<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO
SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
AND
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
----------------
ALLIED CLINICAL LABORATORIES, INC.
(NAME OF SUBJECT COMPANY)
----------------
N ACQUISITION CORP.
NATIONAL HEALTH LABORATORIES INCORPORATED
(BIDDERS)
----------------
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
----------------
019076108
(CUSIP NUMBER OF CLASS OF SECURITIES)
----------------
JAMES G. RICHMOND, ESQ.
N ACQUISITION CORP.
C/O NATIONAL HEALTH LABORATORIES INCORPORATED
4225 EXECUTIVE SQUARE
SUITE 800
LA JOLLA, CALIFORNIA 92037
(619) 550-0600
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSONS AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF BIDDERS)
COPIES TO:
ALLEN FINKELSON, ESQ.
CRAVATH, SWAINE & MOORE
WORLDWIDE PLAZA
825 EIGHTH AVENUE
NEW YORK, NEW YORK 10019
(212) 474-1000
----------------
MAY 3, 1994
(DATE OF EVENT WHICH REQUIRES FILING STATEMENT ON SCHEDULE 13D)
----------------
CALCULATION OF FILING FEE
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<TABLE>
<CAPTION>
TRANSACTION VALUATION* AMOUNT OF FILING FEE
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<S> <C>
$222,399,397.......................................... $44,480
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</TABLE>
* For purposes of calculating amount of filing fee only. The amount assumes the
purchase of 9,669,539 shares of common stock, par value $.01 per share (the
"Shares"), at a price per Share of $23.00 in cash. Such number of shares
represents all the Shares outstanding as of May 6, 1994, and assumes the
exercise or conversion of all existing options, rights and securities
exercisable or convertible into Shares.
[_]Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and
identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
Amount Previously Paid: None Filing Party: N/A
Form or Registration No.: N/A Date Filed: N/A
Page 1 of pages.
Exhibit Index on page .
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<PAGE>
14D-1 AND 13D
CUSIP No. 019076108
Page 2 of Pages
<TABLE>
<C> <S> <C> <C>
1 NAME OF REPORTING PERSON:
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
N ACQUISITION CORP. (13-3766755)
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_]
(b) [_]
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3 SEC USE ONLY
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4 SOURCES OF FUNDS
AF, BK
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5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT [_]
TO ITEMS 2(e) or 2(f)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
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7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,768,815*
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8 CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN [_]
SHARES
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9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
APPROXIMATELY 33.0% OF THE SHARES OUTSTANDING AS OF MAY 5,
1994.*
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10 TYPE OF REPORTING PERSON
CO
</TABLE>
2
<PAGE>
14D-1 AND 13D
CUSIP No. 019076108
Page 3 of Pages
<TABLE>
<C> <S> <C> <C>
1 NAME OF REPORTING PERSON:
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
NATIONAL HEALTH LABORATORIES INCORPORATED
(84-0611484)
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_]
(b) [_]
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3 SEC USE ONLY
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4 SOURCES OF FUNDS
AF, BK
- -----------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT [X]
TO ITEMS 2(e) or 2(f)
- -----------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
- -----------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,768,815*
- -----------------------------------------------------------------------------
8 CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN [_]
SHARES
- -----------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
APPROXIMATELY 33.0% OF THE SHARES OUTSTANDING AS OF MAY 5,
1994.*
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10 TYPE OF REPORTING PERSON
CO
</TABLE>
* On May 3, 1994, National Health Laboratories Incorporated ("Parent") and N
Acquisition Corp., a wholly owned subsidiary of Parent (the "Purchaser"),
entered into a separate stock option agreement (an "Option Agreement") with
each of Warburg, Pincus Capital Company, L.P. and Haywood D. Cochrane, Jr.
(collectively, the "Selling Stockholders"), the President and Chief Executive
Officer of Allied Clinical Laboratories, Inc. (the "Company"), pursuant to
which the Selling Stockholders each granted the Purchaser an irrevocable
option (each, an "Option") to purchase, at a price of $23.00 per share, all
the shares of common stock, par value $.01 per share (the "Shares"), of the
Company owned by them (representing an aggregate of 2,768,815 Shares, or
approximately 33.0% of the Shares outstanding as of May 6, 1994) (the
"Optioned Shares"). The Purchaser's option to purchase the Optioned Shares is
reflected in Rows 7 and 9 of each of the tables above. If the Purchaser
accepts for payment and pays for any Shares tendered under the Offer, the
Purchaser must exercise the Options generally within five trading days
following the date of such payment (unless all the Optioned Shares have been
tendered by the Selling Stockholders and accepted for payment by the
Purchaser under the Offer). Each Selling Stockholder has also executed and
delivered a proxy to the Purchaser to vote the Optioned Shares in favor of
the transactions contemplated between the Company and the Purchaser and
against any other transaction with a third party. The Option Agreements are
described more fully in Section 12 ("Purpose of the Offer; The Merger
Agreement and the Option Agreements") of the Offer to Purchase dated May 9,
1994 (the "Offer to Purchase").
3
<PAGE>
This Tender Offer Statement on Schedule 14D-1 also constitutes a Statement
on Schedule 13D with respect to the acquisition by the Purchaser and Parent of
beneficial ownership of the Optioned Shares. The item numbers and responses
thereto below are in accordance with the requirements of Schedule 14D-1.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Allied Clinical Laboratories, Inc., a
Delaware corporation (the "Company"), which has its principal executive
offices at 300 Delaware Avenue, Suite 528, Wilmington, Delaware 19801-1622.
(b) This Schedule 14D-1 relates to the offer by the Purchaser to purchase
all outstanding Shares at a price of $23.00 per Share, net to the seller in
cash (the "Offer Price"), upon the terms and subject to the conditions set
forth in the Offer to Purchase and in the related Letter of Transmittal
(which, together with any amendments or supplements thereto, collectively
constitute the "Offer"), copies of which are attached hereto as Exhibits
(a)(1) and (a)(2), respectively. Information concerning the number of
outstanding Shares is set forth in the Introduction of the Offer to Purchase
and is incorporated herein by reference.
(c) Information concerning the principal market in which the Shares are
traded and the high and low sales prices of the Shares for each quarterly
period during the past two years is set forth in Section 6 ("Price Range of
the Shares; Dividends on the Shares") of the Offer to Purchase and is
incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This Schedule 14D-1 is being filed by the Purchaser and
Parent, each of which is a Delaware corporation. The Purchaser is a wholly
owned subsidiary of Parent. Information concerning the principal business and
the address of the principal offices of the Purchaser and Parent is set forth
in Section 9 ("Certain Information Concerning the Purchaser and Parent") of
the Offer to Purchase and is incorporated herein by reference. The names,
business addresses, present principal occupations or employment, material
occupations, positions, offices or employment during the last five years and
citizenship of the directors and executive officers of the Purchaser and
Parent are set forth in Schedule I to the Offer to Purchase and are
incorporated herein by reference.
(e) and (f) The information set forth in Section 9 ("Certain Information
Concerning the Purchaser and Parent") and Section 15 ("Certain Legal Matters")
of the Offer to Purchase is incorporated herein by reference.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) The information set forth in Section 11 ("Contacts with the Company;
Background of the Offer") of the Offer to Purchase is incorporated herein by
reference.
(b) The information set forth in Section 11 ("Contacts with the Company;
Background of the Offer") and Section 12 ("Purpose of the Offer; The Merger
Agreement and the Option Agreements") of the Offer to Purchase is incorporated
herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) and (b) The information set forth in Section 10 ("Source and Amount of
Funds") of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in Section 12 ("Purpose of the Offer; The
Merger Agreement and the Option Agreements") of the Offer to Purchase is
incorporated herein by reference.
4
<PAGE>
(f) and (g) The information set forth in Section 7 ("Effect of the Offer on
the Market for the Shares, Stock Quotation and Exchange Act Registration") of
the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) and (b) The information set forth in the Introduction, Section 9
("Certain Information Concerning the Purchaser and Parent") and Section 12
("Purpose of the Offer; The Merger Agreement and the Option Agreements") of
the Offer to Purchase is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction, Section 9 ("Certain
Information Concerning the Purchaser and Parent"), Section 11 ("Contacts with
the Company; Background of the Offer") and Section 12 ("Purpose of the Offer;
The Merger Agreement and the Option Agreements") of the Offer to Purchase is
incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and in Section 16 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
Although the Purchaser and Parent do not believe that their financial
condition or the financial condition of their affiliates is material to a
decision by a security holder of the Company whether to sell, tender or hold
Shares, consolidated financial information with respect to Parent is included
in Section 9 ("Certain Information Concerning the Purchaser and Parent") of
the Offer to Purchase and such information and the consolidated financial
statements of Parent in Parent's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993 are incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in Section 12 ("Purpose of the Offer; The
Merger Agreement and the Option Agreements") of the Offer to Purchase is
incorporated herein by reference.
(b) and (c) The information set forth in Section 15 ("Certain Legal
Matters") of the Offer to Purchase is incorporated herein by reference.
(d) Not applicable.
(e) None.
(f) The information set forth in the Offer to Purchase, the Letter of
Transmittal, the Agreement and Plan of Merger dated as of May 3, 1994, among
the Purchaser, Parent and the Company, the Stock Option Agreement dated as of
May 3, 1994, among the Purchaser, Parent and Warburg, Pincus Capital Company,
L.P., the Stock Option Agreement dated as of May 3, 1994, among the Purchaser,
Parent and Haywood D. Cochrane, Jr., the Proxy dated May 3, 1994, of Warburg,
Pincus Capital Company, L.P. in favor of the Purchaser and the Proxy dated May
3, 1994, of Haywood D. Cochrane, Jr. in favor of the Purchaser, copies of
which are attached hereto as Exhibits (a)(1), (a)(2), (c)(1), (c)(2), (c)(3),
(c)(4) and (c)(5), respectively, is incorporated herein by reference.
5
<PAGE>
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<C> <S>
(a)(1) Offer to Purchase.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Banks, Trust Companies and Other Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Banks, Trust Companies
and Other Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Form of Summary Advertisement dated May 9, 1994.
(a)(8) Text of Press Release dated May 4, 1994, issued by the Company and
Parent.
(b) Commitment Letter dated May 3, 1994, between Parent and Citibank, N.A.
(c)(1) Agreement and Plan of Merger dated as of May 3, 1994, among the
Purchaser, Parent and the Company.
(c)(2) Stock Option Agreement dated as of May 3, 1994, among the Purchaser,
Parent and Warburg, Pincus Capital Company, L.P.
(c)(3) Stock Option Agreement dated as of May 3, 1994, among the Purchaser,
Parent and Haywood D. Cochrane, Jr.
(c)(4) Proxy dated May 3, 1994, of Warburg, Pincus Capital Company, L.P. in
favor of the Purchaser.
(c)(5) Proxy dated May 3, 1994, of Haywood D. Cochrane, Jr. in favor of the
Purchaser.
(c)(6) Confidentiality Agreement dated July 12, 1993, between Parent and the
Company.
(d) None.
(e) Not applicable.
(f) None.
</TABLE>
6
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
Dated: May 9, 1994
N ACQUISITION CORP.
/s/ James R. Maher
By: _________________________________
Name:James R. Maher
Title:President and Chief
Executive Officer
NATIONAL HEALTH LABORATORIES
INCORPORATED
/s/ James R. Maher
By: _________________________________
Name:James R. Maher
Title:President and Chief
Executive Officer
7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER EXHIBIT NAME NUMBER
------- ------------ ------
<C> <S> <C>
(a)(1) Offer to Purchase.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Banks, Trust Companies and Other
Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Banks, Trust
Companies and Other Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(7) Form of Summary Advertisement dated May 9, 1994.
(a)(8) Text of Press Release dated May 4, 1994, issued by the
Company and Parent.
(b) Commitment Letter dated May 3, 1994, between Parent and
Citibank, N.A.
(c)(1) Agreement and Plan of Merger dated as of May 3, 1994, among
the Purchaser, Parent and the Company.
(c)(2) Stock Option Agreement dated as of May 3, 1994, among the
Purchaser, Parent and Warburg, Pincus Capital Company, L.P.
(c)(3) Stock Option Agreement dated as of May 3, 1994, among the
Purchaser, Parent and Haywood D. Cochrane, Jr.
(c)(4) Proxy dated May 3, 1994, of Warburg, Pincus Capital Company,
L.P. in favor of the Purchaser.
(c)(5) Proxy dated May 3, 1994, of Haywood D. Cochrane, Jr. in favor
of the Purchaser.
(c)(6) Confidentiality Agreement dated July 12, 1993, between Parent
and the Company.
(d) None.
(e) Not applicable.
(f) None.
</TABLE>
<PAGE>
EXHIBIT 99(a)(1)
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
Allied Clinical Laboratories, Inc.
at
$23.00 Net Per Share
by
N Acquisition Corp.
a Wholly Owned Subsidiary of
National Health Laboratories Incorporated
---------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, JUNE 7, 1994, UNLESS EXTENDED.
---------------
THE BOARD OF DIRECTORS OF ALLIED CLINICAL LABORATORIES, INC. HAS, BY
UNANIMOUS VOTE, APPROVED THE OFFER AND THE MERGER REFERRED TO HEREIN AND
DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE
BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY AND RECOMMENDS THAT
STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES WHICH, TOGETHER WITH THE OPTIONED SHARES REFERRED TO HEREIN, WOULD
REPRESENT, ON A FULLY DILUTED BASIS, AT LEAST A MAJORITY OF ALL OUTSTANDING
SHARES.
---------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares should either (1) complete and sign the Letter of Transmittal or a
facsimile copy thereof in accordance with the instructions in the Letter of
Transmittal, have such stockholder's signature thereon guaranteed if required
by Instruction 1 to the Letter of Transmittal, mail or deliver the Letter of
Transmittal or such facsimile and any other required documents to the
Depositary and either deliver the certificates for such Shares to the
Depositary along with the Letter of Transmittal or facsimile or deliver such
Shares pursuant to the procedure for book-entry transfer set forth in Section
2 or (2) request such stockholder's broker, dealer, bank, trust company or
other nominee to effect the transaction for such stockholder. A stockholder
having Shares registered in the name of a broker, dealer, bank, trust company
or other nominee must contact such broker, dealer, bank, trust company or
other nominee if such stockholder desires to tender such Shares.
A stockholder who desires to tender Shares and whose certificates for such
Shares are not immediately available or who cannot comply in a timely manner
with the procedure for book-entry transfer, or who cannot deliver all required
documents to the Depositary prior to the expiration of the Offer, may tender
such Shares by following the procedure for guaranteed delivery set forth in
Section 2.
Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery
may be directed to the Information Agent or to the Dealer Manager at their
respective addresses and telephone numbers set forth on the back cover of this
Offer to Purchase.
---------------
The Dealer Manager for the Offer is:
MORGAN STANLEY & CO.
Incorporated
May 9, 1994
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Introduction.............................................................. 1
1. Terms of the Offer.................................................... 2
2. Procedure for Tendering Shares........................................ 4
3. Withdrawal Rights..................................................... 6
4. Acceptance for Payment and Payment.................................... 7
5. Certain Federal Income Tax Consequences............................... 8
6. Price Range of the Shares; Dividends on the Shares.................... 9
7. Effect of the Offer on the Market for the Shares, Stock Quotation and
Exchange Act Registration............................................... 9
8. Certain Information Concerning the Company............................ 10
9. Certain Information Concerning the Purchaser and Parent............... 12
10. Source and Amount of Funds............................................ 15
11. Contacts with the Company; Background of the Offer.................... 16
12. Purpose of the Offer; The Merger Agreement and the Option Agreements.. 17
13. Dividends and Distributions........................................... 24
14. Certain Conditions of the Offer....................................... 25
15. Certain Legal Matters................................................. 27
16. Fees and Expenses..................................................... 30
17. Miscellaneous......................................................... 31
Schedule I--Directors and Executive Officers.............................. S-1
</TABLE>
<PAGE>
To the Holders of Common Stock of Allied Clinical Laboratories, Inc.:
INTRODUCTION
N Acquisition Corp., a Delaware corporation (the "Purchaser") and a wholly
owned subsidiary of National Health Laboratories Incorporated, a Delaware
corporation ("Parent"), hereby offers to purchase all outstanding shares of
common stock, par value $.01 per share (the "Shares"), of Allied Clinical
Laboratories, Inc., a Delaware corporation (the "Company"), at $23.00 per Share
(the "Offer Price"), net to the seller in cash, upon the terms and subject to
the conditions set forth in this Offer to Purchase and in the related Letter of
Transmittal (which, together with any amendments or supplements hereto or
thereto, collectively constitute the "Offer"). Tendering stockholders will not
be obligated to pay brokerage fees or commissions or, except as set forth in
Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase of
Shares pursuant to the Offer. The Purchaser will pay all fees and expenses of
Morgan Stanley & Co. Incorporated, which is acting as Dealer Manager (the
"Dealer Manager"), Chemical Bank, which is acting as the Depositary (the
"Depositary"), and D.F. King & Co., Inc., which is acting as Information Agent
(the "Information Agent"), incurred in connection with the Offer. See Section
16.
THE BOARD OF DIRECTORS OF THE COMPANY HAS, BY UNANIMOUS VOTE, APPROVED THE
OFFER AND THE MERGER (AS DEFINED BELOW) AND DETERMINED THAT THE TERMS OF THE
OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE
STOCKHOLDERS OF THE COMPANY AND RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY
ACCEPT THE OFFER AND TENDER THEIR SHARES.
ALEX. BROWN & SONS INCORPORATED, THE COMPANY'S FINANCIAL ADVISOR ("ALEX.
BROWN"), HAS DELIVERED TO THE BOARD OF DIRECTORS OF THE COMPANY ITS WRITTEN
OPINION TO THE EFFECT THAT THE CASH CONSIDERATION TO BE RECEIVED IN EACH OF THE
OFFER AND THE MERGER IS FAIR, FROM A FINANCIAL POINT OF VIEW, TO THE
STOCKHOLDERS OF THE COMPANY AS OF THE DATE OF DELIVERY OF SUCH OPINION. SUCH
OPINION IS SET FORTH IN FULL AS AN EXHIBIT TO THE COMPANY'S
SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 (THE "SCHEDULE 14D-9"),
WHICH IS BEING MAILED TO STOCKHOLDERS OF THE COMPANY HEREWITH.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN SECTION
1) THAT NUMBER OF SHARES (THE "MINIMUM NUMBER OF SHARES") WHICH, TOGETHER WITH
THE OPTIONED SHARES (AS DEFINED BELOW), WOULD REPRESENT, ON A FULLY DILUTED
BASIS, AT LEAST A MAJORITY OF ALL OUTSTANDING SHARES (THE "MINIMUM TENDER
CONDITION"). THE PURCHASER RESERVES THE RIGHT (SUBJECT TO OBTAINING THE CONSENT
OF THE COMPANY AND THE APPLICABLE RULES AND REGULATIONS OF THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION")), WHICH IT PRESENTLY HAS NO INTENTION OF
EXERCISING, TO WAIVE OR REDUCE THE MINIMUM TENDER CONDITION AND TO ELECT TO
PURCHASE, PURSUANT TO THE OFFER, LESS THAN THE MINIMUM NUMBER OF SHARES. SEE
SECTIONS 1 AND 14.
The Offer is being made pursuant to the Agreement and Plan of Merger dated as
of May 3, 1994 (the "Merger Agreement"), among Parent, the Purchaser and the
Company pursuant to which, following the consummation of the Offer and the
satisfaction or waiver of certain conditions, the Purchaser will be merged with
and into the Company, with the Company surviving the merger as a wholly owned
subsidiary of Parent (the "Merger"). In the Merger, each outstanding Share
(other than Shares owned by the Company as treasury stock or by any subsidiary
of the Company, Parent, the Purchaser or any other subsidiary of Parent or by
stockholders, if any, who are entitled to and who properly exercise dissenters'
rights under Delaware law) will be converted into the right to receive the
Offer Price in cash, without interest (the "Merger Consideration"). See Section
12.
The Merger is subject to a number of conditions, including approval by
stockholders of the Company, if such approval is required by applicable law. In
the event the Purchaser acquires 90% or more of the outstanding Shares pursuant
to the Offer or otherwise, the Purchaser would be able to effect the Merger
pursuant to the short-form merger provisions of the Delaware General
Corporation Law (the "DGCL"), without prior notice to, or any action by, any
other stockholder of the Company. See Section 12.
The Purchaser and Parent also entered into separate stock option agreements,
each dated as of May 3, 1994 (the "Option Agreements"), with Warburg, Pincus
Capital Company, L.P. and Haywood D. Cochrane,
1
<PAGE>
Jr., the President and Chief Executive Officer of the Company (collectively,
the "Selling Stockholders"), pursuant to which each such Selling Stockholder
granted the Purchaser an irrevocable option (each, an "Option") to purchase all
the Shares held by such Selling Stockholder (collectively, the "Optioned
Shares") at a price of $23.00 per share in cash. The Optioned Shares represent
2,768,815 Shares, or approximately 33.0% of the outstanding Shares (28.6% of
Shares on a fully diluted basis), 2,504,042 Shares of which are owned by
Warburg, Pincus Capital Company, L.P. and 264,773 Shares of which are owned by
Mr. Cochrane. Pursuant to the terms of the Option Agreements, the Purchaser has
the right (which it intends to exercise) to require the Selling Stockholders to
tender the Optioned Shares into the Offer. Pursuant to the Option Agreements,
each Selling Stockholder has also executed and delivered a proxy for the
benefit of the Purchaser with respect to the Optioned Shares owned by such
Selling Stockholder to vote such Optioned Shares in favor of the approval of
the Merger, among other things.
The Company has informed the Purchaser that, as of May 2, 1994, there were
8,398,916 Shares issued and outstanding, 508,719 Shares reserved for issuance
upon the exercise of outstanding employee stock options and 761,904 Shares
reserved for issuance upon the conversion of the Company's 7.375% Convertible
Senior Subordinated Notes due December 15, 2006 (the "Convertible Notes").
Based upon the foregoing, the Purchaser believes that approximately 4,835,737
Shares constitutes a majority of the outstanding Shares on a fully diluted
basis. Accordingly, the Minimum Tender Condition will be satisfied if at least
2,066,922 Shares (other than the Optioned Shares), or approximately 24.6% of
the outstanding Shares (21.4% of Shares on a fully diluted basis), are validly
tendered and not withdrawn prior to the Expiration Date. If the Minimum Tender
Condition is satisfied and the Purchaser accepts for payment Shares tendered
pursuant to the Offer and the Purchaser purchases the Optioned Shares pursuant
to the exercise of the Options, or the Selling Stockholders tender the Optioned
Shares pursuant to the Offer or the Purchaser affirmatively votes the Optioned
Shares pursuant to the proxies described above, the Purchaser will be able to
elect a majority of the members of the Company's Board of Directors and to
effect the Merger without the affirmative vote of any other stockholder of the
Company.
The Merger Agreement and the Option Agreements are more fully described in
Section 12. Certain Federal income tax consequences of the sale of Shares
pursuant to the Offer and the exchange of Shares for the Merger Consideration
pursuant to the Merger are described in Section 5.
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions of the Offer, the Purchaser will
accept for payment and pay for all Shares validly tendered prior to the
Expiration Date and not theretofore withdrawn in accordance with Section 3. The
term "Expiration Date" means 12:00 Midnight, New York City time, on Tuesday,
June 7, 1994, unless and until the Purchaser shall have extended the period of
time during which the Offer is open, in which event the term "Expiration Date"
shall mean the latest time and date at which the Offer, as so extended by the
Purchaser, shall expire.
Subject to the terms of the Merger Agreement and the applicable rules and
regulations of the Commission, the Purchaser expressly reserves the right, in
its sole discretion, at any time and from time to time, and regardless of
whether or not any of the events set forth in Section 14 hereof shall have
occurred or shall have been determined by the Purchaser to have occurred, to
(a) extend the period of time during which the Offer is open, and thereby delay
acceptance for payment of and the payment for any Shares, by giving oral or
written notice of such extension to the Depositary and (b) amend the Offer in
any other respect by giving oral or written notice of such amendment to the
Depositary. THE PURCHASER SHALL NOT HAVE ANY OBLIGATION TO PAY INTEREST ON THE
PURCHASE PRICE FOR TENDERED SHARES, WHETHER OR NOT THE PURCHASER EXERCISES ITS
RIGHT TO EXTEND THE OFFER.
If by 12:00 Midnight, New York City time, on Tuesday, June 7, 1994 (or any
other date or time then set as the Expiration Date), any or all conditions to
the Offer have not been satisfied or waived, the Purchaser reserves the right
(but shall not be obligated), subject to the terms and conditions contained in
the Merger Agreement and to the applicable rules and regulations of the
Commission, to (1) terminate the Offer and not
2
<PAGE>
accept for payment any Shares and return all tendered Shares to tendering
stockholders, (2) waive all the unsatisfied conditions and, subject to
complying with the terms of the Merger Agreement and the applicable rules and
regulations of the Commission, accept for payment and pay for all Shares
validly tendered prior to the Expiration Date and not theretofore withdrawn,
(3) extend the Offer and, subject to the right of stockholders to withdraw
Shares until the Expiration Date, retain the Shares that have been tendered
during the period or periods for which the Offer is extended or (4) amend the
Offer.
There can be no assurance that the Purchaser will exercise its right to
extend the Offer (other than as required by the Merger Agreement). Any
extension, amendment or termination will be followed as promptly as practicable
by public announcement. In the case of an extension, Rule 14e-1(d) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires that
the announcement be issued no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date in accordance
with the public announcement requirements of Rule 14d-4(c) under the Exchange
Act. Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the
Exchange Act, which require that any material change in the information
published, sent or given to stockholders in connection with the Offer be
promptly disseminated to stockholders in a manner reasonably designed to inform
stockholders of such change), and without limiting the manner in which the
Purchaser may choose to make any public announcement, the Purchaser will not
have any obligation to publish, advertise or otherwise communicate any such
public announcement other than by making a release to the Dow Jones News
Service.
In the Merger Agreement the Purchaser has agreed that it will not, without
the prior consent of the Company, extend the Offer, except that, without the
consent of the Company, the Purchaser may extend the Offer (1) if at the
Expiration Date of the Offer any of the conditions to the Purchaser's
obligation to accept Shares for payment are not satisfied or waived, until such
time as such conditions are satisfied or waived, (2) for any period required by
any rule, regulation, interpretation or position of the Commission or the staff
thereof and (3) for any reason for an aggregate period of not more than five
business days beyond the latest expiration date that would otherwise be
permitted under the terms of the Merger Agreement as described in this
sentence. As used in this Offer to Purchase, "business day" has the meaning set
forth in Rule 14d-1 under the Exchange Act.
In addition, the Purchaser has agreed in the Merger Agreement that it will
not, without the consent of the Company, (1) reduce the number of Shares
subject to the Offer, (2) reduce the Offer Price, (3) add to the conditions set
forth in Section 14, (4) change the form of consideration payable in the Offer
or (5) otherwise amend the Offer in any manner adverse to the Company's
stockholders.
If the Purchaser extends the Offer or if the Purchaser (whether before or
after its acceptance for payment of Shares) is delayed in its acceptance for
payment of or payment for Shares or it is unable to pay for Shares pursuant to
the Offer for any reason, then, without prejudice to the Purchaser's rights
under the Offer, the Depositary may retain tendered Shares on behalf of the
Purchaser, and such Shares may not be withdrawn except to the extent tendering
stockholders are entitled to withdrawal rights as described in Section 3.
However, the ability of the Purchaser to delay the payment for Shares that the
Purchaser has accepted for payment is limited by Rule 14e-1 under the Exchange
Act, which requires that a bidder pay the consideration offered or return the
securities deposited by or on behalf of holders of securities promptly after
the termination or withdrawal of such bidder's offer.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer
(including, with the Company's consent, a waiver of the Minimum Tender
Condition), the Purchaser will disseminate additional tender offer materials
and extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and
14e-1 under the Exchange Act. The minimum period during which an offer must
remain open following material changes in the terms of the offer or information
concerning the offer, other than a change in price or a change in the
percentage of securities sought, will depend upon the facts and circumstances
then existing, including the relative materiality of the changed terms or
information. With respect to a change in price or a change in the percentage of
securities
3
<PAGE>
sought, a minimum period of 10 business days is generally required to allow for
adequate dissemination to stockholders and investor response.
Consummation of the Offer is conditioned upon satisfaction of the Minimum
Tender Condition, the expiration or termination of all waiting periods imposed
by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
the regulations thereunder (the "HSR Act") and the other conditions set forth
in Section 14. Subject to the terms and conditions contained in the Merger
Agreement, the Purchaser reserves the right (but shall not be obligated) to
waive any or all such conditions. However, if the Purchaser (with the Company's
consent) waives or amends the Minimum Tender Condition during the last five
business days during which the Offer is open, the Purchaser will be required to
extend the Expiration Date so that the Offer will remain open for at least five
business days after the announcement of such waiver or amendment is first
published, sent or given to holders of Shares.
The Company has provided the Purchaser with the Company's stockholder lists
and security position listings for the purpose of disseminating the Offer to
holders of the Shares. This Offer to Purchase, the related Letter of
Transmittal and other relevant materials will be mailed by the Purchaser to
record holders of Shares and will be furnished by the Purchaser to brokers,
dealers, banks, trust companies and similar persons whose names, or the names
of whose nominees, appear on the stockholder lists or, if applicable, who are
listed as participants in a clearing agency's security position listing, for
subsequent transmittal to beneficial owners of Shares.
2. PROCEDURE FOR TENDERING SHARES
Valid Tender. For a stockholder validly to tender Shares pursuant to the
Offer, either (1) a properly completed and duly executed Letter of Transmittal
(or facsimile thereof), together with any required signature guarantees and any
other required documents, must be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase and either
certificates for tendered Shares must be received by the Depositary at one of
such addresses or such Shares must be delivered pursuant to the procedure for
book-entry transfer set forth below (and a Book-Entry Confirmation (as defined
below) received by the Depositary), in each case prior to the Expiration Date,
or (2) the tendering stockholder must comply with the guaranteed delivery
procedure set forth below.
The Depositary will establish an account with respect to the Shares at The
Depository Trust Company, the Midwest Securities Trust Company and the
Philadelphia Depository Trust Company (the "Book-Entry Transfer Facilities")
for purposes of the Offer within two business days after the date of this Offer
to Purchase. Any financial institution that is a participant in any of the
Book-Entry Transfer Facilities' systems may make book-entry delivery of Shares
by causing a Book-Entry Transfer Facility to transfer such Shares into the
Depositary's account in accordance with such Book-Entry Transfer Facility's
procedures for such transfer. However, although delivery of Shares may be
effected through book-entry transfer into the Depositary's account at a Book-
Entry Transfer Facility, the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees
and any other required documents, must, in any case, be transmitted to, and
received by, the Depositary at one of its addresses set forth on the back cover
of this Offer to Purchase prior to the Expiration Date, or the tendering
stockholder must comply with the guaranteed delivery procedure described below.
The confirmation of a book-entry transfer of Shares into the Depositary's
account at a Book-Entry Transfer Facility as described above is referred to
herein as a "Book-Entry Confirmation". DELIVERY OF DOCUMENTS TO A BOOK-ENTRY
TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S
PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal if (1) the Letter of Transmittal is signed by the registered holder
of Shares (which term, for purposes of this Section, includes
4
<PAGE>
any participant in any of the Book-Entry Transfer Facilities' systems whose
name appears on a security position listing as the owner of the Shares)
tendered therewith and such registered holder has not completed either the box
entitled "Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (2) such Shares are tendered for
the account of a firm that is a member of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. (the
"NASD"), or a commercial bank or trust company having an office or
correspondent in the United States or by any other "eligible guarantor
institution", as such term is defined in Rule 17Ad-15 under the Exchange Act
(each, an "Eligible Institution"). In all other cases, all signatures on the
Letters of Transmittal must be guaranteed by an Eligible Institution. See
Instructions 1 and 5 to the Letter of Transmittal. If the certificates for
Shares are registered in the name of a person other than the signer of the
Letter of Transmittal, or if payment is to be made or certificates for Shares
not tendered or not accepted for payment are to be issued to a person other
than the registered holder of the certificates surrendered, the tendered
certificates must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name or names of the registered holders or
owners appear on the certificates, with the signatures on the certificates or
stock powers guaranteed as aforesaid. See Instruction 5 to the Letter of
Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates for Shares are not immediately
available or the procedure for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such stockholder's tender may be
effected if all the following conditions are met:
(1) such tender is made by or through an Eligible Institution;
(2) a properly completed and duly executed Notice of Guaranteed Delivery
substantially in the form provided by the Purchaser is received by the
Depositary, as provided below, prior to the Expiration Date; and
(3) the certificates for all tendered Shares, in proper form for transfer
(or a Book-Entry Confirmation with respect to such Shares), together with a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees and any other documents
required by the Letter of Transmittal, are received by the Depositary
within five trading days after the date of execution of such Notice of
Guaranteed Delivery. A "trading day" is any day on which the New York Stock
Exchange, Inc. (the "NYSE") is open for business.
The Notice of Guaranteed Delivery may be delivered by hand to the Depositary
or transmitted by telegram, facsimile transmission or mail to the Depositary
and must include a guarantee by an Eligible Institution in the form set forth
in such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (1) certificates for (or a timely Book-Entry
Confirmation with respect to) such Shares, (2) a Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, and (3) any other documents required by the Letter of
Transmittal. Accordingly, tendering stockholders may be paid at different times
depending upon when certificates for Shares or Book-Entry Confirmations are
actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE
PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE PURCHASER,
REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
The valid tender of Shares pursuant to one of the procedures described above
will constitute a binding agreement between the tendering stockholder and the
Purchaser upon the terms and subject to the conditions of the Offer.
Appointment. By executing a Letter of Transmittal as set forth above, the
tendering stockholder will irrevocably appoint designees of the Purchaser as
such stockholder's attorneys-in-fact and proxies in the manner set forth in the
Letter of Transmittal, each with full power of substitution, to the full extent
of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by
5
<PAGE>
the Purchaser and with respect to any and all other Shares or other securities
or rights issued or issuable in respect of such Shares on or after May 3, 1994.
All such proxies shall be considered coupled with an interest in the tendered
Shares. Such appointment will be effective when, and only to the extent that,
the Purchaser accepts for payment Shares tendered by such stockholder as
provided herein. Upon such appointment, all prior powers of attorney and
proxies given by such stockholder with respect to such Shares or other
securities or rights will, without further action, be revoked and no subsequent
powers of attorney and proxies may be given (and, if given, will not be deemed
effective). The designees of the Purchaser will thereby be empowered to
exercise all voting and other rights with respect to such Shares or other
securities or rights in respect of any annual, special or adjourned meeting of
the Company's stockholders, or otherwise, as they in their sole discretion deem
proper. The Purchaser reserves the right to require that, in order for Shares
to be deemed validly tendered, immediately upon the Purchaser's acceptance for
payment of such Shares, the Purchaser must be able to exercise full voting and
other rights with respect to such Shares and other securities or rights,
including voting at any meeting of stockholders then scheduled.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
will be determined by the Purchaser in its sole discretion, which determination
will be final and binding. The Purchaser reserves the absolute right to reject
any or all tenders determined by it not to be in proper form or the acceptance
for payment of or payment for which may, in the opinion of the Purchaser's
counsel, be unlawful. The Purchaser also reserves the absolute right to waive
any defect or irregularity in any tender with respect to any particular Shares,
whether or not similar defects or irregularities are waived in the case of
other Shares. No tender of Shares will be deemed to have been validly made
until all defects or irregularities relating thereto have been cured or waived.
None of the Purchaser, Parent, the Depositary, the Information Agent, the
Dealer Manager or any other person will be under any duty to give notification
of any defects or irregularities in tenders or incur any liability for failure
to give any such notification. The Purchaser's interpretation of the terms and
conditions of the Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding.
Backup Withholding. In order to avoid "backup withholding" of Federal income
tax on payments of cash pursuant to the Offer, a stockholder surrendering
Shares in the Offer must provide the Depositary with such stockholder's correct
taxpayer identification number ("TIN") on a Substitute Form W-9 and certify
under penalties of perjury that such TIN is correct and that such stockholder
is not subject to backup withholding. Certain stockholders (including, among
others, all corporations and certain foreign individuals and entities) are not
subject to backup withholding. If a stockholder does not provide its correct
TIN or fails to provide the certifications described above, the Internal
Revenue Service ("IRS") may impose a penalty on such stockholder and payment of
cash to such stockholder pursuant to the Offer may be subject to backup
withholding of 31%. All stockholders surrendering Shares pursuant to the Offer
should complete and sign the main signature form and the Substitute Form W-9
included as part of the Letter of Transmittal to provide the information and
certification necessary to avoid backup withholding (unless an applicable
exemption exists and is proved in a manner satisfactory to the Purchaser and
the Depositary). Noncorporate foreign stockholders should complete and sign the
main signature form and a Form W-8, Certificate of Foreign Status, a copy of
which may be obtained from the Depositary, in order to avoid backup
withholding. See Instruction 9 to the Letter of Transmittal.
3. WITHDRAWAL RIGHTS
Except as otherwise provided in this Section 3, tenders of Shares are
irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to
the procedures set forth below at any time prior to the Expiration Date and,
unless theretofore accepted for payment and paid for by the Purchaser pursuant
to the Offer, may also be withdrawn at any time after July 7, 1994.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase and
must specify the name of the person having tendered the Shares to be withdrawn,
the number of Shares to be withdrawn and the name of the registered holder of
the Shares to be withdrawn, if different from the name of the person who
tendered the Shares. If certificates for Shares have been delivered or
6
<PAGE>
otherwise identified to the Depositary, then, prior to the physical release of
such certificates, the serial numbers shown on such certificates must be
submitted to the Depositary and, unless such Shares have been tendered by an
Eligible Institution, the signatures on the notice of withdrawal must be
guaranteed by an Eligible Institution. If Shares have been delivered pursuant
to the procedure for book-entry transfer as set forth in Section 2, any notice
of withdrawal must also specify the name and number of the account at the
appropriate Book-Entry Transfer Facility to be credited with the withdrawn
Shares and otherwise comply with such Book-Entry Transfer Facility's
procedures. Withdrawals of tenders of Shares may not be rescinded, and any
Shares properly withdrawn will thereafter be deemed not validly tendered for
purposes of the Offer. However, withdrawn Shares may be retendered by again
following one of the procedures described in Section 2 at any time prior to the
Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser in its sole
discretion, which determination will be final and binding. None of the
Purchaser, Parent, the Depositary, the Information Agent, the Dealer Manager or
any other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure
to give any such notification.
4. ACCEPTANCE FOR PAYMENT AND PAYMENT
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the Purchaser will accept for payment and will pay for all Shares
validly tendered prior to the Expiration Date and not properly withdrawn in
accordance with Section 3 promptly after the Expiration Date. Any determination
concerning the satisfaction of such terms and conditions will be within the
sole discretion of the Purchaser, and such determination will be final and
binding on all tendering stockholders. See Sections 1 and 14. The Purchaser
expressly reserves the right, in its sole discretion, to delay acceptance for
payment of or payment for Shares in order to comply in whole or in part with
any applicable law, including, without limitation, the HSR Act. Any such delays
will be effected in compliance with Rule 14e-1(c) under the Exchange Act
(relating to the Purchaser's obligation to pay for or return tendered Shares
promptly after the termination or withdrawal of the Offer).
Parent filed a Notification and Report Form with respect to the Offer under
the HSR Act on May 9, 1994. The waiting period under the HSR Act with respect
to the Offer will expire at 11:59 p.m., New York City time, on May 24, 1994,
unless early termination of the waiting period is granted. In addition, the
Antitrust Division of the Department of Justice (the "Antitrust Division") or
the Federal Trade Commission (the "FTC") may extend the waiting period by
requesting additional information or documentary material from Parent. If such
a request is made, such waiting period will expire at 11:59 p.m., New York City
time, on the 10th day after substantial compliance by Parent with such request.
See Section 15 hereof for additional information concerning the HSR Act and the
applicability of the antitrust laws to the Offer.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (1) certificates
for such Shares (or timely Book-Entry Confirmation of a transfer of such Shares
as described in Section 2), (2) a Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees,
and (3) any other documents required by the Letter of Transmittal. The per
Share consideration paid to any stockholder pursuant to the Offer will be the
highest per Share consideration paid to any other stockholder pursuant to the
Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares properly tendered to the Purchaser and
not withdrawn as, if and when the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance for payment of such Shares. Payment
for Shares accepted for payment pursuant to the Offer will be made by deposit
of the purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from the Purchaser
and transmitting payment to tendering stockholders. UNDER NO CIRCUMSTANCES WILL
INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE
PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH
PAYMENT.
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<PAGE>
If the Purchaser is delayed in its acceptance for payment of or payment for
Shares or is unable to accept for payment or pay for Shares pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer (but subject to compliance with Rule 14e-1(c) under the Exchange Act,
which requires that a tender offeror pay the consideration offered or return
the tendered securities promptly after the termination or withdrawal of a
tender offer), the Depositary may, nevertheless, on behalf of the Purchaser,
retain tendered Shares, and such Shares may not be withdrawn except to the
extent tendering stockholders are entitled to exercise, and duly exercise,
withdrawal rights as described in Section 3.
If any tendered Shares are not purchased pursuant to the Offer because of an
invalid tender or otherwise, certificates for any such Shares will be returned,
without expense to the tendering stockholder (or, in the case of Shares
delivered by book-entry transfer of such Shares into the Depositary's account
at a Book-Entry Transfer Facility pursuant to the procedure set forth in
Section 2, such Shares will be credited to an account maintained at the
appropriate Book-Entry Transfer Facility), as promptly as practicable after the
expiration or termination of the Offer.
The Purchaser reserves the right to transfer or assign, in whole or from time
to time in part, to Parent, or to one or more direct or indirect wholly owned
subsidiaries of Parent, the right to purchase Shares tendered pursuant to the
Offer, but any such transfer or assignment will not relieve the Purchaser of
its obligations under the Offer and will in no way prejudice the rights of
tendering stockholders to receive payment for Shares validly tendered and
accepted for payment pursuant to the Offer.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Sales of Shares pursuant to the Offer (and the receipt of the right to
receive cash by stockholders of the Company pursuant to the Merger) will be
taxable transactions for Federal income tax purposes under the Internal Revenue
Code of 1986, as amended (the "Code"), and may also be taxable transactions
under applicable state, local, foreign and other tax laws. For Federal income
tax purposes, a tendering stockholder will generally recognize gain or loss
equal to the difference between the amount of cash received by the stockholder
pursuant to the Offer (or to be received pursuant to the Merger) and the
aggregate tax basis in the Shares tendered by the stockholder and purchased
pursuant to the Offer (or cancelled pursuant to the Merger). Gain or loss will
be calculated separately for each block of Shares tendered and purchased
pursuant to the Offer.
If tendered Shares are held by a tendering stockholder as capital assets,
gain or loss recognized by the tendering stockholder will be capital gain or
loss, which will be long-term capital gain or loss if the tendering
stockholder's holding period for the Shares exceeds one year. Under present
law, long-term capital gains recognized by a tendering individual stockholder
will generally be taxed at a maximum Federal marginal tax rate of 28%, and
long-term capital gains recognized by a tendering corporate stockholder will be
taxed at a maximum Federal marginal tax rate of 35%.
A stockholder (other than certain exempt stockholders including, among
others, all corporations and certain foreign individuals) that tenders Shares
may be subject to 31% backup withholding unless the stockholder provides its
TIN and certifies that such number is correct or properly certifies that it is
awaiting a TIN. A stockholder that does not furnish its TIN may be subject to a
penalty imposed by the IRS. Each stockholder should complete and sign the
Substitute Form W-9 included as part of the Letter of Transmittal so as to
provide the information and certification necessary to avoid backup
withholding.
If backup withholding applies to a stockholder, the Depositary is required to
withhold 31% from payments to such stockholder. Backup withholding is not an
additional tax. Rather, the amount of the backup withholding can be credited
against the Federal income tax liability of the person subject to the backup
withholding, provided that the required information is given to the IRS. If
backup withholding results in an overpayment of tax, a refund can be obtained
by the stockholder upon filing an income tax return.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE WITH RESPECT TO SHARES
RECEIVED PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS
COMPENSATION OR WITH RESPECT TO HOLDERS OF SHARES WHO ARE SUBJECT TO SPECIAL
TAX TREATMENT UNDER THE CODE, SUCH AS NON-U.S. PERSONS, LIFE INSURANCE
COMPANIES, TAX-EXEMPT
8
<PAGE>
ORGANIZATIONS AND FINANCIAL INSTITUTIONS, AND MAY NOT APPLY TO A HOLDER OF
SHARES IN LIGHT OF ITS INDIVIDUAL CIRCUMSTANCES. STOCKHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO
THEM (INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL OR FOREIGN
INCOME AND OTHER TAX LAWS) OF THE OFFER AND THE MERGER.
6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES
The Shares are traded in the over-the-counter market and prices are quoted on
The Nasdaq National Market under the symbol "ACLB". The following table sets
forth, for each of the periods indicated, the high and low last reported sales
prices per Share as reported by The Nasdaq National Market and the Dow Jones
News Retrieval Service.
<TABLE>
<CAPTION>
SALES PRICE
---------------
HIGH LOW
------- -------
<S> <C> <C>
1992
First Quarter.................................................. $38 1/2 $28 3/4
Second Quarter................................................. $33 1/4 $27
Third Quarter.................................................. $36 5/8 $26 1/2
Fourth Quarter................................................. $34 $25
1993
First Quarter.................................................. $30 3/4 $17
Second Quarter................................................. $21 3/4 $15 1/2
Third Quarter.................................................. $23 3/4 $17 1/4
Fourth Quarter................................................. $22 3/8 $12 1/2
1994
First Quarter.................................................. $16 1/4 $11 3/4
Second Quarter (through May 6, 1994)........................... $22 7/8 $12 1/2
</TABLE>
On May 3, 1994, the last full day of trading before the public announcement
of the execution of the Merger Agreement, the reported closing sale price of
the Shares on The Nasdaq National Market was $17 1/4 per Share. On May 6, 1994,
the last full day of trading before the commencement of the Offer, the reported
closing sale price of the Shares on The Nasdaq National Market was $22 7/8 per
Share. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE
SHARES.
According to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993 (the "Form 10-K"), the Company has never paid any
dividends on the Shares.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, STOCK QUOTATION AND
EXCHANGE ACT REGISTRATION
The purchase of Shares pursuant to the Offer will reduce the number of
holders of Shares and the number of Shares that might otherwise trade publicly
and could adversely affect the liquidity and market value of the remaining
Shares held by the public.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the requirements of the NASD for continued inclusion
in The Nasdaq National Market (the top tier market of The Nasdaq Stock Market),
which require that an issuer have at least 200,000 publicly held shares, held
by at least 400 shareholders or 300 shareholders of round lots, with a market
value of $1,000,000, and have net tangible assets of at least either $2,000,000
or $4,000,000, depending on profitability levels during the issuer's four most
recent fiscal years. If these standards are not met, the Shares might
nevertheless continue to be included in The Nasdaq Stock Market with quotations
published in the Nasdaq "additional list" or in one of the "local lists", but
if the number of holders of the Shares were to fall below 300, or if the number
of publicly held Shares were to fall below 100,000 or there were not at least
two registered and active market makers for the Shares, the NASD's rules
provide that the Shares would no longer be "qualified" for Nasdaq
9
<PAGE>
reporting and Nasdaq would cease to provide any quotations. Shares held
directly or indirectly by directors, officers or beneficial owners of more than
10% of the Shares are not considered as being publicly held for this purpose.
According to the Company, as of May 5, 1994, there were approximately 360
holders of record of Shares and 8,398,916 Shares were outstanding. If, as a
result of the purchase of Shares pursuant to the Offer, the Shares no longer
meet the requirements of the NASD for continued inclusion in The Nasdaq Stock
Market or The Nasdaq National Market and the Shares are no longer included in
The Nasdaq Stock Market or The Nasdaq National Market, as the case may be, the
market for Shares could be adversely affected.
In the event that the Shares no longer meet the requirements of the NASD for
quotation through Nasdaq and the Shares are no longer included in The Nasdaq
Stock Market, it is possible that the Shares would continue to trade in the
over-the-counter market and that price quotations would be reported by other
sources. The extent of the public market for the Shares and the availability of
such quotations would, however, depend upon the number of holders of Shares
remaining at such time, the interests in maintaining a market in Shares on the
part of securities firms, the possible termination of registration of the
Shares under the Exchange Act, as described below, and other factors.
