<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
Amendment No. 1
To
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
--------------
PSICOR, INC.
(Name of Subject Company)
--------------
PSICOR, INC.
(Name of Person(s) Filing Statement)
Common Stock, no par value
(Title of Class of Securities)
744901 109
(CUSIP Number of Class of Securities)
Denise E. Botticelli, Esq.
General Counsel
PSICOR, INC.
16818 Via Del Campo Court
San Diego, CA 92127
(619) 485-5599
(Name, address and telephone number of person
authorized to receive notice and communications on
behalf of the person(s) filing statement)
With a copy to:
Fredrick M. Miller, Esq.
Dykema Gossett PLLC
400 Renaissance Center
Detroit, Michigan 48243
(313) 568-6975
<PAGE>
The Schedule 14D-9 filed with the Securities and Exchange Commission on
November 29, 1995 (the "Schedule 14D-9") by PSICOR, Inc., a Pennsylvania
corporation, is hereby amended as set forth herein. Capitalized terms not
defined herein have the meanings assigned to them in the Schedule 14D-9.
ITEM 3. IDENTITY AND BACKGROUND.
(b) MERGER AGREEMENT. The Offer is being made pursuant to the Merger
Agreement which provides that, among other things, as soon as practicable after
the consummation of the Offer and satisfaction or waiver of all conditions to
the Merger, the Purchaser will be merged with and into the Company and the
Company will continue as the Surviving Corporation, and will be a wholly owned
subsidiary of Parent. At the effective time of the Merger (the "Effective
Time"), each issued and outstanding Share immediately prior to the Effective
Time (other than Shares held in the treasury of the Company or owned by
Purchaser, Parent or any direct or indirect wholly owned subsidiary of Parent or
Shares held by dissenting shareholders who perfect their dissenter's rights
under Pennsylvania law) will be converted into the right to receive the Offer
Price, without interest (the "Merger Consideration"). The Merger Agreement is
filed with this Statement as Exhibit 1 and incorporated herein by reference.
The information with respect to the Merger Agreement set forth in Section 11
of the Offer to Purchase under the caption "Merger Agreement" is incorporated
herein by reference.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The waiting period under the HSR Act applicable to the Offer expired at
11:59 p.m. on December 13, 1995.
The Company learned on December 1, 1995 that a complaint, captioned
Reiss, et al. v. PSICOR, Inc. and PSICOR Office Laboratories, Inc., Docket No.
UNN-L-6687-95 (the "Reiss Action"), was filed in the Superior Court of New
Jersey Law Division, Union County (the "New Jersey Court"), on November 21,
1995 and amended on November 27, 1995. The Reiss Action alleges fraud,
breach of contract and breach of the implied covenant of good faith by the
Company and POL stemming from, among other things, the termination of the
plaintiff's employment with POL which occurred on or about November 1, 1995.
On December 6, 1995 the Company learned that an Order to Show Cause (Without
Restraints) (the "New Jersey Order") was filed by the New Jersey Court on
December 4, 1995 which, among other things, scheduled a hearing for January
10, 1996 as to why a preliminary injunction
2
<PAGE>
should not be issued restraining and enjoining the Company and POL from, among
other things, divesting, selling, disposing of or otherwise transferring
ownership of POL. On December 6, 1995 the Company and POL filed a complaint
captioned PSICOR, Inc. and PSICOR Office Laboratories, Inc. v. Reiss, et al.,
Docket No. 695157, in the Superior Court of the State of California for the
County of San Diego alleging various claims against the plaintiffs in the Reiss
Action and others (collectively, the "Defendants") for, among other things,
breach of contract and fraud in connection with PSICOR's 1994 acquisition of POL
from the Defendants. Such complaint seeks unspecified damages and declaratory
relief. On December 15, 1995, the Company and POL filed a Motion to Dismiss the
Reiss Action based generally on improper venue. If such Motion to Dismiss is
not
3
<PAGE>
successful, the Company intends to seek the acceleration of the January 10, 1996
hearing contemplated by the New Jersey Order.
Under the terms of the Offer, Purchaser is not required to consummate
the Offer if, among other things, it determines that "if POL has not been sold
pursuant to a Higher POL Offer, ... all conditions precedent to the closing of
the transactions contemplated by the POL Agreement shall not be capable of being
satisfied promptly." It is a condition to the obligations of the Company,
Dunaway Holdings and POL to consummate the transactions contemplated by the POL
Purchase Agreement that "no temporary restraining order, preliminary injunction
or permanent injunction or other order precluding, restraining, enjoining,
preventing or prohibiting the consummation of the [POL Purchase] Agreement shall
have been issued by any Federal, state or foreign court or other governmental or
regulatory authority and remain in effect." No injunction has been issued
regarding the transactions contemplated by the POL Agreement, and the New Jersey
Order does not specifically prohibit the consummation of such transactions prior
to the January 10, 1996 hearing. However, if such an injunction is issued, or
if the issues raised by the New Jersey Order are not otherwise satisfactorily
resolved prior to the January 3, 1996 scheduled expiration of the Offer, the
Purchaser has advised the Company that it may review its rights and obligations
with respect to the Offer. The Company intends to vigorously defend the Reiss
Action and any attempt by the plaintiffs to enjoin or delay the sale of POL.
ITEM 9. MATERIALS TO BE FILED AS EXHIBITS.
Exhibit 7 Offer to Purchase dated November 29, 1995
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Amendment No. 1 to Schedule 14D-9
is true, complete and correct.
PSICOR, INC.
By: /s/ MICHAEL W. DUNAWAY
Michael W. Dunaway
Chairman and Chief
Executive Officer
Dated: December 18, 1995
4
<PAGE>
Exhibit Index
EXHIBIT NO.: DESCRIPTION
7 Offer to Purchase dated November 29, 1995
5
<PAGE>
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
PSICOR, INC.
at
$17.50 NET PER SHARE IN CASH
by
BAXTER CVG SERVICES II, INC.
a wholly owned subsidiary of
BAXTER HEALTHCARE CORPORATION
a wholly owned subsidiary of
BAXTER INTERNATIONAL INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, JANUARY 3, 1996
UNLESS THE OFFER IS EXTENDED.
------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED
AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF SHARES
WHICH, WHEN ADDED TO THE SHARES OWNED BY BAXTER HEALTHCARE CORPORATION
("PARENT"), BAXTER CVG SERVICES II, INC. ("PURCHASER") AND THEIR
AFFILIATES, CONSTITUTES AT LEAST 80% OF THE SHARES OUTSTANDING ON A
FULLY DILUTED BASIS (THE "MINIMUM CONDITION"). ALTHOUGH UNDER THE
TERMS OF THE MERGER AGREEMENT (AS HEREINAFTER DEFINED) PARENT AND
PURCHASER MAY WAIVE THE MINIMUM CONDITION, THEY DO NOT
CURRENTLY INTEND TO DO SO, AND PARENT AND PURCHASER MAY
TERMINATE THE MERGER AGREEMENT IF THE MINIMUM CONDITION IS
NOT SATISFIED. THE OFFER IS ALSO SUBJECT TO OTHER
TERMS AND CONDITIONS. SEE SECTION 14.
THE BOARD OF DIRECTORS OF PSICOR, INC. (THE "COMPANY") UNANIMOUSLY HAS
DETERMINED THAT
EACH OF THE OFFER AND THE MERGER (AS HEREINAFTER DEFINED) IS FAIR TO,
AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF THE COMPANY, AND
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS ACCEPT THE OFFER AND
TENDER THEIR SHARES PURSUANT TO THE OFFER. THE SHARES ARE
LISTED FOR TRADING ON THE NASDAQ
NATIONAL MARKET UNDER THE SYMBOL "PCOR". SEE SECTION
6.
PARENT AND PURCHASER HAVE ENTERED INTO THE TENDER AND OPTION AGREEMENT (THE
"TENDER AND OPTION AGREEMENT") WITH MICHAEL W. DUNAWAY, THE CHAIRMAN, CHIEF
EXECUTIVE OFFICER AND PRESIDENT OF THE COMPANY ("MR. DUNAWAY"), TRUDY V.
DUNAWAY, A DIRECTOR, VICE PRESIDENT, SECRETARY AND ASSISTANT TREASURER
OF THE COMPANY ("MRS. DUNAWAY"), AND THE DUNAWAY FAMILY TRUST, OF
WHICH MR. AND MRS. DUNAWAY ARE CO-SETTLORS AND CO-TRUSTEES (THE
"TRUST" AND, TOGETHER WITH MR. AND MRS. DUNAWAY, THE "SELLING
SHAREHOLDERS"), PURSUANT TO WHICH, AMONG OTHER THINGS, THE
SELLING SHAREHOLDERS HAVE GRANTED PARENT AND PURCHASER AN
OPTION TO ACQUIRE AT $17.50 PER SHARE AND HAVE AGREED TO
TENDER AND, IN THE EVENT SUCH IRREVOCABLE OPTION IS
NOT THERETOFORE EXERCISED, SELL IN THE OFFER, IN
EACH CASE UPON THE TERMS AND
SUBJECT TO THE CONDITIONS THEREOF, 1,931,426
SHARES OWNED BY THE SELLING SHAREHOLDERS (OR
APPROXIMATELY 38% OF THE COMPANY'S
OUTSTANDING SHARES CALCULATED ON
A FULLY DILUTED BASIS). SEE
SECTION 11.
------------------
IMPORTANT
ANY SHAREHOLDER DESIRING TO TENDER ALL OR ANY PORTION OF SUCH SHAREHOLDER'S
SHARES OF COMMON STOCK, NO PAR VALUE, OF THE COMPANY (THE "SHARES") SHOULD
EITHER (I) COMPLETE AND SIGN THE LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF)
IN ACCORDANCE WITH THE INSTRUCTIONS IN THE LETTER OF TRANSMITTAL AND MAIL OR
DELIVER IT TOGETHER WITH THE CERTIFICATE(S) EVIDENCING TENDERED SHARES, AND ANY
OTHER REQUIRED DOCUMENTS, TO THE DEPOSITARY OR TENDER SUCH SHARES PURSUANT TO
THE PROCEDURES FOR BOOK-ENTRY TRANSFER SET FORTH IN SECTION 3 OR (II) REQUEST
SUCH SHAREHOLDER'S BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER
NOMINEE TO EFFECT THE TRANSACTION FOR SUCH SHAREHOLDER. A SHAREHOLDER WHOSE
SHARES ARE REGISTERED IN THE NAME OF A BROKER, DEALER, COMMERCIAL BANK, TRUST
COMPANY OR OTHER NOMINEE MUST CONTACT SUCH BROKER, DEALER, COMMERCIAL BANK,
TRUST COMPANY OR OTHER NOMINEE IF SUCH SHAREHOLDER DESIRES TO TENDER SUCH
SHARES.
A SHAREHOLDER WHO DESIRES TO TENDER SHARES AND WHOSE CERTIFICATES EVIDENCING
SUCH SHARES ARE NOT IMMEDIATELY AVAILABLE, OR WHO CANNOT COMPLY WITH THE
PROCEDURES FOR BOOK-ENTRY TRANSFER DESCRIBED IN THIS OFFER TO PURCHASE ON A
TIMELY BASIS, MAY TENDER SUCH SHARES BY FOLLOWING THE PROCEDURES FOR GUARANTEED
DELIVERY SET FORTH IN SECTION 3.
QUESTIONS AND REQUESTS FOR ASSISTANCE, OR FOR ADDITIONAL COPIES OF THIS
OFFER TO PURCHASE, THE LETTER OF TRANSMITTAL OR OTHER TENDER OFFER MATERIALS,
MAY BE DIRECTED TO THE INFORMATION AGENT OR THE DEALER MANAGER AT THEIR
RESPECTIVE ADDRESSES AND TELEPHONE NUMBERS SET FORTH ON THE BACK COVER OF THIS
OFFER TO PURCHASE. A SHAREHOLDER MAY ALSO CONTACT BROKERS, DEALERS, COMMERCIAL
BANKS AND TRUST COMPANIES FOR ASSISTANCE CONCERNING THE OFFER.
------------------
THE DEALER MANAGER FOR THE OFFER IS:
CS First Boston
November 29, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<C> <S> <C>
INTRODUCTION.................................................................................................... 1
THE TENDER OFFER................................................................................................ 3
1. Terms of the Offer................................................................................... 3
2. Acceptance for Payment and Payment for Shares........................................................ 5
3. Procedures for Tendering Shares...................................................................... 6
4. Withdrawal Rights.................................................................................... 8
5. Certain Federal Income Tax Consequences.............................................................. 8
6. Price Range of Shares; Dividends..................................................................... 9
7. Certain Information Concerning the Company........................................................... 9
8. Certain Information Concerning Purchaser, Parent and International................................... 11
9. Source and Amount of Funds........................................................................... 13
10. Background of the Offer; Contacts with the Company................................................... 13
11. Purpose of the Offer; Plans for the Company; Merger Agreement; Tender and Option Agreement; and Other
Agreements.......................................................................................... 16
12. Dividends and Distributions; Changes in Stock........................................................ 31
13. Effect of the Offer on the Market for the Shares; NNM Quotation and Exchange Act Registration........ 31
14. Conditions of the Offer.............................................................................. 32
15. Regulatory Approvals; State Takeover Laws............................................................ 34
16. Fees and Expenses.................................................................................... 37
17. Miscellaneous........................................................................................ 38
Schedule I -- Information Concerning the Directors and Executive Officers of Parent, Purchaser and
International.................................................................................................. 39
Annex A -- Text of Subchapter 25E of the Pennsylvania Business Corporation Law.................................. A-1
</TABLE>
i
<PAGE>
To the Holders of Common Stock of PSICOR, Inc.:
INTRODUCTION
Baxter CVG Services II, Inc. ("Purchaser"), a Pennsylvania corporation and
wholly owned subsidiary of Baxter Healthcare Corporation ("Parent"), a Delaware
corporation and wholly owned subsidiary of Baxter International Inc.
("International"), a Delaware corporation, hereby offers to purchase all
outstanding shares of common stock, no par value (the "Shares"), of PSICOR,
Inc., a Pennsylvania corporation (the "Company"), at a price of $17.50 per
Share, net to the seller in cash, without interest thereon (the "Offer Price"),
upon the terms and subject to the conditions set forth in this Offer to Purchase
and in the related Letter of Transmittal (which, as amended from time to time,
together constitute the "Offer").
Tendering shareholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares pursuant to the
Offer. Purchaser will pay all charges and expenses of CS First Boston
Corporation ("CS First Boston"), as Dealer Manager (the "Dealer Manager"), First
Chicago Trust Company of New York, as Depositary (the "Depositary"), and
Georgeson & Company Inc., as Information Agent (the "Information Agent"),
incurred in connection with the Offer. See Section 16.
The Offer is conditioned upon, among other things, there having been validly
tendered and not withdrawn prior to the expiration of the Offer at least
4,099,261 Shares, which represents at least 80% of the Shares outstanding on a
fully diluted basis (the "Minimum Condition"). Assuming the purchase by the
Purchaser of the Selling Shareholders' 1,931,426 Shares, Purchaser will need to
purchase an additional 2,167,835 Shares to satisfy the Minimum Condition.
Although under the terms of the Merger Agreement (as hereinafter defined) Parent
and Purchaser may waive the Minimum Condition, they do not currently intend to
do so, and Parent and Purchaser may terminate the Merger Agreement if the
Minimum Condition is not satisfied.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") HAS, BY UNANIMOUS VOTE,
APPROVED EACH OF THE OFFER AND THE MERGER (AS HEREINAFTER DEFINED), HAS
DETERMINED THAT EACH OF THE OFFER AND THE MERGER IS FAIR TO AND IN THE BEST
INTERESTS OF THE COMPANY'S SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
The Company has advised Parent that Dain Bosworth Incorporated ("Dain
Bosworth") has delivered to the Board its opinion to the effect that as of
November 21, 1995, the $17.50 per share cash consideration to be received by
shareholders of the Company pursuant to the Offer and the Merger is fair to the
shareholders of the Company from a financial point of view. A copy of the
opinion of Dain Bosworth, which sets forth the factors considered and the
assumptions made by Dain Bosworth, is contained in the Company's Solicitation/
Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"), which is
being mailed to the Company's shareholders herewith.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of November 22, 1995 (the "Merger Agreement"), by and among Parent, Purchaser
and the Company. The Merger Agreement provides that, among other things, as soon
as practicable after the purchase of Shares pursuant to the Offer and the
satisfaction of the other conditions set forth in the Merger Agreement and in
accordance with the relevant provisions of the Pennsylvania Business Corporation
Law ("Pennsylvania Law"), Purchaser will be merged with and into the Company
(the "Merger"). Following consummation of the Merger, the Company will continue
as the surviving corporation (the "Surviving Corporation") and will be a wholly
owned subsidiary of Parent. At the effective time of the Merger (the "Effective
Time"), each issued and outstanding Share immediately prior to the Effective
Time (other than Shares held in the treasury of the Company or owned by
Purchaser, Parent or any direct or indirect wholly owned subsidiary of Parent or
Shares held by dissenting shareholders who perfect their dissenter's rights
under Pennsylvania Law) will be converted into the right to receive the Offer
Price, without interest (the "Merger Consideration"). The Merger Agreement is
more fully described in Section 11.
The Merger Agreement provides that, promptly upon the later of (i) the
purchase of and payment for any Shares (including without limitation all Shares
subject to the Tender and Option Agreement) by Purchaser or any other subsidiary
of Parent pursuant to the Offer or the Tender and Option Agreement (as
1
<PAGE>
hereinafter defined) and (ii) the expiration or waiver of the Company's right to
terminate the Merger Agreement in the event that the Company accepts an
"Acceptable Offer" (as hereinafter defined) prior to the later of (x) the
purchase of Shares pursuant to the Offer or the Tender and Option Agreement or
(y) January 3, 1996, Parent will be entitled to designate such number of
directors, rounded up to the next whole number, on the Board as is equal to the
product of the total number of directors on the Board (which, immediately prior
to such calculation, will not consist of more than four directors) multiplied by
the ratio of the aggregate number of Shares beneficially owned by Parent,
Purchaser and their affiliates to the total number of Shares outstanding. In the
Merger Agreement, the Company has agreed to take all actions necessary to cause
Parent's designees to be elected or appointed to the Board, including without
limitation increasing the size of the Board or securing the resignations of
incumbent directors. Notwithstanding the foregoing, until the Effective Time,
neither Parent nor Purchaser nor their affiliates will take any action as
directors or shareholders of the Company to cause the removal of Mr. Laverne W.
Rees and Mr. Whitney A. McFarlin, independent directors of the Company on the
date of the Merger Agreement.
The consummation of the Merger is subject to the satisfaction or waiver of
certain conditions, including, if required by law, the approval and adoption of
the Merger Agreement by the requisite vote of the shareholders of the Company.
See Section 11. Under Pennsylvania Law, except as otherwise described below, the
Merger contemplated by the Merger Agreement must be approved by the affirmative
vote of a majority of the Shares voted on a proposal to approve the Merger at a
duly convened meeting of the shareholders of the Company. However, under
Pennsylvania Law, if Purchaser acquires, pursuant to the Offer, the Tender and
Option Agreement or otherwise, at least 80% of the then outstanding Shares, the
parties will be able to cause the Merger under the Merger Agreement to become
effective, without the approval of the Company's shareholders.
In the event that Parent, Purchaser or any permitted assignee of Purchaser
acquires at least 80% of the then outstanding Shares, Parent, Purchaser and the
Company have agreed to take, at the request of Parent and subject to the
conditions of the Merger Agreement, all necessary and appropriate action to
cause the Merger to become effective as soon as practicable after such
acquisition, without approval of the Company's shareholders. See Section 11. If,
however, Purchaser does not acquire at least 80% of the then outstanding Shares
and a vote of the Company's shareholders is required under Pennsylvania Law, a
significantly longer period of time will be required to effect the Merger.
Although under the terms of the Merger Agreement, Parent and Purchaser may waive
the Minimum Condition, they do not currently intend to do so and Parent and
Purchaser may terminate the Merger Agreement if the Minimum Condition is not
satisfied.
Concurrently with the execution of the Merger Agreement, Mr. Michael W.
Dunaway, Chairman, Chief Executive Officer and President of the Company, Mrs.
Trudy V. Dunaway, the wife of Mr. Dunaway and a Director, Vice President,
Secretary and Assistant Treasurer of the Company, and The Dunaway Family Trust,
of which Mr. and Mrs. Dunaway are co-settlors and co-trustees (the "Trust" and,
together with Mr. and Mrs. Dunaway, the "Selling Shareholders") each,
individually and as trustee, entered into the Tender and Option Agreement, dated
as of November 22, 1995, with Parent and Purchaser (the "Tender and Option
Agreement"). The Selling Shareholders collectively own 1,931,426 Shares which
are currently subject to the Tender and Option Agreement, approximately 38% of
the outstanding Shares calculated on a fully diluted basis or approximately 44%
of the outstanding Shares. Pursuant to the Tender and Option Agreement, the
Selling Shareholders have agreed, among other things, (i) to grant Parent and
Purchaser an irrevocable option to buy all such Shares owned of record or
beneficially by them from and after the date of the Tender and Option Agreement
at $17.50 per Share (the "Option"), and (ii) to validly tender and, in the event
such Option is not theretofore exercised, sell all such Shares which are owned
of record or beneficially by them prior to the Expiration Date (as hereinafter
defined) and are subject to the Tender and Option Agreement in the Offer and
vote such Shares in favor of the Merger, in each case upon the terms and subject
to the conditions set forth in the Tender and Option Agreement. Pursuant to the
Tender and Option Agreement, Parent and Purchaser have the option to acquire
from the Selling Shareholders at $17.50 per Share all but not part of their
Shares on or after January 3, 1996 until the earlier of (i) the termination of
the Merger Agreement by mutual consent of the parties, or by the Company if (x)
prior to the purchase of Shares pursuant to the Offer or the Tender and Option
Agreement Parent or Purchaser materially breaches any of its representations,
warranties or covenants in the Merger Agreement or (y) Parent, Purchaser or
their
2
<PAGE>
affiliates shall have failed to commence the Offer by November 29, 1995, other
than in certain specified circumstances or (ii) May 21, 1996. The obligation of
the Selling Shareholders to sell their Shares pursuant to such option is subject
to certain conditions specified in the Tender and Option Agreement, including
without limitation the conditions that (i) Shares shall have been accepted for
payment pursuant to the Offer or the Offer shall have otherwise expired or been
terminated in accordance with its terms and (ii) neither Parent nor Purchaser
shall have the right to terminate the Merger Agreement generally in connection
with the failure to commence the Offer by November 29, 1995 or, in certain
circumstances, if the Offer shall have been terminated or expired prior to any
purchase of Shares thereunder. The Tender and Option Agreement is more fully
described in Section 11.
