<PAGE>
Exhibit (a)(1)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
Protocol Systems, Inc.
AT
$16.00 Net Per Share
BY
Welch Allyn Acquisition Corporation,
A WHOLLY OWNED SUBSIDIARY OF
Welch Allyn, Inc.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON WEDNESDAY, JULY 5, 2000, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS BEING MADE PURSUANT TO THE AGREEMENT AND PLAN OF MERGER, DATED
AS OF MAY 24, 2000, AMONG WELCH ALLYN, INC., WELCH ALLYN ACQUISITION
CORPORATION AND PROTOCOL SYSTEMS, INC. THE BOARD OF DIRECTORS OF PROTOCOL
SYSTEMS, INC. HAS ADOPTED THE MERGER AGREEMENT AND APPROVED THE OFFER, THE
MERGER (EACH AS DEFINED HEREIN) AND THE OTHER TRANSACTIONS CONTEMPLATED BY THE
MERGER AGREEMENT, DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN
THE BEST INTERESTS OF THE COMPANY'S SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS
THAT THE SHAREHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES
(AS DEFINED HEREIN) PURSUANT TO THE OFFER.
---------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (A) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER SUCH NUMBER OF
SHARES THAT WOULD CONSTITUTE AT LEAST A MAJORITY OF THE ISSUED AND OUTSTANDING
SHARES OF COMMON STOCK (AS DEFINED HEREIN), DETERMINED ON A FULLY DILUTED
BASIS, AND (B) THE EXPIRATION OR TERMINATION OF THE WAITING PERIOD (AND ANY
EXTENSION THEREOF) UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF
1976, AS AMENDED, APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO THE OFFER.
---------------
IMPORTANT
Any shareholder desiring to tender all or any portion of such shareholder's
shares should either (1) complete and sign the Letter of Transmittal (or a
facsimile thereof) in accordance with the instructions in the Letter of
Transmittal, have such shareholder's signature thereon guaranteed if required
by Instruction 1 to the Letter of Transmittal, mail or deliver the Letter of
Transmittal (or such facsimile) and any other required documents to the
Depositary and deliver the certificates for such shares to the Depositary
along with the Letter of Transmittal (or such facsimile), or, in the case of a
book-entry transfer effected pursuant to the procedures described in Section 2
of this Offer to Purchase, deliver a duly completed and signed Letter of
Transmittal or an Agent's Message (as defined herein) and any other required
documents to the Depositary and deliver such shares pursuant to the procedures
for book-entry transfer described in Section 2, in each case prior to the
expiration of the Offer, or (2) request such shareholder's broker, dealer,
bank, trust company or other nominee to effect the transaction for such
shareholder. A shareholder having shares registered in the name of a broker,
dealer, bank, trust company or other nominee must contact such broker, dealer,
bank, trust company or other nominee if such shareholder desires to tender
such shares.
A shareholder who desires to tender shares and whose certificates for such
shares are not immediately available or who cannot comply in a timely manner
with the procedures for book-entry transfer, or who cannot deliver all
required documents to the Depositary prior to the expiration of the Offer, may
tender such shares by following the procedures for guaranteed delivery set
forth in Section 2 of this Offer to Purchase.
Questions and requests for assistance or for additional copies of this
Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed
Delivery or any other tender materials may be directed to ChaseMellon
Shareholder Services, L.L.C., the Information Agent, or The Robinson-Humphrey
Company, the Dealer Manager, at their respective addresses and telephone
numbers set forth on the back cover of this Offer to Purchase.
---------------
The Dealer Manager for the Offer is:
[LOGO OF THE ROBINSON-HUMPHREY COMPANY]
June 7, 2000
<PAGE>
SUMMARY TERM SHEET
Welch Allyn Acquisition Corporation, a wholly owned subsidiary of Welch
Allyn, Inc, is offering to purchase all of the outstanding shares of common
stock (together with the associated purchase rights) of Protocol Systems, Inc.
for $16.00 net per share, in cash. The following are some of the questions
you, as a shareholder of Protocol Systems, may have and answers to those
questions. All defined terms (which are indicated by initial capitalization)
not defined in this Summary Term Sheet have meanings given to them in the
remainder of this Offer to Purchase.
We urge you to read carefully the remainder of this Offer to Purchase
because the information in this summary is not complete. Additional important
information is contained in the remainder of this Offer to Purchase.
Who is offering to buy my shares? Welch Allyn Acquisition Corporation is an
Oregon corporation formed for the purpose of making a tender offer for all of
the outstanding shares of common stock of Protocol Systems. We are a wholly
owned direct subsidiary of Welch Allyn, Inc., a privately held New York
corporation. See "Introduction" and Section 9 ("Certain Information Concerning
the Purchaser and Parent") of this Offer to Purchase.
What shares are being sought in the Offer? We are seeking to purchase all
of the outstanding shares of common stock of Protocol Systems. See
"Introduction" and Section 1 ("Terms of the Offer") of this Offer to Purchase.
How much are you offering to pay, what is the form of payment and will I
have to pay any fees or commissions? We are offering to pay $16.00 per share,
net to you, in cash. If you are the record owner of your shares and you tender
your shares to us in the Offer, you will not have to pay brokerage fees or
similar expenses. If you own your shares through a broker or other nominee,
and your broker or nominee tenders your shares on your behalf, your broker or
nominee may charge you a fee for doing so. You should consult with your broker
or nominee to determine whether any charges will apply. See "Introduction" and
Section 1 ("Terms of the Offer") of this Offer to Purchase.
Do you have the financial resources to make payment? We plan to obtain all
funds needed for the Offer and the Merger through a bank loan and from
available cash at Welch Allyn's disposal. The Offer is not conditioned upon
any financing arrangements. See Section 9 ("Certain Information Concerning the
Purchaser and Parent") and Section 10 ("Source and Amount of Funds") of this
Offer to Purchase.
What does the Board of Directors of Protocol Systems think of the Offer? We
are making the Offer pursuant to a Merger Agreement among us, Welch Allyn and
Protocol Systems. The board of directors of Protocol Systems adopted the
Merger Agreement and approved our tender offer and our proposed merger with
Protocol Systems. The board of directors of Protocol Systems has unanimously
determined that the Offer and the Merger are fair to, and in the best
interests of, you, as a shareholder of Protocol Systems, and unanimously
recommends that you accept the Offer and tender your shares. SG Cowen
Securities Corporation, the financial advisor of Protocol Systems, has issued
an opinion, dated as of May 24, 2000, to the effect that, as of such date, the
consideration payable in the Offer and the Merger is fair, from a financial
point of view, to the holders of the Shares. See "Introduction" to this Offer
to Purchase.
How long do I have to decide whether to tender in the Offer? You will have
until 12:00 midnight, New York City time, on Wednesday, July 5, 2000, to
tender your shares in the Offer. Further, if you cannot deliver everything
that is required in order to make a valid tender by that time, you may be able
to gain a little extra time by using a guaranteed delivery procedure, which is
described later in this Offer to Purchase. See Section 1 ("Terms of the
Offer") and Section 2 ("Procedures for Tendering Shares") of this Offer to
Purchase.
<PAGE>
What are the most significant conditions to the Offer? There is no
financing condition to the Offer; however, we are not obligated to purchase
any tendered shares unless:
. the number of shares validly tendered and not withdrawn before the
Expiration Date of the Offer represents at least a majority of the
shares of common stock of Protocol Systems outstanding on a fully
diluted basis (this condition is referred to as the "Minimum
Condition"); and
. the applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 has expired or been terminated.
The Offer is also subject to a number of other conditions. See Section 13
("Certain Conditions of the Offer") of this Offer to Purchase.
Can the Offer be extended and under what circumstances? Subject to the
terms of the Merger Agreement, we can extend the Offer without the consent of
Protocol Systems if, for example, at the scheduled expiration of the Offer any
condition to the Offer is not satisfied or waived by us, or any rule or
regulation promulgated by the Securities and Exchange Commission requires us
to so extend the Offer. We have also agreed in the Merger Agreement that, at
the request of Protocol Systems, we will extend the Offer:
. if, at the scheduled Expiration Date, any of the conditions to the
Offer other than the Minimum Condition shall not have been waived or
satisfied, but the Minimum Condition shall have been satisfied, then
until the earlier of 60 calendar days after the date of this Offer to
Purchase or such earlier date upon which Welch Allyn reasonably
determines that any such condition shall not be capable of being
satisfied prior to the expiration of the aforesaid 60 day period; and
. if, at the scheduled Expiration Date all of the conditions to the Offer
other than the Minimum Condition shall have been waived or satisfied,
but the Minimum Condition shall not have been satisfied, then until the
earlier of 10 business days after the Expiration Date or the date that
is 60 calendar days after the date of this Offer to Purchase.
How do I tender my shares? To tender shares, you must deliver the
certificates representing your shares, together with a completed Letter of
Transmittal and any other documents required, to ChaseMellon Shareholder
Services, L.L.C., the Depositary for the Offer, not later than the time the
Offer expires. If your shares are held in "street" name, the shares can be
tendered by your nominee through The Depository Trust Company. If you cannot
deliver an item that is required to be delivered to the Depositary by the
expiration of the Offer, you may get a little extra time to do so by having a
broker, a bank or other fiduciary that is a member of the Securities Transfer
Agents Medallion Program or other eligible institution guarantee that the
missing item will be received by the Depositary within three (3) Nasdaq
trading days. For the tender to be valid, however, the Depositary must receive
the missing item within that three trading day period. See Section 2
("Procedures for Tendering Shares") of this Offer to Purchase.
Until what time can I withdraw previously tendered shares? You can withdraw
shares at any time until the Offer has expired and, if we have not agreed to
accept your shares for payment by Sunday, August 6, 2000, you can withdraw
them at any time after such time until we accept shares for payment. See
Section 1 ("Terms of the Offer") and Section 3 ("Withdrawal Rights") of this
Offer to Purchase.
How do I withdraw previously tendered shares? To withdraw shares, you must
deliver a written notice of withdrawal, or a facsimile of one, with the
required information to the Depositary while you still have the right to
withdraw the shares. See Section 1 ("Terms of the Offer") and Section 3
("Withdrawal Rights") of this Offer to Purchase.
Will the tender offer be followed by a merger if all the shares are not
tendered in the Offer? If we accept for payment and pay for at least a
majority of the outstanding shares of common stock of Protocol Systems on a
fully diluted basis, following approval by the shareholders of Protocol
Systems (if required under Oregon law), we will be merged with and into
Protocol Systems. If that merger takes place, Welch Allyn will directly own
all
ii
<PAGE>
the shares of common stock of Protocol Systems, and all other shareholders of
Protocol Systems will receive $16.00 per share (or such greater amount offered
for the shares in the Offer) in cash. There are no dissenters' rights
available in connection with the Offer. However, if the merger takes place,
shareholders who have not sold their shares in the Offer may have dissenters'
rights under the Oregon Business Corporation Act under certain circumstances.
See Section 12 ("Purpose of the Offer; the Merger Agreement; Other
Agreements--Dissenters' Rights") of this Offer to Purchase.
What is the market value of my shares as of a recent date? On April 17,
2000, the last trading day before Protocol Systems announced that it had
engaged SG Cowen to assist its board of directors in the process of exploring
Protocol's strategic alternatives, including a potential business combination
or sale of the company, the last sale price of the shares reported on the
Nasdaq National Market was $10.88 per share. On May 24, 2000, the last trading
day before Protocol Systems and Welch Allyn announced that they had signed the
Merger Agreement, the last sale price of the shares reported on the Nasdaq
National Market was $13.125 per share. On June 6, 2000, the last full trading
day before the commencement of the Offer, the last sale price of the shares
reported on the Nasdaq National Market was $15.5625 per share. We advise you
to obtain a recent quotation for shares of Protocol Systems in deciding
whether to tender your shares. See Section 6 ("Price Range of the Shares;
Dividends on the Shares") of this Offer to Purchase.
Do you have any other agreements with Protocol Systems? In 1997, Protocol
Systems entered into an agreement with Welch Allyn, which was restated in May,
1999. Under this agreement, Welch Allyn manufactures and supplies Protocol
with a vital signs monitor trademarked under Protocol System's QuikSigns brand
which Protocol is permitted to market and distribute in the U.S. hospital and
military markets. The QuikSigns product is a patient monitor that can be used
to spot check or continuously monitor blood pressure, blood oxygen, and
temperature parameters. A customized version of the QuikSigns product is
capable of networking with Protocol Systems' Acuity(TM) central station
system.
In April, 1998, Welch Allyn entered into an agreement with Pryon
Corporation, a wholly owned subsidiary of Protocol Systems. Under this
agreement, Welch Allyn procures from Protocol a "sidestream capnography"
module that is used as a component in a Welch Allyn vital signs monitor. The
sidestream capnography module is a system for measuring the end-tidal carbon
dioxide concentration in air exhaled by monitored patients. This component
supply agreement is in effect for an initial term of three years, subject to
extension for up to three additional years.
On March 9, 2000, Welch Allyn and Protocol Systems entered into a customary
letter agreement with respect to certain confidential information to be
exchanged in connection with the transactions contemplated by the Merger
Agreement.
Also see the discussion of the amendments to the employment agreements, and
the execution of the retention bonus agreements, of the certain executive
officers of Protocol Systems set forth under Section 12 ("Purpose of the
Offer; the Merger Agreement; Other Agreements").
For further details, see Section 11 ("Contacts with the Company; Background
of the Offer").
To whom can I talk if I have questions about the tender offer? You can call
ChaseMellon Shareholder Services, L.L.C. at (888) 509-7936 (toll free) or The
Robinson-Humphrey Company at (404) 266-6000. ChaseMellon is acting as the
Information Agent and Depositary for the Offer, and The Robinson-Humphrey
Company is acting as Dealer Manager for the Offer. See the back cover of this
Offer to Purchase.
iii
<PAGE>
Table Of Contents
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
Introduction............................................................ 1
The Tender Offer........................................................ 2
1. Terms of the Offer................................................. 2
2. Procedures for Tendering Shares.................................... 4
3. Withdrawal Rights.................................................. 7
4. Acceptance for Payment and Payment................................. 8
5. Certain U.S. Federal Income Tax Consequences....................... 9
6. Price Range of the Shares; Dividends on the Shares................. 10
7. Effect of the Offer on the Market for the Shares; Share Quotation;
Exchange Act Registration; Margin Regulations..................... 10
8. Certain Information Concerning the Company......................... 12
9. Certain Information Concerning the Purchaser and Parent............ 13
10. Source and Amount of Funds......................................... 14
11. Contacts and Transactions with the Company; Background of the
Offer............................................................. 15
12. Purpose of the Offer; The Merger Agreement; Other Agreements....... 18
13. Certain Conditions of the Offer.................................... 29
14. Certain Legal Matters.............................................. 31
15. Fees and Expenses.................................................. 32
16. Miscellaneous...................................................... 33
</TABLE>
SCHEDULE I--Directors and Executive Officers of Welch Allyn, Inc. and Welch
Allyn Acquisition Corporation
iv
<PAGE>
To the Holders of Common Stock
of Protocol Systems, Inc.:
INTRODUCTION
Welch Allyn Acquisition Corporation, an Oregon corporation (the
"Purchaser"), which is a wholly owned subsidiary of Welch Allyn, Inc., a
privately held New York corporation ("Parent"), hereby offers to purchase all
of the issued and outstanding shares (together with the associated purchase
rights, the "Shares") of common stock, par value $.01 per share ("Common
Stock"), of Protocol Systems, Inc., an Oregon corporation (the "Company"), at
a price of $16.00 per Share, net to the seller in cash, without interest
thereon (the "Offer Price"), upon the terms and subject to the conditions set
forth in this Offer to Purchase and in the related Letter of Transmittal
(which, together with any amendments or supplements hereto or thereto,
collectively constitute the "Offer").
Tendering shareholders whose Shares are registered in their own names and
who tender directly to the Depositary (as defined below) will not be obligated
to pay brokerage fees or commissions or, except as set forth in Instruction 6
of the Letter of Transmittal, transfer taxes on the purchase of Shares
pursuant to the Offer. Shareholders who hold their Shares through banks or
brokers should check with such institutions as to whether they charge any
service fees. The Purchaser will pay all fees and expenses of ChaseMellon
Shareholder Services, L.L.C., which is acting as Information Agent and
Depositary, and of The Robinson-Humphrey Company, which is acting as Dealer
Manager, incurred in connection with the Offer. See Section 15.
The Board of Directors of the Company (the "Company Board") has adopted the
Merger Agreement (as defined below) and approved the Offer, the Merger (as
defined below) and the other transactions contemplated by the Merger
Agreement, determined that the terms of the Offer and the Merger are fair to
and in the best interests of the Company's shareholders and unanimously
recommends that shareholders of the Company accept the Offer and tender their
shares pursuant to the Offer. The factors considered by the Company Board in
arriving at its decision to adopt the Merger Agreement, approve the Offer, the
Merger and the other transactions contemplated by the Merger Agreement, to
determine that the terms of the Offer and the Merger are fair to and in the
best interests of the Company's shareholders and to unanimously recommend that
shareholders of the Company accept the Offer and tender their shares pursuant
to the Offer are described in the Company's Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9"), which will be filed with
the Securities and Exchange Commission (the "Commission") and is being mailed
to shareholders of the Company concurrently with this Offer to Purchase.
SG Cowen Securities Corporation ("SG Cowen") has acted as the Company's
financial advisor. The opinion of SG Cowen dated May 24, 2000, as to the
fairness as of such date, from a financial point of view, to the holders of
the shares of the consideration to be received in the Offer and the Merger, is
set forth in full as Annex A to the Schedule 14D-9. Shareholders are urged to,
and should, read the Schedule 14D-9 and such opinion carefully in their
entirety.