The Shares are currently registered under the Exchange Act. Registration of
the Shares under the Exchange Act may be terminated upon application of the
Company to the Commission if the Shares are neither listed on a national
securities exchange nor held by 300 or more holders of record. Termination of
registration of the Shares under the Exchange Act would substantially reduce
the information required to be furnished by the Company to its stockholders and
to the Commission and would make certain provisions of the Exchange Act no
longer applicable to the Company, such as the short-swing profit recovery
provisions of Section 16(b) of the Exchange Act, the requirement of furnishing
a proxy statement pursuant to Section 14(a) of the Exchange Act in connection
with stockholders' meetings and the related requirement of furnishing an annual
report to stockholders and the requirements of Rule 13e-3 under the Exchange
Act with respect to "going private" transactions. Furthermore, the ability of
"affiliates" of the Company and persons holding "restricted securities" of the
Company to dispose of such securities pursuant to Rule 144 or 144A promulgated
under the Securities Act of 1933, as amended, may be impaired or eliminated.
The Purchaser intends to seek to cause the Company to apply for termination of
registration of the Shares under the Exchange Act as soon after the completion
of the Offer as the requirements for such termination are met.
If registration of the Shares is not terminated prior to the Merger, then the
Shares will cease to be reported on The Nasdaq Stock Market and the
registration of the Shares under the Exchange Act will be terminated following
the consummation of the Merger.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
which has the effect, among other things, of allowing brokers to extend credit
on the collateral of the Shares. Depending upon factors similar to those
described above regarding listing and market quotations, it is possible that,
following the Offer, the Shares would no longer constitute "margin securities"
for the purposes of the margin regulations of the Federal Reserve Board and
therefore could no longer be used as collateral for loans made by brokers. If
registration of Shares under the Exchange Act were terminated, the Shares would
no longer be "margin securities" or be eligible for Nasdaq reporting.
8. CERTAIN INFORMATION CONCERNING THE COMPANY
The Company is a Delaware corporation with its principal executive offices at
300 Delaware Avenue, Suite 528, Wilmington, Delaware 19801-1622. According to
the Form 10-K, the Company's principal line of business is clinical laboratory
testing, providing to the medical profession a full range of routine and
esoteric testing services that are used in the diagnosis, monitoring and
treatment of disease. The Company provides its services to physicians,
hospitals, nursing homes, managed care institutions, corporations and
governmental agencies, including agencies of the United States of America. See
Section 15 for a description of certain pending legal matters affecting the
Company.
10
<PAGE>
Set forth below is certain selected consolidated financial information with
respect to the Company and its subsidiaries excerpted or derived from the
information contained in the Form 10-K. More comprehensive financial
information is included in such reports and other documents filed by the
Company with the Commission, and the following summary is qualified in its
entirety by reference to such reports and such other documents and all the
financial information (including any related notes) contained therein. Such
reports and other documents should be available for inspection and copies
thereof should be obtainable in the manner set forth below under "Available
Information".
ALLIED CLINICAL LABORATORIES, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Net revenues............................................. $163.0 $137.2 $102.2
Operating income......................................... 15.6 16.3 11.4
Net income............................................... 8.4 9.1 6.7
Net income per share..................................... $ 1.00 $ 1.10 $ 0.82
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1993 1992
------ -----
<S> <C> <C>
BALANCE SHEET DATA:
Current assets.................................................... $ 49.6 $58.1
Total assets...................................................... 138.1 120.6
Current liabilities............................................... 13.8 12.3
Long-term debt.................................................... 24.7 24.7
Stockholders' equity.............................................. 92.2 80.5
</TABLE>
Certain Company Projections. During the course of discussions between Parent
and the Company that led to the execution of the Merger Agreement (see Section
11), the Company provided Parent with certain non-public business and financial
information about the Company. This information included financial projections
prepared by the Company which projected net revenues, operating income, net
income and earnings per Share for the Company for the year ending December 31,
1994, of $208.5 million, $16.2 million, $9.7 million and $1.15 per Share,
respectively.
The Company does not as a matter of course make public any projections as to
future performance or earnings, and the projections set forth above are
included in this Offer to Purchase only because the information was provided to
Parent. The projections were not prepared with a view to public disclosure or
compliance with the published guidelines of the Commission or the guidelines
established by the American Institute of Certified Public Accountants regarding
projections or forecasts. The Company's internal operating projections (upon
which the projections provided to Parent were based in part) are, in general,
prepared solely for internal use and capital budgeting and other management
decisions and are subjective in many respects and thus susceptible to various
interpretations and periodic revision based on actual experience and business
developments. The projections were based on a number of assumptions (not all of
which were stated in the projections and not all of which were provided to
Parent) that are beyond the control of the Company, the Purchaser or Parent or
their respective financial advisors. Many of the assumptions upon which the
projections were based are dependent upon economic forecasting (both general
and specific to the Company's business), which is inherently uncertain and
subjective, and certain of such assumptions have not been realized in the
period since the date that such projections were prepared. None of the Company,
the Purchaser or Parent or their respective financial advisors assumes any
responsibility for the accuracy of any
11
<PAGE>
of the projections. The inclusion of the foregoing projections should not be
regarded as an indication that the Company, the Purchaser, Parent or any other
person who received such information considers it an accurate prediction of
future events.
Available Information. The Company is subject to the reporting requirements
of the Exchange Act and, in accordance therewith, is required to file reports
and other information with the Commission relating to its business, financial
condition and other matters. Information as of particular dates concerning the
Company's directors and officers, their remuneration, Shares sold to them, the
principal holders of the Company's securities and any material interest of such
persons in transactions with the Company is required to be disclosed in proxy
statements distributed to the Company's stockholders and filed with the
Commission. Such reports, proxy statements and other information should be
available for inspection at the public reference facilities of the Commission
located at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional
offices of the Commission located in the Northwestern Atrium Center, 500 West
Madison Street (Suite 1400), Chicago, Illinois 60661 and Seven World Trade
Center, 13th Floor, New York, New York 10048. Copies should be obtainable, by
mail, upon payment of the Commission's customary charges, by writing to the
Commission's principal office at 450 Fifth Street, N.W., Washington, D.C.
20549.
Except as otherwise stated in this Offer to Purchase, the information
concerning the Company contained herein has been taken from or based upon
publicly available documents on file with the Commission and other publicly
available information. Although the Purchaser and Parent do not have any
knowledge that any such information is untrue, neither the Purchaser nor Parent
takes any responsibility for the accuracy or completeness of such information
or for any failure by the Company to disclose events that may have occurred and
may affect the significance or accuracy of any such information.
9. CERTAIN INFORMATION CONCERNING THE PURCHASER AND PARENT
The Purchaser, a Delaware corporation and a wholly owned subsidiary of
Parent, was organized to acquire the Company and has not conducted any
unrelated activities since its organization. The principal offices of the
Purchaser are located at 4225 Executive Square, Suite 800, La Jolla, California
92037. All outstanding shares of capital stock of the Purchaser are owned by
Parent.
Parent's principal line of business is clinical laboratory testing, offering
a broad range of testing services used by the medical profession in the
diagnosis, monitoring and treatment of disease. Office-based physicians
constitute substantially all of Parent's clients. Parent is a Delaware
corporation with its principal office located at 4225 Executive Square, Suite
800, La Jolla, California 92037.
12
<PAGE>
Set forth below is certain selected consolidated financial information with
respect to Parent and its subsidiaries excerpted or derived from the
information contained in Parent's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993. More comprehensive financial information is
included in such reports and other documents filed by Parent with the
Commission, and the following summary is qualified in its entirety by reference
to such reports and such other documents and all the financial information
(including any related notes) contained therein. Such reports and other
documents should be available for inspection and copies thereof should be
obtainable in the manner set forth below under "Available Information".
NATIONAL HEALTH LABORATORIES INCORPORATED
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Net sales............................................. $ 760.5 $ 721.4 $ 603.9
Gross profit.......................................... 316.0 326.3 271.4
Operating income...................................... 185.5 64.1 165.8
Net earnings.......................................... 112.7 40.6 103.9
Earnings per common share............................. $ 1.26 $ 0.43 $ 1.05
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1993 1992
------- -------
<S> <C> <C>
BALANCE SHEET DATA:
Current assets................................................. $ 183.3 $ 179.6
Total assets................................................... 585.5 477.4
Current obligations............................................ 120.9 147.6
Long-term obligations.......................................... 323.8 117.3
Stockholders' equity........................................... 140.8 212.5
</TABLE>
On April 25, 1994, Parent publicly released its results of operations for the
quarter ended March 31, 1994. A summary of such results is set forth below.
NATIONAL HEALTH LABORATORIES INCORPORATED
SELECTED CONSOLIDATED FINANCIAL INFORMATION (IN MILLIONS, EXCEPT PER SHARE
DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1994 1993
--------- ---------
<S> <C> <C>
Net sales.................................................. $185.0 $199.8
Operating income........................................... 18.6 57.3
Net earnings............................................... 8.1 33.6
Earnings per common share(*)............................... $ 0.10 $ 0.36
</TABLE>
- --------
(*) Based upon a weighted average number of shares outstanding of 84,750,692
shares and 93,525,174 shares during the quarters ended March 31, 1994 and
March 31, 1993, respectively.
Parent is currently seeking stockholder approval of a proposed corporate
reorganization (the "Reorganization") of Parent in which National Health
Laboratories Holdings Inc., a Delaware corporation and currently a wholly owned
subsidiary of Parent ("Holdings"), will own, through NHL Intermediate Holdings
Corp. I, a Delaware corporation and a wholly owned subsidiary of Holdings
("Intermediate
13
<PAGE>
Holdings I"), all the outstanding capital stock of Parent. Parent's Board of
Directors has unanimously approved, and recommended that its stockholders
approve, the Reorganization at Parent's annual meeting of stockholders, which
will take place at 10:30 a.m., Central time on June 7, 1994.
If stockholder approval of the Reorganization is obtained and the
Reorganization is consummated, immediately thereafter and in order to
facilitate the financing arrangements described in Section 10, Intermediate
Holdings I will contribute all the outstanding capital stock of Parent to NHL
Intermediate Holdings Corp. II, a Delaware corporation and a newly formed,
wholly owned subsidiary of Intermediate Holdings I ("Intermediate Holdings
II"). As a result, following these actions, Holdings will be the public company
and the ultimate parent company, through two wholly owned, intermediate holding
companies, of Parent (and, by definition, the Purchaser).
Parent expects the Reorganization to be approved by its stockholders and that
all the foregoing corporate actions will be effected on June 7 prior to the
acceptance for payment of Shares tendered pursuant to the Offer. However, the
failure to obtain stockholder approval of the Reorganization or otherwise to
consummate the Reorganization on June 7 will not affect the Purchaser's ability
or obligation to accept for payment Shares tendered pursuant to the Offer.
Except as described in this Offer to Purchase, none of the Purchaser, Parent
Intermediate Holdings II, Intermediate Holdings I or Holdings (collectively,
the "Corporate Entities") or, to the best knowledge of the Corporate Entities,
any of the persons listed in Schedule I or any associate or majority-owned
subsidiary of the Corporate Entities or any of the persons so listed,
beneficially owns any equity security of the Company, and none of the Corporate
Entities or, to the best knowledge of the Corporate Entities, any of the other
persons referred to above, or any of the respective directors, executive
officers or subsidiaries of any of the foregoing, has effected any transaction
in any equity security of the Company during the past 60 days.
Except as described in this Offer to Purchase, (1) there have not been any
contacts, transactions or negotiations between the Corporate Entities, any of
their respective subsidiaries or, to the best knowledge of the Corporate
Entities, any of the persons listed in Schedule I, on the one hand, and the
Company or any of its directors, officers or affiliates, on the other hand,
that are required to be disclosed pursuant to the rules and regulations of the
Commission and (2) none of the Corporate Entities or, to the best knowledge of
the Corporate Entities, any of the persons listed in Schedule I has any
contract, arrangement, understanding or relationship with any person with
respect to any securities of the Company.
Except as described in this Offer to Purchase, during the last five years,
none of the Corporate Entities or, to the best knowledge of the Corporate
Entities, any of the persons listed in Schedule I (a) has been convicted in a
criminal proceeding (excluding traffic violations and similar misdemeanors) or
(b) was a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to
a judgment, decree or final order enjoining future violations of, or
prohibiting activities subject to, Federal or state securities laws or finding
any violation of such laws. See Section 15 for a description of Parent's plea
of guilty to the charge of presenting two false claims to the Civilian Health
and Medical Program of the Uniformed Services ("CHAMPUS"). The name, business
address, present principal occupation or employment, five-year employment
history and citizenship of each of the directors and executive officers of the
Purchaser, Parent and Holdings are set forth in Schedule I.
Available Information. Parent is subject to the informational filing
requirements of the Exchange Act and, in accordance therewith, is obligated to
file reports and other information with the Commission relating to its
business, financial condition and other matters. Information, as of particular
dates, concerning Parent's directors and officers, their remuneration, options
granted to them, the principal holders of Parent's securities and any material
interest of such persons in transactions with Parent is disclosed in proxy
statements distributed to Parent's stockholders and filed with the Commission.
Such reports, proxy statements and other information should be available for
inspection at the Commission, and copies thereof should be obtainable from the
Commission, in the same manner as set forth with respect to information
concerning the Company
14
<PAGE>
in Section 8. Such material should also be available for inspection at the
library of the NYSE, 20 Broad Street, New York, New York 10005.
10. SOURCE AND AMOUNT OF FUNDS
The total amount of funds required by the Purchaser to purchase all
outstanding Shares pursuant to the Offer and to pay fees and expenses related
to the Offer and the Merger is estimated to be approximately $212,100,000. The
Purchaser plans to obtain all funds needed for the Offer and the Merger
through a capital contribution which will be made by Intermediate Holdings II
to Parent and by Parent to the Purchaser. Intermediate Holdings II plans to
obtain funds for such capital contribution pursuant to a credit agreement (the
"Credit Agreement") to be entered into pursuant to a commitment letter dated
May 3, 1994 (the "Commitment Letter") between Parent and Citibank, N.A.
("Citibank"). However, the Purchaser has not conditioned the Offer on
obtaining financing. In the event the Reorganization is not consummated, the
Commitment Letter provides that the financing for the Offer and the Merger
would be provided directly to Parent. In such event, the interest rate margin
described below would be increased by amounts to be mutually determined
between Citibank and Parent.
Pursuant to the Commitment Letter, Citibank has committed to provide (i) a
revolving credit facility of up to $350,000,000 (the "Revolving Credit
Facility") and (ii) a term loan facility of $400,000,000 (the "Term Facility"
and, together with the Revolving Credit Facility, the "Facilities") to finance
the acquisition of Shares, to refinance certain existing debt of the Company,
to refinance certain existing debt of Parent, to pay related fees and expenses
and for general corporate purposes of the borrower and its subsidiaries, in
each case subject to the terms and conditions set forth therein.
The Commitment Letter provides for facility fees not to exceed $11,562,500
and an agent's fee of $250,000 per annum. The borrower will pay a commitment
fee on the average daily unused portion of the Facilities of 0.5%, subject to
reduction to 0.375% if certain financial tests are met. Availability of funds
under the Facilities is conditioned on certain customary conditions, including
those substantially similar to those set forth in Section 14, and the Credit
Agreement is expected to contain customary representations, warranties,
covenants and events of default. In addition, it will be an event of default
if the Merger is not consummated within 150 days after consummation of the
Offer.
The Revolving Credit Facility will mature on the fifth anniversary of the
consummation of the Offer with semi-annual reductions in availability of
$50,000,000, each commencing three and one-half years after the consummation
of the Offer. The Term Facility will mature six and one-half years after the
consummation of the Offer, with repayments in each quarter prior to maturity
based on a specified amortization schedule. If Intermediate Holdings II issues
long-term fixed-rate unsecured senior notes for cash ("New Debt Securities"),
which it currently intends to do and which will be permitted under the Credit
Agreement, subject to specified conditions, the first $200,000,000 of net cash
proceeds from such issuance must be applied to prepay the Term Facility, and
any excess must be applied pro rata to prepay the Term Facility and to
permanently reduce the Revolving Credit Facility. All net cash proceeds from
the sale of any assets of Intermediate Holdings II and its subsidiaries (with
specified exceptions) must be applied first to prepay the Term Facility and
second to permanently reduce the Revolving Credit Facility. The Facilities
will bear interest, at the borrower's option, at (i) Citibank's Base Rate
(which will be highest of (a) Citibank's publicly announced base rate, (b) a
certificate of deposit rate plus 1/2 of 1% and (c) the Federal funds effective
rate plus 1/2 of 1%), plus a margin of 0.75% per annum prior to the Merger and
thereafter varying between 0.00% and 0.75% per annum based upon variations in
certain financial tests or (ii) the Eurodollar rate for one, two, three or six
month interest periods (as selected by the borrower), plus a margin of 2.0%
per annum prior to the Merger and thereafter varying between 1.25% and 2.00%
per annum based upon variations in certain financial tests. The margin for all
borrowings under the Facilities both before and after the Merger will be
decreased by 0.25% per annum on the date that the net cash proceeds from the
issuance of $200,000,000 of New Debt Securities is applied to prepay the Term
Facility. In addition, if such prepayment occurs within certain time periods,
certain covenants
15
<PAGE>
to be set forth in the Credit Agreement will become less restrictive and the
total amount of facility fees payable will be less than the maximum amount
referred to above.
The Facilities will be guaranteed by the Purchaser, Parent and by all other
present and future domestic subsidiaries of Intermediate Holdings II and by
Intermediate Holdings I. Upon consummation of the Merger, the Company will
assume the obligations of the Purchaser as a guarantor. The Facilities will be
secured by (i) all capital stock of domestic subsidiaries of Intermediate
Holdings II (including the capital stock of the Parent and the Purchaser, but
excluding the capital stock of the Company prior to the consummation of the
Merger), (ii) 66 2/3% of the capital stock of any first-tier foreign
subsidiaries of Intermediate Holdings II and (iii) all such other assets of
Intermediate Holdings II and the domestic subsidiaries described in clause (i)
as Citibank requests. Intermediate Holdings I will pledge all the capital
stock of Intermediate Holdings II as collateral for its guaranty. Upon
consummation of the Merger, all capital stock of the Company and its domestic
subsidiaries, 66 2/3% of the capital stock of any first-tier foreign
subsidiaries of the Company and all such other assets of the Company and its
domestic subsidiaries as Citibank requests will be pledged as collateral for
the Facilities.
In connection with the Facilities, Holdings will execute an agreement in
which it will covenant, among other things, (i) not to engage in any business
other than in the health care industry, (ii) to maintain a separate corporate
identity from Intermediate Holdings II and (iii) not to commingle its assets
and business functions with the assets and business functions of Intermediate
Holdings II. Intermediate Holdings II will be required to agree to provisions
intended to establish it as a bankruptcy-remote vehicle, including a
requirement that its charter and bylaws contain appropriate restrictions on
its ability to commence a voluntary bankruptcy or other insolvency proceeding.
It is anticipated that the indebtedness incurred under the Facilities will
be repaid from funds generated internally by Parent and its subsidiaries
(including, after the Merger, funds generated by the Company) and from other
sources. No final decisions have been made concerning the method the borrower
will employ to repay such indebtedness, although it is presently intended that
one source of repayment of a portion of such indebtedness will be a sale of
the New Debt Securities. Such decisions will be based on Parent's review from
time to time of the advisability of particular actions, as well as on
prevailing interest rates and financial and other economic conditions.
In connection with the Commitment Letter, Parent agreed to indemnify
Citibank against certain liabilities. The foregoing summary of the Commitment
Letter is qualified in its entirety by reference to the text of the Commitment
Letter, which was filed as an exhibit to the Schedule 14D-1. See Section 17.
11. CONTACTS WITH THE COMPANY; BACKGROUND OF THE OFFER
In March 1993, James R. Maher, President and Chief Executive Officer of
Parent, and Haywood D. Cochrane, Jr., President and Chief Executive Officer of
the Company, met in New York City at Mr. Maher's initiative. They discussed in
a general way, and among other things, whether a business combination would be
beneficial for the two companies.
In early July 1993, in separate meetings Mr. Maher met in New York City with
Mr. Cochrane and with John L. Vogelstein, President and Vice Chairman of E.M.
Warburg, Pincus & Co. ("Warburg"), an affiliate of the principal stockholder
of the Company, at which time they discussed a possible acquisition of, or
other business combination involving, the Company. On July 12, 1993, Parent
and the Company executed a confidentiality agreement pursuant to which Parent
agreed that the confidential information provided to it by the Company would
be used solely for the purpose of evaluating a possible transaction with the
Company and that any such information, as well as discussions between Parent
and the Company, would be kept confidential by Parent.
16
<PAGE>
In July and August 1993, Mr. Maher and senior executives and advisors of
Parent had a number of meetings with Mr. Cochrane and other senior executives
of the Company to discuss the business and condition of the Company. After
further discussions between Mr. Maher and Mr. Cochrane, Parent and the Company
were unable to reach an agreement on the price and other terms of a possible
acquisition of the Company.
Mr. Maher and Mr. Cochrane spoke by telephone several times during the fall
of 1993 and met twice in New York City in early December 1993 and January 1994,
along with Gerard M. Hayden, Jr., Chief Financial Officer of the Company, and
advisors to Parent and the Company. During these conversations, the Company
discussed the possibility of selling its Texas and Arizona operations to Parent
and provided information about its current business and financial condition.
The Company's Arizona operations were thereafter sold to Parent on February 1,
1994, for approximately $3,600,000 in cash.
In February 1994, Mr. Cochrane again met with Mr. Maher in New York to
discuss a possible acquisition of the Company, at which meeting Mr. Cochrane
indicated a renewed interest in pursuing such an acquisition or business
combination. Mr. Maher indicated that Parent might be interested in pursuing a
transaction in the future but not at the present time.
On April 21, Mr. Cochrane and Mr. Hayden met with Mr. Maher in New York City
to discuss the acquisition of the Company by Parent and the consideration which
might be involved in such a transaction. Representatives of the parties, their
respective legal advisors and Alex. Brown had several conversations and
meetings in late April regarding such a transaction. On April 22, Mr. Maher
telephoned Mr. Vogelstein to state an interest in Parent's acquiring all the
Shares at $20 per Share in cash and in obtaining an option to purchase the
Shares controlled by Warburg at the same price per Share. On April 25, Mr.
Cochrane discussed with Mr. Maher the price offered by Parent. During the next
several days, senior executives of Parent and representatives of its financial
and legal advisors conducted a review of the Company in Nashville, Tennessee.
On April 28, the Company received an initial draft of the Merger Agreement
and the Option Agreements. During May 1 and May 2, senior executives of Parent
and the Company, representatives of their respective legal advisors and Alex.
Brown and senior executives of Warburg commenced negotiations regarding the
proposed transaction. While negotiations were in progress, in the morning on
May 3, Mr. Maher increased Parent's offer to $23.00 per Share in cash. Final
negotiations concerning the transaction continued through that afternoon. The
Merger Agreement and the Option Agreements were executed late in the night on
May 3, and the transaction was publicly announced on May 4, 1994.
12. PURPOSE OF THE OFFER; THE MERGER AGREEMENT AND THE OPTION AGREEMENTS
Purpose. The purpose of the Offer is to acquire control of and the entire
equity interest in the Company. Following the Offer, the Purchaser and Parent
intend to acquire any remaining equity interest in the Company not acquired in
the Offer by consummating the Merger.
The Merger Agreement. The Merger Agreement provides that following the
satisfaction or waiver of the conditions described below under "Conditions to
the Merger", the Purchaser will be merged with and into the Company, and each
then outstanding Share (other than Shares owned by the Company as treasury
stock or by any subsidiary of the Company, Parent, the Purchaser or any other
subsidiary of Parent or by stockholders, if any, who are entitled to and who
properly exercise dissenters' rights under Delaware law) will be converted into
the right to receive the Merger Consideration.
VOTE REQUIRED TO APPROVE MERGER. The DGCL requires, among other things, that
the adoption of any plan of merger or consolidation of the Company must be
approved by the Board of Directors and generally by the holders of the
Company's outstanding voting securities. The Board of Directors of the Company
has approved the Offer and the Merger; consequently, the only additional action
of the Company that may be necessary to effect the Merger is approval by such
stockholders if the short-form merger procedure described below is not
17
<PAGE>
available. Under the DGCL, the affirmative vote of holders of a majority of the
outstanding Shares (including any Shares owned by the Purchaser), is generally
required to approve the Merger. If the Purchaser acquires, through the Offer or
otherwise, voting power with respect to at least a majority of the outstanding
Shares, (which would be the case if the Minimum Tender Condition were satisfied
and the Purchaser were to accept for payment Shares tendered pursuant to the
Offer and the Purchaser were to purchase the Optioned Shares pursuant to the
exercise of the Options, or the Selling Stockholders were to tender the
Optioned Shares pursuant to the Offer or the Purchaser were to affirmatively
vote the Optioned Shares pursuant to the proxies granted pursuant to the Option
Agreements, as described below under "Option Agreements"), it would have
sufficient voting power to effect the Merger without the vote of any other
stockholder of the Company. However, the DGCL also provides that if a parent
company owns at least 90% of each class of stock of a subsidiary, the parent
company can effect a "short-form" merger with that subsidiary without the
action of the other stockholders of the subsidiary. Accordingly, if, as a
result of the Offer or otherwise, the Purchaser acquires or controls the voting
power of at least 90% of the outstanding Shares, the Purchaser could, and
intends to, effect the Merger without prior notice to, or any action by, any
other stockholder of the Company.
CONDITIONS TO THE MERGER. The Merger Agreement provides that the Merger is
subject to the satisfaction of certain conditions, including the following: (1)
the Merger Agreement having been approved and adopted by the affirmative vote
of the Company's stockholders by the requisite vote in accordance with
applicable law and the Company's certificate of incorporation and (2) no
statute, rule, regulation, executive order, decree, temporary restraining
order, preliminary or permanent injunction or other order issued by any court
of competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger being in effect; provided, however, that each of
the Company, the Purchaser and Parent has used best efforts to prevent the
entry of any such injunction or other order and to appeal as promptly as
possible any injunction or other order that may be entered.
TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be terminated at
any time prior to the effective time of the Merger, whether before or after
approval by the stockholders of the Company, (1) by mutual written consent of
the Company and Parent, (2) by either the Company or Parent if (a)(i) as a
result of the failure of any of the conditions set forth in Section 14, the
Offer has been terminated or expired in accordance with its terms without the
Purchaser having accepted for payment any Shares pursuant to the Offer or (ii)
the Purchaser has not accepted for payment any Shares pursuant to the Offer
within 90 days following the date of the Merger Agreement, unless the failure
of any condition to such acceptance results from the failure by the party
seeking to terminate the Merger Agreement to perform any of its obligations
under the Merger Agreement or unless the failure of any such condition results
from facts or circumstances that constitute a breach of representation or
warranty under the Merger Agreement by such party, or (b) if any Federal, state
or local government or any court, administrative or regulatory agency or
commission or other governmental authority or agency, domestic or foreign (a
"Governmental Entity"), has issued an order, decree or ruling or taken any
action permanently enjoining, restraining or otherwise prohibiting the
acceptance for payment of or payment for Shares pursuant to the Offer or the
Merger and such order, decree or ruling or other action has become final and
nonappealable and (3) by the Company under the circumstances described below
under "Takeover Proposals". In the event the Merger Agreement is terminated by
either the Company or Parent as described in this paragraph, the Merger
Agreement will become void and there will be no liability or obligation on the
part of the Company, the Purchaser or Parent, except with respect to certain
specified provisions (including the provisions described below under "Fees and
Expenses") and except to the extent that such termination results from the
willful and material breach by a party of any of its representations,
warranties, covenants or agreements set forth in the Merger Agreement.
TAKEOVER PROPOSALS. The Merger Agreement provides that the Company will not,
nor will it permit any of its subsidiaries to, nor will it authorize or permit
any director, officer or employee of or any investment banker, attorney or
other advisor or representative of the Company or any of its subsidiaries to,
directly or indirectly, (1) solicit, initiate or encourage the submission of
any Takeover Proposal (as defined below) or (2) participate in any discussions
or negotiations regarding, or furnish to any person any information with
respect
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to, or take any other action to facilitate any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Takeover Proposal; provided, however, that prior to the acceptance for payment
of Shares pursuant to the Offer, to the extent required by the fiduciary
obligations of the Board of Directors of the Company (as determined in good
faith by the Board of Directors based on the advice of outside counsel), the
Company may, (i) in response to an unsolicited request therefor, furnish
information with respect to the Company to any person pursuant to a customary
confidentiality agreement (as determined by the Company's outside counsel) and
discuss (A) such information (but not the terms of any possible Takeover
Proposal) and (B) the terms of the section of the Merger Agreement being
described in this subsection with such person and (ii) upon receipt by the
Company of any Takeover Proposal, following delivery to Parent of a notice of
such Takeover Proposal, participate in negotiations regarding such Takeover
Proposal. The Merger Agreement defines "Takeover Proposal" as any proposal for
a merger or other business combination involving the Company or any of its
Significant Subsidiaries (as defined in the Merger Agreement) or any proposal
or offer to acquire in any manner, directly or indirectly, an equity interest
in, not less than 25% of the outstanding voting securities of, or assets
representing not less than 25% of the annual revenues of, the Company or any of
its Significant Subsidiaries, other than the transactions contemplated by the
Merger Agreement.
The Merger Agreement provides that neither the Board of Directors of the
Company nor any committee thereof will (1) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to the Purchaser or Parent, the
approval or recommendation by the Board of Directors of the Company or any such
committee of the Merger Agreement, the Offer or the Merger, (2) approve or
recommend, or propose to approve or recommend, any Takeover Proposal or (3)
enter into any agreement with respect to any Takeover Proposal. Notwithstanding
the foregoing, in the event the Board of Directors of the Company receives a
Takeover Proposal that, in the exercise of its fiduciary obligations (as
determined in good faith by the Board of Directors after reviewing the advice
of outside counsel), it determines to be a Superior Proposal (as defined
below), the Board of Directors may (subject to the following sentences)
withdraw or modify its approval or recommendation of the Merger Agreement, the
Offer or the Merger, approve or recommend any such Superior Proposal, enter
into an agreement with respect to such Superior Proposal or terminate the
Merger Agreement, in each case at any time after the second business day
following Parent's receipt of written notice (a "Notice of Superior Proposal")
advising Parent that the Board of Directors has received a Takeover Proposal
that it has determined to be a Superior Proposal, specifying the material terms
and conditions of such Superior Proposal and identifying the person making such
Superior Proposal. The Company may take any of the foregoing actions pursuant
to the preceding sentence only if the Purchaser has not accepted for payment
Shares pursuant to the Offer. In addition, if the Company proposes to enter
into an agreement with respect to any Takeover Proposal, the Company must
concurrently with taking any of the foregoing actions pay, or cause to be paid,
to Parent the Expense Fee (as defined below under "Fees and Expenses") and, in
the event the Company enters into such an agreement, such agreement must
provide for the payment to Parent of the Termination Fee (as defined below
under "Fees and Expenses") upon the consummation of the transaction
contemplated by such agreement. For purposes of the Merger Agreement, a
"Superior Proposal" means any bona fide Takeover Proposal on terms which the
Board of Directors of the Company determines in its good faith reasonable
judgment (after reviewing the advice of a financial advisor of nationally
recognized reputation) to be more favorable to the Company's stockholders than
the Offer and the Merger. The Merger Agreement also provides that nothing
contained therein will prohibit the Company from taking and disclosing to its
stockholders a position contemplated by Rule 14e-2(a) under the Exchange Act
prior to the third business day following Parent's receipt of a Notice of
Superior Proposal provided that the Company does not withdraw or modify its
position with respect to the Offer or the Merger or approve or recommend a
Takeover Proposal.
The Merger Agreement provides that the Company will promptly advise Parent
orally and in writing of any request for information or of any Takeover
Proposal, or any inquiry which could lead to any Takeover Proposal, the
material terms and conditions of such inquiry or Takeover Proposal and the
identity of the person making such request, Takeover Proposal or inquiry. The
Company has agreed to keep Parent fully informed of the status and details of
any such request, Takeover Proposal or inquiry.
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FEES AND EXPENSES. The Merger Agreement provides that the Company will pay, or
cause to be paid, in same day funds to Parent an amount equal to its documented
out-of-pocket expenses, not exceeding $6,000,000 (the "Expense Fee"): (i) upon
demand, unless the Merger Agreement is terminated by the Company and Parent or
the Purchaser has failed to perform in any material respect any of its
obligations under the Merger Agreement, if the Merger Agreement is terminated
pursuant to the provisions of the Merger Agreement described in clause (2)(a)
under "Termination of the Merger Agreement" above as a result of the failure of
any condition set forth in clause (i) or (iii) of paragraph (e) or in paragraph
(f) or (g) of Section 14; (ii) upon demand, unless the Merger Agreement is
terminated by the Company and Parent or the Purchaser has failed to perform in
any material respect any of its obligations under the Merger Agreement, if (x)
at any time on or after the date of the Merger Agreement until one year
following the termination of the Merger Agreement, any person or "group"
(within the meaning of Section 13(d)(3) of the Exchange Act) (other than Parent
or any of its affiliates) has acquired, directly or indirectly, the Company,
assets representing more than 50% of the revenues of the Company or more than
50% of the Shares then outstanding and (y)(A) on or after the date of the
Merger Agreement and prior to the expiration of the Offer, such person or group
has made a Takeover Proposal, (B) the Offer has remained open until the
scheduled expiration date immediately following the date such Takeover Proposal
was first publicly announced and (C) the Merger Agreement has been terminated
pursuant to the provisions of the Merger Agreement described in clause (2)(a)
under "Termination of the Merger Agreement" above; or (iii) concurrently with
the Company entering into any agreement with respect to any Superior Proposal
in accordance with the provisions described above under "Takeover Proposals",
unless the Merger Agreement is terminated by the Company and Parent or the
Purchaser has failed to perform in any material respect any of its obligations
under the Merger Agreement.
The Merger Agreement provides that the Company will pay, or cause to be paid,
in same day funds to Parent upon demand an additional fee of $6,000,000 (the
"Termination Fee"), if (i) the Company has entered into an agreement with
respect to a Superior Proposal in accordance with the provisions described
above under "Takeover Proposals" and the transaction contemplated by such
agreement (or any subsequent agreement involving a Takeover Proposal entered
into after the entering into of such agreement) has been consummated within 12
months of the date of the Merger Agreement or (ii) the Company has not entered
into such agreement and the Expense Fee is paid or becomes payable pursuant to
the provisions described in clause (i) (solely with respect to a failure of any
condition set forth in clause (i) or (iii) of paragraph (e) of Section 14) or
(ii) of the preceding paragraph.
CONDUCT OF BUSINESS BY THE COMPANY. The Merger Agreement provides that, until
such time as Parent's designees constitute a majority of the Board of Directors
of the Company, the Company will, and will cause its subsidiaries to, carry on
their respective businesses in the ordinary course and use all reasonable
efforts to preserve intact their current business organizations, keep available
the services of their current officers and employees and preserve their
relationships with customers, suppliers and others having business dealings
with them. The Merger Agreement further provides that, except as otherwise
expressly contemplated by the Merger Agreement, the Company will not, and will
not permit any of its subsidiaries to, (1) (a) declare, set aside or pay any
dividends on, or make other distributions in respect of, its capital stock,
other than dividends and distributions by any direct or indirect wholly owned
subsidiary of the Company to its parent or, in the case of less than wholly
owned subsidiaries, as required by agreements existing on the date of the
Merger Agreement, (b) split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock or (c) purchase, redeem
or otherwise acquire any shares of capital stock of the Company or any of its
subsidiaries or any other securities thereof or any rights, warrants or options
to acquire any such shares or other securities, other than any purchase of the
Convertible Notes in accordance with Section 2.3 of the Note Agreement dated as
of December 1, 1991; (2) issue, deliver, sell, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities, other than Shares issued
pursuant to the exercise of outstanding employee stock options and Shares
issued upon conversion of the Convertible Notes by holders
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thereof; (3) amend its certificate of incorporation or by-laws; (4) acquire or
agree to acquire (a) by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof or (b) any assets that individually or in the aggregate are
material to the Company and its subsidiaries taken as a whole, except purchases
of inventory in the ordinary course of business consistent with past practice;
(5) sell, lease, license, mortgage or otherwise encumber or subject to any lien
or otherwise dispose of any of its properties or assets, except for sales of
its properties or assets in the ordinary course of business consistent with
past practice; (6) incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or warrants or other
rights to acquire any debt securities of the Company or any of its
subsidiaries, guarantee any debt securities of others, enter into any "keep
well" or other agreement to maintain any financial statement condition of
another person or enter into any arrangement having the economic effect of any
of the foregoing, or make any loans, advances or capital contributions to, or
investments in, any other person, other than to the Company or any direct or
indirect wholly owned subsidiary of the Company; (7) make or agree to make any
new capital expenditure or expenditures which individually is in excess of
$150,000 or which in the aggregate are in excess of $1,000,000; (8) make any
tax election or settle or compromise any income tax liability; (9) pay,
discharge, settle or satisfy any claims, liabilities or obligations, other than
the payment, discharge, settlement or satisfaction, in the ordinary course of
business consistent with past practice or in accordance with their terms, of
liabilities reflected or reserved against in, or contemplated by, the most
recent consolidated financial statements (or the notes thereto) of the Company
included in any report of the Company filed with the Commission prior to the
date of the Merger Agreement or incurred since the date of such financial
statements in the ordinary course of business consistent with past practice;
(10) except in the ordinary course of business, modify, amend or terminate any
material contract or agreement to which the Company or any subsidiary is a
party or waive, release or assign any material rights or claims thereunder; or
(11) authorize any of, or commit or agree to take any of, the foregoing
actions.
In the Merger Agreement, the Company has also agreed not to, and not to
permit any of its subsidiaries to, take any action that would result in (1) any
of the representations and warranties of the Company set forth in the Merger
Agreement that are qualified as to materiality becoming untrue, (2) any of such
representations and warranties that are not so qualified becoming untrue in any
material respect or (3) except as otherwise permitted by the provisions of the
Merger Agreement described above under "Takeover Proposals", any of the
conditions to the Offer or to the Merger not being satisfied.
BOARD OF DIRECTORS. The Merger Agreement provides that, subject to compliance
with Section 14(f) of the Exchange Act, promptly upon the acceptance for
payment of and payment for any Shares by the Purchaser pursuant to the Offer,
the Purchaser will be entitled to designate such number of directors on the
Board of Directors of the Company as will give the Purchaser a majority of such
directors, and the Company will, at such time, cause the Purchaser's designees
to be so appointed or elected by the existing Board of Directors of the
Company; provided, however, that, in the event the Purchaser's designees are
elected to the Company's Board of Directors, until the effective time of the
Merger, (i) the Board of Directors of the Company is required to have at least
two directors who were directors of the Company on the date of the Merger
Agreement and who are not officers of the Company (the "Independent Directors")
and (ii) if the number of Independent Directors is reduced below two for any
reason, the remaining Independent Director will designate a person to fill such
vacancy, who will be deemed to be an Independent Director, or, if no
Independent Directors then remain, the other directors will designate two
persons to fill such vacancies who are not officers or affiliates of the
Company, or officers or affiliates of Parent or any of its subsidiaries, and
such persons will be deemed to be Independent Directors. Subject to applicable
law, the Company has agreed to take all action requested by Parent necessary to
effect any such election, including mailing to its stockholders an information
statement containing the information required by Section 14(f) of the Exchange
Act and Rule 14f-1 promulgated thereunder, and the Company has agreed to make
such mailing with the mailing of the Schedule 14D-9. In connection with the
foregoing, the Merger Agreement provides that the Company, at the option of
Parent (which Parent intends to exercise), will promptly increase the size of
the
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Company's Board of Directors or obtain the resignation of such number of its
current directors as is necessary to enable the Purchaser's designees to be
elected or appointed to the Board of Directors as provided above.
STOCK OPTIONS. The Merger Agreement provides that as soon as practicable
following the date of the Merger Agreement, the Board of Directors of the
Company (or, if appropriate, any committee administering any stock option plan)
will take all actions as are required to adjust the terms of all outstanding
employee stock options to purchase Shares granted under any stock option or
stock appreciation rights plan, program or arrangement of the Company as is
necessary to provide that each stock option, whether vested or not, outstanding
immediately prior to the acceptance for payment of Shares pursuant to the Offer
will be cancelled in exchange for a cash payment by the Company of an amount
equal to (i) the excess, if any, of (x) the Offer Price over (y) the exercise
price per Share subject to such stock option, multiplied by (ii) the number of
Shares for which such stock option has not yet been exercised. Notwithstanding
the foregoing, the stock options granted within six months prior to the
effective time of the Merger to directors and officers of the Company who are
subject to the reporting requirements of Section 16 of the Exchange Act and the
rules promulgated thereunder will not be cancelled in exchange for cash
payments, but instead will be immediately converted as of the effective time of
the Merger into the right (each, an "Adjusted Option") to purchase the Option
Conversion Number (as defined below) of shares of common stock, par value $.01
per share, of Parent (or, in the event Parent has consummated the
Reorganization prior to the effective time of the Merger, shares of common
stock, par value $.01 per share, of Holdings). Each Adjusted Option will have
substantially the same terms as the stock option to which it is related, except
that: (i) the Adjusted Option will be deemed fully vested, (ii) if the Adjusted
Option holder's employment with Parent or the Company is terminated, the
Adjusted Option will remain exercisable for a period of at least six months
after the date of such termination and (iii) the exercise price of an Adjusted
Option will be an amount equal to the exercise price of the stock option
related to such Adjusted Option as of the date of the Merger Agreement divided
by the Conversion Number (as defined below). The "Option Conversion Number" for
any Adjusted Option will be equal to the number of Shares purchasable pursuant
to the stock option related to such Adjusted Option as of the date of the
Merger Agreement multiplied by the Conversion Number. The "Conversion Number"
will be a number equal to (x) the Offer Price divided by (y) the average
closing price of common stock of Parent and/or Holdings, as the case may be, on
the NYSE Composite Tape for the 30 consecutive trading days prior to the
effective time of the Merger.
BENEFIT PLANS. Parent currently intends to cause the Surviving Corporation to
maintain for a period of three years after the effective time of the Merger the
benefit plans of the Company and its subsidiaries in effect on the date of the
Merger Agreement or to provide benefits to employees of the Company and its
subsidiaries that are no less favorable in the aggregate to such employees than
those in effect on the date of the Merger Agreement.
INDEMNIFICATION, EXCULPATION AND INSURANCE. The Purchaser and Parent have
agreed in the Merger Agreement that they will agree not to amend, repeal or
otherwise modify the provisions of the certificate of incorporation and the by-
laws of the Company and its subsidiaries with respect to indemnification and
exculpation from liability for a period of six years from the effective time of
the Merger in any manner that would adversely affect the rights thereunder of
individuals who on or prior to the effective time of the Merger were directors,
officers, employees or agents of the Company or its subsidiaries.
The Merger Agreement provides that, subject to certain limitations, Parent
will maintain for a period of six years from the effective time of the Merger,
directors' and officers' liability insurance for all persons who are directors
and officers of the Company on the date of the Merger Agreement, on terms and
conditions no less favorable than the terms of the existing policy; provided
that in no event will Parent be required to expend in any one year an amount in
excess of 200% of the annual premium currently paid by the Company for such
insurance.
BEST EFFORTS; NOTIFICATION. The Merger Agreement provides that, on the terms
and subject to the conditions of the Merger Agreement, each of the parties will
use its best efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Offer
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and the Merger and the other transactions contemplated by the Merger Agreement
and the Option Agreements.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various customary
representations and warranties.
PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER. The Merger Agreement
provides that in the event the Purchaser's designees are appointed or elected
to the Board of Directors of the Company as described above under "Board of
Directors", after the acceptance for payment of Shares pursuant to the Offer
and prior to the effective time of the Merger, the affirmative vote of the
Independent Directors is required for the Company to amend or terminate the
Merger Agreement, exercise or waive any of its rights or remedies under the
Merger Agreement or extend the time for performance of the Purchaser's and
Parent's respective obligations under the Merger Agreement.
Option Agreements. Each Option Agreement provides that the Purchaser has an
Option to purchase the Optioned Shares for $23.00 per Share in cash. Each
Option will expire (if not theretofore exercised) 30 trading days following
termination of the Offer, whether or not Shares have been accepted for payment
by the Purchaser (or Parent or any other person who is authorized by Parent)
pursuant to the Offer; provided that, if the Option cannot be exercised on such
date because the waiting period under the HSR Act with respect to the exercise
of the Option has not expired or been terminated or because of any injunction,
order or similar restraint by a court of competent jurisdiction, the Option
will expire on the fifth trading day after such waiting period has expired or
been terminated or such injunction, order or restraint has been dissolved or
when such injunction, order or restraint has become permanent and no longer
subject to appeal, as the case may be.
Each Option Agreement provides that so long as the waiting period under the
HSR Act with respect to the exercise of the Option has expired or been
terminated and the Offer has been terminated, whether or not Shares have been
accepted for payment by the Purchaser (or Parent or any other Person who is
authorized by Parent) pursuant to the Offer, then the Purchaser may exercise
the Option at any time in whole prior to the expiration of the Option.
Each of the Selling Stockholders has agreed, until the Option has expired,
not to: (i) sell, transfer, pledge, assign or otherwise dispose of, or enter
into any contract, option or other arrangement with respect to the sale,
transfer, pledge, assignment or other disposition of, the Optioned Shares owned
by such Selling Stockholder to any person other than the Purchaser or the
Purchaser's designee; (ii) acquire any additional Shares without the prior
consent of the Purchaser; or (iii) deposit any Optioned Shares owned by such
Selling Stockholder into a voting trust or grant a proxy or enter into a voting
agreement with respect to any Optioned Shares except as described in the next
succeeding paragraph. Each Option Agreement provides that, until the Option has
expired, the applicable Selling Stockholder may (and, if requested to do so in
writing by Parent, will) tender its Optioned Shares in the Offer.
Each Selling Stockholder has also executed and delivered a proxy for the
benefit of the Purchaser with respect to the Optioned Shares owned by such
Selling Stockholder to vote such Optioned Shares at any annual, special or
adjourned meeting of the stockholders of the Company, (i) in favor of the
adoption of the Merger Agreement and approval of the Merger and the other
transactions contemplated by the Merger Agreement, (ii) against any Takeover
Proposal (other than the Merger) and against any other action or agreement that
would result in a breach of any covenant, representation or warranty or any
other obligation or agreement of the Company under the Merger Agreement or
which could result in any of the conditions to the Company's obligations under
the Merger Agreement not being fulfilled and (iii) in favor of any other matter
relating to consummation of the transactions contemplated by the Merger
Agreement.
Appraisal Rights. Holders of Shares do not have dissenters' rights as a
result of the Offer. However, if the Merger is consummated, holders of Shares
will have certain rights pursuant to the provisions of Section
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262 of the DGCL to dissent and demand appraisal of, and to receive payment in
cash of the fair value of, their Shares. If the statutory procedures were
complied with, such rights could lead to a judicial determination of the fair
value required to be paid in cash to such dissenting holders for their Shares.
Any such judicial determination of the fair value of Shares could be based upon
considerations other than or in addition to the Offer Price or the market value
of the Shares, including asset values and the investment value of the Shares.
The value so determined could be more or less than the Offer Price or the
Merger Consideration.
If any stockholder of Shares who demands appraisal under Section 262 of the
DGCL fails to perfect, or effectively withdraws or loses his right to
appraisal, as provided in the DGCL, the Shares of such stockholder will be
converted into the Merger Consideration in accordance with the Merger
Agreement. A stockholder may withdraw his demand for appraisal by delivery to
Parent of a written withdrawal of his demand for appraisal and acceptance of
the Merger.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR
PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS.
Going Private Transactions. The Merger would have to comply with any
applicable Federal law operative at the time of its consummation. Rule 13e-3
under the Exchange Act is applicable to certain "going private" transactions.
The Purchaser does not believe that Rule 13e-3 will be applicable to the Merger
unless the Merger is consummated more than one year after the termination of
the Offer. If applicable, Rule 13e-3 would require, among other things, that
certain financial information concerning the Company and certain information
relating to the fairness of the Merger and the consideration offered to
minority shareholders be filed with the Commission and disclosed to minority
shareholders prior to consummation of the Merger.
Other Matters. It is anticipated that Mr. Cochrane will be invited to join
the Board of Directors of Parent and to serve as its Vice Chairman, with a
salary of $500,000, an annual bonus of up to an additional $500,000 and a grant
of options to acquire 200,000 shares of Parent common stock. It is further
anticipated that Mr. Cochrane would have to agree to stay in this position for
at least one year. While Mr. Cochrane has indicated his interest in such a
position, no agreement has been reached regarding any of the foregoing,
although such an agreement may be reached at any time.