Concurrently with the execution and delivery of the Merger Agreement, as an
inducement to Parent to acquire the Company and as a condition to Parent's
willingness to enter into the Merger Agreement, the Company and Dunaway
Holdings, Inc. ("Dunaway Holdings"), a Delaware corporation, all of the capital
stock of which is owned by Mr. Dunaway, entered into a put option agreement (the
"POL Put Option"), with respect to a form of stock purchase agreement (the "POL
Purchase Agreement" and, together with the POL Put Option, the "POL Agreement"),
pursuant to which Dunaway Holdings has agreed to acquire from the Company, if
the Company exercises the POL Put Option, all of the outstanding shares of
PSICOR Office Laboratories, Inc. ("POL"), a New Jersey corporation and wholly
owned subsidiary of the Company, together with all of the Company's rights,
interests, liabilities and obligations relating to POL, if no higher offer for
POL is received by the Company. If, following exercise of the POL Put Option,
the Company accepts a Higher POL Offer (as hereinafter defined), the Merger
Agreement allows the Company to terminate the POL Agreement. See Section 11. The
Company has informed Purchaser that it has retained Dain Bosworth to seek
possible buyers for POL other than Dunaway Holdings and that Dain Bosworth has
commenced such process. It is a condition to the Offer that POL shall be sold to
a Higher POL Offer or that the POL Agreement be in full force and effect and all
conditions to the closing of the transactions contemplated thereby be capable of
being satisfied promptly, and it is a condition to the Merger that POL shall
have been sold, whether pursuant to the POL Agreement or a Higher POL Offer. See
Section 11. The POL Agreement is more fully described in Section 11.
The Company has informed Purchaser that, as of November 22, 1995, there were
4,360,142 Shares issued and outstanding, 95,779 Shares issued and held in the
treasury of the Company, 706,040 Shares reserved for issuance upon exercise of
outstanding options granted under the Company's option plans, 31,894 Shares
reserved for issuance upon expiration of the current "purchase period" under the
Company's Employee Stock Purchase Plan and 26,000 Shares reserved for issuance
under the Savannah Agreement (as hereinafter defined). As a result, as of such
date, the Minimum Condition would be satisfied if Purchaser acquired 2,167,835
Shares from shareholders other than the Selling Shareholders, given that
pursuant to the Tender and Option Agreement the Selling Shareholders have agreed
to tender their 1,931,426 Shares.
THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
THE TENDER OFFER
1. TERMS OF THE OFFER. Upon the terms and subject to the conditions of the
Offer (including without limitation the Minimum Condition and, if the Offer is
extended or amended, the terms and conditions of any extension or amendment),
Purchaser will accept for payment and pay for all Shares validly tendered prior
to the Expiration Date (as hereinafter defined) and not withdrawn subject to the
Minimum Condition and in accordance with Section 4. The term "Expiration Date"
means 12:00 Midnight, New York City time, on Wednesday, January 3, 1996, unless
and until Purchaser, in its sole discretion (but subject to the terms of the
Merger Agreement), will have extended the period of time during which the Offer
is open, in which event the term "Expiration Date" will mean the latest time and
date at which the Offer, as so extended by Purchaser, will expire. Pursuant to
the Merger Agreement, Parent and Purchaser have agreed that if prior to the
initial scheduled Expiration Date of the Offer the Company has received a Higher
POL Offer that the Company intends to accept, then at the Company's request
Purchaser will extend the Offer for fifteen business days in order to facilitate
the consummation of a transaction pursuant to such Higher POL Offer. See Section
11.
3
<PAGE>
Purchaser expressly reserves the right, in its sole discretion, at any time
and from time to time, to extend for any reason the period of time during which
the Offer is open, including the occurrence of any of the events specified in
Section 14, by giving oral or written notice of such extension to the
Depositary. During any such extension, all Shares previously tendered and not
withdrawn will remain subject to the Offer, subject to the rights of a tendering
shareholder to withdraw its Shares. See Section 4.
Subject to the applicable regulations of the Securities and Exchange
Commission (the "Commission"), Purchaser expressly reserves the right, in its
sole discretion (but subject to the terms of the Merger Agreement), at any time
and from time to time, (i) to delay acceptance for payment of, or, regardless of
whether such Shares were theretofore accepted for payment, payment for, any
Shares pending receipt of any regulatory approval specified in Section 15 or in
order to comply in whole or in part with any other applicable law, (ii) to
terminate the Offer and not accept for payment any Shares if any of the
conditions referred to in Section 14 has not been satisfied or upon the
occurrence of any of the events specified in Section 14 and (iii) to waive any
condition or otherwise amend the Offer in any respect by giving oral or written
notice of such delay, termination, waiver or amendment to the Depositary and by
making a public announcement thereof.
The Merger Agreement provides that, without the consent of the Company,
Purchaser will not decrease the Offer Price, decrease the number of Shares
sought, change the form of consideration to be paid in the Offer, or amend any
condition of the Offer in any manner adverse to the shareholders (other than
with respect to the Minimum Condition or insignificant changes or amendments),
except that if prior to the initial scheduled expiration date of the Offer the
Company has received a Higher POL Offer that the Company intends to accept, then
at the Company's request Purchaser will extend the Offer for fifteen business
days in order to facilitate the consummation of a transaction pursuant to such
Higher POL Offer; and FURTHER, that if on the initial scheduled expiration date
of the Offer (as it may be extended) all conditions to the Offer will not have
been satisfied or waived, the Offer may be extended from time to time until
February 1, 1996. In addition, the Merger Agreement provides that without the
consent of the Company, the Offer Price may be increased and the Offer may be
extended to the extent required by law in connection with such an increase in
the Offer Price. Purchaser will terminate the Offer upon any termination of the
Merger Agreement pursuant to the terms thereof.
Purchaser acknowledges that (i) Rule 14e-1(c) under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), requires Purchaser to pay the
consideration offered or return the Shares tendered promptly after the
termination or withdrawal of the Offer, and (ii) Purchaser may not delay
acceptance for payment of, or payment for (except as provided in clause (i) of
the first sentence of the second preceding paragraph), any Shares upon the
occurrence of any of the conditions specified in Section 14 without extending
the period of time during which the Offer is open.
Any such extension, delay, termination, waiver or amendment will be followed
as promptly as practicable by public announcement thereof, with such
announcement in the case of an extension to be made no later than 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date. Subject to applicable law (including Rules 14d-4(c), 14d-6(d)
and 14e-1 under the Exchange Act, which require that material changes be
promptly disseminated to shareholders in a manner reasonably designed to inform
them of such changes) and without limiting the manner in which Purchaser may
choose to make any public announcement, Purchaser will have no obligation to
publish, advertise or otherwise communicate any such public announcement other
than by issuing a press release to the Dow Jones News Service.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, Purchaser will extend the Offer to the extent required by Rules 14d-4(c),
14d-6(d) and 14e-1 under the Exchange Act.
Subject to the terms of the Merger Agreement, if, prior to the Expiration
Date, Purchaser should decide to decrease the number of Shares being sought or
to increase or decrease the consideration being offered in the Offer, such
decrease in the number of Shares being sought or such increase or decrease in
the consideration being offered will be applicable to all shareholders whose
Shares are accepted for payment pursuant to the Offer and, if at the time notice
of any such decrease in the number of Shares being sought or
4
<PAGE>
such increase or decrease in the consideration being offered is first published,
sent or given to holders of such Shares, the Offer is scheduled to expire at any
time earlier than the period ending on the tenth business day from and including
the date that such notice is first so published, sent or given, the Offer will
be extended at least until the expiration of such ten business day period. For
purposes of the Offer, a "business day" means any day other than a Saturday,
Sunday or Federal holiday and consists of the time period from 12:01 a.m.
through 12:00 Midnight, New York City time.
The Company has provided Purchaser with the Company's shareholder list and
security position listings for the purpose of disseminating the Offer to holders
of Shares. This Offer to Purchase, the related Letter of Transmittal, and other
relevant materials, will be mailed to record holders of Shares whose names
appear on the Company's shareholder list and will be furnished, for subsequent
transmittal to beneficial owners of Shares, to brokers, dealers, commercial
banks, trust companies and similar persons whose names, or the names of whose
nominees, appear on the shareholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and
subject to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of any such extension or amendment), Purchaser
will purchase, by accepting for payment, and will pay for, all Shares validly
tendered prior to the Expiration Date (and not properly withdrawn in accordance
with Section 4) promptly after the later to occur of (i) the Expiration Date and
(ii) the satisfaction or waiver of the conditions set forth in Section 14.
Subject to applicable rules of the Commission and the terms of the Merger
Agreement, Purchaser expressly reserves the right, in its discretion, to delay
acceptance for payment of, or payment for, Shares pending receipt of any
regulatory approvals specified in Section 15. See Section 15.
In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of (i) the certificates
evidencing such Shares (the "Share Certificates") or timely confirmation of a
book-entry transfer (a "Book-Entry Confirmation") of such Shares, if such
procedure is available, into the Depositary's account at The Depository Trust
Company, the Midwest Securities Trust Company or the Philadelphia Depository
Trust Company (each a "Book-Entry Transfer Facility" and, collectively, the
"Book-Entry Transfer Facilities") pursuant to the procedures set forth in
Section 3, (ii) the Letter of Transmittal (or facsimile thereof), properly
completed and duly executed and (iii) any other documents required by the Letter
of Transmittal.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, tendered Shares if, as and when Purchaser gives
oral or written notice to the Depositary of Purchaser's acceptance of such
Shares for payment. Payment for Shares accepted pursuant to the Offer will be
made by deposit of the purchase price therefor with the Depositary, which will
act as agent for tendering shareholders for the purpose of receiving payments
from Purchaser and transmitting payments to such tendering shareholders. Under
no circumstances will interest on the purchase price for Shares be paid by
Purchaser, regardless of any delay in making such payment.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer, or if Share Certificates are submitted
evidencing more Shares than are tendered, Share Certificates evidencing
unpurchased Shares will be returned, without expense to the tendering
shareholder (or, in the case of Shares tendered by book-entry transfer into the
Depositary's account at a Book-Entry Transfer Facility pursuant to the procedure
set forth in Section 3, such Shares will be credited to an account maintained at
such Book-Entry Transfer Facility), as promptly as practicable following the
expiration, termination or withdrawal of the Offer.
If, prior to the Expiration Date, Purchaser increases the consideration to
be paid per Share pursuant to the Offer, Purchaser will pay such increased
consideration for all such Shares purchased pursuant to the Offer, whether or
not such Shares were tendered prior to such increase in consideration.
Purchaser reserves the right to transfer or assign, in whole at any time, or
in part from time to time, to one or more of its affiliates, the right to
purchase all or any portion of the Shares tendered pursuant to the
5
<PAGE>
Offer, but any such transfer or assignment will not relieve Purchaser of its
obligations under the Offer and will in no way prejudice the rights of tendering
shareholders to receive payment for Shares validly tendered and accepted for
payment pursuant to the Offer.
3. PROCEDURES FOR TENDERING SHARES.
VALID TENDER OF SHARES. In order for Shares to be validly tendered pursuant
to the Offer, the Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees, and any
other required documents, must be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date and either (i) the Share Certificates evidencing tendered Shares
must be received by the Depositary at such address or Shares must be tendered
pursuant to the procedure for book-entry transfer described below and a
Book-Entry Confirmation must be received by the Depositary, in each case prior
to the Expiration Date, or (ii) the tendering shareholder must comply with the
guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
BOOK-ENTRY TRANSFER. The Depositary will establish an account with respect
to the Shares at each Book-Entry Transfer Facility for purposes of the Offer
within two business days after the date of this Offer to Purchase, and any
financial institution that is a participant in any of the Book-Entry Transfer
Facilities' systems may make book-entry delivery of Shares by causing a
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at a Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedures for transfer. However, although delivery of
Shares may be effected through book-entry transfer at a Book-Entry Transfer
Facility, the Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, and any other required documents, must, in any case, be
transmitted to and received by the Depositary at one of its addresses set forth
on the back cover of this Offer to Purchase prior to the Expiration Date or the
tendering shareholder must comply with the guaranteed delivery procedures
described below. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN
ACCORDANCE WITH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE
DELIVERY TO THE DEPOSITARY.
SIGNATURE GUARANTEE. Signatures on all Letters of Transmittal must be
guaranteed by a participant in the Security Transfer Agents Medallion Program or
the New York Stock Exchange Medallion Signature Guarantee Program or the Stock
Exchange Medallion Program (each, an "Eligible Institution"), unless the Shares
tendered thereby are tendered (i) by a registered holder of Shares who has not
completed either the box entitled "Special Delivery Instructions" or the box
entitled "Special Payment Instructions" on the Letter of Transmittal, or (ii)
for the account of an Eligible Institution. See Instruction 1 of the Letter of
Transmittal.
If a Share Certificate is registered in the name of a person other than the
signer of the Letter of Transmittal, or if payment is to be made, or a Share
Certificate not accepted for payment or not tendered is to be returned, to a
person other than the registered holder(s), then the Share Certificate must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear on the Share
Certificate, with the signature(s) on such Share Certificate or stock powers
guaranteed as described above. See Instructions 1 and 5 of the Letter of
Transmittal.
GUARANTEED DELIVERY. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's Share Certificates are not immediately
available or time will not permit all required documents to reach the Depositary
prior to the Expiration Date or the procedure for book-entry transfer cannot be
completed on a timely basis, such Shares may nevertheless be tendered if all the
following conditions are satisfied:
(i) the tender is made by or through an Eligible Institution;
6
<PAGE>
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser herewith, is
received by the Depositary as provided below prior to the Expiration Date;
and
(iii) in the case of a guarantee of Shares, the Share Certificates for
all tendered Shares, in proper form for transfer, or a Book-Entry
Confirmation, together with a properly completed and duly executed Letter of
Transmittal (or manually signed facsimile thereof) with any required
signature guarantee and any other documents required by such Letter of
Transmittal, are received by the Depositary within three National
Association of Securities Dealers, Inc. ("NASD") Automated Quotation System
National Market ("NNM") trading days after the date of execution of the
Notice of Guaranteed Delivery.
Any Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, facsimile transmission or mail to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares purchased
pursuant to the Offer will, in all cases, be made only after timely receipt by
the Depositary of (i) the Share Certificates evidencing such Shares, or a
Book-Entry Confirmation of the delivery of such Shares, if available, (ii) a
properly completed and duly executed Letter of Transmittal (or manually signed
facsimile thereof) and (iii) any other documents required by the Letter of
Transmittal.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tendered Shares pursuant to any of the procedures described above will be
determined by Purchaser, in its sole discretion, whose determination will be
final and binding on all parties. Purchaser reserves the absolute right to
reject any or all tenders of any Shares determined by it not to be in proper
form or if the acceptance for payment of, or payment for, such Shares may, in
the opinion of Purchaser's counsel, be unlawful. Purchaser also reserves the
absolute right, in its sole discretion, to waive any of the conditions of the
Offer or any defect or irregularity in any tender with respect to Shares of any
particular shareholder, whether or not similar defects or irregularities are
waived in the case of other shareholders. No tender of Shares will be deemed to
have been validly made until all defects and irregularities have been cured or
waived.
Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be final
and binding. None of Parent, Purchaser, the Dealer Manager, the Depositary, the
Information Agent nor any other person will be under any duty to give
notification of any defects or irregularities in tenders or will incur any
liability for failure to give any such notification.
APPOINTMENT AS PROXY. By executing a Letter of Transmittal as set forth
above, a tendering shareholder irrevocably appoints designees of Purchaser as
such shareholder's proxies, each with full power of substitution, to the full
extent of such shareholder's rights with respect to the Shares tendered by such
shareholder and accepted for payment by Purchaser (and any and all non-cash
dividends, distributions, rights, other Shares, or other securities issued or
issuable in respect of such Shares on or after November 22, 1995). All such
proxies will be considered coupled with an interest in the tendered Shares. This
appointment will be effective if, when, and only to the extent that, Purchaser
accepts such Shares for payment pursuant to the Offer. Upon such acceptance for
payment, all prior proxies given by such shareholder with respect to such Shares
and other securities will, without further action, be revoked, and no subsequent
proxies may be given. The designees of Purchaser will, with respect to the
Shares and other securities for which the appointment is effective, be empowered
to exercise all voting and other rights of such shareholder as they in their
sole discretion may deem proper at any annual, special, adjourned or postponed
meeting of the Company's shareholders, by written consent or otherwise, and
Purchaser reserves the right to require that, in order for Shares or other
securities to be deemed validly tendered, immediately upon Purchaser's
acceptance for payment of such Shares Purchaser must be able to exercise full
voting rights with respect to such Shares, except as otherwise limited by
applicable Pennsylvania Law.
TO PREVENT FEDERAL INCOME TAX BACKUP WITHHOLDING WITH RESPECT TO PAYMENT TO
CERTAIN SHAREHOLDERS OF THE PURCHASE PRICE OF SHARES PURCHASED PURSUANT TO THE
OFFER, EACH SUCH SHAREHOLDER MUST PROVIDE THE
7
<PAGE>
DEPOSITARY WITH SUCH SHAREHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER AND
CERTIFY THAT SUCH SHAREHOLDER IS NOT SUBJECT TO FEDERAL INCOME TAX BACKUP
WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9 IN THE LETTER OF TRANSMITTAL.
IF BACKUP WITHHOLDING APPLIES WITH RESPECT TO A SHAREHOLDER, THE DEPOSITARY IS
REQUIRED TO WITHHOLD 31% OF ANY PAYMENTS MADE TO SUCH SHAREHOLDER. SEE
INSTRUCTION 9 OF THE LETTER OF TRANSMITTAL.
Purchaser's acceptance for payment of Shares tendered pursuant to the Offer
will constitute a binding agreement between the tendering shareholder and
Purchaser upon the terms and subject to the conditions of the Offer.
4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer are
irrevocable except that such Shares may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment by Purchaser
pursuant to the Offer, may also be withdrawn at any time after January 27, 1996.
If Purchaser extends the Offer, is delayed in its acceptance for payment of
Shares or is unable to accept Shares for payment pursuant to the Offer for any
reason, then, without prejudice to Purchaser's rights under the Offer, the
Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares,
and such Shares may not be withdrawn except to the extent that tendering
shareholders are entitled to withdrawal rights as described in this Section 4.
Any such delay will be by an extension of the Offer to the extent required by
law.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder, if different from that of the person who tendered such
Shares. If Share Certificates evidencing Shares to be withdrawn have been
delivered or otherwise identified to the Depositary, then, prior to the physical
release of such Share Certificates, the serial numbers shown on such Share
Certificates must be submitted to the Depositary and the signature(s) on the
notice of withdrawal must be guaranteed by an Eligible Institution, unless such
Shares have been tendered for the account of an Eligible Institution. If Shares
have been tendered pursuant to the procedure for book-entry transfer as set
forth in Section 3, any notice of withdrawal must also specify the name and
number of the account at the Book-Entry Transfer Facility to be credited with
the withdrawn Shares.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Purchaser, in its sole discretion,
whose determination will be final and binding. None of Parent, Purchaser, the
Dealer Manager, the Depositary, the Information Agent or any other person will
be under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification.
Any Shares properly withdrawn will thereafter be deemed to not have been
validly tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered at any time prior to the Expiration Date by following one of the
procedures described in Section 3.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The receipt of cash for Shares
pursuant to the Offer or in the Merger will be a taxable transaction for Federal
income tax purposes and may also be a taxable transaction under applicable
state, local or foreign tax laws. In general, a shareholder will recognize gain
or loss for Federal income tax purposes equal to the difference between the
amount of cash received in exchange for the Shares sold and the shareholder's
adjusted tax basis in such Shares. Assuming the Shares constitute capital assets
in the hands of the shareholder, such gain or loss will be capital gain or loss
and will be long term capital gain or loss if the holder has held the Shares for
more than one year at the time of the sale. Gain or loss will be calculated
separately for each block of Shares tendered pursuant to the Offer.
The foregoing discussion may not be applicable to certain types of
shareholders, including shareholders who acquired Shares pursuant to the
exercise of stock options or otherwise as compensation, individuals who are not
citizens or residents of the United States and foreign corporations, or entities
that are otherwise subject to special tax treatment under the Internal Revenue
Code of 1986, as amended (the "Code").
8
<PAGE>
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND IS BASED UPON PRESENT LAW. SHAREHOLDERS ARE URGED TO
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE
OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICATION AND EFFECT OF THE
ALTERNATIVE MINIMUM TAX, AND STATE, LOCAL AND FOREIGN TAX LAWS.
6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are quoted on the NNM
under the symbol "PCOR." The following table sets forth, for the quarters
indicated, the high and low sales prices per Share on the NNM as reported in
publicly available sources for each of the quarters indicated.
<TABLE>
<CAPTION>
MARKET PRICES
---------------------------
HIGH LOW
----------- -----------
<S> <C> <C>
FISCAL YEAR ENDED SEPTEMBER 30, 1994:
First Quarter................................... $ 12 1/2 $ 11
Second Quarter.................................. 11 3/4 10
Third Quarter................................... 11 1/2 8 1/4
Fourth Quarter.................................. 10 3/4 8 1/4
FISCAL YEAR ENDED SEPTEMBER 30, 1995:
First Quarter................................... 10 3/4 8 3/4
Second Quarter.................................. 12 7/8 9 3/4
Third Quarter................................... 12 3/4 10 3/8
Fourth Quarter.................................. 11 3/4 8 1/2
FISCAL YEAR ENDED SEPTEMBER 30, 1996:
First Quarter (through November 28, 1995)....... 18 10 3/4
</TABLE>
On November 21, 1995, the last full trading day prior to the public
announcement of the execution of the Merger Agreement, the reported closing
sales price of the Shares on the NNM was $15 1/4 per Share. On November 28,
1995, the last full trading day prior to the date of this Offer to Purchase, the
reported closing sales price of the Shares on the NNM was $17 1/4 per Share.
SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
The Company has not paid a dividend on the Shares since the date on which
the Shares were first offered to the public. In the Merger Agreement, the
Company has agreed that it will not declare, set aside or pay any dividends on
or make other distributions in respect of any shares of its capital stock.
Notwithstanding the foregoing, under the Merger Agreement the Company, upon the
consummation by the Company of a transaction for a Higher POL Offer in
accordance with the Merger Agreement, may declare and pay a dividend in respect
of Shares (payable to the Company's record holders of Shares immediately prior
to the earlier of (i) Purchaser's acceptance of Shares for payment under the
Offer or (ii) the Effective Time) in an aggregate amount equal to the amount of
the excess of the net proceeds actually received by the Company in the
transaction for the Higher POL Offer (after taking into account all
out-of-pocket costs and expenses directly related to such transaction incurred
after the date of the Merger Agreement, including without limitation the fees
and expenses, to the extent reimbursable by the Company, of Dunaway Holdings
incurred in connection with the POL Agreement and of Dain Bosworth in connection
with marketing POL) over the $4 million to be received by the Company in the
transaction contemplated by the POL Agreement as of the date of the Merger
Agreement. See Section 11. Moreover, under certain loan agreements, the Company
would be required to obtain the lender's consent prior to paying dividends.
7. CERTAIN INFORMATION CONCERNING THE COMPANY. The information concerning
the Company contained in this Offer to Purchase, including financial
information, has been taken from or based upon publicly available documents and
records on file with the Commission and other public sources. Neither Parent nor
Purchaser assumes any responsibility for the accuracy or completeness of the
information concerning the Company contained in such documents and records or
for any failure by the Company to disclose events which may have occurred or may
affect the significance or accuracy of any such information but which are
unknown to Parent or Purchaser.
The Company is a Pennsylvania corporation and its principal executive
offices are located at 16818 Via del Campo Court, San Diego, California 92127.
