<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 23, 1996
REGISTRATION NO. 333-3436
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ISOLYSER COMPANY, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
GEORGIA 5047 58-1746149
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or No.)
organization)
</TABLE>
------------------------
4320 INTERNATIONAL BOULEVARD, N.W.
NORCROSS, GEORGIA 30093
(770) 381-7566
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
------------------------
ROBERT L. TAYLOR, PRESIDENT
ISOLYSER COMPANY, INC.
4320 INTERNATIONAL BOULEVARD, N.W.
NORCROSS, GEORGIA 30093
(770) 381-7566
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
------------------------
COPIES OF CORRESPONDENCE TO:
Stephen D. Fox, Esq. Bruce Hallett, Esq.
Arnall Golden & Gregory Crouch & Hallett, LLP
1201 West Peachtree Street 717 North Harwood -- Suite 1400
Atlanta, Georgia 30309-3400 Dallas, TX 75201
(404) 873-8500 (214) 953-0053
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable after this Registration Statement becomes effective and
all other conditions to the proposed merger (the "Merger") of a wholly owned
subsidiary of the Registrant with and into Microtek Medical, Inc. ("Microtek")
pursuant to the Agreement and Plan of Merger, dated as of March 15, 1996,
attached as Appendix A to the enclosed Proxy Statement/Prospectus have been
satisfied or waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ISOLYSER COMPANY, INC.
SHARES OF COMMON STOCK
TO BE ISSUED IN CONNECTION WITH THE MERGER
OF A WHOLLY OWNED SUBSIDIARY OF ISOLYSER COMPANY, INC.
INTO
MICROTEK MEDICAL, INC.
------------------------
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND CAPTION LOCATION OR HEADING IN PROXY STATEMENT/PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
PART I. INFORMATION REQUIRED IN THE PROSPECTUS
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside Front
Cover of Page Prospectus............................ Outside Front Cover Page of Proxy
Statement/Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus.......................................... Inside Front Cover Page of Proxy Statement/Prospectus
3. Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information................................... Summary
4. Terms of the Transaction............................. Outside Front Cover Page of Proxy
Statement/Prospectus; The Merger; Summary;
Comparative Rights of Isolyser Shareholders and
Microtek Stockholders
5. Pro Forma Financial Information...................... Isolyser and Microtek Pro Forma Combined Financial
Information; Isolyser Pro Forma Combined Financial
Information; Microtek Pro Forma Combined Financial
Information
6. Material Contracts With the Company Being Acquired... The Merger
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters....... Not Applicable
8. Interests of Named Experts and Counsel............... Not Applicable
9. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants.......... Incorporation of Certain Information by Reference
11. Incorporation of Certain Information by Reference.... Incorporation of Certain Information by Reference
12. Information with Respect to S-2 or S-3 Registrants... Not Applicable
13. Incorporation of Certain Information by Reference.... Not Applicable
14. Information with Respect to Registrants Other than
S-2 or S-3 Registrants.............................. Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND CAPTION LOCATION OR HEADING IN PROXY STATEMENT/PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies............ Not Applicable
16. Information with Respect to S-2 or S-3 Companies..... Incorporation of Certain Information by Reference
17. Information with Respect to Companies Other Than S-2
or S-3 Companies.................................... Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or Authorizations
are to be Solicited................................. Incorporation of Certain Information by Reference;
Special Meeting of Microtek; The Merger
19. Information if Proxies, Consents or Authorizations
are not to be Solicited or in an Exchange Offer..... Not Applicable
PART II. INFORMATION NOT REQUIRED IN THE PROSPECTUS
20. Indemnification of Directors and Officers............ Part II, Indemnification of Directors and Officers
21. Exhibits and Financial Statement Schedules........... Part II, Exhibits and Financial Statement Schedules
22. Undertakings......................................... Part II, Undertakings
</TABLE>
<PAGE>
PRELIMINARY COPY
MICROTEK MEDICAL, INC.
512 LEHMBERG ROAD
COLUMBUS, MISSISSIPPI 39702
(601) 327-1863
------------------------
May 28, 1996
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
Microtek Medical, Inc. ("Microtek") at 10:00 a.m., local time, on June 28, 1996,
at the executive offices of Microtek, 512 Lehmberg Road, Columbus, Mississippi
(together with any adjournments or postponements thereof, the "Special Meeting")
.
