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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
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VWR SCIENTIFIC PRODUCTS CORPORATION
(NAME OF SUBJECT COMPANY)
VWR SCIENTIFIC PRODUCTS CORPORATION
(NAME OF PERSON FILING STATEMENT)
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COMMON SHARES, PAR VALUE $1.00 PER SHARE
(TITLE OF CLASS OF SECURITIES)
918435-10-8
(CUSIP NUMBER OF CLASS OF SECURITIES)
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DAVID M. BRONSON
SENIOR VICE PRESIDENT AND SECRETARY
VWR SCIENTIFIC PRODUCTS CORPORATION
1310 GOSHEN PARKWAY
WEST CHESTER, PENNSYLVANIA 19380
(610) 431-1700
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICE AND COMMUNICATIONS ON BEHALF OF THE PERSON FILING STATEMENT)
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Copy to:
THOMAS E. WOOD
DRINKER BIDDLE & REATH LLP
SUITE 300
1000 WESTLAKES DRIVE
BERWYN, PENNSYLVANIA 19312
(610) 993-2200
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is VWR Scientific Products Corporation, a
Pennsylvania corporation (the "Company"), and the address of the principal
executive offices of the Company is 1310 Goshen Parkway, West Chester,
Pennsylvania 19380.
The title of the class of equity securities to which this statement relates
is the Company's Common Stock, par value $1.00 per share (the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER
This Schedule relates to the Company's recommendation in connection with
the tender offer by EM Subsidiary, Inc., a Pennsylvania corporation
("Purchaser"), a wholly-owned, direct subsidiary of EM Laboratories,
Incorporated, a New York corporation ("Parent"), to purchase all outstanding
Shares of the Company at a price of $37.00 per Share (the "Offer Price") net to
the tendering shareholder in cash, upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated June 14, 1999 (the "Offer to
Purchase"), and the related Letter of Transmittal (which together constitute the
"Offer"). The Offer is disclosed in the Tender Offer Statement on Schedule 14D-1
(the "Schedule 14D-1") filed by Purchaser with the Securities and Exchange
Commission (the "Commission") on June 14, 1999. The principal executive offices
of Purchaser and Parent are located at 7 Skyline Drive, Hawthorne, New York
10532. Purchaser and Parent are indirect subsidiaries of Merck KGaA, Darmstadt,
Germany ("Merck KGaA"). Purchaser may, at any time, transfer or assign to one or
more corporations controlling, controlled by, or under common control with
Parent or Purchaser the right to purchase all or any portion of the Shares
tendered pursuant to the Offer, but any such transfer or assignment will not
relieve Purchaser of its obligations under the Offer.
The Offer is being made pursuant to the terms of an Agreement and Plan of
Merger, dated June 8, 1999 (the "Merger Agreement"), by and among the Company,
Purchaser and Parent. The Merger Agreement provides, among other things, that
upon the terms and subject to the conditions contained therein, and in
accordance with the Pennsylvania Business Corporation Law (the "PBCL"), as
promptly as practicable after the satisfaction or waiver of the conditions
contained therein, and the purchase of Shares pursuant to the Offer, Purchaser
will be merged with and into the Company (the "Merger"), with the Company
continuing as the surviving corporation in the Merger (the "Surviving
Corporation") as a wholly-owned subsidiary of Parent. At the effective time of
the Merger (the "Effective Time"), each issued and outstanding Share not
tendered in the Offer (other than Shares held by the Company, Parent or any
subsidiary of Company or Parent, and Shares held by shareholders who properly
exercise their dissenters' rights under the PBCL), will be converted into the
right to receive the Offer Price (the "Merger Consideration"), without interest
thereon.
Parent together with its affiliates is currently the beneficial owner of
15,538,784 Shares, representing approximately 49.89 % of the Shares that were
issued and outstanding at the close of business on June 8, 1999. Two Directors
of the Company (one of whom is the Company's President), who are beneficial
owners of approximately 2.5% of the issued and outstanding Shares, have entered
into an agreement (the "Shareholder Agreement") with Parent and Purchaser
pursuant to which they have agreed to tender their Shares in the Offer.
The Merger Agreement and the Shareholder Agreement are fully described
below in Item 3. Copies of both agreements are filed as Exhibits hereto and are
incorporated herein by reference in their entirety.
ITEM 3. IDENTITY AND BACKGROUND
(a) Identity
The name and business address of the Company, which is the person
filing this statement, are set forth in Item 1 above.
(b) Contracts
Except as otherwise described in this Schedule 14D-9 or in the
exhibits hereto, to the knowledge of the Company, as of the date hereof,
there are no material contracts, agreements, arrangements or
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understandings, or any actual or potential conflicts of interest, between
the Company or its affiliates and (i) the Company or its executive
officers, directors or affiliates or (ii) Purchaser, Parent or their
respective executive officers, directors or affiliates.
RELATIONSHIP WITH MERCK KGaA
On February 27, 1995, EM Industries, Incorporated, a New York corporation
that owns 100% of the capital stock of Parent ("EM Industries"), and the Company
entered into a Common Share and Warrant Purchase Agreement pursuant to which EM
Industries purchased 1,818,181 authorized but previously unissued Shares,
together with a warrant entitling EM Industries to acquire additional Shares
(the "Warrant"). EM Industries and the Company also entered into a Standstill
Agreement, dated as of February 27, 1995, pursuant to which EM Industries and
its affiliates were given the right to maintain a 20.1% interest in the Company.
Pursuant to an Assignment and Assumption Agreement, dated April 13, 1995, EM
Industries assigned its rights under the Common Share and Warrant Purchase
Agreement to Parent. Parent acquired approximately 20.1% of the then issued and
outstanding Shares.
On May 24, 1995, EM Industries and the Company entered into a Common Share
and Debenture Purchase Agreement pursuant to which the Company agreed to issue
and sell to EM Industries an aggregate of 6,832,797 authorized but unissued
Shares at a purchase price of $12.44 per Share and a subordinated debenture in
the principal amount of $135,000,000 (the "Debenture"). EM Industries also
agreed to exercise the Warrant in full. EM Industries assigned its rights under
the Common Share and Debenture Purchase Agreement to Parent pursuant to an
Assignment and Assumption Agreement dated June 16, 1995. The closing under the
Common Share and Debenture Purchase Agreement occurred on September 15, 1995, at
which time Parent's ownership of Shares increased to an aggregate 9,617,993
Shares, representing approximately 46.5% of the then issued and outstanding
Shares. During the first year of the Debenture, interest on the principal amount
thereof was paid in the form of the aggregate number of Shares equivalent to the
dollar value of the interest due and payable on each interest payment date, at
an issue price deemed to be $12.44 per share (the "Debenture Shares") until such
time as the Company issued the aggregate number of Debenture Shares needed to
increase the total number of Shares held by Parent and its affiliates to 49.89%
of the total issued and outstanding Shares on such date.
The Standstill Agreement was amended on September 15, 1995 to give Parent
and its affiliates the right to maintain a 49.89% interest in the Company in the
event the Company issues additional Shares.
In conjunction with the Company's public offering in 1997, Parent and an
affiliate purchased 3,011,719 Shares, for an aggregate cash purchase price of
approximately $68.5 million, in order to maintain their 49.89% beneficial
ownership. In addition, Parent purchased 52,163 Shares in 1997 in order to
maintain 49.89% beneficial ownership as a result of the Company's issuance of
Shares under its stock incentive plans at prices ranging from $7.79 to $13.25.
In 1998, Parent and an affiliate purchased 239,599 Shares in order to maintain
their 49.89% beneficial ownership as a result of the Company's issuance of
Shares under its stock incentive plans at prices ranging from $7.79 to $18.75.
The Shares sold to Parent and an affiliate in 1997 and 1998 were not registered
under the Securities Act of 1933, as amended (the "Securities Act"), in reliance
upon the exemption afforded by Section 4(2) of the Securities Act.
As the result of the transactions described above, on the date of this
Offer to Purchase, Parent, together with its affiliates, is the beneficial owner
of 15,538,784 Shares, representing approximately 49.89% of the issued and
outstanding Shares.
Pursuant to the Standstill Agreement, the Company is required annually to
cause representatives of Parent and its affiliates to be nominated for election
to the Company's Board of Directors so as to provide Parent and its affiliates
with Board representation, rounded down to the next whole number, that is
commensurate with the proportion of Shares owned by Parent and its affiliates.
Parent and its affiliates are also entitled to be represented on any committee
of the Company's Board of Directors. Five of the eleven members of the current
Board of Directors of the Company are representatives of Parent and its
affiliates (collectively, the "Affiliated Directors"). The directors who are not
Affiliated Directors are referred to herein as the "Unaffiliated Directors".
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The Standstill Agreement provides that Parent and its affiliates have the
right to acquire additional Shares to increase its percentage ownership only by
means of a tender offer commenced on or after April 13, 1999, subject to certain
conditions specified therein. The Standstill Agreement provides that Parent and
its affiliates shall not commence such tender offer unless acceptance of such
offer shall have been recommended to the Company's shareholders by a majority
vote of the Unaffiliated Directors, and the acquisition of the tendered Shares
may not close unless all of the following requirements have been satisfied: (i)
such tender offer shall have been made to all holders of Shares; (ii) the
purchaser shall offer to purchase for cash all Shares tendered; and (iii) such
offer shall have been accepted by shareholders owning not less than a majority
of the outstanding Shares. With respect to calculating whether a tender offer
has been accepted by shareholders owning a majority of the outstanding Shares,
Shares beneficially owned by Parent and its affiliates are to be excluded from
the outstanding Shares.
Affiliates of Merck KGaA have been suppliers of chemicals and other
products to the Company for over 15 years. During 1998, in the ordinary course
of the Company's business, the Company purchased $44 million of products from
affiliates of Merck KGaA.
THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement.
This summary is qualified in its entirety by reference to the Merger Agreement
which is incorporated herein by reference and a copy or form of which has been
filed with the Commission as an exhibit to this Schedule. Defined terms used
herein and not defined herein will have the respective meanings assigned to
those terms in the Merger Agreement.