The Offer is conditioned upon, among other things, (a) there being validly
tendered and not withdrawn prior to the Expiration Date (as defined in Section
1) such number of Shares that would constitute at least a majority of all of
the issued and outstanding shares of Common Stock (determined on a fully
diluted basis, after giving effect to the exercise of all outstanding stock
options to purchase shares of Common Stock) (the "Minimum Condition"), and (b)
the expiration or termination of the waiting period (and any extension
thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), applicable to the purchase of Shares pursuant to the
Offer.
<PAGE>
The Purchaser reserves the right (subject to obtaining the requisite
consent of the Company and the applicable rules and regulations of the
Commission), which it presently has no intention of exercising, to waive or
reduce the Minimum Condition and to elect to purchase, pursuant to the Offer,
fewer than the minimum number of Shares necessary to satisfy the Minimum
Condition. See Sections 1, 12 and 13.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of May 24, 2000 (the "Merger Agreement"), among the Parent, the Purchaser
and the Company pursuant to which, following the consummation of the Offer and
the satisfaction or waiver of certain conditions, the Purchaser will be merged
with and into the Company (the "Merger"), with the Company surviving the
Merger as a wholly owned subsidiary of Parent. In the Merger, each issued and
outstanding Share (other than Shares owned by the Parent, the Purchaser or the
Company or any direct or indirect wholly owned subsidiary of the Parent, the
Purchaser or the Company, or by shareholders, if any, who are entitled to, and
properly exercise, dissenters' rights under Oregon law to the extent such
rights are applicable to the Merger) will be converted into the right to
receive $16.00 (or such greater amount offered for the Shares in the Offer),
in cash, without interest thereon.
Consummation of the Merger is subject to a number of conditions, including
approval by shareholders of the Company (if required by Oregon law) and any of
the Shares having been purchased pursuant to the Offer.
The Merger Agreement is more fully described in Section 12.
The Company has informed the Purchaser that, as of June 2, 2000, there were
8,193,524 Shares of Common Stock issued and outstanding and options to
purchase an aggregate of approximately 1,808,034 shares of Common Stock were
issued and outstanding under the Company's stock option and employee stock
purchase plans. Based upon the foregoing and assuming that no Shares are
otherwise issued after June 2, 2000, there are 10,001,558 Shares outstanding
on a fully diluted basis, and the Minimum Condition will be satisfied if at
least 5,000,780 Shares are validly tendered and not withdrawn prior to the
Expiration Date. The actual number of Shares required to be tendered to
satisfy the Minimum Condition will depend upon the actual number of Shares
outstanding on the date that the Purchaser accepts Shares for payment pursuant
to the Offer. If the Minimum Condition is satisfied and the Purchaser accepts
for payment Shares tendered pursuant to the Offer, the Purchaser will be able
to elect a majority of the members of the Company Board and to effect the
Merger without the affirmative vote of any other shareholder of the Company.
See Section 12.
Certain U.S. federal income tax consequences of the sale of Shares pursuant
to the Offer and the conversion of Shares pursuant to the Merger are described
in Section 5.
This Offer to Purchase and the related Letter of Transmittal contain
important information that should be read carefully before any decision is
made with respect to the Offer.
THE TENDER OFFER
1. Terms of the Offer
Upon the terms and subject to the conditions of the Offer, the Purchaser
will accept for payment and pay for all Shares validly tendered prior to the
Expiration Date and not theretofore withdrawn in accordance with Section 3.
The term "Expiration Date" means 12:00 midnight, New York City time, on
Wednesday, July 5, 2000, unless and until the Purchaser has extended in
accordance with the Merger Agreement the period of time during which the Offer
is open, in which event the term "Expiration Date" shall mean the latest time
and date on which the Offer, as so extended by the Purchaser, will expire.
Subject to the Merger Agreement (which, as described below, prohibits
certain amendments to the Offer without the consent of the Company) and the
applicable rules and regulations of the Commission, the Purchaser reserves the
right (but shall not be obligated), at any time and from time to time, and
regardless of whether or not any of the events or facts set forth in Section
13 shall have occurred, (a) to extend the period of time during
2
<PAGE>
which the Offer is open, and thereby delay acceptance for payment of and the
payment for any Shares, by giving oral or written notice of such extension to
the Depositary and (b) to amend the Offer in any other respect by giving oral
or written notice of such amendment to the Depositary. The Purchaser has no
intention to make available a "subsequent offering period" (within the meaning
of Rule 14d-11 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) at this time, but has the right (but not the obligation) to
do so under Rule 14d-11 and the Merger Agreement. Under no circumstances will
interest be paid on the purchase price for tendered Shares, regardless of any
extension of or amendment to the Offer or any delay in paying for such Shares.
If by 12:00 midnight, New York City time, on Wednesday, July 5, 2000 (or
any date or time then set as the Expiration Date), any of or all the
conditions to the Offer have not been satisfied or waived, the Purchaser,
subject to the Merger Agreement and the applicable rules and regulations of
the Commission, reserves the right (but shall not be obligated) (a) to
terminate the Offer and not accept for payment or pay for any Shares and
return all tendered Shares to tendering shareholders, (b) to waive all the
unsatisfied conditions (other than the Minimum Condition which may not be
waived by Purchaser without the Company's consent) and accept for payment and
pay for all Shares validly tendered prior to the Expiration Date and not
subsequently withdrawn, (c) to extend the Offer and, subject to the right of
shareholders to withdraw tendered Shares until the extended Expiration Date,
retain the Shares that have been tendered during the period or periods for
which the Offer is extended, (d) impose conditions to the Offer other than as
set forth in the Merger Agreement, or (e) to amend the Offer.
In the Merger Agreement, the Purchaser has agreed that, except as described
below, it will not, without the consent of the Company, (a) reduce the Offer
Price, (b) reduce the maximum number of Shares to be purchased in the Offer,
(c) impose conditions to the Offer other than as set forth in the Merger
Agreement, (d) amend or change, in any manner adverse to the holders of
Shares, the terms and conditions to the Offer (which are set forth in Section
13), (e) change or waive the Minimum Condition, (f) change the form of
consideration payable in the Offer, or (g) except as otherwise provided below
or by any rule, regulation, interpretation or position of the Commission
applicable to the Offer, change the Expiration Date. However, the Merger
Agreement provides that, without the consent of the Company, the Purchaser may
(a) extend the Offer, if at the Expiration Date any of the conditions to the
Purchaser's obligation to purchase Shares are not satisfied, until such time
as such conditions are satisfied or waived, (b) extend the Offer for any
period required by any rule, regulation, interpretation or position of the
Commission applicable to the Offer and (c) extend the Offer to provide for a
subsequent offering period pursuant to Rule 14d-11 under the Exchange Act for
an aggregate period of not less than three (3) and not more than 20 business
days (for all such extensions) beyond the latest expiration date that would
otherwise be permitted under the Merger Agreement.
There can be no assurance that the Purchaser will exercise its right to
extend the Offer. Any extension, waiver, amendment or termination will be
followed as promptly as practicable by public announcement thereof. In the
case of an extension, Rule 14e-l(d) under the Exchange Act requires that the
announcement be issued no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date in accordance
with the public announcement requirements of Rule 14d-4(d) under the Exchange
Act. Subject to applicable law (including Rules 14d-4(d) and 14d-6(d) under
the Exchange Act, which require that any material change in the information
published, sent or given to shareholders in connection with the Offer be
promptly disseminated to shareholders in a manner reasonably designed to
inform shareholders of such change) and without limiting the manner in which
the Purchaser may choose to make any public announcement, the Purchaser will
not have any obligation to publish, advertise or otherwise communicate any
such public announcement other than by issuing a press release to the Dow
Jones News Service.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
the Purchaser will disseminate additional tender offer materials and extend
the Offer to the extent required by Rules 14d-4(d), 14d-6(d) and 14e-1 under
the Exchange Act. The minimum period during which a tender offer must remain
open following material changes in the terms of such offer or information
concerning such offer, other than a change in price or a change in the
percentage of securities
3
<PAGE>
sought, will depend upon the facts and circumstances then existing, including
the relative materiality of the changed terms or information. With respect to
a change in price or a change in the percentage of securities sought, a
minimum period of 10 business days is generally required to allow for adequate
dissemination to shareholders under the relevant rules and regulations of the
Commission.
Without limiting the right of the Purchaser to extend the Offer, in the
event that any condition to the Offer is not satisfied or waived at the
scheduled Expiration Date of the Offer, at the request of the Company the
Purchaser is required under the Merger Agreement to extend the Expiration Date
of the Offer (i) in the event that all of the conditions to the Offer (other
than the Minimum Condition) have not been satisfied or waived at the scheduled
Expiration Date, but the Minimum Condition has been satisfied, until the
earlier of 60 calendar days after the date of this Offer to Purchase, or such
earlier date upon which Parent reasonably determines that any such condition
shall not be capable of being satisfied prior to the expiration of the
aforesaid 60 calendar day period, or (ii) in the event that all of the
conditions to the Offer (other than the Minimum Condition) have been satisfied
or waived at the scheduled Expiration Date, but the Minimum Condition has not
been satisfied, until the earlier of 10 business days after the scheduled
Expiration Date or the date that is 60 calendar days after the date of this
Offer to Purchase. As used in this Offer to Purchase, "business day" has the
meaning set forth in Rule 14d-1 under the Exchange Act.
The Company has provided the Purchaser with the Company's shareholder lists
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase, the related Letter of Transmittal
and other relevant materials will be mailed by the Purchaser to record holders
of Shares and will be furnished to brokers, dealers, banks, trust companies
and similar persons whose names, or the names of whose nominees, appear on the
shareholder lists, or, if applicable, who are listed as participants in a
clearing agency's security position listing, for subsequent transmittal to
beneficial owners of Shares.
2. Procedures For Tendering Shares
Valid Tender. For a shareholder validly to tender Shares pursuant to the
Offer, (a) the certificates for tendered Shares, together with a Letter of
Transmittal (or a facsimile thereof) properly completed and duly executed, any
required signature guarantees and any other required documents, must be
received by the Depositary prior to the Expiration Date at one of its
addresses set forth on the back cover of this Offer to Purchase; (b) in the
case of a transfer effected pursuant to the book-entry transfer procedures
described under "Book-Entry Transfer", either a Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, and any required
signature guarantees, or an Agent's Message (as defined below), and any other
required documents, must be received by the Depositary at one of its
addresses, such Shares must be delivered pursuant to the book-entry transfer
procedures described below and a Book-Entry Confirmation (as defined below)
must be received by the Depositary, in each case prior to the Expiration Date;
or (c) the tendering shareholder must, prior to the Expiration Date, comply
with the guaranteed delivery procedures described below under "Guaranteed
Delivery".
The valid tender of Shares pursuant to one of the procedures described
above will constitute a binding agreement between the tendering shareholder
and the Purchaser upon the terms and subject to the conditions of the Offer.
The method of delivery of Shares, the Letter of Transmittal and all other
required documents, including delivery through the Book-Entry Transfer
Facility (as defined below), is at the election and risk of the tendering
shareholder. Shares will be deemed delivered only when actually received by
the Depositary (including, in the case of a book-entry transfer, by Book-Entry
Confirmation). If delivery is by mail, registered mail with return receipt
requested, properly insured, is recommended. In all cases, sufficient time
should be allowed to ensure timely delivery.
Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at The Depository Trust Company (the "Book-Entry Transfer
Facility") for purposes of the Offer within two business
4
<PAGE>
days after the date of this Offer to Purchase. Any financial institution that
is a participant in the Book-Entry Transfer Facility's system may make book-
entry delivery of Shares by causing the Book-Entry Transfer Facility to
transfer such Shares into the Depositary's account in accordance with the
Book-Entry Transfer Facility's procedures for such transfer. However, although
delivery of Shares may be effected through book-entry transfer into the
Depositary's account at the Book-Entry Transfer Facility, the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed,
with any required signature guarantees, or an Agent's Message, and any other
required documents, must, in any case, be received by the Depositary at one of
its addresses set forth on the back cover of this Offer to Purchase prior to
the Expiration Date for a valid tender of Shares by book-entry. The
confirmation of a book-entry transfer of Shares into the Depositary's account
at the Book-Entry Transfer Facility as described above is referred to herein
as a "Book-Entry Confirmation". Delivery of documents to the Book-Entry
Transfer Facility in accordance with the Book-Entry Transfer Facility's
procedures does not constitute delivery to the Depositary.
The term "Agent's Message" means a message, transmitted through electronic
or other means by the Book-Entry Transfer Facility to, and received by, the
Depositary and forming a part of a Book-Entry Confirmation, which states that
the Book-Entry Transfer Facility has received an express acknowledgment from
the participant in the Book-Entry Transfer Facility tendering the Shares that
such participant has received and agrees to be bound by the terms of the
Letter of Transmittal and that the Purchaser may enforce such agreement
against the participant. "Agent's Message" shall also include any hard copy
print-out evidencing such message generated by a computer terminal maintained
by the Depositary.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal if (a) the Letter of Transmittal is signed by the registered
holder(s) (which term, for purposes of this Section 2, includes any
participant in the Book-Entry Transfer Facility's system whose name appears on
a security position listing as the owner of the Shares) of Shares tendered
therewith and such registered holder has not completed either the box entitled
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (b) such Shares are tendered for
the account of a financial institution (including most commercial banks,
savings and loan associations and brokerage houses) that is a participant in
the Security Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
(such participant, an "Eligible Institution"). In all other cases, all
signatures on the Letter of Transmittal must be guaranteed by an Eligible
Institution. See Instructions 1 and 5 to the Letter of Transmittal. If the
certificates for Shares are registered in the name of a person other than the
signer of the Letter of Transmittal, or if payment is to be made or
certificates for Shares not tendered or not accepted for payment are to be
returned to a person other than the registered holder of the certificates
surrendered, the tendered certificates must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name or names
of the registered holders or owners appear on the certificates, with the
signatures on the certificates or stock powers guaranteed as aforesaid. See
Instructions 1 and 5 to the Letter of Transmittal.
Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's certificates for Shares are not immediately
available or the book-entry transfer procedures cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such shareholder's tender may be
effected if all the following conditions are met:
(a) such tender is made by or through an Eligible Institution;
(b) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser, is received
by the Depositary at one of its addresses set forth on the back cover of
this Offer to Purchase prior to the Expiration Date; and
(c) either (i) the certificates for tendered Shares together with a
Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, and any required signature guarantees, and any other required
documents are received by the Depositary at one of its addresses set forth
on the back cover of this Offer to Purchase within three trading days after
the date of execution of such Notice of Guaranteed Delivery or (ii) in the
case of a transfer effected pursuant to the book-entry transfer procedures
described
5
<PAGE>
above under "Book-Entry Transfer", either a Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, and any required
signature guarantees, or an Agent's Message, and any other required
documents, are received by the Depositary at one of such addresses, or such
Shares are delivered pursuant to the book-entry transfer procedures
described above and a Book-Entry Confirmation is received by the
Depositary, in each case within three trading days after the date of
execution of such Notice of Guaranteed Delivery. A "trading day" is any day
on which the Nasdaq National Market System (the "Nasdaq National Market")
operated by the Nasdaq Stock Market, Inc. ("Nasdaq"), a subsidiary of the
National Association of Securities Dealers, Inc., is open for business.
The Notice of Guaranteed Delivery may be delivered to the Depositary in the
manner specified therein and must include a guarantee by an Eligible
Institution in the form set forth in such Notice of Guaranteed Delivery.
Distribution Of Rights. The Company is a party to a Rights Agreement, dated
as of March 20, 1992, with ChaseMellon Shareholder Services, L.L.C. (as
successor to First Interstate Bank of Oregon, N.A.), as Rights Agent (as
amended, the "Rights Agreement"). The Rights Agreement entitles the holders of
Rights (as defined in the Rights Agreement) to certain purchase rights
contemplated thereby. The Company has informed Parent and the Purchaser that
the Rights Agreement was amended as of May 24, 2000, to exempt from the
provisions of the Rights Agreement the acquisition of Shares by the Parent or
the Purchaser pursuant to the Offer, the Merger and the other transactions
contemplated by the Merger Agreement.
Holders of Shares will be required to tender one Right for each Share
tendered to effect a valid tender of such Share. Unless and until the
Distribution Date (as defined in the Rights Agreement) occurs, the Rights are
represented by and transferred with the Shares. Accordingly, if the
Distribution Date does not occur prior to the Expiration Date of the Offer, a
tender of Shares will constitute a tender of the associated Rights. If,
however, pursuant to the Rights Agreement or otherwise, a Distribution Date
does occur, certificates representing a number of Rights equal to the number
of Shares being tendered must be delivered to the Depositary in order for such
Shares to be validly tendered. If a Distribution Date has occurred, a tender
of Shares without Rights constitutes an agreement by the tendering shareholder
to deliver to the Depositary certificates representing a number of Rights
equal to the number of Shares tendered pursuant to the Offer within three
trading days after the date such certificates are distributed. The Purchaser
reserves the right to require that it receive such certificates prior to
accepting Shares for payment. Payment for Shares tendered and purchased
pursuant to the Offer will be made only after timely receipt by the Depositary
of, among other things, such certificates, if such certificates have been
distributed to holders of Shares. The Purchaser will not pay any additional
consideration for the Rights tendered pursuant to the Offer.
Appointment. By executing a Letter of Transmittal (or a facsimile thereof),
a tendering shareholder will irrevocably appoint designees of the Purchaser as
such shareholder's attorneys-in-fact and proxies in the manner set forth in
the Letter of Transmittal, each with full power of substitution, to the full
extent of such shareholder's rights with respect to the Shares tendered by
such shareholder and accepted for payment by the Purchaser and with respect to
any and all other Shares or other securities or rights issued or issuable in
respect of such Shares on or after June 7, 2000. All such proxies will be
considered coupled with an interest in the tendered Shares. Such appointment
will be effective when, and only to the extent that, the Purchaser accepts for
payment Shares tendered by such shareholder as provided herein. Upon the
effectiveness of such appointment, all prior powers of attorney, proxies and
consents given by such shareholder with respect to such Shares or other
securities or rights will, without further action, be revoked and no
subsequent powers of attorney, proxies, consents or revocations may be given
(and, if given, will not be effective). The designees of the Purchaser will
thereby be empowered to exercise all voting and other rights with respect to
such Shares and other securities or rights in respect of any annual, special
or adjourned meeting of the Company's shareholders, actions by written consent
in lieu of any such meeting or otherwise, as they in their sole discretion
deem proper. The Purchaser reserves the right to require that, in order for
Shares to be deemed validly tendered, immediately upon the Purchaser's
acceptance for payment of such Shares, the Purchaser must be able to exercise
full voting, consent and other rights with respect to such Shares and other
securities or rights, including voting at any meeting of shareholders.