Parent intends to conduct a detailed review of the Company and its assets,
corporate structure, dividend policy, capitalization, operations, properties,
policies, management and personnel and to consider, subject to the terms of the
Merger Agreement, what, if any, changes would be desirable in light of the
circumstances then existing, and reserves the right to take such actions or
effect such changes as it deems desirable. Such changes could include changes
in the Company's business, corporate structure, capitalization, Board of
Directors, management or dividend policy.
Except as otherwise described in this Offer to Purchase, the Purchaser and
Parent have no current plans or proposals that would relate to, or result in,
any extraordinary corporate transaction involving the Company, such as a
merger, reorganization or liquidation involving the Company or any of its
subsidiaries, a sale or transfer of a material amount of assets of the Company
or any of its subsidiaries, any change in the Company's capitalization or
dividend policy or any other material change in the Company's business,
corporate structure or personnel.
13. DIVIDENDS AND DISTRIBUTIONS
If on or after the date of the Merger Agreement, the Company should (a)
split, combine or otherwise change the Shares or its capitalization, (b)
acquire currently outstanding Shares or otherwise cause a reduction in the
number of outstanding Shares or (c) issue or sell additional Shares, shares of
any other class of capital stock, other voting securities or any securities
convertible into, or rights, warrants or options, conditional or otherwise, to
acquire, any of the foregoing, other than Shares issued pursuant to the
exercise of outstanding employee stock options and Shares issued upon
conversion of the Convertible Notes by holders thereof, then subject to the
provisions of Section 14 below, the Purchaser, in its sole discretion, may make
such adjustments as it deems appropriate in the Offer Price and other terms of
the Offer, including, without limitation, the number or type of securities
offered to be purchased.
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If, on or after the date of the Merger Agreement, the Company should declare
or pay any cash dividend on the Shares or other distribution on the Shares, or
issue with respect to the Shares any additional Shares, shares of any other
class of capital stock, other voting securities or any securities convertible
into, or rights, warrants or options, conditional or otherwise, to acquire, any
of the foregoing, payable or distributable to stockholders of record on a date
prior to the transfer of the Shares purchased pursuant to the Offer to the
Purchaser or its nominee or transferee on the Company's stock transfer records,
then, subject to the provisions of Section 14 below, (a) the Offer Price may,
in the sole discretion of the Purchaser, be reduced by the amount of any such
cash dividend or cash distribution and (b) the whole of any such noncash
dividend, distribution or issuance to be received by the tendering stockholders
will (i) be received and held by the tendering stockholders for the account of
the Purchaser and will be required to be promptly remitted and transferred by
each tendering stockholder to the Depositary for the account of the Purchaser,
accompanied by appropriate documentation of transfer, or (ii) at the direction
of the Purchaser, be exercised for the benefit of the Purchaser, in which case
the proceeds of such exercise will promptly be remitted to the Purchaser.
Pending such remittance and subject to applicable law, the Purchaser will be
entitled to all rights and privileges as owner of any such noncash dividend,
distribution, issuance or proceeds and may withhold the entire Offer price or
deduct from the Offer price the amount or value thereof, as determined by the
Purchaser in its sole discretion.
Pursuant to the terms of the Merger Agreement, the Company is prohibited from
taking any of the actions described in the two preceding paragraphs, and
nothing herein shall constitute a waiver by the Purchaser or Parent of any of
its rights under the Merger Agreement or a limitation of remedies available to
the Purchaser or Parent for any breach of the Merger Agreement, including
termination thereof.
14. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other term of the Offer or the Merger Agreement, the
Purchaser will not be required to accept for payment or, subject to any
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act (relating to the Purchaser's obligation to pay for or
return tendered Shares after the termination or withdrawal of the Offer), to
pay for any Shares tendered pursuant to the Offer unless (1) the Minimum Tender
Condition shall have been satisfied and (2) any waiting period under the HSR
Act applicable to the purchase of Shares pursuant to the Offer shall have
expired or been terminated. Furthermore, notwithstanding any other term of the
Offer or the Merger Agreement, the Purchaser will not be required to accept for
payment or, subject as aforesaid, to pay for any Shares not theretofore
accepted for payment or paid for, and may terminate or amend the Offer, with
the consent of the Company or if, at any time on or after May 3, 1994, and
before the acceptance of such Shares for payment or the payment therefor, any
of the following conditions exist:
(a) there shall be pending by any Governmental Entity (or the staff of
the FTC or the staff of the Antitrust Division shall have recommended the
commencement of) any suit, action or proceeding, which has a reasonable
possibility of success, or there shall be pending by any other person any
suit, action or proceeding, which has a substantial likelihood of success,
(i) challenging the acquisition by Parent or the Purchaser of any Shares,
seeking to restrain or prohibit the making or consummation of the Offer or
the Merger or the performance of any of the other transactions contemplated
by the Merger Agreement or the Option Agreements, or seeking to obtain from
the Company, Parent or the Purchaser any damages that are material in
relation to the Company and its subsidiaries, taken as whole, (ii) seeking
to prohibit or limit the ownership or operation by the Company, Parent or
any of their respective subsidiaries of a material portion of the business
or assets of the Company and its subsidiaries, taken as a whole, or Parent
and its subsidiaries, taken as a whole, or to compel the Company or Parent
to dispose of or hold separate any material portion of the business or
assets of the Company and its subsidiaries, taken as a whole, or Parent and
its subsidiaries, taken as a whole, as a result of the Offer or any of the
other transactions contemplated by the Merger Agreement or the Option
Agreements, (iii) seeking to impose limitations on the ability of Parent or
the Purchaser to acquire or hold, or exercise full rights of ownership of,
any Shares accepted for payment pursuant to the Offer, including, without
limitation, the right to vote Shares
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<PAGE>
accepted for payment by it on all matters properly presented to the
stockholders of the Company, (iv) seeking to prohibit Parent or any of its
subsidiaries from effectively controlling in any material respect the
business or operations of the Company and its subsidiaries, taken as a
whole, or (v) which otherwise is reasonably likely to have a material
adverse effect on the business, properties, assets, condition (financial or
otherwise), results of operations or prospects of the Company and its
subsidiaries, taken as a whole, other than any action or proceeding arising
out of the existence or occurrence of the following events and
circumstances, in any combination thereof: (x) the subpoena received by the
Company in 1993 from the Office of Inspector General of the United States
Department of Health and Human Services (the "OIG") and the United States
Attorneys Office for the Southern District of California relating to
Medicare billing practices, and any developments, investigations or charges
arising therefrom or relating thereto, (y) the subpoena received by the
Company in April of 1994 from the OIG relating to Medicare billing
practices at the clinical laboratory located in Cincinnati, Ohio, and any
developments, investigations or charges arising therefrom or relating
thereto, and (z) the assessment from the IRS relating to the amortization
of intangible items for the years 1989, 1990 and 1991, or any future
assessment based on the same issue for subsequent years, and any
developments arising therefrom or relating thereto (except to the extent
any such effect referred to in clause (x), (y) or (z) above results from a
state of facts known to the executive officers of the Company, after
appropriate inquiry, on the date of execution of the Merger Agreement and
not disclosed in writing to Parent on or prior to such time);
(b) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to
the Offer, the Merger or the Option Agreements, or any other action shall
be taken by any Governmental Entity or court, other than the application to
the Offer or the Merger of applicable waiting periods under the HSR Act,
that is reasonably likely to result, directly or indirectly, in any of the
consequences referred to in clauses (i) through (iv) of paragraph (a)
above;
(c) there shall have occurred any change (or any development that,
insofar as reasonably can be foreseen, is reasonably likely to result in
any change) that is materially adverse to the business, properties, assets,
condition (financial or otherwise), results of operations or prospects of
the Company and its subsidiaries, taken as a whole, other than changes
relating to the existence or occurrence of the following events and
circumstances, in any combination thereof: (i) the subpoenas referred to in
clauses (x) and (y) of paragraph (a) above, and any developments,
investigations or charges arising therefrom or relating thereto, (ii) any
assessment referred to in clause (z) of paragraph (a) above, and any
developments arising therefrom or relating thereto (except to the extent
any such change referred to in clause (i) or (ii) above results from a
state of facts known to the executive officers of the Company, after
appropriate inquiry, on the date of execution of the Merger Agreement and
not disclosed in writing to Parent on or prior to such time), (iii) any
change in laws, rules and regulations (Federal, state or local) or
reimbursement practices, including, without limitation, changes relating to
Medicare, Medicaid, CHAMPUS and carrier billing practices and (iv) changes
relating to the cancellation, termination or non-renewal by customers
(including (x) doctors that refer specimens to the Company and (y)
hospitals, health maintenance organizations, preferred provider
organizations, the laboratories of which the Company manages) of the
Company or any of its subsidiaries or the voluntary termination by existing
general managers, sales managers or sales representatives from and after
the date of the public announcement of the Merger Agreement, unless and to
the extent such cancellations, terminations or non-renewals are directly
attributable to factors other than the transactions contemplated by the
Merger Agreement;
(d) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, equity securities on the NYSE (excluding any
coordinated trading halt triggered solely as a result of a specified
decrease in a market index), (ii) any extraordinary adverse change in the
financial markets in the United States, (iii) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (iv) any limitation (whether or not mandatory) by any Governmental
Entity on, or other event that materially affects, the extension of credit
by banks or other lending institutions, (v) a commencement of a war or
armed hostilities or other national or international calamity
26
<PAGE>
directly involving the armed forces of the United States on a scale greater
than any other during the two-year period preceding the date of the Merger
Agreement or (vi) in the case of any of the foregoing existing on the date
of the Merger Agreement, a material acceleration or worsening thereof;
(e)(i) the Board of Directors of the Company or any committee thereof
shall have withdrawn or modified in a manner adverse to Parent or the
Purchaser its approval or recommendation of the Offer, the Merger, the
Merger Agreement or the Option Agreements, or approved or recommended any
Takeover Proposal, (ii) the Company shall have entered into any agreement
with respect to any Superior Proposal in accordance with Section 5.02(b) of
the Merger Agreement (as described under "The Merger Agreement--Takeover
Proposals" in Section 12) or (iii) the Board of Directors of the Company or
any committee thereof shall have resolved to take any of the foregoing
actions referred to in clause (i) above;
(f) any of the representations and warranties of the Company set forth in
the Merger Agreement that are qualified as to materiality shall not be true
and correct and any such representations and warranties that are not so
qualified shall not be true and correct in any material respect, in each
case as of the date of the Merger Agreement, or any other date as of which
such representations and warranties expressly speak;
(g) the Company shall have failed to perform in any material respect any
obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under the
Merger Agreement; or
(h) the Merger Agreement shall have been terminated in accordance with
its terms;
which, in the reasonable good-faith judgment of the Purchaser or Parent, in any
such case, and regardless of the circumstances giving rise to any such
condition (other than any action or inaction by Parent or any of its
subsidiaries which constitutes a breach of the Merger Agreement), makes it
inadvisable to proceed with such acceptance for payment or payment.
The Merger Agreement provides that the foregoing conditions are for the sole
benefit of the Purchaser and Parent and may be asserted by the Purchaser or
Parent regardless of the circumstances giving rise to such condition (other
than any action or inaction by Parent or any of its subsidiaries which
constitutes a breach of the Merger Agreement) or may be waived by the Purchaser
and Parent in whole or in part at any time and from time to time in their sole
discretion. The failure by Parent, the Purchaser or any other affiliate of
Parent at any time to exercise any of the foregoing rights shall not be deemed
a waiver of any such right, the waiver of any such right with respect to
particular facts and circumstances shall not be deemed a waiver with respect to
any other facts and circumstances and each such right shall be deemed an
ongoing right that may be asserted at any time and from time to time.
15. CERTAIN LEGAL MATTERS
Except as described in this Section 15, based on a review of publicly
available filings made by the Company with the Commission and other publicly
available information concerning the Company, neither the Purchaser nor Parent
is aware of any license or regulatory permit that appears to be material to the
business of the Company and its subsidiaries, taken as a whole, that might be
adversely affected by the Purchaser's acquisition of Shares as contemplated
herein or of any approval or other action by any Governmental Entity that would
be required for the acquisition or ownership of Shares by the Purchaser as
contemplated herein. Should any such approval or other action be required, the
Purchaser and Parent currently contemplate that such approval or other action
will be sought, except as described below under "State Takeover Laws". While,
except as otherwise expressly described in this Section 15, the Purchaser does
not presently intend to delay the acceptance for payment of or payment for
Shares tendered pursuant to the Offer pending the outcome of any such matter,
there can be no assurance that any such approval or other action, if needed,
would be obtained or would be obtained without substantial conditions or that
failure to obtain any such approval or other action might not result in
consequences adverse to the Company's business or that certain parts of the
Company's business might not have to be disposed of if such approvals were not
obtained or such other actions were not taken or in order to obtain any such
approval or other action. If
27
<PAGE>
certain types of adverse action are taken with respect to the matters discussed
below, the Purchaser could decline to accept for payment or pay for any Shares
tendered. See Section 14 for certain conditions to the Offer.
State Takeover Laws. A number of states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable to
attempts to acquire securities of corporations that are incorporated or have
assets, stockholders, executive offices or places of business in such states.
In Edgar v. MITE Corp., the Supreme Court of the United States held that the
Illinois Business Takeover Act, which involved state securities laws that made
the takeover of certain corporations more difficult, imposed a substantial
burden on interstate commerce and therefore was unconstitutional. In CTS Corp.
v. Dynamics Corp. of America, however, the Supreme Court of the United States
held that a state may, as a matter of corporate law and, in particular, those
laws concerning corporate governance, constitutionally disqualify a potential
acquiror from voting on the affairs of a target corporation without prior
approval of the remaining stockholders, provided that such laws were applicable
only under certain conditions.
Section 203 of the DGCL limits the ability of a Delaware corporation to
engage in business combinations with "interested stockholders" (defined as any
beneficial owner of 15% or more of the outstanding voting stock of the
corporation) unless, among other things, the corporation's board of directors
has given its prior approval to either the business combination or the
transaction which resulted in the stockholder becoming an "interested
stockholder". In addition, the Tennessee Investor Protection Act (Tennessee
Code (S) 48-35-101 et seq.) limits the ability of a Tennessee corporation or a
corporation, among other things, having its principal place of business in
Tennessee to enter into a business combination with a stockholder that
beneficially owns 5% or more of the outstanding voting stock of the
corporation, any of which was acquired less than one year before the business
combination unless, among other things, the corporation's board of directors
has given its approval to the business combination. The Company's Board of
Directors has approved the Merger Agreement, the Option Agreements and the
Purchaser's acquisition of Shares pursuant to the Offer and, therefore, Section
203 of the DGCL and the Tennessee Investor Protection Act are inapplicable to
the Merger. Furthermore, in 1989, the United States Court of Appeals for the
Sixth Circuit held in Tyson Foods, Inc. v. McReynolds that the Tennessee
Investor Protection Act is unconstitutional as applied to target corporations
organized under the laws of states other than Tennessee.
Based on information supplied by the Company, the Purchaser does not believe
that any state takeover statutes purport to apply to the Offer or the Merger.
Neither the Purchaser nor Parent has currently complied with any state takeover
statute or regulation. The Purchaser reserves the right to challenge the
applicability or validity of any state law purportedly applicable to the Offer
or the Merger and nothing in this Offer to Purchase or any action taken in
connection with the Offer or the Merger is intended as a waiver of such right.
If it is asserted that any state takeover statute is applicable to the Offer or
the Merger and an appropriate court does not determine that it is inapplicable
or invalid as applied to the Offer or the Merger, the Purchaser might be
required to file certain information with, or to receive approvals from, the
relevant state authorities, and the Purchaser might be unable to accept for
payment or pay for Shares tendered pursuant to the Offer, or be delayed in
consummating the Offer or the Merger. In such case, the Purchaser may not be
obliged to accept payment or pay for any Shares tendered pursuant to the Offer.
Health Care Regulatory Matters. The Federal government and all states in
which the Company and its subsidiaries currently operate regulate various
aspects of the business of the Company and its subsidiaries. The purchase of
Shares pursuant to the Offer may constitute an event giving rise to notice
and/or new licensing application requirements, and certain states may require
that the Purchaser meet specified notice periods prior to consummation of the
Offer. It is not anticipated that any such notice and/or new licensing
requirements, if any, will cause the consummation of the Offer to be delayed.
The Clinton Administration has announced its desire and intention to reform
health care in the United States. Some of the provisions that have been
discussed include managed competition, global budgeting, price
28
<PAGE>
controls and freezes on health care costs. Neither Parent nor the Company can
predict, however, whether and what type of health care reform legislation will
be enacted into law. Health care reform could have a material adverse effect on
Parent and the Company. Nevertheless, the Merger Agreement provides that any
change in laws, rules and regulations (Federal, state or local) or
reimbursement practices, including, without limitation, changes relating to
Medicare, Medicaid, CHAMPUS and carrier billing practices, whether potentially
materially adverse or not, will not be a material adverse change, or otherwise
have a material adverse effect, for purposes of the Merger Agreement.
Consequently, neither the proposed enactment nor the enactment of health care
reform legislation would give rise to any right of the Purchaser to terminate
the Offer or to decline to accept for payment or pay for tendered Shares.
In addition to general health care reform, the Federal government has been
examining the rapid growth of Federal expenditures for clinical laboratory
services. Several Federal agencies are charged with the responsibility of
investigating allegations of fraudulent and abusive conduct by health care
providers. These agencies include the Federal Bureau of Investigation and the
OIG.
In November 1990, Parent became aware of a grand jury inquiry relating to its
pricing practices being conducted by the United States Attorney for the San
Diego area (the Southern District of California) with the assistance of the
OIG. On December 18, 1992, Parent announced that it had entered into agreements
that concluded the investigation (the "Government Settlement"). The settlement
revolved around the government's contention that Parent improperly included its
tests for high density lipoprotein (HDL) cholesterol and serum ferritin (the
measure of iron stores in the blood) in its basic blood test series, without
clearly offering any alternative profile that did not include these medical
tests.
Pursuant to the Government Settlement, Parent pleaded guilty to the charge of
presenting two false claims to CHAMPUS and paid a $1,000,000 fine. In
connection with pending and threatened civil claims, Parent also agreed to pay
$100,000,000 to the Federal government. Concurrently, the Parent settled
related Medicaid claims with states that account for over 99.5% of its Medicaid
business, and has paid approximately $10,400,000 to the settling states. In
September 1993, Parent was served with a subpoena issued by the OIG, which
required Parent to provide documents to the OIG concerning its regulatory
compliance procedures. Parent has provided documents to the OIG in response to
the subpoena.
In connection with the Government Settlement, the Department of Justice
stated that the Federal government is continuing to investigate certain
business practices by clinical laboratories. In addition, the OIG's published
work plan for 1992-1993 indicates that the OIG has targeted certain laboratory
practices for investigation and prosecution. Pursuant to one such project,
entitled "Laboratory Unbundle", laboratories that offer packages of tests to
physicians and "unbundle" them into "several tests to get higher reimbursement
when billing Medicare and Medicaid" will be identified and "suitable cases will
be presented for prosecution". Under another project, laboratories "that link
price discounts to the volume of physician referrals, "unbundle' tests in order
to bill Medicare at a higher total rate, and conduct unnecessary tests, . . .
will be identified to coordinate investigations throughout the country".
In August 1993, the Company received a subpoena from the OIG requesting a
broad range of documents and certain information relating to the Company's
selling, pricing and billing practices. Other independent clinical laboratories
also received subpoenas as part of what the Company described in its Form 10-K
as a nationwide audit and investigation of the possible submission of allegedly
false or improper claims for reimbursement under the Medicare or Medicaid
programs. In April 1994, the Company received a subpoena from the OIG
requesting documents and certain information regarding the Medicare billing
practices of the Company's Cincinnati, Ohio clinical laboratory with respect to
certain cancer screening tests. Both investigations remain in their early
stages; as a result, the Company has indicated that it is unable to predict the
outcome of either investigation. The Merger Agreement provides that neither the
receipt of any such subpoena nor any development, investigation or charges
arising therefrom or relating thereto, including any suit, action or
proceedings, whether potentially materially adverse or not, will be a material
adverse change, or otherwise have a material adverse effect, for purposes of
the Merger Agreement. Consequently, any such
29
<PAGE>
subpoena, or any such development, investigation or charges arising therefrom
or relating thereto, would not give rise to any right of the Purchaser to
terminate the Offer or to decline to accept for payment or pay for tendered
Shares.
Antitrust. Under the provisions of the HSR Act applicable to the Offer, the
purchase of Shares under the Offer may be consummated following the expiration
of a 15-calendar day waiting period following the filing by Parent of a
Notification and Report Form with respect to the Offer, unless Parent receives
a request for additional information or documentary material from the Antitrust
Division or the FTC or unless early termination of the waiting period is
granted. Parent made such filing on May 9, 1994. If, within the initial 15-day
waiting period, either the Antitrust Division or the FTC requests additional
information or material from Parent concerning the Offer, the waiting period
will be extended and would expire at 11:59 p.m., New York City time, on the
tenth calender day after the date of substantial compliance by Parent with such
request. Only one extension of the waiting period pursuant to a request for
additional information is authorized by the HSR Act. Thereafter, such waiting
period may be extended only by court order or with the consent of Parent. In
practice, complying with a request for additional information or material can
take a significant amount of time. In addition, if the Antitrust Division or
the FTC raises substantive issues in connection with a proposed transaction,
the parties frequently engage in negotiations with the relevent governmental
agency concerning possible means of addressing those issues and may agree to
delay consummation of the transaction while such negotiations continue.
The provisions of the HSR Act would similarly apply to any purchase of the
Optioned Shares pursuant to the Option Agreements (other than purchases
effected through a tender pursuant to the Offer), except that the initial
waiting period would expire 30 days following the filing of HSR Act
Notification Forms by Parent and the Company and a request for additional
information or material from Parent or the Company during the initial 30-day
waiting period would extend the waiting period until 11:59 p.m. New York City
time on the 20th day after the date of substantial compliance by Parent and the
Company with such request. Parent and the Company filed HSR Notification Forms
with respect to the Option Agreements on May 9, 1994. If, as is expected, the
purchase of Shares permitted by the Option Agreements is effected through a
tender of such Shares pursuant to the Offer, the HSR requirements applicable to
the Offer described in the prior paragraph would apply rather than the
requirements described in this paragraph.
The Merger would not require an additional filing under the HSR Act if the
Purchaser owns 50% or more of the outstanding Shares at the time of the Merger
or if the Merger occurs within one year after the HSR Act waiting period
applicable to the Offer expires or is terminated.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's proposed acquisition
of the Company. At any time before or after the Purchaser's purchase of Shares
pursuant to the Offer, the Antitrust Division or FTC could take such action
under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the purchase of Shares pursuant to the
Offer or the consummation of the Merger or seeking the divestiture of Shares
acquired by the Purchaser or the divestiture of substantial assets of Parent or
its subsidiaries, or the Company or its subsidiaries. Private parties may also
bring legal action under the antitrust laws under certain circumstances. There
can be no assurance that a challenge to the Offer on antitrust grounds will not
be made or, if such a challenge is made, of the result thereof.
16. FEES AND EXPENSES
Morgan Stanley & Co. Incorporated ("Morgan Stanley") is acting as Dealer
Manager in connection with the Offer and has provided certain financial
advisory services to Parent in connection with the Offer and the Merger. Parent
has agreed to pay the Dealer Manager as compensation for all such services a
total of $500,000, payable whether or not the Purchaser accepts for payment or
pays for any Shares pursuant to the Offer. In addition, Parent has agreed (i)
to reimburse the Dealer Manager for its out-of-pocket expenses, including the
reasonable fees and expenses of its counsel, in connection with the Offer, (ii)
to indemnify the
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Dealer Manager and certain related persons against certain liabilities and
expenses, including certain liabilities under the Federal securities laws and
(iii) if, at any time within 12 months following the consummation of the
Merger, Parent decides to raise debt or equity financing (excluding bank
financing) relating to the Merger, to retain Morgan Stanley as the lead manager
of any such financing, upon terms and conditions, including compensation,
mutually acceptable to Parent and Morgan Stanley.
The Purchaser has retained D.F. King & Co., Inc. to act as the Information
Agent and Chemical Bank to serve as the Depositary in connection with the
Offer. The Information Agent and the Depositary each will receive reasonable
and customary compensation for their services, be reimbursed for certain
reasonable out-of-pocket expenses and be indemnified against certain
liabilities and expenses in connection therewith, including certain liabilities
under the Federal securities laws.
Neither the Purchaser nor Parent will pay any fees or commissions to any
broker or dealer or other person (other than the Dealer Manager and the
Information Agent) in connection with the solicitation of tenders of Shares
pursuant to the Offer. Brokers, dealers, banks and trust companies will be
reimbursed by the Purchaser upon request for customary mailing and handling
expenses incurred by them in forwarding material to their customers.
17. MISCELLANEOUS
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of
such jurisdiction. None of the Purchaser or Parent is aware of any jurisdiction
in which the making of the Offer or the tender of Shares in connection
therewith would not be in compliance with the laws of such jurisdiction. To the
extent the Purchaser or Parent becomes aware of any state law that would limit
the class of offerees in the Offer, the Purchaser will amend the Offer and,
depending on the timing of such amendment, if any, will extend the Offer to
provide adequate dissemination of such information to holders of Shares prior
to the expiration of the Offer. In any jurisdiction the securities, blue sky or
other laws of which require the Offer to be made by a licensed broker or
dealer, the Offer is being made on behalf of the Purchaser by the Dealer
Manager or one or more registered brokers or dealers licensed under the laws of
such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR PARENT NOT CONTAINED HEREIN OR IN
THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
The Purchaser or Parent have filed with the Commission the Schedule 14D-1
pursuant to Rule 14d-3 under the Exchange Act, furnishing certain additional
information with respect to the Offer. In addition, the Company has filed with
the Commission the Schedule 14D-9 pursuant to Rule 14d-9 under the Exchange
Act, setting forth its recommendation with respect to the Offer and the reasons
for such recommendation and furnishing certain additional related information.
Such Schedules and any amendments thereto, including exhibits, should be
available for inspection and copies should be obtainable in the manner set
forth in Section 8 (except that they will not be available at the regional
offices of the Commission).
N ACQUISITION CORP.
May 9, 1994
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SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS
1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. The following table sets forth
the name, business address and present principal occupation or employment, and
material occupations, positions, offices or employments for the past five years
of each director and executive officer of Parent. Each such person is a citizen
of the United States of America and, unless otherwise indicated below, the
business address of each such person is c/o Parent, 4225 Executive Square,
Suite 800, La Jolla, California 92037.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
NAME AND BUSINESS EMPLOYMENT; MATERIAL POSITIONS
ADDRESS HELD DURING THE PAST FIVE YEARS
- ----------------- -------------------------------
<S> <C>
Ronald O. Perelman (51) Chairman of the Board and director of Parent since 1988.
MacAndrews & Forbes Mr. Perelman has been Chairman of the Board and Chief Ex-
Holdings Inc. ecutive Officer of MacAndrews & Forbes Holdings Inc.
35 East 62nd Street ("M&F Holdings") for more than the past five years. Mr.
New York, New York 10021 Perelman also is Chairman of the Board of Andrews Group
Incorporated ("Andrews Group"), Consolidated Cigar Corpo-
ration ("Consolidated Cigar"), New World Communications
Group Incorporated ("New World Communications"), Mafco
Worldwide Corporation ("Mafco Worldwide"), Marvel Enter-
tainment Group, Inc. ("Marvel"), Revlon Consumer Products
Corporation ("Revlon Products") and New World Television
Incorporated ("NWTV"). Mr. Perelman is a director of the
following corporations which file reports pursuant to the
Securities Exchange Act of 1934: Andrews Group, The Cole-
man Company, Inc. ("Coleman"), Coleman Holdings Inc.,
Coleman Worldwide Corporation, Consolidated Cigar, New
World Communications, Mafco Worldwide, Marvel, Marvel
Holdings Inc. ("Marvel Holdings"), Marvel (Parent) Hold-
ings Inc. ("Marvel Parent"), Marvel III Holdings Inc.
("Marvel III"), Revlon Products, Revlon Worldwide Corpo-
ration and NWTV.
Saul J. Farber, M.D. Director of Parent since 1988. He has been Chairman of
(76) the Department of Medicine of the New York University
New York University Hos- School of Medicine since 1966; Frederick H. King Profes-
pital sor of Medicine since 1978 and Dean of the School of Med-
27th Street/First Avenue icine since 1987.
New York, New York 10016
Howard Gittis (60) Director of Parent since 1988. He has been Vice Chairman
MacAndrews & Forbes and a director of M&F Holdings and various affiliates
Holdings Inc. since 1985. Mr. Gittis also is a director of Andrews
35 East 62nd Street Group, Mafco Worldwide, Revlon Products, Revlon World-
New York, New York 10021 wide, New World Communications, NWTV, Consolidated Cigar,
Jones Apparel Group, Inc. and Loral Corporation.
Ann Dibble Jordan (59) Director of Parent since 1990. She is a consultant and
was previously Field Work Assistant Professor, School of
Social Service Administration, University of Chicago from
1970 to 1987. Ms. Jordan also is a director of Johnson &
Johnson Corporation, Capital Cities--ABC, Inc.,
Primerica, Inc., Salant Corp., The Hechinger Company and
Automatic Data Processing, Inc.
James R. Maher (44) President, Chief Executive Officer and a director of Par-
ent since December 1992. Mr. Maher was Vice Chairman of
The First Boston Corporation from 1990 to 1992 and Manag-
ing Director of The First Boston Corporation from 1982 to
1992. Mr. Maher also is a director of First Brands Corpo-
ration.
</TABLE>
S-1
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
NAME AND BUSINESS EMPLOYMENT; MATERIAL POSITIONS
ADDRESS HELD DURING THE PAST FIVE YEARS
- ----------------- -------------------------------
<S> <C>
David J. Mahoney (70) Director of Parent since 1988. He has been President of
David Mahoney Ventures David Mahoney Ventures since 1983 and was Chairman of
745 Fifth Avenue Norton Simon, Inc. for more than five years prior to
New York, New York 10151 1983. Mr. Mahoney also is a director of NYNEX Corpora-
tion, The Dreyfus Corporation and Bionaire Inc.
Paul A. Marks, M.D. (67) Director of Parent since 1991. He has been President and
Memorial Sloan-Kettering Chief Executive Officer of Memorial Sloan-Kettering Can-
Hospital Cancer Center cer Center since 1980. He has been a Professor of Medi-
1275 York Avenue cine at Cornell University Medical College since 1982 and
New York, New York 10021 a Professor at Cornell University Graduate School of Med-
ical Sciences since 1983. He is a member of the National
Academy of Sciences and American Academy of Arts and Sci-
ences. Dr. Marks also is a director of Pfizer, Inc., sev-
eral Dreyfus Mutual Funds, Life Technologies, Inc. and
Tularik, Inc.
Linda Gosden Robinson Director of Parent since 1990. She has been President and
(41) Chief Executive Officer of Robinson, Lake, Lerer &
Robinson, Lake, Lerer & Montgomery/Sawyer Miller Group since 1986; Senior Vice
Montgomery/Sawyer President, Corporate Affairs, of Warner Cable Communica-
Miller Group tions, Inc. from 1983 to 1986. Ms. Robinson also is a di-
Strategic Communications rector of Bozell, Jacobs, Kenyon & Eckhardt, Inc. and the
75 Rockefeller Plaza Coro Foundation and a trustee of New York University Med-
New York, New York 10019 ical Center.
Samuel O. Thier, M.D. Director of Parent since April 1992. He has been Presi-
(56) dent of Brandeis University since 1991 and, commencing
Brandeis University June 1, 1994, Dr. Thier will become President and Chief
415 South Street Executive Officer of Massachusetts General Hospital. Dr.
P.O. Box 9110 Thier was President of the Institute of Medicine of the
Waltham, Massachusetts National Academy of Sciences from 1985 to 1991. From 1966
02254 to 1985 Dr. Thier served on the faculties of the medical
schools at Harvard University, University of Pennsylvania
and Yale University. At Yale University, Dr. Thier was
Chairman of the Department of Internal Medicine from 1975
through 1985.
David C. Flaugh (46) Appointed Chief Operating Officer and Senior Executive
Vice President of Parent in 1992 and Chief Financial Of-
ficer and Treasurer in 1982 and 1988, respectively. From
1991 to 1992, Mr. Flaugh was Vice President--Managing Di-
rector.
Timothy J. Brodnik (46) Appointed Executive Vice President of Parent in 1993 and
served as Senior Vice President from 1991 to 1993 and
Vice President--Division Manager commencing 1979. Mr.
Brodnik oversees Parent's sales operations.
Michael L. Jeub (51) Joined Parent in 1993 as Executive Vice President, Chief
Financial Officer and Treasurer. Previously, Mr. Jeub was
President, Chief Operating Officer and Chief Financial
Officer of Medical Imaging Centers of America from 1991
to 1993. From 1988 to 1991, Mr. Jeub was a private in-
vestor. Prior to 1988, Mr. Jeub held several positions
with International Clinical Laboratories, Inc., including
Chief Financial Officer and Eastern Division President.
</TABLE>
S-2
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
NAME AND BUSINESS EMPLOYMENT; MATERIAL POSITIONS
ADDRESS HELD DURING THE PAST FIVE YEARS
- ----------------- -------------------------------
<S> <C>
Larry L. Leonard (52) Appointed Executive Vice President of Parent in 1993 and
served as Senior Vice President from 1991 to 1993 and
Vice President--Division Manager commencing 1979. Dr.
Leonard oversees major regional laboratories in Arizona,
Florida, North Carolina, Texas and Virginia.
John F. Markus (42) Appointed Executive Vice President and Corporate Compli-
ance Officer of Parent in 1993 and served as Vice Presi-
dent--Managing Director from 1990 to 1993. Previously,
Mr. Markus was an attorney in the law firm of Akin, Gump,
Strauss, Hauer and Feld in Washington, D.C. for more than
five years and was a partner in such firm since 1989.
James G. Richmond (50) Joined Parent in 1992 as Executive Vice President and
General Counsel. Previously, Mr. Richmond was Managing
Partner of the law firm of Coffield, Ungaretti & Harris
in Chicago from 1991 to 1992. Prior thereto, he was Spe-
cial Counsel to the Deputy Attorney General of the United
States from 1990 to 1991 and from 1985 to 1991 was United
States Attorney for the Northern District of
Indiana.
W. David Slaunwhite, Appointed Executive Vice President in 1993 and served as
PhD. (48) Vice President--Managing Director from 1991 to 1993 and
Vice President--Division Manager from 1989 to 1991. Prior
to that he held positions of increasing importance with
Parent. Dr. Slaunwhite has operational responsibilities
for major regional laboratories in California, Colorado,
Illinois, Kentucky, Michigan, New Jersey, New York and
Washington.
Bernhard E. Statland, Appointed Executive Vice President in 1993 and served as
M.D., Vice President--Managing Director and Chief Executive Of-
PhD. (52) ficer of the National Reference Laboratory from 1990 to
1993. Dr. Statland was named a Scientific Advisor on Par-
ent's Board of Consultants in 1989. Prior to joining Par-
ent, he was Director of Pathology and Laboratory Medicine
at Methodist Hospital of Indiana for four years and pre-
viously held a similar position at Boston University Hos-
pital.
Robert E. Whalen (51) Appointed Executive Vice President of Parent in 1993 and
served as Senior Vice President from 1991 to 1993 and
Vice President--Administration commencing 1985. From 1979
to 1985, he was Vice President--Division Manager of Par-
ent.
</TABLE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER. The following table
sets forth the name and position with the Purchaser of each director and
executive officer of the Purchaser. For further information regarding such
persons, see paragraph 1 above.
<TABLE>
<CAPTION>
NAME POSITION WITH THE PURCHASER
---- ---------------------------
<S> <C>
Ronald O. Perelman Chairman of the Board and Director
Howard Gittis Director
James R. Maher President, Chief Executive Officer and
Director
David C. Flaugh Executive Vice President, Chief Financial
Officer and Treasurer
James G. Richmond Executive Vice President, General Counsel
and Secretary
</TABLE>
S-3
<PAGE>
3. DIRECTORS AND EXECUTIVE OFFICERS OF HOLDINGS. The following table sets
forth the name and position with Holdings of each director and executive
officer of Holdings. For further information regarding such persons, see
paragraph 1 above.
<TABLE>
<CAPTION>
NAME POSITION WITH HOLDINGS
---- ----------------------
<S> <C>
Ronald O. Perelman Chairman of the Board and Director
Saul J. Farber, M.D. Director
Howard Gittis Director
Ann Dibble Jordan Director
James R. Maher President, Chief Executive Officer and
Director
David J. Mahoney Director
Paul A. Marks, M.D. Director
Linda Gosden Robinson Director
Samuel O. Thier, M.D. Director
David C. Flaugh Chief Operating Officer and Senior
Executive Vice President
Timothy J. Brodnik Executive Vice President
Michael L. Jeub Executive Vice President, Chief Financial
Officer
Larry L. Leonard Executive Vice President
John F. Markus Executive Vice President, Assistant
Secretary and Director of Compliance
James G. Richmond Executive Vice President, Assistant
Secretary
William D. Slaunwhite, PhD. Executive Vice President
Bernard E. Statland, M.D., PhD. Executive Vice President and Chief
Executive Officer of National Reference
Laboratories
Robert E. Whalen Executive Vice President
</TABLE>
S-4
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, certificates for Shares and any other
required documents should be sent or delivered by each stockholder of the
Company or such stockholder's broker, dealer, bank, trust company or other
nominee to the Depositary at one of its addresses set forth below.
The Depositary for the Offer is:
CHEMICAL BANK
By Hand/Overnight Courier: By Mail:
Chemical Bank Chemical Bank
55 Water Street Reorganization Department
Second Floor--Room 234 P.O. Box 3085
New York, NY 10041 G.P.O. Station
Attn: Reorganization Department New York, NY 10116-3085
Facsimile Transmission Confirm by Telephone:
(for Eligible Institutions only): (212) 613-7137
(212) 629-8015 (212) 613-7608
(212) 629-8016 (Call Collect)
Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery
may be directed to the Information Agent or the Dealer Manager at their
respective telephone numbers and locations listed below. You may also contact
your broker, dealer, bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street 37 Sun Street
New York, NY 10005 London, England EC2 2PY
(800) 669-5550 (Toll Free) 011-4471-247-8263 (Collect)
The Dealer Manager for the Offer is:
MORGAN STANLEY & CO.
Incorporated
1251 Avenue of the Americas
New York, NY 10020
(212) 703-6137
<PAGE>
EXHIBIT 99(a)(2)
LETTER OF TRANSMITTAL
To Tender Shares of Common Stock
of
Allied Clinical Laboratories, Inc.
Pursuant to the Offer to Purchase Dated May 9, 1994
by
N Acquisition Corp.
a Wholly Owned Subsidiary of
National Health Laboratories Incorporated
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, JUNE 7, 1994, UNLESS EXTENDED.
The Depositary:
CHEMICAL BANK
By Hand/Overnight Courier: By Mail:
Chemical Bank 55 Water Street--2nd Chemical Bank Reorganization Department
Floor, Room 234 New York, N.Y. 10041 P.O. Box 3085--G.P.O. Station New York,
Attention: Reorganization Department N.Y. 10116-3085
Facsimile Transmission
(for Eligible Institutions only): Confirm by Telephone:
(212) 613-7137
(212) 629-8015 (212) 613-7608
(212) 629-8016 (Call Collect)
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE WILL NOT
CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY
BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be used either if certificates are to be
forwarded herewith or if delivery of Shares (as defined below) is to be made by
book-entry transfer to an account maintained by the Depositary at a Book-Entry
Transfer Facility as defined in and pursuant to the procedures set forth in
Section 2 of the Offer to Purchase. Stockholders who deliver Shares by book-
entry transfer are referred to herein as "Book-Entry Stockholders" and other
stockholders are referred to herein as "Certificate Stockholders". Stockholders
whose certificates for Shares are not immediately available or who cannot
deliver either the certificates for, or a Book-Entry Confirmation (as defined
in Section 2 of the Offer to Purchase) with respect to, their Shares and all
other documents required hereby to the Depositary prior to the Expiration Date
(as defined in Section 1 of the Offer to Purchase) must tender their Shares in
accordance with the guaranteed delivery procedures set forth in Section 2 of
the Offer to Purchase. See Instruction 2.
<PAGE>
[_] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY
TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution ___________________________________________
Check Box of Book-Entry Transfer Facility:
[_]The Depository Trust Company
[_]Midwest Securities Trust Company
[_]Philadelphia Depository Trust Company
Account Number _________________________________________________________
Transaction Code Number ________________________________________________
[_] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Owner(s) _________________________________________
Date of Execution of Notice of Guaranteed Delivery _____________________
Name of Institution that Guaranteed Delivery ___________________________
If delivered by Book-Entry Transfer check box of Book-Entry Transfer
Facility:
[_]The Depository Trust Company
[_]Midwest Securities Trust Company
[_]Philadelphia Depository Trust Company
Account Number _______________________________________________________
Transaction Code Number ______________________________________________
DESCRIPTION OF SHARES TENDERED
- --------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDERS (PLEASE FILL IN, IF BLANK,
EXACTLY AS NAME(S) APPEAR(S) ON CERTIFICATE(S))
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES TENDERED
(ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
- --------------------------------------------------------------------------------
TOTAL NUMBER OF
SHARES REPRESENTED
CERTIFICATE BY NUMBER OF SHARES
NUMBER(S)(1) CERTIFICATE(S)(1) TENDERED(2)
------------- ------------------ ----------------
------------- ------------------ ----------------
------------- ------------------ ----------------
------------- ------------------ ----------------
------------- ------------------ ----------------
------------- ------------------ ----------------
TOTAL SHARES
- --------------------------------------------------------------------------------
(1) Need not be completed by Book-Entry Stockholders.
(2) Unless otherwise indicated, it will be assumed that all Shares
described above are being tendered. See Instruction 4.
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to N Acquisition Corp., a Delaware corporation
(the "Purchaser") and a wholly owned subsidiary of National Health Laboratories
Incorporated, a Delaware corporation ("Parent"), the above-described shares of
common stock, par value $.01 per share (the "Shares"), of Allied Clinical
Laboratories, Inc., a Delaware corporation (the "Company"), pursuant to the
Purchaser's offer to purchase all outstanding Shares at a price of $23.00 per
Share, net to the seller in cash, in accordance with the terms and conditions
of the Purchaser's Offer to Purchase dated May 9, 1994 (the "Offer to
Purchase"), and this Letter of Transmittal (which, together with any amendments
or supplements thereto or hereto, collectively constitute the "Offer"), receipt
of which is hereby acknowledged.
Upon the terms of the Offer, subject to, and effective upon, acceptance for
payment of, and payment for, the Shares tendered herewith in accordance with
the terms of the Offer (including, if the Offer is extended or amended, the
terms or conditions of any such extension or amendment), the undersigned hereby
sells, assigns and transfers to, or upon the order of, the Purchaser all right,
title and interest in and to all the Shares that are being tendered hereby (and
any and all other Shares or other securities or rights issued or issuable in
respect of such Shares on or after May 3, 1994) and irrevocably constitutes and
appoints the Depositary the true and lawful agent and attorney-in-fact of the
undersigned with respect to such Shares (and any such other Shares or
securities or rights), with full power of substitution (such power of attorney
being deemed to be an irrevocable power coupled with an interest), to (a)
deliver certificates for such Shares (and any such other Shares or securities
or rights) or transfer ownership of such Shares (and any such other Shares or
securities or rights) on the account books maintained by a Book-Entry Transfer
Facility together, in any such case, with all accompanying evidences of
transfer and authenticity to, or upon the order of, the Purchaser, (b) present
such Shares (and any such other Shares or securities or rights) for transfer on
the Company's books and (c) receive all benefits and otherwise exercise all
rights of beneficial ownership of such Shares (and any such other Shares or
securities or rights), all in accordance with the terms of the Offer.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the tendered Shares
(and any and all Shares or other securities or rights issued or issuable in
respect of such Shares on or after May 3, 1994), and, when the same are
accepted for payment by the Purchaser, the Purchaser will acquire good title
thereto, free and clear of all liens, restrictions, claims and encumbrances.
The undersigned will, upon request, execute any additional documents deemed by
the Depositary or the Purchaser to be necessary or desirable to complete the
sale, assignment and transfer of the tendered Shares (and any such other Shares
or other securities or rights).
All authority conferred or agreed to be conferred pursuant to this Letter of
Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators, trustees in bankruptcy and legal representatives of the
undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. Except as stated in the Offer to Purchase, this
tender is irrevocable.
The undersigned hereby irrevocably appoints James R. Maher, David C. Flaugh
and James G. Richmond, and each of them, and any other designees of the
Purchaser, the attorneys-in-fact and proxies of the undersigned, each with full
power of substitution, to vote at any annual, special or adjourned meeting of
the Company's stockholders or otherwise in such manner as each such attorney
and proxy or his substitute shall in his sole discretion deem proper with
respect to, to execute any written consent concerning any matter as each such
attorney and proxy or his substitute shall in his sole discretion deem proper
with respect to, and to otherwise act as each such attorney and proxy or his
substitute shall in his sole discretion deem proper with respect to, all the
Shares tendered hereby that have been accepted for payment by the Purchaser
prior to the time any such action is taken and with respect to which the
undersigned is entitled to vote (and with respect to any and all other Shares
or other securities or rights issued or issuable in respect of such Shares on
or after May 3, 1994). This appointment is effective when, and only to the
extent that, the Purchaser accepts for payment such Shares as provided in the
Offer to Purchase. This power of attorney and proxy are irrevocable and are
granted in consideration of the acceptance for payment of such Shares in
accordance with the terms of the Offer. Such acceptance for payment shall,
without further action, revoke all prior powers of attorney and proxies
appointed by the undersigned at any time with respect to such Shares (and any
such other Shares or securities or rights) and no subsequent powers of attorney
or proxies will be appointed by the undersigned, or be effective, with respect
thereto.
The undersigned understands that the valid tender of Shares pursuant to any
one of the procedures described in Section 2 of the Offer to Purchase and in
the Instructions hereto will constitute a binding agreement between the
undersigned and the Purchaser upon the terms and subject to the conditions of
the Offer.
Unless otherwise indicated herein under "Special Payment Instructions",
please issue the check for the purchase price and/or return any certificates
for Shares not tendered or accepted for payment in the name(s) of the
registered holder(s) appearing under "Description of Shares Tendered".
Similarly, unless otherwise indicated under "Special Delivery Instructions",
please mail the check for the purchase price and/or return any certificates for
Shares not tendered or accepted for payment (and accompanying documents, as
appropriate) to the address(es) of the registered holder(s) appearing under
"Description of Shares Tendered". In the event that both the Special Delivery
Instructions and the Special Payment Instructions are completed, please issue
the check for the purchase price and/or return any certificates for Shares not
tendered or accepted for payment (and any accompanying documents, as
appropriate) in the name of, and deliver such check and/or return such
certificates (and any accompanying documents, as appropriate) to the person or
persons so indicated. Unless otherwise indicated herein under "Special Payment
Instructions", in the case of a book-entry delivery of Shares, please credit
the account maintained at the Book-Entry Transfer Facility indicated above with
any Shares not accepted for payment. The undersigned recognizes that the
Purchaser has no obligation pursuant to the Special Payment Instructions to
transfer any Shares from the name of the registered holder thereof if the
Purchaser does not accept for payment any of the Shares so tendered.
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS (SEE SPECIAL DELIVERY INSTRUCTIONS
INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certifi- To be completed ONLY if certifi-
cates for Shares not tendered or cates for Shares not tendered or
not accepted for payment and/or not accepted for payment and/or
the check for the purchase price the check for the purchase price
of Shares accepted for payment of Shares accepted for payment
are to be issued in the name of are to be sent to someone other
someone other than the under- than the undersigned or to the
signed, or if Shares delivered by undersigned at an address other
book-entry transfer that are not than that indicated above.
accepted for payment are to be
returned by credit to an account
maintained at a Book-Entry Trans-
fer Facility other than the ac-
count indicated above.
Mail check and/or certificate(s)
to:
Name: ____________________________
(PLEASE PRINT)
Issue check and/or certificate(s) Address: _________________________
to:
----------------------------------
__________________________________
Name: ____________________________ (INCLUDE ZIP CODE)
(PLEASE PRINT)
Address: _________________________
__________________________________
__________________________________
(INCLUDE ZIP CODE)
__________________________________
(TAXPAYER IDENTIFICATION OR
SOCIAL SECURITY NUMBER)
[_]Credit unpurchased Shares
delivered by book-entry
transfer to the Book-Entry
Transfer Facility account set
forth below.