The telephone number of the Company at such offices is
9
<PAGE>
(619) 485-5599. The Company provides skilled personnel, disposable supplies and
capital equipment to hospitals for the performance of open-heart surgery and
related procedures and provides on-site laboratory testing system facilities to
individual physicians and group medical practices through its POL subsidiary.
The Company was incorporated in Pennsylvania. The Company provides contract
services to more than 400 hospitals in 38 states.
FINANCIAL INFORMATION. Set forth below is certain selected consolidated
financial information relating to the Company and its subsidiaries which has
been excerpted or derived from the financial statements contained in the
Company's Annual Report on Form 10-K for the fiscal year ended September 30,
1994 (the "Company Form 10-K") and for 1995 an earnings release issued by the
Company on November 29, 1995 disclosing certain financial information for the
Company's fiscal year ended September 30, 1995 (the "Earnings Release"). More
comprehensive financial information is included in the Company Form 10-K, the
Earnings Release and other documents filed by the Company with the Commission.
The financial information that follows is qualified in its entirety by reference
to the Company Form 10-K and other documents, including the financial statements
and related notes contained therein. The Company Form 10-K and other documents
may be examined and copies may be obtained from the offices of the Commission in
the manner set forth below. Copies of the Earnings Release may be obtained from
the Company.
PSICOR, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue.......................................................................... $ 97,353 $ 82,066 $ 76,918
Gross Profit..................................................................... 16,001 16,394 16,581
Operating Profit................................................................. 4,691 7,045 7,647
Other Income (Expense), net...................................................... (1,094) 492 468
Income before Taxes.............................................................. 3,538 7,520 8,115
Net Income....................................................................... 1,284 4,479 4,532
PER SHARE INFORMATION:
Earnings Per Share............................................................... $ .29 $ 1.02 $ 1.02
Number of Shares Used in Computation............................................. 4,428 4,389 4,433
</TABLE>
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Total Current Assets............................................................. $ 33,394 $ 26,930 $ 26,465
Total Assets..................................................................... 54,844 50,014 43,195
Current Portion of Long-Term Liabilities......................................... 409 262 212
Total Current Liabilities........................................................ 14,036 11,031 8,752
Total Long-Term Liabilities...................................................... 1,036 818 1,002
Total Shareholders' Equity....................................................... 39,771 38,165 33,441
</TABLE>
The Company is subject to the information and reporting requirements of the
Exchange Act and is required to file reports and other information with the
Commission relating to its business, financial condition and other matters.
Information, as of particular dates, concerning the Company's directors and
officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities, any material interests of such persons in
transactions with the Company and other matters is required to be disclosed in
proxy statements distributed to the Company's shareholders and filed with the
Commission. These reports, proxy statements and other information should be
available for inspection at the public reference facilities of the Commission
located in Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
also should be available for inspection and copying at prescribed rates at the
following regional offices of the Commission: Seven World Trade Center, New
York, New York 10048; and 500 West Madison
10
<PAGE>
Street, Suite 1400, Chicago, Illinois 60661. Copies of this material may also be
obtained by mail, upon payment of the Commission's customary fees, from the
Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549.
Reports, proxy statements and other information concerning the Company should
also be available for inspection at the offices of the NASD, Reports Section,
1735 K Street, N.W., Washington, D.C. 20006. Except as otherwise noted in this
Offer to Purchase, all of the information with respect to the Company and its
affiliates set forth in this Offer to Purchase has been derived from publicly
available information.
8. CERTAIN INFORMATION CONCERNING PURCHASER, PARENT AND INTERNATIONAL.
PURCHASER. Purchaser, a newly incorporated Pennsylvania corporation, has
not conducted any business other than in connection with the Offer, the Merger
Agreement and the Tender and Option Agreement. All of the issued and outstanding
shares of capital stock of Purchaser are beneficially owned by Parent. The
principal executive offices of Purchaser are located at One Baxter Parkway,
Deerfield, Illinois 60015. The telephone number of Purchaser at such offices is
(708) 948-2000.
PARENT. Parent is a Delaware corporation. The principal executive offices
of Parent are located at One Baxter Parkway, Deerfield, Illinois 60015. The
telephone number of Parent at such offices is (708) 948-2000. Parent is the
principal U.S. operating subsidiary of International.
INTERNATIONAL. International is a Delaware corporation. The principal
executive offices of International are located at One Baxter Parkway, Deerfield,
Illinois 60015. The telephone number of International at such offices is (708)
948-2000. Through its subsidiaries, International is the leading manufacturer
and marketer of health-care products and services in nearly 100 countries
worldwide. International concentrates research and development programs in
biotechnology, cardiovascular medicine, renal therapy and related medical
fields.
On November 28, 1995, International announced a plan to spin off in 1996
certain of its assets in order to create two public companies: (i) a global
medical-technology company, which will continue to be known as "Baxter
International, Inc." and consist of International's high-growth
medical-technology and international businesses, including Biotechnology, Renal
Therapy, Cardiovascular Medical, International Hospital and Intravenous Systems,
and (ii) a health-care cost management company, which will consist of
International's cost management, U.S. distribution and surgical products
operations. It is currently contemplated that, following the acquisition of the
Company by Parent and Purchaser, the Company will be part of the new
medical-technology company.
International is subject to the information and reporting requirements of
the Exchange Act and is required to file reports and other information with the
Commission relating to its business, financial condition and other matters.
Information, as of particular dates, concerning International's directors and
officers, their remuneration, stock options granted to them, the principal
holders of International's securities, any material interests of such persons in
transactions with International and other matters is required to be disclosed in
proxy statements distributed to International's shareholders and filed with the
Commission. These reports, proxy statements and other information should be
available for inspection and copies may be obtained from the Commission in the
same manner as set forth for the Company in Section 7. International's Common
Stock is listed on the New York Stock Exchange, Inc. ("NYSE"), and reports,
proxy statements and other information concerning International also should be
available for inspection at the offices of the NYSE, 20 Broad Street, New York,
New York 10005.
Set forth below are certain selected consolidated financial data with
respect to International and its subsidiaries for International's last three
fiscal years, excerpted or derived from audited financial statements presented
in International's 1994 Annual Report to Shareholders and from the unaudited
financial statements contained in International's Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30, 1995, in each case filed by
International with the Commission. More comprehensive financial information is
included in such reports and other documents filed by International with the
Commission. The financial information summary set forth below is qualified in
its entirety by reference to those reports and other documents which have been
filed with the Commission and all the financial information and related notes
contained therein.
11
<PAGE>
BAXTER INTERNATIONAL INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA (1)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------- -------------------------------
1995 1994 1994 1993 1992
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales....................................................... $ 7,239 $ 6,824 $ 9,324 $ 8,879 $ 8,471
Income (loss) before income taxes............................... 660 565 801 (330) 753
Net income (loss)............................................... 473 424 596 (198) 441
PER SHARE INFORMATION:
PRIMARY EARNING (LOSS) PER COMMON SHARE
Continuing operations........................................... $ 1.70 $ 1.52 $ 2.13 $ (.97) $ 1.99
Net income...................................................... 1.70 1.52 2.13 (.72) 1.56
FULLY DILUTED EARNINGS (LOSS) PER COMMON SHARE
Continuing operations........................................... 1.67 1.51 2.11 (.97) 1.97
Net income...................................................... 1.67 1.51 2.11 (.72) 1.54
AVERAGE NUMBER OF COMMON SHARES AND EQUIVALENTS OUTSTANDING
Primary......................................................... 278 279 280 277 279
Fully diluted................................................... 283 281 282 277 282
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------------
1994 1993 1992
AT SEPTEMBER 30, --------- --------- ---------
1995
----------------
(UNAUDITED)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................................................ $ 1,507 $ 1,574 $ 1,489 $ 1,221
Total assets................................................... 10,276 10,002 10,545 9,155
Goodwill and other intangible assets........................... 2,218 2,290 2,490 2,488
Total assets excluding goodwill and other intangible assets.... 8,058 7,712 8,055 6,667
Notes payable to banks......................................... 96 131 271 351
Current maturities of long-term debt and lease obligations..... 163 400 551 149
Long-term debt and lease obligations........................... 2,358 2,341 2,800 2,368
Total debt..................................................... 2,617 2,872 3,622 2,868
Shareholders' equity........................................... 3,552 3,720 3,185 3,795
</TABLE>
(1) No pro forma financial information is currently available for International
as a result of the November 28, 1995 announcement. See "International"
above.
The name, citizenship, business address, principal occupation or employment
and five-year employment history for each of the directors and executive
officers of Purchaser, Parent and International are set forth in Schedule I
hereto.
Except as described in this Offer to Purchase, (i) none of International,
Purchaser, Parent or, to the best knowledge of Purchaser and Parent, any of the
persons listed in Schedule I to this Offer to Purchase or any associate or
majority-owned subsidiary of International, Purchaser, Parent or any of the
persons so listed beneficially owns or has any right to acquire, directly or
indirectly, any Shares and (ii) none of International,
12
<PAGE>
Purchaser, Parent nor, to the best knowledge of Purchaser and Parent, any of the
persons or entities referred to above nor any director, executive officer or
subsidiary of any of the foregoing has effected any transaction in the Shares
during the past 60 days.
Except as provided in the Merger Agreement, the Tender and Option Agreement
and as otherwise described in this Offer to Purchase, none of International,
Purchaser, Parent or, to the best knowledge of International, Purchaser and
Parent, any of the persons listed in Schedule I to this Offer to Purchase, has
any contract, arrangement, understanding or relationship with any other person
with respect to any securities of the Company, including, but not limited to,
any contract, arrangement, understanding or relationship concerning the transfer
or voting of such securities, joint ventures, loan or option arrangements, puts
or calls, guaranties of loans, guaranties against loss or the giving or
withholding of proxies. Except as set forth in this Offer to Purchase, since
October 1, 1992, none of International, Purchaser, Parent or, to the best
knowledge of International, Purchaser and Parent, any of the persons listed on
Schedule I hereto, has had any business relationship or transaction with the
Company or any of its executive officers, directors or affiliates that is
required to be reported under the rules and regulations of the Commission
applicable to the Offer. Except as set forth in this Offer to Purchase, since
October 1, 1992, there have been no contacts, negotiations or transactions
between any of International, Purchaser, Parent, or any of their respective
subsidiaries, or, to the best knowledge of International, Purchaser and Parent,
any of the persons listed in Schedule I to this Offer to Purchase, on the one
hand, and the Company or its affiliates, on the other hand, concerning a merger,
consolidation or acquisition, tender offer or other acquisition of securities,
an election of directors or a sale or other transfer of a material amount of
assets. Since October 1, 1992, Parent and its affiliates have sold to the
Company hospital supply products consisting primarily of miscellaneous
cardiovascular products and supplies in the following approximate amounts in
each calendar year: 1995 to date, $2.0 million; 1994, $1.9 million; 1993, $1.4
million; 1992, $1.1 million.
9. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by
Purchaser and Parent to consummate the Offer and the Merger (including the
cash-out of stock options) and to pay related fees and expenses (inclusive of
estimated expenses of the Company) is estimated to be approximately $84 million.
Purchaser will obtain all of such funds from Parent or its affiliates, including
without limitation International. International will cause the funds required
for the foregoing transactions to be made available, and Parent will provide
such funds for the foregoing transactions from its working capital.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY. INFORMATION SET
FORTH BELOW REGARDING THE COMPANY, OR DISCUSSIONS TO WHICH REPRESENTATIVES OF
INTERNATIONAL, PARENT AND PURCHASER WERE NOT PARTICIPANTS, WAS PROVIDED BY THE
COMPANY.
In early 1994, Mr. Olav Bergheim (at the time the Group Vice President of
Parent and President of Parent's Cardiovascular Group) and Mr. R. King Nelson
(President of Parent's Bentley division), approached the Company to discuss
Parent's interest in pursuing a possible business transaction with the Company
in connection with a plan to combine certain operations of Parent's
cardiovascular supply business with that of certain other perfusion services
providers, including the Company. Thereafter, these individuals engaged in
preliminary discussions with Mr. Dunaway and another officer of the Company,
concerning Parent's plan, and with Mr. Robert Nielson, a representative of Price
Waterhouse, financial advisor to Parent. In April 1994 Parent and the Company
entered into a mutual confidentiality agreement in order that both parties could
exchange confidential information to explore the merits of Parent's plan. In
August 1994, Messrs. Bergheim and Nelson, Mr. John H. Kehl, Jr., a senior
officer of Parent's Cardiovascular Group, Mr. Dunaway and two other officers of
the Company, met during a visit of a manufacturing facility affiliated with
Parent in Puerto Rico. Thereafter, the parties determined not to proceed with
any such transaction at that time.
In April 1995, following Parent's acquisition of another company engaged in
the perfusion business, Mr. Michael A. Mussallem, the then Group Vice President
of Parent and President of Parent's Cardiovascular Group, contacted Mr. Dunaway
in order to reiterate Parent's interest in engaging in a possible business
combination transaction with the Company and to determine whether the Company
would have an interest in reopening discussions about a possible acquisition of
the Company by Parent for cash. Shortly thereafter,
13
<PAGE>
Mr. Mussallem and Mr. Lester B. Knight, Executive Vice President of Parent, met
with Mr. Dunaway to discuss generally the Company's business and prospects. In
early May 1995 the parties discussed the possibility of providing Parent with
certain information about the Company in connection with their discussions. Over
the next few months the parties periodically discussed a number of alternative
transaction structures and possible related value ranges but could not agree on
a transaction structure or price.
On July 20, 1995 the Company reported its financial results for the third
quarter of fiscal 1995. Among other things, the Company reported a decline in
its net income and earnings per share. In particular, the Company's earnings per
share for the third quarter and the first nine months of fiscal 1995 declined
54% and 19%, respectively, from earnings per share for the same periods in
fiscal 1994. The Company attributed the decline in net income primarily to
continued losses from its physician office laboratory operations (conducted by
POL) and lower-than-anticipated income from operations of the perfusion business
primarily due to continuing pricing pressures on sales of disposable supplies.
From July 17 through August 6, 1995, there were numerous telephone
conversations between legal counsel and financial advisors for both Parent and
the Company, with Parent's representatives seeking a determination of the
Company's interest in engaging in discussions regarding a possible transaction
with Parent.
On August 7, 1995 the Board met with legal and financial advisors to review
strategic alternatives and other matters, including Parent's expressed
interests. The Board concluded that, while no decision had been made as to
whether the Company should be sold, it was interested in receiving a more
detailed explanation of what Parent was considering with respect to the Company.
On August 11, 1995 Parent delivered to the Company an offer to acquire all
of the outstanding shares of capital stock of the Company for $14 per share in a
transaction proposed to be structured as a tender offer followed by a merger at
the same price per share. The offer was conditioned upon it not being publicly
disclosed by the Company. Other proposed terms included (i) an option to
purchase Mr. Dunaway's shares at the same price, (ii) the Company's agreement
not to "shop" the proposal, (iii) a termination fee payable to Parent and (iv)
the right of Parent to match any offers that the Company might receive for the
entire Company or the perfusion business.
On August 11 and August 15, 1995 the Board met by conference telephone calls
to consider Parent's proposal and determined that, while it was not interested
in pursuing a possible transaction at the price per share proposed by Parent, it
might be willing to consider a possible transaction at a higher price.
From August 15 through August 18, 1995, representatives of both parties
continued telephone conversations, with the Company's advisors suggesting that
Parent agree to a confidentiality and standstill agreement in order for the
Company to share with Parent the reasons why the Company believed that a higher
price was warranted before further discussions could take place. During these
conversations, legal counsel for Parent advised legal counsel for the Company
that Parent was not interested in acquiring POL and suggested ways in which POL
could be spun off from the Company or otherwise disposed of in order to enable
Parent to proceed. On August 18, 1995 representatives of CS First Boston advised
representatives of Dain Bosworth that Parent would not sign a confidentiality
agreement and standstill agreement until the Company responded satisfactorily to
certain inquiries, including whether Mr. Dunaway was willing to acquire POL and
if so, for what price.
The Board of Directors of the Company considered this matter at a special
meeting held by conference telephone call on August 19, 1995. Legal counsel was
directed to respond to Parent's inquiries. In particular, the Board declined to
comment with respect to the value of POL or whether Mr. Dunaway would acquire
POL. Thereafter, conversations continued between the legal and financial
advisors of Parent and the Company.
At Parent's request, on August 30, 1995 Messrs. Dunaway and Mussallem and
their respective legal advisors met to discuss alternative structures for a
possible transaction and other methods by which Parent could increase the price
per share it might be willing to pay to acquire the Company's perfusion
business.
14
<PAGE>
Among other things, the alternatives discussed included the possibility of the
Company selling or engaging in a spinoff of its subsidiary, POL, in connection
with a possible acquisition of the rest of the Company's business by Parent. No
agreement was reached by the parties at this time.
During the first week of September, 1995 Mr. Mussallem contacted Mr. Dunaway
to further explore potential ways for Parent to increase the value it might be
willing to pay in a possible acquisition of the Company. During the next week,
Mr. Mussallem again contacted Mr. Dunaway and indicated that, subject to
completion of Parent's due diligence review of the Company, it might be willing
to consider acquiring all of the outstanding shares of capital stock of the
Company in a transaction similar to that contemplated by the Offer and Merger at
$17 per share, and that Parent would not require that POL be disposed of prior
to a transaction with Parent. Mr. Dunaway agreed to take the information under
advisement and respond at a future time, but did not indicate whether any such
transaction or consideration might be acceptable. Nonetheless, the parties
decided to direct their legal representatives to begin discussing the other
terms of a possible transaction.
Over the next two weeks the parties' legal advisors discussed the general
terms of the Merger Agreement and the Tender and Option Agreement other than the
consideration payable thereunder, including (i) the option to purchase Mr.
Dunaway's shares at the same price, (ii) the Company's agreement not to "shop"
the possible transaction, (iii) certain rights of the Company related to the
exercise of the Board's fiduciary duties, (iv) a termination fee payable to
Parent, (v) the right of Parent to match any offers that might be received for
the Company, and (vi) certain employee matters. Parent's legal advisors also
raised the possibility of Parent receiving certain nonpublic information about
the Company, and the Company's legal advisors responded that Parent's agreements
to enter into a confidentiality and standstill agreement would be a condition to
providing any such nonpublic information.
On September 28, 1995 Mr. Dunaway, Mr. Mussallem and their respective legal
advisors again met to discuss a possible transaction including, among other
things, the terms of the Merger Agreement, the Tender and Option Agreement and
other matters relating to a possible transaction. Mr. Mussallem indicated that
Parent might be willing to engage in a transaction similar to that contemplated
by the Offer and the Merger at $17.50 per share provided that all other material
terms were as Parent had proposed and subject to satisfactory completion of due
diligence with respect to nonpublic information as yet to be provided to Parent.
No agreement was reached, but Mr. Dunaway indicated a willingness to present the
proposal to the Board if legal counsel could reach consensus on various terms of
a possible proposal. The parties directed their legal representatives to
continue reviewing the possible terms.
On October 16, 1995, Parent and the Company entered into the Confidentiality
Agreement (as hereinafter defined) and, commencing on October 17, 1995, members
of Parent's senior management conducted a due diligence review of non-public
information regarding the Company at the Company's offices.
On the afternoon of October 20, 1995, legal counsel for Parent contacted
legal counsel for the Company and indicated that the results of Parent's due
diligence had caused it to reconsider its decision to acquire all of the
Company, and that Parent was prepared to proceed only if POL was disposed of
prior to the completion of any transaction with Parent. The suggestion was made
by Parent that Mr. Dunaway be required to enter into an agreement to agree to
acquire POL on terms satisfactory to Parent, if no higher offer for POL was
received, and that this would be a condition precedent to Parent's willingness
to proceed with the transaction.
A special meeting of the Board was held by conference telephone call on
October 24 to discuss Parent's requirements. Alternatives with respect to POL,
including a possible spin-off, were discussed. Mr. Dunaway advised the Board
that he was not interested in acquiring POL on the terms that had been proposed
by Parent. It was determined that Parent should be notified of this fact and
told that the Board was willing to move forward on the original proposal. Upon
receiving this message from counsel to the Company, representatives of Parent
advised the Company's counsel that Parent was not willing to proceed on that
basis.
Accordingly, from October 24 through November 3, 1995, Mr. Dunaway and
representatives of Parent discussed possible terms of the purchase of POL by Mr.
Dunaway. On November 3, 1995, a special meeting of the Board of Directors of the
Company was held by conference telephone call, wherein Mr. Dunaway advised the
Board of the terms under which he would be willing to acquire POL, thereby
allowing Parent and
15
<PAGE>
the Company to move forward with discussions concerning the larger proposal. The
Company formed a Special Committee, consisting of Messrs. Rees and McFarlin, to
consider the terms of the POL acquisition by Mr. Dunaway, and Mr. Dunaway was
directed to retain separate legal counsel to act on his behalf.
During the succeeding three weeks, the parties negotiated the terms of a
possible sale of POL to Mr. Dunaway or his designee in the event no better
alternative became available, and agreed that the purchase price to be paid by
Mr. Dunaway would be $4 million, subject to adjustment, consisting of $1 million
in cash, subject to adjustment, and $3 million in an unsecured subordinated
ten-year note bearing interest at a prime rate. See Section 11. In the event the
Company identified a purchaser of the POL for a cash purchase price greater than
$4 million, then the Company would be free to accept such proposal and the
proceeds in excess of $4 million (after deduction for costs and expenses of the
sale and any financial advisory fees) would be paid as a dividend to Company
shareholders prior to consummation of the Offer. In the event such a third party
acquiror was identified during the initial term of the Offer, but a transaction
could not be consummated within that time frame, the Company could request an
extension of the initial term of the Offer for an additional 15 business days to
allow for consummation of such a proposal.
During the same period, Mr. Dunaway retained separate counsel to negotiate
the terms of the purchase proposal and the Company and Parent continued to
negotiate the remaining terms of the agreement between Parent and the Company.
Negotiations continued through November 21, 1995, at which time definitive
documentation for all of the transactions contemplated by the agreements was
agreed to by the respective parties thereto.
On November 21, 1995, the Company's Board met to receive a report from the
Special Committee, consider Parent's proposal and other alternatives. The terms
of the proposed transaction and related merger agreement were presented to and
reviewed by the Board. Dain Bosworth made presentations to the Board and
delivered its opinion that, as of November 21, 1995, the $17.50 per share cash
consideration to be received by shareholders of the Company pursuant to the
Offer and the Merger is fair to the shareholders of the Company from a financial
point of view. The Board also discussed the terms of the transaction pursuant to
which Mr. Dunaway had agreed to acquire POL in the event that the Company was
unable to find another purchaser at a higher price. It was also noted that the
press release announcing the transaction with Parent would expressly note that
the Board was marketing the sale of POL. Mr. and Mrs. Dunaway were excused from
the meeting while the Special Committee discussed the Parent's offer, and the
terms of the POL Put Option, the Tender and Option Agreement, the Dunaway
Consulting Agreement (as hereinafter defined) and Mrs. Dunaway's Severance
Agreement (as hereinafter defined). The full Board then discussed the proposed
Merger Agreement and reviewed proposed resolutions related to the transaction.