At the Special Meeting, you will be asked to consider and vote upon a
proposed merger (the "Merger") of MMI Merger Corp., a wholly-owned subsidiary of
Isolyser Company, Inc. ("Isoloyser"), into Microtek. The Merger is described in
the attached Notice of Special Meeting and Proxy Statement/Prospectus. Upon
consummation of the Merger, Microtek will become a wholly owned subsidiary of
Isolyser, and holders of each share of Microtek Common Stock will be entitled to
receive such number of shares of Isolyser Common Stock as are equal to $16.50
divided by the "Determination Price" of Isolyser Common Stock. Under the terms
of the Merger, the"Determination Price" will be equal to the average closing
price (but in no event lower than $14.50 or greater than $18.50) of Isolyser
Common Stock as reported on The Nasdaq Stock Market for the 20 trading days
immediately preceding the second trading day prior to the effective date of the
Merger.
At the meeting, you will also be asked to approve an amendment (the "Option
Proposal") to Microtek's 1990 Incentive Stock Option Plan (the "Option Plan") to
increase the number of shares of Microtek Common Stock issuable upon exercise of
stock options under the Option Plan from 883,302 to 1,083,302 shares. Such stock
options will be converted into the right to purchase Isolyser Common Stock if
the Merger is consummated.
The enclosed Proxy Statement/Prospectus provides a detailed description of
the matters to be considered at the Special Meeting and extensive information
concerning Microtek and Isolyser. A copy of the Agreement and Plan of Merger
pertaining to the Merger is attached as Annex A to the Proxy
Statement/Prospectus. Please carefully review and consider all of this
information.
Also enclosed is Microtek's Annual Report on Form 10-K/A for the year ended
November 30, 1995, and Quarterly Report on Form 10-Q for the quarter ended
February 29, 1996.
AFTER CAREFUL CONSIDERATION, THE BOARD OF DIRECTORS OF MICROTEK HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE OPTION PROPOSAL AND RECOMMENDS
THAT STOCKHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF THE PROPOSED MERGER
AGREEMENT AND "FOR" THE OPTION PROPOSAL AT THE SPECIAL MEETING.
It is important that your shares be present at the Special Meeting,
regardless of the number of shares you hold. Therefore, please sign, date and
return your proxy card as soon as possible, whether or not you plan to attend.
This will not prevent you from voting your shares in person if you subsequently
choose to attend.
Very truly yours,
Kimber L. Vought
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
PRELIMINARY COPY
MICROTEK MEDICAL, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON
JUNE 28, 1996
To The Stockholders of
Microtek Medical, Inc.:
Notice is hereby given that a Special Meeting of Stockholders of Microtek
Medical, Inc., a Delaware corporation ("Microtek"), will be held on June 28,
1996, beginning at 10:00 a.m. local time, at Microtek's offices at 512 Lehmberg
Road, Columbus, Mississippi (together with any adjournments or postponements
thereof, the "Special Meeting"), for the following purposes:
1. To consider and vote upon a proposal to approve that certain Agreement
and Plan of Merger, dated March 15, 1996 (the "Merger Agreement"), by and
among Microtek, Isolyser Company, Inc., a Georgia corporation
("Isolyser"), and MMI Merger Corp. (the "Isolyser Subsidiary"), pursuant
to which, among other things, the Isolyser Subsidiary will be merged with
and into Microtek and Microtek will become a wholly owned subsidiary of
Isolyser, and each issued share of Common Stock of Microtek will be
converted into the right to receive such number of shares of Common Stock
of Isolyser equal to $16.50 divided by the "Determination Price" (as
defined in the Merger Agreement);
2. To consider and act upon a proposed amendment to Microtek's 1990
Incentive Stock Option Plan (the "Option Plan") to increase the number of
shares of Common Stock of Microtek issuable upon exercise of stock
options under the Option Plan from 883,302 to 1,083,302 shares of Common
Stock; and
3. To transact any other business as may properly come before the meeting
or any adjournment thereof.
Stockholders of record at the close of business on April 30, 1996 are
entitled to notice of and to vote at the meeting or any adjournment thereof.
WHETHER OR NOT YOU PLAN TO ATTEND THIS MEETING, PLEASE MARK, SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE
PAID ENVELOPE.
By Order of the Board of Directors
Dan Lee
SECRETARY
Columbus, Mississippi
May 28, 1996
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PRELIMINARY COPY
PROXY STATEMENT/PROSPECTUS
PROXY STATEMENT
MICROTEK MEDICAL, INC.
