeting attended, and $500 for each
committee meeting attended during the period January 1, 1997 to April 15, 1997,
and $1,000 (with the chairman of each committee receiving $2,000) for each
committee meeting attended after April 15, 1997. Pursuant to the terms of the
Company's Non-Employee Directors' Annual Retainer Plan, each non-employee
director (except Mr. Walker, Mr. Beatt and Ms. Burdett who elected not to
participate in the Plan) received a grant of 150 shares of Common Stock on April
1, 1997 and October 1, 1997. Pursuant to the Plan each non-employee director
(except Mr. Walker, Mr. Beatt and Ms. Burdett) will receive a grant of 150
shares of Common Stock of the Company on April 1, 1998 and on October 1, 1998.
Each non-employee director may elect to receive up to 100% of his or her board
retainer fee in Common Stock of the Company rather than in cash. Pursuant to the
terms of the Company's 1996 Non-Employee Directors' Stock Option Plan, each non-
employee director (except Mr. Walker, Mr. Beatt and Ms. Burdett who elected not
to participate in the Plan) was granted an option to purchase 6,750 shares of
Common Stock on October 1, 1997 at a per share price of $31.875 (the fair market
value on that date). The grant becomes exercisable in three equal installments
on the first, second and third anniversary of the date of the grant, subject to
acceleration in the event of a Change of Control (as defined in the Plan). The
options may be exercised by payment in cash, check or shares of Common Stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1997 the Company received the benefit of certain services performed by
Dexter corporate personnel, including insurance, risk management advice and
internal audit, for which the Company paid Dexter $25,000. Dexter also purchased
principally all insurance for the Company for which the Company was charged its
pro rata share of the cost of such insurance. Mr. Walker is a director of the
Company and Dexter; he is also chairman and chief executive officer of Dexter.
Mr. Beatt is a director of the Company; he is also vice president, general
counsel and secretary of Dexter. Ms. Burdett is a director of the Company; she
is also vice president and chief financial officer of Dexter. Dr. Whitesides is
a director of Dexter.
22
<PAGE>
Exhibit 2
[LOGO OF LIFE TECHNOLOGIES APPEARS HERE.]
NOVEMBER 16, 1998
Dear Shareholder:
As you know, on November 2, 1998, Dexter Corporation, the majority
shareholder of Life Technologies, Inc., commenced an unsolicited tender offer
to acquire all of the outstanding shares of common stock of the Company that
it does not currently own for $37.00 per share in cash (the "Offer").
As you may also know, five of the seven members of the Company's Board of
Directors are also officers or directors of Dexter. BECAUSE A MAJORITY OF THE
COMPANY'S BOARD IS AFFILIATED WITH DEXTER, THE BOARD HAS DETERMINED THAT THE
COMPANY WILL EXPRESS NO POSITION AND WILL REMAIN NEUTRAL WITH RESPECT TO THE
OFFER.
The enclosed Solicitation/Recommendation Statement on Schedule 14D-9, which
was filed today with the Securities and Exchange Commission, describes the
Company's position with respect to the Offer and contains other information
relating to the Company, Dexter and the Offer. Although the Company is not
expressing a position and is remaining neutral with respect to the Offer, the
Company's Board encouraged individual directors of the Company who are
unaffiliated with Dexter to include in the Schedule 14D-9 any information,
recommendation or other statement that the individual directors deemed
necessary or appropriate to assist you in determining whether or not to accept
the Offer. On this basis, Thomas H. Adams, Ph.D., the only outside director of
the Company who is not affiliated with Dexter, has advised the Company that it
is his view that the Company's shareholders should reject the Offer and not
tender their shares. The Schedule 14D-9 also contains other information
requested to be included by Dr. Adams.
Because the Company is not making a recommendation with respect to the
Offer, you must make your own decision as to the adequacy, fairness and
acceptability of the Offer in the manner in which you wish. The Company's
Board strongly urges you to make your decision based on all of the information
available to you and, to that end, to read the enclosed materials carefully
and in their entirety.
Sincerely,
/s/ J. Stark Thompson, Ph.D.
