PSICOR INC, SC 14D9, 1995-11-29

PSICOR INC
SC 14D9, 1995-11-29
MISC HEALTH & ALLIED SERVICES, NEC

Previous: CAPITAL BUILDERS DEVELOPMENT PROPERTIES II, 10-Q, 1995-11-29

Next: ELLSWORTH CONVERTIBLE GROWTH & INCOME FUND INC, DEF 14A, 1995-11-29

<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

------------------------

SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES 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>
ITEM 1. SECURITY AND SUBJECT COMPANY.

The name of the subject company is PSICOR, Inc., a Pennsylvania corporation
(the "Company"), and the address of the principal executive offices of the
Company is 16818 Via del Campo Court, San Diego, California 92127. The title of
the class of equity securities to which this statement relates is the common
stock, no par value, of the Company (the "Common Stock").

ITEM 2. TENDER OFFER OF THE PURCHASER.

This statement relates to a tender offer by Baxter CVG Services II, Inc., a
Pennsylvania corporation (the "Purchaser"), and a wholly owned subsidiary of
Baxter Healthcare Corporation, a Delaware corporation ("Parent"), disclosed in a
Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1"), dated November
29, 1995, to purchase all outstanding shares of Common Stock (the "Shares") at a
price of $17.50 per Share (such amount, or any greater amount per Share paid
pursuant to the Offer, being hereafter referred to as the "Offer Price"), net to
the seller in cash, upon the terms and subject to the conditions set forth in
the Offer to Purchase, dated November 29, 1995 (the "Offer to Purchase"), and
the related Letter of Transmittal (which, as amended from time to time, together
constitute the "Offer").

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, the
Purchaser and the Company. The Merger Agreement 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 (the "Merger"), and the Company will continue
as the surviving corporation (the "Surviving Corporation"). A copy of the Merger
Agreement has been filed as Exhibit 1 hereto and is incorporated herein by
reference.

Based on the information in the Offer to Purchase, the principal executive
offices of the Parent and the Purchaser are both located at One Baxter Parkway,
Deerfield, Illinois 60015.

ITEM 3. IDENTITY AND BACKGROUND.

(a)The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.

(b)Each material contract, agreement, arrangement and understanding and any
actual or potential conflict of interest between (1) the Company or its
affiliates and its executive officers, directors or affiliates or (2) the
Company or its affiliates and the Purchaser or its executive officers, directors
or affiliates, is described either below or in the attached Schedule I.

TENDER AND OPTION AGREEMENT. Michael W. Dunaway, Chairman, Chief Executive
Officer and President of the Company ("Mr. Dunaway"), Trudy V. Dunaway, the wife
of Mr. Dunaway and 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 "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"), a copy of which is filed with
this Statement as Exhibit 2.5 and incorporated herein by reference. Pursuant to
the Tender and Option Agreement, the Shareholders have agreed, among other
things, (i) to grant Parent and Purchaser an irrevocable option to buy all
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
their Shares 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. The information with respect to the Tender and Option
Agreement set forth in Section 11 of the Offer to Purchase under the caption
"Tender and Option Agreement" is incorporated herein by reference.

1
<PAGE>
PUT OPTION AGREEMENT. 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., a New Jersey
corporation and a wholly owned subsidiary of the Company ("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. A copy of the POL
Agreement is filed with this Statement as Exhibit 2.6 and incorporated herein by
reference. The information set forth in Section 11 of the Offer to Purchase
under the caption "POL Agreement" is incorporated herein by reference.

STOCK PLANS.

STOCK OPTION PLANS. Options to acquire the Common Stock are outstanding
under (i) the PSICOR, Inc. 1984 Incentive Stock Option Plan for Officers and
Other Key Employees, as amended; (ii) the PSICOR, Inc. 1989 Stock Option Plan
for Officers and Other Key Employees, as amended; (iii) the Non-Qualified Stock
Option Plan for Directors of PSICOR, Inc. and (iv) the Individual Stock Option
Plan for Richard Edwards. Pursuant to the terms of the Merger Agreement, subject
to the consent of each option holder, each outstanding stock option will be
cancelled, and each holder of any such option, whether or not then vested or
exercisable, will be paid by the Company at or immediately prior to the
effective time of the Merger (the "Effective Time") for each such option 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 each 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.

STOCK PURCHASE PLAN. Pursuant to the Company's Employee Stock Purchase Plan
(the "Purchase Plan"), eligible employees are permitted to acquire shares of the
Common Stock from the Company through payroll deductions over a period of six
months (a "Purchase Period") at a purchase price determined by the Compensation
Committee of the Board of Directors that is not lower than the lesser of (i) 85%
of the fair market value of the shares on the first day of the Purchase Period
or (ii) 85% of the fair market value of the shares on the last day of the
Purchase Period. The current Purchase Period under the Purchase Plan expires on
November 30, 1995. The Company has agreed in the Merger Agreement not to permit
any Purchase Period to commence under the Purchase Plan from and after the date
of the Merger Agreement.

EMPLOYEE STOCK OWNERSHIP PLAN. The Company's Employee Stock Ownership Plan
(the "ESOP") invests primarily in shares of the Common Stock. Each participant
in the ESOP has an account maintained on his or her behalf to record his or her
interest in Company contributions to the ESOP and earnings thereon. Participants
acquire a non-forfeitable right to amounts accumulated in their individual
accounts pursuant to a seven year vesting schedule. Pursuant to the Merger
Agreement, all Shares held by the ESOP will be converted into the right to
receive the Offer Price.

CONFIDENTIALITY AGREEMENT. Parent entered into a Confidentiality and
Non-Disclosure Agreement, dated October 13, 1995, with the Company (the
"Confidentiality Agreement"), 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. A
copy of

2
<PAGE>
the Confidentiality Agreement is filed with this Statement as Exhibit 3 and
incorporated herein by reference. The information set forth in Section 11 of the
Offer to Purchase under the caption "Confidentiality Agreement" is incorporated
herein by reference.

CONSULTING AGREEMENT WITH MR. DUNAWAY. On November 21, 1995, the Company
and Mr. Dunaway entered into a consulting agreement (the "Dunaway Consulting
Agreement") pursuant to which, if Mr. Dunaway's employment is terminated either
by the Company other than for "cause" or by Mr. Dunaway for "good reason" (each
as defined in the Dunaway Consulting Agreement) on or prior to November 21,
1997, Mr. Dunaway will be retained by the Company as a consultant for a period
of three years from the date of such termination (the "Consulting Period").
During the Consulting Period, Mr. Dunaway will provide such consulting services
as the Company may reasonably request, but not to exceed 40 hours per month
during the first three months of the Consulting Period and 20 hours per month
thereafter.

If his employment is so terminated, as compensation for the consulting
services to be rendered by Mr. Dunaway and the noncompetition and
confidentiality agreements described below, the Company will make the following
payments and provide the following benefits to Mr. Dunaway: (a) during the
Consulting Period, the Company will pay Mr. Dunaway a consulting fee at the rate
of $20,000 per month; (b) during the Consulting Period, Mr. Dunaway will be
entitled to receive health care benefits no less favorable on the whole to Mr.
Dunaway than the benefits provided to Mr. Dunaway under the terms of the health
plans maintained by the Company in which he was a participant as of November 21,
1995; and (c) within five business days following the date of his termination of
employment, the Company will transfer to Mr. Dunaway or his designee any and all
rights and interests of the Company under certain "key man" life insurance
policies (including without limitation the cash values thereof), and Mr. Dunaway
and his designee will assume any and all obligations and liabilities of the
Company thereunder.

The Dunaway Consulting Agreement also provides that (i) during the
Consulting Period Mr. Dunaway will not compete with the Company or solicit
employees or customers of the Company and (ii) Mr. Dunaway will not at any time
disclose trade secrets or other confidential information of the Company;
PROVIDED, HOWEVER, that Mr. Dunaway will not be prohibited from directly or
indirectly owning, or participating in the conduct of the physician office
laboratory services business of, POL, to the extent that such business is
acquired by Dunaway Holdings pursuant to the POL Put Option. The Dunaway
Consulting Agreement is filed with this Statement as Exhibit 2.1 and
incorporated herein by reference.

OFFICER CONSULTING AGREEMENTS. On November 21, 1995, the Company's Board of
Directors approved the forms of consulting agreements (the "Officer Consulting
Agreements") between the Company and Scott W. Soronen and Michael D. Kebely, the
Senior Vice President and the Chief Financial Officer of the Company,
respectively (the "Officer Consultants"), pursuant to which, if the employment
of either of the Officer Consultants is terminated either by the Company other
than for "cause" or by the Consultant for "good reason" (each as defined in the
Officer Consulting Agreements) on or prior to November 21, 1997, such Officer
Consultant would be retained by the Company as a consultant for a period of nine
months from the date of such termination in the case of Mr. Soronen and six
months from the date of such termination in the case of Mr. Kebely (the
"Consulting Period"). During the Consulting Period, the Officer Consultants
would provide such consulting services as the Company may reasonably request,
but not to exceed 40 hours per month during the first three months of the
Consulting Period and 20 hours per month thereafter.

If their employment is so terminated, as compensation for the services to be
rendered by the Officer Consultants and the noncompetition and confidentiality
agreements described below, during the Consulting Period the Company would pay
Messrs. Soronen and Kebely a consulting fee at the rate of approximately $12,000
and $8,380 per month, respectively.

The Officer Consulting Agreements also provide that (i) during the period of
their employment with the Company and during the Consulting Period the Officer
Consultants will not compete with

3
<PAGE>
the Company or solicit employees or customers of the Company and (ii) the
Officer Consultants will not at any time disclose trade secrets or other
confidential information of the Company. The Officer Consulting Agreements have
not yet been executed by the Officer Consultants; however, the forms thereof are
filed with this Statement as Exhibits 2.2 and 2.3, and incorporated herein by
reference.

OFFICER AND KEY EMPLOYEE SEVERANCE AGREEMENTS. A group of 23 officers and
other key employees of the Company, including Mrs. Dunaway (the "Covered
Employees"), will be offered severance agreements (the "Severance Agreements").
The Severance Agreements provide that if, on or prior to the date which is
eighteen months from the date on which Parent's designees constitute a majority
of the Board of Directors of the Company, a Covered Employee's employment with
the Company and any subsidiary is terminated either by the Company without
"cause" or by the Covered Employee for "good reason" (each as defined in the
Severance Agreements), the Company will pay to such Covered Employee, in lieu of
any severance or other termination benefits, for a period of either six or
twelve months from the date of such termination (the "Severance Period"), an
amount equal to such Covered Employee's monthly base salary as of the date his
or her Severance Agreement is entered into.

The Severance Agreements also provide that (i) during the term of their
employment with the Company and the Severance Period, the Covered Employees will
not solicit customers or employees of the Company and (ii) the Covered Employees
will not at any time disclose trade secrets or other confidential information of
the Company. The form of Severance Agreement is filed with this Statement as
Exhibit 2.4 and incorporated herein by reference.

INDEMNIFICATION OF OFFICERS AND DIRECTORS. The Business Corporation Law of
Pennsylvania ("Pennsylvania Law") under which the Company is incorporated,
permits the Company to indemnify each of its directors and officers against
expenses (including attorney fees) and, except in proceedings by or in the right
of the Company, against judgments, fines and amounts paid in settlement actually
and reasonably incurred by him in connection with litigation or similar
proceedings by reason of serving in such capacities if the person acted in good
faith and in a manner the person reasonably believed to be in or not opposed to
the best interest of the Company and, with respect to criminal actions or
proceedings, had no reasonable cause to believe his conduct was unlawful.

BYLAWS. The Company's bylaws generally provide that directors and officers
will be indemnified to the fullest extent permissible under Pennsylvania Law
against all costs, expenses, damages, judgments, penalties, punitive damages,
excise taxes assessed with respect to an employee benefit plan, fines and
amounts paid in settlement incurred in any proceeding (whether or not such
proceeding was by or in the right of the Company) in which they were a party
because of their position as a director or officer of the Company or because
they served at the request of the Company as a director, officer, employee,
agent, fiduciary or trustee of another corporation or entity. The bylaws also
provide for the advancement of litigation expenses at the request of a director
or officer provided that he undertakes to repay the amount advanced if it is
ultimately determined that he is not entitled to indemnification for such
expenses. Where the director or officer initiated the action or participated as
an intervener or AMICUS CURIAE, the Company is not required to indemnify unless
the initiation or participation has been approved by the Board. In addition, the
Company is not required to indemnify a director or officer with respect to any
proceeding in which a court determines that the conduct of the director or
officer constituted willful misconduct or recklessness within the meaning of
certain provisions of Pennsylvania Law sufficient to bar indemnification, was
based upon or attributable to the receipt of a personal benefit to which the
director or officer was not legally entitled, or was finally adjudicated in a
prescribed arbitration proceeding to be otherwise unlawful. However, directors
and officers are entitled to commence a prescribed arbitration proceeding
against the Company for failure to make a requested indemnification and the
Company has the burden of proving such indemnification to be improper.

LIABILITY INSURANCE. The Company has in effect a directors' and officers'
liability insurance policy under which the issuer agrees to pay on behalf of the
directors and officers covered by the policy certain "losses" (as defined in the
policy) for "wrongful acts" (as defined in the policy) that the

4
<PAGE>
directors and officers become legally obligated to pay, except losses for which
the Company shall indemnify the directors and officers. The insurer agrees to
pay on behalf of the Company all losses for which the Company may be required of
permitted by law to indemnify the directors and officers. The policy is a
"claims made policy."

DIRECTOR INDEMNIFICATION AGREEMENTS. The Company has entered into
indemnification agreements (each an "Indemnification Agreement") with each of
the members of the Board of Directors which provide for indemnification to the
fullest extent authorized by the Pennsylvania law, and such other terms
consistent with the Bylaws of the Company, described above. The indemnification
agreements were effective as of August 7, 1995 and, at the request of Parent,
were amended on November 21, 1995 to eliminate a provision thereof that would
have required the Company to create and fund a trust for the benefit of the
Board of Directors in the event of a Potential Change in Control of the Company
(as defined in the Indemnification Agreements). The execution of the Merger
Agreement would have constituted a Potential Change in Control. The form of
Indemnification Agreement, as amended, is filed with this Statement as Exhibit
2.7 and incorporated herein by reference.

The Merger Agreement provides that Parent will, or will cause the Surviving
Corporation to, indemnify, defend and hold harmless the present and future
officers, directors, employees and agents of the Company and its subsidiaries
(other that POL) for six years, and to maintain directors and officers liability
insurance for not less than three years. The information set forth in Section 11
of the Offer to Purchase under the caption "Directors' and Officers'
Indemnification" is incorporated herein by reference.

ITEM 4. THE SOLICITATION OR RECOMMENDATION.

(A) RECOMMENDATION OF THE BOARD OF DIRECTORS.

Upon recommendation of a Special Committee consisting of the Company's two
outside directors, the Board of Directors has unanimously approved the Merger
Agreement and the transactions contemplated thereby and determined that each of
the Offer and the Merger is fair to, and in the best interests of, the
shareholders of the Company. The Board of Directors unanimously recommends that
all holders of Shares accept the Offer and tender their Shares pursuant to the
Offer.

(B) BACKGROUND; REASONS FOR THE RECOMMENDATION.

INFORMATION SET FORTH BELOW REGARDING PARENT AND THE PURCHASER AS TO WHICH
REPRESENTATIVES OF THE COMPANY WERE NOT PARTICIPANTS WAS PROVIDED BY PARENT OR
THE PURCHASER, AS THE CASE MAY BE.

At various times during the past several years, the Board of Directors and
the senior management of the Company have examined the Company's competitive
position and outlook and considered various strategic alternatives with a view
toward increasing shareholder values.

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. Dain
Bosworth Incorporated ("Dain Bosworth") was retained by the Board of Directors
of the Company to explore the Company's strategic alternatives, including
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.

5
<PAGE>
In the following months, the Company's Board of Directors continued
implementation of the Company's business strategy of acquiring smaller perfusion
services businesses with a view toward increasing caseload. At the same time,
the Company believed that the effects of health care price pressures and the
uncertainty of the status of health care reform that had been discussed in the
U. S. Congress were having a negative impact on the profitability of the
Company's business. In an effort to diversify the Company's business, the
Company's Board of Directors approved the acquisition of Meditech Diagnostic
Systems, Inc. (subsequently renamed PSICOR Office Laboratories, Inc. and
referred to herein as "POL"). This acquisition was completed in August 1994.

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, 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.

In July 1995, the Company's Board of Directors determined that it would be
appropriate to have Dain Bosworth provide a formal analysis of the Company's
strategic alternatives, in light of Parent's interest, and to hear presentations
from senior management of the Company with respect to the Company's competitive
position and outlook for the future. Special legal counsel was retained to
assist the Board in this process.

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.

A Special Meeting of the Board of Directors of the Company was held on
August 7, 1995 to review strategic alternatives and other matters. Legal counsel
advised the Board regarding the discharge of its fiduciary duties when
considering strategic alternatives and explained various provisions of
Pennsylvania law that would impede the completion of a business combination
transaction that was not approved by the Board of Directors. Dain Bosworth made
a detailed financial presentation regarding various strategic alternatives, and
set forth implied valuations of the Company utilizing various valuation
methodologies. Management of the Company presented their view of the Company's
competitive position and outlook, and reported on the progress of the POL
acquisition to date, including various problems that had been encountered and
the steps that had been implemented to deal with those problems. The Board also
considered the adoption of a shareholder rights plan and severance agreements
for officers and key employees, but concluded to table action on such matters.
As a result of these presentations, the Company's Board of Directors concluded
that it would not actively pursue a sale of the Company; however, the
transaction that had been discussed by Parent, including the preliminary price
per share that had been proposed, was sufficiently attractive that the Company's
financial advisors were directed to obtain additional information regarding
Parent's interest.

6
<PAGE>
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.

On or about August 24, 1995, Mr. Dunaway received an unsolicited inquiry
from a large overseas-based manufacturer of cardiovascular equipment and
supplies to renew exploratory discussions that had taken place several months
earlier with respect to a possible significant equity investment in, or
acquisition of, the Company. Mr. Dunaway advised the caller that, although the
Company was not actively seeking a buyer at that time, the Board might be
interested in considering an attractive proposal.

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. 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.

Later that afternoon, a special meeting of the Company's Board of Directors
was held by conference telephone call. Representatives of Dain Bosworth also
participated. Following lengthy discussion, it was determined by the Board that
it was not interested in pursuing a possible transaction at the price per share
proposed by Parent, and authorized the Company's representatives to suggest a
proposal that the Board might find more attractive. Mr. Dunaway advised the
Board that, as a shareholder, he was not willing to sell his shares at the price
proposed by Parent.

On August 31, 1995, representatives of the Company relayed the Board's
message to representatives of Parent. Several discussions followed. Mr. Dunaway
advised representatives of Parent that he would not, as a shareholder, sell his
shares for the price proposed by Parent because he believed that such price was
inadequate, and that it did not accurately reflect the true value of the
Company's

7
<PAGE>
business to Parent. A special meeting of the Board of Directors was subsequently
called by conference telephone, at which the Board was advised of developments
and it was determined that the Company would not approach Parent to discuss this
matter further.

During the first week of September 1995, Mr. Dunaway received an unsolicited
telephone call from another manufacturer of disposable supplies used in
cardiovascular procedures expressing an interest in discussing a possible
business combination with the Company. Mr. Dunaway agreed to consult with the
Company's Board of Directors for instructions.

Also, during that week 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.

A special meeting of the Company's Board of Directors was held by conference
telephone call on September 12, 1995. Mr. Dunaway reported on his recent
conversations with the unsolicited third parties and with Mr. Mussallem.
Following discussion in which legal counsel and representatives of Dain Bosworth
participated, it was determined that legal counsel would permit legal counsel
for Parent to provide draft documentation so that all of the terms of a possible
transaction with Parent could be reviewed and discussed. The Board also
determined that it would be in the best interests of the Company's shareholders
to contact other parties that had expressed interest in the Company in order to
test the market and the attractiveness of the price being discussed with Parent.
Dain Bosworth was directed to make such contacts. The Board expressly confirmed,
however, that it was not by these actions determining that the Company would be
sold to any party.

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.

During this same period, Dain Bosworth made contact with four other parties,
three of which had expressed interest in the Company in the past and the fourth
of which was believed by the Company's Board of Directors to have potentially
attractive synergies with the Company from a strategic point of view. Three of
the parties contacted executed confidentiality and standstill agreements and
engaged in due diligence, including, in the case of two of the parties, on-site
due diligence at the Company's offices in San Diego.

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

8
<PAGE>
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.

From September 28 through October 20, 1995 legal counsel continued
discussions concerning the forms of agreements. On October 13, 1995, Parent and
the Company entered into the Confidentiality Agreement 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. During this period, two of the other three parties that had
entered into confidentiality and standstill agreements and had performed due
diligence, notified the Company that they were not interested in pursuing
discussions at that time.

On October 13, 1995 a representative of Dain Bosworth received a voice mail
message from the remaining party that had signed a confidentiality and
standstill agreement indicating that it was still interested in a possible
transaction with the Company, that it was not in a position to move forward at
that time, but that it would attempt to be more specific with respect to its
interest in the next several days.

The Company's Board of Directors held a special meeting at the offices of
Dain Bosworth in Minneapolis, Minnesota, on October 15, 1995. Legal counsel
reported on the status of discussions with Parent and discussed drafts of
documents that were distributed to the directors for their review, including
provisions in the draft documents relating to the Board's ability to consider a
higher offer subsequent to signing an agreement with Parent, the termination
rights of the parties, the terms of ancillary agreements, termination fees and
other significant terms of the proposed agreements. Representatives of Dain
Bosworth reported with respect to the contacts with interested third parties,
and presented a detailed analysis of Parent's proposal from a financial point of
view. Dain Bosworth indicated that, based on the analysis on that date and the
proposed purchase price of $17.50 per Share in cash, it expected to be able to
give an opinion with respect to the fairness of the transaction to the Company's
shareholders from a financial point of view.

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, 1995 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 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.

9
<PAGE>
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. In the event the Company
identified a purchaser of 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 13, representatives of Dain Bosworth received a telephone call
from representatives of the third party that had made contact on October 13,
indicating the party's continued interest. Such party was contacted by
representatives of Dain Bosworth on November 14 and advised that if it was
interested, it was imperative that the Company receive a proposal within the
next several days. No proposal was ever received.

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 would agree 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 and a severance agreement with Mrs. Dunaway. 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 a 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.

Parent, Purchaser and the Company executed and delivered the Merger
Agreement on November 22, 1995. 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.

10
<PAGE>
In approving the Merger Agreement and the transactions contemplated thereby,
including the POL Put Option, the Special Committee and the Board considered a
number of factors, including:

(i)
the familiarity of the Special Committee and the Board of Directors
with the business, results of operations, properties and financial
condition of the Company and the nature of the industry in which it
operates, based, in part, upon presentations by management of the Company,
including the prospects for the Company if the Company were to remain
independent, and the presentations by Dain Bosworth on August 7, 1995,
October 15, 1995 and November 21, 1995;

(ii)
the terms of the Merger Agreement, including the proposed structure
of the Offer and Merger involving an immediate cash tender offer for
all outstanding Shares to be followed by a Merger for the same
consideration, thereby enabling shareholders to obtain cash for their shares
at the earliest possible time;

(iii)
the results of the process undertaken to identify and solicit
proposals from third parties to enter into a strategic transaction
with the Company;

(iv)
that Parent required, late in discussions with it, that POL be
disposed of prior to its purchase of any shares in the Offer or the
Merger; that the prospects for POL as a stand alone publicly traded
corporation were not favorable, due to its size, the likely low price of its
common stock and probable lack of a public trading market therefor; and that
the POL Put Option would enable the Board to establish a floor price for any
other bids for POL and would enable the Company to satisfy Parent's
condition that POL be sold, thereby enabling the Company's shareholders to
obtain the benefits of the Offer and the Merger;

(v)
that the terms of the Merger Agreement, including the termination fee
provisions and that Parent had agreed to sell any Shares it acquires
upon exercise of the option under the Tender and Option Agreement into
another transaction approved by the Board in accordance with the Merger
Agreement, should not unduly discourage third parties from making a bona
fide proposal subsequent to signing the Merger Agreement;

(vi)
the trading price of the Shares over the last three years and that
the $17.50 per Share Offer price represents a premium of
approximately 15% over the last sale price for the Shares on the NASDAQ
National Market on November 21, 1995, the last trading day prior to the
public announcement of the execution of the Merger Agreement; and a premium
of approximately 30% over the average last sale price for the Shares over
the 30 trading days preceding such announcement;

(vii)
the presentations by Dain Bosworth on August 7, 1995, October 15,
1995 and November 21, 1995, and Dain Bosworth's opinion that, as of
November 21, 1995, the $17.50 per Share cash consideration to be received by
the holders of the Shares pursuant to the Offer and the Merger is fair from
a financial point of view to such holders. Copies of the opinion of Dain
Bosworth is attached hereto, filed as Exhibit 6 and incorporated herein by
reference. SHAREHOLDERS ARE URGED TO READ THE OPINION OF DAIN BOSWORTH
CAREFULLY IN ITS ENTIRETY;

(viii)
that the Merger Agreement permits the Company, in the exercise of the
fiduciary duties of the Board of Directors, to furnish nonpublic
information and access in response to requests which were not solicited by
the Company after the date of the Merger Agreement to third parties pursuant
to confidentiality agreements, and to participate in discussions and
negotiations with any third party that has submitted a bona fide written
acquisition proposal to the Company;

(ix)
that the POL Put Option permits the Company to entertain other
proposals for the sale of POL, that the Merger Agreement permits the
Company to pay a special dividend to holders of the Shares in an amount
equal to the difference between the price provided by the POL Put Option and
a Higher POL Offer accepted by the Company, net of transaction costs payable
by the Company, that Dain Bosworth was retained to market POL and that the
press release announcing the execution of the Merger Agreement would
disclose that fact;

11
<PAGE>
(x)
that Mr. Dunaway, the founder, chief executive officer and principal
shareholder of the Company, advised the Board of his belief that the
$17.50 per Share price offered by Parent was an attractive price, given his
intimate knowledge of the Company, its business and prospects, and that he
had determined to accept such price;

(xi)
the terms of the Tender and Option Agreement, pursuant to which Mr.
and Mrs. Dunaway and the Trust agree to sell their Shares to Parent
for $17.50 per Share, and that they are willing to assign the benefits of a
higher price obtained from another party to Parent, indicating their belief
in the attractiveness of the price per Share offered by Parent;

(xii)
the termination provisions of the Merger Agreement, which were a
condition to Parent's proposal, providing that Parent could be
entitled to a fee of $4 million (including expenses) upon termination of the
Merger Agreement under certain circumstances, including the withdrawal of
the Board of Directors' recommendation with respect to the Offer and the
Merger;

(xiii)
the scope and detail of the negotiating process that led to the
finalization of the Merger Agreement, including the fact that the
Company negotiated an increase from Parent's original proposal of $14.00 per
Share; and

(xiv)
the representation of Parent and the Purchaser that they have
sufficient funds available to them to consummate the Offer and the
Merger.

The Special Committee and the Board did not assign relative weights to the
factors or determine that any factor was of particular importance. Rather, the
Special Committee and the Board of Directors viewed its position and
recommendations as being based upon the totality of the information presented to
and considered by them.

ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.

Dain Bosworth Incorporated ("Dain Bosworth") was retained by the Company to
act as financial advisor to the Company to explore strategic alternatives and,
in connection therewith, with respect to the Offer, the Merger and related
matters, and to act as financial advisor to the Board of Directors for purposes
of evaluating the fairness, from a financial point of view, of the cash
consideration to be received by shareholders pursuant to the Offer and the
Merger. Pursuant to a letter agreement, dated June 14, 1994, between the Company
and Dain Bosworth, the Company agreed to pay Dain Bosworth an engagement fee of
$10,000, an advisory fee of $40,000 and a fairness opinion fee of $60,000,
$30,000 of which fees have been paid by the Company to such firm. In addition,
the Company will pay Dain Bosworth a transaction fee of approximately $971,000,
which amount represents 1.125% of the aggregate consideration represented by the
transactions contemplated by the Merger Agreement to be paid upon consummation
of the Offer and the Merger. The Company has also agreed to reimburse Dain
Bosworth for its reasonable out-of-pocket expenses, including the reasonable
fees and expenses of its counsel, and to indemnify Dain Bosworth against certain
liabilities, including liabilities arising under the federal securities laws.

The Company has also retained Dain Bosworth to assist it in the marketing of
POL pursuant to a letter agreement dated as of November 21, 1995. For its
services in connection therewith, the Company has agreed to pay Dain Bosworth an
engagement fee of $25,000 and a transaction fee if POL is sold to a party other
than Dunaway Holdings in an amount equal to 5% of the total consideration
received by the Company upon consummation of a Higher POL Offer, subject to a
minimum transaction fee of $200,000.

Dain Bosworth has provided certain investment banking services to the
Company from time to time for which it received customary compensation. Except
as disclosed herein, neither the Company nor any person acting on its behalf
currently intends to employ, retain or compensate any other person to make
solicitations or recommendations to security holders on its behalf concerning
the Offer or the Merger.

12
<PAGE>
ITEM 6. RECENT TRANSACTIONS; AND INTENT WITH RESPECT TO SECURITIES.

(a)Except pursuant to the Company's employee stock plans, and transactions
contemplated by the Tender and Option Agreement, no transactions in the
Shares have been effected during the past 60 days by the Company or, to the best
of the Company's knowledge, by any executive officer, director, affiliate or
subsidiary of the Company.

(b)To the best of the Company's knowledge, to the extent permitted by
applicable securities laws, rules or regulations, except for (i) Shares
the sale of which may result in liability for the holder(s) under Section 16(b)
of the Exchange Act, (ii) Shares which are subject to restrictions on transfer
and (iii) gifts of Shares to family members or charitable organizations, each
executive officer, director and affiliate of the Company currently intends to
tender all Shares over which he or she has sole dispositive power pursuant to
the Offer.

ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY SUBJECT COMPANY.

(a)Except as set forth in items 3(b) or 4(b) above, the Company is not
engaged in any negotiation in response to the Offer which relates to or
would result in (i) an extraordinary transaction, such as a merger or
reorganization, involving the Company or any subsidiary of the Company; (ii) a
purchase, sale or transfer of a material amount of assets by the Company or any
subsidiary of the Company; (iii) a tender offer for or other acquisition of
securities by or of the Company; or (iv) any material change in the present
capitalization or dividend policy of the Company.

(b)Except as described in Items 3(b) or 4(b) above, there are no
transactions, Board of Directors resolutions, agreements in principle or
signed contracts in response to the Offer that relate to or would result in one
or more of the events referred to in Item 7(a) above.

ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.

The information Statement attached as Schedule I hereto is being furnished
in connection with the possible designation by the Purchaser, pursuant to the
Merger Agreement, of certain persons to be appointed to the Board of Directors
of the Company other that at a meeting of the Company's shareholders.

ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT NO:
- -------------
<S> <C>
Exhibit 1 Agreement and Plan of Merger, dated as of November 22, 1995, by and among Parent, Purchaser, and
the Company
Exhibit 2.1 Consulting Agreement between the Company and Michael W. Dunaway
Exhibit 2.2 Form of Consulting Agreement between the Company and Scott Soronen
Exhibit 2.3 Form of Consulting Agreement between the Company and Michael Kebely
Exhibit 2.4 Form of Severance Agreement
Exhibit 2.5 Tender and Option Agreement, dated as of November 22, 1995, by and among Mr. Dunaway, Mrs. Dunaway,
and the Dunaway Family Trust, Purchaser and Parent
Exhibit 2.6 Put Option Agreement, dated as of November 22, 1995, between the Company and Dunaway Holdings, Inc.
Exhibit 2.7 Form of Director Indemnification Agreement
Exhibit 3 Confidentiality Agreement, dated October 13, 1995, between the Company and Parent.
Exhibit 4 Press Release issued jointly by the Company and Parent dated November 22, 1995.
Exhibit 5 Letter to Shareholders of the Company dated November 29, 1995.*
Exhibit 6 Opinion of Dain Bosworth Incorporated dated November 29, 1995.*
</TABLE>

- ------------------------
*Included in copies of the Schedule 14D-9 mailed to shareholders.

13
<PAGE>
SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.

PSICOR, INC.
/s/__MICHAEL W. DUNAWAY_______________
By: Michael W. Dunaway
Title: CHAIRMAN AND CHIEF EXECUTIVE
OFFICER

Dated: November 29, 1995

14
<PAGE>
SCHEDULE I

PSICOR, INC.
16818 VIA DEL CAMPO COURT
SAN DIEGO, CALIFORNIA 92127

INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES EXCHANGE
ACT OF 1934 AND RULE 14f-1 THEREUNDER.

This Information Statement is being mailed on or about November 29, 1995, as
a part of the Company's Solicitation/Recommendation Statement and Schedule 14D-9
("Schedule 14D-9") to the holders of record of the Shares at the close of
business on or about November 27, 1995. You are receiving this Information
Statement in connection with the possible election of persons designated by the
Parent to a majority of the seats on the Board of Directors of the Company. The
Merger Agreement requires the Company to use all reasonable efforts to cause the
Parent Designees (as defined below) to be elected to the Board of Directors of
the Company under the circumstances described therein. This Information
Statement is required by Section 14(f) of the Exchange Act and Rule 14f-1
thereunder. See "Board of Directors and Executive Officers -- Right to Designate
Directors; Parent Designees." You are urged to read this Information Statement
carefully. You are not, however, required to take any action in connection with
this information statement. Capitalized terms used herein and not otherwise
defined herein shall have the meanings set forth in the Schedule 14D-9.

Pursuant to the Merger Agreement, the Purchaser commenced the Offer on
November 29, 1995. The Offer is scheduled to expire at 12:00 midnight, New York
City time, on Wednesday, January 3, 1996, unless the Offer is extended.

The information contained in this Information Statement concerning the
Parent and the Parent Designees has been furnished to the Company by the Parent,
and the Company assumes no responsibility for the accuracy or completeness of
such information.

BOARD OF DIRECTORS AND EXECUTIVE OFFICERS

GENERAL

The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of November 21, 1995, there were
4,360,142 Shares outstanding. The Board of Directors currently consists of four
members. Each director holds office until such director's successor is elected
and qualified or until such director's earlier resignation or removal.