The Special Committee unanimously recommended that the Board proceed with the
transactions as presented to the meeting.
After discussion and further analysis, the Company's Board unanimously
decided to proceed with the sale of the Company and to accept Parent's proposal,
and it then approved the Merger Agreement and the transactions contemplated
thereby and unanimously recommended that the shareholders of the Company accept
the Offer and tender their shares pursuant thereto. With respect to the Merger,
the Board unanimously recommended that, if shareholder vote is required by
applicable law, the shareholders of the Company vote in favor of approval and
adoption of the Merger Agreement and the Merger.
On November 22, 1995, Parent, Purchaser and the Selling Shareholders
executed and delivered the Tender and Option Agreement, and Parent, Purchaser
and the Company executed and delivered the Merger Agreement. On November 22,
1995, Parent and the Company issued a joint press release announcing the
execution of the Merger Agreement and Tender and Option Agreement. The Purchaser
commenced the Offer on November 29, 1995.
11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY; MERGER AGREEMENT; TENDER AND
OPTION AGREEMENT; AND OTHER AGREEMENTS.
PURPOSE OF THE OFFER. The purpose of the Offer, the Merger, the Merger
Agreement and the Tender and Option Agreement is to enable Parent to acquire
control of the Board and the entire equity interest in the Company. Upon
consummation of the Merger, the Company will become a wholly owned subsidiary of
Parent. The Offer is being made pursuant to the Merger Agreement.
16
<PAGE>
PLANS FOR THE COMPANY. As promptly as practicable following the purchase of
and payment for Shares under the Offer, Parent intends (i) to exercise its right
under the Merger Agreement to designate such number of directors for the Board
as it is then entitled to designate and (ii) in the event Purchaser acquires at
least 80% of the then outstanding Shares, to cause a "short form" merger of
Purchaser and the Company under Pennsylvania Law. It is Purchaser's expectation
that those individuals so elected or appointed to the Board will not receive any
compensation for services rendered in such capacity. It is Parent's current
intention, in the event that it obtains control of the Board, to terminate the
service of Mr. and Mrs. Dunaway as officers of the Company. In the event of such
termination, Mr. Dunaway would remain with the Company as a consultant under the
Dunaway Consulting Agreement and Mrs. Dunaway would be entitled to receive
severance payments pursuant to her Severance Agreement, both of which agreements
are more fully described in the Schedule 14D-9 enclosed herewith. See also
"Benefit Plans and Certain Contracts, Consulting and Severance Arrangements"
below.
It is expected that, initially following the Merger, except as set forth
below, the business and operations of the Company will be conducted in a manner
substantially similar to how they are conducted currently. However, it is a
condition to the Merger that POL and the related business be sold prior to the
Merger. See "Merger Agreement" below. In addition, Parent will continue to
evaluate the business and operations of the Company during the pendency of the
Offer and after the consummation of the Offer and the Merger and will take such
further actions as it deems appropriate under the circumstances then existing.
Following the Merger, Parent plans to investigate combining its existing
perfusion business with the Company, but no decision has yet been made whether
to merge or otherwise combine such businesses.
Also following the Merger, Parent intends to pursue the sale of the
Company's off-road division and certain other assets unrelated to the perfusion
business. Mr. Dunaway has indicated that he might be interested in making such
an acquisition, but no proposal has been made and the parties do not have any
agreement, arrangement or understanding with respect thereto.
MERGER AGREEMENT. THE FOLLOWING IS A SUMMARY OF CERTAIN PROVISIONS OF THE
MERGER AGREEMENT. THE SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF THE MERGER AGREEMENT WHICH IS INCORPORATED HEREIN BY REFERENCE AND
A COPY OF WHICH HAS BEEN FILED WITH THE COMMISSION AS AN EXHIBIT TO THE SCHEDULE
14D-1. THE MERGER AGREEMENT MAY BE EXAMINED AND COPIES MAY BE OBTAINED AT THE
PLACE AND IN THE MANNER SET FORTH IN SECTION 8 OF THIS OFFER TO PURCHASE.
THE OFFER. The Merger Agreement provides that Purchaser will commence the
Offer and that, upon the terms and subject to the prior satisfaction or waiver
of the conditions of the Offer, Purchaser will accept for payment and pay for
Shares tendered as soon as practicable after it is legally permitted to do so
under applicable law. The Merger Agreement provides that, without the written
consent of the Company, Purchaser will not decrease the Offer Price, decrease
the number of Shares sought, change the form of the consideration to be paid in
the Offer or amend any other condition of the Offer in any manner adverse to the
holders of Shares (other than with respect to the Minimum Condition or
insignificant changes or amendments) except that if prior to the initial
scheduled expiration date, the Company will have received a Higher POL Offer
that the Company intends to accept, then at the Company's request Purchaser will
extend the Offer for fifteen business days; and, further, that if on the initial
scheduled Expiration Date all conditions of the Offer have not been satisfied or
waived, the Offer may be extended from time to time until February 1, 1996
without the consent of the Company. In addition, the Merger Agreement provides
that, without the consent of the Company, the Offer Price may be increased and
the Offer may be extended to the extent required by law in connection with such
an increase.
THE MERGER. The Merger Agreement provides that subject to the terms and
conditions thereof, and pursuant to Pennsylvania Law, at the Effective Time
Purchaser will be merged with and into the Company. As a result of the Merger,
the separate corporate existence of Purchaser will cease and the Company will
continue as the Surviving Corporation.
The respective obligations of Parent and Purchaser, on the one hand, and the
Company, on the other hand, to effect the Merger are subject to the conditions
that: (i) all authorizations, consents, orders or approvals of, or declarations
or filings with, or expiration of waiting periods imposed by, any Federal,
state,
17
<PAGE>
local or foreign governmental or regulatory authority necessary for the
consummation of the Merger and the transactions contemplated by the Merger
Agreement will have been filed, occurred or been obtained and will be in effect
at the Effective Time; (ii) no temporary restraining order, preliminary
injunction or permanent injunction or other order precluding, restraining,
enjoining, preventing or prohibiting the consummation of the Merger will have
been issued by any Federal, state or foreign court or other governmental or
regulatory authority and remain in effect; (iii) no Federal, state, local or
foreign statute, rule or regulation will have been enacted which prohibits the
consummation of the Merger or would make the consummation of the Merger illegal;
and (iv) the Merger Agreement will have been approved and adopted by the
affirmative vote required of the shareholders of the Company, if required
pursuant to the Company's articles of incorporation and applicable Pennsylvania
Law in order to consummate the Merger. In addition, the obligations of the
Company to effect the Merger are also subject to the satisfaction or waiver, on
or prior to the date of the closing of the Merger (the "Closing Date"), of the
additional condition that Parent, Purchaser or their affiliates will have
purchased Shares (including without limitation the Shares subject to the Tender
and Option Agreement) pursuant to the Offer or the Tender and Option Agreement.
The obligations of Parent and Purchaser to effect the Merger are also subject to
the satisfaction or waiver, on or prior to the Closing Date, of the additional
condition that the transactions contemplated by the POL Agreement will have been
consummated or POL will have been sold pursuant to a Higher POL Offer.
The Merger Agreement provides that at the Effective Time, each issued and
outstanding Share (other than Shares that are owned by the Company as treasury
stock and any Shares owned by Parent, Purchaser or any other wholly owned
subsidiary of Parent) will be converted into the right to receive the Offer
Price, without interest.
Pursuant to the Merger Agreement, each issued and outstanding share of
common stock, par value $.01 per share, of Purchaser will be converted into one
fully paid and non-assessable share of common stock of the Surviving
Corporation.
THE COMPANY'S BOARD OF DIRECTORS. The Merger Agreement provides that
promptly upon the later of (i) the purchase of and payment for any Shares
(including without limitation all Shares subject to the Tender and Option
Agreement) by Purchaser or any other subsidiary of Parent pursuant to the Offer
or the Tender and Option Agreement and (ii) the expiration or waiver of the
Company's right to terminate the Merger Agreement in the event that the Company
accepts an Acceptable Offer prior to the later of (x) the purchase of Shares
pursuant to the Offer or Tender and Option Agreement or (y) January 3, 1996,
Parent will be entitled to designate such number of directors, rounded up to the
next whole number, on the Board as is equal to the product of the total number
of directors then serving on the Board (which, immediately prior to such
calculation, may not consist of more than four directors) multiplied by the
ratio of the aggregate number of Shares beneficially owned by Parent, Purchaser
and any of their affiliates to the total number of Shares then outstanding. The
Company must, upon request of Purchaser, take all action necessary to cause
Parent's designees to be elected or appointed to the Board, including without
limitation increasing the size of the Board or, at the Company's election,
securing the resignations of such number of its incumbent directors as is
necessary to enable Parent's designees to be so elected or appointed to the
Board, and must cause Parent's designees to be so elected or appointed. It is
Purchaser's expectation that those individuals so elected or appointed to the
Board will not receive any compensation for services rendered in such capacity.
At such time, the Company will also cause persons designated by Parent to
constitute the same percentage (rounded up to the next whole number) as is on
the Board of (i) each committee of the Board, (ii) each board of directors (or
similar body) of each subsidiary of the Company and (iii) each committee (or
similar body) of each such board. In addition, Parent and Purchaser have agreed
that, until the Effective Time, neither they nor their affiliates will take any
action as directors or shareholders of the Company to cause the removal of
Laverne W. Rees and Whitney A. McFarlin, independent directors of the Company.
The Merger Agreement further provides that the Company will promptly take
all actions required pursuant to Section 14(f) of the Exchange Act and Rule
14f-1 promulgated thereunder, including mailing to shareholders as part of the
Company's Schedule 14D-9 the information required by such Section 14(f) and Rule
14f-1, as is necessary to enable Parent's designees to be elected to the Board.
From and after the time, if any, that Parent's designees constitute a majority
of the Board, any amendment of the Merger Agreement,
18
<PAGE>
any termination of the Merger Agreement by the Company, any extension of time
for performance of any of the obligations of Parent or Purchaser thereunder, any
waiver of any condition or any of the Company's rights thereunder or other
action by the Company thereunder (other than as specifically provided in the
Merger Agreement) may be effected only if the action is approved by a majority
of the directors of the Company then in office who were directors of the Company
on the date thereof; PROVIDED, that if there will be no such directors, such
actions may be effected by majority vote of the entire Board.
SHAREHOLDERS MEETING. Pursuant to the Merger Agreement, the Company will,
if required by applicable law in order to consummate the Merger: (i) duly call,
give notice of, convene and hold a special meeting of its shareholders (the
"Special Meeting") as soon as practicable following the acceptance for payment
and purchase of Shares by Purchaser pursuant to the Offer, or the termination of
the Offer, for the purpose of considering and taking action upon the Merger
Agreement; (ii) prepare and file with the Commission a preliminary proxy or
information statement relating to the Merger and the Merger Agreement and use
its reasonable efforts (x) to obtain and furnish the information required to be
included by the Commission in the Company Proxy Statement (as defined below)
and, after consultation with Parent, to respond promptly to any comments made by
the Commission with respect to the preliminary proxy or information statement
and cause a definitive proxy or information statement (the "Company Proxy
Statement") to be mailed to its shareholders and (y) to obtain the necessary
approvals of the Merger and the Merger Agreement by its shareholders; and (iii)
include in the Company Proxy Statement the recommendation of the Board of
Directors that shareholders of the Company vote in favor of the approval of the
Merger and the adoption of the Merger Agreement unless, in the opinion of the
Board of Directors after consultation with independent counsel, the inclusion of
such recommendation would be inconsistent with its fiduciary duties under
applicable law. Purchaser has agreed that it will, and will cause any of its
permitted assignees to, vote all of the Shares then owned by it which are
entitled to vote in favor of the approval of the Merger and the adoption of the
Merger Agreement.
The Merger Agreement provides that in the event Purchaser acquires at least
80% of the outstanding Shares, the parties will take all necessary and
appropriate action to cause the Merger to become effective as soon as
practicable after such acquisition, without approval of the Company
shareholders.
INTERIM OPERATIONS. In the Merger Agreement, the Company has agreed that,
except as expressly contemplated therein or as agreed in writing by Parent,
after November 22, 1995, and prior to the time the directors of the Purchaser
have been elected to the Board, as follows:
(i) the business of the Company and its subsidiaries will be carried on
in the usual, regular and ordinary course, in substantially the same manner
as previously conducted, and the Company and its subsidiaries will use
reasonable efforts consistent with past practice and policies to preserve
intact their business organizations, keep available the services of their
officers and employees and preserve their existing relationships with
customers, suppliers, lessors, lessees, creditors and others having business
dealings with them, and the Company will continue to maintain a standard
system of accounting established and administered in accordance with United
States generally accepted accounting principles ("GAAP");
(ii) the Company will not, and will not cause or permit any of its
subsidiaries to, (a) declare, set aside or pay any dividends on or make
other distributions in respect of any shares of its capital stock, (b)
split, combine or reclassify any shares of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for any shares of its capital stock or (c) propose to do any
of the foregoing. Notwithstanding the foregoing, nothing in the Merger
Agreement will prevent the Company, upon the consummation by the Company of
a transaction for a Higher POL Offer in accordance with the terms of the
Merger Agreement, from declaring and paying a dividend in respect of its
shares of Common Stock (payable to the Company's record holders of Common
Stock immediately prior to the earlier of (1) Purchaser's acceptance of
Shares for payment under the Offer or (2) the Effective Time) in an
aggregate amount equal to the amount of the excess of the net cash proceeds
actually received by the Company in the transaction for the Higher POL Offer
(after taking into account all out-of-pocket costs and expenses directly
related to such transaction incurred after
19
<PAGE>
November 22, 1995, including without limitation the fees and expenses, to
the extent reimbursable by the Company), of Dunaway Holdings incurred in
connection with the POL Agreement and of Dain Bosworth in connection with
marketing POL) over the $4 million to be received by the Company in the
transaction with Dunaway Holdings contemplated by the POL Agreement as of
November 22, 1995;
(iii) the Company will not, and will not cause or permit any of its
subsidiaries to, issue, pledge, deliver, sell or transfer or authorize or
propose the issuance, pledge, delivery, sale or transfer of, or repurchase,
redeem or otherwise acquire directly or indirectly, or propose the
repurchase, redemption or other acquisition of, any shares of capital stock
of any class of the Company or its subsidiaries, or any options, warrants or
other rights exercisable for or securities convertible into or exchangeable
for, any such shares (or enter into any agreements, arrangements, plans or
understandings with respect to any of the foregoing), other than pursuant to
the exercise of outstanding options pursuant to the terms thereof as of
November 22, 1995 or, solely with respect to POL, the POL Agreement. No
"purchase period" as defined in the Company's Employee Stock Purchase Plan
will be permitted to begin on or after the date of the Merger Agreement, and
no participant will be permitted to elect to participate (or increase his or
her participation) in any offering under the Employee Stock Purchase Plan in
effect on the date of the Merger Agreement;
(iv) the Company will not, and will not cause or permit any of its
subsidiaries to, propose or adopt any amendment to its or their articles of
incorporation or bylaws (or similar charter documents) or take any action to
alter the size or composition of its Board, except as specifically
contemplated by the Merger Agreement;
(v) the Company will not, and will not cause or permit any of its
subsidiaries to, transfer, sell, lease, license, mortgage or otherwise
dispose of or encumber any material assets, or enter into any commitment to
do any of the foregoing, other than in the ordinary and usual course of
business, consistent with past practice and other than any sale by the
Company of its shares of POL pursuant to the POL Agreement or a Higher POL
Offer;
(vi) the Company will not, and will not cause or permit any of its
subsidiaries to, incur, become subject to, or agree to incur any debt for
borrowed money or incur or become subject to any obligation or liability
(absolute or contingent), except current liabilities incurred, and
obligations under contracts entered into, in the ordinary course of business
consistent with prior practice, and the Company will not pay or be liable
for prepayment or other penalties in connection with the early retirement of
any Company indebtedness for borrowed money;
(vii) the Company will not, and will not cause or permit any of its
subsidiaries to, make any change in the compensation payable or to become
payable to any of its officers, directors, employees, agents or consultants,
enter into or amend any employment, severance, termination or other
agreement or make any loans to any of its officers, directors, employees,
agents or consultants or make any change in its existing borrowing or
lending arrangements for or on behalf of any of such persons, whether
contingent on consummation of the Offer, the Merger or otherwise;
(viii) the Company will not, and will not cause or permit any of its
subsidiaries to (a) pay, agree to pay or make any accrual or arrangement for
payment of any pension, retirement allowance or other employee benefit
pursuant to any existing plan, agreement or arrangement to any officer,
director or employee except in the ordinary course of business and
consistent with past practice or as permitted by the Merger Agreement; (b)
pay or agree to pay or make any accrual or arrangement for payment to any
employees of the Company or any of its subsidiaries of any amount relating
to unused vacation days; (c) except for a contribution to the Company's
Profit Sharing Plan in an amount not to exceed $500,000, commit itself or
themselves to adopt or pay, grant, issue, accelerate or accrue salary or
other payments or benefits pursuant to any pension, profit-sharing, bonus,
extra compensation, incentive, deferred compensation, stock purchase, stock
option, stock appreciation right, group insurance, severance pay, retirement
or other employee benefit plan, agreement or arrangement, or any employment
or consulting agreement with or for the benefit of any director, officer,
employee, agent or consultant, whether past or present; or (d) amend in any
material respect any such existing plan, agreement or arrangement;
20
<PAGE>
(ix) the Company and each of its subsidiaries must (a) properly prepare
and file all material reports or tax returns required by the Company or any
subsidiary to be filed with any governmental or regulatory authorities with
respect to its business, operations, or affairs, and (b) pay in full and
when due all taxes indicated on such tax returns or otherwise levied or
assessed upon the Company, its subsidiaries or any of their assets and
properties unless such taxes are being contested in good faith by
appropriate proceedings and reasonable reserves therefor have been
established in accordance with GAAP. The preparation of any such tax returns
filed by the Company will be subject to the timely review and approval of
Parent, which approval will not be unreasonably withheld;
(x) the Company and each of its subsidiaries must (a) report on a
regular basis, at reasonable times, to a representative designated by Parent
regarding material operational matters and financial matters (including
monthly unaudited financial information); (b) promptly and regularly notify
Parent of any change in the normal course or operation of its business or
its properties and of any material development in the business or operations
of the Company and its subsidiaries (including without limitation any
Material Adverse Effect (as hereinafter defined) or any governmental or
third party claims, complaints, investigations or hearings, or
communications indicating that the same may be forthcoming or contemplated);
and (c) cooperate with Parent and its affiliates and representatives in
arranging for an orderly transition in connection with the transfer of
control of the Company, including without limitation arranging meetings
among the Company, its vendors, suppliers and customers and representatives
of Parent and its affiliates; and
(xi) the Company will not, and will not cause or permit any of its
subsidiaries to: (a) enter into, amend or terminate any agreements,
commitments or contracts which, individually or in the aggregate, are
material to the financial condition, business, assets, properties, prospects
or results of operations of the Company and its subsidiaries taken as a
whole, or waive, release, assign or relinquish any material rights or claims
thereunder, except in the ordinary course of business, consistent with past
practice; (b) discharge or satisfy any lien or encumbrance or payment of any
obligation or liability (absolute or contingent) other than current
liabilities in the ordinary course of business; (c) cancel or agree to
cancel any material debts or claims, except in each case in the ordinary
course of business; (d) waive any rights of substantial value; (e) pay,
discharge, satisfy or settle any litigation or other claims, liabilities or
obligations (absolute, accrued, asserted, unasserted, contingent or
otherwise) involving the payment by the Company or any of its subsidiaries
of more than $50,000; (f) make any equity investments in third parties; (g)
incur, pay, or be subject to any material obligation to make any payment of,
or in respect of, any tax on or before the Effective Time, except in the
ordinary course of business consistent with past practice, settle any
material audit, make or change any material tax election or file any amended
tax returns, or agree to extend or waive any statute of limitations on the
assessment or collection of taxes; (h) 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) or otherwise make any material change
in the conduct of the business or operations of the Company and its
subsidiaries taken as a whole; or (i) agree in writing or otherwise to take
any of the foregoing actions or any other action which would constitute a
Material Adverse Effect in any of the representations and warranties of the
Company in the Merger Agreement, or make any representation or warranty of
the Company in the Merger Agreement materially inaccurate in any respect.
Furthermore, under the Merger Agreement the parties have agreed that none of
the Company nor any of its subsidiaries will make any loans, advances or
contributions, or any investments in, POL except any such loans, advances,
contributions or investments that are (a) reflected as an "intercompany account"
on the Company's balance sheet and (b) used solely for POL's ordinary course of
business operations. As used in the Merger Agreement, a "Material Adverse
Effect" means any event, circumstance, condition, development or occurrence
causing, resulting in or having a material adverse effect on the financial
condition, business, assets, properties, prospects or results of operations of
the Company and its subsidiaries taken as a whole; PROVIDED, that such term does
not include effects resulting from market conditions generally in the delivery
of perfusion services.
21
<PAGE>
NO SOLICITATION. In the Merger Agreement, the Company has agreed that the
Company and its subsidiaries and affiliates will not, and will use their
reasonable efforts to ensure that their respective officers, directors,
employees, investment bankers, attorneys, accountants and other representatives
and agents do not, directly or indirectly, initiate, solicit, encourage or
participate in, or provide any information to any person concerning, or take any
action to facilitate the making of, any offer or proposal which constitutes or
is reasonably likely to lead to any Acquisition Proposal (as hereinafter
defined) of the Company or any subsidiary or affiliate or an inquiry with
respect thereto. The Company has agreed and will cause its subsidiaries and
affiliates, and their respective officers, directors, employees, investment
bankers, attorneys, accountants and other agents to, immediately cease and cause
to be terminated all existing activities, discussions and negotiations, if any,
with any parties conducted heretofore with respect to such matters. Nonetheless,
the Company may, directly or indirectly, provide access and furnish information
concerning its business, properties or assets to any corporation, partnership,
person or other entity or group pursuant to an appropriate confidentiality
agreement, and may negotiate and participate in discussions and negotiations
with such entity or group concerning an Acquisition Proposal (x) if such entity
or group has submitted a bona fide written proposal to the Board relating to any
such transaction and (y) if, in the opinion of the Board after consultation with
independent legal counsel to the Company, the failure to provide such
information or access or to engage in such discussions or negotiations would be
inconsistent with their fiduciary duties under applicable law.
The Company is required to promptly notify Parent and Purchaser of any such
offers, proposals or Acquisition Proposals (including without limitation the
terms and conditions thereof and the identity of the person making it), and is
further required to keep Parent apprised of all developments with respect to any
such Acquisition Proposal. The Company is further required to give Parent
written notice of any Acquisition Proposal that the Company intends to accept as
an Acceptable Offer in accordance with the terms of the Merger Agreement at
least two business days prior to accepting such offer or otherwise entering into
any agreement or understanding with respect thereto. Any modification of an
Acquisition Proposal constitutes a new Acquisition Proposal for purposes of
these provisions of the Merger Agreement.
Nothing in Section 6.1 of the Merger Agreement prohibits the Company or its
Board from (a) taking and disclosing to the Company's shareholders a position
with respect to a tender offer by a third party pursuant to Rules 14d-9 and
14e-2 under the Exchange Act, or (b) making such disclosure to the Company's
shareholders which, in the opinion of the Board, after consultation with
independent legal counsel to the Company, may be required under applicable law.