J. Stark Thompson, Ph.D.
President and Chief Executive
Officer
<PAGE>
Exhibit 3
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- -------------------------------
IN RE LIFE TECHNOLOGIES, INC. CONSOLIDATED
SHAREHOLDERS LITIGATION CIVIL ACTION NO. 16513
- -------------------------------
AMENDED CONSOLIDATED CLASS ACTION COMPLAINT
-------------------------------------------
Plaintiffs, by their attorneys, for their Amended Consolidated Class Action
Complaint allege upon information and belief except as to the allegations
contained in paragraph 2, which plaintiffs allege upon knowledge, as follows:
NATURE OF ACTION
----------------
1. Plaintiffs brings this class action on behalf of themselves and
all other public shareholders of defendant Life Technologies, Inc. ("Life" or
the "Company") similarly situated (the "Class") to enjoin defendants from
consummating a tender offer ("Tender Offer") by Life's majority shareholder, The
Dexter Corporation ("Dexter"), which Dexter is pursuing in flagrant disregard of
its fiduciary obligations to Life's minority shareholders. As set forth below,
Dexter, which now controls approximately 51.5% of the Company's total common
stock outstanding, seeks to acquire at least an additional 28.5% of the
Company's common stock at $37 per share. The Tender Offer is manifestly unfair
as it is being made (a) pursuant to a Schedule 14D-1 ("14D-1") which fails to
disclose material information; (b) pursuant to an unfair process in which Dexter
summarily rejected and disbanded a special committee it had initiated; and (c)
at a price substantially below the fair value of the Company.
<PAGE>
PARTIES
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2. Plaintiffs are and have been at all relevant times the owners of
Life common stock.
3. Defendant Life is a Delaware corporation with offices at 9800
Medical Center Drive, Rockville, Maryland 20850. Life develops, manufactures
and supplies products used in life sciences, research and the commercial
manufacture of genetically engineered products. Life's products are used in
cellular biochemistry and molecular biology research. As of October 29, 1998,
the Company had issued and outstanding 23,765,418 shares of common stock. As of
October 29, 1998, Dexter owned approximately 51.5% of the Company's outstanding
common stock, or 12,246,664 shares.
4. Defendant K. Grahame Walker ("Walker") is and was at all relevant
times the Chairman of the Board of Directors of Life. Walker also is and was at
all relevant times the Chairman and Chief Executive Officer of Dexter.
5. Defendant Bruce H. Beatt ("Beatt") is and was at all relevant
times a Director of Life. Beatt is and was at all relevant times a Vice
President, General Counsel and Secretary of Dexter.
6. Defendant Kathleen Burdett ("Burdett") is and was at all relevant
times a Director of Life. Burdett is and was at all relevant times a Vice
President and Chief Financial Officer of Dexter.
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<PAGE>
7. Defendant George Whitesides ("Whitesides") is and was at all
relevant times a Director of both Life and Dexter.
8. Defendant J. Stark Thompson ("Thompson") is and was at all
relevant times the President, Chief Executive Officer and a Director of Life.
9. Defendant Peter G. Kelly ("Kelly") became a Director of Life on
or about August 1, 1998, over the opposition of Thomas H. Adams ("Adams") and
Iain C. Wylie ("Wylie"), two members of Life's Board of Directors. Kelly is
also a Director of Dexter. Adams and Wylie, along with Life director Frank E.
Samuel, Jr. ("Samuel"), who was absent at the time of Kelly's appointment,
constituted the special committee of Life's Directors formed to consider
Dexter's offer to acquire the number of minority Life shares at $37 per share.
Adams, Wylie and Samuel are not named as defendants.
10. Walker, Beatt, Burdett, Whitesides, Thompson and Kelly (the
"Individual Defendants"), by virtue of their positions as directors and/or
officers of Life owe to the Company and its public stockholders certain
fiduciary obligations and are required to: use their ability to control and
manage Life in a fair, just and equitable manner; maximize shareholder value;
act in furtherance of the best interests of Life and its public shareholders;
refrain from abusing their positions of control; provide full disclosure to the
public shareholders; and not favor their own or any other party's interests at
the expense of Life and its public shareholders. However, the Individual
Defendants
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<PAGE>
simultaneously serve as officers and/or directors of Dexter, the majority
shareholder and proposed acquirer, and therefore suffer from disabling conflicts
of interest which have caused, and will continue to cause the Individual
Defendants to breach their fiduciary duties to Life's public stockholders.