Check appropriate box:
[_]The Depository Trust Company
[_]Midwest Securities Trust Company
[_]Philadelphia Depository Trust Company
----------------------------------
(ACCOUNT NUMBER)
<PAGE>
SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
_______________________________________________________
(Left _______________________________________________________ (Right
arrow) (SIGNATURE(S) OF STOCKHOLDER(S)) arrow)
Dated: , 1994
(Must be signed by registered holder(s) as name(s)
appear(s) on the certificate(s) for the Shares or on a
security position listing or by person(s) authorized
to become registered holder(s) by certificates and
documents transmitted herewith. If signature is by
trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity,
please provide the following information and see
Instruction 5.)
Name(s)________________________________________________
(PLEASE PRINT)
Capacity (Full Title) _________________________________
Address________________________________________________
_______________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone No. ___________________________
Taxpayer Identification or Social Security No. ________
GUARANTEE OF SIGNATURE(S) (IF REQUIRED--SEE INSTRUCTIONS 1 AND 5)
Authorized Signature __________________________________
Name___________________________________________________
(PLEASE PRINT)
Name of Firm __________________________________________
Address________________________________________________
_______________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone No. ___________________________
Dated: _________________________________________ , 1994
<PAGE>
INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signature. No signature guarantee is required on this Letter
of Transmittal (a) if this Letter of Transmittal is signed by the registered
holder(s) (which term, for purposes of this document, shall include any
participant in a Book-Entry Transfer Facility whose name appears on a security
position listing as the owner of Shares) of Shares tendered herewith, unless
such holder(s) has completed either the box entitled "Special Delivery
Instructions" or the box entitled "Special Payment Instructions" on the reverse
hereof, or (b) if such Shares are tendered for the account of a firm that is a
member of a registered national securities exchange or of the National
Association of Securities Dealers, Inc. or a commercial bank or trust company
having an office or correspondent in the United States or by any other
"eligible guarantor institution", as such term is defined in Rule 17Ad-15 under
the Securities Exchange Act of 1934, as amended (each, an "Eligible
Institution"). In all other cases, all signatures on this Letter of Transmittal
must be guaranteed by an Eligible Institution. See Instruction 5.
2. Requirements of Tender. This Letter of Transmittal is to be completed by
stockholders either if certificates are to be forwarded herewith or if delivery
of Shares is to be made pursuant to the procedures for book-entry transfer set
forth in Section 2 of the Offer to Purchase. For a stockholder validly to
tender Shares pursuant to the Offer, either (a) a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), together with any
required signature guarantees and any other required documents, must be
received by the Depositary at one of its addresses set forth herein prior to
the Expiration Date and either (i) certificates for tendered Shares must be
received by the Depositary at one of such addresses prior to the Expiration
Date or (ii) Shares must be delivered pursuant to the procedures for book-entry
transfer set forth herein and a Book-Entry Confirmation must be received by the
Depositary prior to the Expiration Date or (b) the tendering stockholder must
comply with the guaranteed delivery procedures set forth below and in Section 2
of the Offer to Purchase.
Stockholders whose certificates for Shares are not immediately available or
who cannot deliver their certificates and all other required documents to the
Depositary or complete the procedures for book-entry transfer prior to the
Expiration Date may tender their Shares by properly completing and duly
executing the Notice of Guaranteed Delivery pursuant to the guaranteed delivery
procedures set forth in Section 2 of the Offer to Purchase.
Pursuant to such procedures, (a) such tender must be made by or through an
Eligible Institution, (b) a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the Purchaser must be
received by the Depositary prior to the Expiration Date and (c) the
certificates for all physically delivered Shares or a Book-Entry Confirmation
with respect to all tendered Shares, as well as a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantees and any other documents required by this Letter of
Transmittal, must be received by the Depositary within five New York Stock
Exchange, Inc. trading days after the date of execution of the Notice of
Guaranteed Delivery.
THE METHOD OF DELIVERY OF SHARES, THIS LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution
of this Letter of Transmittal (or facsimile thereof), waive any right to
receive any notice of the acceptance of their Shares for payment.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
schedule attached hereto.
4. Partial Tenders (Applicable to Certificate Stockholders Only). If fewer
than all the Shares evidenced by any certificate submitted are to be tendered,
fill in the number of Shares that are to be tendered in the box entitled
"Number of Shares Tendered". In any such case, new certificate(s) for the
remainder of the Shares that were evidenced by the old certificate(s) will be
sent to the registered holder, unless otherwise provided in the appropriate box
on this Letter of Transmittal, as soon as practicable after the expiration of
the Offer. All Shares represented by certificates delivered to the Depositary
will be deemed to have been tendered unless otherwise indicated.
5. Signatures on Letters of Transmittal; Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder of the Shares
tendered hereby, the signature must correspond with the name as written on the
face of the certificate(s) without any change whatsoever.
<PAGE>
If any of the Shares tendered hereby are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal or any certificates or stock powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and proper evidence satisfactory
to the Purchaser of their authority so to act must be submitted.
When this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required unless payment is to be made to or
certificates for Shares not tendered or accepted for payment are to be issued
to a person other than the registered holder(s). Signatures on such
certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the registered
holder(s) of certificates listed, the certificates must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name or names of the registered owner or owners appear on the certificates.
Signatures on such certificates or stock powers must be guaranteed by an
Eligible Institution.
6. Stock Transfer Taxes. The Purchaser will pay any stock transfer taxes with
respect to the transfer and sale of Shares to it or its order pursuant to the
Offer. If, however, payment of the purchase price is to be made to, or if
certificates for Shares not tendered or accepted for payment are to be
registered in the name of, any persons other than the registered holder(s), or
if tendered certificates are registered in the name of any person other than
the person(s) signing this Letter of Transmittal, the amount of any stock
transfer taxes (whether imposed on the registered holder(s) or such person)
payable on account of the transfer to such person will be deducted from the
purchase price unless satisfactory evidence of the payment of such taxes or
exemption therefrom is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF
TRANSMITTAL.
7. Special Payment and Delivery Instructions. If a check is to be issued in
the name of, and/or certificates for Shares not tendered or not accepted for
payment are to be returned to, a person other than the signer of this Letter of
Transmittal or if a check is to be sent and/or such certificates are to be
returned to a person other than the signer of this Letter of Transmittal or to
an address other than that shown above, the appropriate boxes on this Letter of
Transmittal should be completed. Any stockholder(s) delivering Shares by book-
entry transfer may request that Shares not accepted for payment be credited to
such account maintained at a Book-Entry Transfer Facility as such
stockholder(s) may designate.
8. Waiver of Conditions. Subject to the terms of the Offer, the Purchaser
reserves the absolute right in its sole discretion to waive any of the
specified conditions of the Offer, in whole or in part, in the case of any
Shares tendered.
9. 31% Backup Withholding. Under U.S. Federal income tax law, a stockholder
whose tendered Shares are accepted for payment is required to provide the
Depositary with such stockholder's correct taxpayer identification number
("TIN") on Substitute Form W-9 below. If the Depositary is not provided with
the correct TIN, the Internal Revenue Service may subject the stockholder or
other payee to a $50 penalty. In addition, payments that are made to such
stockholder or other payee with respect to Shares purchased pursuant to the
Offer may be subject to 31% backup withholding.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, the stockholder must submit a Form W-8, signed under penalties of
perjury, attesting to that individual's exempt status. A Form W-8 can be
obtained from the Depositary. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for more instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any such payments made to the stockholder or other payee. Backup withholding is
not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld, provided that the
required information is given to the Internal Revenue Service. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
<PAGE>
The box in Part 3 of the Substitute Form W-9 may be checked if the tendering
stockholder has not been issued a TIN and has applied for a TIN or intends to
apply for a TIN in the near future. If the box in Part 3 is checked, the
stockholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Depositary will
withhold 31% on all payments made prior to the time a properly certified TIN is
provided to the Depositary. However, such amounts will be refunded to such
stockholder if a TIN is provided to the Depositary within 60 days.
The stockholder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the record owner of the
Shares or of the last transferee appearing on the transfers attached to, or
endorsed on, the Shares. If the Shares are in more than one name or are not in
the name of the actual owner, consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional guidance on which number to report.
10. Requests for Assistance or Additional Copies. Requests for additional
copies of the Offer to Purchase, this Letter of Transmittal, the Notice of
Guaranteed Delivery and the Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 should be directed to the
Information Agent at its addresses set forth below. Questions or requests for
assistance may be directed to the Information Agent or the Dealer Manager.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE COPY THEREOF (TOGETHER
WITH CERTIFICATES FOR, OR A BOOK-ENTRY CONFIRMATION WITH RESPECT TO, TENDERED
SHARES WITH ANY REQUIRED SIGNATURE GUARANTEES AND ALL OTHER REQUIRED DOCUMENTS)
MUST BE RECEIVED BY THE DEPOSITARY, OR THE NOTICE OF GUARANTEED DELIVERY MUST
BE RECEIVED BY THE DEPOSITARY, PRIOR TO THE EXPIRATION DATE.
<PAGE>
PAYER'S NAME: CHEMICAL BANK
- -------------------------------------------------------------------------------
PART 1--PLEASE PROVIDE YOUR Social Security Number
TIN IN THE BOX AT RIGHT AND Employer Identification
CERTIFY BY SIGNING AND Number
DATING BELOW.
SUBSTITUTE
FORM W-9
OR
DEPARTMENT OF -------------------
THE TREASURY --------------------------------------------------------
INTERNAL PART 2--CERTIFICATES--Under penalties of perjury, I
REVENUE certify that:
SERVICE (1) The number shown on this form is my correct
Taxpayer Identification Number (or I am waiting
for a number to be issued for me) and
(2) I am not subject to backup withholding either
because: (a) I am exempt from backup withholding,
or (b) I have not been notified by the Internal
Revenue Service (the "IRS") that I am subject to
backup withholding as a result of a failure to
report all interest or dividends, or (c) the IRS
has notified me that I am no longer subject to
backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out
item (2) above if you have been notified by the
IRS that you are currently subject to backup
withholding because of underreporting interest or
dividends on your tax return. However, if after
being notified by the IRS that you were subject to
backup withholding you received another
notification from the IRS that you are no longer
subject to backup withholding, do not cross out
such item (2).
PAYER'S REQUEST
FOR TAXPAYER
IDENTIFICATION
NUMBER ("TIN") SIGNATURE ______________ DATE _______ PART 3 --
Awaiting
TIN
(RIGHT ARROW) [_]
--------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the
time of payment, 31% of all reportable payments made to me will be
withheld, but that such amounts will be refunded to me if I then provide a
Taxpayer Identification Number within sixty (60) days.
Signature _____________________________________________ Date ______________
Questions and requests for assistance or additional copies of the Offer to
Purchase, any supplements thereto, this Letter of Transmittal and other tender
offer materials may be directed to the Information Agent or the Dealer Manager
as set forth below.
THE INFORMATION AGENT FOR THE OFFER IS:
D.F. KING & CO., INC.
77 Water Street 37 Sun Street
New York, NY 10005 London, England EC2 2PY
(800) 669-5550 (Toll Free) 011-4471-247-8263 (Collect)
The Dealer Manager for the Offer is:
MORGAN STANLEY & CO.
Incorporated
1251 Avenue of the Americas
New York, NY 10020
(212) 703-6137
<PAGE>
EXHIBIT 99(a)(3)
NOTICE OF GUARANTEED DELIVERY
for
Tender of Shares of Common Stock
of
Allied Clinical Laboratories, Inc.
As set forth in Section 2 of the Offer to Purchase (as defined below), this
form or one substantially equivalent hereto must be used to accept the Offer
(as defined below) if certificates representing shares of common stock, par
value $.01 per share (the "Shares"), of Allied Clinical Laboratories, Inc., a
Delaware corporation (the "Company"), are not immediately available or if the
procedures for book-entry transfer cannot be completed on a timely basis or
time will not permit all required documents to reach the Depositary prior to
the Expiration Date (as defined in Section 1 of the Offer to Purchase). Such
form may be delivered by hand or transmitted by telegram or facsimile
transmission or mailed to the Depositary and must include a guarantee by an
Eligible Institution (as defined in Section 2 of the Offer to Purchase). See
Section 2 of the Offer to Purchase.
THE DEPOSITARY:
CHEMICAL BANK
By Hand/Overnight Courier: By Mail:
Chemical Bank Chemical Bank
55 Water Street--2nd Floor, Room 234 Reorganization Department
New York, N.Y. 10041 P.O. Box 3085--G.P.O. Station
Attention: Reorganization Department New York, N.Y. 10116-3085
Facsimile Transmission Confirm by Telephone:
(for Eligible Institutions only):
(212) 613-7137
(212) 629-8015 (212) 613-7608
(212) 629-8016 (Call Collect)
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS
VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an Eligible Institution
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to N Acquisition Corp., a Delaware corporation
(the "Purchaser") and a wholly owned subsidiary of National Health Laboratories
Incorporated, a Delaware corporation, upon the terms and subject to the
conditions set forth in the Purchaser's Offer to Purchase dated May 9, 1994
(the "Offer to Purchase"), and in the related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute
the "Offer"), receipt of which is hereby acknowledged, Shares pursuant to the
guaranteed delivery procedures set forth in Section 2 of the Offer to Purchase.
Number of Shares: ___________________ Name(s) of Record Holder(s):
Certificate Nos. (if available): ____ _____________________________________
_____________________________________ _____________________________________
(Please Print)
Address(es): ________________________
_____________________________________
Zip Code
Area Code and Tel. No.: _____________
(Check one box if Shares will be tendered by book-entry transfer)
[_] The Depository Trust Company
[_] Midwest Securities Trust Company
[_] Philadelphia Depository Trust Company
Account Number: _____________________ Signature(s): _______________________
Dated: ______________________________ _____________________________________
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of a registered national securities exchange or of
the National Association of Securities Dealers, Inc., a commercial bank or
trust company having an office or correspondent in the United States or an
"eligible guarantor institution", as such term is defined in Rule 17Ad-15 under
the Securities Exchange Act of 1934, as amended, hereby guarantees to deliver
to the Depositary either the certificates representing the Shares tendered
hereby, in proper form for transfer, or a Book-Entry Confirmation (as defined
in Section 2 of the Offer to Purchase) of a transfer of such Shares, in any
such case together with a properly completed and duly executed Letter of
Transmittal, or a manually signed facsimile thereof, with any required
signature guarantees, and any other documents required by the Letter of
Transmittal within five New York Stock Exchange, Inc. trading days after the
date hereof.
Name of Firm: _______________________ _____________________________________
Address: ____________________________ Authorized Signature
______________________________ Title: ______________________________
Zip Code Dated: ______________________________
Area Code and Tel. No.: _____________
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. SHARE CERTIFICATES
SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
2
<PAGE>
EXHIBIT 99(a)(4)
Morgan Stanley & Co.
Incorporated
1251 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10020
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
Allied Clinical Laboratories, Inc.
at
$23.00 Net Per Share
by
N Acquisition Corp.
a Wholly Owned Subsidiary of
National Health Laboratories Incorporated
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, JUNE 7, 1994, UNLESS EXTENDED.
May 9, 1994
To Brokers, Dealers, Banks, Trust Companies and Other Nominees:
We have been appointed by N Acquisition Corp., a Delaware corporation (the
"Purchaser") and a wholly owned subsidiary of National Health Laboratories
Incorporated, a Delaware corporation, ("Parent"), to act as Dealer Manager in
connection with the Purchaser's offer to purchase all outstanding shares of
common stock, par value $.01 per share (the "Shares"), of Allied Clinical
Laboratories, Inc., a Delaware corporation (the "Company"), at $23.00 per
Share, net to the seller in cash, upon the terms and subject to the conditions
set forth in the Purchaser's Offer to Purchase dated May 9, 1994 (the "Offer to
Purchase"), and the related Letter of Transmittal (which, together with any
supplements or amendments thereto, collectively constitute the "Offer").
Please furnish copies of the enclosed materials to those of your clients for
whom you hold Shares registered in your name or in the name of your nominee.
Enclosed herewith are copies of the following documents:
1. Offer to Purchase;
2. Letter of Transmittal to be used by stockholders of the Company
accepting the Offer;
3. The Letter to Stockholders of the Company from the President and Chief
Executive Officer of the Company accompanied by the Company's
Solicitation/Recommendation Statement on Schedule 14D-9;
4. A printed form of letter that may be sent to your clients for whose
account you hold Shares in your name or in the name of a nominee, with
space provided for obtaining such client's instructions with regard to the
Offer;
5. Notice of Guaranteed Delivery;
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. Return envelope address to the Depositary.
WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE OFFER AND
WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
TUESDAY, JUNE 7, 1994, UNLESS EXTENDED.
<PAGE>
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer that number of
Shares which, together with the Optioned Shares referred to in the Offer to
Purchase, would represent, on a fully diluted basis, at least a majority of all
outstanding Shares.
The Board of Directors of the Company has, by unanimous vote, approved the
Offer and the Merger (as defined below) and determined that the terms of the
Offer and the Merger are fair to, and in the best interests of, the
stockholders of the Company and recommends that stockholders of the Company
accept the Offer and tender their Shares.
The Offer is being made pursuant to the Agreement and Plan of Merger dated as
of May 3, 1994 (the "Merger Agreement"), among Parent, the Purchaser and the
Company pursuant to which, following the consummation of the Offer and the
satisfaction or waiver of certain conditions, the Purchaser will be merged with
and into the Company, with the Company surviving the merger as a wholly owned
subsidiary of Parent (the "Merger"). In the Merger, each outstanding Share
(other than Shares owned by the Company as treasury stock or by any subsidiary
of the Company, Parent, the Purchaser or any other subsidiary of Parent or by
stockholders, if any, who are entitled to and who properly exercise dissenters'
rights under Delaware law) will be converted into the right to receive $23.00
per Share, without interest, as set forth in the Merger Agreement and described
in the Offer to Purchase.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of certificates for
such Shares (or timely Book-Entry Confirmation of a transfer of such Shares as
described in Section 2 of the Offer to Purchase), a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) and any other documents
required by the Letter of Transmittal.
Neither the Purchaser nor Parent will pay any fees or commissions to any
broker or dealer or other person (other than the Dealer Manager and the
Information Agent as described in the Offer to Purchase) in connection with the
solicitation of tenders of Shares pursuant to the Offer. You will be reimbursed
upon request for customary mailing and handling expenses incurred by you in
forwarding the enclosed offering materials to your customers.
Questions and requests for additional copies of the enclosed material may be
directed to the Information Agent or to the Dealer Manager at their respective
addresses and telephone numbers set forth on the back cover of the enclosed
Offer to Purchase.
Very truly yours,
MORGAN STANLEY & CO.
Incorporated
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU OR ANY
OTHER PERSON THE AGENT OF THE PURCHASER, PARENT, THE DEPOSITARY, THE
INFORMATION AGENT OR THE DEALER MANAGER OR ANY AFFILIATE OF ANY OF THEM OR
AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR USE ANY DOCUMENT
OR MAKE ANY STATEMENTS ON BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFER OTHER
THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
2
<PAGE>
EXHIBIT 99(a)(5)
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
Allied Clinical Laboratories, Inc.
at
$23.00 Net Per Share
by
N Acquisition Corp.
a Wholly Owned Subsidiary of
National Health Laboratories Incorporated
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, JUNE 7, 1994, UNLESS EXTENDED.
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated May 9, 1994
(the "Offer to Purchase"), and a related Letter of Transmittal (which, together
with any amendments or supplements thereto, collectively constitute the
"Offer") relating to an offer by N Acquisition Corp., a Delaware corporation
(the "Purchaser") and a wholly owned subsidiary of National Health Laboratories
Incorporated, a Delaware corporation ("Parent"), to purchase shares of common
stock, par value $.01 per share (the "Shares"), of Allied Clinical
Laboratories, Inc., a Delaware corporation (the "Company"), at $23.00 per
Share, net to the seller in cash, upon the terms and subject to the conditions
set forth in the Offer. Also enclosed is the Letter to Stockholders of the
Company from the President and Chief Executive Officer of the Company
accompanied by the Company's Solicitation/Recommendation Statement on Schedule
14D-9.
We are the holder of record of Shares held by us for your account. A TENDER
OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED TO TENDER SHARES HELD BY US FOR YOUR
ACCOUNT.
We request instructions as to whether you wish to tender any of or all the
Shares held by us for your account, pursuant to the terms and conditions set
forth in the Offer.
Your attention is invited to the following:
1. The tender price is $23.00 per Share, net to the seller in cash, upon
the terms and subject to the conditions set forth in the Offer.
2. The Board of Directors of the Company has, by unanimous vote, approved
the Offer and the Merger (as defined below) and determined that the terms
of the Offer and the Merger are fair to, and in the best interests of, the
stockholders of the Company and recommends that the stockholders of the
Company accept the Offer and tender their Shares.
3. The Offer is being made for all outstanding Shares.
4. The Offer is being made pursuant to the Agreement and Plan of Merger
dated as of May 3, 1994 (the "Merger Agreement"), among Parent, the
Purchaser and the Company pursuant to which, following the consummation of
the Offer and the satisfaction or waiver of certain conditions, the
Purchaser will be merged with and into the Company, with the Company
surviving the merger as a wholly owned subsidiary of Parent (the "Merger").
In the Merger, each outstanding Share (other than Shares owned by the
Company as treasury stock or by any subsidiary of the Company, Parent, the
Purchaser or any other subsidiary of Parent or by stockholders, if any, who
are entitled to and who properly exercise dissenters' rights under Delaware
law) will be converted into the right to receive $23.00 per Share, without
interest, as set forth in the Merger Agreement and described in the Offer
to Purchase.
<PAGE>
5. The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer that number
of Shares which, together with the Optioned Shares (as defined in the Offer
to Purchase), would represent, on a fully diluted basis, at least a
majority of all outstanding Shares.
6. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Tuesday, June 7, 1994, unless the Offer is extended by
the Purchaser. In all cases, payment for Shares accepted for payment
pursuant to the Offer will be made only after timely receipt by the
Depositary of certificates for such Shares (or timely Book-Entry
Confirmation of a transfer of such Shares as described in Section 2 of the
Offer to Purchase), a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) and any other documents required by the
Letter of Transmittal.
7. The Purchaser will pay any stock transfer taxes with respect to the
transfer and sale of Shares to it or its order pursuant to the Offer,
except as otherwise provided in Instruction 6 of the Letter of Transmittal.
If you wish to have us tender any of or all your Shares, please so instruct
us by completing, executing, detaching and returning to us the instruction
form set forth below. An envelope to return your instructions to us is
enclosed. If you authorize tender of your Shares, all such Shares will be
tendered unless otherwise specified below. Your instructions to us should be
forwarded promptly to permit us to submit a tender on your behalf prior to the
expiration of the Offer.
The Offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of Shares in any jurisdiction in which the making or
acceptance of the Offer would not be in compliance with the laws of such
jurisdiction.
TEAR HERE TEAR HERE
- -------------------------------------------------------------------------------
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE
ALL OUTSTANDING SHARES OF COMMON STOCK OF
ALLIED CLINICAL LABORATORIES, INC.
The undersigned acknowledges receipt of your letter enclosing the Offer to
Purchase dated May 9, 1994, of N Acquisition Corp., a Delaware corporation and
a wholly owned subsidiary of National Health Laboratories Incorporated, a
Delaware corporation, and the related Letter of Transmittal, relating to
shares of Common Stock, par value $.01 per share, of Allied Clinical
Laboratories, Inc., a Delaware corporation.
This will instruct you to tender the number of Shares indicated below held
by you for the account of the undersigned on the terms and conditions set
forth in such Offer to Purchase and the related Letter of Transmittal.
Dated: _________________________ 1994 -------------------------------------
-------------------------------------
Number of Shares to be Signature(s)
Tendered* -------------------------------------
___________ Shares -------------------------------------
Please print name(s)
Address _____________________________
-------------------------------------
(Include Zip Code)
Area Code and Telephone No. _________
Taxpayer Identification or Social
Security No. ________________________
-------------------------------------
- --------
* Unless otherwise indicated, it will be assumed that all your Shares are to
be tendered.
2
<PAGE>
EXHIBIT 99(a)(6)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER. -- Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen: i.e. 00-0000000. The table below will help determine the
number to give the payer.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF --
- --------------------------------------------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals (joint account) The actual owner
of the account
or, if combined
funds, any one
of the
individuals(1)
3. Custodian account of a minor (Uniform Gift to Minors Act) The minor(2)
4. a The usual revocable savings trust account (grantor is The grantor-
also trustee) trustee(1)
b So-called trust account that is not a legal or valid The actual
trust under State law owner(1)
5. Sole proprietorship account The owner(3)
</TABLE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF --
- ---------------------------------------------------------------
<S> <C>
6. A valid trust, estate, or pension trust The legal entity
(Do not furnish
the identifying
number of the
personal
representative
or trustee
unless the legal
entity itself is
not designated
in the account
title.)(4)
</TABLE>
<TABLE>
<S> <C>
7. Corporate account The corporation
8. Religious, charitable, or educational organization The organization
account
9. Partnership The partnership
10. Association, club, or other tax-exempt organization The organization
11. A broker or registered nominee The broker or
nominee
12. Account with the Department of Agriculture in the name The public
of a public entity (such as a State or local government, entity
school district, or prison) that receives agricultural
program payments
</TABLE>
- -------------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show the name of the owner. You may also enter your business name. You may
use your Social Security Number or Employer Identification Number.
(4) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your num-
ber, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of
the Social Security Administration or the Internal Revenue Service and apply
for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual re-
tirement plan.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a)
. An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
. An entity registered at all times under the Investment Company Act of 1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to non-resident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDEN-
TIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS,
ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.-- Section 6109 requires most recipients of dividend, in-
terest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are re-
quired to file tax returns. Payers must generally withhold 31% of taxable in-
terest, dividend, and certain other payments to a payee who does not furnish a
taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you
fail to furnish your taxpayer identification number to a payer, you are sub-
ject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or im-
prisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE
<PAGE>
EXHIBIT 99(a)(7)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase dated May 9,
1994 and the related Letter of Transmittal and is not being made to (nor will
tenders be accepted from or on behalf of) holders of Shares in any jurisdiction
in which the making of the Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. In any jurisdiction the
securities laws of which require the Offer to be made by a licensed broker or
dealer, the Offer shall be deemed made on behalf of the Purchaser by the Dealer
Manager or one or more registered brokers or dealers licensed under the laws of
such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ALLIED CLINICAL LABORATORIES, INC.
AT
$23.00 NET PER SHARE
BY
N ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
NATIONAL HEALTH LABORATORIES
INCORPORATED
N Acquisition Corp., a Delaware corporation (the "Purchaser") and a wholly
owned subsidiary of National Health Laboratories Incorporated, a Delaware
corporation ("Parent"), is offering to purchase all outstanding shares of common
stock, par value $.01 per share (the "Shares"), of Allied Clinical Laboratories,
Inc., a Delaware corporation (the "Company"), at $23.00 per Share, net to the
seller in cash, upon the terms and subject to the conditions set forth in the
Offer to Purchase dated May 9, 1994, and in the related Letter of Transmittal
(which together constitute the "Offer").
------------------------------------------------------------------
+ THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, +
+ NEW YORK CITY TIME, ON TUESDAY, JUNE 7, 1994, UNLESS EXTENDED. +
------------------------------------------------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES WHICH, TOGETHER WITH THE OPTIONED SHARES REFERRED TO BELOW, WOULD
REPRESENT, ON A FULLY DILUTED BASIS, AT LEAST A MAJORITY OF ALL OUTSTANDING
SHARES.
The Offer is being made pursuant to an Agreement and Plan of Merger dated
as of May 3, 1994 (the "Merger Agreement"), among Parent, the Purchaser and the
Company pursuant to which, following the consummation of the Offer and the
satisfaction or waiver of certain conditions, the Purchaser will be merged with
and into the Company (the "Merger"). On the effective date of the Merger, each
outstanding Share (other than Shares owned by the Company as treasury stock or
by any subsidiary of the Company, Parent, the Purchaser or any other subsidiary
of Parent or by stockholders, if any, who are entitled to and who properly
exercise dissenters' rights under Delaware law) will be converted into the right
to receive $23.00 in cash, without interest. The Purchaser and Parent have also
entered into stock option agreements with two stockholders of the Company under
which the Purchaser has the option to purchase from such stockholders an
aggregate of 2,768,815 Shares at $23.00 per Share in cash (the "Optioned
Shares").
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER AND THE
MERGER AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO,
AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY, AND RECOMMENDS
THAT STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES.
For purposes of the Offer, the Purchaser shall be deemed to have accepted
for payment, and thereby purchased, Shares properly tendered to the Purchaser
and not withdrawn as, if and when the Purchaser gives oral or written notice to
the Depositary of the Purchaser's acceptance for payment of such Shares. Upon
the terms and subject to the conditions of the Offer, payment for Shares
purchased pursuant to the Offer will be made by deposit of the purchase price
therefor with the Depositary, which will act as agent for tendering stockholders
for the purpose of receiving payment from the Purchaser and transmitting payment
to tendering stockholders. In all cases, payment for Shares purchased pursuant
to the Offer will be made only after timely receipt by the Depositary of (a)
certificates for such Shares or timely confirmation of book-entry transfer of
such Shares into the Depositary's account at a Book-Entry Transfer Facility (as
defined in the Offer to Purchase) pursuant to the procedures set forth in
Section 2 of the Offer to Purchase, (b) a properly completed and duly executed
Letter of Transmittal (or facsimile thereof) with any required signature
guarantees and (c) any other documents required by the Letter of Transmittal.
Under no circumstances will interest be paid by the Purchaser on the purchase
price of the Shares, regardless of any delay in making such payment.
<PAGE>
The term "Expiration Date" means 12:00 Midnight, New York City time, on
Tuesday, June 7, 1994, unless and until the Purchaser, in its sole discretion
(but subject to the terms of the Merger Agreement), shall have extended the
period of time during which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date on which the Offer, as so
extended by the Purchaser, shall expire. The Purchaser expressly reserves the
right, it its sole discretion (but subject to the terms of the Merger
Agreement), at any time or from time to time, and regardless of whether or not
any of the events set forth in Section 14 of the Offer to Purchase shall have
occurred or shall have been determined by the Purchaser to have occurred, to
extend the period of time during which the Offer is open and thereby delay
acceptance for payment of, and the payment for, any Shares, by giving oral or
written notice of such extension to the Depositary. The Purchaser shall not
have any obligation to pay interest on the purchase price for tendered Shares in
the event the Purchaser exercises its right to extend the period of time during
which the Offer is open. There can be no assurance that the Purchaser will
exercise its right to extend the Offer (other than as required by the Merger
Agreement). Any such extension will be followed by a public announcement
thereof no later than 9:00 A.M., New York City time, on the next business day
after the previously scheduled Expiration Date. During any such extension, all
Shares previously tendered and not withdrawn will remain subject to the Offer,
subject to the right of a tendering stockholder to withdraw such stockholder's
Shares.
Except as otherwise provided below, tenders of Shares are irrevocable.
Shares tendered pursuant to the Offer may be withdrawn at any time prior to
12:00 Midnight, New York City time, on Tuesday, June 7, 1994 (or, if the
Purchaser shall have extended the period of time during which the Offer is open,
the latest time and date at which the Offer, as so extended by the Purchaser,
shall expire) and, unless theretofore accepted for payment, may also be
withdrawn at any time after July 7, 1994. For a withdrawal to be effective, a
written, telegraphic or facsimile transmission notice of withdrawal must be
timely received by the Depositary at one of its addresses set forth on the back
cover of the Offer to Purchase and must specify the name of the person having
tendered the Shares to be withdrawn, the number of Shares to be withdrawn and
the name of the registered holder of the Shares to be withdrawn, if different
from the name of the person who tendered the Shares. If certificates for Shares
have been delivered or otherwise identified to the Depositary, then, prior to
the physical release of such certificates, the serial numbers shown on such
certificates must be submitted to the Depositary and, unless such Shares have
been tendered by an Eligible Institution (as defined in Section 2 of the Offer
to Purchase), the signatures on the notice of withdrawal must be guaranteed by
an Eligible Institution. If Shares have been delivered pursuant to the
procedures for book-entry transfer as set forth in Section 2 of the Offer to
Purchase, any notice of withdrawal must also specify the name and number of the
account at the appropriate Book-Entry Transfer Facility to be credited with the
withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility's
procedures. Withdrawals of tenders of Shares may not be rescinded, and any
Shares properly withdrawn will thereafter be deemed not validly tendered for
purposes of the Offer. However, withdrawn Shares may be retendered by again
following one of the procedures described in Section 2 of the Offer to Purchase
at any time prior to the Expiration Date.
The Offer to Purchase and the related Letter of Transmittal and other
relevant materials will be mailed to record holders of Shares and furnished to
brokers, dealers, banks, trust companies and similar persons whose names, or the
names of whose nominees, appear on the stockholder lists or, if applicable, who
are listed as participants in a clearing agency's security position listing, for
subsequent transmittal to beneficial owners of Shares.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) under
the Securities Exchange Act of 1934, as amended, is contained in the Offer to
Purchase and is incorporated herein by reference.
THE OFFER TO PURCHASE AND LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE
OFFER.
Requests for copies of the Offer to Purchase and the Letter of
Transmittal may be directed to the Information Agent or the Dealer Manager as
set forth below, and copies will be furnished promptly at the Purchaser's
expense.
The Information Agent is:
D.F. KING & CO., INC.
77 Water Street 37 Sun Street
New York, NY 10005 London, England EC2 2PY
(800) 669-5550 (Toll Free) 011-4471-247-8263 (Collect)
The Dealer Manager for the Offer is:
MORGAN STANLEY & CO.
INCORPORATED
1251 Avenue of the Americas
New York, New York 10020
(212) 703-6137
May 9, 1994
<PAGE>
EXHIBIT 99(a)(8)
FOR IMMEDIATE RELEASE
- ---------------------
NATIONAL HEALTH LABORATORIES SIGNS
DEFINITIVE MERGER AGREEMENT
WITH ALLIED CLINICAL LABORATORIES
NHL TO MAKE ALL-CASH OFFER FOR ALL OUTSTANDING COMMON SHARES, AT $23 PER SHARE
NHL AUTHORIZES NEW STOCK REPURCHASE PROGRAM AND DISCONTINUES DIVIDEND
La Jolla, CA, May 4, 1994 -- National Health Laboratories Incorporated
(NYSE: NH) and Allied Clinical Laboratories, Inc. (NASDAQ: ACLB) announced today
that they have entered into a definitive agreement for NHL to acquire Allied.
Under the agreement, which was unanimously approved by the Boards of Directors
of both companies, a subsidiary of NHL will commence a cash tender offer for all
shares of Allied common stock for $23 per share. Any shares not tendered and
purchased in the offer will be exchanged for $23 in cash in a second-step
merger. Allied has approximately 8,400,000 shares outstanding.
The offer and the merger are subject, among other things, to the purchase
in the offer of 4,845,000 Allied shares and the expiration of all waiting
periods under the Hart-Scott-Rodino Antitrust Improvements Act. The offer is
not subject to financing, a commitment for which has been obtained from
Citibank. It is currently intended that the offer will commence on Monday, May
9.
"We are extremely pleased that we have reached an agreement with Allied,"
said James R. Maher, Chief Executive Officer of NHL. "This transaction will
strengthen NHL's competitive position in the consolidating clinical lab testing
industry. The merger will broaden our presence in
<PAGE>
2
the marketplace, deepen our penetration of the managed-care and hospital
segments of our business and achieve greater operating efficiencies. In our
industry, firms with a national presence and economies of scale are best
prepared to take advantage of long-term growth opportunities. Clearly, the
merger with Allied will help us achieve this objective."
Mr. Maher also said that it is anticipated that Haywood D. Cochrane, Jr.,
Allied's President and Chief Executive Officer, will become NHL's Vice Chairman
when the transaction is completed. "We are gratified that Haywood has agreed to
join the new company," Mr. Maher said. "Initially, he will be responsible for
integrating the operations of the two companies and for NHL's ongoing
acquisition program. Haywood offers a tremendous depth of experience in the
laboratory business and will be invaluable to us as we work together and
continue building one of the outstanding companies in the business."
Mr. Cochrane said, "We believe this transaction offers our shareholders
fair value for their Allied investment. Further, joining the strengths of
Allied and NHL will give the new company a significantly improved position in
the marketplace and enhance our ability to offer high-quality, sophisticated
testing services at competitive pricing."
NHL DISCONTINUES DIVIDEND TO SUPPORT ACQUISITION STRATEGY
- ---------------------------------------------------------
In order to increase its flexibility with regard to both its acquisition
strategy and stock repurchase program, NHL also said it is discontinuing divided
payments for the foreseeable future. The company will terminate its current 10
million share repurchase program, under which the company, to date, has
repurchased 7.8 million shares, and
<PAGE>
3
will establish a new $50 million stock repurchase program through which NHL will
acquire additional shares of the company's common stock from time to time on the
open market.
"Our acquisition program continues to play a significant role in our
overall growth strategy," said Mr. Maher. "We believe that the elimination of
the dividend is a sound strategic move. It will help us acquire other high-
quality clinical laboratory companies that will help open new markets for NHL
and solidify our position in existing ones. At the same time, we will have
greater latitude with which to pursue a major stock repurchase program."
NHL also announced that it has entered into agreements with Mr. Cochrane
and Warburg, Pincus Capital Company, L.P., under which NHL has the option to
purchase from such stockholders an aggregate amount of approximately 2,751,000
shares of Allied common stock at $23 per share.
NHL's financial advisor is Morgan Stanley & Co. Incorporated, which will
act as the dealer manager for the offer. Alex. Brown & Sons Incorporated is
acting as the financial advisor for Allied.
NHL had 1993 net sales of $760.5 million. The company owns and operates 15
regional laboratories and an esoteric reference laboratory in Nashville, which
offers highly specialized tests to hospitals and other providers. NHL is one of
the leading clinical laboratory companies in the United States, providing
testing services primarily to physicians as well as to hospitals, clinics,
nursing homes and other clinical laboratories in 44 states.
Allied had 1993 sales of $163.0 million. Allied provides testing services
to physicians, hospitals, clinics and other health care providers through a
national network
<PAGE>
4
of 12 regional laboratories, one of which services as a reference laboratory and
one of which services as an anatomical testing laboratory. The company supports
its regional laboratories through approximately 230 other services sites.
Through its Contract Management Services Division, the company has contracted
with approximately 70 health care entities, including multispecialty clinics,
PPO networks and a staff model IIMO to provide a variety of management services
for their on-site laboratories, including both clinical and anatomical testing
as well as pathology consultation and laboratory direction.
# # #
CONTACT: National Health Laboratories
Walter G. Montgomery
212-484-6721
Allied Clinical Laboratories
Gerard M. Hayden, Jr.
615-320-2648
<PAGE>
EXHIBIT 99.b
May 3, 1994
National Health Laboratories
Incorporated
4225 Executive Square
La Jolla, CA 92037
Attention: Al Traub
Project Cold
------------
Ladies and Gentlemen:
Based on our discussions concerning the proposed acquisition by National
Health Laboratories Incorporated ("NHL") of a publicly-held corporation code-
---
named "Cold" (the "Target") (the "Transaction"), Citibank, N.A. ("Citibank") is
------ -----------
pleased to provide you with financing commitments for, and to agree to act as
administrative agent bank (the "Administrative Agent") in connection with,
--------------------
$750,000,000 in senior debt facilities as described below and on the attached
Annex.
As Citibank understands the transaction, NHL will organize a single-
purpose, wholly-owned subsidiary (the "Purchaser") that, pursuant to a merger
---------
agreement to be entered into with the Target, will offer to acquire through a
tender offer (the "Tender Offer") for up to $23 in cash per share all of the
------------
shares of the Target's outstanding common stock, $.01 par value (the "Company
-------
Stock"), but in any event not less than sufficient shares of Target Stock which,
- -----
together with the number of shares of the Company Stock with respect to which
the Purchaser has a valid and existing option, would enable the Purchaser,
voting without any other shareholders of the Target, to approve a merger of the
Purchaser with the Target. As promptly as practicable after the closing of the
Tender Offer, the Purchaser (or a subsidiary of the Purchaser) will consummate a
merger (the "Merger") with the Target in which the Target will be the surviving
------
corporation. On or prior to the consummation of the Tender Offer, National
Health Laboratories Holdings Inc.
<PAGE>
2
("Holdings") will be established as a publicly traded holding company that will
--------
own directly 100% of the capital stock of a newly established intermediate
holding company ("Intermediate Co. I") that will, in turn, own directly 100% of
------------------
the capital stock of another newly established intermediate holding company
("Intermediate Co. II") that will, in turn, own directly 100% of the capital
- ---------------------
stock of NHL (the establishment of Holdings, Intermediate Co. I and Intermediate
Co. II, together with the acquisition by Holdings of 100% of the capital stock
of Intermediate Co. I, the acquisition by Intermediate Co. I of 100% of the
capital stock of Intermediate Co. II and the acquisition by Intermediate Co. II
of 100% of the capital stock of NHL, being referred to as the "Reorganization").
--------------
You have asked Citibank to provide you with commitments for the senior debt
facilities required to consummate the Transaction, consisting of secured term
and revolving credit facilities (the "Senior Facilities"). Intermediate Co. II
-----------------
will be the borrower under the Senior Facilities.
Subject to the satisfaction of the conditions contained in this Commitment
Letter and your acceptance hereof, Citibank commits to lend, or to cause an
affiliate of Citibank to lend, the entire amount of the Senior Facilities, on
the terms and conditions referred to herein and in the attached Annex.
Please note, however, that the terms and conditions of this commitment are
not limited to those set forth herein or in the attached Annex. Those matters
that are not covered or made clear herein or in the attached Annex are subject
to mutual agreement of the parties. The terms and conditions of this commitment
may be modified only in writing. In addition,this commitment is subject to (a)
the preparation, execution and delivery of mutually acceptable loan
documentation, including a credit agreement incorporating substantially the
terms and conditions outlined herein and in the attached Annex, (b) the absence
of (i) a material adverse change in the business, condition (financial or
otherwise), operations, performance, properties or prospects of (A) NHL and its
subsidiaries taken as a whole or (B) the Target and its subsidiaries taken as a
whole, in each case since December 31, 1993, and
<PAGE>
3
(ii) any material adverse change in loan syndication or financial or capital
market conditions generally from those currently in effect and (c) the absence
of a material adverse change in the status, or financial effect on NHL or the
Target, of the investigations with the Office of the Inspector General regarding
billing practices at NHL and the Target from that disclosed to Citibank prior to
the date hereof. Citibank's commitment set forth in this letter will terminate
on August 10, 1994 unless the Tender Offer closes on or before such date.
Citibank intends to syndicate the Senior Facilities to additional Lenders
with a corresponding reduction in its commitment. As more fully set forth in
the attached Annex, Citibank will manage all aspects of the syndication,
including the timing of all offers to potential Lenders and the acceptance of
commitments, the amounts offered and the compensation provided.
In addition to the fees described on the attached Annex, you agree to pay
the nonrefundable fees set forth in the fee letter dated the date hereof with
Citibank (the "Agreed Fees").
-----------
In the event that the shareholders do not approve the Reorganization on or
prior to the consummation of the Tender Offer, the following changes to the
terms and conditions of the Senior Facilities set forth herein and in the
attached Annex shall be made:
(i) NHL will be the borrower under the Senior Facilities and, upon the
consummation of the Reorganization, Intermediate Co. II will
assume the obligations of NHL under the Senior Facilities and
will, thereafter, be the borrower under the Senior Facilities;
(ii) Upon the consummation of the Reorganization, Intermediate Co. I
and NHL will each become a guarantor of the Senior Facility and
will each execute a guaranty in form and substance satisfactory to
the Lenders;
(iii) The term "New Debt Securities" in the attached Annex will be a
reference to the long-term,
<PAGE>
4
fixed rate senior subordinated notes issued by NHL and, upon the
consummation of the Reorganization, Intermediate Co. II will
become the obligor under such New Debt Securities;
(iv) The term "Applicable Margin" in the attached Annex shall be
increased as shall be mutually agreed by Citibank and NHL; and
(v) The conditions precedent to the initial funding of the Senior
Facilities set forth in the attached Annex that relate to
Holdings, Intermediate Co. I and Intermediate Co. II shall all be
satisfied prior to the consummation of the Reorganization.
You agree to indemnify and hold harmless Citibank, the Administrative
Agent, each Lender and each of their affiliates and their officers, directors,
employees, agents and advisors (each, an "Indemnified Party") from and against
-----------------
any and all claims, damages, losses, liabilities and expenses (including,
without limitation, reasonable fees and expenses of counsel) that may be
incurred by or asserted or awarded against any Indemnified Party, in each case
arising out of or in connection with or by reason of, or in connection with the
preparation for a defense of, any investigation, litigation or proceeding
arising out of, related to or in connection with the Transaction, the Senior
Facilities or any application of the proceeds of any borrowing thereunder,
whether or not such investigation, litigation or proceeding is brought by you,
your shareholders or creditors or an Indemnified Party or an Indemnified Party
is otherwise a party thereto and whether or not the Transaction is consummated,
except to the extent such claim, damage, loss, liability or expense is found in
a final, non-appealable judgment by a court of competent jurisdiction to have
resulted from (a) such Indemnified Party's gross negligence or willful
misconduct or (b) from the breach of Citibank's obligation hereunder to
negotiate in good faith definitive documentation for the financing for the
Transaction on the terms set forth herein and in the attached Annex. You also
agree that no Indemnified Party shall have any liability (whether direct or
indirect, in contract or tort or otherwise) to you or your security
<PAGE>
5
holders or creditors arising out of, related to or in connection with the
Transaction, except (a) to the extent that such liability is found in a final
non-appealable judgment by a court of competent jurisdiction to have resulted
from such Indemnified Party's gross negligence or willful misconduct and (b) for
direct, as opposed to consequential, damages for breach of Citibank's obligation
hereunder to negotiate in good faith definitive documentation for the financing
for the Transaction on the terms set forth herein and in the attached Annex.
In further consideration of the commitment of Citibank hereunder, and
recognizing that in connection herewith Citibank is incurring substantial costs
and expenses, including, without limitation, fees and expenses of counsel and
due diligence, syndication (including printing, distribution and bank meetings),
transportation, computer, duplication, appraisal, audit, insurance, consultant,
search, filing and recording fees, you agree to pay, from time to time on
request, such costs and expenses (whether incurred before or after the date
hereof), regardless of whether the Transaction is consummated or any loan
documentation is entered into.
You should be aware that Citibank or its affiliates may be providing
financing or other services to parties whose interests may conflict with yours.
However, be assured that, consistent with its longstanding policy to hold in
confidence the affairs of its customers, Citibank will not furnish confidential
information obtained from you to any of its other customers. By the same token,
Citibank will not make available to you confidential information that it has
obtained or may obtain from any other customer.
You agree that this Commitment Letter is for your confidential use only
and will not be disclosed by you to any person other than your accountants,
attorneys and other advisors, and then only in connection with the Transaction
and on a confidential basis, except that, following your acceptance hereof, you
may make public disclosure of the existence and amount of Citibank's commitment
hereunder, you may file a copy of this Commitment Letter in any public record in
which it is required by law to be filed and you may make such other public
disclosures of the terms and conditions hereof as you are required by law, in
the opinion
<PAGE>
6
of your counsel, to make.
In issuing this commitment, Citibank is relying on the accuracy of the
information furnished to it by you or on your behalf.
This Commitment Letter shall be governed by, and construed in
accordance with, the laws of the State of New York. Delivery of an executed
counterpart of this Commitment Letter by telecopier shall be effective as
delivery of a manually executed counterpart of this Commitment Letter. You and
Citibank hereby irrevocably waive all right to trial by jury in any action,
proceeding or counterclaim (whether based on contract, tort or otherwise)
arising out of or relating to this Commitment Letter, the transactions
contemplated hereby or the actions of Citibank in the negotiation, performance
or enforcement hereof.
Please evidence your acceptance of the provisions of this Commitment
Letter, the attached Annex and the other matters referred to above by signing
the enclosed copy of this Commitment Letter and returning it to the undersigned,
together with payment of the portion of the Agreed Fees then payable, at or
before 5:00 P.M. (New York City time) on May 4, 1994, the time at which
Citibank's commitment set forth above (if not so accepted prior thereto) will
expire.
Very truly yours,
CITIBANK, N.A.
By /s/ Douglas H. Greef
---------------------
Title: Attorney-in-fact
ACCEPTED this 3rd day
---
of May, 1994
NATIONAL HEALTH LABORATORIES
INCORPORATED
By /s/ James R. Maher
___________________
Title: President and Chief
Executive Officer
<PAGE>
EXHIBIT 99(b)
Annex
-----
Summary of Terms
----------------
Tender Offer: National Health Laboratories Incorporated ("NHL") will organize a
- ------------ ----
single-purpose, wholly-owned subsidiary (the "Purchaser") that,
---------
pursuant to a merger agreement to be entered into with a publicly-
held corporation code-named "Cold" (the "Target"), will offer to
------
acquire through a tender offer for up to $23 in cash per share all
of the shares of the Target's outstanding capital stock, $0.01 par
value (the "Target Stock").