6
<PAGE>
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
will be determined by the Purchaser in its sole discretion, which
determination will be final and binding. The Purchaser reserves the absolute
right to reject any or all tenders determined by it not to be in proper form,
or the acceptance for payment of or payment for which may, in the opinion of
the Purchaser's counsel, be unlawful. The Purchaser also reserves the absolute
right to waive any defect or irregularity in the tender of any Shares of any
particular shareholder whether or not similar defects or irregularities are
waived in the case of other shareholders. No tender of Shares will be deemed
to have been validly made until all defects or irregularities relating thereto
have been cured or waived. None of the Purchaser, the Parent, the Company, the
Depositary, the Information Agent or any other person will be under any duty
to give notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification. The Purchaser's
interpretation of the terms and conditions of the Offer (including the Letter
of Transmittal and the instructions thereto) will be final and binding.
Backup Withholding. In order to avoid the "backup withholding" rules of the
U.S. federal income tax law on payments of cash pursuant to the Offer, a
shareholder surrendering Shares in the Offer must, unless an exemption
applies, provide the Depositary with such shareholder's correct taxpayer
identification number ("TIN") on a Substitute Form W-9 and certify under
penalties of perjury that such TIN is correct and that such shareholder is not
subject to backup withholding. If a shareholder does not provide such
shareholder's correct TIN or fails to provide the certifications described
above, the Internal Revenue Service (the "IRS") may impose a penalty (as
provided by, among others, Sections 6723 and 6724(d)(3) of the Internal
Revenue Code of 1986, as amended (the "Code")) on such shareholder, and
payment of cash to such shareholder pursuant to the Offer may be subject to
backup withholding (presently, at the rate of 31%). All shareholders
surrendering Shares pursuant to the Offer should complete and sign the main
signature form and the Substitute Form W-9 included as part of the Letter of
Transmittal to provide the information and certification necessary to avoid
backup withholding (unless an applicable exemption exists and is proved in a
manner satisfactory to the Purchaser and the Depositary). Certain shareholders
(including, among others, all corporations and certain foreign individuals and
entities) are not subject to backup withholding. Each noncorporate foreign
shareholder should complete and sign the main signature form and a Form W-8,
Certificate of Foreign Status, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding. See Instruction 9 to the
Letter of Transmittal.
3. Withdrawal Rights
Except as otherwise provided in this Section 3, tenders of Shares are
irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant
to the procedures set forth below at any time prior to the Expiration Date
and, unless theretofore accepted for payment and paid for by the Purchaser
pursuant to the Offer, may also be withdrawn at any time after Sunday, August
6, 2000.
For a withdrawal to be effective, a written notice of withdrawal must be
timely received by the Depositary at one of its addresses set forth on the
back cover of this Offer to Purchase and must specify the name of the person
having tendered the Shares to be withdrawn, the number of Shares to be
withdrawn and the name of the registered holder of the Shares to be withdrawn,
if different from the name of the person who tendered the Shares. If
certificates for Shares have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such certificates, the
serial numbers shown on such certificates must be submitted to the Depositary
and, unless such Shares have been tendered by an Eligible Institution, any and
all signatures on the notice of withdrawal must be guaranteed by an Eligible
Institution. If Shares have been delivered pursuant to the book-entry transfer
procedures described in Section 2, any notice of withdrawal must also specify
the name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Shares and otherwise comply with the Book-Entry
Transfer Facility's procedures. Withdrawals of tenders of Shares may not be
rescinded, and any Shares properly withdrawn will thereafter be deemed not
validly tendered for purposes of the Offer. However, withdrawn Shares may be
retendered again by following one of the procedures described in Section 2 at
any time prior to the Expiration Date.
7
<PAGE>
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser in its sole
discretion, which determination will be final and binding. None of the
Purchaser, the Parent, the Company, the Depositary and the Information Agent
or any other person will be under any duty to give notification of any defects
or irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification.
4. Acceptance for Payment and Payment
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such
extension or amendment), the Purchaser will, promptly after the Expiration
Date, accept for payment and will pay for all Shares validly tendered prior to
the Expiration Date and not properly withdrawn in accordance with Section 3.
The Purchaser, subject to the Merger Agreement, expressly reserves the right,
in its sole discretion, to delay acceptance for payment of or payment for
Shares in order to comply in whole or in part with any applicable law,
including the HSR Act. See Section 14. Any such delays will be effected in
compliance with Rule 14e-1(c) under the Exchange Act (relating to a bidder's
obligation to pay for or return tendered securities promptly after the
termination or withdrawal of such bidder's Offer).
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made as promptly as practicable following the Expiration Date but only
after timely receipt by the Depositary of (a) the certificates for such
Shares, together with a Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, and any required signature guarantees or
(b) in the case of a transfer effected pursuant to the book-entry transfer
procedures described in Section 2, a Book-Entry Confirmation and either a
Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, and with any required signature guarantees, or an Agent's Message,
and any other required documents. The per Share consideration paid to any
shareholder pursuant to the Offer will be the highest per Share consideration
paid to any other shareholder pursuant to the Offer. Accordingly, tendering
shareholders may be paid at different times depending upon when certificates
for Shares or Book-Entry Confirmations with respect to Shares are actually
received by the Depositary.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares validly tendered to the Purchaser
and not withdrawn as, if and when the Purchaser gives oral or written notice
to the Depositary of the Purchaser's acceptance for payment of such Shares.
Upon the terms and subject to the conditions of the Offer, payment for Shares
accepted for payment pursuant to the Offer will be made by deposit of the
purchase price therefor with the Depositary, which will act as an agent for
tendering shareholders for the purpose of receiving payment from the Purchaser
and transmitting payment to tendering shareholders whose Shares have been
accepted for payment. If the Purchaser varies the terms of the Offer by
increasing the consideration to be paid, the Purchaser shall pay such
increased amount for each tendered Share accepted for payment pursuant to the
Offer. Under no circumstances will interest be paid on the Offer Price for
tendered shares, regardless of any extension of or amendment to the Offer or
any delay in paying for such shares.
If the Purchaser is delayed in its acceptance for payment of or payment for
Shares or is unable to accept for payment or pay for Shares pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer (but subject to compliance with Rule 14e-1(c) under the Exchange Act
(relating to a bidder's obligation to pay for or return tendered securities
promptly after the termination or withdrawal of such bidder's offer)), the
Depositary may, nevertheless, on behalf of the Purchaser, retain tendered
Shares, and such Shares may not be withdrawn except to the extent tendering
shareholders are entitled to do so as described in Section 3.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, the certificates for such Shares will be returned (and, if
certificates are submitted for more Shares than are tendered, new certificates
for the Shares not tendered will be sent), in each case without expense to the
tendering shareholder (or, in the case of Shares delivered by book-entry
transfer of such Shares into the Depositary's account at the Book-Entry
Transfer Facility pursuant to the book-entry transfer procedures described in
Section 2, such Shares will be credited to an account maintained at the Book-
Entry Transfer Facility), as promptly as practicable after the expiration or
termination of the Offer.
8
<PAGE>
Subject to the requisite consent of the Company, the Purchaser reserves the
right to transfer or assign, in whole or from time to time in part, to the
Parent, or to one or more direct or indirect wholly owned subsidiaries of the
Parent, the right to purchase Shares tendered pursuant to the Offer, but any
such transfer or assignment will not relieve the Purchaser of its obligations
under the Offer and will in no way prejudice the rights of tendering
shareholders to receive payment for Shares validly tendered and accepted for
payment pursuant to the Offer.
5. Certain U.S. Federal Income Tax Consequences
The following is a summary of certain United States federal income tax
consequences of the Offer and the Merger to the shareholders of the Company
whose Shares are tendered and accepted for payment pursuant to the Offer or
whose Shares are converted into cash in the Merger. This discussion is for
general information only and does not purport to consider all aspects of
United States federal income taxation that might be relevant to the
shareholders of the Company. This discussion (i) is based on the current
provisions of the Code, existing, proposed and temporary regulations
promulgated thereunder and administrative and judicial interpretations
thereof, all of which are subject to change, possibly with a retroactive
effect; (ii) applies only to the shareholders of the Company in whose hands
the Shares are capital assets within the meaning of Section 1221 of the Code;
and (iii) may not apply to Shares received by a shareholder pursuant to the
exercise of stock options or as compensation, or to certain types of
shareholders (such as insurance companies, tax-exempt organizations, financial
institutions and broker-dealers, and may not apply to a holder of Shares in
light such shareholder's individual circumstances, such as holding Shares as a
hedge or as part of a hedging, straddle, conversion or other risk-reduction
transaction) who may be subject to special rules. This discussion does not
address the United States federal income tax consequences to any stockholder
of the Company who, for United States federal income tax purposes, is a non-
resident alien individual, a foreign corporation, a foreign partnership or a
foreign estate or trust, nor does it consider the effect of any foreign, state
or local tax laws.
BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH SHAREHOLDER SHOULD
CONSULT SUCH SHAREHOLDER'S TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE
RULES DISCUSSED BELOW TO SUCH SHAREHOLDER, INCLUDING THE APPLICATION AND
EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS.
The receipt of cash pursuant to the Offer or the Merger will be a taxable
transaction for U.S. federal income tax purposes and may also be a taxable
transaction under applicable state, local or foreign income or other tax laws.
Generally, for U.S. federal income tax purposes, a tendering shareholder will
recognize gain or loss equal to the difference between the amount of cash
received by the shareholder pursuant to the Offer or Merger, as the case may
be, and the aggregate tax basis in the Shares tendered by the shareholder and
purchased pursuant to the Offer or converted into cash in the Merger, as the
case may be. Gain or loss will be calculated separately for each block of
Shares (i.e., Shares acquired at the same cost in a single transaction)
tendered and purchased pursuant to the Offer or converted into cash in the
Merger, as the case may be.
If tendered Shares are held by a tendering shareholder as capital assets,
gain or loss recognized by such shareholder will be capital gain or loss,
which will be long-term capital gain or loss if such shareholder's holding
period for the Shares exceeds one year. Presently, in the case of a
noncorporate shareholder, long-term capital gain will be subject to a maximum
U.S. federal income tax rate of 20%, and short term capital gain (i.e., Shares
that have been held for one year of less) will be subject to tax at the
shareholder's ordinary income tax rates. In addition, under present law a
shareholder's ability to use capital losses to offset ordinary income is
limited.
Certain shareholders that tender Shares may be subject to backup
withholding at a rate of 31%. A shareholder may avoid backup withholding (i)
by providing such shareholder's TIN and certifying that such number is
correct, or (ii) by properly certifying that such shareholder is awaiting a
TIN and is otherwise complying with the applicable requirements of the backup
withholding rules, or (iii) if an exemption from the backup withholding rules
applies. Exemptions are available for shareholders that are corporations and
for certain foreign individuals and entities. A shareholder that is subject to
backup withholding and does not furnish such
9
<PAGE>
shareholder's TIN or that does not otherwise establish a basis for an
exemption from backup withholding may be subject to a penalty imposed by the
IRS. See "Backup Withholding" under Section 2.
If backup withholding applies to a shareholder, the Depositary is required
to withhold 31% of the payments it makes to such shareholder. Backup
withholding is not an additional tax. Rather, the amount withheld under the
backup withholding rules can be credited against the U.S. federal income tax
liability of the taxpayer subject to the backup withholding, provided that the
required information is given to the IRS. If backup withholding results in an
overpayment of U.S. federal income tax, a taxpayer may obtain a refund of such
overpayment by filing a U.S. federal income tax return.
6. Price Range of the Shares; Dividends on the Shares
The Shares are quoted on the Nasdaq National Market under the symbol "PCOL"
and have been at all times since March 24, 1992. The following table sets
forth, for each of the periods indicated, the high and low sales prices per
Share.
Protocol Systems, Inc.
<TABLE>
<CAPTION>
High Low
------- ------
<S> <C> <C>
Fiscal Year Ended December 31, 1998:
First Quarter............................................ 10.2500 6.7500
Second Quarter........................................... 10.3750 7.6875
Third Quarter............................................ 9.6250 7.8750
Fourth Quarter........................................... 8.5000 6.0000
Fiscal Year Ended December 31, 1999:
First Quarter............................................ 8.8750 5.7500
Second Quarter........................................... 10.3125 5.7500
Third Quarter............................................ 9.5000 6.7500
Fourth Quarter........................................... 9.2500 6.0000
Fiscal Year Ending December 31, 2000:
First Quarter............................................ 14.0000 8.7500
Second Quarter (through June 6, 2000).................... 15.8125 9.2500
</TABLE>
On April 17, 2000, the last trading day before the Company announced that
it had engaged SG Cowen to assist the Company Board in the process of
exploring Protocol's strategic alternatives, including a potential business
combination or sale of the Company, the last sale price of the Shares reported
on the Nasdaq National Market was $10.88 per share. On May 24, 2000, the last
full trading day before the public announcement of the execution of the Merger
Agreement, the last reported sales price of the Shares on the Nasdaq National
Market was $13.125 per Share. On June 6, 2000, the last full trading day
before commencement of the Offer, the last reported sales price of the Shares
on the Nasdaq National Market was $15.5625 per Share. Shareholders are urged
to obtain current market quotations for the Shares.
The Purchaser has been advised by the Company that the Company has never
declared or paid any cash dividends on the Shares.
7. Effect of the Offer on the Market for the Shares; Share Quotation; Exchange
Act Registration; Margin Regulations
Market for the Shares. The purchase of Shares pursuant to the Offer will
reduce the number of holders of Shares and the number of Shares that might
otherwise trade publicly and could adversely affect the liquidity and market
value of the remaining Shares held by the public.
10
<PAGE>
Share Quotation. Depending upon the number of Shares purchased pursuant to
the Offer, the Shares may no longer meet the requirements for continued
designation for the Nasdaq National Market. To maintain such designation, a
security must substantially meet one of two maintenance standards. The first
maintenance standard requires that there be at least 750,000 publicly held
shares, the publicly held shares have a market value of at least $5 million,
the issuer have net tangible assets of at least $4 million, there be at least
400 shareholders of round lots, the minimum bid price per share be $1 and
there be at least two registered and active market makers. The second
maintenance standard requires that the issuer have either (a) a market
capitalization of at least $50 million or (b) total assets and total revenue
of at least $50 million each for the most recently completed fiscal year or
two of the last three most recently completed fiscal years, there be at least
1,100,000 shares publicly held, the publicly held shares have a market value
of at least $15 million, the minimum bid price per share be $5, there be at
least 400 shareholders of round lots and there be at least four registered and
active market makers.
If these standards for continued designation for the Nasdaq National Market
are not met, the Shares might nevertheless continue to be included in the
Nasdaq SmallCap Market. Continued inclusion in the Nasdaq SmallCap Market,
however, would require that there be at least 300 shareholders of round lots,
there be at least 500,000 publicly held shares, the publicly held shares have
a market value of at least $1 million, there be at least two registered and
active market makers, of which one may be entering stabilizing bids, and the
issuer have either (a) net tangible assets of at least $2 million, (b) a
market capitalization of at least $35 million or (c) net income of at least
$500,000 in the most recently completed fiscal year or in two of the last
three most recently completed fiscal years. Shares held directly or indirectly
by directors, officers or beneficial owners of more than 10% of the Shares of
a corporation are not considered as being publicly held for this purpose.
According to the Company, as of June 2, 2000, there were approximately 134
holders of record of Common Stock and approximately 3,000 beneficial owners
and, as of such date, there were 8,193,524 Shares outstanding. If, as a result
of the purchase of Shares pursuant to the Offer or otherwise, the Shares no
longer meet any of the requirements of Nasdaq for continued listing and the
number of Shares outstanding are no longer listed, the market for Shares could
be adversely affected. If Nasdaq were to delist the Stock, it is possible that
the Shares would continue to trade on other securities exchanges or in the
over-the-counter market and that price quotations would be reported by such
exchanges. The extent of the public market for the Shares and the availability
of such quotations would, however, depend upon the number of holders of Shares
remaining at such time, the interests in maintaining a market in the Shares on
the part of securities firms, the possible termination of registration of the
Shares under the Exchange Act, as described below, and other factors.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Registration of the Shares under the Exchange Act may be
terminated upon application of the Company to the Commission if the Shares are
neither listed on a national securities exchange nor held by 300 or more
holders of record. Termination of registration of the Shares under the
Exchange Act would, subject to Section 15(d) of the Exchange Act,
substantially reduce the information required to be furnished by the Company
to its shareholders and to the Commission and would make certain provisions of
the Exchange Act no longer applicable to the Company, such as the short-swing
profit-recovery provisions of Section 16(b) of the Exchange Act, the
requirement of furnishing proxy or information statement pursuant to Section
14(a) or 14(c) of the Exchange Act in connection with shareholders' meetings
and the related requirement of furnishing an annual report to shareholders and
the requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions. Furthermore, the ability of "affiliates" of the Company
and persons holding "restricted securities" of the Company to dispose of such
securities pursuant to Rule 144 or 144A promulgated under the Securities Act
of 1933, as amended, may be impaired or eliminated. The Purchaser intends to
cause the Company to apply for termination of registration of the Shares under
the Exchange Act as soon after the completion of the Offer as the requirements
for such termination are met.
If registration of the Shares is not terminated prior to the Merger, then
the Shares will be delisted from Nasdaq and the registration of the Shares
under the Exchange Act will be terminated following the consummation of the
Merger.