The Merger Agreement provides that upon the terms and subject to the
conditions thereof, and in accordance with the PBCL, Purchaser will be merged
with and into the Company at the Effective Time. Following the Effective Time,
the separate corporate existence of Purchaser will cease and the Company will
continue as the Surviving Corporation and will succeed to and assume all the
rights and obligations of Purchaser and the Company in accordance with the PBCL.
The Offer. The Merger Agreement provides that, so long as the Merger
Agreement has not been terminated pursuant to its terms, and subject to the
terms of the Merger Agreement, as promptly as practicable but in no event later
than five business days after the date of the public announcement by Parent and
the Company of the Merger Agreement, Purchaser will, and Parent will cause
Purchaser to, commence the Offer. In the Merger Agreement, Parent and Purchaser
agree that Purchaser will not terminate the Offer between scheduled expiration
dates (except in the event that the Merger Agreement is terminated) and that, in
the event that Purchaser would otherwise be entitled to terminate the Offer at
any scheduled expiration date due to the failure of one or more of the Offer
Conditions, unless the Merger Agreement has been terminated, Purchaser will, and
Parent will cause Purchaser to, extend the Offer until such date as the Offer
Conditions have been satisfied or such later date as required by applicable law;
provided, however, that Purchaser is not required to extend the Offer beyond
December 31, 1999 (the "Outside Date"). Purchaser may, at any time, transfer or
assign to one or more corporations directly or indirectly wholly-owned by Parent
the right to purchase all or any portion of the Shares tendered pursuant to the
Offer, but any such transfer or assignment will not relieve Purchaser of its
obligations under the Offer or prejudice the rights of tendering shareholders to
receive payment for Shares validly tendered and accepted for payment.
Conditions to Consummation of the Offer. Notwithstanding any other
provision of the Offer, Purchaser will not be required to accept for payment or,
subject to any applicable rules and regulations of the Commission, including
Rule 14e-1(c) promulgated under the Exchange Act (relating to Purchaser's
obligation to pay for or return tendered Shares after termination or withdrawal
of the Offer), pay for, and (subject to any such rules or regulations) may delay
the acceptance for payment of any tendered Shares and (except as provided in the
Merger Agreement) amend or terminate the Offer (whether or not any Shares have
been theretofore purchased or paid for pursuant to the Offer) (A) unless the
following conditions have been satisfied: (i) there are be validly tendered and
not withdrawn prior to the expiration of the Offer a number of Shares which
represents a majority of the total number of outstanding Shares, excluding any
Shares held by Parent, Purchaser or any affiliate thereof (the "Minimum
Condition") and (ii) any applicable waiting period
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under the HSR Act or any similar applicable foreign law, including but not
limited to the requirements of the German federal antitrust supervisory
authority (Bundeskartelamt), have expired or been terminated prior to the
expiration of the Offer and the required approval of any governmental entity for
the Merger Agreement or the consummation of the transactions contemplated by the
Merger Agreement have been obtained or (B) if at any time after the date of the
Merger Agreement and before the time of payment for any such Shares (whether or
not any Shares have previously been accepted for payment or paid for pursuant to
the Offer), any of the following events occur and be continuing:
(a) there have been threatened or pending by any governmental entity
any suit, action or proceeding (i) challenging the acquisition by Parent or
Purchaser of any Shares under the Offer, seeking to restrain or prohibit
the making or consummation of the Offer or the Merger or the performance of
any of the other transactions contemplated by the Merger Agreement or the
Shareholder Agreement or seeking to obtain from the Company, Parent or
Purchaser any damages that are material in relation to the Company and its
subsidiaries taken as a whole, (ii) seeking to prohibit or materially limit
the ownership or operation by the Company, Parent or any of their
respective subsidiaries of any portion of the business or assets of the
Company and its subsidiaries, taken as a whole, or Parent and its
subsidiaries, taken as a whole, or to compel the Company or Parent to
dispose of or hold separate any portion of the business or assets of the
Company and its subsidiaries, taken as a whole, or Parent and its
subsidiaries, taken as a whole, as a result of the Offer or any of the
other transactions contemplated by the Merger Agreement or the Shareholder
Agreement, (iii) seeking to impose limitations on the ability of Parent or
Purchaser to acquire or hold, or exercise full rights of ownership of, any
Shares to be accepted for payment pursuant to the Offer including, without
limitation, the right to vote such Shares on all matters properly presented
to the shareholders of the Company, (iv) seeking to prohibit Parent or any
of its subsidiaries from effectively controlling in any respect any portion
of the business or operations of the Company or its subsidiaries or (v)
which otherwise is reasonably likely to have a material adverse effect on
the business, properties, assets, financial condition or results of
operations of the Company and its subsidiaries taken as a whole;
(b) there is enacted, entered, enforced, promulgated or deemed
applicable to the Offer or the Merger by any governmental entity any
statute, rule, regulation, judgment, order or injunction, other than the
application to the Offer or the Merger of applicable waiting periods under
the HSR Act, that is reasonably likely to result, directly or indirectly,
in any of the consequences referred to in clauses (i) through (v) of
paragraph (a) above;
(c) the Unaffiliated Directors, or any committee designated thereby,
have withdrawn, or modified or changed (including by amendment of this
Schedule 14D-9) their recommendation of the Offer, the Merger or the Merger
Agreement or approved or recommended a Takeover Proposal, or have resolved
to do so;
(d) it has been publicly disclosed or Parent or Purchaser has
otherwise learned that any Person or "group" (as defined in Section
13(d)(3) of the Exchange Act), other than Parent or its affiliates or any
group of which any of them is a member, have acquired beneficial ownership
(determined pursuant to Rule 13d-3 under the Exchange Act) of more than 20%
of the Shares through the acquisition of stock, the formation of a group or
otherwise, or have been granted an option, right or warrant, conditional or
otherwise, to acquire beneficial ownership of more than 20% of the Shares;
(e) any of the representations and warranties of the Company set forth
in the Merger Agreement (without giving effect to the materiality
limitations contained herein) are not true and correct in any respect as of
the date of consummation of the Offer as though made on and as of such date
(except for representations and warranties made as of a specified date,
which are not true and correct as of the specified date), except for any
breach or breaches which, in the aggregate, would not have a material
adverse effect on the Company;
(f) the Company has failed to perform in any material respect any
material obligation or to comply in any material respect with any material
agreement or covenant of the Company to be performed or complied with by it
under the Merger Agreement;
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(g) there has occurred any event that, individually or when considered
together with any other matter, has had or is reasonably likely in the
future to have a material adverse effect on the Company;
(h) there has occurred (i) any general suspension of, or limitation on
prices (other than suspensions or limitations triggered by price
fluctuations on a trading day) for, trading in securities on any national
securities exchange or the over-the-counter market in the United States of
America or the Federal Republic of Germany, (ii) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States of America or in the Federal Republic of Germany, (iii) any material
limitation (whether or not mandatory) by any government or governmental,
administrative or regulatory authority or agency, domestic or foreign, on,
the extension of credit by banks or other lending institutions, (iv) a
commencement of a war or armed hostilities or other national calamity
directly or indirectly involving the United States of America or the
Federal Republic of Germany and Parent has determined that there is a
reasonable likelihood that such event may be of materially adverse
significance to it or the Company, or (v) in the case of any of the
foregoing existing at the time of the execution of the Merger Agreement, a
material acceleration or worsening thereof;
(i) any applicable waiting period under Section 721 of Title VII of
the Defense Production Act of 1950, as amended by Section 5021 of the
Omnibus Trade and Competitiveness Act of 1988 and Section 837 of the
National Defense Authority Act for Fiscal Year 1993 (the "Exon-Florio
Provisions") have not expired, (b) the Committee on Foreign Investment in
the United States ("CFIUS") have initiated an investigation of the
transactions contemplated under the Merger Agreement, or (c) if CFIUS
initiates an investigation, the applicable waiting period under the
Exon-Florio Provisions relating to such investigation has expired, or such
investigation has been completed and the President has announced a decision
to take action pursuant to the Exon-Florio Provisions before the expiration
of the period ending on the 15th day (or if such day is not a business day,
the next business day) following the completion of such investigation,
which has a substantial likelihood of resulting, directly or indirectly, in
any of the consequences referred to in clauses (i) through (v) of paragraph
(a) above or such 15 day waiting period have not expired; or
(j) the Merger Agreement has been terminated in accordance with its
terms.
Except for the Minimum Condition, which may not be waived by Parent or
Purchaser without the consent of the Company, the foregoing conditions are for
the sole benefit of Parent and Purchaser and may, subject to the terms of the
Merger Agreement, be waived by Parent and Purchaser in whole or in part at any
time and from time to time in their sole discretion. The failure by Parent or
Purchaser at any time to exercise any of the foregoing rights will not be deemed
a waiver of any such right, the waiver of any such right with respect to
particular facts and circumstances will not be deemed a waiver with respect to
any other facts and circumstances and each such right will be deemed an ongoing
right that may be asserted at any time and from time to time.
Recommendation. In the Merger Agreement, the Company represents and
warrants that the Company's Board of Directors, at a meeting duly called and
held, duly adopted (by unanimous vote, with the Affiliated Directors not
participating) resolutions approving the Offer, the Merger Agreement, the Merger
and the Shareholder Agreement, determining that the terms of the Offer and the
Merger are fair to, and in the best interests of, the Company's shareholders,
other than the Parent and its affiliates, and recommending that the Company's
shareholders accept the Offer and approve and adopt the Merger Agreement and the
Merger. The only vote of holders of any class or series of the Company's capital
stock required to adopt the Merger Agreement and the transactions contemplated
thereby, including the Merger, is the affirmative vote of a majority of the
votes cast by all holders of the Shares present in person or by proxy at a duly
convened meeting of shareholders, and if Section 1924(b)(1)(ii) of the PBCL is
applicable to the Merger, no such vote will be required (see "Shareholder Vote
Required to Approve this Merger", below). No other state takeover or control
share statute or similar statute or regulation applies or purports to apply to
the Offer, the Merger, the Shareholder Agreement or any of the transactions
contemplated by the Merger Agreement or the Shareholder Agreement.