RIGHT TO DESIGNATE DIRECTORS; PARENT DESIGNEES

Pursuant to the Merger Agreement, 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
under Section 8.1(c)(i) thereof, the Parent shall be entitled to designate such
number of directors ("Parent Designees"), rounded up to the next whole number,
on the Company's Board of Directors as is equal to the product of the total
number of directors on the Board of Directors of the Company which, immediately
prior to such calculation, shall not consist of more than four directors
multiplied by the ratio of the aggregate number of Shares beneficially owned by
Parent, Purchaser or any of their affiliates to the total number of Shares then
outstanding, and the Company shall, upon request of Purchaser, take all action
necessary to cause the Parent Designees to be elected as directors of the
Company, including increasing the size of the Company's Board of Directors or
securing the resignations of incumbent directors. At such time, the Company
shall also cause persons designated by the Parent to constitute the same
percentage (rounded up to the next whole number) as is on the Board of Directors
of the Company of (i) each committee of the Company's Board of Directors, (ii)
each Board of Directors of each Subsidiary of the Company, and (iii) each
committee of each such board. Notwithstanding the foregoing, until the Effective
Time, neither Parent nor Purchaser nor their affiliates
<PAGE>
shall 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 on the date of the Merger Agreement.

The Parent has informed the Company that each of the Parent Designees has
consented to act as a director. It is expected that the Parent Designees may
assume office as described above and that, upon assuming office, the Parent
Designees will thereafter constitute at least a majority of the Board of
Directors of the Company. It is further expected that none of the Parent
Designees will receive any compensation for services performed in his capacity
as a director of the Company.

Biographical information concerning each of the Parent Designees, and
directors and executive officers of the Company is presented in the following
pages.

PARENT DESIGNEES

Parent will choose the Parent Designees from among the directors and
officers of Parent, Purchaser and Baxter International Inc. listed in Schedule I
of the Offer to Purchase, a copy of which is being mailed to shareholders of the
Company together with this Schedule 14D-9. The information on such Schedule I is
incorporated herein by reference.

DIRECTORS

Michael W. Dunaway, age 55, founder of the Company, has been Chief Executive
Officer and Chairman of the Board of Directors since the Company's inception in
1968 and has been President since January 1991. Mr. Dunaway also served as
President from July 1984 to December 1989.

Trudy V. Dunaway, age 44, the wife of Michael W. Dunaway, has been a
director of the Company since 1982, Assistant Treasurer since February 1990,
Secretary since July 1992 and Vice President -- Planning and Development since
February 1993. Mrs. Dunaway also served as Assistant Secretary of the Company
from 1985 to July 1992 and served as Vice President -- Operations Support form
April 1986 to September 1989.

Laverne W. Rees, age 64, has served as a director of the Company since 1987.
Mr. Rees has been an independent management consultant since August 1985. From
January 1981 to February 1985, Mr. Rees was President of St. Jude Medical, Inc.,
St. Paul, Minnesota, a manufacturer of heart valves. Mr. Rees serves a member of
the board of directors of General Securities, Inc., a mutual fund.

Whitney A. McFarlin, age 55, was appointed a director of the Company in
December 1989. Mr. McFarlin has been the Chief Executive Officer, Chairman of
the Board of Directors and President of Angeion Corporation, a medical products
company, since October 1993. From September 1990 until October 1993, Mr.
McFarlin was the President and Chief Executive Officer of Clarus Medical
Systems, Inc. ("Clarus"), a biomedical engineering company. Mr. McFarlin is
currently a director of Clarus. Mr. McFarlin also serves as a member of the
board of directors of Zero Corporation.

EXECUTIVE OFFICERS

The persons listed below currently are the executive officers of the
Company.

<TABLE>
<CAPTION>
NAME AND AGE OFFICES AND LENGTH OF SERVICE
- ----------------------------- -------------------------------------------------------------------
<S> <C>
Michael W. Dunaway, 55 Chief Executive Officer and Chairman of the Board of Directors
since 1968; President since 1991
Jeffrey C. Crowley, 46 Senior Vice President since 1988
Scott W. Soronen, 43 Senior Vice President since 1992
Michael D. Kebely, 46 Chief Financial Officer since May 1995
Trudy V. Dunaway, 44 Vice President -- Planning and Development since 1993; Secretary
since 1992 and Assistant Treasurer since 1990
</TABLE>

Jeffrey C. Crowley, Senior Vice President in charge of clinical operations
and hospital corporation liaison, was previously a practicing perfusionist and
has been with the Company since 1979, holding

I-2
<PAGE>
both district and regional management positions. In 1985, he was promoted to
Director of Clinical Operations, then to Vice President -- Clinical Operations
in 1987, to Senior Vice President -- Clinical Operations in 1988 and to Senior
Vice President -- Clinical Operations West in 1990, a position he held until
being named to his present positions.

Scott W. Soronen, Senior Vice President for acquisitions and also
responsible for physician office laboratory services, joined the Company in 1981
as a staff perfusionist. In 1984 he was named Director of Human Resources, in
July 1987 he became Vice President -- Human Resources, in March 1988 he became
Vice President -- Clinical Operations Support and in October 1992 he became
Senior Vice President -- Clinical Operations Central, a position he held until
being named to his present position.

Michael D. Kebely, Chief Financial Officer, joined the Company in May 1995.
From March 1993 to May 1995, Mr. Kebely was the Chief Financial Officer of
Lottery Enterprises, Inc., a manufacturer of vending machines located in San
Diego, California, and from December 1990 to March 1993, Mr. Kebely was the
Chief Financial Officer of Windsor Group, Inc., a real-estate syndication firm
located in Escondido, California.

Background information concerning Michael W. Dunaway and Trudy V. Dunaway is
set forth under "Board of Directors and Executive Officers -- Directors."

All officers of the Company serve at the pleasure of the Board of Directors.

SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

Based on information available to the Company (a Schedule 13G dated October
9, 1995), 665,100 shares of Common Stock, representing 15.25% of the shares
outstanding, were beneficially owned on October 9, 1995, by Heartland Advisors,
Inc. ("Heartland Advisors"), 790 North Milwaukee Street, Milwaukee, Wisconsin
53202. Of these shares, Heartland Advisors has reported that it has sole power
to vote or direct the vote over 79,200 shares (1.82% of the outstanding shares)
and has sole dispositive power over all 665,100 shares beneficially owned. Of
the 665,100 shares beneficially owned by Heartland Advisors, 313,500 shares were
also beneficially owned by the Heartland Group, Inc.

Based on information available to the Company (a Schedule 13G dated October
9, 1995), 313,500 shares of Common Stock, representing 7.2% of the shares
outstanding, were beneficially owned on October 9, 1955, by Heartland Group,
Inc. ("Heartland Group"), 790 North Milwaukee Street, Milwaukee, Wisconsin
53202. Of these shares, Heartland Group has reported that it has sole power to
vote or direct the vote of 313,500 shares (7.2% of the outstanding shares) and
no dispositive power over any of these shares.

The following table sets forth the number of shares of the Company's Common
Stock (which is the only class of stock outstanding) beneficially owned, as of
November 21, 1995, together with the percentage of the outstanding shares which
such ownership represents, by each director, each Named Executive Officer (as
defined under "Executive Compensation"), and all directors and executive
officers of the Company as a group. The information with respect to directors
and officers has been obtained from the respective individuals and is reported
in accordance with the beneficial ownership

I-3
<PAGE>
rules of the Securities and Exchange Commission under which a person may be
deemed to be the beneficial owner of a security if such person has or shares
voting power or investment power with respect to such security or has the right
to acquire such ownership within the next 60 days.

<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME AND ADDRESS SHARES (1) CLASS
- ------------------------------------------- -------------- -------------
<S> <C> <C>
Michael W. Dunaway, 55 1,936,397(2) 44.41%
16818 Via Del Campo Court
San Diego, California 92127
Trudy V. Dunaway, 44 1,763(3) -- (3)
16818 Via Del Campo Court
San Diego, California 92127
Laverne W. Rees, 64 15,000(4) *
HC1 Box 98B
Hovland, Minnesota 55606
Whitney A. McFarlin, 55 12,000(5) *
460 Peavey Lane
Wayzata, Minnesota 55447
Jeffrey C. Crowley, 46 79,141(6) 1.79%
16818 Via Del Campo Court
San Diego, California 92127
Scott W. Soronen,43 81,818(7) 1.85%
16818 Via Del Campo Court
San Diego, California 92127
All directors and executive officers as a
group (seven persons) 2,126,119(8) 47.05%
</TABLE>

- ------------------------
* Less than 1% of the outstanding shares

(1) Unless otherwise indicated, each person has sole voting and investment power
with respect to all shares owned by such person.

(2) Includes 1,917,526 Shares owned by the Dunaway Family Trust of which Mr.
Dunaway is a settlor and co-trustee and 4,971 Shares which have been
allocated to Mr. Dunaway under the Company's Employee Stock Ownership Plan.
Mr. Dunaway shares voting and investment power with respect to the shares
owned by the trust. See note (3).

(3) Represents shares which have been allocated to Mrs. Dunaway under the
Company's Employee Stock Ownership Plan. Mrs. Dunaway may be deemed to own
beneficially the 1,936,397 Shares beneficially owned by her spouse, Michael
W. Dunaway. Mrs. Dunaway is a settlor and co-trustee of the Dunaway Family
Trust and shares voting and investment power with respect to the 1,917,526
Shares owned by the trust.

(4) Includes stock options for 10,000 shares which are exercisable within 60
days.

(5) Includes stock options for 10,000 shares which are exercisable within 60
days.

(6) Includes 73,500 Shares which may be acquired within 60 days pursuant to the
exercise of stock options and 3,424 shares which have been allocated under
the Company's Employee Stock Ownership Plan.

(7) Includes 65,000 Shares which may be acquired within 60 days pursuant to the
exercise of stock options and 2,784 shares which have been allocated under
the Company's Employee Stock Ownership Plan. Excludes 400 shares held by Mr.
Soronen's spouse, as to which Mr. Soronen does not share voting and
dispositive power.

(8) Includes an aggregate of 158,500 Shares which members of the group may
acquire within 60 days pursuant to the exercise of stock options and 12,942
Shares which have been allocated to the respective accounts of the members
of the group under the Company's Employee Stock Ownership Plan.

I-4
<PAGE>
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD

The Board of Directors is responsible for the overall affairs of the
Company. To assist it in carrying out its duties, the Board has delegated
certain authority to standing audit and compensation committees. Members of each
standing committee are appointed by the Board of Directors at its organizational
meeting following each annual meeting of shareholders. The Company does not have
a nominating committee or other committee performing similar functions.

The Audit Committee of the Board of Directors is presently comprised of
Messrs. McFarlin (Chairman) and Rees. The Audit Committee recommends to the
Board the nomination of independent auditors, reviews with the independent
auditors the scope and results of the audit engagement and any non-audit
services to be performed by the independent auditors, and evaluates the
independence of the independent auditors and their fees for audit and non-audit
services.

The Compensation Committee is presently comprised of Messrs. Rees (Chairman)
and McFarlin. The Compensation Committee reviews and recommends to the Board the
salaries and bonuses of all officers of the Company and remuneration of
directors.

During the year ended September 30, 1995, the Board met a total of ten
times. Neither the Compensation Committee nor the Audit Committee met during the
year ended September 30, 1995. Each director attended at least 75% of the total
number of meetings of the Board and of any committees on which he or she served
during the period.

COMPENSATION OF DIRECTORS. Directors, other than those who are also
employees of the Company, are paid an annual retainer of $5,000 plus a fee of
$1,000 for attendance at each regular or special meeting of the Board. An
additional special fee of $25,000 was paid to Messrs. McFarlin and Rees for
services performed in connection with the transactions contemplated by the
Merger Agreement.

At the 1988 Annual Meeting of Shareholders, the Company's shareholders
approved the adoption of the Nonqualified Stock Option Plan for Directors of
PSICOR, Inc. (the "Directors' Plan"). Under the Directors' Plan, 50,000 shares
of Common Stock were initially reserved for annual option grants to directors of
the Company who are not employees of the Company. Options may be granted
pursuant to the Directors' Plan until December 3, 1997, when the Directors' Plan
will terminate.

Under the Directors' Plan, as soon as reasonably practicable following each
annual meeting of stockholders each non-employee director of the Company who
either (i) was elected at such annual meeting or (ii) continues to serve as a
director following such annual meeting is granted an option to purchase 2,000
Shares at a price equal to the fair market value of the Common Stock on the date
of grant. Each option is exercisable in full beginning six months after the date
of grant and may be exercised for a period not to exceed five years from the
date of grant, PROVIDED, that all outstanding options that have not previously
become exercisable will become exercisable in full in the event of a "change in
control" (as defined in the Directors' Plan). No options will become exercisable
as a result of the transactions contemplated by the Merger Agreement.

EXECUTIVE COMPENSATION

The following table sets forth information concerning compensation paid to
the Chief Executive Officer and the other two most highly paid executive
officers of the Company who earned more than $100,000 in salary and bonus in the
fiscal year ended September 30, 1995 (the "Named Executive Officers") during the
fiscal years ended September 30, 1995, 1994 and 1993.

I-5
<PAGE>
SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-------------
AWARDS
-------------
ANNUAL COMPENSATION (1) SECURITIES
------------------------------- UNDERLYING ALL OTHER
NAME AND SALARY OPTIONS/SARS COMPENSATION
PRINCIPAL POSITION YEAR ($) BONUS ($) (#) (2) ($) (3)
- ----------------------------- --------- --------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Michael W. Dunaway 1995 225,000 -- -- 3,600
Chief Executive Officer, 1994 212,692 -- -- 11,627
Chairman and President 1993 206,137 15,000 -- 15,571
Jeffrey C. Crowley 1995 145,000 -- 20,000 835
Senior Vice President 1994 139,866 -- 12,500 7,600
1993 136,300 15,000 25,000 12,429
Scott W. Soronen 1995 145,000 -- 20,000 489
Senior Vice President 1994 124,433 -- 20,000 6,506
1993 110,088 15,000 25,000 10,866
</TABLE>

- ------------------------
(1) Includes amounts earned in fiscal year, whether or not received in such
fiscal year.

(2) The options granted to Messrs. Crowley and Soronen during the fiscal year
ended September 30, 1993 represent options regranted upon the cancellation
of options granted to such individuals during the fiscal year ended
September 30, 1992.

(3) Represents premium payments made by the Company on a group term life
insurance policy.

OPTION GRANTS AND RELATED INFORMATION

The following table sets forth information concerning stock option grants to
the Named Executive Officers during the fiscal year ended September 30, 1995.

OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS/SARS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM (2)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION --------------------------
NAME GRANTED ($)(1) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ------------------------------------------ -------------- ------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Michael W. Dunaway........................ -- -- -- -- -- --
Jeffrey C. Crowley........................ 20,000 19.75% $ 12.125 2/6/05 $ 152,500 $ 386,500
Scott W. Soronen.......................... 20,000 19.75% $ 12.125 2/6/05 $ 152,500 $ 386,500

POTENTIAL
REALIZABLE
VALUE AT
OFFER
NAME PRICE (3)
- ------------------------------------------ -------------
<S> <C>
Michael W. Dunaway........................ --
Jeffrey C. Crowley........................ $ 107,500
Scott W. Soronen.......................... $ 107,500
</TABLE>

- ------------------------
(1) These options consist of both incentive stock options (12,773 for Mr.
Crowley and 14,433 for Mr. Soronen) and non-qualified stock options (7,227
for Mr. Crowley and 5,567 for Mr. Soronen), were granted with an exercise
price equal to the fair market value of the Common Stock on the date of
grant, vest annually in twenty percent installments beginning one year after
the grant date and have a term of 10 years. All such options will be
cancelled in exchange for $17.50 in cash upon consummation of the
transactions contemplated by the Merger Agreement.

(2) Represents the value of such option at the end of its 10 year term, assuming
the market price of the Common Stock appreciates from the grant date at an
annually compounded rate of 5% or 10%. These amounts represent assumed rates
of appreciation only. Actual gains, if any, will be dependent on overall
market conditions and on the future performance of the Common Stock. There
can be no assurance that the amounts reflected in this table will be
achieved.

(3) Represents the valuation of such options based on the difference between
$17.50 per Share and the respective exercise prices of such options.

I-6
<PAGE>
OPTION EXERCISES AND HOLDINGS

The following table provides information as to options exercised by each of
the Named Executive Officers during the fiscal year ended September 30, 1995 and
the value of options held by the Named Executive Officers both as of such date
and as of November 28, 1995.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FISCAL YEAR END ($) (2) FISCAL YEAR END ($) (3)
SHARES ACQUIRED ON VALUE REALIZED -------------------------- ---------------------------
NAME EXERCISE ($) (1) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ------------------- --------------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Michael W. Dunaway.......... -- -- -- -- -- --
Jeffrey C. Crowley.......... -- -- 73,500 44,000 $ 213,720 $ 5,480
Scott W. Soronen............ -- -- 65,500 50,000 $ 158,860 $ 8,481

VALUE OF UNEXERCISED
IN-THE-MONEY
OPTIONS/SARS UPON
CONSUMMATION OF THE MERGER
($) (4)
---------------------------
NAME EXERCISABLE UNEXERCISABLE
- ---------------------------- ------------ -------------
<S> <C> <C>
Michael W. Dunaway.......... -- --
Jeffrey C. Crowley.......... $ 650,595 $ 247,980
Scott W. Soronen............ $ 542,610 $ 288,480
<FN>
- ------------------------
(1) There were no options exercised by the Named Executive Officers during the
fiscal year ended September 30, 1995. Mr. Dunaway does not participate in
any option plans of the Company.
(2) Includes options to be cancelled in exchange for the difference between
$17.50 per Share subject to such options and the exercise price of such
options upon consummation of the transactions contemplated by the Merger
Agreement.
(3) The closing price of the Common Stock on September 30, 1995 was $11.25 per
Share.
(4) Represents the total net value if all such options were cancelled pursuant
to the Merger Agreement in exchange for a cash payment as described in note
(2).
</TABLE>

CONSULTING AND SEVERANCE AGREEMENTS

Reference is made to the Schedule 14D-9 for a description of (i) the
consulting agreement entered into by the Company as of November 21, 1995 with
Mr. Dunaway; (ii) the forms of consulting agreements approved by the Board of
Directors on November 21, 1995 with Messrs. Kebely and Soronen; and (iii) the
form of severance agreement to be offered to certain officers and key employees
of the Company, including Mr. Crowley.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Laverne W. Rees and Whitney A. McFarlin served on the Compensation Committee
of the Board of Directors of the Company during the fiscal year ended September
30, 1995. Messrs. Rees and McFarlin are non-employee directors.

Mr. McFarlin was the President and Chief Executive Officer of Clarus Medical
Systems, Inc. ("Clarus"), a medical device company, from September 1990 until
October 1993. Mr. McFarlin is currently a director of Clarus. Michael W.
Dunaway, Chief Executive Officer, Chairman and President of the Company has been
a director of Clarus since July 1991. In fiscal 1991, the Company made a
$750,000 investment in convertible preferred stock of Clarus. In fiscal 1993,
the Company made an additional investment of approximately $776,000 in
convertible preferred and common stock of Clarus. In October 1994, the Company
provided a bridge loan to Clarus in the form of a $68,311 promissory note, in
connection with the issuance by Clarus of $1,000,000 of such notes. The note was
converted into shares of Series II preferred stock of Clarus during fiscal 1995.

COMPLIANCE WITH THE SECURITIES EXCHANGE ACT

The Company believes that for the period from October 1, 1994 through
September 30, 1995, its executive officers and directors complied with all
applicable filing requirements of Section 16(a) of the Securities Exchange Act
of 1934 except with respect to Michael W. Dunaway and Trudy V. Dunaway, each of
whom filed one late report on Form 4 relating to one transaction by Michael W.
Dunaway.

I-7
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO: DESCRIPTION PAGE NO.
- ------------- ---------------------------------------------------------------------------------------- -----------
<S> <C> <C>
Exhibit 1 Agreement and Plan of Merger, dated as of November 22, 1995, by and among Parent,
Purchaser, and the Company.............................................................
Exhibit 2.1 Consulting Agreement between the Company and Michael W. Dunaway.........................
Exhibit 2.2 Consulting Agreement between the Company and Scott Soronen..............................
Exhibit 2.3 Consulting Agreement between the Company and Michael Kebely.............................
Exhibit 2.4 Form of Severance Agreement.............................................................
Exhibit 2.5 Tender and Option Agreement, dated as of November 22, 1995, by and among Mr. Dunaway,
Mrs. Dunaway, and the Dunaway Family Trust, Purchaser and Parent.......................
Exhibit 2.6 Put Option Agreement, dated as of November 22, 1995, between the Company and Dunaway
Holdings, Inc..........................................................................
Exhibit 2.7 Form of Director Indemnification Agreement..............................................
Exhibit 3 Confidentiality Agreement, dated October 13, 1995, between the Company and Parent.......
Exhibit 4 Press Release issued jointly by the Company and Parent dated November 22, 1995..........
Exhibit 5 Letter to Shareholders of the Company dated November 29, 1995.*.........................
Exhibit 6 Opinion of Dain Bosworth Incorporated dated November 29, 1995.*.........................
</TABLE>

- ------------------------
*Included in copies of the Schedule 14D-9 mailed to shareholders.

<PAGE>
Exhibit 1

AGREEMENT AND PLAN OF MERGER

by and among

BAXTER HEALTHCARE CORPORATION,

BAXTER CVG SERVICES II, INC.

and

PSICOR, INC.

Dated as of

November 22, 1995

<PAGE>

TABLE OF CONTENTS

Page
----
<S> <C> <C>
ARTICLE I
THE OFFER AND MERGER

SECTION 1.1 The Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.2 Company Actions . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.3 Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.4 The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.5 Effective Time. . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.6 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.7 Directors and Officers of the Surviving Corporation . . . . . . .
SECTION 1.8 Shareholders' Meeting . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.9 Merger Without Approval of Company Shareholders . . . . . . . . .

ARTICLE II
CONVERSION OF SHARES

SECTION 2.1 Conversion of Capital Stock . . . . . . . . . . . . . . . . . . .
SECTION 2.2 Exchange of Certificates. . . . . . . . . . . . . . . . . . . . .
SECTION 2.3 Company Stock Options . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.4 Savannah Perfusion Earn-out . . . . . . . . . . . . . . . . . . .

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

SECTION 3.1 Organization and Qualification; Subsidiaries. . . . . . . . . . .
SECTION 3.2 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.3 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.4 Consents and Approvals; No Violation. . . . . . . . . . . . . . .
SECTION 3.5 Company SEC Reports . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.6 Financial Statements. . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.7 Absence of Undisclosed Liabilities. . . . . . . . . . . . . . . .
SECTION 3.8 Absence of Certain Changes. . . . . . . . . . . . . . . . . . . .
SECTION 3.9 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.10 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.11 Employee Benefit Plans; ERISA . . . . . . . . . . . . . . . . . .
SECTION 3.12 Environmental Liability . . . . . . . . . . . . . . . . . . . . .
SECTION 3.13 Compliance with Applicable Laws . . . . . . . . . . . . . . . . .
</TABLE>

<PAGE>

<TABLE>
<S> <C> <C>
SECTION 3.14 Material Contracts. . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.15 Patents, Marks, Trade Names, Copyrights
and Registrations. . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.16 Fraud and Abuse . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.18 Opinion of Financial Advisor. . . . . . . . . . . . . . . . . . .
SECTION 3.19 Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.20 Information Supplied; Company Proxy Statement . . . . . . . . . .
SECTION 3.21 POL Agreement . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.22 The Shareholders' Shares. . . . . . . . . . . . . . . . . . . . .
SECTION 3.23 Pennsylvania Law. . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.24 Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.25 POL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER

SECTION 4.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.2 Authority Relative to this Agreement . . . . . . . . . . . . . .
SECTION 4.3 Consent and Approvals; No Violation . . . . . . . . . . . . . .
SECTION 4.4 Opinion of Parent Counsel . . . . . . . . . . . . . . . . . . .
SECTION 4.5 Information Supplied . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.6 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.7 Purchaser's Operations . . . . . . . . . . . . . . . . . . . . .
SECTION 4.8 No Shares Owned by Parent, Purchaser or Affiliates . . . . . . .

ARTICLE V
CONDUCT OF BUSINESS BY THE COMPANY
PRIOR TO EFFECTIVE DATE

SECTION 5.1 Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.2 Dividends; Changes in Stock . . . . . . . . . . . . . . . . . .
SECTION 5.3 Issuance or Repurchase of Securities . . . . . . . . . . . . . .
SECTION 5.4 Governing Documents; Board of Directors . . . . . . . . . . . .
SECTION 5.5 No Dispositions . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.6 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.7 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.8 Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.9 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.10 Consultation and Cooperation . . . . . . . . . . . . . . . . .
SECTION 5.11 Additional Matters . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>

<PAGE>

<TABLE>
<S> <C> <C>
ARTICLE VI
ADDITIONAL COVENANTS

SECTION 6.1 No Solicitation . . . . . . . . . . . . . . . . . . . . . . .
SECTION 6.2 Access to Information; Confidentiality . . . . . . . . . . . .
SECTION 6.3 HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 6.4 Consents and Approvals . . . . . . . . . . . . . . . . . . . . .
SECTION 6.5 Notification of Certain Matters . . . . . . . . . . . . . . . . .
SECTION 6.6 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . .
SECTION 6.7 Additional Actions . . . . . . . . . . . . . . . . . . . . . . .
SECTION 6.8 Benefit Plans and Certain Contracts; Severance
Arrangements. . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 6.9 Directors' and Officers' Indemnification . . . . . . . . . . . .
SECTION 6.10 Tender and Option Agreement; Pennsylvania Law . . . . . . . . . .
SECTION 6.11 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 6.12 Parent's Sale of Shares in Acceptable Offer . . . . . . . . . . .
SECTION 6.13 POL Agreement . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 6.14 Company Audited Financial Statements. . . . . . . . . . . . . . .
SECTION 6.15 Opinions of Company Counsel . . . . . . . . . . . . . . . . . . .

ARTICLE VII
CONDITIONS

SECTION 7.1 Conditions to Each Party's Obligations
to Effect the Merger . . . . . . . . . . . . . . . . . . . . .
SECTION 7.2 Additional Condition to Obligations of the Company
to Effect the Merger . . . . . . . . . . . . . . . . . . . . .
SECTION 7.3 Additional Condition to Obligations of Parent and
Purchaser to Effect the Merger . . . . . . . . . . . . . . . .

ARTICLE VIII
TERMINATION

SECTION 8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . .

ARTICLE IX
GENERAL PROVISIONS

SECTION 9.1 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.2 Amendment and Modification . . . . . . . . . . . . . . . . . . .
SECTION 9.3 Nonsurvival of Representations and Warranties . . . . . . . . . .
</TABLE>

iii

<PAGE>

<TABLE>
<S> <C> <C>
SECTION 9.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.5 Definitions; Interpretation . . . . . . . . . . . . . . . . . . .
SECTION 9.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.7 Entire Agreement; No Third Party Beneficiaries. . . . . . . . . .
SECTION 9.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.9 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.10 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . .

ANNEX A Conditions to the Tender Offer. . . . . . . . . . . . . . . . . .

EXHIBIT 3.21 Form of POL Agreement
EXHIBIT 4.4 Form of Opinion of Parent Counsel
EXHIBIT 6.8(b) Form of Severance Agreement
EXHIBIT 6.8(c) Form of Officers' Consulting Agreement
EXHIBIT 6.15(a) Form of Opinion of Company In-House Counsel
EXHIBIT 6.15(b) Form of Opinion of Company Special Counsel
EXHIBIT 7.3 Form of Mr. Dunaway's Consulting Agreement
</TABLE>

<PAGE>

AGREEMENT AND PLAN OF MERGER

This Agreement and Plan of Merger (the "Agreement") is entered into
as of November 22, 1995 by and among Baxter Healthcare Corporation, a Delaware
corporation ("Parent"), Baxter CVG Services II, Inc., a Pennsylvania corporation
and wholly owned subsidiary of Parent ("Purchaser"), and PSICOR, Inc., a
Pennsylvania corporation (the "Company").

RECITALS

WHEREAS, the respective Boards of Directors of Parent and Purchaser
have determined that it is advisable and in the best interests of Parent and
Purchaser to engage in a transaction whereby Parent will acquire the Company on
the terms and subject to the conditions set forth herein; and

WHEREAS, the Board of Directors of the Company has determined that
it is advisable and in the best interests of the Company and its shareholders to
engage in a transaction whereby Parent will acquire the Company on the terms and
subject to the conditions set forth in this Agreement; and

WHEREAS, Michael W. Dunaway, the Chief Executive Officer, Chairman
of the Board and President of the Company ("Mr. Dunaway"), Trudy V. Dunaway, the
Vice President, Secretary, Assistant Treasurer and a director of the Company
("Mrs. Dunaway"), and the Dunaway Family Trust, of which Mr. and Mrs. Dunaway
are co-settlors and co-trustees (the "Dunaway Trust" and, together with Mr. and
Mrs. Dunaway, the "Shareholders"), are the beneficial owners of 1,938,160
shares of Company Common Stock (as defined below); and

WHEREAS, as an inducement to Parent to acquire the Company, and as a
condition to Parent's willingness to enter into this Agreement, concurrently
with the execution and delivery of this Agreement Parent, Purchaser and the
Shareholders are entering into a tender and option agreement (the "Tender and
Option Agreement") pursuant to which the Shareholders have agreed to (i) grant
Parent and Purchaser an irrevocable option to buy their Shares (as defined
below) at $17.50 per Share, (ii) tender and, in the event such irrevocable
option is not theretofore exercised, sell their Shares in the Offer (as defined
below) and vote their Shares in favor of the Merger (as defined below) and (iii)
not compete with Parent, Purchaser, the Company or the Surviving Corporation (as
defined

<PAGE>

below) to the extent set forth therein, in each case upon the terms and subject
to the conditions set forth therein; and

WHEREAS, as an inducement to Parent to acquire the Company, and as a
condition to Parent's willingness to enter into this Agreement, concurrently
with the execution and delivery of this Agreement the Company and Dunaway
Holdings, Inc., a Delaware corporation all of the capital stock of which is
owned by Mr. Dunaway ("Dunaway Holdings"), are entering into a put option with
respect to a purchase agreement (the "POL Agreement") pursuant to which Dunaway
Holdings has agreed to acquire from the Company, if the Company exercises its
option to do so, all of the outstanding shares of Psicor Office Laboratories,
Inc., a New Jersey corporation and a wholly owned subsidiary of the Company
("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; and the Board of Directors of the Company has determined that it is
advisable and in the best interests of the Company and its shareholders to
engage in such transaction; and

WHEREAS, in furtherance of its acquisition of the Company, Parent
proposes to cause Purchaser to make a tender offer (as it may be amended from
time to time as permitted under this Agreement, the "Offer") to purchase all of
the issued and outstanding shares of common stock, no par value, of the Company
(hereinafter referred to as either the "Shares" or the "Company Common Stock")
at a price per share of Company Common Stock of $17.50, net to the seller in
cash, upon the terms and subject to the conditions set forth in this Agreement,
and the Board of Directors of the Company has adopted resolutions approving,
among other things, the Offer and the Merger and recommending that the Company's
shareholders accept the Offer; and

WHEREAS, the respective Boards of Directors of Parent, Purchaser and
the Company have approved the merger (the "Merger") of Purchaser into the
Company, upon the terms and subject to the conditions set forth in this
Agreement, whereby each issued and outstanding share of Company Common Stock not
owned directly or indirectly by Parent or the Company, except shares of Company
Common Stock held by persons who object to the Merger and comply with all the
provisions of Pennsylvania law concerning the right of holders of Company Common
Stock to dissent from the Merger and require appraisal of their shares of
Company Common Stock ("Dissenting Shareholder"), will be converted into the
right to receive the per share consideration paid pursuant to the Offer; and

<PAGE>

WHEREAS, the Company, Parent and Purchaser wish to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger.

NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements contained herein, the parties hereto
agree as follows:

ARTICLE I

THE OFFER AND MERGER

1.1 THE OFFER.

(a) As promptly as practicable (but in no event later than
five business days after the public announcement of the execution hereof),
Purchaser shall commence (within the meaning of Rule 14d-2 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) the Offer to purchase for
cash all of the issued and outstanding shares of Company Common Stock at a price
of $17.50 per Share, net to the seller in cash (such price, or such higher price
per Share as may be paid in the Offer, being referred to herein as the "Offer
Price"), subject to there being validly tendered and not withdrawn prior to the
expiration of the Offer that number of Shares which, together with the Shares
beneficially owned by Parent or Purchaser, represents at least 80% of the Shares
outstanding on a fully diluted basis (the "Minimum Condition") and to the other
conditions set forth in Annex A hereto. Purchaser shall, on the terms and
subject to the prior satisfaction or waiver of the conditions of the Offer
(including without limitation the Minimum Condition), accept for payment and pay
for Shares tendered as soon as practicable after it is legally permitted to do
so under applicable law, but in no event prior to January 3, 1996. The
obligations of Purchaser to commence the Offer and to accept for payment and to
pay for any Shares validly tendered on or prior to the expiration of the Offer
and not withdrawn shall be subject only to the Minimum Condition and the other
conditions set forth in Annex A hereto. The Offer shall be made by means of an
offer to purchase (the "Offer to Purchase") containing the terms set forth in
this Agreement, the Minimum Condition and the other conditions set forth in
Annex A hereto. Without the written consent of the Company, Purchaser shall not
decrease the Offer Price, decrease the number of Shares sought, change the
form of

<PAGE>

consideration to be paid in the Offer, or amend any other condition of the Offer
in any manner adverse to the holders of the Shares (other than with respect to
the Minimum Condition or insignificant changes or amendments) without the
written consent of the Company; PROVIDED, HOWEVER, that if prior to the
initial scheduled expiration date of the Offer the Company shall have received a
Higher POL Offer (as defined in Section 6.13 below) that the Company intends to
accept, then at the Company's request Purchaser shall extend the Offer for
fifteen business days in order to facilitate the consummation of such Higher POL
Offer; and PROVIDED, FURTHER, that if on the initial scheduled expiration
date of the Offer (as it may be extended) all conditions to the Offer shall not
have 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 Offer
Price may be increased and the Offer may be extended to the extent required by
law in connection with such increase, in each case without the consent of the
Company. Purchaser shall terminate the Offer upon termination of this
Agreement pursuant to its terms.

