- ------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
|X| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended July 31, 1997
|_| Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission file number 1-10870
-------
BIOWHITTAKER, INC.
------------------
(Exact name of Registrant as specified in its charter)
Delaware 95-3917176
-------- ----------
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
8830 Biggs Ford Road, Walkersville, Maryland 21793-0127
- -------------------------------------------- ----------
(Address of Principal Executive Offices) (zip code)
(301) 898-7025
--------------
(Registrant's telephone number, including area code)
Indicate by check whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
|X| Yes |_| No
The number of shares outstanding of the Registrant's only class of common
stock as of July 31, 1997 was 10,760,866.
- ------------------------------------------------------------------------------
Part I. Financial Information
Item 1. Financial Statements
BIOWHITTAKER, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
For the Three Months For the Nine Months
Ended July 31, Ended July 31,
-------------- --------------
1997 1996 1997 1996
---- ---- ---- ----
Sales............................... $ 14,322 $ 12,253 $ 42,254 $ 37,724
Costs and expenses
Cost of sales..................... 7,147 6,169 21,289 19,834
Research and development.......... 745 704 2,140 1,938
Selling, general and administrative 3,894 3,398 11,717 10,429
----- ----- ------ ------
11,786 10,271 35,146 32,201
------ ------ ------ ------
Income From Operations.............. 2,536 1,982 7,108 5,523
Other (income)/expenses
Purchased research and development -- -- -- 4,000
Litigation expenses............... -- 3,500 -- 3,500
Gain on sale of product line...... -- -- -- (1,322)
Legal settlement.................. (315) -- (315) --
Other income...................... (91) (91) (272) (272)
Interest.......................... (12) 67 35 226
Loss/(Gain) on foreign currency
transaction .................... (11) (37) 2 (9)
--- --- - --
- ----- (429) 3,439 (550) 6,123
==== ===== ==== =====
Income/(Loss) Before Income Taxes... 2,965 (1,457) 7,658 (600)
Provision for income taxes.......... 1,046 (547) 2,772 902
----- ---- ----- ---
Net Income/(Loss)................... $ 1,919 $ (910) $ 4,886 $ (1,502)
======= ======= ======= ========
Net Income/(Loss) Per Share......... $ 0.17 $ (0.08) $ 0.45 $ (0.14)
======= ======= ======= ========
Average common and common equivalent
shares outstanding (in thousands) 11,021 10,759 10,944 10,759
====== ====== ====== ======
Unaudited
See Notes to Consolidated Financial Statements
2
<PAGE>
BIOWHITTAKER, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
July 31, October 31,
1997 1996
-------- --------
ASSETS
CURRENT ASSETS
Cash and cash equivalents..................... $ 3,441 $ 701
Accounts receivable........................... 7,663 8,623
Other receivables............................. 608 1,233
Inventories................................... 23,093 21,114
Prepaid expenses.............................. 2,232 1,687
Deferred income taxes ........................ 61 119
---------- ---------
Total Current Assets......................... 37,098 33,477
---------- ---------
PROPERTY, PLANT AND EQUIPMENT................. 34,851 33,595
Less accumulated depreciation and amortization 18,088 16,808
---------- ---------
16,763 16,787
INTANGIBLE ASSETS............................ 13,863 12,511
Less accumulated amortization................. 2,597 1,698
--------- ---------
11,266 10,813
OTHER ASSETS.................................. 80 78
--------- ---------
$ 65,207 $ 61,155
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable................................. $ -- $ 300
Current portion of long-term debt............. 512 291
Accounts payable.............................. 3,874 3,857
Accrued liabilities........................... 5,337 6,483
Income taxes payable.......................... 1,076 321
--------- --------
Total Current Liabilities.................... 10,799 11,252
--------- --------
LONG-TERM DEBT................................ 1,345 1,443
--------- --------
DEFERRED INCOME TAXES......................... 1,378 1,669
--------- --------
STOCKHOLDERS' EQUITY
Common stock.................................. 108 108
Additional paid-in capital.................... 26,397 26,389
Retained earnings............................. 25,199 20,313
Translation adjustment........................ (19) (19)
---------- ----------
Total Stockholders' Equity............... 51,685 46,791
--------- ---------
$ 65,207 $ 61,155
========= ========
July 31, 1997 - Unaudited
See Notes to Consolidated Financial Statements
3
BIOWHITTAKER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
For the Nine Months
Ended July 31,
--------------
1997 1996
---- ----
OPERATING ACTIVITIES
Net income/(loss) .................................. $ 4,886 $ (1,502)
Adjustments to reconcile net income/(loss) to net
cash provided by operating activities:
Depreciation and amortization ................... 2,874 2,606
Purchased research and development .............. -- 4,000
Gain on sale of product line .................... -- (1,322)
Legal settlement ................................ (315) --
Deferred income taxes ........................... (233) (754)
Loss on disposal of property, plant and equipment 16 53
Changes in operating assets and liabilities,
excluding the affect of acquisitions:
Accounts receivable ........................... 960 2,009
Inventories ................................... (1,979) (213)
Prepaid expenses and other assets ............. (128) (1,149)
Prepaid royalty ............................... (375) (1,294)
Accounts payable and accrued liabilities ...... (374) (95)
---- ---
Net Cash Provided by Operating Activities ....... 5,332 2,339
----- -----
INVESTING ACTIVITIES
Purchases of property, plant and equipment ......... (1,967) (2,085)
Proceeds from sale of product line ................. 581 12,281
Purchase of Clonetics, net of cash received ........ -- (8,226)
Purchases of other businesses ...................... -- (1,039)
----- ------
Net Cash (Used in)/Provided by Investing Activities (1,386) 931
------ ------
FINANCING ACTIVITIES
Net borrowings/(repayments)payments of notes payable . (300) 400
Payment of long-term debt .......................... (562) (3,425)
Other .............................................. (344) (54)
------- -------
Net Cash Used in Financing Activities ........... (1,206) (3,079)
------ -------
Net Change In Cash and Cash Equivalents ......... 2,740 191
Cash and Cash Equivalents At Beginning Of Year .. 701 359
------- --------
Cash and Cash Equivalents At End Of Period ...... $ 3,441 $ 550
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest ...................................... $ 182 $ 285
======== ========
Income taxes .................................. $ 2,148 $ 2,852
======== ========
Notes
1. In connection with the acquisition of all of the common stock of
Clonetics Corporation for $8,733 in cash, the Company acquired
assets with a value of $8,236, assumed liabilities of $3,503 and
expensed $4,000 of purchased research and development.
Unaudited
See Notes to Consolidated Financial Statements
4
<PAGE>
BIOWHITTAKER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands, Except Per Share Data)
Basis of Presentation: The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the nine months
ended July 31, 1997 are not necessarily indicative of the results that may be
expected for the year ending October 31, 1997. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Annual Report on Form 10-K for the year ended October 31, 1996 for BioWhittaker,
Inc. and its subsidiaries ("the Company" or "BioWhittaker").
Reclassifications: Certain prior years' amounts in the Consolidated
Financial Statements have been reclassified to conform to the 1997 presentation.
Net Income Per Share: Net income per share is computed by dividing net
income by the weighted average number of common and common equivalent shares
outstanding. Common equivalent shares include the dilutive effect of outstanding
stock purchase options and Anasco's right to maintain its aggregate percentage
voting interest in the Company calculated, in each case, under the treasury
stock method. Net income per share determined on a fully diluted basis is not
materially different from the primary net income per share presented.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128 Earnings per Share, which is required to be adopted in fiscal year 1998.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. Under the new
requirements for calculating basic earnings per share, the dilutive effect of
stock options will be excluded. The impact of Statement 128 on the calculation
of basic and fully diluted earnings per share is not expected to be material.
Inventories: Inventories consisted of the following:
July 31, October 31,
1997 1996
---- ----
Raw material........................... $ 4,754 $ 4,050
Work in process........................ 8,306 7,323
Finished goods......................... 10,033 9,741
-------- --------
$ 23,093 $ 21,114
======= ========
5
<PAGE>
Item 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
Overview
The discussion below contains certain forward-looking statements that
involve risks and uncertainties concerning the future Results of Operations of
BioWhittaker, Inc. Actual results could differ materially from those discussed.
In evaluating such statements, readers should specifically consider risk factors
identified under the caption "Factors Affecting Future Operating Results"
contained in the Company's annual report on Form 10-K for the fiscal year ended
October 31, 1996. Readers should also consider the information contained under
the caption "Recent Developments".
Results of Operations
Revenue Summary
BioWhittaker's sales are derived from three principal product lines; cell
culture products, endotoxin detection products and clinical diagnostic testing
products. Sales for the three month and nine month periods ended July 31 are
shown in the following table:
Three Months Nine Months
Ended July 31, Ended July 31,
-------------- --------------
1997 1996 1997 1996
---- ---- ---- ----
(In thousands)
Cell culture products............... $ 9,452 $ 7,096 $27,300 $20,952
Endotoxin detection products........ 3,837 3,295 11,590 10,004
Clinical diagnostic testing products 1,033 1,862 3,364 6,768
------- ------- ------- -------
Total sales ........................ $14,322 $12,253 $42,254 $37,724
======= ======= ======= =======
Comparison of the first nine months of fiscal 1997 to the first nine months
of fiscal 1996.
Sales for the first nine months of fiscal 1997 of $42.3 million exceeded
sales in the comparable fiscal period of fiscal 1996 by $4.5 million, or 12.0%.
Cell culture product sales increased by $6.3 million, or 30.3%, due
primarily to an additional $3.2 million in sales of Clonetics products, higher
prices for certain cell cultures sold to a large customer and to higher sales
volume for cell culture media and fetal bovine serum products.
Endotoxin detection product sales increased by $1.6 million, or 15.9%, due
to increased sales volume in all of the Company's test formats. This rate of
increase is higher than expected because of a change in order patterns for the
Company's European distributors. Sales for the fourth quarter are expected to be
equal to, or slightly less than, sales for the fourth quarter of fiscal 1996.
Growth in subsequent quarters is expected to resume at an annual rate more
closely resembling that of the most recent fiscal year.
Clinical diagnostic testing product sales decreased by $3.4 million, or
50.3%, $1.6 million of which was due to the sale of the EIA and FIAX Product
Lines and $1.2 million due to the completion in the third quarter of fiscal 1996
of a contract to produce botulinum antitoxin. In addition, sales for the
Company's allergy detection products declined $0.4 million primarily as a result
of increased competition. The Company expects sales for allergy products to
continue to decline at similar rates for the foreseeable future.
6
<PAGE>
Gross margins were 49.6% of sales for the first nine months of fiscal 1997
compared to 47.4% during the comparable period of fiscal 1996 reflecting
proportionally higher margins associated with Clonetics products, improved
margins due to higher sales prices for certain cell cultures sold to a large
customer and to improved manufacturing efficiencies.
Research and development expenses increased from $1.9 million for the first
nine months of fiscal 1996 to $2.1 million for the same period of fiscal 1997
primarily as a result of increased development efforts for Clonetics products.
Selling, general and administrative expenses increased from $10.4 million
for the first nine months of fiscal 1996 to $11.7 million for the same period of
fiscal 1997 primarily as a result of higher selling expenses for Clonetics
products.
"Other Income" is comprised of payments received from Boehringer Ingelheim
for technology assistance under the terms of its agreement with the Company.
For fiscal 1997, "Legal settlement" represents the gain, before the effect
of taxes, of the settlement of an appeal pending in the Company's litigation
with Minnesota Mining and Manufacturing Inc. ("3M") concerning disputes arising
from the 1991 acquisition by the Company of 3M's allergy diagnostic testing
product line.
For fiscal 1996, "Purchased research and development" represents the
expensing of in-process research and development acquired as a part of the
purchase of Clonetics. "Litigation expenses" include a one-time pretax charge to
earnings for costs associated with the Company's unsuccessful lawsuit against
3M. "Gain on the sale of product line" represents the gain, before the effect of
taxes, as a result of the sale of the EIA and FIAX Product Lines.
"Provision for income taxes" as a percentage of Income Before Income Taxes
was 36.2% for the first nine months of fiscal 1997. For the first nine months of
fiscal 1996, the "Provision for income taxes" reflects the lack of income tax
benefit associated with the expensing of purchased research and development and
favorable treatment of the gain associated with the sale of the Company's
diagnostic test kit business. Before the effect of these transactions, the
"Provision for income taxes" as a percentage of Income Before Income Taxes was
34.0% and reflects the application of lower tax rates to the income of Clonetics
for the first nine months of fiscal 1996.
Comparison of the third quarter of fiscal 1997 to the third quarter of
fiscal 1996.
Sales for the third quarter of fiscal 1997 of $14.3 million exceeded sales
in the comparable fiscal period of fiscal 1996 by $2.1 million, or 16.9%.