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The Merger Agreement provides that if any "fair price" or "control share
acquisition" statute or other similar statute or regulation becomes applicable
to the transactions contemplated hereby, Parent and the Company and their
respective Boards of Directors will use all reasonable efforts to grant or
obtain such approvals and take such actions as are necessary so that the
transactions contemplated by the Merger Agreement may be consummated as promptly
as practicable on the terms contemplated by the Merger Agreement and otherwise
act to minimize the effects of any such statute or regulation on the
transactions contemplated by the Merger Agreement.
Each of the Unaffiliated Directors has indicated to the Company that he
intends to tender and sell his Shares in response to the Offer, except that
Unaffiliated Directors whose sales of their Shares in response to the Offer
might result in liability under Section 16(b) of the Exchange Act intend that if
they do not tender and sell their Shares in response to the Offer, they will
vote their Shares in favor of the Merger.
The Shares. At the Effective Time (a) each Share that is not automatically
cancelled as described in clause (b) of this paragraph or does not become the
right to receive fair value as described in clause (c) of this paragraph will
become the right to receive $37.00 in cash, without interest or dividends, (b)
each Share owned by Parent, Purchaser or any other subsidiary of Parent, and
each Share owned by the Company or any subsidiary of the Company, will be
automatically cancelled and no consideration will be delivered in exchange for
any such Shares, and (c) each Share held by a person who has not voted in favor
of or consented to the Merger and complies in all respect with Sections 1930 and
1575 through 1580 of the PBCL will become the right to receive payment of the
fair value of such Shares in accordance with Sections 1930 and 1575 through 1580
of the PBCL.
Stock of Purchaser. At the Effective Time, each share of common stock of
Purchaser that is outstanding immediately before the Effective Time will be
converted into and become one share of common stock of the Surviving Corporation
("Surviving Corporation Common Stock"). Therefore, the Parent, as the sole
stockholder of Purchaser, will become the sole stockholder of the Company.
Company Options. Pursuant to the Merger Agreement, in connection with the
consummation of the Offer, either (i) all outstanding options to purchase Shares
under the Company's stock option plans (whether or not vested on the date of the
Merger Agreement) will be cancelled and the holders of such options will be
entitled upon the consummation of the Offer to receive from Purchaser cash in an
amount equal to the excess, if any, of the Offer Price over the exercise price
per share, or (ii) the Company will take all such steps as will be necessary to
achieve substantially the same result as described above. Options otherwise
unexercisable prior to the expiration of the Offer will be accelerated to enable
the holders thereof to participate in the Offer.
Articles, By-Laws, Directors and Officers. The Merger Agreement provides
that the Articles of Incorporation of the Company, as in effect immediately
prior to the Effective Time, will be the Articles of Incorporation of the
Surviving Corporation until thereafter changed or amended as provided therein or
by applicable law. The By-laws of the Company will be amended as of the
Effective Time to read in their entirety as the By-laws of Purchaser, as in
effect immediately prior to the Effective Time, until thereafter changed or
amended as provided therein, by the Articles of Incorporation of the Surviving
Corporation or by applicable law. The directors of Purchaser immediately prior
to the Effective Time will be the directors of the Surviving Corporation, until
the next annual meeting of shareholders of the Surviving Corporation (or the
earlier of their resignation or removal) and until their respective successors
are duly elected and qualified, as the case may be. The officers of the Company
immediately prior to the Effective Time will be the officers of the Surviving
Corporation until the earlier of their resignation or removal and until their
respective successors are duly elected and qualified, as the case may be.
Shareholder Vote Required to Approve the Merger. If the approval of the
Company's shareholders of the Merger Agreement and the Merger is required by
law, the Merger Agreement requires that (a) the Company will, at Parent's
request, as soon as practicable following the expiration of the Offer in
accordance with the terms of the Merger Agreement, duly call, give notice of,
convene and hold a meeting of its shareholders (the "Shareholders Meeting") for
the purpose of obtaining such approval, and (b) the Company will, through its
Board of Directors (but subject to the right of the Company's Unaffiliated
Directors to withdraw or modify its approval or recommendation of the Offer, the
Merger and the Agreement as set forth
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in the Merger Agreement), recommend to its shareholders that the shareholders
approve the Merger. At such meeting, the affirmative vote of a majority of the
votes cast by all holders of the Shares present in person or by proxy will be
necessary to adopt the Merger Agreement and the transaction contemplated
thereby, including the Merger.
Under the PBCL, if Purchaser acquires, pursuant to the Offer or otherwise,
at least 80% of the then-outstanding Shares, Purchaser's Board of Directors will
be able to effect a "short-form merger." Pursuant to the Merger Agreement,
Purchaser may extend the Offer under certain circumstances in the event that the
number of Shares validly tendered and not withdrawn, when taken together with
the Shares held by Parent and its affiliates, does not constitute at least 80%
of the then issued and outstanding Shares. If Purchaser or any other Subsidiary
of Parent acquires 80% or more of the then outstanding Shares, the parties have
agreed, at the request of Parent, to take all necessary and appropriate actions
to cause the Merger to become effective in accordance with Section
1924(b)(1)(ii) of the PBCL, as promptly as practicable after such acquisition
without a meeting of the Shareholders of the Company, including, without
limitation, adoption by the board of directors of Purchaser of a short-form plan
of merger in accordance with the PBCL and consistent with the terms of the
Merger. If Purchaser or any other Subsidiary of Parent does not acquire at least
80% of the then issued and outstanding Shares pursuant to the Offer or
otherwise, a vote of the Company's shareholders will be required under the PBCL
to effect the Merger and a significantly longer period of time will be required
to effect the Merger.
Interim Operations. The Merger Agreement provides that during the period
from the date of the Merger Agreement until the earlier of the Effective Time or
such time as Parent's and Purchaser's designees constitute a majority of the
Company's Board of Directors, the Company will, and will cause each of its
subsidiaries to, in all material respects, except as contemplated by the Merger
Agreement, carry on its business in the ordinary course as previously conducted
and, to the extent consistent therewith, with no less diligence and effort than
would be applied in the absence of the Merger Agreement, seek to preserve intact
their current business organizations, keep available the services of their
current officers and employees and preserve their relationships with customers,
suppliers and others having business dealings with them to the end that goodwill
and ongoing businesses be unimpaired at the Effective Time. In addition, except
as otherwise contemplated by the Merger Agreement, during such period, the
Company will not, and will not permit any of its subsidiaries to, without the
prior written consent of Parent (which consent will not be unreasonably withheld
or delayed):
(a) amend or propose to amend its Articles of Incorporation or By-laws
(or comparable governing instruments) or change the number of directors
constituting the entire Board of Directors of the Company or the Board of
Directors of any of the Company's subsidiaries;
(b) authorize for issuance, issue, deliver, grant, sell, pledge, or
otherwise dispose of or propose to issue, deliver, grant, sell, pledge or
otherwise dispose of any shares of, or any options, warrants, commitments,
subscriptions or rights of any kind to acquire or sell any shares of, the
capital stock or other securities of the Company or any of the Company's
subsidiaries including, but not limited to, stock appreciation rights,
phantom stock, any securities convertible into or exchangeable for shares
of stock of any class of the Company or any of the its subsidiaries other
than the issuance of Shares upon the exercise of stock options of the
Company granted prior to the date of the Merger Agreement;
(c) split, combine or reclassify any shares of its capital stock or
declare, pay or set aside any dividend or other distribution (whether in
cash, stock, securities or other property or any combination thereof) in
respect of its capital stock, or directly or indirectly redeem, purchase or
otherwise acquire or offer to acquire, directly or indirectly, any shares
of its capital stock or other securities;
(d) (i) except in the ordinary course of business consistent with past
practice, (1) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, indirectly, contingently or otherwise) for
the obligations of any person or (2) make any loans, advances or capital
contributions to, or investments in, any other person (other than to one of
its subsidiaries); (ii) acquire the stock or the assets of, or merge or
consolidate with, any other person; (iii) voluntarily incur any liability
or obligation (absolute, accrued, contingent or otherwise) other than in
the ordinary course of business consistent with
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past practice; or (iv) sell, transfer, mortgage, pledge or otherwise
dispose of, or encumber, or agree to sell, transfer, mortgage, pledge or
otherwise dispose of or encumber, any assets or properties, real, personal
or mixed of the Company and its subsidiaries other than sales of products
in the ordinary course of business and in a manner consistent with past
practice; (v) incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any person, or
make any loans, advances or capital contributions to, or investments in,
any other person (other than in the ordinary course of business consistent
with past practice); (vi) enter into any contract or agreement, other than
in the ordinary course of business consistent with past practice, or amend,
alter or terminate any contract that is material to the Company; or (vii)
authorize any capital expenditure except in compliance with procedures
heretofore established by resolutions only adopted by the Board of
Directors of the Company;
(e) increase in any manner the compensation of any of its directors,
officers or employees or (other than in the ordinary course of business
consistent with past practice) enter into, establish, amend or terminate
any benefit plan, employment, consulting, retention, change in control,
collective bargaining, bonus or other incentive compensation, profit
sharing, health or other welfare, stock option or other equity, pension,
retirement, vacation, severance, deferred compensation or other
compensation or benefit plan, policy, agreement, trust, fund or arrangement
with, for or in respect of, any shareholder, officer, director, other
employee, agent, consultant or affiliate other than as required pursuant to
the terms of agreements in effect on the date of the Merger Agreement and
disclosed to Parent prior to the execution of the Merger Agreement;
(f) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
practices or principles used by it;
(g) make any material tax election, settle or compromise any material
federal, state, local or foreign tax liability, or waive any statute of
limitations for any tax claim or assessment;
(h) settle or compromise any material pending or threatened suit,
action or claim;
(i) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its subsidiaries (other than the
Merger);
(j) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction (i) in the ordinary course of
business and consistent with past practice of liabilities reflected or
reserved against in the financial statements of the Company or incurred in
the ordinary course of business and consistent with past practice and (ii)
of liabilities required to be paid, discharged or satisfied pursuant to the
terms of any contract in existence on the date hereof or entered into in
accordance with the terms of the Merger Agreement;
(k) permit any insurance policy naming the Company or any of its
subsidiaries as a beneficiary or a loss payable payee to be cancelled or
terminated without notice to Parent, except in the ordinary course of
business and consistent with past practice; or
(l) take, or offer or propose to take, or agree to take in writing or
otherwise, any of the actions described above or take or omit to take any
action which would make any of the representations or warranties of the
Company contained in the Merger Agreement untrue and incorrect in any
material respect as of the date when made if such action had then been
taken or omitted, or would result in any of the Offer Conditions or the
conditions set forth in the Merger Agreement not being satisfied.