(b) As soon as practicable on the date the Offer is
commenced, Parent and Purchaser shall file with the United States Securities and
Exchange Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 with
respect to the Offer (together with all amendments and supplements thereto and
including the exhibits thereto, the "Schedule 14D-1"). The Schedule 14D-1 will
include, as exhibits, the Offer to Purchase and a form of letter of transmittal
and summary advertisement (collectively, together with any amendments and
supplements thereto, the "Offer Documents") with respect to the Offer. The
Offer Documents will comply in all material respects with the provisions of
applicable Federal securities laws and, on the date filed with the SEC and on
the date first published, sent or given to the Company's shareholders, shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation is made by Parent or Purchaser with
respect to information supplied by the Company for inclusion in the Offer
Documents. Each of Parent and Purchaser further agrees to take all steps
necessary to cause the Offer Documents to be filed with the SEC and to be
disseminated to holders of Shares, in each case as and to the extent required by
applicable Federal securities laws. Each of Parent and Purchaser, on the one
hand, and the Company, on the other hand, agrees promptly to correct any
information provided by it for use in the Offer Documents if and to the extent
that it shall have become false and misleading in any material respect and
Purchaser further agrees to take all steps necessary to cause the Offer
Documents as so corrected to be filed with the SEC and

<PAGE>

to be disseminated to holders of Shares, in each case as and to the extent
required by applicable Federal securities laws. The Company and its counsel
shall be given the opportunity to review the Schedule 14D-1 before it is filed
with the SEC. In addition, Parent and Purchaser agree to provide the Company
and its counsel in writing with any comments Parent, Purchaser or their counsel
may receive from time to time from the SEC or its staff with respect to the
Offer Documents promptly after the receipt of such comments.

1.2 COMPANY ACTIONS.

(a) The Company hereby approves of and consents to the Offer
and represents that the Board of Directors, at a meeting duly called and held on
the date or dates on which the parties entered into this Agreement and the
Tender and Option Agreement, has unanimously (i) determined that each of the
Offer, the Merger and the transactions contemplated thereby is fair to and in
the best interests of the Company's shareholders (other than Parent and
Purchaser); (ii) approved this Agreement and the transactions contemplated
hereby (including without limitation (x) the acquisition of the Company by
Parent or any of its affiliates, and any purchase of Shares in connection
therewith, by means of this Agreement, the Offer, the Merger and the Tender and
Option Agreement, the transactions contemplated by the POL Agreement and/or any
other transactions conducted to effectuate the acquisition of the Company by
Parent or its affiliates in accordance with this Agreement ("Other
Transactions") and (y) any other transactions contemplated hereby and by the
foregoing clause (x)); (iii) resolved to recommend that the shareholders of the
Company accept the Offer, tender their Shares thereunder to Purchaser and
approve and adopt this Agreement and the Merger, PROVIDED, HOWEVER, that
such recommendation may be withdrawn, modified or amended if, in the opinion of
the Board of Directors of the Company, after consultation with independent legal
counsel to the Company, the failure to take such action would be inconsistent
with their fiduciary duties under applicable law, and any such withdrawal,
modification or amendment of the recommendation will not be deemed a breach of
this Agreement; (iv) adopted resolutions approving all of the actions and
transactions referenced herein, with the consequences that the requirements for
"business combinations" set forth in Subchapter 25F of the PBCL will not be
applicable to the Merger; and (v) adopted a resolution affirming that the
transactions contemplated by the POL Agreement are exempt from the "business
combination" provisions of Subchapter 25F of the PBCL.

<PAGE>

(b) Concurrently with the commencement of the Offer, the
Company shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 (together with all amendments and supplements thereto, and
including the exhibits thereto, the "Schedule 14D-9") which shall, subject to
the fiduciary duties of the Company's Board of Directors under applicable law
and the provisions of this Agreement, contain the statements referred to in
Section 1.2(a) hereof. The Schedule 14D-9 will comply in all material respects
with the provisions of applicable Federal securities laws and, on the date filed
with the SEC and on the date first published, sent or given to the Company's
shareholders, shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, except that no representation is made by the Company
with respect to information supplied by Parent or Purchaser for inclusion in the
Schedule 14D-9. The Company further agrees to take all steps necessary to cause
the Schedule 14D-9 to be filed with the SEC and to be disseminated to holders of
Shares, in each case as and to the extent required by applicable Federal
securities laws. Each of the Company, on the one hand, and Parent and
Purchaser, on the other hand, agrees promptly to correct any information
provided by it for use in the Schedule 14D-9 if and to the extent that it shall
have become false and misleading in any material respect and the Company further
agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected
to be filed with the SEC and to be disseminated to holders of the Shares, in
each case as and to the extent required by applicable Federal securities laws.
Parent and its counsel shall be given the opportunity to review the Schedule
14D-9 before it is filed with the SEC. In addition, the Company agrees to
provide Parent, Purchaser and their counsel in writing any comments the Company
or its counsel may receive from time to time from the SEC or its staff with
respect to the Schedule 14D-9 promptly after the receipt of such comments. The
Company and its counsel will provide Parent and its counsel with a reasonable
opportunity to participate in all communications with the SEC and its staff,
including any meetings and telephone conferences relating to the Schedule 14D-9,
the Merger, this Agreement or the transactions contemplated hereby.

(c) In connection with the Offer, the Company will promptly
furnish or cause to be furnished to Purchaser mailing labels, security position
listings and any available listing or computer file containing the names and
addresses of the record holders of the Shares as of a recent date and those of
persons becoming record holders after such date, together with copies of all
other information in the Company's control regarding the beneficial owners of
shares of

<PAGE>

Company Common Stock that Parent may reasonably request, and shall furnish
Purchaser with such other information and assistance as Purchaser or its agents
may reasonably request in communicating the Offer to the shareholders of the
Company.

1.3 DIRECTORS.

(a) 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 this Agreement under Section
8.1(c)(i) hereof, Parent shall be entitled to designate such number of
directors, rounded up to the next whole number, on the Board of Directors of the
Company as is equal to the product of the total number of directors then serving
on such Board (which, immediately prior to such calculation, shall 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 shall, upon request of
Purchaser, take all action necessary to cause Parent's designees to be elected
or appointed to the Company's Board of Directors, including without limitation
increasing the size of its Board of Directors 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
Company's Board, and shall cause Parent's designees to be so elected or
appointed. At such time, the Company shall also cause persons designated by
Parent to constitute the same percentage (rounded up to the next whole number)
as is on the Company's Board of Directors of (i) each committee of the Company's
Board of Directors, (ii) each board of directors (or similar body) of each
Subsidiary (as defined below) of the Company and (iii) each committee (or
similar body) of each such board. Notwithstanding the foregoing, until the
Effective Time (as defined below), neither Parent nor Purchaser nor their
affiliates shall take any action as directors or shareholders of the Company to
cause the removal of Lavern W. Rees and Whitney A. McFarlin, independent
directors of the Company, on the date hereof.

(b) The Company shall promptly take all actions required
pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder in order to fulfill its obligations under Section 1.3(a), including
mailing to shareholders as part of the Schedule 14D-9 the information required
by

<PAGE>

such Section 14(f) and Rule 14f-1, as is necessary to enable Parent's designees
to be elected to the Company's Board of Directors. Parent or Purchaser shall
supply the Company with any information with respect to either of them and their
nominees, officers, directors and affiliates required by such Section 14(f) and
Rule 14f-1. The provisions of Section 1.3(a) are in addition to and shall not
limit any rights which Parent, Purchaser or any of their affiliates may have as
a holder or beneficial owner of Shares as a matter of law with respect to the
election of directors or otherwise.

(c) From and after the time, if any, that Parent's designees
constitute a majority of the Company's Board of Directors, any amendment of this
Agreement, any termination of this Agreement by the Company, any extension of
time for performance of any of the obligations of Parent or Purchaser hereunder,
any waiver of any condition or any of the Company's rights hereunder or other
action by the Company hereunder (other than the actions contemplated by Section
1.8 hereof) 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 hereof, which action shall be deemed to constitute the action of the Board
of Directors; PROVIDED, that if there shall be no such directors, such actions
may be affected by majority vote of the entire Board of Directors of the
Company.

1.4 THE MERGER.

(a) Subject to the terms and conditions of this Agreement,
and pursuant to Sections 1921-1930 of the PBCL, at the Effective Time the
Company and Purchaser shall consummate the Merger pursuant to which (i)
Purchaser shall be merged with and into the Company and the separate corporate
existence of Purchaser shall thereupon cease, (ii) the Company shall be the
successor or surviving corporation in the Merger (the "Surviving Corporation")
and shall continue to be governed by the laws of the Commonwealth of
Pennsylvania, and (iii) the separate corporate existence of the Company with all
its rights, privileges, immunities, powers and franchises shall continue
unaffected by the Merger.

(b) Pursuant to the Merger, (i) the articles of
incorporation of the Company, as in effect immediately prior to the Effective
Time, shall be the articles of incorporation of the Surviving Corporation until
thereafter amended as provided by applicable law and such articles of
incorporation, and (ii) the bylaws of Purchaser, as in effect immediately prior
to the Effective Time,

<PAGE>

shall be the bylaws of the Surviving Corporation until thereafter amended as
provided by law, the articles of incorporation and such bylaws. The corporation
surviving the Merger is sometimes hereinafter referred to as the "Surviving
Corporation." The Merger shall have the effects set forth in the PBCL.

1.5 EFFECTIVE TIME. On the date of Closing (as defined in
Section 1.6) as soon as practicable following the satisfaction or waiver of the
conditions set forth in Article VII (or on such other date as Parent and the
Company may agree) the parties shall cause articles of merger or other
appropriate documents (in any such case, the "Articles of Merger") to be
executed and filed with the Department of State of the Commonwealth of
Pennsylvania as provided in Sections 1926 and 1927 of the PBCL. The Merger
shall become effective at the time and on the date on which the Articles of
Merger have been duly filed with the Department of State of the Commonwealth of
Pennsylvania or such later time as is agreed upon by the parties and specified
in the Articles of Merger, and such time is hereinafter referred to as the
"Effective Time."

1.6 CLOSING. The Closing of the Merger (the "Closing") will
take place at 10:00 a.m., Los Angeles time, on a date to be specified by the
parties, which shall be no later than the second business day after satisfaction
or waiver of all of the conditions set forth in Article VII hereof (the "Closing
Date"), at the offices of Skadden, Arps, Slate, Meagher & Flom, 300 South Grand
Avenue, Los Angeles, California 90071, unless another date or place is agreed to
in writing by the parties hereto.

1.7 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The
directors and officers of Purchaser at the Effective Time shall, from and after
the Effective Time, be the directors and officers, respectively, of the
Surviving Corporation until their successors shall have been duly elected or
appointed or qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's articles of incorporation and
bylaws.

1.8 SHAREHOLDERS' MEETING.

(a) If required by applicable law in order to consummate the
Merger, the Company, acting through its Board of Directors, shall, in accordance
with applicable law:

(i) duly call, give notice of, convene and hold a
special meeting of its shareholders (the "Special Meeting") as soon as
practicable

<PAGE>

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 this Agreement;

(ii) prepare and file with the SEC a preliminary proxy
or information statement relating to the Merger and this Agreement and use its
reasonable efforts (x) to obtain and furnish the information required to be
included by the SEC in the Company Proxy Statement (as defined below) and, after
consultation with Parent, to respond promptly to any comments made by the SEC
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 this 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 this 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.

(b) Parent and Purchaser agree that Purchaser shall, and
shall cause any permitted assignee of Purchaser to, vote all Shares then owned
by it which are entitled to vote in favor of the approval of the Merger and the
adoption of this Agreement.

1.9 MERGER WITHOUT APPROVAL OF COMPANY SHAREHOLDERS.
Notwithstanding Section 1.8 hereof, in the event that Parent, Purchaser or any
permitted assignee of Purchaser shall acquire at least 80% of the outstanding
shares of each class of capital stock of the Company, pursuant to the Offer, the
Tender and Option Agreement or otherwise, the parties hereto agree, at the
request of Parent and subject to Article VII hereof, to 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, in accordance with Section 1924(b)(1)(ii) of the PBCL. In
connection therewith, the Company and its Board of Directors may take all action
necessary to approve a plan of merger under Section 1924(b)(1)(ii) of the PBCL,
which plan of merger shall supersede the plan of merger adopted by the Board of
Directors as contemplated by Section 1.2(a) hereof, solely to cause the Merger
hereunder to become effective without approval of the Company shareholders. If
the Board of Direc-

<PAGE>

tors of the Company so approves a merger pursuant to Section 1924(b)(1)(ii),
Parent or Purchaser shall, and shall cause any permitted assignee to, continue
to hold not less than 80% of the issued and outstanding shares of Company Common
Stock until the consummation or abandonment of such merger.

ARTICLE II

CONVERSION OF SHARES

2.1 CONVERSION OF CAPITAL STOCK. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders of any
shares of Company Common Stock or common stock, par value $.01 per share, of
Purchaser (the "Purchaser Common Stock"):

(a) PURCHASER COMMON STOCK. Each issued and outstanding
share of Purchaser Common Stock shall be converted into and become one fully
paid and nonassessable share of common stock of the Surviving Corporation.

(b) CANCELLATION OF TREASURY STOCK AND PARENT-OWNED STOCK.
All shares of Company Common Stock that are owned by the Company as treasury
stock and any shares of Company Common Stock owned by Parent, Purchaser or any
other wholly owned subsidiary of Parent shall be cancelled and retired and shall
cease to exist and no consideration shall be delivered in exchange therefor.

(c) CONVERSION OF SHARES. Each issued and outstanding
share of Company Common Stock (other than shares to be cancelled in accordance
with Section 2.1(b)) shall be converted into the right to receive the Offer
Price, payable to the holder thereof, without interest (the "Merger
Consideration"), upon surrender of the certificate formerly representing such
share of Company Common Stock in the manner provided in Section 2.2. All such
shares of Company Common Stock, when so converted, shall no longer be
outstanding and shall automatically be cancelled and retired and shall cease to
exist, and each holder of a certificate representing any such Shares shall cease
to have any rights with respect thereto, except the right to receive the Merger
Consideration therefor upon the surrender of such certificate in accordance with
Section 2.2, without interest.

<PAGE>

(d) SHARES OF DISSENTING SHAREHOLDERS. Notwithstanding
anything in this Agreement to the contrary, any issued and outstanding shares of
Company Common Stock held by a Dissenting Shareholder shall not be converted as
described in Section 2.1(c) but shall become the right to receive such
consideration as may be determined to be due to such Dissenting Shareholder
pursuant to the laws of the Commonwealth of Pennsylvania; PROVIDED, HOWEVER,
that the shares of Company Common Stock outstanding immediately prior to the
Effective Time and held by a Dissenting Shareholder who shall, after the
Effective Time, withdraw his demand for appraisal or lose his right of
appraisal, in either case pursuant to the PBCL, shall be deemed to be converted
as of the Effective Time into the right to receive the Merger Consideration.
The Company shall give Parent (i) prompt notice of any written demands for
appraisal of shares of Company Common Stock received by the Company and (ii) the
opportunity to direct all negotiations and proceedings with respect to any such
demands. The Company shall 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.

2.2 EXCHANGE OF CERTIFICATES.

(a) PAYING AGENT. Parent shall designate a bank or trust
company to act as agent for the holders of shares of Company Common Stock in
connection with the Merger (the "Paying Agent") to receive the funds to which
holders of shares of Company Common Stock shall become entitled pursuant to
Section 2.1(c). Such funds shall be invested by the Paying Agent as directed by
Parent or the Surviving Corporation.

(b) EXCHANGE PROCEDURES. As soon as reasonably practicable
after the Effective Time, the Paying Agent shall mail to each holder of record
of a certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (the "Certificates"),
whose Shares were converted pursuant to Section 2.1 into the right to receive
the Merger Consideration (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Paying Agent and shall be
in such form and have such other provisions as Parent and the Company may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for payment of the Merger Consideration. Upon
surrender of a Certificate for cancellation to the Paying Agent or to such
other agent or agents as may be appointed by Parent, together with such letter
of transmittal,

<PAGE>

duly executed, the holder of such Certificate shall be entitled to receive in
exchange therefor the Merger Consideration for each share of Company Common
Stock formerly represented by such Certificate and the Certificate so
surrendered shall forthwith be cancelled. If payment of the Merger
Consideration is to be made to a person other than the person in whose name the
surrendered Certificate is registered, it shall be a condition of payment that
the Certificate so surrendered shall be properly endorsed or shall be otherwise
in proper form for transfer and that the person requesting such payment shall
have paid any transfer and other taxes required by reason of the payment of the
Merger Consideration to a person other than the registered holder of the
Certificate surrendered or shall have established to the satisfaction of the
Surviving Corporation that such tax either has been paid or is not applicable.
Until surrendered as contemplated by this Section 2.2, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive the Merger Consideration in cash as contemplated by this Section 2.2.

(c) TRANSFER BOOKS; NO FURTHER OWNERSHIP RIGHTS IN COMPANY
COMMON STOCK. At the Effective Time, the stock transfer books of the Company
shall be closed and thereafter there shall be no further registration of
transfers of shares of Company Common Stock on the records of the Company. From
and after the Effective Time, the holders of Certificates evidencing ownership
of shares of Company Common Stock outstanding immediately prior to the Effective
Time shall cease to have any rights with respect to such Shares, except as
otherwise provided for herein or by applicable law. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be cancelled and exchanged as provided in this Article II.

(d) TERMINATION OF FUND; NO LIABILITY. At any time
following six months after the Effective Time, the Surviving Corporation shall
be entitled to require the Paying Agent to deliver to it any funds (including
any interest received with respect thereto) which had been made available to the
Paying Agent and which have not been disbursed to holders of Certificates, and
thereafter such holders shall be entitled to look to the Surviving Corporation
(subject to abandoned property, escheat or other similar laws) only as general
creditors thereof with respect to the Merger Consideration payable upon due
surrender of their Certificates, without any interest thereon. Notwithstanding
the foregoing, neither the Surviving Corporation nor the Paying Agent shall be
liable to any holder of a Certificate for Merger Consideration delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.

<PAGE>

2.3 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 (i) the PSICOR, Inc. 1984 Stock Option Plan,
as amended (the "1984 Option Plan"), (ii) the PSICOR, Inc. 1989 Stock Option
Plan for Officers and Other Key Employees, as amended (the "1989 Option Plan"),
(iii) the Non-Qualified Stock Option Plan for Directors of PSICOR, Inc. (the
"Director Option Plan") and (iv) any other stock option plan or arrangement of
the Company or any Subsidiary of the Company (such plans or arrangements,
together with the 1984 Option Plan, the 1989 Option Plan and the Director Option
Plan, are hereinafter collectively referred to as the "Option Plans"), shall be
cancelled, and each holder of any such Option, whether or not then vested or
exercisable, shall be paid by the Company, at or immediately prior to the
Effective Time for each such Option, 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.
The Company shall use all reasonable efforts to effectuate the foregoing,
including without limitation amending the Option Plans and obtaining any
necessary consents from Option holders; PROVIDED, HOWEVER, that prior to the
purchase of Shares pursuant to the Offer, the Board of Directors of the Company
shall adopt such resolutions or take such other actions as are required to
adjust, effective immediately prior to the Effective Time, the terms of each
outstanding Option under the 1984 Option Plan or the 1989 Option Plan as to
which any such consent is not obtained prior to the Effective Time to provide
that such Option shall be converted into the right, upon exercise of such Option
at any time after the Effective Time, to receive an amount in cash equal to
$17.50 for each Share subject to such Option, or, alternatively, upon the
surrender and cancellation of such Option at any time after the Effective Time
to receive 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 subject to such Option, in either case without interest or
any other adjustment thereto.

2.4 SAVANNAH PERFUSION EARN-OUT. At or prior to the Effective
Time the Company shall either (a) have obtained the consent (which shall be in
such form and substance as are reasonably satisfactory to the Company) of Larry
Shelton pursuant to that certain Acquisition Agreement and Plan of Merger, dated
November 30, 1993, by and among Savannah Perfusion, Inc., Shelton, PSICOR Merger
Corporation and the Company (the "Savannah Agreement"), to accept a cash payment
of $17.50 per Share in full satisfaction of the Company's obliga-

<PAGE>

tions, when due, to issue shares of Company Common Stock pursuant to the
earn-out provisions of Section 3.4 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 agrees to use all
reasonable efforts to obtain such consent or other arrangement.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to Parent and Purchaser as
follows:

3.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.

(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Pennsylvania, is duly qualified to do business as a foreign corporation and is
in good standing in the jurisdictions listed on Schedule 3.1(a), which include
each jurisdiction in which the character of the Company's properties or the
nature of its business makes such qualification necessary, except in
jurisdictions, if any, where the failure to be so qualified would not result in
a Material Adverse Effect (as defined below). The Company has all requisite
corporate or other power and authority to own, use or lease its properties and
to carry on its business as it is now being conducted and as it is now proposed
to be conducted. The Company has made available to Parent and Purchaser a
complete and correct copy of its articles of incorporation and bylaws, each as
amended to date, and the Company's articles of incorporation and bylaws as so
delivered are in full force and effect. The Company is not in default in any
respect in the performance, observation or fulfillment of any provision of its
articles of incorporation or bylaws.

(b) Schedule 3.1(b) lists the name and jurisdiction of
organization of each Subsidiary of the Company and the jurisdictions in which
each such Subsidiary is qualified or holds licenses to do business as a foreign
corporation as of the date hereof. Each of the Company's Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, is duly qualified to do business as a
foreign corporation and is in good standing in the jurisdictions listed on
Schedule 3.1(b),

<PAGE>

which include each jurisdiction in which the character of the Company's
properties or the nature of its business makes such qualification necessary,
except in jurisdictions, if any, where the failure to be so qualified would not
result in a Material Adverse Effect. Each of the Company's Subsidiaries has the
requisite corporate or other power and authority to own, use or lease its
properties and to carry on its business as it is now being conducted and as it
is now proposed to be conducted. Each of such Subsidiaries is operating in
accordance with all applicable laws and regulations of its jurisdiction of
incorporation, except where the failure so to operate would not result in a
Material Adverse Effect. The Company has made available to Parent and Purchaser
a complete and correct copy of the articles of incorporation and bylaws (or
similar charter documents) of each of the Company's Subsidiaries, each as
amended to date, and the articles of incorporation and bylaws (or similar
charter documents) as so delivered are in full force and effect. No Subsidiary
of the Company is in default in any respect in the performance, observation or
fulfillment of any provision of its articles of incorporation or bylaws (or
similar charter documents).

(c) For purposes of this Agreement, (i) a "Material Adverse
Effect" shall mean 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
shall not include effects resulting from market conditions generally in the
delivery of perfusion services; (ii) "subsidiary" shall mean, with respect to
any party, any corporation or other organization, whether incorporated or
unincorporated, of which (x) at least a majority of the securities or other
interests having by their terms voting power to elect a majority of the Board of
Directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such party or by any one or more of its subsidiaries, or by such party and
one or more of its subsidiaries, or (y) such party or any other subsidiary of
such party is a general partner (excluding such partnerships where such party or
any Subsidiary of such party do not have a majority of the voting interest in
such partnership); and (iii) "Subsidiary" shall mean any subsidiary of the
Company, including without limitation POL.

3.2 CAPITALIZATION.

(a) The authorized capital stock of the Company consists
solely of 10,000,000 shares of the Company Common Stock. As of the date hereof,
(i) 4,360,142 shares of Company Common Stock are issued and outstand-

<PAGE>

ing; (ii) 95,779 shares of Company Common Stock are issued and held in the
treasury of the Company; (iii) 706,040 shares of Company Common Stock are
reserved for issuance upon exercise of the outstanding Options granted under the
Option Plans; (iv) 31,894 shares of Company Common Stock are reserved for
issuance upon exercise of the outstanding Options under the Company's Employee
Stock Purchase Plan (the "Stock Plan"); and (v) 26,000 shares of Company Common
Stock are reserved for issuance under the Savannah Agreement. No agreement or
other document grants or imposes on any shares of the Company Common Stock any
right, preference, privilege or restriction with respect to the transaction
contemplated hereby (including, without limitation, any rights of first
refusal), other than the right to dissent from the Merger as provided in Section
2.1(d) above. All of the issued and outstanding shares of the Company Common
Stock are, and all Shares which may be issued pursuant to the exercise of
outstanding Options and the Savannah Agreement will be, when issued in
accordance with the terms thereof, duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights. There are no bonds, debentures,
notes or other indebtedness having general voting rights (or convertible into
securities having such rights) ("Voting Debt") of the Company or any of its
Subsidiaries issued and outstanding. Except as set forth above and except for
the transactions contemplated by this Agreement, as of the date hereof, (i)
there are no shares of capital stock of the Company authorized, issued or
outstanding and (ii) except for the POL Agreement with respect to the capital
stock of POL, and except as otherwise set forth on Schedule 3.2(a) hereto, there
are no existing options, warrants, calls, preemptive rights, subscriptions or
other rights, agreements, arrangements or commitments of any character
(including without limitation "earn-out" arrangements) relating to the issued or
unissued capital stock of the Company or any of its Subsidiaries, obligating the
Company or any of its Subsidiaries to issue, transfer or sell or cause to be
issued, transferred or sold any shares of capital stock or Voting Debt of, or
other equity interest in, the Company or any of its Subsidiaries or securities
convertible into or exchangeable for such shares or equity interests or
obligations of the Company or any of its Subsidiaries to grant, extend or enter
into any such option, warrant, call, subscription or other right, agreement,
arrangement or commitment. There are no outstanding contractual obligations of
the Company or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any Shares or the capital stock of the Company or any Subsidiary or
affiliate of the Company or to provide funds to make any investment (in the form
of a loan, capital contribution or otherwise) in any Subsidiary or any other
entity.

<PAGE>

(b) There are no voting trusts or other agreements or
understandings to which the Company or any of its Subsidiaries is a party with
respect to the voting of the capital stock of the Company or any of the
Subsidiaries. None of the Company or its Subsidiaries is required to redeem,
repurchase or otherwise acquire shares of capital stock of the Company or any of
its Subsidiaries, respectively, as a result of the transactions contemplated by
this Agreement.

(c) The authorized capital stock of POL consists solely
of 5,000,000 shares of common stock, no par value per share (the "POL Common
Stock"). As of the date hereof, 120.5 shares of POL Common Stock are issued
and outstanding. All of the issued and outstanding shares of capital stock
of each of the Subsidiaries of the Company are owned beneficially and of
record by the Company or a wholly owned subsidiary of the Company, free and
clear of all liens, charges, pledges, encumbrances, equities, voting
restrictions, claims and options of any nature (except, with respect to the
capital stock of POL, the POL Agreement), and all such shares have been duly
authorized, validly issued and are fully paid, nonassessable and free of
preemptive rights. Except as disclosed on Schedule 3.2(c) hereto, the
Company has not made, directly or indirectly, any material investment in,
advance to or purchase or guaranty of any obligations of, any entity other
than such Subsidiaries.

3.3 AUTHORITY.

(a) The Company has full corporate power and authority to
execute and deliver this Agreement and the POL Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and the POL Agreement and the consummation of the transactions
contemplated hereby and thereby has been duly and validly authorized by the
Company's Board of Directors, and no other corporate proceedings on the part of
the Company are necessary, as a matter of law or otherwise to render the
requirements for business combinations contained in Subchapter 25F of the PBCL
inapplicable to the Merger and the POL Agreement. Each of this Agreement and
the POL Agreement has been duly and validly executed and delivered by the
Company and is a valid and binding agreement of the Company, enforceable against
it in accordance with its terms, except (a) as such enforcement may be subject
to bankruptcy, insolvency or similar laws now or hereafter in effect relating to
creditors rights, and (b) as the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to

<PAGE>

equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.

(b) Except for the action contemplated by Section 1.9
hereof, the Board of Directors of the Company has duly and validly approved
and taken all corporate action required to be taken by the Board of Directors
for the consummation of the transactions contemplated by this Agreement,
including the Offer, the Merger and the acquisition of Shares pursuant to the
Offer, the Merger, the Tender and Option Agreement, the transactions
contemplated by the POL Agreement and any Other Transactions, including
without limitation all matters contemplated by Section 1.2(a)(ii) hereof. In
reliance upon the representation and warranty of Parent and Purchaser in
Section 4.7 hereof, and assuming that the Minimum Condition is satisfied, or
that no Shares are purchased under the Offer or otherwise (other than
pursuant to the Tender and Option Agreement), the Company represents to
Parent and Purchaser that the actions set forth in Section 1.2(a) are all the
actions required, and are sufficient, to render the relevant antitakeover
provisions of the PBCL (other than the provisions of Subchapter 25E of the
PBCL) inapplicable to the Offer, the Merger, the Tender and Option Agreement,
the POL Agreement and any Other Transactions and the other matters referred
to in Section 1.2(a)(ii) above so long as this Agreement has not been
terminated in accordance with its terms.

3.4 CONSENTS AND APPROVALS; NO VIOLATION. The execution and
delivery of this Agreement and the POL Agreement, the consummation of the
transactions contemplated hereby and thereby and the performance by the Company
of its obligations hereunder and thereunder will not:

(a) subject to the obtaining of any requisite approvals of
the Company's shareholders as contemplated by Sections 1.8 and 1.9 hereof,
conflict with any provision of the Company's articles of incorporation or bylaws
or the articles of incorporation or bylaws (or other similar charter documents)
of any of its Subsidiaries;

(b) require any consent, approval, order, authorization or
permit of, or registration, filing with or notification to, any governmental or
regulatory authority or agency (a "Governmental Entity"), except for (i) the
filing of a premerger notification and report form by the Company under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (ii) the filing with the SEC of (x) the Schedule 14D-9, (y) the Company
Proxy Statement relating to the approval by the Company's shareholders of this
Agree-

<PAGE>

ment, if such approval is required by law, and (z) such reports under Section
13(a) of the Exchange Act as may be required in connection with this Agreement,
the Tender and Option Agreement and the transactions contemplated hereby and
thereby, and (iii) the filing of the Articles of Merger with the Department of
State of the Commonwealth of Pennsylvania;

(c) except as disclosed on Schedule 3.4(c), result in any
violation of or the breach of or constitute a default (with notice or lapse of
time or both) under, or give rise to any right of termination, cancellation or
acceleration or guaranteed payments under or to a loss of a material benefit
under, any of the terms, conditions or provisions of any note, lease, mortgage,
license, agreement or other instrument or obligation to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any of their respective properties or assets may be bound,
except for such violations, breaches, defaults, or rights of termination,
cancellation or acceleration, or losses as to which requisite waivers or
consents have been obtained or will be obtained prior to the Effective Time or
which, individually or in the aggregate, would not (i) result in a Material
Adverse Effect, (ii) materially impair the ability of the Company to perform its
obligations under this Agreement or (iii) prevent the consummation of any of the
transactions contemplated by this Agreement;

(d) violate the provisions of any order, writ, injunction,
judgment, decree, statute, rule or regulation applicable to the Company or any
Subsidiary, in such a manner as to (i) result in a Material Adverse Effect, (ii)
materially impair the ability of the Company to perform its obligations under
this Agreement or (iii) prevent the consummation of any of the transactions
contemplated by this Agreement; or

(e) result in the creation of any lien, charge or
encumbrance upon any shares of capital stock, properties or assets of the
Company or its Subsidiaries under any agreement or instrument to which the
Company or its Subsidiaries is a party or by which the Company or its
Subsidiaries is bound.

3.5 COMPANY SEC REPORTS. The Company has filed with the SEC,
and has heretofore made available to Parent and Purchaser true and complete
copies of, each form, registration statement, report, schedule, proxy or
information statement and other document (including exhibits and amendments
thereto), including without limitation its Annual Reports to Shareholders
incorporated by reference in certain of such reports, required to be filed with
the SEC since September 30, 1991 under the Securities Act of 1933, as amended
(the

<PAGE>

"Securities Act"), or the Exchange Act, each of which is identified on Schedule
3.5 hereto (collectively, the "Company SEC Reports"). As of the respective
dates such Company SEC Reports were filed or, if any such Company SEC Reports
were amended, as of the date such amendment was filed, each of the Company SEC
Reports, including without limitation any financial statements or schedules
included therein, (a) complied in all material respects with all applicable
requirements of the Securities Act and the Exchange Act, as the case may be, and
the applicable rules and regulations promulgated thereunder, and (b) did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of the Subsidiaries is required to file any forms, reports or
other documents with the SEC pursuant to Section 12 or 15 of the Exchange Act.

3.6 FINANCIAL STATEMENTS. Each of the audited consolidated
financial statements and unaudited consolidated interim financial statements of
the Company (including any related notes and schedules) included (or
incorporated by reference) in its Annual Reports on Form 10-K for each of the
three fiscal years ended September 30, 1992, 1993 and 1994 and its Quarterly
Reports on Form 10-Q for all interim periods during such period and subsequent
thereto (collectively, the "Financial Statements") have been, and the Company's
financial statements for the fiscal year ended September 30, 1995 to be
delivered to Parent pursuant to Section 6.14 hereof shall have been, prepared
from, and are or shall be (as the case may be) in accordance with, the books and
records of the Company and its consolidated Subsidiaries, comply or shall comply
(as the case may be) in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been or shall be (as the case may be) prepared in
accordance with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis (except as may be indicated in the notes thereto
and subject, in the case of quarterly financial statements, to normal and
recurring year-end adjustments) and fairly present or shall fairly present (as
the case may be), in conformity with GAAP applied on a consistent basis (except
as may be indicated in the notes thereto), the consolidated financial position
of the Company and its Subsidiaries as of the date thereof and the consolidated
results of operations and cash flows (and changes in financial position, if any)
of the Company and its Subsidiaries for the periods presented therein (subject
to normal year-end adjustments and the absence of financial footnotes in the
case of any unaudited interim financial statements).

<PAGE>

3.7 ABSENCE OF UNDISCLOSED LIABILITIES. Except (a) as
specifically disclosed in the Company SEC Reports and (b) for liabilities and
obligations incurred in the ordinary course of business and consistent with past
practice since September 30, 1994, neither the Company nor any of its
Subsidiaries has incurred any liabilities or obligations of any nature
(contingent or otherwise) that have, or would be reasonably likely to have, a
Material Adverse Effect or would be required by GAAP to be reflected on a
consolidated balance sheet of the Company and its Subsidiaries or the notes
thereto which is not so reflected. As of the date hereof, the total amounts of
principal and unpaid interest outstanding under the Company's bank credit line
do not exceed one million dollars ($1,000,000) in the aggregate, and the
long-term principal portions thereof (including such amounts as are required to
be classified as current debt under GAAP) do not exceed one million dollars
($1,000,000).