11. Defendant Dexter Acquisition Delaware, Inc. ("Acquisition") is a
Delaware corporation and wholly owned subsidiary of Defendant Dexter, a
Connecticut corporation with its principal executive offices located at One Elm
Street, Windsor Locks, Connecticut. Dexter produces specialty materials and
support services in aerospace, automotive, electronics, food packaging and the
medical field. As Life's controlling stockholder, Dexter owes fiduciary duties
to Life's public stockholders, including the obligation to ensure entire
fairness to the Life public shareholders in the transaction complained of
herein. Acquisition and Dexter are collectively referred to herein as "Dexter".
12. At all relevant times herein, defendant Dexter owned and/or
controlled approximately 51.5% of the outstanding shares of Life common stock or
12,246,664 shares. Defendant Dexter dominates and controls the affairs of Life,
including the Company's Board. Indeed, from July 27, 1998 to November 5, 1998,
six of the nine Board members were Dexter designees; and with the November 5,
1998 resignation of Messrs. Samuel and Wylie, six of the seven remaining Board
members are Dexter designees. Exercising this domination and control, Dexter
has determined to acquire the remaining outstanding
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<PAGE>
shares of Life in disregard of any semblance of fairness in price or process.
CLASS ACTION ALLEGATIONS
------------------------
13. Plaintiffs bring this action pursuant to Rule 23 of the Rules of
the Court of Chancery, for injunctive and other relief on their own behalf and
as a class action, on behalf of all public stockholders of Life (except
defendants herein and any person, firm, trust, corporation or other entity
related to or affiliated with any of the defendants) and their successors in
interest.
14. This action is properly maintainable as a class action for the
following reasons:
a. The class of stockholders for whose benefit this action is
brought is so numerous that joinder of all class members is impracticable. As of
October 29, 1998, Life had over 23 million shares of common stock duly issued
and outstanding, which were owned by approximately 553 shareholders of record.
Members of the Class are scattered throughout the United States.
b. There are questions of law and fact that are common to the
members of the Class including, inter alia, the following:
----- ----
(1) whether defendants have engaged in conduct
constituting unfair dealing to the detriment of the public stockholders of Life;
(2) whether the Tender Offer by Dexter of $37 per share is
procedurally unfair and/or coercive to the public stockholders of Life;
-5-
<PAGE>
(3) whether the Offer to Purchase contains material
nondisclosures; and
(4) whether the defendants have breached fiduciary and
common law duties owed by them to plaintiffs and the other members of the Class.
c. The claims of plaintiffs are typical of the claims of the
other members of the Class, and plaintiffs have no interests that are adverse or
antagonistic to the interests of the Class.
d. Plaintiffs are committed to the vigorous prosecution of this
action and have retained competent counsel experienced in litigation of this
nature. Accordingly, plaintiffs are adequate representatives of the Class and
will fairly and adequately protect the interests of the Class.
e. The prosecution of separate actions by individual members of
the Class would create a risk of inconsistent or varying adjudications with
respect to individual members of the Class, and would establish incompatible
standards of conduct for the party opposing the Class.
f. Defendants have acted, and are acting, on grounds generally
applicable to the Class, thereby making appropriate preliminary and final
injunctive or corresponding declaratory relief with respect to the Class as a
whole.
SUBSTANTIVE ALLEGATIONS
-----------------------
15. Dexter, a conglomerate, has been restructuring its business.
According to George Shipp, an analyst at Scott &
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<PAGE>
Stringfellow, Life has been Dexter's most profitable business since Dexter
purchased its stake in the Company in 1983. For the 1997 fiscal year, Life
contributed $17 million, or more than 30%, to Dexter's earnings of $56.4
million.