Cell culture product sales increased by $2.4 million, or 33.2%, due
primarily to a 55.5% increase in sales of Clonetics products to $2.5 million, to
higher sales volume for fetal bovine serum and cell culture media and to higher
prices for certain cell cultures sold to a large customer.
Endotoxin detection product sales increased by $0.5 million, or 16.4%, due
to increased sales volume. Sales for the third quarter of fiscal 1997 were
impacted by higher then expected sales to the Company's European distributors as
a result in changes in order patterns. Sales for the fourth quarter are expected
to be equal to, or slightly less than, sales for the fourth quarter of fiscal
1996. Growth in subsequent quarters is expected to resume at an annual rate more
closely resembling that of the most recent fiscal year.
7
<PAGE>
Clinical diagnostic testing product sales decreased by $0.8 million, or
44.5%, primarily due to the completion in fiscal 1996 of a contract to produce
botulinum antitoxin and to lower sales volume for the Company's allergy
detection products, primarily as a result of increased competition. The Company
expects clinical diagnostic testing product sales to continue to decline for the
foreseeable future.
Gross margins were 50.1% of sales for the third quarter of fiscal 1997
compared to 49.7% during the comparable period of fiscal 1996 reflecting
improved manufacturing efficiencies and improved margins due to higher sales
prices for certain cell cultures sold to a large customer.
Research and development expenses of $0.7 million for the third quarter of
fiscal 1997 were essentially the same as those for the third quarter of fiscal
1996.
Selling, general and administrative expenses increased from $3.4 million
for the third quarter of fiscal 1996 to $3.9 million for the same period of
fiscal 1997 primarily as a result of higher compensation expenses and for higher
selling expenses for Clonetics products.
"Other Income" is comprised of payments received from Boehringer Ingelheim
for technology assistance under the terms of its agreement with the Company.
For fiscal 1997, "Legal settlement" represents the gain, before the effect
of taxes, of the settlement of an appeal pending in the Company's on-going
litigation with 3M concerning disputes arising from the 1991 acquisition by the
Company of 3M's allergy diagnostic testing product line.
For fiscal 1996, "Litigation expenses" include a one-time pretax charge to
earnings for costs associated with the Company's unsuccessful lawsuit against
3M.
"Provision for income taxes" as a percentage of Income Before Income Taxes
was 35.2% for the third quarter of fiscal 1997. Before the effect of
non-recurring items, the "Provision for income taxes" as a percentage of Income
Before Income Taxes was 32.6% for the third quarter of fiscal 1996.The
difference reflects primarily the application of lower tax rates to the income
of Clonetics for the third quarter of fiscal 1996.
Liquidity and Financial Condition
During the first nine months of fiscal 1997, the Company financed its
operations, capital expenditures and product development activities with cash
provided by operations. For the first nine months of fiscal year 1997, cash
increased by $2.7 million. The Company's operating activities provided cash of
$5.3 million for the same period.
Total current assets of $37.1 million at July 31, 1997 were $3.6 million
higher than total current assets of $33.5 million at October 31, 1996, primarily
as a result of increased cash on hand and higher inventories for endotoxin
detection products. These increases were slightly offset by a decrease in
accounts receivable. Total current liabilities at July 31, 1997 were $10.8
million compared to $11.3 million at October 31, 1996.
The Company's investing activities consumed cash of $1.4 million in the
first nine months of fiscal 1997, primarily as a result of purchases of
property, plant and equipment totaling $2.0 million, offset by the receipt of
$0.6 million in certain deferred payments as a result of the sale of the EIA and
FIAX Product Lines. The Company's investing activities generated cash of $0.9
million in the first nine months of fiscal 1996, primarily due to the receipt of
$12.3 million in proceeds from the sale of its EIA and FIAX Product Lines offset
by the use of $8.2 million to acquire Clonetics. Purchases of property, plant
and equipment totaled $2.1 million for the first nine months of fiscal 1996.
8
<PAGE>
Financing activities consumed cash of $1.2 and $3.1 million for the first
nine months of fiscal years 1997 and 1996 respectively, reflecting primarily the
repayment of amounts outstanding under the Company's various debt facilities.
At July 31, 1997, the Company's principal short-term cash requirements were
to fund the Company's normal working capital needs, consisting primarily of
inventories and receivables, and to fund capital expenditures. At July 31, 1997,
the Company had outstanding capital commitments of approximately $1.1 million
and $9.0 million was available under the terms of the Company's revolving credit
facility.
Recent Developments
On August 25, 1997, the Company announced that it had signed a definitive
merger agreement pursuant to which Cambrex Corporation ("Cambrex"), has agreed
to acquire the Company for $11.625 per share. A copy of the Agreement and Plan
of Merger among Cambrex, BW Acquisition Corporation, a wholly-owned subsidiary
of Cambrex, and the Company, dated August 22, 1997, (the "Merger Agreement") is
filed as an exhibit to this Report and is incorporated herein by reference.
In accordance with the Merger Agreement and pursuant to an Offer to
Purchase to all stockholders of the Company, Cambrex commenced on August 28,
1997, a tender offer for 100% of the outstanding Common Stock of the Company
(the "Offer"). A copy of the Offer to Purchase by BW Acquisition Corporation,
dated August 28, 1997, is filed as an exhibit to this Report and is incorporated
herein by reference. Assuming that the Offer is consummated, any shares not
tendered in the Offer will be cashed out for $11.625 per share in a statutory
merger, giving the transaction a total value of approximately $130.9 million.
The Offer expires on September 25, 1997, unless it is extended by Cambrex. The
Offer is conditioned upon, among other things, the tender of a number of shares
of Common Stock of the Company which, with the shares of stock issuable upon
exercise of options held by the Selling Stockholders as defined below, equals in
excess of 50% of all outstanding shares, on a fully-diluted basis as of the date
of purchase of the shares and on the expiration of any waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. In the event
of termination of the Merger Agreement, under certain circumstances Cambrex
would be entitled to a termination fee of $4.125 million and the reimbursement
of certain expenses in an aggregate amount not to exceed $1.2 million.
As a condition to Cambrex's entering into the Merger Agreement, Cambrex
required Anasco GmbH and Messrs. Alibrandi, Buterbaugh, Winkler, Rohrer, Staples
and Olsen, each an executive officer and/or director of the Company (with
Anasco, the "Selling Stockholders") to enter into substantially identical
stockholder agreements (the "Stockholders Agreement") covering substantially all
the shares of Common Stock owned beneficially by each of the stockholders,
including all shares issuable upon exercise of the options held by such person
(the "Shares"). The Shares comprise 3,716,443 shares (including 910,928 shares
issuable upon exercise of stock options) or approximately 31.1% of the aggregate
shares of Common Stock outstanding on a fully diluted basis. Pursuant to the
terms of the Stockholders Agreement, the Selling Stockholders have agreed, among
other things, to tender their Shares in the Offer, to vote in favor of the
Merger and otherwise to support the transactions contemplated by the Merger
Agreement. A copy of the forms of Stockholders Agreement with the executive
officers and directors and with Anasco are filed as exhibits to this Report and
are incorporated herein by reference.
9
<PAGE>
The Board of Directors of the Company has unanimously approved the
transactions contemplated by the Merger Agreement. Alex. Brown & Sons
Incorporated, the Company's financial advisor, has delivered to the Board of
Directors a written opinion to the effect that, as of the date of such opinion
and based upon and subject to certain matters stated therein, the $11.625 per
share cash consideration to be received in the Offer and the Merger by holders
of Company Common Stock (other than Cambrex and its affiliates) was fair, from a
financial point of view, to such holders.
On August 28, 1997 Cambrex and the Company filed with the Securities and
Exchange Commission information about the Offer on a Schedule 14D-1 and a
Solicitation/Recommendation Statement reflecting the recommendation of the
Company's Board of Directors on a Schedule 14D-9 (the "Schedule 14D-9"),
respectively. The Schedule 14D-9 contains a summary of the proposed transactions
that is qualified in its entirety by reference to the Merger Agreement and to
the Stockholders Agreement. The relevant portion of the Schedule 14D-9 is
attached hereto as an exhibit and incorporated herein by reference.
10
<PAGE>
BIOWHITTAKER, INC.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
In May 1997, the Company entered into a Settlement Agreement with respect
to its lawsuit against Minnesota Mining and Manufacturing Company ("3M") arising
out of the 1991 purchase from 3M of its allergy diagnostic business. Under the
agreement, the Company dismissed its appeal and 3M agreed to waive a payment of
a future installment of the deferred purchase price payable as a result of the
1991 acquisition.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.20Agreement and Plan of Merger among Cambrex, BW Acquisition
Corporation, a wholly-owned subsidiary of Cambrex, and the
Company, dated August 22, 1997 (incorporated by reference to
Exhibit 2 to the Schedule 14D-9 of the Company filed on August
28, 1997).
10.21Offer to Purchase by BW Acquisition Corporation, a wholly-owned
subsidiary of Cambrex Corporation, dated August 28, 1997
(incorporated by reference to Exhibit 1 to the Schedule 14D-9 of
the Company filed on August 28, 1997).
10.22Form of Stockholders Agreement by and among Cambrex Corporation,
BW Acquisition Corporation and certain officers and directors of
the Company (incorporated by reference to Exhibit 8(a) to the
Schedule 14D-9 of the Company filed on August 28, 1997).
10.23Form of Stockholders Agreement by and among Cambrex Corporation,
BW Acquisition Corporation and Anasco GmbH (incorporated by
reference to Exhibit 8(b) to the Schedule 14D-9 of the Company
filed on August 28, 1997).
10.24Pages 1 through 22 of Schedule 14D-9 of the Company filed on
August 28, 1997 (filed herewith).
11. Statement regarding Computation of Per Share Net Income for the
three months and nine months ended July 31, 1997.
27. Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended July 31,
1997.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BIOWHITTAKER, INC.
Date: September 11, 1997 By /S/PHILP L. ROHRER, JR.
--------------------------- -------------------------------
Philip L. Rohrer, Jr., Vice President
(Principal Financial Officer)
12
<PAGE>
BIOWHITTAKER, INC.
EXHIBIT INDEX
Sequentially
Exhibit No. Description Numbered Page
- ----------- ----------- -------------
11 Computation of Per Share Net Inco 14
27 Financial Data Schedule 15
10.24 Pages 1 through 22 of Schedule 16
14D-9 of the Company filed on
August 28, 1997
13
<PAGE>
Exhibit 11
BIOWHITTAKER, INC.
COMPUTATION OF PER SHARE NET INCOME
(Dollars in thousands, except per share data)
For the Three Months For the Nine Months
Ended July 31, Ended July 31,
-------------- --------------
1997 1996 1997 1996
---- ---- ---- ----
Earnings
Net income/(loss) ................. $ 1,919 $ (910) $ 4,886 $(1,502)
======= ======= ======= =======
Average Common and Common Equivalent
Shares (in 000)
Weighted average number of common
shares outstanding ............. 10,761 10,759 10,760 10,759
Common equivalent shares:
Stock options included under
treasury stock method ........ 237 -- 162 --
Proportional interest rights of
Anasco GmbH .................. 23 -- 22 --
Total .............................. 11,021 10,759 10,944 10,759
------ ------ ------ ------
Net Income/(Loss) Per Share......... $ 0.17 $ (0.08) $ 0.45 $(0.14)
======= ======= ======= ======
Unaudited
Note:Net income per share determined on a fully diluted basis is not
materially different from primary net income per share shown above.
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
BioWhittaker's interim consolidated statement of income for the nine months
ended July 31, 1997 and it's consolidated balance sheet as of July 31, 1997 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> JUL-31-1997
<CASH> 3,441
<SECURITIES> 0
<RECEIVABLES> 7,723
<ALLOWANCES> 60
<INVENTORY> 23,093
<CURRENT-ASSETS> 37,098
<PP&E> 34,851
<DEPRECIATION> 18,088
<TOTAL-ASSETS> 65,207
<CURRENT-LIABILITIES> 10,799
<BONDS> 0
0
0
<COMMON> 108
<OTHER-SE> 51,577
<TOTAL-LIABILITY-AND-EQUITY> 65,207
<SALES> 42,254
<TOTAL-REVENUES> 42,254
<CGS> 21,289
<TOTAL-COSTS> 35,146
<OTHER-EXPENSES> (585)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35
<INCOME-PRETAX> 7,658
<INCOME-TAX> 2,772
<INCOME-CONTINUING> 4,886
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,886
<EPS-PRIMARY> .45
<EPS-DILUTED> .45
</TABLE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
------------------------
BIOWHITTAKER, INC.
(NAME OF SUBJECT COMPANY)
BIOWHITTAKER, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(AND ASSOCIATED RIGHTS)
(TITLE OF CLASS OF SECURITIES)
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09066T 108
((CUSIP) NUMBER OF CLASS OF SECURITIES)
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F. DUDLEY STAPLES, ESQ.