3.8 ABSENCE OF CERTAIN CHANGES. Except as disclosed in the
Company SEC Reports, since September 30, 1994 the Company and its Subsidiaries
have conducted their respective businesses only in, have not engaged in any
transaction other than according to, the ordinary and usual course, and there
has not been (a) any Material Adverse Effect; (b) any declaration, setting aside
or payment of any dividend or other distribution (whether in cash, stock or
property) with respect to the capital stock of the Company or any of its
Subsidiaries; (c) any change by the Company in accounting principles, practices
or methods; (d) any labor dispute or difficulty which is reasonably likely to
result in any Material Adverse Effect, and to the Company's knowledge no such
dispute or difficulty is now threatened; (e) except as contemplated by the POL
Agreement, any material asset sold, disposed of (except inventory sold in the
ordinary course of business) mortgaged, pledged or subjected to any lien, charge
or other encumbrance; (f) except as set forth on Schedule 3.8(f), any increase
in the compensation payable or which could become payable by the Company or any
of its Subsidiaries to their directors, officers, employees, distributors,
dealers or sales representatives; (g) any amendment of any employee benefit
plan; (h) any issuance, transfer, sale or pledge by the Company or its
Subsidiaries of any shares of stock or other securities or of any commitments,
options, rights or privileges under which the Company or its Subsidiaries is or
may become obligated to issue any shares of stock or other securities; (i) any
indebtedness incurred by the Company or its Subsidiaries, except such as may
have been incurred in the ordinary course of business and consistent with past
practice; (j) any loan made or agreed to be made by the Company or its
Subsidiaries, nor has the Company or its Subsidiaries become liable or agreed to
become liable as a guarantor with respect to any loan; (k) any waiver by the
Company or its Subsidiaries of any right or rights of

<PAGE>

material value or any payment, direct or indirect, of any material debt,
liability or other obligation; or (l) except as set forth on Schedule 3.8(l),
any change in or amendment to the articles of incorporation or bylaws (or
similar charter documents) of the Company or its Subsidiaries.

3.9 TAXES.

(a) The Company and each of its Subsidiaries have timely
filed (or have had timely filed on their behalf) or will file or cause to be
timely filed, all material Tax Returns (as defined below) required by applicable
law to be filed by any of them prior to or as of the Closing Date. All such Tax
Returns and amendments thereto are or will be true, complete and correct in all
material respects.

(b) The Company and each of its Subsidiaries have paid (or
have had paid on their behalf), or where payment is not yet due, have
established (or have had established on their behalf and for their sole benefit
and recourse), or will establish or cause to be established on or before the
Closing Date, an adequate accrual for the payment of all material Taxes (as
defined below) due with respect to any period ending prior to or as of the
Closing Date.

(c) Except as disclosed on Schedule 3.9(c), no Audit (as
defined below) by a Tax Authority (as defined below) is pending or threatened
with respect to any Tax Returns filed by, or Taxes due from, the Company or any
Subsidiary. No issue has been raised by any Tax Authority in any Audit of the
Company or any of its Subsidiaries that if raised with respect to any other
period not so audited could be expected to result in a material proposed
deficiency for any period not so audited. No material deficiency or adjustment
for any Taxes has been threatened, proposed, asserted or assessed against the
Company or any of its Subsidiaries. There are no liens for Taxes upon the
assets of the Company or any of its Subsidiaries, except liens for current Taxes
not yet due.

(d) Except as disclosed on Schedule 3.9(d), neither the
Company nor any of its Subsidiaries has given or been requested to give any
waiver of statutes of limitations relating to the payment of Taxes or have
executed powers of attorney with respect to Tax matters, which will be
outstanding as of the Closing Date.

(e) Prior to the date hereof, the Company and its
Subsidiaries have disclosed all material Tax sharing, Tax indemnity, or similar

<PAGE>

agreements to which the Company or any of its Subsidiaries are a party to, is
bound by, or has any obligation or liability for Taxes.

(f) As used in this Agreement, (i) "Audit" shall mean any
audit, assessment of Taxes, other examination by any Tax Authority, proceeding
or appeal of such proceeding relating to Taxes; (ii) "Taxes" shall mean all
Federal, state, local and foreign taxes, and other assessments of a similar
nature (whether imposed directly or through withholding), including any
interest, additions to tax, or penalties applicable thereto; (iii) "Tax
Authority" shall mean the Internal Revenue Service and any other domestic or
foreign governmental authority responsible for the administration of any Taxes;
and (iv) "Tax Returns" shall mean all Federal, state, local and foreign tax
returns, declarations, statements, reports, schedules, forms and information
returns and any amended Tax Return relating to Taxes.

3.10 LITIGATION. Except as disclosed in Schedule 3.10, there is
no suit, claim, action, proceeding or investigation pending or, to the Company's
knowledge, threatened against or affecting the Company, any Subsidiaries of the
Company or any of the directors or officers of the Company or any of its
Subsidiaries in their capacity as such that, individually or in the aggregate,
allege damages of $100,000 or more. Neither the Company nor any of its
Subsidiaries, nor any officer, director or employee of the Company or any of its
Subsidiaries, has been permanently or temporarily enjoined by any order,
judgment or decree of any court or any other governmental or regulatory
authority from engaging in or continuing any conduct or practice in connection
with the business, assets or properties of the Company or such Subsidiary nor,
to the knowledge of the Company, is the Company, any Subsidiary or any officer,
director or employee of the Company or its Subsidiaries under investigation by
any Governmental Entity related to the conduct of the Company's business. There
is not in existence any order, judgment or decree of any court or other tribunal
or other agency enjoining or requiring the Company or any of its Subsidiaries to
take any action of any kind with respect to its business, assets or properties.

3.11 EMPLOYEE BENEFIT PLANS; ERISA. Except as specifically
disclosed in Schedule 3.11:

(a) Schedule 3.11(a) contains a true and complete list of
each employment, bonus, deferred compensation, incentive compensation, stock
purchase, stock option, severance or termination pay, hospitalization or other
medical, life or other insurance, supplemental unemployment benefits,
profit-sharing, pension, or retirement plan, program, agreement or arrangement,
and

<PAGE>

each other employee benefit plan, program, agreement or arrangement, sponsored,
maintained or contributed to or required to be contributed to by the Company or
by any trade or business, whether or not incorporated (an "ERISA Affiliate"),
that together with the Company would be deemed a "single employer" within the
meaning of section 4001(b)(1) of the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder
("ERISA"), for the benefit of any employee or former employee of the Company or
any ERISA Affiliate whether formal or informal and whether legally binding or
not (the "Plans"). Schedule 3.11(a) identifies each of the Plans that is an
"employee welfare benefit plan" or "employee pension benefit plan" as such terms
are defined in sections 3(1) and 3(2) of ERISA (such plans being hereinafter
referred to collectively as the "ERISA Plans"). Neither the Company nor any
ERISA Affiliate has any formal plan or commitment, whether legally binding or
not, to create any additional Plan or modify or change any existing Plan that
would affect any employee or terminated employee of the Company or any ERISA
Affiliate.

(b) With respect to each of the Plans, the Company has
heretofore delivered to Parent and Purchaser true and complete copies of each of
the following documents: (i) a copy of each Plan (including all amendments
thereto); (ii) a copy of the annual report, if required under ERISA, with
respect to each Plan for the last three years; (iii) a copy of the actuarial
report, if required under ERISA, with respect to each Plan for the last three
years; (iv) a copy of the most recent Summary Plan Description ("SPD"), together
with all Summaries of Material Modification issued with respect to such SPD, if
required under ERISA with respect to each Plan, and all other material employee
communications relating to each Plan; (v) if the Plan is funded through a trust
or any other funding vehicle, a copy of the trust or other funding agreement
(including all amendments thereto) and the latest financial statements thereof;
(vi) all contracts relating to the Plans with respect to which the Company or
any ERISA Affiliate may have any liability, including without limitation
insurance contracts, investment management agreements, subscription and
participation agreements and record keeping agreements; and (vii) the most
recent determination letter received from the Internal Revenue Service with
respect to each Plan that is intended to be qualified under section 401 of the
Internal Revenue Code of 1986, as from time to time amended (the "Code").

(c) No ERISA Plan is subject to Title IV of ERISA, and no
liability under Title IV of ERISA has been incurred by the Company or any ERISA
Affiliate since the effective date of ERISA that has not been satisfied in

<PAGE>

full, and no condition exists that presents a material risk to the Company or an
ERISA Affiliate of incurring a liability under such Title.

(d) Neither the Company, any ERISA Affiliate, any of the
ERISA Plans, any trust created thereunder nor any trustee or administrator
thereof has engaged in a transaction or has taken or failed to take any action
in connection with which the Company, any ERISA Affiliate, any of the ERISA
Plans, any such trust, any trustee or administrator thereof, or any party
dealing with the ERISA Plans or any such trust could be subject to either a
civil penalty assessed pursuant to section 409 or 502(i) of ERISA or a tax
imposed pursuant to section 4975, 4976 or 4980B of the Code.

(e) Each of the Plans has been operated and administered
in all material respects in accordance with applicable laws, including but
not limited to ERISA and the Code.

(f) Each of the ERISA Plans that is intended to be
"qualified" within the meaning of section 401(a) of the Code is so qualified.

(g) Neither the Company nor any ERISA Affiliate currently
maintains or previously has maintained an ERISA Plan subject to section
501(c)(9) of the Code.

(h) No amounts payable under the Plans or any other
agreement or arrangement to which the Company or any ERISA Affiliate is a party
will fail to be deductible for Federal income tax purposes by virtue of section
280G of the Code.

(i) No "leased employee," as that term is defined in section
414(n) of the Code, performs services for the Company or any ERISA Affiliate.

(j) No Plan provides benefits, including without limitation
death or medical benefits (whether or not insured), with respect to current or
former employees after retirement or other termination of service (other than
(i) coverage mandated by applicable law, (ii) death benefits or retirement
benefits under any "employee pension plan," as that term is defined in section
3(2) of ERISA, (iii) deferred compensation benefits accrued as liabilities on
the books of

<PAGE>

the Company or the ERISA Affiliates, or (iv) benefits, the full cost of which is
borne by the current or former employee (or his beneficiary)).

(k) With respect to each Plan that is funded wholly or
partially through an insurance policy, there will be no liability of the Company
or an ERISA Affiliate, as of the Closing Date, under any such insurance policy
or ancillary agreement with respect to such insurance policy in the nature of a
retroactive rate adjustment, loss sharing arrangement or other actual or
contingent liability arising wholly or partially out of events occurring prior
to the Closing Date.

(l) As of the date hereof, the median salary paid to Company
employees (other than employees of POL) who would be entitled to severance under
the Company's severance and termination policy as set forth on Schedule
6.8(b)(2) is $40,560 and the median number of years of service of such employees
with the Company is 4.4.

(m) The current "Purchase Period" (as such term is defined
in the Stock Plan) under the Stock Plan will end on November 30, 1995.

3.12 ENVIRONMENTAL LIABILITY. Except as disclosed in Schedule
3.12 hereto:

(a) The businesses of the Company and its Subsidiaries have
been and are operated in material compliance with all Federal, state and local
environmental protection, occupational, health and safety or similar laws,
ordinances, restrictions, licenses, rules, regulations, permit conditions and
legal requirements, including without limitation the Federal Water Pollution
Control Act, Resource Conservation & Recovery Act, Clean Air Act, Comprehensive
Environmental Response, Compensation and Liability Act, Emergency Planning and
Community Right to Know, Occupational Safety and Health Act and Federal, state
and local medical waste laws, each as amended and currently in effect (together,
"Environmental Laws").

(b) Neither the Company nor any of its Subsidiaries has
caused or allowed the generation, treatment, storage, release or disposal of
chemicals, pollutants, contaminants, wastes, toxic substances, hazardous
substances, petroleum, petroleum products or any substance regulated under any
Environmental Law ("Hazardous Substances") except in material compliance with
all Environmental Laws, and no generation, treatment, handling, storage,
release,

<PAGE>

discharge or disposal of Hazardous Substances has occurred at any property owned
or operated by the Company except in material compliance with all Environmental
Laws.

(c) Neither the Company nor any of its Subsidiaries has
received any written notice or, to the knowledge of the Company, any other
communication from any governmental authority alleging or concerning any
material violation by the Company or any of its Subsidiaries of, or
responsibility or liability of the Company or any of its Subsidiaries under, any
Environmental Law. There are no pending, or to the knowledge of the Company,
threatened, claims, suits, proceedings or investigations with respect to the
businesses or operations of the Company or any of its Subsidiaries alleging or
concerning any material violation of or responsibility or liability under any
Environmental Law, nor does the Company have any knowledge of any fact or
condition that could give rise to such a claim, suit, proceeding or
investigation.

(d) The Company and its Subsidiaries are in possession of
all material approvals, permits and licenses from all governmental authorities
under all Environmental Laws with respect to the operation of the businesses of
the Company and its Subsidiaries; there are no pending or to the knowledge of
the Company, threatened, actions, proceedings or investigations seeking to
revoke or deny renewal of any of such approvals, permits and licenses; the
Company does not have knowledge of any fact or condition that could give rise to
any action, proceeding or investigation to revoke or deny renewal of such
approvals, permits or licenses.

(e) Without in any way limiting the generality of the
foregoing, (i) the Company does not store, dispose of or arrange for the
disposal of Hazardous Substances at on-site or off-site locations, (ii) all
underground storage tanks, and the capacity and contents of such tanks, located
on property owned or leased by the Company are identified in Schedule 3.12,
(iii) except as set forth in Schedule 3.12, there is no asbestos contained in or
forming part of any building, building component, structure or office space
owned or leased by the Company, and (iv) except as set forth in Schedule 3.12,
no polychlorinated biphenyls (PCBs) or PCB-containing items are used or stored
at any property owned or leased by the Company.

3.13 COMPLIANCE WITH APPLICABLE LAWS. The Company and each of
its Subsidiaries hold all material licenses, permits and authorizations
necessary for the lawful conduct of its respective businesses, as now conducted,
and such

<PAGE>

businesses are not being, and the Company has not received any notice from any
authority or person that such businesses have been or are being, conducted in
violation of any law, ordinance or regulation, including without limitation any
law, ordinance or regulation relating to (a) the protection of the environment,
(b) the provision of medical supplies and services, or (c) occupational health
and safety, except for possible violations which either singly or in the
aggregate have not resulted and in the future will not result in a Material
Adverse Effect.

3.14 MATERIAL CONTRACTS. Schedule 3.14 hereto sets forth a
true and correct list of any and all agreements, contracts, purchase or
installment agreements, indentures, leases, mortgages, licenses, plans,
arrangements, commitments (whether written or oral) and instruments
(collectively, "contracts") that are material to the Company and its
Subsidiaries (the "Material Contracts") (other than such contracts that are
specifically filed with the Company's SEC Reports), including without limitation
the following types of contracts to which the Company or any of its Subsidiaries
is a party:

(a) any contract which is not terminable by the Company or
any of its Subsidiaries upon 30 days' notice and which involves outstanding
payments of more than $100,000;

(b) any customer contract between the Company or its
Subsidiaries and any party to whom the Company or its Subsidiaries provides
goods or services which represent annual payments by the Company of $100,000
or more;

(c) any contract for the purchase or sale of supplies, raw
materials, commodities or similar products used by the Company or its
Subsidiaries and which call for performance over a period of more than one year
or represent annual payments by the Company of $100,000 or more;

(d) any contract with hospitals or medical centers, it being
represented that all of such contracts are in substantially the form(s) attached
to Schedule 3.14;

(e) the forms of any contract between the Company and any
clinical employees, including without limitation perfusionists or
autotransfusionists, together with a list identifying the parties to such
contracts, it being represented that (i) all of such contracts are in
substantially the form(s) attached to Schedule 3.14, and (ii) the current
average annual rate of compensation and the

<PAGE>

current range of annual compensation for perfusionists are set forth on Schedule
3.14;

(f) the forms of any contract with POL technicians, together
with a list identifying the parties to such contracts, it being represented that
(i) all of such contracts are in substantially the form(s) attached to Schedule
3.14, and (ii) under all such contracts POL is solely liable and the Company has
no liability or obligation thereunder;

(g) any contract with third party payors, including
Medicaid, health maintenance organizations, preferred provider organizations,
insurance companies and other payment sources, which are necessary to conduct
the businesses of the Company and its Subsidiaries as of the date of this
Agreement;

(h) any contract for the employment of any officer,
employee, consultant or other person or entity on a full-time, part-time,
consulting or other basis, including any severance or other termination
provisions with respect to such employment;

(i) any noncompetition agreement, other than customary
agreements with employees who are not officers, directors or key employees, or
any other contract that in any way restricts the Company or any of its
Subsidiaries from carrying on their business any place in the world; and

(j) any contract with the Company and any of its
Subsidiaries or any of their affiliates or with any officers, directors or key
employees of the Company or any of its Subsidiaries.

True and complete copies of each written Material Contract, or form thereof and
true and complete written summaries of each oral Material Contract have been
made available to Parent and Purchaser by the Company prior to the date hereof.
Except as set forth on Schedule 3.14:

(i) Each of the Material Contracts is a valid, binding
and enforceable agreement of the Company or its Subsidiaries and, to the
knowledge of the Company, the other parties thereto and will, subject to the
satisfaction of the conditions in Article VII, continue to be valid, binding and
enforceable immediately after the Closing, except (x) as such enforcement may be
subject to bankruptcy, insolvency or similar laws now or hereafter in effect

<PAGE>

relating to creditors' rights, and (y) as the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought;

(ii) As of the date hereof, the Company has no reason
to believe that the Company or the relevant Subsidiary will not be able to
fulfill in all material respects all of its obligations under the Material
Contracts which remain to be performed after the date hereof;

(iii) To the knowledge of the Company there has not
occurred any material default (or event which upon provision of notice or lapse
of time or both would become such a default) under any of the Material Contracts
on the part of the Company or the relevant Subsidiary party thereto; and

(iv) The Material Contracts listed on Schedule 3.14 are
all of the contracts that are material to the Company or any of its Subsidiaries
or their respective businesses (other than such contracts that are specifically
filed with the Company's SEC Reports).

3.15 PATENTS, MARKS, TRADE NAMES, COPYRIGHTS AND REGISTRATIONS.

(a) The Company has all right, title and interest in all
Intellectual Property (as defined below) used in or necessary for the business
of the Company and its Subsidiaries as now conducted, all of which are set forth
in Schedule 3.15, and the consummation of the transactions contemplated hereby
will not alter or impair in an adverse manner such Intellectual Property rights.

(b) "Intellectual Property" includes United States and
foreign inventions, invention disclosures, patents, inventors' certificates,
utility models, trademarks, service marks, trade names, copyrights, mask work
registrations, trade secrets (including processes and software programs),
registrations and applications therefor, and past, present and future causes of
action and remedies therefor.

(c) To the knowledge of the Company, the Company and its
Subsidiaries are not in default under any material agreement pursuant to which
it is licensing Intellectual Property of a third party or granting licenses to

<PAGE>

its own Intellectual Property. The Company has not notified any other party of
an alleged default of any such agreement. The Company has not received any
communications alleging that the Company has violated in any material respect
any other person's Intellectual Property rights or has engaged in unfair
competition against such person.

(d) To the knowledge of the Company, the Company and its
Subsidiaries do not now infringe or misappropriate any third party's
Intellectual Property rights and do not have any material liability for any past
infringement or misappropriation. No material dispute or disagreement involving
the Company or any of its Subsidiaries exists or is, to the knowledge of the
Company, threatened with regard to any third party Intellectual Property right,
including any allegation of Intellectual Property infringement or
misappropriation or of any breach or default of an Intellectual Property license
or similar agreement.

3.16 FRAUD AND ABUSE. To the knowledge of the Company, none of
the Company, its Subsidiaries or any of their respective officers, directors or
employees is under investigation by any Governmental Entity with respect to any
activities which are prohibited under Federal Medicare and Medicaid Statutes or
any related state or local statutes or regulations, and none of the Company or
any of its Subsidiaries knows of any reasonable basis therefor.

3.17 INSURANCE. Schedule 3.17(a) lists each of the insurance
policies relating to the Company or its Subsidiaries which are currently in
effect. The Company has provided Parent and Purchaser with a true, complete and
correct copy of each such policy or the binder therefor. With respect to each
such insurance policy or binder none of the Company, any of its Subsidiaries or
any other party to the policy is in breach or default thereunder (including with
respect to the payment of premiums or the giving of notices), and the Company
does not know of any occurrence or any event which (with notice or the lapse of
time or both) would constitute such a breach or default or permit termination,
modification or acceleration under the policy, except for such breaches or
defaults which, individually or in the aggregate, would not result in a Material
Adverse Effect. Schedule 3.17(b) describes any self-insurance arrangements
affecting the Company or its Subsidiaries. The insurance policies listed on
Schedule 3.17(a) include all policies which are required in connection with the
operation of the businesses of the Company and its Subsidiaries as currently
conducted by applicable laws and all agreements relating to the Company and its
Subsidiaries.

<PAGE>

3.18 OPINION OF FINANCIAL ADVISOR. The Company has received, and
delivered to Parent a copy of, the opinion of Dain Bosworth Incorporated, the
Company's financial advisor ("Dain Bosworth"), to the effect that the
consideration to be received by the Company's shareholders in the Offer and the
Merger, and the transaction contemplated by the POL Agreement, taken as a whole,
is fair to the Company and the Company's shareholders from a financial point of
view.

3.19 VOTE REQUIRED. If Parent, Purchaser or any permitted
assignee thereof acquires and holds shares of Company Common Stock constituting
at least 80% of all of the issued and outstanding shares of Company Common
Stock, no vote of the holders of the Company Common Stock shall be required to
approve this Agreement or the transactions contemplated hereby. Otherwise, the
Merger contemplated by this 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 special or regular meeting of the shareholders of the Company and, if
Section 2538 of the PBCL is applicable, by the majority of the votes cast by
shareholders other than Parent, Purchaser or any permitted assignee thereof.

3.20 INFORMATION SUPPLIED; COMPANY PROXY STATEMENT. None of the
information supplied or to be supplied by the Company for inclusion in the Offer
Documents will, at the date such Offer Documents are filed with the SEC and the
date they are disseminated to the Company's shareholders, contain any untrue
statement of a material fact regarding the Company or will omit to state any
material fact regarding the Company required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances in which
they are made, not misleading. The Company Proxy Statement (and any amendment
or supplement thereto) will, at the date mailed to the Company shareholders and
at the time of the Special Meeting, not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances in which they are made, not misleading. The Company Proxy
Statement will comply in all material respects with the Exchange Act and the
rules and regulations thereunder. With respect to the Offer Documents and the
Company Proxy Statement, no representation is made by the Company with respect
to statements made therein based on information supplied in writing by Parent or
Purchaser for inclusion therein.

<PAGE>

3.21 POL AGREEMENT. The Company has delivered to Parent an
executed copy of the POL Agreement entered into concurrently herewith by the
Company and Dunaway Holdings providing for the option by the Company to sell
to Dunaway Holdings of all of the outstanding shares of capital stock of POL,
and all of the Company's rights, interests, liabilities and obligations
relating to POL, such option agreement and the underlying purchase agreement
being in substantially the form set forth in Exhibit 3.21 attached hereto.
The POL Agreement is in full force and effect. The POL Agreement provides
for the Company's option to sell the POL shares of capital stock to Dunaway
Holdings and, in the event of such sale, the assignment and assumption by
Dunaway Holdings of obligations and liabilities relating to POL as specified
therein. In the event that the POL Agreement is exercised the Company is
being fully indemnified for any continuing obligations or liabilities of any
nature (contingent or otherwise) that it may have following the consummation
of the sale of the POL shares contemplated by the POL Agreement
notwithstanding the assignment and assumption thereof by Dunaway Holdings.

3.22 THE SHAREHOLDERS' SHARES. All Shares owned beneficially
or of record by each of the Shareholders were acquired at the time and in the
manner set forth in the certificate set forth in Exhibit 3.22 attached hereto,
prior to January 1, 1983 for purposes of Section 2543 of the PBCL.

3.23 PENNSYLVANIA LAW. Assuming that Purchaser does not seek
a "control share approval" as that term is defined in Section 2581 of the PBCL,
the provisions of Subchapters 25I and 25J of the PBCL will not apply to the
transactions contemplated by this Agreement.

3.24 VOTING RIGHTS. All currently outstanding shares of
Common Stock have full voting rights under the PBCL.

3.25 POL. Since September 30, 1995, none of the Company or
any of its Subsidiaries (other than POL) has made any loans, advances or
contributions to, 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.

<PAGE>

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PARENT AND
PURCHASER

Parent and Purchaser represent and warrant to the Company as
follows:

4.1 ORGANIZATION. Each of Parent and Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation and has the requisite corporate power
to carry on its business. Purchaser has made available to the Company a
complete and correct copy of its articles of incorporation and bylaws, each as
amended to date and as in full force and effect. Purchaser is not in default in
any material respect in the performance, observation or fulfillment of any
provision of its articles of incorporation or bylaws.

4.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and
Purchaser has all requisite corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby on the part of Parent and Purchaser have been
duly and validly authorized by the Boards of Directors of Parent and of
Purchaser and by Parent as the sole shareholder of Purchaser and no other
corporate proceedings on the part of Parent and Purchaser are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby,
except as contemplated hereby. This Agreement has been duly and validly
executed and delivered by Parent and Purchaser and, assuming this Agreement
constitutes a valid and binding obligation of the Company and the requisite
approval of the Company's shareholders has been obtained, this Agreement
constitutes a valid and binding agreement of both Parent and Purchaser,
enforceable against each of them in accordance with its terms, except (a) as
such enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights, and (b) as the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefor may be brought.

<PAGE>

4.3 CONSENT AND APPROVALS; NO VIOLATION. Neither the execution
and delivery of this Agreement by Parent and Purchaser, nor the consummation of
the transactions contemplated hereby, will:

(a) conflict with any provision of the certificate of
incorporation or bylaws of Parent or the articles of incorporation or bylaws of
Purchaser;

(b) require any consent, approval, authorization or permit
of, or filing with or notification to, any governmental or regulatory authority,
except (i) the filing of a premerger notification and report form under the HSR
Act, (ii) the filing with the SEC of (x) the Schedule 14D-1, (y) the Company
Proxy Statement relating to the approval by the Company's shareholders of the
Agreement as contemplated by Section 1.8 of the Agreement, if such approval is
required by law, and (z) such reports under Section 13(a) of the Exchange Act as
may be required in connection with this Agreement, the Tender and Option
Agreement and the transactions contemplated hereby and thereby, (iii) the filing
of the Articles of Merger with the Department of State of the Commonwealth of
Pennsylvania, (iv) the filing of an informational notice by Purchaser with the
Pennsylvania Securities Commission in order to perfect an exemption from the
registration requirements of the Pennsylvania Takeover Disclosure Law of 1976
pursuant to Section 8 thereof, and (v) where the failure to obtain such
consents, approvals, authorizations or permits or the failure to make such
filings or notifications would not have a material adverse effect on the
financial condition, business, properties or results of operations of Parent and
its subsidiaries, taken as a whole;

(c) except as disclosed to the Company in writing by Parent
or Purchaser, conflict with, result in the breach of or constitute a default (or
give rise to any right of termination, cancellation or acceleration) under any
of the terms, conditions or provisions of any material note, lease, mortgage,
license, agreement or other instrument or obligation to which Parent or
Purchaser is a party or by which Parent or Purchaser or any of their assets may
be bound, except for such defaults (or rights of termination, cancellation or
acceleration) as to which requisite waivers or consents have been obtained or
which, in the aggregate, would not have a material adverse effect on the
financial condition, business, properties or results of operations of Parent and
its subsidiaries, taken as a whole; or

<PAGE>

(d) conflict with or violate the provisions of any order,
writ, injunction, judgment, decree, statute, rule or regulation applicable to
Parent or Purchaser in such a manner as to result in a material adverse effect
on the financial condition, business, properties or results of operations of
Parent and its subsidiaries, taken as a whole.

4.4 INFORMATION SUPPLIED. None of the information supplied or
to be supplied by Parent and Purchaser expressly for inclusion in the Company
Proxy Statement or the Schedule 14D-9 will, at the date mailed to the Company's
shareholders and at the time of the Special Meeting, contain any untrue
statement of a material fact or will omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances in which they are made, not misleading.

4.5 FINANCING. Either Parent or Purchaser has sufficient
funds available (through existing credit arrangements or otherwise) to purchase
all of the Shares outstanding on a fully diluted basis and to pay all fees and
expenses related to the transactions contemplated by this Agreement.

4.6 PURCHASER'S OPERATIONS. The Purchaser was formed solely for
the purpose of engaging in the transactions contemplated hereby and has not
engaged in any business activities or conducted any operations other than in
connection with the transactions contemplated hereby.

4.7 NO SHARES OWNED BY PARENT, PURCHASER OR AFFILIATES. As of
the date hereof, neither Parent nor Purchaser nor any of their affiliates owns
any Shares.

ARTICLE V

CONDUCT OF BUSINESS BY THE COMPANY
PRIOR TO EFFECTIVE DATE

The Company agrees that, except (i) as expressly contemplated by
this Agreement, or (ii) as agreed in writing by Parent, after the date hereof,
and prior to the time the directors of the Purchaser have been elected to the
Board of Directors of the Company pursuant to Section 1.3, as follows:

<PAGE>

5.1 ORDINARY COURSE. The Company and each of its Subsidiaries
shall carry on their respective businesses in the usual, regular and ordinary
course, in substantially the same manner as heretofore conducted, and use their
reasonable efforts consistent with past practice and policies to preserve intact
their present business organizations, keep available the services of their
present officers and employees and preserve their existing relationships with
customers, suppliers, lessors, lessees, creditors and others having business
dealings with them. The Company will continue to maintain a standard system of
accounting established and administered in accordance with GAAP.

5.2 DIVIDENDS; CHANGES IN STOCK. The Company shall not, and
shall 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 this Section 5.2 shall prevent the Company, upon the consummation
by the Company of a transaction for a Higher POL Offer in accordance with
Section 6.13 hereof, 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 (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 the date hereof, including without
limitation the fees and expenses, to the extent reimbursable by the Company, of
Dunaway Holdings and of Dain Bosworth incurred in connection with the POL
Agreement) 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 hereof
(the amount of such dividend to be subject to prior confirmation by Parent
based upon reasonable documentation prepared by the Company).

5.3 ISSUANCE OR REPURCHASE OF SECURITIES. The Company shall
not, and shall 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

<PAGE>

to the exercise of outstanding Options pursuant to the terms thereof as of the
date hereof or, solely with respect to POL, the POL Agreement. No Purchase
Period shall be permitted to begin on or after the date of this Agreement, and
no participant shall be permitted to elect to participate (or increase his or
her participation) in any offering under the Stock Plan in effect on the date of
this Agreement.

5.4 GOVERNING DOCUMENTS; BOARD OF DIRECTORS. The Company shall
not, and shall 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 of Directors, except as specifically contemplated by Section 1.3(a)
hereof.

5.5 NO DISPOSITIONS. The Company shall not, and shall 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.

5.6 INDEBTEDNESS.

(a) The Company shall not, and shall 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 other material 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.

(b) The Company shall not pay or be liable for prepayment or
other penalties in connection with the early retirement of any Company
indebtedness for borrowed money.

5.7 EMPLOYEES. The Company shall not, and shall 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
arrange-

<PAGE>

ments for or on behalf of any of such persons, whether contingent on
consummation of the Offer, the Merger or otherwise.

5.8 BENEFIT PLANS. The Company shall not, and shall 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 this 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 (including without limitation permitting any Purchase Period to commence
under the Stock Plan); or (d) amend in any material respect any such existing
plan, agreement or arrangement.

5.9 TAXES. The Company and each of its Subsidiaries shall (i)
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 (ii) 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 shall
be subject to the timely review and approval of Parent, which approval shall not
be unreasonably withheld.

5.10 CONSULTATION AND COOPERATION. The Company and each of its
Subsidiaries shall (i) 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); (ii)
promptly and regularly notify Parent of any change in the normal course or
operation of

<PAGE>

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 or any governmental or third party claims,
complaints, investigations or hearings, or communications indicating that the
same may be forthcoming or contemplated); and (iii) 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.

5.11 ADDITIONAL MATTERS. The Company shall not, and shall 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;

(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) (i) 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,
(ii) settle any material Audit, make or change any material Tax election or file
any

<PAGE>

amended Tax Returns, or (iii) agree to extend or waive any statute of
limitations on the assessment or collection of Tax;

(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 items and matters covered by the representations and
warranties of the Company set forth in Article III, or make any representation
or warranty of the Company in this Agreement materially inaccurate in any
respect.

5.12 POL. None of the Company nor any of its Subsidiaries shall
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.

ARTICLE VI

ADDITIONAL COVENANTS

6.1 NO SOLICITATION.

(a) The Company and its Subsidiaries and affiliates will
not, and the Company and its Subsidiaries and affiliates 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 (as defined below)
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 defined below) of the Company or any Subsidiary or affiliate or an
inquiry with respect thereto. The Company shall, and shall 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,
discus-

<PAGE>

sions and negotiations, if any, with any parties conducted heretofore with
respect to any of the foregoing. Notwithstanding the foregoing, 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 of Directors of the Company relating to any such transaction and (y)
if, in the opinion of the Board of Directors of the Company, 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.

(b) The Company shall 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 will keep Parent apprised of all developments with respect to
any such Acquisition Proposal. The Company shall give Parent written notice (an
"Intent Notice") of any Acquisition Proposal that the Company intends to accept
as an Acceptable Offer (as defined below) in accordance with the terms hereof at
least two business days prior to accepting such offer or otherwise entering into
any agreement or understanding with respect thereto. For purposes hereof, any
modification of an Acquisition Proposal shall constitute a new Acquisition
Proposal.

(c) Nothing contained in this Section 6.1 shall prohibit the
Company or its Board of Directors from (i) 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 promulgated under the Exchange Act, or
(ii) making such disclosure to the Company's shareholders which, in the opinion
of the Board of Directors of the Company, after consultation with independent
legal counsel to the Company, may be required under applicable law.