16. On July 7, 1998, Dexter announced that it had offered to acquire
the minority 11.3 million Life shares for $37 cash per share (the "Offer"). On
July 6, 1998, the last trading date prior to announcement of the Offer, Life's
trading was halted at $31 per share. Thus, the $37 per share transaction price
represented only a slight premium (i.e. approximately 19%) over the July 6
----
closing price. Moreover, as recently as on March 31, 1998, Life stock had
closed at $38.50 per share.
17. On October 28, 1998, Life announced in a press release that the
special committee of Life's Board created to review the Offer had reported to
the Board that it was not prepared to recommend the Offer to the Company's
public stockholders. Thus, according to the press release, Dexter had withdrawn
the Offer and had notified the Board that it would commence the Tender Offer at
the $37.00 per share the special committee had refused to recommend.
18. As described herein, the Tender Offer is grossly inadequate in
price, coercive to Life's public stockholders, and results from a process
replete with procedural unfairness. Moreover, defendants have failed to disclose
material information to Life's public stockholders.
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<PAGE>
The Tender Offer Commences
--------------------------
19. On November 2, 1998, defendants filed with the Securities and
Exchange Commission ("SEC") Schedules 14D-1 ("14D-1") and 13E-3 ("13E-3")
describing the background and terms of the Tender Offer. The 14D-1 contains
Dexter's Offer to Purchase Outstanding Common Shares of Life at $37.00 per share
("Offer to Purchase"). The Tender Offer is conditioned upon, inter alia, the
----- ----
tender of at least 80% of Life's outstanding common stock. Pursuant to the
Company's Articles of Incorporation, the merger of Life with Dexter would be a
"Business Combination with a Related Person," which would require approval of
80% of the Company's outstanding shares. Thus, if the Tender Offer condition is
satisfied, Dexter will have sufficient shares to approve a merger.
20. According to the Offer to Purchase, on June 30, 1998, defendant
Walker, Dexter's Chairman and Chief Executive Officer, met with defendant
Thompson, Life's Chief Executive Officer. At that time, Walker advised Thompson
of the possibility of Dexter making the Offer to acquire Life at Life's July 7,
1998 Board meeting. In an apparent effort to obtain Thompson's support for the
Offer, Walker told Thompson that if the transaction was consummated, Dexter
desired that Thompson continue as Life's Chief Executive Officer, and further,
would nominate Thompson to become a member and Vice-Chairman of Dexter's Board.
21. Dexter announced the Offer at Life's July 7 Board meeting. From
the outset, Dexter acknowledged the propriety of having a special committee of
independent Company directors review
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<PAGE>
its Offer. For example, in a July 7, 1998 letter to Life's Board, defendant
Walker stated:
We understand that you may wish to have this proposal considered
by a special committee of independent directors and that such
committee may wish to retain its own advisors to assist in these
deliberations. We invite such representatives to meet with our
-----------------------------------------------
advisors to discuss this proposal at your earliest convenience.
--------------------------------------------------------------
(Emphasis supplied).
22. Following receipt of the Offer, Life's Board adopted a resolution
forming a special committee to consider it, consisting of Adams, Wylie and
Samuel, directors of the Company unaffiliated with Dexter. In addition, the
resolution directed the Company to pay Adams $25,000 and each of Messrs. Samuel
and Wylie $17,500 for their services as members of the special committee in
addition to their expenses incurred in such capacity.
23. The members of the special committee were appropriately
appointed, as all three individuals possess significant expertise in the life
sciences. This expertise contrasted significantly with the Dexter-affiliated
Life directors who, with one exception, do not bring experience and training in
life sciences to their board service.
24. According to the Offer to Purchase, on July 27, 1998, at a
special telephonic meeting of the Board, the special committee advised the Board
that it had retained as financial advisor, Goldman Sachs & Co. ("GS") as well as
legal advisor, Wachtell Lipton Rosen & Katz.