------------
Merger: After the consummation of the Tender Offer, the Purchaser will
- ------ merge with the Target and the Target will be the surviving
corporation.
Reorganization: On or prior to the consummation of the Tender Offer, National
- -------------- Health Laboratories Holdings Inc. ("Holdings") will be
--------
established as a holding company that will own directly 100%
of the capital stock of a newly established intermediate
holding company ("Intermediate Co. I") that will, in turn,
------------------
own directly 100% of the capital stock of another newly
established intermediate holding company ("Intermediate Co.
----------------
II") that will, in turn, own directly 100% of the capital
--
stock of NHL.
Borrower: Intermediate Co. II.
- --------
Guarantors: Intermediate Co. I and all of the present and future subsidiaries
- ---------- of the Borrower organized under the laws of one of the states of
the United States of America. Upon the consummation of the Merger,
the Target will assume the obligations of the Purchaser as a
Guarantor.
<PAGE>
2
Lenders: Citibank, N.A. or an affiliate of Citibank, N.A. ("Citibank") and
------- --------
other financial institutions that are Eligible Assignees (to be
defined in the loan documentation) and are acceptable to Citibank.
Citibank will manage all aspects of the syndication of the Senior
Facilities, including the timing of all offers to potential
Lenders and the acceptance of commitments, the amounts offered and
the compensation provided. Prior to receipt of notice from
Citibank that the syndication of the Senior Facilities has been
completed, no Lender may assign any part of its share thereof to
any other potential Lender. Following receipt of notice from
Citibank that the syndication of the Senior Facilities has been
completed, each Lender may assign all or any part of its share
thereof to one or more other financial institutions that are
Eligible Assignees, and upon such assignment such Eligible
Assignees shall become Lenders for all purposes under the loan
documentation. NHL shall cooperate with Citibank in the
syndication of the Senior Facilities and shall provide and cause
its advisors to provide all information deemed necessary by
Citibank to complete a successful syndication, and Citibank shall
consult with NHL regarding the identity of all potential Lenders
and Eligible Assignees. All commitments received and/or assigned
in the course of syndication of the Senior Facilities or
thereafter shall be in a minimum amount of $10,000,000.
Administrative
- --------------
Agent: Citibank. Citibank may, upon consultation with NHL, designate
- -----
such additional Agents, Co-Agents and Arrangers as Citibank may
deem appropriate in connection with its syndication of the Senior
Facilities.
<PAGE>
3
Senior
- ------
Facilities: Up to $750 million at any time outstanding, apportioned as
- ---------- follows:
(a) $400 million as a Senior Term Loan (the "Term Facility").
-------------
(b) Up to $350 million at any time outstanding as a Senior
Revolving Credit Facility with a sublimit to be agreed upon
for standby and trade letters of credit (the "Revolving
---------
Credit Facility").
---------------
In the event that the Purchaser pays less than $23 per share to
purchase the Target Stock in the Tender Offer, the Term Facility
will reduce based upon such reduction in the purchase price by an
amount to be agreed upon. In the event that a portion of the
existing debt of the Target is permitted to remain outstanding,
the Term Facility will reduce by an amount equal to the principal
amount of such existing debt remaining outstanding. The
amortization schedule for the Term Facility shall be changed as
shall be mutually agreed.
Citibank reserves the right to reapportion the relative amounts of
the Senior Facilities; provided, however, that the aggregate
-------- -------
amount and amortization of the Senior Facilities taken together
shall remain unchanged.
Purpose: To finance the purchase by the Purchaser of all of the shares of
- ------- the Target Stock, in the Tender Offer, finance the Merger,
refinance certain existing debt of the Target, refinance certain
existing debt of NHL, pay transaction costs and for general
corporate purposes of the Borrower and its subsidiaries.
Availability: In the case of the Term Facility, in one drawing upon the
- ------------ consummation of the Tender Offer and one drawing upon the
consummation of the Merger, and, in each case, on one business
day's notice in the case of Base Rate
<PAGE>
4
borrowings and on three business days' notice in the case of
Eurodollar Rate borrowings; in the case of the Revolving Credit
Facility, in multiple drawings from time to time on and after the
consummation of the Tender Offer, in an amount of $10,000,000 or,
in the event that there are not more than three Lenders,
$5,000,000 or, in either case, in an integral multiple of
$1,000,000 in excess thereof, and on one business day's notice in
the case of Base Rate borrowings and on three business days'
notice in the case of Eurodollar Rate borrowings.
Closing Date: On or before August 10, 1994.
------------
Amortization: (a) Term Facility:
- ------------
Amortization quarterly, with annual reductions of no less
than:
Period Ending Amount
------------- ------
6 months after
Amortization Date $ 10 million
18 months after
Amortization Date $ 40 million
30 months after
Amortization Date $ 50 million
42 months after
Amortization Date $ 60 million
54 months after
Amortization Date $ 70 million
66 months after
Amortization Date $ 80 million
78 months after
Amortization Date $ 90 million
<PAGE>
5
"Amortization Date" means the last day of the calendar month in
-----------------
which the Closing Date occurs.
(b) Revolving
Credit Facility:
Fully revolving until final maturity at the end of the fifth
year after the consummation of the Tender Offer; provided,
--------
however, that the commitment of the Lenders in respect of the
-------
Revolving Credit Facility shall reduce semi-annually to the
levels set forth below, commencing 42 months after
Amortization Date:
Date Amount
---- ------
42 months after
Amortization Date $300 million
48 months after
Amortization Date $250 million
54 months after
Amortization Date $200 million
60 months after
Amortization Date $ 0
Optional
- --------
Commitment
- ----------
Reduction: The Borrower may, upon at least three business days' notice,
- --------- terminate or cancel, in whole or in part, the unused portion of
the Senior Facilities; provided, however, that each partial
-------- -------
reduction shall be in an amount of $10,000,000 or, in the event
that there are not more than three Lenders, $5,000,000 or, in
either case, in an integral multiple of $1,000,000 in excess
thereof.
Optional
- --------
Prepayment: The Borrower may, upon at least one business day's notice, prepay,
- ---------- in full or in part, the Senior Facilities without penalty;
provided,
--------
<PAGE>
6
however, that each partial prepayment shall be in an amount of
-------
$10,000,000 or, in the event that there are not more than three
Lenders, $5,000,000 or, in either case, in an integral multiple of
$1,000,000 in excess thereof; and provided further that upon any
-------- -------
prepayment of Eurodollar Rate Advances that is not made on the
last day of the applicable interest period, the Borrower shall
compensate each Lender for any additional loss, cost or expense
such Lender may reasonably incur as a result of such prepayment.
Mandatory
- ---------
Prepayment
- ----------
and
- ---
Commitment
- ----------
Reduction: All net cash proceeds from the sale of assets of the Borrower and
- --------- its subsidiaries (excluding sales in the ordinary course of
business and other exceptions to be agreed upon) shall be applied
to prepay the Senior Facilities in the following order: first, the
-----
Term Facility and the installments thereof ratably and second,
------
permanent reduction of the Revolving Credit Facility. The first
$200 million of net cash proceeds from the issuance of long-term,
fixed-rate, unsecured senior notes by the Borrower for cash (the
"New Debt Securities") shall be applied to prepay the Term
--------------------
Facility and the installments thereof ratably. The remainder of
the net cash proceeds from the issuance of the New Debt Securities
shall be applied pro rata to (i) prepay the Term Facility and the
installments thereof ratably and (ii) permanently reduce the
Revolving Credit Facility. All net cash proceeds from the
issuance by the Borrower of the debt (other than the New Debt
Securities and other exceptions to be mutually agreed) permitted
under the loan documentation shall be applied to prepay the Senior
Facilities in the following order: first, the Term Facility and
-----
the installments thereof in inverse order of maturity and second,
------
permanent reduction of the Revolving Credit Facility.
Interest: Payable at the Applicable Margin above Citibank's Base Rate (360
- -------- day basis) or, at
<PAGE>
7
the Borrower's option, Citibank's Eurodollar Rate (adjusted for
reserves). Interest based on the Base Rate shall be payable
quarterly in arrears.
Interest based on the Eurodollar Rate shall be payable in arrears
at the earlier of the end of the applicable interest period and
quarterly. Eurodollar Rate borrowings shall be available for 1,
2, 3 or 6 month interest periods. Citibank's "Base Rate" is a
---------
fluctuating interest rate equal to the highest from time to time
of (i) the rate of interest announced publicly by Citibank in New
York as its base rate, (ii) 1/2 of 1% per annum above the latest
three-week moving average of secondary market morning offering
rates for three-month certificates of deposit of major U.S. money
market banks, as determined weekly by Citibank and adjusted for
the cost of reserves and estimated insurance assessments from the
FDIC and (iii) a rate equal to 1/2 of 1% per annum above the
weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as determined for any day by Citibank.
The "Applicable Margin" means, (x) during the period from the
-----------------
consummation of the Tender Offer through the consummation of the
Merger, (i) for Base Rate borrowings, 3/4 of 1% per annum, and
(ii) for Eurodollar Rate
<PAGE>
8
borrowings, 2% per annum and, (y) thereafter, the percentage per
annum set forth below for the appropriate Level (as defined
below):
<TABLE>
<CAPTION>
Eurodollar Base
Level Margin Margin
------- ---------- ------
<S> <C> <C>
Level I 1.25% 0.00%
Level II 1.50% 0.25%
Level III 1.75% 0.50%
Level IV 2.00% 0.75%
</TABLE>
"Level I" means an Interest Coverage Ratio of greater than or equal to
-------
5:1 and a Total Funded Debt to EBITDA ratio of less than or equal to
2.5:1. "Level II" means that the performance of the Borrower does not
--------
meet the requirements of Level I and the Borrower has an Interest
Coverage Ratio of greater than or equal to 4:1 and a Total Funded Debt
to EBITDA ratio of less than or equal to 3:1. "Level III" means that
---------
the performance of the Borrower does not meet the requirements of Level
I or Level II and the Borrower has an Interest Coverage Ratio of
greater than or equal to 3.5:1 and a Total Funded Debt to EBITDA ratio
of less than or equal to 3.5:1. "Level IV" means that the performance
--------
of the Borrower does not meet the requirements of Level I, Level II or
Level III.
The Applicable Margin for all borrowings under the Senior Facilities
during both the period from the consummation of the Tender Offer
through the consummation of the Merger and thereafter will be decreased
by 1/4 of 1% per annum on the date that the net cash proceeds from the
issuance of $200,000,000 of the New Debt Securities is applied to
prepay the Term Facility.
The Applicable Margin shall increase by 2% per annum on any amounts not
paid by the Borrower
<PAGE>
9
when due.
Annual
------
Administrative
- --------------
Agency Fee: As agreed between the Administrative Agent and the Borrower.
- ----------
Unused
- ------
Commitment
- ----------
Fee: 1/2 of 1% per annum on the unused portion of each Lender's share of
the Senior Facilities from the date of acceptance of such Lender's
commitment, payable on (a) the closing of the Tender Offer and
quarterly in arrears thereafter and (b) the date (whether before or
after the closing) of termination of the commitments; provided,
--------
however, that the Unused Commitment Fee shall reduce to 3/8 of 1%
-------
per annum during any period in which the Borrower's performance is
at Level I or Level II.
Letter of
- ---------
Credit Fees: Fees for letters of credit issued as part of the Revolving Credit
- ----------- Facility shall be determined based on margins comparable to the
Applicable Margin.
Security: All stock of the Borrower's present and future subsidiaries (other
- -------- than the stock of the Target prior to the consummation of the
Merger) organized under the laws of one of the states of the United
States of America, 66-2/3% of the stock of all other first-tier
subsidiaries of the Borrower, and all other present and future
property and assets, real and personal, of the Borrower, and its
domestic subsidiaries as Citibank shall request, including owned
real estate, leaseholds, fixtures, accounts, license rights,
patents, trademarks, tradenames, copyrights, customer lists,
chattel paper, insurance proceeds, contract rights, hedge
agreements, cash, bank accounts, tax refunds, documents,
instruments, general intangibles, inventory, equipment, vehicles
and other goods. Upon consummation of the Merger, all stock of
<PAGE>
10
the Target's domestic subsidiaries, 66-2/3% of the stock of all
other first-tier subsidiaries of the Target and all other present
and future property and assets, real and personal, of the Target
and its domestic subsidiaries as Citibank shall request, will be
pledged as collateral for the Senior Facilities. Intermediate Co. I
will pledge all of the stock of Intermediate Co. II as collateral
for its Guaranty.
Conditions
-----------
Precedent to
- ------------
Initial
- -------
Funding of
- ----------
the Senior
- ----------
Facilities: Those customarily found in Citibank's credit agreements for secured
- ---------- leveraged acquisition financings and others appropriate in the
judgment of Citibank for this transaction, including, without
limitation, the following:
(a) The Lenders shall be satisfied with the final terms and conditions
of the Tender Offer, including, without limitation, the price per
share and number of shares to be acquired, and with the terms and
conditions of the Merger; the Lenders shall be satisfied with all
legal and tax aspects of the Tender Offer and the Merger; and all
documentation relating to the Tender Offer and the Merger,
including, without limitation, the offer to purchase the Target
Stock (the "Offer to Purchase") and the merger agreement between
----- -----------
the Purchaser and the Target ("Merger Agreement"), shall be in
----------------
form and substance satisfactory to the Lenders.
(b) All documentation relating to the Senior Facilities, including a
credit agreement incorporating substantially the terms and
conditions outlined herein, shall be in form and substance
mutually satisfactory to NHL and the Lenders.
<PAGE>
11
(c) The Lenders shall be satisfied (i) that the amount of committed
debt financing shall be sufficient to meet the financing
requirements of the Tender Offer and the Merger and (ii) that the
assets and earnings of the Borrower and its subsidiaries after the
Merger and the Reorganization will be sufficient to secure the
Senior Facilities and to support the timely amortization of all
debt and other obligations of the Borrower and its subsidiaries.
(d) The Lenders shall be satisfied with the corporate and legal
structure and capitalization of each of Holdings, Intermediate
Co. I, Intermediate Co. II, the Purchaser, NHL and the Target,
including, without limitation, the charter and bylaws of Holdings,
Intermediate Co. I, Intermediate Co. II, the Purchaser, NHL and
the Target and each agreement or instrument relating thereto;
provided, however, that Intermediate Co. II shall be established
-------- -------
as a bankruptcy-remote vehicle and its charter and bylaws shall
contain appropriate restrictions on Intermediate Co. II's ability
to commence a voluntary bankruptcy or other insolvency proceeding.
(e) The Tender Offer shall have been consummated in compliance with
all applicable laws, and in accordance with the terms of the Offer
to Purchase and the Merger Agreement, without any waiver or
amendment to which the Administrative Agent or the Required
Lenders shall have objected within a reasonable period after being
notified of such waiver or amendment by NHL.
(f) The Target's Board of Directors shall have approved the Tender
Offer and the Merger and recommended that its shareholders tender
their Target Stock pursuant to the
<PAGE>
12
Tender Offer, and such recommendation shall not have been
withdrawn or qualified in a manner adverse to NHL. The Merger
Agreement shall be in full force and effect and shall not have
been terminated.
(g) All Target Stock owned by affiliates of the Purchaser shall have
been contributed to the Purchaser; all Target Stock held by the
Purchaser, and all stock of the subsidiaries of Intermediate Co. I
and Intermediate Co. II, shall be free and clear of any lien,
charge or encumbrance.
(h) There shall have occurred no material adverse change since
December 31, 1993 in the business, condition (financial or
otherwise), operations, performance, properties or prospects of
(i) NHL and its subsidiaries taken as a whole or (ii) the Target
and its subsidiaries taken as a whole. All information provided
by or on behalf of NHL to the Lenders prior to their commitment
(the "Pre-Commitment Information") (including without limitation
--------------------------
all facts and circumstances disclosed to the Administrative Agent
regarding investigations with the Office of the Inspector General
regarding billing practices at NHL and the Target) shall be true
and correct in all material aspects.
(i) There shall exist no action, suit, investigation, litigation or
proceeding pending or threatened in any court or before any
arbitrator or governmental instrumentality that (x) would be
reasonably likely to have a material adverse effect on (i) the
business, condition (financial or otherwise), operations,
performance, properties or prospects of either NHL and its
subsidiaries taken as a whole or the Target and its subsidiaries
taken as a whole, (ii) the ability of the Borrower to perform
<PAGE>
13
its obligations under the loan documentation, (iii) any rights and
remedies of the Administrative Agent or any Lender under the loan
documentation, or (iv) the Tender Offer or the Merger or (y)
purports to affect any of the Senior Facilities, and there shall
have been no material adverse change in the status, or financial
effect on NHL or the Target, of (A) the investigations with the
Office of the Inspector General regarding billing practices at NHL
or the Target or (B) the shareholders' suits brought against NHL,
in each case from that described in the Pre-Commitment
Information.
(j) All governmental and third party consents and approvals necessary
in connection with the Transaction and the Senior Facilities shall
have been obtained (without the imposition of any conditions that
are not acceptable to the Lenders) and shall remain in effect; all
applicable waiting periods shall have expired without any action
being taken by any competent authority; and no law or regulation
shall be applicable in the judgment of the Lenders that restrains,
prevents or imposes materially adverse conditions upon the Tender
Offer, the Merger or any of the Senior Facilities.
(k) All loans made by the Lenders shall be in full compliance with the
Federal Reserve's Margin Regulations.
(l) The Borrower shall have delivered letters, in form and substance
satisfactory to the Lenders, attesting to the Solvency of NHL and
the Target after giving effect to the transactions contemplated
hereby, executed on behalf of NHL and the Target by the chief
financial officer of NHL and an appropriate officer of the
Borrower, respectively. As used herein, "Solvency" of any person
--------
means: (i) the fair value of
<PAGE>
14
the property of such person exceeds its total liabilities
(including, without limitation, contingent liabilities), (ii) the
present fair saleable value of the assets of such person is not
less than the amount that will be required to pay its probable
liability on its debts as they become absolute and matured, (iii)
such person does not intend to, and does not believe that it will,
incur debts or liabilities beyond its ability to pay as such debts
and liabilities mature and (iv) such person is not engaged, and is
not about to engage, in business or a transaction for which its
property would constitute an unreasonably small capital.
(m) The Borrower and the Target shall be in compliance in all material
respects with applicable provisions of ERISA under all employee
and retiree welfare plans; the Borrower's and the Target's
employee benefit plans shall, in all material respects, be funded
in accordance with the minimum statutory requirements; no
"reportable event" (as defined in ERISA, but excluding events for
which reporting has been waived) shall have occurred as to any
such employee benefit plan and no termination of, or withdrawal
from, any such employee benefit plan shall have occurred or be
contemplated where such reportable event, termination or
withdrawal is reasonably likely to result in a material liability.
(n) The Lenders shall have received such financial, business and other
information regarding NHL, the Target and their subsidiaries as
they shall have requested, including, without limitation,
information as to possible contingent liabilities, tax matters,
environmental matters, obligations under ERISA and welfare plans,
collective bargaining agreements and other
<PAGE>
15
arrangements with employees, annual financial statements of both
NHL and the Target dated December 31, 1993, pro forma financial
statements as to NHL and forecasts prepared by management of NHL,
in a form satisfactory to the Lenders, of balance sheets, income
statements and cash flow statements on a quarterly basis for the
first year following the closing of the Tender Offer and on an
annual basis for each year thereafter during the projected term of
the Senior Facilities.
(o) The Administrative Agent and the Lenders shall have a valid and
perfected first priority lien and security interest in the
collateral (other than real estate and leasehold collateral and
collateral held by the Target) referred to above under "Security"
--------
and all filings, recordations and searches necessary or desirable
in connection with such liens and security interests shall have
been duly made; and all filing and recording fees and taxes shall
have been duly paid. The Lenders shall be satisfied with the
amount, types and terms and conditions of all insurance maintained
by the Borrower and its subsidiaries, and the Lenders shall have
received endorsements naming the Administrative Agent, on behalf
of the Lenders, as an additional insured under all insurance
policies to be maintained with respect to the properties of the
Borrower and its subsidiaries forming part of the Lenders'
collateral.
(p) The Lenders shall have received satisfactory results from their
environmental due diligence assessment of NHL, the Target and
their subsidiaries, including but not limited to environmental
assessment report, in form and substance satisfactory to the
Lenders, from an environmental consulting firm acceptable to
<PAGE>
16
the Lenders with respect to certain properties of NHL, the Target
and their subsidiaries as agreed by the Administrative Agent and
NHL, as to any environmental hazards or liabilities to which NHL,
the Target or any of their respective subsidiaries may be subject,
and the Lenders shall be satisfied with the amount and nature of
any such hazards or liabilities and with NHL's and the Target's
plans with respect thereto.
(q) Holdings, Intermediate Co. I, Intermediate Co. II and NHL shall
have executed a Tax Sharing Agreement in form and substance
satisfactory to the Lenders.
(r) Holdings shall have executed an agreement (the "Holdings
--------
Agreement") in form and substance satisfactory to the Lenders in
which Holdings agrees, among other things, (i) not to engage in
any business other than a business in the health care industry,
(ii) to maintain a separate corporate identity from the Borrower
and (iii) not to commingle its assets and business functions with
the assets and business functions of the Borrower.
(s) The Lenders shall have received (i) satisfactory opinions of
counsel to the Borrower and of counsel to the Administrative Agent
as to the transactions contemplated hereby (including, without
limitation, compliance with all applicable securities laws), and
(ii) such corporate resolutions, certificates and other documents
as the Lenders shall reasonably request.
(t) There shall exist no default under any of the loan documentation,
and the representations and warranties of the Borrower therein
shall be true and correct in all material respects immediately
prior
<PAGE>
17
to, and after giving effect to, funding.
(u) All accrued fees and expenses of the Administrative Agent and the
Lenders (including the reasonable fees and expenses of special and
local counsel to the Administrative Agent) shall have been paid.
(v) All existing debt of the Target and NHL shall be repaid in full
with exceptions to be agreed upon.
Conditions
- ----------
Precedent to
- ------------
All Advances: There shall exist no default under any of the loan documentation;
- ------------ the representations and warranties of the Borrower and its
subsidiaries therein shall be true and correct in all material
respects immediately prior to, and after giving effect to,
funding; and the Administrative Agent shall have received such
other certificates, opinions and other documents as any Lender
through the Administrative Agent may reasonably request in order
to confirm (i) the accuracy of the Borrower's and each Guarantor's
representations and warranties, (ii) the Borrower's and each
Guarantor's timely compliance with the terms, covenants and
agreements set forth in the loan documentation, (iii) the absence
of any default or event of default and (iv) the absence of any
event that would render illegal the making or maintenance by any
Lender of Eurodollar Rate borrowings.
Represen-
- --------
tations and
- -----------
Warranties: Those customarily found in Citibank's credit agreements for
- ---------- secured acquisition financings and others appropriate in the
judgment of Citibank for this transaction, including, without
limitation, absence of any material adverse change in the
business, condition (financial or otherwise), operations,
performance, properties or prospects of the Borrower or any of its
subsidiaries.
<PAGE>
18
Covenants: Those negative, affirmative and financial covenants customarily
- ---------
found in Citibank's credit agreements for secured acquisition
financings (applicable to the Borrower and its subsidiaries) and others
appropriate in the judgment of Citibank for this transaction,
including, without limitation, the following:
(a) Comply with laws (including, without limitation, ERISA and
environmental laws), pay taxes, maintain appropriate and adequate
insurance, preserve corporate existence, permit inspection of
properties, books and records, keep books in accordance with GAAP
and maintain properties.
(b) Perform obligations under material contracts (with materiality and
other qualifications to be agreed upon); provided, however, that
-------- -------
neither the Borrower nor any of its subsidiaries shall be required
to perform any such obligation that is being contested in good
faith and by proper proceedings and as to which appropriate
reserves are being maintained.
(c) Conduct all transactions with affiliates on terms equivalent to
those obtainable in arm's length transactions.
(d) Maintain main cash concentration accounts with Citibank, and
deliver to the Administrative Agent lockbox letters for all of the
lockbox accounts into which all proceeds of collateral are paid
which state that the relevant banks (which are acceptable to the
Administrative Agent) have accepted the assignment of such
accounts to the Administrative Agent and which the Administrative
Agent can deliver to the relevant banks in its sole discretion.
(e) Financial covenants, including minimum net worth, minimum fixed
charge coverage,
<PAGE>
19
minimum EBITDA to interest expense ratio and maximum debt to
EBITDA ratio.
(f) Within 50 days after the end of each of the first three fiscal
quarters of each year, furnish to the Administrative Agent and the
Lenders quarterly consolidated and consolidating balance sheets,
income statements and statements of cash flow of the Borrower and
its subsidiaries certified by the Borrower's chief financial
officer (which certification may be subject to year-end audit
adjustments) and certificates as to compliance with the loan
documents. Within 30 days after the end of each calendar month
occurring during the first year following the consummation of the
Tender Offer, furnish to the Administrative Agent monthly
consolidated balance sheets and divisional operating results of
the Borrower and its subsidiaries certified by the Borrower's
chief financial officer (but which need not include a GAAP
certification). Within 105 days after the end of each fiscal
year, furnish to the Administrative Agent and the Lenders audited
financial statements of the Borrower and its subsidiaries and
annual consolidating financial statements of the Borrower and its
subsidiaries. No later than 15 days prior to the end of each
fiscal year, furnish the annual business plan of the Borrower and
its subsidiaries and furnish forecasts prepared by management of
the Borrower, in each case in form and detail satisfactory to the
Lenders, of balance sheets, income statements and cash flow
statements on a quarterly basis for the next 12 months and on an
annual basis for each of the following years until the scheduled
final maturity of the Senior Facilities. Promptly after request,
furnish all other business and financial information that any
Lender through the Administrative Agent may
<PAGE>
20
reasonably request.
(g) With exceptions to be negotiated for each of the following: not
create or permit any liens, other than liens securing the Senior
Facilities and other than in respect of "Margin Stock" (as defined
------------
in Federal Reserve Regulation U); not create or permit any debt or
guarantees, other than the Senior Facilities, the New Debt
Securities, provided that such New Debt Securities shall be issued
on terms and conditions as may be mutually agreed, trade debt,
intercompany debt on terms and conditions as may be mutually
agreed, and existing debt of the Target as may be mutually agreed;
not merge or consolidate with any person, other than in the
Merger; not dispose of assets, other than sales of inventory in
the ordinary course of business and other than dispositions of
Margin Stock for cash and for fair value if the proceeds of such
disposition are held as liquid assets (cash, certain U.S.
government obligations and other liquid assets to be set forth in
the loan documentation); not repurchase any stock of the Borrower;
and not make capital expenditures beyond limits to be set forth in
the loan documentation.
(h) Not make investments (other than permitted investments to be
agreed upon) and asset acquisitions other than the following:
(i) a Small Acquisition (as defined below) if the sum of the
purchase price of such Small Acquisition plus the aggregate
purchase price of all other Small Acquisitions in the current
Calculation Period (as defined below) does not exceed
$50,000,000 (the "Small Acquisition Basket"); and
----------------- ------
(ii) Small Acquisitions that are
<PAGE>
21
made in excess of the Small Acquisition Basket and Large
Acquisitions (as defined below) if
(x) the sum of the purchase price of such Small
Acquisition or Large Acquisition, as the case may be,
plus the aggregate purchase price of all other Small
Acquisitions in the current Calculation Period made
in excess of the Small Acquisition Basket for such
Calculation Period plus the aggregate purchase price
of all other Large Acquisitions in the current
Calculation Period does not exceed (A) $75,000,000
from the consummation of the Tender Offer until the
date on which the net cash proceeds from the issuance
of $200,000,000 of the New Debt Securities is applied
to prepay the Term Facility and (B) $100,000,000
thereafter,
(y) after giving effect to the Small Acquisition or
the Large Acquisition, as the case may be, the ratio
of Total Funded Debt to EBITDA is less than 4:1, and
(z) after giving effect to the Small Acquisition or
the Large Acquisition, as the case may be, the
Interest Coverage Ratio is greater than 4:1 on a
rolling twelve-month pro-forma historical basis;
<PAGE>
22
provided, however, that the aggregate purchase price of all Small
-------- -------
Acquisitions and Large Acquisitions made during the term of the
Senior Facilities shall not exceed (x) $150,000,000 if
$200,000,000 of the New Debt Securities are not issued and the net
cash proceeds from such issuance are not applied to prepay the
Term Facility or (y) $200,000,000 if $200,000,000 of the New Debt
Securities are issued and the net cash proceeds are so applied.
For purposes hereof, "Small Acquisition" means an investment or
----- -----------
asset acquisition the purchase price of which is less than
$10,000,000, "Large Acquisition" means an investment or asset
-----------------
acquisition the purchase price of which is equal to or greater
than $10,000,000 but less than or equal to $25,000,000 and
"Calculation Period" means each twelve month period ending on an
------------ ------
anniversary of the consummation of the Tender Offer.
(i) Not pay any dividends or make any other distributions or
payments to shareholders other than (i) dividends not to
exceed the lesser of (x) the amount of dividends paid by
Holdings to its public shareholders in accordance with the
past practices of NHL and (y) a percentage of consolidated
net income of the Borrower and its subsidiaries to be agreed
upon but which shall reduce over the term of the Senior
Facilities, provided that (A) the Borrower is in compliance
--------
with a minimum fixed charge coverage ratio to be mutually
agreed upon and (B) the Borrower has not paid any dividends
pursuant to clause (ii) or (iii) below, (ii) other cash
dividends up to $50,000,000 in connection with the repurchase
of stock of Holdings, provided that after giving effect to
--------
<PAGE>
23
any such repurchase of stock (x) the net worth of the
Borrower shall be at least $100,000,000 and (y) the Borrower
is in compliance with other financial covenants (including a
minimum fixed charge coverage ratio) to be mutually agreed
upon, (iii) other cash dividends at the times and in the
amounts to be agreed upon in connection with additional
repurchases of stock of Holdings, provided that after giving
--------
effect to any such repurchase of stock (x) the net worth of
the Borrower shall be at a level to be agreed upon (which
shall increase over the term of the Senior Facilities) and
(y) the Borrower is in compliance with other financial
covenants to be mutually agreed upon, (iv) payments pursuant
to the Tax Sharing Agreement to be entered into by Holdings,
Intermediate Co. I, Intermediate Holdings Co. II and the
Borrower, and (v) management fees not in excess of an amount
to be set forth in the loan documentation; provided,
--------
however, that, at the time of the payment referred to in
-------
clauses (i), (ii), (iii) and (v), no default under the loan
documentation shall have occurred and be continuing; and
provided, further, that no payment referred to in clause
-------- -------
(i), (ii) or (iii) shall be made unless, on or prior to the
120th day following consummation of the Tender Offer, the
Borrower shall have applied the net cash proceeds from the
issuance of $200,000,000 of the New Debt Securities to prepay
the Term Facility.
(j) Not change the nature of its business, its charter or bylaws or
its accounting policies or reporting practices except as
<PAGE>
24
required or permitted by GAAP.
(k) Not prepay, redeem, purchase, defease or otherwise satisfy prior
to maturity, or make any payment in violation of any subordination
terms of, any debt, subject to certain exceptions.
(l) Not amend or modify the terms of any debt, subject to certain
exceptions.
(m) Not agree to give a negative pledge in favor of any person, other
than the Lenders, subject to certain exceptions.
(n) Not become a general partner in any partnership, other than
through a single-purpose subsidiary established for the sole
purpose of entering into such partnership so that the liability of
the Borrower and its subsidiaries with respect to such partnership
will be limited to their investment in such subsidiary.
(o) From and after the date on which persons designated or approved by
the Borrower shall constitute a majority of the board of directors
of the Target (the "Control Date") (which date the Borrower will
------------
use its best efforts to cause to happen as promptly as
practicable) until the consummation of the Merger, (i) the
Borrower will cause the the Target to perform and observe each of
its obligations and covenants in the Merger Agreement and (ii) the
Borrower will cause the Target not to (A) issue any securities,
rights or options or (B) declare or make any dividends or
distributions to shareholders as such.
(p) Within 180 days following the consummation of the Tender Offer,
the Administrative Agent and the Lenders shall have a valid and
perfected first priority lien and
<PAGE>
25
security interest in the real estate and leasehold collateral
referred to above under "Security" and all filings, recordations
and searches necessary or desirable in connection with such liens
and security interests shall have been duly made; and all filing
and recording fees and taxes shall have been duly paid. Without
limiting the generality of the foregoing and subject to certain
appropriate exceptions, the Lenders shall have received favorable
search reports, prepared by one or more nationally recognized
title insurance companies, from such filing and recordation
offices and covering such real properties of NHL, the Target and
their subsidiaries as they shall have requested and, with respect
to such of the real properties of the Borrower, the Target and
their subsidiaries as the Lenders shall have requested, current
surveys in form, and certified in form and by surveyors,
acceptable to the Administrative Agent, mortgagee title insurance
policies in form, and issued by title insurance companies,
acceptable to the Administrative Agent, FIRREA appraisals and such
consents and estoppel letters from lessors of leased property as
the Administrative Agent shall have requested. The Lenders shall
be satisfied with the amount, types and terms and conditions of
all insurance maintained by the Borrower and the Target and their
subsidiaries, and the Lenders shall have received endorsements
naming the Administrative Agent, on behalf of the Lenders, as an
additional insured under all insurance policies to be maintained
with respect to such properties of the Borrower, the Target and
their subsidiaries forming part of the Lenders' collateral.
Regarding
---------
the
- ---
Merger: Within 150 days following the consummation of
- ------
<PAGE>
26
the Tender Offer, the Merger will close on the following terms and
conditions:
(a) The Merger Agreement shall be in full force and effect, without
any waiver or amendment to which the Administrative Agent or the
Required Lenders shall have objected within a reasonable period
after being notified of such waiver or amendment by the Borrower;
the Transaction as described in the proxy statement mailed to the
Target's stockholders in connection with the Merger (the "Proxy
-----
Statement") shall conform to the terms of the Transaction set
---------
forth herein and in the Merger Agreement; and the Proxy Statement
and all other documentation relating to the Merger shall be in
form and substance reasonably satisfactory to the Lenders.
(b) The Merger shall have been consummated in compliance with all
applicable laws, and in accordance with the terms of the Merger
Agreement and the Proxy Statement, without any waiver or amendment
to which the Administrative Agent or the Required Lenders shall
have objected within a reasonable period after being notified of
such waiver or amendment by the Borrower.
(c) The Target's Board of Directors shall have approved the Merger
and recommended that its shareholders vote in favor of the Merger,
and such recommendation shall not have been withdrawn or qualified
in a manner adverse to the Borrower, the Purchaser or the Lenders.
(d) All governmental and third-party consents and approvals necessary
in connection with the Merger shall have been obtained (without
the imposition of any material conditions that are not acceptable
to the Lenders) and shall remain in effect; all applicable waiting
periods shall have
<PAGE>
27
expired without any action being taken by any competent authority;
and no law or regulation shall be applicable in the judgment of
the Lenders that restrains, prevents or imposes materially adverse
conditions upon the Merger .
(e) The Administrative Agent and the Lenders shall, subject to certain
appropriate exceptions, have a valid and perfected first priority
lien and security interest in the collateral referred to above
under "Security" and owned by the Target and its subsidiaries, and
--------
all filings, recordations and searches necessary or desirable in
connection with such liens and security interests shall have been
duly made; and all filing and recording fees and taxes shall have
been duly paid.
(f) The Lenders shall have received (i) satisfactory opinions of
counsel to the Borrower, of counsel to the Target and of counsel
to the Administrative Agent as to the transactions contemplated
hereby (including, without limitation, in the case of counsel to
the Borrower, compliance with all applicable securities laws),
(ii) such corporate resolutions, certificates and other documents
as the Lenders shall reasonably request and (iii) a copy of the
fairness opinion from the Target's financial advisors.
Guaranty: The Guaranty will contain covenants and representations and warranties
- -------- appropriate in the judgment of Citibank for this transaction. The
covenants applicable to Intermediate Co. I will include an agreement
that Intermediate Co. I will not engage in any other activity other
than holding the stock of Intermediate Co. II and any other activity
contemplated by the loan documentation.
Events of
- ---------
<PAGE>
28
Default: Those customarily found in Citibank's credit agreements for secured
- ------- acquisition financings and others appropriate in the judgment of
Citibank for this transaction, including, without limitation: failure
to pay principal or interest or fees when due; any representation or
warranty in the loan documentation proving to have been materially
incorrect when made; failure to perform or observe covenants contained
in the loan documentation (with agreed upon grace periods when
customary and appropriate); cross-defaults to other indebtedness of
Holdings, the Borrower or any of the Borrower' subsidiaries; bankruptcy
defaults relating to Holdings, the Borrower or any of the Borrower's
subisidiaries; material judgment defaults relating to Holdings, the
Borrower of any of the Borrower's subsidiaries; impairment of loan
documentation or security; change in control; or ERISA defaults.
Expenses: The Borrower shall pay all of the Administrative Agent's due
- -------- diligence, syndication (including printing, distribution and bank
meetings), transportation, computer, duplication, appraisal, audit,
insurance, consultant, search, filing and recording fees and all other
out-of-pocket expenses incurred by the Administrative Agent (including
the reasonable fees and expenses of counsel to the Administrative
Agent) whether or not any of the transactions contemplated hereby are
consummated, as well as all out-of-pocket expenses of the
Administrative Agent in connection with the administration of the loan
documentation. The Borrower shall also pay the expenses of the Lenders
in connection with the enforcement of any of the loan documentation.
Interest Rate
- -------------
Protection: To be mutually agreed.
- ----------
Indemnity: The Borrower will indemnify and hold harmless the Administrative
- --------- Agent, each Lender and each of their affiliates and their officers,
<PAGE>
29
directors, employees, agents and advisors (each, an "Indemnified
-----------
Party") from and against any and all claims, damages, losses,
-----
liabilities and expenses (including, without limitation, reasonable
fees and expenses of counsel) that may be incurred by or asserted or
awarded against any Indemnified Party, in each case arising out of or
in connection with or by reason of, or in connection with the
preparation for a defense of, any investigation, litigation or
proceeding arising out of, related to or in connection with the
Transaction, the Senior Facilities or any application of the proceeds
of any borrowing under the Senior Facilities, whether or not such
investigation, litigation or proceeding is brought by the Borrower,
its shareholders, creditors or affiliates or an Indemnified Party or
an Indemnified Party is otherwise a party thereto and whether or not
the transactions contemplated hereby are consummated, except (i) to
the extent such claim, damage, loss, liability or expense (x) is
found in a final, non-appealable judgment by a court of competent
jurisdiction (a "Final Judgment") to have resulted from such
--------------
Indemnified Party's gross negligence or willful misconduct or (y)
arises from any legal proceedings commenced against any Lender by any
other Lender (in their respective capacities as such and not as agent
under the loan documentation), and (ii) in the case of any litigation
brought by the Borrower (A) seeking a judgment against any
Indemnified Party for any wrongful act or omission of such
Indemnified Party and (B) in which a Final Judgment is rendered in
the Borrower's favor against the Indemnified Party, the provisions of
this paragraph will not be available to provide indemnification for
any damage, loss, lability or expense incurred by such Indemnified
Party in connection with such litigation in clause (i) or (ii) above.
Required
- --------
Lenders: Majority.
- -------
<PAGE>
30
Assignments
- -----------
and
- ---
Partici-
- -------
pations: Assignments may be non-pro rata as to each of the Senior Facilities but
- ------- must be to Eligible Assignees and in a minimum amount of $10,000,000
other than in the case of an assignment to a Lender or an assignment of
the entirety of a Lender's interest in the Senior Facilities. No
participation shall include voting rights, other than for reductions or
postponements of amounts payable or releases of all or substantially
all of the collateral.
Miscellan-
---------
eous: Standard yield protection (including compliance with risk-based capital
- ---- guidelines, increased costs, payments free and clear of withholding
taxes and interest period breakage indemnities), eurodollar illegality
and similar provisions.
Governing
- ---------
Law: New York.
- ---
Material
--------
Adverse
-------
Change: For purposes of the conditions precedent to initial funding and
------ representations and warranties set forth above, the terms "material
adverse change" and "material adverse effect" shall exclude any such
change or effect resulting from (i) the subpoena received by the Target
in 1993 from the Office of Inspector General and the United States
Attorneys Office for the Southern District of California relating to
Medicare billing practices, and any developments, investigations or
charges relating to the Target and its subsidiaries arising therefrom
or relating thereto, (ii) the subpoena received by the Target in April
of 1994 relating to Medicare billing practices at the clinical
laboratory located in Cincinnati, Ohio, and any developments,
investigations or charges relating to the Target and its subsidiaries
arising therefrom or relating thereto, (iii) the
<PAGE>
31
assessment from the Internal Revenue Service relating to the
amortization by the Target of intangible assets for the years 1989,
1990 and 1991, or any future assessment relating to the Target based on
the same issue for subsequent years, and any developments relating to
the Target and its subsidiaries arising therefrom or relating thereto,
(iv) any change in laws, rules and regulations (federal, state or
local) or reimbursement practices, including, without limitation,
changes relating to Medicare, Medicaid, CHAMPUS program, and carrier
billing practices, so long as the same are not, in the aggregate,
material to NHL and its subsidiaries taken as a whole, or (v) changes
relating to the cancellation, termination or non-renewal by customers
(including, without limitation, (x) doctors that refer specimens to the
Company and (y) hospitals, health maintenance organizations, preferred
provider organizations and the laboratories which the Target manages)
of the Target or any of its subsidiaries of their relationships with
the Target or any of its subsidiaries or the voluntary termination by
existing general managers, sales managers or sales representatives from
and after the date of the public announcement of the Merger Agreement,
unless and to the extent such cancellations, terminations or non-
renewals are directly attributable to factors other than the
transactions contemplated by the Merger Agreement, so long as the same
are not, in the aggregate, material to NHL and its subsidiaries taken
as a whole.
<PAGE>
EXHIBIT 99(c)(1)
CONFORMED COPY
================================================================================
AGREEMENT AND PLAN OF MERGER
Dated as of May 3, 1994,
Among
NATIONAL HEALTH LABORATORIES INCORPORATED,
N ACQUISITION CORP.
And
ALLIED CLINICAL LABORATORIES, INC.
================================================================================
<PAGE>
CONFORMED COPY
AGREEMENT AND PLAN OF MERGER dated as of May 3, 1994, among
NATIONAL HEALTH LABORATORIES INCORPORATED, a Delaware corporation
("Parent"), N ACQUISITION CORP., a Delaware corporation and a
wholly owned subsidiary of Parent ("Sub"), and ALLIED CLINICAL
LABORATORIES, INC., a Delaware corporation (the "Company").
WHEREAS, in furtherance of the acquisition of the Company by Parent on
the terms and subject to the conditions set forth in this Agreement, Parent
proposes to cause Sub to make a tender offer (as it may be amended from time to
time as permitted under this Agreement, the "Offer") to purchase all the issued
and outstanding shares of Common Stock, par value $.01 per share, of the Company
(the "Company Common Stock"), at a price per share of Company Common Stock of
$23 net to the seller in cash (such price, as may hereafter be increased, the
"Offer Price"), upon the terms and subject to the conditions set forth in this
Agreement, and the Board of Directors of the Company has approved the Offer and
is recommending that the Company's stockholders accept the Offer;
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company have approved the Offer and the merger of Sub into the Company, as set
forth below (the "Merger"), upon the terms and subject to the conditions set
forth in this Agreement, whereby each issued and outstanding share of Company
Common Stock, other than shares owned directly or indirectly by Parent or the
Company and Dissenting Shares (as defined in Section 3.01(d)), will be converted
into the right to receive the Offer Price;
WHEREAS, Parent, Sub and the Company desire 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; and
WHEREAS, certain stockholders of the Company have each entered into a
separate stock option agreement dated as of the date hereof with Parent and Sub
(the "Option Agreements"), pursuant to which such stockholders are granting Sub
the option to purchase up to an aggregate of 2,768,815 shares of Company Common
Stock upon the terms and
<PAGE>
2
subject to the conditions set forth in the respective Option Agreements.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I
The Offer
---------
SECTION 1.01. The Offer. (a) Subject to the provisions of this
----------
Agreement, as promptly as practicable, but in no event later than May 10, 1994,
Sub shall, and Parent shall cause Sub to, commence the Offer. The obligation of
Sub to, and of Parent to cause Sub to, commence the Offer and accept for
payment, and pay for, any shares of Company Common Stock tendered pursuant to
the Offer shall be subject to the conditions set forth in Exhibit A (any of
which may be waived by Sub in its sole discretion, provided that, without the
consent of the Company, Sub shall not waive the Minimum Tender Condition (as
defined in Exhibit A)) and to the terms and conditions of this Agreement. Sub
expressly reserves the right to modify the terms of the Offer, except that,
without the consent of the Company (such consent to be authorized by the Board
of Directors of the Company), Sub shall not (i) reduce the number of shares of
Company Common Stock subject to the Offer, (ii) reduce the Offer Price, (iii)
add to the conditions set forth in Exhibit A, (iv) except as provided in the
next sentence, extend the Offer, (v) change the form of consideration payable in
the Offer or (vi) otherwise amend the Offer in any manner adverse to the
Company's stockholders. Notwithstanding the foregoing, Sub may, without the
consent of the Company, but subject to the Company's right to terminate this
Agreement pursuant to Section 8.01(b)(i)(y), (A) extend the Offer, if at the
scheduled expiration date of the Offer any of the conditions to Sub's obligation
to accept for payment, and pay for, shares of Company Common Stock shall not be
satisfied or waived, until such time as such conditions are satisfied or waived,
(B) extend the Offer for any period required by any rule, regulation,
interpretation or position of the Securities and Exchange Commission (the "SEC")
or the staff thereof applicable to the Offer and (C) extend the Offer for any
reason on one or more occasions for an aggregate period
<PAGE>
3
of not more than five business days beyond the latest expiration date that would
otherwise be permitted under clause (A) or (B) of this sentence. Subject to the
terms and conditions of the Offer and this Agreement, Sub shall, and Parent
shall cause Sub to, accept for payment, and pay for, all shares of Company
Common Stock validly tendered and not withdrawn pursuant to the Offer that Sub
becomes obligated to accept for payment, and pay for, pursuant to the Offer as
soon as practicable after the expiration of the Offer.
(b) On the date of commencement of the Offer, Parent and Sub shall
file with the SEC a Tender Offer Statement on Schedule 14D-1 with respect to the
Offer, which shall contain an offer to purchase and a related letter of
transmittal and summary advertisement (such Schedule 14D-1 and the documents
included therein pursuant to which the Offer will be made, together with any
supplements or amendments thereto, the "Offer Documents"). Parent and Sub agree
that the Offer Documents shall comply as to form in all material respects with
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations promulgated thereunder and the Offer Documents, on the
date first published, sent or given to the Company's stockholders, 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 Sub with respect
to information supplied by the Company specifically for inclusion in the Offer
Documents. Each of Parent, Sub and the Company agrees promptly to correct any
information provided by it for use in the Offer Documents if and to the extent
that such information shall have become false or misleading in any material
respect, and each of Parent and Sub further agrees to take all steps necessary
to amend or supplement the Offer Documents and to cause the Offer Documents as
so amended or supplemented to be filed with the SEC and to be disseminated to
the Company's stockholders, in each case as and to the extent required by
applicable Federal securities laws. The Company and its counsel shall be given
a reasonable opportunity to review the Offer Documents and all amendments and
supplements thereto prior to their filing with the SEC or dissemination to
stockholders of the Company. Parent and Sub agree to provide the Company and
its counsel any comments Parent, Sub or their counsel may receive from the SEC
or its staff with
<PAGE>
4
respect to the Offer Documents promptly after the receipt of such comments.
(c) Parent shall provide or cause to be provided to Sub on a timely
basis the funds necessary to accept for payment, and pay for, any shares of
Company Common Stock that Sub becomes obligated to accept for payment, and pay
for, pursuant to the Offer.
SECTION 1.02. Company Actions. (a) The Company hereby approves of
----------------
and consents to the Offer and represents that the Board of Directors of the
Company, at a meeting duly called and held, duly and unanimously adopted
resolutions approving this Agreement, the Offer and the Merger, determining that
the terms of the Offer and the Merger are fair to, and in the best interests of,
the Company's stockholders and recommending that the Company's stockholders
accept the Offer and tender their shares pursuant to the Offer and approve and
adopt this Agreement. The Company represents that its Board of Directors has
received the opinion of Alex. Brown & Sons Incorporated that the proposed
consideration to be received by the holders of shares of Company Common Stock
pursuant to the Offer and the Merger is fair to such holders from a financial
point of view, and a complete and correct signed copy of such opinion has been
delivered by the Company to Parent. The Company has been advised by each of its
directors and executive officers that each such person intends to tender all
shares of Company Common Stock owned by such person pursuant to the Offer.