SPECIAL MEETING OF STOCKHOLDERS TO BE
HELD ON JUNE 28, 1996
------------------------
PROSPECTUS
ISOLYSER COMPANY, INC.
COMMON STOCK
------------------------
This Proxy Statement/Prospectus is being furnished to stockholders of
Microtek Medical, Inc., a Delaware corporation ("Microtek"), in connection with
the solicitation of proxies by the Board of Directors of Microtek for use at the
Special Meeting of Stockholders to be held at 10:00 a.m., local time, on June
28, 1996, at 512 Lehmberg Road, Columbus, Mississippi (together with any
adjournment or postponement thereof, the "Special Meeting").
Proxies are being solicited to vote in favor of (i) the approval and
adoption of an Agreement and Plan of Merger dated March 15, 1996 (the "Merger
Agreement") by and among Isolyser Company, Inc., a Georgia corporation
("Isolyser"), MMI Merger Corp., a Delaware corporation and a newly organized,
wholly-owned subsidiary of Isolyser (the "Isolyser Subsidiary"), and Microtek,
pursuant to which the Isolyser Subsidiary will be merged with and into Microtek,
which will be the surviving corporation, and Microtek will become a wholly-owned
subsidiary of Isolyser, and (ii) the approval of a proposed amendment to
Microtek's 1990 Incentive Stock Option Plan (the "Option Plan") to increase the
number of shares of Common Stock of Microtek issuable upon exercise of stock
options under the Option Plan from 883,302 to 1,083,302 shares of Common Stock.
Under the Merger Agreement, Microtek will become a wholly-owned subsidiary of
Isolyser, and holders of each share of Microtek Common Stock will be entitled to
receive such number of shares of Isolyser Common Stock as are equal to $16.50
divided by the "Determination Price" of Isolyser Common Stock. Under the terms
of the Merger Agreement, the "Determination Price" will be equal to the average
closing price (but in no event lower than $14.50 or greater than $18.50) of
Isolyser Common Stock as reported on The Nasdaq Stock Market for the twenty
trading days immediately preceding the second trading day prior to the effective
date of the Merger (the "Effective Date").
A copy of the Merger Agreement is attached to this Proxy
Statement/Prospectus as Annex A and is incorporated herein by reference. All
capitalized terms not otherwise defined in this Proxy Statement/Prospectus shall
have the meanings given to such terms in the Merger Agreement.
Under the rules of the Securities and Exchange Commission (the
"Commission"), the solicitation of proxies from the stockholders of Microtek to
approve and adopt the Merger Agreement constitutes an offering to stockholders
of Microtek of shares of Isolyser Common Stock. Isolyser has filed a
registration statement on Form S-4 (File No. 333-3436) (together with any
amendments thereto, the "Registration Statement") with the Commission relating
to such offering. All information contained in this Proxy Statement/Prospectus
relating to Isolyser and the Isolyser Subsidiary has been supplied by Isolyser
and all information relating to Microtek has been supplied by Microtek.
The principal executive offices of Isolyser are located at 4320
International Boulevard, Norcross, Georgia 30093 and its telephone number is
(770) 381-7566. The principal executive offices of Microtek are located at 512
Lehmberg Road, Columbus, Mississippi 39702 and its telephone number is (601)
327-1863.
This Proxy Statement/Prospectus and the enclosed proxy card are first being
mailed to stockholders of Microtek on or about May 28, 1996.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS , 1996.
<PAGE>
AVAILABLE INFORMATION
This Proxy Statement/Prospectus does not contain all of the information set
forth in the Registration Statement and exhibits thereto which Isolyser has
filed with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"). As permitted by the rules and regulations of the Commission,
this Proxy Statement/Prospectus omits certain information, exhibits and
undertakings contained in the Registration Statement. Reference is made to the
Registration Statement and to the exhibits thereto for further information,
which may be inspected without charge at the office of the Commission at 450
Fifth Street, Washington, D.C. 20549, and copies of which may be obtained from
the Commission at prescribed rates. Statements contained in this Proxy
Statement/Prospectus relating to the contents of any contract or other document
referred to herein or therein are not necessarily complete, and in each
instance, reference is made to the copy of such document filed as an exhibit to
the Registration Statement. Each such statement is qualified in its entirety by
such reference.