GENERAL COUNSEL
BIOWHITTAKER, INC.
8830 BIGGS FORD ROAD
WALKERSVILLE, MD 21793-0127
(301) 898-7025
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF
OF THE PERSON(S) FILING STATEMENT)
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WITH A COPY TO
ARIEL VANNIER, ESQ.
VENABLE, BAETJER, HOWARD & CIVILETTI, LLP
1201 NEW YORK AVENUE. NW
WASHINGTON, DC 20005-3917
<PAGE>
ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the Subject Company is BioWhittaker, Inc., a Delaware
corporation (the "Company"), and the address of its principal executive offices
is 8830 Biggs Ford Road, Walkersville, MD 21793-0127. The title of the equity
securities to which this Solicitation/Recommendation Statement on Schedule 14D-9
(this "Statement") relates is the Company's Common Stock, par value $0.01 per
share (the "Common Stock"), and the associated rights to purchase Series A
Participating Cumulative Preferred Stock, par value $0.1 (the "Rights" and,
together with the Common Stock, the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to the tender offer (the "Offer") made by BW
Acquisition Corporation, a Delaware corporation (the "Purchaser"), a wholly
owned subsidiary of Cambrex Corporation, a Delaware corporation ("Parent"),
disclosed in the Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1")
dated August 28, 1997, to purchase all of the outstanding Shares at a price of
$11.625 per Share, net to the seller in cash, without interest thereon (the
"Offer Price"), upon the terms and subject to the conditions set forth in the
Offer to Purchase dated August 28, 1997 (the "Offer to Purchase"), and the
related Transmittal Letter (the Schedule 14D-1, Offer to Purchase, Transmittal
Letter and related documents, together with any amendments or supplements
thereto, are sometimes collectively referred to herein as the "Offer
Documents"). A copy of the Offer to Purchase is filed as Exhibit 1 to this
Statement.
According to the Schedule 14D-1, the principal executive offices of Parent
and the Purchaser are located at One Meadowland Plaza, East Rutherford, NJ,
07073.
The Offer is being made pursuant to an Agreement and Plan of Merger dated
as of August 22, 1997 (the "Merger Agreement"), by and among Parent, the
Purchaser and the Company. A copy of the Merger Agreement is filed as Exhibit 2
to this Statement.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person
filing this Statement, are set forth in Item 1 above, which information is
incorporated herein by reference.
(b) Except as set forth in this Item 3(b) or in the Information Statement
attached to this Schedule 14-D as Annex A (the "Information Statement") to the
knowledge of the Company, as of the date hereof, there are no material
contracts, agreements, arrangements or understandings and no actual or potential
conflicts of interest between the
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Company and its affiliates and (1) the Company, its executive officers,
directors and affiliates or (2) Parent or the Purchaser or their respective
executive officers, directors or affiliates. The Information Statement is being
furnished to the Company's stockholders pursuant to Section 14(f) of the
Securities Exchange Act of 1934 (the "Exchange Act") and Rule 14f-1 issued under
the Exchange Act in connection with the Purchaser's right (after consummation of
the Offer) to designate persons to be appointed to the Board of Directors of the
Company other than at a meeting of the stockholders of the Company. The
Information Statement is hereby incorporated by reference.
(B)(1) CERTAIN ARRANGEMENTS BETWEEN THE COMPANY AND CERTAIN OF ITS
DIRECTORS,
EXECUTIVE OFFICERS AND AFFILIATES
Funding of SERP
Prior to execution of the Merger Agreement, the Company terminated the
trust that funds the BioWhittaker Inc. Supplemental Executive Retirement Plan
(the "SERP") (the "Original SERP Trust") and immediately established a
replacement trust for the SERP (the "Replacement SERP Trust"). The terms of the
Replacement SERP Trust are substantially identical to those of the Original SERP
Trust. In May 1996, the Company voluntarily funded the Original SERP Trust with
300,000 Shares. In connection with the termination of the Original SERP Trust
and establishment of the Replacement SERP Trust, 179,656 Shares were returned to
the Company and canceled, and the remaining 120,344 Shares were transferred to
the Replacement SERP Trust.
Stock Options; Equity-based Plans
Pursuant to the Merger Agreement, all options to purchase shares of the
Company's Common Stock outstanding immediately prior to the Effective Time of
the Merger (as defined in the Merger Agreement), including, without limitation,
options outstanding pursuant to the Company's 1994 Stock Option Plan for
Non-Employee Directors and its 1991 Long-Term Stock Incentive Plan will be
canceled in exchange for consideration ("Option Consideration") equal to the
product of (i) the number of Shares previously subject to options and (ii) the
excess if any, of the Merger Consideration (as defined in the Merger Agreement)
over the exercise price for such Shares under such options.
The Company has agreed, pursuant to the Merger Agreement and subject to the
payment of the Option Consideration, effective as of the Effective Time of the
Merger, to cause to be terminated each stock option or other equity-based plan
maintained with respect to any Shares (or rights in respect thereof) other than
the BioWhittaker, Inc. Savings & Stock Investment Plan (the "BSSIP") and the
SERP.
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Assumption of Change of Control Employment Agreements
The Company has Change of Control Employment Agreements ("Change of Control
Agreements") with Thomas Winkler, Philip L. Rohrer, Jr., Leif Olsen and F.
Dudley Staples, Jr. (each, an "Executive" and, collectively, the "Executives").
A copy of the form of Change of Control Agreement dated March 11, 1997, entered
into by the Company with each of the Executives is filed as Exhibit 6 to this
Statement. In connection with the Merger Agreement, and in accordance with the
terms of these agreements, Parent and the Purchaser have agreed to assume in all
respects the obligations of the Company pursuant to the Change of Control
Agreements.
Employment Letters
Each of the Executives who is a party to a Change of Control Agreement, and
Noel L. Buterbaugh, the President and Chief Executive Officer of the Company
(each, a "Senior Executive" and, collectively, the "Senior Executives"), has
entered into a letter agreement (each an "Employment Letter" and, collectively,
the "Employment Letters") with Parent concerning their respective employment
relationships following completion of the acquisition of the Company by Parent.
Copies of the forms of Employment Letters applicable to the Executives and of
Mr. Buterbaugh's Employment Letter are filed as Exhibits 7(a) and 7(b),
respectively, to this Statement. The Employment Letters with respect to the
Executives provide that the terms of such Employment Letters will apply, to the
extent that the terms and conditions thereof are not covered by the Change of
Control Agreements and upon expiration of those Agreements and Mr. Buterbaugh's
Employment Letter provides that its terms and conditions will apply commencing
upon completion of the acquisition of the Company by Parent.
Each of the Employment Letters provides for (i) an annual salary at a
stated rate, subject to annual review; (ii) participation in, and receipt of
bonuses through, Parent's Earnings Improvement Program, with 1998 bonuses at
least equal to the Senior Executive's bonus target award under the Company's
1997 Management Incentive Compensation Plan; (iii) the grant of options pursuant
to Parent's 1996 Performance Stock Option Plan; (iv) continued participation in
and receipt of benefits under existing welfare benefit plans (including medical,
prescription, dental, disability, life insurance and similar plans) or similar
plans of Parent which, in the aggregate will provide a similar quality of
benefits; (v) continued accrual of benefits under the Company's defined
contribution plans, SERP and BSSIP, as applicable; and (vi) continuation of
reasonable fringe benefits. In addition, each of the Employment Letters also
provides that upon any termination of the Senior Executive's employment by
Parent (not including death or disability) other than for Cause (as defined),
the Senior Executive is entitled to a severance payment equal to his monthly
base salary for up to 12 months from the date of separation or until he secures
other employment, whichever occurs first.
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The Employment Letters also contain certain non-competition and
non-solicitation provisions applicable for a period of two years following the
date of termination of each Senior Executive's employment by the Parent for any
reason.
Indemnification Arrangements
The Company is a Delaware corporation. The General Corporation Law of the
State of Delaware (the "DGCL") generally provides that a corporation may
indemnify an officer or director who was, is or is threatened to be made a party
to any threatened, pending or completed action by reason of the fact that he is
or was a director, officer or employee of the corporation against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
The Certificate of Incorporation of the Company, provides that no person
shall be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except to the extent such
exemption from liability or limitation thereof is not permitted under Delaware
law. In addition, the Certificate provides that each person who was or is a
party or is threatened to be made a party to, or is involved in any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative (a "Proceeding"), by reason of the
fact that such person is or was a director or officer of the Company, shall be
indemnified and held harmless by the Company to the fullest extent authorized by
the DGCL, including against all expenses incurred in connection with a
Proceeding in advance of its final disposition to the fullest extent permitted
by the DGCL.
The Company maintains a directors' and officers' liability insurance policy
to insure directors and officers against losses resulting from wrongful acts
committed by them in their capacities as officers and directors of the Company,
including liabilities arising under the Securities Act.
The Merger Agreement provides that all rights to indemnification and
exculpation from liabilities for acts or omissions occurring prior to the
Effective Time of the Merger currently 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, by-laws, (or comparable
organizational documents) and indemnification agreements will survive the Merger
and continue in full force and effect for a period of not less than six years
from the Effective Time. The Merger Agreement also obligates the Parent to cause
to be maintained for a period of 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
<PAGE>
Time ("D&O Insurance") for all persons who were directors and officers of
the Company on the date of the Merger Agreement, so long as the annual premium
therefor is not in excess of 200% of the last annual premium paid prior to the
date of the Merger Agreement (the "Maximum Premium"); provided, however, that in
lieu of maintaining such existing D&O Insurance, Parent may cause coverage to be
provided under any policy maintained for the benefit of Parent or any of its
subsidiaries or any policy specifically obtained for that purpose, so long as
the terms thereof are no less advantageous to the covered person than the
existing D&O Insurance. If the existing D&O Insurance expires, is terminated or
canceled, Parent is obligated to use all reasonable efforts to cause to be
obtained for the remainder of the six-year period following the Effective Time
of the Merger as much D&O Insurance as can be obtained for the remainder of the
period, on terms and conditions no less advantageous to the covered person than
the existing D&O Insurance.
(B)(2) CERTAIN ARRANGEMENTS BETWEEN AND AMONG PARENT, THE PURCHASER
AND CERTAIN
DIRECTORS, EXECUTIVE OFFICERS AND AFFILIATES OF THE COMPANY.
On August 22, 1997, the Company, Parent and the Purchaser entered into the
Merger Agreement. Concurrently therewith, Parent, the Purchaser and each of
Anasco GmbH, and Messrs. Joseph Alibrandi, Buterbaugh, Winkler, Rohrer, Olsen,
and Staples entered into a Stockholders Agreement (described below). The
following summaries of agreements are qualified in their entirety by reference
to the full text of these agreements.
The Merger Agreement
The Offer. The Merger Agreement provides that the Purchaser will commence
the Offer and that, upon the terms and subject to the prior satisfaction or
waiver of the conditions of the Offer, the Purchaser will purchase all Shares
validly tendered pursuant to the Offer. The Merger Agreement provides that the
Purchaser may, in its sole discretion waive, in whole or in part, at any time or
from time to time, any condition, increase the price per Share payable in the
Offer, or make any other changes in the terms and conditions of the Offer,
provided that the Purchaser has agreed that it will not, without the written
consent of the Company, (a) reduce the number of Shares subject to the Offer,
(b) reduce the Offer Price, (c) add to the conditions to the Offer set forth in
the Merger Agreement, (d) modify the form of consideration payable in the Offer,
(e) increase the Minimum Condition (which is defined as that number of Shares
which, together with the Option Shares, would represent in excess of 50% of all
outstanding Shares determined on a fully diluted basis on the date of purchase),
or (f) amend the conditions to the Offer or any other term of the Offer in any
manner materially adverse to the holders of Shares. The Purchaser has reserved
the right (but is not obligated to), subject to the terms of the Merger
Agreement and the applicable rules and regulations of the Securities and
Exchange Commission (the "Commission"), extend the period of time during which
the Offer is open, and thereby delay payment for
<PAGE>
the Shares, and to amend the Offer. Purchaser, subject only to the conditions
of the Offer, shall accept for payment and pay for the Shares which have been
validly tendered and not withdrawn pursuant to the Offer as soon as it is
permitted to do so under applicable law. The Purchaser has the right to
terminate the Offer if, on or before October 31, 1997 and without fault of the
Purchaser, the conditions to the Offer have not been met.
The Merger. The Merger Agreement provides that following the satisfaction
or waiver of the conditions described below under "Conditions to the Merger",
and as promptly as practicable following consummation of the Offer, the
Purchaser will be merged with and into the Company, and each then outstanding
Share (other than Shares owned by the Company, any subsidiary of the Company,
Parent, the Purchaser, any other subsidiary of Parent or by stockholders, if
any, who are entitled to and who properly exercise appraisal rights under
Delaware law) will be converted into the right to receive an amount in cash
equal to the price per Share paid pursuant to the Offer.