(d) As used in this Agreement, "Acquisition Proposal" when
used in connection with any Person shall mean 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

<PAGE>

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 this Agreement, the term "Acquisition
Proposal" shall 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 hereof (a "POL
Proposal") and (ii) any transaction of the type described in this subsection (d)
involving Parent, Purchaser or their affiliates. As used in this Agreement,
"Person" shall mean any corporation, partnership, person or other entity or
group (including the Company and its affiliates and representatives, but
excluding Parent or any of its affiliates or representatives).

(e) As used in this Agreement, "Acceptable Offer" shall mean
an executed written offer for an Acquisition Proposal received by the
Company in accordance with Section 6.1 hereof (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) hereof); 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
hereunder, at a per Share purchase price greater than that contained herein (or,
in the event such amount has been increased by Parent hereunder, 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 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 hereunder, such greater amount).

6.2 ACCESS TO INFORMATION; CONFIDENTIALITY.

(a) Between the date of this Agreement and the Effective
Time, upon reasonable notice the Company shall (and shall cause each of its
Subsidiaries to) (i) give Parent, Purchaser and their respective officers,
employees, accountants, counsel, financing sources and other agents and
representatives full access to all plants, offices, warehouses and other
facilities and to all contracts, internal reports, data processing files and
records, Federal, state, local and foreign tax returns and records, commitments,
books, records and affairs of the

<PAGE>

Company and its Subsidiaries, whether located on the premises of the Company or
one of its Subsidiaries or at another location; (ii) furnish promptly to Parent
a copy of each report, schedule, registration statement and other document filed
or received by it during such period pursuant to the requirements of Federal
securities laws or regulations; (iii) permit Parent and Purchaser to make such
inspections as they may require; (iv) cause its officers and the officers of its
Subsidiaries to furnish Parent and Purchaser such financial, operating,
technical and product data and other information with respect to the business
and properties of the Company and its Subsidiaries as Parent and Purchaser from
time to time may request, including without limitation financial statements and
schedules; (v) allow Parent and Purchaser the opportunity to interview such
employees, vendors, customers, sales representatives, distributors and other
personnel of the Company with the Company's prior written consent, which consent
shall not be unreasonably withheld; and (vi) assist and cooperate with Parent
and Purchaser in the development of integration plans for implementation by
Parent and the Surviving Corporation following the Effective Time; PROVIDED,
HOWEVER, that no investigation pursuant to this Section 6.2 shall affect or be
deemed to modify any representation or warranty made by the Company herein.
Until the Effective Time, materials furnished to Parent pursuant to this Section
6.2 may be used by Parent for strategic and integration planning purposes
relating to accomplishing the transactions contemplated hereby.

(b) Except as otherwise provided below, until Parent or
Purchaser acquires Shares pursuant to the Offer or the Tender and Option
Agreement Parent and Purchaser shall, and shall cause their affiliates, agents
and representatives to, keep secret and retain in confidence, and not use for
the benefit of any such person or others (other than in connection with this
Agreement and the transactions contemplated hereby), any confidential
information of the Company which the Parent or Purchaser obtained from the
Company pursuant to this Section 6.2. The restrictions on use and disclosure
contained herein shall not apply if and to the extent any such information (i)
is publicly available or becomes publicly available (through no action or fault
of Parent or Purchaser), (ii) was or is obtained by Parent or Purchaser from a
third party, PROVIDED that to the recipient's knowledge, after reasonable
inquiry, such third party was not bound by a contractual, legal or fiduciary
obligation of confidentiality to the Company or any other party with respect to
such information or material, (iii) was already in the possession of Parent or
Purchaser or known to Parent or Purchaser prior to being disclosed or provided
to them by or on behalf of the Company, PROVIDED, that, to the recipient's
knowledge, after reasonable inquiry, the source of such information or material
was not bound by a contractual, legal

<PAGE>

or fiduciary obligation of confidentiality to the Company or any other party
with respect thereto, or (iv) is required to be disclosed in a legal proceeding
or pursuant to applicable law or the rules or regulations of any national
securities exchange or over-the-counter market. In the event that Parent or
Purchaser is requested or required (by oral questions, interrogatories, request
for information or documents in legal proceedings, subpoena, civil investigative
demand or other similar process) to disclose any of the confidential information
provided under this Section 6.2, such party shall provide the Company with
prompt written notice of any such request or requirement so that the Company may
seek a protective order or other appropriate remedy and/or waive compliance with
the provisions of this Section 6.2. If, in the absence of a protective order or
other remedy or the receipt of a waiver by the Company, Parent or Purchaser is
nonetheless, based on advice of its outside counsel, legally compelled to
disclose the confidential information to any tribunal or else stand liable to
contempt or suffer other censure or penalty, such party may, without liability
hereunder, disclose to such tribunal only that portion of the confidential
information which such counsel advises such party is legally required to be
disclosed, provided that such party shall use its reasonable efforts to preserve
the confidentiality of the confidential information, including without
limitation by cooperating with the Company to obtain an appropriate protective
order or other reliable assurance that confidential treatment will be afforded
the confidential information by such tribunal. The restrictions on use and
disclosure of confidential information under this Section 6.2 shall expire three
years from the date hereof.

6.3 HSR ACT. The Company and Parent shall take all reasonable
actions necessary to file as soon as practicable notifications under the HSR Act
and to respond as promptly as practicable to any inquiries received from the
Federal Trade Commission and the Antitrust Divisions of the Department of
Justice for additional information or documentation and to respond as promptly
as practicable to all inquiries and requests received from any state attorney
general or other Governmental Entity in connection with antitrust matters.

6.4 CONSENTS AND APPROVALS. Each of the Company, Parent and
Purchaser will take all reasonable actions necessary to comply promptly with all
legal requirements which may be imposed on it with respect to this Agreement,
the POL Agreement and the transactions contemplated hereby and thereby (which
actions shall include without limitation furnishing all information required
under the HSR Act and in connection with approvals of or filings with any other
Governmental Entity) and will promptly cooperate with and furnish information to
each other in connection with any such requirements imposed upon any of

<PAGE>

them or any of their respective subsidiaries in connection with this Agreement,
the POL Agreement and the transactions contemplated hereby and thereby. Each of
the Company, Parent and Purchaser will, and will cause its respective
subsidiaries to, take all reasonable actions necessary to obtain (and will
cooperate with each other in obtaining) any consent, authorization, order or
approval of, or any exemption by, any Governmental Entity or other public or
private third party required to be obtained or made by Parent, Purchaser, the
Company or any of their respective subsidiaries in connection with the Merger or
the taking of any action contemplated thereby or by this Agreement or the POL
Agreement.

6.5 NOTIFICATION OF CERTAIN MATTERS. The Company will give
prompt notice to Parent, and Parent and Purchaser will give prompt notice to the
Company, of (a) any notice of default received by either of them or any of their
subsidiaries subsequent to the date of this Agreement and prior to the Effective
Time under any material instrument or material agreement to which either of
them, or any of their subsidiaries, is a party or by which either is bound
(including without limitation the POL Agreement), which default would, if not
remedied, result in a Material Adverse Effect or which would render materially
incomplete or untrue any representation made herein, (b) any suit, action or
proceeding instituted or, to the knowledge of any of them, threatened against or
affecting any of them subsequent to the date of this Agreement and prior to the
Effective Time which, if adversely determined, would have a material adverse
effect on the financial condition or results of operations of Parent or
Purchaser or result in a Material Adverse Effect in the Company and its
Subsidiaries or which would render materially incorrect any representation made
herein and (c) any material breach of the Company's, or Parent's or Purchaser's,
as the case may be, covenants hereunder or the occurrence of any event that is
reasonably likely to cause any of its representations and warranties hereunder
to become incomplete or untrue in any material respect.

6.6 BROKERS OR FINDERS. Each of Parent and the Company
represents, as to itself, its subsidiaries and its affiliates, that no agent,
broker, investment banker, financial advisor or other firm or person is or will
be entitled to any brokers' or finders' fee or any other commission or similar
fee in connection with any of the transactions contemplated by this Agreement
and the POL Agreement except CS First Boston Corporation and Dain Bosworth,
whose fees and expenses will be paid by Parent and the Company, respectively, in
accordance with the agreements with such firms (copies of which have been
delivered by each of the Company and Parent to the other prior to the date of
this Agreement), and each of Parent and Company agrees to indemnify and hold the
other

<PAGE>

harmless from and against any and all claims, liabilities or obligations with
respect to any other fees, commissions or expenses asserted by any person on the
basis of any act or statement alleged to have been made by such party or its
affiliates.

6.7 ADDITIONAL ACTIONS. Subject to the terms and conditions of
this Agreement, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations, or
to remove any injunctions or other impediments or delays, to consummate and make
effective the Merger, the transactions contemplated by the POL Agreement and the
other transactions contemplated by this Agreement, subject, however, to the
appropriate vote of shareholders of the Company required so to vote as described
in Section 3.19 hereof. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of either of
Purchaser or the Company, the proper officers and directors of each corporation
which is a party to this Agreement shall take all such necessary action.

6.8 BENEFIT PLANS AND CERTAIN CONTRACTS; SEVERANCE
ARRANGEMENTS.

(a) Parent hereby agrees to cause the Surviving Corporation
to pay, in accordance with their terms as in effect on the date hereof, without
offset, deduction, counterclaim, interruption or deferment (other than as
required by applicable law) all amounts due and payable under the terms of all
written employment contracts, agreements, plans, policies and commitments of the
Company and its Subsidiaries (other than with respect to liabilities and
obligations to be assumed or retained by POL or Dunaway Holdings for which POL
or Dunaway Holdings shall be liable, in each case pursuant to the POL Agreement
(or, in each case, in the event an agreement is entered into with respect to a
Higher POL Offer, by POL or the purchaser thereunder)) with or with respect to
its current or former employees, officers and directors as such contracts,
agreements, plans, policies and commitments are described on Schedule 3.14(i)
hereto and in the Company SEC Reports filed on or before the date of this
Agreement (other than any such contracts, agreements, plans, policies or
commitments to the extent that such arrangements provide benefits that relate to
severance or termination which are addressed in Section 6.8(b) below) to the
extent such amounts are vested on or prior to the date of this Agreement or will
become vested as a result

<PAGE>

of the transactions contemplated hereby. It is Parent's current intention to
cause the Surviving Corporation to provide its employees with employee benefit
plans providing welfare benefits substantially comparable in the aggregate to
those provided to employees generally by the Company as of the date of this
Agreement. Such welfare benefit plans shall (i) recognize expenses and claims
that were incurred by the Company's employees in the year in which the Effective
Time occurs and recognized for purposes of computing deductible amounts and
copayments under the Company's plans as of the Effective Time and (ii) provide
coverage for pre-existing health conditions to the extent covered under the
applicable plans or programs of the Company as of the Effective Time. In
addition, employees of the Surviving Corporation shall receive credit for their
prior service with the Company and its Subsidiaries for eligibility and vesting
purposes and for vacation accrual purposes. Notwithstanding anything to the
contrary herein, Parent shall be under no obligation to provide employees of the
Surviving Corporation with the opportunity to participate in any "employee stock
ownership plan" (as defined in Section 4975(e)(7) of the Code) or other
stock-based retirement plan or arrangement.

(b) On or prior to the Closing Date, Parent shall cause the
Surviving Corporation to offer to each officer and key employee of the Company
identified on Schedule 6.8(b)(1) hereto a severance agreement with the Company
in substantially the form set forth in Exhibit 6.8(b) hereto and with such other
terms for each such officer as are set forth on Schedule 6.8(b)(1). With
respect to the Company's other employees employed by the Company or its
Subsidiaries (other than POL) as of the Closing Date, Parent shall cause the
Surviving Corporation to honor the Company's severance and termination policy as
set forth on Schedule 6.8(b)(2) hereto.

(c) On or prior to the Closing Date, Parent shall cause the
Surviving Corporation to offer to each officer of the Company identified on
Schedule 6.8(c) hereto a consulting agreement with the Company in substantially
the form set forth in Exhibit 6.8(c) hereto.

(d) Notwithstanding anything to the contrary contained
above, the Surviving Corporation shall be permitted to amend, modify, supplement
or terminate any Plan, policy, agreement, commitment or other arrangement to the
extent not prohibited by the terms thereof or by applicable law.

(e) Nothing contained in this Agreement, including without
limitation this Section 6.8, shall confer on any person not a party to this

<PAGE>

Agreement, or constitute or be evidence of any agreement or understanding,
express or implied, that any person has a right to be employed as an employee of
or consultant to Parent or the Surviving Corporation for any period of time or
at any specific rate of compensation.

6.9 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 of Directors of the
Company pursuant to Section 1.3 hereof and constitute a majority of the members
thereof and (ii) the Effective Time, Parent shall, or shall 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, bylaws or written indemnification agreements that are listed on
Schedule 6.9(a) hereto and have been delivered to the Company prior to the date
hereof, in each case as in effect at the date hereof, 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, shall be made by
independent counsel mutually acceptable to Parent and the Indemnified Party; and
PROVIDED, FURTHER, that nothing herein shall impair any rights or
obligations of any present or former directors or officers of the Company.

(b) Parent or the Surviving Corporation shall 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 the Parent may substitute therefor policies of substantially
similar coverage and amounts containing terms no less advantageous to such
former

<PAGE>

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 this Section 6.9 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 shall nonetheless purchase the
maximum amount of such insurance obtainable by payment of annual premiums equal
to 125% of the 1994 Premiums.

6.10 TENDER AND OPTION AGREEMENT; PENNSYLVANIA LAW. The Company,
regardless of any termination of this Agreement, shall not (a) take any action
which, in the reasonable judgment of Parent, would impede, interfere with or
attempt to discourage the transactions contemplated by this Agreement or the
Tender and Option Agreement, (b) amend, revoke, withdraw or modify the approval
of the Purchaser's acquisition of the Company Common Stock, the Merger and the
other transactions contemplated hereby so as to render the restrictions of
Section 25F of the PBCL applicable to the Merger or the POL Agreement or make
Section 1924(b)(1)(ii) unavailable for the Merger, or (c) take action rendering
the requirements for business combinations contained in Subchapter 25F of the
PBCL inapplicable to a business combination between the Company and any third
party or its affiliates or associates; PROVIDED, HOWEVER, that any of the
above actions may be taken if, in the opinion of the Board of Directors of the
Company after consultation with independent legal counsel to the Company, the
failure to take such action would be inconsistent with their fiduciary duties
under applicable law; and PROVIDED, FURTHER, that the Company may take any
such action if this Agreement has been terminated pursuant to Section 8.1(c)(i)
hereof and Parent has been paid the fees contemplated by Section 9.1 hereof.

6.11 PUBLICITY. So long as this Agreement is in effect and
subject to Section 6.1 hereof, neither the Company, Parent nor any of their
respective affiliates shall issue or cause the publication of any press release
or other announcement with respect to the Merger, this Agreement or the other
transactions contemplated hereby without the prior consultation of the other
party, except as may be required by law or by any listing agreement with a
national securities exchange.

<PAGE>

6.12 PARENT'S SALE OF SHARES IN ACCEPTABLE OFFER. In the event
that (a) this Agreement shall have been terminated in accordance with Section
8.1 hereof (other than due to a breach by the Company), and (b) at any time in
the twelve months after such termination of this Agreement the Company engages
in a transaction that would constitute an Acceptable Offer hereunder, then in
such case Parent agrees that it shall 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 shall 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 shall 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 the PBCL.

6.13 POL AGREEMENT.

(a) The Company will not (i) amend, revoke, withdraw,
modify or terminate the POL Agreement, (ii) exercise or waive any of its
rights under the POL Agreement or (iii) 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. Anything herein or
elsewhere to the contrary notwithstanding, but subject to the immediately
preceding sentence, in the event that the Company exercises its option under
the POL Agreement then the purchase agreement with respect to POL underlying
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 costs and
expenses directly related to such transaction incurred after the date hereof,
including without limitation the fees and expenses, to the extent
reimbursable by the Company, of Dunaway Holdings and of Dain Bosworth incurred
in connection with the POL Agreement) 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 (such offer, a "Higher POL Offer"). For purposes of this Agreement,
in the event that the Company accepts a Higher POL Offer and enters into an
agreement with respect thereto in accordance with the terms of this Section
6.13, thereafter all references herein to the "POL Agreement" shall be deemed
to refer to such agreement providing for the Higher POL Offer. Nothing in
this Section 6.13 shall prohibit the Company from soliciting proposals to
acquire POL.

<PAGE>

(b) The Company shall 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 respect to any POL Proposal. The Company shall give Parent
written notice of any POL Proposal that the Company proposes to accept in
accordance with the terms of Section 6.13(a) hereof 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.

6.14 COMPANY AUDITED FINANCIAL STATEMENTS. Prior to the
expiration of the Offer, the Company shall deliver to Parent a copy of, and an
unqualified audit opinion, dated on or before the expiration date of the Offer,
of Arthur Andersen regarding, the Company's consolidated financial statements
for the fiscal year ended September 30, 1995.

6.15 OPINIONS OF COMPANY COUNSEL. The Company shall use all
reasonable efforts to deliver to Parent, by the tenth business day after the
date hereof (a) the opinion of Dykema Gossett PLLC, special counsel for the
Company, with respect to the matters set forth in the form of opinion set forth
in Exhibit 6.15(a) attached hereto and (b) the opinion of Montgomery, McCracken,
Walker and Rhoads, or such other outside counsel to the Company as is reasonably
acceptable to Parent, in such form as Parent may reasonably require prior to the
date hereof.

6.16 OPINION OF PARENT COUNSEL. Parent shall use its reasonable
efforts to deliver to the Company, by the fifth business day after the date
hereof, (a) the opinion of Jay P. Wertheim, Esq., Vice President, Law, of
Parent, in substantially the form set forth in Exhibit 6.16 attached hereto and
(b) Rhoads & Sinon, special Pennsylvania counsel to Parent.

ARTICLE VII

CONDITIONS

7.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER.
The respective obligations of the parties to effect the Merger shall be subject
to the satisfaction or waiver, on or prior to the Closing Date, of the following
conditions:

<PAGE>

(a) GOVERNMENTAL APPROVALS. All authorizations, consents,
orders or approvals of, or declarations or filings with, or expiration of
waiting periods imposed by, any Federal, state, local or foreign governmental or
regulatory authority necessary for the consummation of the Merger and the
transactions contemplated by this Agreement shall have been filed, occurred or
been obtained and shall be in effect at the Effective Time.

(b) LEGAL ACTION. No temporary restraining order,
preliminary injunction or permanent injunction or other order precluding,
restraining, enjoining, preventing or prohibiting the consummation of the Merger
shall have been issued by any Federal, state or foreign court or other
governmental or regulatory authority and remain in effect.

(c) STATUTES. No Federal, state, local or foreign statute,
rule or regulation shall have been enacted which prohibits the consummation of
the Merger or would make the consummation of the Merger illegal.

(d) SHAREHOLDER APPROVAL. This Agreement shall 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.

7.2 ADDITIONAL CONDITION TO OBLIGATIONS OF THE COMPANY TO EFFECT
THE MERGER. The obligations of the Company to effect the Merger shall be
subject to the satisfaction or waiver, on or prior to the Closing Date, of the
additional condition that Parent, Purchaser or their affiliates shall 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.

7.3 ADDITIONAL CONDITION TO OBLIGATIONS OF PARENT AND PURCHASER
TO EFFECT THE MERGER. The obligations of Parent and Purchaser to effect the
Merger shall be 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 shall have been consummated or POL shall have been sold
pursuant to a Higher POL offer.

<PAGE>

ARTICLE VIII

TERMINATION

8.1 TERMINATION. Anything herein or elsewhere to the contrary
notwithstanding, this 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:

(a) BY MUTUAL CONSENT. By mutual consent of the Board of
Directors of Parent and the Board of Directors of the Company.

(b) BY PARENT AND PURCHASER, OR THE COMPANY. By either the
Board of Directors of Parent or the Board of Directors of the Company:

(i) if the Merger shall not have been consummated on or
prior to May 21, 1996; PROVIDED, HOWEVER, that the right to terminate this
Agreement under this Section 8.1(b)(i) shall not be available to any party whose
failure to fulfill any material obligation under this Agreement has been the
cause of, or resulted in, the failure of the Merger to be consummated on or
prior to such date; or

(ii) if a court of competent jurisdiction or other
governmental or regulatory authority shall have issued an order, decree or
ruling or taken any other action (which order, decree, ruling or other action
the parties hereto shall use their reasonable efforts to lift), in each case
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other action
shall have become final and non-appealable.

<PAGE>

(i) 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 shall have (A)
accepted an Acceptable Offer in compliance with the terms of Section 6.1 hereof
and (B) paid or caused to be paid the fees provided for in Section 9.1(b)
hereof; or

(ii) if, prior to the purchase of Company Common Stock
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 representa-
tions and warranties in any material respect; or

(iii) if Parent, Purchaser or any of their affiliates
shall have failed to commence the Offer on or prior to five business days
following the date of the initial public announcement of the Offer (the "Offer
Deadline") other than due to an occurrence that if occurring after the commence-
ment of the Offer would result in a failure to satisfy any of the conditions set
forth in Annex A hereto; PROVIDED, that the Company may not terminate this
Agreement pursuant to this Section 8.1(c)(iii) if the Company is in material
breach of this Agreement.

(d) BY PARENT AND PURCHASER. By the Board of Directors of
Parent:

(i) 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 set forth in Annex A hereto, Parent, Purchaser or any of their
affiliates shall have failed to commence the Offer on or prior to the Offer
Deadline; PROVIDED that Parent and Purchaser may not terminate this Agreement
pursuant to this Section 8.1(d)(i) if Parent or Purchaser (x) is in material
breach of this Agreement or (y) has not exercised such right by the close of
business on or before the fifth business day following the Offer Deadline; or

(ii) if Parent or Purchaser is not in material breach of
the Agreement and (A) prior to the purchase of shares of Company Common Stock
pursuant to the Offer, the Company shall have received an Acceptable Offer and
the Board of Directors of the Company shall 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

<PAGE>

the Offer, this Agreement or the Merger or shall 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 shall not be deemed to be adverse to
Parent or Purchaser for purposes of this Section 8.1(d)(ii)(A); or (B) prior
to the purchase of shares of Company Common Stock pursuant to the Offer or
the Tender and Option Agreement, it shall have been publicly disclosed or
Parent or Purchaser shall 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, shall
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 shall 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

(iii) if Parent or Purchaser, as the case may be, shall
have terminated the Offer, or the Offer shall have expired without Parent or
Purchaser, as the case may be, purchasing any shares of Company Common Stock
thereunder, PROVIDED that Parent or Purchaser may not terminate this Agreement
pursuant to this Section 8.1(d)(iii) if (x) it or the Purchaser has failed to
purchase shares of Company Common Stock 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; or

(iv) if, prior to the purchase of Company Common Stock
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 herein or breaches its representations and
warranties in any material respect; or

(v) if the Company does not deliver to Parent the
opinions contemplated by Section 6.15 hereof, in form and substance reasonably
satisfactory to Parent in its sole discretion, by the tenth business day
after the date hereof.

<PAGE>

8.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 8.1 above, written notice thereof shall forth-
with be given to the other party or parties specifying the provision hereof
pursuant to which such termination is made, and this Agreement shall forthwith
become null and void and there shall be no liability or obligation on the part
of Parent and Purchaser, or either of them, or the Company, or their respective
officers, directors or employees, except (a) for fraud or for material breach of
this Agreement and (b) as set forth in this Section 8.2, Sections 6.2(b), 6.10,
6.12 and 9.1 hereof and, to the extent that, and for so long as, Parent's
designees to the Company's Board of Directors pursuant to Section 1.3 hereof
constitute at least a majority of the members of such Board of Directors,
Section 6.9(a) hereof.

ARTICLE IX

GENERAL PROVISIONS

9.1 FEES AND EXPENSES.

(a) Except as contemplated by this Agreement, including
Section 9.1(b) hereof, all costs and expenses incurred in connection with this
Agreement and the consummation of the transactions contemplated hereby shall be
paid by the party incurring such expenses.

(b) If (i) the Board of Directors of the Company shall
terminate this Agreement pursuant to Section 8.1(c)(i) hereof, (ii) the Board of
Directors of Parent shall terminate this Agreement pursuant to Section
8.1(d)(ii)(A) hereof, (iii) the Board of Directors of Parent shall terminate
this Agreement pursuant to Section 8.1(d)(ii)(B) and within one year of any such
termination a Person shall acquire or beneficially own a majority of the then
outstanding shares of Company Common Stock or shall have obtained representation
on the Company's Board of Directors or shall enter 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 shall terminate this
Agreement pursuant to Section 8.1(d) due to (I) a material breach of the
representations and warranties of the Company set forth in this Agreement or
(II) a material breach of, or failure to perform or comply with, any material
obligation, agreement or covenant contained in this Agreement, including but not
limited to the covenants contained in Article V hereof, by the Company, then in

<PAGE>

any such case as described in clause (i), (ii), (iii) or (iv), the Company shall
pay or cause to be paid to Parent (concurrently with the termination of this
Agreement in the case of a termination referred to in Section 9.1(b)(i) hereof,
upon the consummation of the Acquisition Proposal or similar business
combination in the case of a termination referred to in Section 9.1(b)(iii)
hereof, and otherwise not later than two business days after termination of this
Agreement) an amount equal to $4 million.

9.2 AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified and supplemented in any and all respects,
whether before or after any vote of the shareholders of the Company contemplated
hereby, by written agreement of the parties hereto, by action taken by their
respective Boards of Directors (which in the case of the Company shall include
approvals as contemplated in Section 1.3(c) hereof), at any time prior to the
Closing Date with respect to any of the terms contained herein; PROVIDED,
HOWEVER, that after the approval of this Agreement by the shareholders of the
Company, no such amendment, modification or supplement shall reduce or change
the Merger Consideration.

9.3 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement shall survive the Effective
Time.

9.4 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given upon personal delivery, facsimile
transmission (which is confirmed), telex or delivery by an overnight express
courier service (delivery, postage or freight charges prepaid), or on the fourth
day following deposit in the United States mail (if sent by registered or
certified mail, return receipt requested, delivery, postage or freight charges
prepaid), addressed to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):

(a) if to Parent or Purchaser, to:

17221 Red Hill Avenue
Irvine, California 92714
Telecopy No. (714) 474-6444
Attention: Jay P. Wertheim, Esq.,
Vice President, Law

<PAGE>

with a copy to:

Skadden, Arps, Slate, Meagher & Flom
300 South Grand Avenue
Suite 3400
Los Angeles, California 90071
Telecopy No. (213) 687-5600
Attention: Joseph J. Giunta, Esq.

(b) if to the Company, to:

PSICOR, Inc.
16818 Via del Campo Court
San Diego, California 92127
Telecopy No. (619) 485-5107
Attention: Michael W. Dunaway, President

with a copy to:

Dykema Gossett PLLC
400 Renaissance Center
Detroit, Michigan 48243
Telecopy No. (313) 568-6915
Attention: Fredrick M. Miller, Esq.

9.5 DEFINITIONS; INTERPRETATION. As used in this Agreement, the
term "affiliate(s)" shall have the meaning set forth in Rule 12b-2 of the
Exchange Act. When a reference is made in this Agreement to an Article,
Section, Exhibit or Schedule, such reference shall be to an Article, Section,
Exhibit or Schedule to this Agreement unless otherwise indicated. The words
"include," "includes" and "including" when used herein shall be deemed in each
case to be followed by the words "without limitation." The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.

9.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.

<PAGE>

9.7 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement
(including the documents and the instruments referred to herein and therein) (a)
constitutes the entire agreement and supersedes all prior agreements and under-
standings, both written and oral, among the parties with respect to the subject
matter hereof, and (b) except as provided in Section 6.9 hereof is not intended
to confer upon any person other than the parties hereto any rights or remedies
hereunder.

9.8 SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void, unenforceable or against its regulatory policy,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.

9.9 GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the Commonwealth of Pennsylvania (without giving
effect to the principles of conflicts of law thereof).

9.10 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that Purchaser may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
Parent or to any direct or indirect wholly owned subsidiary of Parent. Subject
to the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by, the parties and their respective successors
and assigns.

<PAGE>

IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.

BAXTER HEALTHCARE CORPORATION

By /s/ Michael A. Mussallem
--------------------------------------
Name: Michael A. Mussallem
Title: Group President, Cardiovascular Group

BAXTER CVG SERVICES II, INC.

By /s/ Jay B. Wertheim
--------------------------------------
Name: Jay B. Wertheim
Title: Vice President

PSICOR, Inc.

By /s/ Michael W. Dunaway
--------------------------------------
Name: Michael W. Dunaway
Title: Chief Executive Officer
and President

<PAGE>
ANNEX A

CONDITIONS TO THE TENDER 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 shall not be required to accept for payment or, subject to
any applicable rules and regulations of the SEC, 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
shall occur or shall be determined by Purchaser to have occurred:

(a) there shall 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

A-1

<PAGE>

shareholders, except as specifically provided in the Control Share
Acquisitions 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 the PBCL, (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 shall have used reasonable efforts to cause any such judgment,
order or injunction to be vacated or lifted;

(b) there shall have occurred (1) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock Exchange,
Inc. or any other securities market for a period in excess of three hours
(excluding 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 shall 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 shall 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;

A-2

<PAGE>

(d) the Company shall 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 shall have occurred, or there shall 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 shall have been terminated in accordance
with its terms;

(g) (i) it shall have been publicly disclosed or Parent or Purchaser
shall 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, shall 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 shall 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 shall 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 Company's Board of Directors shall 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 shall have recommended an
Acquisition Proposal, PROVIDED, HOWEVER, that if the Company's Board of
Directors 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 shall not be deemed to be
adverse to Parent or Purchaser for purposes of this paragraph (h);

A-3

<PAGE>

(i) the Company shall have not obtained all consents from Option
holders under the Option Plans needed in order to pay them the amounts
contemplated under Section 2.3 of the Agreement in lieu of any and all
rights of such Option holders under such Option Plans;

(j) a "Purchase Period" under the Stock Plan shall have been in
effect at any time after November 30, 1995, or the Company shall not have
the absolute right to convert any outstanding options thereunder into the
right to receive cash determined in accordance with Section 2.1(c) or 2.3
of the Agreement, as the case may be, in lieu of any and all rights of the
participants under the Stock Plan;

(k) the Company shall not have obtained the consent contemplated by
Section 2.4 of the 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 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 shall not be deemed a waiver of any such right and each such right shall
be deemed an ongoing right which may be asserted at any time and from time to
time.

A-4

<PAGE>

EXHIBIT 2.1
FORM OF
CONSULTING AGREEMENT

This CONSULTING AGREEMENT (the "Agreement") is entered into as of
November 21, 1995 between PSICOR, Inc., a Pennsylvania corporation (the
"Company"), and Michael W. Dunaway ("Mr. Dunaway").

WHEREAS, Mr. Dunaway founded the Company in 1968, is a controlling
shareholder of the Company and, as of the date hereof, serves as the Chief
Executive Officer, Chairman of the Board and President of the Company; and

WHEREAS, the Company desires to retain the services of Mr. Dunaway as
a consultant to the Company in the event of the termination of his employment by
the Company for any reason other than for cause within two (2) years from the
date hereof; and

WHEREAS, Mr. Dunaway is willing to agree to serve as a consultant to
the Company, on the terms and conditions provided herein, and to receive the
benefits hereof in lieu of any agreement or other arrangement regarding
severance or similar benefits.

NOW, THEREFORE, in consideration of the premises and the respective
covenants and agreements of the parties contained herein, and intending to be
legally bound hereby, the parties hereto agree as follows:

1. RETENTION AS A CONSULTANT. During the Consulting Period (as
defined below) (i) the Company shall retain Mr. Dunaway, and Mr. Dunaway shall
serve the Company, as an independent consultant on the terms and conditions set
forth herein and (ii) Mr. Dunaway shall provide such consulting services to the
Company as the Company may reasonably request under the direction of the
Company's Board of Directors consistent with its overall objectives in an amount
not to exceed (x) 40 hours per month for the first three months of the
Consulting Period and (y) 20 hours per month thereafter. Mr. Dunaway may
perform his duties hereunder at such locations as may be agreed upon between Mr.
Dunaway and the Company (provided, that if requested to perform such

<PAGE>

duties in any location other than the San Diego, California, area the Company
shall reimburse Mr. Dunaway for his reasonable out-of-pocket expenses incurred
in connection therewith in accordance with Section 3(e) hereof) or by telephone
consultation, written communication and/or by fax as appropriate. As an
independent consultant, Mr. Dunaway shall not be authorized to act for or enter
into any agreement on behalf of the Company without written authorization from
the Company's Board of Directors. The Company acknowledges that Mr. Dunaway has
other business interests and that he intends to travel from the San Diego area
frequently on personal business and that Mr. Dunaway may, as a result, be
unavailable to the Company from time to time.

2. CONSULTING PERIOD. (a) If Mr. Dunaway's employment is terminated
either (i) by the Company other than for "Cause" (as defined below) or (ii) by
Mr. Dunaway for "Good Reason" (as defined below), in each case during the "Two-
Year Period" (as defined below), Mr. Dunaway shall be retained by the Company as
a consultant and shall provide the services specified herein for a period of
three (3) years from the date of such termination (such date, the "Effective
Date," and such period, the "Consulting Period"). Following the termination of
the Consulting Period, except as otherwise specifically provided herein (i) the
Company's obligations under this Agreement shall cease and the Company shall
have no further obligations to Mr. Dunaway under this Agreement and (ii) Mr.
Dunaway's obligation to the Company to provide the consulting services
contemplated by Section 1 hereof shall cease. If, during the Two-Year Period,
Mr. Dunaway's employment is not terminated by the Company other than for cause,
or by Mr. Dunaway for good reason, this Agreement shall expire without further
obligation of either the Company or Mr. Dunaway as of the end of the Two-Year
Period. As used herein, the "Two-Year Period" shall mean the two-year period
beginning on the date hereof, and the parties acknowledge that Mr. Dunaway is
an employee of the Company on the date hereof.