(b) On the date the Offer Documents are filed with the SEC, the
Company shall file with the SEC a Solicitation/ Recommendation Statement on
Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as amended from
time to time, the "Schedule 14D-9") containing the recommendation described in
paragraph (a) and shall mail the Schedule 14D-9 to the stockholders of the
Company. The Company agrees that the Schedule 14D-9 shall comply as to form in
all material respects with the requirements of the Exchange Act and the rules
and regulations promulgated thereunder and, on the date filed with the SEC and
on the date first published, sent or given to the Company's stockholders, 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
<PAGE>
5
representation is made by the Company with respect to information supplied by
Parent or Sub specifically for inclusion in the Schedule 14D-9. Each of the
Company, Parent and Sub agrees promptly to correct any information provided by
it for use in the Schedule 14D-9 if and to the extent that such information
shall have become false or misleading in any material respect, and the Company
further agrees to take all steps necessary to amend or supplement the Schedule
14D-9 and to cause the Schedule 14D-9 as so amended or supplemented to be filed
with the SEC and disseminated to the Company's stockholders, in each case as and
to the extent required by applicable Federal securities laws. Parent and its
counsel shall be given a reasonable opportunity to review the Schedule 14D-9 and
all amendments and supplements thereto prior to their filing with the SEC or
dissemination to stockholders of the Company. The Company agrees to provide
Parent and its counsel in writing with any comments the Company or its counsel
may receive from the SEC or its staff with respect to the Schedule 14D-9
promptly after the receipt of such comments.
(c) In connection with the Offer, the Company shall cause its
transfer agent to furnish Sub promptly with mailing labels containing the names
and addresses of the record holders of Company Common Stock as of a recent date
and of those persons becoming record holders subsequent to such date, together
with copies of all lists of stockholders, security position listings and
computer files and all other information in the Company's possession or control
regarding the beneficial owners of Company Common Stock, and shall furnish to
Sub such information and assistance (including updated lists of stockholders,
security position listings and computer files) as Parent may reasonably request
in communicating the Offer to the Company's stockholders. Subject to the
requirements of applicable law, and except for such steps as are necessary to
disseminate the Offer Documents and any other documents necessary to consummate
the Merger, Parent and Sub and their agents shall hold in confidence the
information contained in any such labels, listings and files, will use such
information only in connection with the Offer and the Merger and, if this
Agreement shall be terminated, will, upon request, deliver, and will use their
best efforts to cause their agents to deliver, to the Company all copies of such
information then in their possession or control.
<PAGE>
6
ARTICLE II
The Merger
----------
SECTION 2.01. The Merger. Upon the terms and subject to the
-----------
conditions set forth in this Agreement, and in accordance with the Delaware
General Corporation Law (the "DGCL"), Sub shall be merged with and into the
Company at the Effective Time (as defined in Section 2.03). Following the
Effective Time, the separate corporate existence of Sub shall cease and the
Company shall continue as the surviving corporation (the "Surviving
Corporation") and shall succeed to and assume all the rights and obligations of
Sub in accordance with the DGCL. Notwithstanding the foregoing, Parent may
elect at any time prior to the Merger, instead of merging Sub into the Company
as provided above, to merge the Company with and into Sub; provided, however,
-------- -------
that the Company shall not be deemed to have breached any of its
representations, warranties, covenants or agreements set forth in this Agreement
solely by reason of such election. In such event, the parties agree to execute
an appropriate amendment to this Agreement in order to reflect the foregoing
and, where appropriate, to provide that Sub shall be the Surviving Corporation
and will continue under the name "Allied Clinical Laboratories, Inc.". At the
election of Parent, any direct or indirect subsidiary (as defined in Section
9.03) of Parent may be substituted for Sub as a constituent corporation in the
Merger. In such event, the parties agree to execute an appropriate amendment to
this Agreement in order to reflect the foregoing.
SECTION 2.02. Closing. The closing of the Merger will take place at
--------
10:00 a.m. on a date to be specified by the parties, which shall be no later
than the second business day after satisfaction or waiver of the conditions set
forth in Article VII (the "Closing Date"), at the offices of Cravath, Swaine &
Moore, Worldwide Plaza, 825 Eighth Avenue, New York, New York 10019, unless
another date or place is agreed to in writing by the parties hereto.
SECTION 2.03. Effective Time. Subject to the provisions of this
---------------
Agreement, as soon as practicable on or after the Closing Date, the parties
shall file a certificate of merger or other appropriate documents (in any such
case, the "Certificate of Merger") executed in accordance with the relevant
provisions of the DGCL and shall make all other filings or recordings required
under the DGCL. The Merger shall become effective at such time as the
Certificate of
<PAGE>
7
Merger is duly filed with the Delaware Secretary of State, or at such other time
as Sub and the Company shall agree should be specified in the Certificate of
Merger (the time the Merger becomes effective being hereinafter referred to as
the "Effective Time").
SECTION 2.04. Effects of the Merger. The Merger shall have the
----------------------
effects set forth in Section 259 of the DGCL.
SECTION 2.05. Certificate of Incorporation and By-laws. (a) The
-----------------------------------------
certificate of incorporation of the Company, as in effect immediately prior to
the Effective Time, shall be amended as of the Effective Time so that Article
FOUR of such certificate of incorporation reads in its entirety as follows:
"The total number of shares of all classes of stock which the corporation shall
have authority to issue is 100 shares of Common Stock, par value $1.00 per
share." and Article FIVE of such certificate of incorporation is deleted in its
entirety and, as so amended, such certificate of incorporation shall be the
certificate of incorporation of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
(b) The by-laws of the Company as in effect at the Effective Time
shall be the by-laws of the Surviving Corporation, until thereafter changed or
amended as provided therein or by applicable law.
SECTION 2.06. Directors. The directors of Sub immediately prior to
----------
the Effective Time shall be the directors of the Surviving Corporation, until
the earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
SECTION 2.07. Officers. The officers of the Company immediately
---------
prior to the Effective Time shall be the officers of the Surviving Corporation,
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
<PAGE>
8
ARTICLE III
Effect of the Merger on the Capital Stock of the
-------------------------------------------------
Constituent Corporations; Exchange of Certificates
--------------------------------------------------
SECTION 3.01. Effect on Capital Stock. As of the Effective Time, by
------------------------
virtue of the Merger and without any action on the part of the holder of any
shares of Company Common Stock or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of
---------------------
capital stock of Sub shall be converted into and become one fully paid and
nonassessable share of Common Stock, par value $1.00 per share, of the
Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent Owned Stock. Each
------------------------------------------------------
share of Company Common Stock that is owned by the Company or by any
subsidiary of the Company and each share of Company Common Stock that is
owned by Parent, Sub or any other subsidiary of Parent shall automatically
be cancelled and retired and shall cease to exist, and no consideration
shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock. Subject to Section 3.01(d),
-----------------------------------
each issued and outstanding share of Company Common Stock (other than
shares to be cancelled in accordance with Section 3.01(b)) shall be
converted into the right to receive from the Surviving Corporation in cash,
without interest, the Offer Price (the "Merger Consideration"). As of the
Effective Time, all such shares of Company Common Stock 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 of Company Common Stock shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration, without
interest.
(d) Shares of Dissenting Stockholders. Notwithstanding anything in
----------------------------------
this Agreement to the contrary, any issued and outstanding shares of
Company Common Stock held by a person (a "Dissenting Stockholder") who
objects to the Merger and complies with all the provisions of Delaware law
concerning the right of holders of Company Common Stock to dissent from the
Merger and require appraisal of their shares
<PAGE>
9
of Company Common Stock ("Dissenting Shares") shall not be converted as
described in Section 3.01(c) but shall become the right to receive such
consideration as may be determined to be due to such Dissenting Stockholder
pursuant to the laws of the State of Delaware. If, after the Effective
Time, such Dissenting Stockholder withdraws his demand for appraisal or
fails to perfect or otherwise loses his right of appraisal, in any case
pursuant to the DGCL, his shares of Company Common Stock 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
demands for appraisal of shares of Company Common Stock received by the
Company and (ii) the opportunity to participate in and direct all
negotiations and proceedings with respect to any such demands. The Company
shall not, without the prior written consent of Parent, make any payment
with respect to, or settle, offer to settle or otherwise negotiate, any
such demands.
SECTION 3.02. Exchange of Certificates. (a) Paying Agent. Prior to
------------------------- -------------
the Effective Time, Parent shall select a bank or trust company to act as paying
agent (the "Paying Agent") for the payment of the Merger Consideration upon
surrender of certificates representing Company Common Stock.
(b) Parent To Provide Funds. Parent shall take all steps necessary
------------------------
to enable and cause the Surviving Corporation to provide to the Paying Agent on
a timely basis, as and when needed after the Effective Time, funds necessary to
pay for the shares of Company Common Stock as part of the Merger pursuant to
Section 3.01.
(c) Exchange Procedure. 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 into the right to receive the Merger Consideration
pursuant to Section 3.01, (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
a form and have such other provisions as Parent may reasonably specify) and (ii)
instructions for use in effecting the
<PAGE>
10
surrender of the Certificates in exchange for 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, duly executed, and such other documents as may reasonably be
required by the Paying Agent, the holder of such Certificate shall be entitled
to receive in exchange therefor the amount of cash into which the shares of
Company Common Stock theretofore represented by such Certificate shall have been
converted pursuant to Section 3.01, and the Certificate so surrendered shall
forthwith be cancelled. In the event of a transfer of ownership of Company
Common Stock which is not registered in the transfer records of the Company,
payment may be made to a person other than the person in whose name the
Certificate so surrendered is registered, if such Certificate shall be properly
endorsed or otherwise be in proper form for transfer and the person requesting
such payment shall pay any transfer or other taxes required by reason of the
payment to a person other than the registered holder of such Certificate or
establish to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable. Until surrendered as contemplated by this
Section 3.02, each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the amount of
cash, without interest, into which the shares of Company Common Stock
theretofore represented by such Certificate shall have been converted pursuant
to Section 3.01. No interest will be paid or will accrue on the cash payable
upon the surrender of any Certificate.
(d) No Further Ownership Rights in Company Common Stock. All cash
----------------------------------------------------
paid upon the surrender of Certificates in accordance with the terms of this
Article III shall be deemed to have been paid in full satisfaction of all rights
pertaining to the shares of Company Common Stock theretofore represented by such
Certificates, and there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the shares of Company
Common Stock which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation or the Paying Agent for any reason, they shall be cancelled and
exchanged as provided in this Article III.
(e) No Liability. None of Parent, Sub, the Company or the Paying
-------------
Agent shall be liable to any person in
<PAGE>
11
respect of any cash delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certificates shall not have
been surrendered prior to seven years after the Effective Time (or immediately
prior to such earlier date on which any payment pursuant to this Article III
would otherwise escheat to or become the property of any Governmental Entity (as
defined in Section 4.01(d))), the cash payment in respect of such Certificate
shall, to the extent permitted by applicable law, become the property of the
Surviving Corporation, free and clear of all claims or interests of any person
previously entitled thereto.
ARTICLE IV
Representations and Warranties
------------------------------
SECTION 4.01. Representations and Warranties of the Company. Except
----------------------------------------------
as set forth on the Disclosure Schedule delivered by the Company to Parent prior
to the execution of this Agreement (the "Company Disclosure Schedule"), the
Company represents and warrants to Parent and Sub as follows:
(a) Organization, Standing and Corporate Power. Each of the Company
-------------------------------------------
and each of its subsidiaries is a corporation or partnership duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has the requisite corporate or
partnership power and authority to carry on its business as now being
conducted. Each of the Company and each of its subsidiaries is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification or licensing necessary,
other than in such jurisdictions where the failure to be so qualified or
licensed individually or in the aggregate would not have a material adverse
effect on the Company. The Company has delivered to Parent complete and
correct copies of its certificate of incorporation and by-laws and the
certificates of incorporation and by-laws or other organizational documents
of its Significant Subsidiaries, in each case as amended to the date of
this Agreement. For purposes of this Agreement, a "Significant Subsidiary"
means any subsidiary of the Company that constitutes a
<PAGE>
12
significant subsidiary within the meaning of Rule 1-02 of Regulation S-X of
the SEC.
(b) Subsidiaries. The Company Disclosure Schedule lists each
-------------
subsidiary of the Company. All the outstanding shares of capital stock of
each such subsidiary have been validly issued and are fully paid and
nonassessable and are owned by the Company, by another subsidiary of the
Company or by the Company and another such subsidiary, free and clear of
all pledges, claims, liens, charges, encumbrances and security interests of
any kind or nature whatsoever (collectively, "Liens"). Except for the
capital stock of its subsidiaries, the Company does not own, directly or
indirectly, any capital stock or other ownership interest in any
corporation, partnership, joint venture or other entity.
(c) Capital Structure. The authorized capital stock of the Company
------------------
consists of 20,000,000 shares of Company Common Stock and 10,000,000 shares
of preferred stock, par value $.01 per share ("Company Preferred Stock").
At the close of business on May 2, 1994, (i) 8,398,916 shares of Company
Common Stock and no shares of Company Preferred Stock were issued and
outstanding, (ii) no shares of Company Common Stock were held by the
Company in its treasury, (iii) 508,719 shares of Company Common Stock were
reserved for issuance upon exercise of outstanding Employee Stock Options
(as defined in Section 6.04) and (iv) 761,904 shares of Company Common
Stock were reserved for issuance upon conversion of the Company's 7.375%
Convertible Senior Subordinated Notes due December 15, 2006 (the
"Convertible Notes"). At the close of business on May 1, 1994, there was
$24,000,000 aggregate principal amount outstanding of the Convertible
Notes, which are convertible into shares of Company Common Stock at the
option of the holder thereof at an exchange price of $31.50 per share of
Company Common Stock. Except as set forth above, at the close of business
on May 1, 1994, no shares of capital stock or other voting securities of
the Company were issued, reserved for issuance or outstanding. There are
no outstanding stock appreciation rights which were not granted in tandem
with a related Employee Stock Option. All outstanding shares of capital
stock of the Company are, and all shares which may be issued will be, when
issued, duly authorized,
<PAGE>
13
validly issued, fully paid and nonassessable and not subject to preemptive
rights. There are no bonds, debentures, notes or other indebtedness of the
Company having the right to vote (or, except for the Convertible Notes,
convertible into, or exchangeable for, securities having the right to vote)
on any matters on which stockholders of the Company may vote. Except as
set forth above, as of the date of this Agreement, there are no outstanding
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the Company or any of its
subsidiaries is a party or by which any of them is bound obligating the
Company or any of its subsidiaries to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of capital stock or other
voting securities of the Company or of any of its subsidiaries or
obligating the Company or any of its subsidiaries to issue, grant, extend
or enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. As of the date of this Agreement,
there are not any outstanding contractual obligations (i) of the Company or
any of its subsidiaries to repurchase, redeem or otherwise acquire any
shares of capital stock of the Company or any of its subsidiaries or (ii)
of the Company to vote or to dispose of any shares of the capital stock of
any of its subsidiaries.
(d) Authority; Noncontravention. The Company has the requisite
----------------------------
corporate power and authority to enter into this Agreement and, subject to,
if required by law, approval of the Merger by an affirmative vote of the
holders of a majority of the outstanding shares of Company Common Stock
(the "Company Stockholder Approval"), to consummate the transactions
contemplated by this Agreement. The execution and delivery of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated by this Agreement have been duly authorized by
all necessary corporate action on the part of the Company, subject to the
Company Stockholder Approval, if such approval is required by law. This
Agreement has been duly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms. The execution and
delivery of this Agreement do not, and the consummation of the transactions
contemplated by
<PAGE>
14
this Agreement and compliance with the provisions of this Agreement will
not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under, or result in the creation of any Lien upon any of
the properties or assets of the Company or any of its subsidiaries under,
(i) the certificate of incorporation or by-laws of the Company or the
comparable charter or organizational documents of any of its subsidiaries,
(ii) any loan or credit agreement, note, bond, mortgage, indenture, lease
or other agreement, instrument, permit, concession, franchise or license
applicable to the Company or any of its subsidiaries or their respective
properties or assets or (iii) subject to the governmental filings and other
matters referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or
any of its subsidiaries or their respective properties or assets, other
than, in the case of clause (ii) or (iii), any such conflicts, violations,
defaults, rights or Liens that individually or in the aggregate would not
(x) have a material adverse effect on the Company, (y) impair the ability
of the Company to perform its obligations under this Agreement or (z)
prevent the consummation of any of the transactions contemplated by this
Agreement. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Federal, state or local
government or any court, administrative or regulatory agency or commission
or other governmental authority or agency, domestic or foreign (a
"Governmental Entity"), is required by or with respect to the Company or
any of its subsidiaries in connection with the execution and delivery of
this Agreement by the Company or the consummation by the Company of the
transactions contemplated by this Agreement, except for (1) the filing of a
premerger notification and report form by the Company under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), (2) the filing
with the SEC of (A) the Schedule 14D-9, (B) a proxy statement relating to
the Company Stockholder Approval, if such approval is required by law (as
amended or supplemented from time to time, the "Proxy Statement"), and (C)
such reports under Section 13(a) of the Exchange Act as may be required in
connection
<PAGE>
15
with this Agreement and the transactions contemplated by this Agreement,
(3) the filing of the Certificate of Merger with the Delaware Secretary of
State and appropriate documents with the relevant authorities of other
states in which the Company is qualified to do business and (4) such other
consents, approvals, orders, authorizations, registrations, declarations
and filings as would not individually or in the aggregate (A) have a
material adverse effect on the Company, (B) impair the ability of the
Company to perform its obligations under this Agreement or (C) prevent the
consummation of any of the transactions contemplated by this Agreement.
(e) SEC Documents; Financial Statements. The Company has filed all
------------------------------------
required reports, schedules, forms, statements and other documents with the
SEC since January 1, 1993 (the "SEC Documents"). As of their respective
dates, the SEC Documents complied in all material respects with the
requirements of the Securities Act of 1933, as amended (the "Securities
Act"), or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such SEC
Documents, and none of the SEC Documents contained any untrue statement of
a material fact or omitted 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. Except to
the extent that information contained in any SEC Document has been revised
or superseded by a later Filed SEC Document (as defined in Section
4.01(g)), none of the SEC Documents contains any untrue statement of a
material fact or omits 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. The
financial statements of the Company included in the SEC Documents comply as
to form in all material respects with applicable accounting requirements
and the published rules and regulations of the SEC with respect thereto,
have been prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited statements, as permitted by
Form 10-Q of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly
present the consolidated financial
<PAGE>
16
position of the Company and its consolidated subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows for
the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments). Except as set forth in the Filed SEC
Documents and except for liabilities and obligations incurred in the
ordinary course of business consistent with past practice since the date of
the most recent consolidated balance sheet included in the Filed SEC
Documents, neither the Company nor any of its subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by generally accepted accounting
principles to be set forth on a consolidated balance sheet of the Company
and its consolidated subsidiaries or in the notes thereto.
(f) Information Supplied. None of the information supplied or to be
---------------------
supplied by the Company specifically for inclusion or incorporation by
reference in (i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the
information to be filed by the Company in connection with the Offer
pursuant to Rule 14f-1 promulgated under the Exchange Act (the "Information
Statement") or (iv) the Proxy Statement, will, in the case of the Offer
Documents, the Schedule 14D-9 and the Information Statement, at the
respective times the Offer Documents, the Schedule 14D-9 and the
Information Statement are filed with the SEC or first published, sent or
given to the Company's stockholders, or, in the case of the Proxy
Statement, at the time the Proxy Statement is first mailed to the Company's
stockholders or at the time of the Stockholders Meeting (as defined in
Section 6.01(a)), 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 are made, not misleading. The Schedule 14D-9, the Information
Statement and the Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and
regulations thereunder, except that no representation or warranty is made
by the Company with respect to statements made or incorporated by reference
therein based on
<PAGE>
17
information supplied by Parent or Sub specifically for inclusion or
incorporation by reference therein.
(g) Absence of Certain Changes or Events. Except as disclosed in the
-------------------------------------
SEC Documents filed and publicly available prior to the date of this
Agreement (the "Filed SEC Documents"), since the date of the most recently
audited financial statements included in the Filed SEC Documents, the
Company has conducted its business only in the ordinary course, and there
has not been (i) any material adverse change in the Company, (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of the Company's
capital stock, (iii) any split, combination or reclassification of any of
its capital stock or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in substitution for
shares of its capital stock, (iv)(x) any granting by the Company or any of
its subsidiaries to any executive officer of the Company or any of its
subsidiaries of any increase in compensation, except in the ordinary course
of business consistent with prior practice or as was required under
employment agreements in effect as of the date of the most recent audited
financial statements included in the Filed SEC Documents, (y) any granting
by the Company or any of its subsidiaries to any such executive officer of
any increase in severance or termination pay, except as was required under
any employment, severance or termination agreements in effect as of the
date of the most recent audited financial statements included in the Filed
SEC Documents, or (z) any entry by the Company or any of its subsidiaries
into any employment, severance or termination agreement with any such
executive officer, (v) any damage, destruction or loss, whether or not
covered by insurance, that has or could reasonably be expected to have a
material adverse effect on the Company or (vi) any change in accounting
methods, principles or practices by the Company materially affecting its
assets, liabilities or business, except insofar as may have been required
by a change in generally accepted accounting principles.
(h) Litigation. Except as disclosed in the Filed SEC Documents, as
-----------
of the date of this Agreement, there is no suit, action or proceeding
pending or, to the
<PAGE>
18
knowledge of the Company, threatened against the Company or any of its
subsidiaries that individually or in the aggregate could reasonably be
expected to (i) have a material adverse effect on the Company, (ii) 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, nor is there any judgment, decree, injunction, rule or
order of any Governmental Entity or arbitrator outstanding against the
Company or any of its subsidiaries having, or which is reasonably likely to
have, any effect referred to in the foregoing clause (i), (ii) or (iii)
above.
(i) Absence of Changes in Benefit Plans. Except as disclosed in the
------------------------------------
Filed SEC Documents, since the date of the most recent audited financial
statements included in the Filed SEC Documents, there has not been any
adoption or amendment in any material respect by the Company or any of its
subsidiaries of any collective bargaining agreement or any bonus, pension,
profit sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock, retirement,
vacation, severance, disability, death benefit, hospitalization, medical or
other plan, arrangement or understanding (whether or not legally binding)
providing benefits to any current or former employee, officer or director
of the Company or any of its subsidiaries. Except as disclosed in the
Filed SEC Documents, there exist no employment, consulting, severance,
termination or indemnification agreements, arrangements or understandings
between the Company or any of its subsidiaries and any current or former
employee, officer or director of the Company or any of its subsidiaries.
(j) ERISA Compliance. (i) The Company Disclosure Schedule contains
-----------------
a list and brief description of each "employee pension benefit plan" (as
defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) (sometimes referred to herein as a "Pension
Plan"), each "employee welfare benefit plan" (as defined in Section 3(1) of
ERISA) and each stock option, stock purchase, deferred compensation plan or
arrangement and each other employee fringe benefit plan (as defined in
Section 6039D(d) of the Code) maintained, contributed to or required to be
maintained or contributed to by
<PAGE>
19
the Company, any of its subsidiaries or any other person or entity that,
together with the Company, is treated as a single employer under Section
414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended
(the "Code"), (each, a "Commonly Controlled Entity"), for the benefit of
any current or former employees, officers, directors or independent
contractors of the Company or any of its subsidiaries (collectively,
"Benefit Plans"). The Company has delivered to Parent true, complete and
correct copies of (w) each Benefit Plan (or, in the case of any unwritten
Benefit Plans, descriptions thereof), (x) the most recent annual report on
Form 5500 filed with the Internal Revenue Service with respect to each
Benefit Plan (if any such report was required), (y) the most recent summary
plan description for each Benefit Plan for which such summary plan
description is required and (z) each currently effective trust agreement
and insurance or group annuity contract relating to any Benefit Plan.
(ii) Each Benefit Plan has been administered in all material respects
in accordance with its terms. The Company, its subsidiaries and all the
Benefit Plans are all in compliance in all material respects with the
applicable provisions of ERISA and the Code.
(iii) All Pension Plans intended to be qualified under Section 401(a)
of the Code have been the subject of determination letters from the
Internal Revenue Service to the effect that such Pension Plans are
qualified and exempt from Federal income taxes under Section 401(a) and
501(a), respectively, of the Code and no such determination letter has been
revoked nor, to the knowledge of the Company, has revocation been
threatened, nor has any such Pension Plan been amended since the date of
its most recent determination letter or application therefor in any respect
that would adversely affect its qualification or materially increase its
costs.
(iv) No Pension Plan that the Company or any of its subsidiaries
maintains, or to which the Company or any of its subsidiaries is obligated
to contribute, other than any Pension Plan that is a "multiemployer plan"
(as such term is defined in Section 4001(a)(3) of ERISA; collectively, the
"Multiemployer Pension Plans"), had, as of the respective last annual
<PAGE>
20
valuation date for each such Pension Plan, an "unfunded benefit liability"
(as such term is defined in Section 4001(a)(18) of ERISA), based on
actuarial assumptions which have been furnished to Parent and neither the
Company nor any of its subsidiaries is aware of any facts or circumstances
that would materially change the funded status of any such Benefit Plans.
None of the Pension Plans has an "accumulated funding deficiency" (as such
term is defined in Section 302 of ERISA or Section 412 of the Code), and
there has been no application for a waiver of the minimum funding standards
imposed by Section 412 of the Code with respect to any Benefit Plan that is
a Pension Plan.
(v) None of the Company, any of its subsidiaries, any officer of the
Company or any of its subsidiaries or any of the Benefit Plans which are
subject to ERISA, including the Pension Plans, any trusts created
thereunder or any trustee or administrator thereof, has engaged in a non-
exempt "prohibited transaction" (as such term is defined in Section 406 of
ERISA or Section 4975 of the Code) or any other breach of fiduciary
responsibility that could subject the Company, any of its subsidiaries or
any officer of the Company or any of its subsidiaries to tax or penalty
under ERISA, the Code or other applicable law that has not been corrected
or that individually or in the aggregate would have a material adverse
effect on the Company (determined assuming that the tax under Section
4975(b) of the Code is imposed with respect to such prohibited
transaction). Any taxes or penalties arising from prohibited transactions
that have been corrected have been paid in full. Neither any of such
Benefit Plans nor any of such trusts that is subject to Title IV of ERISA
has been terminated, nor has there been any "reportable event" (as that
term is defined in Section 4043 of ERISA) with respect thereto, during the
last five years.
(vi) Neither the Company nor any Commonly Controlled Entity has
suffered or otherwise caused a "complete withdrawal" or a "partial
withdrawal" (as such terms are defined in Section 4203 and Section 4205,
respectively, of ERISA) with respect to any of the Multiemployer Pension
Plans that could lead to the imposition of any withdrawal liability under
Section 4201 of ERISA; and no action has been taken
<PAGE>
21
that alone or with the passage of time could result in either a partial or
complete withdrawal by any Commonly Controlled Entity in respect of any
such plan.
(vii) With respect to any Benefit Plan that is an employee welfare
benefit plan, except as disclosed in the Company Disclosure Schedule, (x)
no such Benefit Plan is funded through a "welfare benefit fund", as such
term is defined in Section 419(e) of the Code, (y) each such Benefit Plan
that is a "group health plan", as such term is defined in Section
5000(b)(1) of the Code, complies in all material respects with the
applicable requirements of Section 4980B(f) of the Code and (z) each such
Benefit Plan (including any such Plan covering retirees or other former
employees) may be amended or terminated without material liability to the
Company or any of its subsidiaries on or at any time after the consummation
of the Offer.
(viii) No Commonly Controlled Entity has incurred any material liability
to a Pension Plan (other than for contributions not yet due).
(k) Taxes. (i) Each of the Company and each of its subsidiaries has
------
filed all tax returns and reports required to be filed by it. All such
returns and reports are complete and correct in all material respects.
Each of the Company and each of its subsidiaries has paid (or the Company
has paid on its behalf) all taxes shown as due on such returns and all
material taxes for which no return was required to be filed, and the most
recent financial statements contained in the Filed SEC Documents properly
reflect in accordance with generally accepted accounting principles all
taxes payable by the Company and its subsidiaries for all taxable periods
and portions thereof through the date of such financial statements.
(ii) No deficiencies for any taxes have been proposed, asserted or
assessed against the Company or any of its subsidiaries that are not
properly reflected in accordance with generally accepted accounting
principles in the most recent financial statements contained in the Filed
SEC Documents, except for deficiencies that individually or in the
aggregate would not have a material adverse effect on the Company, and no
requests for waivers of the time to assess any such taxes are pending. The
Company has not
<PAGE>
22
agreed with any tax authority to extend the time to assess any such taxes
beyond the date of this Agreement. The Federal income tax returns of the
Company and each of its subsidiaries consolidated in such returns have been
examined by the Internal Revenue Service for all years through 1991 and
such examination is not ongoing. The Company has not entered into any
closing agreement with respect to any taxable year.
(iii) As used in this Agreement, "taxes" shall include all Federal,
state, local and foreign income, property, sales, excise and other taxes,
tariffs or duties of any nature whatsoever.
(l) No Excess Parachute Payments; Section 162(m) of the Code. (i)
---------------------------------------------------------
Any amount that could be received (whether in cash or property or the
vesting of property) as a result of any of the transactions contemplated by
this Agreement by any employee, officer or director of the Company or any
of its affiliates who is a "disqualified individual" (as such term is
defined in proposed Treasury Regulation Section 1.280G-1) under any
employment, severance or termination agreement, other compensation
arrangement or Benefit Plan currently in effect would not be characterized
as an "excess parachute payment" (as such term is defined in Section
280G(b)(1) of the Code).
(ii) The disallowance of a deduction under Section 162(m) of the Code
for employee remuneration will not apply to any amount paid or payable by
the Company or any subsidiary of the Company under any contract, plan,
program, arrangement or understanding.
(m) Compliance with Applicable Laws. (i) Each of the Company and
--------------------------------
each of its subsidiaries has in effect all Federal, state, local and
foreign governmental approvals, authorizations, certificates, filings,
franchises, licenses, notices, permits and rights ("Permits") necessary for
it to own, lease or operate its properties and assets and to carry on its
business as now conducted, and there has occurred no default under any such
Permit, except for the lack of Permits and for defaults under Permits which
lack or default individually or in the aggregate would not have a material
adverse effect on the Company. Except as disclosed in the Filed SEC
Documents, the Company and its subsidiaries are in compliance with all
applicable
<PAGE>
23
statutes, laws, ordinances, rules, orders and regulations of any
Governmental Entity, except for noncompliance which individually or in the
aggregate would not have a material adverse effect on the Company.
(ii) To the best knowledge of the Company, each of the Company and its
subsidiaries is, and has been, and each of the Company's former
subsidiaries, while subsidiaries of the Company, was in compliance with all
applicable Environmental Laws, except for noncompliance which individually
or in the aggregate would not have a material adverse effect on the
Company. The term "Environmental Laws" means any Federal, state or local
statute, code, ordinance, rule, regulation, policy, guideline, permit,
consent, approval, license, judgment, order, writ, decree, directive,
injunction or other authorization, including the requirement to register
underground storage tanks, relating to: (A) Releases (as defined below) or
threatened Releases of Hazardous Material (as defined below) into the
environment, including into ambient air, soil, sediments, land surface or
subsurface, buildings or facilities, surface water, groundwater, publicly-
owned treatment works, septic systems or land; or (B) the generation,
treatment, storage, disposal, use, handling, manufacturing, transportation
or shipment of Hazardous Material.
(iii) During the period of ownership or operation by the Company and
its subsidiaries of any of their respective current or previously owned or
leased properties, there have been no Releases of Hazardous Material in,
on, under or affecting such properties or, to the knowledge of the Company,
any surrounding site, and none of the Company or its subsidiaries have
disposed of any Hazardous Material or any other substance in a manner that
could reasonably be anticipated to lead to a Release, except in each case
for those which individually or in the aggregate would not have a material
adverse effect on the Company. Prior to the period of ownership or
operation by the Company and its subsidiaries of any of their respective
current or previously owned or leased properties, to the knowledge of the
Company, no Hazardous Material was generated, treated, stored, disposed of,
used, handled or manufactured at, or transported, shipped or disposed of
from, such current or previously owned properties,
<PAGE>
24
and there were no Releases of Hazardous Material in, on, under or affecting
any such property or any surrounding site, except in each case for those
which individually or in the aggregate would not have a material adverse
effect on the Company. The term "Release" has the meaning set forth in 42
U.S.C. (S) 9601(22). The term "Hazardous Material" means (1) hazardous
materials, pollutants, contaminants, constituents, medical or infectious
wastes, hazardous wastes and hazardous substances as those terms are
defined in the following statutes and their implementing regulations: the
Hazardous Materials Transportation Act, 49 U.S.C. (S) 1801 et seq., the
-- ----
Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901 et seq., the
-- ----
Comprehensive Environmental Response, Compensation and Liability Act, as
amended by the Superfund Amendments and Reauthorization Act, 42 U.S.C. (S)
9601 et seq., the Clean Water Act, 33 U.S.C. (S) 1251 et seq., the Toxic
-- ---- -- ----
Substances Control Act, 15 U.S.C. (S) 2601 et seq. and the Clean Air Act,
-- ----
42 U.S.C. (S) 7401 et seq., (2) petroleum, including crude oil and any
-- ----
fractions thereof, (3) natural gas, synthetic gas and any mixtures thereof,
(4) asbestos and/or asbestos-containing material, (5) radon and (6) PCBs,
or materials or fluids containing PCBs.
(n) State Takeover Statutes. The Board of Directors of the Company
------------------------
has approved the Offer, the Merger, this Agreement and the Option
Agreements and such approval is sufficient to render inapplicable to the
Offer, the Merger, this Agreement and the Option Agreements and the
transactions contemplated by this Agreement and the Option Agreements the
provisions of Section 203 of the DGCL and the provisions of the Tennessee
Investor Protection Act. To the best of the Company's knowledge, no other
state takeover statute or similar statute or regulation applies or purports
to apply to the Offer, the Merger, this Agreement, the Option Agreements or
any of the transactions contemplated by this Agreement and the Option
Agreements.
(o) Brokers; Schedule of Fees and Expenses. No broker, investment
---------------------------------------
banker, financial advisor or other person, other than Alex. Brown & Sons
Incorporated, the fees and expenses of which will be paid by the Company,
is entitled to any broker's, finder's, financial advisor's or other similar
fee or commission in
<PAGE>
25
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company. The estimated fees and
expenses incurred and to be incurred by the Company in connection with this
Agreement and the transactions contemplated by this Agreement (including
the fees of the Company's legal counsel) are set forth in the Company
Disclosure Schedule.
(p) Opinion of Financial Advisor. The Company has received the
-----------------------------
opinion of Alex. Brown & Sons Incorporated, dated the date of this
Agreement, to the effect that, as of such date, the consideration to be
received in the Offer and the Merger by the Company's stockholders is fair
to the Company's stockholders from a financial point of view, and a signed
copy of such opinion has been delivered to Parent.
(q) Contracts; Debt Instruments. (i) Except as disclosed in the
----------------------------
Filed SEC Documents, there is no contract or agreement that is material to
the business, condition (financial or otherwise), results of operations or
prospects of the Company and its subsidiaries taken as a whole. Neither
the Company nor any of its subsidiaries is in violation of or in default
under (nor does there exist any condition which upon the passage of time or
the giving of notice would cause such a violation of or default under) any
loan or credit agreement, note, bond, mortgage, indenture, lease, permit,
concession, franchise, license or any other contract, agreement,
arrangement or understanding to which it is a party or by which it or any
of its properties or assets is bound, except for violations or defaults
that individually or in the aggregate would not have a material adverse
effect on the Company.
(ii) Set forth on the Company Disclosure Schedule is (x) a list of all
loan or credit agreements, notes, bonds, mortgages, indentures and other
agreements and instruments pursuant to which any indebtedness of the
Company or any of its subsidiaries in an aggregate principal amount in
excess of $250,000 is outstanding or may be incurred and (y) the respective
principal amounts currently outstanding thereunder. For purposes of this
Agreement, "indebtedness" shall mean, with respect to any person, without
duplication, (A) all obligations of such person for borrowed money, or with
respect to deposits or advances of any kind to such
<PAGE>
26
person, (B) all obligations of such person evidenced by bonds, debentures,
notes or similar instruments, (C) all obligations of such person upon which
interest charges are customarily paid, (D) all obligations of such person
under conditional sale or other title retention agreements relating to
property purchased by such person, (E) all obligations of such person
issued or assumed as the deferred purchase price of property or services
(excluding obligations of such person to creditors for raw materials,
inventory, services and supplies incurred in the ordinary course of such
person's business), (F) all capitalized lease obligations of such person,
(G) all obligations of others secured by any lien on property or assets
owned or acquired by such person, whether or not the obligations secured
thereby have been assumed, (H) all obligations of such person under
interest rate or currency hedging transactions (valued at the termination
value thereof), (I) all letters of credit issued for the account of such
person (excluding letters of credit issued for the benefit of suppliers to
support accounts payable to suppliers incurred in the ordinary course of
business) and (J) all guarantees and arrangements having the economic
effect of a guarantee of such person of any indebtedness of any other
person.
(r) Title to Properties. (i) Each of the Company and each of its
--------------------
subsidiaries has good and marketable title to, or valid leasehold interests
in, all its material properties and assets except for such as are no longer
used or useful in the conduct of its businesses or as have been disposed of
in the ordinary course of business and except for defects in title,
easements, restrictive covenants and similar encumbrances or impediments
that individually or in the aggregate would not materially interfere with
its ability to conduct its business as currently conducted. All such
material properties and assets, other than properties and assets in which
the Company or any of its subsidiaries has leasehold interests, are free
and clear of all Liens, except for Liens that individually or in the
aggregate would not materially interfere with the ability of the Company
and its subsidiaries to conduct business as currently conducted.
(ii) Each of the Company and each of its subsidiaries has complied in
all material respects with
<PAGE>
27
the terms of all material leases to which it is a party and under which it
is in occupancy, and all such leases are in full force and effect. Each of
the Company and each of its subsidiaries enjoys peaceful and undisturbed
possession under all such material leases.
(s) Labor Matters. There are no collective bargaining or other labor
--------------
union agreements to which the Company or any of its subsidiaries is a party
or by which any of them is bound. To the best knowledge of the Company,
since December 1, 1992, neither the Company nor any of its subsidiaries has
encountered any labor union organizing activity, or had any actual or
threatened employee strikes, work stoppages, slowdowns or lockouts.
SECTION 4.02. Representations and Warranties of Parent and Sub.
-------------------------------------------------
Parent and Sub represent and warrant to the Company as follows:
(a) Organization, Standing and Corporate Power. Each of Parent, Sub
-------------------------------------------
and each of Parent's other subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated and has the requisite corporate power and
authority to carry on its business as now being conducted. Each of Parent,
Sub and each of Parent's other subsidiaries is duly qualified or licensed
to do business and is in good standing in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes
such qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed individually or in the
aggregate would not have a material adverse effect on Parent. Parent has
delivered to the Company complete and correct copies of its certificate of
incorporation and by-laws and the certificate of incorporation and by-laws
of Sub, in each case as amended to the date of this Agreement.
(b) Authority; Noncontravention. Parent and Sub have all requisite
----------------------------
corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. The execution
and delivery of this Agreement by Parent and Sub and the consummation by
Parent and Sub of the transactions contemplated by this Agreement have been
<PAGE>
28
duly authorized by all necessary corporate action on the part of Parent and
Sub. This Agreement has been duly executed and delivered by Parent and Sub
and constitutes a valid and binding obligation of each such party,
enforceable against each such party in accordance with its terms. The
execution and delivery of this Agreement do not, and the consummation of
the transactions contemplated by this Agreement and compliance with the
provisions of this Agreement will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time or both)
under, or give rise to a right of termination, cancellation or acceleration
of any obligation or loss of a material benefit under, or result in the
creation of any Lien upon any of the properties or assets of Parent or any
of its subsidiaries under, (i) the certificate of incorporation or by-laws
of Parent or Sub or the comparable charter or organizational documents of
any other subsidiary of Parent, (ii) any loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to Parent, Sub or any of
Parent's other subsidiaries or their respective properties or assets or
(iii) subject to the governmental filings and other matters referred to in
the following sentence, any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent, Sub or any of Parent's
other subsidiaries or their respective properties or assets, other than, in
the case of clause (ii) or (iii), any such conflicts, violations, defaults,
rights or Liens that individually or in the aggregate would not (x) have a
material adverse effect on Parent, (y) impair the ability of Parent and Sub
to perform their respective obligations under this Agreement or (z) prevent
the consummation of any of the transactions contemplated by this Agreement.
No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to Parent, Sub or any of Parent's other subsidiaries in connection
with the execution and delivery of this Agreement or the consummation by
Parent or Sub, as the case may be, of any of the transactions contemplated
by this Agreement, except for (1) the filing of a premerger notification
and report form under the HSR Act, (2) the filing with the SEC of (A) the
Offer Documents and (B) such reports under Sections 13(a), 13(d) and 16(a)
of the Exchange Act as
<PAGE>
29
may be required in connection with this Agreement and the transactions
contemplated by this Agreement, (3) the filing of the Certificate of Merger
with the Delaware Secretary of State and appropriate documents with the
relevant authorities of other states in which the Company is qualified to
do business and (4) such other consents, approvals, orders, authorizations,
registrations, declarations and filings as would not individually or in the
aggregate (A) have a material adverse effect on Parent, (B) impair the
ability of Parent and Sub to perform their respective obligations under
this Agreement or (C) prevent the consummation of any of the transactions
contemplated by this Agreement. Neither Parent nor any of its affiliates
or associates (as such term is defined in Section 203 of the DGCL) was,
immediately prior to the execution and delivery of the Option Agreements,
an Interested Stockholder (as such term is defined in Section 203 of the
DGCL) of the Company.
(c) Information Supplied. None of the information supplied or to be
---------------------
supplied by Parent or Sub specifically for inclusion or incorporation by
reference in the Offer Documents, the Schedule 14D-9, the Information
Statement or the Proxy Statement will, in the case of the Offer Documents,
the Schedule 14D-9 and the Information Statement, at the respective times
the Offer Documents, the Schedule 14D-9 and the Information Statement are
filed with the SEC or first published, sent or given to the Company's
stockholders, or, in the case of the Proxy Statement, at the date the Proxy
Statement is first mailed to the Company's stockholders or at the time of
the Stockholders Meeting, 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 are made, not misleading. The Offer
Documents will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations promulgated
thereunder, except that no representation or warranty is made by Parent or
Sub with respect to statements made or incorporated by reference therein
based on information supplied by the Company specifically for inclusion or
incorporation by reference therein.
<PAGE>
30
(d) Brokers. No broker, investment banker, financial advisor or other
--------
person, other than Morgan Stanley & Co. Incorporated, the fees and expenses
of which will be paid by Parent, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with
the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Parent or Sub.
(e) Financing. Parent and Sub have obtained bank commitments for
----------
funds sufficient to consummate the Offer and the Merger on the terms
contemplated by this Agreement, and at the expiration of the Offer and the
Effective Time, Parent and Sub will have available all the funds necessary
for the acquisition of all shares of Common Stock pursuant to the Offer and
to perform their respective obligations under this Agreement.
(f) Litigation. Except as disclosed in documents filed with the SEC
----------
by Parent, as of the date of this Agreement, there is no suit, action or
proceeding pending or, to the knowledge of Parent, threatened against
Parent or any of its subsidiaries that individually or in the aggregate
could reasonably be expected to (i) impair the ability of Parent or Sub to
perform their obligations under this Agreement or (ii) prevent the
consummation of any of the transactions contemplated by this Agreement, nor
is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against Parent or any of its
subsidiaries having, or which is reasonably likely to have, any effect
referred to in the foregoing clause (i) or (ii) above.
ARTICLE V
Covenants Relating to Conduct of Business
-----------------------------------------
SECTION 5.01. Conduct of Business. (a) Conduct of Business by the
-------------------- --------------------------
Company. Until such time as Parent's designees shall constitute a majority of
- --------
the members of the Board of Directors of the Company, the Company shall, and
shall cause its subsidiaries to, carry on their respective businesses in the
ordinary course and use all reasonable efforts to preserve intact their current
business organizations, keep available the services of their current officers
and employees and preserve their relationships with
<PAGE>
31
customers, suppliers and others having business dealings with them. Without
limiting the generality of the foregoing, until such time as Parent's designees
shall constitute a majority of the members of the Board of Directors of the
Company, the Company shall not, and shall not permit any of its subsidiaries to:
(i) (x) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, other than dividends
and distributions by any direct or indirect wholly owned subsidiary of the
Company to its parent, in the case of less than wholly owned subsidiaries,
as required by agreements existing on the date of this Agreement, (y)
split, combine or reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or (z) purchase, redeem or
otherwise acquire any shares of capital stock of the Company or any of its
subsidiaries or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities, other than any
purchase of the Convertible Notes in accordance with Section 2.3 of the
Note Agreement dated as of December 1, 1991 (the "Note Agreement");
(ii) issue, deliver, sell, pledge or otherwise encumber any shares of
its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities (other than (x) the
issuance of Company Common Stock upon the exercise of Employee Stock
Options outstanding on the date of this Agreement and in accordance with
their present terms and (y) the issuance of Company Common Stock upon
conversion of the outstanding Convertible Notes by the holders thereof in
accordance with their present terms);
(iii) amend its certificate of incorporation, by-laws or other
comparable charter or organizational documents;
(iv) acquire or agree to acquire (x) by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, joint venture,
association or other business organization or
<PAGE>
32
division thereof or (y) any assets that individually or in the aggregate
are material to the Company and its subsidiaries taken as a whole, except
purchases of inventory in the ordinary course of business consistent with
past practice;
(v) sell, lease, license, mortgage or otherwise encumber or subject to
any Lien or otherwise dispose of any of its properties or assets, except
for sales of its properties or assets in the ordinary course of business
consistent with past practice;
(vi) (x) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or
any of its subsidiaries, guarantee any debt securities of another person,
enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having
the economic effect of any of the foregoing or (y) make any loans, advances
or capital contributions to, or investments in, any other person, other
than to the Company or any direct or indirect wholly owned subsidiary of
the Company;
(vii) make or agree to make any new capital expenditure or
expenditures which individually is in excess of $150,000 or which in the
aggregate are in excess of $1,000,000;
(viii) make any tax election or settle or compromise any income tax
liability;
(ix) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge, settlement or satisfaction,
in the ordinary course of business consistent with past practice or in
accordance with their terms, of liabilities reflected or reserved against
in, or contemplated by, the most recent consolidated financial statements
(or the notes thereto) of the Company included in the Filed SEC Documents
or incurred since the date of such financial statements in the ordinary
course of business consistent with past practice;
<PAGE>
33
(x) except in the ordinary course of business, modify, amend or
terminate any material contract or agreement to which the Company or any
subsidiary is a party or waive, release or assign any material rights or
claims thereunder; or
(xi) authorize any of, or commit or agree to take any of, the
foregoing actions.
(b) Other Actions. The Company and Parent shall not, and shall not
--------------
permit any of their respective subsidiaries to, take any action that would, or
that could reasonably be expected to, result in (i) any of the representations
and warranties of such party set forth in this Agreement that are qualified as
to materiality becoming untrue, (ii) any of such representations and warranties
that are not so qualified becoming untrue in any material respect or (iii) any
of the conditions to the Offer set forth in Exhibit A or any of the conditions
to the Merger not being satisfied (subject to the Company's right to take action
consistent with Section 5.02).
SECTION 5.02. No Solicitation. (a) The Company shall not, nor shall
----------------
it permit any of its subsidiaries to, nor shall it authorize or permit any
officer, director or employee of, or any investment banker, attorney or other
advisor or representative of, the Company or any of its subsidiaries to,
directly or indirectly, (i) solicit, initiate or encourage the submission of any
takeover proposal or (ii) participate in any discussions or negotiations
regarding, or furnish to any person any information with respect to, or take any
other action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any takeover proposal;
provided, however, that prior to the acceptance for payment of shares of Company
- -------- -------
Common Stock pursuant to the Offer, to the extent required by the fiduciary
obligations of the Board of Directors of the Company, as determined in good
faith by the Board of Directors based on the advice of outside counsel, the
Company may, (A) in response to an unsolicited request therefor, furnish
information with respect to the Company to any person pursuant to a customary
confidentiality agreement (as determined by the Company's outside counsel) and
discuss (1) such information (but not the terms of any possible takeover
proposal) and (2) the terms of this Section 5.02 with such person and (B) upon
receipt by the Company of a takeover proposal, following delivery to Parent of
the
<PAGE>
34
notice required pursuant to Section 5.02(c), participate in negotiations
regarding such takeover proposal. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the preceding
sentence by any officer, director or employee of the Company or any of its
subsidiaries or any investment banker, attorney or other advisor or
representative of the Company or any of its subsidiaries, whether or not such
person is purporting to act on behalf of the Company or any of its subsidiaries
or otherwise, shall be deemed to be a breach of this Section 5.02(a) by the
Company. For purposes of this Agreement, "takeover proposal" means any proposal
for a merger or other business combination involving the Company or any of its
Significant Subsidiaries or any proposal or offer to acquire in any manner,
directly or indirectly, an equity interest in, not less than 25% of the
outstanding voting securities of, or assets representing not less than 25% of
the annual revenues of the Company or any of its Significant Subsidiaries, other
than the transactions contemplated by this Agreement.