11
<PAGE>
Margin Regulations. The Shares are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of
allowing brokers to extend credit on the collateral of the Shares. Depending
upon factors similar to those described above regarding listing and market
quotations, it is possible that, following the Offer, the Shares would no
longer constitute "margin securities" for the purposes of the margin
regulations of the Federal Reserve Board and therefore could no longer be used
as collateral for loans made by brokers.
8. Certain Information Concerning the Company
The Company was incorporated in Oregon and is headquartered at 8500 S. W.
Creekside Place, Beaverton, Oregon 97008-7107, (503) 526-8500. According to
the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1999 (the "Company 10-K"), the Company, which began active operations in
1985, designs, manufactures, sells and services medical vital signs monitors
and systems. The primary users of the Company's products are hospitals,
physicians, emergency medical operators and other health related professions.
The Company's main product, the Propaq monitor, combines multiple
physiological measurement and display capabilities in a single instrument
permitting the use of the monitor in a variety of patient care applications.
Set forth below is certain selected financial information with respect to
the Company and its subsidiaries excerpted from the information contained in
the Company 10-K and its Quarterly Report on Form 10-Q for the quarter ended
March 31, 2000. More comprehensive financial information is included in such
reports and other documents filed by the Company with the Commission, and the
following summary is qualified in its entirety by reference to such reports,
other documents and all the financial information (including any related
notes) contained therein. Such reports and other documents should be available
for inspection and copies thereof should be obtainable in the manner set forth
below under "Available Information".
PROTOCOL SYSTEMS, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Fiscal Year
Ended Ended
March 31, December 31,
--------------- ---------------
2000 1999 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Sales ....................................... $17,667 $14,299 $66,317 $67,323
Income (loss) from Operations ............... 1,484 705 5,515 (2,182)
Net income (loss) ........................... 1,381 725 6,291 (675)
Basic earnings (loss) per share.............. 0.17 0.09 .77 (.08)
Diluted earnings (loss) per share............ 0.16 0.09 .76 (.08)
BALANCE SHEET:
Working Capital.............................. $43,481 $36,651 $39,296
Total Assets................................. 61,347 59,838 55,851
Long-term Liabilities ....................... -- -- --
Stockholders' equity......................... 54,356 51,951 47,746
</TABLE>
Certain Forecast Information. During the course of discussions between
representatives of the Company and the Parent, the Company provided the Parent
with the Company's summary forecasts of the Company's future financial
performance during the years ending December 31, 2000, 2001 and 2002. In its
provisional budget for fiscal years 2000 through 2002, the Company forecast
that:
(i) during fiscal year 2000, the Company is expected to have sales of
$77.0 million, income before taxes of $9.2 million and net income of $6.4
million;
(ii) during fiscal year 2001, the Company is expected to have sales of
$91.7 million, income before taxes of $13.0 million and net income of $9.1
million; and
12
<PAGE>
(iii) during fiscal year 2002, the Company is expected to have sales of
$114.3 million, income before taxes of $19.7 million and net income of
$13.8 million.
The financial forecasts were prepared by the Company and were not prepared
with a view to public disclosure or compliance with the published guidelines
of the Commission or the guidelines established by the American Institute of
Certified Public Accountants regarding projections or forecasts. Such
forecasts are, in general, prepared solely for internal use and capital
budgeting and other management decisions and are subjective in many respects
and thus susceptible to various interpretations and periodic revision based on
actual experience and business developments. Such forecasts are based on a
number of assumptions that are beyond the control of the Company or its
financial advisors, including economic forecasting (both general and specific
to the Company's business), which is inherently uncertain and subjective.
Accordingly, there can be no assurance that the assumptions made in preparing
such forecasts will prove accurate. It is expected that there will be
differences between actual and forecasted results, and actual results may be
materially greater or less than those contained in the forecasts. Neither the
Purchaser, the Parent nor the Company nor their respective financial advisors
assumes any responsibility for the validity, reasonableness, completeness or
accuracy of any of such forecasts. The inclusion of the foregoing information
should not be regarded as an indication that the Purchaser, the Parent, or the
Company or any other person who provided or received such information
considers it an accurate prediction of future events and the forecasts should
not be relied upon as such. None of the Purchaser, the Parent, or the Company
intends to update, revise or correct such information if it becomes inaccurate
(even in the short term).
Available Information. The Company is subject to the informational
requirements of the Exchange Act and, in accordance therewith, is required to
file reports and other information with the Commission relating to its
business, financial condition and other matters. Certain information as of
particular dates concerning the Company's directors and officers, their
remuneration, stock options and other matters, the principal holders of the
Company's securities and any material interest of such persons in transactions
with the Company is required to be disclosed in the Company's proxy statements
distributed to the Company's shareholders and filed with the Commission. Such
information should be available for inspection at the public reference
facilities of the Commission at 450 Fifth Street, N.W., Washington, DC 20549,
and at the regional offices of the Commission located at Seven World Trade
Center, 13th Floor, New York, NY 10048 and Northwestern Atrium Center, 500
West Madison Street (Suite 1400), Chicago, IL 60661. Copies of such
information should be obtainable, by mail, upon payment of the Commission's
customary charges, by writing to the Commission's principal office at 450
Fifth Street, N.W., Washington, DC 20549. The Commission also maintains a Web
site on the Internet at (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission.
Except as otherwise stated in this Offer to Purchase, the information
concerning the Company contained herein has been taken from or based upon
publicly available documents on file with the Commission and other publicly
available information. Although the Purchaser and the Parent do not have any
knowledge that any such information is untrue, neither the Purchaser nor the
Parent takes any responsibility for the accuracy or completeness of such
information or for any failure by the Company to disclose events that may have
occurred and may affect the significance or accuracy of any such information.
9. Certain Information Concerning the Purchaser and Parent
The Purchaser, an Oregon corporation which is a wholly owned subsidiary of
the Parent, was organized to acquire the Company and has not conducted any
activities unrelated to the acquisition of the Company since its organization.
The principal executive offices of the Purchaser are located at the principal
executive offices of the Parent described below. All outstanding shares of
capital stock of the Purchaser are owned by the Parent.
Parent is a privately held corporation organized under the laws of the
State of New York. Founded in 1915, Parent is a manufacturer of medical and
dental diagnostic equipment and miniature precision lamps. Parent is
headquartered in Skaneateles, New York and has more than 1,800 employees
located in numerous manufacturing, sales and distribution facilities
worldwide. The address of the principal executive offices of Parent is 4341
State Street Road, Skaneateles Falls, New York 13153 and its telephone number
at such location is (315) 685-4100.
13
<PAGE>
None of Parent, the Purchaser or, to the best of their knowledge, any of
the persons listed on Schedule I hereto, or any associate or majority-owned
subsidiary of Parent, the Purchaser or any of the persons so listed, owns or
has the right to acquire any Shares or has effected any transaction in the
Shares during the past 60 days, except that:
(i) Parent owns 10 Shares;
(ii) William F. Allyn, a director of Parent, owns 100 Shares;
(iii) Peter H. Soderberg, President and Chief Executive Officer of
Parent and President of the Purchaser, and certain members of his immediate
family own an aggregate of 7,868 Shares; and
(iv) a son of Lew F. Allyn, the Chairman of the Board of Directors of
Parent, owns 500 Shares through a trust, for which Mr. Allyn serves as
custodian.
None of the Shares described in subparagraph (i) above or, based upon the
written representations obtained by Parent from the applicable persons, the
Shares described in subparagraphs (ii) through (iv) above were purchased
during the last three years. Such Shares constitute in the aggregate less than
one percent of the issued and outstanding Shares.
Except as set forth in this Offer to Purchase, none of Parent, the
Purchaser or, to the best of their knowledge, any of the persons listed in
Schedule I hereto, (a) has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the
Company, including, but not limited to, any contract, arrangement,
understanding or relationship concerning the transfer or the voting of any
securities of the Company, joint ventures, loan or option arrangements, puts
or calls, guaranties of loans, guaranties against loss, or the giving or
withholding of proxies, (b) has engaged in contacts, negotiations or
transactions with the Company or its affiliates concerning a merger,
consolidation, acquisition, tender offer or other acquisition of securities,
election of directors or a sale or other transfer of a material amount of
assets during the past two years, or (c) has had any other transaction with
the Company or any of its executive officers, directors or affiliates that
would require disclosure under the rules and regulations of the Commission
applicable to the Offer.
10. Source and Amount of Funds
The Purchaser estimates that the total amount of funds required to purchase
all of the outstanding Shares, and to pay fees and expenses related to the
Offer, will be approximately $146.8 million. The Purchaser will obtain all
funds needed for the Offer from Parent pursuant to a capital contribution or
an unsecured loan (or a combination of both) prior to the consummation of the
Offer.
Parent recently obtained an unsecured $40 million bridge loan from Bank
One, NA ("Bank One"). The proceeds of the bridge loan, combined with cash on
hand and other liquid investments of Parent, provide funds sufficient to
consummate the Offer. The bridge loan is evidenced by a letter agreement and
promissory note, each of which is dated as of May 18, 2000, and attached as
Exhibit (b)(1) and (b)(2), respectively, to Schedule TO filed with the
Commission by Parent and the Purchaser. The bridge loan bears interest at Bank
One's prime rate or at a fixed rate offered by Bank One from time to time. The
bridge loan will mature on the earlier of July 31, 2000 or the date Parent
secures a permanent revolving credit facility (see below), and contains
customary provisions allowing the lender to accelerate upon the occurrence of
certain defaults. If the Offer is extended beyond July 31, 2000 and the
permanent revolving credit facility described below has not yet been obtained,
Parent anticipates being able to extend or refinance the bridge loan.
Parent intends to establish a permanent revolving credit facility which
will refinance the bridge loan and provide Parent and its subsidiaries
(including the Company) with working capital. Parent has received and accepted
a signed commitment from Banc One Capital Markets, Inc. ("Banc One Capital
Markets"), an affiliate of Bank One, to use its best efforts to form a
syndicate to provide a $100 million unsecured five-year revolving credit
facility to Parent. Bank One will serve as the agent for the syndicate lenders
and has committed to provide
14
<PAGE>
up to $50 million of the total $100 million in commitments, and Banc One
Capital Markets has received commitment letters from two additional lenders
for up to the remaining balance of the $100 million credit facility
commitment. The Bank One commitment letter expires on July 31, 2000 unless
extended.
Parent has not completed the process of negotiating a credit agreement, but
based upon the commitment letter and a draft of the credit agreement received
by Parent, it is anticipated that the final credit agreement will contain the
following material terms: (a) the $100 million credit facility will be
unsecured and will mature in five years; (b) loans will bear interest at (i) a
floating rate based upon the prime rate or the effective federal funds rate
plus .5% or (ii) a Eurodollar rate based upon the London interbank offered
rate ("LIBOR") plus a margin ranging from .625% to 1.00% per annum, based upon
Parent's leverage ratio (total debt to consolidated EBITDA (earnings before
interest, taxes, depreciation, and amortization)) from time to time; (c)
Parent will pay a variable commitment fee ranging from .175% to .315% per
annum (based upon Parent's leverage ratio from time to time) calculated on the
unused portion of the revolving credit facility; (d) loans made under the
credit agreement will be subject to customary conditions, representations and
warranties, affirmative and negative covenants and default provisions, and (e)
financial covenants will include an interest coverage ratio, a leverage ratio,
and a minimum net worth requirement. There can be no assurance, however, that
the final credit agreement will contain all or any such terms, or that Parent
will be able to enter into a credit agreement on terms acceptable to it or at
all.
Parent intends to repay amounts due under the revolving credit facility out
of funds generated from operations or by refinancing the facility at maturity.
The Offer is not conditioned upon the Purchaser obtaining financing to
purchase Shares pursuant to the Offer. The Purchaser has available, through
Parent, sufficient funds to consummate the Offer.
11. Contacts and Transactions with the Company; Background of the Offer
The business relationship between Parent and the Company began in
September, 1996, when Parent initiated discussions with the Company regarding
the Company's distribution of Parent's vital signs monitor product. On April
4, 1997, Parent and the Company signed a distribution agreement under which
Parent's vital signs monitor was branded with the Company's QuikSigns
trademark, and the Company was granted the exclusive right to distribute and
sell the QuikSigns branded monitor in the U.S. hospital and military markets.
The communication and business activity carried out under this agreement
allowed the management of the two companies to become familiar with each
other. This distribution agreement was modified and restated in May, 1999,
generally to permit Parent to sell the vital signs monitor branded with
Parent's trademark(s) in the U.S. hospital market. Under this agreement,
Parent received payments from the Company in an aggregate amount of
approximately $1.2 million and $1.8 million during the years ended December
31, 1998 and 1999, respectively.
During 1997, the Company invited representatives of Parent to its
facilities in Beaverton, Oregon for discussions about potential strategic
relationships between the companies, including the possibility of an
acquisition of the Company by Parent. However, no negotiations or further
discussions regarding such acquisition resulted from this meeting.
In November, 1997, Parent initiated discussions with Pryon Corporation
("Pryon"), a wholly owned subsidiary of the Company, regarding an agreement
under which Parent would purchase from Pryon a side stream etCO\\2\\ module to
be used as an optional component in Parent's Atlas monitor, which was then
under development. The etCO\\2\\ module measures the concentration of carbon
dioxide in air exhaled by a patient. The companies signed a supply agreement
for the etCO\\2\\ module on April 15, 1998. Under this agreement, Parent made
payments to the Company in the aggregate amount of approximately $5,670 and
$171,635 during the years ended December 31, 1998 and 1999, respectively. This
agreement further developed the commercial relationship between the companies,
and provided a basis for more open dialog concerning business matters common
to the companies.
15
<PAGE>
On February 24, 2000, SG Cowen contacted Parent management on behalf of the
Company and communicated the Company's interest in pursuing strategic
alternatives, including the possible merger or sale of the Company. Based upon
Parent's familiarity with the Company, and in light of the Company's rejection
of Invivo Corporation's publicly announced interest in acquiring control of
the Company, Parent management decided to evaluate the strategic benefit of
acquiring the Company. On March 9, 2000, Parent signed a confidentiality
agreement with SG Cowen on behalf of the Company to participate in preliminary
due diligence.
On March 9, 2000, Parent management met with the Company's management and
SG Cowen representatives at the offices of the Company's outside counsel in
Portland, Oregon to further investigate this opportunity. The Company's
management team presented a company overview outlining strategic direction,
markets, current and future product lines, competition, and summary financial
forecasts. The Parent team was given access to a data room containing
materials suitable for a preliminary evaluation of the Company.
Parent contacted The Robinson-Humphrey Company, LLC ("Robinson-Humphrey")
on March 14, 2000 to discuss the possibility of engaging Robinson-Humphrey as
its financial advisor in connection with the potential transaction with the
Company. On March 30, 2000 Parent and Robinson-Humphrey signed an agreement
appointing Robinson-Humphrey as Parent's financial advisor with respect to
analyzing the Company as a strategic partner or an acquisition candidate and
to providing other related services. Parent discussed with Robinson-Humphrey
the information provided by the Company in the initial round of due diligence.
Robinson-Humphrey contacted SG Cowen regarding the strategic transaction
alternatives that could be acceptable to the Company, and was advised that
several other strategic buyers had expressed some level of interest in
pursuing further due diligence investigation of the Company. SG Cowen also
disclosed that interested parties were being asked to submit by April 10, 2000
written indications of interest regarding a potential strategic transaction or
relationship with the Company.
The respective representatives of Parent and the Company participated in a
conference call on March 31, 2000, during which Parent sought additional
information regarding the Company's operations, to enable Parent to determine
whether or not to submit a preliminary non-binding indication of interest in
accordance with the process prescribed by SG Cowen. The information requested
related to sales forecasts, fixed costs, operating margins, balance sheet
data, and the status of product development programs. The Company provided the
information requested, to the extent consistent with the evaluation process it
had established with SG Cowen.
On April 7, 2000, Parent's management team and Robinson-Humphrey made a
presentation to the Executive Committee of the Board of Directors of Parent
(the "Executive Committee") detailing (i) the opportunity presented by the
transaction, (ii) the key issues that remained unanswered, and (iii) the
preliminary range of valuation of the Company. The Executive Committee
authorized management to pursue this opportunity and submit an initial
indication of interest to acquire the Company. On April 7, 2000, a director of
Parent, William Allyn, who was on other business in Oregon, visited the
Company's Beaverton facility. The Company's management team provided Mr. Allyn
with an overview of the Company similar to the presentation previously made to
Parent management.
On April 10, 2000, Parent submitted a preliminary non-binding indication of
interest to SG Cowen to acquire the Company for consideration in the range
between $125-150 million in cash. This indication of interest was subject to
completion of further due diligence.
On April 12 and 13, 2000, Peter Soderberg, President and Chief Executive
Officer of Parent, met with several members of the Company's management team
in Beaverton, Oregon. Discussion included Parent's vision for the Company as
its subsidiary, the Company's product development pipeline, and key personnel.
On April 17, 2000, SG Cowen contacted Robinson-Humphrey to indicate that,
based on the range of acquisition consideration proposed by Parent, Parent and
one other company would be invited to complete further due diligence of the
Company and thereafter determine whether to submit a specific proposal to
acquire the Company.
16
<PAGE>
By a letter dated April 24, 2000, SG Cowen informed Parent that final bid
proposals to acquire the Company were to be submitted no later than the close
of business on May 12, 2000, and a proposed draft of an Agreement and Plan of
Merger was provided with such letter along with a request to submit proposed
modifications thereto in connection with the bid proposal.
On April 24 and 25, 2000, Parent's project team visited the Company's
facility in Beaverton, Oregon to conduct on-site due diligence regarding the
Company's operations, forecasts, product development plans, cost structure,
manufacturing operations, regulatory status, management teams, and
competencies. Meetings with the Company management were conducted during this
visit to review financial, legal and business records. The Company's
management made presentations regarding its product development programs and a
joint discussion regarding the Company's business plan was also held. On May 1
and 2, 2000, Parent sent a second group of its representatives, including its
outside counsel, to the Company for additional on-site due diligence to review
key technologies as well as legal matters and information systems.