Employees. In the Merger Agreement, Parent agreed that for at least the
one year period following the consummation of the Offer, all persons who, as of
the date of the Merger Agreement, were employees of the Company or any of its
Subsidiaries and who are involuntarily terminated by the Company will be
entitled to receive severance pay and benefits equal to the severance pay and
benefits provided for in the Company's severance pay plan.
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No Solicitation. In the Merger Agreement the Company has agreed that it
will not, nor will it permit any of its subsidiaries to, nor will it permit any
of its executive officers, directors, authorized representatives or authorized
agents to, directly or indirectly, (i) solicit, initiate or knowingly encourage
(including by way of furnishing non-public information) any inquiries or the
making of any proposal which constitutes, or may reasonably be expected to lead
to, any Takeover Proposal or (ii) except as expressly permitted as described in
the immediately succeeding paragraph, participate in any discussions or
negotiations regarding any Takeover Proposal. For purposes of the Merger
Agreement, "Takeover Proposal" means (x) any inquiry, proposal or offer from any
person relating to any direct or indirect acquisition or purchase of any of the
assets of the Company or its subsidiaries (other than the purchase of inventory
or other assets in the ordinary course of business) or any of the Shares then
outstanding, any tender offer or exchange offer for any of the Shares then
outstanding, or any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Company or any of its subsidiaries, other than the transactions contemplated by
this Agreement or (y) any other transaction the consummation of which could
reasonably be expected to impede, interfere with, prevent or delay the Offer
and/or the Merger or which would reasonably be expected to dilute the benefits
to Parent of the transactions contemplated by the Merger Agreement and the
Shareholders Agreement.
The Merger Agreement provides that neither the Unaffiliated Directors nor
any committee designated thereby may (i) withdraw or modify, or propose publicly
to withdraw or modify, in a manner adverse to Parent, the approval or
recommendation by Unaffiliated Directors or such committee of the Offer, the
Merger or the Merger Agreement (or any transaction contemplated thereby);
provided, that the Unaffiliated Directors may, (A) in response to any Takeover
Proposal, suspend such recommendation for a period of up to 24 hours pending the
analysis by the Unaffiliated Directors of such Takeover Proposal, which analysis
may include to the extent necessary discussions with a person making such
Takeover Proposal regarding same, or (B) at any time prior to the consummation
of the Offer, modify or withdraw such recommendation, but only if the
Unaffiliated Directors determine in good faith, based on a written opinion of
Drinker Biddle & Reath LLP that it would be a breach of its fiduciary duties not
to so modify or withdraw such recommendations, (ii) approve or recommend, or
propose publicly to approve or recommend, any Takeover Proposal or (iii) cause
the Company to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement related to any Takeover
Proposal.
The Merger Agreement provides that in the event of a withdrawal by the
Company's Board of Directors of its recommendation, the Purchaser must terminate
the Offer and any party may terminate the Merger Agreement.
Indemnification; Exculpation and Insurance. The Merger Agreement provides
that all rights to indemnification and exculpation from liabilities for acts or
omissions occurring at or prior to the Effective Time existing in favor of the
present or former directors, officers or employees of the Company as provided in
the Company's Articles of Incorporation or By-laws or pursuant to agreements
existing on the date of the Merger Agreement will be assumed by the Surviving
Corporation, and Parent will cause the Surviving Corporation to honor such
obligations in accordance with the terms thereof, without further action, as of
the Effective Time, and such rights will continue in full force and effort in
accordance with their respective terms. Such rights, and the Surviving
Corporation's and Parent's related obligations, will apply in all respects to
the present or former directors, officers and employees of each of the Company's
subsidiaries as though such directors, officers and employees were entitled to
indemnification rights pursuant to the Company's Articles of Incorporation or
By-laws as in effect on the date of the Merger Agreement or pursuant to such
agreements, as the case may be. In addition, from and after the Effective Time,
directors and officers of the Company who become or remain directors or officers
of Parent will be entitled to the same indemnity rights and protections
(including those provided by directors' and officers' liability insurance) as
are afforded to other directors and officers of Parent.
The Merger Agreement also provides that Parent will, and will cause the
Surviving Corporation or one of its affiliates to, maintain in effect for six
years after the Effective Time policies of directors' and officers' liability
insurance equivalent in all material respects to those maintained by or on
behalf of the Company and the Company's subsidiaries on the date of the Merger
Agreement (and having coverage and containing terms
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and conditions which in the aggregate are not less advantageous to the persons
presently covered by such policies as insured) with respect to claims arising
from any actual or alleged wrongful act or omission occurring at or prior to the
Effective Time for which a claim has not been made against any director or
officer of the Company or any director or officer of the Company Subsidiaries
prior to the Effective Time.
Conditions to Consummation of the Merger. The Merger Agreement provides
that the respective obligations of the Company, Parent and Purchaser to effect
the Merger are subject to the satisfaction or waiver of the following
conditions: (a) subject to the satisfaction, or waiver by Purchaser, of all of
the Offer Conditions (it being understood that pursuant to the Merger Agreement
Purchaser may not waive the Minimum Condition without the prior written consent
of the Company), Purchaser has accepted for payment all Shares validly tendered
in the Offer and not withdrawn, provided that neither Parent nor Purchaser may
invoke this condition if Purchaser fails to purchase Shares so tendered and not
withdrawn in violation of the terms of the Merger Agreement or the Offer; (b) if
required by applicable law or the constituent documents of the Company, Parent
or Purchaser, the Merger and Merger Agreement have been approved at or prior to
the Effective Time by the requisite vote of the shareholders of the Company in
accordance with the PBCL and the Company's Articles of Incorporation and
By-laws; (c) no order, statute, rule, regulation, executive order, stay, decree,
judgment or injunction have been enacted, entered, promulgated or enforced by
any court or other governmental entity that temporarily, preliminarily or
permanently prohibits or prevents the consummation of the Merger and that has
not been vacated, dismissed or withdrawn prior to the Effective Time; and (d)
the waiting period (and any extension thereof) applicable to the Merger under
the HSR Act and any similar foreign laws have been terminated or have expired
and all consents necessary for the consummation of the Merger have been
obtained.
In addition, the obligations of Parent and Purchaser to consummate the
Merger are subject to the satisfaction or waiver of the conditions (which may be
waived in whole or in part by Parent) that the Company has performed in all
material respects all obligations required to be performed by the Company under
the Merger Agreement at or before the earlier of (x) such time as Parent's or
Purchaser's designees constitute a majority of the Company's Board of Directors
and (y) the Effective Time; provided that no failure by the Company to have so
performed any such obligation will constitute a failure of satisfaction of the
foregoing condition where the Company's failure of performance was caused by
Parent.
Representations and Warranties. In the Merger Agreement, the Company has
made customary representations and warranties to Parent and Purchaser with
respect to, among other things, its organization, capitalization, public
filings, conduct of business, compliance with laws, litigation,
non-contravention, consents and approvals, opinions of financial advisors and
environmental liabilities.
Termination. The Merger Agreement provides that it may be terminated at
any time prior to the Effective Time, whether before or after the approval by
the shareholders of the Company (if required by applicable law): (a) by the
mutual written consent of Parent, Purchaser and the Company; (b) by either
Parent or the Company: (i) if (x) as a result of the failure of any of the Offer
Conditions the Offer has terminated or expired in accordance with its terms
without Purchaser having accepted for payment any Shares pursuant to the Offer
or (y) Purchaser has, consistent with its obligations under the Merger
Agreement, failed to pay for the Shares prior to the Outside Date; provided,
however, that such right to terminate the Merger Agreement will not be available
to any party whose failure to perform any of its obligations under the Merger
Agreement results in the failure of any such Offer Condition or if the failure
of such condition results from facts or circumstances that constitute a breach
of any representation or warranty under the Merger Agreement by such party; or
(ii) if any governmental entity has issued an order, decree or ruling or taken
any other action permanently enjoining, restraining or otherwise prohibiting the
transactions contemplated by the Merger Agreement and such order, decree or
ruling or other action has become final and nonappealable; provided, however,
that Parent or the Company, as the case may be, may not terminate the Merger
Agreement if it has not complied with its obligations under the Merger Agreement
with respect to any such order, decree, ruling, or other action; (c) by either
Parent or Purchaser if the Company has breached in any material respect any of
its material covenants or other agreements contained in the Merger Agreement
which breach or failure to perform is incapable of being cured or, the Company
having been given reasonable written notice of such breach by Parent, has not
been cured within one business day prior to the then scheduled Expiration Time;
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(d) by any of the Company, Parent or Purchaser if either Parent or Purchaser is
entitled to terminate the Offer because the Unaffiliated Directors, or any
committee designated thereby, has withdrawn, modified or changed (including by
amendment of the Schedule 14D-9) their recommendation of the Offer, the Merger
or the Merger Agreement or approved or recommended a Takeover Proposal, or have
resolved to do so; provided that the temporary suspension of the recommendation
of the Company's Board of Directors referred to in the Merger Agreement will not
give rise to such right of termination; (e) by the Company, if Parent or
Purchaser has breached in any material respect any of its material covenants or
other agreements contained in the Merger Agreement, which breach or failure to
perform is incapable of being cured or, Parent having been given reasonable
written notice of such breach by the Company, has not been cured within one
business day prior to the then scheduled Expiration Date; or (f) by the Company,
if the Offer has not been timely commenced in accordance with the Merger
Agreement.
Effect of Termination. If the Merger Agreement is terminated, neither the
Company nor Purchaser will be required to complete the Merger. Termination of
the Merger Agreement will not relieve any party thereto from any liability for
any breach of the Merger Agreement that occurs before the Merger Agreement is
terminated.