The Company shall be the surviving entity in the Merger and the name of the
surviving company shall be "BioWhittaker Inc." The Certificate of Incorporation
and Bylaws of the Company shall remain those of the surviving company.
The Merger Agreement also provides that the directors of the Purchaser at
the effective time of the Merger (the "Effective Time") will be the directors of
the surviving corporation, and the officers of the Company at the Effective Time
will be the officers of the surviving corporation, until their respective
successors are duly elected or appointed and qualified.
The Merger Agreement provides that promptly upon the purchase by the
Purchaser of the Shares pursuant to the Offer and from time to time thereafter,
the Purchaser shall be entitled to designate up to the minimum number of
directors of the Company necessary in order for the result (expressed as a
fraction) derived by dividing the number of directors so designated by the total
number of directors to be at least equal to the result (expressed as a fraction)
derived by dividing the Shares then held by the Purchaser by the total number of
Shares then outstanding, provided, however, that until the consummation of the
Merger, the Board of Directors of the Company will have at least two 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 the Information Statement containing the information required
by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder,
which Information Statement is attached as Annex A hereto. The term "Independent
Director" means a director of the Company who is (i) not designated by the
Purchaser nor otherwise affiliated with Parent or the Purchaser, (ii) not an
employee or the Chairman of the Company or any of its subsidiaries and (iii) is
not affiliated with Anasco.
Following the election or appointment of the Purchaser's designees to the
Board, any amendment to the Merger Agreement or the Certificate of Incorporation
<PAGE>
or By-laws of the Company, any termination of the Merger Agreement by the
Company, and any extension of time for performance, or waiver of rights, under
the Merger Agreement will require the concurrence of a majority of Independent
Directors.
Company Stock Options. Immediately prior to the Effective Time, each then
outstanding option to purchase Shares (a "Company Stock Option"), whether or not
then vested and exercisable, shall be canceled in exchange for a right to
receive payment within 15 days of an amount in cash (less applicable withholding
taxes) equal to the product of (i) the number of Shares previously subject to
such Company Stock Option multiplied by (ii) the excess, if any, of the price
per Share paid pursuant to the Offer over the exercise price per Share of the
Share previously subject to such Company Stock Option.
Stockholder's Meeting. Pursuant to the Merger Agreement, the Company will,
if required by applicable law in order to consummate the Merger, as soon as
practicable following the consummation of the Offer, duly call, give notice of,
convene and hold a meeting of its stockholders (the "Meeting") for the purpose
of considering and taking action upon the Merger Agreement. The Proxy Statement
shall include the recommendation of the Board that stockholders of the Company
vote in favor of the approval and adoption of the Merger Agreement and the
transactions contemplated thereby (provided, however, that such recommendation
may be modified or withdrawn as provided in the Merger Agreement).
Conditions to the Merger. The Merger Agreement provides that the
obligations of Parent, the Purchaser and the Company to consummate the Merger
are subject to the satisfaction of certain conditions, including the following:
(a) the Purchaser shall have purchased all Shares duly tendered and not
withdrawn pursuant to the terms of the Offer and subject to the terms thereof;
provided that the obligation of the Parent and the Purchaser to effect the
Merger shall not be conditioned on the fulfillment of such condition if the
failure of the Purchaser to purchase the Shares pursuant to the Offer shall have
constituted a breach of the Offer or of the Merger Agreement; (b) the
consummation of the Merger shall not be precluded by any order, decree or
injunction of a court of competent jurisdiction (each party having agreed to use
its best efforts to have any such order reversed or injunction lifted), and
there shall not have been any action taken or any law enacted, promulgated or
deemed applicable to the Merger by any court, governmental agency or regulatory
or administrative authority, foreign or domestic (each, a "Governmental Entity")
that makes consummation of the Merger illegal; (c) if required by Certificate of
Incorporation and By-Laws of the Company and the DGCL, the Merger Agreement
shall have been approved and adopted by the affirmative vote of the holders of
the requisite number of Shares in accordance with the Certificate of
Incorporation and By-Laws of the Company and the DGCL; and (d) any applicable
waiting period under the HSR Act shall have expired or been terminated. The
Merger Agreement also provides that the obligations of Parent and the Purchaser
to consummate the Merger are subject to the following additional conditions: (a)
<PAGE>
the Company shall have performed all of its material agreements and
covenants contained in the Merger Agreement required to be performed on or prior
to the Effective Time and the representations and warranties of the Company
contained in the Merger Agreement shall be true and correct in all material
respects on and as of (i) the date made and (ii) except in the case of
representations and warranties expressly made solely with reference to a
particular date, the effective time of the Merger and (b) the Company shall not
have received notice from the holder or holders of more than 10% of the
outstanding Shares, determined on a fully diluted basis, that such holder or
holders have exercised or intend to exercise its or their appraisal rights under
Section 262 of the DGCL.
As used herein, "Material Adverse Effect" means, with respect to any person
or entity, a material adverse effect on the business, assets, liabilities,
operations or condition (financial or otherwise) of such person or entity and
its subsidiaries, taken as a whole.
Termination of the Merger Agreement. The Merger Agreement may be terminated
at any time prior to the effective time of the Merger, whether prior to or after
approval of the terms of the Merger Agreement by the stockholders of the
Company:
(1) by the mutual written consent of Parent, the Purchaser and the
Company;
(2) by either the Parent or the Company if, on or before October 31,
1997 and without fault of such terminating party, Purchaser shall not have
purchased in the Offer such number of Shares which, together with the
number of Option Shares (as defined below) subject to the Stockholders
Agreement, represents in excess of 50% of the Shares on a fully diluted
basis, or the Merger shall not have been consummated on or before November
30, 1997, provided, however, that the right to terminate the Merger
Agreement is not available (i) to any party whose failure to fulfill any
obligation under the Merger Agreement has been the cause of, or resulted
in, the failure of the Offer or the Merger to have occurred on or before
the aforesaid date;
(3) by either the Parent or the Company if the Offer shall expire or
terminate in accordance with its terms without any Shares having been
purchased thereunder and, in the case of termination by the Parent, the
Purchaser shall not have been required by the terms of the Offer or the
Merger Agreement to purchase any Shares pursuant to the Offer;
(4) by the Company if the Purchaser shall not timely commence the
Offer as provided in the Merger Agreement;
<PAGE>
(5) if approval by the Company's stockholders is required by law, by
either the Purchaser or the Company if, upon a vote of the Company's
stockholders, such stockholder approval shall not have been obtained;
(6) unilaterally by the Purchaser or the Company (i) if the other
fails to perform any material covenant or agreement in any material respect
in the Merger Agreement, and does not cure the failure in all material
respects within 30 business days after the terminating party delivers
written notice of the alleged failure or (ii) if any condition to the
obligations of that party is not satisfied (other than by reason of a
breach by that party of its obligations hereunder), and it reasonably
appears that the condition cannot be satisfied prior to November 30, 1997;
(7) by either the Purchaser or the Company if either is prohibited by
an order or injunction (other than an order or injunction on a temporary or
preliminary basis) of a court of competent jurisdiction or other
Governmental Entity from consummating the Offer or the Merger and all means
of appeal and all appeals from such order or injunction have been finally
exhausted;
(8) by the Purchaser if the Board of Directors of the Company shall
have withdrawn or modified, or resolved to withdraw or modify, in any
manner which is adverse to Parent or the Purchaser, its recommendation or
approval of the Merger or the Merger Agreement; provided, however, that
such a termination shall not become effective if, as a result of the
Company's receipt of a proposal for an Acquisition Transaction (as defined
under "Takeover Proposals") from a third party, the Company, in accordance
with the Merger Agreement, withdraws or modifies, or resolves to withdraw
or modify, in any manner which is adverse to Parent or the Purchaser, its
recommendation or approval of the Merger or the Merger Agreement and if
within ten business days of taking and disclosing to its stockholders the
aforementioned position the Company publicly reconfirms its recommendation
of the transactions contemplated by the Merger Agreement; or
(9) by the Company if (i) the Board of Directors of the Company shall
have determined in good faith, based on the advice of outside counsel, that
it is necessary, in order to comply with its fiduciary duties to the
Company's stockholders under applicable law, to terminate the Merger
Agreement to enter into an agreement with respect to or to consummate a
transaction constituting a Superior Proposal (as defined under "Takeover
Proposals"), (ii) the Company shall have given notice to the Purchaser
advising the Purchaser that the Company has received a Superior Proposal
from a third party, specifying the material terms and conditions (including
the identity of the third party) and that the Company intends to terminate
the Merger Agreement, (iii) either (A) the Purchaser shall not have revised
its proposal for an Acquisition Transaction within two business days from
the time on which such notice is deemed to have been given to Parent, or
(B) if the Purchaser within such period shall have revised its proposal for
<PAGE>
an Acquisition Transaction, the Board of Directors of the Company, after
receiving advice from the Company's financial advisor, shall have
determined in its good faith reasonable judgment that the third party's
proposal for an Acquisition Transaction is superior to Parent's revised
proposal for an Acquisition Transaction and (iv) the Company, at the time
of such termination, pays the Expenses and the Termination Fee (each as
defined under "Fees and Expenses" below).
Takeover Proposals. The Merger Agreement provides that the Company shall
not, shall not permit any of its subsidiaries to, and shall not authorize or
permit any officer, director or employee or any investment banker, attorney,
accountant or other advisor or representative of the Company or any of its
subsidiaries to, directly or indirectly, except as otherwise described in this
Section on "Takeover Proposals" (i) initiate, solicit, negotiate, encourage, or
provide confidential information to facilitate any proposal or offer to acquire
all or any substantial part of the business and properties of the Company and
its subsidiaries, taken as a whole, or beneficial ownership (as determined
pursuant to Rule 13d-3 promulgated under the Exchange Act) of 20% or more of the
capital stock of the Company, whether by merger, purchase of assets, tender
offer or otherwise, whether for cash, securities or any other consideration or
combination thereof (such transactions being referred to herein as "Acquisition
Transactions"), (ii) enter into any agreement with respect to any Acquisition
Transaction or give any approval of the type referred to in the next paragraph
below with respect to any Acquisition Transaction or (iii) participate in any
discussions regarding, 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 Acquisition Transaction. Notwithstanding the immediately preceding
sentence, the Company and its subsidiaries may, prior to the approval of the
Merger Agreement by the Company's stockholders, in response to any unsolicited
proposal for an Acquisition Transaction, furnish information concerning its
business, properties or assets to the corporation, partnership, person or other
entity or group (a "Potential Acquiror") making such proposal for an Acquisition
Transaction and participate in negotiations with the Potential Acquiror if (x)
the Company's Board of Directors after consultation with one or more of its
independent financial advisors, is of the reasonable belief that such Potential
Acquiror has the financial wherewithal to consummate such an Acquisition
Transaction, (y) the Company's Board of Directors reasonably determines, after
receiving advice from the Company's financial advisor, that such Potential
Acquiror has submitted a proposal for an Acquisition Transaction that involves
consideration to the Company's stockholders and other terms that taken as a
whole are superior to the Merger, and (z) based upon advice of counsel to such
effect, the Company's Board of Directors determines in good faith that it is
necessary to so furnish information and negotiate in order to comply with its
fiduciary duty to stockholders of the Company. The Merger Agreement provides
that in the event the Company shall determine to provide any information as
described above, or shall receive any offer of the type referred to in this
subsection or shall receive or become aware of any other proposal to acquire a
substantial part of the business and properties of the Company and its
<PAGE>
subsidiaries, taken as a whole, or to acquire a substantial amount of capital
stock of the Company, it shall promptly inform Parent orally as to the fact that
information is to be provided and shall furnish to Parent the identity of the
recipient of such information and/or the proponent of such offer or proposal and
a description of the material terms thereof. The Company is also obligated to
keep Parent fully informed of the status and material details of any such
proposed Acquisition Transaction or other transaction (including any material
amendments or material proposed amendments of any such proposed Acquisition
Transaction or other transaction).
The Merger Agreement also provides that neither the Board of Directors of
the Company nor any committee thereof (x) shall withdraw or modify or propose to
withdraw or modify, in any manner adverse to Parent, the approval of
recommendation of such Board of Directors or such committee of the Merger or (y)
approve or recommend, or propose to approve or recommend, any proposal for an
Acquisition Transaction except, in each case, in connection with a Superior
Proposal. As used herein, the term "Superior Proposal" means a bona fide
proposal to acquire, directly or indirectly, for consideration consisting of
cash and/or securities, more than 50% of the Shares then outstanding or all or
substantially all the assets of the Company, provided (i) such proposed
transaction satisfies the tests set forth in clauses (x), (y) and (z) of the
second sentence of the immediately preceding paragraph and (ii) the Board of
Directors determines, in its good faith reasonable judgment, that such proposed
transaction is reasonably likely to be consummated without undue delay.
