<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12
VWR Corporation
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X]$125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-
6(i)(2) or Item 22(a)(2) of Schedule 14A. (Paid on 6/28/95)
[_]$500 per each party to the controversery pursuant to the Exchange Act
Rule 14a-6(i)(3).
[_]Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-
11.
(1)Title of each class of securities to which transaction applies:
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(2)Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it is determined):
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(4)Proposed maximum aggregate value of transaction:
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(5)Total fee paid:
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[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
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(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO OF VWR CORPORATION APPEARS HERE]
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of VWR
Corporation to be held at 11:00 a.m., EDT, on September 13, 1995, at the
offices of the Corporation, 1310 Goshen Parkway, West Chester, Pennsylvania.
At the Meeting, you will be asked to approve the issuance and sale of Common
Shares of the Corporation to EM Laboratories, Incorporated ("EML"), an
affiliate of E. Merck, Darmstadt, Germany. The proceeds from the issuance of
such shares and the proceeds of borrowings by the Corporation from senior bank
lenders and EML will be used by the Corporation to fund the $400,000,000 to be
paid at the closing of the Corporation's proposed acquisition of the
industrial distribution business of the Industrial and Life Sciences Division
of Baxter Healthcare Corporation, a subsidiary of Baxter International Inc. At
the Meeting we will respond to any questions you may have.
Your Board of Directors recommends that you vote to approve the issuance of
Common Shares to EML. This matter is described more fully in the formal notice
of special meeting and proxy statement which appear on the following pages.
YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the Meeting,
it is important that your shares be represented. Therefore, I urge you to
sign, date, and promptly return the enclosed proxy in the enclosed postage
paid envelope. If you attend the Meeting, you will, of course, have the
privilege of voting in person.
I look forward to greeting you personally; and on behalf of the Board of
Directors and management of the Corporation, I would like to express our
appreciation for your interest in VWR Corporation.
Sincerely,
/s/ Jerrold B. Harris
JERROLD B. HARRIS
President and Chief Executive
Officer
West Chester, Pennsylvania
August 11, 1995
<PAGE>
VWR CORPORATION
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
----------------
TO THE SHAREHOLDERS:
A Special Meeting of Shareholders of VWR Corporation will be held at 11:00
a.m., EDT, on September 13, 1995, at the offices of the Corporation, 1310
Goshen Parkway, West Chester, Pennsylvania, for the following purposes:
1. To approve the issuance to EM Laboratories, Incorporated ("EML"), pursuant
to agreements between the Corporation and EMI Industries, Incorporated
("EMI"), EML's parent corporation, of Common Shares, par value $1.00 per
share, of the Corporation which will result in EML's ownership of up to
49.89% of the issued and outstanding Common Shares of the Corporation; and
2. To transact such other business as may properly come before the Meeting, or
any adjournment thereof.
Only shareholders of record at the close of business on July 14, 1995, are
entitled to notice of, and to vote at, the Meeting.
Each shareholder is urged to sign, date and promptly return the accompanying
proxy in the enclosed envelope to which no postage need be affixed if mailed
in the United States.
BY ORDER OF THE BOARD OF DIRECTORS
BY
/s/ Walter S, Sobon
WALTER S. SOBON
Vice President Finance
Corporate Secretary
West Chester, Pennsylvania
August 11, 1995
<PAGE>
VWR CORPORATION
1310 GOSHEN PARKWAY
WEST CHESTER, PENNSYLVANIA 19380
(610) 431-1700
----------------
PROXY STATEMENT FOR SPECIAL MEETING OF SHAREHOLDERS TO BE HELD SEPTEMBER 13,
1995
----------------
This proxy statement and accompanying proxy, which are being mailed to
shareholders on or about August 11, 1995, are furnished in connection with the
solicitation of proxies on behalf of the Board of Directors of VWR Corporation
(the "Corporation" or "VWR") to be voted at a Special Meeting (the "Meeting")
of Shareholders of the Corporation to be held at 11:00 a.m., EDT, on September
13, 1995, at the offices of the Corporation, 1310 Goshen Parkway, West
Chester, Pennsylvania, for the purposes set forth in the accompanying Notice
of Special Meeting of Shareholders. Shareholders who execute proxies retain
the right to revoke them at any time before they are voted. The proxy of any
shareholder may be revoked at any time prior to its exercise by giving written
notice to the Secretary of the Corporation, by presenting a duly executed
proxy bearing a later date, or by voting in person at the Meeting; but mere
attendance by a shareholder at the Meeting will not revoke a proxy previously
granted.
The cost of solicitation of proxies will be borne by the Corporation. In
addition to solicitation by mail, directors, officers, and employees of the
Corporation may solicit proxies. The Corporation has employed Corporate
Investor Communications, Inc. to assist in the solicitation of proxies for a
fee expected to be approximately $5,000 plus reasonable expenses. Solicitation
is being made by the use of the mails, but may also be made by telephone,
other means of telecommunication and personal interviews.
The approval of the issuance and sale of the Corporation's Common Shares,
par value $1.00 per share (the "Common Shares"), to EM Laboratories,
Incorporated ("EML"), an affiliate of E. Merck, Darmstadt, Germany, requires
the affirmative vote of a majority of the votes cast by all shareholders
present in person or by proxy and voting at the Meeting, a quorum being
present. If a proxy is marked as "abstain" on such proposal, or if specific
instructions are given that no vote be cast on such proposal (a "specified
non-vote"), the Common Shares represented by such proxy will not be voted on
such proposal. Abstentions and specified non-votes will have no effect on the
vote for the issuance and sale of Common Shares to EML, although such shares
will be included for purposes of determining the presence of a quorum for the
conduct of the Meeting.
As of the close of business on July 14, 1995, the record date for the
Meeting, there were outstanding an aggregate of 12,898,870 Common Shares. The
Common Shares are the only class of securities of the Corporation entitled to
be voted at the Meeting. Each Common Share is entitled to one vote. Only
shareholders of record on the books of the Corporation at the close of
business on July 14, 1995 will be entitled to notice of, and to vote at, the
Meeting.
In the event that at the time any session of the Meeting is called to order
a quorum is not present in person or by proxy, the persons named as proxies
may vote those proxies which have been received to adjourn the Meeting to a
later date so as to permit the solicitation of additional proxies to
constitute a quorum. In the event that a quorum is present but votes
sufficient to adopt the proposal to approve the issuance and sale of Common
Shares to EML have not been received,
1
<PAGE>
the persons named as proxies may propose one or more adjournments of the
Meeting to permit further solicitation of proxies with respect to such
proposal. Any such adjournment will require the affirmative vote of the
holders of a majority of the Common Shares present in person or by proxy at
the session of the Meeting to be adjourned. The persons named as proxies will
vote those proxies which they are entitled to vote in favor of any proposal to
adjourn the Meeting with respect to the voting on the proposal to approve the
issuance and sale of Common Shares to EML, and will vote those proxies
required to be voted against the proposal to approve the issuance and sale of
Common Shares to EML against any such adjournment. Notice of the time and
place of any such adjourned session of the Meeting will be given at the
Meeting and otherwise to the extent required by law or the Bylaws of the
Corporation.
ALL PROXIES WILL BE VOTED IN ACCORDANCE WITH INDICATED INSTRUCTIONS. IF NO
INSTRUCTIONS ARE GIVEN ON THE PROPOSAL TO APPROVE THE ISSUANCE AND SALE OF
COMMON SHARES TO EML, THE PROXY WILL BE VOTED FOR SUCH PROPOSAL.
Holders of 2,924,241 Common Shares, including EML and certain directors of
the Corporation, constituting approximately 22.7% of the outstanding Common
Shares entitled to be voted at the Meeting, have advised the Corporation that
they intend to vote FOR the issuance and sale of Common Shares to EML.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ISSUANCE OF ADDITIONAL COMMON SHARES TO EML............................... 6
General................................................................. 6
Sale Prices for the EML Shares and the Debenture........................ 7
Use of Proceeds From the Issuance of the EML Shares and the Debenture... 7
Reasons For the Issuance of Additional Shares to EML.................... 7
Opinion of Financial Advisor Relating to the Issuance and Sale of the
EML Shares and Debenture............................................... 9
Summary of the Securities Purchase Agreement............................ 11
Summary of the Standstill Agreement and the Standstill Amendment........ 12
Regulatory Approvals.................................................... 14
General Effect Upon the Rights of Existing Shareholders................. 14
Certain Officers' Agreements............................................ 15
Litigation.............................................................. 16
Required Vote........................................................... 16
DESCRIPTION OF THE ACQUISITION OF THE INDUSTRIAL DISTRIBUTION BUSINESS OF
BAXTER HEALTHCARE CORPORATION............................................ 17
Introduction and Background............................................. 17
General Description of the Acquisition.................................. 17
Description of Other Financing of the Acquisition....................... 18
VWR's Reasons for the Acquisition....................................... 19
Risks To VWR Associated with the Acquisition............................ 20
Opinion of Financial Adviser Relating to the Acquisition................ 21
Regulatory Approvals.................................................... 23
Summary of the Asset Purchase Agreement................................. 23
Other Material Contracts................................................ 24
Accounting for the Acquisition.......................................... 25
Federal Income Tax Consequences......................................... 25
Prior Transaction....................................................... 25
Corporate Name Change................................................... 25
Market Data............................................................. 26
INFORMATION ABOUT THE INDUSTRIAL DISTRIBUTION BUSINESS.................... 26
Description of Business................................................. 26
Customers and Suppliers................................................. 26
Competition............................................................. 26
Description of Property................................................. 26
Selected Financial Data--Industrial Distribution Business............... 27
Management's Discussion and Analysis of Financial Condition and Results
of Operations of the Industrial Distribution Business.................. 27
VWR SELECTED FINANCIAL DATA............................................... 31
UNAUDITED PRO FORMA FINANCIAL INFORMATION................................. 32
Unaudited Pro Forma Balance Sheet....................................... 33
Unaudited Pro Forma Statement of Operations............................. 37
Comparative Per Share Data.............................................. 39
OWNERSHIP OF VWR'S COMMON SHARES.......................................... 40
INDEPENDENT PUBLIC ACCOUNTANTS............................................ 41
PROPOSALS OF SECURITY HOLDERS............................................. 41
OTHER BUSINESS............................................................ 41
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... 41
FINANCIAL STATEMENTS OF INDUSTRIAL DISTRIBUTION BUSINESS.................. F-1
</TABLE>
3
<PAGE>
EXHIBITS
Exhibit I--Opinion of PNC Securities Corp
Exhibit II--Common Share and Debenture Purchase Agreement
Exhibit III--Standstill Agreement
Exhibit IV--Amendment No. 1 to Standstill Agreement
Exhibit V--Opinion of Goldman, Sachs & Co.
Exhibit VI--Asset Purchase Agreement
Exhibit VII--Services Agreement
Exhibit VIII--Baxter Distribution Agreement
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
TERM PAGE
- ---- -----
<S> <C>
Acquisition............................................................... 7
Amended Percentage Limitation............................................. 7,13
April Shares.............................................................. 6
April Warrant............................................................. 6
Asset Purchase Agreement.................................................. 7
Banks..................................................................... 18
Baxter.................................................................... 7
Baxter Distribution Agreement............................................. 18
Business Employees........................................................ 23
Canlab.................................................................... 25
Commitment Letter......................................................... 18
Common Shares............................................................. 1
Corporation............................................................... 1
Debenture................................................................. 6
Debenture Shares.......................................................... 7
EBITDA.................................................................... 19
EMI....................................................................... 6
EMI Distribution Agreement................................................ 8
EML....................................................................... 1
EML Agreements............................................................ 6
EML Investment............................................................ 32,39
EML Shares................................................................ 6
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- ---- -----
<S> <C>
Engagement Letter......................................................... 23
40% Shareholder........................................................... 15
Initial Fee............................................................... 23
Exchange Act.............................................................. 13
Goldman, Sachs............................................................ 8
HSR Act................................................................... 12
Industrial Distribution Business.......................................... 7
LIBOR..................................................................... 19
LIFO...................................................................... 39
Meeting................................................................... 1
Monthly Retainer Fee...................................................... 23
Original Percentage Limitation............................................ 6
PNC Bank.................................................................. 11
PNC Securities............................................................ 9
Prime..................................................................... 19
Purchase Shares........................................................... 7
Purchased Assets.......................................................... 23
Refinancing............................................................... 32,39
Revolver.................................................................. 18
Rights Agreement.......................................................... 12
Securities Act............................................................ 13
Securities Purchase Agreement............................................. 6
Senior Facility........................................................... 18
Services Agreement........................................................ 17,32
Specified non-vote........................................................ 1
Standstill Agreement...................................................... 6
Standstill Amendment...................................................... 12
Standstill Period......................................................... 12
Standstill Shares......................................................... 7
Term Loan................................................................. 18
20% Shareholder........................................................... 15
USD....................................................................... 35
</TABLE>
5
<PAGE>
ISSUANCE OF ADDITIONAL COMMON SHARES TO EML
GENERAL
On April 13, 1995, pursuant to an agreement with EM Industries,
Incorporated, EML's direct parent corporation ("EMI"), the Corporation issued
and sold to EML 1,818,181 Common Shares (the "April Shares"), and a warrant
(the "April Warrant") exercisable to purchase an additional 967,015 Common
Shares at $11.00 per share. EML paid the Corporation an aggregate of
approximately $20,000,000 for the April Shares and the April Warrant, and the
Corporation has used the proceeds to reduce its indebtedness. As a result of
its acquisition of the April Shares and the April Warrant, EML now
beneficially owns (including the Common Shares covered by the April Warrant
which has not yet been exercised) approximately 20% of the Corporation's
issued and outstanding Common Shares.
In connection with the agreement to purchase the April Shares and the April
Warrant, EMI entered into a Standstill Agreement with the Corporation, dated
February 27, 1995 (the "Standstill Agreement"), pursuant to which EMI agreed
that it and its affiliates would not, subject to certain specified exceptions,
for a period of four years, increase its beneficial ownership of the
Corporation's Common Shares above 20.1% (the "Original Percentage Limitation")
without the prior consent of the Corporation. EML directly assumed those
restrictions at the time of its purchase of the April Shares and the April
Warrant.
The Corporation is now seeking shareholder approval of the proposed issuance
to EML of Common Shares which the Corporation has agreed to issue to EML,
subject to such shareholder approval, under the terms of (i) a Common Share
and Debenture Purchase Agreement, dated May 24, 1995 (the "Securities Purchase
Agreement") between the Corporation and EMI, (ii) a Subordinated Debenture of
the Corporation in the principal amount of $135,000,000 (the "Debenture")
which will be purchased by EML under the terms of the Securities Purchase
Agreement, and (iii) the Standstill Agreement, as proposed to be amended under
the terms of the Securities Purchase Agreement. EMI has assigned its rights
under the Standstill Agreement, as well as its rights to acquire additional
Common Shares and the Debenture under the Securities Purchase Agreement, to
EML. The Securities Purchase Agreement, the Debenture and the Standstill
Agreement are sometimes collectively referred to herein as the "EML
Agreements" and the Common Shares to be issued to EML under the EML Agreements
are referred to herein as the "EML Shares." Based upon 12,898,870 issued and
outstanding Common Shares as of July 14, 1995 (the record date) and assuming
the exercise by EML of the April Warrant, the EML Agreements contemplate the
issuance and sale by the Corporation to EML of approximately 8,242,000 Common
Shares, plus such additional number of Common Shares as will enable EML to
maintain an ownership percentage equal to 49.89% of the issued and outstanding
Common Shares. The obligations of the Corporation under the Securities
Purchase Agreement are subject to the approval by the Corporation's
shareholders of the issuance of the EML Shares.
Approval by the shareholders of the Corporation of the issuance of the EML
Shares is required under the regulations of the Nasdaq Stock Market (R) which
require approval of issuances which result in a "change in control" of an
issuer. While the provisions of the Standstill Agreement are inconsistent with
a conclusion that EML's acquisition of the EML Shares will result in a change
in control of the Corporation (e.g., restrictions on further acquisitions of
VWR's Common Shares by EML or its affiliates and limitations on EML's
representation on VWR's Board of Directors. See "Issuance of Additional Common
Shares to EML--Summary of the Standstill Agreement and the Standstill
Amendment."), the Nasdaq regulations nevertheless require shareholder approval
of such issuances because of the significant percentage of Common Shares which
will be owned by EML as a result of the EML Agreements. Shareholder approval
is not otherwise required under applicable law or the Articles of
Incorporation or Bylaws of the Corporation.
6
<PAGE>
SALE PRICES FOR THE EML SHARES AND THE DEBENTURE
Under the terms of the Securities Purchase Agreement, EML has agreed to
purchase 6,832,797 Common Shares (the "Purchase Shares") at a price of $12.44
per share and the Debenture at a price of $135,000,000. After giving effect to
the purchase of the Purchase Shares and the exercise of the April Warrant, EML
will own approximately 46% of the issued and outstanding Common Shares. Under
the terms of the Debenture, the Corporation is obligated to issue to EML, at a
price of $12.44 per share in lieu of cash interest, that number of Common
Shares (the "Debenture Shares") as will cause EML's beneficial ownership of
Common Shares to increase to 49.89% (the "Amended Percentage Limitation") of
the issued and outstanding Common Shares. Assuming the Corporation does not
issue any additional Common Shares to third parties prior to the completion of
the issuance of the Debenture Shares to EML, the Corporation will issue
approximately 1,409,000 Debenture Shares to EML. Under the Standstill
Agreement, as proposed to be amended by the Securities Purchase Agreement, in
the event the Corporation issues additional Common Shares to third parties in
a registered public offering or private placement, EML is entitled to purchase
from time to time that number of Common Shares (the "Standstill Shares") as
will enable it to maintain an ownership interest of Common Shares equal to the
Amended Percentage Limitation at the same price at which the Corporation
proposes to issue such additional Common Shares to third parties. The
consideration to be received by VWR for the issuance and sale of the EML
Shares and the Debenture was determined by negotiations between the parties
and approved by the Board of Directors of VWR, with EML's Board
representatives abstaining. On May 24, 1995, the last trading day prior to the
announcement of the execution of the Securities Purchase Agreement, the high
and low per share sales price of the Corporation's Common Shares, as reported
by the Nasdaq Stock Market, were $10.00 and $9.25, respectively.
USE OF PROCEEDS FROM THE ISSUANCE OF THE EML SHARES AND THE DEBENTURE
Closing under the Securities Purchase Agreement, and EML's exercise of the
April Warrant, are to occur on or prior to closing of VWR's proposed
acquisition of the industrial distribution business of the Industrial and Life
Sciences Division of Baxter Healthcare Corporation, a Delaware corporation
("Baxter") and the industrial distribution business conducted by certain
Baxter affiliates (collectively, the "Industrial Distribution Business"). The
proceeds from the issuance and sale of the Purchase Shares and the Debenture
(approximately $220,000,000) and from EML's exercise of the April Warrant
(approximately $10,600,000) will be used to fund, in part, the $400,000,000 to
be paid by VWR at the closing of such acquisition.
Baxter is a wholly-owned subsidiary of Baxter International Inc., a Delaware
corporation. Such acquisition of assets from Baxter pursuant to the Asset
Purchase Agreement dated as of May 24, 1995 between Baxter and VWR (the "Asset
Purchase Agreement") is referred to herein as the "Acquisition." See
"Description of the Acquisition of the Industrial Distribution Business of
Baxter Healthcare Corporation" for information regarding the Industrial
Distribution Business and the terms of the Acquisition.
REASONS FOR THE ISSUANCE OF ADDITIONAL SHARES TO EML
The Board of Directors of the Corporation has had two interdependent
corporate strategies which resulted in its decision to enter into the
Securities Purchase Agreement. The first set of reasons relates to the
desirability of the Acquisition. The Acquisition is intended to enable the
Corporation to substantially increase its sales volume through the
Corporation's existing distribution infrastructure (facilities and systems)
while increasing its associated costs by a smaller percentage. For a more
complete description of the Board's reasons for entering into the Asset
Purchase Agreement to effect the Acquisition, as well as certain risks to the
Corporation inherent in the Acquisition, see "Description of the Acquisition
of the Industrial Distribution Business of Baxter Healthcare Corporation--
VWR's Reasons for the Acquisition" and "--Risks To VWR Associated with the
Acquisition."
7
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At the time of VWR's acquisition in Canada of the Canlab division of an
affiliate of Baxter in the summer of 1994, the Corporation conducted
exploratory talks with Baxter about the possibility of acquiring the
Industrial Distribution Business. In connection with those discussions, the
Corporation and Goldman, Sachs & Co. ("Goldman, Sachs") discussed with several
possible funding sources the issuance by the Corporation of equity to fund
such a transaction. Only limited preliminary interest was demonstrated by
these potential sources. The Corporation did not pursue such discussions
because at the time the exploratory acquisition talks were terminated by
Baxter.
At approximately the beginning of 1995, VWR resumed discussions with Baxter
regarding the possible acquisition of the Industrial Distribution Business.
Having reached the conclusion that the Acquisition would be in the best
interests of the Corporation and its shareholders, the Board then was required
to determine an optimal method for funding the Acquisition. The Board
recognized that the Acquisition would involve a high degree of risk to
shareholders if funded by an unduly large amount of borrowings. The Board
concluded that an adequate equity element was necessary. Because of both the
timing constraints associated with the Acquisition and the Corporation's
experience in seeking equity capital in the fall of 1994, the Board concluded
that it would not be desirable or feasible to raise additional equity to fund
the Acquisition through a public offering of equity securities or a broadly-
based institutional private placement.
EML is a wholly-owned subsidiary of EMI, which is, in turn, a wholly-owned
subsidiary of Merck AG, a Swiss corporation. Merck AG is controlled by Merck &
Cie. KG, a Swiss partnership, which is 97.81% owned by Merck KGaA, Darmstadt,
Germany, a limited liability company based on shares, the majority of which
are owned by E. Merck, Darmstadt, Germany. Merck KGaA, Darmstadt, Germany, has
succeeded to E. Merck, Darmstadt Germany's international business of
manufacturing and distributing pharmaceutical, laboratory and chemical
products. In 1994, E. Merck, Darmstadt, Germany achieved worldwide sales of
approximately $3.5 billion. (E. Merck, Darmstadt, Germany and its affiliates
are not affiliated with Merck & Co., the United States-based manufacturer and
world wide distributor of pharmaceutical and other products.)
During the past two years, the Corporation has formed certain strategic
alliances with E. Merck, Darmstadt, Germany and its affiliates. For example,
on December 17, 1993, the Corporation and E. Merck, Darmstadt, Germany entered
into a joint venture agreement whereby the Corporation acquired 10% of the
outstanding capital stock of Bender & Hobein GmbH, a subsidiary of E. Merck,
Darmstadt, Germany and one of the largest distributors of scientific products
in Germany, and agreed to provide certain distribution assistance to Bender &
Hobein. In addition, in early 1993 the Corporation's Canadian subsidiary, VWR
Scientific of Canada Ltd., became the sole distributor of certain chemical
products manufactured by BDH, Inc., a wholly-owned subsidiary of Merck AG. On
February 27, 1995, the date on which the Corporation and EMI executed the
agreements relating to the April Shares and April Warrant, the Corporation and
EMI entered into a distribution agreement (the "EMI Distribution Agreement")
which provides for the distribution in the United States of certain products
manufactured by EMI and its affiliates. These alliances most recently
culminated in the Corporation's sale to EML in April, 1995, of the April
Shares and the April Warrant for a total purchase price of approximately
$20,000,000, the proceeds of which were used by the Corporation to reduce its
indebtedness and thereby strengthen its balance sheet.
It was in the context of the Corporation's growing set of relationships with
affiliates of E. Merck, Darmstadt, Germany that the Board determined that a
logical source of funding for the Acquisition would be E. Merck, Darmstadt,
Germany and its affiliates and that, by effecting such funding in that manner,
the Corporation could effectively pursue its goal of greater sales and
infrastructure utilization while further strengthening its strategic alliances
with E. Merck, Darmstadt, Germany and its affiliates.
8
<PAGE>
The Board of Directors considered in substantial detail at a number of
meetings both the desirability and proposed terms of the Acquisition and the
discussions with EMI and its affiliates concerning possible funding of a
substantial portion of the cost of the Acquisition by EMI and its affiliates.
The deliberations culminated at the Board's meeting on May 24, 1995, at which
time the Board received an opinion from Goldman, Sachs that the consideration
to be paid by the Corporation for the Industrial Distribution Business
pursuant to the Asset Purchase Agreement is fair to the Corporation (see
"Description of the Acquisition of the Industrial Distribution Business of
Baxter Healthcare Corporation--Opinion of Financial Advisor Relating to the
Acquisition") and an opinion of PNC Securities Corp that the consideration to
be paid by EML in connection with the issuance and sale of the EML Shares and
the Debenture to EML are fair to the Corporation and its shareholders not
affiliated with EML from a financial point of view (see "--Opinion of
Financial Advisor Relating to the Issuance and Sale of Purchase Shares and
Debenture").
The Board of Directors concluded that the issuance and sale of the EML
Shares on the terms provided for in the EML Agreements and the use of the
proceeds from the issuance and sale of the Purchase Shares and the Debenture
to fund a portion of the Acquisition presented an effective linchpin between
the corporate strategies inherent in the Corporation's pursuit of the
Acquisition and the desire to further strengthen the Corporation's strategic
alliance with E. Merck, Darmstadt, Germany and its affiliates.
OPINION OF FINANCIAL ADVISOR RELATING TO THE ISSUANCE AND SALE OF THE EML
SHARES AND DEBENTURE
PNC Securities Corp ("PNC Securities") has delivered to the Corporation's
Board of Directors its opinion that, in light of the perceived benefits of
consummating the Acquisition and the necessity of obtaining financing
therefor, the consideration to be received by the Corporation in connection
with the issuance and sale of the EML Shares and the Debenture is fair to the
Corporation and its shareholders not affiliated with EML from a financial
point of view. The full text of the opinion of PNC Securities dated May 24,
1995, which sets forth certain assumptions made, matters considered and
limitations on and the scope of the review undertaken, is attached as Exhibit
I to this Proxy Statement. PNC Securities received no instructions from VWR,
nor were any limitations imposed by VWR or its affiliates on the scope of the
investigation made or procedures followed in connection with its fairness
opinion. In arriving at its opinion, PNC Securities was not authorized to
solicit, and did not solicit, inquiries with respect to the placement of
Common Shares or subordinated debt of the Corporation with institutional
investors in order to finance in part the Acquisition. In the opinion of VWR's
management, since May 24, 1995, no events have occurred, and there has been no
significant change in any information available to PNC Securities which should
alter PNC Securities' opinion given as of such date. SHAREHOLDERS ARE URGED TO
READ THE PNC SECURITIES OPINION CAREFULLY AND IN ITS ENTIRETY. The opinion of
PNC Securities is directed only to the fairness of the consideration to be
paid by EML in connection with the issuance and sale of the EML Shares and the
Debenture and does not constitute a recommendation to any VWR shareholder of
the Corporation as to how such shareholder should vote, nor an opinion
regarding the fairness to the Corporation of the terms of the Acquisition.
(See "Description of the Acquisition of the Industrial Distribution Business
of Baxter Healthcare Corporation--Opinion of Financial Advisor Relating to the
Acquisition.") The summary of the opinion of PNC Securities as set forth in
this Proxy Statement is qualified in its entirety by reference to the full
text of such opinion.
In arriving at its opinion, PNC Securities, among other things, (i) analyzed
certain publicly-available financial statements and other information of the
Corporation, including documentation relating to the purchase by EML of the
April Shares and April Warrant; (ii) analyzed certain internal financial
statements and other financial and operating data concerning the Corporation,
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including certain pro forma financial data giving effect to the consummation
of the Acquisition and related financing, prepared by the management of the
Corporation; (iii) analyzed certain financial data projections prepared by the
management of the Corporation; (iv) discussed the past and current operations
and financial condition and the prospects of the Corporation with senior
management of the Corporation, including the strategic and operating benefits
anticipated by senior management to be derived from the Acquisition, the
issuance and sale of the EML Shares and the Debenture and the Corporation's
commercial arrangements with EML and discussed with senior management of the
Corporation prior efforts by the Corporation to placing equity securities; (v)
reviewed the historical stock prices and trading volume of the Common Shares;
(vi) visited the principal offices of the Corporation; (vii) compared the
financial performance and prospects of the Corporation with that of certain
other comparable publicly-traded companies and analyzed the market valuation
of such companies; (viii) compared certain financial terms contained in the
EML Shares and the Debenture to certain financial terms of other selected
transactions deemed relevant; (ix) reviewed the principal terms of the
Acquisition and the opinion of Goldman Sachs, the Corporation's financial
advisor, dated May 24, 1995 with respect to the fairness to the Corporation of
the consideration to be paid by the Corporation for the Industrial
Distribution Business as of the date of such opinion; (x) reviewed the terms
of the EML Agreements (including the Standstill Agreement, as proposed to be
amended by the Securities Purchase Agreement) and related agreements as agreed
between the Corporation and EML; and (xi) performed such other analyses as PNC
Securities deemed appropriate.
PNC Securities' opinion was based solely on the consideration to be received
by the Corporation from the issuance and sale of the EML Shares and the
Debenture to EML pursuant to the Securities Purchase Agreement subject to the
standstill restrictions contained in the Standstill Agreement, as proposed to
be amended by the Securities Purchase Agreement, which limit the ability of
EML and its affiliates to acquire majority ownership of the Corporation or to
elect a majority of the Board of Directors, for an agreed period of time and
under the conditions set forth in the Standstill Agreement and, as proposed to
be amended by the Securities Purchase Agreement. In rendering its opinion, it
was PNC Securities' understanding, based upon discussions with senior
management of the Corporation and its review of the related documents, that
EML will not acquire control of the management and direction of the business
and affairs of the Corporation as a result of the issuance and sale of the EML
Shares, and therefore the opinion of PNC Securities did not address the
question whether the consideration to be paid by EML for the EML Shares and
the Debenture would be fair from a financial point of view if the transactions
with EML were to result in a change of control.
Further, PNC Securities assumed that the consideration to be paid by the
Corporation in connection with the Acquisition is fair to the Corporation and
its shareholders from a financial point of view. PNC Securities also
considered the view of the Board of Directors and senior management of the
Corporation that the Acquisition represents a significant business opportunity
for the Corporation and that significant strategic and operational benefits
will be derived by consummating the Acquisition and the concurrent investment
and commercial arrangements with EML, and the view of management of the
Corporation that the issuance and sale of the EML Shares and the Debenture
represents the best source of the financing for the Acquisition available to
the Corporation at the time and that the purchase by EML of the Purchase
Shares and the Debenture will provide significant benefit to the Corporation
by its assistance in obtaining necessary bank financing to consummate the
Acquisition.
In connection with its opinion, PNC Securities did not independently verify
any of the financial and other information that was provided to PNC Securities
by the Corporation or that was publicly available, and its opinion is
conditioned on the information being complete and accurate in all material
respects. In addition, PNC Securities did not make and has not been provided
with any evaluation or appraisal of any of the assets (contingent or
otherwise) of the
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Corporation. With respect to the financial projections, including pro forma
financial data taking into account the Acquisition, PNC Securities assumed
that they had been reasonably prepared on bases reflecting the best then
available estimates and judgments of the Corporation's management as to the
future financial performance of the Corporation. PNC Securities did not make
any independent evaluation of the solvency of the Corporation and assumed
after giving effect to the Acquisition and related debt and equity financing,
including the issuance and sale of the Purchase Shares and the Debenture, that
(i) the Corporation will be able to pay its debts as they become due in the
usual course of business; (ii) the fair value of the Corporation's total
assets would not be less than the Corporation's total liabilities; and (iii)
the Corporation will not have unreasonably small capital with which to engage
in its business. PNC Securities' opinion was based on economic, monetary and
market conditions existing at the date thereof. Furthermore, PNC Securities
expressed no opinion as to the price or trading range at which the Common
Shares will trade or as to the Corporation's ability to access the capital
markets prior to or subsequent to the consummation of the issuance and sale of
the EML Shares and the Debenture or the Acquisition.
PNC Securities is an affiliate of PNC Bank, National Association ("PNC
Bank"). PNC Bank, Bank of America National Trust and Savings Association and
CoreStates Bank, N.A. have delivered a commitment letter to the Corporation
under which, subject to the terms and conditions thereof, those banks have
committed to lend the Corporation up to an aggregate of $285,000,000 to
provide the balance of the funds necessary to effect the Acquisition and to
provide the Corporation with post-Acquisition working capital. (See
"Description of the Acquisition of the Industrial Distribution Business of
Baxter Healthcare Corporation--Description of Other Financing of the
Acquisition.")
Pursuant to the engagement letter between the Corporation and PNC Securities
relating to its financial advisory services in connection with the issuance
and sale of the EML Shares and the Debenture, the Corporation paid a fee of
$300,000 to PNC Securities plus certain of its expenses and agreed to
indemnify PNC Securities against certain liabilities, including certain
liabilities under the federal securities laws. To date PNC Securities has not
received any reimbursement of out-of-pocket expenses. PNC Securities estimates
that its out-of-pocket expenses, including fees and expenses of its counsel,
amount to approximately $35,000.
SUMMARY OF THE SECURITIES PURCHASE AGREEMENT
The Securities Purchase Agreement is attached as Exhibit II to this Proxy
Statement and is incorporated herein by reference.
Issuance and Sale of Purchase Shares and Debenture. Subject to the terms and
conditions of the Securities Purchase Agreement, on the Closing Date (as
defined in such Agreement) the Corporation will issue and sell the Purchase
Shares and the Debenture to EML for an aggregate purchase price of
$220,000,000. As a result of such purchase and EML's exercise of the April
Warrant, EML will own approximately 46% of the issued and outstanding Common
Shares.
The Debenture. The Debenture will be in the principal amount of $135,000,000
and will mature in a single installment on the tenth anniversary of the issue
date. The indebtedness evidenced by the Debenture will be subordinated to the
Corporation's obligations to its primary bank lending institutions. Interest
will be payable on the unpaid principal of the Debenture quarterly at 13% per
annum, but until such time as EML and its affiliates own 49.89% of the
aggregate number of issued and outstanding Common Shares, interest shall be
payable solely in Debenture Shares at a price of $12.44 per share. Thereafter
and until the second anniversary of the issuance of the Debenture, the payment
of any cash interest otherwise accruing will be deferred until maturity of the
Debenture.
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Beginning on the fifth anniversary of the issue date of the Debenture, the
Corporation will have the right to redeem all or any portion of the Debenture,
but only from internally generated cash flow.
Closing Conditions. The obligations of the Corporation to sell, and EML to
purchase, the Purchase Shares and the Debenture are subject to the requirement
that the proceeds from the Purchase Shares and Debenture be used solely for
the consummation of the Acquisition and are further subject to the
satisfaction on or before the Closing Date of certain additional conditions,
including that: (i) the issuance of the EML Shares has been approved by the
Corporation's shareholders; (ii) the issuance of the EML Shares has been
approved by the Nasdaq Stock Market; (iii) the waiting period under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"),
shall have expired or have been terminated; (iv) the parties shall have
executed and delivered the Amendment (the "Standstill Amendment") to the
Standstill Agreement; and (v) such other conditions to closing customary to
transactions of this nature as set forth in further detail in the Securities
Purchase Agreement.
In addition, the obligation of EML to purchase the Purchase Shares and the
Debenture is also subject to (i) an amendment of the EMI Distribution
Agreement on terms to be mutually agreed upon; (ii) EML's not becoming an
"Acquiring Person" (as defined in the Rights Agreement (the "Rights
Agreement") dated May 20, 1988 between the Corporation and The First Jersey
National Bank, as amended) upon the acquisition of the Purchase Shares,
Debenture and Debenture Shares; and (iii) the execution and delivery of an
employment agreement between the Corporation and its President and Chief
Executive Officer satisfactory in form and substance to EML.
Certain Covenants. In the Securities Purchase Agreement, the Corporation has
agreed, among other things, to: (a) use all proceeds received from EML from
the sale of the Purchase Shares and the Debenture for the purpose of financing
the Acquisition; (b) conduct its business through the Closing Date in the
ordinary course and, to the extent consistent with such business, use all
reasonable efforts to preserve intact its present business organization, to
keep available the services of its present officers and employees, and to
preserve its relationships with its customers, suppliers and others having
business dealings with it; (c) refrain through the Closing Date from
declaring, setting aside or paying any non-ordinary dividend or other
distribution with respect to shares of its capital stock; (d) refrain through
the Closing Date from issuing or selling any shares of its capital stock; (e)
refrain through the Closing Date from amending its Articles of Incorporation
or Bylaws or the Rights Agreement; and (f) call the Meeting and use its best
efforts to obtain shareholder approval at the Meeting of the issuance by the
Corporation of the EML Shares.
In the Securities Purchase Agreement, EML has agreed, among other things,
to: (a) refrain from acquiring any Common Shares (other than those obtained
upon its exercise of the April Warrant) prior to the Closing Date without the
consent of the Corporation; (b) vote the Common Shares held by it at the
Meeting in favor of the issuance and sale of the EML Shares; and (c) exercise
the April Warrant on or before the Closing Date.
SUMMARY OF THE STANDSTILL AGREEMENT AND THE STANDSTILL AMENDMENT
The Standstill Agreement and the Standstill Amendment are attached as
Exhibits III and IV, respectively, to this Proxy Statement and are
incorporated herein by reference.
Restrictions on the Acquisition of Additional Common Shares. The Standstill
Agreement currently restricts EML and its affiliates from acquiring or holding
more than the Original Percentage Limitation of the Common Shares for a four
year period ending April 13, 1999 (the "Standstill Period"), subject to
certain exceptions, as set forth in more detail in such Agreement.
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For example, if an unaffiliated third party made a tender or exchange offer to
acquire Common Shares, EML may make a tender offer for up to an equivalent
number of Common Shares (subject to the right of VWR to subsequently
repurchase Common Shares from EML to reduce EML's percentage Common Share
ownership to the Amended Percentage Limitation). In addition, EML may purchase
additional Common Shares upon the approval of two-thirds of VWR's directors
who were not nominated or appointed by EML. On April 13, 1995, EMI assigned
its rights and delegated its obligations under the Standstill Agreement to EML
whereupon EMI and EML became jointly and severally liable for their respective
performance under such Agreement. Under the Standstill Amendment, the Original
Percentage Limitation would be increased to 49.89% (the "Amended Percentage
Limitation") upon the issuance and sale of the Purchase Shares.
Under the Standstill Agreement, neither EMI, EML or any affiliate of either
of them could make any further acquisition of Common Shares of the Corporation
following the expiration of the Standstill Period, without the consent of the
Corporation, unless it was by means of a tender offer for all of the shares
made to all other shareholders and the holders of at least two-thirds of the
shares not owned by EML and its affiliates had accepted such offer. Under the
Standstill Amendment, this restriction would be changed to provide that the
terms of such tender offer first be approved by a majority of the directors of
the Corporation not affiliated with or designated by EML and thereafter be
accepted by the holders of at least a majority of the shares not owned by EML
and its affiliates.
Restrictions on the Transfer of Common Shares. The Standstill Agreement
currently prohibits EML and its affiliates from transferring any of its Common
Shares during the Standstill Period except in certain limited circumstances,
including: (i) sales made pursuant to the exercise of registration rights
granted by the Corporation by such Agreement; (ii) sales made pursuant to Rule
144 under the Securities Act of 1933, as amended (the "Securities Act"); (iii)
private sales to third parties (including sales pursuant to tender and
exchange offers and private offerings); (iv) certain transfers to affiliates;
and (v) sales made in conjunction with a merger or consolidation in which the
Corporation is acquired or in conjunction with a sale of all or substantially
all of the Corporation's assets, provided that the Corporation's Board of
Directors had approved such merger, consolidation or sale. Sales of any Common
Shares made pursuant to sub-clauses (i), (ii) and (iii) above, however, are
subject to the Corporation's rights of first refusal to purchase all, but not
fewer than all, of such Common Shares.
Certain Covenants. Pursuant to the Standstill Agreement, EML has made
certain negative covenants to the Corporation. In particular, EML has agreed
that during the Standstill Period it and its affiliates will not, without the
prior consent of a majority of the Corporation's directors which are not
affiliated with EML, (i) solicit proxies or become a participant in opposition
to the Corporation's Board of Directors; (ii) deposit its Common Shares into a
voting trust or subject EML to any voting agreement with any non-affiliate of
EML; (iii) join any group for the purpose of acquiring, holding or disposing
of Common Shares within the meaning of Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"); (iv) induce or attempt
to induce any other person to initiate a tender offer for any securities of
the Corporation or to effect any change of control of the Corporation, or take
any action for the purpose of convening a meeting of the Corporation's
shareholders; and (v) acquire any class of equity securities of any entity
which, prior to the time of acquisition of more than 1% of such class, is
publicly disclosed to be the beneficial owner of more than 5% of any class of
the Corporation's voting securities.
Under the terms of the Standstill Agreement and Standstill Amendment, the
Corporation has agreed not to issue any security which provides the holder(s)
thereof with any extraordinary or special voting rights or any right to veto
any action of the Corporation.
EML Board Representation. The Corporation's Board of Directors is classified
and currently consists of eleven members distributed among three classes. The
terms of office of three directors
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expire in 1996 and four such terms expire in each of 1997 and 1998. In
connection with the issuance of the April Shares and April Warrant, the
Corporation's Board of Directors was increased from nine to its present size
of eleven and two designees of EML were elected to the Board (with terms
expiring in 1997 and 1998, respectively) to fill the vacancies created
thereby. Pursuant to the Standstill Amendment, upon consummation of the
purchase and sale of the Purchase Shares, the Corporation on EML's request
will take all requisite action, including, without limitation, increasing or
decreasing the size of the Board, to enable EML to maintain Board
representation (rounded down to the nearest whole number) which at all times
is commensurate with the actual proportion of Common Shares owned by it and
its affiliates. So long as EML and its affiliates own no more than the Amended
Percentage Limitation, less than half of the Corporation's Board will be
comprised of members nominated by EML and its affiliates. Pursuant to the
Standstill Agreement, however, there are certain circumstances under which EML
and its affiliates could be entitled to nominate a majority of the Board by
increasing its ownership of Common Shares above the Amended Percentage
Limitation, as described above in the paragraph captioned "Summary of the
Standstill Agreement and the Standstill Amendment--Restrictions on the
Acquisition of Additional Common Shares."
Registration Rights. Under the terms of the Standstill Agreement, EML is
entitled to certain registration rights with respect to Common Shares
beneficially owned by it, including the EML Shares. Subject to certain
conditions and limitations, EML may, during any twelve month period, require
the Corporation to effect one registration of any of the Common Shares held by
EML and its affiliates for sale under the Securities Act. In addition, subject
to certain conditions and limitations, if the Corporation proposes to register
any of its Common Shares under the Securities Act, EML is entitled to notice
of, and to include Common Shares which it owns in, such registration.
REGULATORY APPROVALS
The Corporation and EML have made all requisite filings under the HSR Act
and the applicable waiting period has been terminated.
GENERAL EFFECT UPON THE RIGHTS OF EXISTING SHAREHOLDERS
Influence by EML. After the consummation of the issuance and sale of the
Purchase Shares, EML will have the opportunity to exercise a material degree
of influence over the Corporation's business and activities through its
ability to vote the Common Shares owned by it and to nominate to the
Corporation's Board pursuant to the provisions of the Standstill Agreement
persons who will constitute one less than a majority of the members of the
Board. EML will not, however, be involved in the day-to-day management of the
Corporation's business. The shareholders owning Common Shares immediately
prior to such issuance and sale will continue to own a majority of the
outstanding Common Shares immediately after such issuance and sale, and will
continue to be able to elect nominees to the Board of Directors who are not
designees of EML and who will constitute a majority of the Board of Directors
of the Corporation.
Future Acquisition of the Corporation. Following EML's purchase of the
Purchase Shares and the Debenture Shares, there will be a substantially
decreased likelihood that any party other than EML and its affiliates would
make an offer to acquire all of the equity interests of the Corporation. This
is so in large measure because, as a practical matter, no entity could
thereafter acquire the Corporation without EML's approval.
In addition to its substantial equity investment in the Corporation, EML and
its affiliates would have an advantage over others in any subsequent
acquisition of the Corporation by reason of the fact that in connection with
EML's purchase of the April Shares and April Warrant, the Board of Directors
of the Corporation (i) approved an amendment to the Rights Agreement which
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has the effect of excluding the application of the Rights Agreement as to EML
and its affiliates (so long as they are not in default under the Standstill
Agreement) and (ii) approved EML as a "20% Shareholder" (as that term is
defined in the Corporation's Articles of Incorporation) prior to its becoming
such, thereby rendering inapplicable the super-majority voting provision under
Article VIII of the Corporation's Articles of Incorporation. Absent a similar
approval, under Article VIII of the Corporation's Articles of Incorporation,
any merger or sale of assets between the Corporation and the beneficial owner
of 20% or more of the Corporation's voting securities would require the
affirmative vote of (i) the holders of 80% of the voting securities, including
(ii) the holders of more than 50% of the outstanding voting securities not
held by the 20% holder; however, by reason of the prior action of the Board of
Directors of the Corporation, these provisions are no longer applicable to EML
and its affiliates.
Cumulative Voting. The Corporation's Articles of Incorporation provide that
for as long as the Corporation has a shareholder which owns 40% or more of the
issued and outstanding Common Shares (a "40% Shareholder"), all shareholders
of the Corporation shall be entitled to cumulate votes in the election of
directors. In addition, during any such time that the Corporation has a 40%
Shareholder, one or more candidates for the Corporation's Board of Directors
may be nominated by a majority of the Corporation's directors not affiliated
with such 40% Shareholder or by any person who beneficially owns Common Shares
having a market value of at least $250,000. Upon the issuance and sale of the
Purchase Shares to EML and EML's agreed-upon exercise of the April Warrant,
EML will be a 40% Shareholder. Accordingly, cumulative voting in the election
of the Corporation's directors and the aforementioned nomination rights will
become effective upon the issuance and sale of the Purchase Shares to EML.
CERTAIN OFFICERS' AGREEMENTS
VWR has agreements with six of its most senior officers, including its
President and Chief Executive Officer. Each agreement provides that such
officer will receive compensation for up to 24 months if his employment
terminates (voluntarily or involuntarily) for any reason, other than gross
misconduct, death, disability, or reaching age 65, within two years following
completion of the proposed transactions with EML. The compensation will be
paid at a rate equal to the officer's current salary and target bonus. The
compensation is subject to a minimum annual rate of not less than the
officer's average compensation for the preceding three calendar years, and is
subject to reduction if the aggregate present value of all payments would
exceed three times the officer's "annualized includable compensation," as
defined in Section 280G of the Internal Revenue Code, for the officer's most
recent five taxable years. The officer will also continue to have "employee"
status for the 24 month period and will be entitled to retain most employee
benefits and rights during this period.
The agreement between VWR and its President and Chief Executive Officer is
to be replaced by the employment agreement referred to under "Issuance of
Additional Common Shares to EML--Summary of the Securities Purchase
Agreement--Closing Conditions."
The estimated aggregate amounts currently payable if the officers (not
including its President and Chief Executive Officer) were to exercise their
individual rights following completion of VWR's transactions with EML
(assuming each officer receives payment for the maximum 24-month period) would
be approximately $2,000,000. The foregoing amount does not include the value
of any employee benefits which might be payable to an officer during the 24-
month period. VWR may cease payments in the event the officer breaches certain
non-competition or confidentiality covenants.
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LITIGATION
Litigation relating to the issuance of the EML Shares and the Debenture has
been commenced (in Delaware by a person who alleges he is a shareholder of
VWR) against VWR, VWR's President and Chief Executive Officer, seven members
of VWR's Board of Directors and EMI. In the complaint the plaintiff seeks to
have an action certified as a class action and, on behalf of all shareholders
of VWR (except those named as defendants), to enjoin VWR from consummating the
transactions contemplated by the EML Agreements, an award of class rescissory
and/or compensatory damages, an award of costs and disbursements (including
fees of attorneys and experts) and such other further relief as the court
might deem just and proper. In addition, the plaintiff, on behalf of the
shareholders, seeks an order that the Director defendants take appropriate
measures to maximize shareholder value, including, without limitation,
creating an active auction for VWR.
The plaintiff alleges, among other things, that the consummation of the
transactions contemplated by the EML Agreements will transfer control of VWR
to EMI and because EMI will own nearly 50% of VWR, no third party will make a
bid for VWR. The plaintiff also alleges that the individual defendants have
participated in unfair dealing towards plaintiff and the other shareholders by
failing to implement procedures for maximization of shareholder value and
permitting the transfer of control of VWR at a value which fails to reflect
the long-term value of VWR's Common Shares, particularly in light of VWR's
future prospects upon consummation of the Acquisition.
VWR believes that this suit is without merit and VWR, EMI and the individual
defendants intend to vigorously defend this action. As described in this Proxy
Statement, VWR's Board of Directors believes that the Standstill Agreement and
the Standstill Amendment will protect shareholder value following the
consummation of the transactions contemplated by the EML Agreements.
REQUIRED VOTE
The approval of the issuance and sale of the EML Shares requires the
affirmative vote of a majority of the votes cast by all shareholders
(including, without limitation, EML) present in person or by proxy and voting
at the Meeting, a quorum being present. Pursuant to the Securities Purchase
Agreement, EML has agreed to vote all 1,818,181 Common Shares owned by it on
the record date in favor of the proposal to approve the issuance and sale of
the EML Shares.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL
OF THE ISSUANCE AND SALE OF THE EML SHARES
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DESCRIPTION OF THE ACQUISITION OF THE INDUSTRIAL DISTRIBUTION BUSINESS OF
BAXTER HEALTHCARE CORPORATION
INTRODUCTION AND BACKGROUND
The following information with respect to the Acquisition is being provided
by VWR pursuant to the rules and requirements of the Securities and Exchange
Commission. There is no requirement that the Acquisition itself be approved by
VWR's shareholders, and no such approval is being sought at the Meeting.
Shareholders should understand, however, that approval of VWR's issuance of
additional Common Shares to EML, as described above in this Proxy Statement,
will permit VWR to consummate a critical component of the financing required
for the Acquisition. If the shareholders of the Corporation approve such
issuance, then, subject to the satisfaction of the terms and conditions of the
Securities Purchase Agreement described above and of the Asset Purchase
Agreement described below, it is likely that the Acquisition will be
consummated; if such issuance is not approved by the shareholders, then the
Acquisition could not be consummated under its existing terms and it is
unlikely it would be consummated at all.
GENERAL DESCRIPTION OF THE ACQUISITION
The Industrial Distribution Business is engaged in the business of
distributing general laboratory supplies and equipment, worldwide, to
customers such as analytical research and development laboratories,
educational institutions, environmental testing laboratories, clean room
facilities, medical device manufacturers, electronic and semiconductor
manufacturers, government research facilities and others. For more detailed
information about the Industrial Distribution Business, which information has
been furnished by Baxter, see "Information About the Industrial Distribution
Business." The Industrial Distribution Business does not include Baxter's
distribution of products, whether manufactured by it or by others, in Canada
and Japan or to customers of Baxter who purchase such products for use in the
care of human patients or for the diagnosis of disease or defect for the
purpose of caring for human patients.
Pursuant to the terms and conditions of the Asset Purchase Agreement, VWR
has agreed to acquire substantially all of the Industrial Distribution
Business. At the closing under the Asset Purchase Agreement, VWR will purchase
designated assets from Baxter, including, but not limited to, a portion of the
domestic trade accounts receivable of the Industrial Distribution Business,
certain tangible personal property, rights and benefits under certain
contracts and certain rights in specified trademarks. VWR will also assume, as
and to the extent specified in the Asset Purchase Agreement, (i) certain
liabilities of Baxter for accrued vacation pay; (ii) post-closing liabilities
and obligations under the acquired contracts; (iii) certain liabilities and
obligations to Baxter employees working solely in the Industrial Distribution
Business; and (iv) all liabilities for warranty claims for products sold by
the Industrial Distribution Business. The cash purchase price payable at
closing under the Asset Purchase Agreement is $400,000,000, subject to a post-
closing adjustment on a dollar-for-dollar basis to the extent that the amount
obtained by subtracting the accrued vacation pay liabilities being assumed as
of the date of closing, from the sum of trade accounts receivable plus
tangible personal property being purchased, exceeds or is less than
$45,000,000. The consideration to be paid by VWR for the Industrial
Distribution Business was determined by negotiations between VWR and Baxter
and approved by the Board of Directors of VWR. VWR is negotiating with Baxter
to acquire at closing additional accounts receivable of the Industrial
Distribution Business (approximately $25,000,000), expected to be paid for on
a dollar-for-dollar basis over a period not to exceed two months.
Pursuant to the terms of a Services Agreement to be entered into between VWR
and Baxter (the "Services Agreement") at closing under the Asset Purchase
Agreement, Baxter will, for a
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transition period of up to two years, provide VWR with certain administrative
and distribution services for the Industrial Distribution Business from
Baxter's own facilities. From time to time during such transition period VWR
will move the operations of the Industrial Distribution Business from Baxter's
facilities into its own distribution facilities. Each time such operations are
transferred from a Baxter facility to a VWR facility, VWR will purchase
certain inventories of the laboratory supplies and equipment which Baxter then
holds in that facility for sale in connection with the Industrial Distribution
Business.
For Baxter's basic services under the Services Agreement, VWR will pay
Baxter monthly an amount equal to 5.5% of the total sales of the Industrial
Distribution Business which are serviced by Baxter, although no such amounts
will be payable for the first three months of the Services Agreement. The
minimum amount payable by VWR to Baxter for its basic services during the
first fifteen months under the Services Agreement is $18,645,000. In addition,
under the Services Agreement VWR will reimburse Baxter for customary net
freight expenditures incurred by Baxter in performing such basic services and
will make certain incremental payments to Baxter for any additional services
provided by Baxter to VWR.
At closing under the Asset Purchase Agreement, VWR and Baxter will also
enter into a Distribution Agreement (the "Baxter Distribution Agreement")
pursuant to which VWR will be granted the right to sell and distribute certain
Baxter-manufactured products to customers for use in laboratories, production
plants and other facilities not involved in the care of human patients or the
diagnosis of disease or defect for the purpose of care of human patients. The
Baxter Distribution Agreement, which will continue until September 30, 2000
(and be automatically renewed for successive one-year terms thereafter unless
terminated as provided therein), imposes specified minimum purchase
obligations on VWR which increase annually over its term.
Baxter's principal executive offices are located at One Baxter Parkway,
Deerfield, Illinois, 60015 and its telephone number at such offices is (708)
948-2000.
DESCRIPTION OF OTHER FINANCING OF THE ACQUISITION
In addition to the financing to be provided by the transactions with EML
described above in this Proxy Statement, the Corporation will require senior
bank financing for the Acquisition and the post-Acquisition conduct of its
increased business operations. Each of Bank of America National Trust and
Savings Association, PNC Bank and CoreStates Bank, N.A. (collectively, the
"Banks") have entered into a commitment letter (the "Commitment Letter") with
the Corporation. The Commitment Letter sets forth the terms under which,
subject to the negotiation and execution of a mutually satisfactory loan
agreement and other conditions set forth therein, the Banks will lend the
Corporation an aggregate of $285,000,000 (the "Senior Facility"). The
principal terms and conditions of the Commitment Letter are described below.
While BA Securities, Inc., an affiliate of Bank of America, has undertaken to
syndicate, on behalf of the Banks, a portion of the principal amount of the
Senior Facility to other participants, the commitment of each of the Banks is
not contingent on such syndication. VWR is currently discussing with Goldman,
Sachs the possible participation of Goldman, Sachs in the Senior Facility.
The Senior Facility will consist of a five-year amortizing term loan of
$135,000,000 (the "Term Loan") and a revolving credit facility of $150,000,000
(the "Revolver"). The Term Loan will require scheduled principal payments, as
well as mandatory prepayments from excess cash flow (as to be defined) and
from certain types of corporate transactions (e.g., asset sales, issuances of
equity, etc.) should VWR elect to engage in any such transactions.
18
<PAGE>
The loans under the Senior Facility will be secured by substantially all of
the tangible and intangible personal property of the Corporation and its
subsidiaries and the Corporation will agree not to create any liens on its
real property. The Corporation will be obligated to grant liens on its real
property to secure the Senior Facility in the event the Banks should later
request it to do so.
Both the Term Loan and the Revolver will bear interest rates based, in such
relative principal amounts as the Corporation shall elect, on the London
Interbank Offered Rate ("LIBOR") or the prime rate announced from time to time
by CoreStates Bank, N.A. ("Prime"). The Corporation will be obligated to pay
amounts in excess of such floating rates (between .75% and 2.5% in the case of
LIBOR elections and 0% and 1% in the case of Prime elections), which such
amounts will vary depending upon the relationship between the Corporation's
earnings before interest, taxes, depreciation and amortization ("EBITDA") and
the then aggregate amount outstanding under the Senior Facility. The
Corporation would also be required to pay a commitment fee on the unused
portion of the Revolver of between .25% and .5%, also varying depending on the
relationship between the Corporation's EBITDA and aggregate borrowings under
the Senior Facility.
The terms of the Revolver will provide that the Corporation must have at
least $20,000,000 undrawn on the Revolver for at least thirty consecutive days
in the first twelve months following the closing and at least $30,000,000
undrawn for at least thirty consecutive days during each twelve month period
thereafter. Borrowings under the Revolver will be limited to 85% of eligible
accounts receivable and 50% of the eligible inventory.
The definitive documentation will include various financial covenants of the
Corporation, including covenants with respect to minimum EBITDA, maximum
senior leverage ratio, minimum interest coverage, minimum net worth, and
minimum consolidated fixed coverage rates. The definitive documentation will
also include other customary covenants in loan agreements of this type,
customary representations and warranties, and customary conditions to each
drawing.
VWR'S REASONS FOR THE ACQUISITION
VWR operates in a market which demands that distribution companies operate
more efficiently to remain profitable and competitive. Over the past few years
VWR's management has taken several steps to operate more efficiently. The
consolidation and restructuring of certain regional and corporate functions
are examples of cost-saving steps VWR has undertaken since 1993. While these
steps have created cost savings, VWR's current infrastructure (including,
without limitation, facilities and systems) is capable of absorbing a higher
level of sales and to realize substantial further efficiencies, VWR must
increase the volume of products flowing through its warehouses to further
absorb fixed warehousing and other selling, general and administrative costs.
Facing similar market demands in Canada, VWR has been able to create
operating efficiencies by increasing volume and sales through integration of
acquired businesses into VWR's Canadian infrastructure. VWR began expanding
its market share in Canada with the acquisition of John's Scientific, Inc. in
1992. In October 1994, VWR acquired the laboratory supply business of Canlab,
a division of Baxter Corporation, an affiliate of Baxter.
VWR believes that it is necessary for it to expand further its domestic and
international customer and revenue base to achieve certain marketing and other
efficiencies, which would allow VWR to compete more effectively and
profitably. VWR's Board has concluded that the Acquisition is an attractive
method of expanding its customer base and volume both currently and in the
future and utilizing existing capacity in its domestic infrastructure.
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<PAGE>
As a result of the Acquisition, VWR is expected to have approximately $1
billion in sales and will be one of the largest distributors in the
approximate $7-8 billion industrial, government and education laboratory
supply market. VWR expects to achieve several synergies from the combination,
which VWR believes will result in improved operating performance. VWR expects
to phase in the integration of the Industrial Distribution Business within
approximately 18 months of the closing date of the Acquisition. Operating
efficiencies and synergies are anticipated to include, among other things:
. The expected economies that potentially can be achieved by combining the
two similar businesses without a proportionate increase in overhead
through the consolidation of office and distribution facilities and
functions.
. Utilization of excess capacity of VWR's current infrastructure by
increasing the volume of products that flow through VWR's warehouses and
thus spreading fixed costs (including selling, general and
administrative expenses) over a much larger base of sales.
. Revenue enhancement potential resulting from the cross-selling
opportunities between the two businesses including sales to VWR's
customers of Baxter's critical environmental products for non-patient
care, and to Baxter's customers of VWR's furniture products. Under the
Baxter Distribution Agreement, VWR will have immediate access to
products manufactured by Baxter for VWR's sale for use in cleanrooms and
critical environments. This access will give VWR a significantly broader
product line and VWR believes it will make it a more attractive
supplier.
. The significant overlap of the relationships that VWR and Baxter have
with customers and vendors will allow for an efficient integration of
the two businesses. It will also provide purchasing economies with
vendors due to increased volume.
RISKS TO VWR ASSOCIATED WITH THE ACQUISITION
For the reasons stated above, the Corporation's Board of Directors believes
that the Acquisition is in the best interests of the Corporation and its
shareholders. However, shareholders should be aware of the fact that the
Acquisition, and the financing required to effect the Acquisition (including
the Corporation's transactions with EML discussed under "Issuance of
Additional Common Shares to EML"), involve risks to VWR, including but not
limited to the following:
. Successful integration of the Industrial Distribution Business into VWR
may ultimately require greater time and expense than are currently
anticipated by VWR's management.
. The expected synergies of the Acquisition may not be fully realized or
their realization may be significantly delayed.
. The successful integration of the Industrial Distribution Business into
VWR will be significantly dependent upon VWR's ability to attract and
retain the personnel (including those who are now Baxter employees)
necessary to effectively integrate, and thereafter operate, the combined
businesses. (See "Issuance of Additional Common Shares to EML--Certain
Officers' Agreements.")
. The adequacy of the Corporation's post-Acquisition revenues to service
its substantially increased indebtedness and to meet expenses generally
will be dependent upon the Corporation's ability to retain both its
historic customer base and those customers which were formerly customers
of the Industrial Distribution Business in the context of an extremely
competitive distribution marketplace.