Fees and Expenses. Under the Merger Agreement, all fees, costs and
expenses incurred in connection with the Merger Agreement and the transactions
contemplated thereby will be paid by the party incurring such fees, costs or
expenses, whether or not the Offer or the Merger is consummated. However, if the
Merger Agreement is terminated by Parent pursuant to clause (d) in the paragraph
entitled "Termination" above, the Merger Agreement provides that the Company
will promptly pay Parent upon its request all reasonable out-of-pocket charges
and expenses incurred by Parent or its affiliates in connection with the Merger
Agreement and the transactions contemplated thereby, including without
limitation reasonable and documented attorneys' and accountants' fees and
disbursements and fees and expenses of Parent's financial advisor and any
information agent and depositary retained in connection with the Offer and all
printing and mailing fees and expenses, in an amount not to exceed $8,000,000.
Board of Directors. The Merger Agreement provides that promptly after such
time as Purchaser purchases the Shares pursuant to the Offer (but subject to the
satisfaction of the Minimum Condition), Purchaser will be entitled, to the
fullest extent permitted by law, to designate at its option up to that number of
directors, rounded to the next highest whole number, of the Company's Board of
Directors, subject to compliance with Section 14(f) of the Exchange Act, as will
make the percentage of the Company's directors designated by Purchaser equal to
the aggregate voting power of the Shares held by Parent or any of its
Subsidiaries; provided, however, that in the event that Purchaser's designees
are elected to the Board of Directors of the Company, until the Effective Time,
such Board of Directors will have (i) at least three Unaffiliated Directors who
are Directors on June 8, 1999 or are designated by a majority of the
Unaffiliated Directors of the Company who were directors on June 8, 1999 and
(ii) the number of Affiliated Directors required by the Standstill Agreement
which will be in addition to the number of directors designated by Purchaser
pursuant to the Merger Agreement; and provided, further that, in such event, if
the number of Unaffiliated Directors will be reduced below three for any reason
whatsoever, the remaining Unaffiliated Directors will, to the fullest extent
permitted by law, designate a person to fill such vacancy who will be deemed to
be an Unaffiliated Director for purposes of the Merger Agreement or, if no
Unaffiliated Directors then remain, the other directors will designate three
persons to fill such vacancies who will not be officers or Affiliates of the
Company or any of its subsidiaries, or officers or affiliates of Parent, of any
of its Subsidiaries or of any other entity in which Parent owns, directly or
indirectly, any material amount of capital stock or other significant ownership
interest, and such persons will be deemed to be Unaffiliated Directors for
purposes of the Merger Agreement.
Following the election or appointment of Purchaser's designees and prior to
the Effective Time, any termination or amendment of the Merger Agreement by the
Company, any extension by the Company of the time for the performance of any of
the obligations or other acts of Purchaser or waiver or assertion of any of the
Company's rights under the Merger Agreement, and any other consent or action by
the Board of Directors of the Company with respect to the Merger Agreement
(other than recommending or reconfirming the recommendation that the holders of
the Shares approve and adopt the Merger Agreement and the Merger,
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and making determinations in connection therewith, which recommendations and
determinations may be made by a majority of the Board of Directors as
constituted at any time after such election or appointment of Purchaser's
designees pursuant to the Merger Agreement) will to the fullest extent permitted
by applicable law require the concurrence of a majority of the Unaffiliated
Directors and, to the fullest extent permitted by law, no other action by the
Company, including any action by any other Director of the Company, will be
required to approve such actions. To the fullest extent permitted by applicable
law, the Company will take all actions requested by Parent that are reasonably
necessary to effect the election of any such designee, including mailing to its
shareholders the Information Statement containing the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, and the
Company agrees to make such mailing with the mailing of the Schedule 14D-9
(provided that Purchaser has provided to the Company on a timely basis all
information required to be included in the Information Statement with respect to
Purchaser's designees). Parent and Purchaser will be solely responsible for any
information with respect to either of them and their nominees, officers,
directors and Affiliates required by Section 14(f) of the Exchange Act and Rule
14f-1 promulgated thereunder. In connection with the foregoing, the Company will
promptly, at the option of Parent, to the fullest extent permitted by law,
either increase the size of the Company's Board of Directors and/or obtain the
resignation of such number of its current directors as is necessary to enable
Purchaser's designees to be elected or appointed to the Company's Board of
Directors as provided above.
THE SHAREHOLDER AGREEMENT
The following is a summary of the material terms of the Shareholder
Agreement. This summary is qualified in its entirety by reference to the copy of
the Shareholder Agreement filed with the Commission as an Exhibit to this
Schedule 14D-9 and incorporated herein by reference. The Shareholder Agreement
may be examined and copies may be obtained at the place and in the manner set
forth in Section 14 of the Offer to Purchase.
In connection with the execution of the Merger Agreement, N. Stewart Rogers
(an Unaffiliated Director) and Jerrold B. Harris (an Unaffiliated Director and
Company President), who beneficially own approximately 729,000 Shares, or
approximately 2.5%, of the now issued and outstanding Shares (the "Option
Shares"), entered into the Shareholder Agreement with Parent and Purchaser
pursuant to which they have agreed to tender their Shares (or cause the record
owner of such Shares validly to tender), and not to withdraw any Shares so
tendered not later than the fifth business day after commencement of the Offer
pursuant to of the Merger Agreement and Rule 14d-2 under the Exchange Act;
provided, however, that in the event that the Unaffiliated Directors (or any
committee designated thereby) withdraw, or propose publicly to withdraw, the
approval or recommendation by such Unaffiliated Directors or such committee of
the Offer, the Merger or Merger Agreement (or any transaction contemplated
thereby), they will each have the right to withdraw any Shares that they have
tendered.
Messrs. Rogers and Harris have also granted to Parent and Purchaser, as
Parent may designate, an irrevocable option (the "Option") to purchase the
Option Shares owned by them and any additional Shares acquired by either of them
(whether by exercise of options, or by means of a purchase, distribution,
dividend or otherwise) at $37.00 per Share or such higher price as may be paid
by Parent or Purchaser pursuant to the Offer. Parent or Purchaser may exercise,
but are not required to exercise, the Option from time to time, in whole or in
part, on or after the date of the consummation of the Offer but prior to the
Effective Time if the Offer is consummated but (whether due to improper tender
or withdrawal of tender) Purchaser has not accepted for payment and paid for all
of the Option Shares.
Parent and Purchasers' obligation to purchase Shares upon exercise of the
Option is subject to the conditions that (i) no preliminary or permanent
injunction or other order issued by any court or governmental, administrative or
regulatory agency or authority prohibiting the exercise of the Option pursuant
to the Shareholder Agreement will be in effect (and no action or proceeding will
have been commenced or threatened for the purpose of obtaining such an
injunction or order); (ii) any applicable waiting period under the HSR Act or
similar foreign law required for the purchase of the Shares upon such exercise
will have expired; and (iii) there have been no material breach of the
representations, warranties or covenants of any Share Tender Party contained in
the Shareholder Agreement; provided, that any failure by Parent or
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Purchaser to purchase Shares upon exercise of the Option as a result of the
nonsatisfaction of any of such conditions will not affect or prejudice Parent or
Purchaser's right to purchase such Shares upon the subsequent satisfaction of
such conditions.
In the Shareholder Agreement, the holders of the Option Shares have made
certain customary representations, warranties and covenants, including with
respect to (i) ownership of the Shares, (ii) the absence of liens and
encumbrances on and in respect of the Share Tender Parties' Shares, (iii) their
authority to enter into and perform their respective obligations under the
Shareholder Agreement, (iv) their ability to enter into the Shareholder
Agreement without violating other agreements to which they are party, and (v)
the absence of restrictions on the transfer of the Option Shares.
The Shareholder Agreement provides for its termination upon the earlier of
(i) the Effective Time and (ii) the termination of the Merger Agreement in
accordance with its terms.
AGREEMENTS WITH CERTAIN OFFICERS
On September 15, 1995, as a condition to the Common Share and Debenture
Purchase Agreement between VWR and EML, the Company entered into a five-year
employment agreement with Mr. Harris. This agreement replaced a previous
agreement which included change of control provisions. During the employment
period, Mr. Harris' base salary and bonus is determined by the Compensation
Committee at its own discretion. In addition, the Company issued and granted to
Mr. Harris 42,566 of the Company's common shares as a restricted stock award.
The restricted stock award vests based upon the following schedule: 45% vested
on the first three anniversary dates of the agreement; 15% will vest on
September 15, 1999; and the remaining 40% will vest on the fifth anniversary
date of the employment agreement. If the Company were to terminate Mr. Harris
without cause (as defined therein), Mr. Harris would be paid beginning on the
date of termination and ending on the fifth anniversary of the date of the
agreement, at an annual rate equal to the greater of (i) the sum of Mr. Harris'
most-recent annual salary plus most-recent annual bonus or (ii) the average
salary and bonus earned by Mr. Harris during the term of the employment
agreement. In addition, effective upon any such termination, Mr. Harris would
become fully vested in the restricted stock award.
The estimated amount payable over the remaining term of the employment
agreement in the event the Company were to terminate Mr. Harris' employment
without cause would be approximately $825,000.
The Company is party to a change of control agreement with one of its
current executive officers, Paul J. Nowak. This agreement provides that Mr.
Nowak would continue to receive compensation if his employment is terminated
(voluntarily or involuntarily) for any reason other than gross misconduct,
death, disability, or reaching age 65, provided such termination occurs within
24 months after certain defined events which might lead to a change in control
of the Company. The term of the compensation period decreases to a minimum of 12
months during the 24 months following the change of control. The compensation
would be paid at a rate equal to Mr. Nowak's then-current salary and target
bonus. The compensation is subject to a minimum annual rate of not less than Mr.
Nowak'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 Mr. Nowak's "annualized includable compensation," as defined in
Section 280G of the Internal Revenue Code, for the Executive's most recent five
taxable years. Mr. Nowak would also continue to have "employee" status for the
compensation period and would be entitled to retain most employee benefits and
rights during this period.
The estimated aggregate amounts presently payable in the event the
Company's obligations under the agreement were triggered (assuming Mr. Nowak
receives payments for the maximum 24-month period) would be $620,000. The
foregoing does not include the value of any employee benefits which might be
payable to Mr. Nowak during the compensation period.