"Acquisition Proposal" when used in connection with any person means any tender
or exchange offer involving such person, any proposal for a merger,
consolidation or other business combination involving such person or any
subsidiary of such person, any proposal or offer to acquire in any manner a
substantial equity interest in, or a substantial portion of the business or
assets of, such person or any subsidiary of such person, any proposal or offer
with respect to any recapitalization or restructuring with respect to such
person or any subsidiary of such person or any proposal or offer with respect to
any other transaction similar to any of the foregoing with respect to such
person, or any subsidiary of such person; PROVIDED, HOWEVER, that, as used in
the Merger Agreement, the term "Acquisition Proposal" does not apply to (i) any
offer or proposal for a transaction between the Company and any person providing
for the sale to such person of all of the capital stock of, and the Company's
rights, interests, obligations and liabilities relating to, POL which is covered
by Section 6.13 of the Merger Agreement (See "POL Agreement" below) and (ii) any
transaction of the type described in Section 6.1(d) of the Merger Agreement
involving Parent, Purchaser or their affiliates. "Acceptable Offer" means an
executed written offer for an Acquisition Proposal received by the Company (i)
in which the offeror demonstrates proof of its financial capability and
authority to consummate the transactions contemplated by such offer (including
without limitation the payments required by Section 9.1(b) of the Merger
Agreement) and (ii) which provides for (x) net cash proceeds to the Company or
all of its shareholders (in addition to amounts paid pursuant to clause (i)
above) in an amount greater than that provided for thereunder, at a per Share
purchase price greater than that contained in the Merger Agreement (or, in the
event such amount has been increased by Parent in the Merger Agreement, such
greater amount) or (y) the issuance of publicly traded stock as the
consideration payable to the Company or all of its shareholders (in addition to
amounts paid pursuant to
22
<PAGE>
clause (i) above) which has an established market value in excess of the per
Share purchase price contained herein (or, in the event such amount has been
increased by Parent in the Merger Agreement, such greater amount).
PARENT'S SALE OF SHARES IN ACCEPTABLE OFFER. In the event that (a) the
Merger Agreement has been terminated in accordance with Section 8.1 thereof
(other than due to a breach by the Company), and (b) at any time in the twelve
months after such termination of the Merger Agreement the Company engages in a
transaction that would constitute an Acceptable Offer under the Merger
Agreement, then in such case Parent agrees that it will sell to the Company's
designee (i) the Option, at a purchase price equal to the product of (x) the
excess of the price per Share provided by such Acceptable Offer and (y) the
number of Shares subject to the Option; or (ii) if Purchaser will have
theretofore exercised the Option, the Shares acquired pursuant thereto at the
price per Share provided by such Acceptable Offer, in either case at or prior to
the consummation of the transaction contemplated by such Acceptable Offer.
Notwithstanding the foregoing, neither Parent nor Purchaser will be required to
sell the Option on the Shares, or Shares purchased upon exercise thereof, to the
extent that any profits resulting therefrom would be subject to the profit
recovery provisions of Subchapter 25H of Pennsylvania Law.
DIRECTORS' AND OFFICERS' INDEMNIFICATION. (a) For six years after the
earlier of (i) the date on which the designees of Parent have been elected to
the Board pursuant to the Merger Agreement and constitute a majority of the
members thereof and (ii) the Effective Time, Parent will, or will cause the
Surviving Corporation to, indemnify, defend and hold harmless the present and
former officers, directors, employees and agents of the Company and its
Subsidiaries (other than POL) (each an "Indemnified Party") against all losses,
claims, damages, liabilities, fees and expenses (including reasonable fees and
disbursements of counsel and judgments, fines, losses, claims, liabilities and
amounts paid in settlement (provided that any such settlement is effected with
the prior written consent of Parent or the Surviving Corporation)) arising out
of actions or omissions occurring at or prior to the Effective Time to the full
extent permitted under Pennsylvania law, the Company's articles of incorporation
or bylaws or certain written indemnification agreements, in each case as in
effect at November 22, 1995, including provisions therein relating to the
advancement of expenses incurred in the defense of any action or suit; PROVIDED,
that in the event any claim or claims are asserted or made within such six-year
period, all rights to indemnification in respect of any such claim or claims
shall continue until disposition of any and all such claims; and PROVIDED,
FURTHER, that any determination required to be made with respect to whether an
Indemnified Party's conduct complies with the standards set forth under
Pennsylvania Law, the Company's articles of incorporation or bylaws or such
agreements, as the case may be, will be made by independent counsel mutually
acceptable to Parent and the Indemnified Party.
(b) Parent or the Surviving Corporation must maintain the Company's existing
officers' and directors' liability insurance policy ("D&O Insurance") for a
period of not less than three years after the Effective Time; PROVIDED,that
Parent may substitute therefor policies of substantially similar coverage and
amounts containing terms no less advantageous to such former directors or
officers; PROVIDED, FURTHER, that if the existing D&O Insurance expires, is
terminated or cancelled during such period, Parent or the Surviving Corporation
will use its reasonable efforts to obtain substantially similar D&O Insurance;
PROVIDED, HOWEVER, that in no event shall the Company be required to pay
aggregate premiums for insurance under Section 6.9 of the Merger Agreement in
excess of 125% of the aggregate premiums paid by the Company in 1994 (on an
annualized basis for such purpose) (the "1994 Premiums"). In the event that, but
for the last proviso of the immediately preceding sentence, Parent or the
Surviving Corporation would be required to expend more than 125% of the 1994
Premiums, Parent or the Surviving Corporation will purchase the maximum amount
of such insurance obtainable by payment of annual premiums equal to 125% of the
1994 Premiums.
BENEFIT PLANS AND CERTAIN CONTRACTS; CONSULTING AND SEVERANCE
ARRANGEMENTS. It is Parent's current intention to cause the Company to provide
its employees in general with employee benefit arrangements providing welfare
benefits substantially comparable in the aggregate to those provided by the
Company as of the date of the Merger Agreement, and Parent has agreed to cause
the Company to honor its existing severance and termination policy with respect
to employees generally, PROVIDED, that Parent has retained the right to amend,
modify or terminate any employee benefit policy or arrangement maintained by the
23
<PAGE>
Company to the extent permitted by applicable law. A group of 23 officers and
other key employees including Mrs. Dunaway will be offered severance agreements
(the "Severance Agreements") providing for either six or twelve months of salary
continuation benefits in the event their employment is terminated by the Company
without "cause" or by the employee for "good reason" (each as defined in the
Severance Agreements) within eighteen months following the date on which
Parent's designees constitute a majority of the Board of Directors of the
Company. The Board approved consulting agreements between the Company and Mr.
Scott W. Soronen and Mr. Michael D. Kebely, the Senior Vice President and the
Chief Financial Officer of the Company, respectively (the "Officer Consulting
Agreements"), which provide for their retention as consultants for a period of
nine and six months, respectively, at the rate of approximately $12,000 and
$8,380 per month, respectively, if their employment is terminated by the Company
without "cause" or by Mr. Soronen or Mr. Kebely for "good reason" (each as
defined in the Officer Consulting Agreements) on or prior to November 21, 1997.
Mr. Dunaway has a consulting agreement with the Company (the "Dunaway Consulting
Agreement") providing for his retention as a consultant for a period of three
years if his employment is terminated by the Company without "cause" or by Mr.
Dunaway for "good reason" (each as defined in the Dunaway Consulting Agreement)
on or prior to November 21, 1997. Pursuant to the Dunaway Consulting Agreement,
Mr. Dunaway would receive a consulting fee at the rate of $20,000 per month,
continuation of medical benefits, transfer to him of certain "key man" life
insurance policies and certain other benefits. The Dunaway Consulting Agreement,
the Officer Consulting Agreements and the Severance Agreements are each
described in more detail in the Schedule 14D-9 enclosed herewith.
COMPANY STOCK OPTIONS. At or immediately prior to the Effective Time, each
outstanding employee and director stock option to purchase Shares (an "Option")
granted under any stock option plan or arrangement of the Company or any
subsidiary of the Company (the "Option Plans") will, subject to the consent of
the holders thereof, be cancelled, and each holder of any such Option, whether
or not then vested or exercisable, will be paid by the Company in consideration
therefor an amount in cash determined by multiplying (i) the excess, if any, of
$17.50 per Share over the applicable exercise price of such Option by (ii) the
number of Shares such holder could have purchased (assuming full vesting of all
Options) had such holder exercised such Option in full immediately prior to the
Effective Time. With respect to any Options the holders of which do not consent
to such cancellation, the Company will take appropriate action to adjust such
Options to provide that upon the subsequent exercise or surrender thereof, such
holders will receive a net amount, without interest, equivalent to what such
holders would have received had such Options been cancelled at or immediately
prior to the Effective Time in the manner described above.
POL AGREEMENT. The Merger Agreement provides that the Company may not (a)
amend, revoke, withdraw, modify or terminate the POL Agreement, (b) exercise or
waive any of its rights under the POL Agreement or (c) impede, interfere with or
attempt to discourage the transactions contemplated by the POL Agreement without
the prior written consent of Parent in its sole discretion. The POL Agreement
may only be terminated by the Company in order to allow the Company to accept a
bona fide POL Proposal providing for the sale of POL for greater net cash
proceeds (after taking into account all out-of-pocket expenses directly related
to such transaction incurred after November 22, 1995, including without
limitation the fees and expenses of Dunaway Holdings incurred in connection with
the POL Agreement and Dain Bosworth in connection with marketing POL), than $4
million and which is (i) otherwise on substantially the same terms (other than
any financing terms) and (ii) for such other consideration, in either case as
Parent in its sole discretion may agree to. Under the Merger Agreement the
Company must promptly notify Parent of any POL Proposal (including without
limitation the terms and conditions thereof and the identity of the person
making it), and will keep Parent apprised of all developments with any respect
to any POL Proposal. In addition, the Company must give Parent written notice of
any POL Proposal that the Company proposes to accept in accordance with the
terms of the Merger Agreement as a Higher POL Offer at least five business days
prior to accepting such POL Proposal or otherwise entering into any agreement or
understanding with respect thereto.
SAVANNAH PERFUSION EARN-OUT. At or prior to the Effective Time the Company
must either (a) obtain a consent (which will be in such form and substance as
are reasonably satisfactory to the Company) pursuant to that certain Acquisition
Agreement and Plan of Merger, dated November 30, 1993, by and among
24
<PAGE>
Savannah Perfusion, Inc., Shelton, PSICOR Merger Corporation and the Company
(the "Savannah Agreement"), for the party thereto to accept a cash payment of
$17.50 per Share in full satisfaction of the Company's obligations, when due, to
issue the Shares pursuant to the earn-out provisions of the Savannah Agreement
or (b) enter into such other arrangements with respect to the Savannah Agreement
as are reasonably satisfactory to Parent and the Company. The Company has agreed
to use all reasonable efforts to obtain such consent or other arrangement.
REPRESENTATIONS AND WARRANTIES. The Company has made customary
representations and warranties to Parent and Purchaser with respect to, among
other things, its organization and qualification, subsidiaries, capitalization,
authority, consents and approvals, violation, the Company's SEC reports,
financial statements, undisclosed liabilities, certain changes, taxes,
litigation, employee benefit plans, environmental liability, compliance with
applicable laws, material contracts, patents, marks, trade names, copyrights and
registrations, fraud and abuse, insurance, opinion of financial advisor, vote
required, information supplied, the Company's proxy statement, certain matters
with respect to Shareholders' Shares and Pennsylvania Law, voting rights of
Shares, and the POL Agreement.
TERMINATION; FEES. The Merger Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, whether before or
after shareholder approval thereof:
(i) by mutual consent of the Board of Directors of Parent and the Board;
(ii) by either the Board of Directors of Parent or the Board: (a) if the
Merger will not have been consummated on or prior to May 21, 1996; PROVIDED,
HOWEVER, that the right to terminate the Merger Agreement as described in
this clause (a) will not be available to any party whose failure to fulfill
any material obligation under the Merger Agreement has been the cause of, or
resulted in, the failure of the Merger to be consummated on or prior to such
date; or (b) if a court of competent jurisdiction or other governmental or
regulatory authority will have issued an order, decree or ruling or taken
any other action (which order, decree, ruling or other action the parties
hereto will use their reasonable efforts to lift), in each case permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated by the Merger Agreement and such order, decree, ruling or other
action will have become final and non-appealable;
(iii) by the Board: (a) if, prior to the later of (x) the purchase of
Shares by Parent, Purchaser or their affiliates pursuant to the Offer or the
Tender and Option Agreement or (y) January 3, 1996, the Company will have
(A) accepted an Acceptable Offer in compliance with the terms of Section 6.1
of the Merger Agreement and (B) paid or caused to be paid the $4 million fee
payable to Parent provided for in Section 9.1(b) of the Merger Agreement; or
(b) if, prior to the purchase of the Shares pursuant to the Offer or the
Tender and Option Agreement, Parent or Purchaser breaches or fails in any
material respect to perform or comply with any of its material covenants and
agreements contained herein or breaches its representations and warranties
in any material respect; or (c) if Parent, Purchaser or any of their
affiliates will have failed to commence the Offer on or prior to five
business days following the date of the initial public announcement of the
Offer other than due to an occurrence that if occurring after the
commencement of the Offer would result in a failure to satisfy any of the
conditions described in Section 14 of this Offer to Purchase; provided that
the Company may not terminate the Merger Agreement as described in this
clause (c) if the Company is in material breach of the Merger Agreement;
(iv) by the Board of Directors of Parent: (a) if, due to an occurrence
that if occurring after the commencement of the Offer would result in a
failure to satisfy any of the conditions described in Section 14 of this
Offer to Purchase, Parent, Purchaser, or any of their affiliates will have
failed to commence the Offer on or prior to November 29, 1995; PROVIDED that
Parent and Purchaser may not terminate the Merger Agreement as described in
this clause (a) if Parent or Purchaser (x) is in material breach of the
Merger Agreement; or (y) has not exercised such right by the close of
business, Los Angeles time, on the fifth business day following November 29,
1995; or (b) if Parent or Purchaser is not in material breach of the Merger
Agreement and (A) prior to the purchase of Shares pursuant to the Offer, the
Company will have received an Acceptable Offer and the Board will have
withdrawn, or
25
<PAGE>
modified or changed (including by amendment of the Schedule 14D-9) in a
manner adverse to Parent or Purchaser its approval or recommendation of the
Offer, the Merger Agreement or the Merger or will have recommended an
Acquisition Proposal, PROVIDED, HOWEVER, that if the Company's Board of
Directors modifies or changes its recommendation of the Offer, this
Agreement or the Merger to either express no opinion and remain neutral with
respect thereto, or to provide that it is unable to take a position with
respect thereto, such modification or change will not be deemed to be
adverse to Parent or Purchaser for purposes of this clause (b)(A); or (B)
prior to the purchase of the Shares pursuant to the Offer or the Tender and
Option Agreement, it will have been publicly disclosed or Parent or
Purchaser will have learned that any person, entity or "group" (as that term
is 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, will have
acquired beneficial ownership (determined pursuant to Rule 13d-3 promulgated
under the Exchange Act) of more than 19.9% of any class or series of capital
stock of the Company (including the Shares), through the acquisition of
stock, the formation of a group or otherwise, or will have been granted an
option, right, or warrant, conditional or otherwise, to acquire beneficial
ownership of more than 19.9% of any class or series of capital stock of the
Company (including the Shares); (c) if Parent or Purchaser, as the case may
be, will have terminated the Offer, or the Offer will have expired without
Parent or Purchaser, as the case may be, purchasing any Shares thereunder,
PROVIDED that Parent and Purchaser may not terminate the Merger Agreement as
described in this clause (c) if (x) it or the Purchaser has failed to
purchase the Shares in the Offer in violation of the material terms thereof
or (y) Parent or Purchaser has not exercised such right by the close of
business on or before the fifth business day following the termination or
expiration of the Offer in accordance with its terms; (d) if, prior to the
purchase of the Shares pursuant to the Offer or the Tender and Option
Agreement, the Company breaches or fails in any material respect to perform
or comply with any of its material covenants and agreements contained in the
Merger Agreement or breaches its representations and warranties in any
material respect; or (e) if the Company does not deliver to Parent the
opinions contemplated by the Merger Agreement by the tenth business day
after the date of the Merger Agreement, in form and substance reasonably
satisfactory to Parent in its sole discretion.
If (i) the Board terminates the Merger Agreement because the Company has
accepted an Acceptable Offer under certain conditions prior to the later of the
purchase of Shares under the Offer or Tender and Option Agreement or January 3,
1996, (ii) the Board of Directors of Parent terminates the Merger Agreement if
the Company has received an Acceptable Offer and withdrawn or adversely changed
its recommendation of the transaction under certain circumstances, (iii) the
Board of Directors of Parent terminates the Merger Agreement if a person will
have acquired more than 19.9% of any class of the Company's capital stock and
within one year of any such termination a Person acquires or beneficially owns a
majority of the then outstanding Shares or has obtained representation on the
Board or entered into a definitive agreement with the Company with respect to an
Acquisition Proposal or similar business combination or (iv) the Board of
Directors of Parent terminates the Merger Agreement if Parent, Purchaser or any
of their affiliates will have failed to commence the Offer by November 29, 1995
under certain circumstances or if Parent or Purchaser will have terminated the
Offer or the Offer will have expired without Parent or Purchaser purchasing any
Shares under certain conditions, in each case due to (x) a material breach of
the representations and warranties of the Company set forth in the Merger
Agreement or (y) a material breach of, or failure to perform or comply with, any
material obligation, agreement or covenant contained in the Merger Agreement,
including but not limited to the covenants by the Company, then in any such case
as described in clause (i), (ii), (iii) or (iv), the Company will pay or cause
to be paid to Parent (concurrently with the termination of the Merger Agreement
in the case of a termination referred to in clause (i) upon the consummation of
the Acquisition Proposal or similar business combination in the case of a
termination referred to in clause (iii), and otherwise not later than two
business days after termination of the Merger Agreement) an amount equal to $4
million.
TENDER AND OPTION AGREEMENT. THE FOLLOWING IS A SUMMARY OF THE MATERIAL
TERMS OF THE TENDER AND OPTION AGREEMENT. THIS SUMMARY IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE TENDER AND
26
<PAGE>
OPTION AGREEMENT WHICH IS INCORPORATED HEREIN BY REFERENCE AND COPIES OF WHICH
HAVE BEEN FILED WITH THE COMMISSION AS AN EXHIBIT TO THE SCHEDULE 14D-1. THE
TENDER AND OPTION AGREEMENT MAY BE EXAMINED AND COPIES MAY BE OBTAINED AT THE
PLACE AND IN THE MANNER AS SET FORTH IN SECTION 8 OF THIS OFFER TO PURCHASE.
TENDER OF SHARES. Immediately after the execution of the Merger Agreement,
Parent, Purchaser and Selling Shareholders entered into the Tender and Option
Agreement. Upon the terms and subject to the conditions of such agreement, the
Selling Shareholders have severally agreed (i) to validly tender or cause the
record owner of any Shares to tender all Shares pursuant to the Offer, not later
than the fifth business day after commencement of the Offer or, with respect to
any Shares acquired directly or indirectly, or otherwise beneficially owned, by
any of the Selling Shareholders in any capacity after November 22, 1995 and
prior to the termination of the Tender and Option Agreement, whether upon the
exercise of options, warrants or rights, the conversion or exchange of
convertible or exchangeable securities, or by means of a purchase, dividend,
distribution, gift, bequest, inheritance or as a successor-in-interest in any
capacity (including a fiduciary capacity) or otherwise ("After-Acquired Shares")
within one business day following the acquisition thereof, (ii) not to withdraw
any Shares so tendered without the prior written consent of Parent except upon
receipt of notice from Parent that it is exercising the Option to acquire the
Shares and (iii) to withdraw all Shares tendered in the Offer immediately upon
receipt of notice from Parent that it is exercising the Option in order that
Purchaser may acquire such Shares. The Selling Shareholders have agreed that
Purchaser's obligation to accept for payment and pay for the Shares in the Offer
is subject to the terms and conditions of the Offer.
OPTION. In order to induce Parent and Purchaser to enter into the Merger
Agreement each of the Selling Shareholders have granted to Parent and Purchaser
an irrevocable option, exercisable in whole but not in part (the "Option") to
purchase the Selling Shareholders' 1,931,426 Shares at a purchase price per
Share equal to $17.50. The Option terminates and is no longer exercisable,
notwithstanding any notice of exercise with respect thereto, from and after the
earlier of (i) termination of the Merger Agreement by mutual consent, because of
Parent's or Purchaser's material breach of their representations, warranties or
covenants or if Parent, Purchaser or any of their affiliates will have failed to
commence the Offer by November 29, 1995 under certain conditions or (ii) May 21,
1996. The obligation of the Selling Shareholders to sell Shares pursuant to the
Option is subject to the following conditions: (i) neither Parent nor Purchaser
will be in breach in any material respect of the Merger Agreement; (ii) Parent
will have accepted Shares for payment pursuant to the Offer, or the Offer shall
have otherwise expired or been terminated in accordance with its terms; (iii)
neither Parent nor Purchaser will have the right to terminate the Merger
Agreement under Section 8.1(d)(i) or (iii) thereof; (iv) all waiting periods
under the HSR Act and any securities laws applicable to the exercise of the
Option will have expired or been terminated; (v) there will be no preliminary or
permanent injunction or other order, decree or ruling issued by any governmental
or regulatory authority or agency (a "Governmental Entity"), nor any statute,
rule, regulation or order promulgated or enacted by any Governmental Entity
prohibiting, or otherwise restraining, such exercise of the Option; (vi) the
conditions to the Merger regarding governmental approvals, legal actions and
statutes will have theretofore been satisfied or are not impossible to satisfy
(other than due to a material breach of the Merger Agreement by Parent or
Purchaser); and (vii) the Option will be exercisable on or after January 3,
1996. In the event Parent or Purchaser wishes to exercise the Option, Parent
will deliver notice thereof to each of the Selling Shareholders, specifying the
date, time and place for the closing of such purchase.
ASSIGNMENT OF DIVIDENDS AND OTHER DISTRIBUTIONS. The Selling Shareholders
have assigned to Purchaser any and all dividends and other distributions that
may be declared, set aside or paid by the Company with respect to the Shares
during the term of the Tender and Option Agreement.
NON-COMPETITION; NONDISCLOSURE. The Selling Shareholders have jointly and
severally agreed that for a period of three years from the date of the sale of
the Shares neither Shareholder will compete with the Company or solicit
employees or customers of the Company, and that neither Shareholder will
disclose trade secrets or other confidential information of the Company;
PROVIDED, HOWEVER, that neither Mr. nor Mrs. Dunaway will be prohibited from
directly or indirectly owning, or participating in the conduct of the physician
office laboratory services business of, Psicor Office Laboratories, Inc. to the
extent that such business is acquired by Dunaway Holdings pursuant to the POL
Put Option.