On May 3 and 4, 2000, the Board of Directors of Parent (the "Parent Board")
met in Skaneateles Falls, New York to consider the acquisition of the Company.
The Parent Board reviewed the strategic opportunity of acquiring the Company
and discussed, among other things, the related but complementary products
made, and markets served, by Parent and the Company, the capability of
management to integrate the business of the Company with the existing business
of the Parent, and preliminary models of valuation for the Company. Action on
the approval of the acquisition was deferred to a subsequent meeting scheduled
for May 11, 2000.
Meanwhile, Parent and its outside counsel held a number of meetings and
conference telephone calls to prepare a proposal of modifications to the draft
Merger Agreement provided by the Company.
On May 9, 2000, Parent hosted Jim Welch, the Company's Vice President and
General Manager--Flexible Monitoring, at its facilities in Skaneateles Falls,
New York. The visit included discussion regarding the Company's Acuity network
approach and the probable future evolution of the Company's technology.
On May 11, 2000, the Parent Board met again for final consideration of the
acquisition. The Parent Board reviewed: (a) the Company's business plan, (b)
Parent's financial models, (c) potential business synergies to be realized by
combining the respective businesses of the Company and Parent, (d) market
analysis prepared by Robinson-Humphrey and the management of Parent, and (e) a
summary of the essential terms of the proposed Merger Agreement. Robinson-
Humphrey recommended that a bid proposal for the cash tender offer be at the
price of $16.00 per share, and the Board concurred and resolved to authorize
management to submit a bid proposal for a cash tender offer at $16.00 per
share, subject to certain contingencies to be determined by management,
including execution of amended and restated employment agreements with certain
key employees of the Company. Later in the day, Parent management held
discussions with the Company management concerning continuation of employment
of key employees after consummation of the acquisition, and representatives of
Robinson-Humphrey and SG Cowen discussed potential issues with respect to
Parent's bid proposal and potential modifications to the proposed Merger
Agreement.
On May 12, 2000, Parent submitted to the Company a detailed proposal of
modifications to the Merger Agreement. Later that day, Parent submitted to SG
Cowen a bid proposal to commence a tender offer for all the outstanding shares
of common stock of the Company for $16.00 per share in cash, subject to
certain contingencies, including negotiation and execution of the Merger
Agreement, execution of amended and restated employment agreements by a
minimum number of key employees employed by the Company, and receipt by Parent
of certain opinions of counsel regarding the Company's intellectual property.
On May 13, 2000, Parent, the Company and their respective outside counsel
held a number of conference telephone calls to further discuss the key terms
of the Merger Agreement and the proposed amendments to the employment
agreements of certain key employees of the Company.
On May 16, 2000, the Company Board met to review all submitted bids, and
following the meeting, Parent was informed that the Company Board had
authorized management to begin negotiation of a definitive Merger Agreement.
17
<PAGE>
Between May 17 and 21, 2000, Parent management met with various key
employees of the Company to discuss and finalize amended and restated
employment agreements with the Company, to become effective only on the
condition that Parent acquired control of the Company pursuant to the Offer.
More than the minimum number of the key employees specified in Parent's bid
proposal entered into the amended and restated employment agreements with the
Company, thereby satisfying one of the conditions to the bid proposal. During
this period, Parent also received a satisfactory opinion of counsel regarding
the Company's intellectual property, which satisfied the corresponding
condition of the bid proposal. During the period between May 18 through
May 24, the parties continued to negotiate the terms of the Merger Agreement.
On May 24, the Company Board met with representatives from SG Cowen to
consider the Offer and the Merger Agreement and, based in part upon a
presentation given, and a fairness opinion rendered, by SG Cowen, resolved to
approve and authorize the execution and delivery of the Merger Agreement. The
Merger Agreement was executed by the parties later that day. The following
morning, prior to the opening of the markets, Parent and the Company issued a
joint press release announcing the execution of the Merger Agreement and the
pending cash tender offer contemplated thereby.
12. Purpose of the Offer; The Merger Agreement; Other Agreements
Purpose
The purpose of the Offer is to enable the Parent to acquire control of the
Company by acquiring the outstanding Shares. The Offer, as the first step in
the acquisition of the Company, is intended to facilitate the acquisition of
all of the outstanding Shares. The purpose of the Merger is to cause the
Company to become a wholly owned subsidiary of the Parent.
The Merger Agreement
The Merger Agreement provides that, following the satisfaction or waiver of
the conditions described below under "Conditions to the Merger", the Purchaser
will be merged with and into the Company, and each issued Share (other than
Shares owned by the Parent, the Purchaser or the Company or a direct or
indirect wholly owned subsidiary of the Parent, the Purchaser or the Company,
or by shareholders, if any, who are entitled to and who properly exercise
dissenters' rights under Oregon law, to the extent that such rights are
applicable to the Merger) will be converted into the right to receive $16.00,
in cash, without interest thereon.
Vote Required to Approve Merger. If the Purchaser does not own at least 90
percent of the issued and outstanding Shares, the Oregon Business Corporation
Act (the "OBCA") requires, among other things, that any plan of merger adopted
by the Company Board must be approved by a majority of all the votes entitled
to be cast on the plan. The Company Board has approved the Offer, the Merger
and the Merger Agreement; consequently, the only additional action of the
Company that may be necessary to effect the Merger is approval of the Merger
Agreement and the plan of merger by the Company's shareholders. If the
Purchaser acquires at least 90 percent of the issued and outstanding Shares in
the Offer or otherwise, the Merger can be approved by the Board of Directors
of the Purchaser without any vote of the shareholders of the Company.
Conditions to The Merger. The Merger Agreement provides that the respective
obligations of each party to effect the Merger are subject to the satisfaction
or waiver of certain conditions, including the following: (a) the Merger
Agreement and the Merger shall have been approved and adopted by the
affirmative vote of the holders of the Shares to the extent required by OBCA
and the articles of incorporation of the Company; (b) the waiting period (and
any extension thereof) applicable to the Merger under the HSR Act shall have
expired or terminated; (c) no permanent or temporary injunction or restraining
order shall have been issued or entered by any court or any other governmental
entity of competent jurisdiction, or other legal restraint or prohibition
shall be in effect, in each case preventing the consummation of the Merger
(the "Injunction"); and (d) Purchaser or its permitted assignee shall have
purchased all Shares validly tendered and not withdrawn pursuant to the Offer,
18
<PAGE>
provided that neither Parent nor Purchaser is entitled to assert the failure
of the condition set forth in this clause (d) if, in breach of the Merger
Agreement or the terms of the Offer, Purchaser fails to purchase any Shares
validly tendered and not withdrawn pursuant to the Offer.
Termination of the Merger Agreement. The Merger Agreement may be terminated
at any time prior to the effective time of the Merger (the "Effective Time"),
whether before or after approval of the Merger Agreement by the shareholders
of the Company:
(a) by mutual written consent duly authorized by the respective Boards
of Directors of Parent and the Company prior to the purchase by Purchaser
of any Shares in the Offer;
(b) by either the Parent or the Company: (i) if any court of competent
jurisdiction in the United States or other governmental authority shall
have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the acceptance for payment
of, or payment for, the Shares pursuant to the Offer or the Merger and such
order, decree, ruling or other action shall have become final and
nonappealable; (ii) if the Merger shall not have been consummated by
November 24, 2000; provided, that such date shall be extended to February
24, 2001 in the event all conditions to effect the Merger other than those
set forth in clause (b) or (c) in the above paragraph captioned "Conditions
to the Merger" (the conditions in such clause (b) or (c), the "Extension
Conditions") have been or are capable of being satisfied at the time of
such extension, and the Extension Conditions have been or are reasonably
capable of being satisfied on or prior to February 24, 2001; except that
the right to terminate this Agreement under this clause (ii) shall not be
available to (A) any party whose failure to fulfill any obligation or
condition under the Merger Agreement has been the cause of, or resulted in,
the failure of the Merger to occur on or before such date, or (B) to
Parent, if Purchaser has purchased Shares pursuant to the Offer; (iii) if
the Offer is terminated, withdrawn or expires pursuant to its terms without
any Shares being purchased thereunder; provided that Parent may terminate
the Merger Agreement pursuant to this clause (iii) only if Parent's or
Purchaser's termination or withdrawal of the Offer is not in violation of
the terms of the Merger Agreement or the Offer; or (iv) if any approval by
the shareholders of the Company required for the consummation of the Merger
or the other transactions contemplated by the Merger Agreement shall not
have been obtained at a shareholders' meeting called for the purpose of
approving the Merger or any adjournment thereof.
(c) By Parent, prior to the acceptance for payment by Purchaser of
Shares pursuant to the Offer, if (i) the Company Board shall have withdrawn
or materially or adversely modified its recommendation of the Offer or the
adoption of the Merger Agreement; (ii) the Company Board shall have
recommended to the shareholders of the Company that they approve an
Alternative Proposal (as defined below under the caption "Other Takeover
Proposals") and at least 72 hours have elapsed since the recommendation;
(iii) a tender offer or exchange offer that, if successful, would result in
any third party or "group" becoming a "beneficial owner" (such terms having
the respective meaning ascribed to them under Regulation 13D under the
Exchange Act) of 50% or more of the outstanding Shares is commenced (other
than by Parent or an affiliate of Parent) and the Company Board recommends
that the shareholders of the Company tender their Shares in such tender or
exchange offer; or (iv) any third party or group has become the beneficial
owner of more than 50% of the outstanding Shares;
(d) By the Company, prior to the acceptance for payment by Purchaser of
Shares pursuant to the Offer, if the Company Board determines to withdraw
or modify its approval or recommendation of the Offer, the Merger Agreement
or the Merger, approve or recommend a Superior Proposal (as defined below
under the caption "Other Takeover Proposals"), or enter into an agreement
with respect to a Superior Proposal, in each case in accordance with the
terms described in the fourth paragraph under the caption entitled "Other
Takeover Proposals" below;
(e) By Parent, prior to the acceptance for payment by Purchaser of
Shares pursuant to the Offer, upon a material breach of any material
covenant or agreement on the part of the Company set forth in the Merger
Agreement, or if any representation or warranty of the Company set forth in
the Merger Agreement shall not have been true and correct at the date of
the Merger Agreement, and as a result thereof there shall have been, or it
is reasonably likely that there will be, a Material Adverse Effect (as such
term is defined in the
19
<PAGE>
Merger Agreement) on the Company (a "Terminating Company Breach");
provided, however, that if such Terminating Company Breach is capable of
being cured by the Company within five (5) business days after the giving
of written notice of such breach by Parent to the Company through the
exercise of its best efforts, so long as the Company continues to exercise
such best efforts, Parent may not terminate the Merger Agreement under this
paragraph (e) until after such fifth (5th) business day; provided, further,
that Parent may not terminate the Merger Agreement under this paragraph (e)
at any time that there exists a Terminating Parent Breach;
(f) By the Company, upon a material breach of any material covenant or
agreement on the part of Parent or Purchaser set forth in the Merger
Agreement, or if any representation or warranty of Parent or Purchaser set
forth in the Merger Agreement shall not have been true and correct at the
date of the Merger Agreement, and as a result thereof there shall have
been, or it is reasonably likely that there will be, a Material Adverse
Effect on Parent or Purchaser (a "Terminating Parent Breach"); provided,
however, that, if such Terminating Parent Breach is capable of being cured
by Parent within five (5) business days after the giving of written notice
of such breach by the Company to Parent through the exercise of its best
efforts, so long as Parent continues to exercise such best efforts, the
Company may not terminate the Merger Agreement under this paragraph (f)
until after such fifth (5th) business day; provided, further, that the
Company may not terminate the Merger Agreement under this paragraph (f) at
any time that there exists a Terminating Company Breach; or
(g) By the Company, if Purchaser shall have failed to commence the Offer
within 10 business days of the date of the Merger Agreement, or Purchaser
fails to pay for validly tendered Shares in violation of the terms of the
Offer or the Merger Agreement.
Other Takeover Proposals. The Merger Agreement provides that, except as
provided below, the Company, from the date of the Merger Agreement until the
earlier of termination thereof or the Effective Time, will not, and will not
authorize or permit its officers, directors, employees, investment bankers,
attorneys, accountants and other agents to directly or indirectly (i)
initiate, solicit or knowingly encourage or facilitate the submission of any
Alternative Proposal (as defined below), (ii) enter into any agreement with
respect to any Alternative Proposal, or (iii) in the event of an unsolicited
Alternative Proposal engage in negotiations or discussions with, or provide
any information or data to, any third party (other than Parent, any of its
affiliates or representatives) relating to any Alternative Proposal or take
any other action to facilitate any inquiries or the making of an Alternative
Proposal; provided, however, that neither the Company nor the Company Board is
prohibited from (a) taking and disclosing to the Company's shareholders a
position contemplated by Rule 14e-2 promulgated under the Exchange Act or
otherwise making disclosure to the Company's shareholders, or (b) otherwise
discharging its fiduciary duties to shareholders.
Notwithstanding the foregoing, prior to the acceptance for payment of
Shares by Purchaser in the Offer, the Company may furnish information
concerning its business, properties or assets to any third party pursuant to a
confidentiality agreement with terms no less favorable to the Company than
those contained in the Confidentiality Agreement (as defined below under the
caption entitled "Confidentiality Agreement") and may negotiate and
participate in discussions and negotiations with such party concerning an
Alternative Proposal if such party has, on an unsolicited basis, submitted an
Alternative Proposal to the Company which the Company Board concludes in good
faith after consultation with its outside legal counsel and financial advisor
is or may result in a Superior Proposal. The Company must promptly (but in no
event later than 48 hours) following receipt of an Alternative Proposal,
notify Parent of the receipt of the same and the identity of the party making
any such Alternative Proposal, and provide a copy of such Alternative Proposal
to Parent. The Company must promptly provide to Parent any material non-public
information regarding the Company provided to any other party which was not
previously provided to Parent.
The Company agreed to, and agreed to cause its subsidiaries and the
directors, employees and other agents of the Company and its subsidiaries to,
cease immediately and cause to be terminated all activities, discussions or
negotiations, if any, with any third party conducted prior to the date of the
Merger Agreement with respect to any Alternative Proposal.
20
<PAGE>
The Merger Agreement further provides that, except as otherwise set forth
in the Merger Agreement, neither the Company Board nor any committee thereof
shall (i) withdraw or modify, or propose to withdraw or modify, in a manner
adverse to Parent or Purchaser, the approval or recommendation by the Company
Board or any such committee of the Offer, the Merger Agreement or the Merger,
(ii) approve or recommend or propose to approve or recommend any Alternative
Proposal or (iii) enter into any agreement with respect to any Alternative
Proposal. Notwithstanding the foregoing, prior to the time of acceptance for
payment of Shares by Purchaser in the Offer, the Company Board may withdraw or
modify its approval or recommendation of the Offer, the Merger Agreement or
the Merger, approve or recommend a Superior Proposal, or enter into an
agreement with respect to a Superior Proposal, in each case at any time after
the elapse of 72 hours following the Company's delivery to Parent of written
notice advising Parent that the Company Board has received a Superior
Proposal, specifying the material terms and conditions of such Superior
Proposal and identifying the person making such Superior Proposal; provided
that the Company may not enter into an agreement with respect to a Superior
Proposal before the Company also shall have furnished Parent with written
notice that it intends to enter into such agreement and shall have terminated
the Merger Agreement in accordance with its terms.
Except to the extent restricted by the Merger Agreement, Purchaser is
entitled to amend or change the terms and conditions of the Offer at any time
before or after it receives notice that the Company has received a Superior
Proposal.
Except to cause the Rights Agreement to be inapplicable to the Offer and
the Merger in accordance with the Merger Agreement or otherwise approved in
writing by Parent, the Company may not amend or terminate the Rights Agreement
or redeem the Rights.
"Alternative Proposal" means any proposal, other than as contemplated by
the Merger Agreement or otherwise proposed by Parent or its affiliates, for
(A) a merger, consolidation, share exchange, reorganization, other business
combination, recapitalization or similar transaction involving the Company,
(B) the acquisition, directly or indirectly, of an equity interest
representing greater than 20% of the voting securities of the Company, (C) the
acquisition of a substantial portion of any of the assets of the Company, or
(D) any transaction the effect of which would be reasonably likely to
prohibit, restrict or delay the consummation of the Offer or the Merger or any
of the other transactions contemplated by the Merger Agreement.
"Superior Proposal" means any Alternative Proposal to acquire, directly or
indirectly, all or substantially all of the Shares then outstanding or all or
substantially all the assets of the Company and that a majority of
disinterested members of the Company Board concludes in good faith, after
consultation with its outside legal counsel and financial advisor and taking
into account all the terms and conditions of the Alternative Proposal
(including the ability of the Person making the Alternative Proposal to
consummate the same), is more favorable to the Company's shareholders than the
Offer and the Merger.
Fees And Expenses; Termination Fee. Except as provided below, all Expenses
(as defined below) incurred in connection with the Merger Agreement, the
Offer, the Merger and the other transactions contemplated by the Merger
Agreement will be paid by the party incurring such Expenses, whether or not
the Offer or the Merger is consummated, except the Expenses incurred in
connection with the printing, filing and mailing to shareholders of the
Company of the Schedule TO, this Offer to Purchase, the Schedule 14D-9, the
information statement under Rule 14f-1 under the Exchange Act and the
solicitation of shareholder approvals (including any proxy statement therefor)
shall be shared equally by the Company and Parent.
The term "Expenses" includes all out-of-pocket expenses (including, without
limitation, all fees and expenses of counsel, accountants, investment bankers,
experts and consultants to a party to the Merger Agreement and its affiliates)
incurred by a party or on its behalf in connection with or related to the
authorization, preparation, negotiation, execution and performance of the
Merger Agreement and the transactions contemplated thereby and all other
matters related to the transactions contemplated thereby.