. As a result of the Acquisition the Corporation's debt-to-equity ratio
will increase from 1.95-to-1.00 at March 31, 1995 to 2.39-to-1.00 on a
pro-forma basis. Also, VWR's consolidated long-term debt will increase
from an actual outstanding amount of $79.1
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million at March 31, 1995 to $372.7 million on a pro-forma basis. As a
result, the Corporation's pro forma interest expense for the year ended
December 31, 1994, including $17.5 million of interest expense related
to the Debenture which will be paid with Common Shares, approximates
$36.4 million compared to $5.1 million actually incurred in the year
ended December 31, 1994. The extent of its indebtedness, both senior and
subordinated, may make it difficult for the Corporation to borrow
additional funds in its future, if needed, and may increase
substantially the cost to VWR of any additional borrowings even if such
funds are available.
. During at least the first six months of the Services Agreement, most of
the Industrial Distribution Business will be serviced by Baxter.
Accordingly, while Baxter covenants to perform services under such
Agreement in a manner consistent with past practice and with the same
degree of care, skill and prudence customarily exercised by it in
providing similar services to its own operating divisions prior to the
date of such Agreement, the failure of Baxter to provide such services
in a satisfactory manner could be expected to have a material adverse
effect on VWR's results of operations and condition (financial or
otherwise).
. In each year during the term of the Baxter Distribution Agreement, VWR
will be required to meet substantial minimum purchase requirements or,
if such minimums are not achieved, to purchase products or pay to Baxter
an amount, in each case, equal to any deficiency. Such minimum
requirements increase in each successive year. The failure of VWR to
meet such minimum purchase requirements because of its inability to
resell the products it is required to purchase from Baxter could be
expected to have a material adverse effect on VWR's results of
operations and condition (financial or otherwise). The minimum purchase
requirement of $63,000,000 for the first contract year under the Baxter
Distribution Agreement represents an approximate 12.5% increase over the
annualized unaudited sales of the Industrial Distribution Business of
comparable products during the quarter ended March 31, 1995. (See
"Description of the Acquisition of the Industrial Distribution
Businesses of Baxter Healthcare Corporation--Other Material Contacts--
Baxter Distribution Agreement.")
OPINION OF FINANCIAL ADVISER RELATING TO THE ACQUISITION
Goldman, Sachs delivered to the VWR Board of Directors its written opinion
that, as of May 24, 1995, the consideration to be paid by VWR for the
Industrial Distribution Business pursuant to the Asset Purchase Agreement is
fair to VWR. Goldman, Sachs received no instructions from VWR, nor were any
limitations imposed by VWR or its affiliates on the scope of the investigation
made or procedures followed in connection with its fairness opinion. The full
text of the opinion of Goldman, Sachs dated May 24, 1995, which sets forth
assumptions made, matters considered and limits on the review undertaken, is
attached as Exhibit V to this Proxy Statement. VWR SHAREHOLDERS ARE URGED TO
READ THE GOLDMAN, SACHS OPINION CAREFULLY AND IN ITS ENTIRETY. In the opinion
of VWR's management, since May 24, 1995, no events have occurred, and there
has been no significant change in any information available to Goldman, Sachs
which should alter Goldman Sachs' opinion given as of such date. The summary
of the opinion of Goldman, Sachs as set forth in this Proxy Statement is
qualified in its entirety by reference to the full text of such opinion.
Goldman, Sachs' opinion is with respect only to the fairness of the
consideration to be paid by VWR to Baxter in connection with the Acquisition
and does not constitute a recommendation to any VWR shareholder as to how to
vote upon the issuance of the EML Shares to EML nor does it any way constitute
an opinion regarding the fairness to VWR of the consideration paid by EML for
the EML Shares and the Debenture.
In connection with its opinion, Goldman, Sachs reviewed, among other things,
the Asset Purchase Agreement (including the exhibits thereto), the Annual
Reports to Shareholders and
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<PAGE>
Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q of VWR and
Baxter for the five years ended December 31, 1994. For the Industrial
Distribution Business, Goldman, Sachs reviewed certain internal financial
analyses, unaudited financial results for the three years ended December 31,
1994, and projected sales and gross profit for 1995 prepared by Baxter, and
projected financial forecasts for 1995-1999 prepared by VWR as of April 20,
1995. Goldman, Sachs noted that audited financial information for the
Industrial Distribution Business had not been prepared and, accordingly, had
not been reviewed by it. Goldman, Sachs also held discussions with members of
the senior managements of Baxter and the Industrial Distribution Business
regarding their respective past and current business operations and financial
condition. Goldman, Sachs also held discussions with members of the senior
management of VWR, Baxter and the Industrial Distribution Business regarding
future prospects of the Industrial Distribution Business. In addition,
Goldman, Sachs compared certain financial information for the Industrial
Distribution Business with similar information for certain other companies the
securities of which are publicly traded, reviewed the financial terms of
certain recent business combinations in the distribution industry specifically
and in other industries generally and performed such other studies and
analyses as it considered appropriate. Goldman, Sachs expressed no opinion
with respect to any transaction undertaken by VWR to finance the transactions
pursuant to the Asset Purchase Agreement.
Goldman, Sachs relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by it for
purposes of its opinion. In that regard, Goldman, Sachs assumed, with VWR's
consent, that the projected sales and gross profit for 1995 prepared by Baxter
and the financial forecasts prepared by VWR, including, without limitation,
projected cost savings and operating synergies resulting from the acquisition
of the Industrial Distribution Business by VWR and other acquisition-related
adjustments have been reasonably prepared on a basis reflecting the best
currently available judgments and estimates of Baxter and VWR and that such
forecasts will be realized in the amounts and at the times contemplated
thereby. In addition, Goldman, Sachs has not made an independent evaluation or
appraisal of the assets and liabilities of the Industrial Distribution
Business. Goldman, Sachs has not been furnished with any such evaluation or
appraisal. Goldman, Sachs also assumed that VWR will receive all necessary
regulatory approvals to complete the transactions contemplated by the Asset
Purchase Agreement without undue delay.
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 is
familiar with VWR having acted as its financial advisor in connection with,
and having participated in certain of the negotiations leading to, the Asset
Purchase Agreement and is discussing with VWR its participation in the senior
bank financing to be used for the Acquisition and the post-Acquisition conduct
of VWR's business. Goldman, Sachs also provided, and may provide in the
future, certain investment services to Baxter unrelated to the Acquisition.
Recent investment banking services provided to Baxter International Inc. by
Goldman, Sachs include serving as a managing underwriter of public offerings
of its debt securities and acting as agent to its commercial paper program.
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 VWR and/or Baxter International Inc. for its own account and for
the account of customers of Goldman, Sachs. As of May 24, 1995, Goldman, Sachs
held for its own account a net short position of 21,754 of the shares of
Baxter International Inc.
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<PAGE>
Pursuant to a letter agreement dated September 8, 1994 (the "Engagement
Letter"), VWR engaged Goldman, Sachs to act as its financial advisor in
connection with the possible acquisition of all or a portion of the stock or
assets of the Industrial Distribution Business. Pursuant to the terms of the
Engagement Letter, VWR has paid Goldman, Sachs an initial fee of $150,000 (the
"Initial Fee"), and has agreed to pay Goldman, Sachs an ongoing monthly
retainer fee of $75,000 per month commencing after April 30, 1995 (the
"Monthly Retainer Fee"). VWR has also agreed to pay Goldman, Sachs a
transaction fee of $3,000,000 if, among other things, at least 50% of the
assets of the Industrial Distribution Business are acquired by VWR. The
Initial Fee and any Monthly Retainer Fee would be credited against any such
transaction fee. VWR has agreed to reimburse Goldman, Sachs for its reasonable
out-of-pocket expenses, including attorneys' fees and disbursements plus any
sales, use or similar taxes (including additions to taxes, if any) arising in
connection with the engagement. To date Goldman, Sachs has not received any
reimbursement of out-of-pocket expenses. Goldman, Sachs estimates that its
out-of-pocket expenses, including fees and expenses of its counsel, amount to
approximately $24,400. VWR has also agreed to indemnify Goldman, Sachs against
certain liabilities, including certain liabilities under the federal
securities laws.
REGULATORY APPROVALS
The Corporation and Baxter have made all requisite filings under the HSR Act
and the applicable waiting period has been terminated.
SUMMARY OF THE ASSET PURCHASE AGREEMENT
The Asset Purchase Agreement is attached as Exhibit VI to this Proxy
Statement and is incorporated herein by reference.
Purchase of Industrial Distribution Business. In the Acquisition, the
Corporation will purchase from Baxter certain specified assets (the "Purchased
Assets") and assume certain liabilities, in each case, associated with the
Industrial Distribution Business, for $400,000,000, subject to adjustment as
set forth in the Asset Purchase Agreement. For a period of up to 24 months
after the Closing Date, Baxter will provide, on a region-by-region basis,
certain services in connection with VWR's sales to customers of the Industrial
Distribution Business pursuant to the terms and conditions of the Services
Agreement. In addition, Baxter will supply certain of its manufactured
products to VWR for distribution to customers of the Industrial Distribution
Business and other customers of VWR pursuant to the terms of the Baxter
Distribution Agreement. The Services Agreement and the Baxter Distribution
Agreement are described in more detail below.
Employees of Industrial Distribution Business. VWR will offer employment to
all of the employees of Baxter's Industrial Distribution Business (the
"Business Employees"). As of April 26, 1995, there were approximately 570
Business Employees. Subject to certain limitations, VWR and Baxter will share
equally amounts payable to those Business Employees who reject such offers of
employment from VWR and are not retained by Baxter and who are eligible for
severance benefits under Baxter's policies.
Conditions to the Acquisition. The respective obligations of the Corporation
and Baxter to consummate the Acquisition are subject to the satisfaction of
the following conditions, any or all of which may be waived by VWR and Baxter
to the extent permitted by applicable law: (a) the issuance of the EML Shares
by VWR to EML shall have been duly approved by the requisite vote of VWR's
shareholders in accordance with law and applicable rules, regulations and
practices of the Nasdaq Stock Market, (b) the applicable waiting periods under
the HSR Act or any extensions thereof with respect to the Acquisition shall
have expired and no injunction or restraining order
23
<PAGE>
shall have been issued by any court of competent jurisdiction and be in effect
which restrains or prohibits any material transaction contemplated by the
Asset Purchase Agreement; (c) the parties shall have executed and delivered
the Baxter Distribution Agreement and the Services Agreement; and (d) certain
other customary conditions such as the accuracy of representations and
warranties, performance of agreements and covenants and the lack of certain
governmental proceedings.
Non-Competition. With certain exceptions, Baxter has agreed for a three-year
period following the Closing Date not to enter into any business in
competition with VWR. Such exceptions include the purchase as a passive
investor of up to 8% of the outstanding publicly-traded shares of any
corporation, the purchase of equity interests of an entity with direct and
indirect net sales of laboratory equipment and supplies (to customers which
purchase products distributed by the Industrial Distribution Business) which
do not exceed $100,000,000 in such entity's most recently completed fiscal
year, the continued carrying on of any aspect of Baxter's medical/surgical
supplies or medical/surgical diagnostics businesses for clinical uses as
operated as of the Closing, and the selling and distributing of products
competitive with or the same as the products of the Industrial Distribution
Business to laboratories and other facilities of a clinical customer if such
clinical customer conditions the sale of medical/surgical or diagnostic
products upon the sale and distribution of such other products to its non-
clinical laboratories and other facilities.
Indemnification. The Asset Purchase Agreement provides each party with the
right to seek indemnification for such customary matters as any (i) breach of
or inaccuracy in any representation or warranty; (ii) breach or nonfulfillment
of any agreement or covenant; or (iii) failure to satisfy any excluded/assumed
liability. Except for matters relating to the excluded/assumed liabilities,
the rights of a party to seek indemnification is limited in certain respects,
including, (i) a claim for indemnification may not be made until, and then
only to the extent, that the total of all losses exceeds $1,000,000; (ii) a
claim may not be made after two years following the Closing; and (iii) the
maximum aggregate liability of a party in respect of all claims for
indemnification is limited to $300,000,000.
Termination and Expiration; Liquidated Damages. The Asset Purchase Agreement
may be terminated by either party if the Closing shall not have occurred on or
before October 31, 1995 because of the failure to satisfy any condition
precedent to the obligations of such party. The Asset Purchase Agreement
provides that if the Closing has not occurred due to the inability of a party
to fulfill certain conditions required of it prior to Closing, that party will
be obligated to pay $5,000,000, and no more, to the other party as liquidated
damages. In addition, if the shareholders of VWR do not approve the issuance
and sale of the EML Shares, VWR will be obligated to pay $5,000,000, and no
more, to Baxter as liquidated damages. No payment is due from any party if the
Asset Purchase Agreement is terminated or expires due to antitrust matters.
OTHER MATERIAL CONTRACTS
The Services Agreement and the Baxter Distribution Agreement are attached
hereto as Exhibits VII and VIII, respectively, and are incorporated herein by
reference.
Services Agreement. The Services Agreement governs the provision by Baxter
of certain services to VWR to enable the uninterrupted continuation of the
Industrial Distribution Business after the Closing as well as an orderly
transfer of the Industrial Distribution Business to VWR. Under the Services
Agreement, Baxter will continue to provide the same type of services to the
customers of the Industrial Distribution Business after the date of Closing as
it had provided prior to such date. Such services include order entry,
shipping, invoicing, credit and collection, and inventory stocking and
replenishment. While the term of the Services Agreement is for two years,
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upon prior notice, VWR may direct Baxter to discontinue the provision of
services in any particular region. No service fees are payable for services
under the Services Agreement during the first three months of the term of such
Agreement. VWR will make monthly payments during the remaining term of the
Services Agreement to Baxter at the rate of 5.5% of the total sales of certain
products sold to customers of the Industrial Distribution Business which are
serviced by Baxter; provided, VWR will be obligated to pay a minimum of
$18,645,000 to Baxter during the first fifteen months of such Agreement. Upon
the cessation of services by Baxter at a particular facility, VWR will be
required to purchase from Baxter the inventory of laboratory supplies and
equipment held by Baxter at such facility for sale to customers of the
Industrial Distribution Business.
Baxter Distribution Agreement. Under the Baxter Distribution Agreement,
Baxter will grant to VWR the right to sell and distribute for non-patient use
(anywhere except in Canada) certain products and accessories manufactured by
Baxter and its affiliates. The Baxter Distribution Agreement, which has a term
ending on September 30, 2000, provides, among other things, that VWR will be
obligated during each year to either purchase a minimum dollar amount of
products for sale in each of the United States and internationally, or, if
such minimum requirements have not been met during such year, purchase
products or pay to Baxter an amount, in each case, equal to any such
deficiency. The minimum aggregate domestic and international requirements for
each of the five years of the Baxter Distribution Agreement are as follows:
Year 1--$63,000,000; Year 2--$74,000,000; Year 3--$82,000,000; Year 4--
$89,000,000; and Year 5--$96,000,000.
ACCOUNTING FOR THE ACQUISITION
VWR will account for the transaction under the purchase method of
accounting. The Corporation will allocate the purchase price to the estimated
fair values of the assets acquired and liabilities assumed, with the excess
recorded as goodwill. VWR estimates the amount of the purchase price allocable
to goodwill will approximate $361,000,000 which will be amortized to
operations on a straight-line basis over 40 years. The results of operations
of the Industrial Distribution Business will be included in VWR's financial
statements from the effective date of the Acquisition.
FEDERAL INCOME TAX CONSEQUENCES
The Acquisition will be in the form of a purchase of assets for cash and the
assumption of certain liabilities. Other than acquired accounts receivable,
substantially all of the purchase price in the acquisition will be allocable
to intangible assets such as goodwill and going concern value and,
accordingly, will be amortizable by VWR over fifteen years for federal
corporate income tax purposes. Neither VWR nor its shareholders will recognize
any income or gain for federal income tax purposes by reason of the issuance
of VWR shares to EML or by reason of the completion of the Acquisition.
PRIOR TRANSACTION
On October 31, 1994, VWR (through a wholly-owned subsidiary) acquired for
approximately $13,900,000 the business and certain assets of the Canlab
division ("Canlab") of Baxter Corporation, an affiliate of Baxter. Canlab was
engaged (solely in Canada) in the distribution of general laboratory products
to industrial users (a business which was similar to that currently conducted
by the Industrial Distribution Business) and biomedical users.
CORPORATE NAME CHANGE
Upon the closing of the Acquisition, VWR is expected to change its corporate
name from "VWR Corporation" to "VWR Scientific Products Corporation."
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MARKET DATA
On May 24, 1995, the last trading day prior to the joint announcement by VWR
and Baxter that they had executed the Asset Purchase Agreement, the high and
low per share sales price of VWR's Common Shares, as reported by the Nasdaq
Stock Market, were $10.00 and $9.25, respectively.
INFORMATION ABOUT THE INDUSTRIAL DISTRIBUTION BUSINESS
The following information about the Industrial Distribution Business has
been supplied by Baxter for inclusion in this Proxy Statement.
DESCRIPTION OF BUSINESS
The Industrial Distribution Business is in the business of distributing
general laboratory supplies and equipment to customers such as analytical
research and development laboratories, educational institutions, environmental
testing laboratories, cleanroom facilities, medical device manufacturers,
electronic and semiconductor manufacturers, government research facilities and
others. The Industrial Distribution Business is one of the largest
distributors of laboratory equipment and supplies in the United States, with
1994 domestic and international sales of approximately $471,000,000. The
Industrial Distribution Business does not include Baxter's distribution of
products, whether manufactured by it or by others, in Japan and Canada or to
customers of Baxter who purchase such products for use in the care of human
patients or for the diagnosis of disease or defect for the purpose of caring
for human patients.
CUSTOMERS AND SUPPLIERS
The Industrial Distribution Business serves two customer categories: non-
clinical laboratories and research facilities, and the cleanroom industry. The
Industrial Distribution Business has approximately 40,000 active customers.
Although many of the Fortune 100 companies are counted among the Industrial
Distribution Business customers base, no one customer accounts for more than
3% of total revenues.
The Industrial Distribution Business has supply and distribution
relationships with approximately 2,000 manufacturers. Approximately 80% of the
total revenues of the Industrial Distribution Business come from the sale of
products from the top 25 of these suppliers, which include Baxter
manufacturing units. Many suppliers assist in the marketing and sales of their
products by maintaining a technical salesforce which works with Industrial
Distribution Business sales representatives.
COMPETITION
The Industrial Distribution Business competes with several national
distributors and many smaller, regional distributors. In addition, there are a
number of manufacturers of laboratory chemicals, supplies, and equipment that
sell directly to customers and do not go through distributors.
DESCRIPTION OF PROPERTY
The Industrial Distribution Business utilizes Baxter's distribution
infrastructure of warehouses and transportation fleet, and is charged at
Baxter's cost for doing so, thus there is minimal property, plant and
equipment of the Industrial Distribution Business.
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SELECTED FINANCIAL DATA--INDUSTRIAL DISTRIBUTION BUSINESS
The selected financial data set forth below as of December 31, 1994 and 1993
and for each of the years in the three-year period ended December 31, 1994 are
derived from the audited financial statements of the Industrial Distribution
Business appearing elsewhere in this Proxy Statement. The selected financial
data as of December 31, 1992, 1991 and 1990 and for the two years ended
December 31, 1991 and 1990 and as of and for the three months ended March 31,
1995 and 1994, are derived from the unaudited financial statements of the
Industrial Distribution Business prepared by its management. The unaudited
financial statements as of March 31, 1995 and for the three months ended March
31, 1995 and 1994 appear elsewhere in this Proxy Statement. The information as
of December 31, 1992 and for 1990, 1991 and the interim periods is unaudited;
however, in the opinion of Baxter's management, all adjustments (consisting
only of normal recurring adjustments) necessary for a fair presentation of
such information have been included. Operating results for the three months
ended March 31, 1995 may not be indicative of the results that may be achieved
for the year ending December 31, 1995.
The selected financial data should be read in conjunction with the
Industrial Distribution Business's financial statements and related notes
thereto and Management's Discussion and Analysis of Results of Operations and
Financial Condition included elsewhere in this Proxy Statement.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31 YEAR ENDED DECEMBER 31
------------- ----------------------------------
1995 1994 1994 1993 1992 1991 1990
------ ------ ------ ------ ------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA
Net sales $122.0 $111.7 $471.3 $450.2 $427.8 $398.7 $412.4
Income before cumulative ef-
fect of accounting change 6.5 5.3 23.6 19.9 21.0 18.0 19.6
<CAPTION>
MARCH 31 DECEMBER 31
------------- ----------------------------------
1995 1994 1994 1993 1992 1991 1990
------ ------ ------ ------ ------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Total assets $157.6 $146.5 $147.2 $140.9 $129.0 $133.3 $136.8
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF THE INDUSTRIAL DISTRIBUTION BUSINESS
The following is a discussion of the financial condition and results of
operations of the Industrial Distribution Business. The discussion should be
read in conjunction with the combined financial statements and the notes
thereto included elsewhere in this Proxy Statement.
OVERVIEW
The Industrial Distribution Business distributes a wide variety of products
used by industry, government, and research and educational institutions. These
customers consist of laboratories, production plants and other facilities not
involved in the care of human patients. Products distributed include
consumable glass and plasticware, laboratory equipment, gloves and other
apparel, safety supplies, and laboratory chemicals. The Industrial
Distribution Business competes against several other national distributors and
numerous regional and local distributors. In
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addition, the Industrial Distribution Business competes against various
manufacturers who ship directly to end users without going through
distributors.
RESULTS OF OPERATIONS
The following table shows selected information concerning the results of
operations for the three years ended December 31, 1994:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1994 1993 1992
------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Net Sales...................................... $ 471.3 $ 450.2 $ 427.8
% Growth..................................... 4.7% 5.2%
Cost of Goods Sold............................. $357.9 $338.7 $313.9
% Growth..................................... 5.7% 7.9%
% of Sales................................... 75.9% 75.2% 73.4%
Gross Profit Margin............................ 24.1% 24.8% 26.6%
Marketing and Administrative................... $ 72.3 $ 76.5 $ 72.8
% Growth (decline)........................... (5.5)% 5.1%
% of Sales................................... 15.3% 17.0% 17.0%
Income Before Income Taxes and Cumulative Ef-
fect of Accounting Change..................... $ 40.4 $ 33.8 $ 35.6
% Growth (decline)........................... 19.5% (5.0)%
% of Sales................................... 8.6% 7.5% 8.3%
</TABLE>
The sales increases in 1994 and 1993 were achieved by a combination of
Baxter management's actions to refocus the Industrial Distribution Business on
its historical core competencies of laboratory chemicals and general
laboratory products in medium and small accounts. In addition, the Industrial
Distribution Business began its strategic focus on cleanroom manufacturing
through its Critical Environments program by deploying a dedicated salesforce,
and by the addition of new, key suppliers' product lines.
Gross profit margins declined in 1994 and 1993 due to competitive pressures
in the market, especially in the areas of general laboratory products and
laboratory chemicals. These pressures have been offset to some degree by a
favorable mix shift to higher-margin, proprietary product lines, and by
programs and incentives to improve margins. Such programs and incentives
included implementing price increases when possible and aggressively focusing
on limiting supplier cost increases. Additionally, performance measures for
management included targets for margin improvement.
The 1993 increase in marketing and administrative expenses reflects the
investments made in the Critical Environments sales and marketing
organization. The 1994 decrease in marketing and administrative expenses
reflects the efficiencies obtained through Baxter's U.S. Distribution
Division's cost reduction program implemented in 1993. This cost reduction
program primarily involved the consolidation of Baxter's distribution
businesses. This consolidation resulted in cost savings in operations
management, systems and administrative functions.
The increase in income before income taxes and cumulative effect of
accounting change for 1994 was driven by a combination of increases in
revenues and focused management of expense growth, partially offset by higher
costs and competitive pricing.
28
<PAGE>
The effective tax rate for 1994 was 41.6% versus 41.1% and 41.0% for 1993
and 1992. This change reflects domestic statutory rates for both federal and
state taxes, combined with provisions for foreign taxes for the increasing
amount of international business.
The following table shows selected information concerning the results of
operations for the three months ended March 31, 1995 and 1994 (unaudited):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
%
1995 1994 GROWTH
------ ------ ------
(DOLLARS IN
MILLIONS)
<S> <C> <C> <C>
Net Sales......................................... $122.0 $111.7 9.2%
Marketing and Administrative $ 18.6 $ 17.8 4.5%
% of Sales...................................... 15.2% 15.9%
Income Before Income Taxes........................ $ 10.9 $ 9.1 19.8%
% of Sales...................................... 8.9% 8.1%
Gross Profit Margin............................... 24.5% 24.3%
</TABLE>
Net sales for the quarter ended March 31, 1995 increased over the comparable
period in 1994 primarily as a result of the increased focus on the Critical
Environments program. As discussed previously, this focus was implemented in
1994 through the establishment of a dedicated salesforce and key suppliers'
product lines.
The gross profit margin for the three months ended March 31, 1995 improved
slightly from the similar period of 1994. Margin has been maintained through
management's efforts to limit cost increases from suppliers and improve the
mix of higher margin product lines.
The decrease in marketing and administrative expenses as a percentage of
sales for the three months ended March 31, 1995 as compared to the same period
in 1994 reflects the Industrial Distribution Business' share of savings from
efficiencies gained through Baxter's U.S. Distribution Division's cost
reductions implemented throughout 1993 and 1994, and the strong growth rate in
revenues.
The increase in income before income taxes for the three months ended March
31, 1995 versus the comparable period of 1994 was driven by sales growth, a
slight margin improvement over the prior year and expense growth leverage.
ADOPTION OF NEW ACCOUNTING STANDARDS
The Industrial Distribution Business adopted FASB Statement No. 109,
"Accounting for Income Taxes" effective January 1, 1993. The effect on the
Industrial Distribution Business' financial statements of adopting this
statement was immaterial. The 1992 charge for the cumulative effect of
adopting FASB Statement No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" covering the accounting for retiree benefits
other than pensions, was $.5 million (net of $.3 million of income tax
benefit). Statement No. 106 was adopted during the fourth quarter of 1992,
retroactive to January 1, 1992.
LIQUIDITY AND CAPITAL RESOURCES
Cash generated by the Industrial Distribution Business is transferred to
Baxter affiliates as generated. Accordingly, the balance sheets of the
Industrial Distribution Business reflect no cash balances. Funds required for
capital expenditures or other uses have been obtained from operating cash flow
or from advances from Baxter. There is no debt associated with the Industrial
29
<PAGE>
Distribution Business. Historically, the Industrial Distribution Business has
been a net generator of cash to Baxter affiliates. See the Combined Statements
of Cash Flows for the Industrial Distribution Business included elsewhere in
this Proxy Statement.
For the three years ended December 31, 1994, cash flow provided by
operations (which includes working capital components) increased to $18.2
million for 1994 from a level of $10.4 million in 1993. This increase
primarily reflects improved profitability and reduction in inventory, offset
by an increase in accounts receivable. The increase in accounts receivable was
primarily the result of the 1994 relocation of the Industrial Distribution
Business' credit and collection function to Baxter's Shared Services Division
in New Mexico, which has resulted in increased days sales outstanding during
the transition period. The 1993 cash flow provided by operations of $10.4
million decreased from 1992 because of lower net earnings and an increase in
inventories, as the Industrial Distribution Business focused on improved
service levels to customers and built inventory levels for the Critical
Environments program. The decrease in cash flow (used in) provided by
operations for the three months ended March 31, 1995 as compared to the same
period in 1994 was primarily the result of increases in accounts receivable
due to the relocation of the Industrial Distribution Business' credit and
collection function.
The Industrial Distribution Business' current assets exceeded current
liabilities by $58.5 million at December 31, 1994 and $51.8 million at
December 31, 1993. Current assets included receivables of $62.5 million and
inventories of $40.8 million at December 31, 1994. Current assets included
receivables of $52.0 million and inventories of $43.6 million at December 31,
1993. Current assets exceeded current liabilities by $67.7 million at March
31, 1995 and included accounts receivable of $70.9 million and inventories of
$42.6 million. These sources of liquidity are convertible into cash over a
relatively short period of time and thus, will help the Industrial
Distribution Business satisfy normal operating cash requirements.
The Industrial Distribution Business utilizes Baxter's distribution
infrastructure of warehouses and transportation fleet, and is charged at
Baxter's cost for doing so, thus there is minimal property, plant and
equipment on the Industrial Distribution Business' balance sheet.
30
<PAGE>
VWR SELECTED FINANCIAL DATA
The selected financial data set forth below as of and for each of the years
in the five-year period ended December 31, 1994 are derived from the audited
consolidated financial statements of VWR. The selected financial data set
forth below as of, and for each of the three months ended, March 31, 1995 and
1994 are derived from the interim unaudited condensed consolidated financial
statements of VWR. The information for such three month interim periods is
unaudited; however, in the opinion of VWR's management, all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of such information have been included. Operating results for the
three months ended March 31, 1995 may not be indicative of the results that
may be achieved for the year ending December 31, 1995.
The selected financial data should be read in conjunction with the Company's
consolidated financial statements and related notes thereto and Management's
Discussion and Analysis of Results of Operations and Financial Condition
incorporated by reference in this Proxy Statement.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 YEAR ENDED DECEMBER 31
------------------- -----------------------------------------------
1995 1994 1994 1993(1) 1992 1991 1990
--------- --------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA
Sales $ 146,376 $ 122,044 $535,179 $509,235 $490,168 $440,983 $428,568
Cost of sales 115,444 95,538 421,981 392,961 375,737 336,059 325,745
--------- --------- -------- -------- -------- -------- --------
Gross margin 30,932 26,506 113,198 116,274 114,431 104,924 102,823
Operating expenses 28,527 25,088 105,040(2) 105,013 95,322 88,347 85,945
--------- --------- -------- -------- -------- -------- --------
Operating income 2,405 1,418 8,158 11,261 19,109 16,577 16,878
Interest expense and
other 1,487 1,111 5,137 4,708 4,021 4,188 5,489
--------- --------- -------- -------- -------- -------- --------
Income before income
taxes and cumulative
effect of accounting
change 918 307 3,021 6,553 15,088 12,389 11,389
Income taxes 358 124 968 2,663 5,658 4,646 4,419
--------- --------- -------- -------- -------- -------- --------
Income before cumulative
effect of accounting
change $ 560 $ 183 $ 2,053 $ 3,890 $ 9,430 $ 7,743 $ 6,970
========= ========= ======== ======== ======== ======== ========
PER SHARE DATA(3)
Income before cumulative
effect of accounting
change $ 0.05 $ 0.02 $ 0.18 $ 0.35 $ 0.85 $ 0.71 $ 0.66
Dividends 0.04 0.10 0.34 0.40 0.40 0.40 0.40
Book value 3.66 3.68 3.62 3.68 3.80 3.34 3.02
Weighted average common
shares outstanding 11,103 11,124 11,128 11,153 11,128 10,960 10,628
<CAPTION>
MARCH 31 DECEMBER 31
------------------- -----------------------------------------------
1995 1994 1994 1993 1992 1991 1990
--------- --------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Working capital $ 74,525 $ 67,493 $ 75,120 $ 65,197 $ 57,881 $ 52,928 $ 58,991
Total assets 190,233 162,846 173,375 148,777 136,093 126,896 132,876
Long-term debt,
including current
portion 79,098 66,161 81,420 61,907 47,771 47,019 58,277
Shareholders' equity 40,667 40,987 40,168 41,057 42,257 36,832 32,847
</TABLE>
- ---------------------
(1) The results shown are presented before the cumulative effect of change in
accounting for postretirement benefits of $1.4 million (net of income tax
benefit of $.9 million), and include restructuring and other charges of
$3.3 million pretax ($1.9 million net of tax).
(2) Operating expenses for the year ended December 31, 1994 include $.9
million of transition costs related to the acquisition of Canlab.
(3) All share and per share data reflect a two-for-one stock split effective
May 9, 1992.
31
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma combined balance sheet as of March 31, 1995 set
forth below gives effect to the: (i) issuance of 9,617,993 Common Shares to
EML resulting in net proceeds of $115.1 million and borrowings of $135 million
from EML under the Debenture (collectively referred to as the "EML
Investment"); (ii) execution of the proposed $285 million credit agreement
under the Senior Facility (the "Refinancing"); and (iii) the proposed
Acquisition, as if such transactions had occurred on March 31, 1995. The pro
forma financial statements give simultaneous effect to the three transactions
because the impact of the Acquisition and the EML Investment may influence the
shareholders' vote on the issuance of the Common Shares. The proposed
Acquisition is to be accounted for under the purchase method of accounting.
Pursuant to the Asset Purchase Agreement, VWR is not acquiring inventories and
certain trade accounts receivables nor assuming accounts payable and certain
liabilities. However, these working capital items relate to operations of the
acquired business and accordingly, the pro forma balance sheet includes $28.2
million of receivables, $42.6 million of inventories and $42.8 million of
accounts payable. VWR and Baxter negotiated a two-year services agreement
("Services Agreement") whereby, among other things, Baxter will continue to
own and warehouse the inventory related to the Industrial Distribution
Business and VWR will pay Baxter for the inventory upon shipment to customers.
At various stages during the Services Agreement period, VWR will transfer
certain inventories related to the Industrial Distribution Business into VWR's
warehouses. Upon each transfer, VWR is committed to purchase all of the
transferred Baxter inventory at cost as provided in the Services Agreement and
VWR expects to fund such purchases from cash generated from operations and
available borrowings under its then-current credit facility.
The unaudited pro forma combined statements of operations for the year ended
December 31, 1994 and the three months ended March 31, 1995 set forth below
give effect to the EML Investment, Refinancing and Acquisition, as if such
transactions had occurred as of January 1, 1994. The financial statements of
the Industrial Distribution Business reflect the "carve-out" financial
position and results of operations of the Industrial Distribution Business.
Certain general and administrative expenses of Baxter have been allocated to
the Industrial Distribution Business on various bases which, in the opinion of
Baxter's management, are reasonable. However, such expenses are not
necessarily indicative of, and it is not practicable for management to
estimate, the nature and level of expenses which might have been incurred had
the Industrial Distribution Business been operating as a separate independent
company. Potential cost savings from combining the operations are not
reflected in the pro forma combined statement of operations because the
Industrial Distribution Business and VWR's business are not expected to be
fully integrated until after the first anniversary date of the closing. In
addition, pursuant to the Services Agreement, VWR is required to make payments
to Baxter during the Services Agreement period equal to 5.5% of sales
processed by Baxter. The service fee is intended to compensate Baxter for
direct and indirect costs (including corporate allocations) it will incur
during the service period.
The unaudited pro forma adjustments are based upon available information and
upon certain assumptions that VWR believes are reasonable. All information and
financial data concerning the Industrial Distribution Business included in
"Unaudited Pro Forma Financial Information" has been provided to VWR by
Baxter. The unaudited pro forma financial information is provided for
informational purposes only and does not purport to be indicative of VWR's
results of operations that would actually have been achieved had the EML
Investment, Refinancing and Acquisition been completed as of or for the
periods presented, or that may be obtained in the future. The pro forma
financial information should be read in conjunction with the audited and
unaudited historical financial statements of VWR and related notes thereto
incorporated by reference into this Proxy Statement, and of the Industrial
Distribution Business and related notes thereto included elsewhere in this
Proxy Statement, and "Description of the Acquisition of the Industrial
Distribution Business of Baxter Healthcare Corporation" and "Information About
the Industrial Distribution Business" included elsewhere in this Proxy
Statement.
32
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET
MARCH 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS FOR AS ADJUSTED
INDUSTRIAL EML FOR THE EML
DISTRIBUTION INVESTMENT, INVESTMENT,
VWR BUSINESS REFINANCING AND REFINANCING AND
HISTORICAL HISTORICAL ACQUISITION(A) ACQUISITION
---------- ------------ --------------- ---------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Receivables--
Trade receivables $ 82,055 $ 70,900 $152,955 (j)
Other 2,373 2,373
Inventories 46,177 42,600 88,777 (j)
Other 7,493 3,000 10,493
-------- -------- -------- --------
Total Current As-
sets 138,098 116,500 254,598
Property and Equipment--
net 37,215 400 37,615
Goodwill 6,993 40,300 $320,845 (b) 368,138
Other Assets 7,927 400 4,575 (c) 12,902
-------- -------- -------- --------
$190,233 $157,600 $325,420 $673,253
======== ======== ======== ========
LIABILITIES AND SHARE-
HOLDERS' EQUITY
Current Liabilities:
Bank checks
outstanding, less cash
in bank $ 7,517 $ 7,517
Accounts payable 48,125 $ 42,800 90,925 (j)
Accrued liabilities 5,681 6,000 $ (2,452)(d) 9,229
Current portion of
long-term debt 2,250 12,750 (e) 15,000
-------- -------- -------- --------
Total Current Lia-
bilities 63,573 48,800 10,298 122,671
Long-term debt
Credit facility:
Revolver 76,848 (20,000)(f)
45,833 (e)
27,952 (g) 130,633
Term note 120,000 (e) 120,000
Subordinated note pay-
able 135,000 (h) 135,000
Deferred Income Taxes and
Other 9,145 2,300 (2,300) 9,145
Shareholders' equity:
Common stock 11,316 9,618 (i) 20,934
Additional paid-in cap-
ital 29,257 105,519 (i) 134,776
Retained earnings 5,495 5,495
Treasury stock (2,376) (2,376)
Unamortized restricted
stock and ESOP
contribution, and
other (3,025) (3,025)
Net Assets of the In-
dustrial Distribution
Business 106,500 (106,500)
-------- -------- -------- --------
Total stockholders'
equity/
net assets 40,667 106,500 8,637 155,804
-------- -------- -------- --------
Total liabilities &
stockholders' eq-
uity $190,233 $157,600 $325,420 $673,253
======== ======== ======== ========
</TABLE>
33
<PAGE>
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
(a) VWR has entered into the Asset Purchase Agreement to acquire the
Industrial Distribution Business for approximately $400 million in cash.
The acquisition will be accounted for under the purchase method of
accounting and will be funded as follows (in thousands):
<TABLE>
<S> <C>
USE OF FUNDS
Purchase price of Acquisition $400,000
Pay off existing credit facility 56,848
Acquisition closing costs 4,145
Debt issuance cost 4,575
Stock issuance cost 500
--------
Total use of funds $466,068
========
SOURCE OF FUNDS
Exercise of April Warrant $ 10,637
Issuance of Purchase Shares to EML 85,000
Subordinated note payable to EML 135,000
Borrowings under the Senior Facility 235,431
--------
Total source of funds $466,068
========
</TABLE>
Schedule A on page 35 sets forth the details of the individual pro forma
balance sheet adjustments.
(b) Represents: i) the $361 million excess of purchase price (including
estimated acquisition costs of $4.1 million and acquisition liabilities of
$2.0 million) over net assets acquired, less; ii) Industrial Distribution
Business's historical goodwill of $40.3 million related to the Industrial
Distribution Business. The purchase price allocation is tentative and
subject to change.
(c) Represents debt issuance cost which will be amortized over the related
debt instrument period using the straight-line method or effective
interest rate method, as applicable.
(d) Represents an adjustment of $4.5 million to exclude certain accrued
liabilities of Baxter not acquired pursuant to the Asset Purchase
Agreement plus $2 million of estimated acquisition liabilities.
(e) Represents borrowings under the committed $285 million Senior Facility
that will be used to fund a portion of the purchase price and estimated
fees related to the Acquisition and debt issuance costs. The Senior
Facility includes a $150 million revolving facility which is payable on
the fifth anniversary date and a $135 million term note with annual
principal reductions beginning in the first year. The Senior Facility
bears a fluctuating interest rate based on the prime rate or LIBOR at
VWR's option plus an applicable margin between .75% and 2.5% in the case
of the LIBOR election and 0% and 1% in the case of the prime rate
election. VWR is required to enter into interest-rate protection
arrangements for at least 25% of the facility.
(f) Represents the pay down of a portion of the existing revolving credit debt
from application of proceeds from issuance of 1,818,181 Common Shares and
the April Warrant to EML for approximately $20 million on April 13, 1995.
(g) Represents assumed additional borrowings related to the Industrial
Distribution Business working capital which will not be incurred at
closing. See note (j) below.
(h) Represents borrowings under the $135 million Debenture payable to EML used
to fund a portion of the purchase price of the Acquisition. Borrowings
under the Debenture are payable
34
<PAGE>
on the tenth anniversary date and bear interest at 13% per year payable
quarterly as follows: by issuance of Common Shares in the first year in an
amount that will enable EML to obtain an ownership percentage of 49.89%
based on a fixed price of $12.44 per share; deferred in year two which will
be paid with accumulated interest thereon at maturity of the Debenture and;
in cash thereafter beginning in year three.
(i) Represents the (i) issuance of 1,818,181 Common Shares and the April
Warrant to EML on April 13, 1995 resulting in proceeds of $20 million;
(ii) exercise of the April Warrant to purchase 967,015 Common Shares at a
price of $11.00 per share resulting in proceeds of $10.6 million; and
(iii) proposed issuance of 6,832,797 Common Shares to EML for an aggregate
of $85 million in connection with the Acquisition; less (iii) estimated
common stock issuance cost of $.5 million.
(j) Includes certain assets not acquired ($28.2 million of accounts receivable
and $42.6 million of inventory) and liabilities not assumed ($42.8 million
of accounts payable) pursuant to the Asset Purchase Agreement. These
assets and liabilities are related to the historical operations of the
Industrial Distribution Business and accordingly such amounts are included
in the pro forma balance sheet. Inventories and accounts payable of the
Industrial Distribution Business are commingled with Baxter's US
Distribution Division ("USD") and are allocated in the Industrial
Distribution Business's financial statements based on the Company's
percentage of total cost of goods sold of USD. Pursuant to the Service
Agreement entered into between VWR and Baxter, Baxter will continue to own
and warehouse the inventory related to the Industrial Distribution
Business for a period of up to two years. At various stages during the
service agreement period, VWR will transfer certain of the inventories
related to the operations of Industrial Distribution Business into its
warehouses. Upon each such transfer, VWR is committed to purchase such
inventories at cost as provided in the Service Agreement. VWR expects to
fund such purchases from cash generated from operations and available
borrowings under its then current credit facility. Notwithstanding the
aforementioned, VWR is negotiating with Baxter to acquire at closing
additional accounts receivable of the Industrial Distribution Business
(approximately $25.0 million), expected to be paid for on a dollar-for-
dollar basis over a period not to exceed two months.
35
<PAGE>
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
SCHEDULE A--DETAILS OF THE PRO FORMA BALANCE SHEET ADJUSTMENTS
<TABLE>
<CAPTION>
CURRENT
PORTION OF REVOLVING SUBORDINATED
OTHER ACCRUED LONG-TERM CREDIT TERM NOTE
CASH GOODWILL ASSETS LIABILITIES DEBT FACILITY NOTE PAYABLE
--------- -------- ------ ----------- ---------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of
1,818,181 Common
Shares and the
April Warrant to
EML on April 13,
1995 $ 20,000
Proposed
issuance
6,832,797 Common
Shares to EML $ 85,000
Exercise of the
April Warrant to
purchase 967,615
Common Shares 10,637
Issuance of
Debentures
payable to EML 135,000 $(135,000)
Borrowings under
the new Senior
Facility 235,431 $(15,000) (100,431) $(120,000)
--------- -------- ------ ------ -------- --------- --------- ---------
Total Source
of Funds 466,068 $ 0 $ 0 $ 0 (15,000) (80,431) (120,000) (135,000)
Pay-off existing
credit facility (56,848) 2,250 54,598
Purchase price
of Acquisition
including
closing cost of
$4,145 (404,145) 359,145
Accrued
acquisition
liabilities 2,000 (2,000)
Eliminate assets
and liabilities
not acquired (40,300) 4,452
Working capital
assets and
liabilities not
acquired but
included on pro
forma balance
sheet (27,952)
Debt issuance
cost (4,575) 4,575
Stock issuance
cost (500)
--------- -------- ------ ------ -------- --------- --------- ---------
Total Use of
Funds (466,068) 320,845 4,575 2,452 2,250 26,646 0 0
--------- -------- ------ ------ -------- --------- --------- ---------
Net pro forma
adjustment and
footnote
reference $ 0 $320,845(b) $4,575(c) $2,452(d) $(12,750)(e) $ (53,785)(e)(f)(g) $(120,000)(e) $(135,000)(h)
========= ======== ====== ====== ======== ========= ========= =========
<CAPTION>
DEFERRED NET ASSETS
INCOME ADDITIONAL OF INDUSTRIAL
TAXES AND COMMON PAID-IN DISTRIBUTION
OTHER STOCK CAPITAL BUSINESS
--------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
Issuance of
1,818,181 Common
Shares and the
April Warrant to
EML on April 13,
1995 $(1,818) $ (18,182)
Proposed
issuance
6,832,797 Common
Shares to EML (6,833) (78,167)
Exercise of the
April Warrant to
purchase 967,615
Common Shares (967) (9,670)
Issuance of
Debentures
payable to EML
Borrowings under
the new Senior
Facility
--------- ----------- -------------- -------------
Total Source
of Funds $ 0 (9,618) (106,019) $ 0
Pay-off existing
credit facility
Purchase price
of Acquisition
including
closing cost of
$4,145 45,000
Accrued
acquisition
liabilities
Eliminate assets
and liabilities
not acquired 2,300 33,548
Working capital
assets and
liabilities not
acquired but
included on pro
forma balance
sheet 27,952
Debt issuance
cost
Stock issuance
cost 500
--------- ----------- -------------- -------------
Total Use of
Funds 2,300 0 500 106,500
--------- ----------- -------------- -------------
Net pro forma
adjustment and
footnote
reference $2,300 $(9,618)(i) $(105,519)(i) $106,500
========= =========== ============== =============
</TABLE>
36
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS FOR AS ADJUSTED
INDUSTRIAL EML FOR THE EML
DISTRIBUTION INVESTMENT, INVESTMENT,
VWR BUSINESS REFINANCING AND REFINANCING AND
HISTORICAL HISTORICAL ACQUISITION ACQUISITION
---------- ------------ --------------- ---------------
<S> <C> <C> <C> <C>
Sales $146,376 $122,000 $ (1,137)(a) $ 267,239
Cost of sales 115,444 92,200(f) 207,644
-------- -------- -------- ----------
Gross margin 30,932 29,800 (1,137) 59,595
Operating expenses 28,527 18,900 803 (b) 48,230
-------- -------- -------- ----------
Operating income 2,405 10,900 (1,940) 11,365
Interest expense and
other 1,487 8,429 (c) 9,916
-------- -------- -------- ----------
Income before income
taxes 918 10,900 (10,369) 1,449
Income taxes 358 4,400 (4,148)(d) 610
-------- -------- -------- ----------
Net income $ 560 $ 6,500 $ (6,221) $ 839
======== ======== ======== ==========
Net income per share $0.05 $0.04
======== ==========
Weighted average number
of common shares
outstanding(e) 11,103 11,029 22,132
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
PRO FORMA
ADJUSTMENTS FOR AS ADJUSTED
INDUSTRIAL EML FOR THE EML
DISTRIBUTION INVESTMENT, INVESTMENT,
VWR BUSINESS REFINANCING AND REFINANCING AND
HISTORICAL HISTORICAL ACQUISITION ACQUISITION
---------- ------------ --------------- ---------------
<S> <C> <C> <C> <C>
Sales $535,179 $471,300 $ (4,977)(a) $1,001,502
Cost of sales 421,981 357,900(f) 779,881
-------- -------- -------- ----------
Gross margin 113,198 113,400 (4,977) 221,621
Operating expenses 104,124 73,000 2,783 (b) 179,907
Canlab transition ex-
penses 916 916
-------- -------- -------- ----------
Operating income 8,158 40,400 (7,760) 40,798
Interest expense and
other 5,137 31,238 (c) 36,375
-------- -------- -------- ----------
Income before income
taxes 3,021 40,400 (38,998) 4,423
Income taxes 968 16,800 (15,599)(d) 2,169
-------- -------- -------- ----------
Net income $ 2,053 $ 23,600 $(23,399) $ 2,254
======== ======== ======== ==========
Net income per share $0.18 $0.11
======== ==========
Weighted average number
of common shares
outstanding(e) 11,128 10,266 21,394
</TABLE>
37
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(a) Represents an adjustment to reclassify Industrial Distribution Business'
freight-out expense (less amounts charged to customers) from operating
expenses to net sales to conform to VWR's presentation.
(b) Represents the following adjustment to operating expenses (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Eliminate the Industrial Distribution Business's
goodwill amortization expense $ (330) $(1,318)
Record amortization expense for the excess
purchase price related to the Acquisition over
net assets acquired which is being amortized
over 40 years on a straight-line basis 2,270 9,078
Reclassification of the Industrial Distribution
Business's net freight-out expense discussed in
note (a) above (1,137) (4,977)
------- -------
$ 803 $ 2,783
======= =======
</TABLE>
(c)Represents an adjustment to interest expense as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Eliminate interest on the existing credit
facility with weighted average borrowings of
$68.2 million and $77.9 million for the year
ended December 31, 1994 and the three months
ended March 31, 1995, respectively, and weighted
average interest rates of 5.3% and 7.3%,
respectively $(1,415) $(3,608)
Record interest expense on the Senior Facility
assuming borrowings of $256.8 million and $266.5
million in 1994 and 1995, respectively, to fund
the Acquisition purchase price and assumed
additional working capital borrowings of $30
million and assuming weighted average interest
rates of 6.3% in 1994 and 7.8% in 1995
(representative of historical interest rates
using the Senior Facility margins) 5,178 16,214
Record interest expense on the $135 million
Debenture at 13% per year 4,388 17,550
Record amortization of debt issuance costs
related to the Senior Facility ($4.3 million
using the effective interest rate method related
to the term portion and the straight line method
related to the revolving portion) and the
Debenture ($300,000 using the effective interest
rate method) 278 1,082
------- -------
$ 8,429 $31,238
======= =======
</TABLE>
The new credit facility bears a fluctuating interest rate based on the
prime rate or LIBOR at the Company's option. A 1/8 of 1% increase in
the pro forma weighted average interest rate would result in a $.3
million and $.1 million increase in pro forma interest expenses in 1994
and the three months ended March 31, 1995, respectively.
38
<PAGE>
(d)Represents income tax effect of the pro forma adjustments.
(e) The adjusted weighted average number of outstanding shares include Common
Shares of VWR issued or to be issued to EML as follows: (i) 1,818,181
Common Shares issued in April 1995; (ii) 967,015 Common Shares to be
issued upon the exercise of the April Warrant; (iii) proposed issuance of
6,832,797 Common Shares discussed in this Proxy Statement and; (iii)
1,410,722 Common Shares expected to be issued to satisfy interest expense
in year one on the Debenture payable to EML which are included in the
calculation based on the accrual of interest during the first year.
(f) The Industrial Distribution Business's inventory is valued at the lower of
cost (determined on a "first-in, first-out" basis) or market. Cost of
sales have not been adjusted to give the pro forma effect to adopt VWR's
accounting policy to value inventory on the "last-in, first-out" ("LIFO")
method because it is not practical to calculate the pro forma adjustment.
Upon transfer of the inventory to VWR, the acquired inventory will be
valued using the LIFO method of accounting.
COMPARATIVE PER SHARE DATA
The following table sets forth for the periods indicated selected historical
book value, dividends and net income per share of VWR and the corresponding
pro forma equivalent per share amounts after giving effect to the following
transactions: (i) issuance of 9,617,993 Common Shares to EML resulting in net
proceeds of approximately $115.1 million and borrowings of $135 million from
EML under the Debenture (collectively referred as the "EML Investment"); (ii)
execution of the proposed $285 million credit agreement under the Senior
Facility (the "Refinancing"); and (iii) the proposed Acquisition of the
Industrial Distribution Business at a purchase price of $400 million plus
related acquisition costs of approximately $4.1 million and acquisition
liabilities of approximately $2 million. The data presented is based upon the
VWR consolidated financial statements and related notes thereto incorporated
by reference in this Proxy Statement, the Industrial Distribution Business
financial statements and related notes thereto included in this Proxy
Statement, and the unaudited pro forma financial information and related notes
thereto, also appearing in this Proxy Statement. This information should be
read in conjunction with such historical consolidated financial statements and
pro forma financial information and related notes thereto. Baxter's amounts
are not presented as such data are not applicable or are not meaningful.
This data does not purport to be indicative of the results of future
operations of the combined business or the actual results that would have
occurred if the aforementioned transactions were effective as of the
respective dates indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 1995 DECEMBER 31, 1994
-------------------- --------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Book value per share, at pe-
riod end $3.66 $7.51(a) $3.62 $7.26(a)
Cash dividends declared per
share .04 (b) .34 (b)
Net income per share .05 .04(c) .18 .11(c)
</TABLE>
- ---------------------
(a) Assumes the EML Investment, Refinancing and the Acquisition occurred as of
the balance sheet date.
(b) Pro forma amounts are not presented as such amounts are not meaningful.
(c) Assumes the EML Investment, Refinancing and the Acquisition occurred as of
the beginning of the period indicated.
39
<PAGE>
OWNERSHIP OF VWR'S COMMON SHARES
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL
OWNERSHIP OF PERCENT OF
COMMON SHARES CLASS AS OF
DIRECTORS AS OF MAY 31, 1995(1) MAY 31, 1995(2)
- --------- --------------------- ---------------
<S> <C> <C>
DIRECTORS-TERM EXPIRES IN 1996
James W. Bernard 90,718(3) --
Richard E. Engebrecht 110,641 --
Robert S. Rogers 158,882(4) 1.23%
DIRECTORS-TERM EXPIRES IN 1997
Curtis P. Lindley 221,058(5) 1.71%
Edward A. McGrath, Jr. 6,078 --
N. Stewart Rogers 336,031(6) 2.61%
Alfred Koch -- (7)
DIRECTORS-TERM EXPIRES IN 1998
Jerrold B. Harris 223,944(8) 1.73%
Donald P. Nielsen 27,278 --
James H. Wiborg 479,543(9) 3.72%
Walter W. Zywottek -- (10)
<CAPTION>
CERTAIN EXECUTIVE OFFICERS
- --------------------------
<S> <C> <C>
Walter S. Sobon 24,989(11) --
Joseph A. Panozzo 16,419(12) --
Paul J. Nowak 10,356(13) --
Richard Amstutz 32,233(14) --
<CAPTION>
CERTAIN BENEFICIAL OWNERS
- -------------------------
<S> <C> <C>
EM Laboratories, Incorporated 2,785,196(15) 20.10%
5 Skyline Drive
Hawthorne, New York 10532
</TABLE>
- ---------------------
(1) Except as otherwise indicated, beneficial ownership represents sole
voting and sole investment power with respect to $1.00 par value Common
Shares, the Corporation's only outstanding class of stock.
(2) Unless otherwise indicated, amount owned does not exceed 1% of the total
number of Common Shares outstanding.
(3) Mr. Bernard disclaims any beneficial interest in 40,500 shares (included
in the amounts shown in the above table) owned by his spouse.
(4) Mr. Robert S. Rogers disclaims any beneficial interest in 15,594 shares
(included in the amounts shown in the above table) owned by his spouse.
(5) Mr. Lindley disclaims any beneficial interest in 4,372 shares (included
in the amounts shown in the above table) owned by his spouse.
(6) Mr. N. Stewart Rogers is a trustee of a trust for grandchildren which
holds 4,000 shares (included in the amounts shown in the above table).
(7) Mr. Koch is an executive officer of EML and a nominee of EML to VWR's
board of directors. Mr. Koch disclaims beneficial ownership of all Common
Shares owned by EML.
(8) Includes 52,982 shares which Mr. Harris had the right to acquire through
the exercise of options. Also, includes 29,818 held under the
Corporation's benefit plans for which beneficial ownership is based upon
sole voting power.
(9) Mr. Wiborg disclaims any beneficial interest in 150,000 shares (included
in the amounts shown in the above table) owned by his spouse. Mr. Wiborg
is also a trustee of two trusts owning 67,979 shares (included in the
amounts shown in the above table). Mr. Wiborg disclaims beneficial
interest in the shares owned by these trusts.
40
<PAGE>
(10) Mr. Zywottek is an executive officer of EML and a nominee of EML to VWR's
board of directors. Mr. Zywottek disclaims beneficial ownership of all
Common Shares owned by EML.
(11) Includes 12,000 shares which Mr. Sobon has the right to acquire through
the exercise of options. Also, includes 2,642 shares held under the
Corporation's benefit plans for which beneficial ownership is based upon
sole voting power.
(12) Includes 6,900 shares which Mr. Panozzo has the right to acquire through
the exercise of options. Also includes 1,600 shares held under the
Corporation's benefit plans for which beneficial ownership is based upon
sole voting power.
(13) Includes 6,522 shares which Mr. Nowak has the right to acquire through
the exercise of options. Also includes 3,179 shares held under the
Corporation's benefit plans for which beneficial ownership is based upon
sole voting power.
(14) Includes 8,748 shares which Mr. Amstutz has the right to acquire through
the exercise of options. Also includes 2,578 shares held under the
Corporation's benefit plans for which beneficial ownership is based upon
sole voting power.
(15) Includes 967,015 shares obtainable upon exercise of the April Warrant.
As of May 31, 1995, all directors and executive officers of VWR as a group
(15 persons), beneficially owned Common Shares totaling 1,738,170 or
approximately 13.39% of the Common Shares outstanding. Members of the group
shared voting and/or investment power with other persons as to 71,979 of such
Common Shares or .56% of the Common Shares outstanding.
INDEPENDENT PUBLIC ACCOUNTANTS
It is expected that representatives of Ernst & Young LLP will be present at
the Meeting to respond to appropriate questions of shareholders and to make a
statement if they so desire.
PROPOSALS OF SECURITY HOLDERS
Under Securities and Exchange Commission rules and the Corporation's
Articles of Incorporation and Bylaws certain shareholder proposals may be
included in the Corporation's Proxy Statement. Any shareholder desiring to
have such a proposal included in the Corporation's Proxy Statement for the
annual meeting to be held in 1996 must submit such proposal in full compliance
with Rule 14a-8 under the Exchange Act which requires, among other things,
that such proposal be received by the Corporation not later than December 2,
1995.
OTHER BUSINESS
The Board of Directors has no knowledge of any other business to be acted
upon at this meeting. However, if any other business is presented at the
meeting, proxies will be voted in accordance with the judgment of the person
or persons voting such proxies.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Proxy Statement incorporates by reference the following documents
relating to the Corporation which are not delivered herewith:
(a) The Annual Report on Form 10-K for the fiscal year ended December 31,
1994;
(b) The Quarterly Report on Form 10-Q for the three-month period ended
March 31, 1995; and
(c) The Current Reports on Form 8-K dated February 23, 1995 and April 13,
1995.
41
<PAGE>
All documents and reports subsequently filed by the Corporation pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the
mailing date of this Proxy Statement and prior to the Meeting shall be deemed
to be incorporated by reference in this Proxy Statement and to be a part
hereof from the date of filing such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein, or
contained in this Proxy Statement, shall be deemed to be modified or
superseded for purposes of this Proxy Statement to the extent that a statement
contained herein or in any such subsequently filed document which also is
deemed to be incorporated herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed to constitute a part
of this Proxy Statement, except as so modified or superseded.
This Proxy Statement incorporates documents by reference which are not
presented herein or delivered herewith. The Corporation will provide, without
charge, to each person to whom this Proxy Statement is delivered, on written
or oral request of such person a copy (without exhibits, unless such exhibits
are specifically incorporated by reference) of any or all of the documents
that have been or will be incorporated by reference herein, within one
business day of the receipt of such request by first class mail or equally
prompt means. Such request should be made to VWR at 1310 Goshen Parkway, West
Chester, Pennsylvania 19380, attention: Secretary. Telephone number (610) 431-
1700.
42
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Baxter International Inc.
In our opinion, the accompanying combined balance sheets and the related
combined statements of income, of cash flows and of equity present fairly, in
all material respects, the financial position of the Industrial Distribution
Business of Baxter Healthcare Corporation (the "Company") at December 31, 1994
and 1993, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1994, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audit. We conducted our
audit of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Chicago, Illinois
June 27, 1995
F-1
<PAGE>
FINANCIAL STATEMENTS OF INDUSTRIAL DISTRIBUTION BUSINESS
BAXTER HEALTHCARE CORPORATION
INDUSTRIAL DISTRIBUTION BUSINESS
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1994 1993 1992
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Net Sales $471.3 $450.2 $427.8
Operating Costs and Expenses:
Cost of goods sold 357.9 338.7 313.9
Marketing and administrative expenses 72.3 76.5 72.8
Goodwill amortization 1.3 1.3 1.3
Other (.6) (.1) 4.2
------ ------ ------
Total costs and expenses 430.9 416.4 392.2
------ ------ ------
Income Before Income Taxes and Cumulative Effect
of Accounting Change 40.4 33.8 35.6
Income Tax Expense 16.8 13.9 14.6
------ ------ ------
Income Before Cumulative Effect of Accounting
Change 23.6 19.9 21.0
------ ------ ------
Cumulative Effect of Change in Accounting for
Other Postretirement Benefits (net of income tax
benefit of $.3) -- -- (.5)
------ ------ ------
Net Income $ 23.6 $ 19.9 $ 20.5
====== ====== ======
</TABLE>
See accompanying notes to combined financial statements.
F-2
<PAGE>
BAXTER HEALTHCARE CORPORATION
INDUSTRIAL DISTRIBUTION BUSINESS
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1994 1993
------ ------
(IN MILLIONS)
<S> <C> <C>
CURRENT ASSETS:
Accounts receivable, net of allowances of $3.8 in 1994 and $2.2
in 1993 $ 62.5 $ 52.0
Inventories 40.8 43.6
Prepaid expenses 2.5 2.8
------ ------
Total current assets 105.8 98.4
------ ------
MACHINERY AND EQUIPMENT:
At cost 1.0 .9
Accumulated depreciation .6 .4
------ ------
Net machinery and equipment .4 .5
------ ------
OTHER ASSETS:
Goodwill 40.6 41.9
Other .4 .1
------ ------
Total other assets 41.0 42.0
------ ------
TOTAL ASSETS $147.2 $140.9
====== ======
CURRENT LIABILITIES:
Accounts payable, principally trade $ 36.2 $ 34.5
Accounts payable--Baxter 5.4 6.1
Accrued liabilities 5.7 6.0
------ ------
Total current liabilities 47.3 46.6
------ ------
NON-CURRENT LIABILITIES 2.1 2.1
------ ------
TOTAL LIABILITIES 49.4 48.7
------ ------
EQUITY:
Investments by and advances from Baxter 97.8 92.2
------ ------
TOTAL LIABILITIES AND EQUITY $147.2 $140.9
====== ======
</TABLE>
See accompanying notes to combined financial statements.