27
<PAGE>
VOTING. Each Selling Shareholder has agreed that (for so long as the Merger
Agreement is in effect), at any meeting of the holders of the Shares, however
called, or in connection with any written consent of the holders of the Shares,
they will vote (or cause to be voted) their Shares (a) in favor of the Merger,
the execution and delivery by the Company of the Merger Agreement and the
approval of the terms thereof and each of the other actions contemplated by the
Merger Agreement and the Tender and Option Agreement and any actions required in
furtherance thereof and hereof; (b) against any action or agreement that would
result in a breach in any respect of any covenant, representation or warranty or
any other obligation or agreement of the Company under the Merger Agreement or
the Tender and Option Agreement; and (c) except as otherwise agreed to in
writing in advance by Parent, against any of the following actions or agreements
(other than the Merger Agreement or the transactions contemplated thereby): (i)
any action or agreement that is intended, or could reasonably be expected, to
impede, interfere with, delay, postpone or attempt to discourage or adversely
affect the Merger, the Offer and the transactions contemplated by the Tender and
Option Agreement and the Merger Agreement; (ii) any extraordinary corporate
transaction, such as a merger, consolidation or other business combination
involving the Company and its subsidiaries; (iii) a sale, lease or transfer of a
material amount of assets of the Company or its subsidiaries or a
reorganization, recapitalization, dissolution or liquidation of the Company or
its subsidiaries; (iv) any change in the management or the Board, except as
specifically contemplated by the Merger Agreement; (v) any change in the present
capitalization or dividend policy of the Company; (vi) any amendment of the
Company's articles of incorporation or bylaws; or (vii) any other material
change in the Company's corporate structure or business. Notwithstanding
anything to the contrary contained in the Tender and Option Agreement, Mr. and
Mrs. Dunaway will be free to act in their respective capacities as members of
the Board and to discharge their fiduciary duties as such.
OTHER COVENANTS, REPRESENTATIONS, WARRANTIES. In connection with the Tender
and Option Agreement, the Selling Shareholders have made certain
representations, warranties and covenants, including without limitation with
respect to ownership of Shares, the Selling Shareholders' power and authority to
enter into and perform their obligations under the Tender and Option Agreement,
the receipt of requisite governmental consents and approvals, absence of
conflicts, absence of liens and encumbrances on and in respect of the Selling
Shareholders' Shares, restrictions on the transfer of the Selling Shareholders'
Shares, reliance by Parent, finder's fees, no solicitation, non-competition,
nondisclosure, notice of additional shares and the solicitation of acquisition
proposals.
CONFIDENTIALITY AGREEMENT. THE FOLLOWING IS A SUMMARY OF THE MATERIAL TERMS
OF THE CONFIDENTIALITY AGREEMENT. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF THE CONFIDENTIALITY AGREEMENT WHICH IS
INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH HAS BEEN FILED WITH THE
COMMISSION AS AN EXHIBIT TO THE SCHEDULE 14D-1. THE CONFIDENTIALITY AGREEMENT
MAY BE EXAMINED AND COPIES MAY BE OBTAINED AT THE PLACE AND IN THE MANNER AS SET
FORTH IN SECTION 8 OF THIS OFFER TO PURCHASE.
Parent entered into a Confidentiality and Non-disclosure Agreement, dated
October 13, 1995 (the "Confidentiality Agreement"), with the Company pursuant to
which Parent has agreed, among other things, to keep confidential certain
non-public confidential or proprietary information of the Company furnished to
Parent by or on behalf of the Company. The Confidentiality Agreement provides
that Parent agreed that, for twelve months, without the prior written consent of
the Company, Parent will not in any manner, directly or indirectly, or in
connection with any other person or entity, (a) effect or seek, offer or propose
(whether publicly or otherwise) to effect or participate in, (i) any acquisition
of any securities (or beneficial ownership thereof) or assets of the Company,
(ii) any tender or exchange offer, merger or other business combination
involving the Company, (iii) any recapitalization, restructuring, liquidation,
dissolution or other extraordinary transaction with respect to the Company, or
(iv) any "solicitation" of "proxies" (as such terms are defined in Rule 14a-1
under the Exchange Act) or consents to vote any securities of the Company; (b)
form, join or in any way participate in a "group" (as such term is used in
Section 13(d)(3) of the Exchange Act) or otherwise act, alone or with others, to
seek to acquire or affect control or influence the management, Board of
Directors or policies of the Company; or (c) enter into any discussions or
arrangements with any third party other than the Company, its representatives,
or advisors to the recipient regarding any of the foregoing. Notwithstanding the
foregoing, Parent is not prohibited from proposing to the Board a cash
transaction
28
<PAGE>
structured as a tender offer followed by a merger in which all holders of the
Shares (including outstanding options to acquire the Shares, whether vested and
exercisable or not) will receive cash consideration of not less than $17.50,
net, per share of the Shares.
POL AGREEMENT. THE FOLLOWING IS A SUMMARY OF THE MATERIAL TERMS OF THE POL
AGREEMENT. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL
TEXT OF THE POL PUT OPTION AND THE POL PURCHASE AGREEMENT WHICH ARE INCORPORATED
HEREIN BY REFERENCE AND COPIES OF WHICH HAVE BEEN FILED WITH THE COMMISSION AS
AN EXHIBIT TO THE SCHEDULE 14D-1. THE POL AGREEMENT MAY BE EXAMINED AND COPIES
MAY BE OBTAINED AT THE PLACE AND IN THE MANNER AS SET FORTH IN SECTION 8 OF THIS
OFFER TO PURCHASE.
Concurrently with the execution and delivery of the Merger Agreement, as an
inducement to Parent to acquire the Company, the Company and Dunaway Holdings
entered into the POL Agreement pursuant to which Dunaway Holdings has agreed to
acquire from the Company, if the Company exercises the POL Put Option, all of
the outstanding shares of POL, together with all of the Company's rights,
interests, liabilities and obligations relating to POL, if no higher offer for
POL is received by the Company. If the Company exercises the POL Put Option,
under the POL Purchase Agreement the purchase price payable by Dunaway Holdings
will be $4 million, subject to adjustment, payable as follows: (i) the sum of $1
million cash, such amount to be subject to adjustment (based upon the excess of
the amount of the "intercompany account balance" with respect to POL reflected
on the Company's closing balance sheet over such amount reflected on the
Company's balance sheet for the fiscal year ended September 30, 1995) and (ii) a
$3 million principal amount unsecured subordinated ten-year note of Dunaway
Holdings bearing interest at the prime rate. The Merger Agreement allows the
Company to terminate the POL Agreement in order for the Company to accept a
Higher POL Offer. The Company has informed Purchaser that it has retained Dain
Bosworth to seek possible buyers for POL other than Dunaway Holdings and that
Dain Bosworth has commenced such process. The POL Agreement provides that any
closing of the acquisition of POL by Dunaway Holdings in accordance with the
terms and conditions of the POL Agreement will occur after the closing or
termination of the Offer. It is a condition to the Offer that POL be sold in a
Higher POL Offer or that the POL Agreement be in full force and effect and all
conditions to the closing of the transactions contemplated thereby be capable of
being satisfied promptly, and it is a condition to the Merger that POL shall
have been sold, whether pursuant to the POL Agreement or a Higher POL Offer. See
"Merger Agreement" above. As part of the POL Agreement, the parties have agreed
that they shall in good faith negotiate the terms of a services agreement
providing, for an interim period following the closing of the transaction under
the POL Purchase Agreement, for the delivery by the Company to POL of such
administrative and warehousing services as may be agreed upon at the Company's
cost of providing such services.
VOTE REQUIRED TO APPROVE MERGER. Pennsylvania Law provides that the
adoption of any plan of merger or consolidation by the Company requires the
approval of the Board and the affirmative vote of a majority of the votes cast
by all shareholders entitled to vote thereon (including the votes of any Shares
owned by Parent and Purchaser that have voting rights at such time), if the
"short form" merger procedure described below is not available. The Board has
authorized and approved the Offer and the Merger; consequently, the only
additional action of the Company that may be necessary to effect the Merger is
approval by such shareholders at a meeting of the Company's shareholders
convened for that purpose (the "Shareholders Meeting") if the short-form merger
procedure described below is not available. Pennsylvania Law also provides that
the Merger will not require the approval of the Company's shareholders, and can
be adopted by Purchaser's Board of Directors, if Purchaser owns at least 80% of
the outstanding Shares. Accordingly, if, as a result of the Offer or otherwise,
Purchaser acquires or controls the voting power of at least 80% of the
outstanding Shares (which would be the case if the Minimum Tender Condition were
satisfied and Purchaser were to accept for payment Shares tendered pursuant to
the Offer, including Shares tendered by the Selling Shareholders), Purchaser
could, and intends to, effect the Merger without the Shareholders Meeting and
without approval by shareholders of the Company. If, however, Purchaser does not
acquire at least 80% of the then outstanding Shares pursuant to the Offer or
otherwise and a vote of the Company's shareholders is required under
Pennsylvania Law, a significantly longer period of time will be required to
effect the Merger.
29
<PAGE>
Although under the terms of the Merger Agreement, Parent and Purchaser may waive
the Minimum Condition, they do not currently intend to do so and Parent and
Purchaser may terminate the Merger Agreement if the Minimum Condition is not
satisfied.
The Commission has adopted Rule 13e-3 under the Exchange Act which is
applicable to certain "going private" transactions and which may under certain
circumstances be applicable to the Merger or another business combination
following the purchase of Shares pursuant to the Offer in which Purchaser seeks
to acquire the remaining Shares not held by it. Purchaser believes, however,
that Rule 13e-3 will not be applicable to the Merger because it is anticipated
that the Merger will be effected within one year following consummation of the
Offer. Rule 13e-3 requires, among other things, that certain financial
information concerning the Company and certain information relating to the
fairness of the proposed transaction and the consideration offered to minority
shareholders in such transaction, be filed with the Commission and disclosed to
shareholders prior to consummation of the transaction.
APPRAISAL RIGHTS. Notwithstanding anything in the Merger Agreement to the
contrary, any issued and outstanding Shares held by persons who object to the
Merger and comply with all the provisions of Pennsylvania Law concerning the
right of holders of Shares to dissent from the Merger and require appraisal of
their Shares ("Dissenting Shareholder") will not be converted into the right to
receive the Offer Price, without interest, pursuant to the Merger Agreement but
will become the right to receive such consideration as may be determined to be
due to such Dissenting Shareholder pursuant to the Pennsylvania Law; PROVIDED,
HOWEVER, that the Shares outstanding immediately prior to the Effective Time and
held by a Dissenting Shareholder who will, after the Effective Time, withdraw
his demand for appraisal or lose his right of appraisal, in either case pursuant
to the Pennsylvania Law, will be deemed to be converted as of the Effective Time
into the right to receive the Offer Price, payable to the holder thereof,
without interest. The Company will give Parent (i) prompt notice of any written
demands for appraisal of the Shares received by the Company and (ii) the
opportunity to direct all negotiations and proceedings with respect to any such
demands. The Company will not, without the prior written consent of Parent,
voluntarily make any payment with respect to, or settle, offer to settle or
otherwise negotiate, any such demands.
In addition to the appraisal rights discussed above, shareholders also have
certain rights ("Subchapter 25E Rights") under Subchapter 25E of the
Pennsylvania Law ("Subchapter 25E") which will become applicable prior to the
Effective Time in the event that the Purchaser (or a group of related persons,
or any other person or group of related persons) were to acquire Shares
representing at least 20% of the voting power of the Company, in connection with
the Offer or otherwise (a "Control Transaction"). In such event, shareholders of
the Company would have the right to demand "fair value" of such shareholders'
Shares and to be paid such fair value upon compliance with the requirements of
Subchapter 25E. Under Subchapter 25E, "fair value" may not be less than the
highest price per share paid by the controlling person or group at any time
during the 90-day period ending on and including the date of the Control
Transaction, plus an increment, if any, representing any value, including,
without limitation, any proportion of value payable for acquisition of control
of the Company that may not be reflected in such price. Purchaser believes that
the Offer Price represents fair market value of the Shares within the meaning of
Subchapter 25E. Subchapter 25E Rights would attach immediately upon consummation
of a Control Transaction and require that any shareholder seeking such appraisal
must make a demand for fair value within a reasonable time after the notice to
shareholders that a Control Transaction has occurred is given by the controlling
person or group in accordance with Subchapter 25E, which time period may be
specified in such notice, as well as comply with the other procedures of
Subchapter 25E. Subchapter 25E Rights are available only with respect to shares
of a registered corporation held by a shareholder after the occurrence of a
Control Transaction; accordingly, Subchapter 25E Rights would not be available
with respect to any Shares tendered in the Offer and accepted for payment.
Although under the terms of the Merger Agreement Parent and Purchaser may waive
the Minimum Condition, they do not currently intend to do so; and Parent and
Purchaser may terminate the Merger Agreement and the transactions contemplated
thereby (including, without limitation, the Offer) if the Minimum Condition is
not satisfied. The foregoing summary of rights under Subchapter 25E is qualified
in its entirety by reference to the full text of Subchapter 25E, which is
attached hereto as Annex A.
30
<PAGE>
Except as noted in this Offer to Purchase, neither Parent nor Purchaser has
any present plans or proposals that would result in an extraordinary corporate
transaction, such as a merger, reorganization, liquidation, relocation of
operations, or sale or transfer of assets, involving the Company or any material
changes in the Company's corporate structure, business or composition of its
management or personnel.
12. DIVIDENDS AND DISTRIBUTIONS; CHANGES IN STOCK. As described above, the
Merger Agreement provides that the Company will not, and will not cause or
permit any of its Subsidiaries to, (a) declare, set aside or pay any dividends
on or make other distributions in respect of any shares of its capital stock,
(b) split, combine or reclassify any shares of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or in
substitution for any shares of its capital stock or (c) propose to do any of the
foregoing. Notwithstanding the foregoing, the restrictions on the Company
declaring dividends under the Merger Agreement will not prevent the Company,
upon the consummation by the Company of a transaction for a Higher POL Offer in
accordance with the Merger Agreement, from declaring and paying a dividend in
respect of Shares (payable to the Company's record holders of Shares immediately
prior to the earlier of (i) Purchaser's acceptance of Shares for payment under
the Offer or (ii) the Effective Time) in an aggregate amount equal to the amount
of the excess of the net cash proceeds actually received by the Company in the
transaction for the Higher POL Offer (after taking into account all
out-of-pocket costs and expenses directly related to such transaction incurred
after November 22, 1995, including without limitation the fees and expenses, to
the extent reimbursable by the Company, of Dunaway Holdings incurred in
connection with the POL Agreement and of Dain Bosworth in connection with
marketing POL) over the $4 million to be received by the Company in the
transaction with Dunaway Holdings contemplated by the POL Agreement as of the
date thereof (the amount of such dividend to be subject to prior confirmation by
Parent based upon reasonable documentation prepared by the Company). See Section
11.
13. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; NNM QUOTATION AND
EXCHANGE ACT REGISTRATION. The purchase of Shares by Purchaser pursuant to the
Offer will reduce the number of Shares that might otherwise trade publicly and
will reduce the number of holders of Shares, which could adversely affect the
liquidity and market value of the remaining Shares held by the public.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the requirements of the NASD for continued inclusion
on the NNM. The NASD requires that an issuer have at least 100,000 publicly held
shares, held by at least 300 shareholders, with a market value of at least
$200,000, have total assets of at least $2 million and have capital and surplus
(total shareholders' equity) of at least $1 million. If the NNM were to cease to
publish quotations for the Shares, it is possible that the Shares would continue
to trade in the over-the-counter market and that price or other quotations would
be reported by other sources. The extent of the public market for such and the
availability of such quotations would depend, however, upon such factors as the
number of shareholders and/or the aggregate market value of such securities
remaining at such time, the interest in maintaining a market in the Shares on
the part of securities firms, the possible termination of registration under the
Exchange Act as described below, and other factors. The Purchaser cannot predict
whether the reduction in the number of Shares that might otherwise trade
publicly would have an adverse or beneficial effect on the market price for, or
marketability of, the Shares or whether it would cause future market prices to
be greater or lesser than the Offer Price.
The Shares are currently "margin securities," as such term is defined under
the rules of the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"), which has the effect, among other things, of allowing brokers
to extend credit on the collateral of such securities. Depending upon factors
similar to those described above regarding listing and market quotations,
following the Offer it is possible that the Shares might no longer constitute
"margin securities" for purposes of the margin regulations of the Federal
Reserve Board, in which event such Shares could no longer be used as collateral
for loans made by brokers.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application of the Company to the Commission
if the Shares are not listed on a national securities exchange and there are
fewer than 300 record holders of the Shares. The termination of registration of
the Shares under the Exchange Act would substantially reduce the information
required to be furnished by the
31
<PAGE>
Company to holders of Shares and to the Commission and would make certain
provisions of the Exchange Act, such as the short-swing profit recovery
provisions of Section 16(b), the requirement of furnishing a proxy statement in
connection with shareholders' meetings pursuant to Section 14(a), no longer
applicable to the Shares. In addition, "affiliates" of the Company and persons
holding "restricted securities" of the Company may be deprived of the ability to
dispose of such securities pursuant to Rule 144 promulgated under the Securities
Act.
If registration of the Shares under the Exchange Act were terminated, the
Shares would no longer be "margin securities" or be eligible for NNM reporting.
In addition, if registration of the Shares under the Exchange Act is terminated,
Pennsylvania Law provides that the applicability of Chapter 25 thereof to the
Company (see below) shall terminate immediately upon the termination of the
Company's status as a "registered corporation."
Purchaser intends to seek to cause the Company to terminate the registration
of the Shares under the Exchange Act as soon after consummation of the Offer as
the requirements for termination of the registration of the Shares are met.
14. CONDITIONS OF THE OFFER. Notwithstanding any other provisions of the
Offer, and in addition to (and not in limitation of) Purchaser's rights to
extend and amend the Offer at any time in its sole discretion (subject to the
provisions of the Merger Agreement), 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) under the Exchange Act (relating to
Purchaser's obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), pay for, and may delay the acceptance
for payment of or, subject to the restriction referred to above, the payment
for, any tendered Shares, and may terminate the Offer as to any Shares not then
paid for, if (i) the applicable waiting period under the HSR Act has not expired
or terminated, (ii) the Minimum Condition has not been satisfied or waived, or
(iii) at any time on or after November 22, 1995 and before the time for payment
of any such Shares, any of the following events will occur or will be determined
by Purchaser to have occurred:
(a) there will have been instituted, pending or threatened any action,
proceeding, application, claim or suit, or any statute, rule, regulation,
judgment, order or injunction promulgated, entered, enforced, enacted,
proposed, issued or applicable to the Offer or the Merger by any domestic or
foreign Federal, state or local governmental regulatory or administrative
agency or authority or court or legislative body or commission which
directly or indirectly (1) challenges, seeks to make illegal, prohibits or
makes illegal, or imposes any material limitations on, Parent's or
Purchaser's ownership or operation (or that of any of their respective
subsidiaries or affiliates) of all or a material portion of the businesses
or assets of them or of the Company or its subsidiaries, or compels Parent
or Purchaser or their respective subsidiaries and affiliates to dispose of
or hold separate any material portion of the business or assets of the
Company or Parent and their respective subsidiaries, in each case taken as a
whole, (2) challenges, seeks to make illegal, prohibits or makes illegal the
acceptance for payment, payment for or purchase of Shares or the
consummation of the Offer or the Merger, (3) results in the delay in or
restricts the ability of Purchaser, or renders Purchaser unable, to accept
for payment, pay for or purchase some or all of the Shares, (4) imposes
material limitations on the ability of Parent or Purchaser to exercise full
rights of ownership of the Shares, including without limitation the right to
vote the Shares purchased by it on all matters presented to the Company's
shareholders, except as specifically provided in the Control Share
Acquisition Chapter to the extent that such chapter does not prohibit the
Company and Parent from engaging in a short-form merger under Section
1924(b)(ii) of Pennsylvania Law, (5) seeks to obtain or obtains material
damages or otherwise directly or indirectly relates to the transactions
contemplated by the Offer or the Merger, (6) seeks to require divestiture by
Parent, Purchaser or any of their respective subsidiaries or affiliates of
any Shares, or (7) could otherwise have a Material Adverse Effect, PROVIDED
that Parent will have used reasonable efforts to cause any such judgment,
order or injunction to be vacated or lifted;
(b) there will have occurred (1) any general suspension of trading in,
or limitation on prices for, securities on the NYSE or any other securities
market for a period in excess of three hours (excluding
32
<PAGE>
suspensions or limitations resulting solely from physical damage or
interference with such exchanges not related to market conditions), (2) a
declaration of a banking moratorium or any suspension of payments in respect
of banks in the United States (whether or not mandatory), (3) a commencement
of a war, armed hostilities or other international or national calamity
directly or indirectly involving the United States, (4) any limitation
(whether or not mandatory) by any foreign or United States governmental
authority on the extension of credit by banks or other financial
institutions, (5) any decline in either the Dow Jones Industrial Average or
the Standard & Poor's Index of 500 Industrial Companies
by an amount in excess of 20% measured from the close of business on
November 22, 1995, or (6) in the case of any of the foregoing existing at
the time of the commencement of the Offer, a material acceleration or
worsening thereof;
(c) the representations and warranties of the Company set forth in the
Merger Agreement will not be true and correct in any material respect when
made or at and as of the date of consummation of the Offer as though made on
or as of such date, except (i) for changes specifically permitted by the
Merger Agreement, and (ii) those representations and warranties that address
matters only as of a particular date are true and correct as of such date,
or the Company will have breached or failed in any material respect to
perform or comply with any material obligation, agreement or covenant
required by the Merger Agreement to be performed or complied with by it;
(d) the Company will have breached or failed to perform in any material
respect any of its covenants or agreements under this Agreement;
(e) any change in the financial condition, business, assets, properties,
prospects or results of operations of the Company and its subsidiaries taken
as a whole, that would constitute a Material Adverse Effect will have
occurred, or there will be any event, condition, occurrence or development
of a state of circumstances or facts which individually or in the aggregate
causes, results in or could cause or result in such a Material Adverse
Effect;
(f) the Merger Agreement will have been terminated in accordance with
its terms;
(g) (i) it will have been publicly disclosed or Parent or Purchaser will
have otherwise learned that any person, entity 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, will have acquired beneficial
ownership (determined pursuant to Rule 13d-3 promulgated under the Exchange
Act) of more than 19.9% of any class or series of capital stock of the
Company (including the Shares), through the acquisition of stock, the
formation of a group or otherwise, or will have been granted an option,
right or warrant, conditional or otherwise, to acquire beneficial ownership
of more than 19.9% of any class or series of capital stock of the Company
(including the Shares); or (ii) any person or group will have entered into a
definitive agreement or agreement in principle with the Company with respect
to an Acquisition Proposal or other business combination with the Company;
(h) the Board will have withdrawn, or modified or changed (including by
amendment of the Schedule 14D-9) in a manner adverse to Parent or Purchaser
its approval or recommendation of the Offer, the Merger Agreement or the
Merger or will have recommended an Acquisition Proposal, PROVIDED, HOWEVER,
that if the Board modifies or changes its recommendation of the Offer, the
Merger Agreement or the Merger or will have recommended an Acquisition
Proposal, provided, however, that if the Board modifies or changes its
recommendation of the Offer, the Merger Agreement or the merger to either
express its opinion and remain neutral with respect thereto, or to provide
that it is unable to take a position with respect thereto, such modification
or change will not be deemed to be adverse to Parent or Purchaser for
purposes of this paragraph (h);
(i) the Company will not have obtained all consents needed from Option
holders under the Option Plans in order to pay them the amounts contemplated
by the Merger Agreement in lieu of any and all rights of such Option holders
under the Option Plans;
(j) a "Purchase Period" under the Company's Employee Stock Purchase Plan
will have been in effect at any time after November 30, 1995, or the Company
will not have the absolute right to convert
33
<PAGE>
any outstanding options thereunder into the right to receive cash determined
in accordance with the Merger Agreement in lieu of any and all rights of the
participants under the Employee Stock Purchase Plan;
(k) the Company will not have obtained the consent with respect to the
Savannah Agreement;
(l) if POL has not been sold pursuant to a Higher POL Offer, the POL
Agreement shall not be in full force and effect, there shall have been a
breach of such POL Agreement or all conditions precedent to the closing of
the transactions contemplated by the POL Agreement shall not be capable of
being satisfied promptly; and
(m) an exemption under Section 8(a) of the Pennsylvania Takeover
Disclosure Law (as hereinafter defined) with respect to the Offer shall not
be effective;
which in the sole judgment of Parent or Purchaser, in any such case, and
regardless of the circumstances (including any action or inaction by Parent or
Purchaser giving rise to such condition) makes it inadvisable to proceed with
the Offer or with such acceptance for payment or payments.