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<PAGE>
25. Also on July 27, 1998, the Board elected defendant Kelly, a
director of Dexter, to fill a vacancy created by the resignation of Rita Colwell
("Colwell") a former Life director unaffiliated with Dexter. Prior to the
meeting, defendant Thompson had suggested other persons to defendant Walker to
fill this vacancy. At the July 27 meeting, each of the Individual Defendants
voted in favor of Kelly's appointment, while Adams and Wylie voted against
Kelly's appointment. Samuel was absent from the meeting. Thus, defendants acted
quickly to ensure that, in the event the special committee recommended against
the Offer, Dexter would control and dominate the Board.
26. However, in an abundance of caution, defendants took further
steps to promote a favorable response to the Offer from the members of the
special committee. Effective August 18, 1998, the Board "supplemented and
clarified its prior Special Committee resolutions" to, among other things,
increase the fees for service as members of the special committee, granting
- --------
$75,000 to Adams as chairman, and $50,000 to each of Messrs. Samuel and Wylie,
reimburse their expenses and pay all other customary fees and expenses as
members of the Board.
27. Between August 17, 1998 and August 31, 1998, the special
committee and its advisors reviewed the Offer. On September 14, 1998, after six
weeks of intensive work, the special committee advised certain of Dexter's
officers that it did not believe that the Offer adequately reflected the
Company's prospects. In particular, the Special Committee noted that Life's
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<PAGE>
1998 Strategic Plan ("Strategic Plan") (which encompassed years 1998 through
2000) did not give effect to the Company's research and development efforts,
i.e., products that are currently under development ("R&D Pipeline").
- ----
28. The special committee also advised certain of Dexter's
representatives on September 14, 1998, that it had received inquiries from
various third parties as to the possibility of a possible business combination,
which were not pursued by such third parties after being advised that Dexter was
unwilling to sell its stake in the Company. As was subsequently revealed, the
unidentified third party was willing to offer a price in excess of $37, but this
expression of interest could not be pursued due to Dexter's refusal to sell its
Life stake.
29. In an effort to quantify the effect the R&D Pipeline would have
on Life's prospects, GS prepared projected income and cash flow statements for
the fiscal years 1998 - 2002 ("Base Case Projections"), which were extrapolated
from the Strategic Plan. In addition, GS also prepared and presented to
Dexter's financial advisors, Merrill Lynch & Co. ("ML") a financial model which
contained revenues and earnings before interest and taxes ("EBIT") to be
realized from the R&D Pipeline each year from 1998 through 2002 ("R&D
Projections"). In the R&D Projections, approximately 68% of the revenues in
2002 and approximately 73% of the EBIT in 2002 would be attributable to five of
the 21 projects covered by such projections. GS, in its discounted cash flow
analyses, applied significantly higher discount rates to the R&D Pipeline
-11-
<PAGE>
than those applied to the Company's ongoing operations. Thus, the special
committee believed that the results achieved were conservative and not
speculative.
30. According to the Offer to Purchase, GS undertook various other
analyses of Life, one of which, based on the discounted cash flows of the
Company, resulted in a value of $40.83 to $49.32 per share for the Base Case
Projections and an incremental value of $10.37 to $13.05 per share for the R&D
Projections, for a total value of $51.20 to $62.37 per share.
31. Despite the obvious importance of the above-described GS
projections and analyses to a reasonable Life stockholder, none of the foregoing
----
GS documents were annexed as exhibits to the 14D-1 or 13E-3; customarily,
however, these analyses would be an exhibit to SEC filings in this type of
transaction. Thus, Life stockholders have been completely deprived of crucial
information prepared by Life management and relied upon by the special committee
& GS to value the Company's future prospects.
32. Despite continuing discussions between the special committee and
its advisors, and representatives of Dexter between September 17, 1998 and
October 14, 1998, on October 15, 1998 representatives of Dexter advised the
special committee that Dexter believed the price in the Offer was "full and
fair". However, ML and Dexter refused to attribute any meaningful value to the
R&D Pipeline.