F-3
<PAGE>
BAXTER HEALTHCARE CORPORATION
INDUSTRIAL DISTRIBUTION BUSINESS
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1994 1993 1992
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
CASH FLOW PROVIDED BY OPERATIONS:
Income before cumulative effect of accounting change $ 23.6 $ 19.9 $ 21.0
Adjustments:
Depreciation .3 .1 .1
Amortization 1.3 1.3 1.3
Changes in balance sheet items:
Accounts receivable, net (10.5) (3.9) 1.3
Inventories 2.8 (8.1) 1.8
Accounts payable and accrued liabilities .7 2.4 .7
Other -- (1.3) (.3)
------ ------ ------
Cash flow provided by operations 18.2 10.4 25.9
------ ------ ------
INVESTMENT TRANSACTIONS:
Capital expenditures, net (.2) (.2) (.2)
------ ------ ------
FINANCING TRANSACTIONS:
Payments to Baxter, net (18.0) (10.2) (25.7)
------ ------ ------
NET CASH FLOW $ 0.0 $ 0.0 $ 0.0
====== ====== ======
</TABLE>
See accompanying notes to combined financial statements.
F-4
<PAGE>
BAXTER HEALTHCARE CORPORATION
INDUSTRIAL DISTRIBUTION BUSINESS
COMBINED STATEMENTS OF EQUITY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1994 1993 1992
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Balance, beginning of period $ 92.2 $ 82.5 $ 88.2
Net income 23.6 19.9 20.5
Payments to Baxter, net (cash) (18.0) (10.2) (25.7)
Payments to Baxter (non-cash) -- -- (.5)
------ ------ ------
Investments by and advances from Baxter $ 97.8 $ 92.2 $ 82.5
====== ====== ======
</TABLE>
See accompanying notes to combined financial statements.
F-5
<PAGE>
BAXTER HEALTHCARE CORPORATION
INDUSTRIAL DISTRIBUTION BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
The Industrial Distribution Business is comprised of the Industrial and Life
Sciences Division of the U.S. Healthcare Business of Baxter Healthcare
Corporation and certain foreign operations of Baxter World Trade Corporation,
both wholly owned subsidiaries of Baxter International Inc. ("Baxter"). A
significant portion of the Industrial Distribution Business was acquired
through Baxter's 1985 acquisition of American Hospital Supply Corporation.
Goodwill related to this acquisition has been allocated to the Industrial
Distribution Business. The Industrial Distribution Business is a distributor
of third party and Baxter-manufactured laboratory and cleanroom products to
customers for use in laboratories, production plants and other facilities not
involved in the care of human patients. On May 24, 1995, Baxter entered into a
definitive agreement (the "Asset Purchase Agreement") to sell the Industrial
Distribution Business to VWR. (See Note 9)
The accompanying financial statements reflect the "carve-out" financial
position, results of operations and cash flows of the Industrial Distribution
Business for the periods presented. Certain marketing and administrative
expenses of Baxter have been allocated to the Industrial Distribution Business
(See Note 3) on various bases which, in the opinion of management, are
reasonable. However, such expenses are not necessarily indicative of, and it
is not practicable for management to estimate, the nature and level of
expenses which might have been incurred had the Industrial Distribution
Business been operating as a separate independent company.
The financial information included herein does not necessarily reflect what
the financial position and results of operations of the Industrial
Distribution Business would have been had it operated as a stand-alone entity
during the periods covered, and may not be indicative of future operations or
financial position.
Baxter will retain certain rights and obligations after the divestiture of
the Industrial Distribution Business. Such rights and obligations were
negotiated in connection with, or are reflected in, the Asset Purchase
Agreement and related distribution and other ancillary service agreements
which will be executed between Baxter and VWR. (See Note 9)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies is presented to assist the
reader in understanding and evaluating the accompanying financial statements.
These policies are in conformity with generally accepted accounting
principles, and have been applied consistently in all material respects.
Inventories and Accounts Payable, Principally Trade
Inventories consist of third party and Baxter-manufactured laboratory and
cleanroom products and are stated at the lower of cost (first-in, first-out
method) or market. Appropriate consideration is given to deterioration,
obsolescence and other factors in evaluating net realizable value. Inventories
and accounts payable (principally trade payables), for the Industrial
Distribution Business are commingled with Baxter's U.S. Distribution Division
("USD") and are allocated in the accompanying combined balance sheets based on
the Industrial Distribution Business' percentage of total cost of goods sold
of USD.
F-6
<PAGE>
BAXTER HEALTHCARE CORPORATION
INDUSTRIAL DISTRIBUTION BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Machinery and Equipment
Machinery and equipment is stated at cost. Depreciation is provided for
financial reporting purposes on the straight-line method over the estimated
useful lives of the assets (ranging from 3 to 11 years depending on the nature
of the asset).
Goodwill
Goodwill represents the excess of cost over the fair value of net assets
allocated to the Industrial Distribution Business arising from Baxter's 1985
acquisition of American Hospital Supply Corporation, and is amortized on a
straight-line basis over 40 years. Based upon management's assessment of the
future undiscounted operating cash flows of the Industrial Distribution
Business, the carrying value of goodwill at December 31, 1994 has not been
impaired. Management reassesses the carrying value of goodwill on an annual
basis. As of December 31, 1994 and 1993, goodwill was $40.6 million and $41.9
million, respectively, net of accumulated amortization of $16.4 million and
$15.1 million, respectively.
Income Taxes
The operations of the Industrial Distribution Business were historically
included in Baxter's consolidated U.S. federal and state income tax returns
and in the tax returns of certain Baxter foreign subsidiaries. The provision
for income taxes shown in the accompanying financial statements has been
determined as if the Industrial Distribution Business had filed separate tax
returns under its existing structure for the periods presented. Accordingly,
the effective tax rate of the Industrial Distribution Business in future years
could vary from its historical effective rates depending on the legal
structure of and tax elections made by VWR. All income taxes, including
deferred taxes, are settled with Baxter on a current basis through the
"Investment by and advances from Baxter" account.
Baxter adopted Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes", effective January 1, 1993. The effect on the
financial statements of the Industrial Distribution Business of adopting SFAS
No. 109 is immaterial. Prior to January 1, 1993, Baxter accounted for income
taxes pursuant to Accounting Principles Board Opinion No. 11, "Accounting for
Income Taxes".
3. RELATED PARTY TRANSACTIONS
The Industrial Distribution Business participates in Baxter's centralized
cash management program with respect to intercompany sales and accounts
receivable, accounts payable, payroll and employee benefits. As a result, the
Industrial Distribution Business does not report a cash balance. Historically,
the intercompany receivables and payables have been settled in the normal
course of business, usually within 30 to 60 days, and are not interest
bearing. The net cumulative, interdivisional balances are included in the
Combined Balance Sheets as "Investments by and advances from Baxter" and
"Accounts payable--Baxter".
Baxter has provided to the Industrial Distribution Business certain domestic
legal, treasury, audit, data processing, insurance, facility, regulatory and
administrative services. Charges for these services are based on allocations
of Baxter's actual direct and indirect costs using varying allocation bases as
appropriate (sales, payroll, headcount, managed capital, etc.) designed to
F-7
<PAGE>
BAXTER HEALTHCARE CORPORATION
INDUSTRIAL DISTRIBUTION BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
estimate the actual cost incurred by Baxter to render these services to the
Industrial Distribution Business. The allocation process is also consistent
with the methodology used by Baxter to allocate the cost of similar services
provided to its other business units. The allocated cost of these services are
reflected in the combined statements of income and are summarized in the table
below. No provision has been made for possible incremental expenses that would
have been incurred had the Industrial Distribution Business operated as an
independent stand-alone entity.
The Industrial Distribution Business purchases products from certain current
and former Baxter manufacturing divisions. Gross margins on Baxter-
manufactured products approximate the experience of the Industrial
Distribution Business in distributing third-party products. "Accounts
payable--Baxter" is allocated based upon Baxter's average settlement terms.
The Industrial Distribution Business utilizes certain facility space and
equipment on month-to-month arrangements from Baxter. The costs allocated to
the Industrial Distribution Business for such utilization approximate Baxter's
cost and are included in the table below for certain services provided by
Baxter.
Although the Industrial Distribution Business has dedicated customer service
and distribution representatives, certain distribution, warehousing and
administrative services are provided to the Industrial Distribution Business
by USD. The estimated costs of providing these services are allocated to the
Industrial Distribution Business based on actual direct and indirect costs
incurred by USD to provide these services. The allocation methodology is based
primarily on shipments by the Industrial Distribution Business, which
management believes to be a reasonable basis of allocation. Such services
include:
Customer service
Distribution services
Outbound transportation
Billing and accounts receivable
Credit and collection
Sales administration
Quality assurance programs
A summary of the related party transactions described in the paragraphs
above, all of which are with Baxter or Baxter affiliates is shown in the table
below (in millions):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Purchases of product from Baxter (cost of goods sold) $ 43.2 $ 50.0 $ 45.9
Certain services provided by Baxter (marketing and
administrative expenses) 23.8 30.4 29.1
------ ------ ------
Total $ 67.0 $ 80.4 $ 75.0
====== ====== ======
</TABLE>
4. ACCRUED LIABILITIES
Accrued liabilities consist of the following (in millions):
<TABLE>
<CAPTION>
DECEMBER
31,
---------
1994 1993
---- ----
<S> <C> <C>
Salaries, wages, withholdings, commissions and other payroll
taxes $2.5 $2.8
Property, sales and use and other taxes 1.8 2.6
Other 1.4 .6
---- ----
Total accrued liabilities $5.7 $6.0
==== ====
</TABLE>
F-8
<PAGE>
BAXTER HEALTHCARE CORPORATION
INDUSTRIAL DISTRIBUTION BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
5. LEASE OBLIGATIONS
The Industrial Distribution Business leases certain facilities and equipment
under operating leases expiring at various dates. Most of these operating
leases contain renewal options.
Future minimum lease payments (including interest) under noncancelable
operating leases at December 31, 1994 were as follows (in millions):
<TABLE>
<S> <C>
1995 $1.3
1996 .9
1997 .4
1998 .3
1999 .2
Thereafter 0.0
----
Total
obligations $3.1
====
</TABLE>
Total expense for all operating leases was $.7 million, $.2 million and $0
million for the years ended December 31, 1994, 1993 and 1992, respectively.
6. OTHER EXPENSES
On October 28, 1992, the board of directors of Baxter declared a dividend to
common stockholders of all of the common stock of Caremark International Inc.
(the "spin-off"). In connection with this transaction the industrial business
of Caremark (which was not included in the spin-off) was consolidated with the
Industrial Distribution Business. As a result of this consolidation, the
Industrial Distribution Business incurred certain expenses, primarily asset
write-offs and severance, amounting to $3.7 million. These charges are
included in other expense for the year ended December 31, 1992.
7. INCOME TAXES
Income before income tax expense and cumulative effect of accounting change
is as follows (in millions):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Domestic $37.4 $31.8 $32.7
Foreign 3.0 2.0 2.9
----- ----- -----
Income before income tax expense and cumulative effect of
an accounting change $40.4 $33.8 $35.6
===== ===== =====
</TABLE>
F-9
<PAGE>
BAXTER HEALTHCARE CORPORATION
INDUSTRIAL DISTRIBUTION BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Income tax expense before cumulative effect of accounting change by category
and by income statement classification is as follows (in millions):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Current:
Domestic:
Federal $13.0 $10.7 $10.7
State and local 3.2 2.7 2.7
Foreign 1.1 .5 1.2
----- ----- -----
Current income tax expense 17.3 13.9 14.6
Deferred:
Domestic:
Federal (.4) -- --
State and local (.1) -- --
Foreign -- -- --
----- ----- -----
Deferred income tax benefit (.5) -- --
----- ----- -----
Income tax expense $16.8 $13.9 $14.6
===== ===== =====
</TABLE>
Income tax expense before cumulative effect of accounting change differs
from income tax expense calculated by using the U.S. federal income tax rates
in effect for the periods presented for the following reasons (in millions):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Income tax expense at statutory rate $14.1 $11.8 $12.1
Nondeductible goodwill .5 .5 .4
State and local taxes 2.0 1.6 1.8
Foreign tax expense .1 (.1) .2
Other factors .1 .1 .1
----- ----- -----
Income tax expense $16.8 $13.9 $14.6
===== ===== =====
</TABLE>
8. RETIREMENT PROGRAMS
The Industrial Distribution Business participates in a Baxter-sponsored non-
contributory defined benefit pension plan covering substantially all employees
in the United States. The benefits are based on years of service and the
employee's compensation during five of the last ten years of employment as
defined by the plan. Baxter's funding policy is to make contributions to the
trust of the qualified plan which meet or exceed the minimum requirements of
the Employee Retirement Income Security Act of 1974. Assets held by the trust
of the plan consist primarily of equity and fixed income securities.
F-10
<PAGE>
BAXTER HEALTHCARE CORPORATION
INDUSTRIAL DISTRIBUTION BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Pension expense applicable to the Industrial Distribution Business includes
the following components (in millions):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Service cost-benefits earned during the period $ .6 $ .6 $ .5
Interest cost on projected benefit obligation .4 .4 .3
Actual return on assets (.3) (.3) (.2)
Net amortization and deferral .1 .1 .1
---- ---- ----
Total pension expense $ .8 $ .8 $ .7
==== ==== ====
</TABLE>
Assumptions used for the above pension expense calculations include:
<TABLE>
<CAPTION>
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Discount rate applied to benefit obligation 7.5% 8.0% 8.4%
Long-term return on assets 10.5% 10.5% 10.5%
</TABLE>
The following table sets forth the funded status of amounts applicable to
the Industrial Distribution Business at December 31, 1994 and 1993 (in
millions):
<TABLE>
<CAPTION>
DECEMBER
31,
----------
1994 1993
---- ----
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits $3.3 $3.9
---- ----
Accumulated benefits $3.4 $4.1
---- ----
Projected benefits $4.4 $5.3
Less allocated plan assets at fair value 3.5 3.6
---- ----
Projected benefit obligation in excess of plan assets .9 1.7
Unrecognized net gains and unrecognized prior service cost .1 (.6)
Unrecognized obligation, net of amortization (.3) (.3)
---- ----
Net pension liability $ .7 $ .8
==== ====
</TABLE>
Assumptions used for the above funded status calculations include:
<TABLE>
<CAPTION>
1994 1993
---- -----
<S> <C> <C>
Annual rate of increase in compensation levels 4.5% 4.5%
Discount rate applied to benefit obligations 9.0% 7.5%
Return on assets 9.5% 10.5%
</TABLE>
In addition to pension benefits, the Industrial Distribution Business
participates in certain Baxter-sponsored contributory healthcare and life
insurance benefit plans for substantially all retired employees. Effective
January 1, 1992, Baxter adopted Statement of Financial Accounting Standard No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions",
which requires companies to accrue costs for postretirement benefits over the
service years of the employees. The Industrial Distribution Business recorded
their portion of the transition obligation, $.5 million (net of $.3 million in
related income tax benefit), as a cumulative effect of an accounting change.
F-11
<PAGE>
BAXTER HEALTHCARE CORPORATION
INDUSTRIAL DISTRIBUTION BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Net postretirement health-care and life insurance expense ("postretirement
benefits") applicable to the Industrial Distribution Business for active
employees was not material for the years ended December 31, 1994, 1993 and
1992. The postretirement benefits plans are not funded. The present value of
the Industrial Distribution Business obligations included in the balance
sheets were not material at December 31, 1994 and 1993.
Most of the employees are eligible to participate in a Baxter-sponsored
qualified 401(k) plan. Participants may contribute up to 12% of their annual
compensation (limited in 1994 to $9,240 per individual) to the plan and Baxter
matches the participants' contributions, up to 3% of compensation. Matching
contributions related to the Industrial Distribution Business employees were
$.6 million, $.6 million and $.5 million for the years ended December 31,
1994, 1993 and 1992, respectively.
9. SUBSEQUENT EVENT
On May 24, 1995, Baxter signed a definitive agreement to sell certain assets
and liabilities of the Industrial Distribution Business to VWR for $400
million in cash, subject to certain closing conditions. Terms of the Asset
Purchase Agreement and the related distribution agreement and other ancillary
service agreements are summarized in the following paragraphs.
Asset Purchase Agreement
VWR will acquire certain assets of the Industrial Distribution Business
which include, but are not limited to, selected domestic accounts receivable
and related reserves, certain tangible personal property, rights and benefits
under certain contracts and rights in specified trademarks. Inventory will
remain the property of Baxter until used by VWR to fulfill orders. Once
transition from Baxter in a particular region is complete under the Services
Agreement described below, VWR will purchase certain inventories maintained in
such region by Baxter at cost. VWR will assume certain liabilities which
principally include accrued vacation pay and all liabilities for product
warranty claims. In general, Baxter will retain all other liabilities. For
additional information related to the Asset Purchase Agreement, reference
"Description of the Acquisition of the Industrial Distribution Business of
Baxter Healthcare Corporation--General Description of the Acquisition" and the
"Unaudited ProForma Balance Sheet" included elsewhere in this Proxy Statement.
Baxter Distribution Agreement
Baxter and VWR have agreed to enter into the Baxter Distribution Agreement
beginning at closing and ending on September 30, 2000. Each contract year will
begin on October 1 and end on September 30 except for the first contract year
which begins at closing and ends on September 30, 1996. In connection with the
agreement, Baxter grants to VWR the right to sell and distribute Baxter-
manufactured products only to Industrial Distribution Business customers for
use in laboratories, production plants and other facilities not involved in
the care of human patients. VWR may distribute such products through sub-
distributors provided the dollar volume of all products sold does not exceed
15% of the dollar volume of all products sold by VWR during the contract year
in the United States.
Minimum purchase requirements, which increase annually, exist for VWR during
the first five years of the contract. If such purchase requirements are not
met, VWR is required to pay Baxter the difference between the minimum purchase
requirements and the actual purchase amounts.
F-12
<PAGE>
BAXTER HEALTHCARE CORPORATION
INDUSTRIAL DISTRIBUTION BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Beginning on October 1, 1995, Baxter will pay a rebate to VWR of 5.9% of the
net purchase price for purchases in excess of $12 million in each of the first
three quarters of any contract year providing that total purchases are in
excess of $48 million for the full contract year.
Services Agreement
Pursuant to the Services Agreement which will become effective at closing,
Baxter will provide, among other things, certain transition services such as
order fulfillment, management information systems, credit, collections, cash
application, shipping, replenishment and warehousing to VWR in connection with
VWR's sales of products to its industrial customers. This Services Agreement
will continue for a period of up to two years. The agreement stipulates that
no payment for services is required in the first three months. Subsequent to
the first three months of the agreement, VWR is required to make monthly
payments to Baxter in an amount equal to 5.5% of the total sales of products
to industrial customers. The minimum amount payable to Baxter related to
performance of services outlined under the contract is $18.6 million in the
first 15 months.
F-13
<PAGE>
BAXTER HEALTHCARE CORPORATION
INDUSTRIAL DISTRIBUTION BUSINESS
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
---------------
1995 1994
------- -------
(UNAUDITED)
(IN MILLIONS)
<S> <C> <C>
Net Sales $ 122.0 $ 111.7
Cost and Expenses:
Cost of goods sold 92.2 84.5
Marketing and administrative expenses 18.6 17.8
Goodwill amortization .3 .3
------- -------
Total costs and expenses 111.1 102.6
------- -------
Income Before Income Taxes 10.9 9.1
Income Tax Expense 4.4 3.8
------- -------
Net Income $ 6.5 $ 5.3
======= =======
</TABLE>
See accompanying notes to unaudited combined financial statements.
F-14
<PAGE>
BAXTER HEALTHCARE CORPORATION
INDUSTRIAL DISTRIBUTION BUSINESS
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
----------- ------------
(UNAUDITED)
(IN MILLIONS)
<S> <C> <C>
CURRENT ASSETS:
Accounts receivable, net of allowances of $4.2 in
1995 and
$3.8 in 1994 $ 70.9 $ 62.5
Inventories 42.6 40.8
Prepaid expenses 3.0 2.5
------ ------
Total current assets 116.5 105.8
------ ------
MACHINERY AND EQUIPMENT:
At cost 1.1 1.0
Accumulated depreciation .7 .6
------ ------
Net machinery and equipment .4 .4
------ ------
OTHER ASSETS:
Goodwill 40.3 40.6
Other .4 .4
------ ------
Total other assets 40.7 41.0
------ ------
TOTAL ASSETS $157.6 $147.2
====== ======
CURRENT LIABILITIES:
Accounts payable, principally trade $ 37.0 $ 36.2
Accounts payable--Baxter 5.8 5.4
Accrued liabilities 6.0 5.7
------ ------
Total current liabilities 48.8 47.3
------ ------
NON-CURRENT LIABILITIES 2.3 2.1
------ ------
TOTAL LIABILITIES 51.1 49.4
EQUITY:
Investments by and advances from Baxter 106.5 97.8
------ ------
TOTAL LIABILITIES AND EQUITY $157.6 $147.2
====== ======
</TABLE>
See accompanying notes to unaudited combined financial statements.
F-15
<PAGE>
BAXTER HEALTHCARE CORPORATION
INDUSTRIAL DISTRIBUTION BUSINESS
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
----------------
1995 1994
------- -------
(UNAUDITED)
(IN MILLIONS)
<S> <C> <C>
CASH FLOW PROVIDED BY OPERATIONS:
Income from operations $ 6.5 $ 5.3
Adjustments:
Depreciation and amortization .4 .3
Changes in balance sheet items:
Accounts receivable, net (8.4) (5.7)
Inventories (1.8) .8
Accounts payable and other accrued liabilities 1.5 2.2
Other (.3) (.9)
------- -------
Cash flow (used in) provided by operations (2.1) 2.0
------- -------
INVESTMENT TRANSACTIONS:
Capital expenditures, net -- --
------- -------
FINANCING TRANSACTIONS:
Advances from (payments to) Baxter, net 2.1 (2.0)
------- -------
NET CASH FLOW $ 0.0 $ 0.0
======= =======
</TABLE>
See accompanying notes to unaudited combined financial statements.
F-16
<PAGE>
BAXTER HEALTHCARE CORPORATION
INDUSTRIAL DISTRIBUTION BUSINESS
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
The Industrial Distribution Business is comprised of the Industrial and Life
Sciences Division of the U.S. Healthcare Business of Baxter Healthcare
Corporation and certain foreign operations of Baxter World Trade Corporation,
both wholly owned subsidiaries of Baxter International Inc. ("Baxter"). A
significant portion of the Industrial Distribution Business was acquired
through Baxter's 1985 acquisition of American Hospital Supply Corporation.
Goodwill related to this acquisition has been allocated to the Industrial
Distribution Business. The Industrial Distribution Business is a distributor
of third party and Baxter-manufactured laboratory and cleanroom products to
customers for use in laboratories, production plants and other facilities not
involved in the care of human patients. On May 24, 1995, Baxter entered into a
definitive agreement (the "Asset Purchase Agreement") to sell the Industrial
Distribution Business to VWR. (See Note 3)
2. INTERIM FINANCIAL INFORMATION
The accompanying unaudited combined financial statements as of March 31,
1995 and for the three month periods ended March 31, 1995 and 1994, reflect
adjustments consisting of normal and recurring adjustments necessary for a
fair presentation of such financial information. These unaudited interim
combined financial statements should be read in conjunction with the audited
financial statements included elsewhere in this Proxy Statement.
3. SUBSEQUENT EVENT
On May 24, 1995, Baxter signed a definitive agreement to sell certain assets
and liabilities of the Industrial Distribution Business to VWR for $400
million in cash, subject to certain closing conditions. Terms of the Asset
Purchase Agreement and the related distribution agreement and other ancillary
service agreements are summarized in the following paragraphs.
Asset Purchase Agreement
VWR will acquire certain assets of the Industrial Distribution Business
which include, but are not limited to, selected domestic accounts receivable
and related reserves, certain tangible personal property, rights and benefits
under certain contracts and rights in specified trademarks. Inventory will
remain the property of Baxter until used by VWR to fulfill orders. Once
transition from Baxter in a particular region is complete under the Services
Agreement described below, VWR will purchase certain inventories maintained in
such region by Baxter at cost. VWR will assume certain liabilities which
principally include accrued vacation pay and all liabilities for product
warranty claims. In general, Baxter will retain all other liabilities. For
additional information related to the Asset Purchase Agreement, reference
"Description of the Acquisition of the Industrial Distribution Business of
Baxter Healthcare Corporation--General Description of the Acquisition" and the
"Unaudited Pro Forma Balance Sheet" included elsewhere in this Proxy
Statement.
Baxter Distribution Agreement
Baxter and VWR have agreed to enter into the Baxter Distribution Agreement
beginning at closing and ending on September 30, 2000. Each contract year will
begin on October 1 and end on September 30 except for the first contract year
which begins at closing and ends on September 30, 1996. In connection with the
agreement, Baxter grants to VWR the right to sell and distribute Baxter-
manufactured products only to Industrial Distribution Business customers for
use in laboratories, production plants and other facilities not involved in
the care of human patients. VWR may distribute products through sub-
distributors provided the dollar volume of all products
F-17
<PAGE>
BAXTER HEALTHCARE CORPORATION
INDUSTRIAL DISTRIBUTION BUSINESS
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS--(CONTINUED)
sold does not exceed 15% of the dollar volume of all products sold by VWR
during the contract year in the United States.
Minimum purchase requirements, which increase annually, exist for VWR during
the first five years of the contract. If such purchase requirements are not
met, VWR is required to pay Baxter the difference between the minimum purchase
requirements and the actual purchase amounts.
Beginning on October 1, 1995, Baxter will pay a rebate to VWR of 5.9% of the
net purchase price for purchases in excess of $12 million in each of the first
three quarters of any contract year providing that total purchases are in
excess of $48 million for the full contract year.
Services Agreement
In the Services Agreement to become effective at closing, Baxter will
provide, among other things, certain transition services such as order
fulfillment, management information systems, credit, collections, cash
applications, shipping, replenishment and warehousing to VWR in connection
with VWR's sales of products to its industrial customers. This Services
Agreement will continue for a period of up to two years. The agreement
stipulates that no payment for services is required in the first three months.
Subsequent to the first three months of the agreement, VWR is required to make
monthly payments to Baxter in an amount equal to 5.5% of the total sales of
the products to its industrial customers. The minimum amount payable to Baxter
related to performance of services outlined under the agreement is $18.6
million in the first 15 months.
F-18
<PAGE>
EXHIBIT INDEX
Exhibit I -- Opinion of PNC Securities Corp.
Exhibit II -- Common Share and Debenture Purchase Agreement
Exhibit III -- Standstill Agreement
Exhibit IV -- Amendment No. 1 to Standstill Agreement
Exhibit V -- Opinion of Goldman, Sachs & Co.
Exhibit VI -- Asset Purchase Agreement
Exhibit VII -- Services Agreement
Exhibit VIII -- Baxter Distribution Agreement
<PAGE>
EXHIBIT I
May 24, 1995
CONFIDENTIAL
The Board of Directors
VWR Corporation
1310 Goshen Parkway
West Chester, PA 19380
Gentlemen:
You have asked us to advise the Board of Directors with respect to certain
financial consequences to the Company of a private placement of subordinated
debt and common stock (the "Investment") of VWR Corporation (the "Company") to
EM Industries, Incorporated (the "Purchaser") under that certain Common Share
and Debenture Purchase Agreement dated May 24, 1995 (the "Placement
Agreement") entered into in connection with the Company's acquisition of
certain assets of the Industrial Products Group of the Scientific Products
Division (the "Distribution Business") of Baxter Healthcare Corporation (the
"Baxter Asset Purchase"). Pursuant to the Placement Agreement, the Company
will issue to the Purchaser a subordinated debenture due 2005 in the principal
amount of $135 million (the "Debenture") and 6,832,797 shares of common stock
of the Company at a purchase price of $12.44 per share (the "Purchased
Shares"), subject to certain conditions, including the consummation of the
Baxter Asset Purchase. We understand that the two directors of the Company
affiliated with the Purchaser are not participating in the consideration by
the Board of Directors of the Investment.
PNC Securities Corp, as part of its investment banking business, is
regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions and valuations for corporate, estate,
and other purposes. We are currently acting as financial advisor to the Board
of Directors of the Company and will receive a fee for such services. PNC
Securities may provide investment banking and financial advisory services to
the Company in the future.
In the course of our review of the Investment, we have: (i) analyzed certain
publicly available financial statements and other information of the Company,
including documentation relating to the purchase of Company common stock and a
warrant by the Purchaser on April 13, 1995; (ii) analyzed certain internal
financial statements and other financial and operating data concerning the
Company, including certain pro forma financial data giving effect to the
consummation of the Baxter Asset Purchase and related financing, prepared by
the management of the Company; (iii) analyzed certain financial projections
prepared by the management of the Company; (iv) discussed the past and current
operations and financial condition and the prospects of the Company with
senior executives of the Company, including the strategic and operating
benefits anticipated by senior management to be derived from the Baxter Asset
Purchase and the investment and commercial arrangements with the Purchaser and
discussed prior efforts to place equity securities; (v) reviewed the
historical stock prices and trading volume of the Company's common stock; (vi)
visited the principal offices of the Company; (vii) compared the financial
performance and prospects of the Company with that of certain other comparable
publicly traded companies and analyzed the market valuations of such
companies; (viii) compared certain financial terms of the Investment to
certain financial terms of selected other transactions we deemed relevant;
(ix) reviewed the principal terms of the Baxter Asset Purchase and the opinion
of Goldman Sachs & Co., the Company's financial advisor, dated May 24, 1995
with respect to the
I-1
<PAGE>
fairness to the Company of the consideration to be paid by the Company for the
Distribution Business as of the date of such opinion; (x) reviewed the terms
of the Placement Agreement, including the form of the Debenture, an amended
standstill agreement and related agreements as agreed by the Company and the
Purchaser, and (xi) performed such other analyses as we have deemed
appropriate.
Our review was based solely on the consideration received by the Company
from the issuance of Company common stock and subordinated debt to the
Purchaser pursuant to the Placement Agreement subject to the standstill
restrictions agreed to by the Company and the Purchaser, which limit the
ability of the Purchaser and affiliates to acquire majority ownership of the
Company or to elect a majority of the Board of Directors, for an agreed period
of time and under the conditions set forth in the amended standstill
agreement. In rendering our opinion, it is our understanding, based upon
discussions with senior management of the Company and our review of the
related documents, that the Purchaser will not acquire control of the
management and direction of the business and affairs of the Company as a
result of the Investment.
Further, with your permission and without independent investigation, we
assumed that the consideration to be paid by the Company in connection with
the Baxter Asset Purchase is fair to the Company and its shareholders from a
financial point of view. We have considered the view of the Board of Directors
and senior management of the Company that the proposed Baxter Asset Purchase
represents a significant business opportunity for the Company and that
significant strategic and operational benefits will be derived by consummating
the Baxter Asset Purchase and the concurrent investment and commercial
arrangements with the Purchaser. We also understand that the senior management
of the Company is of the view that the Investment represents the best source
of financing for the Baxter Asset Purchase available to the Company at this
time and that the Investment will provide significant benefit to the Company
by its assistance in obtaining necessary bank financing to consummate the
Baxter Asset Purchase.
In arriving at our opinion, we were not authorized to solicit, and we did
not solicit, inquiries with respect to the placement of common stock or
subordinated debt of the Company with institutional investors in order to
finance in part the Company's Baxter Asset Purchase.
In rendering our opinion, we have relied without independent verification on
the accuracy, completeness and fair presentation of all financial and other
information that was provided to us by the Company or was publicly available,
and this opinion is conditioned on such information being complete and
accurate in all material respects. With respect to the Company's financial
forecasts provided to us by management, including pro forma financial data
taking into account the Baxter Asset Purchase, we are assuming for the
purposes of our opinion that they have been reasonably prepared on bases
reflecting the best available estimates and judgments of the Company's
management at the time of preparation as to the future financial performance
of the Company. We have not made an independent evaluation or appraisal of the
assets (contingent or otherwise) of the Company nor have we been furnished
with any such evaluations or appraisals. We have not made any independent
evaluation of the solvency of the Company, and have assumed, with your
permission, that after giving effect to the Baxter Asset Purchase and related
debt and equity financing, including the Investment that: (i) the Company will
be able to pay its debts as they become due in the usual course of business;
(ii) the fair value of the Company's total assets would not be less than the
Company's total liabilities; and (iii) the Company will not have unreasonably
small capital with which to engage in its business. Further, our opinion is
based on economic, monetary and market conditions existing as of the date of
this opinion.
Based on the foregoing, we are of the opinion on the date hereof that, in
light of the perceived benefits of consummating the Baxter Asset Purchase and
the necessity of obtaining financing
I-2
<PAGE>
therefor, the consideration to be received by the Company from the Investment
in its subordinated debt and common stock by the Purchaser pursuant to the
Placement Agreement is fair, from a financial point of view, to the Company
and the shareholders of the Company other than the Purchaser and affiliated
corporations. In rendering our opinion, we are expressing no opinion as to the
price or trading range at which the common stock of the Company will trade or
the ability of the Company to access the capital markets prior to or
subsequent to the consummation of the Baxter Asset Purchase and the
Investment.
Very truly yours,
/s/ PNC SECURITIES CORP
PNC SECURITIES CORP
I-3
<PAGE>
EXHIBIT II
-----------------------------------------------------------------------
COMMON SHARE AND DEBENTURE PURCHASE AGREEMENT
-----------------------------------------------------------------------
BY AND BETWEEN
VWR CORPORATION
AND
EM INDUSTRIES, INCORPORATED
MAY 24, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE 1. DEFINITIONS.................................................. 2
ARTICLE 2. SALE AND PURCHASE; CLOSING................................... 3
2.1 Sale and Purchase of the Common Shares and Debenture......... 3
2.2 Closing...................................................... 4
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY................ 4
3.1 Organization and Good Standing............................... 4
3.2 Authorization................................................ 4
3.3 Baxter Asset Purchase........................................ 4
3.4 No Conflict with Law or Documents............................ 5
3.5 Capital Stock of the Company................................. 5
3.6 Valid Issuance............................................... 5
3.7 Consents and Approvals....................................... 5
3.8 Private Offering............................................. 6
3.9 Additional Securities Law Matters............................ 6
3.10 Articles of Incorporation and Bylaws......................... 6
3.11 Subsidiaries................................................. 6
3.12 SEC Filings.................................................. 6
3.13 Financial Statements......................................... 6
3.14 Documents Delivered.......................................... 7
3.15 Proceedings and Litigation................................... 8
3.16 Insurance.................................................... 8
3.17 Intellectual Property Rights................................. 8
3.18 Prior Registration Rights.................................... 8
3.19 Environmental Matters........................................ 8
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.............. 8
4.1 Principal Place of Business.................................. 8
4.2 Purchase Without View to Distribute.......................... 8
4.3 Restrictions on Transfer..................................... 8
4.4 Access to Information........................................ 9
4.5 Additional Representations of the Purchaser.................. 9
4.6 Legends...................................................... 9
4.7 Proceedings and Litigation................................... 9
4.8 Authorization................................................ 9
ARTICLE 5. CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATIONS.......... 9
5.1 Representations and Warranties............................... 9
5.2 Performance.................................................. 10
5.3 Opinion of Counsel........................................... 10
5.4 HSR Act...................................................... 10
5.5 Standstill Agreement......................................... 10
5.6 Distribution Agreement....................................... 10
5.7 Rights Agreement............................................. 10
5.8 Employment Contract.......................................... 10
5.9 Baxter Asset Purchase........................................ 10
5.10 No Proceeding or Litigation.................................. 10
5.11 Disclosure Letter............................................ 10
5.12 Approval by Principal Trading Market......................... 10
5.13 Approval by Company Stockholders............................. 10
</TABLE>
II-i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE 6. CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS........... 10
6.1 Representations and Warranties.............................. 11
6.2 Performance................................................. 11
6.3 No Proceeding or Litigation................................. 11
6.4 HSR Act..................................................... 11
6.5 Standstill Agreement........................................ 11
6.6 Opinion of Counsel.......................................... 11
6.7 Approval by Principal Trading Market........................ 11
6.8 Approval by Company Stockholders............................ 11
6.9 Baxter Asset Purchase....................................... 11
ARTICLE 7. HSR ACT..................................................... 11
7.1 Filings..................................................... 11
ARTICLE 8. COVENANTS OF THE COMPANY AND THE PURCHASER.................. 11
8.1 Covenants of the Company.................................... 11
8.2 Covenants of the Purchaser.................................. 12
ARTICLE 9. CERTAIN ADDITIONAL COVENANTS................................ 12
9.1 Further Assurances.......................................... 12
9.2 Certain Filings............................................. 13
9.3 Public Announcements........................................ 13
9.4 Amendment of Standstill Agreement........................... 13
9.5 Board Action under Rights Agreement......................... 13
9.6 Meeting of Company Stockholders............................. 13
9.7 Proxy Statement............................................. 13
ARTICLE 10. COMPLIANCE WITH 1933 ACT; RESTRICTIONS ON TRANSFERABILITY OF
PURCHASED SHARES AND DEBENTURE SHARES...................... 14
10.1 Compliance with 1933 Act.................................... 14
10.2 Restrictive Legend.......................................... 14
10.3 Restrictions on Transferability............................. 14
10.4 Termination of Restrictions on Transferability.............. 14
ARTICLE 11. SURVIVAL OF COVENANTS, AGREEMENTS, REPRESENTATIONS AND
WARRANTIES................................................. 15
ARTICLE 12. INDEMNIFICATION............................................. 15
ARTICLE 13. TERMINATION................................................. 16
13.1 Termination................................................. 16
13.2 Effect of Termination....................................... 16
ARTICLE 14. MISCELLANEOUS............................................... 16
14.1 Owner of Shares............................................. 16
14.2 Broker or Finder............................................ 16
14.3 Specific Enforcement........................................ 17
14.4 Severability................................................ 17
14.5 Expenses.................................................... 17
14.6 Assignment; Successors...................................... 17
14.7 Amendments.................................................. 18
14.8 Notices..................................................... 18
14.9 Attorneys' Fees............................................. 18
14.10 Integration................................................. 18
14.11 Waivers..................................................... 19
</TABLE>
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<TABLE>
<CAPTION>
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<C> <S> <C>
14.12 Governing Law.................................................. 19
14.13 Counterparts................................................... 19
14.14 Cooperation.................................................... 19
14.15 Section Headings and Captions.................................. 19
EXHIBIT A Form of Subordinated Debenture
EXHIBIT B Form of Opinion of Counsel of the Company
EXHIBIT C Form of Opinion of Counsel of the Purchaser
EXHIBIT D Form of Amendment to the Standstill Agreement
</TABLE>
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COMMON SHARE AND DEBENTURE PURCHASE AGREEMENT (the "Agreement") made this
24th day of May, 1995 by and between VWR CORPORATION ("the Company"), a
Pennsylvania corporation, and EM INDUSTRIES, INCORPORATED ("the Purchaser"), a
New York corporation.
BACKGROUND
WHEREAS, pursuant to the Common Share and Warrant Purchase Agreement, dated
February 27, 1995, between the Company and the Purchaser (the "Original
Purchase Agreement") the Company agreed to sell and the Purchaser agreed to
buy 1,818,181 shares (the "Original Shares") of the issued and outstanding
common shares, par value $1.00, of the Company ("Common Shares") representing
approximately 14.1% of the Common Shares as of the date thereof;
WHEREAS, under the Original Purchase Agreement, the Company agreed to sell
and the Purchaser agreed to purchase a warrant (the "Warrant") pursuant to
which the Purchaser is entitled to purchase additional Common Shares (the
"Warrant Shares");
WHEREAS, the Company and the Purchaser entered into a Standstill Agreement,
dated February 27, 1995 (the "Standstill Agreement"), pursuant to which the
parties agreed to regulate the acquisition and disposition by the Purchaser of
the Company's Common Shares under the Original Purchase Agreement;
WHEREAS, pursuant to an Assignment and Assumption Agreement dated April 13,
1995, the Purchaser assigned its rights and delegated its duties and
obligations under each of the Original Purchase Agreement and the Standstill
Agreement to EM Laboratories, Incorporated ("EM Laboratories"), a New York
corporation and wholly owned subsidiary of the Purchaser, and EM Laboratories
accepted such assignment and delegation; and, accordingly, all references to
EMI in each of the Original Purchase Agreement and the Standstill Agreement
refer to EM Laboratories as assignee as well as to the Purchaser, and the
Purchaser and EM Laboratories are jointly and severally liable for the
performance of the obligations of EM Laboratories under each of the Original
Purchase Agreement and the Standstill Agreement;
WHEREAS, at the closing on April 13, 1995 the Company sold and EM
Laboratories purchased the Original Shares and the Warrant, under the Original
Purchase Agreement;
WHEREAS, the Company wishes to issue and sell to the Purchaser on the
Closing Date an aggregate of 6,832,797 shares of the authorized but unissued
Common Shares of the Company at a purchase price of $12.44 per share (the
"Purchased Shares") and a subordinated debenture in the principal amount of
$135,000,000 (the "Debentures") substantially in the form attached hereto as
Exhibit A;
WHEREAS, the Purchaser wishes to acquire the Purchased Shares and the
Debenture on the terms and subject to the conditions as set forth in this
Agreement;
WHEREAS, after its purchase of the Original Shares, Warrant Shares and
Purchased Shares the Purchaser and its Affiliates will hold an aggregate of
approximately 46.5% of the Common Shares and upon the issuance of additional
Common Shares in accordance with the interest payment terms contained in the
Debenture (the "Debenture Shares") the Purchaser and its Affiliates will hold
an aggregate of approximately 49.9% of the Common Shares;
WHEREAS, the parties have agreed to amend the Standstill Agreement as of the
Closing Date in accordance with the terms thereof;
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WHEREAS, the Company has entered into an asset purchase agreement with
Baxter Healthcare Corporation ("Baxter"), a Delaware corporation, and other
parties to purchase the Industrial Products Group of Baxter's Scientific
Products Division (the "Baxter Asset Purchase"), and the Company has agreed to
finance the Baxter Asset Purchase by means of the proceeds received as a
result of the transactions contemplated under this Agreement and related
financing agreements;
WHEREAS, the Company has agreed that all proceeds received by the Company
pursuant to this Agreement shall be used exclusively for the purpose of
financing the Baxter Asset Purchase;
WHEREAS, the completion of the Baxter Asset Purchase is among the conditions
precedent to the Purchaser's obligations hereunder;
WHEREAS, the Purchaser has agreed to cause EM Laboratories to exercise the
Warrant in full on or before the Closing Date (as defined herein);
WHEREAS, the Company and the Purchaser entered into a Distribution
Agreement, dated February 27, 1995 (the "Distribution Agreement"), and the
parties have agreed to amend the Distribution Agreement in light of the
transactions contemplated herein; and
WHEREAS, the Purchaser is entering into this Agreement with the expectation
that the chief executive officer of the Company (the "Company CEO") will
continue providing his services with the Company and the Company is entering
into an employment contract (the "Employment Contract") with such Company CEO
to assure the continuation of such services, and the Company CEO's entering
into the Employment Contract is among the conditions precedent to the
Purchaser's obligations hereunder;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement, and intending to be legally bound hereby, the
parties agree as follows:
ARTICLE 1.
DEFINITIONS
The following terms, as used herein, have the following meanings:
"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by, or under common control with, such
other Person. For the purposes of this definition, "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Board of Directors" means the board of directors of the Company.
"Debenture" means the subordinated debenture to be issued to the Purchaser
pursuant to this Agreement substantially in the form attached hereto as
Exhibit A.
"Disclosure Letter" means the disclosure letter from the Company to the
Purchaser, dated the date hereof, in a form reasonably acceptable to the
Purchaser, that (i) discloses certain specified information as provided
herein, including but not limited to information to be provided pursuant to
Article 3, and (ii) states the name of each of the Company's Subsidiaries,
each Subsidiary's jurisdiction of incorporation and the percentage of its
voting stock owned by the Company and
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each other Subsidiary, and the name of each of the Company's corporate or
joint venture Affiliates (other than Subsidiaries) and the nature of the
affiliation.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest, encumbrance, option or right of any kind of any other
Person in respect of such asset.
"Material Adverse Change" means a materially adverse change in the condition
(financial or otherwise), properties, assets, liabilities, business,
operations or prospects of the Company and Subsidiaries taken as a whole.
"1933 Act" means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
"Person" means an individual, a corporation, a partnership, an association,
a trust or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Principal Trading Market" means the principal trading exchange or national
automated stock quotation system on which the Common Shares at any given time
are traded or quoted.
"Purchased Shares" shall have the meaning set forth in the sixth Recital of
this Agreement.
"SEC" means the United States Securities and Exchange Commission.
"Subsidiary" means any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are owned directly or
indirectly by the Company.
"Taxes" means any federal, state, county, local or foreign taxes, charges,
fees, levies, or other assessments, including all net income, gross income,
sales and use, ad valorem, transfer, gains, profits, value-added, excise,
franchise, real and personal property, gross receipt, capital stock,
production, business and occupancy, disability, employment, payroll, license,
estimated, stamp, custom duties, severance or withholding taxes or charges, or
any other tax of any kind whatsoever, imposed by any government entity, and
which includes any interest and penalties (civil or criminal) on or additions
to any such taxes and any expenses incurred in connection with the
determination, settlement or litigation of any Tax liability.
ARTICLE 2.
SALE AND PURCHASE; CLOSING
2.1 Sale and Purchase of the Common Shares and Debenture. Upon the terms and
subject to the conditions of this Agreement, on the Closing Date (as
hereinafter defined) the Company shall issue, sell and deliver to the
Purchaser, and the Purchaser shall purchase and take from the Company, the
Purchased Shares and the Debenture for the aggregate cash purchase price of
$220,000,000 (the "Purchase Price").
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<PAGE>
2.2 Closing.
(a) Subject to the satisfaction or waiver of all the conditions of each
party's obligation to close the transaction contemplated hereby, the
closing of the purchase and sale of the Purchased Shares and Debenture (the
"Closing") pursuant to this Agreement shall be held at the offices of
Drinker Biddle & Reath, 1345 Chestnut Street, Philadelphia, Pennsylvania
19107, at 10:00 A.M., local time, on such date and time as may be fixed by
mutual agreement of the Company and the Purchaser as soon as practicable
following satisfaction of the conditions contained in Section 5 and Section
6, but in no event later than the closing date of the Baxter Asset Purchase
(such date and time being hereinafter called the "Closing Date"). Subject
to Article 13, failure to consummate the Closing shall not result in the
termination of this Agreement or relieve any person of any obligation
hereunder.
(b) At the Closing the Company shall deliver to the Purchaser
certificates representing the Purchased Shares and a Debenture
substantially in the form attached hereto as Exhibit A, duly executed by
the Company, registered in such Purchaser's name, free and clear of all
Liens and Taxes, and against such deliveries the Purchaser shall deliver to
the Company, by wire transfer to a bank in the United States specified by
the Company for the account of the Company or such other account as
designated by the Company, funds in U.S. dollars in the amount of
$220,000,000.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Other than as set forth in the Disclosure Letter, the Company represents and
warrants to the Purchaser as follows:
3.1 Organization and Good Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and has all requisite power and authority, and
all necessary licenses and permits, to own and lease its properties and assets
and to conduct its business as now conducted. Each Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite power and authority,
and all necessary licenses and permits, to own and lease its properties and
assets and to conduct its business as now conducted. The Company and its
Subsidiaries are each qualified to do business as a foreign corporation and
are in good standing in all states where the conduct of their respective
businesses or their ownership or leasing of property requires such
qualification, except where the failure to so qualify would not have a
material adverse effect on the Company's or any Subsidiary's business,
properties, assets, prospects, operations or condition (financial or
otherwise).
3.2 Authorization. The Company has all requisite power and authority to
execute and deliver this Agreement and to carry out the transactions
contemplated hereby. The execution, delivery and performance by the Company of
this Agreement have been duly authorized by all requisite corporate action,
and this Agreement has been duly executed and delivered by the Company and
constitutes the valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as such enforcement
may be limited by bankruptcy, insolvency, moratorium, reorganization and other
similar laws relating to or affecting the enforcement of creditors' rights
generally, and except that the availability of specific performance,
injunctive relief or other equitable remedies is subject to the discretion of
the court before which any such proceeding may be brought.
3.3 Baxter Asset Purchase. The Company has entered into the Asset Purchase
Agreement dated May 24, 1995, by and among the Company, Baxter and the
Purchaser, which agreement
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governs the Baxter Asset Purchase, and an executed copy thereof has been
provided to the Purchaser and such agreement has not been amended.
3.4 No Conflict with Law or Documents. The execution, delivery and
performance of this Agreement and the Debenture by the Company will not
violate any provision of law, any rule or regulation of any governmental
authority, or any judgment, decree or order of any court binding on the
Company, and will not conflict with or result in any breach of any of the
terms, conditions or provisions of, or constitute a default under, or result
in the creation of any Lien, security interest, charge or encumbrance upon,
any of the properties, assets or outstanding stock of the Company under its
Articles of Incorporation or Bylaws, or any indenture, mortgage, lease,
agreement or other instrument to which the Company is a party or by which it
or any of its properties is bound.
3.5 Capital Stock of the Company.
(a) The authorized capital stock of the Company consists of: (i)
30,000,000 Common Shares, $1.00 par value per share, of which, prior to the
issuance of any of the Purchased Shares pursuant to this Agreement, (A)
12,894,257 shares have been duly and validly issued (of which 12,892,271
are currently outstanding, fully paid and nonassessable and 1,986 are
treasury shares), (B) 586,684 shares have been reserved for issuance upon
the awarding of stock grants or the exercise of options granted or to be
granted by the Company (the "Options" and "Option Shares") under the
Company's 1986 Long-Term Incentive Stock Plan, as amended to date (the
"Existing Stock Plan"), and (C) an adequate number of shares has been
reserved for issuance upon the exercise of the Warrant and the issuance of
the Debenture Shares, and (ii) 1,000,000 Preferred Shares, $1.00 par value
per share, of which none is presently issued and outstanding. All
outstanding Common Shares have been duly authorized and validly issued and
are fully paid and nonassessable. Except for any rights to acquire
securities of the Company pursuant to the Rights Agreement (as defined in
subsection (b) below) or the Standstill Agreement, as amended and as
otherwise described in this Section, there are no preemptive or similar
rights to purchase or otherwise acquire shares of capital stock of the
Company pursuant to any provision of law or the Articles of Incorporation
or Bylaws of the Company or by agreement or otherwise.
(b) The Rights Agreement, dated as of May 20, 1988 (the "Rights
Agreement") between the Company and First Interstate Bank of Washington,
N.A., as Rights Agent, as amended, is in full force and effect. The
Purchaser's acquisition of the Purchased Shares, the Debenture and the
Debenture Shares, as contemplated herein, will not cause the Purchaser to
become an "Acquiring Person," as defined in the Rights Agreement.
3.6 Valid Issuance. The Purchased Shares when issued, sold and delivered to
the Purchaser in accordance with this Agreement will be duly and validly
issued, fully paid, non-assessable and free and clear of Liens and Taxes, and
preemptive or similar rights except as set forth in this Agreement and the
Debenture Shares, when issued and delivered to the Purchaser in accordance
with the terms of the Debenture will be duly and validly issued, fully paid,
nonassessable and free and clear of all Liens and Taxes, and or preemptive or
similar rights except as set forth in this Agreement or the Debenture, as the
case may be.
3.7 Consents and Approvals. Except for compliance with the notification or
other requirements of the NASDAQ System and the HSR Act, and the rules and
regulations promulgated thereunder and filings under Federal and applicable
state securities laws, no permit, consent, approval or authorization of, or
declaration to or filing with, any federal, state, local or foreign
governmental or regulatory authority or other person, not made or obtained, is
required in connection with the execution or delivery of this Agreement or the
Debenture by the Company,
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the offer, issuance, sale or delivery of the Purchased Shares or the Debenture
Shares, or the carrying out by the Company of the other transactions
contemplated hereby.
3.8 Private Offering. Assuming the accuracy of the Purchaser's
representations and warranties contained in Article 4 herein, the offer,
issuance and delivery to the Purchaser pursuant to the terms of this Agreement
of the Purchased Shares, Debenture and Debenture Shares are exempt from
registration under the 1933 Act. The Purchaser shall have certain rights to
registration of the Purchased Shares and the Debenture Shares for resale, as
provided in the Standstill Agreement, as amended.
3.9 Additional Securities Law Matters. None of the Company or any of its
Affiliates, or any Person acting on its or their behalf, has offered to sell
or sold any Common Stock by means of any form of general solicitation or
general advertising within the meaning of Rule 502(c) under the 1933 Act that
would subject the issuance and sale of the Purchased Shares or the Debenture
to the registration provisions of the 1933 Act.
3.10 Articles of Incorporation and Bylaws. The copies of the Company's
Articles of Incorporation and Bylaws, each as amended to date and as attached
to the Disclosure Letter, are true and correct copies of such documents and
are in full force and effect.
3.11 Subsidiaries. The Disclosure Letter states the name of each of the
Company's Subsidiaries. The Disclosure Letter also states each Subsidiary's
jurisdiction of incorporation and the percentage of its voting stock owned by
the Company and each other Subsidiary and the name of each of the Company's
corporate or joint venture Affiliates (other than Subsidiaries) and the nature
of the affiliation.
3.12 SEC Filings.
(a) The Company has delivered to the Purchaser or has made available,
prior to the date hereof, true and correct copies of (i) its Annual Report
on Form 10-K for the fiscal year ended December 31, 1994, (ii) its
Quarterly Reports of Form 10-Q for the quarter ended March 31, 1995, (iii)
its 1994 Annual Report to Stockholders, (iv) its Current Reports on Form 8-
K, if any, filed with the SEC since December 31, 1994 and (v) its Proxy
Statements for its 1995 Annual Meeting of Stockholders. All documents
described in this Section are hereinafter referred to as the "SEC Reports."
(b) The SEC Reports are all of the reports the Company has been required
to file with the Commission since December 31, 1994. The SEC Reports when
filed complied in all material respects with the 1934 Act and all
applicable legal requirements and did not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading and as of the
Closing Date no event will have occurred that should have been described in
any SEC Report or an amendment or supplement thereto which has not been so
described.
3.13 Financial Statements.
(a) (i) The audited consolidated balance sheets and related audited
statements of consolidated income, cash flow and stockholders' equity of
the Company and its Subsidiaries as at and for the three fiscal years of
the Company ended December 31, 1994, (ii) the unaudited consolidated
balance sheet and related unaudited consolidated statements of income, cash
flow and stockholders' equity of the Company and its Subsidiaries, as at
and for the three months ended March 31, 1995 in each case together with
the notes thereto, copies of all of which have heretofore been furnished to
the Purchaser or have been made available, present fairly in all material
respects the consolidated financial position of the Company and
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its Subsidiaries at such dates and the consolidated results of their
operations and their consolidated cash flows for the periods then ended,
and (iii) the consolidated balance sheet (the "Balance Sheet") of the
Company and its Subsidiaries at March 31, 1995 ("the Balance Sheet Date")
reflected all material liabilities and obligations of the Company and of
each Subsidiary, whether accrued, contingent or otherwise, as of the date
thereof, in each case, to the extent required by United States generally
accepted accounting principles, consistently applied ("GAAP").
(b) Since the Balance Sheet Date there has been no Material Adverse
Change or any event or development which could reasonably be expected to
result in a Material Adverse Change in the business, properties, assets,
operations or condition (financial or otherwise) of the Company and its
Subsidiaries, taken as a whole, other than such changes, events or
developments resulting from general economic conditions or generally
affecting the industries in which the Company and its Subsidiaries are
involved.
(c) Since the Balance Sheet Date there has been no declaration, setting
aside or payment of any dividend or other distribution with respect to any
shares of capital stock of the Company.
(d) Since the Balance Sheet Date there has been no issuance or sale by
the Company of any shares of capital stock of the Company of any class, or
any options, warrants or other rights to acquire any such shares, or any
securities convertible into or exchangeable for such shares or any
commitments made with respect to the foregoing, other than stock option
exercises, grants of stock options and grants of restricted stock awards
pursuant to Company plans.
(e) Since the Balance Sheet Date, other than the Debenture, the Company
has not incurred any additional indebtedness for borrowed money and has not
issued or sold any additional debt securities and has not entered into any
commitments with respect to the foregoing.
(f) Since the Balance Sheet Date there has been no forgiveness or
cancellation of any debts or claims or waivers of any rights.
(g) Since the Balance Sheet Date there has been no mortgage, pledge,
lien, security interest or other charge or encumbrance on any of the
properties or assets, tangible or intangible, of the Company or its
Subsidiaries.
(h) Since the Balance Sheet Date there has been no loss of officers,
employees, suppliers or customers; or any strike or other labor trouble,
that materially and adversely affects the business, operations or prospects
of the Company and its Subsidiaries taken as a whole.
(i) Since the Balance Sheet Date no damage, destruction or loss, whether
or not covered by insurance, has occurred which materially and adversely
affects the condition (financial or otherwise), properties, assets,
business, operations or prospects of the Company and its Subsidiaries taken
as a whole.
(j) Since the Balance Sheet Date there has been no change in method of
accounting or accounting practice by the Company or any Subsidiary, except
for any such change required by reason of a concurrent change in or
application of generally accepted accounting principles.
3.14 Documents Delivered. No document, certification, schedule, list or
other written information required to be delivered to the Purchaser by or on
behalf of the Company pursuant to this Agreement contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact which will make the statements herein or therein, in light of the
circumstances under which they were made, misleading.
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3.15 Proceedings and Litigation. There is no pending, or to the knowledge of
the Company threatened, suit, action or administrative, arbitration or other
proceeding, or governmental inquiry or investigation, seeking to restrain,
prevent or change the transactions contemplated hereby or otherwise
questioning the validity or legality of such transactions or which may
otherwise have a materially adverse effect upon the business, properties,
assets, operations or condition (financial or otherwise) of the Company and
its Subsidiaries, taken as a whole.
3.16 Insurance. All material insurance policies carried by the Company and
its Subsidiaries are in full force and effect and all premiums due thereon
have been paid and the Company has complied in all material respects with the
provisions of all such policies.
3.17 Intellectual Property Rights. The Company has received no notice that
the Company is infringing any intellectual property rights of any other
Person, no claim is pending or, to the knowledge of the Company, has been made
to such effect that has not been resolved and, to the knowledge of the
Company, the Company is not infringing any intellectual property rights of any
other Person.
3.18 Prior Registration Rights. Except as provided in the Standstill
Agreement, as amended, the Company is under no contractual obligation to
register under the 1933 Act any of its presently outstanding securities or any
of its securities that may subsequently be issued.
3.19 Environmental Matters. The Company is involved in various
environmental, contractual, warranty, and public liability cases and claims,
which are considered routine to the Company's business. In the opinion of the
Company's management the potential financial impact of these matters is not
material to the business, properties, assets, prospects, operations or
condition (financial or otherwise) of the Company and its Subsidiaries.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
4.1 Principal Place of Business. The Purchaser represents and warrants to
the Company that the address of its principal place of business is 5 Skyline
Drive, Hawthorne, New York 10532.
4.2 Purchase Without View to Distribute. The Purchaser represents and
warrants to the Company that the Purchased Shares, the Debenture and, when
issued, the Debenture Shares are being acquired by the Purchaser for its own
account, not as a nominee or agent, and not with a view to resale or
distribution within the meaning of the 1933 Act and the rules and regulations
thereunder, and such Purchaser will not distribute the Purchased Shares or
Debenture in violation of the 1933 Act.
4.3 Restrictions on Transfer. The Purchaser (i) acknowledges that the
Debenture is transferrable only to an Affiliate of the Purchaser and that the
Purchased Shares and the Debenture Shares have not been registered under the
1933 Act and must be held indefinitely by the Purchaser unless they are
subsequently registered under the 1933 Act or an exemption from registration
is available, (ii) is aware that any routine sales under Rule 144 of the
Securities and Exchange Commission under the 1933 Act of Purchased Shares or
Debenture Shares may be made only in limited amounts and in accordance with
the terms and conditions of that Rule and that in such cases where the Rule is
not applicable, compliance with some other registration exemption will be
required, (iii) is aware that Rule 144 is not presently available for use by
the Purchaser for resale of any of the Purchased Shares or the Debenture
Shares and (iv) is aware that, except as provided in the Standstill Agreement,
as amended, the Company is not obligated to register
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under the 1933 Act any sale, transfer or other disposition of the Purchased
Shares or the Debenture Shares.
4.4 Access to Information. The Purchaser confirms that the Company has made
available to it the opportunity to ask questions of and receive answers from
the Company's officers and directors concerning the terms and conditions of
the offering and the business and financial condition of the Company, and to
acquire, and the Purchaser has received to its satisfaction, such additional
information, in addition to that set forth herein, about the business and
financial condition of the Company and the terms and conditions of the
offering as it has requested; provided, however, that the Purchaser's
confirmation set forth in this Section shall in no way prejudice or otherwise
affect the Purchaser's right to rely upon and enforce the Company's covenants,
agreements, representations and warranties contained in this Agreement.