The foregoing conditions are for the sole benefit of Parent and Purchaser
and may be waived by Parent or Purchaser, in whole or in part at any time and
from time to time in the sole discretion of Parent or Purchaser. 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 and each such right will be deemed an
ongoing right which may be asserted at any time and from time to time.
15. REGULATORY APPROVALS; STATE TAKEOVER LAWS.
GENERAL. Except as otherwise disclosed herein, based on a review of
publicly available information by the Company with the Commission, neither
Purchaser nor Parent is aware of (i) any license or regulatory permit that
appears to be material to the business of the Company and its subsidiaries,
taken as a whole, that might be adversely affected by the acquisition of Shares
by Purchaser pursuant to the Offer or the Merger or (ii) any approval or other
action by any governmental, administrative or regulatory agency or authority,
domestic or foreign, that would be required for the acquisition or ownership of
Shares by Purchaser as contemplated herein. Should any such approval or other
action be required, Purchaser currently contemplates that such approval or
action would be sought. While Purchaser does not currently intend to delay the
acceptance for payment of Shares tendered pursuant to the Offer pending the
outcome of any such matter, there can be no assurance that any such approval or
action, if needed, would be obtained or would be obtained without substantial
conditions or that adverse consequences might not result to the business of the
Company, Purchaser or Parent or that certain parts of the businesses of the
Company, Purchaser or Parent might not have to be disposed of in the event that
such approvals were not obtained or any other actions were not taken.
Purchaser's obligation under the Offer to accept for payment and pay for Shares
is subject to certain conditions. See Section 14.
ANTITRUST. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act") and the rules that have been promulgated thereunder
by the Federal Trade Commission ("FTC"), certain acquisition transactions may
not be consummated unless certain information has been furnished to the
Antitrust Division of the Department of Justice (the "Antitrust Division") and
the FTC and certain waiting period requirements have been satisfied. The
acquisition of Shares by Purchaser pursuant to the Offer is subject to the HSR
Act requirements.
Under the provisions of the HSR Act applicable to the purchase of Shares
pursuant to the Offer, such purchase may not be made until the expiration of a
15-calendar day waiting period following the required filing under the HSR Act
by Parent, which Parent made on November 28, 1995. Accordingly, the waiting
period under the HSR Act will expire at 11:59 P.M., New York City time, on
December 13, 1995, unless early termination of the waiting period is granted or
Parent receives a request for additional information of documentary material
prior thereto. Pursuant to the HSR Act, Parent has requested early termination
of the waiting period applicable to the Offer. There can be no assurances,
however, that the 15-day HSR Act waiting period will be terminated early. If
either the FTC or the Antitrust Division were to request additional information
or documentary material from Parent, the waiting period would expire at 11:59
P.M., New York City time, on the tenth calendar day after the date of
substantial compliance by the Parent with such request.
34
<PAGE>
Thereafter, the waiting period could be extended only by court order or by
consent of Parent. If the acquisition of Shares is delayed pursuant to a request
by the FTC or the Antitrust Division for additional information or documentary
material pursuant to the HSR Act, the purchase of and payment for Shares
pursuant to the Offer will be deferred until 10 days after the request is
substantially complied with unless the waiting period is terminated sooner by
the FTC or the Antitrust Division. See Section 2. Only one extension of such
waiting period pursuant to a request for additional information is authorized by
the rules promulgated under the HSR Act, except by court order. Although the
Company is required to file certain information and documentary material with
the Antitrust Division and the FTC in connection with the Offer, neither the
Company's failure to make such filings nor a request to the Company from the
Antitrust Division or the FTC for additional information or documentary material
will extend the waiting period.
No separate HSR Act requirements with respect to the Merger, the Merger
Agreement, and the Tender and Option Agreement will apply if the 15-day waiting
period relating to the Offer (as described above) has expired or been
terminated. However, if the Offer is withdrawn or if the filing relating to the
Offer is withdrawn prior to the expiration or termination of the 15-day waiting
period relating to the Offer, the acquisition of Shares under the Tender and
Option Agreement and/or the Merger pursuant to the Merger Agreement may not be
consummated until 30 calendar days after receipt by the Antitrust Division and
the FTC of the Notification and Report Forms of both Parent and the Company
unless the 30-day period is earlier terminated by the Antitrust Division and the
FTC. Within such 30-day period, the Antitrust Division or the FTC may request
additional information or documentary materials from Parent and/or the Company,
in which event, the acquisition of Shares pursuant to the Merger or the Tender
and Option Agreement, as the case may be, may not be consummated until 20 days
after such requests are substantially complied with by both Parent and the
Company. Thereafter, the waiting periods may be extended only by court order or
by consent.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares by
Purchaser pursuant to the Offer. At any time before or after Purchaser's
purchase of Shares, either the Antitrust Division or the FTC could take such
action under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the acquisition of Shares pursuant to the
Offer or seeking divestiture of Shares acquired by Purchaser or divestiture of
substantial assets of Parent, the Company or any of their respective
subsidiaries. Private parties may also bring legal action under the antitrust
laws under certain circumstances. Based upon an examination of publicly
available information relating to the businesses in which Parent and its
subsidiaries and the Company and its subsidiaries are involved, Parent and
Purchaser believe that the Offer will not violate the antitrust laws.
Nevertheless, there can be no assurance that a challenge to the Offer on
antitrust grounds will not be made or, if a challenge is made, what the result
will be.
STATE TAKEOVER LAWS. A number of states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable to
attempts to acquire securities of corporations that are incorporated or have
assets, stockholders, executive offices or places of business in such states. In
EDGAR V. MITE CORP., the Supreme Court of the United States held that the
Illinois Business Takeover Act, which involved state securities laws that made
the takeover of certain corporations more difficult, imposed a substantial
burden on interstate commerce and therefore was unconstitutional. In CTS CORP.
V. DYNAMICS CORP. OF AMERICA, however, the Supreme Court of the United States
held that a state may, as a matter of corporate law and, in particular, those
laws concerning corporate governance, constitutionally disqualify a potential
acquiror from voting on the affairs of a target corporation without prior
approval of the remaining stockholders, provided that such laws were applicable
only under certain conditions.
The Pennsylvania Takeover Disclosure Law ("PTDL") purports to regulate
certain attempts to acquire a corporation which (1) is organized under the laws
of Pennsylvania or (2) has its principal place of business and substantial
assets located in Pennsylvania. In CRANE CO. V. LAM, 509 F. Supp. 782 (E.D. Pa.
1981), the United States District Court for the Eastern District of Pennsylvania
preliminarily enjoined, on grounds arising under the United States Constitution,
enforcement of at least the portion of the PTDL involving the pre-offer waiting
period thereunder. Section 8(a) of the PTDL provides an exemption for any offer
to purchase securities as to which the board of directors of the target company
recommends acceptance to its
35
<PAGE>
shareholders, if at the time such recommendation is first communicated to
shareholders the offeror files with the Pennsylvania Securities Commission
("PSC") a copy of the Schedule 14D-1 and certain other information and
materials, including an undertaking to notify security holders of the target
company that a notice has been filed with the PSC which contains substantial
additional information about the offer and which is available for inspection at
the PSC's principal office during business hours. While reserving and not
waiving its right to challenge the validity of the PTCL or its applicability to
the Offer, the Purchaser is making such a filing with the PSC in order to
qualify for such exemption from the PTCL. Additional information about the Offer
has been filed with the Pennsylvania Securities Commission pursuant to the
Pennsylvania Takeover Disclosure Law and is available for inspection at the
Pennsylvania Securities Commission's office at Eastgate Office Building, 1010
North 7th Street, Harrisburg, PA 17102-1410, during business hours.
Chapter 25 of Pennsylvania Law contains other provisions relating generally
to takeovers and acquisitions of certain publicly owned Pennsylvania
corporations such as the Company that have a class or series of shares entitled
to vote generally in the election of directors registered under the Exchange Act
(a "registered corporation"). The following discussion is a general and highly
abbreviated summary of certain features of such chapter, is not intended to be
complete or to completely address potentially applicable exceptions or
exemptions, and is qualified in its entirety by reference to the full text of
Chapter 25 of Pennsylvania Law.
In addition to other provisions not applicable to the Offer or the Merger,
Subchapter 25D of Pennsylvania Law includes provisions requiring approval of a
merger of a registered corporation with an "interested shareholder" in which the
"interested shareholder" is treated differently from other shareholders, by the
affirmative vote of the shareholders entitled to cast at least a majority of the
votes that all shareholders other than the interested shareholder are entitled
to cast with respect to the transaction without counting the votes of the
interested shareholders. This disinterested shareholder approval requirement is
not applicable to a transaction (i) approved by a majority of disinterested
directors, (ii) in which the consideration to be received by shareholders is not
less than the highest amount paid by the interested shareholder in acquiring his
shares, or (iii) effected without submitting the Merger to a vote of
shareholders as permitted in Section 1924(b)(1)(ii) of the Pennsylvania Law.
Purchaser currently believes that the disinterested shareholder approval
requirement of Subchapter 25D will not be applicable to the contemplated Merger
because of prior disinterested Board approval.
Subchapter 25E of Pennsylvania Law, which addresses "control transactions,"
requires under certain circumstances any person who acquires at least 20% of the
voting power of a registered corporation to offer to purchase up to the balance
of the voting shares of the corporation at the price determined under the
statute, which may not be less than the highest price per share paid by the
controlling person or group at any time during the 90-day period ending on and
including the date of the control transaction, plus an increment representing
any value, including without limitation, any proportion of value payable for
acquisition of control of the corporation, that may not be reflected in such
price. A "control transaction" will occur if Purchaser acquires voting power
over 20% or more of the Shares of the Company by purchasing Shares either
pursuant to the Offer or the Tender and Option Agreement. See Section 11.
Subchapter 25F of Pennsylvania Law prohibits under certain circumstances
certain "business combinations," including mergers and sales or pledges of
significant assets, of a registered corporation with an "interested shareholder"
for a period of five years. Subchapter 25F exempts business combinations
approved by the board or directors prior to a shareholder becoming an interested
shareholder and transactions with interested shareholders who beneficially owned
shares with at least 15% of the total voting power of a corporation on March 23,
1988 and remain so. The Company has represented to the Purchaser that Subchapter
25F is not applicable to the contemplated Merger or the POL Agreement.
Subchapter 25G of Pennsylvania Law, relating to "control-share
acquisitions," prevents under certain circumstances the owner of a control-share
block of shares of a registered corporation from voting such shares unless a
majority of the "disinterested" shares approve such voting rights. Failure to
obtain such approval may result in a forced sale by the control-share owner of
the control-share block to the corporation at a possible loss. The purchase by
Purchaser of Shares, other than certain Shares beneficially owned by the Selling
Shareholders satisfying the requirements for exemption from the definition of
"control shares," may
36
<PAGE>
be deemed to constitute a control-share acquisition, with the result that
Purchaser would not have voting rights with respect to such control-shares
unless the voting rights are restored by a disinterested shareholder vote.
Subchapter 25H of Pennsylvania Law, relating to disgorgement by certain
controlling shareholders of a registered corporation, provides that under
certain circumstances any profit realized by a controlling person from the
disposition of shares of the corporation to any person (including to the
corporation under Subchapter 25G or otherwise) will be recoverable by the
corporation.
Subchapter 25I of Pennsylvania Law entitles "eligible employees" of a
registered corporation to a lump sum payment of severance compensation under
certain circumstances if the employee is terminated, other than for willful
misconduct, within 90 days before voting rights lost as a result of a
control-share acquisition are restored by a vote of disinterested shareholders.
Subchapter 25J of Pennsylvania Law provides protection against termination or
impairment under certain circumstances of "covered labor contracts" of a
registered corporation as a result of a "business combination" transaction if
the business operation to which the covered labor contract relates was owned by
the registered corporation at the time voting rights are restored by shareholder
vote after a control-share acquisition. Although Purchaser will lose certain
voting rights as a result of its "control-share acquisition" pursuant to
Subchapter 25G, if the contemplated Merger is consummated without a vote of the
Company's shareholders as is currently intended, it will not be necessary, in
order to consummate the Merger, for Purchaser to seek a vote of disinterested
Company shareholders in order to restore voting rights with respect to control
shares of the Company owned by Purchaser. Therefore, Subchapters 25I and 25J
should not have any adverse effect on Purchaser.
Section 2504 of Pennsylvania Law provides that the applicability of Chapter
25 of Pennsylvania Law to a registered corporation having a class or series of
shares entitled to vote generally in the election of directors registered under
the Exchange Act or otherwise satisfying the definition of a registered
corporation under Section 2502(1) of Pennsylvania Law shall terminate
immediately upon the termination of the status of the corporation as a
registered corporation. Purchaser intends to seek to cause the Company to
terminate the registration of the Shares under the Exchange Act as soon after
consummation of the Offer as the requirements for termination of the
registration of the Shares are met.
Except for the filing pursuant to Section 8(a) of the PTDL described above,
neither Purchaser nor Parent has currently complied with any state takeover
statute or regulation. Purchaser reserves the right to challenge the
applicability or validity of any state law purportedly applicable to the Offer
or the Merger and nothing in this Offer to Purchaser or any action taken in
connection with the Offer or the Merger is intended as a waiver of such right.
If it is asserted that any state takeover statute is applicable to the Offer or
the Merger and an appropriate court does not determine that it is inapplicable
or invalid as applied to the Offer or the Merger, Purchaser might be required to
file certain information with, or to receive approvals from, the relevant state
authorities, and Purchaser might be unable to accept for payment or pay for
Shares tendered pursuant to the Offer, or be delayed in consummating the Offer
or the Merger. In such case, Purchaser may not be obliged to accept payment or
pay for any Shares tendered pursuant to the Offer.
16. FEES AND EXPENSES. Except as set forth below, neither Parent nor
Purchaser will pay any fees or commissions to any broker, dealer or other person
for soliciting tenders of Shares pursuant to the Offer.
CS First Boston is acting as Dealer Manager in connection with the Offer and
has provided certain financial advisory services to Parent and Purchaser in
connection with the Offer and the Merger. As compensation for CS First Boston's
services as financial advisor, Parent will pay CS First Boston a transaction fee
upon the consummation of the Offer. In addition, Parent has agreed to reimburse
CS First Boston for all reasonable out-of-pocket expenses, including attorneys'
fees, incurred by CS First Boston, in connection with its role as financial
advisor and Dealer Manager, and Parent has agreed to indemnify CS First Boston
and certain related persons against certain liabilities and expenses in
connection with its role as financial advisor and Dealer Manager. In addition,
Parent has agreed to pay directly, or reimburse CS First Boston, as the case may
be, for (i) all expenses incurred by CS First Boston relating to the
preparation, printing, filing, mailing and publishing of all Offer material,
(ii) all fees and expenses of the Depositary and Information Agent referred to
in this Offer to Purchase, (iii) all advertising charges in connection with the
37
<PAGE>
Offer, including those of any public relations firm or other person or entity
rendering services in connection therewith, (iv) all fees, if any, payable to
dealers (including CS First Boston), and banks and trust companies as
reimbursement for their customary mailing and handling expenses incurred in
forwarding the Offer material to their customers and (v) all other fees and
expenses incurred by CS First Boston in connection with the Offer or otherwise
in connection with the performance of CS First Boston's services hereunder
(including fees and disbursements of CS First Boston's legal counsel). All
payments to be made by Parent pursuant to the Dealer Manager Agreement will be
made promptly against delivery to Parent of statements therefor. Parent will be
liable for the foregoing payments whether or not the Offer is commenced,
withdrawn, terminated or canceled prior to the purchase of any Shares or whether
Purchaser or any of its affiliates acquires any Shares pursuant to the Offer or
whether CS First Boston withdraws pursuant to Section 4 of the Dealer Manager
Agreement. In addition, Purchaser has agreed to hold harmless and indemnify CS
First Boston from and against losses arising out of certain situations as set
forth in the Dealer Manager Agreement.
Purchaser has retained Georgeson & Company Inc. to act as the Information
Agent in connection with the Offer. The Information Agent may contact holders of
Shares by mail, telephone, facsimile, telegraph and personal interviews and may
request brokers, dealers and other nominee shareholders to forward materials
relating to the Offer to beneficial owners of Shares. The Information Agent will
receive reasonable and customary compensation for its services, will be
reimbursed for certain reasonable out-of-pocket expenses and will be indemnified
against certain liabilities and expenses in connection therewith, including
certain liabilities under the Federal securities laws.
In addition, First Chicago Trust Company of New York has been retained as
the Depositary. The Depositary has not been retained to make solicitations or
recommendations in its role as Depositary. The Depositary will receive
reasonable and customary compensation for its services, will be reimbursed for
certain reasonable out-of-pocket expenses and will be indemnified against
certain liabilities and expenses in connection therewith, including certain
liabilities under the Federal securities laws. Brokers, dealers, commercial
banks and trust companies will be reimbursed by Purchaser for customary mailing
and handling expenses incurred by them in forwarding offering material to their
customers.
17. MISCELLANEOUS. Purchaser is not aware of any jurisdiction where the
making of the Offer is prohibited by any administrative or judicial action
pursuant to any valid state statute. If Purchaser becomes aware of any valid
state statute prohibiting the making of the Offer or the acceptance of the
Shares pursuant thereto, Purchaser will make a good faith effort to comply with
such state statute. If, after such good faith effort, Purchaser cannot comply
with any such state statute, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) the holders of Shares in such state. In any
jurisdiction where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer will be deemed to be made on
behalf of Purchaser by one or more registered brokers or dealers which are
licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PARENT OR PURCHASER NOT CONTAINED IN THIS OFFER TO
PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Parent and Purchaser have filed with the Commission the Schedule 14D-1,
together with exhibits, pursuant to Rule 14d-3 of the General Rules and
Regulations under the Exchange Act, furnishing certain additional information
with respect to the Offer, and may file amendments thereto. The Schedule 14D-1
and any amendments thereto, including exhibits, may be inspected at, and copies
may be obtained from, the same places and in the same manner as set forth in
Section 8 (except that they will not be available at the regional offices of the
Commission).
Baxter CVG Services II, Inc.
November 29, 1995
38
<PAGE>
SCHEDULE I
INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE
OFFICERS OF PARENT, PURCHASER AND INTERNATIONAL
1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. Set forth below is the
name, current business address, citizenship and the present principal occupation
or employment and material occupations, positions, offices or employments for
the past five years of each director and executive officer of Parent. Unless
otherwise indicated, each person identified below is employed by Parent or its
affiliates, and has been employed by Parent or its affiliates, in positions of
increasing responsibility, for the past five years. The principal address of
Parent and, unless otherwise indicated below, the current business address for
each individual listed below is One Baxter Parkway, Deerfield, Illinois
60015-4633. Each such person (other than Brian P. Anderson, who is a citizen of
Jamaica, and Jack L. McGinley, who is a citizen of Canada) is a citizen of the
United States. Directors are identified by an asterisk.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- ------------------------------------ -----------------------------------------------------------------
<S> <C>
Vernon R. Loucks Jr.*............... Chairman and Chief Executive Officer of International.
Lester B. Knight*................... President.
Arthur F. Staubitz.................. Senior Vice President and General Counsel. Former Senior Vice
President, Secretary and General Counsel of Amgen, Inc.
Harry M. Jansen Kraemer Jr.*........ Senior Vice President and Chief Financial Officer.
Timothy B. Anderson................. Group Vice President.
Joseph F. Damico.................... Group Vice President.
Donald W. Joseph.................... Group Vice President.
Darnell Martin...................... Group Vice President.
Jack L. McGinley.................... Group Vice President.
Terrence J. Mulligan................ Group Vice President.
Michael A. Mussallem................ Group Vice President.
John F. Gaither Jr.................. Corporate Vice President.
Roberto E. Perez.................... Corporate Vice President.
Kathy B. White...................... Vice President and Chief Information Officer. Former Vice
President, Information Systems and Services at AlliedSignal
Corporation. Former Vice President, Corporate Services at
Guilford Mills, Inc.
A. Gerard Sieck..................... Secretary.
Brian P. Anderson................... Controller.
</TABLE>
39
<PAGE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER. Set forth below is the
name, current business address, citizenship and the present principal occupation
or employment and material occupations, positions, offices or employments for
the past five years of each director and executive officer of Purchaser. The
principal address of Purchaser and the current business address for each
individual listed below, unless otherwise indicated, is One Baxter Parkway,
Deerfield, Illinois 60015-4633. Directors are identified by an asterisk.
<TABLE>
<CAPTION>
NAME AND CURRENT PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- --------------------------- ---------------------------------------------------------------------------
<S> <C>
Michael A. Mussallem* President of Purchaser; Group Vice President of Parent and divisional
president of the Cardiovascular Group of Parent (and holder of positions
of increasing responsibility at Parent for the past five years).
John H. Kehl, Jr.* Chief Financial Officer of Purchaser; divisional vice president of the
17221 Red Hill Avenue Cardiovascular Group of Parent (and holder of positions of increasing
Irvine, Califoria 92714 responsibility at Parent for the past five years).
Jay P. Wertheim* Vice President and Secretary of Purchaser; divisional vice president of the
17221 Red Hill Avenue Cardiovascular Group of Parent since March 1995; former partner in the law
Irvine, Califoria 92714 firm of Perkins Coie.