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<PAGE>
33. On October 13, 1998, Life issued a press release reporting its
financial results for the third fiscal quarter ended September 30, 1998 ("Third
Quarter Results"). In the Third Quarter Results, Life reported revenue of $89.6
million and net income of $8.8 million and diluted earnings per share of $0.36,
compared with revenues of $83.7 million and net income of $7.9 million or $.033
per share for the same period in 1997.
34. At a special telephonic meeting on October 26, 1998 between GS
and ML, GS reaffirmed its views and stated that application of its methodologies
yielded a composite value in the range of $36.32 to $51.81 per share, after
giving effect to both the Base Case and R&D Projections. Thus, the $37.00 price
reflects the lowest end of the GS range of values for Life. Thereafter, on
October 27, 1998, GS advised ML that the special committee would not recommend a
price "in the $30's". GS also stated that, although the special committee
believed that its valuations would support a price per share "in the $50s", the
special committee would be willing to consider a price per share "in the $40s".
35. Later on October 27, 1998, Dexter withdrew its Offer.
36. Dexter made no effort to negotiate in good faith with the special
---------
committee despite having initiated the special committee process and ML's view
that the value range proffered by GS and the special committee were
"negotiating views of value" (Offer to Purchase, page 17). Dexter and its
advisors, disgruntled that the special committee refused to "rubber-stamp" the
$37.00
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<PAGE>
price, simply walked away. At this time Dexter also announced it would shortly
commence a Tender Offer at $37.00 per share.
37. Also on October 27, 1998, after Dexter announced through
defendant Walker that it had withdrawn its Offer, defendant Walker stated that
there "appeared to be no purpose in continuing the existence" of the special
committee, whereupon the Board, controlled and dominated by Dexter (except
defendant Thompson, who abstained), voted to dissolve the special committee,
over the objections of the members of the special committee, and overruled a
- -----------------------------------------------------------
direct request from an independent director to discuss the issue prior to a
Board vote. Thus, Dexter not only walked away from discussions with the special
committee that it had invited to negotiate, but it also, through its designees
on Life's Board, terminated that committee.
38. On November 5, 1998, Life announced in a press release that
Messrs. Samuel and Wylie resigned from the Board as they felt their positions as
Life directors were "untenable."
39. Accordingly, on November 5, 1998, Dexter filed an amendment to
the 14D-1 ("Amendment"), annexing as exhibits the press release announcing the
resignations of Samuel and Wylie, the resignation letters to the Board, and a
document entitled "Joint Statement of the Former Members of The Special
Committee of Independent Directors of Life Technologies, Inc. ("Joint
Statement").
40. The Joint Statement reveals that Life's stock repurchase program,
which was approved at the Company's April 14,
-14-
<PAGE>
1998 shareholder meeting, and which the Board at that time said was "a prudent
investment for the Company's surplus funds, and that the repurchase of stock may
have an accretive effect on the Company's earnings per share," had been
suspended by Dexter without notice to the Board in May, 1998. No public
announcement of the suspension was ever made.
41. The Joint Statement reaffirms the Special Committee's view,
reinforced after months of rigorous analyses, that $37.00 per share "would not
adequately compensate" Life stockholders. In particular, the Special Committee
believes that:
Dexter Corporation has ignored or omitted from its $37 per share value
significant components to [Life's] long term inherent value and
earning power. Foremost among these is the value of the products in
["Life's"] R&D pipeline that have not yet been commercialized. Even
using conservative assumptions and probability discounts to account
for the probabilities of success associated with these products the
Special Committee determined that the R&D pipeline has significant
value that [Life's] public stockholders are entitled to be compensated
for and that are not reflected in Dexter's $37 per share offer.
42. In Samuel's resignation letter, he describes Dexter's
inappropriate and coercive actions as follows:
I am troubled by several features of the situation as it unfolded:
Dexter's refusal to consider or even discuss the issues relating to
[Life's] value raised by the Special Committee, the termination of the
Special Committee by the Chairman of the Board and his conflicted
colleagues, and Dexter's coercive attempt to buy out the [Life] public
stockholders at a price which, I believe, deprives these stockholders
of the significant inherent values to which they are rightfully
entitled. This is particularly troubling
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<PAGE>
because, as has been discussed by [Life] Board members from time to
time. [Life] is a difficult company to value without intensive study.