4.5 Additional Representations of the Purchaser. The Purchaser represents
that (i) it is an "accredited investor" as such term is defined in Rule 501
promulgated under the 1933 Act, (ii) it has sufficient funds available to
purchase the Purchased Shares and the Debenture and (iii) its knowledge and
experience in financial and business matters are such that it is capable of
evaluating the merits and risks of its purchase of the Purchased Shares and
the Debenture; provided, however, that the Purchaser's representation set
forth in this clause (iii) shall in no way prejudice or otherwise affect the
Purchaser's right to rely upon and enforce the Company's covenants,
agreements, representations and warranties contained in this Agreement, and
(iv) the purchase of the Purchased Shares and the Debenture has been duly and
properly authorized and this Agreement has been duly executed by it or on its
behalf.
4.6 Legends. The Purchaser understands that the certificates evidencing the
Purchased Shares and, when issued, the Debenture Shares shall bear the legend
set forth in Section 10.2 herein.
4.7 Proceedings and Litigation. There is no pending, or to the knowledge of
the Purchaser threatened, suit, action or administrative, arbitration or other
proceeding, or governmental inquiry or investigation, seeking to restrain,
prevent or change the transactions contemplated hereby or otherwise
questioning the validity or legality of such transactions.
4.8 Authorization. The Purchaser has all requisite power and authority to
execute and deliver this Agreement and to carry out the transactions
contemplated hereby. The execution, delivery and performance by the Purchaser
of this Agreement have been duly authorized by all requisite corporate action,
and this Agreement has been duly executed and delivered by the Purchaser and
constitutes the valid and binding obligation of the Purchaser, enforceable
against the Purchaser in accordance with its terms, except as such enforcement
may be limited by bankruptcy, insolvency, moratorium, reorganization and other
similar laws relating to or affecting the enforcement of creditors' rights
generally, and except that the availability of specific performance,
injunctive relief or other equitable remedies is subject to the discretion of
the court before which any such proceeding may be brought.
ARTICLE 5.
CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATIONS
The Purchaser's obligation to purchase and make payment for the Purchased
Shares and Debenture on the Closing Date is subject, at its option, to the
satisfaction of each of the following conditions:
5.1 Representations and Warranties. On the Closing Date, the representations
and warranties contained in Article 3 hereof shall be true and correct in all
material respects with the
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same effect as though made on and as of the Closing Date, and the Purchaser
shall have received a certificate signed by an executive officer of the
Company to the foregoing effect.
5.2 Performance. All the covenants, agreements and conditions contained in
this Agreement to be performed or complied with by the Company on or prior to
the Closing Date shall have been performed or complied with in all material
respects, and the Purchaser shall have received a certificate signed by an
executive officer of the Company to the foregoing effect.
5.3 Opinion of Counsel. The Purchaser shall have received a legal opinion
from counsel to the Company, substantially in the form set forth in Exhibit B.
5.4 HSR Act. The waiting period under the HSR Act shall have expired or been
terminated.
5.5 Standstill Agreement. The Company shall have signed the amendment to the
Standstill Agreement, which amendment shall be substantially in the form set
forth in Exhibit D.
5.6 Distribution Agreement. The Distribution Agreement shall have been
amended as mutually agreed by the Company and the Purchaser.
5.7 Rights Agreement. The Purchaser's acquisition of the Purchased Shares,
Debenture and Debenture Shares, as contemplated herein, did not and will not
cause the Purchaser to become an "Acquiring Person," as defined in the Rights
Agreement.
5.8 Employment Contract. The Company CEO and the Company shall have entered
into the Employment Contract and the Employment Contract shall be satisfactory
in form and substance to the Purchaser.
5.9 Baxter Asset Purchase. The Baxter Asset Purchase shall have been
completed.
5.10 No Proceeding or Litigation. No suit, action, or other proceeding by
any person (other than by the Purchaser) seeking to restrain, prevent or
change the transactions contemplated hereby or otherwise questioning the
validity or legality of such transactions shall have been instituted and be
pending.
5.11 Disclosure Letter. The Disclosure Letter shall have been delivered to
the Purchaser.
5.12 Approval by Principal Trading Market. The issuance, sale and purchase
of the Purchased Shares and Debenture Shares, as contemplated by this
Agreement, shall have received all necessary approvals from the Principal
Trading Market.
5.13 Approval by Company Stockholders. The issuance, sale and purchase of
the Purchased Shares and Debenture Shares, as contemplated by this Agreement,
shall have received all necessary approvals by the Company's stockholders.
ARTICLE 6.
CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS
The Company's obligation to sell the Purchased Shares and the Debenture on
the Closing Date is subject, at the Company's option, to the satisfaction of
each of the following conditions:
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6.1 Representations and Warranties. On the Closing Date, the representations
and warranties contained in Article 4 hereof shall be true and correct in all
material respects with the same effect as though made on and as of the Closing
Date and the Company shall have received a certificate signed by an executive
officer of the Purchaser to the foregoing effect.
6.2 Performance. All the covenants, agreements and conditions contained in
this Agreement to be performed or complied with by the Purchaser on or prior
to the Closing Date shall have been performed or complied with in all material
respects, and the Company shall have received a certificate signed by an
executive officer of the Purchaser to the foregoing effect.
6.3 No Proceeding or Litigation. No suit, action, or other proceeding by any
person (other than by the Company) seeking to restrain, prevent or change the
transactions contemplated hereby or otherwise questioning the validity or
legality of such transactions shall have been instituted and be pending.
6.4 HSR Act. The waiting period under the HSR Act shall have expired or been
terminated.
6.5 Standstill Agreement. The Purchaser shall have signed the amendment to
the Standstill Agreement, which amendment shall be substantially in the form
set forth in Exhibit D.
6.6 Opinion of Counsel. The Company shall have received a legal opinion from
Counsel to the Purchaser, substantially in the form set forth in Exhibit C.
6.7 Approval by Principal Trading Market. The issuance, sale and purchase of
the Purchased Shares and Debenture Shares, as contemplated by this Agreement,
shall have received all necessary approvals from the Principal Trading Market.
6.8 Approval by Company Stockholders. The issuance, sale and purchase of the
Purchased Shares and Debenture Shares, as contemplated by this Agreement,
shall have received all necessary approvals by the Company's stockholders.
6.9 Baxter Asset Purchase. The Baxter Asset Purchase shall have been
completed, and the related Asset Purchase Agreement shall not have been
amended since the date hereof, without the prior written consent of the
Purchaser.
ARTICLE 7.
HSR ACT
7.1 Filings. As promptly as practicable after the date of this Agreement the
Company and the Purchaser shall, and the Purchaser shall make arrangements for
its "ultimate parent entity," as defined under the HSR Act, to (a) make all
filings required to be made by them and provide such information as may be
requested under the HSR Act in order to consummate the transactions
contemplated hereby, (b) make all other required regulatory filings which may
be applicable to the transactions contemplated hereby and (c) cooperate with
one another in connection with all such filings.
ARTICLE 8.
COVENANTS OF THE COMPANY AND THE PURCHASER
8.1 Covenants of the Company. The Company covenants that:
(a) at all such times as Rule 144 is available for use by the holders of
the Purchased Shares or Debenture Shares, the Company will furnish each
such holder upon request with
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all information within the possession of the Company required for the
preparation and filing of Form 144;
(b) subject to the provisions of the Confidentiality Agreement, dated
December 13, 1994, between the parties, during the time between the signing
of this Agreement and the Closing the Company will give the Purchaser
reasonable access during normal business hours, upon reasonable prior
notice, to the offices, properties, books and records of the Company and
will furnish to the Purchaser such financial and operating data and other
information relating to the Company as the Purchaser may reasonably
request;
(c) all proceeds received by the Company from the Purchaser pursuant to
this Agreement will be used exclusively for the purpose of financing the
Baxter Asset Purchase;
(d) except as contemplated by this Agreement of the Existing Stock Plan,
or as may be disclosed in the Disclosure Letter, from the date hereof until
the Closing Date, the Company will conduct its business in the ordinary
course and, to the extent consistent with such business, use all reasonable
efforts to preserve intact its present business organization, to keep
available the services of its present officers and employees, and to
preserve its relationships with customers, suppliers and others having
business dealings with it, and will not (i) declare, set aside or pay any
dividend or other distribution with respect to shares of capital stock of
the Company, (ii) issue or sell any shares of capital stock of the Company
of any class, or any options, warrants or other rights to acquire any such
shares, or any securities convertible into or exchangeable for such shares,
or make any commitments with respect to the foregoing, (iii) amend its
Restated Articles of Incorporation of Bylaws or the Rights Agreement, (iv)
make any change in any method of accounting or accounting practice by the
Company or any Subsidiary, except for any such change required by reason of
a concurrent change in or application of generally accepted accounting
principles, or (v) take or permit to be taken any action which would cause
the representations and warranties contained in Article 3 of this Agreement
to be inaccurate as of the Closing Date; and
8.2 Covenants of the Purchaser. The Purchaser covenants that:
(a) the Purchaser will cause EM Laboratories to exercise the Warrant in
full on or before the Closing Date;
(b) other then the acquisition of Warrant Shares by means of the exercise
of the Warrant, neither the Purchaser nor its Affiliates shall between the
date of execution of this Agreement and Closing, without the written
consent of the Company, acquire in any way or hold record or beneficial
ownership of any Common Shares or any other Company securities entitled to
vote for the election of directors, or any security convertible into or
exchangeable or exercisable for the purchase of Common Shares or other
Company securities entitled to vote for the election of directors, except
such Common Shares and other such Company securities which the Purchaser or
its Affiliates hold of record or beneficially own as of the date hereof.
ARTICLE 9.
CERTAIN ADDITIONAL COVENANTS
9.1 Further Assurances. Subject to the terms and conditions of this
Agreement, each party will use all reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary or
desirable under applicable laws and regulations to consummate the transactions
contemplated by this Agreement. The Company and the Purchaser each agree to
execute and deliver such other documents, certificates, agreements and other
writings and to take such other actions as may be necessary or desirable in
order to consummate or implement expeditiously the transactions contemplated
by this Agreement.
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9.2 Certain Filings. The Company and the Purchaser will cooperate with one
another (a) in obtaining all necessary regulatory approvals, (b) in
determining whether any actions, consents, approvals or waivers are required
to be obtained from parties to any material contracts in connection with the
consummation of the transactions contemplated by this Agreement and (c) in
taking such actions or making any such filings, furnishing information
required in connection therewith and seeking timely to obtain any such
actions, consents, approvals or waivers.
9.3 Public Announcements. The parties agree to consult with each other
before taking any action that would require the issuance of, or issuing, any
press release or making any public statement with respect to this Agreement,
the Debenture or the transactions contemplated hereby and thereby and, except
as may be required by applicable law or any listing agreement with the
Principal Trading Market or any other securities exchange, will not take any
such action, issue any such press release or make any such public statement
prior to such consultation.
9.4 Amendment of Standstill Agreement. The parties agree to amend the
Standstill Agreement, which amendment shall be substantially in the form set
forth in Exhibit D hereto.
9.5 Board Action under Rights Agreement. The Board of Directors will take
all necessary actions, including amending the Rights Agreement, to ensure that
the Purchaser's acquisition of the Purchased Shares, Debenture and Debenture
Shares, as contemplated herein, will not cause the Purchaser to become an
"Acquiring Person," as defined in the Rights Agreement.
9.6 Meeting of Company Stockholders.
(a) The Company's Board of Directors shall call a special meeting of the
Company's stockholders (the "Stockholders Meeting") for the purpose of
approving, as may be required by applicable law and stock exchange rules,
the Company's issuance of Common Shares to the Purchaser, as provided
herein. The Company shall use its reasonable best efforts to obtain such
stockholder approval. The Company, acting through its Board of Directors,
shall recommend such issuance to the Company's stockholders.
(b) At the Stockholders Meeting, the Purchaser agrees to vote or cause to
be voted all Common Shares held by it and its Affiliates in favor of the
proposal to approve such issuance. The Stockholders Meeting shall be held
as soon as practicable after the date of this Agreement in accordance with
applicable law and with rules, regulations and practices of the National
Association of Securities Dealers, Inc.
9.7 Proxy Statement. The Company will promptly prepare and file with the SEC
preliminary proxy solicitation materials (the "Preliminary Proxy Statement")
for the Stockholders Meeting and, after review by the SEC, shall mail a
definitive version of such materials (the "Proxy Statement") to all
stockholders of the Company. The Proxy Statement will comply in all material
respects with all applicable requirements of the laws of the Commonwealth of
Pennsylvania and the 1934 Act. The Proxy Statement will not contain any
statement which, at the time and in the light of the circumstances in which it
is made, is false or misleading with respect to any material fact, or will not
omit to state any material fact necessary in order to make the statements made
therein not false or misleading; provided, however, that the Company makes no
representation or warranty as to any statement or omission in the Proxy
Statement made in reliance upon and in conformity with written information (a)
relating to the Purchaser or its Affiliates as furnished by the Purchaser
expressly for inclusion in the Preliminary Proxy Statement or the Proxy
Statement, or (b) relating to Baxter or its Affiliates as furnished by Baxter
expressly for inclusion in the Preliminary Proxy Statement or the Proxy
Statement. The Company will amend, supplement or revise the Proxy Statement as
may from time to time be necessary in order to make the immediately preceding
sentence true and correct at and as of all times from the mailing of the Proxy
Statement to the stockholders of the Company to and including the date of the
Stockholders
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Meeting. Prior to submitting the Preliminary Proxy Statement and the Proxy
Statement and any such amendment, supplement or revision to the SEC or the
Company's stockholders, such Preliminary Statement, Proxy Statement and
amendment, supplement or revision will be submitted to the Purchaser for its
review and comment.
ARTICLE 10.
COMPLIANCE WITH 1933 ACT; RESTRICTIONS ON TRANSFERABILITY OF PURCHASED SHARES
AND DEBENTURE SHARES
10.1 Compliance with 1933 Act. The Purchased Shares, the Debenture and the
Debenture Shares shall not be transferable, except upon the conditions
specified in this Article and in the Standstill Agreement, as amended, which
conditions are intended among other things to insure compliance with the
provisions of the 1933 Act and applicable state securities laws in respect of
any such transfer.
10.2 Restrictive Legend. Each certificate representing the Purchased Shares
or Debenture Shares shall (unless otherwise permitted by the provisions of
Section 10.4 below) be stamped or otherwise imprinted with the following
legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY APPLICABLE STATE SECURITIES LAW AND ARE SUBJECT TO THE
RESTRICTIONS ON DISPOSITION SET FORTH IN AND TO THE OTHER
PROVISIONS OF A COMMON SHARE AND DEBENTURE PURCHASE AGREEMENT,
DATED MAY 24, 1995, BETWEEN VWR CORPORATION AND EM INDUSTRIES,
INCORPORATED, AND A STANDSTILL AGREEMENT, DATED FEBRUARY 27,
1995, AS AMENDED ON MAY 24, 1995, BETWEEN VWR CORPORATION AND
EM INDUSTRIES, INCORPORATED. COPIES OF SUCH AGREEMENTS ARE ON
FILE AT THE RESPECTIVE OFFICES OF VWR CORPORATION AND EM
INDUSTRIES, INCORPORATED."
10.3 Restrictions on Transferability. The Company shall not be required to
register the transfer of the Purchased Shares or the Debenture Shares on the
books of the Company unless the Company shall have been provided with an
opinion of counsel reasonably satisfactory to it prior to such transfer to the
effect that registration under the 1933 Act or any applicable state securities
law is not required in connection with the transaction resulting in such
transfer; provided, however, that no such opinion of counsel shall be
necessary in order to effectuate a transfer of Purchased Share or Debenture
Shares in accordance with the provisions of Rule 144(k) promulgated under the
1933 Act. Each certificate for Purchased Shares or Debenture Shares issued
upon any transfer as above provided shall bear the restrictive legend set
forth in Section 10.2 above, except that such restrictive legend shall not be
required if the opinion of counsel reasonably satisfactory to the Company
referred to above is to the further effect that such legend is not required in
order to establish compliance with the provisions of the 1933 Act and any
applicable state securities law, or if the transfer is made in accordance with
the provisions of Rule 144(k) under the 1933 Act.
10.4 Termination of Restrictions on Transferability. The conditions
precedent imposed by this Article upon the transferability of the Purchased
Shares and Debenture Shares shall cease and terminate as to any of the
Purchased Shares or Debenture Shares when (i) such securities shall have been
registered under the 1933 Act and sold or otherwise disposed of in accordance
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with the intended method of disposition by the seller or sellers thereof set
forth in the registration statement covering such securities, (ii) at such
times as an opinion of counsel reasonably satisfactory to the Company shall
have been rendered as required pursuant to Section 10.3 to the effect that the
restrictive legend on such securities is no longer required, or (iii) when
such securities are transferable in accordance with the provisions of Rule
144(k) promulgated under the 1933 Act. Whenever the conditions imposed by this
Article shall terminate as hereinabove provided with respect to any of the
Purchased Shares or Debenture Shares, the holder of any such securities
bearing the legend set forth in this Article as to which such conditions shall
have terminated shall be entitled to receive from the Company, without expense
(except for the payment of any applicable transfer tax) and as expeditiously
as possible, new stock certificates not bearing the portion of such legend
relating to the 1933 Act.
ARTICLE 11.
SURVIVAL OF COVENANTS, AGREEMENTS,
REPRESENTATIONS AND WARRANTIES
All covenants, agreements, representations and warranties made herein shall
survive until July 1, 1997; provided, however, representations and warranties
made herein shall only be deemed to have been made as of the date hereof and
as of the Closing Date.
ARTICLE 12.
INDEMNIFICATION
(a) Effective at the Closing, the Company agrees to indemnify, hold harmless
and defend the Purchaser and its Affiliates, against and in respect of any and
all claims, demands, liabilities, losses, costs and expenses (including
reasonable attorneys' fees and litigation expenses) arising out of or based
upon (i) the breach of any representation or warranty made by the Company in
this Agreement, the Standstill Agreement, as amended, or in any certificate or
other document required to be delivered pursuant hereto, or (ii) the breach by
the Company of any agreement or covenant contained in this Agreement or the
Standstill Agreement, as amended.
(b) Effective at the Closing, the Purchaser agrees to indemnify, hold
harmless and defend the Company and its Affiliates against and in respect of
any and all claims, demands, liabilities, losses, costs and expenses
(including reasonable attorneys' fees and litigation expenses) arising out of
or based upon (i) the breach of any representation or warranty made by the
Purchaser in this Agreement, the Standstill Agreement, as amended, or in any
certificate or other document required to be delivered pursuant hereto, or
(ii) the breach by the Purchaser of any agreement or covenant contained in
this Agreement or the Standstill Agreement, as amended.
(c) No party shall be liable for indemnification under this Article unless
the total of all liabilities, costs, losses and expenses for which the
indemnified party has a right to indemnification under this Article
(collectively, the "Indemnifiable Damages") exceeds $500,000, in which event
the indemnified party shall be entitled to Indemnifiable Damages solely in
excess of such amount.
(d) No claims for indemnification under this Article may be made later than
July 1, 1997, with respect to the inaccuracy or breach of a representation or
warranty, or two (2) years after such breach first occurred with respect to
the breach of a covenant or agreement. No provision of this Agreement shall
limit the ability of either party to obtain specific performance of the other
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party's obligations hereunder, including, without limitation, the obligations
of the Company to register the registrable securities.
(e) The party seeking indemnification under this Article (the "Indemnified
Party") agrees to give prompt notice to the party against whom indemnity is
sought (the "Indemnifying Party") of the assertion of any claim, or the
commencement of any suit, action or proceeding, in respect of which indemnity
may be sought under such Article. The Indemnifying Party may participate in
and, at its election, control the defense of any such suit, action or
proceeding at its own expense; provided that counsel selected to conduct such
defense is reasonably satisfactory to the Indemnified Party. The Indemnifying
Party shall not be liable under this Article in the event prompt notice of the
assertion of a claim or the commencement of a suit, action or proceeding in
respect of which indemnity is sought is not given as described herein, but
only to the extent the defense of such claim, suit, action or proceeding is
prejudiced thereby, or for any settlement effected without its consent of any
claim, litigation or proceeding in respect of which indemnity may be sought
hereunder. The Indemnifying Party may settle or compromise any claim without
the prior written consent of the Indemnified Party; provided that the
Indemnifying Party may not agree to any such settlement pursuant to which any
remedy or relief, other than monetary damages for which the Indemnifying Party
shall be responsible hereunder, shall be applied to or against the Indemnified
Party, without the prior written consent of the Indemnified Party.
ARTICLE 13.
TERMINATION
13.1 Termination. This Agreement may be terminated at any time:
(a) by mutual consent of the Company and the Purchaser in a written
instrument;
(b) by either the Purchaser or the Company if there has been a material
breach on the part of the other of any representation, warranty, covenant
or agreement set forth in this Agreement, which breach has not been cured
within thirty (30) business days following receipt by the breaching party
of notice of such breach;
(c) by either the Company or the Purchaser if the Closing shall not have
occurred on or before November 1, 1995 unless the failure to close by such
time is due to the breach of this Agreement by the party seeking to
terminate.
13.2 Effect of Termination. In the event of termination of this Agreement by
either the Company or the Purchaser as provided in Section 13.1, this
Agreement shall forthwith become void. No termination of this Agreement shall
relieve any party from liability resulting from a breach by such party of any
of its representations, warranties, covenants or agreements set forth herein.
ARTICLE 14.
MISCELLANEOUS
14.1 Owner of Shares. The Company may deem and treat the person in whose
name the Purchased Shares, Debenture or Debenture Shares are registered as the
absolute owner thereof for all purposes whatsoever, and the Company shall not
be affected by any notice to the contrary.
14.2 Broker or Finder. Each party to this Agreement represents and warrants
that no broker or finder has acted for such party in connection with this
Agreement or the transactions
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contemplated by this Agreement and that no broker or finder is entitled to any
broker's or finder's fee or other commission in respect thereof based in any
way on agreements, arrangements or understandings made by such party. The
Company shall indemnify the Purchaser against, and hold it harmless from, any
liability, cost, or expense (including reasonable attorneys' fees and
expenses) resulting from any agreement, arrangement, or understanding made by
the Company, and the Purchaser shall indemnify the Company against, and hold
the Company harmless from, any liability, cost, or expense (including
reasonable attorneys fees and expenses) resulting from any agreement,
arrangement, or understanding made by the Purchaser with any third party, for
brokerage or finder's fees or other commissions in connection with this
Agreement or any of the transactions contemplated hereby.
14.3 Specific Enforcement. The parties hereto acknowledge and agree that
each would be irreparably damaged if any of the provisions of this Agreement
are not performed by the other in accordance with their specific terms or are
otherwise breached. It is accordingly agreed that each party shall be entitled
to seek an injunction or injunctions to prevent breaches of this Agreement by
the other and to enforce this Agreement and the terms and provisions thereof
specifically against the other, in addition to any other remedy to which such
aggrieved party may be entitled at law or in equity. Any action or proceeding
seeking to enforce any provision of, or based on any right arising out of,
this Agreement may be brought against any of the parties in the courts of the
Commonwealth of Pennsylvania, County of Chester, in the United States District
Court for the Eastern District of Pennsylvania, in the courts of the State of
New York, County of New York, or in the United States District Court for the
Southern District of New York, and each of the parties consents to the
jurisdiction of such courts (and of the appropriate appellate courts) in any
such action or proceeding and waives any objection to venue laid therein.
Process in any action or proceeding referred to in the preceding sentence may
be served on any party anywhere in the world.
14.4 Severability. If any term or provision of this Agreement is held by a
court of competent jurisdiction or other authority to be invalid, void,
unenforceable or against its regulatory policy, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
14.5 Expenses. Except as otherwise provided herein, each party hereto shall
pay its own expenses in connection with this Agreement.
14.6 Assignment; Successors. This Agreement shall be binding upon and shall
inure to the benefit of and be enforceable by the successors and permitted
assigns of the parties hereto. The Company may not assign its rights and
delegate its duties and obligations under this Agreement without the prior
written consent of the Purchaser, and the Purchaser may not assign its rights
or delegate its duties and obligations under this Agreement without the prior
written consent of the Company and, in the absence of such consent, any such
purported assignment or delegation shall be void; provided, however, that the
Purchaser may assign its rights and delegate its duties and obligations under
this Agreement and the Debenture without such consent to an Affiliate of the
Purchaser, which Affiliate (referred to herein as the "Assignee") may,
following duly authorized execution and delivery of an agreement assuming the
obligations of the Purchaser hereunder reasonably satisfactory to the Company,
accept title to the Purchased Shares, Debenture and/or Debenture Shares. In
the event that the Purchaser assigns its rights and delegates all of its
obligations under this Agreement or the Debenture in accordance with this
Section, all references to the Purchaser herein shall refer to the Assignee as
well as to the Purchaser and the Purchaser shall be jointly and severally
liable with the Assignee for the performance of its obligations hereunder.
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14.7 Amendments. This Agreement may not be modified, amended, altered or
supplemented except by a written agreement signed by the Company and the
Purchaser which shall be authorized by all necessary corporate action of each
party. Any party may waive any condition to the obligations of any other party
hereunder.
14.8 Notices. Every notice or other communication required or contemplated
by this Agreement to be given by a party shall be delivered either by (a)
personal delivery, (b) courier mail, or (c) facsimile mail addressed to the
party for whom intended at the following address:
To the Company: VWR Corporation
1310 Goshen Parkway
West Chester, PA 19380
Attention: Jerrold B. Harris
President and Chief Executive Officer
Telecopy No.: (610) 436-1760
With a copy to: Drinker Biddle & Reath
1000 Westlakes Drive, Suite 300
Berwyn, PA 19312
Attention: Thomas E. Wood, Esq.
Telecopy No.: (610) 993-8585
To the Purchaser: EM Industries, Incorporated
5 Skyline Drive
Hawthorne, New York 10532
Attention: President & Chief Executive Officer
Telecopy No.: (914) 592-8775
With a copy to: Rogers & Wells
200 Park Avenue
New York, New York 10166
Attention: Klaus H. Jander, Esq.
Telecopy No.: (212) 878-3025
or at such other address as the intended recipient previously shall have
designated by written notice to the other parties. Notice by courier mail
shall be effective on the date it is officially recorded as delivered to the
intended recipient by return receipt or equivalent. All notices and other
communications required or contemplated by this Agreement delivered in person
or sent by facsimile mail shall be deemed to have been delivered to and
received by the addressee and shall be effective on the date of personal
delivery or on the date sent, respectively. Notice not given in writing shall
be effective only if acknowledged in writing by a duly authorized
representative of the party to whom it was given.
14.9 Attorneys' Fees. If any action or proceeding shall be commenced to
enforce this Agreement or any right arising in connection with this Agreement,
the prevailing party in such action or proceeding shall be entitled to recover
from the other party the reasonable attorneys' fees, costs and expenses
incurred by such prevailing party in connection with such action or
proceeding.
14.10 Integration. This Agreement, together with the Warrant and Standstill
Agreement, as amended, contains the entire understanding of the parties with
respect to its subject matter. There are no restrictions, agreements,
promises, warranties, covenants or undertakings other than those expressly set
forth herein or therein with respect to any matter.
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14.11 Waivers. No failure or delay on the part of either party in the
exercise of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege. All rights and remedies existing under this Agreement are
cumulative to, and not exclusive of, any rights or remedies otherwise
available.
14.12 Governing Law. This Agreement shall be exclusively governed by,
construed in accordance with, and interpreted according to the substantive law
of the Commonwealth of Pennsylvania without giving effect to the principles of
conflict of laws.
14.13 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
14.14 Cooperation. The parties hereto shall each perform such acts, execute
and deliver such instruments and documents, and do all such other things as
may be reasonably necessary to accomplish the transactions contemplated in
this Agreement.
14.15 Section Headings and Captions. Section headings and captions used in
this Agreement are provided for convenience only and shall not affect the
Agreement's meaning or interpretation.
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement on the date first set forth above.
VWR Corporation
/s/ Jerrold B. Harris
By:__________________________________
Name: Jerrold B. Harris
Title: President & CEO
EM Industries, Incorporated
/s/ Walter W. Zywottek
By:__________________________________
Name: Walter W. Zywottek
Title: President & CEO
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EXHIBIT III
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STANDSTILL AGREEMENT
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BY AND BETWEEN
VWR CORPORATION
AND
EM INDUSTRIES, INCORPORATED
FEBRUARY 27, 1995
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TABLE OF CONTENTS
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ARTICLE 1. DEFINITIONS................................................. 1
1.1 Act......................................................... 1
1.2 Affiliate................................................... 1
1.3 Affiliated Director......................................... 1
1.4 Assignee.................................................... 2
1.5 Board....................................................... 2
1.6 Business Day................................................ 2
1.7 Commission.................................................. 2
1.8 Common Share and Warrant Purchase Agreement................. 2
1.9 Common Stock................................................ 2
1.10 Common Stock Equivalents.................................... 2
1.11 Effective Date.............................................. 2
1.12 Exchange Act................................................ 2
1.13 Holder...................................................... 2
1.14 Investment Banking Firm..................................... 2
1.15 Market Disposition Program.................................. 2
1.16 Notice of Exercise.......................................... 2
1.17 Notice of Issue............................................. 2
1.18 Notice of Proposed Sale..................................... 2
1.19 Percentage Limitation....................................... 2
1.20 Permitted Percentage........................................ 3
1.21 Person...................................................... 3
1.22 Principal Trading Market.................................... 3
1.23 Private Sale................................................ 3
1.24 Purchaser................................................... 3
1.25 Purchaser Affiliate......................................... 3
1.26 Registrable Securities...................................... 3
1.27 Registration Expenses....................................... 3
1.28 Restriction Termination Date................................ 3
1.29 Selling Expenses............................................ 3
1.30 Twenty Day Average.......................................... 3
1.31 Unaffiliated Director....................................... 3
1.32 Voting Securities........................................... 3
1.33 13D Group................................................... 3
ARTICLE 2. RESTRICTIONS ON ACQUISITION OF ADDITIONAL SHARES BY
PURCHASER................................................... 4
2.1 No Purchases Before Effective Date.......................... 4
2.2 No Purchases Beyond Percentage Limitation................... 4
Permitted Purchase Due to Increases in Common Stock
2.3 Equivalents................................................. 4
2.4 Procedures Concerning Purchaser's Acquisition of Shares From
Company in Response to Increases in Common Stock
Equivalents................................................. 4
2.5 Limitation on Purchaser's Right to Purchase Common Stock
Pursuant to Section 2.3 in the Event of a Business
Acquisition by Company...................................... 5
2.6 Permitted Purchase If Company Proposes to Issue Voting
Securities for Cash......................................... 5
2.7 Permitted Purchase in Response To Third Party Tender Offer
or Exchange Offer........................................... 6
2.8 Permitted Purchase With Board Approval...................... 6
2.9 Permitted Purchase by 100% Tender Offer After Four Years.... 6
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2.10 Requirements for Tender Offers.............................. 7
2.11 Mandatory Disposal of Excess Shares......................... 7
2.12 Monthly Report of Ownership................................. 7
2.13 General Rule Regarding Acquisition of Voting Securities..... 7
2.14 Requirements of Trading Exchange or Stock Quotation System.. 8
ARTICLE 3. SALES OF SHARES BY PURCHASER AND RELATED RIGHTS AND
OBLIGATIONS OF PURCHASER AND COMPANY........................ 8
3.1 General Restrictions on Resale or Other Disposition......... 8
3.2 Allowed Sales Pursuant to Registration Rights............... 8
3.3 Allowed Sales Pursuant to Rule 144.......................... 8
Allowed Private Sales to Third Parties or Pursuant to Tender
3.4 Offer....................................................... 8
3.5 Allowed Transfers by EMI and Purchaser Affiliates........... 8
3.6 Allowed Transfers Upon Approved Business Disposition........ 8
3.7 Right of First Refusal...................................... 8
3.8 Procedures for Right of First Refusal....................... 9
Purchaser's Covenants With Respect to Distribution of
3.9 Shares...................................................... 10
3.10 Company's Undertaking to Cooperate in Rule 144 Transactions. 10
ARTICLE 4. LEGENDS AND STOP TRANSFER ORDERS............................ 11
4.1 Placement of Legends and Entry of Stop Transfer Orders...... 11
4.2 Removal of Legends and Stop Transfer Orders................. 11
ARTICLE 5. CERTAIN AGREEMENTS OF PURCHASER AND COMPANY................. 11
5.1 Future Actions.............................................. 11
5.2 Acquisitions and Transfers in Contravention of Agreement.... 12
5.3 Company's Issuance of Securities............................ 12
ARTICLE 6. BOARD OF DIRECTORS.......................................... 12
6.1 Size of Board............................................... 12
6.2 Terms....................................................... 12
6.3 Vacancies................................................... 13
6.4 Proportional Representation................................. 13
ARTICLE 7. REGISTRATION RIGHTS......................................... 13
7.1 Duration of Registration Rights............................. 13
7.2 Demand Registration Covenant................................ 14
7.3 Participation Registration Covenant......................... 14
7.4 Company's Obligations in Connection with Registrations...... 15
Conditions to Obligations of Company Under Registration
7.5 Covenants................................................... 16
7.6 Expenses.................................................... 17
7.7 Assignability of Registration Rights........................ 17
7.8 Indemnification............................................. 17
ARTICLE 8. TERMINATION................................................. 19
8.1 Termination................................................. 19
8.2 Extended Cure Period........................................ 20
ARTICLE 9. REPRESENTATIONS AND WARRANTIES.............................. 20
9.1 Of Company.................................................. 20
9.2 Of EMI...................................................... 20
ARTICLE 10. MISCELLANEOUS............................................... 21
10.1 Specific Enforcement........................................ 21
10.2 Severability................................................ 21
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10.3 Expenses........................................................ 21
10.4 Assignment; Successors.......................................... 21
10.5 Amendments...................................................... 22
10.6 Notices......................................................... 22
10.7 Attorneys' Fees................................................. 22
10.8 Integration..................................................... 22
10.9 Waivers......................................................... 23
10.10 Governing Law................................................... 23
10.11 Counterparts.................................................... 23
10.12 Cooperation..................................................... 23
10.13 Section Headings and Captions................................... 23
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STANDSTILL AGREEMENT
THIS STANDSTILL AGREEMENT (the "Agreement") is made this 27th day of
February, 1995, by and between VWR CORPORATION, a Pennsylvania corporation
("Company") and EM Industries, Incorporated, a New York corporation ("EMI").
RECITALS
A. Company and EMI have entered into a Common Share and Warrant Purchase
Agreement pursuant to which, among other things, Company shall issue and sell
to EMI Common Stock (as defined below) of Company and a common share purchase
warrant (the "Warrant").
B. The parties seek to regulate the acquisition and disposition by Purchaser
(as defined below) of Company's Voting Securities, provide for EMI
representation on Company's Board, and generally foster a constructive and
mutually beneficial relationship.
C. EMI and Company acknowledge that Company has made, prior to the date
hereof, a careful evaluation of Purchaser's investment objectives with regard
to its ownership of Voting Securities, and the compatibility of Purchaser's
management and objectives with the management and objectives of Company; that
such factors were critical to Company in its decision to enter into this
Agreement; that, absent the provisions of Articles 2 through 4 hereof,
Purchaser's ownership of Voting Securities would present an unusual
opportunity for it to gain effective control of Company and Company might have
reached a different decision with regard to entering into this Agreement and
the Common Share and Warrant Purchase Agreement; that, therefore, the
provisions of Articles 2 through 4 were a material inducement to Company to
enter into this Agreement and the Common Share and Warrant Purchase Agreement;
and, that the primary purposes of Articles 2 through 4 are that, so long as
such provisions remain in effect and except as permitted by such provisions,
the Voting Securities owned by Purchaser not come to rest in the hands of any
single holder or group of holders other than Purchaser, and Purchaser's
ownership of Voting Securities not be increased, other than as provided for in
this Agreement or with the consent of Company. EMI acknowledges that such
purposes are reasonable and that the provisions of Articles 2 through 4 are
reasonable in view of such purposes.
NOW, THEREFORE, in consideration of the mutual agreements and covenants set
forth herein and in the Common Share and Warrant Purchase Agreement, and for
other good and valuable consideration, the parties agree as follows:
ARTICLE 1.
DEFINITIONS
As used in this Agreement, in addition to other terms defined elsewhere
herein, the following terms have the respective meanings set forth below:
1.1 Act. "Act" means the Securities Act of 1933, as amended.
1.2 Affiliate. "Affiliate" means any Person directly or indirectly
controlled by, controlling or under common control with another Person. For
purposes of this definition, "control" means the power to direct the
management or policies of the Person in question.
1.3 Affiliated Director. "Affiliated Director" means any member of the Board
who has been designated by EMI under Article 6 for nomination or appointment
as a director of Company.
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1.4 Assignee. See Section 10.4.
1.5 Board. "Board" means the Board of Directors of Company as constituted
from time to time.
1.6 Business Day. "Business Day" means any Monday through Friday, inclusive,
excluding any such day which is a Federal or Commonwealth of Pennsylvania
holiday.
1.7 Commission. "Commission" means the Securities and Exchange Commission of
the United States.
1.8 Common Share and Warrant Purchase Agreement. "Common Share and Warrant
Purchase Agreement" means the Common Share and Warrant Purchase Agreement,
dated February 27, 1995, between Company and EMI.
1.9 Common Stock. "Common Stock" means the common shares of Company, par
value $1.00 per share or such other par value as may be established from time
to time.
1.10 Common Stock Equivalents. "Common Stock Equivalents" means the sum of
the following, determined at any time during the term of this Agreement: (a)
the total number of shares of issued and outstanding Common Stock, plus (b)
the number of shares of Common Stock reserved for issuance pursuant to stock
options granted (but not yet exercised) under Company's stock option plans,
and plus (c) the number of votes which may be cast for the election of
directors (whether directly or by formula) as a result of ownership of any
Voting Securities other than Common Stock; provided, however, the shares of
Common Stock described in (b) above shall not be included in Common Stock
Equivalents until the earlier of (i) the date the options are exercisable, or
(ii) the end of the fiscal year of Company during which such options were
granted; provided, further, that the votes described in (c) above shall not be
included in Common Stock Equivalents until the Voting Securities other than
Common Stock are able to be voted for the election of directors.
1.11 Effective Date. "Effective Date" means the date the acquisition of
Common Stock by Purchaser is consummated pursuant to the terms of the Common
Share and Warrant Purchase Agreement.
1.12 Exchange Act. "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
1.13 Holder. "Holder" means Purchaser and any Person to whom the
registration rights under Article 7 have been transferred in compliance with
Section 7.7.
1.14 Investment Banking Firm. "Investment Banking Firm" means an
internationally recognized investment banking firm.
1.15 Market Disposition Program. See Section 3.8(a).
1.16 Notice of Exercise. See Section 3.8(b)(iii).
1.17 Notice of Issue. See Section 2.6.
1.18 Notice of Proposed Sale. See Section 3.8(a).
1.19 Percentage Limitation. See Section 2.2.
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1.20 Permitted Percentage. "Permitted Percentage" means the Percentage
Limitation or, if the percentage of Common Stock Equivalents owned by
Purchaser increases as a consequence of (a) a reduction in the number of
outstanding Voting Securities other than as a result of (1) the expiration of
rights to acquire Common Stock under Company's stock option plans or (2) the
lapse of rights to vote for the election of directors as a result of ownership
of any Voting Securities other than Common Stock, (b) Purchaser's acquisitions
of Voting Securities with Board approval in accordance with Section 2.8, or
(c) Purchaser's acquisitions of Voting Securities in a tender offer permitted
by Section 2.7, following which Company fails to repurchase shares of Voting
Securities in accordance with Section 2.7(b), such greater percentage of
Common Stock Equivalents owned by Purchaser after such reduction, acquisition,
or failure, respectively. The Permitted Percentage shall be reduced from time
to time if, upon the issuance by Company of Common Stock Equivalents,
Purchaser either does not or is not permitted by this Agreement to purchase
its full Permitted Percentage of such issuance.
1.21 Person. "Person" means any individual, partnership, association,
corporation, trust, limited liability company or other entity, including
without limitation employee pension, profit sharing, and other benefit plans
and trusts.
1.22 Principal Trading Market. "Principal Trading Market" means the
principal trading exchange or national automated stock quotation system on
which the Common Stock is traded or quoted.
1.23 Private Sale. See Section 3.8(a).
1.24 Purchaser. "Purchaser" means EMI and Purchaser Affiliates, jointly and
severally.
1.25 Purchaser Affiliate. "Purchaser Affiliate" means any Affiliate of EMI.
1.26 Registrable Securities. See Section 7.1.
1.27 Registration Expenses. See Section 7.6(a).
1.28 Restriction Termination Date. See Section 7.1.
1.29 Selling Expenses. See Section 7.6(a).
1.30 Twenty Day Average. "Twenty Day Average" means the average closing sale
price of Common Stock on the Principal Trading Market for the twenty (20)
trading days preceding the earlier of the closing of, or public announcement
date concerning, the issuance of Voting Securities by Company.
1.31 Unaffiliated Director. "Unaffiliated Director" means a director on the
Board who is not an Affiliated Director.
1.32 Voting Securities. "Voting Securities" means Common Stock and any other
Company securities entitled to vote for the election of directors, or any
security (including any preferred stock of Company) convertible into or
exchangeable for or exercisable for the purchase of Common Stock or other
Company securities entitled to vote for the election of directors.
1.33 13D Group. "13D Group" means any group of Persons formed for the
purpose of acquiring, holding, voting or disposing of Voting Securities
required under Section 13(d) of the Exchange Act and the rules and regulations
thereunder (as now in effect) to file a statement on Schedule 13D with the
Commission as a "person" within the meaning of Section 13(d)(3) of the
Exchange Act disclosing beneficial ownership of Voting Securities representing
more than 5% of any class of Voting Securities.
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ARTICLE 2.
RESTRICTIONS ON ACQUISITION OF ADDITIONAL SHARES BY PURCHASER
2.1 No Purchases Before Effective Date. Except as provided in Section 2.7,
Purchaser shall not, between the date of execution of this Agreement and the
Effective Date, acquire in any way or hold record or beneficial ownership of
any Voting Securities.
2.2 No Purchases Beyond Percentage Limitation. Except as otherwise permitted
herein, Purchaser shall not, directly or indirectly, acquire any Voting
Securities beyond its "Percentage Limitation." The "Percentage Limitation"
shall be 20.1% of the Common Stock Equivalents.
2.3 Permitted Purchase Due to Increases in Common Stock Equivalents. If the
Common Stock Equivalents increase at any time and, as a consequence thereof
Purchaser's aggregate ownership of Common Stock Equivalents falls below the
Percentage Limitation, Purchaser may acquire additional shares of Common Stock
up to the Percentage Limitation, as follows:
(a) Purchaser may at any time do so by open-market purchases, partial
tender offer, or private transaction; and/or
(b) Purchaser may, in accordance with Section 2.4, purchase unissued or
treasury shares of Common Stock from Company.
2.4 Procedures Concerning Purchaser's Acquisition of Shares From Company in
Response to Increases in Common Stock Equivalents.
(a) Within thirty (30) days after any increase in Common Stock
Equivalents (other than an increase previously notified to EMI under
Section 2.6), Company shall give EMI written notice setting forth the
number of Common Stock Equivalents prior to the increase, the number of
Common Stock Equivalents after the increase, Purchaser's Percentage
Limitation, the number of shares of Common Stock Purchaser may purchase as
a consequence of said increase, and the per share purchase price for such
shares.
(b) The purchase price per share of Common Stock purchased under Section
2.3(b) shall be established as follows:
(i) if the Common Stock Equivalents increased as a result of issuance
by Company of one or more Voting Securities (other than issuance of
options under Company's stock option plans), the price per share shall
be the lesser of the Twenty Day Average or the aggregate fair market
value of all consideration received by Company for such Voting
Securities determined in good faith by the Board (including attributing
the consideration received with respect to each Voting Security other
than Common Stock) within thirty (30) days after the issuance, divided
by the number of Common Stock Equivalents issued by Company; or
(ii) if the Common Stock Equivalents increased as a result of
Company's issuance of stock options under Company's stock option plans,
the purchase price shall be the exercise price of such stock options.
(c) Purchaser shall have the right to purchase from Company a number of
shares of Common Stock equal to its Percentage Limitation multiplied by the
increase in the Common Stock Equivalents. Purchaser shall have sixty (60)
days from receipt of Company's notice pursuant to Section 2.4.(a) above to
notify Company in writing whether it elects to purchase any of such shares
of Common Stock and, if it so elects, the number of shares it elects to
purchase. At the time Purchaser delivers its notice to Company, there shall
be a binding agreement between Purchaser and Company for the purchase and
sale of the number of shares of Common Stock elected by Purchaser.
Purchaser shall pay the purchase price to Company in immediately available
funds, and Company shall deliver certificates representing
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the shares to Purchaser, on a date specified by Purchaser in its notice,
which date shall not be more than ten (10) days after Purchaser delivers
its notice to Company.
2.5 Limitation on Purchaser's Right to Purchase Common Stock Pursuant to
Section 2.3 in the Event of a Business Acquisition by Company.
(a) Notwithstanding Section 2.3, Purchaser shall have no right to
purchase additional shares of Common Stock if (i) the Common Stock
Equivalents increased due to issuance by Company of Voting Securities in
connection with Company's acquisition of a business entity from a third
party, (ii) during the one year period following closing of such an
acquisition, Company repurchases a number of shares of Voting Securities
equal to or greater than the number of shares of Common Stock Equivalents
issued to the third party, and (iii) Company's Plan to repurchase shares
was approved by a majority of the Board and notice thereof was given to
Purchaser prior to the closing of the acquisition. If Company does not
within the one year period repurchase a number of shares of Voting
Securities equal to the number of Common Stock Equivalents issued to the
third party, Purchaser shall have all rights under Section 2.3 to purchase
shares of Common Stock up to its Percentage Limitation. For purposes of
Section 2.4, Company shall give notice to Purchaser in accordance with
Section 2.4(a) within thirty (30) days after the end of the one year
period, and the purchase price to be paid by Purchaser to purchase shares
from Company shall be established in accordance with Section 2.4(b)(i) as
of the date of the closing of the business acquisition. Except as modified
by the preceding sentence, the provisions of Section 2.4 shall govern any
such purchase.
(b) The limitation contained in Section 2.5(a) shall only apply to
increases of fifteen percent (15%) or less in the Common Stock Equivalents.
If in connection with an acquisition Company issues Voting Securities which
cause the Common Stock Equivalents to increase more than fifteen percent
(15%), Purchaser shall have all rights under Section 2.3 to purchase Common
Stock in connection with such increase over fifteen percent (15%).
2.6 Permitted Purchase If Company Proposes to Issue Voting Securities for
Cash. If Company proposes to issue Voting Securities solely for cash pursuant
to a registered offering or a private placement, and as a consequence thereof
Purchaser's aggregate ownership of Common Stock Equivalents would fall below
its Percentage Limitation, Company shall give EMI written notice of such fact
(the "Notice of Issue") at least thirty (30) days prior to the anticipated
date of such issuance stating the anticipated number of Common Stock
Equivalents to be issued and the anticipated price per Common Stock
Equivalent. Purchaser shall have the right to purchase from Company the number
of shares of Common Stock required for Purchaser to own in the aggregate the
Percentage Limitation of the Common Stock Equivalents following the issuance
of the shares actually issued in such registered offering or private
placement. Purchaser shall have fifteen (15) days from receipt of the Notice
of Issue to notify Company in writing whether it elects to purchase any of
such shares of Common Stock and, if it so elects, the number of shares it
elects to purchase. At the time Purchaser delivers its election to Company,
there shall be a binding agreement between Purchaser and Company for the
purchase and sale of the number of shares of Common Stock elected by
Purchaser, subject to the consummation of such sale described in the Notice of
Issue. The purchase price per share shall be the price per Common Stock
Equivalent at which the Voting Securities are actually issued by Company;
provided, however, that without Purchaser's consent the purchase price shall
not be more than one hundred twenty percent (120%) of the anticipated price
per Common Stock Equivalent set forth in the Notice of Issue. Purchaser shall
pay the purchase price to Company in immediately available funds, and Company
shall deliver certificates representing the shares of Common Stock to
Purchaser, on the date of Company's issuance of the Voting Securities.
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2.7 Permitted Purchase in Response To Third Party Tender Offer or Exchange
Offer.
(a) If a tender or exchange offer is made by any Person or 13D Group
(other than Purchaser or any Person acting in concert with Purchaser) to
acquire Voting Securities, Purchaser may make a tender offer for up to an
equivalent number of shares of such Voting Securities as are sought to be
purchased by the party making the other tender offer. If Purchaser
initiates a tender offer under this Section 2.7, the tender offer may be on
such terms as Purchaser shall elect and Company agrees that it shall not in
any way (whether by active opposition, Board announcement or otherwise)
contest said tender offer.
(b) If, following such a tender offer by Purchaser, it owns in the
aggregate more than the Percentage Limitation of the Common Stock
Equivalents, Company shall have the right, exercisable at any time during
the six month period following completion of Purchaser's tender offer, to
demand the purchase from Purchaser a number of shares of such Voting
Securities as will cause Purchaser to own in the aggregate the Percentage
Limitation of the Common Stock Equivalents following such purchase;
provided, however, that Purchaser shall not be obligated to sell any Common
Stock Equivalents to Company pursuant to this Section 2.7 until such time
as such sale would not subject Purchaser to liability under Section 16(b)
of the Exchange Act or any other applicable provision of federal or state
law; and, provided further, that Purchaser shall not be entitled to vote
such Common Stock Equivalents between the time of Company's demand to
purchase pursuant to this Section 2.7(b) and Purchaser's sale of such
Common Stock Equivalents. Company shall, within said six month period,
notify EMI in writing whether it elects to purchase any of such shares and,
if it so elects, the number of shares it elects to purchase. At the time
Company delivers its notice to EMI, there shall be a binding agreement
between Purchaser and Company for the purchase and sale of the number of
shares of such Voting Securities elected by Company.
(c) The purchase price per share shall be the price per share paid by
Purchaser in such tender offer to the tendering shareholders. In addition,
Company shall reimburse Purchaser for Purchaser's pro-rata share of the
costs and expenses incurred in conducting said tender offer. The pro-rata
share of costs and expenses shall be the aggregate of all costs and
expenses (including Purchaser's cost of borrowing, not to exceed the lesser
of the prime interest rate plus 1% and Company's then-current cost of
borrowing) actually incurred by Purchaser, divided by the number of shares
of Voting Securities acquired by it in the tender offer. Company shall pay
the purchase price and the costs and expenses described in this paragraph
to Purchaser in immediately available funds, and Purchaser shall deliver
certificates representing the shares to Company, on a date specified by
Company in its notice, which date shall not be more than twenty (20) days
after Company delivers its notice to EMI.
(d) If Company's purchase is subject to or is voluntarily submitted for
shareholder approval, Purchaser shall vote all its Voting Securities in
favor of the purchase.
(e) If Company does not elect to purchase shares from Purchaser, or
elects to purchase only a portion of the shares under Section 2.7(b),
Purchaser shall be entitled to retain the shares over the Percentage
Limitation but the Percentage Limitation shall remain 20.1%.
2.8 Permitted Purchase With Board Approval. Notwithstanding any other
provision of this Agreement, Purchaser may purchase additional shares of
Voting Securities at any time, if two-thirds ( 2/3) of the Unaffiliated
Directors approve such purchase in advance.
2.9 Permitted Purchase by 100% Tender Offer After Four
Years. Notwithstanding any other provision of this Agreement, commencing on
the fourth anniversary of the Effective Date, Purchaser shall have the right
to acquire additional shares of Common Stock by means of a tender offer in
accordance with Section 2.10 below.
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2.10 Requirements for Tender Offers.
(a) Whenever Purchaser shall make a tender offer for shares of Common
Stock under Section 2.9, Purchaser may not close the acquisition of the
tendered shares unless all of the following requirements have been
satisfied:
(i) Purchaser's offer shall have been made to all holders of Common
Stock;
(ii) Purchaser shall offer to purchase for cash all shares tendered;
and
(iii) Purchaser's offer shall have been accepted by shareholders
owning not less than two-thirds ( 2/3) of the outstanding Common Stock.
(b) With respect to calculating whether Purchaser's offer has been
accepted by shareholders owning two-thirds ( 2/3) of the outstanding Common
Stock, Common Shares beneficially owned by Purchaser shall be excluded from
the outstanding Common Stock.
2.11 Mandatory Disposal of Excess Shares. If in violation of any provision
of this Article 2 Purchaser shall at any time hold in the aggregate in excess
of its then Permitted Percentage, Purchaser shall be required to dispose of
such excess shares by promptly selling, subject to Company's right of first
refusal under Section 3.7, sufficient Voting Securities so that after such
sale Purchaser shall own in the aggregate not more than its then Permitted
Percentage, provided, however, that Purchaser shall not be obligated to sell
any Voting Securities to Company pursuant to this Section 2.11 until such time
as such sale would not subject Purchaser to liability under Section 16(b) of
the Exchange Act or any other applicable provision of federal or state law;
and, provided further, that Purchaser shall not be entitled to vote such
Voting Securities between the time of Company's demand that Purchaser dispose
of such Voting Securities pursuant to this Section 2.11 and Purchaser's
disposal of such Voting Securities. If Purchaser fails to dispose of shares of
Voting Securities within one hundred eighty (180) days after receipt of notice
from Company advising EMI of its obligation so to dispose of shares (it being
understood that giving of notice by Company is not a precondition to
Purchaser's obligation to dispose of excess shares), Company shall have the
right to redeem at par value from Purchaser a number of shares of Common Stock
so that after such redemption the shares of Voting Securities owned by
Purchaser do not exceed Purchaser's then Permitted Percentage. Any Voting
Securities held by Purchaser in contravention of this Section 2.11 may not be
voted in any manner on which shareholders of Company are entitled to vote and
Company shall not be required to count any such votes, if cast, in determining
the result of shareholder voting on any matter.
2.12 Monthly Report of Ownership. During the term of this Agreement,
Purchaser will furnish to Company, within ten (10) days after the end of each
calendar month in which Purchaser acquires or disposes of any Voting
Securities, a statement showing the number of shares of Voting Securities
acquired or disposed of during the just ended month and the aggregate number
of shares of Voting Securities held by Purchaser at the end of such month. To
the extent that any such acquisition or disposition must be reported to the
Commission, Purchaser may fulfill the statement requirement in this Section
2.12 by providing to Company a copy of such report to the Commission.
2.13 General Rule Regarding Acquisition of Voting Securities. Purchaser
agrees that any and all acquisitions of Voting Securities shall be made in
compliance with all applicable federal and state securities laws. EMI agrees
to indemnify, defend and hold harmless Company, its officers, directors and
employees from and against any and all losses, claims, liabilities, assertions
and expenses incurred or suffered by any of them, including attorneys' fees
and costs of litigation, as a consequence of a claim by any party other than
Company or any of its Affiliates that Purchaser breached its obligations set
forth in the preceding sentence.
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2.14 Requirements of Trading Exchange or Stock Quotation System.
Notwithstanding any other provision of this Agreement, if, by reason of the
listing or other requirements of the principal trading exchange or national
automated stock quotation system on which the Company's Common Stock is then
traded or quoted, the issuance by Company of any additional Voting Securities
to Purchaser pursuant to this Article 2 requires approval of Company's
shareholders, then Company's obligation to issue and sell such additional
Voting Securities to Purchaser shall be subject to receipt of such shareholder
approval, which Company shall use its best efforts to obtain as soon as
possible after the date on which Purchaser shall otherwise become entitled to
purchase such additional Voting Securities from Company pursuant to this
Article 2.
ARTICLE 3.
SALES OF SHARES BY PURCHASER AND RELATED RIGHTS AND OBLIGATIONS OF PURCHASER
AND COMPANY
3.1 General Restrictions on Resale or Other Disposition. During the term of
this Agreement, Purchaser shall not sell, transfer any beneficial interest in,
pledge, hypothecate or otherwise dispose of any Voting Securities except in
compliance with Article 3.
3.2 Allowed Sales Pursuant to Registration Rights. Subject to Company's
right of first refusal under Section 3.7, Purchaser may at any time sell
Common Stock by means of an offering made pursuant to the registration rights
set forth in Article 7 below.
3.3 Allowed Sales Pursuant to Rule 144. Subject to Company's right of first
refusal under Section 3.7, Purchaser may at any time sell Common Stock
pursuant to Rule 144 of the General Rules and Regulations under the Act,
provided that Purchaser shall notify Company at least two Business Days prior
to the date of entering any sale or transfer order of Common Stock pursuant to
Rule 144, and provided further that, if Company shall thereupon notify EMI of
the pendency of its public offering of any Voting Securities, Purchaser shall
not effect any sales under Rule 144 within 10 days prior to the commencement
of or during such offering.
3.4 Allowed Private Sales to Third Parties or Pursuant to Tender
Offer. Subject to Company's right of first refusal under Section 3.7,
Purchaser may at any time make private sales
of Voting Securities to a third person, including sales pursuant to a tender
offer or exchange offer.
3.5 Allowed Transfers by EMI and Purchaser Affiliates. EMI and Purchaser
Affiliates may at any time transfer Voting Securities among themselves,
provided that such transfer would have no clear, adverse impact of a financial
character on Company, and would not adversely affect the liabilities and/or
responsibilities of EMI to Company, provided that the transferee shall agree
in advance in writing to be bound by the terms of this Agreement.
3.6 Allowed Transfers Upon Approved Business Disposition. Purchaser may
dispose of Voting Securities in conjunction with a merger or consolidation in
which Company is acquired, or in conjunction with a sale of all or
substantially all of Company's assets, provided a majority of the Board
approved such merger, consolidation, or sale.
3.7 Right of First Refusal. If during the term of this Agreement, Purchaser
desires to sell all or part of its Voting Securities pursuant to Section 2.11,
3.2, 3.3 or 3.4, Company shall have a right of first refusal to purchase said
Voting Securities in accordance with the procedures set forth in Section 3.8
below.
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3.8 Procedures for Right of First Refusal.
(a) If Purchaser desires to sell a third party all or part of its Voting
Securities pursuant to Section 3.4 above ("Private Sale"), or if Purchaser
desires to sell all or part of its Common Stock in the open market pursuant
to Section 3.2 or 3.3 above ("Market Disposition Program"), Purchaser shall
transmit to Company a written notice ("Notice of Proposed Sale") setting
forth:
(i) if a Private Sale, (A) as to each Person to whom such sale is
proposed to be made: (1) the name, address and principal business
activity of such Person; (2) the number of shares of Voting Securities
proposed to be sold to such Person; (3) the manner in which the sale is
proposed to be made; and (4) the price at which or other consideration
for which, and the material terms upon which, such sale is proposed to
be made, and (B) representing that the Private Sale is bona fide; and
(ii) if sales pursuant to a Market Disposition Program: (A) the
approximate date the sales are scheduled to commence; and (B) the
amount of Common Stock sought to be disposed of.
(b) Upon receipt of the Notice of Proposed Sale Company shall have an
option to purchase, in the case of a Private Sale, all but not less than
all of the Voting Securities proposed to be sold, and in the case of a
Market Disposition Program, all, if the Market Disposition Program is a
firm commitment public offering, or, if it is not such an offering, any
part, of the Common Stock proposed to be disposed of, on the following
terms and conditions;
(i) If the option arises in connection with a Private Sale, the
purchase price shall be the price specified in the Notice of Proposed
Sale.
(ii) If the option arises in connection with a Market Disposition
Program, the purchase price per share of Common Stock shall be the
Twenty Day Average determined as if the day Purchaser delivers the
Notice of Proposed Sale to Company is the closing date of an issuance
of securities by Company in the absence of any public announcement.
(iii) If a majority of the Unaffiliated Directors determine to
exercise the option, they shall direct Company to send a written notice
(the "Notice of Exercise") to EMI within thirty (30) days after the
Notice of Proposed Sale is received by Company specifying the number of
shares Company is purchasing; provided, however, that in the case of a
tender offer or exchange offer, EMI must receive the Notice of Exercise
not less than forty-eight (48) hours prior to the earlier of (A) the
expiration of the tender offer or exchange offer or (B) any date after
which shares tendered may be treated less favorably than shares
tendered prior thereto. If approval of such purchase by Company's
shareholders is required by law or Company's Restated Articles of
Incorporation, and if the Private Sale is in response to a tender
offer, Company shall waive its right of first refusal granted under
Section 3.7; otherwise, Company's Notice of Exercise shall be subject
to receipt of such shareholder approval, which Company shall use its
best efforts to obtain as soon as possible, and in any event within one
hundred twenty (120) days after, the date of the Notice of Exercise.
Company's failure to obtain shareholder approval within the one hundred
twenty (120) day period shall give Purchaser the right to proceed with
the proposed sale under Section 3.8(c). If such repurchase is subject
to shareholder approval, Purchaser shall vote all its Voting Securities
in favor of the purchase.
(iv) Upon EMI's receipt of the Notice of Exercise, there shall be a
binding agreement between Purchaser and Company for the purchase and
sale of the number of shares contained in the Notice of Exercise. The
closing of the purchase and sale shall occur on the thirtieth Business
Day following EMI's receipt of the Notice of Exercise. At the closing
Purchaser will deliver to Company certificates for the Voting
Securities to be sold,
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<PAGE>
duly endorsed for transfer or accompanied by a duly executed stock
power, and Company will deliver to Purchaser the purchase price as
follows: if Company's purchase is following Purchaser's proposed
Private Sale, Company shall pay Purchaser the price specified in the
Notice of Proposed Sale in the same manner (and the sale shall be upon
the same terms) specified therein, and if Company's purchase is
following Purchaser's proposed Market Disposition Program, Company
shall pay Purchaser at the closing for the shares purchased in
immediately available funds; provided, however, that if Company
receives a Notice of Proposed Sale on or before the third anniversary
of the Effective Date, Company shall have the option to pay Purchaser
by delivery at the closing of ten (10%) percent of the purchase price
in immediately available funds, and the balance by delivery of a
promissory note providing terms specified in the next succeeding
sentence; provided, further, that notwithstanding the preceding
proviso, if the Notice of Proposed Sale received by Company on or
before the third anniversary describes a proposed Private Sale in
response to a tender offer, Company shall pay the purchase price in the
same manner (and the sale shall be upon the same terms) specified in
the Notice of Proposed Sale. The promissory note shall provide for:
fixed interest at a rate equal to the Company's then-current cost of
borrowing; equal annual installments including interest payable on each
anniversary of the closing in immediately available funds, with each
installment in an amount sufficient to amortize the promissory note in
ten annual payments; and for the entire unpaid balance including
accrued and unpaid interest to be payable on the fifth anniversary of
the closing.