(b) Neither the Board of Directors of the Company nor any committee
thereof shall (i) withdraw or modify, or propose to withdraw or modify, in a
manner adverse to Parent or Sub, the approval or recommendation by such Board of
Directors or any such committee of the Offer, this Agreement or the Merger, (ii)
approve or recommend, or propose to approve or recommend, any takeover proposal
or (iii) enter into any agreement with respect to any takeover proposal.
Notwithstanding the foregoing, in the event the Board of Directors of the
Company receives a takeover proposal that, in the exercise of its fiduciary
obligations (as determined in good faith by the Board of Directors after
reviewing the advice of outside counsel), it determines to be a superior
proposal, the Board of Directors may (subject to the following sentences)
withdraw or modify its approval or recommendation of the Offer, this Agreement
or the Merger, approve or recommend any such superior proposal, enter into an
agreement with respect to such superior proposal or terminate this Agreement, in
each case at any time after the second business day following Parent's receipt
of written notice (a "Notice of Superior Proposal") advising Parent that the
Board of Directors has received a superior proposal, specifying the material
terms and conditions of such superior proposal and identifying the person making
such superior proposal. The Company may take any of the foregoing actions
pursuant to the preceding sentence only if Sub shall not have accepted for
payment shares of Company
<PAGE>
35
Common Stock pursuant to the Offer. In addition, if the Company proposes to
enter into an agreement with respect to any takeover proposal, it shall
concurrently with taking any of the foregoing actions pay, or cause to be paid,
to Parent the Expense Fee (as defined in Section 6.08(b)) and, in the event the
Company shall enter into such an agreement, such agreement shall provide for the
payment to Parent of the Termination Fee (as defined in Section 6.08(c)) upon
the consummation of the transaction contemplated by such agreement. For
purposes of this Agreement, a "superior proposal" means any bona fide takeover
proposal on terms which the Board of Directors of the Company determines in its
good faith reasonable judgment (after reviewing the advice of a financial
advisor of nationally recognized reputation) to be more favorable to the
Company's stockholders than the Offer and the Merger. Nothing contained herein
shall prohibit the Company from taking and disclosing to its stockholders a
position contemplated by Rule 14e-2(a) promulgated under the Exchange Act prior
to the third business day following Parent's receipt of a Notice of Superior
Proposal provided that the Company does not withdraw or modify its position with
respect to the Offer or Merger or approve or recommend a takeover proposal.
(c) In addition to the obligations of the Company set forth in
paragraph (b) above, the Company shall promptly advise Parent orally and in
writing of any request for information or of any takeover proposal, or any
inquiry with respect to or which could lead to any takeover proposal, the
material terms and conditions of such request, takeover proposal or inquiry, and
the identity of the person making any such takeover proposal or inquiry. The
Company will keep Parent fully informed of the status and details of any such
request, takeover proposal or inquiry.
ARTICLE VI
Additional Agreements
---------------------
SECTION 6.01. Stockholder Approval; Preparation of Proxy Statement.
-----------------------------------------------------
(a) If the Company Stockholder Approval is required by law, the Company will,
at Parent's request, as soon as practicable following the expiration of the
Offer, duly call, give notice of, convene and hold a meeting of its stockholders
(the "Stockholders Meeting") for the purpose of obtaining the Company
Stockholder Approval. The Company will, through its Board of Directors,
recommend
<PAGE>
36
to its stockholders that the Company Stockholder Approval be given.
Notwithstanding the foregoing, if Sub or any other subsidiary of Parent shall
acquire at least 90% of the outstanding shares of Company Common Stock, the
parties shall, at the request of Parent, take all necessary and appropriate
action to cause the Merger to become effective as soon as practicable after the
expiration of the Offer without a Stockholders Meeting in accordance with
Section 253 of the DGCL. Without limiting the generality of the foregoing, the
Company agrees that its obligations pursuant to the first sentence of this
Section 6.01(a) shall not be affected by (i) the commencement, public proposal,
public disclosure or communication to the Company of any takeover proposal or
(ii) the withdrawal or modification by the Board of Directors of the Company of
its approval or recommendation of the Offer, this Agreement or the Merger.
(b) If the Company Stockholder Approval is required by law, the
Company will, at Parent's request, as soon as practicable following the
expiration of the Offer, prepare and file a preliminary Proxy Statement with the
SEC and will use its best efforts to respond to any comments of the SEC or its
staff and to cause the Proxy Statement to be mailed to the Company's
stockholders as promptly as practicable after responding to all such comments to
the satisfaction of the staff. The Company will notify Parent promptly of the
receipt of any comments from the SEC or its staff and of any request by the SEC
or its staff for amendments or supplements to the Proxy Statement or for
additional information and will supply Parent with copies of all correspondence
between the Company or any of its representatives, on the one hand, and the SEC
or its staff, on the other hand, with respect to the Proxy Statement or the
Merger. If at any time prior to the Stockholders Meeting there shall occur any
event that should be set forth in an amendment or supplement to the Proxy
Statement, the Company will promptly prepare and mail to its stockholders such
an amendment or supplement. The Company will not mail any Proxy Statement, or
any amendment or supplement thereto, to which Parent reasonably objects.
(c) Parent agrees to cause all shares of Company Common Stock
purchased pursuant to the Offer and all other shares of Company Common Stock
owned by Sub or any other subsidiary of Parent to be voted in favor of the
Company Stockholder Approval.
<PAGE>
37
SECTION 6.02. Access to Information; Confidentiality. The Company
---------------------------------------
shall, and shall cause each of its subsidiaries to, afford to Parent, and to
Parent's officers, employees, accountants, counsel, financial advisers and other
representatives, reasonable access during normal business hours during the
period prior to the Effective Time to all their respective properties, books,
contracts, commitments, personnel and records and, during such period, the
Company shall, and shall cause each of its subsidiaries to, furnish promptly to
Parent (a) a copy of each report, schedule, registration statement and other
document filed by it during such period pursuant to the requirements of Federal
or state securities laws and (b) all other information concerning its business,
properties and personnel as Parent may reasonably request. Except as required
by law, Parent will hold, and will cause its officers, employees, accountants,
counsel, financial advisers and other representatives and affiliates to hold,
any confidential information in accordance with the Confidentiality Agreement
dated July 12, 1993, between Parent and the Company (the "Confidentiality
Agreement"). Parent and its subsidiaries agree not to acquire or agree to
acquire, or, for 90 days following the termination of this Agreement, otherwise
obtain beneficial ownership of, the stock or assets of any company listed on the
Company Disclosure Schedule pursuant to this Section 6.02.
SECTION 6.03. Best Efforts; Notification. (a) Upon the terms and
---------------------------
subject to the conditions set forth in this Agreement, each of the parties
agrees to use its best efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, and to assist and cooperate with the other parties
in doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Offer, the Merger and
the other transactions contemplated by this Agreement and the Option Agreements,
including (i) the obtaining of all necessary actions or nonactions, waivers,
consents and approvals from Governmental Entities and the making of all
necessary registrations and filings (including filings with Governmental
Entities, if any) and the taking of all reasonable steps as may be necessary to
obtain an approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity, (ii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iii) the defending of any lawsuits or other legal
proceedings,
<PAGE>
38
whether judicial or administrative, challenging this Agreement or the Option
Agreements or the consummation of any of the transactions contemplated by this
Agreement or the Option Agreements, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement and the Option Agreements. In
connection with and without limiting the foregoing, the Company and its Board of
Directors shall (A) take all action necessary to ensure that no state takeover
statute or similar statute or regulation is or becomes applicable to the Offer,
the Merger, this Agreement, the Option Agreements or any of the other
transactions contemplated by this Agreement or the Option Agreements and (B) if
any state takeover statute or similar statute or regulation becomes applicable
to the Offer, the Merger, this Agreement, the Option Agreements or any other
transaction contemplated by this Agreement or the Option Agreements, take all
action necessary to ensure that the Offer, the Merger and the other transactions
contemplated by this Agreement and the Option Agreements may be consummated as
promptly as practicable on the terms contemplated by this Agreement and the
Option Agreements and otherwise to minimize the effect of such statute or
regulation on the Offer, the Merger and the other transactions contemplated by
this Agreement and the Option Agreements. Notwithstanding anything to the
contrary set forth in this Section 6.03(a), the Board of Directors of the
Company shall not be prohibited from taking any action permitted by Section
5.02(b).
(b) The Company shall give prompt notice to Parent, and Parent shall
give prompt notice to the Company, of (i) any representation or warranty made by
it contained in this Agreement that is qualified as to materiality becoming
untrue or inaccurate in any respect or any such representation or warranty that
is not so qualified becoming untrue or inaccurate in any material respect or
(ii) the failure by it to comply with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement; provided, however, that no such notification shall affect the
-------- -------
representations, warranties, covenants, or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
<PAGE>
39
SECTION 6.04. Stock Option Plans. (a) As soon as practicable
-------------------
following the date of this Agreement, the Board of Directors of the Company (or,
if appropriate, any committee administering the Stock Plans) shall adopt such
resolutions or take such other actions as are required to adjust the terms of
all outstanding employee stock options to purchase shares of Company Common
Stock ("Employee Stock Options") and all outstanding stock appreciation rights
("SARs") heretofore granted under any stock option or stock appreciation rights
plan, program or arrangement of the Company (collectively, the "Stock Plans") to
provide that each Employee Stock Option (and any SAR related thereto), whether
vested or not, outstanding immediately prior to the acceptance for payment of
shares of Company Common Stock pursuant to the Offer shall be cancelled in
exchange for a cash payment by the Company of an amount equal to (i) the excess,
if any, of (x) the price per share of Company Common Stock to be paid pursuant
to the Offer over (y) the exercise price per share of Company Common Stock
subject to such Employee Stock Option, multiplied by (ii) the number of shares
of Company Common Stock for which such Employee Stock Option shall not
theretofore have been exercised. Notwithstanding the foregoing, the Employee
Stock Options granted within six months prior to the Effective Time to officers
and directors of the Company who are subject to the reporting requirements of
Section 16 of the Exchange Act and the rules promulgated thereunder shall not be
cancelled in exchange for cash payments, but instead shall be immediately
converted as of the Effective Time into the right ("Adjusted Option") to
purchase the Option Conversion Number (as defined below) of shares of common
stock, par value $.01 per share, of Parent (or, in the event Parent has
consummated prior to the Effective Time the holding company reorganization as
contemplated by its proxy statement/prospectus dated April 26, 1994, shares of
common stock, par value $.01 per share, of Parent's public holding company
("Holdings")). Each Adjusted Option will have substantially the same terms as
the Employee Stock Option to which it is related, except that: (i) the Adjusted
Option shall be deemed fully vested, (ii) if the Adjusted Option holder's
employment with Parent or the Surviving Company is terminated, the Adjusted
Option will remain exercisable for a period of at least six months after the
date of such termination and (iii) the exercise price of an Adjusted Option
shall be an amount equal to the exercise price of the Employee Stock Option
related to such Adjusted Option as of the date of this Agreement divided by the
Conversion Number (as defined below). The "Option Conversion Number" for any
<PAGE>
40
Adjusted Option shall be equal to the number of shares of Company Common Stock
purchasable pursuant to the Employee Stock Option related to such Adjusted
Option as of the date of this Agreement multiplied by the Conversion Number.
The "Conversion Number" shall be a number equal to (x) the Offer Price divided
by (y) the average closing price of common stock of Parent and/or Holdings, as
the case may be, on the NYSE Composite Tape for the 30 consecutive trading days
prior to the Effective Date. Parent agrees to use best efforts to take, and, if
applicable, to cause Holdings to take, such actions as are necessary for the
conversion of the Employee Stock Options to Adjusted Options as described above,
including the reservation, issuance and listing of common stock of Parent or
Holdings, as the case may be, as is necessary to effect the transactions
contemplated by this Section 6.04(a).
(b) All amounts payable pursuant to this Section 6.04 shall be
subject to any required withholding of taxes and shall be paid without interest.
The Company shall use its best efforts to obtain all consents of the holders of
the Employee Stock Options as shall be necessary to effectuate the foregoing.
Notwithstanding anything to the contrary contained in this Agreement, payment
shall, at Parent's request, be withheld in respect of any Employee Stock Option
until all necessary consents are obtained.
(c) The Stock Plans shall terminate as of the Effective Time, except
with respect to Adjusted Options granted pursuant to Section 6.04(a), if any,
which shall continue to be governed by the applicable Stock Plan of the Company,
and the provision in any other Benefit Plan providing for the issuance, transfer
or grant of any capital stock of the Company or any interest in respect of any
capital stock of the Company shall be deleted as of the Effective Time, and the
Company shall ensure that following the Effective Time no holder of an Employee
Option or SAR or any participant in any Stock Plan or other Benefit Plan shall
have any right thereunder to acquire any capital stock of the Company or the
Surviving Corporation.
SECTION 6.05. Benefit Plans and Employee Matters. (a) Except as
-----------------------------------
provided in Section 6.04, Parent currently intends to cause the Surviving
Corporation to maintain for a period of three years after the Effective Time the
Benefit Plans of the Company and its subsidiaries in effect on the date of this
Agreement or to provide benefits to employees of the Company and its
subsidiaries that are no less
<PAGE>
41
favorable in the aggregate to such employees than those in effect on the date of
this Agreement.
(b) Parent currently intends, for a period of three years after the
Effective Time, to provide, or cause its subsidiaries to provide, to persons who
are employees of the Company or any of its subsidiaries at the Effective Time
("Company Employees"), and whose employment is thereafter terminated by Parent
or any of its subsidiaries, with an opportunity to apply for subsequent
employment opportunities involving substantially similar job qualifications with
the Parent and its subsidiaries prior to the placement of advertisements or
other open notices to the general public that such employment opportunities are
available; provided, however, that neither the Parent nor any of its
-------- -------
subsidiaries shall have any obligations to offer employment to any such former
Company Employees.
SECTION 6.06. Indemnification, Exculpation and Insurance. (a)
-------------------------------------------
Parent and Sub agree that all rights to indemnification and exculpation from
liability for acts or omissions occurring prior to the Effective Time now
existing in favor of the current or former directors or officers of the Company
and its subsidiaries as provided in their respective certificates of
incorporation or by-laws shall survive the Merger and shall continue in full
force and effect in accordance with their terms for a period of not less than
six years from the Effective Time. Parent will cause to be maintained for a
period of not less than six years from the Effective Time the Company's current
directors' and officers' insurance and indemnification policy to the extent that
it provides coverage for events occurring prior to the Effective Time (the "D&O
Insurance") for all persons who are directors and officers of the Company on the
date of this Agreement, so long as the annual premium therefor would not be in
excess of 200% of the last annual premium paid prior to the date of this
Agreement (the "Maximum Premium"); provided, however, that Parent may, in lieu
-------- -------
of maintaining such existing D&O Insurance as provided above, cause comparable
coverage to be provided under any policy maintained for the benefit of Parent or
any of its subsidiaries, so long as the material terms thereof are no less
advantageous than the existing D&O Insurance. If the existing D&O Insurance
expires, is terminated or cancelled during such six-year period, Parent will use
all reasonable efforts to cause to be obtained as much D&O Insurance as can be
obtained for the remainder of such period for an annualized premium not in
excess of the Maximum Premium, on
<PAGE>
42
terms and conditions no less advantageous than the existing D&O Insurance. The
Company represents to Parent that the Maximum Premium is $113,400.
(b) In the event Parent, the Surviving Corporation or any of their
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then and in each such case, proper
provisions shall be made so that the successors and assigns of Parent or the
Surviving Corporation, as the case may be, shall assume the obligations set
forth in this Section 6.06.
SECTION 6.07. Directors. Promptly upon the acceptance for payment
----------
of, and payment for, any shares of Company Common Stock by Sub pursuant to the
Offer, Sub shall be entitled to designate such number of directors on the Board
of Directors of the Company as will give Sub, subject to compliance with Section
14(f) of the Exchange Act, a majority of such directors, and the Company shall,
at such time, cause Sub's designees to be so elected by its existing Board of
Directors; provided, however, that in the event that Sub's designees are elected
-------- -------
to the Board of Directors of the Company, until the Effective Time such Board of
Directors shall have at least two directors who are directors on the date of
this Agreement and who are not officers of the Company (the "Independent
Directors"); and provided further that, in such event, if the number of
-------- -------
Independent Directors shall be reduced below two for any reason whatsoever, the
remaining Independent Director shall designate a person to fill such vacancy who
shall be deemed to be an Independent Director for purposes of this Agreement or,
if no Independent Directors then remain, the other directors shall designate two
persons to fill such vacancies who shall not be officers or affiliates of the
Company or any of its subsidiaries, or officers or affiliates of Parent or any
of its subsidiaries, and such persons shall be deemed to be Independent
Directors for purposes of this Agreement. Subject to applicable law, the
Company shall take all action requested by Parent necessary to effect any such
election, including mailing to its stockholders the Information Statement
containing the information required by Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder, and the Company agrees to make such mailing
with the mailing of the Schedule 14D-9 (provided that Sub shall have provided to
the Company on a timely basis all
<PAGE>
43
information required to be included in the Information Statement with respect to
Sub's designees). In connection with the foregoing, the Company will promptly,
at the option of Parent, either increase the size of the Company's Board of
Directors and/or obtain the resignation of such number of its current directors
as is necessary to enable Sub's designees to be elected or appointed to the
Company's Board of Directors as provided above.
SECTION 6.08. Fees and Expenses. (a) Except as provided below in
------------------
this Section 6.08, all fees and expenses incurred in connection with the Offer,
the Merger, this Agreement and the transactions contemplated by this Agreement
shall be paid by the party incurring such fees or expenses, whether or not the
Offer or the Merger is consummated.
(b) The Company shall pay, or cause to be paid, in same day funds to
Parent all Expenses, not exceeding $6,000,000 (the "Expense Fee"), as follows:
(i) upon demand, unless this Agreement is terminated by the Company
and Parent or Sub shall have failed to perform in any material respect any
of its obligations under this Agreement, if this Agreement is terminated
pursuant to Section 8.01(b)(i) as a result of the failure of any condition
set forth in clause (i) or (iii) of paragraph (e) or in paragraph (f) or
(g) of Exhibit A;
(ii) upon demand, unless this Agreement is terminated by the Company
and Parent or Sub shall have failed to perform in any material respect any
of its obligations under this Agreement, if (x) at any time on or after the
date of this Agreement until one year following the termination of this
Agreement, any person or "group" (within the meaning of Section 13(d)(3) of
the Exchange Act) (other than Parent or any of its affiliates) shall have
acquired, directly or indirectly, the Company, assets representing more
than 50% of the revenues of the Company or more than 50% of the shares of
Company Common Stock then outstanding, and (y)(A) on or after the date of
this Agreement and prior to the expiration of the Offer, such person or
group shall have made a takeover proposal, (B) the Offer, if required to
have been commenced, shall have remained open until the scheduled
expiration date immediately following the date such takeover proposal
<PAGE>
44
was first publicly announced and (C) this Agreement shall have been
terminated pursuant to Section 8.01(b)(i); or
(iii) concurrently with the Company entering into any agreement with
respect to any superior proposal in accordance with Section 5.02(b), unless
this Agreement is terminated by the Company and Parent or Sub shall have
failed to perform in any material respect any of its obligations under this
Agreement.
"Expenses" shall mean all documented out-of-pocket fees and expenses incurred or
paid by or on behalf of Parent in connection with the Offer, the Merger or the
consummation of any of the transactions contemplated by this Agreement,
including all fees and expenses of counsel, commercial banks, investment banking
firms, accountants, experts and consultants to Parent.
(c) The Company shall pay, or cause to be paid, in same day funds to
Parent upon demand an additional fee of $6,000,000 (the "Termination Fee") if
(i) the Company shall have entered into an agreement with respect to a superior
proposal in accordance with Section 5.02(b) and the transaction contemplated by
such agreement (or any subsequent agreement involving a takeover proposal
entered into after the entering into of such agreement) shall have been
consummated within 12 months of the date of this Agreement or (ii) the Company
shall not have entered into such agreement and the Expense Fee is paid or is
payable pursuant to paragraph (b)(i) (solely with respect a failure of any
condition set forth in clause (i) or (iii) of paragraph (e) of Exhibit A) or
(b)(ii) of this Section 6.08.
SECTION 6.09. Public Announcements. Parent and Sub, on the one hand,
---------------------
and the Company, on the other hand, will consult with each other before issuing,
and provide each other the opportunity to review, comment upon and concur with,
any press release or other public statements with respect to the transactions
contemplated by this Agreement, including the Offer and the Merger, and shall
not issue any such press release or make any such public statement prior to such
consultation, except as may be required by applicable law, court process or by
obligations pursuant to any listing agreement with any national market system.
The parties agree that the initial press release to be issued with respect to
the transactions contemplated by
<PAGE>
45
this Agreement shall be in the form heretofore agreed to by the parties.
SECTION 6.10. Stockholder Litigation. The Company shall give Parent
-----------------------
the opportunity to participate in the defense or settlement of any stockholder
litigation against the Company and its directors relating to any of the
transactions contemplated by this Agreement until the purchase of Company Common
Stock pursuant to the Offer, and thereafter, shall give Parent the opportunity
to direct the defense of such litigation and, if Parent so chooses to direct
such litigation, Parent shall give the Company and its directors an opportunity
to participate in such litigation; provided, however, that no such settlement
-------- -------
shall be agreed to without Parent's consent, which consent shall not be
unreasonably withheld; and provided further that no settlement requiring a
-------- -------
payment by a director shall be agreed to without such director's consent.
SECTION 6.11. Convertible Notes. (a) The Company shall deliver, or
------------------
shall cause to be delivered, as promptly as practicable following completion of
the Offer and following completion of the Merger all notices required with
respect to either such event to be delivered to each holder of the Convertible
Notes pursuant to the Note Agreement, including an Event Notice (as defined in
Section 2.3(a) of the Note Agreement) and, if applicable, a Put Notice (as
defined in Section 2.3(c) of the Note Agreement). The Company shall promptly
repurchase from any holders exercising their right to sell their Convertible
Notes back to the Company all such Convertible Notes.
(b) The Company shall also take any steps that may be necessary to
facilitate the automatic adjustment of the rights of holders of the Convertible
Notes following the Effective Time to receive upon conversion of the Convertible
Notes the Merger Consideration rather than shares of Company Common Stock in
accordance with Section 9.5 of the Note Agreement, including by preparing and
executing the lawful and adequate provision referred to therein.
(c) Immediately following the execution of this Agreement, the
Company shall deliver to each holder of the Convertible Notes a notice dated the
date of this Agreement that describes the existence of this Agreement and the
principal economic terms of the Offer and the Merger as contemplated in this
Agreement and notifies each such holder of such holder's continuing right until
consummation of the
<PAGE>
46
Merger to exercise their right to convert their Convertible Notes to shares of
Company Common Stock in accordance with the terms of such Convertible Notes.
ARTICLE VII
Conditions Precedent
--------------------
SECTION 7.01. Conditions to Each Party's Obligation to Effect the
---------------------------------------------------
Merger. The respective obligation of each party to effect the Merger is subject
- -------
to the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Company Stockholder Approval. If required by applicable law, the
-----------------------------
Company Stockholder Approval shall have been obtained.
(b) No Injunctions or Restraints. No statute, rule, regulation,
-----------------------------
executive order, decree, temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other Governmental Entity or other legal restraint or
prohibition preventing the consummation of the Merger shall be in effect;
provided, however, that each of the parties shall have used best efforts to
-------- -------
prevent the entry of any such injunction or other order and to appeal as
promptly as possible any injunction or other order that may be entered.
(c) Notice to Holders of Convertible Notes. There shall have elapsed
---------------------------------------
30 days following the receipt by the last holder of Convertible Notes of
the notice from the Company that is referred to in Section 6.11(c).
ARTICLE VIII
Termination, Amendment and Waiver
---------------------------------
SECTION 8.01. Termination. This Agreement may be terminated at any
------------
time prior to the Effective Time, whether
<PAGE>
47
before or after approval of matters presented in connection with the Merger by
the stockholders of the Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if (w) as the result of the failure of any of the conditions
set forth in paragraphs (a) through (h) of Exhibit A to this
Agreement, Sub shall have failed to commence the Offer in the time
required by this Agreement or (x) as a result of the failure of any of
the conditions set forth in Exhibit A to this Agreement the Offer
shall have terminated or expired in accordance with its terms without
Sub having accepted for payment any shares of Company Common Stock
pursuant to the Offer or (y) Sub shall not have accepted for payment
any shares of Company Common Stock pursuant to the Offer within 90
days following the date of this Agreement; provided, however, that the
-------- -------
right to terminate this Agreement pursuant to this Section 8.01(b)(i)
shall not be available to any party whose failure to perform any of
its obligations under this Agreement results in the failure of any
such condition or if the failure of such condition results from facts
or circumstances that constitute a breach of representation or
warranty under this Agreement by such party; or
(ii) if any Governmental Entity shall have issued an order, decree
or ruling or taken any other action permanently enjoining, restraining
or otherwise prohibiting the acceptance for payment of, or payment
for, shares of Company Common Stock pursuant to the Offer or the
Merger and such order, decree or ruling or other action shall have
become final and nonappealable; or
(c) by the Company in accordance with the provisions of Section 5.02.
SECTION 8.02. Effect of Termination. In the event of termination of
----------------------
this Agreement by either the Company or Parent as provided in Section 8.01, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Sub or the
<PAGE>
48
Company, other than the provisions of Section 4.01(o), Section 4.02(d), the last
two sentences of Section 6.02, Section 6.08, this Section 8.02 and Article IX
and except to the extent that such termination results from the willful and
material breach by a party of any of its representations, warranties, covenants
or agreements set forth in this Agreement.
SECTION 8.03. Amendment. This Agreement may be amended by the
----------
parties at any time before or after obtaining the Company Stockholder Approval,
if required by law; provided, however, that after any such approval, there shall
-------- --------
not be made any amendment that by law requires further approval by such
stockholders without the further approval of such stockholders. This Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties.
SECTION 8.04. Extension; Waiver. At any time prior to the Effective
------------------
Time, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement or (c) subject to the proviso of
Section 8.03, waive compliance with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of those rights.
SECTION 8.05. Procedure for Termination, Amendment, Extension or
--------------------------------------------------
Waiver. A termination of this Agreement pursuant to Section 8.01, an amendment
- -------
of this Agreement pursuant to Section 8.03 or an extension or waiver pursuant to
Section 8.04 shall, in order to be effective, require in the case of Parent, Sub
or the Company, action by its Board of Directors or the duly authorized designee
of its Board of Directors; provided, however, that in the event that Sub's
-------- -------
designees are appointed or elected to the Board of Directors of the Company as
provided in Section 6.07, after the acceptance for payment of shares of Company
Common Stock pursuant to the Offer and prior to the Effective Time, the
affirmative vote of the Independent Directors shall be required by the Company
to (i) amend or terminate this Agreement by the Company, (ii) exercise or waive
any of the
<PAGE>
49
Company's rights or remedies under this Agreement or (iii) extend the time for
performance of Parent's and Sub's respective obligations under this Agreement.
ARTICLE IX
General Provisions
------------------
SECTION 9.01. Nonsurvival of Representations and Warranties. None of
----------------------------------------------
the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time or, in the
case of the Company, shall survive the acceptance for payment of, and payment
for, of shares of Company Common Stock by Sub pursuant to the Offer. This
Section 9.01 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Effective Time.
SECTION 9.02. Notices. All notices, requests, claims, demands and
--------
other communications under this Agreement shall be in writing and shall be
deemed given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) 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 Sub, to
National Health Laboratories Incorporated
4225 Executive Square
Suite 800
La Jolla, California 92037
Facsimile: (619) 658-6693
Attention: Mr. James R. Maher
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Facsimile: (212) 474-3700
Attention: Allen Finkelson, Esq.
<PAGE>
50
(b) if to the Company, to
Allied Clinical Laboratories, Inc.
2515 Park Plaza
Nashville, Tennessee 37203
Facsimile: (615) 320-2013
Attention: Mr. Haywood D. Cochrane, Jr.
with a copy to:
Irell & Manella
1800 Avenue of the Stars
Suite 900
Los Angeles, California 90067
Facsimile: (310) 203-7199
Attention: Ronald Loeb, Esq.
and a copy to:
Irell & Manella
333 South Hope Street
Suite 3300
Los Angeles, California 90071
Facsimile: (213) 229-0515
Attention: Stephen Rothman, Esq.
SECTION 9.03. Definitions. For purposes of this Agreement:
------------
(a) an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person;
(b) "material adverse change" or "material adverse effect" means, when
used in connection with the Company or Parent, any change or effect (or any
development that, insofar as can reasonably be foreseen, is likely to
result in any change or effect) that is materially adverse to the business,
properties, assets, condition (financial or otherwise), results of
operations or prospects of such party and its subsidiaries taken as a
whole; provided, however, that the existence or occurrence of the following
-------- -------
events and circumstances, in any combination thereof, shall not constitute
a
<PAGE>
51
"material adverse change" or "material adverse effect": (i) the subpoena
received by the Company in 1993 from the Office of Inspector General and
the United States Attorneys Office for the Southern District of California
relating to Medicare billing practices, and any developments,
investigations or charges arising therefrom or relating thereto, (ii) the
subpoena received by the Company in April of 1994 relating to Medicare
billing practices at the clinical laboratory located in Cincinnati, Ohio,
and any developments, investigations or charges arising therefrom or
relating thereto, (iii) the assessment from the Internal Revenue Service
relating to the amortization of intangible items for the years 1989, 1990
and 1991, or any future assessment based on the same issue for subsequent
years, and any developments arising therefrom or relating thereto (except
to the extent any such change or effect referred to in clause (i), (ii) or
(iii) above results from a state of facts known to the executive officers
of the Company, after appropriate inquiry, on the date of execution of this
Agreement and not disclosed in writing to Parent on or prior to such time),
(iv) any change in laws, rules and regulations (Federal, state or local) or
reimbursement practices, including, without limitation, changes relating to
Medicare, Medicaid, CHAMPUS program and carrier billing practices and (v)
changes relating to the cancellation, termination or non-renewal by
customers (including (x) doctors that refer specimens to the Company and
(y) hospitals, health maintenance organizations, preferred provider
organizations, the laboratories of which the Company manages) of the
Company or any of its subsidiaries or the voluntary termination by existing
general managers, sales managers or sales representatives from and after
the date of the public announcement of this Agreement, unless and to the
extent such cancellations, terminations or non-renewals are directly
attributable to factors other than the transactions contemplated by this
Agreement;
(c) "person" means an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity;
(d) a "subsidiary" of any person means another person, an amount of
the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its
<PAGE>
52
Board of Directors or other governing body (or, if there are no such voting
interests, 50% or more of the equity interests of which) is owned directly
or indirectly by such first person;
(e) "superior proposal" has the meaning assigned thereto in Section
5.02(b); and
(f) "takeover proposal" has the meaning assigned thereto in Section
5.02(a).
SECTION 9.04. Interpretation. When a reference is made in this
---------------
Agreement to an Article, a Section, Exhibit or Schedule, such reference shall be
to an Article or a Section of, or an Exhibit or Schedule to, this Agreement
unless otherwise indicated. 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. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation". The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined herein. The definitions contained in this Agreement
are applicable to the singular as well as the plural forms of such terms and to
the masculine as well as to the feminine and neuter genders of such term. Any
agreement, instrument or statute defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
References to a person are also to its permitted successors and assigns.
SECTION 9.05. Counterparts. This Agreement may be executed in one or
-------------
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
<PAGE>
53
SECTION 9.06. Entire Agreement; No Third-Party Beneficiaries. This
-----------------------------------------------
Agreement and the Confidentiality Agreement constitute the entire agreement, and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter of this Agreement and except for
the provisions of Sections 6.04, 6.05 and 6.06, are not intended to confer upon
any person other than the parties any rights or remedies hereunder.
SECTION 9.07. Governing Law. This Agreement shall be governed by,
--------------
and construed in accordance with, the laws of the State of Delaware, regardless
of the laws that might otherwise govern under applicable principles of conflict
of laws thereof.
SECTION 9.08. Assignment. Neither this Agreement nor any of the
-----------
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties, except that Sub may assign, in
its sole discretion, any of or all its rights, interests and obligations under
this Agreement to Parent or to any direct or indirect wholly owned subsidiary of
Parent, but no such assignment shall relieve Sub of any of its obligations under
this Agreement. 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.
SECTION 9.09. Enforcement. The parties agree that irreparable damage
------------
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware or in Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any Federal court located in the State of Delaware or
any Delaware state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated by this Agreement, (b) agrees that it
will not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court and (c) agrees that it will not bring
<PAGE>
54
any action relating to this Agreement or any of the transactions contemplated by
this Agreement in any court other than a Federal or state court sitting in the
State of Delaware.
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
NATIONAL HEALTH LABORATORIES INCORPORATED,
by
/s/ James R. Maher
--------------------------
Name: James R. Maher
Title: President and
Chief Executive
Officer
N ACQUISITION CORP.,
by
/s/ James R. Maher
--------------------------
Name: James R. Maher
Title: President and
Chief Executive
Officer
ALLIED CLINICAL LABORATORIES, INC.,
by
/s/ Haywood D. Cochrane
--------------------------
Name: Haywood D. Cochrane, Jr.
Title: President and
Chief Executive
Officer
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Parties and Recitals.................................. 1
</TABLE>
ARTICLE I
The Offer
---------
<TABLE>
<S> <C> <C>
SECTION 1.01. The Offer............................ 2
SECTION 1.02. Company Actions...................... 4
</TABLE>
ARTICLE II
The Merger
----------
<TABLE>
<S> <C> <C>
SECTION 2.01. The Merger........................... 6
SECTION 2.02. Closing.............................. 6
SECTION 2.03. Effective Time....................... 6
SECTION 2.04. Effects of the Merger................ 7
SECTION 2.05. Certificate of Incorporation
and By-laws.......................... 7
SECTION 2.06. Directors............................ 7
SECTION 2.07. Officers............................. 7
</TABLE>
ARTICLE III
Effect of the Merger on the Capital Stock of the
------------------------------------------------
Constituent Corporations; Exchange of Certificates
--------------------------------------------------
<TABLE>
<S> <C> <C>
SECTION 3.01. Effect on Capital Stock.............. 8
SECTION 3.02. Exchange of Certificates............. 9
</TABLE>
ARTICLE IV
Representations and Warranties
------------------------------
<TABLE>
<S> <C> <C>
SECTION 4.01. Representations and Warranties of
the Company.......................... 11
SECTION 4.02. Representations and Warranties of
Parent and Sub....................... 27
</TABLE>
<PAGE>
2
<TABLE>
<CAPTION>
Page
----
ARTICLE V
Covenants Relating to Conduct of Business
-----------------------------------------
<S> <C> <C>
SECTION 5.01. Conduct of Business ......................... 30
SECTION 5.02. No Solicitation.............................. 33
</TABLE>
ARTICLE VI
Additional Agreements
---------------------
<TABLE>
<S> <C> <C>
SECTION 6.01. Stockholder Approval; Preparation
of Proxy Statement......................... 35
SECTION 6.02. Access to Information;
Confidentiality............................ 37
SECTION 6.03. Best Efforts; Notification................... 37
SECTION 6.04. Stock Option Plans........................... 39
SECTION 6.05. Benefit Plans and Employee Matters........... 40
SECTION 6.06. Indemnification, Exculpation and
Insurance.................................. 41
SECTION 6.07. Directors.................................... 42
SECTION 6.08. Fees and Expenses............................ 43
SECTION 6.09. Public Announcements......................... 44
SECTION 6.10. Stockholder Litigation....................... 45
SECTION 6.11. Convertible Notes............................ 45
</TABLE>
ARTICLE VII
Conditions Precedent
--------------------
<TABLE>
<S> <C> <C>
SECTION 7.01. Conditions to Each Party's
Obligation to Effect the Merger............ 46
</TABLE>
ARTICLE VIII
Termination, Amendment and Waiver
---------------------------------
<TABLE>
<S> <C> <C>
SECTION 8.01. Termination.................................. 46
SECTION 8.02. Effect of Termination........................ 47
SECTION 8.03. Amendment.................................... 48
SECTION 8.04. Extension; Waiver............................ 48
SECTION 8.05. Procedure for Termination,
Amendment, Extension or Waiver............... 48
</TABLE>
<PAGE>
3
<TABLE>
<CAPTION>
Page
----
ARTICLE IX
General Provisions
------------------
<S> <C> <C>
SECTION 9.01. Nonsurvival of Representations
and 49
SECTION 9.02. Warranties........................ 49
SECTION 9.03. Notices........................... 50
SECTION 9.04. Definitions....................... 52
SECTION 9.05. Interpretation.................... 52
SECTION 9.06. Counterparts......................
Entire Agreement; No Third-Party 53
SECTION 9.07. Beneficiaries..................... 53
SECTION 9.08. Governing Law..................... 53
SECTION 9.09. Assignment........................ 53
SECTION 9.09. Enforcement....................... 53
</TABLE>
EXHIBITS
EXHIBIT A Conditions of the Offer
<PAGE>
EXHIBIT A
Conditions of the Offer
-----------------------
Notwithstanding any other term of the Offer or this Agreement, Sub
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 Sub's obligation to pay for or return tendered shares of Company
Common Stock after the termination or withdrawal of the Offer), to pay for any
shares of Company Common Stock tendered pursuant to the Offer unless (i) there
shall have been validly tendered and not withdrawn prior to the expiration of
the Offer that number of shares of Company Common Stock which, together with the
number of shares with respect to which Sub has a valid and existing option to
purchase pursuant to the Option Agreements, would represent at least a majority
of the Fully Diluted Shares (the "Minimum Tender Condition") and (ii) any
waiting period under the HSR Act applicable to the purchase of shares of Company
Common Stock pursuant to the Offer shall have expired or been terminated. The
term "Fully Diluted Shares" means all outstanding securities entitled generally
to vote in the election of directors of the Company on a fully diluted basis,
after giving effect to the exercise or conversion of all options, rights and
securities exercisable or convertible into such voting securities. Furthermore,
notwithstanding any other term of the Offer or this Agree-ment, Sub shall not be
required to accept for payment or, subject as aforesaid, to pay for any shares
of Company Common Stock not theretofore accepted for payment or paid for, and
may terminate or amend the Offer, with the consent of the Company or if, at any
time on or after the date of this Agreement and before the acceptance of such
shares for payment or the payment therefor, any of the following conditions
exists:
(a) there shall be pending by any Governmental Entity (or the staff of
the Federal Trade Commission or the staff of the Antitrust Division of the
Department of Justice shall have recommended the commencement of) any suit,
action or proceeding, which has a reasonable possibility of success, or
there shall be pending by any other person any suit, action or proceeding,
which has a substantial likelihood of success, (i) challeng-ing the
acquisition by Parent or Sub of any shares of Company Common Stock, seeking
to restrain or prohibit the making or consummation of the Offer or the
Merger or the performance of any of the other transactions contemplated by
this Agreement or the Option
<PAGE>
2
Agreements, or seeking to obtain from the Company, Parent or Sub any
damages that are material in relation to the Company and its subsidiaries
taken as whole, (ii) seeking to prohibit or limit the ownership or
operation by the Company, Parent or any of their respective subsidiaries of
a material portion of the business or assets of the Company and its
subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as a
whole, or to compel the Company or Parent to dispose of or hold separate
any material portion of the business or assets of the Company and its
subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as a
whole, as a result of the Offer or any of the other transactions
contemplated by this Agreement or the Option Agreements, (iii) seeking to
impose material limitations on the ability of Parent or Sub to acquire or
hold, or exercise full rights of ownership of, any shares of Company Common
Stock accepted for payment pursuant to the Offer including without
limitation the right to vote the Company Common Stock accepted for payment
by it on all matters properly presented to the stockholders of the Company,
(iv) seeking to prohibit Parent or any of its subsidiaries from effectively
controlling in any material respect the business or operations of the
Company and its subsidiaries taken as a whole or (v) which otherwise is
reasonably likely to have a material adverse effect on the business,
properties, assets, condition (financial or otherwise), results of
operations or prospects of the Company and its subsidiaries taken as a
whole, other than any action or proceeding arising out of the existence or
occurrence of the following events and circumstances, in any combination
thereof: (i) the subpoena received by the Company in 1993 from the Office
of Inspector General and the United States Attorneys Office for the
Southern District of California relating to Medicare billing practices, and
any developments, investigations or charges arising therefrom or relating
thereto, (ii) the subpoena received by the Company in April of 1994
relating to Medicare billing practices at the clinical laboratory located
in Cincinnati, Ohio, and any developments, investigations or charges
arising therefrom or relating thereto, and (iii) the assessment from the
Internal Revenue Service relating to the amortization of intangible items
for the years 1989, 1990 and 1991, or any future assessment based on the
same issue for subsequent years, and any developments arising therefrom or
relating thereto (except to the
<PAGE>
3
extent any such effect referred to in clause (i), (ii) or (iii) above
results from a state of facts known to the executive officers of the
Company, after appropriate inquiry, on the date of execution of this
Agreement and not disclosed in writing to Parent on or prior to such time);
(b) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to
the Offer, the Merger or the Option Agreements, or any other action shall
be taken by any Governmental Entity or court, other than the application to
the Offer or the Merger of applicable waiting periods under the HSR Act,
that is reasonably likely to result, directly or indirectly, in any of the
consequences referred to in clauses (i) through (iv) of paragraph (a)
above;
(c) there shall have occurred any change (or any development that,
insofar as reasonably can be foreseen, is reasonably likely to result in
any change) that is materially adverse to the business, properties, assets,
condition (financial or otherwise), results of operations or prospects of
the Company and its subsidiaries taken as a whole, other than changes
relating to the existence or occurrence of the following events and
circumstances, in any combination thereof: (i) the subpoena received by
the Company in 1993 from the Office of Inspector General and the United
States Attorneys Office for the Southern District of California relating to
Medicare billing practices, and any developments, investigations or charges
arising therefrom or relating thereto, (ii) the subpoena received by the
Company in April of 1994 relating to Medicare billing practices at the
clinical laboratory located in Cincinnati, Ohio, and any developments,
investigations or charges arising therefrom or relating thereto, (iii) the
assessment from the Internal Revenue Service relating to the amortization
of intangible items for the years 1989, 1990 and 1991, or any future
assessment based on the same issue for subsequent years, and any
developments arising therefrom or relating thereto (except to the extent
any such change referred to in clause (i), (ii) or (iii) above results from
a state of facts known to the executive officers of the Company, after
appropriate inquiry, on the date of execution of this Agreement and not
disclosed in writing to Parent on or
<PAGE>
4
prior to such time), (iv) any change in laws, rules and regulations
(Federal, state or local) or reimbursement practices, including, without
limitation, changes relating to Medicare, Medicaid, CHAMPUS program and
carrier billing practices and (v) changes relating to the cancellation,
termination or non-renewal by customers (including (x) doctors that refer
specimens to the Company and (y) hospitals, health maintenance
organizations, preferred provider organizations, the laboratories of which
the Company manages) of the Company or any of its subsidiaries or the
voluntary termination by existing general managers, sales managers or sales
representatives from and after the date of the public announcement of this
Agreement, unless and to the extent such cancellations, terminations or
non-renewals are directly attributable to factors other than the
transactions contemplated by this Agreement;
(d) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, equity securities on the New York Stock
Exchange (excluding any coordinated trading halt triggered solely as a
result of a specified decrease in a market index), (ii) any extraordinary
adverse change in the financial markets in the United States, (iii) a
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States, (iv) any limitation (whether or not
mandatory) by any Governmental Entity on, or other event that materially
affects, the extension of credit by banks or other lending institutions,
(v) a commencement of a war or armed hostilities or other national or
international calamity directly involving the armed forces the United
States on a scale greater than any other during the two-year period
preceding the date of this Agreement or (vi) in the case of any of the
foregoing existing on the date of this Agreement, a material acceleration
or worsening thereof;
(e) (i) the Board of Directors of the Company or any committee thereof
shall have withdrawn or modified in a manner adverse to Parent or Sub its
approval or recommendation of the Offer, the Merger, this Agreement or the
Option Agreements, or approved or recommended any takeover proposal, (ii)
the Company shall have entered into any agreement with respect to any
superior proposal in accordance with Section 5.02(b) of this
<PAGE>
5
Agreement or (iii) the Board of Directors of the Company or any committee
thereof shall have resolved to take any of the foregoing actions referred
to in clause (i) above;
(f) any of the representations and warranties of the Company set forth
in this Agreement that are qualified as to materiality shall not be true
and correct and any such representations and warranties that are not so
qualified shall not be true and correct in any material respect, in each
case as of the date of this Agreement or any other date as of which such
representations and warranties expressly speak;
(g) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under this
Agreement; or
(h) this Agreement shall have been terminated in accordance with its
terms;
which, in the reasonable good faith judgment of Sub or Parent, in any such case,
and regardless of the circumstances giving rise to any such condition (other
than any action or inaction by Parent or any of its subsidiaries which
constitutes a breach of this Agreement), makes it inadvisable to proceed with
such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Sub and Parent
and may be asserted by Sub or Parent regardless of the circumstances giving rise
to such condition (other than any action or inaction by Parent or any of its
subsidiaries which constitutes a breach of this Agreement) or may be waived by
Sub and Parent in whole or in part at any time and from time to time in their
sole discretion. The failure by Parent, Sub or any other affiliate of Parent at
any time to exercise any of the foregoing rights shall not be deemed a waiver of
any such right, the waiver of any such right with respect to particular facts
and circumstances shall not be deemed a waiver with respect to any other facts
and circumstances and each such right shall be deemed an ongoing right that may
be asserted at any time and from time to time.
<PAGE>
EXHIBIT 99(C)(2)
CONFORMED COPY
STOCK OPTION AGREEMENT dated as of May 3, 1994, among
NATIONAL HEALTH LABORATORIES INCORPORATED, a Delaware corporation
("Parent"), N ACQUISITION CORP., a Delaware corporation (the
"Purchaser"), and WARBURG, PINCUS CAPITAL COMPANY, L.P., a
Delaware limited partnership (the "Stockholder").
WHEREAS Parent, the Purchaser and Allied Clinical Laboratories, Inc.,
a Delaware corporation (the "Company"), propose to enter into an Agreement and
Plan of Merger of even date herewith (the "Merger Agreement") providing for the
making of a cash tender offer (the "Offer") by the Purchaser for shares of
Common Stock, par value $.01 per share, of the Company (the "Common Stock") and
the merger of the Company and the Purchaser (the "Merger");
WHEREAS the Stockholder owns in the aggregate 2,504,042 shares of
Common Stock (the "Optioned Shares"); and
WHEREAS, as a condition to their willingness to enter into the Merger
Agreement, Parent and the Purchaser have required that the Stockholder agree to
grant the Purchaser an irrevocable option, as set forth herein, to purchase all
the Optioned Shares;
NOW, THEREFORE, to induce Parent and the Purchaser to enter into, and
in consideration of their entering into, the Merger Agreement, and in
consideration of the premises and the representations, warranties and agreements
herein contained, the parties agree as follows:
1. Grant of Option. The Stockholder hereby grants the Purchaser an
----------------
irrevocable option (the "Option") to purchase for $23 per share in cash (the
"Per Share Price") all the Optioned Shares. The Option shall not become
exercisable and shall expire on May 10, 1994, if the Offer is not commenced by
May 10, 1994 for any reason other than that referred to in clause (i) below.
The Option shall expire (if not theretofore exercised) (i) if the Offer is not
commenced by May 10, 1994, as a result of the failure of any of the conditions
set forth in paragraphs (a) through (h) of Exhibit A to the Merger Agreement, on
June 9, 1994, or (ii) if the Offer is so commenced, 30 trading days following
termination of the Offer, whether or not
<PAGE>
2
shares of Common Stock shall have been accepted for payment by the Purchaser (or
Parent or any other person who is authorized by Parent) pursuant to the Offer;
provided that, if the Option cannot be exercised on any such date because the
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
(the "HSR Act") with respect to the exercise of the Option shall not have
expired or been terminated or because of any injunction, order or similar
restraint by a court of competent jurisdiction, the Option shall expire on the
fifth trading day after such waiting period shall have expired or been
terminated or such injunction, order or restraint shall have been dissolved or
when such injunction, order or restraint shall have become permanent and no
longer subject to appeal, as the case may be. A "trading day" shall be any date
on which the New York Stock Exchange shall be open for business.