Although the Company believes that the compensation or other benefits
payable or vesting upon Mr. Nowak's termination should not constitute "golden
parachute payments" under the Internal Revenue Code, the agreement does provide
for indemnification against excise taxes payable by Mr. Nowak in the event of
such a determination. The Company may cease payments in the event Mr. Nowak
breaches certain noncompetition or confidentiality covenants. The Company also
has the right to terminate the agreement upon
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a one-year notice, except as to rights accruing as a result of an event which
has triggered the change of control provisions of the agreement.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Bylaws require the Company to indemnify any person who was or
is a party or is threatened to be made a party to or is involved (including,
without limitation, as a witness) any threatened, pending or completed action,
suit or proceeding, whether civil, derivative, criminal, administrative, or
investigative (a "proceeding"), by reason of the fact that he or she is or was a
director or officer of the Company or, being or having been such a director or
officer, he or she or a person of whom he or she is a legal representative, is
or was serving at the request of the Company as a director, officer, partner,
trustee, employee, or agent of another corporation or of a partnership, joint
venture, trust, or other enterprise, including service with respect to employee
benefit plans, whether the basis of such proceeding is alleged action or
inaction in an official capacity as a director, officer, partner, trustee,
employee, or agent or in any other capacity while serving as a director,
officer, partner, trustee, employee, or agent to the fullest extent not
prohibited by the PBCL, public policy, or other applicable law (including
binding regulations and orders of, and undertakings or other commitments with,
any governmental entity or agency) as the same exists or is amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Company to provide broader indemnification rights than said law permitted by the
Company to provide prior to such amendment), against all expense, liability, and
loss (including attorney's fees, judgments, fines, ERISA excise taxes, or
penalties and amounts paid or to be paid in settlement) actually and reasonably
incurred or suffered by such person in connection therewith. Such
indemnification shall continue as to a person who has ceased to be a director,
officer, partner, trustee, employee, or agent, and shall inure to the benefit of
his or her heirs, executors, and administrators. The Company currently maintains
insurance for its directors and officers. The determination of whether an
individual meets the applicable standard of conduct may be made by the
disinterested directors, independent legal counsel, or the shareholders.
Pennsylvania law also permits indemnification in connection with a proceeding
brought by or in the right of the Company to procure a judgment in its favor.
The Company's Articles of Incorporation provide that to the fullest extent
permitted by the PBCL, Directors will not be personally liable, as such, for
monetary damages for any action taken or for any failure to take any action. The
PBCL authorizes such a provision in the Articles of Incorporation provided that
such Director has not breached or failed to perform his duties, which breach
constitutes self-dealing, willful misconduct or recklessness, and that such
provision will not apply to the responsibility or liability of a Director
pursuant to a criminal statute or personal liability for payment of taxes.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
RECOMMENDATION BY THE BOARD OF DIRECTORS
The Unaffiliated Directors of the Company acting as a quorum of the full
Board, have unanimously approved the Offer and the Merger and determined that
the terms of the Offer and the Merger are fair to, and in the best interest of,
the shareholders of the Company, and unanimously recommend that the shareholders
of the Company accept the Offer and tender their Shares.
In making the Board recommendation and approving the Merger Agreement and
the transactions contemplated thereby, the Unaffiliated Directors considered a
number of factors, including, but not limited to, the following:
(a) the financial and other terms and conditions of the Merger
Agreement, including the proposed structure of the Offer and the Merger
involving a cash tender offer of $37.00 per Share for all outstanding
Shares to be followed by a merger for the same consideration;
(b) costs, risks and uncertainties associated with expansion of the
Company's distribution business to meet the needs of its global customers;
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(c) the fact that the value of $37.00 per Share cash price to be
received by the Company's shareholders in both the Offer and the Merger
represented a substantial premium over the market prices of the Shares over
various periods;
(d) the fact that neither the Offer nor the Merger is subject to any
financing condition, and that Parent has represented that it has available
to it from or through Merck KGaA or its affiliates sufficient funds to
consummate the Offer, the Merger and the transactions contemplated thereby;
(e) the separate opinions, each dated June 8, 1999, to the Company's
Board and Special Committee, of BT Alex. Brown Incorporated ("BT Alex.
Brown") (now merged with Deutsche Bank Securities Inc., and known as
Deutsche Banc Alex. Brown) and Warburg Dillon Read LLC ("Warburg Dillon
Read") to the effect that, as of the date of such opinions and based upon
and subject to certain matters stated therein, the $37.00 per Share cash
consideration to be received in the Offer and the Merger by the holders of
Shares (other than Merck KGaA and its affiliates) was fair, from a
financial point of view, to such holders. The full text of the written
opinions of BT Alex. Brown and Warburg Dillon Read dated June 8, 1999,
which set forth the assumptions made, matters considered and limitations on
the review undertaken, are attached as Annex A and Annex B, respectively,
to this document and are incorporated herein by reference. The opinions of
BT Alex. Brown and Warburg Dillon Read are directed to the Company's Board
and Special Committee, address only the fairness of the $37.00 per Share
cash consideration to be received in the Offer and the Merger by the
holders of Shares (other than Merck KGaA and its affiliates) from a
financial point of view, and do not constitute a recommendation to any
shareholder as to whether or not such shareholder should tender Shares in
the Offer or as to how such shareholder should vote with respect to the
proposed Merger. HOLDERS OF SHARES ARE URGED TO READ SUCH OPINIONS
CAREFULLY IN THEIR ENTIRETY; and
(f) the fact that, prior to consummation of the Offer, the
Unaffiliated Directors may withdraw their recommendation of the Offer if
the Company receives a superior unsolicited proposal to be acquired by a
third-party and the opinion of Drinker Biddle & Reath LLP that failure to
consider such proposal would result in a breach of the fiduciary duties of
the Board of Directors under applicable law. Upon the withdrawal of the
Unaffiliated Directors' recommendation of the Offer, Purchaser or Parent
must terminate the Offer. Under such circumstances, the Company would be
required to reimburse the Parent for its reasonable documented
out-of-pocket expenses in an amount up to $8 million.
The Board of Directors' approval and recommendation was based on the
totality of the information considered by it. The Board of Directors did not
assign relative weights to the factors considered by it or determine that any
one factor was of primary importance.
BACKGROUND
On September 18, 1998, the Company's Board of Directors designated a group
consisting of both Affiliated Directors and Unaffiliated Directors (the "Working
Group") to study various means by which the Company could expand its business
and better serve its major global customers. The Company's designees on the
Working Group were Jerrold B. Harris, Donald P. Nielsen and N. Stewart Rogers;
the Merck KGaA and Parent's designees were Wolfgang Honn, Dr. Harald J. Schroder
and Walter W. Zywottek.
At a meeting of the Working Group held on February 17, 1999, the Parent's
designees on the Working Group advised the Company's designees that Merck KGaA
and Parent were considering the possibility of formulating a plan or proposal
that could result in the acquisition of the Shares that were not already owned
by affiliates of Merck KGaA (the "Merck KGaA Shares"). The Company's designees
inquired as to whether Merck KGaA was also considering the possibility of
formulating a plan or proposal for the sale to the Company of the Merck KGaA
Shares. The Special Committee was advised by the Affiliated Director members of
the Working Group that no active consideration was being given to that
possibility.
At a meeting of the Company's Board of Directors held on February 18, 1999,
the Working Group informed the Company's Board of Directors of the substance of
the discussions among the members of the
16
<PAGE> 17
Working Group that had taken place the previous day. At that meeting, the
Company's Board of Directors appointed the Company's designees on the Working
Group to serve as a special committee of the Board of Directors of the Company
(the "Special Committee") to conduct any discussions that might occur regarding
the matters discussed within the Working Group on February 17, 1999 and to
receive and evaluate any plan or proposal that Merck KGaA and Parent might
formulate and present to the Company. In March, 1999 the Company retained BT
Alex. Brown and Warburg Dillon Read as financial advisors to the Company to
render advice and assistance to the Special Committee in the event that any such
plan or proposal were to be formulated by Merck KGaA and Parent and presented to
the Special Committee. The Company's Board of Directors also authorized Mr.
Harris to participate in preliminary due diligence discussions with Lehman
Brothers Inc., which Merck KGaA and Parent had retained as their financial
advisor ("Lehman Brothers") to assist them in connection with the possible
formulation of a plan or proposal for the acquisition of the Shares that are not
Merck KGaA Shares.
On March 29, 1999, the Affiliated Director members of the Working Group and
Merck KGaA's and Parent's legal and financial advisors met with the members of
the Special Committee and their legal and financial advisors to discuss
preliminarily the results of Merck KGaA's and Parent's deliberations. At that
meeting, the members of the Special Committee again inquired as to whether Merck
KGaA was also considering the possibility of formulating a plan or proposal for
the sale to the Company of the Merck KGaA Shares. The Special Committee was
again advised by the Affiliated Director members of the Working Group that no
active consideration was being given to that possibility.
A general discussion was held on April 16, 1999, in Germany, among Mr.
Harris, the Affiliated Director members of the Working Group and other
representatives of Merck KGaA and its affiliates. Thereafter, several telephone
conferences were held among the legal and financial advisors of the Special
Committee, Merck KGaA and Parent.
Another discussion was held between the Affiliated and Unaffiliated
Directors at the Board meeting held April 29, 1999 in conjunction with the
Company's Annual Meeting of Shareholders.
A telephone conference between members of the Special Committee and the
Affiliated Director members of the Working Group was held on May 25, 1999 and a
meeting was conducted by those parties on June 1, 1999, again for the purpose of
continuing the exploratory work and preliminary considerations of Merck KGaA and
its Affiliates, including further tentative discussions concerning price and
form of consideration.
On June 8, 1999, representatives of Parent, after completing additional due
diligence work, formulated a proposal in which the Merger and Offer were
contemplated, and thereafter on that date presented such proposal to a
representative of the Special Committee during a telephone conference.