(v) Company may assign its right to purchase the Voting Securities
and may designate in the Notice of Exercise one or more Persons to take
title to all or any part of the Voting Securities, but this shall not
relieve Company of its obligation to pay the purchase price.
(c) If following receipt of a Notice of Proposed Sale Company fails to
give EMI a Notice of Exercise within the prescribed time period, Purchaser
shall be free to effect such sale on the following terms and conditions:
(i) if a Private Sale was proposed, Purchaser may effect such sale at
any time during the period ending one hundred twenty (120) days after
the date Company's Notice of Exercise was required to be given, to the
Person or Persons specified in the Notice of Proposed Sale for the
consideration and on the terms specified in said notice; and
(ii) if a Market Disposition Program was proposed, Purchaser may
effect such sales at any time during the period ending one hundred
eighty (180) days after the date Company's Notice of Exercise required
to be given.
(d) If Purchaser does not make the sales within the time periods provided
above, the Voting Securities so proposed to be sold will once again become
subject to this Agreement to the same extent as if such sales had not been
proposed.
3.9 Purchaser's Covenants With Respect to Distribution of Shares. In any
transaction or transactions under Section 3.2 or 3.3, Purchaser shall use its
reasonable best efforts, and shall cause any underwriter involved to use its
reasonable best efforts, to sell the Common Stock in the United States and in
a manner which will effect the broadest distribution reasonably possible, with
no sales to any one person or group (as defined in the Exchange Act) in excess
of 10% of the Common Stock sold in such sale.
3.10 Company's Undertaking to Cooperate in Rule 144 Transactions. In the
event of any proposed sales of Common Stock by Purchaser under Section 3.3,
Company shall cooperate with Purchaser to enable such sales to be made in
accordance with applicable laws, rules and regulations, the requirements of
Company's transfer agent, and the reasonable requirements of
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<PAGE>
the broker through which the sales are proposed to be executed, and shall,
upon request, furnish unlegended certificates representing Common Stock in
such numbers and denominations as Purchaser shall reasonably require for
delivery in connection with such sales.
ARTICLE 4.
LEGENDS AND STOP TRANSFER ORDERS
4.1 Placement of Legends and Entry of Stop Transfer Orders. Purchaser
agrees:
(a) that, within ten (10) Business Days after its acquisition of any
certificates evidencing Voting Securities (or, in the case of Voting
Securities currently owned by Purchaser, within ten (10) Business Days
after the date hereof) to submit such certificates to Company for placing
on the face thereof the following legends:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY APPLICABLE STATE SECURITIES LAW AND ARE SUBJECT TO THE
RESTRICTIONS ON DISPOSITION SET FORTH IN AND TO THE OTHER
PROVISIONS OF A COMMON SHARE AND WARRANTY PURCHASE AGREEMENT,
DATED FEBRUARY 27, 1995, BETWEEN VWR CORPORATION AND EM
INDUSTRIES, INCORPORATED, AND A STANDSTILL AGREEMENT, DATED
FEBRUARY 27, 1995, BETWEEN VWR CORPORATION AND EM INDUSTRIES,
INCORPORATED. COPIES OF SUCH AGREEMENTS ARE ON FILE AT THE
RESPECTIVE OFFICES OF VWR CORPORATION AND EM INDUSTRIES
INCORPORATED.";
and such additional legends designed to ensure compliance with Federal and
State laws as counsel for Company may reasonably request; and
(b) to the entry of stop transfer orders with the transfer agents of any
such Voting Securities, against the transfer of such legended certificates
except in compliance with this Agreement.
4.2 Removal of Legends and Stop Transfer Orders. Company agrees that it
will, upon receipt of an opinion from its counsel that it is appropriate so to
do and upon the presentation to its transfer agent of the certificates
containing the legends provided for in Section 4.1(a), remove such legends and
withdraw the stop transfer orders provided for in Section 4.1(b) with respect
to such certificates, upon the earlier of the following:
(a) any sale of the shares represented by such certificates made under
Section 3.2, 3.3, or 3.4; or
(b) termination of this Agreement.
ARTICLE 5.
CERTAIN AGREEMENTS OF PURCHASER AND COMPANY
5.1 Future Actions. Purchaser shall not, unless the prior written consent of
the Board (in which a majority of the Unaffiliated Directors shall concur) has
been obtained, and then only to the extent express written consent has been
obtained:
(a) at any time before the expiration of four (4) years after the
Effective Date, solicit proxies or become a "participant" in a
"solicitation" (as such terms are defined in Regulation
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<PAGE>
14A under the Exchange Act) in opposition to the recommendation of the
majority of the directors on the Board with respect to any matter; or
(b) deposit any Voting Securities in a voting trust or subject them to a
voting agreement or other arrangement of similar effect; provided, however,
that nothing in this Section 5.1 shall preclude Purchaser from so
depositing any Voting Securities if such trust, agreement or arrangement
is, and continues to be during the term of this Agreement, solely by and
among EMI and Purchaser Affiliates; or
(c) join a partnership, limited partnership, syndicate or other group for
the purpose of acquiring, holding or disposing of Voting Securities within
the meaning of Section 13(d) of the Exchange Act; or
(d) induce or attempt to induce any other Person to initiate a tender
offer for any securities of Company, or to effect any change of control of
Company, or take any action for the purpose of convening a stockholders'
meeting of Company; or
(e) acquire, by purchase or otherwise, more than 1% of any class of
equity securities of any entity which, prior to the time Purchaser acquires
more than 1% of such class, is publicly disclosed (by filing with the
Commission or otherwise) to be the beneficial owner of more than 5% of any
class of the Voting Securities; if Purchaser owns in the aggregate in
excess of 1% of any such entity, it shall promptly divest such excess;
provided, however, that Purchaser shall not be obligated to divest itself
of such excess pursuant to this Section 5.1(e) until such time as such
divestment would not subject Purchaser to liability under Section 16(b) of
the Exchange Act or any other applicable provision of federal or state law;
and, provided further, that Purchaser shall not be entitled to vote such
Voting Securities until Purchaser shall divest itself of such excess; and,
provided further, that upon being notified by Company in writing that an
entity owns in excess of 5% of any class of the Voting Securities,
Purchaser shall affirm in writing to Company that Purchaser does not own,
in the aggregate, more than 1% of any class of equity securities of such
Person.
5.2 Acquisitions and Transfers in Contravention of
Agreement. Notwithstanding Company's rights to seek injunctions or other
relief, any Voting Securities acquired or transferred by Purchaser in
contravention of this Agreement may not be voted on any matter on which
shareholders of Company are entitled to vote, any attempt to vote such Voting
Securities shall be a breach of this Agreement and Company shall not be
required to count any such votes, if cast, in determining the result of
shareholder voting on any matter.
5.3 Company's Issuance of Securities. During the term of this Agreement,
Company shall not issue any security (including without limitation any Voting
Security) which provides the holder(s) thereof with any extraordinary or
special voting rights or any right to veto any action of Company, unless such
issuance is approved in advance by an Affiliated Director. Further, Company
shall not consider or approve any such issuance prior to the Effective Date.
ARTICLE 6.
BOARD OF DIRECTORS
6.1 Size of Board. On or before the Effective Date, Company shall take all
requisite action to increase the size of the Board by two to eleven and to
appoint, effective as of the Effective Date, individuals designated by EMI to
fill the two new seats.
6.2 Terms. EMI shall advise company on or before the Effective Date which of
the Affiliated Directors shall have a term expiring at the second annual
meeting of shareholders of Company next following the Effective Date, and
which shall have a term expiring at the third
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<PAGE>
such annual meeting. After the term of any Affiliated Director expires, his or
her successor shall serve a term of three (3) years as provided in the
Restated Articles of Incorporation of Company.
6.3 Vacancies. In the event of the death, resignation, retirement,
disqualification or removal from office of any Affiliated Director for any
reason, EMI shall have the right to designate a replacement for such
Affiliated Director, or fill such vacancy, to the extent EMI would be entitled
to designate a nominee for election to the Board of Directors pursuant to
Section 6.4 hereof if directors were to be elected at an annual meeting
occurring at such date.
6.4 Proportional Representation.
(a) Company shall annually cause representatives designated by EMI to be
nominated for election to the Board so as to provide Purchaser with that
percentage representation on the Board, rounded down to the nearest whole
number, as shall equal the Permitted Percentage applicable at the time of
each annual nomination. With respect to committees of the Board, Purchaser
shall be entitled to be represented on any committee with respect to which
EMI requests representation.
(b) Purchaser shall vote its shares of Common Stock so as to elect to the
Board its proportionate number of Affiliated Directors and the persons who
have been designated by the Unaffiliated Directors, and in all other
matters so as to provide other Company shareholders with corresponding
proportionate representation. If, pursuant to the Restated Articles of
Incorporation of Company, cumulative voting for the election of Company
directors is required, Purchaser may initially vote its shares to ensure
that its then proportionate number of Affiliated Directors are elected.
Purchaser agrees that, once its proportionate number of Affiliated
Directors are elected, Purchaser shall vote its shares of Common Stock so
as to elect persons to the Board who have been designated by the
Unaffiliated Directors.
(c) Subject to the provisions of Section 6.3, Company may effect changes
in Board representation by increase in the size of the Board or by
resignations or retirements of Board members. Notwithstanding the
foregoing, Purchaser's right to proportional Board representation shall not
cause the number of Affiliated Directors to (i) decrease during the one
year period during which Company has the right to purchase Voting
Securities under Section 2.5(a), or (ii) increase during the six month
period during which Company has the right to purchase Voting Securities
under Section 2.7(b).
ARTICLE 7.
REGISTRATION RIGHTS
7.1 Duration of Registration Rights. Purchaser's rights to have Company
register shares of Registrable Securities (as defined below) provided in this
Article 7 shall terminate upon the Restriction Termination Date (as defined
below). Rights of a Holder other than Purchaser to have Company register
shares of Registrable Securities provided in this Article 7 shall terminate
upon the Restriction Termination Date. As used in this Article 7, "Registrable
Securities" shall mean all Common Stock so long as certificates representing
the same are required to bear the restrictive legend set forth in Section 4.1
hereof, to the extent that such legend refers to registration under the Act.
As used in this Article 7, "Restriction Termination Date" shall mean, with
respect to any Registrable Securities, the earliest of (i) the date that such
Registrable Securities shall have been Registered and sold or otherwise
disposed of in accordance with the intended method of distribution by the
seller or sellers thereof set forth in the Registration Statement covering
such Registrable Securities or transferred in compliance with Rule 144 under
the Securities Act and (ii) the date that an opinion of counsel to Company,
which opinion of counsel shall be reasonably acceptable to Purchaser,
containing reasonable assumptions shall have been rendered and, based
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upon such opinion, the legend referred to in Section 4.1 hereof, to the extent
that such legend refers to registration under the Act, shall have been
removed.
7.2 Demand Registration Covenant.
(a) If a Holder requests in writing that Company register under the Act
any Registrable Securities then owned by Holder, Company will use its best
efforts to cause the offering and sale to be registered as soon as
reasonably practicable. In connection therewith Company shall prepare and
file a registration statement under the Act on such form as Company shall
determine to be appropriate; provided, however, that Company shall not be
obligated to file more than one registration statement pursuant to this
Section 7.2 during any 12-month period. The request shall specify the
amount of Registrable Securities intended to be offered and sold, shall
express Holder's present intent to offer such Registrable Securities for
distribution, shall describe the nature or method of the proposed offer and
sale, and shall contain the undertaking of Holder to comply with all
applicable requirements of this Article 7.
(b) Upon receipt of a request for registration under Section 7.2, Company
will promptly give notice to all Holders other than those initiating the
request and provide a reasonable opportunity for such Holders to
participate in such registration. Any such other Holder must notify Company
in writing of its desire to participate, within thirty (30) days of receipt
of Company's notice.
(c) Any request for registration under Section 7.2 must be for a firm
commitment public offering to be managed by one or more Investment Banking
Firms selected by the Holders requesting registration, provided that such
Investment Banking Firms are reasonably satisfactory to Company. If, in the
written opinion of the Investment Banking Firms marketing factors require a
limitation of the number of shares to be underwritten, and if the total
amount of securities that all Holders (initiating and non-initiating)
request pursuant to Section 7.2 to be included in such offering exceeds the
amount of securities that the Investment Banking Firms reasonably believe
compatible with the success of the offering, Company shall only be required
to include in the offering the amount of Registrable Securities that the
Investment Banking Firms believe will not jeopardize the success of the
offering, and such amount shall be allocated among such Holders in
proportion to the respective amounts of Registrable Securities proposed to
be sold by each of the Holders. Any shares of Registrable Securities that
are so excluded from the underwriting shall be excluded from the
registration.
(d) Subject to the provisions of Section 7.2(a) and 7.2(b), if within
forty-five (45) days after receipt of a request under Section 7.2(a) and
any requests under Section 7.2(b), Company shall have obtained (i) from
Commission a "no-action" letter, in form and substance reasonably
satisfactory to the counsel of the Holders requesting registration, in
which the Commission has indicated that it will take no action if, without
registration under the Act, Holders dispose of the Registrable Securities
covered by the request(s) in the manner proposed or (ii) any opinion of its
counsel (concurred in by counsel for the requesting Holder(s)) that no
registration under the Act is required, Company need not comply with such
request or request(s); provided, however, that receipt of such "no-action"
letter or opinion shall not constitute a registration for the purpose of
determining Company's obligations to Holders under Section 7.2; and
provided, further, that in such event counsel for Company shall opine that,
whether by reason of the "no-action" letter or otherwise, the removal of
any legend from certificates representing all shares to which such "no-
action" letter or opinion refers is permissible, and, if so, Company shall
remove from such certificates all legends no longer required and shall
rescind any stop-transfer instructions previously communicated to its
transfer agent relating to such certificates.
7.3 Participation Registration Covenant. If Company shall propose
registration under the Act of an offering of Common Stock, Company shall give
prompt written notice of such fact to each
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Holder and will use all reasonable efforts to cause the registration of such
number of shares of Common Stock then owned by Holders as Holders shall
request, within fifteen (15) days after receipt of such notice, to be
included, upon the same terms (including the method of distribution) of any
such offering; provided, however, that (a) Company shall not be required to
give notice or include such Common Stock in any such registration if the
proposed registration (i) is not a primary registration of securities by
Company for its own account, or (ii) is primarily (A) a registration of a
stock option or compensation plan or of securities issued or issuable pursuant
to any such plan, or (B) a registration of securities proposed to be issued in
exchange for securities or assets of, or in connection with a merger or
consolidation with, another corporation; (b) the offering of Common Stock by
Holders shall comply with Section 3.9 above; and (c) Company may, in its sole
discretion and without the consent of the Holders, withdraw such registration
statement and abandon the proposed offering.
7.4 Company's Obligations in Connection with Registrations. In connection
with any registration of Registrable Securities undertaken by Company under
Article 7, Company shall:
(a) furnish to Holders or their underwriter such copies of any prospectus
(including any preliminary prospectus) Holders may reasonably request to
effect the offering and sale, but only while Company is required under the
provisions hereof to cause the registration statement to remain current and
effective;
(b) use its best efforts to qualify the offering under applicable Blue
Sky or other state securities laws to enable Holders to offer and sell the
Registrable Securities; provided, however, that Company shall not be
obligated to qualify as a foreign corporation to do business under the laws
of any jurisdiction in which it is not then qualified;
(c) furnish Holders, at the expense of Company, with unlegended
certificates representing ownership of the Registrable Securities being
sold in such numbers and denominations as Holders shall reasonably request,
meeting the requirements of the Principal Trading Market;
(d) use its best efforts to cause the registration statement to remain
current and effective for sixty (60) days following its effective date or
such lesser period as the underwriters may agree; and
(e) instruct the transfer agent(s) and the registrar(s) of Company's
securities to release the stop transfer orders with respect to the
Registrable Securities being sold.
(f) Company will promptly prepare and file with the Commission such
amendments and prospectus supplements, including post-effective amendments,
to the Registration Statement as Company determines may be necessary or
appropriate, and use its best efforts to have such post-effective
amendments declared effective as promptly as practicable; cause the related
prospectus to be supplemented by any prospectus supplement, and as so
supplemented, to be filed with the Commission; and notify the Holders of
any securities included in such Registration Statement and the underwriter
thereof, if any, promptly when a prospectus, any prospectus supplement or
post-effective amendment must be filed or has been filed and, with respect
to any post-effective amendment, when the same has become effective, and
make the same available to such Holders and any underwriter.
(g) Company will furnish to each Holder and the underwriter thereof, if
any, a signed counterpart, addressed to each Holder and underwriter, of (i)
an opinion or opinions of counsel to Company and (ii) a comfort letter or
comfort letters from Company's independent public accountants, each in
customary form and covering such matters of the type customarily covered by
opinions or comfort letters, as the case may be, as Holders or the
underwriter may reasonably request.
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(h) Company will make generally available to its securityholders, as soon
as reasonably practicable, an earning statement covering a period of 12
months, beginning three months after the effective date of the Registration
Statement, which earning statement shall satisfy the provisions of Section
11(a) of the Securities Act.
(i) Company will use its best efforts to cause all such Registrable
Securities to be listed in the Principal Trading Market, and on each
securities exchange on which similar securities issued by Company are then
listed.
7.5 Conditions to Obligations of Company Under Registration
Covenants. Company's obligations to register the Registrable Securities owned
by Holders under Article 7 are subject to the following conditions.
(a) Company (upon the decision of a majority of the Unaffiliated
Directors) shall be entitled to postpone for up to ninety (90) days the
filing of any registration statement under Section 7.2, if at the time it
receives the request for registration such Unaffiliated Directors
determine, in their reasonable judgment, that such registration and
offering would materially interfere with any financing, acquisition,
corporate reorganization or other material transaction involving Company or
any of its Affiliates. Company shall promptly give Holders written notice
of such determination.
(b) Company may require that the number of shares of Registrable
Securities offered for sale by Holders pursuant to a request for
registration under Section 7.3 be decreased or excluded entirely if, in the
opinion of Company's Investment Banking Firm, such reduction is desirable
to permit the orderly distribution and sale of the securities being
offered. If Company shall require such a reduction, Holders shall have the
right to withdraw from the offering.
(c) If Holders request registration pursuant to Section 7.2, Company will
enter into an underwriting agreement containing representations, warranties
and agreements not materially different from those customarily included in
underwriting agreements with an issuer for a secondary distribution;
provided, however, that Company will not be obligated to indemnify the
Investment Banking Firms on terms materially different from those set forth
in Section 7.8.
(d) Company may require, as a condition to fulfilling its obligations
under the registration covenants in Sections 7.2 and 7.3, the
indemnification agreements provided in Section 7.8(b) from Holders and the
underwriters.
(e) It shall be a condition precedent to the obligations of Company to
take action pursuant to this Article 7 that each Holder whose Registrable
Securities are being registered, and each underwriter designated by such
Holder, will furnish to Company such information and materials as Company
may reasonably request and as shall be required in connection with the
action to be taken by Company. To the extent possible Holders shall provide
Company with any information and materials required to obtain acceleration
of the effective date of the registration statement.
(f) If, in the reasonable opinion of counsel to Company it is necessary
or appropriate for Company to comply with any applicable rule, regulation,
or release promulgated by the Commission, each Holder whose Registrable
Securities are being registered and any underwriter participating in such
public offering shall execute and deliver to Company an appropriate
agreement, in form satisfactory to counsel for Company, that such Holder or
underwriter will comply with all prospectus delivery requirements of the
Act and with all anti-stabilization, manipulation, and similar provisions
of Section 10 of the Exchange Act and any rules issued thereunder by the
Commission, and will furnish to Company information about sales made in
such public offering.
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(g) Holders of Common stock included in the registration statement shall
not (until further notice) effect sales thereof after receipt of written
notice (which may include notice by telegraph) from Company to suspend
sales, to permit Company to correct or update a registration statement or
prospectus; provided, however, that the obligations of Company with respect
to maintaining any registration statement current and effective shall be
extended by a period of days equal to the period such suspension is in
effect.
(h) At the end of the period during which Company is obligated to keep
any registration statement current and effective (and any extensions
thereof required by the preceding paragraph), and upon receipt of notice
from Company of its intention to remove from registration the securities
covered by such registration statement that remain unsold, Holders of
Registrable Securities included in the registration statement shall
discontinue sales of such Registrable Securities pursuant to such
registration statement, and each such Holder shall notify Company of the
number of shares registered belonging to such Holder that remain unsold
promptly following receipt of such notice from Company.
7.6 Expenses.
(a) In connection with any registration pursuant to Section 7.2, all
Registration Expenses (as defined below) shall be borne fifty percent (50%)
by Company and fifty percent (50%) by Holders of the Registrable Securities
on the basis of the number of shares registered by them, and all Selling
Expenses (as defined below) shall be borne by Holders of the Registrable
Securities on the basis of the number of shares registered by them. As used
in this Section 7.6, "Registration Expenses" shall mean all expenses
incurred by Company in complying with this Article 7, including, without
limitation, all federal and state registration, qualification and filing
fees, printing expenses, fees and disbursements of counsel for Company,
Blue Sky fees and expenses, and the expense of any special audits incident
to or required by such registration. As used in this Section 7.6, "Selling
Expenses" shall mean all underwriting discounts and selling commissions
applicable to the sale of Registrable Securities pursuant to this Agreement
and all fees and disbursements of counsel for any Holder.
(b) In connection with any registration pursuant to Section 7.3, Company
shall pay all Registration Expenses and Selling Expenses, except to the
extent the aggregate of such expenses exceeds the amount which Company
would have expended in conducting an offering of only the shares sold by
it, and the participating Holders pro rata shall pay such excess based on
the number of shares of Registrable Securities offered by each pursuant to
such registration statement. Such Holders shall pay all Registration
Expenses and Selling Expenses directly attributable to the inclusion in the
offering of Registrable Securities being sold by the Holders, including
without limitation fees and disbursements of their own counsel and
accountants.
7.7 Assignability of Registration Rights. The registration rights afforded
Purchaser in this Article 7 shall be assignable to a transferee of Registrable
Securities from Purchaser so long as (i) such transferee has acquired no fewer
than two million (2,000,000) shares of Registrable Securities (as adjusted
from time to time to reflect stock splits, stock dividends and similar changes
in the capitalization of Company) from Purchaser, (ii) such transferee has
agreed with Company in writing to comply with all applicable provisions of
this Article 7, and (iii) Purchaser has otherwise complied with all provisions
of this Agreement which affect its right to sell, transfer or otherwise
dispose of shares of Registrable Securities. For a transfer of registration
rights to be effective, Purchaser shall give Company written notice at the
time of such transfer stating the name and address of the transferee and
identifying the shares with respect to which the rights under this Article 7
are being assigned.
7.8 Indemnification.
(a) In the case of each registration effected by Company pursuant to
Section 7.2 or 7.3, to the extent permitted by law, Company ("indemnifying
party") agrees to indemnify and hold
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harmless each Holder, its officers and directors, and each underwriter
within the meaning of Section 15 of the Act, against any and all losses,
claims, damages, liabilities or actions to which they or any of them may
become subject under the Act or any other statute or common law, including
any amount paid in settlement of any litigation, commenced or threatened,
if such settlement is effected with the written consent of Company, and to
reimburse them for any legal or other expenses incurred by them in
connection with investigating any claims and defending any actions, insofar
as any such losses, claims, damages, liabilities or actions arise out of or
are based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in the registration statement relating to the sale
of such shares, or any post-effective amendment thereto, or the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus, if used prior to the effective
date of such registration statement, or contained in the final prospectus
(as amended or supplemented if Company shall have filed with the Commission
any amendment thereof or supplement thereto) if used within the period
during which Company is required to keep the registration statement to
which such prospectus relates current under Section 7.4(d) (including any
extensions of such period as provided in Section 7.5(g)), or the omission
or alleged omission to state therein (if so used) a material fact necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading; provided, however, that the indemnification
agreement contained in this Section 7.8(a) shall not (x) apply to such
losses, claims, damages, liabilities or actions arising out of, or based
upon, any such untrue statement or alleged untrue statement, or any such
omission or alleged omission, if such statement or omission was made in
reliance upon and in conformity with information furnished to Company by
such Holder or underwriter for use in connection with preparation of the
registration statement, any preliminary prospectus or final prospectus
contained in the registration statement, or any amendment or supplement
thereto, or (y) inure to the benefit of any underwriter or any Person
controlling such underwriter, if such underwriter failed to send or give a
copy of the final prospectus to the Person asserting the claim at or prior
to the written confirmation of the sale of such securities to such Person
and if the untrue statement or omission concerned had been corrected in
such final prospectus.
(b) In the case of each registration effected by Company pursuant to
Section 7.2 or 7.3 above, each Holder and each underwriter of the shares to
be registered (each such party and such underwriters being referred to
severally as an "indemnifying party") shall agree in the same manner and to
the same extent as set forth in Section 7.8(a) to indemnify and hold
harmless Company, each Person (if any) who controls Company within the
meaning of Section 15 of the Act, the directors of Company and those
officers of Company who shall have signed any such registration statement,
with respect to any untrue statement or alleged untrue statement in, or
omission or alleged omission from, such registration statement or any post-
effective amendment thereto or any preliminary prospectus or final
prospectus (as amended or supplemented, if amended or supplemented)
contained in such registration statement, if such statement or omission was
made in reliance upon and in conformity with information furnished to
Company by such indemnifying party for use in connection with the
preparation of such registration statement or any preliminary prospectus or
final prospectus contained in such registration statement or any such
amendment or supplement thereto.
(c) Each indemnified party will, promptly after receipt of written notice
of the commencement of an action against such indemnified party in respect
of which indemnity may be sought under this Section 7.8, notify the
indemnifying party in writing of the commencement thereof. In case any such
action shall be brought against any indemnified party and it shall so
notify an indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein, with the approval of any
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indemnified parties, which approval shall not be unreasonably withheld, and
to the extent it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof with counsel satisfactory
to such indemnified party, and after notice from the indemnifying party to
such indemnified party of its election so to assume the defense thereof,
the indemnifying party will not be liable to such indemnified party under
this Section 7.8 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation. Notwithstanding the foregoing, an
indemnified party shall have the right to employ separate counsel
(reasonably satisfactory to the indemnifying party) to participate in the
defense thereof, but the fees and expenses of such counsel shall be the
expense of such indemnified party unless the named parties to such action
or proceedings include both the indemnifying party and the indemnified
party and the indemnifying party or such indemnified party shall have been
advised by counsel that there are one or more legal defenses available to
it which are different from or additional to those available to the
indemnifying party (in which case, if the indemnified party notifies the
indemnifying party in writing that it elects to employ separate counsel at
the reasonable expense of the indemnifying party, the indemnifying party
shall not have the right to assume the defense of such action or proceeding
on behalf of the indemnified party, as the case may be, it being
understood, however, that the indemnifying party shall not, in connection
with any such action or proceeding or separate or substantially similar or
related action or proceeding in the same jurisdiction arising out of the
same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate counsel at any time for the
indemnifying party and all indemnified parties, which counsel shall be
designated in writing by the Holders of a majority of the Common Shares).
If the indemnifying party withholds consent to a settlement or proposed
settlement by the indemnified party, it shall acknowledge to the
indemnified party its indemnification obligations hereunder. The indemnity
agreements in this Section 7.8 shall be in addition to any liabilities
which the indemnifying parties may have pursuant to law.
(d) If the indemnification provided for in this Section 7.8 from an
indemnifying party is unavailable to an indemnified party hereunder in
respect to any losses, claims, damages, liabilities or expenses referred to
herein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities
or expenses in such proportion as is appropriate to reflect the relative
fault of the indemnifying party and indemnified party in connection with
the statements or omissions which result in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by such indemnifying party or indemnified party and
that party's relative intent, knowledge, access to information supplied by
such indemnifying party or indemnified party and opportunity to correct or
prevent such statement or omission. The amount paid or payable by a party
as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such party in connection with investigating
or defending any action, suit, proceeding or claim.
ARTICLE 8.
TERMINATION
8.1 Termination. This Agreement shall terminate upon the earliest to occur
of the following:
(a) Purchaser's completion of a tender offer in accordance with Section
2.10, provided, that Purchaser's offer has been accepted by shareholders
owning not less than two-thirds ( 2/3) of the outstanding Common Stock, as
provided in such Section; or
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(b) by mutual written agreement of Company and EMI; or
(c) if the transactions contemplated under the Common Share Purchase
Agreement shall not have been consummated, on August 1, 1995; or
(d) if elected by EMI, exercisable upon delivery of written notice
thereof to Company, upon the failure of Company to comply with its
obligations under this Agreement and cure of such failure does not occur
within thirty (30) days after EMI has given written notice of such failure
to Company; or
(e) if elected by Company, exercisable upon delivery of written notice
thereof to EMI, upon the failure of Purchaser to comply with its
obligations under this Agreement and cure of such failure does not occur
within thirty (30) days after Company gives written notice of such failure
to EMI.
8.2 Extended Cure Period. Notwithstanding Sections 8.1(d) and 8.1(e), the
parties agree that if the nature of the failure requires that more than thirty
(30) days are necessary to cure, this Agreement shall not terminate if the
failing party commences a cure within the thirty (30) day period and
thereafter continuously and diligently pursues all steps necessary to cure the
failure up to and including completion of the cure; provided, however, that
such extended cure period shall terminate sixty (60) days after the expiration
of the thirty-day period after the delivery of notice, as contemplated in
Sections 8.1(d) and 8.1(e); provided, further, that this Section 8.2 shall not
apply to Company's failure to sell at the time provided shares of Common Stock
to Purchaser under Section 2.4 or 2.6.
ARTICLE 9.
REPRESENTATIONS AND WARRANTIES
9.1 Of Company. Company hereby represents and warrants to EMI as follows:
(a) Company is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania, with corporate
power to own its properties and to conduct its business as now conducted.
(b) The authorized capital stock of Company consists of (i) 30,000,000
shares of Common Stock, of which at the date of this Agreement, 11,066,367
shares were validly-issued and outstanding, fully paid and nonassessable
and no shares were held in Company's treasury, and (ii) 1,000,000 preferred
shares, par value $1.00 per share, of which, at the date of this Agreement,
no shares were issued and outstanding. In addition, at the date of this
Agreement, an aggregate of 597,407 shares of Common Stock (including
authorized but unissued shares and treasury shares) were reserved for
issuance pursuant to presently existing options and future options under
currently existing stock option plans. Other than the Warrant, no other
options, warrants, rights or convertible securities providing for the
issuance of Company capital stock are outstanding.
(c) Company has full legal right, power and authority to enter into and
perform this Agreement, and the execution and delivery of this Agreement by
Company and the consummation of the transactions contemplated hereby have
been duly authorized by the Board and require no other Board or stockholder
action. This Agreement constitutes a valid and binding agreement of
Company. Neither this Agreement nor the performance of this Agreement by
Company or EMI violate Company's Restated Articles of Incorporation.
9.2 Of EMI. EMI hereby represents and warrants to Company as follows:
(a) EMI is a corporation duly organized, validly existing and in good
standing under the laws of New York, with corporate power to own its
properties and to conduct its business as now conducted.
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<PAGE>
(b) EMI has full legal right, power and authority to enter into and
perform this Agreement, and the execution and delivery of this Agreement by
it and the consummation of the transactions contemplated hereby have been
duly authorized by the Board of Directors of EMI and require no other Board
of Directors or stockholder action. This Agreement constitutes a valid and
binding agreement of EMI.
ARTICLE 10.
MISCELLANEOUS
10.1 Specific Enforcement. The parties hereto acknowledge and agree that
each would be irreparably damaged if any of the provisions of this Agreement
are not performed by the other in accordance with their specific terms or are
otherwise breached. It is accordingly agreed that each party shall be entitled
to seek an injunction or injunctions to prevent breaches of this Agreement by
the other and to enforce this Agreement and the terms and provisions thereof
specifically against the other, in addition to any other remedy to which such
aggrieved party may be entitled at law or in equity. Any action or proceeding
seeking to enforce any provision of, or based on any right arising out of,
this Agreement may be brought against any of the parties in the courts of the
Commonwealth of Pennsylvania, County of Chester, in the United States District
Court for the Eastern District of Pennsylvania, courts of the State of New
York, New York County, or in the United States District Court for the Southern
District of New York, and each of the parties consents to the jurisdiction of
such courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. Process in any
action or proceeding referred to in the preceding sentence may be served on
any party anywhere in the world.
10.2 Severability. If any term or provision of this Agreement is held by a
court of competent jurisdiction or other authority to be invalid, void,
unenforceable or against its regulatory policy, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
10.3 Expenses. Except as otherwise provided herein, each party hereto shall
pay its own expenses in connection with this Agreement.
10.4 Assignment; Successors. This Agreement shall be binding upon and shall
inure to the benefit of and be enforceable by the successors and permitted
assigns of the parties hereto. Except as otherwise provided herein, Company
may not assign its rights and delegate its duties and obligations under this
Agreement without the prior written consent of EMI, and EMI may not assign its
rights or delegate its duties and obligations under this Agreement without the
prior written consent of Company and, in the absence of such consent, any such
purported assignment or delegation shall be void; provided, however, that EMI
may assign its rights and delegate its duties and obligations under this
Agreement without such consent to a directly or indirectly wholly owned
subsidiary of EMI, or to any corporation, partnership or other entity wholly-
owned by the same person which controls EMI, which subsidiary, corporation,
partnership or other entity (referred to herein as the "Assignee") may,
following duly authorized execution and delivery of an agreement assuming the
obligations of EMI hereunder reasonably satisfactory to Company, accept title
to the Shares and/or Warrant Shares. In the event that EMI assigns its rights
and delegates all of its obligations under this Agreement in accordance with
this Section 10.4, all references to EMI herein shall refer to the Assignee as
well as to EMI and EMI shall be jointly and severally liable with the Assignee
for the performance of its obligations hereunder.
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<PAGE>
10.5 Amendments. This Agreement may not be modified, amended, altered or
supplemented except by a written agreement signed by Company and EMI which
shall be authorized by all necessary corporate action of each party. Any party
may waive any condition to the obligations of any other party hereunder.
10.6 Notice. Every notice or other communication required or contemplated by
this Agreement to be given by a party shall be delivered either by (a)
personal delivery, (b) courier mail, or (c) facsimile mail addressed to the
party for whom intended at the following address:
To Company: VWR Corporation
1310 Goshen Parkway
West Chester, PA 19380
Attention: Jerrold B. Harris
Telecopy No.: (610) 436-1760
With a copy to: Drinker Biddle & Reath
1000 Westlakes Drive, Suite 300
Berwyn, PA 19312
Attention: Thomas E. Wood, Esq.
Telecopy No.: (610) 993-8585
To EMI: EM Industries, Incorporated
5 Skyline Drive
Hawthorne, New York 10532
Attention: President & Chief Executive Officer
Telecopy No.: (914) 592-8775
With a copy to: Rogers & Wells
200 Park Avenue
New York, New York 10166
Attention: Klaus H. Jander, Esq.
Telecopy No.: (212) 878-3025
or at such other address as the intended recipient previously shall have
designated by written notice to the other parties. Notice by courier mail
shall be effective on the date it is officially recorded as delivered to the
intended recipient by return receipt or equivalent. All notices and other
communications required or contemplated by this Agreement delivered in person
or sent by facsimile mail shall be deemed to have been delivered to and
received by the addressee and shall be effective on the date of personal
delivery or on the date sent, respectively. Notice not given in writing shall
be effective only if acknowledged in writing by a duly authorized
representative of the party to whom it was given.
10.7 Attorneys' Fees. If any action or proceeding shall be commenced to
enforce this Agreement or any right arising in connection with this Agreement,
the prevailing party in such action or proceeding shall be entitled to recover
from the other party the reasonable attorneys' fees, costs and expenses
incurred by such prevailing party in connection with such action or
proceeding.
10.8 Integration. This Agreement, together with the Common Share and Warrant
Purchase Agreement and the Warrant, contains the entire understanding of the
parties with respect to its subject matter. There are no restrictions,
agreements, promises, warranties, covenants or undertakings other than those
expressly set forth herein or therein with respect to any matter.
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<PAGE>
10.9 Waivers. No failure or delay on the part of either party in the
exercise of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege. All rights and remedies existing under this Agreement are
cumulative to, and not exclusive of, any rights or remedies otherwise
available.
10.10 Governing Law. This Agreement shall be exclusively governed by,
construed in accordance with, and interpreted according to the substantive law
of the Commonwealth of Pennsylvania without giving effect to the principles of
conflict of laws.
10.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
10.12 Cooperation. The parties hereto shall each perform such acts, execute
and deliver such instruments and documents, and do all such other things as
may be reasonably necessary to accomplish the transactions contemplated in
this Agreement.
10.13 Section Headings and Captions. Section headings and captions used in
this Agreement are provided for convenience only and shall not affect its
meaning or interpretation.
IN WITNESS WHEREOF, Company and EMI have caused this Agreement to be
executed on the date first above written.
VWR Corporation
BY: /s/ Jerrold B. Harris
---------------------------------
ITS: President & CEO
--------------------------------
EM Industries, Incorporated
BY: /s/ Walter W. Zynotter
---------------------------------
ITS: President & CEO
--------------------------------
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<PAGE>
EXHIBIT IV
FORM OF AMENDMENT TO THE STANDSTILL AGREEMENT
AMENDMENT NUMBER ONE TO THE STANDSTILL AGREEMENT
This Amendment Number One to the Standstill Agreement (the "Amendment") made
this [ ] day of [ ], 1995 by and among VWR Corporation ("VWR"), a
Pennsylvania corporation, EM Industries, Incorporated ("EMI"), a New York
corporation, and EM Laboratories, Incorporated ("EM Laboratories"), a New York
corporation.
WITNESSETH:
WHEREAS, EMI and VWR entered into a Standstill Agreement dated February 27,
1995 (the "Standstill Agreement");
WHEREAS, pursuant to an Assignment and Assumption Agreement dated April 13,
1995, and in conformity with Section 10.4 of the Standstill Agreement, EMI
assigned its rights and delegated its duties and obligations under the
Standstill Agreement to EM Laboratories and EM Laboratories accepted such
assignment and delegation; and WHEREAS, accordingly, all references to EMI in
the Standstill Agreement refer to EM Laboratories as assignee as well as to
EMI, and EMI and EM Laboratories are jointly and severally liable for the
performance of the obligations of EM Laboratories under the Standstill
Agreement;
WHEREAS, Section 10.5 of the Standstill Agreement provides that the
Standstill Agreement may be amended by a written agreement signed by VWR and
EMI; and
WHEREAS, VWR, EMI and EM Laboratories have agreed to amend the Standstill
Agreement as provided herein,
NOW THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, and for other good and valuable consideration, the parties agree
that the Standstill Agreement shall be amended as of the date hereof as
follows:
SECTION 1. To the Recitals there shall be added Recital D, which shall read in
its entirety as follows:
"D. Company and EMI have entered into a Common Share and Debenture Purchase
Agreement dated May 24, 1995, pursuant to which, among other things, Company
shall issue and sell to EMI additional Common Stock (as defined below) of
Company and a subordinated debenture (the 'Debenture')."
SECTION 2. To Article 1 there shall be added the following sentence, which
shall be set forth immediately after the caption "DEFINITIONS":
"Capitalized terms used but not defined herein shall have the meaning set
forth, as the case may be, in the Common Share and Warrant Purchase Agreement
(as defined below) or the Common Share and Debenture Purchase Agreement (as
defined below)."
SECTION 3. To Article 1 there shall be added the following definitions, the
other sections of Article 1 being renumbered accordingly, which
new definitions shall read in their entirety as follows:
"1.3 Agreement. "Agreement' means this Standstill Agreement, as it may be
from time to time modified, amended, altered or supplemented by written
agreement of the parties as provided in Section 10.5."
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<PAGE>
"1.10. Common Share and Debenture Purchase Agreement. "Common Share and
Debenture Purchase Agreement' means the Common Share and Debenture Purchase
Agreement, dated May 24, 1995, between Company and EMI."
"1.12 Common Stock Equivalents. "Common Stock Equivalents' means the sum of
the following, determined at any time during the term of this Agreement: (a)
the total number of shares of issued and outstanding Common Stock, plus (b)
the number of votes which may be cast for the election of directors (whether
directly or by formula) as a result of ownership of any Voting Securities
other than Common Stock; provided, however, that the votes described in (b)
above shall not be included in Common Stock Equivalents until the Voting
Securities other than Common Stock are able to be voted for the election of
directors."
"1.31. Second Closing Date. "Second Closing Date' means the date the
acquisition of the Common Stock and Debenture by Purchaser is consummated
pursuant to the terms of the Common Share and Debenture Purchase Agreement."
SECTION 4. The second sentence of Section 2.2 shall be amended to read in its
entirety as follows:
"The "Percentage Limitation' shall be 49.89% of the Common Stock
Equivalents."
SECTION 5. Section 2.7(e) shall be amended to read in its entirety as follows:
"(e) If Company does not elect to purchase shares from Purchaser, or
elects to purchase only a portion of the shares under Section 2.7(b),
Purchaser shall be entitled to retain the shares over the Percentage
Limitation but the Percentage Limitation shall remain 49.89%."
SECTION 6. Section 2.10 shall be amended to read in its entirety as follows:
"2.10 Requirements for Tender Offers. Whenever Purchaser shall make a tender
offer for shares of Common Stock under Section 2.9:
"(a) Purchaser shall not commence any such tender offer unless acceptance
of Purchaser's offer shall have been recommended to the shareholders by a
majority vote of the Unaffiliated Directors; and
"(b) Purchaser may not close the acquisition of the tendered shares
unless all of the following requirements have been satisfied:
"(i) Purchaser's offer shall have been made to all holders of Common
Stock;
"(ii) Purchaser shall offer to purchase for cash all shares tendered;
and
"(iii) Purchaser's offer shall have been accepted by shareholders
owning not less than a majority of the outstanding Common Stock.
"(c) With respect to calculating whether Purchaser's offer has been
accepted by shareholders owning a majority of the outstanding Common Stock,
Common Shares beneficially owned by Purchaser shall be excluded from the
outstanding Common Stock."
SECTION 7. Section 4.1(a) shall be amended so that the legend set forth
therein shall read in its entirety as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY APPLICABLE STATE SECURITIES LAW AND ARE SUBJECT TO THE
RESTRICTIONS ON DISPOSITION SET FORTH
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<PAGE>
IN AND TO THE OTHER PROVISIONS OF A COMMON SHARE AND WARRANTY
PURCHASE AGREEMENT, DATED FEBRUARY 27, 1995, BETWEEN VWR
CORPORATION AND EM INDUSTRIES, INCORPORATED, AND A COMMON
SHARE AND DEBENTURE PURCHASE AGREEMENT, DATED MAY 24, 1995,
BETWEEN VWR CORPORATION AND EM INDUSTRIES, INCORPORATED, AND A
STANDSTILL AGREEMENT, DATED FEBRUARY 27, 1995, BETWEEN VWR
CORPORATION AND EM INDUSTRIES, INCORPORATED, AS AMENDED ON
[CLOSING DATE], 1995. COPIES OF SUCH AGREEMENTS ARE ON FILE AT
THE RESPECTIVE OFFICES OF VWR CORPORATION AND EM INDUSTRIES,
INCORPORATED."
SECTION 8. Section 6.1 shall be amended to read in its entirety as follows:
"6.1. Size of Board; Proportionate Representation. (a) On or before the
Second Closing Date, the Company shall take all requisite action, including
without limitation increasing or decreasing the number of seats on the Board,
to grant EMI the right, at EMI's option, to nominate such number of directors
to the Board as shall ensure that EMI shall have the right to maintain Board
representation at all times commensurate with the aggregate proportion of
Common Shares owned by EMI and its Affiliates.
"(b) At any time when EMI shall exercise its option to appoint directors, as
described in paragraph (a) above, the Company shall take all requisite action
to cause the election, effective immediately, of the individual designated by
EMI to fill the number of seats on the Board that shall be proportionate to
the aggregate Common Share ownership of EMI and its Affiliates."
SECTION 9. Section 6.2 shall be amended to read in its entirety as follows:
"6.2 Terms. EMI shall advise Company as necessary, from time to time, which
of the Affiliated Directors shall have a term expiring at the second annual
meeting of shareholders of Company next following the Second Closing Date, and
which shall have a term expiring at the third such annual meeting. After the
term of any Affiliated Director expires, his or her successor shall serve a
term of three (3) years as provided in the Restated Articles of Incorporation
of Company."
SECTION 10. Section 8.1(a) shall be amended to read in its entirety as
follows:
"(a) Purchaser's completion of a tender offer in accordance with Section
2.10, provided, that Purchaser's offer shall have been recommended to the
shareholders by a majority vote of the Unaffiliated Directors and shall have
been accepted by shareholders owning not less than a majority of the
outstanding Common Stock, as provided in such Section; or".
SECTION 11. The proviso set forth in the second sentence of Section 10.4 shall
be amended to read in its entirety as follows:
". . . provided, however, that EMI may assign its rights and delegate its
duties and obligations under this Agreement without such consent to an
Affiliate of EMI, which Affiliate (referred to herein as the "Assignee") may,
following duly authorized execution and delivery of an agreement assuming the
obligations of EMI hereunder reasonably satisfactory to Company, accept title
to the Shares and/or Warrant Shares."
SECTION 12. This Amendment shall be exclusively governed by, construed in
accordance with, and interpreted according to the substantive law
of the Commonwealth of Pennsylvania without giving effect to the
principles of conflict of laws.
SECTION 13. This Amendment may be executed in one or more counterparts, each
of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, VWR, EMI and EM Laboratories have caused this Amendment
to be executed on the date first above written.
VWR Corporation
By: _________________________________
Name:
Title:
EM Industries, Incorporated
By: _________________________________
Name:
Title:
EM Laboratories, Incorporated
By: _________________________________
Name:
Title:
IV-4
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[LETTERHEAD OF GOLDMAN, SACHS & CO. APPEARS HERE]
EXHIBIT V
- --------------------------------------------------------------------------------
May 24, 1995
Board of Directors
VWR Corporation
1310 Goshen Parkway
West Chester, PA 19380
Gentlemen:
You have requested our opinion as to the fairness to VWR Corporation (the
"Company") of the cash consideration to be paid for the industrial distribution
business of the Industrial and Life Sciences Division (the "Distribution
Business") of Baxter International, Inc. ("Baxter") pursuant to the Asset
Purchase Agreement (the "Agreement") dated as of May 24, 1995, by and among
Baxter and the Company. Pursuant to the Agreement, the Company will pay Baxter
$400,000,000 in cash (the "Consideration") for the Distribution Business,
subject to adjustments under certain circumstances as more fully set forth in
the Agreement.
Goldman, Sachs & Co., 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. We are familiar with
the Company having acted as its financial advisor in connection with, and having
participated in certain of the negotiations leading to, the Agreement and are
currently discussing with the Company our possible participation in the Senior
Debt Facility used to finance a portion of the transactions pursuant to the
Agreement. We have also provided, and may provide in the future, certain
investment banking services to Baxter. Recent investment banking services
provided to Baxter include serving as a managing underwriter of public offerings
of Baxter's debt securities and acting as agent for Baxter's commercial paper.
In the course of trading activity we have accumulated a net short position of
21,754 Baxter shares.
In connection with this opinion, we have reviewed, among other things, the
Agreement, annual reports, 10-K's and interim 10-Q's of the Company and Baxter
for the five years ended December 31, 1994. For the Distribution Business, we
have reviewed certain internal financial analyses and unaudited financial
results for the three years ended December 31, 1994, projected financial
forecasts for 1995 prepared by Baxter and projected financial forecasts for
1995-1999 prepared by the Company as of April 20, 1995. We note that audited
financial information for the Distribution Business has not been prepared and,
accordingly, has not been reviewed by us. We have also held discussions with
members of the senior managements of Baxter and the Distribution Business
regarding its past and current business operations, financial condition and we
have also held discussions with members of the senior management of the Company,
Baxter and the Distribution Business regarding future prospects of the
Distribution Business. In addition, we have compared
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VWR Corporation
May 24, 1995
Page Two
certain financial information for the Distribution Business with similar
information for certain other companies the securities of which are publicly
traded, reviewed the financial terms of certain recent business combinations in
the distribution industry specifically and in other industries generally and
performed such other studies and analyses as we considered appropriate. We are
expressing no opinion with respect to any transaction undertaken by the Company
to finance the transactions pursuant to the Agreement.
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of this opinion. In that regard, we have assumed with your consent,
that the financial forecasts prepared by Baxter and the Company, including,
without limitation, projected cost savings and operating synergies resulting
from the acquisition of the Distribution Business by the Company and other
acquisition related adjustments have been reasonably prepared on a basis
reflecting the best currently available judgments and estimates of Baxter and
the Company and that such forecasts will be realized in the amounts and at the
times contemplated thereby. In addition, we have not made an independent
evaluation or appraisal of the assets and liabilities of the Distribution
Business. We have not been furnished with any such evaluation or appraisal. We
have also assumed that the Company will receive all necessary regulatory
approvals to complete the transactions contemplated by the Agreement without
undue delay.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that as of the date hereof, the
Consideration to be paid by the Company for the Distribution Business pursuant
to the Agreement is fair to the Company.
Very truly yours,
/s/ Goldman, Sachs & Co.
GOLDMAN, SACHS & Co.
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<PAGE>
EXHIBIT VI
ASSET PURCHASE AGREEMENT
BY AND AMONG
VWR CORPORATION
AS BUYER
AND
BAXTER HEALTHCARE CORPORATION
AS SELLER
AND
EM LABORATORIES, INCORPORATED
MAY 24, 1995
<PAGE>
TABLE OF CONTENTS
SECTION 1
PURCHASE AND SALE OF SUBJECT ASSETS
<TABLE>
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<C> <S> <C>
1.1 Purchase and Sale of Subject Assets................................ 1
1.2 Assumption of Liabilities.......................................... 4
1.3 Excluded Liabilities............................................... 4
1.4 Purchase Price and Payment......................................... 5
1.5 Closing............................................................ 7
1.6 Transfer of Subject Assets......................................... 7
1.7 Delivery of Records and Contracts.................................. 7
1.8 Non-Assignable Contracts........................................... 7
1.9 Further Assurances................................................. 8
1.10 Allocation of Purchase Price....................................... 8
1.11 Sales and Transfer Taxes........................................... 8
SECTION 2
REPRESENTATIONS AND WARRANTIES OF SELLER
2.1 Making of Representations and Warranties........................... 9
2.2 Organization and Qualifications of Seller.......................... 9
2.3 Authority of Seller................................................ 9
2.4 Status of Tangible Property........................................ 10
2.5 Consents........................................................... 10
2.6 Intellectual Property.............................................. 10
2.7 Contracts.......................................................... 11
2.8 Litigation......................................................... 11
2.9 Compliance with Laws............................................... 11
2.10 Finder's Fee....................................................... 11
2.11 Permits............................................................ 11
2.12 Sales and Margins.................................................. 12
2.13 Industrial Accounts Receivable..................................... 12
2.14 Pre-Closing Statement of Assets and Liabilities.................... 12
2.15 Labor Matters...................................................... 12
2.16 Employees and Executive Compensation............................... 13
2.17 Suppliers and Customers............................................ 13
2.18 Full Disclosure.................................................... 13
SECTION 3
REPRESENTATIONS AND WARRANTIES OF BUYER
3.1 Making of Representations and Warranties........................... 14
3.2 Organization of Buyer.............................................. 14
3.3 Authority of Buyer................................................. 14
3.4 Litigation......................................................... 14
3.5 Consents........................................................... 15
3.6 Finder's Fee....................................................... 15
3.7 Financial Ability.................................................. 15
SECTION 4
COVENANTS OF SELLER
4.1 Making of Covenants and Agreements................................. 15
4.2 Conduct of Business................................................ 15
</TABLE>
VI-i
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4.3 Authorization from Others........................................... 16
4.4 Notice of Default................................................... 16
4.5 Consummation of Agreement........................................... 16
4.6 Co-operation of Seller.............................................. 16
4.7 No Solicitation of Other Offers..................................... 16
4.8 Confidentiality..................................................... 16
4.9 Access.............................................................. 17
4.10 Billing Errors...................................................... 17
4.11 Non-Competition..................................................... 17
SECTION 5
COVENANTS OF BUYER
5.1 Making of Covenants and Agreements.................................. 18
5.2 Confidentiality..................................................... 19
5.3 Disclosure.......................................................... 19
5.4 Warranty............................................................ 19
5.5 Meeting of Shareholders of Buyer.................................... 19
5.6 Release of Guaranties............................................... 19
5.7 Notice of Default................................................... 20
5.8 Consummation of Agreement........................................... 20
5.9 Co-operation of Buyer and EM........................................ 20
SECTION 6
MUTUAL COVENANTS
6.1 Improvements Act.................................................... 20
6.2 Non-Solicitation.................................................... 20
6.3 Restricted Marks.................................................... 21
6.4 Proxy Statement and Financial Statements............................ 22
6.5 Supply Agreement.................................................... 22
SECTION 7
CONDITIONS
7.1 Conditions to the Obligations of Buyer.............................. 22
7.2 Conditions to Obligations of Seller................................. 24
SECTION 8
CERTAIN EMPLOYEE AND EMPLOYEE PLAN MATTERS
8.1 Offers of Employment................................................ 25
8.2 Buyer's Assumption of Employee Liability and Indemnity.............. 26
8.3 Benefit Plans and Pension Plans..................................... 26
8.4 Buyer's Plans....................................................... 26
8.5 Continuation Coverage............................................... 27
8.6 WARN................................................................ 27
SECTION 9
RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING
9.1 Survival............................................................ 27
9.2 Collection of Assets................................................ 27
9.3 Payment or Satisfaction of Excluded Liabilities..................... 27
9.4 Certain Additional Agreements....................................... 28
</TABLE>
VI-ii
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<TABLE>
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SECTION 10
INDEMNIFICATION
<C> <S> <C>
10.1 Indemnification of Seller........................................ 28
10.2 Limitations on Indemnification by Seller......................... 28
10.3 Indemnification by Buyer......................................... 29
10.4 Limitations on Indemnification by Buyer.......................... 29
10.5 Notice: Defense of Claims........................................ 30
10.6 Exclusive Remedy................................................. 32
SECTION 11
EXPIRATION OR TERMINATION OF AGREEMENT
11.1 Expiration or Termination........................................ 32
11.2 Effect of Expiration or Termination.............................. 32
SECTION 12
ALTERNATIVE DISPUTE RESOLUTION
12.1 Dispute Resolution............................................... 33
12.2 Referral to Representatives...................................... 33
SECTION 13
DEFINITIONS
13.1 Certain Defined Terms............................................ 34
13.2 Cross-Reference Table............................................ 35
SECTION 14
MISCELLANEOUS
14.1 Consent to Jurisdiction.......................................... 36
14.2 Bulk Sales Law................................................... 36
14.3 Risk of Loss..................................................... 37
14.4 Fees and Expenses................................................ 37
14.5 Governing Law.................................................... 37
14.6 Notices.......................................................... 37
14.7 Entire Agreement................................................. 38
14.8 Assignability; Binding Effect.................................... 38
14.9 No Third Party Beneficiaries..................................... 38
14.10 Captions and Gender.............................................. 38
14.11 Execution in Counterparts........................................ 39
14.12 Amendments....................................................... 39
14.13 Public Disclosures............................................... 39
LIST OF EXHIBITS
1.6(a) Form of Bill of Sale and Assignment
1.6(b) Form of Assumption Agreement
7.1(d) Form of Opinion of Seller's Counsel
7.1(i) Form of Trademark License Agreement
7.1(j) Form of Distribution Agreement
7.1(k) Form of Services Agreement
7.2(d) Form of Opinion of Buyer's Counsel
</TABLE>
VI-iii
<PAGE>
ASSET PURCHASE AGREEMENT
AGREEMENT entered into as of May 24, 1995 by and among VWR Corporation, a
Pennsylvania corporation ("Buyer"), Baxter Healthcare Corporation, a Delaware
corporation ("Seller"), and, solely with respect to paragraphs 5.5, 5.8 and
5.9, EM Laboratories, Incorporated, a New York corporation ("EM").
WITNESSETH
WHEREAS, Seller is, among other things, engaged through its Industrial and
Life Sciences Division in the business of distributing worldwide to Industrial
Customers (as defined in paragraph 13.1 hereof) general laboratory equipment
and supplies (the "Industrial Distribution Business") (it being understood
that the Industrial Distribution Business shall not be deemed to include the
biomedical group of its Hospital Supply/Scientific Products U.S. Distribution
Division, any business, products or assets in Canada or Japan, or any
business, products or assets described herein as constituting Excluded Assets
(as defined in paragraph 1.1(b) hereof)).
WHEREAS, subject to the terms and conditions hereof, Seller desires to sell
the Industrial Distribution Business and certain of the assets and properties
of Seller specifically related to and used exclusively in connection with the
Industrial Distribution Business; and
WHEREAS, subject to the terms and conditions hereof, Buyer desires to
purchase the Industrial Distribution Business and said properties and assets
of Seller for the consideration specified herein and the assumption by Buyer
of certain liabilities and obligations of Seller.
NOW THEREFORE, in order to consummate said purchase and sale and in
consideration of the mutual agreements set forth herein, the parties,
intending to be legally bound, hereby agree as follows:
SECTION 1
PURCHASE AND SALE OF SUBJECT ASSETS
1.1 Purchase and Sale of Subject Assets
(a) Subject to the provisions of this Agreement, Seller shall sell, assign,
transfer, convey and deliver to Buyer, and Buyer shall purchase and acquire
from Seller, at the Closing (as defined in paragraph 1.5 hereof) for the
consideration hereinafter set forth, all of Seller's right, title and interest
in and to the following properties and assets of Seller used or held in
connection with the operation of the Industrial Distribution Business as the
same shall exist on the Closing Date (as defined in paragraph 1.5 hereof)
(collectively, the "Subject Assets"):
(i) the automobile leases relating exclusively to the Industrial
Distribution Business;
(ii) the real property leases and leasehold improvements listed or
described in Schedule 1.1(a)(ii);
(iii) the tangible personal property owned or leased by Seller and used
exclusively or held for use exclusively in connection with the Industrial
Distribution Business which is set forth on Schedule 1.1(a)(iii);
(vi) subject to paragraph 1.8 hereof, all rights and benefits of Seller
in, to and under all licenses, contracts, customer pricing agreements and
other written understandings, agreements, commitments and purchase orders
with all of the Industrial Customers and
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others relating exclusively to the operation of the Industrial Distribution
Business or by which any of the Subject Assets are specifically bound,
including, without limitation, all leases for the use of personal property
relating exclusively to the operation of the Industrial Distribution
Business and to which Seller is a party or by which any of the Subject
Assets are specifically bound, together with the additional and agreements,
if any, listed or described on Schedule 1.1(a)(iv) (collectively, the
"Contracts");
(v) all of the sales and business records relating exclusively to the
Industrial Distribution Business (other than any income tax records of
Seller) wherever located including, without limitation, all files
(including but not limited to regulatory compliance files), invoices,
correspondence, maintenance, operating records, advertising materials,
customer lists, cost and pricing information, supplier lists, business
plans (other than Seller's corporate strategic plans), quality control
records and manuals, personnel records and credit records of customers;
(vi) all permits, approvals, licenses, franchises, authorizations, or
other rights granted by any federal, state, local or foreign governmental
authority held or applied for by Seller and which are exclusively used, or
intended to be exclusively used, in the Industrial Distribution Business or
which relate exclusively to the Subject Assets, and all other consents,
grants, and other rights that are used exclusively, required or necessary
for the lawful ownership of the Subject Assets and the operation of the
Industrial Distribution Business, all only to the extent legally
transferable;
(vii) all of Seller's or any of its Affiliates' (as defined in paragraph
13.1 hereof) rights in the trademarks, including registrations and
applications for registrations thereof, set forth on Schedule 1.1(a)(vii);
(viii) domestic trade accounts receivable of Seller arising exclusively
from the sale by the Industrial Distribution Business of general laboratory
equipment and supplies prior to the Closing Date in an amount reasonably
estimated by Seller to result in a Closing Date Net Asset Amount (as
defined in paragraph 1.4(c) hereof) of $45,000,000 (the "Industrial
Accounts Receivable");
(ix) all rights and benefits of Seller in and to all prepayments,
deposits and refunds related exclusively to the Industrial Distribution
Business (with the exception of withholding, unemployment, social security
and payroll taxes for which Seller is responsible pursuant to paragraph
1.3(ii) hereof), all cash payments received by Seller after the Closing
Date on account of the Industrial Accounts Receivable delivered pursuant to
subparagraph 1.1(a)(viii), all manufacturers' warranties or guaranties
related exclusively to the Subject Assets, all indemnification rights
against third parties related exclusively to the Subject Assets or related
exclusively to any of the Assumed Liabilities, (as defined in paragraph 1.2
hereof) and any and all manufacturers' or third party service and
replacement programs related exclusively to the Subject Assets;
(x) all brochures, sales literature, promotional materials, advertising
materials and artwork relating exclusively to products of the Industrial
Distribution Business, customer lists to the extent relating exclusively to
the Industrial Distribution Business, and all other selling materials of
Seller used exclusively by Seller in the operation of the Industrial
Distribution Business or which relate exclusively to the Industrial
Distribution Business and the Subject Assets; and
(xi) all other assets, if any, reflected on the Pre-Closing Statement of
Assets and Liabilities (as defined in paragraph 1.4 hereof) and those
assets acquired by Seller exclusively for use in connection with the
operation of the Industrial Distribution Business between the date hereof
and the Closing Date, together with all goodwill and going concern value
relating exclusively to the Industrial Distribution Business (including the
goodwill connected with the intellectual property described in subparagraph
1.1(a)(vii) above).