2. Exercise of Option.
-------------------
(a) Provided that (i) the waiting period under the HSR Act with
respect to the exercise of the Option shall have expired or been terminated and
(ii)(A) as a result of the failure of any of the conditions set forth in
paragraphs (a) through (h) of Exhibit A to the Merger Agreement, the Purchaser
shall have failed to commence the Offer by May 10, 1994, or (B) the Offer,
having been so commenced, has been terminated, whether or not shares of Common
Stock shall have been accepted for payment by the Purchaser (or Parent or any
other Person who is authorized by Parent) pursuant to the Offer, then the
Purchaser may exercise the Option at any time in whole prior to the expiration
of the Option. In the event that the Purchaser wishes to exercise the Option,
the Purchaser shall do so by giving written notice (the date of such notice
being herein called the "Notice Date") to the Stockholder specifying the place,
time and date not earlier than two trading days, nor later than 10 trading days,
from the Notice Date for the closing of the purchase by the Purchaser pursuant
to such exercise.
(b) In the event that any share of Common Stock is accepted for
payment and paid for by the Purchaser (or Parent or any other person who is
authorized by Parent) pursuant to the Offer, the Purchaser shall be obligated to
exercise the Option in whole (with respect to the Optioned Shares not
theretofore accepted for payment and paid for pursuant to the Offer) no later
than five trading days following the date of such payment; provided, however,
-------- -------
that
<PAGE>
3
if the waiting period under the HSR Act with respect to the exercise of the
Option shall not have expired or been terminated or any injunction, order or
similar restraint by a court of competent jurisdiction shall exist, in each case
on such fifth trading day, then, notwithstanding the foregoing, the Purchaser
shall be obligated to exercise the Option in whole not later than five trading
days after such waiting period shall have expired or been terminated or such
injunction, order or restraint shall have been dissolved.
3. Payment of Purchase Price and Delivery of Certificates for
----------------------------------------------------------
Optioned Shares. At any closing of the exercise of the Option hereunder, (i)
- ----------------
the Purchaser will deliver to the Stockholder a certified or official bank check
payable to the order of the Stockholder in New York Clearing House funds in an
amount equal to the product of the Per Share Price and the number of Optioned
Shares being purchased at such closing and (ii) the Stockholder shall deliver to
the Purchaser certificates representing the Optioned Shares sold by the
Stockholder to the Purchaser at such closing, duly endorsed in blank or
accompanied by stock powers duly executed by the Stockholder in blank, in proper
form for transfer.
4. Representations and Warranties of the Stockholder. The
--------------------------------------------------
Stockholder hereby represents and warrants to Parent and the Purchaser as
follows:
(a) Authority; Noncontravention. The Stockholder has all requisite
----------------------------
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement by the Stockholder and the consummation by the Stockholder of the
transactions contemplated hereby have, in the case of each Stockholder that
is not a natural person, been duly authorized by all necessary partnership
action on the part of the Stockholder. This Agreement has been duly
executed and delivered by the Stockholder and constitutes a valid and
binding obligation of the Stockholder, enforceable against the Stockholder
in accordance with its terms. The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby and
compliance with the terms hereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time or both)
under (i) with respect to Stockholders that are not natural persons, the
certificate of incorporation
<PAGE>
4
or by-laws or any other comparable charter or organizational documents of
the Stockholder or (ii) any provision of any trust agreement, loan or
credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
the Stockholder or to the Stockholder's property or assets, other than, in
the case of clause (ii), any such conflicts, violations, defaults, rights
or liens that individually or in the aggregate would not (x) impair the
ability of the Stockholder to perform its obligations under this Agreement
or (y) prevent the consummation of any of the transactions contemplated by
this Agreement. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Federal, state or local
government or any court, administrative or regulatory agency or commission
or other governmental authority or agency, domestic or foreign (a
"Governmental Entity"), is required by or with respect to the Stockholder
in connection with the execution and delivery of this Agreement or the
consummation by the Stockholder of the transactions contemplated by this
Agreement, except for (1) the filing with the Securities and Exchange
Commission of such reports under Sections 13(d) and 16(a) of the Securities
Exchange Act of 1934, as amended, as may be required in connection with
this Agreement and the transactions contemplated by this Agreement and (2)
such other consents, approvals, orders, authorizations, registrations,
declarations and filings as would not individually or in the aggregate
prevent the consummation of any of the transactions contemplated by this
Agreement.
(b) The Optioned Shares. The Stockholder has, and the transfer by
--------------------
the Stockholder of the Optioned Shares hereunder will pass to the
Purchaser, good and marketable title to the Optioned Shares, free and clear
of any claims, liens, encumbrances, security interests, voting restrictions
and limitations on disposition whatsoever. The Stockholder does not
directly or indirectly own, either beneficially or of record, any shares of
Common Stock other than the Optioned Shares.
<PAGE>
5
5. Representations and Warranties of Parent and the Purchaser.
-----------------------------------------------------------
Parent and the Purchaser hereby represent and warrant to the Stockholder as
follows:
(a) Authority; Noncontravention. Parent and the Purchaser have all
----------------------------
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of Parent and the Purchaser. This Agreement
has been duly executed and delivered by Parent and the Purchaser and
constitutes a valid and binding obligation of each such party, enforceable
against each such party in accordance with its terms. The execution and
delivery of this Agreement do not, and the consummation of the transactions
contemplated by this Agreement and compliance with the provisions of this
Agreement will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any
obligation or to loss of a material benefit under, or result in the
creation of any lien upon any of the properties or assets of Parent or any
of its subsidiaries under, (i) the certificate of incorporation or by-laws
of Parent or the Purchaser or the comparable charter or organizational
documents of any other subsidiary of Parent, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to Parent
or any of its subsidiaries or their respective properties or assets or
(iii) subject to the governmental filings and other matters referred to in
the following sentence, any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent or any of its
subsidiaries or their respective properties or assets, other than, in the
case of clause (ii) or (iii), any such conflicts, violations, defaults,
rights or liens that individually or in the aggregate would not (x) have a
material adverse effect (as such term is defined in the Merger Agreement)
on Parent, (y) impair the ability of Parent and the Purchaser to perform
their respective obligations under this Agreement or (z) prevent the
consummation of any of the transactions
<PAGE>
6
contemplated by this Agreement. No consent, approval, order or
authorization of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to Parent or any of its
subsidiaries in connection with the execution and delivery of this
Agreement or the consummation by Parent or the Purchaser of any of the
transactions contemplated by this Agreement, except for (1) filings under
the HSR Act, if applicable, (2) the filing with the Securities and Exchange
Commission of such reports under Sections 13(a), 13(d) and 16(a) of the
Securities Exchange Act of 1934, as amended, as may be required in
connection with this Agreement and the transactions contemplated by this
Agreement and (3) such other consents, approvals, orders, authorizations,
registrations, declarations and filings as would not individually or in the
aggregate (A) have a material adverse effect on Parent or (B) prevent the
consummation of any of the transactions contemplated by this Agreement.
(b) Securities Act. Any Optioned Shares purchased by the Purchaser
---------------
pursuant to this Agreement will be acquired for investment only and not
with a view to any public distribution thereof, and the Purchaser will not
offer to sell or otherwise dispose of any Optioned Shares so acquired by it
in violation of any of the registration requirements of the Securities Act
of 1933, as amended.
6. Distributions; Adjustment upon Changes in Capitalization. (a)
---------------------------------------------------------
Any dividends or other distributions (whether payable in cash, stock or
otherwise) by the Company with respect to any Optioned Shares purchased
hereunder with a record date on or after the date of the closing of such
purchase will belong to the Purchaser. If any such dividend or distribution
belonging to the Purchaser is paid by the Company to the Stockholder, the
Stockholder shall hold such dividend or distribution in trust for the benefit of
the Purchaser and shall promptly remit such dividend or distribution to the
Purchaser in exactly the form received, accompanied by appropriate instruments
of transfer.
(b) If on or after the date of this Agreement there shall occur any
stock dividend, stock split, recapitalization, combination or exchange of
shares, merger, consolidation, reorganization or other change or transaction of
or by the Company, as a result of which shares of any
<PAGE>
7
class of stock, other securities, cash or other property shall be issued in
respect of any Optioned Shares or if any Optioned Shares shall be changed into
the same or a different number of shares of the same or another class of stock
or other securities, then, upon exercise of the Option the Purchaser shall
receive for the aggregate price payable upon exercise of the Option with respect
to the Optioned Shares, all such shares of stock, other securities, cash or
other property issued, delivered or received with respect to such Optioned
Shares (or if the Option shall not be exercised, appropriate adjustment shall be
made for purposes of the calculations set forth in this Agreement).
7. Covenants of the Stockholder.
-----------------------------
(a) The Stockholder agrees, until the Option has expired, not to:
(i) sell, transfer, pledge, assign or otherwise dispose of, or enter
into any contract, option or other arrangement with respect to the sale,
transfer, pledge, assignment or other disposition of, the Optioned Shares
to any person other than the Purchaser or the Purchaser's designee;
(ii) acquire any additional shares of Common Stock without the prior
consent of the Purchaser; or
(iii) deposit any Optioned Shares into a voting trust or grant a proxy
or enter into a voting agreement with respect to any Optioned Shares except
as provided in this Agreement.
(b) The parties hereto agree that, until the Option has expired, the
Stockholder may (and, if requested to do so in writing by Parent, will) tender
the Optioned Shares in the Offer.
(c) The Stockholder agrees to execute and deliver, simultaneously
with the execution and delivery of this Agreement, a proxy for the benefit of
the Purchaser in the form of Exhibit A hereto.
8. No Brokers. Each of the Stockholder, Parent and the Purchaser
-----------
represents, as to itself and its affiliates, that no agent, broker, investment
banker or other firm or person is or will be entitled to any broker's or
finder's fees or any other commission or similar fee in
<PAGE>
8
connection with any of the transactions contemplated by this Agreement and
respectively agrees to indemnify and hold the others harmless from and against
any and all claims, liabilities or obligations with respect to any such fees,
commissions or expenses asserted by any person on the basis of any act or
statement alleged to have occurred or been made by such party or its affiliates.
9. Survival of Representations. All representations, warranties and
----------------------------
agreements made by the parties to this Agreement shall survive the closings
hereunder notwithstanding any investigation at any time made by or on behalf of
any party hereto.
10. Further Assurances. If the Purchaser shall exercise the Option
-------------------
in accordance with the terms of this Agreement, from time to time and without
additional consideration the Stockholder will execute and deliver, or cause to
be executed and delivered, such additional or further transfers, assignments,
endorsements, consents and other instruments as the Purchaser may reasonably
request for the purpose of effectively carrying out the transactions
contemplated by this Agreement, including the transfer of the Optioned Shares to
the Purchaser and the release of any and all liens, claims and encumbrances with
respect thereto.
11. Assignment. Neither this Agreement nor any of the rights,
-----------
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other parties, except that the
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.
12. General Provisions.
-------------------
(a) Specific Performance. The parties hereto acknowledge that
---------------------
damages would be an inadequate remedy for any breach of the provisions of this
Agreement and agree that the obligations of the parties hereunder shall be
specifically enforceable.
(b) Expenses. Whether or not the Option is exercised, all costs and
---------
expenses incurred in connection with the Option, this Agreement and the
transactions
<PAGE>
9
contemplated hereby shall be paid by the party incurring such expense.
(c) Amendments. This Agreement may not be amended except by an
-----------
instrument in writing signed by each of the parties hereto.
(d) Notices. All notices and other communications hereunder shall be
--------
in writing and shall be deemed given if delivered personally or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(i) if to Parent or the Purchaser, to
National Health Laboratories Incorporated
4225 Executive Square
Suite 800
La Jolla, California 92037
Facsimile: (619) 658-6693
Attention: Mr. James R. Maher;
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Facsimile: (212) 474-3700
Attention: Allen Finkelson, Esq., and
<PAGE>
10
(ii) if to the Stockholder, to
Warburg, Pincus Capital Company, L.P.
466 Lexington Avenue
New York, New York 10017
Facsimile: (212) 878-9361
Attention: Mr. James E. Thomas
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Facsimile: (212) 821-8111
Attention: Bruce R. Kraus, Esq.
(e) Interpretation. When a reference is made in this Agreement to
---------------
Sections or Exhibits, such reference shall be to a Section or Exhibit to this
Agreement unless otherwise indicated. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Wherever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation".
(f) Counterparts. This Agreement may be executed in one or more
-------------
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more of the counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
(g) Entire Agreement; No Third-Party Beneficiaries. This Agreement
-----------------------------------------------
(including the documents and instruments referred to herein) (i) 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 (ii) is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
<PAGE>
11
(h) Governing Law. This Agreement shall be governed by and construed
--------------
in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, Parent, the Purchaser and the Stockholder have
caused this Agreement to be signed by their respective duly authorized
representatives, all as of the date first written above.
NATIONAL HEALTH LABORATORIES
INCORPORATED,
by
/s/ James R. Maher
---------------------------
Name: James R. Maher
Title: President and
Chief Executive
Officer
N ACQUISITION CORP.,
by
/s/ James R. Maher
---------------------------
Name: James R. Maher
Title: President and
Chief Executive
Officer
WARBURG, PINCUS CAPITAL
COMPANY, L.P.,
by E.M. WARBURG, PINCUS &
CO., General Partner
by /s/ James E. Thomas
------------------------
James E. Thomas
<PAGE>
EXHIBIT A
[Form of Proxy]
The undersigned hereby irrevocably constitutes and appoints James R.
Maher, David C. Flaugh and James G. Richmond, and each of them, and any other
designees of N Acquisition Corp., a Delaware corporation (the "Purchaser"), the
attorneys and proxies of the undersigned, each with full power of substitution,
to vote each of the shares of Common Stock, par value $.01 per share, of Allied
Clinical Laboratories, Inc., a Delaware corporation (the "Company"), owned by
the undersigned (the "Shares") (and any and all other securities or rights
issued or issuable in respect of such Shares on or after May 3, 1994) at any
annual, special or adjourned meeting of the stockholders of the Company, (i) in
favor of the adoption of the Merger Agreement dated as of May 3, 1994 (the
"Merger Agreement"), among the Company, the Purchaser and National Health
Laboratories Incorporated, a Delaware corporation ("Parent"), and approval of
the Merger (as defined in the Merger Agreement) and the other transactions
contemplated by the Merger Agreement, (ii) against any takeover proposal (as
defined in the Merger Agreement) (other than the Merger) and against any other
action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the Company
under the
<PAGE>
2
Merger Agreement or which could result in any of the conditions to the Company's
obligations under the Merger Agreement not being fulfilled and (iii) in favor of
any other matter relating to consummation of the transactions contemplated by
the Merger Agreement. This appointment is effective upon the execution of, and
only until the expiration of the option granted pursuant to, the Stock Option
Agreement dated as of May 3, 1994, among Parent, the Purchaser and the
undersigned. This power of attorney and proxy is irrevocable, is granted in
consideration of the Purchaser entering into the Merger Agreement and is coupled
with an interest sufficient in law to support an irrevocable power. This
appointment shall revoke all prior attorneys and proxies appointed by the
undersigned at any time with respect to such Shares (and any such other
securities or rights) and no subsequent attorneys or proxies will be appointed
by the undersigned, or be effective, with respective thereto.
Dated: May 3, 1994 WARBURG, PINCUS CAPITAL
COMPANY, L.P.,
by E.M. WARBURG, PINCUS &
CO., General Partner
by_____________________
<PAGE>
EXHIBIT 99(c)(3)
CONFORMED COPY
STOCK OPTION AGREEMENT dated as of May 3, 1994, among
NATIONAL HEALTH LABORATORIES INCORPORATED, a Delaware corporation
("Parent"), N ACQUISITION CORP., a Delaware corporation (the
"Purchaser"), and HAYWOOD D. COCHRANE, JR. (the "Stockholder").
WHEREAS Parent, the Purchaser and Allied Clinical Laboratories, Inc.,
a Delaware corporation (the "Company"), propose to enter into an Agreement and
Plan of Merger of even date herewith (the "Merger Agreement") providing for the
making of a cash tender offer (the "Offer") by the Purchaser for shares of
Common Stock, par value $.01 per share, of the Company (the "Common Stock") and
the merger of the Company and the Purchaser (the "Merger");
WHEREAS the Stockholder owns in the aggregate 264,773 shares of Common
Stock (the "Optioned Shares"); and
WHEREAS, as a condition to their willingness to enter into the Merger
Agreement, Parent and the Purchaser have required that the Stockholder agree to
grant the Purchaser an irrevocable option, as set forth herein, to purchase all
the Optioned Shares;
NOW, THEREFORE, to induce Parent and the Purchaser to enter into, and
in consideration of their entering into, the Merger Agreement, and in
consideration of the premises and the representations, warranties and agreements
herein contained, the parties agree as follows:
1. Grant of Option. The Stockholder hereby grants the Purchaser an
----------------
irrevocable option (the "Option") to purchase for $23 per share in cash (the
"Per Share Price") all the Optioned Shares. The Option shall not become
exercisable and shall expire on May 10, 1994, if the Offer is not commenced by
May 10, 1994 for any reason other than that referred to in clause (i) below.
The Option shall expire (if not theretofore exercised) (i) if the Offer is not
commenced by May 10, 1994, as a result of the failure of any of the conditions
set forth in paragraphs (a) through (h) of Exhibit A to the Merger Agreement, on
June 9, 1994, or (ii) if the Offer is so commenced, 30 trading days following
termination of the Offer, whether or not shares of Common Stock shall have been
accepted for payment by the Purchaser (or Parent or any other person who is
authorized by Parent) pursuant to the Offer; provided that,
<PAGE>
2
if the Option cannot be exercised on any such date because the waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act")
with respect to the exercise of the Option shall not have expired or been
terminated or because of any injunction, order or similar restraint by a court
of competent jurisdiction, the Option shall expire on the fifth trading day
after such waiting period shall have expired or been terminated or such
injunction, order or restraint shall have been dissolved or when such
injunction, order or restraint shall have become permanent and no longer subject
to appeal, as the case may be. A "trading day" shall be any date on which the
New York Stock Exchange shall be open for business.
2. Exercise of Option.
-------------------
(a) Provided that (i) the waiting period under the HSR Act with
respect to the exercise of the Option shall have expired or been terminated and
(ii)(A) as a result of the failure of any of the conditions set forth in
paragraphs (a) through (h) of Exhibit A to the Merger Agreement, the Purchaser
shall have failed to commence the Offer by May 10, 1994, or (B) the Offer,
having been so commenced, has been terminated, whether or not shares of Common
Stock shall have been accepted for payment by the Purchaser (or Parent or any
other Person who is authorized by Parent) pursuant to the Offer, then the
Purchaser may exercise the Option at any time in whole prior to the expiration
of the Option. In the event that the Purchaser wishes to exercise the Option,
the Purchaser shall do so by giving written notice (the date of such notice
being herein called the "Notice Date") to the Stockholder specifying the place,
time and date not earlier than two trading days, nor later than 10 trading days,
from the Notice Date for the closing of the purchase by the Purchaser pursuant
to such exercise.
(b) In the event that any share of Common Stock is accepted for
payment and paid for by the Purchaser (or Parent or any other person who is
authorized by Parent) pursuant to the Offer, the Purchaser shall be obligated to
exercise the Option in whole (with respect to the Optioned Shares not
theretofore accepted for payment and paid for pursuant to the Offer) no later
than five trading days following the date of such payment; provided, however,
-------- -------
that if the waiting period under the HSR Act with respect to the exercise of the
Option shall not have expired or been terminated or any injunction, order or
similar restraint by
<PAGE>
3
a court of competent jurisdiction shall exist, in each case on such fifth
trading day, then, notwithstanding the foregoing, the Purchaser shall be
obligated to exercise the Option in whole not later than five trading days after
such waiting period shall have expired or been terminated or such injunction,
order or restraint shall have been dissolved.
3. Payment of Purchase Price and Delivery of Certificates for
----------------------------------------------------------
Optioned Shares. At any closing of the exercise of the Option hereunder, (i)
- ----------------
the Purchaser will deliver to the Stockholder a certified or official bank check
payable to the order of the Stockholder in New York Clearing House funds in an
amount equal to the product of the Per Share Price and the number of Optioned
Shares being purchased at such closing and (ii) the Stockholder shall deliver to
the Purchaser certificates representing the Optioned Shares sold by the
Stockholder to the Purchaser at such closing, duly endorsed in blank or
accompanied by stock powers duly executed by the Stockholder in blank, in proper
form for transfer.
4. Representations and Warranties of the Stockholder. The
--------------------------------------------------
Stockholder hereby represents and warrants to Parent and the Purchaser as
follows:
(a) Authority; Noncontravention. The Stockholder has all requisite
----------------------------
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement by the Stockholder and the consummation by the Stockholder of the
transactions contemplated hereby have, in the case of each Stockholder that
is not a natural person, been duly authorized by all necessary partnership
action on the part of the Stockholder. This Agreement has been duly
executed and delivered by the Stockholder and constitutes a valid and
binding obligation of the Stockholder, enforceable against the Stockholder
in accordance with its terms. The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby and
compliance with the terms hereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time or both)
under (i) with respect to Stockholders that are not natural persons, the
certificate of incorporation or by-laws or any other comparable charter or
organizational documents of the Stockholder or (ii) any provision of any
trust agreement, loan or credit
<PAGE>
4
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the
Stockholder or to the Stockholder's property or assets, other than, in the
case of clause (ii), any such conflicts, violations, defaults, rights or
liens that individually or in the aggregate would not (x) impair the
ability of the Stockholder to perform its obligations under this Agreement
or (y) prevent the consummation of any of the transactions contemplated by
this Agreement. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Federal, state or local
government or any court, administrative or regulatory agency or commission
or other governmental authority or agency, domestic or foreign (a
"Governmental Entity"), is required by or with respect to the Stockholder
in connection with the execution and delivery of this Agreement or the
consummation by the Stockholder of the transactions contemplated by this
Agreement, except for (1) the filing with the Securities and Exchange
Commission of such reports under Sections 13(d) and 16(a) of the Securities
Exchange Act of 1934, as amended, as may be required in connection with
this Agreement and the transactions contemplated by this Agreement and (2)
such other consents, approvals, orders, authorizations, registrations,
declarations and filings as would not individually or in the aggregate
prevent the consummation of any of the transactions contemplated by this
Agreement.
(b) The Optioned Shares. The Stockholder has, and the transfer by
--------------------
the Stockholder of the Optioned Shares hereunder will pass to the
Purchaser, good and marketable title to the Optioned Shares, free and clear
of any claims, liens, encumbrances, security interests, voting restrictions
and limitations on disposition whatsoever. The Stockholder does not
directly or indirectly own, either beneficially or of record, any shares of
Common Stock other than the Optioned Shares.
5. Representations and Warranties of Parent and the Purchaser.
-----------------------------------------------------------
Parent and the Purchaser hereby represent and warrant to the Stockholder as
follows:
(a) Authority; Noncontravention. Parent and the Purchaser have all
----------------------------
requisite corporate power and
<PAGE>
5
authority to enter into this Agreement and to consummate the transactions
contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action on
the part of Parent and the Purchaser. This Agreement has been duly
executed and delivered by Parent and the Purchaser and constitutes a valid
and binding obligation of each such party, enforceable against each such
party in accordance with its terms. The execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated by
this Agreement and compliance with the provisions of this Agreement will
not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under, or result in the creation of any lien upon any of
the properties or assets of Parent or any of its subsidiaries under, (i)
the certificate of incorporation or by-laws of Parent or the Purchaser or
the comparable charter or organizational documents of any other subsidiary
of Parent, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession,
franchise or license applicable to Parent or any of its subsidiaries or
their respective properties or assets or (iii) subject to the governmental
filings and other matters referred to in the following sentence, any
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Parent or any of its subsidiaries or their respective
properties or assets, other than, in the case of clause (ii) or (iii), any
such conflicts, violations, defaults, rights or liens that individually or
in the aggregate would not (x) have a material adverse effect (as such term
is defined in the Merger Agreement) on Parent, (y) impair the ability of
Parent and the Purchaser to perform their respective obligations under this
Agreement or (z) prevent the consummation of any of the transactions
contemplated by this Agreement. No consent, approval, order or
authorization of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to Parent or any of its
subsidiaries in connection with the execution and delivery of this
Agreement or the consummation by Parent or the
<PAGE>
6
Purchaser of any of the transactions contemplated by this Agreement, except
for (1) filings under the HSR Act, if applicable, (2) the filing with the
Securities and Exchange Commission of such reports under Sections 13(a),
13(d) and 16(a) of the Securities Exchange Act of 1934, as amended, as may
be required in connection with this Agreement and the transactions
contemplated by this Agreement and (3) such other consents, approvals,
orders, authorizations, registrations, declarations and filings as would
not individually or in the aggregate (A) have a material adverse effect on
Parent or (B) prevent the consummation of any of the transactions
contemplated by this Agreement.
(b) Securities Act. Any Optioned Shares purchased by the Purchaser
---------------
pursuant to this Agreement will be acquired for investment only and not
with a view to any public distribution thereof, and the Purchaser will not
offer to sell or otherwise dispose of any Optioned Shares so acquired by it
in violation of any of the registration requirements of the Securities Act
of 1933, as amended.
6. Distributions; Adjustment upon Changes in Capitalization. (a)
---------------------------------------------------------
Any dividends or other distributions (whether payable in cash, stock or
otherwise) by the Company with respect to any Optioned Shares purchased
hereunder with a record date on or after the date of the closing of such
purchase will belong to the Purchaser. If any such dividend or distribution
belonging to the Purchaser is paid by the Company to the Stockholder, the
Stockholder shall hold such dividend or distribution in trust for the benefit of
the Purchaser and shall promptly remit such dividend or distribution to the
Purchaser in exactly the form received, accompanied by appropriate instruments
of transfer.
(b) If on or after the date of this Agreement there shall occur any
stock dividend, stock split, recapitalization, combination or exchange of
shares, merger, consolidation, reorganization or other change or transaction of
or by the Company, as a result of which shares of any class of stock, other
securities, cash or other property shall be issued in respect of any Optioned
Shares or if any Optioned Shares shall be changed into the same or a different
number of shares of the same or another class of stock or other securities,
then, upon exercise of the Option the Purchaser shall receive for the aggregate
price payable
<PAGE>
7
upon exercise of the Option with respect to the Optioned Shares, all such shares
of stock, other securities, cash or other property issued, delivered or received
with respect to such Optioned Shares (or if the Option shall not be exercised,
appropriate adjustment shall be made for purposes of the calculations set forth
in this Agreement).
7. Covenants of the Stockholder.
-----------------------------
(a) The Stockholder agrees, until the Option has expired, not to:
(i) sell, transfer, pledge, assign or otherwise dispose of, or enter
into any contract, option or other arrangement with respect to the sale,
transfer, pledge, assignment or other disposition of, the Optioned Shares
to any person other than the Purchaser or the Purchaser's designee;
(ii) acquire any additional shares of Common Stock without the prior
consent of the Purchaser; or
(iii) deposit any Optioned Shares into a voting trust or grant a proxy
or enter into a voting agreement with respect to any Optioned Shares except
as provided in this Agreement.
(b) The parties hereto agree that, until the Option has expired, the
Stockholder may (and, if requested to do so in writing by Parent, will) tender
the Optioned Shares in the Offer.
(c) The Stockholder agrees to execute and deliver, simultaneously
with the execution and delivery of this Agreement, a proxy for the benefit of
the Purchaser in the form of Exhibit A hereto.
8. No Brokers. Each of the Stockholder, Parent and the Purchaser
-----------
represents, as to itself and its affiliates, that no agent, broker, investment
banker or other firm or person is or will be entitled to any broker's or
finder's fees or any other commission or similar fee in connection with any of
the transactions contemplated by this Agreement and respectively agrees to
indemnify and hold the others harmless from and against any and all claims,
liabilities or obligations with respect to any such fees, commissions or
expenses asserted by any person on the basis
<PAGE>
8
of any act or statement alleged to have occurred or been made by such party or
its affiliates.
9. Survival of Representations. All representations, warranties and
----------------------------
agreements made by the parties to this Agreement shall survive the closings
hereunder notwithstanding any investigation at any time made by or on behalf of
any party hereto.
10. Further Assurances. If the Purchaser shall exercise the Option
-------------------
in accordance with the terms of this Agreement, from time to time and without
additional consideration the Stockholder will execute and deliver, or cause to
be executed and delivered, such additional or further transfers, assignments,
endorsements, consents and other instruments as the Purchaser may reasonably
request for the purpose of effectively carrying out the transactions
contemplated by this Agreement, including the transfer of the Optioned Shares to
the Purchaser and the release of any and all liens, claims and encumbrances with
respect thereto.
11. Assignment. Neither this Agreement nor any of the rights,
-----------
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other parties, except that the
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.
12. General Provisions.
-------------------
(a) Specific Performance. The parties hereto acknowledge that
---------------------
damages would be an inadequate remedy for any breach of the provisions of this
Agreement and agree that the obligations of the parties hereunder shall be
specifically enforceable.
(b) Expenses. Whether or not the Option is exercised, all costs and
---------
expenses incurred in connection with the Option, this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expense.
<PAGE>
9
(c) Amendments. This Agreement may not be amended except by an
-----------
instrument in writing signed by each of the parties hereto.
(d) Notices. All notices and other communications hereunder shall be
--------
in writing and shall be deemed given if delivered personally or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(i) if to Parent or the Purchaser, to
National Health Laboratories Incorporated
4225 Executive Square
Suite 800
La Jolla, California 92037
Facsimile: (619) 658-6693
Attention: Mr. James R. Maher;
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Facsimile: (212) 474-3700
Attention: Allen Finkelson, Esq., and
<PAGE>
10
(ii) if to the Stockholder, to
Mr. Haywood D. Cochrane, Jr.
Allied Clinical Laboratories, Inc.
2515 Park Plaza
Nashville, Tennessee 37203
Facsimile: (615) 320-2013
with a copy to:
Irell & Manella
1800 Avenue of the Stars
Suite 900
Los Angeles, California 90067
Facsimile: (310) 203-7199
Attention: Ronald Loeb, Esq.
and a copy to:
Irell & Manella
333 South Hope Street
Suite 3300
Los Angeles, California 90071
Facsimile: (213) 229-0515
Attention: Stephen Rothman, Esq.
(e) Interpretation. When a reference is made in this Agreement to
---------------
Sections or Exhibits, such reference shall be to a Section or Exhibit to this
Agreement unless otherwise indicated. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Wherever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation".
(f) Counterparts. This Agreement may be executed in one or more
-------------
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more of the counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
<PAGE>
11
(g) Entire Agreement; No Third-Party Beneficiaries. This Agreement
-----------------------------------------------
(including the documents and instruments referred to herein) (i) 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 (ii) is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
(h) Governing Law. This Agreement shall be governed by and construed
--------------
in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, Parent, the Purchaser and the Stockholder have
caused this Agreement to be signed by their respective duly authorized
representatives, all as of the date first written above.
NATIONAL HEALTH LABORATORIES
INCORPORATED,
by
/s/ James R. Maher
-----------------------
Name: James R. Maher
Title: President and
Chief Executive
Officer
N ACQUISITION CORP.,
by
/s/ James R. Maher
-----------------------
Name: James R. Maher
Title: President and
Chief Executive
Officer
/s/ Haywood D. Cochrane, Jr.
----------------------------
Haywood D. Cochrane, Jr.
<PAGE>
EXHIBIT A
[Form of Proxy]
The undersigned hereby irrevocably constitutes and appoints James R.
Maher, David C. Flaugh and James G. Richmond, and each of them, and any other
designees of N Acquisition Corp., a Delaware corporation (the "Purchaser"), the
attorneys and proxies of the undersigned, each with full power of substitution,
to vote each of the shares of Common Stock, par value $.01 per share, of Allied
Clinical Laboratories, Inc., a Delaware corporation (the "Company"), owned by
the undersigned (the "Shares") (and any and all other securities or rights
issued or issuable in respect of such Shares on or after May 3, 1994) at any
annual, special or adjourned meeting of the stockholders of the Company, (i) in
favor of the adoption of the Merger Agreement dated as of May 3, 1994 (the
"Merger Agreement"), among the Company, the Purchaser and National Health
Laboratories Incorporated, a Delaware corporation ("Parent"), and approval of
the Merger (as defined in the Merger Agreement) and the other transactions
contemplated by the Merger Agreement, (ii) against any takeover proposal (as
defined in the Merger Agreement) (other than the Merger) and against any other
action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the Company
under the
<PAGE>
2
Merger Agreement or which could result in any of the conditions to the Company's
obligations under the Merger Agreement not being fulfilled and (iii) in favor of
any other matter relating to consummation of the transactions contemplated by
the Merger Agreement. This appointment is effective upon the execution of, and
only until the expiration of the option granted pursuant to, the Stock Option
Agreement dated as of May 3, 1994, among Parent, the Purchaser and the
undersigned. This power of attorney and proxy is irrevocable, is granted in
consideration of the Purchaser entering into the Merger Agreement and is coupled
with an interest sufficient in law to support an irrevocable power. This
appointment shall revoke all prior attorneys and proxies appointed by the
undersigned at any time with respect to such Shares (and any such other
securities or rights) and no subsequent attorneys or proxies will be appointed
by the undersigned, or be effective, with respective thereto.
Dated: May 3, 1994
______________________________
Haywood D. Cochrane, Jr.
<PAGE>
EXHIBIT 99(c)(4)
Proxy
-----
The undersigned hereby irrevocably constitutes and appoints James R. Maher,
David C. Flaugh and James G. Richmond, and each of them, and any other designees
of N Acquisition Corp., a Delaware corporation (the "Purchaser"), the attorneys
and proxies of the undersigned, each with full power of substitution, to vote
each of the shares of Common Stock, par value $.01 per share, of Allied Clinical
Laboratories, Inc., a Delaware corporation (the "Company"), owned by the
undersigned (the "Shares") (and any and all other securities or rights issued or
issuable in respect of such Shares on or after May 3, 1994) at any annual,
special or adjourned meeting of the stockholders of the Company, (i) in favor of
the adoption of the Merger Agreement dated as of May 3, 1994 (the "Merger
Agreement"), among the Company, the Purchaser and National Health Laboratories
Incorporated, a Delaware corporation ("Parent"), and approval of the Merger (as
defined in the Merger Agreement) and the other transactions contemplated by the
Merger Agreement, (ii) against any takeover proposal (as defined in the Merger
Agreement) (other than the Merger) and against any other action or agreement
that would result in a breach of any covenant, representation or warranty or any
other obligation or agreement of the Company under the
<PAGE>
2
Merger Agreement or which could result in any of the conditions to the Company's
obligations under the Merger Agreement not being fulfilled and (iii) in favor of
any other matter relating to consummation of the transactions contemplated by
the Merger Agreement. This appointment is effective upon the execution of, and
only until the expiration of the option granted pursuant to, the Stock Option
Agreement dated as of May 3, 1994, among Parent, the Purchaser and the
undersigned. This power of attorney and proxy is irrevocable, is granted in
consideration of the Purchaser entering into the Merger Agreement and is coupled
with an interest sufficient in law to support an irrevocable power. This
appointment shall revoke all prior attorneys and proxies appointed by the
undersigned at any time with respect to such Shares (and any such other
securities or rights) and no subsequent attorneys or proxies will be appointed
by the undersigned, or be effective, with respective thereto.
Dated: May 3, 1994 WARBURG, PINCUS CAPITAL
COMPANY, L.P.,
by E.M. WARBURG, PINCUS &
CO., General Partner
by /s/ James E. Thomas
---------------------
General Partner
<PAGE>
EXHIBIT 99(c)(5)
Proxy
-----
The undersigned hereby irrevocably constitutes and appoints James R. Maher,
David C. Flaugh and James G. Richmond, and each of them, and any other designees
of N Acquisition Corp., a Delaware corporation (the "Purchaser"), the attorneys
and proxies of the undersigned, each with full power of substitution, to vote
each of the shares of Common Stock, par value $.01 per share, of Allied Clinical
Laboratories, Inc., a Delaware corporation (the "Company"), owned by the
undersigned (the "Shares") (and any and all other securities or rights issued or
issuable in respect of such Shares on or after May 3, 1994) at any annual,
special or adjourned meeting of the stockholders of the Company, (i) in favor of
the adoption of the Merger Agreement dated as of May 3, 1994 (the "Merger
Agreement"), among the Company, the Purchaser and National Health Laboratories
Incorporated, a Delaware corporation ("Parent"), and approval of the Merger (as
defined in the Merger Agreement) and the other transactions contemplated by the
Merger Agreement, (ii) against any takeover proposal (as defined in the Merger
Agreement) (other than the Merger) and against any other action or agreement
that would result in a breach of any covenant, representation or warranty or any
other obligation or agreement of the Company under the
<PAGE>
2
Merger Agreement or which could result in any of the conditions to the Company's
obligations under the Merger Agreement not being fulfilled and (iii) in favor of
any other matter relating to consummation of the transactions contemplated by
the Merger Agreement. This appointment is effective upon the execution of, and
only until the expiration of the option granted pursuant to, the Stock Option
Agreement dated as of May 3, 1994, among Parent, the Purchaser and the
undersigned. This power of attorney and proxy is irrevocable, is granted in
consideration of the Purchaser entering into the Merger Agreement and is coupled
with an interest sufficient in law to support an irrevocable power. This
appointment shall revoke all prior attorneys and proxies appointed by the
undersigned at any time with respect to such Shares (and any such other
securities or rights) and no subsequent attorneys or proxies will be appointed
by the undersigned, or be effective, with respective thereto.
Dated: May 3, 1994
/s/ Haywood D. Cochrane, Jr.
----------------------------
Haywood D. Cochrane, Jr.
<PAGE>
EXHIBIT 99(c)(6)
LOGO OF ALLIED CLINICAL
LABORATORIES
CONFIDENTIALITY AGREEMENT
July 12, 1993
Mr. James R. Maher
President & Chief Executive Officer
National Health Laboratories, Inc.
c/o MacAndrews & Forbes Holdings, Inc.
35 East 62nd Street
New York, New York 10021
Dear Jim:
In connection with your consideration of a possible negotiated transaction
with Allied Clinical Laboratories, Inc. and/or its subsidiaries, affiliates or
divisions (collectively, with such subsidiaries, affiliates and division, the
"Company"), the Company is prepared to make available to you certain information
concerning the business, financial condition, operations, assets and liabilities
of the Company. As a condition to such information being furnished to you and at
your request your directors, officers, employees, agents or advisors (including,
without limitation, attorneys, accountants, consultants, banks and financial
advisors) (collectively, "Representatives"), you agree to treat any information
concerning the Company (whether prepared by the Company, its advisors or
otherwise and irrespective of the form of communication) which is furnished to
you or to your Representatives now or in the future by or on behalf of the
Company (herein collectively referred to as the "Evaluation Material") in
accordance with the provisions of this letter agreement, and to take or abstain
from taking certain other actions hereinafter set forth.
The term "Evaluation Material" also shall be deemed to include all notes,
analyses, compilations, studies, interpretations or other documents prepared by
you or your Representatives which contain, reflect or are based upon, in whole
or in part, the information furnished to you or your Representatives pursuant
hereto. The term Evaluation Material does not include information which (i) is
or becomes generally available to the public other than as a result of a
disclosure by you or your Representatives, (ii) was within your possession prior
to its being furnished to you by or on behalf of the Company pursuant hereto,
provided that the source of such information was not known by you to be bound by
a confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to the Company with respect to such information or
(iii) becomes available to you on a nonconfidential basis from a source other
than the Company or any
<PAGE>
Mr. James R. Maher
July 12, 1993
Page 2
of its Representatives, provided that such source is not known by you to be
bound by a confidentiality agreement with or other contractual, legal or
fiduciary obligation of confidentiality to the Company with respect to such
information. Notwithstanding any other provision hereof, the Company reserves
the right not to make available hereunder any information, the provison of
which is determined by it, in its sole discretion, to be inadvisable or
inappropriate; provided, however, that if such information is required to be
disclosed under the definitive agreement regarding a transaction contemplated
hereby, when, as and if executed, such information will not be withheld.
You hereby agree that you shall use the Evaluation Material solely for the
purpose of evaluating a possible negotiated transaction between the Company and
you, that the Evaluation Material will be kept confidential and that you will
not disclose any of the Evaluation Material in any manner whatsoever; provided,
however, that (i) you may make any disclosure of such information to which the
Company gives its prior written consent and (ii) any of such information may be
disclosed to your Representatives who need to know such information for the sole
purpose of evaluating a possible negotiated transaction with the Company and who
agree for the benefit of the Company to keep such information confidential.
In addition, you agree that, without the prior written consent of the
Company, you will not disclose to any other person, and you will direct your
Representatives not to disclose to any other person, the fact the Evaluation
Material has been made available to you, that discussions or negotiations are
taking place concerning a possible transaction involving the Company or any of
the terms, conditions or other facts with respect thereto (including the status
thereof); provided, you may make such disclosure if in the opinion of your
legal counsel that such disclosure is required by applicable law. The term
person as used in this letter agreement shall be broadly interpreted to include
- ------
the media and any corporation, partnership, group, individual or other entity.
In the event that you or any of your Representatives are requested or
required (by oral questions, interrogatories, requests for information or
documents in legal proceedings, subpoena, civil investigative demand or other
similar process) to disclose any of the Evaluation Material, or, in the opinion
of your counsel disclosure is otherwise required by applicable law, you shall
provide the Company with prompt prior notice of any such request or requirement
so that the Company may seek an injunction, a protective order or other
appropriate remedy and/or waive compliance with the provisions of this letter
agreement. If, in the absence of a protective order or other remedy or the
receipt of a waiver by the Company, you or any of your Representatives are
nonetheless, in the written opinion of counsel, legally compelled
<PAGE>
Mr. James R. Maher
July 12, 1993
Page 3
to disclose Evaluation Material, you or your Representative may, without
liability hereunder, disclose only that portion of the Evaluation Material which
such counsel advises you is legally required to be disclosed. You agree that you
shall cooperate with the Company to obtain an appropriate protective order or
other reliable assurance that confidential treatment will be accorded the
Evaluation Material by such tribunal.
If you decide that you do not wish to proceed with a transaction with the
Company, you will promptly inform the Company of that decision. In that case, or
at any time upon the request of the Company for any reason, you will promptly
deliver to the Company all Evaluation material (and all copies thereof whether
received from the Company or made by you or your Representatives) furnished to
you or your Representatives by or on behalf of the Company pursuant hereto. In
the event of such a decision or request, all other Evaluation Material prepared
by you or your Representatives shall be destroyed and no copy thereof shall be
retained. Notwithstanding the return or destruction of the Evaluation Material,
you and your Representatives will continue to be bound by your obligations of
confidentiality and other obligations hereunder.
You understand and acknowledge that neither the Company nor any of its
Representatives (including without limitation any of the Company's directors,
officers, employees, or agents) make any representation or warranty, express or
implied, as to the accuracy or completeness of its Evaluation Material. You
agree that neither the Company nor any of its Representatives (including without
limitation any of the Company's directors, officers, employees, or agents) shall
have any liability to you or to any of your Representatives, relating to or
resulting from the use of the Evaluation Material or any efforts therein or
omissions therefrom. Only those representations or warranties which are made in
a final definitive agreement regarding any transactions contemplated hereby,
when, as and if executed, and subject to such limitations and restrictions as
may be specified therein, will have any legal effect.
In consideration of the Evaluation Material being furnished to you, you
hereby agree that, for a period of two years from the date hereof, none of
your officers, employees or Representatives who are apprised of the potential of
a transaction between you and the Company, directly or indirectly, or who
receive, directly or indirectly through your evaluation of the potential
transaction with the Company, information concerning any current officer of the
Company or other employee of the Company who you and the Company agree in
writing should be covered by this paragraph ("Covered Employee"), will solicit
the employ of such current officer or Covered Employee, so long as such current
officer or Covered
<PAGE>
Mr. James R. Maher
July 12, 1993
Page 4
Employee is employed by the Company, without obtaining the prior written consent
of the Company.
You agree that, for a period of two years from the date of this agreement,
unless such shall have been specifically invited in writing by the Company,
neither you nor any of your affiliates who were privy to the Evaluation Material
or any report based thereon, (as affiliates are defined under the Securities
Exchange Act of 1934, as amended (the "1934 Act")) will in any manner, directly
or indirectly, (a) effect or seek, offer or propose (whether publicly or
otherwise) to effect, or cause or participate in or in any way assist any other
person to effect or seek, offer or propose (whether publicly or otherwise) to
effect or participate in, (i) any acquisition of 5% or more of any class of
equity securities (or beneficial ownership thereof) or any material portion of
the assets of the Company or any of its subsidiaries; (ii) any tender or
exchange offer, merger or other business combination involving the Company or
any of its subsidiaries; (iii) any recapitalization, restructuring, liquidation,
dissolution or other extraordinary transaction with respect to the Company or
any of its subsidiaries; or (iv) any "solicitation" of "proxies" (as such terms
are used in the proxy rules of the Securities and Exchange Commission) or
consents to vote any voting securities of the Company; (b) form, join or in any
way participate in a "group" (as defined under the 1934 Act); (c) otherwise act,
alone or in concert with others, to seek to control or influence the management,
Board of Directors or policies of the Company; (d) take any action which might
force the Company to make a public announcement regarding any of the types of
matters set forth in (a) above; or (e) enter into any discussions or
arrangements with any third party with respect to any of the foregoing. You also
agree during such period not to request the Company (or its Representatives),
directly or indirectly, to amend or waive any provision of this paragraph
(including this sentence).
You and we understand and agree that no contract or agreement providing for
any transaction involving the Company shall be deemed to exist between you and
the Company unless and until a final definitive agreement has been executed and
delivered, and you and we hereby waive, in advance, any claims, (including,
without limitation, breach of contract) in connection with any transaction
involving you and the Company unless and until you and the Company shall have
entered into a final definitive agreement. You also agree that, unless and until
a final definitive agreement regarding a transaction between the Company and you
has been executed and delivered, neither the Company nor you will be under any
legal obligation of any kind whatsoever with respect to such a transaction by
virtue of this letter agreement except for the matters specifically agreed to
herein. You further acknowledge and agree that the Company reserves the right,
in its sole discretion, to reject any and all proposals made by you or any of
your
<PAGE>
Mr. James R. Maher
July 12, 1993
Page 5
Representatives with regard to a transaction between the Company and you, and to
terminate discussion and negotiations with you at any time.
It is understood and agreed that no failure or delay by the Company in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
future exercise thereof or the exercise of any other right, power or privilege
hereunder.
It is further understood and agreed that money damages would not be
sufficient remedy for any breach of this letter agreement by you or any of your
Representatives and that the Company shall be entitled to equitable relief,
including injunction and specific performance, as a remedy for any such breach.
Such remedies shall not be deemed to be the exclusive remedies for a breach by
you of this letter agreement but shall be in addition to all other remedies
available at law or equity to the Company.
This letter agreement is for the benefit of the Company, and shall be
governed by and construed in accordance with the laws of the State of Delaware.
You also hereby irrevocably and unconditionally consent to submit to the
exclusive jurisdiction of the courts of the State of Delaware and of the United
States of America located in the State of Delaware for any actions, suits or
proceedings arising out of or relating to this agreement (and you agree not to
commence any action, suit or proceeding relating thereto except in such courts),
and further agree to accept service of any process for any action, suit or
proceeding brought against you in any such court. You hereby irrevocably and
unconditionally waive any objection to the laying of venue of any action, suit
or proceeding arising out of this agreement in the courts of the State of
Delaware or the United States of America located in the State of Delaware, and
hereby further irrevocably and unconditionally waive and agree not to plead or
claim in any such court that any such action, suit or proceeding brought in any
such court has been brought in an inconvenient forum.
<PAGE>
Mr. James R. Maher
July 12, 1993
Page 6
Please confirm your agreement with the foregoing by signing and returning
one copy of this letter to the undersigned, whereupon this letter agreement
shall become a binding agreement between you and the Company.
Very truly yours,
Allied Clinical Laboratories, Inc.
By: /s/ Haywood D. Cochrane, Jr.
-------------------------------
Haywood D. Cochrane, Jr.
President & Chief Executive Officer
Accepted and agreed as of this date: July 12, 1993
-------------
By: /s/ James R. Maher
-----------------------------------
James R. Maher
President & Chief Executive Officer
HDC/tf