(b) As used herein, "Cause" shall mean:

i) Mr. Dunaway's willful failure to perform or habitual
neglect of his duties as an employee of the Company or a subsidiary
thereof;

ii) Mr. Dunaway's commission or conviction of any crime or
criminal offense involving theft, fraud, embezzlement, misappropriation of
assets, malicious mischief, or any felony; or

<PAGE>

iii) Mr. Dunaway's willful engaging in conduct which is
injurious to the Company or a subsidiary thereof monetarily or otherwise,
including, but not limited to, conduct that constitutes competitive
activity or other activity inconsistent with the terms of Section 4
hereof.

(c) As used herein, "Good Reason" shall mean any diminution in the
nature or status of Mr. Dunaway's authority, duties and responsibilities or any
diminution in Mr. Dunaway's base salary, in each case from those in effect as of
the date hereof.

3. COMPENSATION AND RELATED MATTERS. As compensation for the
services to be rendered by Mr. Dunaway and the noncompetition and
confidentiality agreements provided for hereunder, and in lieu of any severance
or termination benefits to which Mr. Dunaway might otherwise be entitled in
connection with the termination of his employment, the Company shall make the
following payments and provide the following benefits to Mr. Dunaway during the
Consulting Period:

(a) CONSULTING FEE. During the Consulting Period the Company
shall pay Mr. Dunaway a consulting fee payable no less frequently than monthly
at the rate of $20,000.00 per month.

(b) HEALTH BENEFITS. During the Consulting Period, Mr. Dunaway
shall be entitled to health care benefits no less favorable on the whole to Mr.
Dunaway than the benefits provided to Mr. Dunaway under the terms of the health
plans maintained by the Company in which he is a participant as of the date
hereof.

(c) TRANSFER OF "KEY MAN" LIFE INSURANCE POLICIES. Within five
(5) business days following the Effective Date, the Company shall transfer to
Mr. Dunaway or his designee any and all rights and interests of the Company
under the "key man" life insurance policies identified on Schedule 3 hereto
(including without limitation the cash values thereof as of the Effective Date),
and Mr. Dunaway and his designee shall assume any and all obligations and
liabilities of the Company thereunder. Mr. Dunaway hereby agrees to pay or
otherwise discharge, or cause to be paid or otherwise discharged, from and after
the Effective Date, any and all obligations or liabilities of the Company under
the policies identified on Schedule 3 hereto when such obligations and
liabilities become due and the Company shall have no further obligation or
liability with respect thereto. Within five (5) business days following the
Effective Date, the

<PAGE>

Company, Mr. Dunaway and any designee of Mr. Dunaway shall enter into an
assignment and assumption agreement, together with the insurers of such
policies, with respect to the matters contemplated by this Section 3(c).

(d) OFFICE; SECRETARIAL SERVICES. During the Consulting Period,
the Company shall provide Mr. Dunaway with an office in the Company's
headquarters and reasonable access to secretarial services.

(e) REIMBURSEMENT OF EXPENSES. The Company shall provide Mr.
Dunaway with reimbursement for reasonable and necessary business expenses to the
extent such expenses are incurred upon the request of the Company and provided
that such expenses are accounted for in accordance with the policies and
procedures established by the Company from time to time for its senior
executives.

4. NON-COMPETITION; NON-DISCLOSURE. Mr. Dunaway recognizes and
expressly acknowledges that (i) he has developed a highly valuable expertise in
the business of cardiovascular perfusion and ancillary services, including
without limitation delivery of perfusion services and sales of supplies in
connection therewith, which expertise is of a special, unique and extraordinary
character (as such perfusion and related business is presently conducted by the
Company and its Subsidiaries, the "Company Business"); (ii) the Company would be
irreparably damaged if Mr. Dunaway were to (x) engage in any activity competing
with the Company Business in violation of the terms of this Agreement, or (y)
disclose in violation of this Agreement, or make unauthorized use of, any
confidential information concerning the Company Business; (iii) he is
voluntarily entering into this Agreement, including without limitation this
Section 4, with the intent that the covenants in this Section 4 shall be valid
and enforceable; and (iv) the terms and conditions of this Agreement and this
Section 4 are fair and reasonable to him in all respects and will not create any
hardship for him.

(a) In light of the foregoing, and for and in consideration of
benefits derived directly and indirectly from this Agreement, Mr. Dunaway
covenants and agrees as follows:

(i) During the Consulting Period, Mr. Dunaway shall not, alone
or as a member, employee or agent of any partnership or as an officer, agent,
employee, consultant, director, shareholder (except for passive investments of
not more than (x) two percent (2%) of the outstanding shares of, or any other
equity interest in, any company or entity (other than one listed or traded on a
4

<PAGE>

national securities exchange or on an over-the-counter securities market) and
(y) five percent (5%) of the outstanding shares of, or any other equity interest
in, any company or entity listed or traded in a national securities exchange or
over-the-counter securities market) of any corporation or entity, directly or
indirectly manage, operate, join, control or participate in the management,
operation or control of, or work for (as an employee, consultant, independent
contractor or otherwise) or permit the use of his name by, or be connected in
any manner with any business or activity which is in competition with the
Company Business in any town, county, parish or other municipality in any state
of the United States in which the Company Business is presently conducted and in
any town, county, parish or municipality adjacent thereto;

(ii) During the Consulting Period, Mr. Dunaway shall not,
directly or indirectly, solicit, induce, or attempt to solicit or induce (x)
any employee of the Company or its Subsidiaries, affiliates, successors or
assigns to terminate his or her employment relationship with the Company or its
Subsidiaries, affiliates, successors or assigns for the purpose of associating
with any competitor of the Company or its Subsidiaries, affiliates, successors
or assigns; or (y) any customer, client, vendor, supplier or consultant then
under contract to the Company or its Subsidiaries, affiliates, successors or
assigns, to terminate his, her or its relationship with the Company or its
Subsidiaries, affiliates, successors or assigns, for the purpose of associating
with any competitor of the Company or its Subsidiaries, affiliates, successors
or assigns; and

(iii) Unless otherwise required by any applicable law or rules
and regulations of any national securities exchange, Mr. Dunaway shall not
disclose to any person any trade secrets or confidential information with
respect to any of the Company's patents, trademarks, products, improvements,
formulas, designs or styles, processes, customers, methods of distribution or
methods of manufacture; PROVIDED, HOWEVER, that such trade secrets or
confidential information shall not include any information known generally to
the public (other than as a result of unauthorized disclosure by Mr. Dunaway).

(c) Mr. Dunaway recognizes and acknowledges that his expertise
is of a special, unique and extraordinary character and that (i) in the event of
his failure to comply with any of the restrictions contained in this Section 4,
it may be impossible to measure in money the damage to the Company and (ii) in
the event of any such failure, the Company may not have an adequate remedy at
law. It is therefore agreed that the Company, in addition to any other rights
or remedies which it may have, shall be entitled to immediate injunctive

<PAGE>

relief to enforce such restrictions, and specific enforcement of the provisions
of this Section 4 in the event of any breach or threatened breach hereof.

(d) Mr. Dunaway further acknowledges and agrees that these
covenants are reasonable and valid in geographic and temporal scope and in all
other respects and that if any court determines that any of these covenants, or
any part thereof, is invalid or unenforceable, the remainder of these covenants
shall not thereby be affected and shall be given full effect without regard to
the invalid portions. If any court determines that any of these covenants, or
any part thereof, is unenforceable because of the duration or scope of such
provision, such court shall have the power to reduce the duration or scope of
such provision, as the case may be, and, in its reduced form, such provision
shall then be enforceable.

(e) In the event that Dunaway Holdings, Inc. ("Dunaway
Holdings") acquires Psicor Office Laboratories, Inc. ("POL") then,
notwithstanding anything to the contrary in Section 4(a)(i) hereof, Mr. Dunaway
shall not be prohibited from directly or indirectly owning, or participating in
the conduct of the physician office laboratory services business of, POL whether
such business is conducted by Mr. Dunaway through POL or otherwise.

5. SUCCESSORS; BINDING AGREEMENT. The services to be performed by
Mr. Dunaway hereunder are personal in nature, and the obligations to perform
such services and the conditions and covenants of this Agreement cannot be
delegated by Mr. Dunaway. This Agreement will be binding upon, inure to the
benefit of and be enforceable by, the Company and its successors and assigns.
The Company may assign, in its sole discretion, any or all of its rights,
interests and obligations hereunder to any third party PROVIDED that the Company
shall also remain obligated hereunder.

6. NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given upon personal delivery, facsimile
transmission (which is confirmed), telex or delivery by an overnight express
courier service (delivery, postage or freight charges prepaid), or on the fourth
day following deposit in the United States mail (if sent by registered or
certified mail, return receipt requested, delivery, postage or freight charges
prepaid),

<PAGE>

addressed to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):

If to Mr. Dunaway, to

Dunaway Holdings, Inc.
18075 Polvera Way
San Diego, California 92128
Telecopy No. (619) ___________
Attention: Michael W. Dunaway

with a copy to:

Baker & McKenzie
101 West Broadway
San Diego, California 92101
Telecopy No. (619) 236-0429
Attention: John J. Hentrich, Esq.

If to the Company, to:

PSICOR, Inc.
16818 Via del Campo Court
San Diego, California 92127
Telecopy No. (619) 485-5107
Attention: Denise E. Botticelli, Esq.

or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.

7. WITHHOLDING. All amounts payable and benefits provided hereunder
shall be subject to, and reduced by, any withholding taxes as may be required by
law. In the case of the provision of benefits, the Company may withhold from
any cash payments payable hereunder any withholding taxes imposed on, or arising
from, the benefits provided hereunder.

8. MODIFICATION OF AGREEMENT; GOVERNING LAW. No provisions of this
Agreement may be modified, waived or discharged unless such waiver,

<PAGE>

modification or discharge is agreed to in writing signed by Mr. Dunaway and such
officer of the Company as may be specifically designated by the Board of
Directors of the Company. No waiver by either party hereto at any time of any
term, provision or condition of this Agreement, whether by conduct or otherwise,
in any one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such term, provision or condition or as a waiver of any
other term, provision or condition of this Agreement. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California without regard to its conflicts of law principles.

9. VALIDITY. The validity or enforceability of any provision or
provisions of this Agreement shall not be affected by the invalidity or
unenforceability of any other provision of this Agreement, and such valid and
enforceable provisions shall remain in full force and effect.

10. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same instrument.

11. OBLIGATIONS AND CLAIMS; ENTIRE AGREEMENT. Mr. Dunaway
acknowledges and agrees that (a) all obligations of the Company to him prior to
the date hereof (and, as of the Effective Date, prior to such date) in his
capacity as a director, officer or employee of the Company have been (and, as of
the Effective Date, will be) fully satisfied other than (i) any obligation of
the Company for indemnification of claims (x) pending as of the date hereof as
set forth on Exhibit A hereto and (y) not made as of the date hereof (and Mr.
Dunaway represents and warrants to the Company that as of the date hereof he is
not aware, and as of the Effective Date he will not be aware, of any such claims
pending other than as set forth on Exhibit A hereto on the day hereof or on or
about the Effective Date), (ii) accrued but unpaid salary and benefits and
business expenses reimbursable by the Company in accordance with Company policy
and (iii) for amounts specifically accruing to Mr. Dunaway under the terms of
this Agreement, and (b) he understands that the Company's willingness to enter
into this Agreement and its obligations hereunder are conditioned upon his
foregoing acknowledgement being true and correct as of the date hereof and as of
the Effective Date and his written confirmation thereof being delivered to the
Company within five (5) business days after the Effective Date. This Agreement
8

<PAGE>

sets forth the entire agreement of the parties hereto with respect to the
subject matter contained herein and supersedes all prior agreements, promises,
covenants, arrangements, communications, representations or warranties, whether
oral or written, by any officer, employee or representative of any party hereto,
and any other prior agreement of the parties hereto in respect of the subject
matter contained herein is hereby terminated and canceled.

12. ATTORNEYS' FEES. In the event of litigation relating to this
Agreement, if a court of competent jurisdiction determines that this Agreement
has been breached by either party, then the breaching party will reimburse the
non-breaching party for its reasonable costs and expenses (including without
limitation legal fees and expenses) incurred in connection with all such
litigation.

<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.

PSICOR, INC.

By /s/ Trudy V. Dunaway
-------------------------------------------
Name: Trudy V. Dunaway
Title: Vice President

/s/ Michael W. Dunaway
---------------------------------------------
Michael W. Dunaway

<PAGE>

EXHIBIT 2.2

FORM OF
CONSULTING AGREEMENT

This CONSULTING AGREEMENT (the "Agreement") is entered into as of
November 21, 1995 between PSICOR, Inc., a Pennsylvania corporation (the
"Company"), and Scott W. Soronen ("Consultant").

WHEREAS, as of the date hereof, Consultant serves as the Senior
Vice President of the Company; and

WHEREAS, the Company desires to retain the services of Consultant as a
consultant to the Company in the event of the termination of Consultant's
employment by the Company for any reason other than for cause within two (2)
years from the date hereof; and

WHEREAS, Consultant is willing to agree to serve as a consultant to
the Company, on the terms and conditions provided herein, and to receive the
benefits hereof in lieu of any agreement or other arrangement regarding
severance or similar benefits.

1. RETENTION AS A CONSULTANT. During the Consulting Period (as
defined below) (i) the Company shall retain Consultant and Consultant shall
serve the Company as an independent consultant on the terms and conditions set
forth herein and (ii) Consultant shall provide such consulting services to the
Company as the Company may reasonably request under the direction of the
Company's Board of Directors consistent with its overall objectives in an amount
not to exceed (x) 40 hours per month for the first three months of the
"Consulting Period" (as defined below) and (y) 20 hours per month thereafter.
Consultant may perform his duties hereunder at such locations as may be agreed
upon between Consultant and the Company (PROVIDED, that if requested to perform
such

<PAGE>

duties in any location other than the San Diego, California, area the Company
shall reimburse Consultant for his reasonable out-of-pocket expenses incurred in
connection therewith in accordance with Section 3(b) hereof) or by telephone
consultation, written communication and/or by fax as appropriate. As an
independent consultant, Consultant shall not be authorized to act for or enter
into any agreement on behalf of the Company without written authorization from
the Company's Board of Directors.

2. CONSULTING PERIOD. (a) If Consultant's employment is terminated
either (i) by the Company other than for "Cause" (as defined below) or (ii) by
Consultant for "Good Reason" (as defined below), in each case during the "Two-
Year Period" (as defined below), Consultant shall be retained by the Company as
a consultant and shall provide the services specified herein for a period of
six/nine months from the date of such termination (such date, the "Effective
Date," and such period, the "Consulting Period"). Following the termination of
the Consulting Period, except as otherwise specifically provided herein (i) the
Company's obligations under this Agreement shall cease and the Company shall
have no further obligations to Consultant under this Agreement and (ii)
Consultant's obligation to the Company to provide the consulting services
contemplated by Section 1 hereof shall cease. If, during the Two-Year Period,
Consultant's employment is not terminated by the Company other than for Cause
or by Consultant for Good Reason, this Agreement shall expire without further
obligation of either the Company or Consultant as of the end of the Two-Year
Period. As used herein, the "Two-Year Period" shall mean the two-year period
beginning on the date hereof and the parties acknowledge that Consultant is an
employee of the Company on the date hereof.

(b) As used herein, "Cause" shall mean:

i) Consultant's willful failure to perform or
habitual neglect of his duties as an employee of the Company or a subsidiary
thereof;

ii) Consultant's commission or conviction of any crime
or criminal offense involving theft, fraud, embezzlement, misappropriation of
assets, malicious mischief, or any felony; or

iii) Consultant's willful engaging in conduct which is
injurious to the Company or a subsidiary thereof monetarily or other-

<PAGE>

wise, including, but not limited to, conduct that constitutes competitive
activity or other activity inconsistent with the terms of Section 4 hereof.

(c) As used herein, "Good Reason" shall mean any diminution in
the nature or status of Consultant's authority, duties and responsibilities or
any diminution in Consultant's base salary, in each case from those in effect as
of the date hereof.

3. COMPENSATION AND RELATED MATTERS. As compensation for the
services to be rendered by Consultant and the noncompetition and confidentiality
agreements provided for hereunder, and in lieu of any severance or termination
benefits to which Consultant might otherwise be entitled in connection with the
termination of his employment, the Company shall make the following payments and
provide the following benefits to Consultant during the Consulting Period:

(a) CONSULTING FEE. During the Consulting Period the Company
shall pay Consultant a consulting fee payable no less frequently than monthly at
the rate of $12,083 per month.

(b) REIMBURSEMENT OF EXPENSES. The Company shall provide
Consultant with reimbursement for reasonable and necessary business expenses to
the extent such expenses are incurred upon the request of the Company and
provided that such expenses are accounted for in accordance with the policies
and procedures established by the Company from time to time for its senior
executives.

4. NON-COMPETITION; NON-DISCLOSURE. Consultant recognizes and
expressly acknowledges that (i) he has developed a highly valuable expertise in
the business of cardiovascular perfusion and ancillary services, including
without limitation delivery of perfusion services and sales of supplies in
connection therewith, which expertise is of a special, unique and extraordinary
character (as such perfusion and related business is presently conducted by the
Company and its Subsidiaries, the "Company Business"); (ii) he is voluntarily
entering into this Agreement, including without limitation this Section 4, with
the intent that the covenants in this Section 4 shall be valid and enforceable;
and (iii) the terms and conditions of this Agreement and this Section 4 are fair
and reasonable to him in all respects and will not create any hardship for him.
In light of the foregoing, and for and in consideration of benefits derived
directly and indirectly from this Agreement, Consultant covenants and agrees as
follows:

<PAGE>

(a) During the term of Consultant's employment with the Company
and during the Consulting Period (the "Noncompete Term"), Consultant shall not,
alone or as a member, employee or agent of any partnership or as an officer,
agent, employee, consultant, director, shareholder (except for passive
investments of not more than (x) two percent (2%) of the outstanding shares of,
or any other equity interest in, any company or entity (other than one listed or
traded on a national securities exchange or on an over-the-counter securities
market) and (y) five percent (5%) of the outstanding shares of, or any other
equity interest in, any company or entity listed or traded in a national
securities exchange or over-the-counter securities market) of any corporation or
entity, directly or indirectly manage, operate, join, control or participate in
the management, operation or control of, or work for (as an employee,
consultant, independent contractor or otherwise) or permit the use of its name
by, or be connected in any manner with any business or activity which is in
competition with the Company Business in any town, county, parish or other
municipality in any state of the United States in which the Company Business is
presently conducted and in any town, county, parish or municipality adjacent
thereto.

(b) During the Noncompete Term, Consultant shall not, directly
or indirectly, solicit, induce, or attempt to solicit or induce (x) any
employee of the Company or its Subsidiaries, affiliates, successors or assigns
to terminate his or her employment relationship with the Company or its
Subsidiaries, affiliates, successors or assigns for the purpose of associating
with any competitor of the Company or its Subsidiaries, affiliates, successors
or assigns; or (y) any customer, client, vendor, supplier or consultant then
under contract to the Company or its Subsidiaries, affiliates, successors or
assigns, to terminate his, her or its relationship with the Company or its
Subsidiaries, affiliates, successors or assigns, for the purpose of associating
with any competitor of the Company or its Subsidiaries, affiliates, successors
or assigns.

(c) Unless otherwise required by any applicable law or rules and
regulations of any national securities exchange, not to disclose to any person
any trade secrets or confidential information with respect to any of the
Company's patents, trademarks, products, improvements, formulas, designs or
styles, processes, customers, methods of distribution or methods of manufacture;
PROVIDED, HOWEVER, that such trade secrets or confidential information shall not
include any information known generally to the public (other than as a result of
unauthorized disclosure by Consultant).

<PAGE>

(d) Consultant recognizes and acknowledges that his expertise is
of a special, unique and extraordinary character and that (i) in the event of
his failure to comply with any of the restrictions contained in this Section 4,
it may be impossible to measure in money the damage to the Company and (ii) in
the event of any such failure, such persons may not have an adequate remedy at
law. It is therefore agreed that the Company, in addition to any other rights
or remedies which it may have, shall be entitled to immediate injunctive relief
to enforce such restrictions, and specific enforcement of the provisions of this
Section 4 in the event of any breach or threatened breach hereof.

(e) Consultant further acknowledges and agrees that these
covenants are reasonable and valid in geographic and temporal scope and in all
other respects and that if any court determines that any of these covenants, or
any part thereof, is invalid or unenforceable, the remainder of these covenants
shall not thereby be affected and shall be given full effect without regard to
the invalid portions. If any court determines that any of these covenants, or
any part thereof, is unenforceable because of the duration or scope of such
provision, such court shall have the power to reduce the duration or scope of
such provision, as the case may be, and, in its reduced form, such provision
shall then be enforceable.

5. SUCCESSORS; BINDING AGREEMENT. The services to be performed by
Consultant hereunder are personal in nature, and the obligations to perform such
services and the conditions and covenants of this Agreement cannot be delegated
by Consultant. This Agreement will be binding upon, inure to the benefit of and
be enforceable by, the Company and its successors and assigns. The Company may
assign, in its sole discretion, any or all of its rights, interests and
obligations hereunder to any third party PROVIDED that the Company shall also
remain obligated hereunder.

<PAGE>

If to Consultant, to

-----------------------------
-----------------------------
Telecopy No.-----------------
Attention: Scott W. Soronen

with a copy to:

-----------------------------
-----------------------------
-----------------------------
Telecopy No. ----------------
Attention: ------------------

If to the Company, to:

PSICOR, Inc.
16818 Via del Campo Court
San Diego, CA 92127
Telecopy No. (619) 485-5107
Attention: Denise Botticelli

or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.

8. MODIFICATION OF AGREEMENT; GOVERNING LAW. No provisions of this
Agreement may be modified, waived or discharged unless such waiver, modification
or discharge is agreed to in writing signed by Consultant and such officer of
the Company as may be specifically designated by the Board of Directors of the
Company. No waiver by either party hereto at any time of any term, provision or
condition of this Agreement, whether by conduct or otherwise, in any one or more
instances, shall be deemed to be or construed as a further or

<PAGE>

continuing waiver of any such term, provision or condition or as a waiver of any
other term, provision or condition of this Agreement. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California without regard to its conflicts of law principles.

10. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same instrument.

11. OBLIGATIONS AND CLAIMS, ENTIRE AGREEMENT. Consultant
acknowledges and agrees that (a) all obligations of the Company to him prior to
the date hereof (and, as of the Effective Date, prior to such date) in his
capacity as an officer of the Company have been (and, as of the Effective Date,
will be) fully satisfied other than (i) any obligation of the Company for
indemnification of claims (x) pending as of the date hereof as set forth in
Exhibit A hereto and (y) not made as of the date hereof (and Consultant
represents and warrants to the Company that as of the date hereof he is not
aware, and as of the Effective Date he will not be aware, of any such claims
pending other than as set forth on Exhibit A hereto on the day hereof or on or
about the Effective Date), (ii) accrued but unpaid salary and benefits, and
business expenses reimbursable by the Company in accordance with Company policy,
and (iii) for amounts specifically accruing to Consultant under the terms of
this Agreement, and (b) he understands that the Company's willingness to enter
into this Agreement and its obligations hereunder are conditioned upon his
foregoing acknowledgement being true and correct as of the date hereof and as of
the Effective Date and his written confirmation thereof being delivered to the
Company within five (5) business days after the Effective Date. This Agreement
sets forth the entire agreement of the parties hereto with respect to the
subject matter contained herein and supersedes all prior agreements, promises,
covenants, arrangements, communications, representations or warranties, whether
oral or written, by any officer, employee or representative of any party hereto,
and any other prior agreement of the parties hereto in respect of the subject
matter contained herein is hereby terminated and canceled.

<PAGE>

12. ATTORNEY'S FEES. In the event of litigation relating to this
Agreement, if a court of competent jurisdiction determines that this Agreement
has been breached by either party, then the breaching party will reimburse the
non-breaching party for its reasonable costs and expenses (including without
limitation legal fees and expenses) incurred in connection with all such
litigation.

<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.

PSICOR INC.

By /s/ Michael W. Dunaway
-------------------------------------------
Name: Michael W. Dunaway
Title: Chief Executive Officer
and President

---------------------------------------------
Name: Scott W. Soronen

<PAGE>

EXHIBIT 2.3

FORM OF
CONSULTING AGREEMENT

This CONSULTING AGREEMENT (the "Agreement") is entered into as of
November 21, 1995 between PSICOR, Inc., a Pennsylvania corporation (the
"Company"), and Michael Kebely ("Consultant").

WHEREAS, as of the date hereof, Consultant serves as the Chief
Financial Officer of the Company; and

<PAGE>

(b) As used herein, "Cause" shall mean:

i) Consultant's willful failure to perform or
habitual neglect of his duties as an employee of the Company or a subsidiary
thereof;

ii) Consultant's commission or conviction of any crime
or criminal offense involving theft, fraud, embezzlement, misappropriation of
assets, malicious mischief, or any felony; or

iii) Consultant's willful engaging in conduct which is
injurious to the Company or a subsidiary thereof monetarily or other-

<PAGE>

wise, including, but not limited to, conduct that constitutes competitive
activity or other activity inconsistent with the terms of Section 4 hereof.

(a) CONSULTING FEE. During the Consulting Period the Company
shall pay Consultant a consulting fee payable no less frequently than monthly at
the rate of $8,333 per month.

<PAGE>

If to Consultant, to

-----------------------------
-----------------------------
Telecopy No.-----------------
Attention: Michael Kebely

with a copy to:

-----------------------------
-----------------------------
-----------------------------
Telecopy No. ----------------
Attention: ------------------

If to the Company, to:

PSICOR, Inc.
16818 Via del Campo Court
San Diego, CA 92127
Telecopy No. (619) 485-5107
Attention: Denise Botticelli

or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.

<PAGE>

10. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same instrument.

11. OBLIGATIONS AND CLAIMS, ENTIRE AGREEMENT. Consultant
acknowledges and agrees that (a) all obligations of the Company to him prior
to the date hereof (and, as of the Effective Date, prior to such date) in his
capacity as an officer of the Company have been (and, as of the Effective Date,
will be) fully satisfied other than (i) any obligation of the Company for
indemnification of claims (x) pending as of the date hereof as set forth in
Exhibit A hereto and (y) not made as of the date hereof (and Consultant
represents and warrants to the Company that as of the date hereof he is not
aware, and as of the Effective Date he will not be aware, of any such claims
pending other than as set forth on Exhibit A hereto on the day hereof or on or
about the Effective Date), (ii) accrued but unpaid salary and benefits, and
business expenses reimbursable by the Company in accordance with Company policy,
and (iii) for amounts specifically accruing to Consultant under the terms of
this Agreement, and (b) he understands that the Company's willingness to enter
into this Agreement and its obligations hereunder are conditioned upon his
foregoing acknowledgement being true and correct as of the date hereof and as of
the Effective Date and his written confirmation thereof being delivered to the
Company within five (5) business days after the Effective Date. This Agreement
sets forth the entire agreement of the parties hereto with respect to the
subject matter contained herein and supersedes all prior agreements, promises,
covenants, arrangements, communications, representations or warranties, whether
oral or written, by any officer, employee or representative of any party hereto,
and any other prior agreement of the parties hereto in respect of the subject
matter contained herein is hereby terminated and canceled.

<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.

PSICOR INC.

By /s/ Michael W. Dunaway
-------------------------------------------
Name: Michael W. Dunaway
Title: Chief Executive Officer
and President

---------------------------------------------
Name: Michael Kebely

<PAGE>

EXHIBIT 2.4

FORM OF
SEVERANCE AGREEMENT

This SEVERANCE AGREEMENT (the "Agreement") is entered into as of
November 21, 1995 between PSICOR, Inc., a Pennsylvania corporation (the
"Company"), and [Name] ("Employee").

WHEREAS, the Company is entering into that certain Agreement and Plan
of Merger with Baxter Healthcare Corporation, a Delaware corporation ("Parent"),
and Baxter CVG Services II, Inc., a Pennsylvania corporation ("Purchaser"),
pursuant to which Parent will acquire the Company on the terms and subject to
the conditions set forth therein; and

WHEREAS, Employee currently serves as [title] of the Company; and

WHEREAS, the Company and Employee desire to provide for the payment of
certain severance benefits to Employee in the event of the termination of
Employee's employment with the Company as described herein.

1. TERM. The term of this Agreement (the "Term") shall commence as
of the date on which Parent's designees constitute a majority of the Board of
Directors of the Company (such commencement date, the "Effective Date") and
shall expire at the close of business on the date that is 18 months following
the Effective Date. Following the expiration of the Term, except as otherwise
specifically provided herein, the Company's obligations under this Agreement
shall cease and the Company shall have no further obligations to Employee under
this Agreement, it being agreed that if the Employee remains in the employ of
the Company following the expiration of the Term and is thereafter terminated,
Employee shall be entitled only to such severance, if any, as may be provided
under the Company's general severance policy in effect for employees of like
status, title or responsibility to Employee on the date of such termination

<PAGE>

of employment. It is expressly understood that the provisions of Section 4
shall survive the expiration of the Term.

2. SEVERANCE PAYMENT. If, prior to expiration of the Term,
Employee's employment with the Company and any subsidiary of the Company is
terminated either (a) by the Company and such subsidiary without Cause (as
defined below) or (b) by Employee for Good Reason (as defined below), the
Company shall pay to Employee for a period of [six/twelve] months from the date
notice of such termination is provided from one party to the other, on the last
day of each month ending during such period, an amount equal to $ _____,
Employee's monthly base salary on the date hereof. The parties agree that any
amounts payable hereunder shall be in lieu of any other severance or termination
benefits to which Employee would be entitled in the absence of this Agreement.

3. DEFINITIONS. For purposes of this Agreement, the terms set forth
below shall be defined as follows:

(a) CAUSE. As used herein, "Cause" shall mean:

i) Employee's willful failure to perform or habitual
neglect of his or her duties as an employee of the Company or a subsidiary
thereof;

ii) Employee's commission or conviction of any crime or
criminal offense involving theft, fraud, embezzlement, misappropriation of
assets, malicious mischief, or any felony; or

iii) Employee's willful engaging in conduct which is
injurious to the Company or a subsidiary thereof, monetarily or otherwise,
including, but not limited to, conduct that constitutes competitive
activity or other activity inconsistent with the terms of Section 4 hereof.

(b) GOOD REASON. As used herein, "Good Reason" shall mean:

i) A substantial diminution in the overall nature or
status of Employee's authority, duties and responsibilities or any
diminution in Employee's base salary, in each case from those in effect as
of the Effective Date, PROVIDED that it is expressly understood that in
con-

<PAGE>

nection with Parent's acquisition of the Company, (x) the Company's
management structure may be reorganized such that Employee's
responsibilities thereafter may be significantly different from what they
were prior thereto, and that Good Reason will exist only where such
changes, taken as a whole, have the effect of substantially and adversely
lessening the nature and status of Employee's authorities, duties and
responsibilities as a whole from those in effect on the date hereof, and
(y) the Company will become a wholly owned subsidiary of a public company,
and that Good Reason will not include any change in such authorities,
duties and responsibilities arising from the fact that the Company has
become such a subsidiary; or

ii) The relocation, without Employee's consent, of the
Company's principal offices to a location outside the San Diego, California
area or required business travel outside of the San Diego, California area
substantially in excess of that done by the Employee immediately prior to
the Effective Date; or

iii) The Company's material breach of this Agreement.

4. NON-SOLICITATION; NON-DISCLOSURE. For and in consideration of
the benefits derived from this Agreement, Employee hereby agrees as follows:

(a) During the term of Employee's employment with the Company
and for a period of [six/twelve months] following the termination of such
employment, Employee will not, individually or in association with others
(except for the Company), solicit services similar to the services provided by
the Company, directly or indirectly, as the owner, stockholder, employee or
consultant in any business which provides services for any of the hospitals or
medical facilities, or doctors (other than with respect to the physician office
medical laboratory business) for whom Employee performed services at any time
during Employee's employment with the Company or solicit for employment any
persons who are or were employees of the Company or its subsidiaries at any time
during the twelve month period immediately preceding Employee's termination of
employment with the Company.

(b) Unless otherwise required by any applicable law or rules and
regulations of any national securities exchange, without limitation in time, not
to disclose to any person any trade secrets or confidential information

<PAGE>

with respect to any of the Company's patents, trademarks, products,
improvements, formulas, designs or styles, processes, customers, methods of
distribution or methods of manufacture; PROVIDED, HOWEVER, that such trade
secrets or confidential information shall not include any information known
generally to the public (other than as a result of unauthorized disclosure by
Employee).

(c) Employee further acknowledges and agrees that these
covenants are reasonable and valid in geographic and temporal scope and in all
other respects and that if any court determines that any of these covenants, or
any part thereof, is invalid, illegal or unenforceable, the remainder of these
covenants shall not thereby be affected and shall be given full effect without
regard to the invalid portions. If any court determines that any of these
covenants, or any part thereof, is invalid, illegal or unenforceable because of
the duration or scope of such provision, such court shall have the power to
reduce the duration or scope of such provision, as the case may be, and, in its
reduced form, such provision shall then be enforceable.

(d) In the event of any breach or threatened breach of Section
4 not to solicit, the Company shall have the right to have Section 4
specifically enforced by any court of appropriate jurisdiction, in addition to
any other remedies the Company may have at law or in equity.

5. SUCCESSORS; BINDING AGREEMENT. This Agreement will be binding
upon, inure to the benefit of and be enforceable by, the Company and its
successors and assigns. The Company may assign, in its sole discretion, any or
all of its rights, interests and obligations hereunder to any third party
PROVIDED that the Company shall also remain obligated hereunder.

<PAGE>

If to Employee, to
______________________
______________________
Telecopy No.___________
Attention: Employee

If to the Company, to:

PSICOR, Inc.
16818 Via del Campo Court
San Diego, CA 92127
Telecopy No. (619) 485-5107
Attention: Denise Botticelli

with a copy to:

Baxter Healthcare Corporation
17221 Red Hill Avenue
Irvine, CA 92714
Telecopy No. (714) 474-6444
Attention: Jay P. Wertheim, Esq.
Vice President, Law

or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.

7. WITHHOLDING. All amounts payable hereunder shall be subject to,
and reduced by, (i) such withholding taxes as may be required by law and (ii)
any other debts or other binding obligations of Employee, including without
limitation premium payments for COBRA continuation coverage (if elected by
Employee) and any loans to Employee (whether under any qualified retirement plan
or otherwise).