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(b) Notwithstanding anything contained in this Agreement to the contrary,
the Subject Assets shall not be deemed to include, and there shall be excluded
from the purchase and sale hereunder, the following assets, properties and
interests in assets and properties, all of which shall be retained by Seller
(collectively, the "Excluded Assets"):
(i) all assets and properties disposed of since the date of the Pre-
Closing Statement of Assets and Liabilities in the ordinary course of
business substantially consistent with past practice and such other assets
as have been or are disposed of pursuant to this Agreement;
(ii) all assets, properties and rights of Seller related to the
biomedical group of Seller's Hospital Supply/Scientific Products U.S.
Distribution Division and any other assets, properties and rights of Seller
or any Affiliate of Seller relating to a business or businesses other than
the Industrial Distribution Business;
(iii) all cash, and cash equivalents of Seller, including any securities
and investments of Seller held by third parties, in each case other than as
may be included in subparagraph 1.1(a)(ix);
(iv) subject to the Trademark License Agreement (as defined in paragraph
7.1(i) hereof), the names "Baxter," "Scientific Products," "SP" or "Baxter
Healthcare" or any derivative thereof and all trademarks, tradenames, word
marks and symbols connoting or incorporating any of the names Baxter
International Inc., Baxter Healthcare Corporation, Baxter Travenol
Laboratories, Inc., Scientific Products, SP or American Hospital Supply
(collectively, the "Restricted Marks");
(v) all claims, rights and interests in and to any refunds for federal,
state, foreign or local franchise, income or other taxes or fees of any
nature whatsoever related to the Industrial Distribution Business for
periods prior to the Closing Date;
(vi) any of Seller's rights, claims or causes of action against third
parties relating to the assets, properties, business or operations of the
Industrial Distribution Business arising out of transactions occurring
prior to the Closing Date, to the extent that such rights, claims or causes
of action relate to the (A) Excluded Assets or (B) any matter in respect of
which Seller is required to indemnify Buyer in accordance with paragraph
10.1 hereof;
(vii) all bonds held, contracts and policies of insurance and prepaid
insurance relating to the Industrial Distribution Business;
(viii) all records or reports prepared in connection with the sale of the
Industrial Distribution Business and the Subject Assets for the purpose of
informing management of Seller or its Affiliates of such sale and any
analyses relating to the Industrial Distribution Business or the Subject
Assets;
(ix) all records and documents containing information about the
Industrial Distribution Business or the Subject Assets which is combined or
consolidated with other information of Seller or its Affiliates and all
records and documents relating to any assets, properties or business of
Seller or its Affiliates not specifically related to the Industrial
Distribution Business or the Subject Assets, including, without limitation,
the corporate seal, corporate minute books, stock transfer records,
employee benefit records, corporate tax returns and related documents and
supporting workpapers;
(x) any of Seller's rights in any computerized records or other computer
software, including Source 2000 and other CD-ROM technology, utilized by
Seller in connection with the Industrial Distribution Business;
(xi) employee benefit plans;
(xii) any of Seller's rights under or pursuant to this Agreement or the
other agreements with Buyer contemplated hereby;
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(xiii) the assets or properties of Seller related to the Industrial
Distribution Business which are specifically set forth in Schedule 1.1(b)
(xiii);
(xiv) any accounts receivable from any Affiliate of Seller whether or not
related to the Industrial Distribution Business;
(xv) Seller's interest in the capital stock of Allied Clean Room
Technologies, Inc., a New Mexico corporation, and the Shareholder Agreement
dated May 2, 1994 related thereto;
(xvi) any other assets of Seller not listed or described in subparagraph
1.1(a), the Schedules to this Agreement, the Pre-Closing Statement of
Assets and Liabilities or the Closing Statement of Assets and Liabilities
(as defined in paragraph 1.4 hereof); and
(xvii) all the inventories of Seller, regardless of whether such
inventories relate to the Industrial Distribution Business.
1.2 Assumption of Liabilities
Subject to the conditions of paragraph 7.1 of this Agreement and paragraph
1.3 below, upon the sale and purchase of the Subject Assets, Buyer shall
assume and agree to pay, perform, or discharge when due in accordance with
their respective terms the following liabilities and obligations of Seller
(collectively, the "Assumed Liabilities"):
(a) all liabilities of Seller for accrued vacation and accrued equipment
and automobile rentals reflected on the Closing Statement of Assets and
Liabilities;
(b) all liabilities and obligations of Seller to be performed after the
Closing under the Contracts, except to the extent that such liabilities and
obligations relate to a breach of a Contract by Seller prior to the
Closing;
(c) the liabilities and obligations of Seller to the Business Employees
(as defined in paragraph 2.15 hereof) to the extent set forth in Section 8;
and
(d) all liabilities and obligations arising from or in connection with
product warranty claims relating to recalls, refunds or returns of any
products of the Industrial Distribution Business sold or distributed by
Seller prior to the Closing Date.
1.3 Excluded Liabilities
Notwithstanding anything to the contrary contained herein but except to the
extent specifically set forth in paragraph 1.2 hereof, Buyer shall not have
any responsibility and shall not assume or in any way be liable or responsible
to Seller shall not assume or in any way be liable or responsible to Seller or
any other person for, and Seller shall retain the liability in respect of, all
liabilities, obligations and debts of Seller which relate to the Industrial
Distribution Business or the Subject Assets arising from the conduct of the
Industrial Distribution Business prior to the Closing, whenever arising and
whether primary or secondary, direct or indirect, absolute or contingent,
known or unknown, contractual, tortious or otherwise, except for the Assumed
Liabilities (collectively, the "Excluded Liabilities"). Without limiting the
foregoing, the Excluded Liabilities shall include without limitation: (i) tax
liabilities or obligations of Seller with respect to any period prior to the
Closing, (ii) liabilities or obligations of Seller for withholding,
unemployment, social security or payroll taxes with respect to any period
prior to the Closing, (iii) liabilities or obligations of Seller for salary,
wages, pension and profit sharing expenses accrued with respect to any period
prior to the Closing, (iv) liabilities or obligations relating in any way to
any violation by Seller of (or non-compliance by Seller with) the bulk sales
act of any state, (v) liabilities of Seller for all claims for health care and
other welfare benefits (it being understood that this clause shall not be
deemed to affect Section 8 hereof), (vi) liabilities resulting from the
failure of Seller to provide health continuation coverage as required by the
Internal Revenue Code
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of 1986, as amended, and ERISA (as defined in paragraph 2.16 hereof), (it
being understood that this clause shall not be deemed to affect Section 8
hereof), (vii) liabilities of Seller arising out of a violation by Seller of
any Law (as defined in paragraph 13.1 hereof), including without limitation
Laws relating to health and safety, (viii) liabilities of Seller incurred for
the costs and expenses of negotiating and consummating the transactions
contemplated by this Agreement, (ix) tort liabilities of Seller arising in
connection with products sold or actions taken by Seller prior to the Closing,
(x) claims arising under any Contract not included in the Subject Assets, (xi)
claims based upon Seller's performance prior to the Closing or Seller's
failure to perform any obligation required to be performed prior to the
Closing, and (xii) all liabilities and obligations of Seller in respect of
trade payables arising from the purchase of products and/or inventory used in
or sold by the Industrial Distribution Business. The assumption of the Assumed
Liabilities by Buyer hereunder shall not enlarge any rights of third parties
under contracts or arrangements with Buyer or Seller and nothing herein shall
prevent any party from contesting in good faith with any third party any of
said Assumed Liabilities.
1.4 Purchase Price and Payment
(a) Amount Payable. In consideration of the sale by Seller to Buyer of the
Subject Assets and the satisfaction of all of the conditions contained herein,
Buyer shall at the Closing deliver to Seller $400,000,000 by wire transfer of
immediately available funds (such amount being herein referred to as the
"Purchase Price"). The Purchase Price shall be subject to adjustment as
provided for herein.
(b) Closing Statement of Assets and Liabilities.
(i) as soon as practicable, but in any event within 60 days after the
Closing, Seller will cause to be prepared and delivered to Buyer a
statement of assets and liabilities of the Industrial Distribution Business
(the "Closing Statement of Assets and Liabilities") reflecting the Subject
Assets and the Assumed Liabilities as of the Closing Date.
(ii) The Closing Statement of Assets and Liabilities shall be prepared
from the books and records of Seller relating to the Industrial
Distribution Business in a manner consistent with that of the statement of
assets and liabilities of the Industrial Distribution Business as of March
31, 1995 attached as Schedule 1.4(b)(ii) (the "Pre-Closing Statement of
Assets and Liabilities"). Buyer shall cooperate with Seller in the
preparation of the Closing Statement of Assets and Liabilities to the
extent reasonably requested by Seller. The items reflected on such Closing
Statement of Assets and Liabilities shall be calculated in accordance with
generally accepted accounting principles ("GAAP"), including an allowance
for uncollectible Industrial Accounts Receivable, as applied in a manner
consistent with the Pre-Closing Statement of Assets and Liabilities, except
that the calculation of Industrial Accounts Receivable shall exclude any
reserves for price adjustments, billing errors and returns. Buyer and
Seller acknowledge that no value shall be given on such statement to any
goodwill. Buyer and Seller shall have full access to the accounting records
from which the Closing Statement of Assets and Liabilities will be derived
and may, at the option of either of them and at their own expense, have
representatives present to observe any part of the preparation of the
Closing Statement of Assets and Liabilities or any other matter relating
thereto.
(iii) Subject to subparagraph 1.4(b)(iv), the Closing Statement of Assets
and Liabilities delivered by Seller to Buyer shall be final, binding and
conclusive on the parties hereto for all purposes of this Agreement and
shall provide the basis for determining (1) the liabilities and obligations
of Seller to be assumed pursuant to paragraph 1.2 and (2) the adjustments
(if any) specified in subparagraph 1.4(c).
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(iv) (A) Buyer, at its own expense, may conduct an audit, review or other
report of the Closing Statement of Assets and Liabilities, including
causing any nationally recognized firm of independent public accountants
designated by Buyer and reasonably acceptable to Seller which, for purposes
hereof, shall include Ernst & Young L.L.P. ("Buyer's Accountants") to
perform such audit, review or other report. Buyer may dispute the Closing
Statement of Assets and Liabilities, but only on the basis that the items
on the Closing Statement of Assets and Liabilities were not calculated in
accordance with GAAP as applied in a manner consistent with the Pre-Closing
Statement of Assets and Liabilities. Any such dispute shall be initiated by
written notice delivered to Seller within 30 days of Buyer's receipt of the
initial Closing Statement of Assets and Liabilities specifying each
disputed item, the amount thereof and the basis on which such dispute is
made.
(B) In the event of such a dispute, Seller and Buyer shall attempt to
reconcile their differences and any written resolution by them as to
any disputed amounts shall be final, binding and conclusive on the
parties, and Seller shall revise the Closing Statement of Assets and
Liabilities in accordance with such written resolution.
(C) If Seller and Buyer are unable to reach a written resolution of
all disputed items within 20 days after Buyer's written notice of
dispute, Seller and Buyer shall submit the items remaining in dispute
for resolution to a firm of independent public accountants having
national standing in the United States which is not then retained by
Seller, Buyer or their respective Affiliates, as mutually selected by
Buyer and Seller (the "Neutral Accounting Firm"). In the event that
Seller and Buyer are unable to agree on the Neutral Accounting Firm,
then a nationally recognized "Big Six" accounting firm will be selected
by lot after eliminating one such firm selected by Seller and one such
firm selected by Buyer. The Neutral Accounting Firm shall, within 30
days after submission to it of the disputed items, determine and report
in writing to the parties upon such remaining disputed items in
accordance with the provisions hereof; and such report shall be final,
binding and conclusive on the parties hereto. The fees and
disbursements of the Neutral Accounting Firm shall be allocated between
Seller and Buyer in the same proportion that the aggregate amount of
such remaining disputed items so submitted to the Neutral Accounting
Firm that is unsuccessfully disputed by each (as finally determined by
the Neutral Accounting Firm) bears to the total amount of such
remaining disputed items so submitted. The Neutral Accounting Firm
shall make such determination in its sole discretion, subject to the
terms and conditions of this Agreement; provided, however, that the
amount determined by the Neutral Accounting Firm in respect of any such
remaining disputed item shall not exceed the highest amount claimed by
either of the parties disputing such item, or be less than the lowest
amount claimed by either of the parties disputing such item. The
Closing Statement of Assets and Liabilities as finally determined in
accordance with subparagraph (b)(iii) or (iv) shall constitute the
Closing Statement of Assets and Liabilities for all purposes of this
Agreement.
(c) Purchase Price Adjustment. In the event that the final determination of
the Closing Statement of Assets and Liabilities indicates that the amount
obtained (the "Closing Date Net Asset Amount") by subtracting (i) the Assumed
Liabilities reflected on the Closing Statement of Assets and Liabilities from
(ii) the Subject Assets reflected on the Closing Statement of Assets and
Liabilities is less than $45,000,000, the amount of the difference shall be an
adjustment in favor of Buyer to be refunded to Buyer, as a reduction of the
Purchase Price, within 10 days of the final determination of such adjustment.
In the event that the final determination of the Closing Statement of Assets
and Liabilities indicates that the Closing Date Net Asset Amount is greater
than $45,000,000 the aggregate amount of the difference shall be an adjustment
in favor of Seller to be paid to Seller, as an increase of the Purchase Price,
within 10 days of the final determination of such adjustment.
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1.5 Closing
Subject to the satisfaction or waiver of all of the conditions of each
party's obligation to close the transaction contemplated hereby, the Closing
of the purchase and sale provided for in this Agreement (the "Closing") shall
be held at the offices of Drinker Biddle & Reath, 1345 Chestnut Street,
Philadelphia, Pennsylvania at 10:00 A.M., local time, on such date and time as
may be fixed by mutual agreement of Buyer and Seller as soon as practicable
following satisfaction of the conditions contained in Section 7 (such date and
time being hereinafter called the "Closing Date").
1.6 Transfer of Subject Assets
At the Closing, Seller shall deliver or cause to be delivered to Buyer a
bill of sale and assignment, in substantially the form of Exhibit 1.6(a),
together with such additional documents and instruments as may be reasonably
requested by Buyer, transferring to Buyer all of Seller's right, title and
interest in, to and under the Subject Assets. At the Closing, Buyer shall
deliver to Seller an assumption agreement, in substantially the form of
Exhibit 1.6(b), together with such additional documents and instruments as may
be reasonably requested by Seller, evidencing Buyer's agreement to pay,
perform and discharge the Assumed Liabilities.
1.7 Delivery of Records and Contracts
At the Closing, or at such later time as Buyer may direct, subject to
paragraph 1.9, Seller shall deliver or cause to be delivered to Buyer all of
the Contracts; Seller shall also deliver to Buyer at the Closing, or at such
later time as Buyer may direct, all of Seller's business records, books and
other data relating exclusively to the Industrial Distribution Business and
forming part of the Subject Assets, and Seller shall take all requisite steps
to put Buyer in actual possession and operating control of the Subject Assets
and the Industrial Distribution Business. After the Closing, (i) Buyer shall
afford to Seller, and its Affiliates and their accountants and attorneys, for
all reasonable business purposes after the Closing, reasonable access to the
books and records of Seller delivered to Buyer under this Section and shall
permit Seller, at Seller's expense, to make extracts and copies therefrom and
(ii) Seller shall afford to Buyer, and its Affiliates and their accountants
and attorneys, for all reasonable business purposes related to the operation
of the Industrial Distribution Business after the Closing Date, reasonable
access to the books and records of Seller relating to the Industrial
Distribution Business which are retained by Seller pursuant to paragraph
1.1(b) and shall permit Buyer, at Buyer's expense, to make copies and extracts
therefrom. The parties each covenant to take such care in keeping and storing
all such books and records retained by such party as would a prudent owner
thereof. Such books and records shall be retained for a period of six years
after the Closing Date or, in the case of books and records required to
support tax returns and tax audits, ten years after the Closing Date, and
thereafter, as the case may be, shall only be destroyed after first giving
notice to the other party of such intention to destroy and providing a
reasonable opportunity, at such other party's expense, to segregate and remove
such books and records, if any, as such other party may select.
1.8 Non-Assignable Contracts
(a) Non-Assignability. Nothing in this Agreement will constitute a transfer
or an attempted transfer of any Contract which is not capable of being
transferred without the consent, approval, waiver or novation of a third
person or entity, or with respect to which such transfer or attempted transfer
would constitute a breach thereof or a violation of any Law, other than those
for which such consents, approvals, waivers or novations have been obtained by
Seller prior to the Closing Date (such nontransferable Contracts and permits
being collectively referred to herein as "Unassigned Contracts").
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(b) Consents, Approvals, etc. Notwithstanding anything contained in this
Agreement to the contrary, Seller shall not be obligated to transfer to Buyer
any of its rights and obligations in and to any Unassigned Contract without
first having obtained all consents, approvals, waivers and novations necessary
for such transfer under the terms of such Unassigned Contract or applicable
law, at which time such Unassigned Contract will, without further action, be
deemed to be transferred to Buyer.
(c) If Consents, Approvals, etc. Are Not Obtained. Prior to the Closing
Date, Seller shall use its commercially reasonable efforts to obtain the
consents, approvals, waivers and novations referred to in subparagraph 1.8(a),
provided that the only consents required prior to Closing are the consents, if
any, referred to in subparagraph 7.1(f). To the extent that the consents,
approvals, waivers and novations referred to in subparagraph 1.8(a) are not
obtained by Seller, Seller will, as to each Unassigned Contract, use its
commercially reasonable efforts after the Closing Date to provide to Buyer the
full benefits of such Unassigned Contracts, cooperate in any lawful
arrangement designed to provide such benefits to Buyer without incurring any
obligation to any third party, and enforce, at the request of Buyer, at the
cost of and for the account of Buyer, any rights of Seller arising from any
such Unassigned Contract (including, without limitation, the right to elect to
terminate in accordance with the terms thereof upon the request of Buyer).
1.9 Further Assurances
Seller from time to time after the Closing at the request of Buyer and
without further consideration shall execute and deliver such further
instruments of transfer and assignment and take such other action as Buyer may
reasonably require to more effectively transfer and assign to, and vest in,
Buyer good title, subject to Permitted Encumbrances (as defined in paragraph
13.1 hereof), to each of the Subject Assets.
1.10 Allocation of Purchase Price
The Purchase Price shall be allocated among the Subject Assets as set forth
on Schedule 1.10 hereto (the "Allocation"). The Allocation shall be adjusted
downward or upward, as the case may be, as appropriate to reflect any
adjustments in the Purchase Price pursuant to paragraph 1.4(c). Seller and
Buyer agree that they shall file Internal Revenue Service Form 8594, and all
income tax returns and other documents that they may be required to file on a
basis that is consistent with the Allocation. Buyer and Seller each agree to
provide the other promptly with any other information required to complete
Form 8594. Buyer and Seller shall give prompt notice to each other of the
commencement of any tax audit or the assertion of any proposed deficiency or
adjustment by any taxing authority which challenges the Allocation.
1.11 Sales and Transfer Taxes
Buyer shall be liable for and shall pay at the time of Closing all federal,
foreign and state sales taxes and all other sales taxes, duties, documentary
stamps, transfer taxes, registration fees and charges or other like charges
properly payable upon and in connection with the assignment and transfer of
the Subject Assets by Seller to Buyer hereunder.
VI-8
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SECTION 2
REPRESENTATIONS AND WARRANTIES OF SELLER
2.1 Making of Representations and Warranties
As a material inducement to Buyer to enter into this Agreement and
consummate the transactions contemplated hereby, Seller hereby makes to Buyer
the representations and warranties contained in this Section 2. Certain
information relating to the representations and warranties of Seller is set
forth in a Disclosure Statement hereto (the "Disclosure Statement") prepared
by Seller and delivered to Buyer pursuant to this Agreement as of the date
hereof.
2.2 Organization and Qualifications of Seller
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware with full corporate power and
authority to own or lease its properties and to conduct the Industrial
Distribution Business in the manner and in the places where such properties
are owned or leased or the Industrial Distribution Business is currently
conducted. Seller is duly qualified to do business as a foreign corporation
and is in good standing under the laws of each jurisdiction in which its
ownership or leasing of assets or properties utilized by the Industrial
Distribution Business or the nature of the Industrial Distribution Business
requires such qualification.
2.3 Authority of Seller
(a) Seller has the full legal right, corporate power and authority to enter
into this Agreement and each agreement, document and instrument to be executed
and delivered by Seller pursuant to this Agreement and to carry out the
transactions contemplated hereby and thereby. The execution, delivery and
performance by Seller of this Agreement and each such other agreement,
document and instrument have been duly authorized by all necessary corporate
action of Seller.
(b) This Agreement and each agreement, document and instrument to be
executed and delivered by Seller pursuant to this Agreement constitute, or
when executed and delivered by Seller and each of the other parties thereto
will constitute, valid and legally binding obligations of Seller, enforceable
against Seller in accordance with their respective terms. Except as set forth
in the Disclosure Statement, the execution, delivery and performance by Seller
of this Agreement and each such agreement, document and instrument:
(i) does not and will not violate any provision of the Certificate of
Incorporation or by-laws of Seller;
(ii) does not and will not violate any Law applicable to Seller; and
(iii) does not and will not result in a violation or breach of,
constitute a default under, accelerate any obligation under, or give rise
to a right of termination of or otherwise cause a loss of benefit under (A)
any Contract material to the Industrial Distribution Business, or (B) any
indenture or loan or credit agreement to which Seller is a party or by
which the Subject Assets are bound or affected, or (C) any other agreement,
certificate, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination,
arbitration award or other decision or requirement of any arbitrator,
court, government or governmental authority or instrumentality to which
Seller is a party or by which the Subject Assets are bound or affected, or
result in the creation or imposition of any mortgage, restriction, deed of
trust, pledge, lien, security interest or other charge or encumbrance of
any nature upon or with respect to any of the Subject Assets.
VI-9
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(c) Except for Buyer under this Agreement, no person has any written or oral
agreement, option, understanding or commitment for the purchase from Seller of
any of the Subject Assets, other than pursuant to purchase orders accepted by
Seller in the ordinary course of business substantially consistent with past
practice.
2.4 Status of Tangible Property
Except as set forth in the Disclosure Statement, Seller has good title to
all of the tangible personal property forming part of the Subject Assets. None
of such tangible real or personal property or assets is subject to any
mortgage, pledge, lien, deed of trust, conditional sale agreement, security
interest, encumbrance, other charge or claim of ownership except for Permitted
Encumbrances (as defined in paragraph 13.1 hereof) or as set forth in the
Disclosure Statement. Except as set forth in the Disclosure Statement, the
ownership and operation of all tangible personal property forming part of the
Subject Assets complies with all applicable Laws except where non-compliance
does not materially adversely affect the Industrial Distribution Business or
impose significant administrative costs upon Buyer. Except for the
representations and warranties provided for in this Agreement, all of the
tangible assets included in the Subject Assets are sold to Buyer "As Is"
without implied warranty of merchantability, fitness for intended use or
otherwise.
2.5 Consents
Except for the requirements of the Improvements Act (as defined in paragraph
6.1 hereof) and except as set forth in the Disclosure Statement, no consent,
approval or authorization of, or exemption by, or filing with, any
governmental authority or third party is required in connection with the
execution, delivery and performance by Seller of this Agreement or the taking
by Seller of any other action contemplated hereby to be taken by Seller.
2.6 Intellectual Property
(a) Except as described or set forth in the Disclosure Statement: (i) Seller
owns, or holds a valid license to use, Seller's interest in the intellectual
property described in subparagraph 1.1(a)(vii) (the "Intellectual Property");
(ii) Seller's rights in such Intellectual Property are freely transferable and
there are no claims or demands of any other person known by Seller to be
pertaining to any of such Intellectual Property; (iii) to the knowledge of
Seller, no proceedings have been instituted, or are pending or threatened,
which challenge the rights of Seller in respect thereof; (iv) Seller has the
right to use the Intellectual Property, free and clear of claims or rights of
other persons.
(b) Other than the right to promote, market and sell products of the
Industrial Distribution Business, Seller does not own and is not licensed to
use, in each case in respect of the Industrial Distribution Business, any
patent nor does Seller have any patent applications related exclusively to,
used exclusively by or to be used exclusively by Seller in the Industrial
Distribution Business as presently conducted or the Subject Assets or any part
thereof.
(c) Except as set forth in the Disclosure Statement Seller has taken all
reasonable steps required in accordance with sound business practice to
establish and preserve its ownership of all Intellectual Property.
(d) To Seller's knowledge, the present activities and products of the
Industrial Distribution Business do not infringe any intellectual property of
any other person. No proceeding charging Seller, in respect of the Industrial
Distribution Business or the Subject Assets, with infringement of any
adversely held intellectual property has been filed or, to Seller's knowledge,
is threatened
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to be filed. To the Seller's knowledge it is not, in respect of the Industrial
Distribution Business, making unauthorized use of any material confidential
information or material trade secrets of any other person.
2.7 Contracts
The Disclosure Statement sets forth (i) the Contracts with the top four
Industrial Customers by dollar volume for the first six months of 1994 and
(ii) any Contracts with the top 20 suppliers to the Industrial Distribution
Business by dollar volume for the year ended December 31, 1994 which obligate
Seller to purchase specified levels of products on a "take or pay,"
"requirements" or similar basis. Except as set forth in the Disclosure
Statement, each of the Contracts listed or described in said Schedule is in
full force and effect and constitutes a valid and binding obligation of Seller
and, to Seller's knowledge, the other party or parties thereto. Neither Seller
nor, to Seller's knowledge, any other party to any such Contract has breached
or improperly terminated any such Contract, or is in default under any such
Contract, and, to the knowledge of Seller, there exists no condition or event
which, after notice or lapse of time or both, would constitute any such
breach, termination or default.
2.8 Litigation
Except for matters described in the Disclosure Statement, there is no
litigation or governmental or administrative proceeding or investigation
pending or, to the knowledge of Seller, threatened against Seller or any
Affiliate of Seller that questions the validity of any of the transactions
contemplated by, or the validity of, this Agreement or any of the other
agreements or instruments contemplated hereby. With respect to each matter set
forth therein, the Disclosure Statement sets forth a brief description of the
forum for the matter, the parties thereto and the type and amount of relief
sought. Except as set forth in the Disclosure Statement, Seller has not
received any request from any governmental agency or instrumentality for
information with respect to the transactions contemplated hereby. Except for
matters described in the Disclosure Statement, there is no litigation or
governmental or administrative proceeding or investigation pending, or to the
knowledge of Seller, threatened against Seller or any Affiliate of Seller in
respect of the Industrial Distribution Business which may have a material
adverse effect on the Subject Assets. There are no unsatisfied judgments,
penalties or awards against or affecting the Industrial Distribution Business
or any Subject Asset.
2.9 Compliance with Laws
Except for matters described in the Disclosure Statement, the Industrial
Distribution Business has, and the Subject Assets have, been operated in
compliance with all applicable Laws where noncompliance with such Laws could
materially adversely affect the Industrial Distribution Business or impose
material obligations upon Buyer, and Seller has not received, in respect of
the Industrial Distribution Business or any Subject Asset, notice of a
violation or alleged violation of any such statute, ordinance, order, rule or
regulation.
2.10 Finder's Fee
Seller has not engaged any person in a manner that would result in Buyer
being or becoming liable for any broker's commission or finder's fee relating
to or in connection with the transactions contemplated by this Agreement.
2.11 Permits
As promptly as reasonably practical after the date hereof and in any event
before Closing, Seller shall deliver to Buyer a list of all permits,
registrations, licenses, franchises, certifications
VI-11
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and other approvals (collectively, the "Approvals") required from federal,
foreign, state and local authorities in order for Seller to conduct the
Industrial Distribution Business and to own or lease the Subject Assets, other
than such Approvals as are: (i) generally applicable to all entities
conducting business in the jurisdictions in which Seller carries on business;
or (ii) the failure of which to obtain would not materially adversely affect
the Industrial Distribution Business or impose significant administrative
costs upon Buyer. Seller has obtained all such Approvals, which are each valid
and in full force and effect, and Seller is operating in compliance therewith.
Seller has not received any notice or any claim or charge that Seller is, or
within the last two years has been, in violation of or in default under any
such Approval. Except as set forth in the Disclosure Statement: (i) no
proceeding is pending, or to the knowledge of Seller, threatened, by any
person to revoke or to deny the renewal of any such approval; and (ii) Seller
has not been notified that any such Approval may not in the ordinary course be
renewed upon its expiration or that by virtue of the transactions contemplated
hereby any such Approval may not be granted or renewed.
2.12 Sales and Margins
Net sales of the Industrial Distribution Business to unaffiliated third
parties, as calculated in accordance with GAAP, for the twelve months ended
December 31, 1994 were in excess of $450,000,000. Net sales of the Industrial
Distribution Business to unaffiliated third parties (as calculated in
accordance with GAAP) for the three months ended March 31, 1995 were in excess
of $115,000,000. Gross margins of the Industrial Distribution Business (as
calculated in accordance with GAAP) for the twelve months ended December 31,
1994 were in excess of $108,000,000. As used herein, "gross margins" (i) means
net sales less only the cost of goods sold and (ii) reflects a 20% allocated
gross margin to the Industrial Distribution Business with respect to products
manufactured by Seller or any of its Affiliates.
2.13 Industrial Accounts Receivable
All Industrial Accounts Receivable included on the Pre-Closing Statement of
Assets and Liabilities represented, and all Industrial Accounts Receivable of
Seller to be included in Subject Assets will represent, valid obligations from
sales made or services rendered in the ordinary course of business. The
Disclosure Statement sets forth a correct and complete consolidated Industrial
Accounts Receivable aging of the Industrial Distribution Business as of March
31, 1995 reflecting the designated and undesignated reserves for possible
losses as of such date and the aggregate dollar amount of all Industrial
Accounts Receivable due which have been outstanding for: 30 days or less; more
than 30 but less than 61 days; more than 60 but less than 91 days; and more
than 90 days.
2.14 Pre-Closing Statement of Assets and Liabilities
The items reflected on the Pre-Closing Statement of Assets and Liabilities
have been calculated in accordance with GAAP, as applied in a manner
consistent with Seller's past practices.
2.15 Labor Matters
(a) Seller is in material compliance with all Laws respecting employment and
employment practices, terms and conditions of employment, pay equity and wages
and hours and has not and is not knowingly engaged in any unfair labor
practice with respect to the employees of Seller conducting the Industrial
Distribution Business (the "Business Employees").
(b) No unfair labor practice, complaint or grievance against the Seller is
pending before any labor relations board or similar governmental entity with
respect to the Industrial Distribution Business.
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(c) There is no labor strike, dispute, slowdown or stoppage actually pending
or involving or, to the best of the knowledge of the Seller, threatened
against the Seller with respect to the Industrial Distribution Business, and,
to Seller's knowledge, during the last three years there has been no union
organizational activity with respect to such employees.
(d) No grievance which might have an adverse effect upon the Seller or the
conduct of the Industrial Distribution Business exists and no claim therefor
has been asserted.
(e) Seller is not a party to any collective bargaining agreement that
applies to any Business Employees, nor is any such agreement currently being
negotiated by the Seller.
2.16 Employees and Executive Compensation
(a) The Disclosure Statement sets forth a complete list of all permanent and
full-time Business Employees, their salaries and wage rates, amounts payable
under the Management Incentive Compensation Plan bonus arrangement, vacation
pay schedule as of March 31, 1995, benefits, positions, and length of service.
Set forth in the Disclosure Statement is a description of the Severance Pay
Policies (as defined in paragraph 8.1 hereof) and Seller's vacation pay
policy.
(b) Except as set forth in the Disclosure Statement, no Business Employee
has any agreement as to length of notice required to terminate his or her
employment, other than such as results by law from the employment of an
employee without agreement as to such notice or as to length of employment.
(c) Seller does not contribute, and is not obligated to contribute, to any
multiemployer plan (within the meaning of section 4001 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) with respect to
the Business Employees.
2.17 Suppliers and Customers
The Disclosure Statement sets forth a true and complete list of the top 20
suppliers to the Industrial Distribution Business by dollar volume for the
year ended December 31, 1994. Except as set forth in the Disclosure Statement,
Seller has not entered into any contracts or arrangements with any such
supplier which obligates the Industrial Distribution Business to purchase
specified levels of products on a "take or pay," "requirements" or similar
basis. The Disclosure Statement also sets forth a true and complete list of
the top 20 customers of the Industrial Distribution Business by dollar volume
for the first six months of 1994 and separately identifies the expiration date
of any sales agreement or pricing arrangement understanding with any of the
top four customers described above. As promptly as practicable after the date
hereof and in any event before Closing, Seller shall identify to Buyer the
expiration date of any sales agreement or pricing arrangement understanding
with any of the remaining customers described above. No such supplier or
customer has terminated or materially reduced, or has given notice of intent
to terminate or materially reduce, the amount of business done with the
Industrial Distribution Business, and Seller is not aware of any such
intention on the part of any such supplier or customer, whether or not in
connection with the transactions contemplated hereunder.
2.18 Full Disclosure
No representation or warranty of Seller contained in this Agreement contains
any untrue statement of a material fact or omits to state a fact necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
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SECTION 3
REPRESENTATIONS AND WARRANTIES OF BUYER
3.1 Making of Representations and Warranties
As a material inducement to Seller to enter into this Agreement and
consummate the transactions contemplated hereby, Buyer hereby makes to Seller
the representations and warranties contained in this Section 3.
3.2 Organization of Buyer
Buyer is a corporation duly organized, validly subsisting and in good
standing under the laws of the Commonwealth of Pennsylvania with full
corporate power and authority to own or lease its properties and to conduct
its business in the manner and in the places where such properties are owned
or leased or such business is currently conducted.
3.3 Authority of Buyer
Buyer has the full legal right, corporate power and authority to enter into
this Agreement and each agreement, document and instrument to be executed and
delivered by Buyer pursuant to this Agreement and to carry out the
transactions contemplated hereby and thereby. The execution, delivery and
performance by Buyer of this Agreement and each such other agreement, document
and instrument have been duly authorized by all necessary corporate action on
the part of Buyer, other than Shareholder Approval (as defined in paragraph
7.1(h) hereof). This Agreement and each agreement, document and instrument to
be executed and delivered by Buyer pursuant to this Agreement constitute, or
when executed and delivered by Buyer and each of the other parties thereto
will constitute, valid and legally binding obligations of Buyer, enforceable
against Buyer in accordance with their respective terms. Except as set forth
in Schedule 3.3, the execution, delivery and performance by Buyer of this
Agreement and each such agreement, document and instrument:
(a) does not and will not violate any provision of the Articles of
Incorporation or by-laws of Buyer;
(b) does not and will not violate any Law applicable to Buyer; and
(c) does not and will not result in a violation or breach of, constitute
a default under, accelerate any obligation under, or give rise to a right
of termination of or otherwise cause a loss of benefit under (A) any
indenture, loan or credit agreement to which Buyer is a party and which is
material to the business and financial condition of Buyer, or (B) any other
agreement, certificate, contract, instrument, mortgage, lien, lease,
permit, authorization, order, writ, judgment, injunction, decree,
determination, arbitration award or other decision or requirement of any
arbitrator, court, government or governmental authority or instrumentality
to which Buyer is a party and which is material to the business and
financial condition of Buyer.
3.4 Litigation
There is no litigation or governmental or administrative proceeding or
investigation pending or, to the knowledge of Buyer, threatened against Buyer
or any Affiliate of Buyer that questions the validity of any of the
transactions contemplated by, or the validity of, this Agreement or any of the
other agreements or instruments contemplated hereby. Except as set forth in
Schedule 3.4, Buyer has not received any request from any governmental agency
or instrumentality for information with respect to the transactions
contemplated hereby.
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3.5 Consents
Except for the requirements of the Improvements Act, the proxy requirements
of the Securities and Exchange Commission ("SEC") and the obtaining by Buyer
of Shareholder Approval (as defined in paragraph 7.1(h) hereof) and except as
set forth in Schedule 3.3, no consent, approval or authorization of, or
exemption by, or filing with, any governmental authority or third party is
required in connection with the execution, delivery and performance by Buyer
of this Agreement or the taking by Buyer of any other action contemplated
hereby to be taken by Buyer.
3.6 Finder's Fee
Buyer has not engaged any person in a manner that would result in Seller
being or becoming liable for any broker's commission or finder's fee relating
to or in connection with the transactions contemplated by this Agreement.
3.7 Financial Ability
Buyer has the financial ability to consummate the transactions contemplated
by the Agreement and has furnished Seller with evidence thereof.
SECTION 4
COVENANTS OF SELLER
4.1 Making of Covenants and Agreements
Seller hereby makes the covenants and agreements set forth in this Section
4.
4.2 Conduct of Business
Between the date of this Agreement and the Closing Date, unless the prior
written consent of Buyer is obtained, Seller shall:
(a) conduct the Industrial Distribution Business only in the ordinary
course substantially consistent with past practice and refrain from
changing operations except in the ordinary course of business and
consistent with prior practices;
(b) refrain from making any purchase, sale or disposition of any asset
for the Industrial Distribution Business or property of the Industrial
Distribution Business other than in the ordinary course of business
substantially consistent with past practice and from mortgaging, pledging,
subjecting to a lien or otherwise encumbering any of the Subject Assets
other than in the ordinary course of business substantially consistent with
past practice or other than as set forth in the Disclosure Statement;
(c) shall not reassign any Business Employees to other areas of Seller's
business other than within the Industrial Distribution Business;
(d) use its reasonable efforts to keep intact the business organization
of the Industrial Distribution Business, to keep available the present
Business Employees and to preserve the goodwill of all suppliers,
customers, independent contractors and others having business relations
with the Industrial Distribution Business; and
(e) have in effect and maintain at all times all insurance currently in
effect with respect to the Industrial Distribution Business or equivalent
insurance with any substitute insurers approved in writing by Buyer.
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4.3 Authorization from Others
Prior to the Closing Date, but subject to paragraph 1.8, Seller will use its
reasonable efforts to obtain all authorizations, consents and permits of
others required to permit the consummation by Seller of the transactions
contemplated by this Agreement.
4.4 Notice of Default
Promptly upon the occurrence of, or promptly upon Seller becoming aware of
the impending or threatened occurrence of, any event which would cause or
constitute a breach or default, or would have caused or constituted a breach
or default had such event occurred or been known to Seller prior to the date
hereof, of any of the representations, warranties, agreements or covenants of
Seller contained in, referred to or set forth in this Agreement, the
Disclosure Statement or in any Schedule or Exhibit referred to in this
Agreement, Seller shall give detailed written notice thereof to Buyer and
shall use its reasonable best efforts to prevent or promptly remedy the same.
4.5 Consummation of Agreement
Seller shall use its reasonable best efforts to perform and fulfill all
conditions and obligations on its part to be performed and fulfilled under
this Agreement, to the end that transactions contemplated by this Agreement
shall be fully carried out.
4.6 Co-operation of Seller
Seller shall cooperate with all reasonable requests of Buyer and Buyer's
counsel in connection with the consummation of the transactions contemplated
hereby.
4.7 No Solicitation of Other Offers
Neither Seller nor any of its Affiliates or any agents, consultants or
representatives of any of the foregoing shall directly or indirectly:
(a) solicit, initiate discussions or engage in negotiations with, any
person, other than Buyer, relating to the possible acquisition of the
Industrial Distribution Business or the Subject Assets (except commercial
sales of Subject Assets in the ordinary course of business of Seller
consistent with the terms of this Agreement);
(b) provide, or cause any other person to provide, any information to any
person, other than Buyer, relating to the possible acquisition of the
Industrial Distribution Business except for such disclosure as is required
by law; or
(c) enter into a transaction with any person or persons, other than
Buyer, concerning the possible acquisition of the Industrial Distribution
Business.
4.8 Confidentiality
Whether or not the Closing occurs, Seller shall, and shall cause its
subsidiaries, Affiliates, agents, consultants and representatives to, treat in
confidence and use solely for the purpose of evaluating the transaction
contemplated by this Agreement during the course of the negotiations leading
to the execution of this Agreement and thereafter, all documents, materials
and other information disclosed by Buyer to them, whether during the course of
the negotiations leading to the execution of this Agreement or thereafter, in
their investigation of Buyer and in the preparation of agreements and other
documents relating to the consummation of such transactions. In the event the
transactions contemplated hereby are not consummated, Seller shall return to
Buyer all originals and copies of non-public documents and materials of the
type provided for in this paragraph 4.8 which have been furnished in
connection with this Agreement
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or destroy such documents and materials pursuant to instructions previously
agreed to in writing by Buyer; provided, however, that notwithstanding the
return of such documents and materials, or the termination of this Agreement,
Seller shall continue to hold in confidence the information described in the
first sentence of this paragraph 4.8 and will not release or disclose such
information to any third party. This covenant is in addition to and does not
replace or modify the obligations of Seller contained in the confidentiality
agreement dated September 13, 1994 between Buyer and Seller.
4.9 Access
From the date hereof through the Closing Date and subject to the provisions
of paragraph 5.2 herein, Seller shall provide Buyer and Buyer's officers,
attorneys, accountants and other authorized representatives free and full
access, during normal business hours, to all of the assets, properties, books,
contracts, commitments, and records of Seller relating exclusively to the
Industrial Distribution Business (other than those relating to the Excluded
Assets which are not related to the Industrial Distribution Business) and the
Subject Assets necessary in order to afford Buyer a full opportunity of
review, examination and investigation as Buyer shall desire to make of the
Industrial Distribution Business and the Subject Assets and as necessary in
order to enable Buyer to prepare a proxy statement (the "Proxy Statement") for
distribution to Buyer's shareholders in connection with the Shareholders'
Meeting (as defined in paragraph 5.5); provided, that Buyer shall not be
provided access to any assets, properties, books, contracts, commitments,
records or other information that Seller shall be advised by anti-trust
counsel would be inappropriate to provide to Buyer prior to the Closing; and
provided, further, that Seller shall be entitled to have an attorney or other
representative present at any meetings between Buyer and employees of Seller
for the purpose of monitoring the matters described in the foregoing proviso.
Buyer shall be permitted to make extracts from, or make copies of such books,
records or other documentation as may be reasonably necessary for such
purpose. Buyer shall provide Seller with reasonable advance notice of the date
and location of any proposed review, examination or investigation of any of
Seller's assets, properties, books, contracts, commitments or records and no
such review, examination or investigation shall unreasonably interfere with
the conduct by the Seller of its business. Any such review, examination or
investigation shall not in any way affect or mitigate the representations and
warranties of Seller under this Agreement.
4.10 Billing Errors
At any time during the 60 days immediately following the Closing Date, Buyer
may present to Seller one or more written requests for an adjustment with
respect to (i) errors made by Seller in invoices supporting any of the
Industrial Accounts Receivable transferred to Buyer pursuant to paragraph
1.1(a)(viii); (ii) returns of products sold by Seller prior to the Closing
Date which are returned in accordance with Seller's return policy existing on
the date hereof, provided, that all products for which a return credit is
granted shall be delivered to Seller; and (iii) price adjustments approved in
writing by Seller, in its sole discretion, for products sold by Seller prior
to the Closing Date. Such written request shall be accompanied by such
supporting documentation as may be reasonably requested by Seller. Within 30
days of the end of such 60-day period, Seller shall pay to Buyer the aggregate
amount, if any, of any credits to customers due from Seller as a result of any
errors in such invoices, returns of products or price adjustments and which
errors, returns of products or price adjustments were described in the notice
from Buyer referred to above.
4.11 Non-Competition
(a) Except as set forth herein, neither Seller nor any of its Affiliates
shall without the prior written consent of Buyer at any time within three (3)
years following the Closing Date, own any
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equity interest, manage, carry on or be engaged in a business that is
competitive to or in competition with the Business (as defined in paragraph
13.1 hereof) within the United States (as defined in paragraph 13.1 hereof).
(b) The restrictions set forth in subsection (a) shall not prevent Seller or
any of its Affiliates from:
(i) purchasing as a passive investor up to eight percent (8%) of the
outstanding publicly traded shares or other securities of any class of any
issuer listed on a recognized stock exchange or quotation system, or
purchasing an equity interest in any entity engaged, directly or
indirectly, in a business which is competitive with the Business in the
United States provided that such entity's direct and indirect net sales of
laboratory equipment and supplies to Industrial Customers in the United
States in its most recently completed fiscal year do not exceed
$100,000,000;
(ii) carrying on or continuing to carry on any aspect of the
medical/surgical supplies or medical/surgical diagnostics businesses for
clinical uses as operated as of the Closing Date or thereafter, including
by selling to other than Industrial Customers in the United States products
that may be competitive with or the same as products of the Business;
(iii) selling and distributing products competitive with or the same as
products of the Business to laboratories and other facilities of a clinical
customer if such clinical customer conditions the sale of medical/surgical
or diagnostic products upon the sale and distribution of products to its
non-clinical laboratories and other facilities;
(iv) selling Baxter Manufactured and Private-Labeled Products (as defined
in paragraph 13.1 hereof) to third parties who will include such products
as components of kits used to perform any test or procedure;
(v) selling Baxter Manufactured and Private-Labeled Products to third
party distributors for resale to customers including Industrial Customers,
in the United States by any means by which Seller or any Affiliate of
Seller distributed such Baxter Manufactured and Private-Labeled Products
other than through the Industrial Distribution Business prior to the
Closing Date, except to the extent prohibited by any provision to the
contrary contained in the Distribution Agreement (as defined in paragraph
7.1(j) hereof);
(vi) distributing any product to an Industrial Customer in the United
States to the extent any Contract with an Industrial Customer is an
Unassigned Contract; or
(vii) distributing any product in a manner not otherwise specifically
prohibited by the terms hereof or of the Distribution Agreement.
(c) Seller or any Affiliate of Seller may permit its name or trademarks to
be used in connection with any of the activities permitted by subsection (b)
above.
(d) In the event that Seller or any Affiliate of Seller shall desire to
purchase any equity interest in any other entity which purchase is prohibited
by the provisions of this paragraph 4.11, Buyer shall not unreasonably
withhold its consent which may be necessary to permit such purchase.
SECTION 5
COVENANTS OF BUYER
5.1 Making of Covenants and Agreements
Buyer hereby makes the covenants and agreements set forth in this Section 5.
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5.2 Confidentiality
Whether or not the Closing occurs, Buyer shall, and shall cause its
subsidiaries, Affiliates, agents, consultants and representatives to, treat in
confidence and use solely for the purpose of evaluating the transaction
contemplated by this Agreement during the course of the negotiations leading
to the execution of this Agreement and thereafter, all documents, materials
and other information disclosed by Seller to them, whether during the course
of the negotiations leading to the execution of this Agreement or thereafter,
in their investigation of Seller and in the preparation of agreements and
other documents relating to the consummation of such transactions. In the
event the transactions contemplated hereby are not consummated, Buyer shall
return to Seller all originals and copies of non-public documents and
materials of the type provided for in this paragraph 5.2 which have been
furnished in connection with this Agreement or destroy such documents and
materials pursuant to instructions previously agreed to in writing by Seller;
provided, however, that notwithstanding the return of such documents and
materials, or the termination of this Agreement, Buyer shall continue to hold
in confidence the information described in the first sentence of this
paragraph 5.2 and will not release or disclose such information to any other
third party. This covenant is in addition to and does not replace or modify
the obligations of Buyer contained in the Confidentiality Agreement dated
September 13, 1994 between Buyer and Seller.
5.3 Disclosure
Buyer will disclose to Seller any information that is within its knowledge
or becomes known to it prior to Closing that is contrary to the
representations and warranties provided by Seller.
5.4 Warranty
Buyer shall honor at its own cost all product warranty claims relating to
recalls, refunds or returns of any products of the Industrial Distribution
Business sold prior to Closing in accordance with the Seller's obligations,
policies and practices prior to Closing.
5.5 Meeting of Shareholders of Buyer
Buyer's board of directors shall call a special meeting of Buyer's
shareholders (the "Shareholders' Meeting") for the purpose of approving, as
may be required by applicable Law and stock exchange rules, Buyer's issuance
of shares of its common stock to EM. Buyer shall use its reasonable best
efforts to obtain such shareholder approval. EM agrees to vote all of the
common shares of Buyer held by it in favor of the proposal to approve such
issuance. The Shareholders' Meeting shall be held as soon as practicable after
the date of this Agreement in accordance with applicable Law and rules,
regulations and practices of the National Association of Securities Dealers,
Inc. (the "NASD"). Buyer, acting through its Board of Directors, shall
recommend such issuance to its shareholders. Except as provided in paragraph
6.4 hereof, all costs and expenses incurred in connection with the
Shareholders' Meeting, including any legal, accounting or other expenses
relating to the preparation of any Proxy Statement or information statement
distributed in connection with such meeting shall be the responsibility of
Buyer.
5.6 Release of Guaranties.
Buyer agrees to be substituted in all respects for Seller or any of its
Affiliates, effective as of the Closing, in respect of all obligations of
Seller or any of its Affiliates under each of the guaranties and letters of
credit set forth in the Disclosure Statement (collectively, the "Guaranties").
If Buyer is unable to effect such a substitution with respect to any of the
Guaranties, Buyer shall obtain one or more letters of credit, on terms and
from financial
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institutions satisfactory to Seller, fully indemnifying Seller and its
Affiliates with respect to the obligations covered by each of the guaranties
for which Buyer does not effect such substitution.
5.7 Notice of Default
Promptly upon the occurrence of, or promptly upon Buyer becoming aware of
the impending or threatened occurrence of, any event which would cause or
constitute a breach of default, or would have caused or constituted a breach
or default had such event occurred or been known to Buyer prior to the date
hereof, of any of the representations, warranties, agreement or covenants of
Buyer contained in or referred to in this Agreement or in any Schedule or
Exhibit referred to in this Agreement, Buyer shall give detailed written
notice thereof to Seller and use its reasonable best efforts to prevent or
promptly remedy the same.
5.8 Consummation of Agreement
Each of Buyer and EM shall use its reasonable best efforts to perform and
fulfill all conditions and obligations on its part to be performed and
fulfilled under this Agreement, to the end that the transactions contemplated
by this Agreement shall be fully carried out.
5.9 Co-operation of Buyer and EM
Buyer and EM shall cooperate with all reasonable requests of Seller and
Seller's counsel in connection with the consummation of the transactions
contemplated hereby.
SECTION 6
MUTUAL COVENANTS
6.1 Improvements Act
As promptly as practicable after the date hereof, Buyer and Seller shall
file (or cause their respective parent entities to file) with the Federal
Trade Commission and the Antitrust Division of the Department of Justice the
notifications and other information required to be filed under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "Improvements
Act"), or any rules and regulations promulgated thereunder, with respect to
the transactions contemplated hereby. Each of Buyer and Seller covenants to
file as promptly as practicable such additional information as may be
requested. Each of Buyer and Seller warrants that all such filings by it will
be, as of the date filed, true and accurate and in accordance with the
requirements of the Improvements Act and any such rules and regulations. Each
of Buyer and Seller agrees to make available to the other or its counsel such
information as each of them may reasonably request relative to its business,
assets and property (including, in the case of Seller, the Industrial
Distribution Business) as may be required of each of them, to file any
additional information requested by such agencies under the Improvements Act
and any such rules and regulations or as may be reasonably requested to
facilitate completion of the review process and expedite expiration of the
applicable waiting period.
6.2 Non-Solicitation
(a) Neither Buyer nor any Affiliate of Buyer shall, for a period of two
years after the Closing Date or the termination of this Agreement, as the case
may be, without the prior written approval of Seller, directly or indirectly
solicit, induce or attempt to persuade any person who is (i) in the case of a
termination of this Agreement, an employee of Seller or any of its Affiliates
on the date hereof or any time thereafter that precedes such termination or
(ii) in the case the Closing is consummated,
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an employee of Seller or any of its Affiliates on the date hereof or any time
thereafter that precedes the Closing (and who is not otherwise a Business
Employee), to terminate his or her employment with Seller or its Affiliates.
(b) Neither Seller nor any Affiliate of Seller shall, for a period of two
years after the Closing Date or the termination of this Agreement, as the case
may be, without the prior written approval of Buyer, directly or indirectly
solicit, induce or attempt to persuade any person who is an employee of Buyer
or any of its Affiliates on the date hereof or any time hereafter that
precedes such termination or the Closing, to terminate his or her employment
with Buyer or its Affiliates. Notwithstanding the foregoing, any Business
Employee (a) who declines Buyer's offer of employment or (b) whose employment
is terminated by Buyer shall be eligible for employment by Seller.
(c) Notwithstanding anything contained herein to the contrary, a general
advertising or solicitation by any party for employment positions and contacts
initiated by an employee in response to an advertisement or by an employee
otherwise seeking to change his or her employment shall not be deemed
prohibited by the provision of this paragraph 6.2.
(d) Without limiting the right of Seller, on the one hand, or Buyer, on the
other hand, to pursue all other legal and equitable rights available for a
violation of this paragraph 6.2 by the other or its Affiliates, Seller and
Buyer each acknowledge that other remedies cannot fully compensate Seller or
Buyer, as the case may be, for such a violation and that Seller or Buyer, as
the case may be, shall be entitled to injunctive relief to prevent a violation
or continuing violation hereof. It is the intent and understanding of each
party hereto that if, in any action before any court or agency legally
empowered to enforce this paragraph 6.2, any term, restriction, covenant or
promise in this paragraph 6.2 is found to be unreasonable and for that reason
unenforceable, then such term, restriction, covenant or promise shall be
deemed modified to the extent necessary to make it enforceable by such court
or agency.
6.3 Restricted Marks
Notwithstanding anything contained herein to the contrary, no interest in or
right to use any of the Restricted Marks is being transferred to Buyer
pursuant to the transactions contemplated hereby. Except as provided in the
Distribution Agreement and the Services Agreement, Buyer shall remove or
obliterate all references to the Restricted Marks, if any, from any signs,
purchase orders, invoices, sales orders, labels, letterheads, shipping
documents and other materials included in the Subject Assets purchased by
Buyer hereunder and Buyer shall not put into use after the Closing Date any
such materials not in existence on the Closing Date that bear any reference to
the Restricted Marks. In addition, in designing its own packaging, labeling,
logos and trademarks for use in connection with products manufactured or
distributed by Buyer after the Closing, Buyer shall not use any trademarks,
service marks, designs, logos or trade dress (including, without limitation,
the "Baxter Blue" color as defined in the Pantone Matching System 747XR as
shades numbers 285, 286, 287, 288, 289 and 290) that are confusingly similar
to the Restricted Marks. Notwithstanding the foregoing, Buyer shall be
entitled for a transition period not exceeding the three-month anniversary of
the Closing Date to use any such materials bearing a reference to the
Restricted Marks if the removal of any such reference prior to the expiration
of such transition period would be impractical. Buyer agrees that neither
Seller nor any Affiliate thereof shall have any responsibility for claims by
third parties arising out of, or relating to, the use by Buyer or any
successor thereof of any materials bearing reference to the Restricted Marks
after the Closing Date.
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6.4 Proxy Statement and Financial Statements
Buyer shall prepare and file with the SEC as soon as practicable the Proxy
Statement. Seller agrees to furnish Buyer all information concerning the
Industrial Distribution Business that is required by the rules and regulations
of the SEC and the NASD to be included in the Proxy Statement, including
without limitation such audited financial statements with respect to the
Industrial Distribution Business in a format suitable for inclusion in the
Proxy Statement (which financial statements will differ from the Statement of
Assets and Liabilities referred to in paragraph 1.4). In addition, unless
Buyer shall receive confirmation from the SEC that audited financial
statements with respect to the Industrial Distribution Business for the period
beginning on January 1, 1995 and ending on the Closing Date in accordance with
the rules and regulations of the SEC are not required to be included in
Buyer's Annual Report on Form 10-K for the year ending December 31, 1995 (the
"Form 10-K") Seller agrees to provide Buyer no later than January 15, 1996
with such audited financial statements in a format suitable for inclusion in
the Form 10-K. Promptly after the Closing, Buyer agrees to make reasonable
efforts to obtain confirmation from the SEC that the foregoing financial
statements are not required for inclusion in the Form 10-K. Buyer acknowledges
that the responsibility of Seller to Buyer with respect to the financial
statements and information provided pursuant to this paragraph 6.4 shall be
limited to ensuring that such financial statements have been prepared in
accordance with GAAP and applicable regulations of the SEC relating to
financial statements. Buyer agrees to pay to Seller, promptly upon the request
of Seller, an amount equal to one-half of all out-of-pocket expenses incurred
by Seller in connection with the preparation and audit of the financial
statements described in this paragraph 6.4 but not to exceed $125,000.
6.5 Supply Agreement
Between the date hereof and the Closing Date, Buyer and Seller shall
negotiate in good faith to agree upon the form of a supply agreement (the
"Supply Agreement") pursuant to which Buyer will supply to Seller and Seller's
Affiliates equipment and supplies manufactured by third parties. Such
agreement shall (i) apply only to Seller's facilities currently serviced by
the Industrial Distribution Business, (ii) contain pricing terms that are cost
neutral to Buyer and Seller and (iii) have a term the same as the Distribution
Agreement. Buyer and Seller shall execute such agreement at the Closing.
SECTION 7
CONDITIONS
7.1 Conditions to the Obligations of Buyer
The obligation of Buyer to consummate this Agreement and the transactions
contemplated hereby is subject to the fulfillment, prior to or at the Closing,
of the following conditions precedent:
(a) Representations; Warranties; and Covenants
Each of the representations and warranties of Seller contained in Section
2 that is qualified by materiality shall be true and correct, and each of
the representations and warranties of Seller contained in Section 2 that is
not so qualified shall be true and correct in all material respects, in
each case as though made on and as of the Closing Date except for changes
or exceptions required to reflect the operation of the Industrial
Distribution Business after the date hereof in the ordinary course
substantially consistent with past practice; and Seller shall, on or before
the Closing and except with respect to paragraph 6.5 hereof, have performed
all of its obligations hereunder which by the terms hereof are to be
performed on or before the Closing.
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(b) Certificate from Officer
Seller shall have delivered to Buyer a certificate of Seller, signed on
its behalf by its President or Chief Financial Officer and dated as of the
Closing to the effect that the statements set forth in subparagraph (a)
above in this paragraph 7.1 are true and correct in all material respects.
(c) Seller's Closing Deliveries
All actions, proceedings, instruments and documents required to carry out
this Agreement and the transactions contemplated hereby and all related
legal matters contemplated by this Agreement shall have been approved by
Buyer and its counsel, acting reasonably, and Seller shall have delivered
such other certificates, opinions, and documents in form and substance
satisfactory to Buyer and its counsel, acting reasonably, as Buyer may
reasonably require to evidence compliance with the terms and conditions
hereof as of the Closing and the fulfillment of Seller's covenants.
(d) Opinions of Counsel
On the Closing Date, Buyer shall have received from Arthur F. Staubitz,
Senior Vice President and General Counsel of Seller and/or Sidley & Austin,
an opinion or opinions as of said date, to the effect set forth as Exhibit
7.1(d).
(e) No Adverse Proceeding
No action or proceeding to which the federal or a state government or a
federal or state agency or instrumentality is a party shall be pending or
threatened before a court or similar body or any government or governmental
agency or instrumentality which would prohibit the completion of the
purchase transaction contemplated hereby or the operation of the Industrial
Distribution Business by Buyer; no action or proceeding to which the
federal or a state government or a federal or state agency or
instrumentality is not a party shall be pending before a court or similar
body or any government agency or instrumentality which, in the reasonable
judgment of Buyer, would prohibit the completion of the purchase
transaction contemplated hereby or the operation of the Industrial
Distribution Business by Buyer.
(f) Consents
Seller and/or Buyer shall have received consents to the assignments to
Buyer of the Contracts set forth in the Disclosure Statement as
constituting conditions to the Closing.
(g) Regulatory Approvals
Buyer and Seller each shall have filed all notices and information
required under the Improvements Act and satisfied any request for
additional information thereunder. The applicable waiting periods under the
Improvements Act and any extensions thereof shall have expired and no
injunction or restraining order shall have been issued by any court of
competent jurisdiction and be in effect which restrains or prohibits any
material transaction contemplated hereby. In addition, Seller shall have
made all other filings with and notifications of governmental authorities,
regulatory agencies and other entities required to be made by Seller on or
prior to Closing in connection with the execution and delivery of this
Agreement, the performance of the transactions contemplated hereby and the
continued operation of the Industrial Distribution Business by Buyer
subsequent to the Closing.
(h) Shareholder Approval
Buyer's issuance of shares of its common stock in connection with
completing the purchase transaction contemplated herein shall have been
approved by Buyer's shareholders in accordance with applicable Law and the
rules, regulations and practices of the NASD ("Shareholder Approval").
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(i) Trademark License Agreement
Seller shall have executed and delivered to Buyer the trademark license
agreement (the "Trademark License Agreement") in the form of Exhibit 7.1(i)
hereto.
(j) Distribution Agreement
Seller shall have executed and delivered to Buyer the distribution
agreement (the "Distribution Agreement") in the form of Exhibit 7.1(j)
hereto.
(k) Services Agreement
Seller shall have executed and delivered to Buyer the services agreement
(the "Services Agreement") in the form of Exhibit 7.1(k) hereto.
(l) Material Adverse Change
There shall have not occurred any damage or destruction to a material
part of the Subject Assets which could reasonably be expected to prevent
Buyer from meeting at least 75% of the foreseeable commitments of customers
of the Industrial Distribution Business following Closing.