Fees and Expenses. The Merger Agreement provides that the Company will pay,
or cause to be paid, in same day funds to Parent the sum of (x) Parent's
Expenses (as defined below) and (y) $4,125,000 (the "Termination Fee") upon
demand if (i) the Company terminates the Merger Agreement in accordance with the
provision described in paragraph (9) under "Termination of Merger Agreement". In
addition, the Company will pay or cause to be paid in same day funds to Parent,
the sum of Parent's Expenses and the Termination Fee upon demand if (i) the
Purchaser terminates the Merger Agreement in accordance with the provisions
described in paragraphs (6) or (8) under "Termination of Merger Agreement" at
any time after a proposal for an Acquisition Transaction has been made, (ii) the
Company or the Purchaser terminates the Merger Agreement in accordance with the
provisions described in paragraphs (2), (3) or (5) under "Termination of Merger
Agreement" at any time after a proposal for an Acquisition Transaction has been
made, or (iii) the Purchaser terminates the Merger Agreement in accordance with
the provision described in paragraph (6)(ii) under "Termination of Merger
Agreement" at any time after a proposal for an Acquisition Transaction has been
made and, within nine months after any termination referred to in the
immediately preceding clauses (i), (ii) or (iii) of this sentence, the person
that made the proposal for an Acquisition Transaction (or an affiliate thereof)
completes a merger, consolidation or other business combination with the Company
or a subsidiary of the Company, or the purchase from the Company or from a
subsidiary of the Company of 30% or more (in voting power) of the voting
securities of the Company or of 30% or more (in market value)
<PAGE>
of the assets of the Company and its subsidiaries, on a consolidated basis;
provided that the Company will not have any such obligations if the Purchaser
terminates the Merger Agreement in accordance with the provision described in
paragraph (6)(ii) under "Termination of Merger Agreement" as a result of the
failure of a condition to be satisfied unless the reason for the failure of such
condition to be satisfied is reasonably related to the making of such proposal
for an Acquisition Transaction by the person that ultimately consummated a
transaction with the Company. "Expenses" shall mean reasonable and reasonably
documented out-of-pocket fees and expenses incurred or paid by or on behalf of
Parent in connection with the Offer and the Merger or the consummation of any of
the transactions contemplated by the Merger Agreement (including, without
limitation, the fees and expenses of one counsel representing the financial
institutions providing financing to the Purchaser and all fees and expenses of
Parent's investment banking firm), provided that all such Expenses for this
purpose shall not exceed $1.2 million in the aggregate.
Conduct of Business by the Company. The Merger Agreement provides that,
except as otherwise expressly contemplated by the Merger Agreement (including as
an exception on the disclosure schedule thereto) or to the extent that Purchaser
shall otherwise consent in writing, during the period from the date of the
Merger Agreement to the effective time of the Merger the Company shall not and
shall cause its subsidiaries not to: (a) 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 a direct or indirect wholly owned
subsidiary of the Company to its parent; (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; (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; (d) 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 except upon exercise of any Option; (e) amend its
certificate of incorporation, by-laws or other comparable organizational
documents; (f) 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, limited liability company, partnership, joint
venture, association or other business organization or division thereof or (y)
any assets that individually or in the aggregate are material to the Company and
its subsidiaries taken as a whole; (g) sell, lease, license, mortgage or
otherwise encumber or subject to any lien or otherwise dispose of any of its
properties or assets, other than in the ordinary course of business consistent
with past practice, that are material to the Company and its subsidiaries taken
as a whole; (h) incur any indebtedness, except for borrowings for working
capital purposes not in excess of $500,000 at any one time outstanding incurred
in the ordinary course of business consistent with past practice and except for
intercompany indebtedness between the Company and any of its wholly-owned
<PAGE>
subsidiaries or between such wholly-owned subsidiaries, 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; (i) make or agree to make any new capital expenditure or capital
expenditures which in the aggregate are in excess of $250,000; (j) make any tax
election that could reasonably be expected to have a Material Adverse Effect on
the Company or settle or compromise any material income tax liability; (k)
except in the ordinary course of business or except as would not reasonably be
expected to have a Material Adverse Effect on the Company, 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; (l) make any material change to its accounting methods, principles
or practices, except as may be required by generally accepted accounting
principles; or (m) authorize, or commit or agree to take, any of the foregoing
actions.
In addition to the foregoing, the Company has agreed that, except as
expressly contemplated or permitted by the Merger Agreement, it will not take
any action, or permit any of its subsidiaries to take any action, that would, or
that could reasonably be expected to, result in (a) any of the representations
and warranties of the Company set forth in the Merger Agreement that are
qualified as to materiality becoming untrue, (b) any of such representations and
warranties that are not so qualified becoming untrue in any material respect or
(c) any of the conditions to the Merger not being satisfied.
Reasonable Efforts. The Merger Agreement provides that, except as otherwise
contemplated therein, Parent, the Purchaser and the Company shall use their
reasonable best efforts to take promptly, or cause to be taken, all actions and
to do promptly, or cause to be done, all things necessary, proper or advisable
to consummate and make effective the transactions contemplated by the Merger
Agreement, including using their reasonable best efforts (i) to obtain all
necessary waivers, consents and approvals, and (ii) to effect all necessary
registrations and filings, subject to approval by the Company's stockholders. In
case at any time after the effective time of the Merger any further action is
necessary or desirable to carry out the obligations of the parties under the
Merger Agreement, the proper officers and/or directors of Parent, the Purchaser
and the Company, as the case may be, shall take the necessary action.
Specifically, Parent, Purchaser and the Company have agreed to use their
reasonable best efforts to make promptly any required submissions under the HSR
Act with respect to the Merger and the transactions contemplated by the Merger
Agreement. The Company has agreed to use its reasonable best efforts to obtain
all consents, approvals, permits or authorizations as are required to be
obtained from other parties to loan agreements or other contracts material to
the Company's business in connection with the consummation of the Merger.
<PAGE>
The Confidentiality Agreement
On March 20, 1997 Parent entered into a confidentiality agreement with the
Company pursuant to which, among other things, Parent agreed to treat as
confidential certain information provided by or on behalf of the Company, agreed
for a period of 18 months not to solicit for hire any present officer or
management level employee of the Company, and agreed that, for a period of two
years, without the prior written consent of the Company, Parent will not (i)
acquire, offer to acquire, or agree to acquire, directly or indirectly, by
purchase or otherwise, any voting securities or direct or indirect rights or
options to acquire any voting securities of the Company, (ii) make, or in any
way participate, directly or indirectly, in any "solicitation" of any "proxy" to
vote (as such terms are used in the proxy rules of the Securities and Exchange
Commission) or seek to advise or influence any person or entity with respect to
the voting of any voting securities of the Company, (iii) form, join or in any
way participate, directly or indirectly, in a "group" within the meaning of
Section 13(d)(3) of the Exchange Act with respect to any voting securities of
the Company, or (iv) otherwise act, alone or in concert with others, directly or
indirectly, to seek control or influence or assist others to seek control or
influence the management, board of directors, or policies of the Company.
The Stockholders Agreement
In connection with execution of the Merger Agreement, Parent and the
Purchaser have entered into two separate but substantially identical
Stockholders Agreements, each dated as of August 22, 1997 (collectively, the
"Stockholders Agreement"), with Anasco GmbH ("Anasco"), a principal stockholder
of the Company, and each of Joseph F. Alibrandi, Noel L. Buterbaugh, Thomas R.
Winkler, Philip L. Rohrer, Jr., Leif Olsen and F. Dudley Staples, Jr., each an
executive officer and/or director of the Company (with Anasco, the "Selling
Stockholders"). A copy of the form of Stockholders Agreement with the executive
officers and directors is filed as Exhibit 8(a) to this Statement and of the
form of Stockholders Agreement with Anasco is filed as Exhibit 8(b) to this
Statement and are incorporated herein by reference.
Pursuant to the terms and conditions of the Stockholders Agreement, each
Selling Stockholder has agreed to tender his Shares in the Offer. In the
Stockholders Agreement, each Selling Stockholder has further agreed that, until
the Termination Date (as defined below), such Selling Stockholder has granted to
<PAGE>
Purchase an irrevocable proxy to, and will vote his Shares (i) in favor of the
Merger, the execution and delivery by the Company of the Merger Agreement and
the approval of the terms thereof and each of the other actions contemplated by
the Merger Agreement and the Stockholders Agreement and any actions required in
furtherance thereof; (ii) against any 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, the Offer or the
Stockholders Agreement; and (iii) except as specifically requested in writing by
Parent in advance, against the following actions (other than the Merger and the
transactions contemplated by the Merger Agreement): (A) any extraordinary
corporate transaction, such as a merger, consolidation or other business
combination involving the Company or its subsidiaries; (B) a sale, lease or
transfer of a material amount of assets of the Company or its subsidiaries or a
reorganization, recapitalization, dissolution, liquidation or winding up of the
Company or any of its subsidiaries; (C) any change in the majority of the Board
of Directors of the Company; (D) any material change in the present
capitalization of the Company or any amendment of the Company's Certificate of
Incorporation; (E) any other material change in the Company's corporate
structure or business; and (F) any other action which is intended or could
reasonably be expected to impede, interfere with, delay, postpone, discourage or
materially adversely affect the Merger, the transactions contemplated by the
Merger Agreement or the Stockholders Agreement or the contemplated economic
benefits of any of the foregoing.
In addition, subject to his obligations as a director or officer of the
Company and further subject to such restrictions as exist under the Merger
Agreement, each Selling Stockholder has agreed that he shall not, directly or
indirectly (including through advisors, agents or other intermediaries),
initiate, solicit, negotiate, encourage or provide confidential information to
facilitate any proposal or offer by any person that constitutes or could
reasonably be expected to lead to an Acquisition Transaction (as defined in the
Merger Agreement). If any Selling Stockholder receives any such inquiry or
proposal, then such Selling Stockholder shall promptly inform Parent of the
material terms and conditions, if any, of such inquiry or proposal and the
identity of the person making it. The Selling Stockholders have also agreed to
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing.
Each Selling Stockholder has agreed not to transfer or otherwise dispose of
its or his Shares other than through the Offer or Merger, or otherwise grant any
proxies with respect to, or otherwise encumber its or his Shares.
Under the Stockholders Agreement, each Selling Stockholder has also granted
the Purchaser an irrevocable option to purchase all of such Selling
Stockholder's Shares, including all Shares subject to all Stock Options owned by
such Selling Stockholder, in each case at the Offer Price per Share. In the case
<PAGE>
of all Shares underlying all such Stock Options (the "Option Shares"), such
option may be exercised by the Purchaser at any time following its purchase of
any Shares pursuant to the Offer and prior to the Termination Date. Among other
things, this option may facilitate the Purchaser's ability to acquire 50% of the
outstanding Shares. In the case of all other Shares held by the Selling
Stockholders, such option may be exercisable by the Purchaser at any time, and
from time to time, following any time when the Merger Agreement has been
terminated in accordance with its terms and prior to the Termination Date. Among
other things, such option will enable the Purchaser to acquire, and then sell,
all of such Shares to any person who has made and consummates a Superior
Proposal.
For purposes of the Stockholders Agreement, the term "Termination Date"
means the earlier of (a) twelve months from the date of the Stockholders
Agreement and (b) the consummation of the Merger, provided, however, that if the
Company is not in breach of its obligations under the Merger Agreement and none
of the Selling Stockholders are in breach of their obligations under the
Stockholders Agreement, the Termination Date shall be the date that: (i) the
Merger Agreement shall have terminated in accordance with the provisions
described in paragraphs (1), (4), (6)(i) or (7) under "Termination of the Merger
Agreement" above, (ii) the Merger Agreement shall have terminated in accordance
with the provisions described in paragraphs (2), (3) or (5) under "Termination
of the Merger Agreement" above and no proposal for an Acquisition Transaction
has been made, (iii) the Merger Agreement shall have terminated in accordance
with the provisions described in paragraph (6)(ii) under "Termination of the
Merger Agreement" above unless a proposal for an Acquisition Transaction has
been made. The Stockholders Agreement shall terminate on the Termination Date.
* * * * * *
The foregoing descriptions are qualified in their respective entireties by
reference to the texts of the relevant agreements, plans, amendments and other
documents, copies of which are filed as Exhibits 4 through 8(b) to this
Statement and are incorporated herein by reference.
ITEM 4. THE SOLICITATION AND RECOMMENDATION.
(a) RECOMMENDATION.
At a meeting held on August 21, 1997, the Board of Directors of the Company
unanimously approved the Offer and the Merger, determining that each of the
Offer and the Merger (including the offer price of $11.625 per Share in cash) is
fair to and in the best interests of stockholders of the Company. At such
meeting, the Board also unanimously adopted a resolution to recommend to the
stockholders of the Company that they accept the Offer. In addition, the Board
unanimously approved the form of Merger Agreement. Copies of a press release and
a letter from the Board to the Company's stockholders concerning the Offer, the
<PAGE>
Merger Agreement and the Board's recommendations are filed as Exhibits 13 and
12, respectively, to this Statement and are incorporated herein by reference.