</TABLE>
3. DIRECTORS AND EXECUTIVE OFFICERS OF INTERNATIONAL. Set forth below is
the name, current business address, citizenship and the present principal
occupation or employment and material occupations, positions, offices or
employments for the past five years of each director and executive officer of
International. Unless otherwise indicated, each person identified below is
employed by International or its subsidiaries, and has held positions of
increasing responsibility at International or its subsidiaries, for the past
five years. The principal address of International and, unless otherwise
indicated below, the current business address for each individual listed below
is One Baxter Parkway, Deerfield, Illinois 60015-4633. Each such person (other
than Frank R. Frame, who is a citizen of the United Kingdom, Fabrizio Bonanni,
who is a citizen of Italy and Brian P. Anderson, who is a citizen of Jamaica) is
a citizen of the United States. Directors who are not also employees of
International or its subsidiaries are identified by one asterisk. Directors who
are also employees of International or its subsidiaries are identified by two
asterisks.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- ------------------------------------ -----------------------------------------------------------------
<S> <C>
Silas S. Cathcart*.................. Director of General Electric Company, Illinois Tool Works, Inc.
and The Quaker Oats Company. Trustee of Northern Funds Mutual
Fund. Retired Chairman of the Board and Chief Executive Officer
Kidder, Peabody Group Inc.
John W. Colloton*................... Vice President for Statewide Health Services for the University
of Iowa. Director of Iowa State Bank & Trust, OncorMed,
Iowa-Illinois Gas and Electric Company and Iowa-South Dakota
Blue Cross and Blue Shield (IASD).
Susan Crown*........................ Vice President of the Henry Crown and Company. Director of
Caribbean International News Corporation, Illinois Tool Works,
Inc. Trustee of Northern Funds Mutual Fund.
Mary Johnston Evans*................ Director of Household International, Inc., Sun Company, Delta
Airlines, Inc., The Dunn & Bradstreet Corporation and Scudder
New Europe Fund. Former Director and Vice Chairman of Amtrak.
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- ------------------------------------ -----------------------------------------------------------------
<S> <C>
Frank R. Frame*..................... Advisor to the Board HSBC Holdings plc. Chairman of Wallem Group
Limited. Deputy Chairman of Time Products plc. Director of
Edinburgh Dragon Trust plc and HSBC Global Investment Funds.
Retired Deputy Chairman of The Hong Kong and Shanghai Banking
Corporation Limited.
David W. Grainger*.................. Chairman of the Board of W.W. Grainger, Inc.
Martha R. Ingram*................... Chairman of the Board of Ingram Industries Inc. Director of First
American Corporation.
Arnold J. Levine, Ph.D.*............ Professor of Biology and Chairman of the Molecular Biology
Department Princeton University.
Georges C. St. Laurent Jr.*......... Chairman of the Board and Chief Executive Officer of Western
Bank.
Monroe E. Trout, M.D.*.............. Chairman Emeritus of the Board of American Healthcare Systems.
Director of Cytyo Corporation, Science Applications
International Corporation (SAIC), Gensia, Inc. and The West
Company, Inc.
Fred L. Turner*..................... Senior Chairman of the Board and Chairman of the Executive
Committee McDonalds Corporation. Director of Aon Corporation and
W.W. Grainger, Inc.
Vernon R. Loucks Jr.**.............. Chairman and Chief Executive Officer. Director of Anheuser-Busch
Companies, Inc., The Dunn & Bradstreet Corporation, Emerson
Electric Co. and The Quaker Oats Company.
Manuel A. Baez...................... Executive Vice President.
Lester B. Knight**.................. Executive Vice President.
Harry M. Jansen Kraemer Jr.**....... Senior Vice President and Chief Financial Officer.
Arthur F. Staubitz.................. Senior Vice President and General Counsel. Former Senior Vice
President, Secretary and General Counsel of Amgen, Inc.
Michael J. Tucker................... Senior Vice President.
Herbert E. Walker................... Senior Vice President.
David J. Aho........................ Vice President.
Fabrizio Bonanni.................... Vice President.
John F. Gaither Jr.................. Vice President.
Kshitij Mohan....................... Vice President.
John L. Quick....................... Vice President.
Kathy B. White...................... Vice President and Chief Information Officer. Former Vice
President, Information Systems and Services at AlliedSignal
Corporation. Former Vice President, Corporate Services at
Guilford Mills, Inc.
A. Gerard Sieck..................... Secretary.
Lawrence D. Damron.................. Treasurer.
Brian P. Anderson................... Controller. Former partner in the international accounting firm
of Deloitte & Touche.
</TABLE>
41
<PAGE>
ANNEX A
PENNSYLVANIA BUSINESS CORPORATION LAW OF 1988
CHAPTER 25
SUBCHAPTER E. CONTROL TRANSACTIONS
2541 APPLICATION AND EFFECT OF SUBCHAPTER. -- (a) General rule. -- Except
as otherwise provided in this section, this subchapter shall apply to a
registered corporation unless:
(1) the registered corporation is one described in section 2502(1)(ii)
or (2) (relating to registered corporation status):
(2) the bylaws, by amendment adopted either:
(i) by March 23, 1984; or
(ii) on or after March 23, 1988, and on or before June 21, 1988; and,
in either event, not subsequently rescinded by an article amendment,
explicitly provide that this subchapter shall not be applicable to the
corporation in the case of a corporation which on June 21, 1988, did not
have outstanding one or more classes or series of preference shares
entitled, upon the occurrence of a default in the payment of dividends or
another similar contingency, to elect a majority of the members of the
board of directors (a bylaw adopted on or before June 21, 1988, by a
corporation excluded from the scope of this paragraph by the restriction
of this paragraph relating to certain outstanding preference shares shall
be ineffective unless ratified under paragraph (3));
(3) the bylaws of which explicitly provide that this subchapter shall
not be applicable to the corporation by amendment ratified by the board of
directors on or after December 19, 1990, and on or before March 19, 1991, in
the case of a corporation:
(i) which on June 21, 1988, had outstanding one or more classes or
series of preference shares entitled, upon the occurrence of a default in
the payment of dividends or another similar contingency, to elect a
majority of the members of the board of directors; and
(ii) the bylaws of which on that date contained a provision described
in paragraph (2); or
(4) the articles explicitly provide that this subchapter shall not be
applicable to the corporation by a provision included in the original
articles, by an article amendment adopted prior to the date of the control
transaction and prior to or on March 23, 1988, pursuant to the procedures
then applicable to the corporation, or by an article amendment adopted prior
to the date of the control transaction and subsequent to March 23, 1988,
pursuant to both:
(i) the procedures then applicable to the corporation; and
(ii) unless such proposed amendment has been approved by the board of
directors of the corporation, in which event this subparagraph shall not
be applicable, the affirmative vote of the shareholders entitled to cast
at least 80% of the votes which all shareholders are entitled to cast
thereon.
A reference in the articles or bylaws to former section 910 (relating to right
of shareholders to receive payment for shares following a control transaction)
of the act of May 5, 1933 (P.L. 364, No. 106), known as the Business Corporation
Law of 1933, shall be a reference to this subchapter for the purposes of this
section. See section 101(c) (relating to references to prior statutes).
(b) Inadvertent transactions. -- This subchapter shall not apply to any
person or group that inadvertently becomes a controlling person or group if that
controlling person or group, as soon as practicable, divests itself of a
sufficient amount of its voting shares so that it is no longer a controlling
person or group.
A-1
<PAGE>
(c) Certain subsidiaries. -- This subchapter shall not apply to any
corporation that on December 23, 1983, was a subsidiary of any other
corporation.
2542 DEFINITIONS. -- The following words and phrases when used in this
subchapter shall have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Control transaction." The acquisition by a person or group of the status of
a controlling person or group.
"Controlling person or group." A controlling person or group as defined in
section 2543 (relating to controlling person or group).
"Fair value." A value not less than the highest price paid per share by the
controlling person or group at any time during the 90-day period ending on and
including the date of the control transaction plus an increment representing any
value, including, without limitation, any proportion of any value payable for
acquisition of control of the corporation, that may not be reflected in such
price.
"Partial payment amount." The amount per share specified in section 2545 (c)
(2) (relating to contents of notice).
"Subsidiary." Any corporation as to which any other corporation has or has
the right to acquire, directly or indirectly, through the exercise of all
warrants, options and rights and the conversion of all convertible securities,
whether issued or granted by the subsidiary or otherwise, voting power over
voting shares of the subsidiary that would entitle the holders thereof to cast
in excess of 50% of the votes that all shareholders would be entitled to cast in
the election of directors of such subsidiary, except that a subsidiary will not
be deemed to cease being a subsidiary as long as such corporation remains a
controlling person or group within the meaning of this subchapter.
"Voting shares." The term shall have the meaning specified in section 2552
(relating to definitions).
2543 CONTROLLING PERSON OR GROUP. -- (a) General rule. -- For the purpose
of this subchapter, a "controlling person or group" means a person who has, or a
group of persons acting in concert that has, voting power over voting shares of
the registered corporation that would entitle the holders thereof to cast at
least 20% of the votes that all shareholders would be entitled to cast in an
election of directors of the corporation.
(b) Exceptions generally. -- Notwithstanding subsection (a):
(1) A person or group which would otherwise be a controlling person or
group within the meaning of this section shall not be deemed a controlling
person or group unless, subsequent to the later of March 23, 1988, or the
date this subchapter becomes applicable to a corporation by bylaw or article
amendment or otherwise, that person or group increases the percentage of
outstanding voting shares of the corporation over which it has voting power
to in excess of the percentage of outstanding voting shares of the
corporation over which that person or group had voting power on such later
date, and to at least the amount specified in subsection (a), as the result
of forming or enlarging a group or acquiring, by purchase, voting power over
voting shares of the corporation.
(2) No person or group shall be deemed to be a controlling person or
group at any particular time if voting power over any of the following
voting shares is required to be counted at such time in order to meet the
20% minimum:
(i) Shares which have been held continuously by a natural person
since January 1, 1983, and which are held by such natural person at such
time.
A-2
<PAGE>
(ii) Shares which are held at such time by any natural person or
trust, estate, foundation or other similar entity to the extent the
shares were acquired solely by gift, inheritance, bequest, devise or
other testamentary distribution or series of these transactions, directly
or indirectly, from a natural person who had acquired the shares prior to
January 1, 1983.
(iii) Shares which were acquired pursuant to a stock split, stock
dividend, reclassification or similar recapitalization with respect to
shares described under this paragraph that have been held continuously
since their issuance by the corporation by the natural person or entity
that acquired them from the corporation or that were acquired, directly
or indirectly, from such natural person or entity, solely pursuant to a
transaction or series of transactions described in subparagraph (ii), and
that are held at such time by a natural person or entity described in
subparagraph (ii).
(iv) Control shares as defined in section 2562 (relating to
definitions) which have not yet been accorded voting rights pursuant to
section 2564(a) (relating to voting rights of shares acquired in a
control-share acquisition).
(v) Shares, the voting rights of which are attributable to a person
under subsection (d) if:
(A) the person acquired the option or conversion right directly
from or made the contract, arrangement or understanding or has the
relationship directly with the corporation; and
(B) the person does not at the particular time own or otherwise
effectively possess the voting rights of the shares.
(vi) Shares acquired directly from the corporation or an affiliate or
associate, as defined in section 2552 (relating to definitions), of the
corporation by a person engaged in business as an underwriter of
securities who acquires the shares through his participation in good
faith in a firm commitment underwriting registered under the Securities
Act of 1933.
(3) In determining whether a person or group is or would be a
controlling person or group at any particular time, there shall be
disregarded voting power arising from a contingent right of the holders of
one or more classes or series of preference shares to elect one or more
members of the board of directors upon or during the continuation of a
default in the payment of dividends on such shares or another similar
contingency.
(c) Certain record holders. -- A person shall not be a controlling person
under subsection (a) if the person holds voting power, in good faith and not for
the purpose of circumventing this subchapter, as an agent, bank, broker, nominee
or trustee for one or more beneficial owners who do not individually or, if they
are a group acting in concert, as a group have the voting power specified in
subsection (a), or who are not deemed a controlling person or group under
subsection (b).
(d) Existence of voting power. -- For the purposes of this subchapter, a
person has voting power over a voting share if the person has or shares,
directly or indirectly, through any option, contract, arrangement,
understanding, conversion right or relationship, or by acting jointly or in
concert or otherwise, the power to vote, or to direct the voting of, the voting
share.
2544 RIGHT OF SHAREHOLDERS TO RECEIVE PAYMENT FOR SHARES. -- Any holder of
voting shares of a registered corporation that becomes the subject of a control
transaction who shall object to the transaction shall be entitled to the rights
and remedies provided in this subchapter.
2545 NOTICE TO SHAREHOLDERS. -- (a) General rule. -- Prompt notice that a
control transaction has occurred shall be given by the controlling person or
group to:
(1) Each shareholder of record of the registered corporation holding
voting shares.
A-3
<PAGE>
(2) To the court, accompanied by a petition to the court praying that
the fair value of the voting shares of the corporation be determined
pursuant to section 2547 (relating to valuation procedures) if the court
should receive pursuant to section 2547 certificates from shareholders of
the corporation or an equivalent request for transfer of uncertificated
securities.
(b) Obligations of the corporation. -- If the controlling person or group so
requests, the corporation shall, at the option of the corporation and at the
expense of the person or group, either furnish a list of all such shareholders
to the person or group or mail the notice to all such shareholders.
(c) Contents of notice. -- The notice shall state that:
(1) All shareholders are entitled to demand that they be paid the fair
value of their shares.
(2) The minimum value the shareholder can receive under this subchapter
is the highest price paid per share by the controlling person or group
within the 90-day period ending on and including the date of the control
transaction, and stating that value.
(3) If the shareholder believes the fair value of his shares is higher,
that this subchapter provides an appraisal procedure for determining the
fair value of such shares, specifying the name of the court and its address
and the caption of the petition referenced in subsection (a) (2), and
stating that the information is provided for the possible use by the
shareholder in electing to proceed with a court-appointed appraiser under
section 2547.
There shall be included in, or enclosed with, the notice a copy of this
subchapter.
(d) Optional procedure. The controlling person or group may, at its option,
supply with the notice referenced in subsection (c) a form for the shareholder
to demand payment of the partial payment amount directly from the controlling
person or group without utilizing the court-appointed appraiser procedure of
section 2547, requiring the shareholder to state the number and class or series,
if any, of the shares owned by him, and stating where the payment demand must be
sent and the procedures to be followed.
2546 SHAREHOLDER DEMAND FOR FAIR VALUE. -- (a) General rule. -- after the
occurrence of the control transaction, any holder of voting shares of the
registered corporation may, prior to or within a reasonable time after the
notice required by section 2545 (relating to notice to shareholders) is given,
which time period may be specified in the notice, make written demand on the
controlling person or group for payment of the amount provided in subsection (c)
with respect to the voting shares of the corporation held by the shareholder,
and the controlling person or group shall be required to pay that amount to the
shareholder pursuant to the procedures specified in section 2547 (relating to
valuation procedures).
(b) Contents of demand. -- The demand of the shareholder shall state the
number and class or series, if any, of the shares owned by him with respect to
which the demand is made.
(c) Measure of value. -- A shareholder making written demand under this
section shall be entitled to receive cash for each of his shares in an amount
equal to the fair value of each voting share as of the date on which the control
transaction occurs, taking into account all relevant factors, including an
increment representing a proportion of any value payable for acquisition of
control of the corporation.
(d) Purchases independent of subchapter. -- The provisions of this
subchapter shall not preclude a controlling person or group subject to this
subchapter from offering, whether in the notice required by section 2545 or
otherwise, to purchase voting shares of the corporation at a price other than
that provided in subsection (c), and the provisions of this subchapter shall not
preclude any shareholder from agreeing to sell his voting shares at that or any
other price to any person.
2547 VALUATION PROCEDURES. -- (a) General rule. -- If, within 45 days (or
such other time period, if any, as required by applicable law) after the date of
the notice required by section 2545 (relating to notice to shareholders), or, if
such notice was not provided prior to the date of the written demand by the
shareholder under section 2546 (relating to shareholder demand for fair value),
then
A-4
<PAGE>
within 45 days (or such other time period, if any, required by applicable law)
of the date of such written demand, the controlling person or group and the
shareholder are unable to agree on the fair value of the shares or on a binding
procedure to determine the fair value of the shares, then each shareholder who
is unable to agree on both the fair value and on such a procedure with the
controlling person or group and who so desires to obtain the rights and remedies
provided in this subchapter shall, no later than 30 days after the expiration of
the applicable 45-day or other period, surrender to the court certificates
representing any of the shares that are certificated shares, duly endorsed for
transfer to the controlling person or group, or cause any uncertificated shares
to be transferred to the court as escrow agent under subsection (c) with a
notice stating that the certificates or uncertificated shares are being
surrendered or transferred, as the case may be, in connection with the petition
referenced in section 2545 or, if no petition has theretofore been filed, the
shareholder may file a petition within the 30-day period in the court praying
that the fair value (as defined in this subchapter) of the shares be determined.
(b) Effect of failure to give notice and surrender certificates. -- Any
shareholder who does not so give notice and surrender any certificates or cause
uncertificated shares to be transferred within such time period shall have no
further right to receive, with respect to shares the certificates of which were
not so surrendered or the uncertificated shares which were not so transferred
under this section, payment under this subchapter from the controlling person or
group with respect to the control transaction giving rise to the rights of the
shareholder under this subchapter.
(c) Escrow and notice. -- The court shall hold the certificates surrendered
and the uncertificated shares transferred to it in escrow for, and shall
promptly, following the expiration of the time period during which the
certificates may be surrendered and the uncertificated shares transferred,
provide a notice to the controlling person or group of the number of shares so
surrendered or transferred.
(d) Partial payment for shares. -- The controlling person or group shall
then make a partial payment for the shares so surrendered or transferred to the
court, within ten business days of receipt of the notice from the court, at a
per-share price equal to the partial payment amount. The court shall then make
payment as soon as practicable, but in any event within ten business days, to
the shareholders who so surrender or transfer their shares to the court of the
appropriate per-share amount received from the controlling person or group.
(e) Appointment of appraiser. -- Upon receipt of any share certificate
surrendered or uncertificated share transferred under this section, the court
shall, as soon as practicable but in any event within 30 days, appoint an
appraiser with experience in appraising share values of companies of like nature
to the registered corporation to determine the fair value of the shares.
(f) Appraisal procedure. -- The appraiser so appointed by the court shall,
as soon as reasonably practicable, determine the fair value of the shares
subject to its appraisal and the appropriate market rate of interest on the
amount then owed by the controlling person or group to the holders of the
shares. The determination of any appraiser so appointed by the court shall be
final and binding on both the controlling person or group and all shareholders
who so surrendered their share certificates or transferred their shares to the
court, except that the determination of the appraiser shall be subject to review
to the extent and within the time provided or prescribed by law in the case of
other appointed judicial officers. See 42 Pa.C.S. SectionSection5105(a)(3)
(relating to right to appellate review) and 5571(b) (relating to appeals
generally).
(g) Supplemental payment. -- Any amount owed, together with interest, as
determined pursuant to the appraisal procedures of this section shall be payable
by the controlling person or group after it is so determined and upon and
concurrently with the delivery or transfer to the controlling person or group by
the court (which shall make delivery of the certificate or certificates
surrendered or the uncertificated shares transferred to it to the controlling
person or group as soon as practicable but in any event within ten business days
after the final determination of the amount owed) of the certificate or
certificates representing shares surrendered or the uncertificated shares
transferred to the court, and the court shall then make payment, as soon as
practicable but in any event within ten business
A-5
<PAGE>
days after receipt of payment from the controlling person or group, to the
shareholders who so surrendered or transferred their shares to the court of the
appropriate per-share amount received from the controlling person or group.
(h) Voting and dividend rights during appraisal proceedings. -- Shareholders
who surrender their shares to the court pursuant to this section shall retain
the right to vote their shares and receive dividends or other distributions
thereon until the court receives payment in full for each of the shares so
surrendered or transferred of the partial payment amount (and, thereafter, the
controlling person or group shall be entitled to vote such shares and receive
dividends or other distributions thereon). The fair value (as determined by the
appraiser) of any dividends or other distributions so received by the
shareholders shall be subtracted from any amount owing to such shareholders
under this section.
(i) Powers of the court. -- The court may appoint such agents, including the
transfer agent of the corporation, or any other institution, to hold the share
certificates so surrendered and the shares surrendered or transferred under this
section, to effect any necessary change in record ownership of the shares after
the payment by the controlling person or group to the court of the amount
specified in subsection (h), to receive and disburse dividends or other
distributions, to provide notices to shareholders and to take such other actions
as the court determines are appropriate to effect the purposes of this
subchapter.
(j) Costs and expenses. -- The costs and expenses of any appraiser or other
agents appointed by the court shall be assessed against the controlling person
or group. The costs and expenses of any other procedure to determine fair value
shall be paid as agreed to by the parties agreeing to the procedure.
(k) Jurisdiction exclusive. -- The jurisdiction of the court under this
subchapter is plenary and exclusive and the controlling person or group and all
shareholders who so surrendered or transferred their shares to the court shall
be made a party to the proceeding as in an action against their shares.
(l) Duty of corporation. -- The corporation shall comply with requests for
information, which may be submitted pursuant to procedures maintaining the
confidentiality of the information, made by the court or the appraiser selected
by the court. If any of the shares of the corporation are not represented by
certificates, the transfer, escrow or retransfer of those shares contemplated by
this section shall be registered by the corporation, which shall give the
written notice required by section 1528(f) (relating to uncertificated shares)
to the transferring shareholder, the court and the controlling shareholder or
group, as appropriate in the circumstances.
(m) Payment under optional procedure. -- Any amount agreed upon between the
parties or determined pursuant to the procedure agreed upon between the parties
shall be payable by the controlling person or group after it is agreed upon or
determined and upon and concurrently with the delivery of any certificate or
certificates representing such shares or the transfer of any uncertificated
shares to the controlling person or group by the shareholder.
(n) Title to shares. -- Upon full payment by the controlling person or group
of the amount owed to the shareholder or to the court, as appropriate, the
shareholder shall cease to have any interest in the shares.
2548 COORDINATION WITH CONTROL TRANSACTION. -- (a) General rule. -- A
person or group that proposes to engage in a control transaction may comply with
the requirements of this subchapter in connection with the control transaction,
and the effectiveness of the rights afforded in this subchapter to shareholders
may be conditioned upon the consummation of the control transaction.
(b) Notice. -- The person or group shall give prompt written notice of the
satisfaction of any such condition to each shareholder who has made demand as
provided in this subchapter.
A-6
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal, certificates for the Shares
and any other required documents should be sent by each shareholder of the
Company or his broker, dealer, commercial bank, trust company or other nominee
to the Depositary as follows:
THE DEPOSITARY FOR THE OFFER IS:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
BY MAIL: BY HAND OR OVERNIGHT COURIER:
Tenders & Exchanges Tenders & Exchanges
P.O. Box 2559-PSIC 14 Wall Street
Suite 4660 8th Floor, Suite 4680-PSIC
Jersey City, NJ 07303-2559 NewYork, NY 10005
Any questions or requests for assistance or additional copies of the Offer
to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery or
other tender offer materials may be directed to the Dealer Manager or the
Information Agent at their respective telephone numbers and addresses listed
below. You may also contact your broker, dealer, commercial bank or trust
company or other nominee for assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
[LOGO]
GEORGESON
& COMPANY INC.
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect (212) 440-9800
All Others Call Toll-Free (800) 223-2064
THE DEALER MANAGER FOR THE OFFER IS:
CS First Boston
Park Avenue Plaza
55 East 52nd Street
New York, NY 10055
Call Toll-Free (800) 881-8320