7.2 Conditions to Obligations of Seller
The obligation of Seller to consummate this Agreement and the transactions
contemplated hereby is subject to the fulfillment, prior to or at the Closing,
of the following conditions precedent:
(a) Representations; Warranties; and Covenants
Each of the representations and warranties of Buyer contained in Section
3 that is qualified by materiality shall be true and correct, and each of
the representations and warranties of Buyer contained in Section 3 that is
not so qualified shall be true and correct in all material respects, in
each case as though made on and as of the Closing Date; each of Buyer and
EM shall, on or before the Closing, have performed all of its respective
obligations hereunder which by the terms hereof are to be performed on or
before the Closing; and Buyer shall have delivered to Seller a certificate
of Buyer, signed on each Buyer's behalf by its President or Chief Financial
Officer and dated as of the Closing, to such effect.
(b) Buyer's Closing Deliveries
All actions, proceedings, instruments and documents required to carry out
this Agreement and the transactions contemplated hereby and all related
legal matters contemplated by this Agreement shall have been approved by
Seller and its counsel, acting reasonably, and Buyer shall have delivered
such other certificates, opinions and documents in form and substance
satisfactory to counsel to Seller and its counsel, acting reasonably, as
Seller may reasonably require to evidence compliance with the terms and
conditions hereof as of the Closing and the fulfillment of Buyer's
covenants.
(c) No Adverse Proceeding
No action or proceeding to which the federal or a state government or a
federal or state agency or instrumentality is a party shall be pending or
threatened before a court or similar body or any government or governmental
agency or instrumentality which would prohibit the completion of the
purchase transaction contemplated hereby or the operation of the Industrial
Distribution Business by Buyer; no action or proceeding to which the
federal or a state government or a federal or state agency or
instrumentality is not a party shall be pending before a court or similar
body or any government agency or instrumentality which, in the reasonable
judgment of Seller, would prohibit the completion of the purchase
transaction contemplated hereby or the operation of the Industrial
Distribution Business by Buyer.
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(d) Opinion of Counsel
On the Closing Date, Seller shall have received from Drinker Biddle &
Reath, counsel for Buyer, an opinion as of said date, to the effect set
forth in Exhibit 7.2(d).
(e) Regulatory Approvals
Buyer and Seller each shall have filed all notices and information
required under the Improvements Act and satisfied any request for
additional information thereunder. The applicable waiting periods under the
Improvements Act and any extensions thereof shall have expired and no
injunction or restraining order shall have been issued by any court of
competent jurisdiction and be in effect which restrains or prohibits any
material transaction contemplated hereby. In addition, Buyer shall have
made all other filings with and notifications of governmental authorities,
regulatory agencies and other entities required to be made by Buyer on or
prior to Closing in connection with the execution and delivery of this
Agreement, the performance of the transactions contemplated hereby and the
continued operation of the Industrial Distribution Business by Buyer
subsequent to the Closing.
(f) Shareholder Approval
Shareholder Approval shall have been obtained.
(g) Distribution Agreement
Buyer shall have executed and delivered to Seller the Distribution
Agreement.
(h) Services Agreement
Buyer shall have executed and delivered to Seller the Services Agreement.
(i) Trademark License Agreement
Buyer shall have executed and delivered to Seller the Trademark License
Agreement.
(j) Supply Agreement
Buyer shall have executed and delivered to Seller the Supply Agreement.
SECTION 8
CERTAIN EMPLOYEE AND EMPLOYEE PLAN MATTERS
8.1 Offers of Employment
Prior to the Closing, Buyer shall offer employment to all Business
Employees, which as of April 26, 1995 is 569 Business Employees. Any Business
Employee who is on a leave of absence due to disability (including but not
limited to maternity leave) which terminates within the one-year period
beginning on the Closing Date shall receive an offer of employment from Buyer
on the date such leave of absence terminates. The terms of employment offered
to such Business Employees shall be based on Buyer's existing employment
practices and policies, provided that it shall be a term of such offer that
each such Business Employee be entitled to receive (a) cash compensation
(including bonuses) based on a pay scale which is no less generous than
Seller's pay scale, (b) employee benefits which are no less generous than
those provided to similarly situated employees of Buyer, and (c) severance
benefits, or payments in lieu of notice in accordance with Seller's severance
pay policies in effect immediately prior to the Closing as set forth on the
Disclosure Statement (the "Severance Pay Policies") in the event that his or
her employment is terminated by Buyer within 6 months of the Closing. Buyer
shall assume any and all obligations for vacation pay earned by Business
Employees who accept employment with Buyer prior to the Closing Date. Pursuant
to the terms of the Baxter International Inc. and Subsidiaries Incentive
Investment Plan (the "Seller's Savings Plan") and within the time limits
prescribed by applicable law, Seller shall transmit to the Seller's Savings
Plan all contributions withheld from the
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compensation earned by Business Employees prior to the Closing Date pursuant
to the salary reduction elections of such employees ("401(k) contributions")
and all matching contributions attributable to such 401(k) contributions.
Seller shall assist Buyer in securing acceptances from Business Employees to
whom Buyer offers employment. In the event that less than all of the Business
Employees accept offers of employment from Buyer, Buyer shall pay to Seller,
at the time of Closing, one-half of the aggregate amount payable by Seller
pursuant to the Severance Pay Policies to those Business Employees who, as of
the Closing Date, have rejected such offers, it being acknowledged and
understood that, through this mechanism, Buyer shall hire and/or partially
fund the cost to terminate all of the Business Employees. Seller shall use all
such funds received from Buyer to partially fund the cost to terminate
Business Employees pursuant to the Severance Pay Policies, provided that
Seller may, in its discretion, terminate Business Employees who are offered
employment by Buyer and do not accept such offer of employment. With respect
to any Business Employee who is an outside sales representative and who
accepts Buyer's offer of employment, but who is terminated within the 60-day
period following the Closing Date, Seller shall pay to Buyer within ninety
days after the Closing Date one-half of the aggregate amount payable as
severance benefits to such terminated employee. Notwithstanding anything
herein to the contrary, the maximum amount which Seller shall be obligated to
pay for severance benefits with respect to Business Employees who are outside
sales representatives who are terminated by Buyer following the Closing Date
is $750,000. Buyer shall have no severance pay obligations with respect to any
Business Employees who decline Buyer's offer of employment and are continued
as employees of Seller.
The provisions of this paragraph 8.1 shall not apply to the President of the
Industrial Distribution Business.
8.2 Buyer's Assumption of Employee Liability and Indemnity
Subject to paragraph 8.1, Buyer shall assume and be solely responsible for
the past service liability of Seller under the Severance Pay Policies for 6
months following the Closing and as otherwise imposed by law in respect of all
Business Employees who accept offers of employment from Buyer.
8.3 Benefit Plans and Pension Plans
Buyer shall not assume any obligations arising under any "employee benefit
plan" (as such term is defined in Section 3(3) of ERISA) which Seller
maintains relating to any Business Employee (collectively the "Plans"). The
participation of the Business Employees in the Plans shall be terminated as of
the Closing Date, in each case except to the extent that any rights under the
Plans shall have vested, or may vest upon fulfillment of certain conditions,
in accordance with the terms contained therein; provided, however, that
Business Employees who accept employment with Buyer shall be 100% vested in
their account balances under the Seller's Savings Plan and in their accrued
benefits under the Baxter International Inc. Pension Plan.
8.4 Buyer's Plans
Buyer shall provide for the participation, commencing on the Closing Date by
such of the Business Employees who accept offers of employment from Buyer and
who participated in the Plans prior to the Closing Date, in Buyer's employee
benefits plans, provided that for purposes of eligibility to participate and
vesting under Buyer's plans (but not for purposes of benefit accruals), Buyer
shall take any and all action necessary (including amendment of Buyer's plans)
to recognize each Business Employee's service with Seller. Buyer shall
recognize each Business Employee's
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years of service with Seller for all purposes under the Buyer's sick and
disability pay plan. No Business Employee's participation in any of Buyer's
employee benefit plans shall be limited or restricted due to a preexisting
condition limitation in such plan.
8.5 Continuation Coverage
Buyer acknowledges that Seller is not obligated to offer "continuation
coverage" as provided by Part 6 of Title I of the Employee Retirement Income
Security Act of 1974, as amended and Section 4980B of the Internal Revenue
Code ("COBRA") under Seller's group health plans with respect to the Business
Employees who accept Buyer's offer of employment because Buyer shall be
providing as of the Closing Date group health plans which provide coverage
which is comparable to the coverage such Business Employees received
immediately prior to the Closing Date under the Seller's group health plans.
Seller shall retain liability for employees (and their qualified
beneficiaries) receiving continuation coverage as of the Closing Date under
Seller's group health plans. With respect to group health plans established by
Buyer or its Affiliates on or after the Closing Date and for the benefit of
Business Employees who accept employment with Buyer, or its Affiliates shall
comply with all COBRA obligations applicable to those plans.
8.6 WARN
Buyer shall comply with all notice and other requirements under the Workers
Adjustment and Retraining Notification Act ("WARN") and any similar state,
local, or foreign country statute with respect to all Business Employees who
accept employment with Buyer and all other employees of Buyer. Seller shall
comply with all notice and any other requirements under WARN and any similar
state, local, or foreign country statute with respect to all Business
Employees who either are not offered employment with Buyer or who decline
offers of employment with Buyer as well as other employees of Seller.
SECTION 9
RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING
9.1 Survival
Except as otherwise provided in paragraph 10.2 with respect to Seller and
paragraph 10.4 with respect to Buyer, the representations and warranties
contained in this Agreement shall terminate two years after the Closing Date.
9.2 Collection of Assets
Subsequent to the Closing, Buyer shall have the right and authority to
collect all Industrial Accounts Receivable and other items transferred and
assigned to it by Seller hereunder and to endorse with the name of Seller any
checks received on account of such receivables or other items, and Seller
agrees that, except as contemplated by subparagraph 1.1(b), it will promptly
transfer or deliver to Buyer from time to time, any cash or other property
that Seller may receive with respect to any claims, contracts, licenses,
leases, commitments, sales orders, purchase orders, receivables of any
character or any other items included in the Subject Assets.
9.3 Payment or Satisfaction of Excluded Liabilities
Seller shall pay or satisfy all of the Excluded Liabilities in the ordinary
course of business as they become due, including but not limited to any
obligations owed to suppliers of the Industrial Distribution Business which
are included in the Excluded Liabilities.
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9.4 Certain Additional Agreements
(a) Buyer agrees to perform its pro rata portion of all distribution related
obligations under agreements, contracts, commitments and other written
understandings of Seller with suppliers or vendors relating to the Industrial
Distribution Business that are not transferred to Buyer as contemplated
hereby. Buyer's pro rata portion of such distribution related obligations
shall include all such obligations that are directly allocable to the
Industrial Distribution Business and the portion of such obligations that
relate to the Industrial Distribution Business and other portions of Seller's
business comparable to the portion of products purchased under such agreement
and sold to Industrial Customers during calendar year 1994.
(b) Notwithstanding anything to the contrary contained herein, effective as
of the Closing Date, Buyer shall, as a subdistributor of Seller, assume and
agree to perform all contractual obligations of Seller pursuant to the terms
and conditions of the Exclusive Distribution Agreement dated as of December
19, 1994 between Dade International Inc. and Seller, including without
limitation the obligation of Seller to distribute in the United States
products manufactured by Dade International Inc., to the extent that such
contractual obligations relate to the distribution of Dade products
distributed by Seller to Industrial Customers, except to the extent that such
obligations relate to the distribution of products by Seller prior to the
Closing Date.
SECTION 10
INDEMNIFICATION
10.1 Indemnification by Seller
Seller shall indemnify and hold Buyer and its respective subsidiaries and
Affiliates and persons serving as officers, directors, partners, employees,
agents or representatives thereof (individually a "Buyer Indemnified Party"
and collectively the "Buyer Indemnified Parties") harmless from and against
and in respect of any and all claims, demands, suits, damages, liabilities,
losses, fines, penalties, costs and expenses (including, without limitation,
reasonable fees and disbursements of counsel) of any kind or nature whatsoever
(whether or not arising out of a Third Party Claim (as defined in paragraph
10.5(a) below) and including all amounts paid in investigation, defense or, to
the extent contemplated below, settlement of the foregoing pursuant to this
Section 10) which may be sustained or suffered by any of them arising out of
or based upon any of the following matters (in each case, a "Loss"):
(a) any breach by Seller of, or inaccuracy in, any representation or
warranty of Seller contained in this Agreement, the Disclosure Statement or
in any certificate, Schedule or Exhibit delivered by Seller hereunder, or
by reason of any claim, action or proceeding asserted or instituted by a
third party to the extent arising specifically out of any matter or thing
specifically constituting a breach by Seller of, or inaccuracy in, any such
representation or warranty of Seller;
(b) any breach or nonfulfillment by Seller of any agreement or covenant
of Seller contained in this Agreement, or by reason of any claim, action or
proceeding asserted or instituted by a third party to the extent arising
specifically out of any matter or thing specifically constituting a breach
or nonfulfillment by Seller of any such agreement or covenant of Seller;
and
(c) any Excluded Liabilities.
10.2 Limitations on Indemnification by Seller
Notwithstanding the foregoing right of Buyer Indemnified Parties to
indemnification for Losses pursuant to subparagraph 10.1(a), no amounts shall
be payable pursuant to subparagraph 10.1(a):
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(a) until and then only to the extent that the total of all such Losses
determined pursuant to subparagraph 10.1(a) shall exceed $1,000,000;
(b) if the claim for indemnification is a duplication of an amount
previously paid by Seller to Buyer as a Purchase Price adjustment;
(c) to the extent the Loss arises from a breach by Seller of, or
inaccuracy in, a representation or warranty of Seller known to the Buyer
prior to Closing; or
(d) unless a claim for indemnification is made prior to the date which is
two years after the Closing Date;
provided, however, that nothing in this Agreement shall limit the obligation
of Seller to indemnify Buyer for Losses pursuant to subparagraphs 10.1(b) or
10.1(c), other than paragraph 11.2(b) hereof, and, with respect to
subparagraph 10.1(b), other than as provided below in this paragraph 10.2. In
addition to the foregoing, Buyer shall not be entitled to make any claim for
indemnification pursuant to subparagraph 10.1(a) with respect to a particular
breach by Seller of, or inaccuracy in, a representation or warranty of Seller
if the Losses suffered by Buyer as a result of such particular breach or
inaccuracy are less than $20,000 in the aggregate.
Notwithstanding the foregoing right of Buyer Indemnified Parties to
indemnification for Losses pursuant to subparagraphs 10.1(a) and 10.1(b), and
regardless of the actual amount of Losses suffered or incurred by Buyer
pursuant to subparagraphs 10.1(a) and 10.1(b), the maximum aggregate liability
of Seller in respect of all such Losses shall be $300,000,000.
10.3 Indemnification by Buyer
Buyer shall indemnify and hold Seller and its respective subsidiaries and
Affiliates and persons serving as officers, directors, partners, employees,
agents or representatives thereof (individually a "Seller Indemnified Party"
and collectively the "Seller Indemnified Parties") harmless from and against
and in respect of any Loss which may be sustained or suffered by any of them
arising out of or based upon any of the following matters:
(a) any breach by Buyer of, or inaccuracy in, any representation or
warranty of Buyer contained in this Agreement or in any certificate,
Schedule or Exhibit delivered by Buyer hereunder, or by reason of any
claim, action or proceeding asserted or instituted by a third party to the
extent arising specifically out of any matter or thing constituting
specifically a breach by Buyer of, or inaccuracy in, any such
representation or warranty of Buyer;
(b) any breach or nonfulfillment by Buyer of any agreement or covenant of
Buyer contained in this Agreement, or by reason of any claim, action or
proceeding asserted or instituted by a third party to the extent arising
specifically out of any matter or thing specifically constituting a breach
or nonfulfillment by Buyer of any such agreement or covenant of Buyer; and
(c) any Assumed Liabilities.
10.4 Limitations on Indemnification by Buyer
Notwithstanding the foregoing right of Seller Indemnified Parties to
indemnification for Losses pursuant to subparagraph 10.3(a), no amounts shall
be payable pursuant to subparagraph 10.3(a):
(a) until and then only to the extent that the total of all Losses
determined pursuant to subparagraph 10.3(a) shall exceed $1,000,000;
(b) if the claim for indemnification is a duplication of an amount
previously paid by Buyer to Seller as a Purchase Price adjustment;
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(c) to the extent the Loss arises from a breach by Buyer of, or
inaccuracy in a representation or warranty of Buyer known to Seller prior
to Closing; or
(d) unless a claim for indemnification is made prior to the date which is
two years after the Closing Date;
provided, however, that nothing in this Agreement shall limit the obligation
of Buyer to indemnify Seller for Losses pursuant to subparagraphs 10.3(b) or
10.3(c), other than paragraph 11.2(c) hereof, and, with respect to
subparagraph 10.3(b), other than as provided below in this paragraph 10.4. In
addition to the foregoing, Seller shall not be entitled to make any claim for
indemnification pursuant to subparagraph 10.3(a) with respect to a particular
breach by Seller of, or inaccuracy in, a representation or warranty of Seller
if the Losses suffered by Seller as a result of such particular breach or
inaccuracy are less than $20,000 in the aggregate.
Notwithstanding the foregoing right of Seller Indemnified Parties to
indemnification for Losses pursuant to subparagraphs 10.3(a) and 10.3(b), and
regardless of the actual amount of Losses suffered or incurred by Seller
pursuant to subparagraphs 10.3(a) and 10.3(b), the maximum aggregate liability
of Buyer in respect of all such Losses shall be $300,000,000.
10.5 Notice: Defense of Claims
(a) If any indemnified party shall receive notice of the assertion by a
person who is not a party to this Agreement of any claim or of the
commencement by any such person of any action or proceeding (a "Third Party
Claim") with respect to which an indemnifying party may be obligated to
provide indemnification pursuant to this Agreement, such indemnified party
shall give the indemnifying party written notice thereof promptly after
becoming aware of such Third Party Claim; provided, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations hereunder, except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice. Such
notice shall describe the Third Party Claim in reasonable detail, and shall
indicate the amount (estimated if necessary) of the indemnifiable Loss that
has been or may be sustained by such indemnified party.
(b) The indemnifying party may elect to defend or to seek to settle or
compromise, at the indemnifying party's own expense and by the indemnifying
party's own counsel, any Third Party Claim. Within 30 days of the receipt of
notice from an indemnified party in accordance with subparagraph (a) above (or
sooner, if the nature of such a Third Party Claim so requires), the
indemnifying party shall notify the related indemnified party if the
indemnifying party elects not to defend or not to seek to settle or compromise
such Third Party Claim (which elections may be made only in the event of a
good faith assertion by the indemnifying party that a claim was
inappropriately tendered hereunder, as the case may be). Unless the
indemnifying party elects not to assume the defense or not to seek to settle
or compromise a Third Party Claim, the indemnifying party shall not be liable
to such indemnified party hereunder for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof; provided, that such indemnified party shall have the right to employ
one counsel to represent such indemnified party if, in such indemnified
party's reasonable judgment, a conflict of interest between such indemnified
party and the indemnifying party exists in respect of such claim, and in that
event the reasonable fees and disbursements of such separate counsel shall be
paid by the indemnifying party. If the indemnifying party elects not to defend
or to seek to compromise or settle a Third Party Claim, or fails to notify an
indemnified party of its election as provided herein, such indemnified party
may defend or seek to compromise or settle such Third Party Claim.
Notwithstanding the foregoing, neither the indemnifying party nor any
indemnified party may settle or compromise any claim over the objection of the
other; provided, however, that consent to settlement or compromise shall not
be unreasonably withheld. The indemnifying party
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shall not consent to entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof the giving by the claimant
or plaintiff to such indemnified party of a release from all liability in
respect of such claim or litigation.
(c) If the indemnifying party chooses to defend or to seek to compromise or
settle any Third Party Claim, the related indemnified party shall make
available to the indemnifying party any personnel or any books, records or
other documents within its control or which it otherwise has the ability to
make available that are necessary or appropriate for such defense, settlement
or compromise and shall otherwise cooperate in the defense, settlement or
compromise of such Third Party Claims.
(d) Notwithstanding anything else herein, if any offer of settlement or
compromise is received by the indemnifying party with respect to a Third Party
Claim and the indemnifying party notifies the related indemnified party in
writing of the indemnifying party's willingness to settle or compromise such
Third Party Claim on the basis set forth in such notice and such indemnified
party declines to accept such settlement or compromise, such indemnified party
may continue to contest such Third Party Claim free of any participation by
the indemnifying party, at such indemnified party's sole expense. In such
event, the obligation of the indemnifying party to defend or to seek to settle
or compromise such Third Party Claim shall cease and the obligation of the
indemnifying party to such indemnified party with respect to such Third Party
Claim shall be limited to the lesser of (i) the amount of the offer of
settlement or compromise which such indemnified party declined to accept plus
the costs and expenses of such indemnified party prior to the date the
indemnifying party notifies such indemnified party of the offer to settle or
compromise and (ii) the actual out-of-pocket amount such indemnified party is
obligated to pay as a result of such indemnifying party's continuing to
contest such Third Party Claim. The indemnifying party shall be entitled to
recover (by set-off or otherwise) from any indemnified party any additional
expenses incurred by the indemnifying party as a result of such indemnified
party's decision to continue to contest such Third Party Claim.
(e) Any claim on account of any Loss which does not result from a Third
Party Claim shall be asserted by written notice by the indemnified party to
the indemnifying party. The indemnifying party shall have a period of 60 days
after the receipt of such notice within which to respond thereto. If the
indemnifying party does not respond within such 60-day period, the
indemnifying party shall be deemed to have forfeited its right to contest the
claimed payment and shall have no further right to contest the validity of
such a claim. If the indemnifying party does not respond within such 60-day
period or rejects such a claim in whole or in part, such indemnified party
shall be free to pursue such remedies as may be available to such party under
applicable law.
(f) If the amount of any indemnifiable Loss shall, at any time subsequent to
payment pursuant to this Agreement, be reduced by recovery, settlement or
otherwise, the amount of such reduction, less any expenses incurred in
connection therewith, shall promptly be repaid by the indemnified party to the
indemnifying party.
(g) In the event of payment by the indemnifying party to any indemnified
party in connection with any Third Party Claim, the indemnifying party shall
be subrogated to and shall stand in the place of such indemnified party as to
any events or circumstances in respect of which such indemnified party may
have any right or claim relating to any Third Party Claim against any claimant
or plaintiff asserting such Third Party Claim. Such indemnified party shall
cooperate with the indemnifying party in a reasonable manner, and at the cost
and expense of the indemnifying party, in prosecuting any subrogated right or
claim.
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10.6 Exclusive Remedy
To the extent permitted by Law and except as set forth in paragraphs 11.2(b)
and (c), respectively, the respective remedies of Buyer and Seller contained
in this Section 10 shall be exclusive.
SECTION 11
EXPIRATION OR TERMINATION OF AGREEMENT
11.1 Expiration or Termination
If for any reason whatsoever Closing shall not have occurred on or before
October 31, 1995, and neither Buyer nor Seller shall have terminated the
Agreement as provided in clause (a) or (b) below, this Agreement shall
nevertheless expire at the close of business on October 31, 1995 without the
need for any further action by any party hereto. At any time prior to the
Closing, this Agreement may be terminated as follows:
(a) by mutual written consent of Buyer and Seller; or
(b) by either Seller or Buyer in writing, without liability of the
terminating party on account of such termination except as set forth in
paragraph 11.2 (provided the terminating party is not otherwise in breach
of this Agreement), if the Closing shall not have occurred on or before
October 31, 1995 because of the failure to satisfy any condition precedent
to the obligations of the terminating party.
11.2 Effect of Expiration or Termination
(a) All obligations of the parties hereunder shall cease upon any expiration
or termination pursuant to paragraph 11.1, provided, however, that (i) the
provisions of this Section 11, paragraph 4.8, paragraph 5.2, paragraph 6.2,
paragraph 14.4, and paragraph 14.13 hereof shall survive any expiration or
termination of this Agreement and (ii) nothing herein shall relieve any party
from any obligations pursuant to subparagraph (b) or (c) below.
(b) Notwithstanding any provision in this Agreement to the contrary, if this
Agreement is terminated by Buyer pursuant to paragraph 11.1(b) above or
expires, Seller shall not have any obligations or liabilities under this
Agreement (except as set forth in paragraph 11.2(a) above and this
subparagraph 11.2(b)); provided, however, that in the event such termination
or expiration is attributable to (i) Seller's failure to satisfy any of the
conditions to Closing described in subparagraphs 7.1(a), 7.1(b), 7.1(c),
7.1(d), 7.1(i), 7.1(j) or 7.1(k) or (ii) Seller's failure to close the
transactions contemplated hereby for any reason other than as permitted by the
terms of this Agreement, then Seller shall pay to Buyer, as liquidated
damages, an amount equal to the sum of $5,000,000. Any amount payable to Buyer
by Seller pursuant to the foregoing sentence shall be paid promptly after
receipt by Seller of a written notice setting forth in reasonable detail the
reason or reasons such amount is payable; provided, however, that in the event
this Agreement expires by reason of Seller's failure to close the transactions
contemplated hereby for any reason other than as permitted by the terms of
this Agreement, such written notice shall be received by Seller no later than
30 days after the expiration date of this Agreement.
(c) Notwithstanding any provision in this Agreement to the contrary, if this
Agreement is terminated by Seller pursuant to paragraph 11.1(b) above or
expires, Buyer shall not have any obligations or liabilities under this
Agreement (except as set forth in paragraph 11.2(a) hereof and this
subparagraph 11.2(c)); provided, however, that in the event such termination
or expiration is attributable to (i) Buyer's failure to satisfy any of the
conditions to Closing described in subparagraphs 7.2(a), 7.2(b), 7.2(d),
7.2(f), 7.2(g), 7.2(h) or 7.2(i) or (ii) Buyer's failure to close the
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transactions contemplated hereby for any reason other than as permitted by the
terms of this Agreement, then Buyer shall pay to Seller, as liquidated
damages, an amount equal to the sum of $5,000,000. Notwithstanding any
provision in this Agreement to the contrary, if this Agreement is terminated
by Buyer pursuant to paragraph 11.1(b) above or expires, Buyer shall not have
any obligations or liabilities under this Agreement (except as set forth in
paragraph 11.2(a) hereof); provided however, that in the event such
termination or expiration is attributable to the failure to satisfy the
condition to Closing described in subparagraph 7.1(h), then Buyer shall pay to
Seller, as liquidated damages, an amount equal to the sum of $5,000,000. Any
amount payable to Seller by Buyer pursuant to the two preceding sentences
shall be paid promptly after receipt by Buyer of a written notice setting
forth in reasonable detail the reason or reasons such amount is payable;
provided, however, that in the event this Agreement expires by reason of
Buyer's failure to close the transactions contemplated hereby for any reason
other than as permitted by the terms of this Agreement, such written notice
shall be received by Buyer no later than 30 days after the expiration date of
this Agreement.
(d) The payment by Seller or Buyer, as the case may be, of $5,000,000 as
provided in subparagraph (b) or (c) above shall constitute liquidated damages
for expiration or termination and shall be the payee's sole remedy for
expiration or termination and upon payment thereof no party hereunder shall
have any liability to or recourse against the other under or on account of
this Agreement, except that nothing contained herein shall affect any party's
obligations as described in subparagraph (a)(i) above.
(e) Neither Buyer nor Seller shall have any liability to or recourse against
the other if this Agreement expires or is terminated because of the failure to
satisfy any of the conditions to Closing described in subparagraphs 7.1(e),
7.1(f), 7.1(g) or 7.1(l), or the failure to satisfy either of the conditions
to Closing described in subparagraphs 7.2(c), 7.2(e) or 7.2(j).
SECTION 12
ALTERNATIVE DISPUTE RESOLUTION
12.1 Dispute Resolution
Any claim, dispute, difference or controversy between or among the parties
hereto arising out of, or relative to, this Agreement which cannot be settled
by reference to other terms of this Agreement or by mutual understanding
between the parties shall be submitted to alternative dispute resolution as
described in this Section 12.
12.2 Referral to Representatives
(a) The claim, dispute, difference or controversy arising out of or in
relation to this Agreement, shall be subjected first to the procedure in this
paragraph 12.2. Any party may cause a proceeding to be commenced by giving
written notice to all other parties that it desires to do so (the date of such
notice is hereinafter referred to as the "Notice Date"). Each party shall
thereupon prepare a written statement (the "Statement") briefly describing
such party's position with respect to such claim, dispute, difference or
controversy. For purposes hereof, Buyer shall designate a representative and
Seller shall designate a representative (collectively, the "Representatives")
as the individuals who shall represent such parties for purposes of this
paragraph 12.2. The Statement shall be prepared within 15 days of the Notice
Date and given to all parties.
(b) The Representatives shall, during the 15 day period commencing on the
fifteenth day after the Notice Date, meet and negotiate in good faith in an
attempt to resolve such claim, dispute, difference or controversy. If such
attempt proves unsuccessful in the judgment of any party, such
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party may, subject to the terms of this Agreement, pursue any legal remedy
available to such party.
SECTION 13
DEFINITIONS
13.1 Certain Defined Terms
As used herein, the following terms shall have the meanings set forth below:
"Affiliate" or "Affiliated" means, any person, controlling, controlled by or
under direct or indirect common control with such person. For purposes of this
definition, the term "control" means the power to direct the management or
policies of a person, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Baxter Manufactured and Private-Labeled Products" means products
manufactured by Seller or any of its Affiliates, or manufactured for or
bearing the trademark "Baxter" or any trademark of Seller or of any of its
Affiliates.
"Business" means the business of distributing general laboratory and clean
room products that are not Baxter Manufactured or Private-Labeled Products to
Industrial Customers, as that business is conducted by Seller and its
Affiliates immediately prior to the Closing Date.
"Business Day" means any day other than Saturday, Sunday or a statutory
holiday in the State of Illinois.
"Industrial Customers" means customers who purchase the products distributed
by the Industrial Distribution Business for use in laboratories, production
plants, and other facilities (in all cases not involved in the care of human
patients or the diagnosis of disease or defect for the purpose of care of
human patients), including, without limitation, analytical research and
development laboratories, educational institutions, environmental testing
laboratories, clean room facilities, biotechnology and pharmaceutical research
and production facilities, medical device manufacturers, electronic and
semiconductor manufacturers, and government research facilities.
"Knowledge" where the word "knowledge" is used in this Agreement in
connection with a representation and warranty of a party means that the party
has made appropriate inquiries of its relevant corporate officers and of its
counsel and, in the case of Seller, Kim Bush, David Bronson and David Jonas.
"Law" or "Laws" means all statutes, codes, ordinances, decrees, rules,
regulations, municipal by-laws, judicial, arbitral, administrative,
ministerial, departmental or regulatory judgments, orders, decisions, rulings
or awards, policies, voluntary restraints, guidelines, or any provisions of
the foregoing, including general principles of common and civil law and
equity, of the United States or any state or other jurisdiction, or any agency
or instrumentality of any of the foregoing, binding on or affecting the person
referred to in the context in which such word is used.
"Permitted Encumbrance" means (a) encumbrances for taxes not yet due or
which are being contested in good faith and by appropriate proceedings if
adequate reserves with respect thereto are maintained on the books of Seller
in accordance with GAAP; (b) carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other like encumbrances arising in the ordinary
course of the Industrial Distribution Business which are not overdue for a
period of more than 30 days
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or which are being contested in good faith and by appropriate proceedings, if
adequate reserves with respect thereto are maintained on the books of Seller
in accordance with GAAP; (c) pledges or deposits in connection with worker's
compensation, unemployment insurance and other social security legislation;
(d) deposits to secure the performance of any or all of the following: bids,
trade contracts (other than for borrowed money), leases (other than financing
leases), statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of the
Industrial Distribution Business; (e) easements, rights-of-way, restrictions
and other similar encumbrances incurred in the ordinary course of the
Industrial Distribution Business which, in the aggregate, are not substantial
in amount, and which do not in any case materially detract from the value of
the property subject thereto or interfere with the ordinary conduct of the
Industrial Distribution Business and (f) such imperfections or irregularities
of title and encumbrances, if any, as are not substantial in character, amount
or extent so as to materially detract from the value or interfere with the
present use of the properties affected thereby or otherwise materially impair
present business operations.
"United States" means the United States, excepting Puerto Rico and other
territories and possessions of the United States.
13.2 Cross-Reference Table
As used herein, the following terms shall have the meanings set forth in the
paragraphs listed below:
<TABLE>
<CAPTION>
TERM REFERENCE
- ---- ---------------
<S> <C>
Affiliate...................................................... 13.1
Allocation..................................................... 1.10
Approvals...................................................... 2.11
Assumed Liabilities............................................ 1.2
Baxter Manufactured and Private-Labeled Products............... 13.1
Business....................................................... 13.1
Business Day................................................... 13.1
Business Employees............................................. 2.15(a)
Buyer.......................................................... Introduction
Buyer's Accountants............................................ 1.4(b) (iv) (A)
Buyer Indemnified Party........................................ 10.1
Closing........................................................ 1.5
Closing Date................................................... 1.5
Closing Date Net Asset Amount.................................. 1.4(c)
Closing Statement of Assets and Liabilities.................... 1.4(b) (i)
COBRA.......................................................... 8.5
Contracts...................................................... 1.1(a) (iv)
Disclosure Statement........................................... 2.1
Distribution Agreement......................................... 7.1(j)
EM............................................................. Introduction
ERISA.......................................................... 2.16
Excluded Assets................................................ 1.1(b)
Excluded Liabilities........................................... 1.3
Form 10-K...................................................... 6.4
GAAP........................................................... 1.4(b) (ii)
Guaranties..................................................... 5.6
Improvements Act............................................... 6.1
Industrial Accounts Receivable................................. 1.1(a) (viii)
Industrial Customers........................................... 13.1
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
TERM REFERENCE
- ---- ---------------
<S> <C>
Industrial Distribution Business............................... Introduction
Intellectual Property.......................................... 2.6(a)
Knowledge...................................................... 13.1
Law............................................................ 13.1
Loss........................................................... 10.1
NASD........................................................... 5.5
Non-Competition Agreement...................................... 7.1(i)
Neutral Accounting Firm........................................ 1.4(b) (iv) (C)
Notice Date.................................................... 12.2(a)
Permitted Encumbrances......................................... 13.1
Plans.......................................................... 8.3
Pre-Closing Statement of Assets and Liabilities................ 1.4(b) (ii)
Proxy Statement................................................ 4.9
Purchase Price................................................. 1.4(a)
Representatives................................................ 12.2(a)
Restricted Marks............................................... 1.1(b) (iv)
SEC............................................................ 3.3(b)
Seller......................................................... Introduction
Seller Indemnified Party....................................... 10.3
Seller's Savings Plan.......................................... 8.1
Services Agreement............................................. 7.1(k)
Severance Pay Policies......................................... 8.1
Shareholder Approval........................................... 7.1(h)
Shareholders' Meeting.......................................... 5.5
Statement...................................................... 12.2(a)
Subject Assets................................................. 1.1(a)
Supply Agreement............................................... 6.5
Third Party Claim.............................................. 10.5(a)
Trademark License Agreement.................................... 7.1(m)
Unassigned Contracts........................................... 1.8(a)
United States.................................................. 13.1
WARN........................................................... 8.6
401(k) Contributions........................................... 8.1
</TABLE>
SECTION 14
MISCELLANEOUS
14.1 Consent to Jurisdiction
Solely for the purpose of allowing a party to enforce its indemnification
and other rights hereunder, each of the parties hereby consents to personal
jurisdiction, service or process and venue in the United States District Court
for the Northern District of Illinois or the Eastern District of Pennsylvania,
any state court situated in Lake County in the State of Illinois, any
Commonwealth court situated in Chester County in the Commonwealth of
Pennsylvania or in the court in which any claim for which indemnification may
be sought hereunder is brought against an indemnified party.
14.2 Bulk Sales Law
Buyer waives compliance by Seller with the provisions of any applicable bulk
sales legislation in connection with the transfer of the Subject Assets under
this Agreement.
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<PAGE>
14.3 Risk of Loss
From the date hereof until the completion of the Closing, the Subject Assets
shall be and remain at the risk of Seller.
14.4 Fees and Expenses
(a) Except as set forth in paragraph 11.2, each of the parties will bear its
own expenses in connection with the negotiation and the consummation of the
transactions contemplated by this Agreement.
(b) Buyer will pay all federal, foreign and state sales and other taxes,
duties, documentary stamps, transfer taxes, registration charges, or other
like charges in connection with the transfer of the Subject Assets (as
provided in paragraph 1.11); and all premiums, charges and costs of obtaining
and providing appraisals and personal property searches for the benefit of
Buyer with respect to the Subject Assets.
14.5 Governing Law
This Agreement shall be construed under and governed by the internal laws of
the State of Illinois without regard to its conflict of laws provisions.
14.6 Notices
Any notice, request, demand or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been given if
delivered or sent by facsimile transmission, upon receipt, or if sent by
registered or certified mail, upon the sooner of the date on which receipt is
acknowledged or the expiration of 3 days after deposit in United States post
office facilities properly addressed with postage prepaid. All notices to a
party will be sent to the address set forth below or to such other address or
person as such party may designate by notice to each other party hereunder:
To Buyer: c/o VWR Corporation
Goshen Corporate Park West
1310 Goshen Parkway
West Chester, Pennsylvania 19380
Facsimile: (610) 436-1760
Attn: President
With a copy to: Drinker Biddle & Reath
1000 Westlakes Drive
Suite 300
Berwyn, Pennsylvania 19312-2409
Facsimile: (610) 993-8585
Attn: Thomas E. Wood
To Seller: Baxter Healthcare Corporation
One Baxter Parkway
Deerfield, Illinois 60015-4633
Facsimile: (708) 948-4266
Attn: General Counsel
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<PAGE>
With a copy to: Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Facsimile: (312) 853-7036
Attn: John M. O'Hare
To EM: EM Laboratories, Incorporated
5 Skyline Drive
Hawthorne, New York 10532
Facsimile: (914) 542-8775
Attn: Walter W. Zywottek
With a copy to: Rogers & Wells
200 Park Avenue
New York, New York 10166
Facsimile: (212) 878-8375
Attn: Klaus H. Jander
Any notice given hereunder may be given on behalf of any party by its counsel
or other authorized representatives.
14.7 Entire Agreement
This Agreement, including the Disclosure Statement and Schedules and
Exhibits referred to herein and the other writings specifically identified
herein or contemplated hereby, is complete, reflects the entire agreement of
the parties with respect to its subject matter, and supersedes all previous
written or oral negotiations, commitments and writings; no promises,
representations, understandings, warranties and agreements have been made by
any of the parties hereto except as referred to herein, the Disclosure
Statement or in such Schedules and Exhibits or in such other writings, and all
inducements to the making of this Agreement relied upon by any party hereto
have been expressed herein, the Disclosure Statement or in such Schedules or
Exhibits or in such other writings.
14.8 Assignability; Binding Effect
This Agreement shall only be assignable by Buyer to a corporation or
partnership controlling, controlled by or under common control with Buyer upon
written notice to Seller. This Agreement may not be assigned by Seller without
the prior written consent of Buyer. This Agreement shall be binding upon and
enforceable by, and shall inure to the benefit of, the parties hereto and
their respective successors, and permitted assigns.
14.9 No Third Party Beneficiaries
Except as expressly provided in Section 10, the terms and provisions of this
Agreement are intended solely for the benefit of Buyer and Seller and their
successors or permitted assigns, and it is not the intention of the parties
hereto to confer third party beneficiary rights upon any other persons.
14.10 Captions and Gender
The captions in this Agreement are for convenience only and shall not affect
the construction or interpretation of any term or provision hereof. The use in
this Agreement of any pronoun in
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<PAGE>
reference to a party hereto shall be deemed to include the masculine, feminine
or neuter pronoun, as the context may require.
14.11 Execution in Counterparts
For the convenience of the parties and to facilitate execution, this
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which shall constitute one and the same
document.
14.12 Amendments
This Agreement may not be amended or modified, nor may compliance with any
condition or covenant set forth herein be waived, except by a writing duly and
validly executed by each party hereto, or in the case of a waiver, the party
waiving compliance.
14.13 Public Disclosures
Except as required by Law or the rules of any applicable national securities
exchange or association, no press releases or public disclosure, either
written or oral, of the transactions contemplated by this Agreement, shall be
made by a party to this Agreement without the prior knowledge and written
consent of Buyer and Seller.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date set forth above by their duly authorized
representatives.
VWR Corporation
/s/ Jerrold B. Harris
By: _________________________________
Name: Jerrold B. Harris
Title: President & CEO
Baxter Healthcare Corporation
/s/ David N. Jonas
By: _________________________________
David N. Jonas
Vice President
Strategic Initiatives
With Respect to Paragraphs
5.5, 5.8 and 5.9 only:
EM Laboratories, Incorporated
/s/ Walter W. Zywottek
By: _________________________________
Name: Walter W. Zywottek
Title: President & CEO
VI-39
<PAGE>
EXHIBIT VII
SERVICES AGREEMENT
THIS SERVICES AGREEMENT ("Agreement") dated as of [ ], 1995 by and
between BAXTER HEALTHCARE CORPORATION, a Delaware corporation with its
principal offices at One Baxter Parkway, Deerfield, Illinois 60015
(hereinafter "Baxter"), and VWR CORPORATION, a Pennsylvania corporation with
its principal offices at 1310 Goshen Parkway, West Chester, Pennsylvania 19380
(hereinafter "VWR").
RECITALS
I. Baxter, VWR, and EM Laboratories, Incorporated, a New York corporation,
have entered into an Asset Purchase Agreement dated as of May 24, 1995
pursuant to which Baxter has sold to VWR, and VWR has purchased from Baxter,
certain of the assets and business of Baxter's "Industrial Distribution
Business," as defined in the Asset Purchase Agreement.
II. Baxter and VWR recognize that it is advisable for Baxter and its
Affiliates to continue providing certain administrative and other services to
VWR for a transitional period.
III. This Agreement is a condition to the consummation of the transactions
contemplated by the Asset Purchase Agreement.
AGREEMENT
In consideration of the mutual covenants contained herein, and for other
good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:
1. Definitions.
1.1 "Affiliate" shall mean any person, firm or corporation controlling,
controlled by or under direct or indirect common control with a party hereto.
For the purpose of this definition, the term "control" means the power to
direct the management or policies of a party, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the
foregoing.
1.2 "Industrial Customers" shall mean customers who purchase the Products
for use in laboratories, production plants, and other facilities in all cases
not involved in the care of human patients or the diagnosis of disease or
defect for the purpose of care of human patients, including, without
limitation, analytical, research and development laboratories, educational
institutions, environmental testing laboratories, clean room facilities,
biotechnology and pharmaceutical research and production facilities, medical
device manufacturers, electronic and semiconductor manufacturers, and
government research facilities.
1.3 "Products" shall mean the products distributed by the Industrial
Distribution Business immediately prior to the date of this Agreement,
including the following types of products:
1.3.1 "Baxter Products" shall mean Products that are manufactured by
Baxter, or manufactured for Baxter and bear the trademark "BAXTER" or any
other trademark of Baxter or any of its Affiliates, and sold to VWR for
resale by VWR to Industrial Customers pursuant to the VWR Distribution
Agreement entered into by the parties on the date hereof. The inventories
of the Baxter Products shall remain the property of Baxter until such time
as a Baxter Product is used to fulfill an order from an Industrial Customer
pursuant to this Agreement. Baxter shall retain title in such Baxter
Product until the time of shipment from
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<PAGE>
Baxter's shipping point (or the manufacturer's shipping point in the case
of a drop shipment) to the Industrial Customer, at which time such Baxter
Product shall be sold by Baxter to VWR; and
1.3.2 "Distributed Products" shall mean Products manufactured by third
parties and normally distributed by Baxter to Industrial Customers. The
inventories of such Distributed Products shall remain the property of
Baxter until such time as a Distributed Product is used to fulfill an order
from an Industrial Customer. Baxter shall retain title in such Distributed
Product until the time of shipment from Baxter's shipping point (or the
manufacturer's shipping point in the case of a drop shipment) to the
Industrial Customer at which time such Distributed Product shall be sold by
Baxter to VWR.
1.4 "Region" shall mean any one of the Baxter operational or sales regions
listed on Exhibit A of this Agreement.
1.5 "Territory" shall mean the United States, excluding Puerto Rico and its
other territories and possessions.
2. Services.
2.1 During the Term, as defined in Section 3 herein, Baxter shall or shall
cause one or more of its Affiliates, to render in the Territory services to
VWR as are described in Exhibit B hereto (the "Services") in connection with
VWR's sales of Products to its Industrial Customers. In addition to the
Services listed on Exhibit B, Baxter shall provide additional services that
are requested by VWR and agreed to in writing by Baxter ("Additional
Services").
2.2 Except as otherwise provided for in the Asset Purchase Agreement, VWR
shall not acquire any right, title or interest in any software, systems or
other materials used in the provision of the Services. VWR shall pay the
license fees and other third party charges necessary to enable Baxter to use
any software that Baxter uses during the Term for the benefit of VWR but only
to the extent such fees and charges are attributable to the provision of
Services or Additional Services.
2.3 Notwithstanding anything to the contrary contained herein, including,
without limitation, Exhibit B, Baxter shall not provide legal services,
research and development services or facilities, or insurance coverage or risk
management services anywhere in the Territory. Baxter shall not provide
treasury services (including, without limitation, cash management), audit
services (including, without limitation, internal audit), human resources
services (including, without limitation, BEBC administration services), tax
services, personal transportation services (including, without limitation,
access to Baxter's airplanes, cars or trucks), or use of Baxter facilities, in
each case, except to the extent identified in Exhibit B hereto.
2.4 For Industrial Customers that place orders for Products pursuant to
Section 2.6.1 and 2.6.2, Baxter shall make all credit determinations according
to Baxter's then-current standard credit procedures ( a copy of the current
procedures have been provided to VWR and updates of such procedures shall be
provided to VWR within a reasonable time of the implementation of the same),
unless otherwise directed by VWR. Notwithstanding anything to the contrary
contained herein, VWR shall bear all risks in connection with all accounts
receivable, and Baxter shall have no responsibility or liability with respect
to the same, except for any non-VWR approved credit extensions in violation of
such standard credit procedures.
2.5 VWR shall: (i) be fully responsible for soliciting orders from
Industrial Customers for the sale of the Products and the determination of
resale prices and terms of payment, other than with respect to credit
determinations as provided for in Section 2.4 herein; (ii) be fully
responsible for
VII-2
<PAGE>
any Distributed Products returned or rejected by Industrial Customers for any
reason; and (iii) give Baxter access to and use of all assets acquired by VWR
pursuant to the Asset Purchase Agreement to the extent required to enable
Baxter to provide the Services.
2.6 The following procedures shall be implemented by Baxter and VWR in
connection with the Services:
2.6.1 Baxter shall receive orders from Industrial Customers via EDI
transmission and Baxter's ASAP computer ordering system.
2.6.2 VWR customer service representatives ("CSR's") and telesales
representatives located in Baxter facilities pursuant to this Agreement
shall receive telephone and facsimile orders from Industrial Customers and
enter such orders into Baxter's system in the same manner as placed prior
to the date of this Agreement.
2.6.3 Baxter shall fulfill the orders with the required Products in the
same manner used by Baxter to fulfill similar orders to similar Industrial
Customers prior to the date of this Agreement, including shipments out of
stock of various Baxter facilities and/or direct shipment from third party
manufacturers.
2.6.4 Baxter shall provide invoices to Industrial Customers, using a
Baxter invoice generated by Baxter's billing system, but bearing a
reference to VWR.
2.6.5 On a daily basis after performing cash application, Baxter shall
remit to VWR by wire transfer all payments received from Industrial
Customers (including any sales taxes and freight charges collected by
Baxter as agent for VWR) on account of accounts receivable assigned by
Baxter to VWR on the date hereof and all VWR's accounts receivable based
upon sales of Products made to Industrial Customers under this Agreement
after the date hereof. If necessary, for the first ten days from the date
hereof, Baxter shall remit to VWR by wire transfer an amount equal to an
estimate of such receipts based on a percentage of the historic average
daily cash collected of accounts receivable from Industrial Customers
assigned by Baxter to VWR on the date hereof. If such an estimate is used,
at the end of the first month of the Term, the parties shall calculate the
difference between: (a) estimated payments made by Baxter to VWR during
such ten day period; and (b) the actual collections received on account of
the accounts receivable specified in the first sentence of this Section
2.6.5. If such actual collections are greater than such estimated payments,
Baxter shall pay to VWR such difference within ten days. If such actual
collections are less than such estimated payments, VWR shall pay to Baxter
such difference within ten days.
2.6.6 Baxter shall perform cash application services, matching payments
received from Industrial Customers with the appropriate invoices.
2.6.7 Baxter shall base invoices to Industrial Customers on prices for
Products determined by VWR and communicated to Baxter, provided that VWR
shall provide Baxter with at least 30 days notice in writing of any change
in such prices or any new contracts with Industrial Customers. Baxter shall
continue to provide invoices to Industrial Customers having a contract or
price agreement with Baxter (which may be in writing or may only be
reflected in Baxter computer system) prior to the date of this Agreement,
at the price contained in such contract or price agreement, until notified
by VWR to change such price.
2.6.8 Baxter shall provide VWR with a summary of monthly sales by state
and local taxing jurisdiction which shall be classified on an exempt and
non-exempt basis within seven days of month end. VWR shall be responsible
for filing sales tax returns with the appropriate taxing authorities and
remitting to them the sales taxes remitted by Baxter to VWR pursuant to
Section 2.6.5. Baxter shall obtain exemption certificates relating to new
Industrial Customers during the term of this Agreement. Unless otherwise
directed by VWR, Baxter shall maintain all appropriate controls and
administration of all sales tax compliance functions. Baxter shall from
time to time make available to VWR upon its request detailed
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<PAGE>
sales journals (which it shall maintain by state and local taxing
jurisdiction) and all copies of all invoices which it has delivered to
Industrial Customers. In addition, Baxter shall furnish to VWR all state
tax exemption certificates in its possession relating to all Industrial
Customers upon the transfer of the applicable accounts receivable
information pursuant to Section 7. All sales transaction records for
Industrial Customers shall, after the expiration or termination of this
Agreement, be retained by Baxter, but shall be stored for audit purposes by
Baxter for seven years and, from time to time, made available to VWR upon
its request.
2.7 During the first six months of the Term, Baxter shall provide to VWR, at
no charge, Facilities Services consisting of access to certain Baxter
facilities for VWR's sales representatives, customer service representatives
and general office personnel ("VRW Representatives") to the same extent that
the persons employed by Baxter in similar capacities had access to such
facilities immediately prior to the date of this Agreement, and voice mail for
the VWR Representatives using such facilities, the number of such VWR
Representatives not to exceed 569 in the aggregate. If requested by VWR and
agreed to by Baxter, Baxter shall provide to VWR Facilities Services after the
first six months of the Term subject to Section 4.8 herein.
3. Term.
Baxter shall render the Services and the Additional Services during the term
of this Agreement ("Term") which shall commence on the date of this Agreement
and terminate no later than two years thereafter. This Agreement shall
terminate with respect to all of the Services or Additional Services on a
Region by Region basis pursuant to the termination schedule which shall be
provided by VWR within 30 days after the date of this Agreement. VWR may
shorten the period during which Services or Additional Services are provided
by Baxter in any Region by giving Baxter 120 days written notice prior to the
effective date of termination of such Services or Additional Services. VWR may
extend the period during which Services or Additional Services are provided to
any Region beyond the applicable termination date in the termination schedule
provided by VWR by giving Baxter 120 days written notice prior to the date of
termination of the Services or Additional Services, provided that such notice
sets forth the time period of such extension, which in no case shall extend
beyond the Term, unless extended by mutual agreement, and the Services or
Additional Services to be provided.
4. Consideration.
4.1 In consideration of Baxter providing Services to VWR, VWR shall made
monthly payments to Baxter for such Services ("Services Payments") as set
forth herein, provided that VWR shall not be required to make any Services
Payments during the first three months of this Agreement.
4.2 The Services Payments for the 12 month period from the beginning of the
fourth month through the end of the fifteenth month of the Term shall equal
5.5% of the total sales of the Products to Industrial Customers which are
serviced by Baxter pursuant to the terms of this Agreement ("IC Sales") during
such 12 month period, provided that in no event shall such Services Payments
be less than $18,645,000 in the aggregate during such 12 month period (such
$18,645,000 figure is based on $452,000,000 multiplied by 5.5% multiplied by
9/12). Payments due during such 12 month period shall be due and payable
within 15 days following the end of each such month. If during any quarter
during such 12 month period the difference between: (a) $4,661,250, less (b)
the actual IC Sales made during such quarter multiplied by 5.5% is greater
than zero, then, within 15 days after the end of each such quarter, VWR shall
pay to Baxter an amount equal to such difference.
4.3 If VWR has made payments to Baxter totalling at least $18,645,000
pursuant to Section 4.2 and the difference between: (a) the actual Services
Payments made by VWR during such
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<PAGE>
12-month period (including any end-of-quarter payments) pursuant to Section
4.2 exceeds (b) 5.5% multiplied by IC Sales during such 12-month period, then
VWR shall be entitled to a credit ("Credit") equal to such excess, which
Credit shall be applied against Services Payments for Services provided during
each month during the three month period from the beginning of the sixteenth
month through the end of the eighteenth month of the Term.
4.4 The Services Payments for each month during the period from the
beginning of the sixteenth month through the end of the eighteenth month of
the Term shall be actual IC Sales multiplied by 5.5%, provided that any Credit
shall be applied against such Services Payments until such Credit is depleted.
Such Services Payment shall be paid within 15 days of the end of each month
during such period.
4.5 The Services Payments for each month during the period from the
beginning of the nineteenth month through the end of the twenty-fourth month
of the Term shall be 5.5% of actual IC Sales during each such month. Such
Services Payments shall be paid within 15 days of the end of each month during
such period.
4.6 Except as expressly provided herein, no other consideration or
reimbursement shall be payable to Baxter for the Services unless the parties
otherwise agree in writing.
4.7 If Baxter renders any Additional Services to VWR pursuant to the terms
of Section 2.1, VWR shall pay to Baxter in addition to the Services Payments
an amount equal to that set forth in any written agreement providing for such
Additional Services (which the parties acknowledge shall be based upon the
variable cost incurred by Baxter in rendering such Additional Services). Any
such payment for Additional Services shall be paid within 15 days of the end
of each month in which such Additional Services have been rendered.
4.8 If Baxter renders any Facilities Services to VWR after the first six
months of the Term pursuant to the terms of Section 2.7, VWR shall, for each
VWR Representative located at a Baxter facility, pay to Baxter in addition to
the Services Payments $192 per each such VWR Representative per month based on
full-time employment. Baxter shall invoice VWR for such Facilities Services
and specify the number of VWR Representatives and their locations broken out
by full-time and part-time employees. Any such payment for Facilities Services
shall be paid within 15 days of the end of each month during which such
Facilities Services have been rendered.
4.9 If any payments due hereunder have not been received by Baxter within 15
days after the date on which such payments are due, such overdue amounts shall
bear interest from the applicable due date until the date paid at the prime
rate published by the Wall Street Journal as of such applicable due date.
4.10 Notwithstanding anything to the contrary contained herein, if, during
any year during the Term, IC Sales in any Region exceed 125% of the 1994
annual sales level for such Region specified in Exhibit A, Baxter shall not be
obligated to provide any Services to any such Region in connection with any IC
Sales in excess of such 125% amount if the provision of such excess Services
would require Baxter to make any capital expansions.
5. Performance of Services.
5.1 Subject to the other provisions of this Section 5, Baxter shall use
reasonable efforts in providing the Services hereunder and shall perform the
Services in a manner consistent with past practice and with the same degree of
care, skill and prudence customarily exercised by Baxter in providing services
similar to the Services to its own operating divisions prior to the date of
this Agreement. Baxter shall stock inventories of the Products at service
levels consistent with those service levels provided by Baxter to the
Industrial Distribution Business prior to the date hereof.
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<PAGE>
5.2 Baxter shall prepare and deliver monthly sales, cost of goods sold,
accounts receivable and other reports as such reports were prepared by Baxter
for the Industrial Distribution Business immediately prior to the date hereof
(collectively, the "Reports"). Baxter shall from time to time upon advance
notice provide VWR and/or its independent public accountants or principal
financial institutions with full access to all accounting and other records
which were used to produce, or in any way support, the Reports in connection
with VWR's business.
5.3 Baxter and VWR shall cooperate in planning the scope and timing of the
Additional Services in order to minimize or eliminate interference with the
conduct of Baxter's business activities.
5.4 In providing the Services, neither Baxter nor its Affiliates shall be
responsible for the accuracy, completeness or timeliness of any advice or
Service or any return, report, filing or other document which it provides,
prepares or assists in preparing, except to the extent that any inaccuracy,
incompleteness or untimeliness arises from the gross negligence or willful
misconduct of Baxter or its Affiliates; provided that in no event, whether as
a result of a breach of this Agreement, tort liability or otherwise, shall
Baxter be liable to VWR for any special, indirect, incidental or consequential
damages. Baxter and its Affiliates shall provide Services with respect to such
returns, reports, filings and other documents with the same timeliness and
accuracy as it prepared such returns, reports, filings and other documents for
the Industrial Distribution Business immediately prior to the date hereof,
provided that Baxter acknowledges that the timeliness of the Reports are
essential to VWR's ability to meet its financial reporting requirements
(including those imposed by the federal securities laws).
6. Remittances and Settlement.
6.1 Baxter shall invoice VWR as follows:
6.1.1 2.6% times net IC Sales for the month just ended to cover freight
from Baxter's shipping point(s) (or manufacturer's facility in the case of
a drop shipment) to Industrial Customers in the United States; provided,
however, that Baxter shall credit VWR for any freight collected from
Industrial Customers.
6.1.2 for Baxter Products delivered by Baxter to fulfill Industrial
Customers' orders and invoiced during the month just ended. Such Baxter
Products shall be deemed to have been sold to VWR at the point of shipment
to the Industrial Customer. Baxter shall invoice VWR for such Baxter
Products at the prices then in effect under terms of the VWR Distribution
Agreement.
6.1.3 for Distributed Products delivered by Baxter to fulfill VWR's
Industrial Customer orders and invoiced during the month just ended. Such
Distributed Products shall have been sold to VWR at the time of shipment to
Industrial Customers. Baxter shall invoice VWR for such Distributed
Products at then-current merchandise File Costs contained on Baxter's
computer system (which shall include a factor for inbound freight costs)
net of applicable vendor rebates.
6.1.4 Baxter shall invoice VWR pursuant to this Section on a daily basis
and VWR shall pay such invoices by wire transfer within 15 days after the
date of each such invoice.
7. Termination of Services.
7.1 Prior to the date upon which Baxter's performance of Services shall
cease for any Region, Baxter and VWR shall formulate a mutually acceptable
transition plan, including, without limitation, VWR's purchase of Distributed
Products from Baxter as provided for herein. As part of such transition plan,
VWR shall purchase from the Baxter facility that has been servicing customers
in that Region, an inventory of Distributed Products at Baxter's then-current
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merchandise file costs (which shall include a factor for inbound freight
costs) which shall include associated excess, no-move Distributed Products (at
Baxter's book value determined following Baxter's standard policies), all
F.O.B. the Baxter facility. VWR shall pay Baxter the costs for such
Distributed Products within 15 days after the date of termination of Services
in the applicable Region. The quantity of inventory of each Distributed
Product that VWR shall purchase shall be equal to that portion of the
Distributed Products that Baxter has held in order to service Industrial
Customers of that Region. VWR shall be liable for and shall pay at the time of
the purchase of such Distributed Products all federal, foreign and state sales
taxes and all other sales taxes, duties, documentary stamps, transfer taxes,
registration fees and charges or other like charges properly payable upon and
in connection with the assignment and transfer of such Distributed Products by
Baxter to VWR hereunder. Baxter shall prepare such Distributed Products for
shipment to a VWR location specified by VWR. Pursuant to the implementation of
such transition plan, Baxter shall transfer such Distributed Products as
follows:
7.1.1 Baxter shall provide VWR with a magnetic tape containing the
catalog numbers of such Distributed Products to be purchased;
7.1.2 Baxter shall conduct a physical count of such Distributed Products
to be shipped;
7.1.3 Baxter shall prepare such Distributed Products for shipment to a
specified VWR location pursuant to such transition plan, provided that VWR
shall be solely responsible for all costs associated with such shipment;
and
7.1.4 Baxter shall deliver to VWR a detailed invoice (each a "Baxter
Invoice") for such Distributed Products based upon its physical count which
contains prices for each such Distributed Product, which invoice, subject
to Section 7.2. below, shall be final, binding and conclusive on the
parties hereto.
Any adjustments resulting from the physical count (i.e., "ADKS") shall be
provided to VWR within two business days of the reconciliation. VWR shall be
entitled to have its representatives (including its independent auditors)
present during any such physical inventory count.
7.2 VWR, at its own expense, may conduct an audit or review of the amount
set forth on any Baxter invoice, including causing any nationally recognized
firm of independent public accountants designated by VWR to perform such
audit, review or other report. VWR may dispute any
Baxter Invoice from Baxter, but only on the basis that VWR has been invoiced
for Distributed Products at costs other than Baxter's then-current merchandise
file costs (or book value for excess, no-move) or that such Distributed
Products are not in new or saleable condition (except for such no-move). Any
such dispute shall be initiated by written notice delivered to Baxter within
30 days of VWR's receipt of any such Products. Such notice shall specify each
disputed item, the amount thereof and the basis on which such dispute is made.