This is both because a significant part of the value of [Life] is in
its R&D pipeline, the details of which are not fully public, and
because [Life] receives very little analyst coverage from Wall Street
due to Dexter's majority position.
The Tender Offer Is Procedurally Unfair
---------------------------------------
43. Even prior to the commencement of the Tender Offer, defendants
took steps to ensure Dexter's acquisition of the Life minority interest. To
achieve this goal, defendants (a) terminated the stock repurchase program to
hold down the market price of Life's stock; (b) stacked the Board with Dexter-
affiliated members; and (c) tripled the compensation of members of the special
committee in an effort to corrupt their judgment.
44. Moreover, the appointment of Kelly to the Board was part of
defendants' scheme to acquire all of Life's outstanding stock. According to the
Certificate of Incorporation, as amended and annexed as an exhibit to Life's
Form 10-Q for the Quarter ended June 30, 1998 the approval of an acquisition of
Life by Dexter would not only require an 80% approval by Life stockholders
(hence, the condition of the Tender Offer) but it would require approval by 75%
of the members of the Board. Thus, Colwell's fortuitous resignation increased
by one the number of Dexter-affiliated Board members and enabled Dexter to be
one step closer to the requisite 75% required to approve a subsequent merger, if
necessary. With the subsequent resignations of Messrs. Samuel and Wylie, Dexter
now has sufficient votes on the Board to approve the transaction.
-16-
<PAGE>
45. Having initiated a special committee process, Dexter was required
to follow it through to conclusion. In the face of the special committee's
refusal to recommend the low-ball price Dexter offered for Life, Dexter not only
refused to negotiate, but withdrew the Offer, disbanded the special committee,
and commenced the Tender Offer at the same price that the special committee had
refused to recommend.
The Tender Offer Is Coercive
----------------------------
46. As noted above, the Tender Offer is conditioned upon Dexter's
receiving at least 80% of Life's outstanding shares; and in the event it
receives 90% or more of the Company's outstanding shares, Dexter intends to
consummate a "short form" merger. However, if Dexter receives more than 80%,
but less than 90% of Life's shares, shareholders have been advised that there is
". . . no assurance . . . as to whether or when [Acquisition]
will cause the Second Step Merger to be consummated and,
similarly, no assurance can be given as to whether or when the
Merger Consideration [of $37 per share] will be paid to
stockholders who do not tender their shares in the Offer."
47. If the Tender Offer is consummated but there is no prompt follow-
up merger, the Company's shares may be delisted from the NASDAQ National Market
Systems; the Offer to Purchase states that, in that event, ". . . the market for
the shares could be adversely affected."
48. Thus, class members have been presented with a "Hobson's" choice
of either tendering their shares for inadequate
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<PAGE>
consideration, or retaining their shares with the fear that they will be
delisted and suffer a decline in market value.
Defendants Have Failed To Disclose Material Information
-------------------------------------------------------
49. The 14D-1, 13E-3 and the Offer to Purchase fail to disclose
information material and necessary for a reasonable Life stockholder to make a
fully-informed decision on whether or not to tender shares in the Tender Offer,
including the failure to annex the crucial GS analyses, Base Case Projections or
R&D Projections as exhibits to the SEC filings, documents which are customarily
exhibits in this type of transaction. Moreover, although Dexter has been aware
of the details of the Company's R&D Pipeline for some time, Dexter has not
included in the Offer to Purchase non-public information on the nature and
number of products, their stage of development, when they can reasonably be
expected to be marketable, and their anticipated commercial prospects, all of
which is material and necessary to an informed judgment on the value of the R&D
Pipeline and, hence, on the value of Life.
CLAIM FOR RELIEF
----------------
50. As a result of the foregoing, the Tender Offer is a coercive
transaction designed and intended to compel Life's minority shareholders to sell
their Life stock to Dexter at an inadequate and unfair price, unilaterally
determined by Dexter to serve its interest without regard to the interest of
Life's minority shareholders. The process by which the Tender Offer was made
and is being implemented is not only lacking in procedural
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<PAGE>
fairness, but constitutes a high-handed and flagrant disregard of any recognized
aspect of procedural fairness.