As set forth in the Merger Agreement, the Purchaser will purchase Shares
tendered prior to the close of the Offer if the conditions to the Offer have
been satisfied (or waived).
STOCKHOLDERS CONSIDERING NOT TENDERING THEIR SHARES IN ORDER TO WAIT FOR
THE MERGER SHOULD NOTE THAT IF THE MINIMUM CONDITION IS NOT SATISFIED OR ANY OF
THE OTHER CONDITIONS TO THE OFFER ARE NOT SATISFIED, THE PURCHASER IS NOT
OBLIGATED TO PURCHASE ANY SHARES, AND CAN TERMINATE THE OFFER AND THE MERGER
AGREEMENT AND NOT PROCEED WITH THE MERGER.
Under Delaware Law, the approval of the Board and the affirmative vote of
the holders of a majority of the outstanding Shares (unless at least 90% of the
outstanding Shares are held by the Purchaser) are required to approve the
Merger. Accordingly, if the conditions to the Offer are satisfied, the Purchaser
will have sufficient voting power to cause the approval of the Merger without
the affirmative vote of any other stockholder. Under Delaware Law, if Purchaser
acquires, pursuant to the Offer or otherwise, at least 90% of the then
outstanding Shares, Purchaser will be able to approve and adopt the Merger
Agreement and the Merger, without a vote of the Company's stockholders. Parent,
Purchaser and the Company have agreed to use their reasonable best efforts to
take promptly, or cause to be taken, all actions and to do promptly, or cause to
be done, all things necessary, proper or advisable to consummate and make
effective the Offer, the Merger and the other transactions contemplated by the
Merger Agreement, including effecting the Merger as promptly as practicable
following consummation of the Offer. If Purchaser does not acquire at least 90%
of the then outstanding Shares pursuant to the Offer or otherwise and a vote of
the Company's stockholders is required under Delaware Law, a longer period of
time will be required to effect the Merger.
The Offer is scheduled to expire at 12:00 midnight, New York City time, on
Thursday, September 25, 1997, unless the Purchaser extends the period of time
for which the Offer is open. A copy of the press release issued jointly by the
Company and Parent on August 25, 1997 announcing the Merger and the Offer is
filed as Exhibit 13 to this Schedule 14D-9 and is incorporated herein by
reference in its entirety.
(b) BACKGROUND AND REASONS FOR THE RECOMMENDATION.
BACKGROUND OF THE OFFER
In the fall of 1996, management began its annual review of its business
plans for the Company's short-term and long-term growth and, at the urging of
certain large stockholders of the Company, began a review with the Board of
Directors of the Company of strategies for enhancing shareholder value.
<PAGE>
The Board determined to seek the advice of investment bankers and, on the
recommendation of the current Chief Executive Officer, also discussed the
possibility of initiating a search for a new Chief Executive Officer as part of
a succession plan for senior management.
In November 1996, after interviewing several investment banking firms of
national reputation, the Company announced that it had retained Alex. Brown &
Sons Incorporated ("Alex. Brown") to assist the Company in exploring strategic
alternatives to best position the Company for growth in its business and
concentrating on methods and strategies for enhancing shareholder value,
including possible acquisitions and/or strategic business combinations. The
Company's management and representatives of Alex. Brown began an evaluation of
available alternatives, including possible business combinations, strategic
acquisitions or a stock split or repurchase of the Company's Common Stock. At a
meeting on December 6, 1996, management reported to the Board on the progress of
that work to date. Management also informed the board that, in accordance with
the Company's request, Alex. Brown had been responding on the Company's behalf
to inquiries which the Company had received as a result of its public
announcement as to its evaluation of strategic alternatives to determine the
level of interest of such parties in a possible transaction with the Company.
In November 1996, the Company also retained Korn/Ferry International, a
nationally recognized executive search firm, to identify candidates to serve as
Chief Executive Officer. Following a national search, the Board interviewed a
number of potential candidates during the winter and spring of 1997. As a result
of developments described below, the Board suspended its search in May 1997.
On February 17, 1997, the Board further reviewed with management and Alex.
Brown the strategic alternatives available to the Company, including possible
strategic acquisitions. Management subsequently reviewed the potential
acquisitions and concluded as to each that it was not compatible with the
Company's business strategy. The Board also received an update as to the results
of discussions with those parties that had approached the Company subsequent to
its November 1996 press release. The Board determined that sufficient interest
had been expressed to warrant further consideration and authorized Alex. Brown
to pursue its discussions with those parties that had expressed an interest in
the Company, and to contact a limited number of additional potential buyers for
the Company that had been selected by management from a list of potential
candidates prepared by management and Alex. Brown, so that the Board could
determine whether to consider the alternative of an acquisition of the Company
by a third party. A confidential information package on the Company also had
been prepared for submission to interested parties.
Over the course of the spring, 42 prospective strategic and financial
buyers for the Company were contacted to determine their level of interest. Of
the parties contacted, 32 parties, including Parent, executed confidentiality
and standstill agreements with the Company and received a confidential
information package on the Company. A copy of the confidentiality and standstill
<PAGE>
agreement executed by Parent on March 20, 1997 is included as Exhibit 16 hereto
and is incorporated herein by reference. Each company that signed the
confidentiality agreement and received a confidential information package on the
Company was asked to indicate its level of interest by mid-May 1997.
In May 1997, representatives of Boehringer Ingelheim GmbH ("Boehringer
Ingelheim") informed the Company's Chief Executive Officer that preliminary
consideration was being given by Boehringer Ingelheim to the possible sale of a
European company (the "BI Joint Venture"), in which the Company previously owned
a 50% interest. Boehringer Ingelheim currently owns 100% of the BI Joint
Venture, but the Company has the right to reacquire its 50% interest at such
time as the BI Joint Venture becomes profitable, subject to certain terms and
conditions, including Boehringer Ingelheim's right to terminate the option
following a change of control of the Company. The BI Joint Venture manufactures
products under license from the Company and distributes other Company products
in Europe and certain other regions. On May 16, 1997, Anasco GmbH ("Anasco"), an
affiliate of Boehringer Ingelheim that owns 2,097,043 Shares, filed an amendment
to its Schedule 13D stating that, in connection with the Company's announcement
regarding its review of strategic alternatives and with a pending reassessment
of the bioproducts and biosystems businesses of companies within the Boehringer
Ingelheim group, initial steps had been taken by Boehringer Ingelheim to
determine whether there might be prospective purchasers of all or a portion of
various assets related to the group's bioproducts and biosystems businesses.
These assets include the BI Joint Venture and Anasco's holdings of Shares.
On April 17, 1997, Parent provided to Alex. Brown in writing a non-binding
indication of interest in the range of $100 to 120 million (or $9.00 to $11.25
per Share) to purchase the Company subject, among other things, to negotiation
of definitive agreements relating to the proposed transaction and satisfactory
completion of due diligence. Thereafter, representatives of Parent visited the
Company's offices on May 19, 1997, and received a presentation from the
Company's senior management.
At a meeting on May 23, 1997, Alex. Brown updated the Board of Directors as
to the responses that had been obtained from interested parties, including
preliminary, non-binding indications of interest from four companies which had
stated that they would be interested in exploring a possible acquisition of the
Company, at prices ranging from $8.00 to $12.00 per share, including Parent's
preliminary indication of interest. The Board also further reviewed with
management and Alex. Brown other alternatives available for enhancing
shareholder value, including strategies for growth on an independent basis.
After further discussion, the Board concluded that there was sufficient interest
to continue to pursue discussions with potential acquirors and authorized Alex.
Brown to pursue discussions with any other companies considered to be likely
potential acquirors.
<PAGE>
On May 27, 1997, the Company announced in a press release that there was
sufficient interest to warrant further discussions concerning the possible sale
of the Company, but that discussions were at a preliminary stage and that it was
not possible to predict whether a sale would result from these discussions.
During May and June, 1997, the four parties, including Parent, that had
submitted indications of interest were invited to visit the Company to receive a
presentation by senior management and to conduct a due diligence review of the
Company. Of the three parties other than Parent that submitted indications of
interest, two parties subsequently withdrew from the process and one party
indicated that any offer would likely be at the lower end of its indicated
range.
On June 10, 1997, the Company's Chief Executive Officer met informally with
the Chairman of the Board and the Chief Executive Officer of Parent and
discussed whether the two companies were strategically compatible. On June 12
and June 24, 1997, representatives of Parent visited the Company's headquarters
to conduct further due diligence.
On June 27, 1997, an additional candidate, Party A, contacted Alex. Brown
and indicated its interest in acquiring the Company. Party A subsequently
executed a confidentiality and standstill agreement with the Company and
received a confidential information package on the Company.
On July 1, 1997, Parent made an offer to acquire the Company for $120
million subject, among other things, to negotiation and execution of definitive
agreements relating to the proposed acquisition, and requested that the Company
enter into an exclusive negotiating period through August 31, 1997. The Company
declined to grant Parent's request for exclusivity but continued discussions
with Parent during the early part of July.
On July 11, 1997, the Company's Chief Executive Officer and a
representative of Alex. Brown met with the President and other members of senior
management of Parent and representatives of Schroder & Co. Inc. ("Schroders"),
Parent's investment banking firm. As a result of those negotiations, Parent
notified the Company that it was prepared to negotiate to acquire the Company at
a price of $11.625 per share subject to completing due diligence, negotiating
the terms of an acceptable agreement and satisfactory discussions with certain
key executives of the Company concerning their role with the Company following
any such acquisition.
On July 18, 1997, Party A submitted a preliminary, non-binding indication
of interest of $10.00 to $12.00 per Share.
On July 22, 1997, the Company received from Parent's counsel an initial
draft of a merger agreement, which contemplated, among other things, the receipt
<PAGE>
of stockholder agreements from Anasco and certain directors and officers of the
Company. Counsel for the companies then negotiated provisions of the agreement
of merger and related documents.
On July 24, 1997, the Chief Executive Officer and Chief Financial Officer
of the Company attended a portion of a meeting of the Board of Directors of
Parent and answered questions from the Board concerning the Company.
On July 25, 1997, a representative of Boehringer Ingelheim wrote a letter
to Parent stating that Boehringer Ingelheim would not be able to respond
immediately to Parent's request for a stockholder agreement binding on Anasco
until after it had reviewed the implications of such an agreement with its legal
and financial advisors. The letter stated that Boehringer Ingelheim also was
considering the suitability of Parent as a partner in light of the commercial
arrangements between the Company and the BI Joint Venture and Parent's future
intentions in this regard. Counsel for the Company and for Parent continued to
negotiate provisions of the merger agreement, including the conditions for
termination by Parent, the effect of termination, of the merger agreement
including the size of any termination fee and the payment of Parent's expenses,
and the circumstances under which the Company's Board could entertain
alternative acquisition proposals. During the course of these negotiations,
Parent converted the structure of the transaction to a tender offer, followed by
a merger, and provided a new draft of the agreement for the Board and its
counsel to consider.
On July 29-30, 1997, Party A visited the Company, received a presentation
by senior management and performed a due diligence review of the Company.
On July 30, 1997, the Company's Board met to consider Parent's proposal.
Counsel for the Company reviewed with the Board the proposed form of the
transaction as a tender offer/merger and various terms of the agreement,
including the price, the absence of a financing contingency, the tax treatment
of the transaction, the proposed terms of stockholder agreements, the terms of a
proposed termination fee of 3% of the acquisition consideration (which had been
reduced through negotiations) and unlimited reimbursement of Parent's expenses
in the event of termination, the treatment of certain employee benefit plans
including the cashing out of stock options, the conditions of termination of the
merger and of the tender offer and the circumstances under which the Board could
entertain an alternative proposal. Alex. Brown also reviewed with the Board the
process that had been undertaken on behalf of the Company to identify potential
acquirors (including the number of parties contacted, the number of
confidentiality agreements received, the number of parties that had submitted
indications of interest and the reasons for parties' declining to proceed), an
overview of Parent, the historical performance over specified periods of the
Company's stock, and the valuation methodologies to be utilized by Alex. Brown
in connection with its financial analysis of the proposed transaction. Alex.
Brown also reviewed with the Board certain data relating to the range of
termination fees for deals of similar size.
<PAGE>
The Board then considered the proposal in light of its strategic
alternatives, and in light of the Board's discussions over the past year. The
Board discussed whether, in light of the indication of interest of Party A, the
Company should delay completing a transaction with Parent. Following further
discussion, and particularly given the uncertainty of receiving an offer from
Party A and the concern that Parent would withdraw its offer if the Company were
to delay its discussions with Parent, the Board determined to proceed with a
possible transaction with Parent, subject to the resolution of certain issues.