In the event that the Merger Agreement is terminated pursuant to paragraph
(c) or (d) under the caption "Termination of the Merger Agreement" above, then
the Company shall pay Parent a cash fee of $5 million,
21
<PAGE>
which amount shall be payable by wire transfer of immediately available funds
no later than two business days after such termination.
In the event that the Merger Agreement is terminated by Parent pursuant to
paragraph (e) under the caption "Termination of the Merger Agreement" above,
then the Company shall pay Parent an amount equal to Parent's reasonable,
actual and documented Expenses not in excess of $600,000, which amount shall
be payable by wire transfer of immediately available funds no later than five
business days after the Company's receipt of documentation of such Expenses.
On the other hand, in the event that the Merger Agreement is terminated by the
Company pursuant to paragraph (f) under the caption "Termination of the Merger
Agreement" above, then the Parent shall pay the Company an amount equal to the
Company's reasonable, actual and documented Expenses not in excess of
$600,000, which amount shall be payable by wire transfer of immediately
available funds no later than five business days after Parent's receipt of
documentation of such Expenses.
Conduct of Business. Except as set forth on the Disclosure Schedule
delivered by the Company to Parent and Purchaser in connection with the Merger
Agreement (the "Company Disclosure Schedule") or except as otherwise
contemplated by the Merger Agreement or consented to or approved by Parent in
writing, the Company agreed to, and agreed to cause each of its subsidiaries
to, during the period commencing on the date of the Merger Agreement and
ending at the election or appointment of Purchaser's designees to the Company
Board upon the purchase by Purchaser of any Shares pursuant to the Offer:
(a) conduct its business only in, and not take any action except in, the
ordinary course of its business and consistent with recent past practices;
(b) use reasonable efforts to preserve intact its business organization,
to preserve its relationships with customers and suppliers, to keep
available the services of its present officers and key employees, and to
preserve the goodwill of others having business relationships with it;
(c) not (i) make any change or amendments in its charter or bylaws; (ii)
issue, grant, sell or deliver any shares of its capital stock or any of its
other equity interests or securities (other than shares of Common Stock
issued upon the exercise of any outstanding stock options and the granting
of stock options in the ordinary course of business and consistent with
recent past practice to new hires or pursuant to the 1993 Stock Option Plan
for Nonemployee Directors, in each case with the exercise price no less
than the fair market value on the date of grant) or any "phantom stock,"
"phantom stock" rights, stock appreciation rights or stock-based
performance units; (iii) split, combine or reclassify the outstanding
shares of its capital stock or any of its other outstanding equity
interests or securities or issue any capital stock or other equity
interests or securities in exchange for any such shares or interests; (iv)
redeem, purchase or otherwise acquire, directly or indirectly, any shares
of capital stock or any other securities of the Company or any of its
subsidiaries; (v) amend, accelerate or modify any outstanding options,
warrants, or rights to acquire, or securities convertible into shares of
its capital stock or other equity interests or securities, or adopt or
authorize any other stock or equity appreciation rights, restricted stock
or equity, stock or equity purchase, stock or equity bonus or similar plan,
arrangement or agreement; (vi) make any changes in its equity capital
structure; (vii) declare, set aside, pay or make any dividend or other
distribution or payment (whether in cash, property or securities) with
respect to its capital stock or other securities, except for dividends by a
subsidiary of the Company paid ratably to its shareholders or the partners
thereof, as the case may be; (viii) sell, transfer or otherwise dispose of,
or pledge any stock, equity or partnership interest owned by it in any
subsidiary of the Company; or (ix) enter into or assume any contract,
agreement, obligation, commitment or arrangement with respect to any of the
foregoing;
(d) not (i) modify or change in any material respect any material
contract of the Company specified in the Merger Agreement, other than in
the ordinary course of business consistent with recent past practice; (ii)
enter into any new employment, consulting, agency, severance, termination
or commission agreement, make any amendment or modification to any existing
such agreement or grant any increases in compensation, (A) in each case
other than in the ordinary course of business and consistent with recent
past practice and with or granted to persons who are not officers or
directors of the Company or any of its
22
<PAGE>
subsidiaries and which do not, in the aggregate, materially increase the
compensation or benefit expense of the Company, and (B) other than the
regular annual salary increase granted in the ordinary course of business
and consistent with recent past practice to employees of the Company or any
of its subsidiaries who are not directors or executive officers of the
Company; (iii) establish, amend or modify any employee benefit plan of any
kind, except to the extent required by any applicable law, or the existing
terms of any such plan or the provisions of the Merger Agreement; (iv)
secure any of its outstanding unsecured indebtedness, provide additional
security for any of its outstanding secured indebtedness or grant, create
or suffer to exist any material lien (statutory or other), security
interest, mortgage, pledge, hypothecation, charge, claim, option,
assignment, encumbrance or other restriction on or with respect to any
property, assets or rights of the Company; (v) pay, discharge or satisfy
claims, liabilities or obligations (absolute, accrued, contingent or
otherwise), other than any payment, discharge or satisfaction in the
ordinary course of business consistent with recent past practice; (vi)
cancel any indebtedness or waive any claims or rights, except in the
ordinary course of business and consistent with recent past practice; (vii)
make any material capital expenditures (other than in accordance with the
capital expenditure budget for the year 2000); (viii) accelerate the
payment of, or otherwise prepay, any existing outstanding indebtedness
except in the ordinary course of business consistent with recent past
practice; (ix) other than as contemplated or otherwise permitted by the
Merger Agreement and other than the normal cash management practices of the
Company conducted in the ordinary and usual course of business and
consistent with recent past practice, make any advance or loan to or engage
in any material transaction with any director, officer, partner or
affiliate not required by the terms of an existing contract; (x) guarantee
or otherwise become responsible for any indebtedness of any other party;
(xi) make any change in accounting methods, principles or practices, except
as may have been required by the Commission or the Company's independent
auditors, or (xii) enter into or assume any contract, agreement,
obligation, commitment or arrangement with respect to any of the foregoing;
(e) not acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial equity interest in or a substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof
or otherwise acquire or agree to otherwise acquire any assets which are
material, individually or in the aggregate, to the Company;
(f) except (i) as described in the Company Disclosure Schedule and (ii)
for dispositions in the ordinary course of business consistent with prior
practice, not sell, lease or encumber or otherwise voluntarily dispose of,
or agree to sell, lease, encumber or otherwise dispose of, any of its
assets which are material, individually or in the aggregate, to the
Company;
(g) not incur any indebtedness;
(h) not take any action that would cause its representations and
warranties contained in the Merger Agreement to be untrue in any respect
or, except as otherwise contemplated by the Merger Agreement, make any
changes to the corporate structure of the Company or any its subsidiaries
(including the structure of the ownership by the Company of the direct and
indirect interests in its subsidiaries and of the ownership by the Company
and its subsidiaries of their respective businesses, properties and
assets);
(i) not enter into any agreement that would (after the Effective Time)
purport to bind Parent or any of its subsidiaries (other than the Company
or any of its subsidiaries);
(j) not make any tax election or settle or compromise any material
federal, state, local or foreign income tax liability;
(k) not settle or comprise any pending or threatened suit, action or
claim which is material or which relates to any of the transactions
contemplated by the Merger Agreement; and
(l) confer on a regular and frequent basis with Parent, report on
operational matters and promptly advise Parent of any material adverse
change; and promptly provide to Parent (or its counsel) copies of all
23
<PAGE>
filings made by the Company with any federal, state, foreign or
supranational governmental entity in connection with the Merger Agreement
and the transactions contemplated thereby.
Notwithstanding the above, but subject to the provisions described under
the caption "Other Takeover Proposals" above (to the extent applicable), the
provisions contained in the above paragraph shall not prohibit or restrict in
any way the Company from entering into an agreement with respect to a Superior
Proposal or taking any other action in connection therewith.
Board of Directors. The Merger Agreement provides that promptly upon the
purchase by the Purchaser of Shares pursuant to the Offer, and from time to
time thereafter, the Purchaser shall be entitled to designate up to such
number of directors, rounded up to the next whole number, on the Company Board
as shall give Purchaser representation on the Company Board equal to the
product of the total number of directors on the Company Board (giving effect
to the directors elected pursuant to this sentence) multiplied by the
percentage that the aggregate number of Shares beneficially owned by Purchaser
or any of its affiliates at such time bears to the total number of Shares then
outstanding, and the Company shall, at such time, promptly take all actions
necessary to cause Purchaser designees to be elected as directors of the
Company, including increasing the size of the Company Board. The Company has
agreed to secure prior to the Expiration Date conditional resignations of
incumbent directors. At such time, the Company shall use its best efforts to
cause persons designated by Purchaser to constitute the same percentage as
persons designated by Purchaser shall constitute of the Company Board (i) each
committee of the Company Board (some of whom may be required to be independent
as required by applicable law) (ii) each board of directors of each domestic
subsidiary, and (iii) each committee of each such board, in each case only to
the extent permitted by applicable law.
The Merger Agreement also provides that the Company shall promptly take all
actions required pursuant to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder in order to fulfill its obligations under the above
paragraph and shall include in the Schedule 14D-9 such information with
respect to the Company and its officers and directors as is required under
Section 14(f) and Rule 14f-1 to fulfill such obligations.
Stock Options. The Merger Agreement provides that, at the Effective Time,
each unexpired and unexercised outstanding option to purchase shares of Common
Stock (the "Company Options") previously granted by the Company or its
subsidiaries under any Company Stock Plan (as defined below) or otherwise,
whether or not then vested or exercisable in accordance with its terms, shall
be automatically converted into the right to receive from the Company, at the
Effective Time, cash in an amount equal to the product of (i) the Offer Price
(or such greater amount offered for the Shares in the Offer) minus the
exercise price per share under such Company Option (or, in the case of options
outstanding under the Employee Stock Purchase Plan, the Offer Price or such
greater amount offered for the Shares in the Offer), times (ii) the number of
shares of Common Stock which may be purchased upon exercise of such Company
Option (whether or not then exercisable or vested), less any required
withholding, and thereupon each Company Option shall terminate and each holder
thereof shall have no further rights to any Common Stock. The Company agreed
that, prior to the Effective Time, it will take all action necessary to (A)
shorten the offering period under the Company's Employee Stock Purchase Plan
in which the Effective Time occurs so that such offering period terminates on
the day prior to the Effective Time, and (B) terminate the Employee Stock
Purchase Plan effective as of the Effective Time. Prior to or at the Effective
Time, the Company will adopt such resolutions or take such actions as are
necessary, including, without limitation, to the extent necessary, obtaining
consents of holders of the Company Options, to carry out the terms of this
paragraph. In no event will any Company Options be exercisable after the
Effective Time, except to receive cash as provided in this paragraph.
"Company Stock Plans" means the following: (i) the Company's 1993 Stock
Option Plan for Nonemployee Directors; (ii) the Company's 1994 Employee Stock
Purchase Plan; (iii) the Company's 1987 Stock Incentive Plan; (iv) the
Company's 1992 Stock Incentive Plan; and (v) the Company's 1998 Stock
Incentive Plan.
Employee Matters. In the Merger Agreement, Parent agreed that, and to take
all necessary action to ensure that, during the period commencing at the
Effective Time and ending on the first anniversary thereof, the
24
<PAGE>
employees of the Company will continue to be provided with (whether by Parent,
the Company or otherwise) employee benefit plans (other than stock option or
other plans involving the potential issuance of securities or other equity-
based instruments of the Company) which in the aggregate are not materially
less favorable than those currently provided by the Company to such employees;
provided, however, that subject to compliance with the Merger Agreement,
Parent reserves the right to review all employee benefits after the Effective
Time and to make such changes as it deems appropriate. Parent intends to cause
the Company to provide or enter into new incentive and performance based
compensation plans or arrangements with management employees of the Company
after the Effective Time, the purpose of which will be to provide such
management employees with incentive and performance based compensation.
Parent agreed to cause the Company to assume and honor after the Effective
Time, in accordance with their terms, all written employment, severance and
termination plans and agreements (including change in control provisions) of
employees of the Company and its subsidiaries as in effect on the Effective
Time, subject to all rights to amend or terminate as set forth in those
agreements.
Contemporaneously with the execution and delivery of the Merger Agreement,
the executive officers of the Company amended their existing employment
agreements with the Company and entered into a retention bonus agreement.
These amendments to the employment agreements and the retention bonus
agreements are subject to, and shall not become effective until, the
consummation of the Offer. For further details, see "Other Agreements" below.
Indemnification and Insurance. Parent and Purchaser agreed that, for a
period of six years after the Effective Time, the articles of incorporation
and bylaws of the Company (the "Company Charter" and the "Company Bylaws",
respectively) shall contain provisions with respect to indemnification
substantially to the same effect as those currently set forth in such
documents, and that such provisions shall not be amended, modified or
otherwise repealed for a period of six years after the Effective Time in any
manner that would adversely affect the rights thereunder as of the Effective
Time of individuals who then were directors, officers, employees or agents of
the Company, unless such modification is required by law after the Effective
Time. From and after the Effective Time, Parent also agreed to cause the
Company to the fullest extent permitted under applicable law or under the
Company Charter or Bylaws, to indemnify and hold harmless, each present and
former director, officer or employee of the Company or any of its subsidiaries
(collectively, the "Indemnified Parties") against any costs or expenses
(including attorney's fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, (x) arising out of or pertaining to the
transactions contemplated by the Merger Agreement or (y) otherwise with
respect to any acts or omissions occurring at or prior to the Effective Time,
to the same extent as provided in the Company Charter or Company Bylaws or any
applicable contract or agreement as in effect on the date hereof, in each case
for a period of six years after May 24, 2000. In the event of any such claim,
action, suit, proceeding or investigation (whether arising before or after the
Effective Time) and subject to the specific terms of any indemnification
contract, (i) any counsel retained by the Indemnified Parties for any period
after the Effective Time shall be reasonably satisfactory to the Company, (ii)
after the Effective Time, the Company shall pay the reasonable fees and
expenses of such counsel, promptly after statements therefor are received and
(iii) the Company will cooperate in the defense of any such matter; provided,
however, that the Company shall not be liable for any settlement effected
without its written consent (which consent shall not be unreasonably withheld
or delayed); provided, however, that, in the event that any claim or claims
for indemnification are asserted or made within such six-year period, all
rights to indemnification in respect of any such claim or claims shall
continue until the disposition of any and all such claims.
In addition, Parent agreed to provide, or to cause the Company to provide,
for a period of not less than six years after the Effective Time, the
Company's current directors and officers an insurance and indemnification
policy that provides coverage for events occurring at or prior to the
Effective Time that is no less favorable than the existing policy or, if
substantially equivalent insurance coverage is unavailable, the best available
coverage; provided, however, that, after the second anniversary of the
Effective Time, Parent and the Company shall not be
25
<PAGE>
required to pay an annual premium for such insurance in excess of 150% of the
annual premium currently paid by the Company for such insurance, but in such
case shall purchase as much coverage as possible for such amount.
Reasonable Efforts; Notification. The Merger Agreement provides that each
of the Company, Parent and Purchaser agreed to use reasonable efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, all things
reasonably necessary, proper or advisable to consummate and make effective the
transactions contemplated by the Merger Agreement as soon as reasonably
practicable, including such actions or things as any party to the Merger
Agreement may reasonably request in order to cause any of the conditions to
any other party's obligation to consummate such transactions specified in the
Merger Agreement to be fully satisfied, and to promptly cooperate with and
furnish information to each other in connection with any requirements imposed
upon any of them with respect thereto. In addition, the parties agreed to
consult and fully cooperate with and provide reasonable assistance to each
other in the preparation and filing of any documents with the Commission
contemplated by the Merger Agreement (including any necessary amendments or
supplements) and to use commercially reasonable efforts to obtain all
necessary consents, approvals, waivers, licenses, permits, authorizations,
registrations, qualifications, or other permission or action by, and giving
all necessary notices to and making all necessary filings with and
applications and submissions to, any governmental entity or other party
required to be obtained or made by Parent, Purchaser, the Company or any of
their respective subsidiaries in connection with the Offer, the Merger or the
taking of any action contemplated thereby or by the Merger Agreement and, in
general, using commercially reasonable efforts to consummate and make
effective the transactions contemplated by the Merger Agreement. The parties
agreed, however, that in making any such filing and in order to obtain any
consent, approval, waiver, license, permit, authorization, registration,
qualification, or other permission or action or the lifting of any Injunction
referred to in this sentence, (A) no party shall be required to pay any
consideration, to divest itself of any of, or otherwise rearrange the
composition of, any of its assets or to agree to any of the foregoing or any
other condition or requirement that is materially adverse or burdensome; and
(B) Parent shall not be required to take any action pursuant to the foregoing
if the taking of such action is reasonably likely to result in the imposition
of a condition or restriction of the type referred to in paragraphs (a), (b)
or (c) under Section 13 ("Certain Conditions to the Offer").
The parties also agreed to give prompt notice to the other parties of
(i)the occurrence, or non-occurrence, of any event, the occurrence or non-
occurrence of which would likely cause any of the representation or warranty
of the notifying party contained in the Merger Agreement to be untrue or
inaccurate and (ii) any failure of the notifying party to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied
by it under the Merger Agreement; provided, that the delivery of any such
notice shall not limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties.
Procedure for Amendment, Extension or Waiver. The Merger Agreement provides
that an amendment of the Merger Agreement pursuant to the provisions for an
amendment thereof or an extension or waiver pursuant to the provisions
thereof, in order to be effective, require action by the applicable Board of
Directors or the duly authorized designee of such Board of Directors.
The foregoing summary of the Merger Agreement is qualified in its entirety
by reference to the Merger Agreement, a copy of which is filed as Exhibit
(d)(1) to the Schedule TO. The Merger Agreement should be read in its entirety
for a more complete description of the matters summarized above.