8. MODIFICATION OF AGREEMENT; GOVERNING LAW. No provisions of this
Agreement may be modified, waived or discharged unless such waiver, modification
or discharge is agreed to in writing signed by Employee and such officer of the
Company as may be designated by the Board of Directors of the Company. No
waiver by either party hereto at any time of any term, provision or condition of
this Agreement, whether by conduct or otherwise, in any one or more instances,
shall be deemed to be or construed as a further or continuing

<PAGE>

waiver of any such term, provision or condition or as a waiver of any other
term, provision or condition of this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of California without regard to its conflicts of law principles.

10. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same instrument.

11. OBLIGATIONS AND CLAIMS; ENTIRE AGREEMENT. Employee
acknowledges and agrees that (a) all obligations of the Company to him or her
prior to the date hereof (and, as of the Effective Date, prior to such date)
in his or her capacity as [a director, officer and/or employee] of the
Company have been (and as of the Effective Date, will be) fully satisfied
other than (i) any obligation of the Company for indemnification of claims
(x) pending as of the date hereof as set forth in Exhibit A hereto and (y)
not made as of the date hereof (and Employee represents and warrants to the
Company that as of the date hereof Employee is not aware, and as of the
Effective Date Employee will not be aware, of any such claims pending, other
than as set forth on Exhibit A hereto on the date hereof or on or about the
Effective Date), (ii) accrued but unpaid salary and benefits and business
expenses reimbursable by the Company in accordance with Company policy and
(iii) for amounts specifically accruing to Employee under the terms of this
Agreement, and (b) Employee understands that the Company's willingness to
enter into this Agreement and its obligations hereunder are conditioned upon
Employee's foregoing acknowledgement being true and correct as of the date
hereof and Employee's written confirmation thereof being delivered to the
Company within five business days after the Effective Date. This Agreement
sets forth the entire agreement of the parties hereto with respect to the
subject matter contained herein and (except with respect to any
confidentiality, non-competition, non-solicitation or similar agreements in
effect between Employee and the Company as of the date hereof) supersedes all
prior agreements, promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any officer,
employeeor representative of any party hereto, and any other prior agreement
of the parties hereto in respect of the subject matter contained herein
(except with respect to any confidentiality, non-competition,
non-solicitation or similar agreements in effect between Employee and the
Company as of the date hereof) is hereby terminated and canceled.

<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.

PSICOR, Inc.

By /s/ Michael W. Dunaway
-------------------------------------------
Name: Michael W. Dunaway
Title: Chief Executive Officer
and President

---------------------------------------------
Name:

<PAGE>

EXHIBIT 2.5

TENDER AND OPTION AGREEMENT

This TENDER AND OPTION AGREEMENT (the "Agreement") is entered into as
of November 22, 1995 by and among Baxter Healthcare Corporation, a Delaware
corporation ("Parent"), Baxter CVG Services II, Inc., a Pennsylvania corporation
and a wholly owned subsidiary of Parent ("Purchaser"), and Mr. Michael W.
Dunaway, Mrs. Trudy V. 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 "Shareholders").

RECITALS

WHEREAS, concurrently herewith, Parent and Purchaser are entering into
an Agreement and Plan of Merger (the "Merger Agreement") with PSICOR, Inc., a
Pennsylvania corporation (the "Company"), pursuant to which Parent will acquire
the Company, on the terms and subject to the conditions set forth in the Merger
Agreement, by means of a tender offer by Purchaser (the "Offer") for all
outstanding shares of common stock, no par value, of the Company (the "Company
Common Stock"), at $17.50 per share, net to the seller in cash, followed by a
merger (the "Merger") of the Company into Purchaser (capitalized terms used
herein and not otherwise defined are used as defined in the Merger Agreement);
and

WHEREAS, as of the date hereof the Shareholders together beneficially
own directly or indirectly 1,931,426 shares of Company Common Stock (the
"Existing Shares" and, together with any After-Acquired Shares (as defined
below), the "Shares"), which Shares constitute approximately 45% of the issued
and outstanding shares of Company Common Stock; and

WHEREAS, as an inducement to Parent to acquire the Company, and as a
condition to Parent's willingness to enter into the Merger Agreement and
consummate the transactions contemplated thereby, Parent and Purchaser have
required that the Shareholders agree, and the Shareholders have agreed (i) to
grant Parent and Purchaser an irrevocable option to buy the Shares at $17.50
per share (the "Option"); (ii) to tender and, in the event such option is not
theretofore

<PAGE>

exercised, sell the Shares in the Offer and vote their Shares in favor of the
Merger; and (iii) not to compete with Parent, Purchaser, the Company or the
Surviving Corporation to the extent set forth herein, in each case upon the
terms and subject to the conditions set forth herein; and

WHEREAS, the Board of Directors of the Company has approved this
Agreement, the Merger Agreement, the Offer, the Merger and the transactions
contemplated thereby.

NOW THEREFORE, in consideration of the premises and the
representations, warranties and agreements contained herein, and such other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:

1. AGREEMENT TO TENDER; OPTION.

1.1 TENDER OF SHARES. The Shareholders hereby agree (a) 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 After-Acquired Shares, within one business day
following the acquisition thereof, (b) not to withdraw any Shares so tendered
without the prior written consent of Parent except as otherwise provided in
Section 1.1(c) and (c) 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 in accordance with Section 1.2(a) hereof.
The Shareholders hereby acknowledge and agree 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.

1.2 OPTION.

(a) In order to induce Parent and Purchaser to enter into the
Merger Agreement, each of the Shareholders hereby irrevocably grants to Parent
and Purchaser the Option exercisable in whole but not in part from and after the
date hereof, to purchase Shares at a purchase price of $17.50 per Share. The
Option shall terminate and shall no longer be exercisable, nor shall Shares
subject to the Option be purchasable hereunder at a Closing (as defined below)
notwithstanding any notice of exercise contemplated by Section 1.2(c) with
respect thereto, from and after the earlier of (i) termination of the Merger
Agreement pursuant to Sections 8.1(a), (c)(ii) or (c)(iii) thereof or (ii) May
21, 1996 .

<PAGE>

(b) The obligation of the Shareholders to sell Shares at Closing
is subject to the following conditions:

(i) neither Parent nor Purchaser shall be in
breach in any material respect of the Merger Agreement;

(ii) Parent shall 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 shall
have the right to terminate the Merger Agreement under
Sections 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 shall have expired or been terminated;

(v) there shall be no preliminary or
permanent injunction or other order, decree or ruling issued
by any 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 set forth in Section
7.1(a), (b) and (c) of the Merger Agreement shall 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 shall be exercised on or
after January 3, 1996.

(c) In the event Parent or Purchaser wish to exercise the
Option, Parent shall deliver notice thereof to each of the Shareholders,
specifying the date, time and place for the closing of such purchase. A closing
of the purchase of Shares pursuant to the Option (a "Closing") shall take place
on the date, at the time and at the place specified in such notice; PROVIDED,
that if at such date any of the conditions specified in Section 1.2(b) hereof
shall not have been satisfied or waived, Parent may postpone such Closing until
a date within two

<PAGE>

business days after such conditions are satisfied or waived. At the Closing,
each of the Shareholders will deliver to Parent or Purchaser (in accordance with
Parent's instructions) the certificates representing the Shares being purchased
pursuant to Section 1.2, duly endorsed or accompanied by stock powers duly
executed in blank. At such Closing, Parent or Purchaser shall either (i) wire
transfer to the account designated by the Shareholders or (ii) deliver to each
Shareholder a certified or bank cashier's check payable to or upon the order of
such Shareholder, in each case in an amount equal to the number of Shares being
purchased from such Shareholder at such Closing multiplied by $17.50 in
immediately available funds.

1.3 ASSIGNMENT OF DIVIDENDS AND OTHER DISTRIBUTIONS. The
Shareholders hereby assign 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 this Agreement.

1.4 NO LIENS. The Shareholders agree that, in connection with the
transfer of Shares to Purchaser in the Offer or to Parent or Purchaser pursuant
to the Option, they shall transfer to and unconditionally vest in the Purchaser
or Parent, as the case may be, good and valid title to such Shares, free and
clear of all claims, liens, restrictions, security interests, pledges,
limitations and encumbrances whatsoever, except those arising hereunder.

1.5 NO PURCHASE. Purchaser may allow the Offer to expire without
accepting for payment or paying for any Shares, as set forth in the Offer to
purchase, and Parent and Purchaser may allow the Option to terminate without
purchasing all or any Shares pursuant to the exercise thereof. If any Shares
are not accepted for payment in accordance with the terms of the Offer or
purchased pursuant to the Option, they shall be returned to the respective
Shareholder, whereupon they shall continue to be held by such Shareholder
subject to the terms and conditions of this Agreement.

2. VOTING. Each Shareholder hereby agrees that (for so long as the
Merger Agreement is in effect), at any meeting of the holders of Company Common
Stock, however called, or in connection with any written consent of the holders
of Company Common Stock, it shall vote (or cause to be voted) the 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 this Agreement and any actions required
in furtherance thereof and hereof; (b) against any action or

<PAGE>

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 this 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 this
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 Board of Directors of the
Company, except as provided in Section 1.3 of 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 this Agreement, Mr. and
Mrs. Dunaway shall be free to act in their respective capacities as members of
the Board of Directors of the Company and to discharge their fiduciary duties as
such.

3. REPRESENTATION AND WARRANTIES. The Shareholders jointly and
severally represent and warrant to Parent and Purchaser as follows:

3.1 OWNERSHIP OF SHARES. On the date hereof, each Shareholder is the
record owner of the Existing Shares as set forth opposite each such
Shareholder's name on the signature page hereto and, on the date hereof, such
Existing Shares constitute all of the shares of Company Common Stock owned of
record and beneficially by each such Shareholder other than, with respect to Mr.
and Mrs. Dunaway, the 4,971 and 1,763 shares of Company Common Stock
beneficially owned by each of them, respectively, that are allocated to each of
them under the Company's Employee Stock Ownership Plan. Each Shareholder has
sole voting power, sole power of disposition and sole power to agree to all of
the matters set forth in this Agreement with respect to all of the Existing
Shares, with no limitations, qualifications or restrictions on such rights, and
the Existing Shares are the only shares of Company Common Stock over which any
of the Shareholders has such powers or otherwise are owned of record or
beneficially by any of the Shareholders as of the date hereof.

<PAGE>

3.2 POWER; BINDING AGREEMENT. The Trust is a valid revocable trust
created under the laws of the State of California. Each Shareholder has
the legal capacity, power and authority to enter into and perform all of its
obligations under this Agreement. The execution, delivery and performance of
this Agreement by the Shareholders will not violate any other agreement to which
any of the Shareholders is a party, including without limitation any voting
agreement, shareholders agreement or voting trust. This Agreement has been duly
and validly executed and delivered by the Shareholders and constitutes a valid
and binding agreement of the Shareholders, enforceable against each of the
Shareholders in accordance with its terms, except that such enforceability may
be limited by bankruptcy, insolvency or similar laws affecting creditors'
rights.

3.3 NO CONFLICTS. Except for filings under the HSR Act and the
Exchange Act, (a) no filing with, and no permit, authorization, consent or
approval of, any Federal, state or foreign public body or authority is necessary
for the execution of this Agreement by the Shareholders and the consummation by
the Shareholders of the transactions contemplated hereby and (b) neither the
execution and delivery of this Agreement by the Shareholders nor the
consummation by the Shareholders of the transactions contemplated hereby nor
compliance by the Shareholders with any of the provisions hereof shall (i)
conflict with or result in any breach of any applicable organizational documents
applicable to the Trust, (ii) result in a violation or breach of, or constitute
(with or without notice or lapse of time or both) a default (or give rise to any
third party right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation to which any
Shareholder is a party or by which any Shareholder or any of its properties
or assets may be bound or (iii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to any Shareholder or any of its
properties or assets.

3.4 ENCUMBRANCES. The Shares and the certificates representing such
Shares are now, and at all times during the term hereof will be, held by the
Shareholders, or by a nominee or custodian for the benefit of such Shareholders,
free and clear of all liens, claims, security interests, proxies, voting trusts
or agreements, understandings or arrangements or any other encumbrances
whatsoever, except for any such encumbrances or proxies arising hereunder.

<PAGE>

3.5 FINDER'S FEES. No investment banker, broker, financial advisor,
finder or other person is entitled to a commission or fee from Parent, Purchaser
or the Company in respect of this Agreement or the transactions contemplated
hereby based upon any arrangement or agreement made by or on behalf of any
Shareholder, except as otherwise specifically provided in the Merger Agreement
or arrangements or agreements made by or on behalf of Parent or Purchaser by its
authorized representatives.

3.6 RELIANCE BY PARENT. Each Shareholder understands and
acknowledges that Parent is entering into, and causing Purchaser to enter into,
the Merger Agreement in reliance upon the Shareholders' execution and delivery
of this Agreement and the representations, warranties and covenants of the
Shareholders set forth herein.

3.7 OWNERSHIP OF SHARES. All Shares owned beneficially of record by
each of the Shareholders were acquired at such a time and in such a manner as
set forth on the certificate attached hereto as Exhibit 3.7.

4. OTHER COVENANTS OF THE SHAREHOLDERS. The Shareholders hereby
jointly and severally covenant and agree as follows:

4.1 NO SOLICITATION. The Shareholders shall not (in the capacity of
a shareholder of the Company or otherwise, including without limitation in the
case of Mr. and Mrs. Dunaway as an officer and/or director of the Company),
directly or indirectly solicit (including by way of furnishing information) or
respond to any inquiries or the making of any proposal by any person or entity
(other than Parent or any affiliate of Parent) concerning any Acquisition
Proposal, except as permitted by Section 6.1 of the Merger Agreement. If any
Shareholder receives any such inquiry or proposal with respect to the sale of
Shares, then the Shareholder shall promptly inform Parent in the same manner as
set forth in Section 6.1 of the Merger Agreement. The Shareholders shall
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing.

4.2 NON-COMPETITION; NONDISCLOSURE.

(a) In addition to being the controlling shareholders of the
Company, Mr. Dunaway founded the Company in 1968 and is currently the Chief
Executive Officer, Chairman of the Board and President of the Company, and Mrs.
Dunaway has been a director of the Company since 1982 and is the Vice

<PAGE>

President, Secretary and Assistant Treasurer. Accordingly, the Shareholders
recognize and expressly acknowledge that (i) Mr. and Mrs. Dunaway have developed
a highly valuable expertise in the business of cardiovascular perfusion and
ancillary services, including without limitation delivery of perfusion services
and sales of supplies in connection therewith, which expertise is of a special,
unique and extraordinary character (as such perfusion and related business is
presently conducted by the Company and its Subsidiaries, the "Company
Business"); (ii) Parent and Purchaser and, after the consummation of the
transactions contemplated hereby and by the Merger Agreement, the Company and
the Surviving Corporation, would be irreparably damaged, and the substantial
investment by Parent and Purchaser in the business of the Company and the
Surviving Corporation materially and irreparably harmed and impaired, if the
Shareholders were to (x) engage in any activity competing with the Company
Business in violation of the terms of this Agreement or (y) disclose in
violation of this Agreement or make unauthorized use of any confidential
information concerning the Company Business; (iii) they are voluntarily entering
into this Agreement, including without limitation this Section 4.2, with the
intent that the covenants in this Section 4.2 shall be valid and enforceable;
and (iv) the terms and conditions of this Agreement and this Section 4.2 are
fair and reasonable to the Shareholders in all respects and will not create any
hardship for such Shareholders.

(b) In light of the foregoing, and for and in consideration of
benefits derived directly and indirectly from this Agreement, the Shareholders
jointly and severally covenant and agree as follows:

(i) for a period of three years from the date of the sale of the
Shares (the "Noncompete Term") no Shareholder will, alone or as a member,
employee or agent of any partnership or as an officer, agent, employee,
consultant, director, shareholder (except for passive investments of not more
than (x) two percent (2%) of the outstanding shares of, or any other equity
interest in, any company or entity (other than one listed or traded on a
national securities exchange or on an over-the-counter securities market) and
(y) five percent (5%) of the outstanding shares of, or any other equity interest
in, any company or entity listed or traded in a national securities exchange or
over-the-counter securities market) of any corporation or entity, directly or
indirectly manage, operate, join, control or participate in the management,
operation or control of, or work for (as an employee, consultant, independent
contractor or otherwise) or permit the use of its name by, or be connected in
any manner with any business or activity which is in competition with the
Company Business in any town, county, parish or other municipality in any state
of the United States in which the Company

<PAGE>

Business is presently conducted and in any town, county, parish or municipality
adjacent thereto;

(ii) during the Noncompete Term, the Shareholders shall not,
directly or indirectly, solicit, induce, or attempt to solicit or induce (x)
any employee of the Company or its Subsidiaries, affiliates, successors or
assigns to terminate his or her employment relationship with the Company or its
Subsidiaries, affiliates, successors or assigns for the purpose of associating
with any competitor of the Company or its Subsidiaries, affiliates, successors
or assigns; or (y) any customer, client, vendor, supplier or consultant then
under contract to the Company or its Subsidiaries, affiliates, successors or
assigns, to terminate his, her or its relationship with the Company or its
Subsidiaries, affiliates, successors or assigns, for the purpose of associating
with any competitor of the Company or its Subsidiaries, affiliates, successors
or assigns; and

(iii) unless otherwise required by any applicable law or rules
and regulations of any national exchange, not to disclose to any person any
trade secrets or confidential information with respect to any of the Company's
patents, trademarks, products, improvements, formulas, designs or styles,
processes, customers, methods of distribution or methods of manufacture;
PROVIDED, HOWEVER, that such trade secrets or confidential information shall not
include any information known generally to the public (other than as a result of
unauthorized disclosure by any Shareholder).

(c) The Shareholders recognize and acknowledge that the
expertise of Mr. and Mrs. Dunaway is of a special, unique and extraordinary
character and that (i) in the event of any Shareholder's failure to comply with
any of the restrictions contained in this Section 4.2, it may be impossible to
measure in money the damage to Parent, Purchaser, the Company and the Surviving
Corporation and (ii) in the event of any such failure, such persons may not have
an adequate remedy at law. It is therefore agreed that Parent, Purchaser, the
Company and the Surviving Corporation, in addition to any other rights or
remedies which they may have, shall be entitled to immediate injunctive relief
to enforce such restrictions, and specific enforcement of the provisions of this
Section 4.2 in the event of any breach or threatened breach hereof.

<PAGE>

(d) The Shareholders further acknowledge and agree that these
covenants are reasonable and valid in geographic and temporal scope and in all
other respects and that if any court determines that any of these covenants, or
any part thereof, is invalid or unenforceable, the remainder of these covenants
shall not thereby be affected and shall be given full effect without regard to
the invalid portions. If any court determines that any of these covenants, or
any part thereof, is unenforceable because of the duration or scope of such
provision, such court shall have the power to reduce the duration or scope of
such provision, as the case may be, and, in its reduced form, such provision
shall then be enforceable.

(e) In the event that Dunaway Holdings, Inc. ("Dunaway
Holdings") acquires Psicor Office Laboratories, Inc. ("POL") then
notwithstanding anything to the contrary in Section 4.2(b)(i) hereof, neither
Mr. nor Mrs. Dunaway shall be prohibited from directly or indirectly owning, or
participating in the conduct of the physician office laboratory services
business of POL, whether such business is conducted by Mr. and Mrs. Dunaway
through POL or otherwise.

4.3 RESTRICTION ON TRANSFER, PROXIES AND NON-INTERFERENCE; STOP
TRANSFER ORDER.

(a) Each Shareholder hereby agrees, while this Agreement is in
effect, and except as specifically contemplated hereby, not to (i) offer for
sale, sell, transfer, tender, pledge, encumber, assign or otherwise dispose of,
or enter into any contract, option or other arrangement or understanding with
respect to the offer for sale, sale, transfer, tender, pledge, encumbrance,
assignment or other disposition of, any of the Shares or any interest therein,
(ii) grant any proxies or powers of attorney, deposit any Shares into a voting
trust or enter into a voting agreement with respect to any Shares or (iii) take
any action that would make any representation or warranty of any Shareholders
contained herein untrue or incorrect or have the effect of preventing or
disabling any Shareholder from performing its obligations under this Agreement.

(b) In furtherance of the provisions of Section 4.3(a) hereof,
concurrently herewith the Shareholders shall and hereby do authorize the
Company's counsel to notify the Company's transfer agent that there is a stop
transfer order with respect to all of the Existing Shares and any additional
Shares of Common Stock acquired by any Shareholder after the date hereof (and
that this Agreement places limits on the voting and transfer of such shares).

<PAGE>

4.4 NOTICE OF ADDITIONAL SHARES. Each Shareholder hereby agrees to
promptly notify Parent in writing of the number of After-Acquired Shares that
may be acquired by such Shareholder, if any, after the date hereof.

4.5 PUBLIC DISCLOSURE. The Shareholders hereby agree that Parent and
Purchaser may publish and disclose in the Offer Documents and, if approval of
the Company's shareholders is required under applicable law, the Company Proxy
Statement (including all documents and schedules filed with the SEC) their
identity and ownership of Company Common Stock and the nature of their
commitments, arrangements and understandings under this Agreement.

4.6 NO INCONSISTENT AGREEMENTS. No Shareholder shall enter into any
agreement or understanding with any person or entity the effect of which would
be inconsistent or violative of the provisions of this Agreement.

4.7 FURTHER ASSURANCES. From time to time, at the other party's
request and without further consideration, each party hereto shall execute and
deliver such additional documents and take all such further action as may be
necessary or desirable to consummate and make effective, in the most expeditious
manner practicable, the transactions contemplated by this Agreement.

5. MISCELLANEOUS.

5.1 FEES AND EXPENSES. All costs and expenses incurred in connection
with this Agreement and the consummation of the transactions contemplated hereby
shall be paid by the party incurring such expenses.

5.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties contained in this Agreement shall survive the delivery of and
payment for the Shares.

5.3 AMENDMENT AND MODIFICATION. This Agreement may be amended,
modified and supplemented in any and all respects by written agreement of the
parties hereto.

5.4 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that (i) Purchaser may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
Parent, and (ii) Purchas-

<PAGE>

er or Parent may assign, in their sole discretion, any or all of their
respective rights, interests and obligations hereunder to Baxter International
Inc., the owner of all of the outstanding shares of Parent, or to any direct or
indirect wholly owned subsidiary of Baxter International Inc. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by, the parties and their respective successors and assigns.

5.5 SPECIFIC PERFORMANCE. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.

5.6 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given upon personal delivery, facsimile
transmission (which is confirmed), telex or delivery by an overnight express
courier service (delivery, postage or freight charges prepaid), or on the fourth
day following deposit in the United States mail (if sent by registered or
certified mail, return receipt requested, delivery, postage or freight charges
prepaid), addressed to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):

If to a Shareholder:

c/o PSICOR, Inc.
16818 Via del Campo Court
San Diego, California 92127
Telecopy No. (619) 485-5107
Attention: Mr. Michael W. Dunaway

with a copy to:

Dykema Gossett PLLC
400 Renaissance Center
Detroit, Michigan 48243
Telecopy No. (313) 568-6915
Attention: Fredrick M. Miller, Esq.

<PAGE>

and a copy to:

Baker & McKenzie
101 West Broadway
San Diego, California 92101
Telecopy No. (619) 236-0429
Attention: John J. Hentrich, Esq.

If to Parent or Purchaser, to:

17221 Red Hill Avenue
Irvine, CA 92714
Telecopy No. (714) 474-6444
Attention: Jay P. Wertheim, Esq.
Vice President, Law

with a copy to:

Skadden, Arps, Slate, Meagher & Flom
300 South Grand Avenue
Los Angeles, CA 90071
Telecopy No. (213) 687-5600
Attention: Joseph J. Giunta, Esq.

5.7 DEFINITIONS; INTERPRETATION.

(a) As used in this Agreement, (i) the term "After-Acquired
Shares" shall mean any shares of Company Common Stock acquired directly or
indirectly, or otherwise beneficially owned, by any of the Shareholders in any
capacity after the date hereof and prior to the termination hereof, 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; (ii) the term
"affiliate(s)" shall have the meaning set forth in Rule 12b-2 of the Exchange
Act and (ii) the phrases "beneficially own" or "beneficial ownership" with
respect to any securities shall mean having "beneficial ownership" of such
securities (as determined pursuant to Rule 13d-3 under the Exchange Act),
including pursuant to any agreement, arrangement or understanding, whether or
not in writing (without duplicative counting of the same securities by the same
holder, securities beneficially owned

<PAGE>

by a person shall include securities beneficially owned by all other persons
with whom such Person would constitute a "group" within the meaning of Rule 13d-
5 of the Exchange Act).

(b) When a reference is made in this Agreement to a Section,
such reference shall be to a Section in this Agreement unless otherwise
indicated. The words "include," "includes" and "including" when used herein
shall be deemed in each case to be followed by the words "without limitation."
The descriptive headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.

5.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.

5.9 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES, RIGHTS OF
OWNERSHIP. This Agreement (a) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof, and (b) is not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.

5.10 SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void, unenforceable or against its regulatory policy,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.

5.11 GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of Pennsylvania without giving effect
to the principles of conflicts of law thereof.

<PAGE>

IN WITNESS WHEREOF, Parent, Purchaser and each of the Shareholders
have caused this Agreement to be duly executed as of the day and year first
above written.

BAXTER HEALTHCARE CORPORATION

By: /s/ Michael A. Mussallem
-----------------------------
Name: Michael A. Mussallem
Title: Group President,
Cardiovascular Group

BAXTER CVG SERVICES II, INC.

By: /s/ Jay P. Wertheim
-----------------------------
Name: Jay P. Wertheim
Title: Vice President

Number of Existing Shares: 13,900 /s/ Michael W. Dunaway
---------------------------------
Michael W. Dunaway

Number of Existing Shares: 0 /s/ Trudy V. Dunaway
---------------------------------
Trudy V. Dunaway

Number of Existing Shares: 1,917,526 DUNAWAY FAMILY TRUST

By: /s/ Michael W. Dunaway
-----------------------------
Name: Michael W. Dunaway
Title: Co-settlor and Co-trustee

By: /s/ Trudy V. Dunaway
-----------------------------
Name: Trudy V. Dunaway
Title: Co-settlor and Co-trustee

<PAGE>

EXHIBIT 2.6

PUT OPTION AGREEMENT

THIS PUT OPTION AGREEMENT (the "Agreement"), is entered into as of November
22, 1995 by and between PSICOR, Inc., a Pennsylvania corporation ("PSICOR") and
Dunaway Holdings, Inc., a Delaware corporation ("Purchaser").

RECITALS

WHEREAS, PSICOR is the owner, beneficially or of record, of all of the
outstanding shares of common stock, no par value, of Psicor Office Laboratories,
Inc., a New Jersey corporation (the "Company"); and

WHEREAS, in order to induce Baxter Healthcare Corporation, a Delaware
corporation and Baxter CVG Services II, Inc., a Pennsylvania corporation
(together, "Baxter") to enter into that certain Agreement and Plan of Merger
(the "Merger Agreement") with PSICOR, pursuant to which Baxter will acquire
PSICOR on the terms and subject to the conditions set forth therein, Purchaser
is willing to grant to PSICOR a put option on the terms and conditions set forth
herein.

NOW, THEREFORE, in consideration of the premises and the respective
covenants and agreements of the parties contained herein, and intending to be
legally bound hereby, the parties agree as follows:

1. PUT. Purchaser hereby grants to PSICOR a put option (the "Put
Option") pursuant to which following the consummation of the tender offer
contemplated by the Merger Agreement Purchaser may be required to purchase from
PSICOR all of the common stock (the "Common Stock") of the Company, as provided
in the Purchase Agreement attached to this Agreement and marked as Exhibit A
(the "Purchase Agreement"), in the event that no Higher POL Offer (as defined in
Section 6.13 of the Merger Agreement) is accepted by PSICOR in accordance
with the Merger Agreement.

<PAGE>

2. PUT NOTICE. PSICOR shall give written notice (the "Put Notice")
to Purchaser of its intention to exercise the Put Option, specifying the time
and date not earlier than one business day from the date such Put Notice is
given for the closing of such sale (the "Put Closing"). From and after the date
of any change in control at PSICOR, and through the Put Closing, PSICOR shall
cause the Company to conduct its business in the ordinary course.

3. CLOSING. The Put Closing shall be held on the date specified in
the Put Notice unless, on such date, there shall be any preliminary or permanent
injunction or other order by any court of competent jurisdiction or any other
legal restraint or prohibition preventing the consummation of such sale, in
which event such Put Closing shall be held as soon as practicable following the
lifting, termination or suspension of such injunction, order, restraint or
prohibition (each party agreeing to use its reasonable efforts to have such
injunction, order, restraint or prohibition lifted, terminated or suspended),
but in any event within five business days thereof. Notwithstanding the
foregoing, in no event shall the Put Closing occur on or prior to the closing or
termination of the tender offer contemplated by the Merger Agreement.

4. ACKNOWLEDGEMENT. Purchaser understands and acknowledges that
PSICOR has no obligation to sell to it the Common Stock and that this Agreement
is being entered into solely to facilitate the Merger Agreement and to allow
PSICOR to satisfy, in the event that no Higher POL Offer is accepted, the
closing condition set out in Section 7.3(b) of the Merger Agreement if Baxter
does not waive such closing condition.

5. FEES AND EXPENSES. Except as contemplated by this Agreement, all
costs and expenses incurred in connection with this Agreement and the
consummation of the transactions contemplated hereby, including the legal fees
and expenses of Purchaser which shall be paid by PSICOR. Notwithstanding the
foregoing sentence, in the event that the Put Option is exercised, the excess of
Purchaser's legal fees and expenses over $20,000 which have been paid by PSICOR
shall be added to the Closing Intercompany Account Balance (as defined in the
Purchase Agreement) for purposes of Section 2.2 of the Purchase Agreement; and
PROVIDED, FURTHER, that the $25,000 retention fee payable to Dain Bosworth
Incorporated in connection with the transaction contemplated hereby shall also
be added to the Closing Intercompany Account Balance for purposes of such
Section 2.2.

<PAGE>

6. AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified and supplemented in any and all respects by
written agreement of the parties hereto.

7. NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given upon personal delivery, facsimile
transmission (which is confirmed), telex or delivery by an overnight express
courier service (delivery, postage or freight charges prepaid), or on the fourth
day following deposit in the United States mail (if sent by registered or
certified mail, return receipt requested, delivery, postage or freight charges
prepaid), addressed to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):

(a) if to PSICOR, to:

PSICOR, Inc.
16818 Via del Campo Court
San Diego, California 92127
Telecopy No. (619) 485-5107
Attention: Denise E. Botticelli, Esq.

with a copy to:

Dykema Gossett PLLC
400 Renaissance Center
Detroit, Michigan 48243
Telecopy No.(313) 568-6915
Attention: Frederick M. Miller, Esq.

and a copy to:

Baxter Healthcare Corporation
17221 Red Hill Avenue
Irvine, California 92714
Telecopy No. (714) 474-6444
Attention: Jay P. Wertheim, Esq.
Vice President, Law

<PAGE>

(b) if to Purchaser, to:

Dunaway Holdings, Inc.
18075 Polvera Way
San Diego, California 92101
Telecopy No. (619)
Attention: Michael W. Dunaway

with a copy to:

Baker & McKenzie
101 West Broadway
San Diego, California 92101
Telecopy No (619) 236-0429
Attention: John J. Hentrich, Esq.

8. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.

9. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the Commonwealth of Pennsylvania without giving
effect to the principles of conflicts of law thereof.

10. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto; provided, however that Purchaser may assign this Agreement to any
company of which Michael W. Dunaway owns, directly or indirectly, all of the
outstanding common stock. Subject to the preceding sentence, this Agreement
shall be binding upon, inure to the benefit of and be enforceable by, the
parties and their respective successors and assigns.

12. TERM. This Agreement shall terminate, and shall no longer be
exercisable, from and after the earlier of (a) termination of the Merger
Agreement or (b) May 21, 1996.

<PAGE>

13. ATTORNEYS' FEES. In the event of litigation relating to this
Agreement, if a court of competent jurisdiction determines that this Agreement
has been breached by either party, then the breaching party will reimburse the
non-breaching party for its reasonable costs and expenses (including without
limitation legal fees and expenses) incurred in connection with all such
litigation.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have entered into this
Agreement as of the date first above written.

PSICOR, Inc.

By: /s/ Trudy V. Dunaway
-----------------------------

Dunaway Holdings, Inc.

By: /s/ Michael W. Dunaway
-----------------------------
Michael W. Dunaway
President

<PAGE>

EXHIBIT 2.7

FORM OF DIRECTOR INDEMNIFICATION AGREEMENT

This Indemnification Agreement (the "Agreement") is made as of the 7th
day of August, 1995, by and between PSICOR, Inc., a Pennsylvania Corporation
(the "Company"), and ________________ (the "Director").

A. It is essential to the Company to retain and attract as directors
the most capable persons available.

B. The substantial increase in corporate litigation subjects directors
to expensive litigation risks and it is therefore reasonable, prudent and
necessary for the Company contractually to obligate itself to indemnify
directors to the fullest extent permitted by the Pennsylvania Business
Corporation Law so that capable persons will serve or continue to serve the
Company.

C. The Director is willing to serve, continue to serve and to take on
additional service for or on behalf of the Company on the condition that the
Director be so indemnified.

NOW, THEREFORE, in consideration of the covenants contained herein and
of the Director's continuing service to the Company, the Company and the
Director do hereby agree as follows:

l. DEFINITIONS. The following terms as used in this Agreement shall
have the following respective meanings:

"Expenses" means all expenses, liabilities and losses, including
attorneys' fees, judgments, fines, and amounts paid or to be paid in
settlement of a Proceeding.

"Proceeding" means any threatened, pending or completed action, suit or
proceeding (or part thereof), whether civil, criminal, administrative or
investigative.

2. SERVICES BY DIRECTOR. The Director agrees to serve as a director
of the Company for so long as the Director is duly elected or appointed or
until the tender of the Director's written resignation.