The Board directed counsel and Alex. Brown to present to Parent its position on
certain issues, including a request for a lower termination fee, a cap on
expenses, the treatment of certain employee benefit plans, including
confirmation of Parent's 3 assumption of existing change of control agreements,
the conditions to consummation of the tender offer and the merger, the scope of
the proposed stockholder agreements, the duration of certain non-compete
agreements to be signed by management and the circumstances under which the
Board could consider an alternative proposal.
Following the July 30, 1997 meeting, the Company's legal and financial
advisors presented the open issues to representatives of Parent. Following
discussions, the Executive Vice President of Parent telephoned the Chief
Executive Officer of the Company to state that Parent was unwilling to accede to
these requests and that Parent was deferring further negotiations. Counsel for
the Company sent a revised draft of the agreement to counsel for Parent that
evening, reflecting among other things, the Board's position on these issues.
Thereafter, at the request of the Board, Alex. Brown further discussed
certain of the open issues with Parent's investment bankers, who stated that
Parent would not pursue the transaction without stockholder agreements from
Anasco and certain officers and directors in order to assure these parties'
support of the transaction, and again contacted Party A, which, on August 1,
1997 stated that it was not inclined to make an offer for the Company and was
terminating further discussions.
During the next week, the Company and its representatives pursued
discussions with representatives of Boehringer Ingelheim regarding its possible
willingness to negotiate a stockholder's agreement binding on Anasco and the
terms and conditions under which it might be willing to cause Anasco to sign
such an agreement. Boehringer Ingelheim sought a revision of the proposed terms,
including of the proposed triggering events, the conditions of termination of
the agreement and that Parent not be the beneficiary under the stockholder
agreement of the spread between a superior proposal and Parent's proposed
purchase price in the event a transaction involving a superior proposal were
consummated. The stockholder agreement also required Anasco to irrevocably
tender its shares in the tender offer and to grant Parent an irrevocable option,
for up to one year, to purchase Anasco's shares in the event the tender offer
<PAGE>
were not consummated and the merger agreement were terminated. Following further
negotiations with representatives of Parent and of the Company, Boehringer
Ingelheim agreed to participate in additional discussions to reach agreement
regarding a proposed stockholder's agreement under partially revised terms and
conditions and the senior members of the Company's management and the Company's
Chairman of the Board agreed to participate in similar discussions.
Thereafter, the parties, and their respective legal and financial advisors,
resumed their negotiations regarding the remaining terms of the merger
agreement. In a conference call on August 11, 1997, Schroders and counsel for
Parent informed the Company's legal and financial advisors that Parent would be
willing to modify its position with respect to certain of the open issues, but
would not go forward without a stockholder agreement from Anasco on the terms
previously proposed by Parent. Over the next several days, representatives of
Parent and the Company held a number of discussions with members of Boehringer
Ingelheim concerning the terms of the stockholder agreement, including the
proposed trigger events and who would receive the spread between a superior
proposal and Parent's proposed purchase price for the Shares in the event its
superior transaction was consummated by a third party.
During the course of discussions with Boehringer Ingelheim concerning the
stockholder agreement, Parent, the Company and their advisors continued
negotiation of the terms of the merger agreement. On August 14, 1997, Boehringer
Ingelheim indicated its tentative agreement to the terms of the stockholder
agreement proposed by Parent and authorized its counsel to finalize the
definitive agreement with counsel for Parent.
At a meeting on August 18, 1997, the Board received an update on the status
of all remaining issues, and was informed of Boehringer Ingelheim's position as
to the stockholder's agreement, that Party A had declined to bid on the Company,
and that no alternative potential acquirors for the Company had come forward. At
that meeting, the Company's Chief Financial Officer also advised the Board
concerning the Company's results of operations for the nine months ended July
31, 1997.
Over the next few days, counsel for the parties continued negotiations on
the merger agreement and related documents. On August 21, 1997, the Board of the
Company met to review the latest draft of the agreements. Counsel presented an
update on the status of all open issues and expressed the view that these issues
appeared likely to be resolved in favor of the Company, although further final
negotiations were on-going. Alex. Brown provided the Board with its financial
presentation with respect to the proposed transaction, and informed the Board
that, subject to review of the final form of the agreements to be entered into
in connection with the transaction and certain other customary matters, Alex.
Brown would be in a position to render to the Board, at the time of execution of
the agreements, a written opinion to the effect that, as of the date of such
opinion and based upon and subject to certain matters stated therein, the
$11.625 per Share cash consideration to be received by the holders of Shares
<PAGE>
(other than Parent and its affiliates) in the tender offer and merger was fair,
from a financial point of view, to such holders. Alex. Brown also reviewed with
the Board certain data relating to the range of termination fees for deals of
similar size and stated its view that it was not unreasonable for an acquiror to
request that certain expenses be reimbursed in the event of termination, as
contemplated by the proposed merger agreement.
Following further discussions, the Board unanimously determined that the
Offer and Merger on substantially the terms presented at the meeting were fair
to and in the best interests of the Company and its stockholders. The Board also
approved the merger agreement in substantially the form presented to the Board
of Directors, including such changes as were discussed by counsel at the meeting
and were still subject to negotiations and subject to such further changes as
deemed necessary or desirable by certain officers, with the advice of counsel,
and further subject to the receipt of a fairness opinion of Alex. Brown, the
substance of which (including matters considered, assumptions made and
limitations thereon) was reviewed with the Board at the meeting. The Board
determined to recommend acceptance of the Offer and approval and adoption of the
final merger agreement by the stockholders of the Company (to the extent that
such approval and adoption may be required by applicable law) and the Board
authorized management to finalize the agreements.
In connection with these approvals, the Board also waived, on behalf of the
Company, for the sole and limited purpose and duration of the proposed
stockholder's agreement between Anasco and Parent, certain rights pursuant to a
Stock Purchase Agreement dated as of September 24, 1991, between the Company and
Anasco (the "Stock Purchase Agreement"), including a right of refusal granted to
the Company to purchase certain shares of Common Stock from Anasco, and certain
prohibitions under which Anasco is not permitted to engage in, encourage or
initiate certain acquisition, solicitation, and proxy activities or to grant
certain proxies or enter into certain voting arrangements or agreements,
provided however, that these terms would continue in effect as if no waiver had
occurred upon expiration of the term of the stockholders agreement in the event
Anasco's shares are not purchased by Parent.
In addition, for the purpose of ensuring that the proposed transactions
would not have the effect of triggering the Exercisability of the Rights (as
defined) or the separation of the Rights from the shares to which they are
attached, or cause the Distribution Date (as defined) to occur, all pursuant to
the Stockholder Rights Protection Agreement dated as of January 20, 1995 (the
"Rights Plan"), the Board approved an amendment to the Rights Plan, and the
Rights Plan subsequently was amended in accordance with the Board's resolution.
The Board also approved the Merger Agreement and each of the stockholders'
agreements to be executed in connection with the proposed acquisition, for the
purpose of exempting Parent and its acquiring subsidiary from the provisions of
Section 203 of the Delaware General Corporation Law.
<PAGE>
On August 22, 1997, after the close of business, the parties resolved all
outstanding issues, received the opinion of Alex. Brown described above in
writing, and the parties executed and delivered the Merger Agreement, the
stockholder agreements and the other related agreements. On August 25, 1997, the
parties publicly announced that they had entered into the Agreement and Plan of
Merger.
In deciding to accept Parent's proposal, approve the Merger Agreement and
recommend acceptance of the Offer and approval of the Merger Agreement to the
stockholders, the Board considered a number of factors, including, without
limitation, the following:
(i) Historical information concerning the Company's business,
prospects, financial performance and condition, operations, technology,
management and competitive position; the projects relating to, and
prospects of, going forward as an independent company; various factors
affecting the Company's strategic plans, the Company's position in its
industry and industry conditions generally;
(ii) The possible alternatives to the Offer and the Merger (including
the possibility of continuing to operate the Company as an independent
entity), the range of possible benefits to the Company's stockholders of
such alternatives and the timing and the likelihood of actually
accomplishing any of such alternatives;
(iii) The circumstances giving rise to the Offer and the Agreement and
Plan of Merger, the historical price range of the Shares and the
price-earnings multiple represented by the Offer as compared to historical
ratios, the premium presented by the price to be paid in the Offer for the
Shares over the historical price range of the Shares, and prices paid in
recent acquisitions of similar companies;
(iv) The price provided by the Parent proposal, which was the highest
then available, following a comprehensive search for potential bidders and
two public announcements relating to the Company's intentions;
(v) The terms of the Merger Agreement, including the form of the
transaction, the parties' representations, warranties and covenants, and
the conditions to their respective obligations, including the fact that,
pursuant to the Merger Agreement, the Company is not prohibited from
responding to any unsolicited proposal for an Acquisition Transaction (as
defined in the Merger Agreement) involving superior terms to acquire the
Company, and that the Company may terminate the Merger Agreement and accept
such superior proposal subject to the Company's obligation to pay a
termination fee in the amount and in the manner described in the Merger
Agreement;
<PAGE>
(vi) The desirability of cash consideration relative to stock
consideration because of the investment considerations affecting a stock
transaction and Parent's ability to effect a cash transaction without any
financing contingency;
(vii) The potential for other third parties to acquire the Company;
(viii) The availability of appraisal rights in the Merger under
applicable law;
(ix) The opinion of Alex. Brown dated August 22, 1997 to the effect
that, as of such date and based upon and subject to certain matters stated
in such opinion, the $11.625 per Share cash consideration to be received by
holders of Shares (other than Parent and its affiliates) in the Offer and
the Merger was fair, from a financial point of view, to such holders. The
full text of Alex. Brown's written opinion dated August 22, 1997, which
sets forth the assumptions made, matters considered and limitations on the
review undertaken by Alex. Brown, is attached hereto as Annex B and is
incorporated herein by reference. Alex. Brown's opinion is directed only to
the fairness, from a financial point of view, of the cash consideration to
be received in the Offer and the Merger by holders of Shares (other than
Parent and its affiliates) and is not intended to constitute, and does not
constitute, a recommendation as to whether any stockholder should tender
Shares pursuant to the Offer. HOLDERS OF SHARES ARE URGED TO READ SUCH
OPINION CAREFULLY IN ITS ENTIRETY.
The Board did not assign relative weights to the above factors. Rather, the
Board viewed its position and recommendations as being based on the totality of
the information presented to and considered by it during the process followed by
the Board.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company has retained Alex. Brown as its financial advisor in connection
with the Offer and the Merger. Pursuant to the terms of Alex. Brown's
engagement, the Company has agreed to pay Alex. Brown for its services an
aggregate financial advisory fee based on a percentage of the total
consideration (including liabilities assumed) payable in connection with the
Offer and the Merger. The fee payable to Alex. Brown currently is estimated to
be approximately $1.5 million. The Company also has agreed to reimburse Alex.
Brown for reasonable out-of-pocket expenses, including reasonable legal fees and
expenses, and to indemnify Alex. Brown and certain related parties against
certain liabilities, including liabilities under the federal securities laws,
arising out of Alex. Brown's engagement. In the ordinary course of its business,
Alex. Brown and its affiliates may actively trade or hold the securities of the
Company and Parent for their own account or for the accounts of customers and,
accordingly, may at any time hold a long or a short position in such securities.
<PAGE>
Except as described herein, neither the Company nor any person acting on
its behalf currently intends to employ, retain or compensate any other person to
make solicitations or recommendations to security holders on its behalf
concerning the Of
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) Except as set forth in Items 3 and 4 herein, or pursuant to the
Company's Savings and Stock Investment Plan, no transactions in Shares have been
effected during the past 60 days by the Company or, to the best knowledge of the
Company, by any of its executive officers, directors or affiliates.
(b) To the best knowledge of the Company, (i) each of its executive
officers and directors and Anasco, who currently own in the aggregate
approximately 31% of the Shares outstanding, on a fully diluted basis, presently
intend to tender their Shares pursuant to the Offer and (ii) none of its
executive officers, directors or other affiliates presently intends otherwise to
sell any Shares which are owned beneficially or held of record thereby. The
foregoing does not include any Shares over which, or with respect to which, any
such executive officer, director or affiliate acts in a fiduciary or
representative capacity or as to which any such executive officer, director or
affiliate is subject to instructions from a third party with respect to such
tender.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as described in Item 3(b) and Item 4(b), the Company has not
undertaken, and there is not underway any response to the Offer which relates to
or would result in (1) an extraordinary transaction such as a merger or
reorganization, involving the Company or any subsidiary of the Company; (2) a
purchase, sale or transfer of a material amount of assets by the Company or any
subsidiary of the Company; (3) a tender offer for or other acquisition of
securities by or of the Company; or (4) any material change in the present
capitalization of dividend policy of the Company.