Other Agreements.
Rights Agreement. Parent has been informed by the Company that the Rights
Agreement has been amended as of May 24, 2000, to render the Rights
inapplicable to the Offer, the Merger and the other Transactions.
26
<PAGE>
Amended and Restated Executive Employment Agreements
In connection with the execution of the Merger Agreement, the Company, at
the request of Parent, entered into an Amended and Restated Executive
Employment Agreement (each, a "Restated Employment Agreement") with each of
its executive officers. The Restated Employment Agreements will become
effective only upon the purchase of Shares pursuant to the Offer (the
"Effective Date"), and will be null and void if Shares are not purchased
pursuant to the Offer. Each Restated Employment Agreement specifies the
executive officer's base salary and target bonus. The Employment Agreements
are for a term ending two years after the Effective Date, provided that if a
"Change of Control" (as defined in the Restated Employment Agreements and
described below) occurs before that date, the Restated Employment Agreements
will continue in effect until one year after the Change of Control. If a
Restated Employment Agreement is terminated by the Company without "Cause" (as
defined in the Employment Agreements and described below) or is terminated by
the executive officer for "Good Reason" (as defined in the Restated Employment
Agreements and described below) within two years after the Effective Date, the
executive officer is entitled to receive a lump sum payment equal to one
year's base salary plus an amount equal to any annual bonus that the executive
officer would have been entitled to had he remained employed for the remainder
of the fiscal year in which the termination occurred, provided that the amount
of such payment shall be prorated based on the portion of the period actually
employed. If a Restated Employment Agreement is terminated for Cause, all pay
and benefits under the Restated Employment Agreement will cease as of the
effective date of the termination. In the event of the death of an executive
officer, the estate of the executive officer would receive a lump sum payment
equal to six months base salary at the then current rate. In the event of the
termination of a Restated Employment Agreement due to an executive officer's
disability, the executive officer would continue to receive his base salary
for five months after he was no longer able to perform his duties. In the
event of either death or disability, the executive officer would also be
entitled to receive a payment equal to any incentive bonus the executive
officer would have earned, prorated based on the portion of the period
actually employed.
For a period of one year following a Change of Control, each executive
officer would have the right to terminate his employment for Good Reason and
to receive upon such termination or upon a termination by the Company other
than for Cause, a lump sum payment in an amount equal to 12 months base salary
(or, in the case of Messrs. Adrion, Fee and Welch, 24 months base salary),
plus an amount equal to the amount the executive officer would have received
in incentive plan bonuses for the year in which the termination occurred based
on the Company's actual performance for the year (or, in the case of Messrs.
Adrion, Fee and Welch, two times the amount). With respect to any termination
by the Company without Cause or any termination by an executive officer for
Good Reason, the executive officer would be entitled to the continuation of
health and insurance benefits for certain periods. Each Restated Employment
Agreement includes a covenant not to compete that prohibits the executive
officer from owning, operating or working for any business in the United
States that is selling or developing products that compete with those of the
Company for a period of twelve months after his employment with the Company is
terminated.
For purposes of the Restated Employment Agreements, a "Change of Control"
includes (i) any merger or consolidation transaction to which Parent or the
Company is a party that results in the shareholders of the Company or Parent
(as the case may be) immediately before such transaction owning less than
fifty percent of the total combined voting power of the surviving corporation
in the transaction, (ii) the sale of substantially all of the assets of Parent
or the Company to any person that is not an affiliate of Parent, or (iii)
shareholder approval of the liquidation of the Company. For purposes of the
Restated Employment Agreements, "Cause" means the failure to satisfactorily
perform the duties assigned to the executive officer within a certain period
after notice of such failure is given or commission of certain illegal or
wrongful acts. For purposes of the Restated Employment Agreements, "Good
Reason" includes any of the following events that have not been corrected
within thirty days after written notice by the executive of such event: (i) a
change in executive's reporting responsibilities, titles or offices which has
the effect of materially diminishing the executive's responsibility or
authority, other than a change in administrative responsibilities attributable
to conversion of the Company from a public company to a subsidiary of a
private company as a result of the Merger; (ii) a reduction in the executive's
base salary or in the target percentage of incentive compensation to which the
executive is entitled; (iii) a material reduction in
27
<PAGE>
the aggregate expenditures to provide certain employee benefits to the
executive other than reductions in cost achieved without a material reduction
in benefits to the executive; (iv) the failure of the Company to implement a
new management bonus plan and/or a new long-term incentive plan; (v) a
requirement that the executive be based anywhere other than within twenty-five
miles of the executive's job location at the time of the Change of Control; or
(vi) a material breach of the Restated Employment Agreement by the Company.
The Restated Employment Agreements provide that the consummation of the
transactions contemplated by the Merger Agreement will not constitute a
"Change of Control" for purposes of the existing Employment Agreements and
include an unconditional waiver by the executive officer of all rights granted
to the executive officer under the existing Employment Agreements that might
result from the transaction contemplated by the Merger Agreement. Mr. Adrion's
Restated Employment Agreement also states that he waives all rights granted to
him by virtue of the Company's offer of employment letter dated June 16, 1999.
Such rights include his right to receive certain restricted stock awards in
the future. In consideration of this waiver of rights, Mr. Adrion and Parent
entered into an agreement dated May 24, 2000 pursuant to which Mr. Adrion will
receive certain additional grants under the long-term incentive plan to be
established by Parent. The summary of the Restated Employment Agreements set
forth above does not purport to be complete and is qualified in its entirety
by reference to the complete text of the Restated Employment Agreement, copies
of which are filed as Exhibits (d)(3)-(d)(11) to the Schedule TO and are
incorporated herein by reference.
Retention Bonus Agreements
In connection with the execution of the Restated Employment Agreements,
each executive officer also entered into a Retention Bonus Agreement (each, a
"Retention Bonus Agreement") with the Company. The Retention Bonus Agreements
will become effective only upon the purchase of Shares pursuant to the Offer,
and will be null and void if Shares are not purchased pursuant to the Offer.
Each Retention Bonus Agreement provides for the payment of a bonus in an
amount equal to a specified percentage of the executive officer's base salary
on each of the first and second annual anniversaries of the effective date of
the Retention Bonus Agreement, provided that the executive officer is still
employed by the Company on the payment date. The Retention Bonus Agreements
permit the executive officers to elect an alternative payment methodology that
provides bonus payments on the sixth month and second annual anniversaries of
the effective date of the Retention Bonus Agreement under the same conditions
described above. The summary of the Retention Bonus Agreements set forth above
does not purport to be complete and is qualified in its entirety by reference
to the complete text of the Retention Bonus Agreements, copies of which are
filed as Exhibits (d)(12)-(d)(20) to the Schedule TO and are incorporated
herein by reference.
Confidentiality Agreement. Pursuant to the letter agreement dated March 9,
2000, between the Parent and the Company (the "Confidentiality Agreement"),
the Company and the Parent agreed to keep confidential certain information
exchanged between such parties. The Merger Agreement provides that all
information exchanged pursuant to Section 6.2 of the Merger Agreement
concerning "Access to Information Concerning Properties and Records" shall be
subject to the Confidentiality Agreement.
Plans for the Company
In the event that the Offer and the Merger are successfully completed, the
Company will become a wholly owned subsidiary of Parent. This merged entity is
expected to be renamed "Welch Allyn Protocol, Inc." and to be combined with
Parent's existing patient monitoring business. It is currently anticipated
that the merged entity will be headquartered in Beaverton, Oregon, and it will
direct Parent's interest in the patient monitoring, multiparameter electronic
vital signs, and networked clinical data communications markets.
Upon completion of the Offer, Parent intends to conduct a detailed review
of the Company, its subsidiaries and their respective assets, corporate
structure, capitalization, operations, policies, management and personnel.
After such review, Parent will determine what actions or changes, if any,
would be desirable in light of the circumstances which then exist, and
reserves the right to effect such actions or changes.
28
<PAGE>
Except as otherwise described in this Offer to Purchase, Parent and the
Purchaser have no current plans or proposals that would relate to, or result
in, (i) an extraordinary corporate transaction involving the Company, such as
a merger, reorganization or liquidation involving the Company or any of its
subsidiaries, a sale or transfer of a material amount of assets of the Company
or any of its subsidiaries, (ii) any change in the present Company Board or
management of the Company including, but not limited to, any plans or
proposals to change the number or term of directors or to fill any existing
vacancies on the Company Board, (iii) any material change in the Company's
present capitalization or dividend policy, (iv) any other material change in
the Company's corporate structure or business, (v) causing a class of
securities of the Company to be delisted from a national securities exchange
or to cease to be authorized to be quoted in an inter-dealer quotation system
of a registered national securities association or (vi) a class of equity
securities of the Company becoming eligible for termination of registration
pursuant to Section 12(g)(4) of the Exchange Act.
Dissenters' Rights
The holders of Shares do not have dissenters' rights as a result of the
Offer. However, if the Merger is consummated, holders of Shares at the
Effective Time will have certain rights pursuant to the provisions of Chapter
60 of the OCBA ("Chapter 60") to dissent and obtain payment of the fair value
for their Shares if the Shares are not quoted on the Nasdaq National Market on
the record date for the meeting of shareholders at which the Merger is to be
approved (if shareholder vote is required to approve the Merger) or on the
date a copy or summary of the plan of merger is mailed to shareholders (if
shareholder approval is not required to approve the Merger). Under Chapter 60,
dissenting shareholders who comply with the applicable statutory procedures
will be entitled to receive a judicial appraisal of the fair value of their
Shares (excluding any appreciation or depreciation in anticipation of the
Merger) and to receive payment of such fair value in cash, together with
accrued interest. Any such judicial determination of the fair value of Shares
could be based upon factors other than, or in addition to, the price per Share
to be paid in the Merger or the market value of the Shares. The value so
determined could be more or less than the price per Share to be paid in the
Merger.
Under the OBCA, no dissenters' rights would be available to holders of the
Shares if the Shares are quoted on the Nasdaq National Market on the record
date for the meeting of shareholders at which the Merger is to be approved (if
shareholder vote is required to approve the Merger) or on the date a copy or
summary of the plan of merger is mailed to shareholders (if shareholder
approval is not required to approve the Merger).
The foregoing summary of Chapter 60 does not purport to be complete and is
qualified in its entirety by reference to Chapter 60. Failure to follow the
steps required by Chapter 60 of the OBCA for perfecting dissenters' rights may
result in the loss of such rights.
Going-Private Transactions
The Commission has adopted Rule 13e-3 under the Exchange Act, which is
applicable to certain "going private" transactions. The Purchaser does not
believe that Rule 13e-3 will be applicable to the Merger. If applicable, Rule
13e-3 requires, among other things, that certain financial information
concerning the fairness of the Merger and the consideration offered to
minority shareholders in the Merger be filed with the Commission and disclosed
to shareholders prior to the consummation of the Merger.
13. Certain Conditions of the Offer
Notwithstanding any other provision of the Offer, Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-1(c) promulgated under the
Exchange Act (relating to the obligation of Purchaser to pay for or return
tendered Shares promptly after termination or withdrawal of the Offer), pay
for any Shares tendered pursuant to the Offer, and (subject to any such rules
or regulations and except as provided in the Merger Agreement) may terminate
or amend the Offer and may postpone the acceptance for payment of and payment
for Shares tendered, if (i) the Minimum Condition shall not have been
satisfied, (ii) any applicable waiting period under the HSR Act shall not have
expired or
29
<PAGE>
been terminated prior to the expiration of the Offer or (iii) at any time
prior to the acceptance for payment of Shares, any of the following conditions
shall exist:
(a) there shall have been instituted or be pending any action or
proceeding brought by any governmental entity, domestic or foreign
("governmental entity") (i) challenging or seeking to make illegal,
materially delay or otherwise directly or indirectly restrain or prohibit
the making of the Offer, the acceptance for payment of, or payment for, any
Shares by Parent, Purchaser or any other affiliate of Parent pursuant to
the Offer, or the consummation of the Merger, or seeking to obtain material
damages in connection with the Merger; (ii) seeking to prohibit or limit
materially the ownership or operation by the Company, Parent or any of
their subsidiaries of all or any material portion of the business or assets
of the Company, or to compel the Company to dispose of or hold separate all
or any material portion of the business or assets of the Company, as a
result of the transactions contemplated by the Merger Agreement; (iii)
seeking to impose or confirm limitations on the ability of Parent,
Purchaser or any other affiliate of Parent to exercise effectively full
rights of ownership of any Shares, including, without limitation, the right
to vote any Shares acquired by Purchaser pursuant to the Offer, or
otherwise on all matters properly presented to the Company's shareholders
or (iv) seeking to prohibit Parent or any of its subsidiaries from
effectively controlling in any material respect any material portion of the
business or operations of the Company and its subsidiaries;
(b) there shall have been issued any Injunction resulting from any
action or proceeding brought by any person other than any governmental
entity that is reasonably likely to result, directly or indirectly, in any
of the consequences referred to in clauses (i) through (iv) of paragraph
(a) above;
(c) there shall have been any statute, rule, regulation, order or
injunction enacted, entered, enforced, promulgated, amended, issued or
deemed applicable to the Offer or the Merger, by any governmental entity,
other than the routine application of the waiting period provisions of the
HSR Act to the Offer or the Merger, that is reasonably likely to result,
directly or indirectly, in any of the consequences referred to in clauses
(i) through (iv) of paragraph (a) above;
(d) the Company Board shall have withdrawn or modified in a manner
adverse to Parent or Purchaser the approval or recommendation of the Offer,
the Merger or the Merger Agreement or approved or recommended any
Alternative Proposal or any other takeover proposal or any other
acquisition of Shares other than the Offer and the Merger;
(e) any of the representations and warranties of the Company set forth
in the Merger Agreement shall cease to be true and correct at any time on
or after May 24, 2000 and before the acceptance for payment of Shares as if
made at such time (other than representations and warranties made as of a
specified date which shall be true and correct as of such specified date)
if such failure to be true and correct, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect on the
Company; provided, however, that such representation or warranty is
incapable of being cured or has not been cured within five (5) days after
the giving of written notice thereof to the Company;
(f) the Merger Agreement shall have been terminated in accordance with
its terms; and
(g) Purchaser and the Company shall have agreed that Purchaser shall
terminate the Offer or postpone the acceptance for payment of or payment
for Shares thereunder.
The foregoing conditions are for the sole benefit of Purchaser and Parent
and may be asserted by Purchaser or Parent regardless of the circumstances
giving rise to any such condition or may be waived by Purchaser or Parent in
whole or in part at any time and from time to time in their sole discretion.
The failure by Parent or Purchaser at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right; the waiver of
any such right with respect to particular facts and other circumstances shall
not be deemed a waiver with respect to any other facts and circumstances; and
each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time.
30
<PAGE>
14. Certain Legal Matters
Except as described in this Section 14, based on a review of publicly
available filings made by the Company with the Commission and other publicly
available information concerning the Company and discussions of
representatives of the Parent with representatives of the Company, none of the
Purchaser, the Parent or the Company is aware of any license or regulatory
permit that appears to be material to the business of the Company and its
subsidiaries, taken as a whole, that might be adversely affected by the
Purchaser's acquisition of Shares (and the indirect acquisition of the stock
of the Company's subsidiaries) as contemplated herein or of any approval or
other action by any governmental entity that would be required or desirable
for the acquisition or ownership of Shares by the Purchaser as contemplated
herein. Should any such approval or other action be required or desirable, the
Parent and the Purchaser currently contemplate that such approval or other
action will be sought, except as described below under "State Takeover Laws".
While (except as otherwise expressly described in this Section 14) the
Purchaser does not presently intend to delay the acceptance for payment of or
payment for Shares tendered pursuant to the Offer pending the outcome of any
such matter, there can be no assurance that any such approval or other action,
if needed, would be obtained or would be obtained without substantial
conditions or that failure to obtain any such approval or other action might
not result in consequences adverse to the Company's business or that certain
parts of the Company's business might not have to be disposed of if such
approvals were not obtained or such other actions were not taken or in order
to obtain any such approval or other action. If certain types of adverse
action are taken with respect to the matters discussed below, the Purchaser
could, subject to the terms and conditions of the Merger Agreement, decline to
accept for payment or pay for any Shares tendered. See Section 13 for a
description of certain conditions to the Offer.
State Takeover Laws. A number of states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable
to attempts to acquire securities of corporations that are incorporated or
have assets, shareholders, executive offices or places of business in such
states. In Edgar V. Mite Corp., the Supreme Court of the United States held
that the Illinois Business Takeover Act, which involved state securities laws
that made the takeover of certain corporations more difficult, imposed a
substantial burden on interstate commerce and therefore was unconstitutional.
In CTS Corp. V. Dynamics Corp. Of America, however, the Supreme Court of the
United States held that a state may, as a matter of corporate law and, in
particular, those laws concerning corporate governance, constitutionally
disqualify a potential acquirer from voting on the affairs of a target
corporation without prior approval of the remaining shareholders, provided
that such laws were applicable only under certain conditions. Subsequently, a
number of U.S. federal courts ruled that various state takeover statutes were
unconstitutional insofar as they apply to corporations incorporated outside
the state of enactment.
If applicable, Sections 60.801 to 60.816 of the OBCA would, under certain
circumstances, cause the Shares acquired by the Purchaser in the Offer to have
no voting rights. If applicable, Sections 60.825 to 60.845 of the OBCA could
preclude the Merger for a period of three years after the Purchaser
consummates the Offer. However, under the Merger Agreement, the Company has
represented that it has amended its bylaws and obtained or taken such
additional actions (or it will so amend, obtain or take prior to the
Expiration Date) to make the provisions of Sections 60.801 to 60.816 and
Sections 60.825 to 60.845 of the OBCA inapplicable to the Offer and the
Merger. Accordingly, the Purchaser does not believe that any state takeover
statutes or similar laws purport to apply to the Offer or the Merger. Except
as described above, neither the Purchaser nor the Parent has currently
complied with any state takeover statute or regulation. The Purchaser reserves
the right to challenge the applicability or validity of any state law
purportedly applicable to the Offer or the Merger and nothing in this Offer to
Purchase or any action taken in connection with the Offer or the Merger is
intended as a waiver of such right. If it is asserted that any state takeover
statute is applicable to the Offer or the Merger and an appropriate court does
not determine that it is inapplicable or invalid as applied to the Offer or
the Merger, the Purchaser might be required to file certain information with,
or to receive approvals from, the relevant state authorities, and the
Purchaser might be unable to accept for payment or pay for Shares tendered
pursuant to the Offer, or be delayed in consummating the Offer or the Merger.