3. INDEMNIFICATION. Subject to the terms and conditions of this
Agreement, the Company shall indemnify and hold harmless the Director to the
fullest extent authorized by the Pennsylvania Business Corporation Law, as
the same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Company to
provide broader indemnification rights than said law permitted the Company to
provide prior to such change), against all Expenses reasonably incurred or
suffered by the Director in connection with any Proceeding in which the
Director is or was a party to or witness or other participant in, or is
threatened to be made a party to or

<PAGE>

witness or other participate in, or is involved by reason of the fact that
the Director is or was a director, officer or employee of the Company or is
or was serving at the request of the Company as a director, officer, partner,
trustee, administrator, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of the Proceeding is
alleged action in an official capacity as a director, officer, partner,
trustee, administrator, employee or agent or in any other capacity while
serving as a director, officer, partner, trustee, administrator, employee or
agent; PROVIDED, HOWEVER, that, except as provided in Section 5 hereof with
respect to Proceedings to enforce rights to indemnification, the Company
shall indemnify the Director seeking indemnification in connection with a
Proceeding (or part thereof) initiated by the Director only if such
proceeding (or part thereof) was authorized by the Board of Directors of the
Company.

4. EXPENSES. The right to indemnification conferred under Section 3
hereof shall include the right to be paid by the Company Expenses incurred in
defending any such Proceeding in advance of its final disposition; PROVIDED,
HOWEVER, that the payment of such Expenses incurred by the Director in
advance of the final disposition of a Proceeding shall be made only upon
delivery to the Company of an undertaking, by or on behalf of the Director,
to repay all advances if it shall ultimately be determined that the Director
is not entitled to be indemnified by the Company.

5. RIGHT OF THE DIRECTOR TO BRING SUIT. (a) If a claim under Section
3 hereof is not paid in full by the Company within thirty (30) days after
notice to the Company as provided in Section 10 hereof, the Director may at
any time thereafter bring suit against the Company in any court of competent
jurisdiction to recover the unpaid amount of the claim and, if successful in
whole or in part, the Director shall be entitled to be paid also the expense
of prosecuting such claim.

(b) It shall be a defense to any such action seeking indemnification
under Section 3 hereof (other than an action brought to enforce a claim for
Expenses incurred in defending any Proceeding in advance of its final
disposition where the required undertaking has been tendered to the Company
in accordance with Section 4 hereof) that the Director has not met the
applicable standard of conduct set forth in the Pennsylvania Business
Corporation Law. Further, in any action brought by the Company to recover
advances, the Company shall be entitled to recover such advances, if the
Director has not met the applicable standard of conduct set forth in the
Pennsylvania Business Corporation Law. Neither the failure of the Company
(including its Board of Directors, independent legal counsel, or its
shareholders) to have made a determination prior to the commencement of such
action that indemnification of the Director is proper in the circumstances
because the Director has met the applicable standard of conduct set forth in
the Pennsylvania Business Corporation Law, nor an actual

<PAGE>

determination by the Company (including its Board of Directors, independent
legal counsel, or its shareholders) that the Director has not met such
applicable standard of conduct, shall be a defense to an action brought by
the Director or create a presumption that the Director has not met the
applicable standard of conduct. In any action brought by the Director to
enforce a right hereunder, or by the Company to recover payments by the
Company of advances, the burden of proof shall be on the Company.

6. ASSUMPTION OF CLAIM. The Company shall be entitled, but not
obligated, to assume the defense of any Proceeding with respect to which
indemnification is sought, with counsel satisfactory to the Director, upon
the delivery to the Director of written notice of the Company's election to
do so. After delivery of such notice, the Company will not be liable to the
Director under this Agreement for any expenses (including legal expenses)
subsequently incurred by the Director in defending such Proceeding; PROVIDED
HOWEVER, that the Director shall have the right to employ his or her own
counsel in any Proceeding but the fees and expenses of such counsel incurred
after delivery of notice from the Company of its assumption of such defense
shall be at the Director's expense; and PROVIDED, FURTHER that if (i) the
employment of such counsel by the Director has been previously authorized by
the Company, (ii) the Director shall have reasonably concluded that there may
be a conflict of interest between the Company and the Director in the conduct
of any such defense or (iii) the Company shall not, in fact, have employed
counsel to assume the defense of such action, the fees and expenses of such
counsel shall be at the expense of the Company.

7. ESTABLISHMENT OF TRUST. In the event of a Potential Change in
Control of the Company, as defined below, the Company shall, upon written
request by the Director, create a trust for the benefit of the Director and
from time to time upon written request of the Director shall fund such trust
in an amount sufficient to satisfy any and all Expenses that may properly be
subject to indemnification under Section 3 above anticipated at the time of
each such request. The amount or amounts to be deposited in the trust
pursuant to this funding obligation shall be determined by a majority vote of
a quorum consisting of directors who are not parties to such Proceeding, if
any, the executive committee of the Board of Directors or the President of
the Company. If all such individuals are parties to the Proceeding, if any,
the amount or amounts to be deposited in the trust shall be determined by
independent legal counsel. The terms of the trust shall provide that upon a
Change in Control, as defined below, (i) the trust shall not be revoked or
the principal thereof invaded, without the written consent of the Director;
(ii) the trustee shall advance, within two (2) business days of a request by
the Director, any amount properly payable to the Director under Section 3 of
this Agreement; (iii) the trust shall continue to be funded by the Company in
accordance with the funding obligation set forth above; (iv) the trustee
shall promptly pay to the Director all amounts for which the Director shall
be entitled to indemnification pursuant to

<PAGE>

this Agreement or otherwise; and (v) all unexpended funds in such trust shall
revert to the Company upon a final determination by a court of competent
jurisdiction that the Director has been fully indemnified under the terms of
this Agreement or as set forth below. The trustee shall be chosen by the
Director and shall be a national or state chartered commercial bank. Nothing
in this Section shall relieve the Company of any of its obligations under
this Agreement. At the time of each draw from the trust fund, the Director
shall provide the trustee with a written request providing that the Director
undertakes to repay such amount to the extent that it is ultimately
determined that the Director is not entitled to such indemnification. Any
funds, including interest or investment earnings thereon, remaining in the
trust fund shall revert and be paid to the Company if (i) a Change in Control
has not occurred and (ii) the Board of Directors, the executive committee of
the Board of Directors or the President of the Company determines that the
circumstances giving rise to that particular funding of the trust no longer
exists.

For purposes of this Section and Section 9 hereof, a "Change in Control"
shall mean a change in control of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14a
promulgated under the Securities Exchange Act of 1934, as amended, provided
that, without limitation, such a change in control shall be deemed to have
occurred if (i) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board of Directors of the
Company and any new director whose election by the Board of Directors or
nomination for election by the Company's shareholders was approved by a vote
of at least two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute a
majority thereof; (ii) the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger
or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 80% of the total voting power represented by the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; or (iii) the shareholders of
the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company (in one transaction or a
series of transactions) of all or substantially all of the Company's assets.

For purposes of this Section, a "Potential Change in Control" shall be
deemed to have occurred if (i) the Company enters into an agreement, the
consummation of which would result in the occurrence of a Change in Control;
(ii) any person (including the Company) publicly announces an intention to
take or to consider taking actions which once consummated would constitute a
Change in Control; or (iii) the Board of Directors adopts a resolution to the

<PAGE>

effect that, for purposes of this Agreement, a Potential Change in Control
has occurred.

8. NON-EXCLUSIVITY OF RIGHTS. The rights provided hereunder shall not
be deemed exclusive of any other rights which the Director may be entitled
under any statute, agreement, provision of the Restatement of Articles of
Incorporation or Bylaws of the Company, vote of shareholders or disinterested
directors of the Company, or otherwise, and such rights shall continue after
the Director ceases to serve the Company as a director.

9. SETTLEMENT. Unless and until a Change in Control has occurred, the
Company shall have no obligation to indemnify the Director under this
Agreement for any amounts paid in settlement of any Proceeding effected
without the Company's prior written consent. The Company shall not settle
any claim in any manner which would impose any obligation on the Director
without the Director's written consent. Neither the Company nor the Director
shall unreasonably withhold their consent to any proposed settlement.

10. NOTICE OF CLAIM. The Director, as a condition precedent to his
right to be indemnified under this Agreement, shall give to the Company
notice in writing as soon as practicable of any claim made against him for
which indemnity will or could be sought under this Agreement. Notice to the
Company shall be directed to PSICOR, Inc., 16818 Via del Campo Court, San
Diego, California 92127, Attention: President (or such other address as the
Company shall designate in writing to the Director). Notice shall be deemed
received if sent by prepaid mail properly addressed, the date of such notice
being the date postmarked. In addition, the Director shall give the Company
such information and cooperation as it may reasonably request.

11. SEVERABILITY. In the event that any provision of this Agreement is
determined by a court to require the Company to do or to fail to do an act
which is in violation of applicable law, such provision shall be limited or
modified in its application to the minimum extent necessary to avoid a
violation of law, and, as so limited or modified, such provision and the
balance of this Agreement shall be enforceable in accordance with their terms.

12. CHOICE OF LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the Commonwealth of Pennsylvania.

13. SUCCESSORS AND ASSIGNS. This Agreement shall be (i) binding upon
all successors and assigns of the Company (including any transferee of all or
substantially all of its assets and any successor by merger or otherwise by
operation of law) and (ii) shall be binding on and inure to the benefit of
the heirs, personal representatives, executors and administrators of the
Director.

<PAGE>

14. AMENDMENT. No amendment, modification, termination or cancellation
of this Agreement shall be effective unless made in writing and signed by
each of the parties hereto.

IN WITNESS WHEREOF, the Company and the Director have executed this
Agreement as of the day and year first above written.

PSICOR, INC.

By: ___________________________________
Its:___________________________________

DIRECTOR

_______________________________________

<PAGE>

FORM OF AMENDMENT TO DIRECTOR INDEMNIFICATION AGREEMENT

This Amendment to Director Indemnification Agreement ("Amendment") is
made this 21st day of November, 1995 by and between Psicor, Inc. (the
"Company") and _______________ (the "Director").

A. The Company and the Director entered into a Director
Indemnification Agreement dated as of August 7, 1995 (the "Agreement"); and

B. Since entering into the Agreement, the parties have agreed to
certain changes to the Agreement set forth herein.

NOW, THEREFORE, the Company and the Director, in consideration of the
premises, agreements and covenants contained herein (the receipt and
sufficiency whereof are hereby acknowledged), hereby agree to the following
modifications of the Agreement:

1. All references to capitalized terms contained herein which are not
otherwise defined in this Amendment shall have the meanings ascribed to them
in the Agreement.

2. Section 7 of the Agreement is hereby amended by changing the
heading to "DEFINITION." and by deleting the first and third paragraphs so
that the only language remaining relates to the definition of "Change in
Control."

3. Except as specifically amended by this Amendment, all provisions of
the Agreement shall remain in full force and effect. This Amendment shall
govern in the event that there is a conflict between the Agreement and this
Amendment.

IN WITNESS WHEREOF, the parties hereto have executed this Amendment on
the day and year first above written.

PSICOR, INC.

By:____________________________________
Name:
Title:

_______________________________________

<PAGE>
EXHIBIT 3

CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENT

This Confidentiality and Non-disclosure Agreement (the "Agreement") is
made and entered into effective as of this 13th day of October, 1995, by and
between PSICOR, INC., a Pennsylvania corporation (the "Company"), and BAXTER
HEALTHCARE CORPORATION, a Delaware corporation ("Recipient"). In consideration
of the mutual covenants and conditions contained herein, to induce the Company
to provide certain information to Recipient and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties to this Agreement do hereby agree as follows:

1. DEFINITION OF CONFIDENTIAL INFORMATION. For all purposes of this
Agreement, the term "Confidential Information" shall collectively refer to all
information or material disclosed or provided by the Company to Recipient,
either orally or in writing, or obtained by Recipient from a third party or any
other source at the Company's direction, concerning any aspect of the business
or affairs of the Company or its "affiliates" (as such term is defined in Rule
12b-2 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), including without limitation, any information or material pertaining to
products, formulae, specifications, designs, processes, plans, policies,
procedures, employees, work conditions, legal and regulatory affairs, assets,
inventory, discoveries, trademarks, patents, manufacturing, packing,
distribution, sales, marketing, expenses, financial statements and data,
customer and supplier lists, raw materials, costs of goods and relationships
with third parties. Confidential Information also includes any notes, analyses,
compilations, studies or other material or documents prepared by Recipient which
contain, reflect or are based, in whole or in part, on the Confidential
Information.

Notwithstanding the foregoing, Confidential Information shall not include
information or material that (i) is publicly available or becomes publicly
available through no action or fault of Recipient, (ii) was already in
Recipient's possession or known to Recipient prior to being disclosed or
provided to Recipient by or on behalf of the Company, PROVIDED, that, to the
Recipient's knowledge, after reasonable inquiry, the source of such information
or material was not bound by a contractual, legal or fiduciary obligation of
confidentiality to the Company or any other party with respect thereto, or (iii)
was or is obtained by Recipient from a third party, PROVIDED, that to the
Recipient's knowledge, after reasonable inquiry, such third party was not bound
by a contractual, legal or fiduciary obligation of confidentiality to the
Company or any other party with respect to such information or material.

<PAGE>

2. RESTRICTIONS ON DISCLOSURE AND USE. Recipient does hereby covenant and
agree with the Company as follows:

2.1 NON-DISCLOSURE. Recipient shall keep confidential and shall not
disclose, or cause or permit to be disclosed, to any person or entity, (i) any
information about a potential acquisition of or merger with the Company (the
"Transaction") or the fact that Recipient has received the Confidential
Information and is considering the Transaction and all discussions between the
Company and Recipient related thereto, except the Recipient may make such
disclosure if it has been advised by its outside counsel that such disclosure
must be made in order that Recipient not commit a violation of law and if
Recipient provides the Company, prior to making such disclosure, with notice of
the decision to make such disclosure, and (ii) the Confidential Information,
except, in either case, to those officers, employees or other authorized agents
and representatives of Recipient to whom disclosure is reasonably necessary in
Recipient's judgment in connection with the Transaction and who shall agree to
be bound by the terms of this Agreement, and except as otherwise consented to in
writing by the Company. Recipient shall take all actions reasonably necessary
to ensure that the Confidential Information remains strictly confidential and is
not disclosed to or seen, used or obtained by any person or entity except in
accordance with the terms of this Agreement. Recipient agrees not to contact
any employees not specifically designated by the Company, customers or suppliers
of the Company or its affiliates with respect to the Transaction or for the
purpose of obtaining information for use in evaluating the Transaction, without
the Company's prior written consent. Recipient further agrees that all
inquiries, requests for information and other communications concerning the
Transaction shall be made only to the employees designated by the Company or
through Dain Bosworth Incorporated, the advisor to the Company, unless and until
another contact person is identified to Recipient in writing by the Company.

In the event that Recipient is requested or required (by oral questions,
interrogatories, request for information or documents in legal proceedings,
subpoena, civil investigative demand or other similar process) to disclose any
of the Confidential Information, Recipient shall provide the Company with prompt
written notice of any such request or requirement so that the Company may seek a
protective order or other appropriate remedy and/or waive compliance with the
provisions of this Agreement. If, in the absence of a protective order or other
remedy or the receipt of a waiver by the Company, Recipient is nonetheless,
based on advice of its outside counsel, legally compelled to disclose
Confidential Information to any tribunal or else stand liable to contempt or
suffer other

<PAGE>

censure or penalty, Recipient may, without liability hereunder, disclose to such
tribunal only that portion of the Confidential Information which such counsel
advises Recipient is legally required to be disclosed, provided that Recipient
shall use its reasonable efforts to preserve the confidentiality of the
Confidential Information, including, without limitation, by cooperating with the
Company to obtain an appropriate protective order or other reliable assurance
that confidential treatment will be afforded the Confidential Information by
such tribunal.

2.2 OWNERSHIP. The Confidential Information is owned solely and
exclusively by the Company, shall remain the exclusive property of the Company
unless transferred to Recipient in the Transaction, and Recipient shall have no
right, title or interest in or to any of the Confidential Information or any
material developed therefrom.

2.3 USE. Recipient shall use or cause the Confidential Information to
be used only to evaluate the Transaction and in a manner consistent with the
terms and conditions of this Agreement and at no time shall Recipient otherwise
use the Confidential Information for the benefit of itself or any other third
party or in any manner adverse to, or to the detriment of, the Company or its
affiliates or their respective shareholders, other than in connection with the
registration or completion of a Transaction.

2.4 OTHER PARTIES BOUND. All affiliates of Recipient and all
directors, officers, employees, agents and representatives of Recipient or its
affiliates shall be included within the definition of the term "Recipient" for
purposes of this Agreement and shall be bound by the terms and conditions of
this Agreement. Recipient shall be responsible for any breaches of this
Agreement by any of its affiliates and any directors, officers, employees,
agents and representatives of Recipient or its affiliates.

3. NO SOLICITATION OR HIRING OF EMPLOYEES. For a period of one year from
the date of this Agreement, Recipient and its affiliates will not knowingly
solicit the employment of, or offer employment to, any officer of the Company or
its affiliates without the Company's prior written consent.

4. RETURN OF CONFIDENTIAL INFORMATION. Recipient shall, upon accomplishing
the limited purpose of evaluating the Transaction, or at any time upon the
request of the Company, (a) immediately return to the Company all Confidential
Information (including notes, writing and other materials developed therefrom by
Recipient) and all copies thereof and retain none for its files, or (b) destroy
all Confi-

<PAGE>

dential Information, originals and copies, and provide an affidavit
verifying such destruction. Notwithstanding such return or destruction,
Recipient shall continue to be bound by this Agreement.

5. NO REPRESENTATIONS OR WARRANTIES. The Confidential Information is being
provided to Recipient "as is" and without any representation or warranty of any
kind, either express or implied, regarding the accuracy or completeness or other
quality of the Confidential Information. In no event shall the Company or its
affiliates or any of their respective directors, officers, employees, agents or
representatives (including, without limitation, Dain Bosworth Incorporated) have
any liability to Recipient relating to or arising out of any use of the
Confidential Information, except as may be provided in a definitive agreement in
connection with the Transaction.

6. EQUITABLE REMEDIES. Recipient hereby agrees that its failure to perform
any obligation or duty which it has agreed to perform under this Agreement will
cause irreparable harm to the Company, which harm cannot be adequately
compensated for by money damages. It is further agreed by Recipient that an
order of specific performance or for injunctive relief against Recipient in the
event of a breach or default under the terms of this Agreement would be
equitable and would not work a hardship on Recipient. Accordingly, in the event
of a breach or default by Recipient hereunder, the Company, in addition to
whatever other remedies are or might be available at law or in equity, shall
have the right either to compel specific performance by, or to obtain injunctive
relief against, Recipient, with respect to any obligation or duty herein or
breach thereof.

7. NO LICENSES GRANTED. The Company grants no licenses, by implication or
otherwise, under any patent, copyright, trademark, trade secret or other rights
by disclosing Confidential Information under this Agreement.

8. DEFINITIVE AGREEMENT. Except for the terms and conditions of this
Agreement, Recipient and the Company each understand and agree that no contract
or agreement providing for any transaction involving the Company shall be deemed
to exist between Recipient and the Company unless and until a final definitive
agreement has been executed and delivered, and Recipient and the Company each
hereby waive in advance, any claims (including, without limitation, breach of
contract) in connection with any transaction involving the Company unless and
until Recipient and the Company shall have entered into a final definitive
agreement. Recipient and the Company each also agree that unless and until a
final definitive agreement between Recipient and the Company has been executed
and

<PAGE>

delivered, neither Recipient nor the Company will be under any legal obligation
of any kind whatsoever with respect to such a transaction by virtue of this
Agreement except for the matters specifically agreed to herein. The Company
reserves the right, in its sole discretion, to reject any and all proposals made
by Recipient and to terminate discussions and negotiations with Recipient at any
time. Recipient further understands that, except as otherwise agreed to in
writing, (i) the Company shall be free to conduct any process for any
transaction involving the Company, if and as the Company in its sole discretion
shall determine (including, without limitation, negotiating with any other
interested party and entering into a definitive agreement without prior notice
to Recipient or any other person), (ii) any procedures relating to such process
or transaction may be changed at any time in the Company's sole discretion
without notice to Recipient or any other person, and (iii) Recipient shall not
have any claims whatsoever against the Company or any of its agents or
representatives (including, without limitation, Dain Bosworth Incorporated)
arising out of or relating to any transaction involving the Company (other than
any claims against the parties to a definitive agreement with Recipient in
accordance with the terms thereof) nor, unless a definitive agreement is entered
into with Recipient, against any third party with whom a transaction is entered
into.

9. STANDSTILL.

9.1 Recipient hereby convenants and agrees that, until twelve months
from the date of this Agreement, without the prior written consent of the
Company, Recipient 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.

<PAGE>

9.2 Notwithstanding paragraph 9.1 above, Recipient shall not be
prohibited from proposing to the Company's Board of Directors a cash transaction
structured as a tender offer followed by a merger in which all holders of the
Company's Common Stock (including outstanding options to acquire shares of the
Company's Common Stock, whether vested and exercisable or not) will receive cash
consideration of not less than $17.50, net, per share of the Company's Common
Stock.

10. TRADING IN SECURITIES. Recipient acknowledges that it is aware, and
agrees to advise its directors, officers, employees, agents and representatives
who are informed as to the matters which are the subject of this Agreement, that
the United States securities laws prohibit any person who has material,
non-public information concerning the Transaction from purchasing or selling
securities of a company that may be party to such Transaction or from
communicating such information to any other person under circumstances in which
it is reasonably foreseeable that such person is likely to purchase or sell such
securities.

11. MISCELLANEOUS. This Agreement shall be binding upon, and inure to the
benefit of, and be enforceable by, the parties hereto and their respective
successors and assigns, but this Agreement shall not be assignable by Recipient
without the prior written consent of the Company. This Agreement constitutes
the complete agreement between the parties hereto with respect to the subject
matter hereof and shall continue in full force and effect until terminated by
mutual agreement of the parties hereto. This Agreement specifically revokes and
supersedes the Mutual Confidentiality Agreement entered into between the Company
and Baxter Healthcare Corporation dated April 21, 1994. The section headings
used herein are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement. This Agreement shall be construed,
performed and enforced in accordance with, and governed by, the internal laws of
the State of California, without giving effect to the principles of conflicts of
law thereof, and each party consents to personal jurisdiction in such state and
voluntarily submits to the jurisdiction of the courts of such state in any
action or proceeding relating to this Agreement. Whenever possible, each
provision of this Agreement shall be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision hereof is held to
be invalid, illegal or unenforceable under any applicable law or rule in any
jurisdiction, such provision will be ineffective only to the extent of such
invalidity, illegality, or unenforceability, without invalidating the remainder
of this Agreement. This Agreement may not be modified or amended and no
provision hereof may be waived, in whole or in part, except by a written
agreement signed by the

<PAGE>

parties hereto. No waiver of any breach of default hereunder shall be
considered valid unless in writing, and no such waiver shall be deemed a waiver
of any subsequent breach or default of the same or similar nature. This
Agreement may be executed in any number of counterparts, each of which shall be
deemed an original, but all of which taken together shall constitute one and the
same instrument.

12. TERM. Except as otherwise specifically provided herein, the provisions
of this Agreement shall terminate and be of no further force or effect two years
from the date first written above.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
effective as of the date first set forth above.

The Company The Recipient

PSICOR, INC. BAXTER HEALTHCARE
CORPORATION

By: /s/ Denise Botticelli By: /s/ Jay P. Wertheim
--------------------------- ----------------------------
Its: General Counsel Its: Vice President, Law
-------------------------- ---------------------------

<PAGE>
Exhibit 4
November 22, 1995, Wednesday

BAXTER TO ACQUIRE PSICOR FOR APPROXIMATELY $80 MILLION

DEERFIELD, ILL. and SAN DIEGO, CA., November 22, 1995 -- Baxter Healthcare
Corporation, a subsidiary of Baxter International Inc. (NYSE: BAX) and
PSICOR, Inc., announced today that they have signed a definitive merger
agreement for Baxter to acquire PSICOR for $17.50 per share, or approximately
$80 million. PSICOR, which is publicly traded on Nasdaq, is a leading
provider of cardiovascular perfusion services to U.S. hospitals that perform
open-heart surgery. The agreement is subject to customary closing conditions,
including the expiration of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act. Baxter expects to complete the
acquisition within the next several weeks.

Baxter will initiate a tender offer for PSICOR's shares within five
business days and has concurrently entered into a tender and option agreement
with certain PSICOR shareholders who own about 45 percent of PSICOR's common
stock. The tender will be subject to customary conditions, including the
tender of at least 80 percent of the outstanding shares. The tender offer
will be followed by a second-step cash merger at the same price. The parties
also disclosed that it is a condition to the merger that PSICOR sell its PSICOR
Office Labs subsidiary and that it has retained Dain Bosworth Incorporated to
assist in marketing the property.

"This acquisition strengthens our ability to offer customers a set of
'capitated' or fixed-cost products and services that will help hospitals
manage the total cost of open-heart surgery," said Baxter Executive Vice
President Lester B. Knight.

Baxter's Cardiovascular business already is a leading provider of
perfusion products, replacement heart valves and valve-repair products, and
other products used in open-heart surgery. "The acquisition clearly will
establish us as the leading provider of perfusion services and enhance our
offering of products and services used to treat late-stage cardiovascular
disease," said Mike Mussallem, group vice president of Baxter's
Cardiovascular business.

Earlier this year, Baxter acquired SETA, Inc., another company that offers
perfusionists to hospitals on a contract basis.

Michael Dunaway, Founder and Chief Executive Officer of PSICOR, stated, "We
believe this transaction represents superior value to our shareholders, and,
given Baxter's vast expertise in the health-care industry, our employees and
client hospitals will be well served by this business combination."

<PAGE>

PSICOR, based in San Diego, employs more than 450 perfusionists and
technicians. Perfusionists run the heart-lung bypass machines used during
open-heart surgery. PSICOR's customers include more than 400 hospitals across
the United States. The company reported 1994 sales of about $82 million.

Between 800 and 900 U.S. hospitals perform approximately 375,000
open-heart surgeries a year. About half of these hospitals contract out for
perfusion services. "It's a growing business," Mussallem said. "More and more
hospitals are asking us to provide specialized services, including perfusion
services, due to the increased cost pressures of managed care."

Baxter Healthcare Corporation is the principal U.S. operating subsidiary
of Baxter International Inc. Through its subsidiaries, Baxter is the leading
manufacturer and marketer of health-care products and services to health-care
providers in nearly 100 countries. The company concentrates
research-and-development programs in cardiovascular medicine, biotechnology,
renal therapy and related medical fields.

<PAGE>

16818 VIA CAMPO COURT TELEPHONE
[LOGO]SAN DIEGO, CALIFORNIA 92127-1799 619-485-5599

November 29, 1995

To our Shareholders:

I am pleased to inform you that, on November 22, 1995, PSICOR, Inc. entered
into an Agreement and Plan of Merger (the "Merger Agreement") with Baxter CVG
Services II, Inc. ("Purchaser"), a wholly owned subsidiary of Baxter Healthcare
Corporation, which is a wholly owned subsidiary of Baxter International Inc.,
pursuant to which Purchaser has commenced a cash tender offer (the "Offer") to
purchase all of the outstanding shares of PSICOR Common Stock (the "Shares") for
$17.50 per share. Under the Merger Agreement, the Offer will be followed by a
merger (the "Merger") in which any remaining Shares of PSICOR Common Stock will
be converted into the right to receive $17.50 per share in cash, without
interest.

YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT THE OFFER AND THE
MERGER ARE FAIR TO, AND IN THE BEST INTEREST OF, THE SHAREHOLDERS OF THE
COMPANY, HAS APPROVED THE OFFER AND THE MERGER, AND UNANIMOUSLY RECOMMENDS THAT
PSICOR SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE
OFFER. Having reviewed the best course for our Company, we believe that this
transaction represents superior value to our shareholders and, given Baxter's
vast expertise in the healthcare industry, that our employees and client
hospitals will be well served.

In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors described in the attached Schedule 14D-9
that is being filed today with the Securities and Exchange Commission,
including, among other things, the opinion of Dain Bosworth Incorporated,
PSICOR's financial advisors, that the consideration to be received by holders of
PSICOR Common Stock in the Offer and the Merger is fair to such holders from a
financial point of view.

In addition to the attached Schedule 14D-9 relating to the Offer, also
enclosed is the Offer to Purchase, dated November 29, 1995, of Purchaser,
together with related materials, including a Letter of Transmittal to be used
for tendering your Shares. These documents set forth the terms and conditions of
the Offer and the Merger and provide instructions as to how to tender your
Shares. I urge you to read the enclosed material carefully.

Sincerely,

/s/ MICHAEL W. DUNAWAY

--------------------------------------
Michael W. Dunaway
Chairman of the Board
and Chief Executive Officer

PSICOR, INC.

<PAGE>
November 21, 1995

The Board of Directors
PSICOR, Inc.
16818 Via del Campo Court
San Diego, California 92127

Ladies and Gentlemen:

You have requested our opinion, as of the date hereof, as to the fairness,
from a financial point of view, to the stockholders of PSICOR, Inc. ("PSICOR" or
the "Company") of the consideration to be received in connection with a proposed
merger of the Company with a wholly-owned subsidiary ("Merger Sub") of Baxter
Healthcare Corporation ("Baxter"). The terms of the Merger are set forth in an
Agreement and Plan of Merger dated as of November 22, 1995 (the "Agreement").
The Agreement provides for a cash tender offer by Merger Sub for all of the
issued and outstanding shares of common stock of the Company (the "Common
Stock") at a price of $17.50 per share (the "Offer") and for a subsequent merger
of Merger Sub with and into the Company pursuant to which each outstanding share
of Common Stock (other than shares that are owned by the Company as treasury
stock and any shares owned by Baxter, Merger Sub or any other wholly owned
subsidiary of Baxter or shares held by dissenting shareholders who perfect their
dissenters' rights under Pennsylvania law) will be converted into the right to
receive $17.50 in cash (the "Merger"). Under the Agreement, Baxter has required
that the Company's PSICOR Office Laboratories subsidiary ("POL") be sold prior
to the consummation of the Merger for a price of not less that $4 million. To
induce Baxter to sign the Agreement, Michael W. Dunaway has agreed to purchase
POL from the Company at such price if the Company is unable to find another
purchaser at a higher price.

Dain Bosworth Incorporated ("Dain Bosworth"), as a customary part of its
investment banking business, is engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, competitive bids,
negotiated underwritings, secondary distributions and private placements of
listed and unlisted securities, and valuations for estate, corporate, and other
purposes. In addition, in the ordinary course of business, Dain Bosworth acts as
a market maker for PSICOR's common stock and accordingly may periodically hold a
position in such stock. Dain Bosworth may, in the ordinary course of its
business, also trade securities of Baxter for its own account and the account of
its customers and, accordingly, may at any time hold a long or short position in
such securities. Additionally, from time to time, Dain Bosworth and its
affiliates may produce research materials regarding PSICOR. Dain Bosworth may
also act as a market maker in the publicly traded securities of companies
engaged in the same or similar lines of business as PSICOR and Baxter and may
periodically have positions in their securities as well.

In June 1994, Dain Bosworth was retained as the Company's financial advisor
with respect to (i) an analysis of strategic alternatives and (ii) any
transaction arising from such analysis of alternatives. Dain Bosworth's duties
as financial advisor to the Company included assisting PSICOR in identifying and
contacting parties that might be interested in purchasing the Company. Dain
Bosworth will receive a fee for its services, a portion of which is contingent
upon the consummation of the Merger, and will be indemnified against certain
liabilities. Dain Bosworth has in the past provided no investment banking
services to Baxter.

In connection with this opinion, we have undertaken such review, analyses
and inquiries as we deemed necessary and appropriate under the circumstances.
Among other things, we have reviewed (i) the Agreement, (ii) certain historical
financial information for PSICOR and Baxter, (iii) certain financial information
for PSICOR prepared for financial planning purposes and furnished by the
management of PSICOR, (iv) certain publicly available data relative to PSICOR,
(v) certain financial and securities data for companies deemed similar to PSICOR
and (vi) to the extent publicly available, the financial terms of certain
acquisition transactions involving companies operating in industries deemed
similar to that in which the Company operates. We visited the headquarters of
the Company and had discussions with the management of the Company concerning
the financial condition, operating results and business outlook for the Company.
<PAGE>
The Board of Directors
PSICOR, Inc.
Page 2

In conducting our review and in rendering our opinion, we have assumed and
relied upon the accuracy, completeness and fairness of the financial and other
information provided to us or publicly available and we have not assumed any
responsibility for independent verification of such information, and we have
further relied upon the assurances of management of the Company and Baxter that
they are not aware of any facts that would make such information inaccurate or
misleading. It is understood that we were retained by the Board of Directors of
the Company, and that the Board of Directors has not looked to us for
independent verification with respect to the financial and other information
provided to us or publicly available, including the projections provided to us
by the Company. With respect to the financial projections for the Company, we
have assumed that such projections have been reasonably prepared on a basis
reflecting the best currently available estimates and judgment of the management
of the Company as to the future financial performance of the Company, and that
the Company will perform substantially in accordance with such projections.
Also, we did not make an independent appraisal of the assets or liabilities of
PSICOR, and we do not express an opinion regarding the liquidation values or
solvency of either company separately or the combined companies following the
Merger. Our opinion as expressed herein is limited to the fairness to the
stockholders of PSICOR, from a financial point of view, of the $17.50 per share
cash consideration to be received by stockholders of the Company pursuant to the
Offer and the Merger, and it does not address the Company's underlying business
decision to proceed with the Merger. Our opinion is based upon general market,
economic, financial, monetary and other conditions as they exist and can be
evaluated, and the information available to us, as of the date hereof.

It is understood that this letter is for the information of the Board of
Directors of the Company only and is not intended and does not constitute a
recommendation to any stockholder as to whether such stockholder should tender
his or her shares in the Offer or how such stockholder should vote with respect
to the Merger. This opinion shall not be published or otherwise used, nor shall
any public reference to Dain Bosworth be made without our prior written
approval, except that the Company may include this letter in proxy statements or
similar documents distributed to shareholders and in filings with the Securities
and Exchange Commission, provided that any such disclosure shall first be
submitted to Dain Bosworth for its approval.

Based upon and subject to the foregoing, and other matters that we
considered relevant, it is our opinion that, as of the date hereof, the $17.50
per share cash consideration to be received by stockholders of the Company
pursuant to the Offer and the Merger are fair to the stockholders of PSICOR from
a financial point of view.

Very truly yours,
DAIN BOSWORTH INCORPORATED