(b) Except as described in Item 3 and Item 4, there are no transactions,
board resolutions, agreements in principle or signed contracts in response to
the Offer which relate to or would result in one or more of the matters referred
to in clause (1), (2), (3) or (4) of Item 7(a).
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
(I) STOCKHOLDER PROTECTION RIGHTS AGREEMENT
The Company has in place a stockholder rights plan. Each share of Common
Stock is accompanied by one Right which entitles the registered holder to
purchase from the Company a unit consisting of one one-hundredth of a share (a
<PAGE>
"Unit") of Series A Participating Cumulative Preferred Stock, par value $0.01
per share (the "Series A Preferred Stock"), at a purchase price of $24.00 per
Unit (the "Purchase Price"), subject to adjustment. The terms of the Rights are
set forth in the Stockholder Protection Rights Agreement dated as of January 20,
1995, as amended, between the Company and Bank of Boston, as Rights Agent (the
"Rights Agreement"), the forms of which are filed as Exhibits 10 and 11 to this
Statement and incorporated herein by reference.
Prior to the Rights Distribution Date (as defined), the Rights will not be
exercisable and will be evidenced by the certificates for, and will trade with,
the Common Stock. As soon as practicable after the earlier of (i) the tenth day
(or such later day as may be designated by a majority of the Continuing
Directors (as defined below)) after the date (the "Stock Acquisition Date") of
the first public announcement that a person or group of affiliated or associated
persons (an "Acquiring Person") has acquired beneficial ownership of 30% more
(the "Specified Percentage") of the outstanding shares of Common Stock and (ii)
the tenth business day (or such later day as may be designated by a majority of
the Continuing Directors) after the date of the commencement of a tender or
exchange offer by any person (other than the Company, any of its subsidiaries or
any employee benefit plan of the Company or any of its subsidiaries) if, upon
consummation thereof, such person would be the beneficial owner of the Specified
Percentage or more of the outstanding shares of Common Stock (the earlier of
such dates being referred to as the "Rights Distribution Date"), the Company
will issue separate certificates evidencing the Rights and the Rights will begin
to trade separately from the Common Stock. The Rights are not exercisable until
the Rights Distribution Date and will expire at the close of business on January
30, 2002 (the "Rights Expiration Date"), unless previously redeemed or exchanged
by the Company as described below.
If a person becomes the beneficial owner of the Specified Percentage or
more of the outstanding shares of Common Stock, each holder of a Right (other
than Rights that are, or under certain circumstances specified in the Rights
Agreement were, beneficially owned by an Acquiring Person (which will thereafter
be void)) will thereafter have the right to receive upon exercise thereof at the
then current purchase price (the "Purchase Price"), Common Stock having a market
value equal to two times the Purchase Price. At any time after any person has
become an Acquiring Person (but before such person becomes the beneficial owner
of 50% or more of the outstanding shares of Common Stock), the Board of
Directors of the Company may, at its option, exchange all or part of the Rights
(other than the Rights owned by an Acquiring Person) for shares of Common Stock
at an exchange ratio of one share of Common Stock per Right.
If, at any time following the Stock Acquisition Date, (i) the Company is
acquired in a merger or other business combination transaction in which the
Company is not the surviving corporation or the Common Stock is exchanged for
other securities or assets or (ii) 50% or more of the Company's assets or
earning power is sold, each holder of a Right will thereafter have the right to
<PAGE>
receive, upon exercise thereof at the then current Purchase Price, common stock
of the acquiring company having a market value equal to two times the Purchase
Price.
The Rights may, at the option of the Board of Directors, be redeemed in
whole, but not in part, at a price of $0.01 per Right at any time prior to the
earlier of the tenth day after the Stock Acquisition Date (or such later date as
a majority of the Continuing Directors (as that term is defined) may designate)
and the Rights Expiration Date. Under certain circumstances set forth in the
Rights Agreement, the decision to redeem shall require the concurrence of a
majority of the Continuing Directors. Immediately upon the requisite action of
the Board of Directors ordering exchange or redemption of the Rights, the Rights
will terminate, and thereafter the only right of the holders of Rights will be
to receive shares of Common Stock or the redemption price, as the case may be.
"Continuing Director" means any member of the Board of Directors who was a
member of the Board prior to the time an Acquiring Person becomes such, or any
person who is subsequently elected to the Board if such person is recommended or
approved by a majority of the Continuing Directors. Continuing Director does not
include an Acquiring Person, or an affiliate or associate of an Acquiring
Person, or any representative of any of the foregoing.
The Purchase Price payable, and the number of Units or other securities or
property issuable upon exercise of the Rights are subject to adjustment from
time to time to prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Series A Preferred Stock;
(ii) if holders of the Series A Preferred Stock are granted certain rights or
warrants to subscribe for Series A Preferred Stock or convertible securities at
less than the then current market price of the Series A Preferred Stock; or
(iii) upon the distribution to holders of the Series A Preferred Stock of
evidences of indebtedness or assets (excluding regular quarterly cash dividends)
or of subscription rights or warrants (other than those referred to above). With
certain exceptions, no adjustment in the Purchase Price will be required until
cumulative adjustments amount to at least 1% of the Purchase Price. No
fractional Units are required to be issued and, in lieu thereof, an adjustment
in cash will be made based on the market price of the Series A Preferred Stock
on the last trading date prior to the date of exercise.
Until a Right is exercised, the holder will, as result thereof, have no
rights as a stockholder of the Company, including the right to vote or to
receive dividends.
Stockholders may, depending upon the circumstances, recognize taxable
income in the event that the Rights become exercisable for Series A Preferred
Stock or other consideration as set forth above.
Prior to the Rights Distribution Date, the Rights Agreement will, if the
<PAGE>
Company so directs, be amended by the Company and the Rights Agent in any manner
that the Company may deem necessary or desirable without the approval of any
holders of Common Stock. After the Rights Distribution Date, the Rights
Agreement may be amended in any respect that does not adversely affect Rights
holders; provided that, after a person becomes an Acquiring Person, any
amendment requires the concurrence of a majority of the Continuing Directors.
At a special meeting on August 21, 1997, the Company's Board of Directors
acted to amend the Rights Agreement to, among other things, (i) exclude Parent
and the Purchaser from the definition of "Acquiring Person;" (ii) provide that
actions related to the Merger and the Merger Agreement will not trigger a
Distribution Date; (iii) provide that date of consummation of the Merger will
constitute a Rights Expiration Date; and (iv) provide that actions related to
the Merger and the Merger Agreement will not trigger the Exercisability of the
Rights or the separation of the Rights from the Shares.
The Rights may have the effect of impeding the acquisition of control of
the Company by any parties other than Parent and the Purchaser and may also
discourage attempts to obtain control of the Company by means of a hostile
tender offer, even if such offer would be beneficial to stockholders generally,
and thereby protect the continuity of management. The Merger Agreement provides
that the Company will not take action pursuant to or amend the Rights Agreement,
redeem the Rights or terminate the Rights Agreement prior to the Effective Date
of the Merger. THEREFORE, THE BOARD OF DIRECTORS MAY NOT EXEMPT ANY OTHER
PROPOSED ACQUIROR OR ACQUISITION TRANSACTION FROM THE OPERATION OF THE RIGHTS
PLAN SO LONG AS THE MERGER AGREEMENT REMAINS IN EFFECT.
(II) SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
In general, Section 203 of the Delaware General Corporation Law ("Section
203" of the "DGCL") prevents an "Interested Stockholder" (defined generally as a
person that is the "owner" of 15% or more of a corporation's outstanding voting
stock from engaging in a "Business Combination" (defined as a variety of
transactions, including mergers, as set forth in the second following paragraph)
with a Delaware corporation for three years following the time such person
became an Interested Stockholder unless (i) before such person became an
Interested Stockholder, the board of directors of the corporation approved the
transaction in which the Interested Stockholder became an Interested Stockholder
or approved the Business Combination; (ii) upon consummation of the transaction
which resulted in the Interested Stockholder becoming an Interested Stockholder,
the Interested Stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced (excluding stock
held by directors who are also officers and employee stock ownership plans in
which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer); or (iii) following the transaction in which such person became an
<PAGE>
Interested Stockholder, the Business Combination is (x) approved by the board of
directors of the corporation and (y) authorized at a meeting of stockholders by
an affirmative vote of the holders of two-thirds of the outstanding voting stock
of the corporation not owned by the Interested Stockholder.
Section 203 provides that, during the three-year period following the date
a person becomes an Interested Stockholder, the corporation may not merge or
consolidate with an Interested Stockholder or any affiliate or associate
thereof, and also may not engage in certain other transactions with an
Interested Stockholder or any affiliate or associate thereof, including, without
limitation, (i) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of assets (except proportionately as a stockholder of the
corporation) having an aggregate market value equal to 10% or more of the
aggregate market value of either the aggregate value of all of the assets of the
corporation or the aggregate market value of all of the outstanding stock of the
corporation; (ii) any transaction which results in the issuance or transfer by
the corporation or by certain subsidiaries thereof of any stock of the
corporation to the Interested Stockholder, subject to certain exceptions; (iii)
any transaction involving the corporation or any majority-owned subsidiary
thereof which has the effect of increasing the proportionate share of the stock
of any class or series, or securities convertible into the stock of any class or
series, of the corporation or any such subsidiary which is owned by the
Interested Stockholder (except as a result of immaterial changes due to
fractional share adjustments or as a result of any purchase or redemption of any
shares of stock not caused, directly or indirectly, by the Interested
Stockholder); or (iv) any receipt by the Interested Stockholder of the benefit
(except proportionately as a stockholder of such corporation) of any loans,
advances, guarantees, pledges or other financial benefits provided by or through
the corporation.
In accordance with the requirements of Section 203, the Company's Board of
Directors has approved the Merger and the Merger Agreement for the purpose of
exempting Parent and the Purchaser from the provisions of Section 203, and the
terms of the Merger Agreement, the Stockholders Agreements and the transactions
contemplated thereby for the purpose of exempting the Merger and the other
transactions contemplated thereby from Section 203. AS A RESULT, SECTION 203
WILL NOT APPLY TO CONSUMMATION OF THE OFFER AND THE MERGER.
The foregoing summary of Section 203 of the DGCL is qualified in its
entirety by reference to the full text of that section.
<PAGE>
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
EXHIBIT NO. DESCRIPTION
- - ----------- ---------------------------------------------------------
1 Offer to Purchase dated August 28, 1997.
2 Merger Agreement dated as of August 22, 1997 by and among Parent,
the Purchaser and the Company.
3 Information Statement Pursuant to Section 14(f) of the Securities
Exchange Act of 1934 and Rule 14f-1 thereunder.*
4 BioWhittaker, Inc. 1991 Long-Term Stock Incentive Plan (attached
as Annex I to the Form 10 General Form for Registration of
Securities (the "Form 10") filed with the Securities and Exchange
Commission on September 25, 1991, and incorporated herein by
reference.
5 BioWhittaker, Inc. 1994 Stock Option Plan for Non-Employee
Directors (attached as Exhibit A to the Company's 1994 Proxy
Statement and incorporated herein by reference).
6 Form of Change of Control Employment Agreement dated March 11,
1997, between the Company and certain Executives thereof
(included as Exhibit 10.19 to the Company's Quarterly Report on
Form 10-Q for the quarter ended April 30, 1997 and incorporated
herein by reference) and Assumption Agreement dated as of August
22, 1997.
7 (a) Form of Employment Letter dated August 18, 1997 between
Parent and each of the Executives who is a party to a Change of
Control Employment Agreement. (b) Form of Employment Letter dated
August 18, 1997, between Parent and Noel L. Buterbaugh
8 (a) Form of Stockholders Agreement by and among Parent, the
Purchaser and certain officers and directors of the Company. (b)
Form of Stockholders Agreement by and among Parent the Purchaser
and Anasco GmbH.
9 Opinion of Alex. Brown & Sons Incorporated dated August 22,
1997.**
10 Form of Stockholder Rights Protection Agreement between the
Company and Bank of Boston, as Rights Agent (the "Rights
Agreement" (included as Exhibit 4.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended October 31, 1995,
and incorporated herein by reference).
11 Amendment No. 1 to the Rights Agreement dated as of August 22,
1997.
12 Letter to Stockholders dated August 28, 1997.***
13 Press Release issued by Parent and the Company on August 25,
1997.
14 Form of letter to participants in BioWhittaker, Inc.'s Savings
and Stock Investment Plan ("BSSIP").***
15 intentionally omitted
16 Confidentiality Agreement between Company and Parent dated March
20, 1997.
- ---------------
* Included as Annex A hereto.
** Included as Annex B hereto.
*** Included in materials mailed to stockholders or participants in the BSSIP.
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this Statement is true,
complete and correct.
BIOWHITTAKER, INC.
Date: August 28, 1997
By: /s/ Noel L. Buterbaugh
--------------------------------------
Name: Noel L. Buterbaugh
Title: President and Chief Executive
Officer
<PAGE>