In such case, the Purchaser may not be obligated to accept payment or pay for
any Shares tendered pursuant to the Offer. See Section 13.
31
<PAGE>
Antitrust. Under the provisions of the HSR Act applicable to the Offer, the
acquisition of Shares under the Offer may be consummated after the expiration
of a 15-calendar-day waiting period commenced by the filing by the Parent of a
Notification and Report Form with respect to the Offer, unless the Parent
receives a request for additional information or documentary material from the
Antitrust Division of the Department of Justice (the "Antitrust Division") or
the Federal Trade Commission (the "FTC") or unless early termination of the
waiting period is granted. On Monday, June 5, 2000, Parent and the Purchaser
made such filing with the Antitrust Division and the FTC. If, within the
initial 15-day waiting period, either the Antitrust Division or the FTC
requests additional information or material from the Parent, the Purchaser or
their respective affiliates concerning the Offer, the waiting period will be
extended and would expire at 11:59 p.m., New York City time, on the tenth
calendar day after the date of substantial compliance by the Parent with such
request. Only one extension of the waiting period pursuant to a request for
additional information is authorized by the HSR Act. Thereafter, such waiting
period may be extended only by court order or with the consent of the Parent.
In practice, complying with a request for additional information or material
can take a significant amount of time. In addition, if the Antitrust Division
or the FTC raises substantive issues in connection with a proposed
transaction, the parties frequently engage in negotiations with the relevant
governmental agency concerning possible means of addressing those issues and
may agree to delay consummation of the transaction while such negotiations
continue. Expiration or termination of the applicable waiting period under the
HSR Act is a condition to the Purchaser's obligation to accept for payment and
pay for Shares tendered pursuant to the Offer. See Section 13 ("Certain
Conditions of the Offer").
The Merger will not require an additional filing under the HSR Act if the
Purchaser owns 50% or more of the outstanding Shares at the time of the Merger
or if the Merger occurs within one year after the HSR Act waiting period
applicable to the Offer expires or is terminated.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's proposed
acquisition of the Company. At any time before or after the Purchaser's
acquisition of Shares pursuant to the Offer, the Antitrust Division or the FTC
could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the purchase of
Shares pursuant to the Offer or the consummation of the Merger or seeking the
divestiture of Shares acquired by the Purchaser or the divestiture of
substantial assets of the Company or its subsidiaries or Parent or its
subsidiaries. Private parties may also bring legal action under the antitrust
laws under certain circumstances. There can be no assurance that a challenge
to the Offer on antitrust grounds will not be made or, if such a challenge is
made, of the result thereof.
15. Fees and Expenses
Robinson-Humphrey is acting as the financial advisor in connection with the
Offer and the other transactions contemplated by the Merger Agreement, and is
providing certain financial advisory services to the Parent and the Purchaser
in connection with the Offer. Pursuant to an engagement letter dated March 30,
2000, Robinson-Humphrey will receive customary compensation for such services.
The Parent has also agreed to reimburse Robinson-Humphrey for its out-of-
pocket expenses and to indemnify Robinson-Humphrey, its affiliates and certain
other related persons against any losses, claims, damages or liabilities
incurred in connection with its engagement, including certain liabilities
under federal securities laws.
In addition, Parent and the Purchaser have retained Robinson-Humphrey to
act as the Dealer Manager in connection with the Offer. In such capacity,
Robinson-Humphrey will receive customary compensation for its services, be
reimbursed for certain reasonable out-of-pocket expenses and be indemnified
against certain liabilities and expenses in connection therewith.
The Parent and the Purchaser have retained ChaseMellon Shareholder
Services, L.L.C. to act as the Information Agent and Depositary in connection
with the Offer. In its capacity as the Information Agent and the Depositary,
ChaseMellon will receive reasonable and customary compensation for its
services, be reimbursed for certain reasonable out-of-pocket expenses and be
indemnified against certain liabilities and expenses in connection therewith.
32
<PAGE>
Neither the Purchaser nor the Parent will pay any fees or commissions to
any broker or dealer or other person (other than the Information Agent and the
Dealer Manager) in connection with the solicitation of tenders of Shares
pursuant to the Offer. Brokers, dealers, banks and trust companies will be
reimbursed by the Purchaser upon request for customary mailing and handling
expenses incurred by them in forwarding material to their customers.
16. Miscellaneous
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of
such jurisdiction. Neither the Purchaser nor the Parent is aware of any
jurisdiction in which the making of the Offer or the acceptance thereof would
not be in compliance with the laws of such jurisdiction. To the extent the
Purchaser or the Parent becomes aware of any state law that would limit the
class of offerees in the Offer, the Purchaser will amend the Offer and,
depending on the timing of such amendment, if any, will extend the Offer to
provide adequate dissemination of such information to holders of Shares prior
to the expiration of the Offer. In any jurisdiction the securities, blue sky
or other laws of which require the Offer to be made by a licensed broker or
dealer, the Offer is deemed made on behalf of the Purchaser by the Dealer
Manager or one or more registered brokers or dealers licensed under the laws
of such jurisdiction.
No person has been authorized to give any information or to make any
representation on behalf of the Purchaser or Parent which is not contained
herein or in the Letter of Transmittal and, if given or made, such information
or representation must not be relied upon as having been authorized.
Parent and Purchaser have filed with the Commission the Schedule TO
pursuant to Rule 14d-3 under the Exchange Act, together with exhibits,
furnishing certain additional information with respect to the Offer, and may
file amendments thereto. In addition, the Company has filed the Schedule 14D-9
pursuant to Rule 14d-9 under the Exchange Act, together with exhibits, setting
forth its recommendation with respect to the Offer and the reasons for such
recommendation and furnishing certain additional related information. Such
Schedules and any amendments thereto, including exhibits, should be available
for inspection and copies should be obtainable in the manner set forth in
Section 8 (except that such material will not be available at the regional
offices of the Commission).
Welch Allyn Acquisition Corporation
June 7, 2000
33
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
WELCH ALLYN, INC.
1. DIRECTORS AND EXECUTIVE OFFICERS OF WELCH ALLYN, INC. The name,
citizenship, present principal occupation or employment, five-year employment
history of, and certain directorships held by, each of the directors and
executive officers of Welch Allyn, Inc. are set forth below. Directors of Welch
Allyn, Inc. are indicated by an asterisk.
<TABLE>
<CAPTION>
Name and Business; Address; Present Principal Occupation or Employment;
Citizenship Five-year Employment History
--------------------------- -------------------------------------------
<C> <S>
William F. Allyn*................ President and Chief Executive Officer,
Welch Allyn, Inc. Welch Allyn Ventures, LLC, January 2000-
4341 State Street Road present; President and Chief Executive
Skaneateles Falls, NY 1315 Officer, Welch Allyn, Inc., 1980-1999.
Citizenship: United States of
America
Peter H. Soderberg*.............. President and Chief Executive Officer,
Welch Allyn, Inc. Welch Allyn, Inc., January 2000-present;
4341 State Street Road Group Vice President and Chief Executive
Skaneateles Falls, NY 13153 Officer, Welch Allyn Medical Products,
Citizenship: United States of 1996-1999; Vice President and General
America Manager, Welch Allyn Imaging Products,
1993-1995.
Lew F. Allyn*.................... Chairman of the Board, Welch Allyn, Inc.,
Welch Allyn, Inc. January 2000-present; Executive Vice
4341 State Street Road President, Welch Allyn, Inc., 1996-1999
Skaneateles Falls, NY 13153
Citizenship: United States of
America
Barbara Lee Santry*.............. Partner, Pathfinder Venture Capital Fund
Capstone Ventures III, 1991-present; Managing Member,
3000 Sand Hill Road Capstone Management, LLC, 1996-present.
Building 1, Suite 290
Menlo Park, CA 94025
Citizenship: United States of
America
Richard Dulude*.................. Director, Ambac Municipal Bond Insurance,
P.O. Box 537 1991-present; Director, Landec Corp., 1995-
Georges Mills, NH 03751 present; Director, Lightship, 1998-
Citizenship: United States of present; Director, Raychem Corp., 1990-
America 1999; Director, HCIA, 1995-1998.
Frank H. Barker*................. Director, Aradigm Corp., 1999-present;
U.S. Dermatologics Director, Catalina Marketing Corp., 1995-
149 Twelve Oaks Lane present; President and Chairman, U.S.
Ponte Vedra Beach, FL 32082 Dermatologics, 1996-present; Corporate Vice
Citizenship: United States of President and Company Group Chairman,
America Johnson & Johnson, 1987-1996.
Robert J. Bennett*............... Chairman of the Board, M&T Bank
M&T Bank Corporation Corporation, Inc., 1998-present; Chairman
101 South Salina Street of the Board, President and Chief Executive
Syracuse, NY 13202 Officer, ONBank Corp., 1989-1998.
Citizenship: United States of
America
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Name and Business; Address; Present Principal Occupation or Employment;
Citizenship Five-year Employment History
--------------------------- -------------------------------------------
<C> <S>
Brian J. Thompson*............... Provost Emeritus, University of Rochester,
9 Esternay Lane Distinguished University Professor, 1994-
Pittsford, NY 14534 present; Director, Semi Conductor Laser
Citizenship: United Kingdom, U.S. International, 1993-1999; Director, Boydell
resident & Brewer LTD, 1996-present.
Andrew Wallace*.................. Dean, Dartmouth Medical School, Vice
62 Oak Ridge Road President for Health Affairs, Dartmouth
West Lebanon, NH 03784 College, 1990-present; Director, Laboratory
Citizenship: United States of Corporation of America, 1995-present.
America
M. Jack Rudnick.................. Vice President, General Counsel and
Welch Allyn, Inc. Secretary, Welch Allyn, Inc., 1992-present.
4341 State Street Road
Skaneateles Falls, NY 13153
Citizenship: United States of
America
Kevin E. Cahill.................. Vice President, Finance and Chief Financial
Welch Allyn, Inc. Officer, Welch Allyn, Inc., January 2000-
4341 State Street Road present; Chairman of the Board, Everest
Skaneateles Falls, NY 13153 VIT, Inc., 1999-present; Vice President,
Citizenship: United States of Controller and Treasurer, Welch Allyn,
America Inc., 1994-1999.
William J. Bolton, II............ Vice President, General Manager, Lighting
Welch Allyn, Inc. Products Division, Welch Allyn, Inc., 1998-
4619 Jordan Road present; Director, Business Development,
Skaneateles Falls, NY 13153-0187 Cooper Industries, 1996-1998; Director,
Citizenship: United States of Marketing, Temperature Control Division,
America Cooper Industries, 1994-1996.
Daniel J. Fisher................. Vice President, Human Resources, Welch
Welch Allyn, Inc. Allyn, Inc., 1985-present.
4341 State Street Road
Skaneateles Falls, NY 13153
Citizenship: United States of
America
James M. Horan................... Vice President, Controller for Medical
Welch Allyn, Inc. Products, Welch Allyn, Inc., 1999-present;
4341 State Street Road Medical Division Controller, Welch Allyn,
Skaneateles Falls, NY 13153 Inc., 1993 to 1999.
Citizenship: United States of
America
Craig Sundheimer................. Chief Business Development Officer, Welch
Welch Allyn, Inc. Allyn, Inc., 1996-present; Vice President,
4341 State Street Road Corporate Development, XOMED Surgical,
Skaneateles Falls, NY 13153 Inc., 1995-1996; Division Manager of
Citizenship: United States of Business Development, Abbott Labs, 1986-
America 1995.
Richard W. Newman................ Vice President, Advanced Technology, Welch
Welch Allyn, Inc. Allyn, Inc., 1995-present.
4341 State Street Road
Skaneateles Falls, NY 13153
Citizenship: United States of
America
</TABLE>
I-2
<PAGE>
<TABLE>
<CAPTION>
Name and Business; Address; Present Principal Occupation or Employment;
Citizenship Five-year Employment History
--------------------------- -------------------------------------------
<C> <S>
Louise McDonald.................. Vice President, Global Channel Development,
Welch Allyn, Inc. Welch Allyn, Inc., January 2000-present;
4341 State Street Road Director, Office of the Future, Welch
Skaneateles Falls, NY 13153 Allyn, Inc., 1997-1999; General Manager,
Citizenship: Canada Canada/Latin America, Welch Allyn, Inc.,
1992-1997.
Wolfgang Rudolf Geihe............ Vice President, World Wide Manufacturing
Welch Allyn, Inc. Operations, Welch Allyn, Inc., 1992-
4341 State Street Road present.
Skaneateles Falls, NY 13153
Citizenship: Germany, U.S.
resident
Stephen F. Meyer................. Group Vice President, Welch Allyn, Inc.,
Welch Allyn, Inc. January 2000-present; Vice President, EENT
4341 State Street Road Group, Welch Allyn, Inc., 1997-1999;
Skaneateles Falls, NY 13153 General Manager, Grason-Stadler, Inc., a
Citizenship: United States of Welch Allyn company, 1995-1996.
America
Thomas J. Wood, Jr............... Executive Vice President, Welch Allyn,
Welch Allyn, Inc. Inc., January 2000-present; Vice President
4341 State Street Road of Finance and Chief Financial Officer,
Skaneateles Falls, NY 13153 Welch Allyn, Inc., 1995-1999.
Citizenship: United States of
America
Bonita L. Labosky................ Group Vice President, Welch Allyn, Inc.,
Welch Allyn, Inc. February 2000-present; Vice President and
4341 State Street Road General Manager, Heart Failure Management,
Skaneateles Falls, NY 13153 Medtronic, Inc., 1998-2000; Vice President
Citizenship: United States of and General Manager, Promeon Division,
America 1995-1998, - .
</TABLE>
I-3
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF
WELCH ALLYN ACQUISITION CORPORATION
2. DIRECTORS AND EXECUTIVE OFFICERS OF WELCH ALLYN ACQUISITION CORPORATION.
The name, citizenship, present principal occupation or employment and five-year
employment history of each of the directors and executive officers of Welch
Allyn Acquisition Corporation are set forth below. Directors of Welch Allyn
Acquisition Corporation are indicated by an asterisk.
<TABLE>
<CAPTION>
Present Principal Occupation or
Name and Business; Address; Employment;
Citizenship Five-year Employment History
--------------------------- -------------------------------
<C> <S>
Peter H. Soderberg............... President, Welch Allyn Acquisition
Welch Allyn, Inc. Corporation, May 2000-present; President
4341 State Street Road and Chief Executive Officer, Welch Allyn,
Skaneateles Falls, NY 13153 Inc., January 2000-present; Group Vice
Citizenship: United States of President and Chief Executive Officer,
America Welch Allyn Medical Products, 1996-1999;
Vice President and General Manager, Welch
Allyn Imaging Products, 1993-1995.
M. Jack Rudnick*................. Vice President, Welch Allyn Acquisition
Welch Allyn, Inc. Corporation, May 2000-present; Vice
4341 State Street Road President, General Counsel, and Secretary,
Skaneateles Falls, NY 13153 Welch Allyn, Inc., 1992-present.
Citizenship: United States of
America
Chris A. Horacek*................ Secretary, Welch Allyn Acquisition
Welch Allyn, Inc. Corporation, May 2000-present; Associate
4341 State Street Road General Counsel, Welch Allyn, Inc., 1999-
Skaneateles Falls, NY 13153 present; Outside Counsel, Welch Allyn,
Citizenship: United States of Inc., 1997-1999; Partner, Hroch & Horacek,
America 1995-1997.
Kevin Cahill..................... Treasurer, Welch Allyn Acquisition
Welch Allyn, Inc. Corporation, May 2000-present; Vice
4341 State Street Road President, Finance and Chief Financial
Skaneateles Falls, NY 13153 Officer, Welch Allyn, Inc., January 2000-
Citizenship: United States of present; Chairman of the Board, Everest
America VIT, Inc., 1999-present; Vice President,
Controller and Treasurer, Welch Allyn,
Inc., 1994-1999.
</TABLE>
I-4
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, certificates for Shares and any other
required documents should be sent or delivered by each shareholder of the
Company or such shareholder's broker, dealer, bank, trust company or other
nominee to the Depositary at one of its addresses set forth below.
The Depositary for the Offer is:
[LOGO OF CHASE MELLON]
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
ChaseMellon Shareholder Services,
ChaseMellon Shareholder Services, L.L.C. ChaseMellon Shareholder Services,
L.L.C. 85 Challenger Road--Mail Drop-- L.L.C.
P.O. Box 3301 Reorg 120 Broadway, 13th Floor
South Hackensack, NJ 07606 Ridgefield Park, NJ 07660 New York, NY 10271
Attention: Reorganization Attention: Reorganization Attention: Reorganization
Department Department Department
</TABLE>
By Facsimile Transmission: (201) 296-4293
Confirm Facsimile Only: (201) 296-4860
Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery
may be directed to the Information Agent or the Dealer Manager at their
respective telephone numbers and locations listed below. You may also contact
your broker, dealer, bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the Offer is:
[LOGO OF CHASE MELLON]
44 Wall Street, 7th Floor
New York, New York 10005
Banks and Brokers Call: (917) 320-6270
All Others Please Call Toll-Free: (888) 509-7936
The Dealer Manager for the Offer is:
[LOGO OF ROBINSON-HUMPHREY]
3333 Peachtree Road, N.E.
Atlanta, Georgia 30326
(404) 266-6000