At a special meeting of the Company's Board of Directors and Special
Committee held on June 8, 1999, at which only the Unaffiliated Directors
(constituting a quorum) were present, the proposal was considered at length. At
that meeting, the Company's legal counsel reviewed, and the Board discussed at
length, the terms of the Offer and of the Merger Agreement, including the
Company's ability to respond to unsolicited third-party proposals and to
terminate the Merger Agreement under certain circumstances consistent with the
fiduciary responsibilities of the Board of Directors, and the situations under
which the Company could be required to reimburse the Parent for its reasonable
documented out-of-pocket expenses up to $8 million. BT Alex. Brown and Warburg
Dillon Read then reviewed their respective financial analyses and rendered
separate opinions to the Company's Board of Directors and Special Committee as
to the fairness, from a financial point of view, to the holders of Shares (other
than Merck KGaA and its affiliates) of the $37.00 per Share cash consideration
to be received in the Offer and the Merger by such holders. Following further
in-depth discussion of the Offer, the Merger, the Merger Agreement and the
Shareholders Agreement, the Unaffiliated Directors, constituting a quorum of the
Board, unanimously found the Offer and the Merger to be fair to, and in the best
interests of, the Company and its shareholders, and recommended that the
shareholders accept the Offer and approve the Merger Agreement if required. The
Merger Agreement and the Shareholder Agreement were both unanimously approved.
17
<PAGE> 18
The Merger Agreement and the Shareholder Agreement were both executed after
the close of trading on the Nasdaq Stock Exchange on June 8, 1999, and the
Company issued a press release announcing the actions taken.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The Company has retained BT Alex. Brown and Warburg Dillon Read to act as
its financial advisors in connection with the Offer and the Merger. Pursuant to
the terms of their engagement, the Company has agreed to pay BT Alex. Brown and
Warburg Dillon Read for their services an aggregate financial advisory fee of
$9,150,000, such fee to be divided equally between BT Alex. Brown and Warburg
Dillon Read. A portion of such fee was payable upon the delivery by BT Alex.
Brown and Warburg Dillon Read of their respective opinions, with the balance
payable upon completion of the Merger. The Company also has agreed to reimburse
BT Alex. Brown and Warburg Dillon Read for travel and other out-of-pocket
expenses, including the fees and expenses of legal counsel, and to indemnify BT
Alex. Brown, Warburg Dillon Read and related parties against certain
liabilities, including liabilities under the federal securities laws, relating
to or arising out of their engagement. In the past, BT Alex. Brown and its
affiliates have provided financial services to the Company and Merck KGaA, and
Warburg Dillon Read and its predecessors have provided investment banking
services to Merck KGaA, unrelated to the Offer and the Merger, for which
services BT Alex. Brown and Warburg Dillon Read have received compensation. In
addition, affiliates of BT Alex. Brown and Warburg Dillon Read, including BT
Alex. Brown's parent entity, Deutsche Bank, and Warburg Dillon Read's parent
entity, UBS AG, currently have, or may have in the future, banking or financing
relationships with the Company and/or Merck KGaA. In the ordinary course of
business, BT Alex. Brown, Warburg Dillon Read and their respective successors
and affiliates may actively trade or hold the securities of the Company and
Merck KGaA for their own accounts or for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) Transactions in Securities. During the past 60 days, no transactions
in Shares have been effected by the Company, or, to the best of the Company's
knowledge, by any of its executive officers, directors, affiliates or
subsidiaries except for routine purchases pursuant to Company employee benefit
plans and except for execution of the Shareholder Agreement.
(b) Intent to Tender. To the best of the Company's knowledge, all
executive officers and directors of the Company presently intend to tender,
pursuant to the Offer, all Shares beneficially owned by them, except for those
Shares, if any, held by such persons which, if tendered could cause such persons
to incur liability under provisions of Section 16(b) of the Exchange Act.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Negotiations. Except as set forth in this Schedule 14D-9, no
negotiation is being undertaken or is underway by the Company in response to the
Offer that relates to or would result in (i) an extraordinary transaction, such
as a merger or reorganization involving the Company or any subsidiary thereof;
(ii) a purchase, sale or transfer of a material amount of assets by the Company
or any subsidiary thereof; (iii) a tender offer for or other acquisition of
securities by or of the Company; or (iv) any material change in the present
capitalization or dividend policy of the Company.
(b) Transactions and other Matters. Except as set forth in this Schedule
14D-9, there are no transactions, Board resolutions, agreements in principle or
signed contracts in response to the Offer that relate to or would result in one
or more of the events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
The information contained in all of the Exhibits referred to in Item a
below is incorporated herein by reference.
18
<PAGE> 19
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<S> <C>
(a)(1) Press Release, dated June 8, 1999, issued by the Company
(incorporated herein by reference to Exhibit 99.1 to the
Company's Current Report on Form 8-K dated June 10, 1999)
(a)(2) Opinion of BT Alex. Brown Incorporated dated June 8, 1999
(included as Annex A to this Schedule 14D-9)*
(a)(3) Opinion of Warburg Dillon Read LLC dated June 8, 1999
(included as Annex B to this Schedule 14D-9)*
(b) None
(c)(1) Agreement and Plan of Merger, dated June 8, 1999, among EM
Laboratories, Incorporated, EM Subsidiary, Inc. and VWR
Scientific Products Corporation (incorporated herein by
reference to Exhibit 2.1 to the Company's Current Report on
Form 8-K dated June 10, 1999)
(c)(2) Shareholder Agreement, dated June 8, 1999 among EM
Laboratories, Incorporated, EM Subsidiary, Inc. and the
Shareholders of the Company listed therein (incorporated
herein by reference to Exhibit 4.1 to the Company's Current
Report on Form 8-K dated June 10, 1999)
(c)(3) Common Share and Warrant Purchase Agreement dated February
27, 1995 between VWR Corporation and EM Industries,
Incorporated (incorporated by reference to Exhibit 10 of the
Company's Current Report on Form 8-K dated April 19, 1995)
(c)(4) Standstill Agreement between VWR Corporation and EM
Industries, Incorporated dated February 27, 1995
(incorporated by reference to Exhibit 4(a) of the Company's
Current Report on Form 8-K dated April 13, 1995)
(c)(5) Common Share and Debenture Purchase Agreement dated as of
May 24, 1995 between VWR Corporation and EM Industries,
Incorporated (incorporated by reference to Exhibit 2 of the
Company's definitive proxy statement filed with the
Securities and Exchange Commission on August 11, 1995)
(c)(6) Amendment Number One to the Standstill Agreement dated
September 15, 1995 by and among VWR Corporation, EM
Industries, Incorporated, and EM Laboratories, Incorporated
(incorporated by reference to Exhibit 4(b) of the Company's
Current Report on Form 8-K dated September 15, 1995)
(c)(7) Subordinated Debenture dated as of September 15, 1995 in the
principal amount of $135,000 payable to the order of EM
Laboratories, Incorporated (incorporated by reference to
Exhibit 4(c) of the Company's Current Report on Form 8-K
dated September 15, 1995)
(c)(8) Employment Agreement between Jerrold B. Harris and VWR
Corporation dated as of September 15, 1995 (incorporated by
reference to Exhibit 10(e) of the Company's Current Report
on Form 8-K dated September 15, 1995)
(c)(9) Change of Control Agreement between VWR Corporation and Paul
J. Nowak (incorporated by reference to Exhibit 10 of the
Company's Current Report on Form 8-K dated December 31,
1992)
(c)(10) Form of letter to stockholders of the Company dated June 14,
1999 (included in copies mailed to stockholders of the
Company)*
</TABLE>
- ---------------
* Included in documents mailed to shareholders.
19
<PAGE> 20
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
June 14, 1999 By:
/s/ DAVID M. BRONSON
------------------------------------
David M. Bronson
Senior Vice President Finance
20
<PAGE> 21
ANNEX A
[Letterhead of BT Alex. Brown Incorporated]
June 8, 1999
The Board of Directors and
Special Committee of the Board of Directors
VWR Scientific Products Corporation
1310 Goshen Parkway
Westchester, Pennsylvania 19380
Members of the Board and Special Committee:
BT Alex. Brown Incorporated ("BT Alex. Brown") has acted as financial
advisor to VWR Scientific Products Corporation ("VWR") in connection with the
proposed transaction involving VWR and Merck KGaA ("Merck") pursuant to the
Agreement and Plan of Merger, dated June 8, 1999 (the "Merger Agreement"), among
EM Laboratories, Incorporated, an indirect subsidiary of Merck ("EM"), EM
Subsidiary, Inc., a wholly owned subsidiary of EM ("Sub"), and VWR, which
provides, among other things, for (i) the commencement by Sub of a tender offer
to purchase all outstanding shares of the common stock, par value $1.00 per
share, of VWR (the "VWR Common Stock" and, such tender offer, the "Tender
Offer") at a purchase price of $37.00 per share, net to the seller in cash (the
"Cash Consideration"), and (ii) subsequent to the Tender Offer, the merger of
Sub with and into VWR (the "Merger" and, together with the Tender Offer, the
"Transaction") pursuant to which each outstanding share of VWR Common Stock not
previously tendered will be converted into the right to receive the Cash
Consideration.
You have requested BT Alex. Brown's opinion as to the fairness, from a
financial point of view, of the Cash Consideration to the holders of VWR Common
Stock (other than Merck and its affiliates).
In connection with BT Alex. Brown's role as financial advisor to VWR, and
in arriving at its opinion, BT Alex. Brown has reviewed certain publicly
available financial and other information concerning VWR and certain internal
analyses and other information furnished to or discussed with it by VWR and its
advisors. BT Alex. Brown has also held discussions with members of the senior
management of VWR regarding the business and prospects of VWR. In addition, BT
Alex. Brown has (i) reviewed the reported prices and trading activity for VWR
Common Stock, (ii) compared certain financial and stock market information for
VWR with similar information for certain other companies whose securities are
publicly traded, (iii) reviewed the financial terms of certain recent business
combinations which it deemed comparable in whole or in part, (iv) reviewed the
terms of the Merger Agreement, and (v) performed such other studies and analyses
and considered such other factors as it deemed appropriate.
BT Alex. Brown has not assumed responsibility for independent verification
of, and has not independently verified, any information, whether publicly
available or furnished to it, concerning VWR, including, without limitation, any
financial information, forecasts or projections considered in connection with
the rendering of its opinion. Accordingly, for purposes of its opinion, BT Alex.
Brown has assumed and relied upon the accuracy and completeness of all such
information and BT Alex. Brown has not conducted a physical inspection of any of
the properties or assets, and has not prepared or obtained any independent
evaluation or appraisal of any of the assets or liabilities, of VWR. With
respect to the financial forecasts and projections made available to BT Alex.