51. Moreover, the Offer to Purchase fails to disclose to Life's
minority shareholders information available to Dexter that is material to a
fully informed decision by Life's minority shareholders on the Tender Offer.
52. In addition, Dexter has deliberately timed this heavy-handed
acquisition effort to occur when the market price of Life's stock is depressed
and before Life can realize the benefits of the products in its R&D Pipeline.
Dexter is attempting, through the timing of the Tender Offer, its coercive
nature, and the failure to disclose material information about the R&D Pipeline,
to arrogate for itself all the future benefits of the products Life has been
developing.
53. The Board also had an affirmative duty to assure that any
transaction to acquire the minority interest of Life be accomplished only on
terms that are fair to Life's public shareholders and represent the best
available terms from their point of view. The Individual Defendants failed in
this obligation.
54. Accordingly, the Tender Offer constitutes a breach of Dexter's
fiduciary duty as majority shareholder and the fiduciary duties of the
Individual Defendants to safeguard and protect the interests of all Life
shareholders.
55. Plaintiffs and other members of the Class have been and will be
damaged in that they have not and will not receive
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<PAGE>
their fair proportion of the value of Life's assets and business, will be
largely divested from their right to share in Life's future growth and
development and have been and will be prevented from obtaining the best price
available in the market for corporate control.
56. Plaintiffs have no adequate remedy at law.
WHEREFORE, plaintiffs demand judgment and relief in their favor and
that of the Class and against defendants, as follows:
A. Declaring that this action be certified as a proper class action
and certifying plaintiffs as class representatives;
B. Preliminarily and permanently enjoining defendants and their
counsel, agents, employees and all persons acting under, in concert with, or for
them, from proceeding with, consummating or closing the Tender Offer which will
irreparably harm plaintiffs and the Class without independent and adequate
protection and representation of the public shareholders;
C. Ordering defendants to supplement the Offer to Purchase;
D. Awarding plaintiffs and the Class compensatory or rescissory
damages in an amount to be determined;
E. Awarding plaintiffs the fees and expenses of this litigation
including reasonable fees of attorneys and experts; and
F. Awarding such order and further relief which the Court may deem
just and proper.
Dated: November 6, 1998
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<PAGE>
ROSENTHAL MONHAIT GROSS
& GODDESS, P.A.
By: /S/ Norman M. Monhait
----------------------------
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, Delaware 19899
(302) 656-4433
-and-
CHIMICLES & TIKELLIS LLP
One Rodney Square
Wilmington, DE 19899
(302) 656-2500
Co-Liaison Counsel
for Plaintiffs
GOODKIND LABATON RUDOFF
& SUCHAROW LLP
100 Park Avenue
New York, NY 10017
(212) 907-0700
WOLF POPPER LLP
845 Third Avenue
New York, NY 10022
(212) 759-4600
BERNSTEIN LIEBHARD & LIFSHITZ,
LLP
10 East 40th Street
New York, NY 10016
(212) 779-1414
Plaintiffs' Co-Lead Counsel
ABBEY GARDY & SQUITIERI LLP
212 East 39th Street
New York, NY 10016
(212) 889-3700
-21-
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BEATIE & OSBORN
599 Lexington Avenue
New York, NY 10022
(21) 888-9000
BERNSTEIN LITOWITZ BERGER
& GROSSMAN LLP
1285 Avenue of the Americas
New York, NY 10019
(212) 554-1400
HANZMAN CRIDEN KORGE CHAYKIN
PONCE & HEISE, P.A.
200 S. Biscayne Blvd, Ste. 2100
Miami, FL 33131
(305) 579-1222
MILBERG WEISS BERSHAD HYNES
& LERACH LLP
One Pennsylvania Plaza
New York, NY 10119
(212) 594-5300
WECHSLER HARWOOD HALEBIAN
& FEFFER LLP
488 Madison Avenue
New York, NY 10022
(21) 935-7400
-22-