If Baxter and VWR are unable to reach a written resolution of all disputed
items within 20 days after VWR's written notice of dispute, Baxter and VWR
shall submit the items remaining in dispute for resolution to a firm of
independent public accountants having national standing in the United States
which is not then retained by Baxter, VWR or their respective Affiliates, as
mutually selected by VWR and Baxter (the "Neutral Accounting Firm"). In the
event that Baxter and VWR are unable to agree on the Neutral Accounting Firm,
then a nationally recognized "Big Six" accounting firm shall be selected by
lot after eliminating one such firm selected by Baxter and one such firm
selected by VWR. The Neutral Accounting Firm shall, within 30 days after
submission to it of the disputed items, determine and report in writing to the
parties upon such remaining disputed items in accordance with the provisions
hereof; and such report shall be final, binding and conclusive on the parties
hereto. The fees and disbursements of the Neutral Accounting Firm shall be
allocated between Baxter and VWR in the same proportion that the aggregate
amount of such remaining disputed items so submitted to the Neutral Accounting
Firm that is unsuccessfully disputed by each (as finally determined by the
Neutral Accounting Firm) bears to the total amount of such remaining
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disputed items so submitted. The Neutral Accounting Firm shall make such
determination in its sole discretion, subject to the terms and conditions of
this Agreement; provided, however, that the amount determined by the Neutral
Accounting Firm in respect of any such remaining disputed item shall not
exceed the highest amount claimed by either of the parties disputing such
item, or be less than the lowest amount claimed by either of the parties
disputing such item.
7.3 VWR shall pay each Baxter Invoice, less any disputed amounts subject to
Section 7.2, by wire transfer within 15 days after the date of such Baxter
Invoice.
7.4 Each mutually acceptable transition plan discussed in Section 7.1 shall
contain understandings regarding the delivery of all of Baxter's records,
books, and other data relating exclusively to the Products previously serviced
by Baxter at such Region, including all accounts receivable data.
8. Indemnity.
8.1 VWR agrees to indemnify and hold Baxter and the Baxter Indemnified
Parties (as hereinafter defined) harmless from and against, and in respect of,
any and all damages, claims, losses, demands, suits, losses, fines, penalties
and liabilities ("Losses") asserted against or incurred by, and all expenses
(including all reasonable fees and expenses of counsel, travel costs and other
out-of-pocket costs) incurred in connection with pending or threatened
litigation or other proceedings ("Expenses") by, Baxter or any of the Baxter
Indemnified Parties and which arise out of or relate to the provision of
Services hereunder by Baxter or any of the Baxter Indemnified Parties which
arise out of or relate to any claim, action or proceeding asserted by a third
party to the extent arising specifically out of any matter or thing
specifically constituting a breach by VWR hereunder or any wrongful or
negligent act or omission by VWR (or its employees or agents) in its
performance of the terms of this Agreement. The Baxter Indemnified Parties
shall mean and include: (x) Baxter's Affiliates; and (y) the respective
directors, officers, agents and employees of Baxter and its Affiliates.
Expenses shall be reimbursed or advanced when and as incurred promptly upon
submission by Baxter or any Baxter Indemnified Party of statements to VWR.
8.2 Baxter agrees to indemnify and hold VWR and the VWR Indemnified Parties
(as hereinafter defined) harmless from and against, and in respect of, any and
all damages, claims, losses, demands, suits, losses, fines, penalties and
liabilities ("Losses") asserted against or incurred by, and all expenses
(including all reasonable fees and expenses of counsel, travel costs and other
out-of-pocket costs) incurred in connection with pending or threatened
litigation or other proceedings ("Expenses") by, VWR or any of the VWR
Indemnified Parties and which arise out of or relate to the provision of
Services hereunder by VWR or any of the VWR Indemnified Parties which arise
out of or relate to any claim, action or proceeding asserted by a third party
to the extent arising specifically out of any matter or thing specifically
constituting a branch by Baxter hereunder or any wrongful or negligent act or
omission by Baxter (or its employees or agents) in its performance of the
terms of this Agreement. The VWR Indemnified Parties shall mean and include:
(x) VWR's Affiliates; and (y) the respective directors, officers, agents and
employees of VWR and its Affiliates. Expenses shall be reimbursed or advanced
when and as incurred promptly upon submission by VWR or any VWR Indemnified
Party of statements to Baxter.
9. Third Party Claims.
If any third party shall make any claim or commence any arbitration
proceeding or suit against any one or more of the Indemnified Persons with
respect to which an Indemnified Person
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intends to make any claim for indemnification against VWR under Section 8.1 or
against Baxter under Section 8.2, such Indemnified Persons shall promptly give
written notice to VWR or Baxter, as the case may be, of such third party
claim, arbitration proceeding or suit and the following provisions shall
apply:
9.1 Subject to Section 9.2, such Indemnified Persons shall have the right to
conduct and control, through counsel of their choosing, the defense of any
third party claim, arbitration proceeding or suit, and such Indemnified
Persons may settle the same; provided that such Indemnified Persons shall give
the indemnifying party advance notice of any proposed settlement. Such
Indemnified Persons shall permit the indemnifying party to participate in the
defense of any such action or suit through counsel chosen by it, provided that
the fees and expenses of such counsel shall be borne by the indemnifying
party. Any settlement with respect to a claim for money damages effected by
such Indemnified Persons after the indemnifying party has notified such
Indemnified Persons in writing of the indemnifying party's disapproval of such
settlement, shall discharge the indemnifying party from liability with respect
to the subject matter thereof under this Agreement, and no claim for
indemnification therefor shall be claimed by such Indemnified Persons under
Section 8.1 or Section 8.2, as the case may be.
9.2 Notwithstanding Section 9.1, if the remedy sought in any claim,
arbitration proceeding or suit referred to in this Section 9 is solely money
damages, the indemnifying party shall have 15 business days after receipt of
the notice referred to above in this Section 9 to notify such Indemnified
Persons that it elects to conduct and control the defense of such claim,
proceeding or suit. If the indemnifying party does not give the foregoing
notice, such Indemnified Persons shall have the right to defend or settle such
claim, proceeding or suit in the exercise of their exclusive discretion, and
the indemnifying party shall, upon request from any of such Indemnified
Persons, promptly pay to them in accordance with Section 8.1 or Section 8.2,
as the case may be, the amount of any liabilities, damages, losses and
expenses, including reasonable attorney's fees, resulting from such claim,
proceeding or suit. If the indemnifying party gives the foregoing notice, the
indemnifying party shall have the right to undertake, conduct and control,
through counsel of its own choosing and at the sole expense of the
indemnifying party, the conduct and control of the defense and any settlement
of such claim, proceeding or suit, and such Indemnified Persons shall
cooperate with the indemnifying party in connection therewith; provided that:
(a) the indemnifying party shall not thereby permit to exist any lien,
encumbrance or other adverse charge upon any asset of any of such Indemnified
Persons; (b) the indemnifying party shall permit such Indemnified Persons to
participate in such defense or settlement through counsel chosen by such
Indemnified Persons, but the fees and expenses of such counsel shall be borne
by such Indemnified Persons except as provided in clause (c) below; and (c)
the indemnifying party shall agree to reimburse promptly under Section 8.1 or
Section 8.2, as the case may be, such Indemnified Persons for the full amount
of any liabilities, damages, losses and expenses, including reasonable
attorneys' fees, resulting from such claim, proceeding or suit, except in each
case for any fees and expenses of counsel for such Indemnified Persons
incurred after the assumption of the conduct and control of such claim,
proceeding or suit by the indemnifying party. So long as the indemnifying
party is contesting any such claim, proceeding or suit in good faith, such
Indemnified Persons shall not pay or settle any such claim, proceeding or
suit; provided, however, that such Indemnified Persons shall have the right to
pay or settle any such claim, proceeding or suit; provided, further, that in
such event such Indemnified Persons shall be deemed to have waived any right
to indemnity therefor by the indemnifying party under Section 8.1 or Section
8.2, as the case may be.
10. Confidentiality.
10.1 Each of Baxter and VWR undertakes to the other, on behalf of itself and
its employees, officers, directors, agents and Affiliates, that it shall keep
confidential and shall not, without the
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prior written consent of the party to whom the information relates, disclose
to any person, nor use or exploit commercially for its own purposes, any
information obtained relating to the subject matter or performance of this
Agreement; provided, however, that each of Baxter and VWR may disclose such
information: (a) to its Affiliates for any purposes reasonably incidental to
the purposes of this Agreement; (b) to its respective advisors for use in
connection with rendering advice with respect to the performance of this
Agreement; and (c) as is required to be disclosed by operation of law, legal
process or any stock exchange regulations or any binding judgment or order, or
by any requirement of any competent, federal, provincial, state, local or
foreign court, administrative agency or governmental or regulatory authority
or body. In performing its obligations under this Section 10.1, each of Baxter
and VWR shall use all reasonable efforts to ensure that its employees,
officers, directors and agents and Affiliates observe the foregoing
confidentiality obligations.
10.2 Section 10.1 shall not apply to information:
10.2.1 acquired from a third party with the right to divulge the same;
10.2.2 which, prior to or after the date of this Agreement, Baxter and
VWR jointly decided to disclose; or
10.2.3 which is or becomes within the public domain (otherwise than
through the fault of the recipient party).
11. Suspension/Termination.
Baxter may suspend the provision of any Services, Additional Services or
Facilities Services for which payment has not been received within 30 days
following the date on which such payment is due until such payments have been
received by Baxter and any such failure to pay within such 30-day period shall
be considered a material default hereunder, provided that the foregoing shall
not apply to any portion of any invoice that is disputed in good faith by VWR.
Either party shall have the right to terminate this Agreement effective upon
delivery of written notice to the other party if the other party: (a) makes an
assignment for the benefit of creditors, or becomes bankrupt or insolvent, or
is petitioned into bankruptcy, or takes advantage of any federal, provincial
or foreign bankruptcy or insolvency act, or if a receiver or receiver/manager
is appointed for all or any substantial part of its property and business and
such receiver or receiver/manager remains undischarged for a period of 30
days, or if the corporate existence of the other party is terminated by
voluntary or involuntary dissolution; or (b) materially defaults in the
performance of any of its convenants or obligations contained in this
Agreement and such default is not remedied to the non-defaulting party's
reasonable satisfaction within 30 days after written notice to the defaulting
party of such default, or if such default is not capable of rectification
within 30 days, if the defaulting party has not promptly commenced to rectify
the default within such 30-day period, and thereafter proceeds diligently to
rectify same, provided that such right of rectification shall not extend the
Term as provided in Section 3.
12. Non-Exclusivity.
Nothing in this Agreement shall preclude VWR from obtaining the Services, in
whole or in part, from its own employees or from providers other than Baxter
at any time; provided that VWR shall be responsible for paying to Baxter
Services Payments as provided for herein. Subject to the terms and conditions
of Section 4.11 of the Asset Purchase Agreement, nothing shall preclude Baxter
or any of its Affiliates from providing services comparable to the Services to
any other person or entity at any time.
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<PAGE>
13. Notices.
Any notice, request, demand or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been given if
delivered or sent by facsimile transmission, upon receipt, or if sent by
registered or certified mail, upon the sooner of the date on which receipt is
acknowledged or the expiration of 3 days after deposit in United States post
office facilities properly addressed with postage prepaid. All notices to a
party shall be sent to the address set forth below or to such other address or
person as such party may designate by notice to each other party hereunder:
To VWR: c/o VWR Corporation
Goshen Corporate Park West
1310 Goshen Parkway
West Chester, Pennsylvania 19380
Facsimile: (610) 436-1760
Attn: President
With a copy to: Drinker Biddle & Reath
1000 Westlakes
Suite 300
Berwyn, Pennsylvania 19312-2409
Facsimile: (610) 993-8585
Attn: Thomas E. Wood
To Baxter: Baxter Healthcare Corporation
One Baxter Parkway
Deerfield, Illinois 60015-4633
Facsimile: (708) 948-4266
Attention: General Counsel
With a copy to: Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Facsimile: (312) 853-7036
Attention: John M. O'Hare
Any notice given hereunder may be given on behalf of any party by its counsel
or other authorized representatives.
14. Miscellaneous.
14.1 This Agreement shall constitute the entire agreement between Baxter and
VWR with respect to the subject matter hereof and shall supersede all previous
negotiations, commitments and writings with respect to such subject matter.
14.2 This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Illinois and the federal laws of the
United States of America applicable therein. Any lawsuit arising from or
related to this Agreement shall be brought before the United States District
Court for the Northern District of Illinois or the Eastern District of
Pennsylvania or an Illinois state court sitting in Lake County, Illinois, or
any Commonwealth Court sitting in Chester County, Pennsylvania. The parties
hereby consent to the jurisdiction of such courts.
14.3 This Agreement may not be amended or modified, nor may compliance with
any condition or covenant set forth herein be waived, except by a writing duly
and validly executed by each party hereto, or in the case of a waiver, the
party waiving compliance.
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14.4 This Agreement shall be binding upon and enure to the benefit of the
parties hereto and their respective successors and assigns, provided, however,
that neither party shall have the right to transfer or assign its interest in
this Agreement without the prior written consent of the other party, which
consent shall not be unreasonably withheld.
14.4.1 Notwithstanding the foregoing, either party may assign its rights
and obligations, in whole or in part, to any Affiliate provided that the
assigning party guarantees performance by such Affiliate.
14.4.2 Notwithstanding the foregoing provisions of this Section 14.4,
Baxter may assign its rights and obligations under this Agreement to any
corporation or other entity that shall acquire all or substantially all of
Baxter's business and assets and who shall assume in writing all of
Baxter's obligations hereunder and deliver a signed copy of such assumption
instrument to VWR; provided, further, that upon VWR's receipt of such
assumption instrument, Baxter shall be fully released and discharged from
its obligations under this Agreement.
14.4.3 Notwithstanding the foregoing provisions of this Section 14.4, to
the extent that any corporation or other entity shall acquire all or
substantially all of Baxter's business and assets relating to any of the
Products, Baxter may assign a corresponding portion of its rights hereunder
to such corporation or entity, provided that any such corporation or entity
shall assume in writing all of Baxter's obligations hereunder which
correspond to the portion of rights assigned, and shall deliver a signed
copy of such assumption instrument to VWR.
14.5 The terms and provisions of this Agreement are intended solely for the
benefit of Baxter and VWR and their respective Affiliates, successors or
permitted assigns, and it is not the intention of the parties to confer third
party beneficiary rights upon any other person.
14.6 Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall be ineffective to the extent of such prohibition or
unenforceability without affecting, impairing or invalidating the remaining
provisions or the enforceability of this Agreement.
14.7 The failure at any time of either party to require performance by the
other party of any responsibility provided for in this Agreement shall in no
way affect the right to require full performance of any such responsibility at
any time thereafter, nor shall the waiver by either party of a breach of any
provision of this Agreement by the other party constitute a waiver of any
succeeding breach of the same or any other provision nor shall it constitute a
waiver of the responsibility itself.
14.8 Baxter is acting as an independent contractor in connection with
providing the Services and neither party constitutes the other as its agent,
partner, joint venturer, or legal representative or has express or implied
authority to bind the other in any manner whatsoever. All employees and
representatives of Baxter providing the Services to VWR shall be deemed for
purposes of all compensation and employee benefits to be employees or
representatives of Baxter and not employees or representatives of VWR. In
performing the Services, such employees and representatives shall be under the
direction, control and supervision of Baxter (and not of VWR) and Baxter shall
have the sole right to exercise all authority with respect to the employment
(including termination of employment), assignment and compensation of such
employees and representatives.
14.9 The obligations of either party to perform under this Agreement shall
be excused during each period of delay caused by matters (not including lack
of funds or other financial causes) such as strikes, supplier delays,
shortages of raw materials, government orders or acts of
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God, which are reasonably beyond the control of the party obligated to perform.
Any delay occasioned thereby shall not constitute a default under this
Agreement, and the obligations of the parties shall be suspended during the
period of delay so occasioned.
IN WITNESS WHEREOF, the parties have by their duly authorized officers
executed this Agreement as of the date first above written.
Baxter Healthcare Corporation
By: _________________________________
Name: David N. Jonas
Title: Vice President
Strategic Initiatives
VWR Corporation
By: _________________________________
Name: Jerrold B. Harris
Title: President and
Chief Executive Officer
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<PAGE>
EXHIBIT VIII
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT ("Agreement"), dated as of [August 1, 1995] by
and among BAXTER HEALTHCARE CORPORATION, a Delaware corporation with its
principal offices at One Baxter Parkway, Deerfield, Illinois 60015
(hereinafter called the "Supplier") and VWR CORPORATION, a Pennsylvania
corporation with its principal office at 1310 Goshen Parkway, West Chester,
Pennsylvania 19380 (hereinafter called "Distributor").
RECITALS
1. Distributor, Supplier, and EM Laboratories, Incorporated, a New York
corporation ("EM"), have entered into an Asset Purchase Agreement dated as of
May 24, 1995 pursuant to which Supplier has sold to Distributor, and
Distributor has purchased from Supplier, certain of the assets and business of
Supplier's "Industrial Distribution Business," as defined in the Asset
Purchase Agreement.
2. This Agreement is a condition to the consummation of the transactions
contemplated by the Asset Purchase Agreement.
AGREEMENT
In consideration of the Asset Purchase Agreement and the mutual covenants
contained herein, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, Supplier and Distributor
agree as follows:
1. Definitions.
1.1 "Affiliate" shall mean any person, firm or corporation controlling,
controlled by or under direct or indirect common control with a party hereto.
For the purpose of this definition, the term "control" means the power to
direct the management or policies of a party, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the
foregoing.
1.2 "Contract Year" shall mean the period commencing on October 1 and ending
on September 30 in each year during the Term, provided that there shall be a
"Stub Period" beginning on the date hereof and ending on September 30, 1995.
1.3 "Industrial Customers" shall mean customers who purchase the Products
for use in laboratories, production plants, and other facilities in all cases
not involved in the care of human patients or the diagnosis of disease or
defect for the purpose of care of human patients, including, without
limitation, analytical, research and development laboratories, educational
institutions, environmental testing laboratories, clean room facilities,
biotechnology and pharmaceutical research and production facilities, medical
device manufacturers, electronic and semiconductor manufacturers, and
government research facilities.
1.4 "Minimum Purchase Requirement" shall mean the aggregate minimum dollar
volume of the Products purchased by Distributor during each Contract Year
determined in accordance with Section 4 herein, including any orders placed
but not filled at least 30 days prior to the end of any such Contract Year.
1.5 "Person" shall mean an individual, corporation, partnership,
unincorporated syndicate, unincorporated organization, trust, trustee,
executor, administrator or other legal representative, governmental authority
or agency, or any group or combination thereof.
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1.6 "Products" shall mean the products and accessories listed in Exhibit A
hereto together with the parts and components necessary for the repair and
replacement thereof, provided that Supplier may, upon 30 days written notice
to Distributor: (a) add the Products to Exhibit A which have uses or
applications similar to any Products set forth in Exhibit A; or (b) delete
from Exhibit A and this Agreement any Product, the manufacture and sale of
which has been generally discontinued by Supplier. Exhibit A shall be deemed
to be amended to reflect any such Product additions without any further act by
any party hereto. Exhibit A, as amended and supplemented from time to time, is
incorporated by reference herein and forms part of this Agreement.
1.7 "Term" shall mean the period of time specified in Section 3 hereof,
including any and all renewals thereof.
1.8 "Territory" shall mean the world (excluding Canada).
2. Distribution Rights.
2.1 During the Term, as defined herein, Supplier hereby grants to
Distributor, and Distributor accepts the right to sell and distribute the
Products only to Industrial Customers in the Territory for non-patient use
subject to the terms and conditions stated herein. Distributor may grant to EM
or its Affiliates the rights to distribute the Products outside the United
States, provided that with respect to such distribution, EM shall be subject
to all of Distributor's duties and obligations hereunder (except for the
Minimum Purchase Requirements) and Distributor shall remain fully liable for
EM's performance of such duties and obligations. During the Term, except as
otherwise provided in Section 2.3, Supplier and its Affiliates shall
distribute the Products to Industrial Customers in the Territory only through
Distributor pursuant to this Agreement.
2.2 Distributor hereby accepts such grant of distribution rights.
Distributor represents and warrants that it shall not sell or distribute the
Products other than as provided for herein. Distributor hereby agrees that
during the Term:
2.2.1 none of Distributor or its respective Affiliates, or any other
Person on its or their behalf, shall sell, solicit orders for or otherwise
distribute any Product, directly or indirectly through distributors, agents
or otherwise, to or from any customer or any Affiliate of any customer: (a)
located outside of the Territory; (b) that is not an Industrial Customer;
or (c) for any use other than non-patient use;
2.2.2 Distributor may distribute Products in the Territory through sub-
distributors provided that the dollar volume of Products sold to sub-
distributors in the United States in any Contract Year does not exceed 15%
of the dollar volume of all Products sold by Distributor during such
Contract Year in the United States; and
2.2.3 Supplier shall not be responsible to the extent Distributor grants
any warranty, service contract or similar right with respect to the
Products that is different from or additional to the warranty set forth in
Section 7.7 herein without the prior written consent of Supplier, which
consent may be withheld by Supplier in its sole discretion. To the extent
that Distributor or any of its Affiliates grants, or is deemed to have
granted, any such warranty or right, Distributor shall be solely
responsible therefor, it being understood that the purpose of this sentence
is to allocate responsibility between Distributor and Supplier and not with
respect to any other party.
2.3 Distributor acknowledges and agrees that:
2.3.1 this Agreement shall not prohibit Supplier or its Affiliates from
distributing the Products to Industrial Customers within the Territory
otherwise than through Distributor to the extent that Distributor shall be
unable to so distribute the Products by reason of any matter referred to in
Section 11 or if Distributor is otherwise prohibited from selling, or
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unable to sell, the Products to any customer or class of customers,
provided that such sales shall be credited against the Minimum Purchase
Requirements for the applicable Contract Year or Stub Period;
2.3.2 Supplier may continue to distribute the Products in the Territory
to Industrial Customers during the Term: (a) by any means by which Supplier
distributed the Products, other than through the Industrial Distribution
Business, prior to the date of this Agreement; or (b) through sub-
distributors used by Supplier prior to the date of this Agreement; and
2.3.3 Supplier may: (a) continue to sell and distribute the Products in
the Territory via any means to customers other than Industrial Customers;
(b) sell and distribute the Products to any customer for non-patient use if
such customer conditions any sale or distribution of the Products by
Supplier for patient treatment on the sale or distribution of the Products
for non-patient use, provided that any such sales shall be credited against
the Minimum Purchase Requirements for the applicable Contract Year or Stub
Period; (c) sell and distribute the Products to its Affiliates provided
that such sale and distribution is for internal use only and not for
resale, and Distributor shall assist Supplier in connection with such sales
and distribution; (d) continue to sell and distribute the Products to third
parties who will include such Products as components of kits used to
perform any test or procedure; and (e) continue to sell and distribute any
Product to any Industrial Customer in the United States to the extent
necessitated by Supplier's inability to assign to Distributor any contract
or agreement with an Industrial Customer pursuant to the Asset Purchase
Agreement, provided that such sales shall be credited against Distributor's
Minimum Purchase Requirements in the applicable Contract Year or Stub
Period.
3. Term.
The initial term ("Term") of this Agreement shall begin on the date of this
Agreement and end on September 30, 2000; provided that the Term shall be
automatically renewed for additional and successive periods of one year each,
unless and until such initial or additional Term is terminated as provided in
Section 9 of this Agreement.
4. Minimum Purchase Requirements.
4.1 Supplier and Distributor acknowledge and agree that the Minimum Purchase
Requirements for Products for the Stub Period and the first five Contract
Years are set forth in Exhibits B and C. The total Minimum Purchase
Requirement for Distributor's U.S. sales for each Contract Year and the Stub
Period shall be the sum of the Base amount plus the Incremental amount listed
on Exhibit B for each such Contract Year or Stub Period. The total Minimum
Purchase Requirement for Distributor's international sales for each Contract
Year and the Stub Period is the incremental amount listed on Exhibit C.
4.2 The Minimum Purchase Requirements for each Contract Year after the fifth
Contract Year, if any, shall be reviewed and established by Distributor and
Supplier on an annual basis through good faith negotiations which shall begin
six months prior to the beginning of each such Contract Year and be completed
at least 60 days prior to the beginning of the applicable Contract Year,
provided that in no event shall any Minimum Purchase Requirement for any
Contract Year be less than such Minimum Purchase Requirement for the previous
Contract Year.
4.3 In the event that the actual dollar amount of the Products purchased by
Distributor in any Contract Year or the Stub Period (the "Actual Purchase
Amount") is less than any Minimum Purchase Requirement for such Contract Year
or Stub Period, Distributor shall, within 30 days after the end of such
Contract Year or Stub Period, either: (a) pay to Supplier as liquidated
damages the difference between the Minimum Purchase Requirement and the Actual
Purchase
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Amount (the "Purchase Shortfall"); or (b) order and pay for Products in a
dollar amount equal to such Purchase Shortfall.
4.4 Notwithstanding anything to the contrary contained herein, the parties
agree that if, at the end of the third Contract Year, Supplier determines, in
its sole and absolute discretion, that there has been a significant change in
manufacturing processes in clean room environments since the date of this
Agreement, Supplier shall propose revised Minimum Purchase Requirements for
the fourth and fifth Contract Years to address such change.
4.5 If with respect to Distributor's international sales: (a) Distributor's
actual sales during any Contract Year are greater than or less than (b) the
Minimum Purchase Requirement for such Contract Year as set forth in Exhibit C,
the Minimum Purchase Requirement for the following Contract Year shall be
adjusted upward (in the event such sales are greater) or downward (in the
event such sales are less) by the percentage of such shortfall or overage.
4.6 During the first Contract Year and the Stub Period, the mix of
Distributor's purchases of Products shall be of similar proportion to the mix
of such Products sold by the Industrial Distribution Business in 1994. After
the first Contract Year, the mix of Distributor's purchases of Products shall
be of similar proportion to the mix of such Products purchased by Distributor
during the immediately preceding Contract Year. Twice during each Contract
Year, the parties shall meet to determine whether the mix of Distributor's
purchases of Products varies by more than 10% of the mix from the period
against which such Contract Year is measured. If Supplier's margin is
adversely affected by such mix, Supplier shall have the right to revise and
adjust margins in order to eliminate any detrimental effect from such mix on
future sales.
4.7 During the Stub Period and the first Contract Year, Distributor shall
use good faith efforts to achieve the purchase goals specified in Exhibit D,
provided, however, that Distributor shall incur no liability for its failure
to achieve any such purchase goals in excess of any Minimum Purchase
Requirements.
5. Prices.
5.1 The prices for each Product sold by Supplier to Distributor under this
Agreement shall be the price set forth opposite such Product in Exhibit A.
Supplier may increase or decrease the price of any Product upon not less than
60 days written notice to Distributor effective on the first day of any
calendar year, provided that such price increase shall be based upon the
constant volume "standard to standard" cost change for Supplier's
manufacturing units producing the Pharmaseal and Convertors Products. Any such
notice shall contain the specific price change for each Product affected by
the notice. Upon the first day of the calendar year immediately following the
expiration of such 60 day period, Exhibit A shall be deemed to be amended to
reflect the price increases and/or decreases contained in such notice without
any further act by any party hereto. Supplier shall honor Distributor's
purchase orders received by Supplier prior to Distributor's receipt of any
such notice at the prices in effect when such orders were received.
Distributor agrees that the dollar volume of its Product purchases during the
60 days prior to the effective date of a price change shall not exceed 20% of
the dollar volume of Distributor's Product purchases during the preceding 10
months, except that such 20% limit shall not apply to purchases made by
Distributor for the sole purpose of achieving any Minimum Purchase
Requirement.
5.1.1 If Distributor exceeds the Minimum Purchase Requirement for the
Stub Period listed on Exhibit B, Supplier shall pay Distributor a rebate of
5.9% times the net purchase price of all Products purchased during such
Stub Period in excess of such Minimum Purchase Requirement.
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5.1.2 Beginning on October 1, 1995, if at any time during any of the
first three calendar quarters of any Contract Year, Distributor purchases
from Supplier more than $12,000,000 of Products, Supplier shall pay
Distributor a rebate of 5.9% times the net purchase price of all Products
purchased during such quarter in excess of $12,000,000 subject to Section
5.1.3.
5.1.3 After the end of each Contract Year Supplier shall calculate
Distributor's total net purchases of Products and Distributor shall be
entitled to a rebate of 5.9% times the net purchase price of all Products
purchased during such Contract Year in excess of $48,000,000. If the
rebates due Distributor for such Contract Year exceed the rebates paid to
Distributor during the Contract Year, pursuant to Section 5.1.2 Supplier
shall pay Distributor such remaining rebate due Distributor. To the extent
rebates paid for the Contract Year pursuant to Section 5.1.2 exceed the
total due to Distributor for such Contract Year, Distributor shall repay to
Supplier the rebate overpayment. If Distributor's total net purchases of
Products during such Contract Year totalled less than $48,000,000,
Distributor shall repay all rebates paid by Supplier for the Contract Year
pursuant to Section 5.1.2.
5.1.4 All rebates due Distributor shall be paid within fifteen (15) days
after the end of the applicable quarter. All rebate repayments due to
Supplier shall be paid within fifteen (15) days after the date of
Supplier's invoice for any repayments due.
5.2 Distributor shall have the exclusive right to establish and control
prices on the Products sold to its customers.
5.3 The prices for the Products sold by Supplier to Distributor shall not
include any transportation expenses, customs duties, sales tax, goods and
services tax or any other sales, use, inventory, delivery, value added or like
taxes of any federal, state or local government in the Territory or anywhere
else, however imposed. Distributor shall be responsible for all such expenses,
duties and taxes and shall pay Supplier any and all taxes which Supplier is
required to collect or pay with respect to the sale to Distributor, of the
Products pursuant to this Agreement.
6. Distributor's Duties
During the Term, Distributor shall maintain the facilities and personnel
necessary to distribute the Products as provided for hereunder, including
without limitation the facilities and personnel necessary to:
6.1 continue to supply the Products to existing customers of the Industrial
Distribution Business in the Territory pursuant to all contracts, commitments,
and other arrangements between Supplier and Industrial Customers in effect as
of the date of execution of this Agreement.
6.2 submit its orders for the Products on its standard purchase order form,
provided that notwithstanding any terms or provisions of such purchase order,
the terms and conditions of this Agreement shall apply to each such purchase
order;
6.3 pay for such orders on Supplier's terms of payment net 30 days from the
date of invoice;
6.4 actively advertise, promote and distribute the Products by methods which
in Distributor's reasonable judgment are best suited for the sale of such
Products, including, without limitation, the following:
6.4.1 promptly respond to customer requests for Product information and
samples and promptly deliver demonstration equipment to customers'
facilities and redeliver such equipment to Supplier in accordance with
Supplier's reasonable instructions;
6.4.2 provide instruction to customers in the use and routine handling of
the Products;
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6.4.3 promptly replace any Products whose expiration date has expired, in
each case at Distributor's cost and expense unless the replacement was
necessary because of a breach by Supplier of any of Supplier's duties
hereunder;
6.4.4 promptly and courteously resolve billing disputes;
6.4.5 highlight the Products in Distributor's catalogues and other
promotional materials;
6.4.6 display the Products at trade shows and at Distributor's national
and regional sales meetings;
6.4.7 promptly share with Supplier all information in Distributor's
possession about the Products and their ability to compete and customer's
needs; and
6.4.8 provide sales, marketing and promotional support with respect to
the Products that is no less extensive than the support provided by
Distributor with respect to any other similar product line.
6.5 use trademarks and trade names connoting Supplier only in connection
with the Products sold in the Territory and subject to all terms of this
Agreement, including but not limited to Section 8 hereof;
6.6 provide appropriate training with respect to the Products for
Distributor's sales representatives;
6.7 after the expiration of the Services Agreement between the parties dated
as of the date hereof with respect to any Region, as defined therein, stock
inventories of the Products in quantities which are sufficient to achieve a
fulfillment rate acceptable to customers in the Territory;
6.8 deliver Products that have an expiration date to customers with a
minimum shelf life acceptable to customers;
6.9 store Products only in a manner consistent with applicable
manufacturer's specifications in order to prevent damage to or deterioration
of the Products;
6.10 give Supplier 30 days written notice of any and all proposed returns of
Products and Distributor shall not return any Products without Supplier's
prior written approval, provided that during any Contract Year, Distributor
may exchange with Supplier up to $100,000 of Products (provided that if any
such Product has an expiration date such return shall be made at least 60 days
prior to such expiration date) for $100,000 of alternate Products;
6.11 offer to its sales representatives incentives with respect to the
Products that are no less favorable to such personnel than the incentives
offered to such personnel with respect to any other similar product line;
6.12 obtain and maintain during the Term and for one year after the
expiration or termination of this Agreement product liability insurance
(containing either a vendor's endorsement or contractual liability coverage
referencing the indemnification provisions contained in Section 6.15 hereof)
on all Products with insurers reasonably satisfactory to Supplier with minimum
limits of $1,000,000/$3,000,000 for bodily injury and $300,000 for property
damage and immediately furnish to Supplier a certificate of insurance issued
by the insurance carrier evidencing the foregoing endorsements, coverages and
limits and that such insurance shall not be cancellable without at least 30
days prior written notice to Supplier;
6.13 comply (or cause compliance) with all existing and future federal,
state and other laws and regulations in the Territory applicable to the
conduct of Distributor's business or the
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possession, use and sale to its customers of Products pursuant to this
Agreement, including, without limitation, the following:
6.13.1 give prompt written notice to Supplier if Distributor should
become aware of any defect or condition (actual or alleged) which may alter
the quality of the Products in any material respect or may render any of
the Products in violation of any applicable law or regulation of the
Territory, including, without limitation, any violation which could require
any alteration of the specifications of any Product, affect the sale of any
Product, cause revocation of any regulatory approval with respect to any
Product or its sale hereunder, or give rise to a claim against Supplier by
any person, and Distributor shall promptly notify Supplier upon becoming
aware of any changes in any laws or regulations in the Territory applicable
to the manufacture, sale, packaging, labelling, possession or use of the
Products;
6.13.2 keep appropriate records of all lot coded and serial numbered
Products sold to customers, including without limitation particle testing
data and sterility information;
6.13.3 make prompt return of any and all Products affected by holds or
recalls, if so requested by Supplier;
6.13.4 not alter, remove or otherwise modify the packaging, labelling or
product insert sheets furnished by Supplier for the Products; and
6.13.5 grant to Supplier the right to audit Distributor's customer sales
information to verify that Products have not been sold to any customers
other than Industrial Customers;
6.14 not repackage or relabel any Products;
6.15 shall indemnify and hold harmless Supplier, its Affiliates and: (a)
their respective directors, officers, employees, agents and counsel; and (b)
the successors, assigns, heirs and personal representatives of any of the
foregoing (all of the foregoing being collectively referred to in Section 13
as "Indemnified Persons") with respect to all claims, liabilities, damages,
and expenses, including reasonable attorneys' fees and expenses, arising out
of claims by third parties caused by any wrongful or negligent act or omission
by Distributor (or its employees or other agents) in its performance of the
terms of this Agreement; provided that Section 13 shall apply to any claim,
arbitration proceeding or suit made or brought by any third party as to which
any Indemnified Person intends to claim indemnification under this Section
6.15; and
6.16. provide Supplier with a rolling six month forecast of Distributor's
planned purchases of Products, provided that the forecast for the first four
months of the forecast period shall constitute firm orders for the Products
forecasted for purchase in such months.
7. Supplier's Duties.
Supplier:
7.1 shall ship all Products from sources determined by Supplier in its sole
discretion on the following basis:
7.1.1 all Products shipped to Distributor by Supplier shall be shipped
F.O.B. Origin Baxter Replenishment Center, Prepaid and Add, to
Distributor's facility in the Territory as designated pursuant to the
relevant Purchase Order; and
7.1.2 in cases of emergency or at Distributor's request, Products may be
shipped directly to Distributor's customers ("drop shipments"), in which
event such Products shall be shipped F.O.B. Destination, Prepaid and Add,
with Supplier adding the actual freight charges incurred for such shipments
to the relevant invoices to Distributor.
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Title and risk of loss of all Products shall pass to Distributor or, in
emergency situations or at Distributor's request as indicated above, to its
customers, as the case may be, upon Supplier's delivery of such Products to
the carrier;
7.2 shall adequately package and deliver the Products to the carrier;
7.3 shall, subject to Section 2.3, promptly refer to all Product inquiries
from Industrial Customers in the Territory to Distributor;
7.4 shall obtain and maintain during the Term and for one year after the
expiration or termination of this Agreement product liability insurance
(containing either a vendor's endorsement or contractual liability coverage
referencing the indemnification provisions contained in Section 7.8 hereof) on
all Products with insurers reasonably satisfactory to Distributor with minimum
limits of $1,000,000/$3,000,000 for bodily injury and $300,000 for property
damage and immediately furnish to Distributor a certificate of insurance
issued by the insurance carrier evidencing the foregoing endorsement,
coverages and limits and that such insurance shall not be cancellable without
at least 30 days prior written notice to Distributor; provided, however, that
Supplier may satisfy its obligations under this Section 7.4 through its self-
insurance program;
7.5 shall furnish Distributor, at no cost to Distributor, reasonable
quantities of the following materials that Supplier has prepared for the
Products and considers appropriate for release to Distributor and its
customers (as determined by Supplier in its sole discretion): sales
literature, product insert sheets and customer instruction manuals for each
Product or versions or summaries thereof and, upon Distributor's written
request, photographs or copies thereof and camera-ready artwork included in
such materials;
7.6 shall comply (or cause compliance) with all existing and future laws and
regulations in the Territory applicable to the conduct of Supplier's business
or the manufacture, packaging, labelling and sale to Distributor of Products
pursuant to this Agreement, including, without limitation, the following:
7.6.1 give prompt written notice to Distributor if Supplier should become
aware of any defect or condition (actual or alleged) which may alter the
quality of the Products in any material respect or may render any of the
Products in violation of any applicable law or regulation of the Territory,
including, without limitation, any violation which could require any
alteration of the specifications of any Product, affect the sale of any
Product, cause revocation of any federal, state or other regulatory
approval with respect to any Product or its sale hereunder or give rise to
a claim against Distributor by any person; and
7.6.2 give prompt written notice to Distributor of any and all Products
affected by holds or recalls and, if Supplier requests Distributor to
return any of such Products to Supplier, promptly reimburse Distributor for
the price of such returned Products paid by Distributor under this
Agreement and the direct cost of returning such Products to Supplier;
7.7 warrants to Distributor that: (a) all Products sold to Distributor or
its customers pursuant to this Agreement shall not be adulterated or
misbranded and the packaging or labelling thereof shall not be misleading
within the meaning of applicable legislation relating thereto in the
Territory; (b) each of such Products shall conform to the descriptions and
uses set forth in the labelling and product insert sheets for such Product
approved by Supplier; and (c) Supplier shall have good and marketable title to
all such Products free and clear of all liens or encumbrances
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(other than any created by Distributor or its customers). The foregoing
warranty shall commence on the date of delivery of each Product to Distributor
or a customer, as the case may be, and expire 6 months thereafter (the
"Warranty Period"), except that the Warranty Period for each Product the use
of which is subject to an expiration date shall expire on the applicable
expiration date. The foregoing warranty does not apply to any Product which
has been modified, improved or refurbished other than by Supplier and does not
cover any defect, malfunction or damage due to: (i) accident, neglect or
willful mistreatment of any Product; (ii) failure to properly store or handle
any Product; (iii) failure to use, operate, service or maintain any Product in
accordance with Supplier's applicable operating and service manuals; or (iv)
failure to use or apply proper reagents or chemicals in or to any Product. Any
Product which proves not to be in conformity with the foregoing warranty
during the applicable Warranty Period shall be repaired or replaced at the
option and expense of Supplier. At Supplier's option, Supplier shall pay the
transportation and other costs incurred by Distributor with respect to any
Products returned to Supplier for repair or replacement under these
warranties, or reimburse Distributor for any such costs.
7.7.1 THE FOREGOING WARRANTY CONTAINS THE SOLE REMEDY FOR ANY DEFECT IN
THE PRODUCTS. THE FOREGOING WARRANTY IS EXCLUSIVE AND IN LIEU OF ALL OTHER
WARRANTIES OF ANY KIND, WHETHER STATUTORY, WRITTEN, ORAL, EXPRESS OR
IMPLIED, INCLUDING ANY WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE AND
MERCHANTABILITY. IN NO EVENT, WHETHER AS A RESULT OF BREACH OF CONTRACT,
TORT LIABILITY (INCLUDING NEGLIGENCE) OR OTHERWISE, SHALL SUPPLIER BE
LIABLE TO DISTRIBUTOR FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES; and
7.7.2 ANY LIABILITY OF SUPPLIER TO DISTRIBUTOR UNDER THE WARRANTY
CONTAINED IN SECTION 7.7 SHALL BE LIMITED TO THE TOTAL PRICE PAID BY
DISTRIBUTOR FOR THE PRODUCTS WHICH ARE THE SUBJECT OF SUCH LIABILITY PLUS
ALL COSTS FOR TRANSPORTATION AND OTHER DIRECT EXPENSES INCURRED BY
DISTRIBUTOR WITH RESPECT TO SUCH PRODUCTS.
7.8 shall indemnify and hold harmless Distributor, its Affiliates and: (a)
their respective directors, officers, employees, agents and counsel; and (b)
the successors, assigns, heirs and personal representatives of any of the
foregoing (all of the foregoing being collectively referred to in Section 13
as "Indemnified Persons") with respect to all claims, liabilities, damages,
and expenses, including reasonable attorney's fees and expenses, arising out
of claims by third parties caused by:
7.8.1 any actual or alleged patent, copyright or trademark infringement,
or violation of any other proprietary right, arising out of the purchase,
sale or use of the Products pursuant to this Agreement;
7.8.2 any actual breach of Section 7.7 (subject to the limitations in
Section 7.7); and
7.8.3 any wrongful or negligent act or omission by Supplier (or its
employees or agents) in its performance of the terms of this Agreement;
provided that Section 13 shall apply to any claim, arbitration proceeding or
suit made or brought by any third party as to which any Indemnified Person
intends to claim indemnification under this Section 7.8; and
7.9 represents to Distributor that: (a) for the first calendar quarter of
1995 domestic net sales of the Products to unaffiliated third parties by the
Industrial Distribution Business were at least $12,000,000; and (b) for the
first calendar quarter of 1995 International net sales (excluding sales in the
United States and Japan) of Products to unaffiliated third parties by the
Industrial Distribution Business were at least $2,000,000.
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8. Trademarks.
8.1 Supplier acknowledges that Distributor is the owner or licensee of the
trademarks and trade names connoting Distributor which Supplier may elect to
use in the promotion and sale of the Products and that Supplier has no right
or interest in such trademarks and trade names. Before commencing any use of
the trademarks or trade names connoting Distributor in connection with any
catalog, promotional, packaging, or other material, which use has not been
previously approved in writing by Distributor, Supplier agrees to provide
Distributor with proposed specimens of use of such trademarks or trade names
and to obtain Distributor's written approval of such proposed use.
8.2 Distributor acknowledges that Supplier is the owner or licensee of the
trademarks and trade names connoting Supplier which Distributor may elect to
use in the promotion and sale of the Products hereunder, and the Distributor
has no right or interest in such trademarks or trade names. Before commencing
any use of the trademarks or trade names connoting Supplier in connection with
any catalog, promotional, packaging, or other materials, which use has not
been previously approved in writing by Supplier, Distributor agrees to provide
Supplier with proposed specimens of use of such trademarks or trade names and
to obtain Supplier's written approval of such proposed use.
8.3 Supplier and Distributor shall each notify the other party promptly of
any and all infringements or improper use by any third party of the trademarks
and trade names connoting such other party, should such Supplier or
Distributor discover reasonable cause for believing that such infringement or
improper use is taking place, and provide to such other party all information
which Supplier or Distributor has available thereon. Supplier and Distributor
shall each have sole discretion and control with regard to any proceedings
relating to infringement or improper use of its trademarks and trade names.
Either party may choose to be represented by its own counsel in any such
proceedings but such representation shall be at such other party's sole
expense.
8.4 Supplier and Distributor each acknowledge that the other party would not
have any adequate remedy at law for the breach by the other party of any one
or more of the covenants contained in this Section 8 and agrees that, in the
event of such breach, the other party may, in addition to the other remedies
which may be available to it, file a suit in equity to enjoin the breaching
party from any further breach of any of the terms of this Section 8.
9. Termination.
9.1 Supplier and Distributor shall each have the right to terminate this
Agreement effective upon delivery of written notice to the other party if the
other party: (a) makes an assignment for the benefit of creditors, or becomes
bankrupt or insolvent, or is petitioned into bankruptcy, or takes advantage of
any state, federal or foreign bankruptcy or insolvency act, or if a receiver
or receiver/manager is appointed for all or any substantial part of its
property and business and such receiver or receiver/manager remains
undischarged for a period of 30 days, or if the corporate existence of the
other party is terminated by voluntary or involuntary dissolution; or (b)
defaults in the performance of any of its covenants or obligations contained
in this Agreement and such default is not remedied to the non-defaulting
party's reasonable satisfaction within 30 days after written notice to the
defaulting party of such default, or if such default is not capable of
rectification within 30 days, if the defaulting party has not promptly
commenced to rectify the default within such 30 day period, and thereafter
proceeds diligently to rectify same. Notwithstanding the foregoing provisions
of this Section 9, Supplier may suspend its performance under this Agreement
if Distributor has not made any uncontested payment due under Section 6.3
within 30 days following the date on which such payment is due until such
payments have
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been received by Supplier and any such failure to pay within such 30 day
period shall be considered a default under this Agreement.
9.2 In the event that Distributor fails to achieve the Minimum Purchase
Requirements for any two successive Contract Years, Supplier shall have the
option, upon written notice to Distributor, to terminate this Agreement 90
days after the end of the second such Contract Year.
9.3 In the event that Distributor does not pay any Purchase Shortfall in
accordance with Section 4.3, Supplier shall have the option to either: (a)
terminate this Agreement in its entirety within 90 days after the end of the
Contract Year for which such Purchase Shortfall was due; or (b) continue to
perform pursuant to the terms of this Agreement provided that notwithstanding
anything to the contrary contained herein, Supplier may, directly or
indirectly, distribute the Products in the Territory to any Industrial
Customers without limitation beginning on the day after the Purchase Shortfall
is due to Supplier. Notwithstanding the foregoing, Distributor shall remain
liable to Supplier for any Purchase Shortfall.
9.4 In the event that after good faith negotiations pursuant to Section 4.2,
the parties cannot agree on any Minimum Purchase Requirement for any Contract
Year after the fifth Contract Year, this Agreement shall automatically
terminate at the end of the fifth Contract Year.
9.5 In the event that this Agreement is terminated pursuant to this Section
9, Supplier and Distributor shall comply fully with this Agreement and use
their best efforts to adequately service existing customers of the Products
until such termination becomes effective.
10. Procedures on Expiration or Termination.
10.1 On the expiration or termination of this Agreement for any reason: (a)
Supplier shall continue to honor Distributor's orders for Products placed up
to the effective date of termination and for a period of 60 days thereafter
and Distributor shall pay for such Products on the terms and conditions set
forth in this Agreement; and (b) if a pro rata amount of the Minimum Purchase
Requirements for the Contract Year during which such expiration or termination
occurs has not been purchased by the time such expiration or termination
occurs, Distributor shall pay to Supplier a pro rata amount of the Purchase
Shortfall that would have been due at the end of such Contract Year pursuant
to the terms of Section 4.3.
10.2 Within 30 days after termination of this Agreement by Supplier, upon
written request from Distributor, Supplier shall have the option to repurchase
for cash Distributor's inventory of the Products for which Distributor has
good and marketable title free of all liens and encumbrances and that are in
good, resalable condition in their original packaging and are not obsolete.
The purchase price of such inventory shall be equal to the purchase price
thereof paid by Distributor to Supplier, less any reserves for over-stocked or
slow-moving inventory maintained by Distributor in the ordinary course of
business and a restocking fee equal to 10% of Distributor's purchase price
thereof, provided that Supplier may deduct from any amount owed by Supplier
for inventory repurchase any amount owed by Distributor to Supplier for any
Volume Difference. Notwithstanding the foregoing provisions on this Section
10.2, if, on the date of expiration or termination of this Agreement,
Distributor shall be in default in the performance of any of its covenants or
obligations contained in this Agreement, or if this Agreement shall be
terminated by Supplier in accordance with Section 9 hereof, Supplier shall
have no obligation to purchase any of Distributor's inventory of Products
under this Section 10.2, but Supplier shall have the option, exercisable by
written request to Distributor, to repurchase such inventory on the terms and
conditions specified herein.
10.3 Notwithstanding any provision of this Agreement or any other agreement
between Supplier, Distributor and/or their respective Affiliates, Supplier and
its Affiliates and successors
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shall have the unrestricted right to sell or otherwise dispose of the Products
within the Territory from and after the effective date of the expiration or
termination of this Agreement.
11. Force Majeure.
The obligations of either party to perform under this Agreement shall be
excused during each period of delay caused by matters (not including lack of
funds or other financial causes) such as strikes, supplier delays, shortages
of raw materials, government orders or acts of God, which are reasonably
beyond the control of the party obligated to perform. Any delay occasioned
thereby shall not constitute a default under this Agreement, and the
obligations of the parties shall be suspended during the period of delay so
occasioned.
12. Confidentiality.
12.1 Supplier agrees that, pursuant to this Agreement, valuable marketing
information of a confidential nature pertaining to the marketplace in the
Territory may be disclosed by Distributor to Supplier; that such information
shall be retained by Supplier in confidence; and that Supplier shall not,
either during the term of this Agreement or thereafter, publish or disclose or
cause anyone else to publish or disclose any marketing information supplied to
Supplier by Distributor. Notwithstanding the foregoing provisions of this
Section 12, the above restrictions on disclosure and use shall not apply to
any information which Supplier can show by written evidence was known to it at
the time of receipt thereof from Distributor or which may subsequently be
obtained from sources other than Distributor who are not bound by a
confidentiality agreement with Distributor.
12.2 Distributor agrees that, pursuant to this Agreement, valuable
marketing, sales or technical information of a confidential nature may be
disclosed by Supplier to Distributor; that such information shall be retained
by Distributor and its respective Affiliates in confidence; that the
transmittal of such technical information by Supplier to Distributor is upon
the express condition that it is to be used solely for the purpose of
effectuating this Agreement; and that Distributor and its respective
Affiliates shall not, either during the term of this Agreement or thereafter,
publish or disclose or cause anyone else to publish or disclose any marketing
or sales information supplied to Distributor by Supplier, or publish, disclose
or use or cause anyone else to publish, disclose or use, any technical
information supplied to Distributor by Supplier. Notwithstanding the foregoing
provisions of this Section 12.2, the above restrictions on disclosure and use
shall not apply to any information which Distributor can show by written
evidence was known to it at the time of receipt thereof from Supplier or which
may subsequently be obtained from sources other than Supplier who are not
bound by a confidentiality agreement with Supplier.
12.3 Each party acknowledges that the other party would not have any
adequate remedy at law for the breach by either party of any one or more of
the covenants contained in this Section 12 and agrees that, in the event of
such breach, the other party may, in addition to the other remedies which may
be available to it, file a suit in equity to enjoin the breaching party from
any further breach of any of the terms of this Section 12.
13. Third Party Claims.
If any third party shall make any claim or commence any arbitration
proceeding or suit against any one or more of the Indemnified Persons with
respect to which an Indemnified Person intends to make any claim for
indemnification against Distributor under Section 6.15 or against Supplier
under Section 7.8, such Indemnified Persons shall promptly give written notice
to Distributor or Supplier, as the case may be, of such third party claim,
arbitration proceeding or suit and the following provisions shall apply:
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13.1 Subject to Section 13.2, such Indemnified Persons shall have the right
to conduct and control, through counsel of their choosing, the defense of any
third party claim, arbitration proceeding or suit, and such Indemnified
Persons may settle the same; provided that such Indemnified Persons shall give
the indemnifying party advance notice of any proposed settlement. Such
Indemnified Persons shall permit the indemnifying party to participate in the
defense of any such action or suit through counsel chosen by it, provided that
the fees and expenses of such counsel shall be borne by the indemnifying
party. Any settlement with respect to a claim for money damages effected by
such Indemnified Persons after the indemnifying party has notified such
Indemnified Persons in writing of the indemnifying party's disapproval of such
settlement, shall discharge the indemnifying party from liability with respect
to the subject matter thereof under this Agreement, and no claim for
indemnification therefor shall be claimed by such Indemnified Persons under
Section 6.15 or Section 7.8, as the case may be.
13.2 Notwithstanding Section 13.1, if the remedy sought in any claim,
arbitration proceeding or suit referred to in this Section 13 is solely money
damages, the indemnifying party shall have 15 business days after receipt of
the notice referred to above in this Section 13 to notify such Indemnified
Persons that it elects to conduct and control the defense of such claim,
proceeding or suit. If the indemnifying party does not give the foregoing
notice, such Indemnified Persons shall have the right to defend or settle such
claim, proceeding or suit in the exercise of their exclusive discretion, and
the indemnifying party shall, upon request from any of such Indemnified
Persons, promptly pay to them in accordance with Section 6.15 or Section 7.8,
as the case may be, the amount of any liabilities, damages, losses and
expenses, including reasonable attorney's fees, resulting from such claim,
proceeding or suit. If the indemnifying party gives the foregoing notice, the
indemnifying party shall have the right to undertake, conduct and control,
through counsel of its own choosing and at the sole expense of the
indemnifying party, the conduct and control of the defense and any settlement
of such claim, proceeding or suit, and such Indemnified Persons shall
cooperate with the indemnifying party in connection therewith; provided that:
(a) the indemnifying party shall not thereby permit to exist any lien,
encumbrance or other adverse charge upon any asset of any of such Indemnified
Persons; (b) the indemnifying party shall permit such Indemnified Persons to
participate in such defense or settlement through counsel chosen by such
Indemnified Persons, but the fees and expenses of such counsel shall be borne
by such Indemnified Persons except as provided in clause (c) below; and (c)
the indemnifying party shall agree to reimburse promptly under Section 6.15 or
Section 7.8, as the case may be, such Indemnified Persons for the full amount
of any liabilities, damages, losses and expenses, including reasonable
attorneys' fees, resulting from such claim, proceeding or suit, except in each
case for any fees and expenses of counsel for such Indemnified Persons
incurred after the assumption of the conduct and control of such claim,
proceeding or suit by the indemnifying party. So long as the indemnifying
party is contesting any such claim, proceeding or suit in good faith, such
Indemnified Persons shall not pay or settle any such claim, proceeding or
suit; provided, however, that such Indemnified Persons shall have the right to
pay or settle any such claim, proceeding or suit; provided, further, that in
such event such Indemnified Persons shall be deemed to have waived any right
to indemnity therefor by the indemnifying party under Section 6.15 or Section
7.8, as the case may be.
14. Miscellaneous Provisions.
14.1 All notices and other communication required under this Agreement shall
be in writing and shall be deemed to have been given if delivered by hand, or
sent by courier or facsimile transmission (provided that in the case of
facsimile transmission, a confirmation copy of the notice shall be delivered
by hand or sent by courier within 2 days of transmission), addressed:
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<PAGE>
if to Supplier to:
Baxter Healthcare Corporation
One Baxter Parkway
Deerfield, Illinois 60015
Attention: General Counsel
(facsimile number: (708) 689-4266)
with copies to:
William L. Feather, Esq.
Assistant General Counsel
MPN-02
U.S. Healthcare/Law
Baxter Healthcare Corporation
1450 Waukegan Road
McGaw Park, Illinois 60085
(facsimile number: (708) 689-6452)
and
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: John M. O'Hare
(facsimile number: (312) 853-7036)
if to Distributor to:
VWR Corporation
1310 Goshen Parkway
West Chester, Pennsylvania 19380
Attention: President
(facsimile number: (610) 436-1760)
with a copy to:
Drinker Biddle & Reath
1000 Westlakes, Suite 300
Berwyn, Pennsylvania 19312-2409
Attn: Thomas E. Wood
(facsimile number: (610) 993-8585)
until notice of a change is given as provided in this Section 14.1. All
notices given in accordance with this Section 14.1 shall be effective, if
delivered by hand or by courier, at the time of delivery, and, if communicated
by facsimile transmission, at the time of transmission.
14.2 This Agreement is the entire agreement between the parties hereto with
respect to the subject matter hereof, there being no prior written or oral
promises or representations not incorporated herein or therein.
14.3 This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Illinois and the federal laws of the
United States of America applicable therein. Any lawsuit arising from or
related to this Agreement shall be brought before the United
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<PAGE>
States District Court for the Northern District of Illinois or the Eastern
District of Pennsylvania or an Illinois state court sitting in Lake County,
Illinois, or any Commonwealth Court sitting in Chester County, Pennsylvania.
The parties hereby consent to the jurisdiction of such courts.
14.4 No amendment or modification of the terms of this Agreement shall be
binding on either party unless reduced to writing and signed by an authorized
officer of the party to be bound. The waiver by either party of any particular
default by the other party shall not affect or impair the rights of the party
so waiving with respect to any subsequent default of the same or a different
kind; nor shall any delay or omission by either party to exercise any right
arising from any default by the other affect or impair any rights which the
non-defaulting party may have with respect to the same or any future default.
14.5 Each party represents and warrants that the terms of this Agreement do
not violate any existing obligations or contracts of, or any law, rule,
regulation, judgment or order binding on, such party. Each party shall
indemnify and hold harmless the other party from and against any and all
liabilities, damages, losses and expenses (including reasonable attorney's
fees) resulting from any third party claim, arbitration proceeding or suit
which is hereafter made or brought against the other party and which alleges
any such violation, all as provided in Section 13 herein with respect to the
indemnification provided in Section 6.15 and Section 7.8.
14.6 Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall be ineffective to the extent of such prohibition or
unenforceability without affecting, impairing or invalidating the remaining
provisions or the enforceability of this Agreement.
14.7 By virtue of this Agreement, neither party constitutes the other as its
agent, partner, joint venturer, or legal representative and neither party has
express or implied authority to bind the other in any manner whatsoever.
15. Assignment.
15.1 This Agreement shall be binding upon and enure to the benefit of the
parties hereto and their respective successors and assigns, provided, however,
that neither party shall have the right to transfer or assign its interest in
this Agreement without the prior written consent of the other party, which
consent shall not be unreasonably withheld.
15.2 Notwithstanding the foregoing provisions of this Section 15, Supplier
may assign its rights and obligations under this Agreement to any corporation
or other entity that shall acquire all or substantially all of Supplier's
business and assets and who shall assume in writing all of Supplier's
obligations hereunder and deliver a signed copy of such assumption instrument
to Distributor; provided, further, that upon Distributor's receipt of such
assumption instrument, Supplier shall be fully released and discharged from
its obligations under this Agreement.
15.3 Notwithstanding the foregoing provisions of this Section 15, to the
extent that any corporation or other entity shall acquire all or substantially
all of Supplier's business and assets relating to any of the Products,
Supplier may assign a corresponding portion of its rights hereunder to such
corporation or entity, provided that any such corporation or entity shall
assume in writing all of Supplier's obligations hereunder which correspond to
the portion of rights assigned, and shall deliver a signed copy of such
assumption instrument to Distributor; provided further that upon Distributor's
receipt of such assumption instrument, Supplier shall be fully released and
discharged from all of the obligations under this Agreement that are assumed
by such a corporation or entity. Notwithstanding anything to the contrary set
forth in this Section 15.3, if any such assignee of Supplier does not, in any
material respect, produce Products of the
VIII-15
<PAGE>
same quality as produced by Supplier, Distributor shall have the right, upon
60 days prior notice, to unilaterally terminate its obligations under Section
4 of this Agreement.
16. Counterparts.
For convenience of the parties hereto, this Agreement may be executed in one
or more counterparts, each of which shall be deemed an original for all
purposes.
IN WITNESS WHEREOF, the parties have by their duly authorized officers
executed this Agreement as of the date first above written.
SUPPLIER:
DISTRIBUTOR:
Baxter Healthcare Corporation VWR Corporation
By: _________________________________ By: _________________________________
Name: David N. Jonas Name: Jerrold B. Harris
Title: Vice President Title: President and Chief
Strategic Initiatives Executive Officer
VIII-16
<PAGE>
[LOGO OF VWR CORPORATION APPEARS HERE]
1310 GOSHEN PARKWAY, WEST CHESTER, PA 19380
-------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Jerrold B. Harris, and Walter S. Sobon, or
either of them, each with full power of substitution and revocation, as Proxies
to vote, as designated below, all Common Shares of VWR Corporation which the
undersigned would be entitled to vote if personally present at a Special
Meeting of the Corporation to be held at the offices of the Corporation, 1310
Goshen Parkway, West Chester, Pennsylvania on September 13, 1995 and at any
adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDERS. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1 AND, IN THE PROXIES' DISCRETION, UPON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING OR ANY ADJOURNMENT THEREOF. THE
UNDERSIGNED HEREBY REVOKES ANY PROXY OR PROXIES HERETOFORE GIVEN TO VOTE AT
SAID SPECIAL MEETING OR ANY ADJOURNMENT THEREOF.
PLEASE DATE AND SIGN ON REVERSE SIDE
<PAGE>
1. PROPOSAL: To approve the Issuance of Common
Shares to EM Laboratories, Incorporated.
FOR AGAINST ABSTAIN
[_] [_] [_]
2. To vote in their discretion upon such other business as may
properly come before the meeting or any adjournment thereof.
NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS BELOW. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE, OR GUARDIAN, PLEASE GIVE YOUR FULL TITLE AS SUCH. IF A CORPORATION,
PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED OFFICER. IF
A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
- --------------------------------------------------------------------------------
Signature
- --------------------------------------------------------------------------------
Signature, if held jointly
DATED ___________________________________________________________________ , 1995
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