Brown and used in its analyses, BT Alex. Brown has assumed that they have been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the management of VWR as to the matters covered thereby. In
rendering its opinion, BT Alex. Brown expresses no view as to the reasonableness
of such forecasts and projections or the assumptions on which they are based. BT
Alex. Brown's opinion is
A-1
<PAGE> 22
The Board of Directors and
Special Committee of the Board of Directors
VWR Scientific Products Corporation
June 8, 1999
Page 2
necessarily based upon economic, market and other conditions as in effect on,
and the information made available to it as of, the date hereof.
For purposes of rendering its opinion, BT Alex. Brown has assumed that, in
all respects material to its analysis, the representations and warranties of
VWR, EM and Sub contained in the Merger Agreement are true and correct, VWR, EM
and Sub will each perform all of the covenants and agreements to be performed by
it under the Merger Agreement and all conditions to the obligations of each of
VWR, EM and Sub to consummate the Transaction will be satisfied without any
waiver thereof. BT Alex. Brown has also assumed that all material governmental,
regulatory or other approvals and consents required in connection with the
consummation of the Transaction will be obtained and that in connection with
obtaining any necessary governmental, regulatory or other approvals and
consents, or any amendments, modifications or waivers to any agreements,
instruments or orders to which either VWR, EM or Sub is a party or is subject or
by which it is bound, no limitations, restrictions or conditions will be imposed
or amendments, modifications or waivers made that would have a material adverse
effect on VWR or materially reduce the contemplated benefits of the Transaction
to VWR. In connection with its engagement, BT Alex. Brown was not requested to,
and did not, solicit third party indications of interest with respect to the
acquisition of all or a part of VWR.
This opinion is addressed to, and for the use and benefit of, the Board of
Directors and Special Committee of the Board of Directors of VWR and is not a
recommendation to any stockholder as to whether or not such stockholder should
tender shares of VWR Common Stock in the Tender Offer or how such stockholder
should vote with respect to matters relating to the proposed Merger. This
opinion is limited to the fairness, from a financial point of view, of the Cash
Consideration to the holders of VWR Common Stock (other than Merck and its
affiliates), and BT Alex. Brown expresses no opinion as to the merits of the
underlying decision by VWR to engage in the Transaction.
BT Alex. Brown, as a customary part of its investment banking business, is
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, private placements and
valuations for estate, corporate and other purposes. We have acted as financial
advisor to VWR in connection with the Transaction and will receive a fee for our
services, a significant portion of which is contingent upon the consummation of
the Transaction and a portion of which is payable upon delivery of this opinion.
BT Alex. Brown and its affiliates have in the past provided financial services
to VWR and Merck unrelated to the proposed Transaction, for which services BT
Alex. Brown and its affiliates have received compensation. BT Alex. Brown
maintains a market in VWR Common Stock and regularly publishes research reports
regarding the businesses and securities of VWR, Merck and other publicly traded
companies in the distribution industry. In the ordinary course of business, BT
Alex. Brown and its affiliates may actively trade or hold the securities and
other instruments and obligations of VWR and Merck for their own account and for
the accounts of customers and, accordingly, may at any time hold a long or short
position in such securities, instruments or obligations.
Based upon and subject to the foregoing, it is BT Alex. Brown's opinion
that, as of the date of this letter, the Cash Consideration to be received in
the Transaction by holders of VWR Common Stock (other than Merck and its
affiliates) is fair, from a financial point of view, to such holders.
Very truly yours,
/s/ BT ALEX. BROWN INCORPORATED
--------------------------------------
BT Alex. Brown Incorporated
A-2
<PAGE> 23
ANNEX B
[Letterhead of Warburg Dillon Read LLC]
June 8, 1999
The Board of Directors and
Special Committee of the Board of Directors
VWR Scientific Products Corporation
1310 Goshen Parkway
Westchester, Pennsylvania 19380
Dear Members of the Board and Special Committee:
We understand that VWR Scientific Products Corporation ("VWR") is
considering a transaction whereby (i) EM Laboratories, Incorporated ("EM"), an
indirect subsidiary of Merck KGaA ("Merck"), will cause EM Subsidiary, Inc., a
wholly owned subsidiary of EM ("Sub"), to commence a tender offer to purchase
all outstanding shares of the common stock, par value $1.00 per share, of VWR
("VWR Common Stock" and, such tender offer, the "Tender Offer") at a purchase
price of $37.00 per share, net to the seller in cash (the "Cash Consideration"),
and (ii) subsequent to the Tender Offer, Sub will be merged with and into VWR
(the "Merger" and, together with the Tender Offer, the "Transaction") pursuant
to which each outstanding share of VWR Common Stock not previously tendered will
be converted into the right to receive the Cash Consideration. The terms and
conditions of the Transaction are more fully set forth in the Agreement and Plan
of Merger, dated June 8, 1999, among EM, Sub and VWR (the "Merger Agreement").
You have requested our opinion as to the fairness, from a financial point
of view, of the Cash Consideration to be received in the Transaction by holders
of VWR Common Stock (other than Merck and its affiliates).
Warburg Dillon Read LLC ("WDR") has acted as financial advisor to the Board
of Directors and the Special Committee in connection with the Transaction and
will receive a fee for its services, a significant portion of which is
contingent upon the consummation of the Transaction and a portion of which is
payable upon delivery of this opinion. In the past, WDR and its predecessors
have provided investment banking services to Merck unrelated to the proposed
Transaction and received customary compensation for the rendering of such
services. In addition, WDR's affiliates or parent entity, UBS AG, currently
have, or may have in the future, a banking or financing relationship with VWR
and/or Merck. In the ordinary course of business, WDR, its successors and
affiliates may trade securities of VWR and Merck for their own accounts and,
accordingly, may at any time hold a long or short position in such securities.
Our opinion does not address VWR's underlying business decision to effect
the Transaction or constitute a recommendation to any stockholder of VWR as to
whether or not such stockholder should tender shares of VWR Common Stock in the
Tender Offer or how such stockholder should vote with respect to the Merger. At
your direction, we have not been asked to, nor do we, offer any opinion as to
the material terms of the Merger Agreement and the obligations thereunder, or
the form of the Transaction. In rendering this opinion, we have assumed, with
your consent, that each of VWR, EM and Sub will comply with all material terms
of the Merger Agreement, as applicable, and that the Transaction will be validly
consummated in accordance with its terms. In connection with our engagement, we
were not requested to, and we did not, solicit third party indications of
interest with respect to the acquisition of all or a part of VWR.
In arriving at our opinion, we have, among other things: (i) reviewed
certain publicly available business and historical financial information
relating to VWR; (ii) reviewed certain internal financial information and other
data relating to the business and financial prospects of VWR, including
estimates and financial forecasts
B-1
<PAGE> 24
The Board of Directors and
Special Committee of the Board of Directors
VWR Scientific Products Corporation
June 8, 1999
Page 2
prepared by the management of VWR, that were provided to us by VWR and not
publicly available; (iii) conducted discussions with members of the senior
management of VWR; (iv) reviewed publicly available financial and stock market
data with respect to certain other companies in lines of business we believe to
be generally comparable to those of VWR and Chemdex Corporation, a company in
which VWR has an equity interest; (v) compared the financial terms of the
Transaction with the publicly available financial terms of certain other
transactions which we believe to be generally relevant; (vi) reviewed the Merger
Agreement; and (vii) conducted such other financial studies, analyses, and
investigations, and considered such other information as we deemed necessary or
appropriate.
In connection with our review, with your consent, we have not assumed any
responsibility for independent verification of any of the information provided
to or reviewed by us for the purpose of this opinion and have, with your
consent, relied on its being complete and accurate in all material respects. In
addition, at your direction, we have not made any independent evaluation or
appraisal of any of the assets or liabilities (contingent or otherwise) of VWR,
nor have we been furnished with any such evaluation or appraisal. With respect
to the financial forecasts and estimates referred to above, we have assumed, at
your direction, that they have been reasonably prepared on a basis reflecting
the best currently available estimates and judgments of the management of VWR as
to the future performance of VWR. Our opinion is necessarily based on economic,
monetary, market and other conditions as in effect on, and the information made
available to us, as of the date of this letter.
Based upon and subject to the foregoing, it is our opinion that, as the
date hereof, the Cash Consideration to be received in the Transaction by the
holders of VWR Common Stock (other than Merck and its affiliates) is fair, from
a financial point of view, to such holders.
Very truly yours,
WARBURG DILLON READ LLC
B-2
<PAGE> 1
VWR SCIENTIFIC PRODUCTS CORPORATION
1310 GOSHEN PARKWAY
WEST CHESTER, PA 19380
June 14, 1999
Fellow Shareholders:
We are pleased to inform you that VWR Scientific Products Corporation has
entered into an Agreement and Plan of Merger with EM Laboratories, Incorporated,
the subsidiary of Merck KGaA that together with its affiliates already owns
approximately 49.89% of VWR. Pursuant to the Agreement a wholly-owned subsidiary
of EM Laboratories is commencing a tender offer to purchase all of the
outstanding shares of Common Stock of VWR for $37 per share in cash. The tender
offer will be followed by a merger in which holders of any shares of Common
Stock not tendered pursuant to the tender offer will receive the same cash price
paid per share pursuant to the tender offer. As a result of the merger, VWR will
become a wholly-owned subsidiary of EM Laboratories.
The Directors of VWR who are not representatives of Merck KGaA have
determined that the EM Laboratories tender offer and the merger are fair to and
in the best interests of VWR and its shareholders, and recommend that
shareholders accept the offer and tender their shares. These Directors intend to
tender their VWR shares to EM Laboratories.
Enclosed are the Offer to Purchase, dated June 14, 1999, Letter of
Transmittal and other related documents. These documents set forth the terms and
conditions of the tender offer. Attached is a copy of the Company's Schedule
14D-9, as filed with the Securities and Exchange Commission. The Schedule 14D-9
describes in more detail the reasons for the Directors' conclusions and contains
other important information relating to the tender offer. We urge you to
consider this information carefully.
The Board of Directors and the management and employees of VWR thank you
for your support.
Sincerely,
JERROLD B. HARRIS
Jerrold B. Harris
President and
Chief Executive Officer