In addition, both Isolyser (File No. 0-24866) and Microtek (File No.0-20346)
are subject to the informational requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and in accordance therewith file reports,
proxy statements and other information with the Commission. Such reports, proxy
statements and other information filed with the Commission can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549 or at the Regional Offices
of the Commission which are located as follows: Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade
Center, 13th Floor, New York, New York 10048. Copies of such material can also
be obtained from the Commission at prescribed rates. Written requests for such
material should be addressed to the Public Reference Section, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS RELATING
TO ISOLYSER AND MICROTEK. DOCUMENTS RELATING TO ISOLYSER (OTHER THAN EXHIBITS TO
SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED HEREIN BY
REFERENCE) ARE AVAILABLE TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM
THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED, ON WRITTEN OR ORAL REQUEST,
WITHOUT CHARGE, FROM ISOLYSER COMPANY, INC., 4320 INTERNATIONAL BOULEVARD,
NORCROSS, GEORGIA ATTENTION: C. FRED HARLOW, CHIEF FINANCIAL OFFICER, TELEPHONE
(770) 381-7566. DOCUMENTS RELATING TO MICROTEK (OTHER THAN EXHIBITS TO SUCH
DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED THEREIN BY
REFERENCE) ARE AVAILABLE TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM
THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED, ON WRITTEN OR ORAL REQUEST,
WITHOUT CHARGE, FROM MICROTEK MEDICAL, INC., 512 LEHMBERG ROAD, COLUMBUS,
MISSISSIPPI 39702, ATTENTION: DAN LEE, CHIEF FINANCIAL OFFICER, TELEPHONE: (601)
327-1863. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY SUCH REQUEST
SHOULD BE MADE BY JUNE 21, 1996. COPIES OF DOCUMENTS SO REQUESTED WILL BE SENT
BY FIRST CLASS MAIL, POSTAGE PAID WITHIN ONE BUSINESS DAY OF THE RECEIPT OF SUCH
REQUEST.
The following Isolyser documents are incorporated by reference herein:
A. Annual Report on Form 10-K for the year ended December 31, 1995
filed with the Commission on April 1, 1996.
B. Quarterly Report on Form 10-Q for the quarter ended March 31, 1996
filed with the Commission on May 15, 1996.
C. Current Report on Form 8-K filed with the Commission on June 15,
1995, as amended by Current Report on Form 8-K/A filed with the Commission
on July 17, 1995.
D. Current Report on Form 8-K filed with the Commission on October 3,
1995.
E. The description of Isolyser Common Stock set forth in Isolyser's
Registration Statement filed pursuant to Section 12 of the Exchange Act, and
any amendment or report filed for the purpose of updating such description.
2
<PAGE>
The following Microtek documents are incorporated by reference herein:
1. Annual Report on Form 10-K for the year ended November 30, 1995, as
amended and restated by Annual Report on Form 10-K/A filed with the
Commission on May 23, 1996 (as so amended, the "1995 Microtek 10-K").
2. Quarterly Report on Form 10-Q for the quarter ended February 29,
1996 filed with the Commission on April 12, 1996 (the "Microtek 10-Q").
3. Current Report on Form 8-K filed with the Commission on May 15,
1996.
All documents filed by Isolyser or Microtek with the Commission pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date
hereof and prior to the date of the Microtek stockholder meeting shall be
deemed to be incorporated by reference herein and shall be a part hereof
from the date of filing of such documents. Any statements contained in a
document incorporated by reference herein or contained in this Proxy
Statement/Prospectus shall be deemed to be modified or superseded for
purposes hereof to the extent that a statement contained herein (or in any
other subsequently filed document which also is incorporated by reference
herein) modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed to constitute a part hereof except as so
modified or superseded.
------------------------
The 1995 Microtek 10-K and the Microtek 10-Q are delivered in conjunction
with this Proxy Statement/Prospectus.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IN CONNECTION
WITH THE OFFERS MADE HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY ISOLYSER OR
MICROTEK. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THOSE TO WHICH IT
RELATES OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER IN SUCH PERSON'S JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY
STATEMENT/PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT, SINCE THE DATE OF THIS PROXY STATEMENT/PROSPECTUS,
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF ISOLYSER OR MICROTEK.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information...................................................................................... 2
Incorporation of Certain Information by Reference.......................................................... 2
Summary of Proxy Statement/Prospectus...................................................................... 5
Special Meeting of Microtek................................................................................ 16
The Merger................................................................................................. 16
Isolyser and Microtek Pro Forma Combined Financial Information............................................. 39
Isolyser Pro Forma Combined Financial Information.......................................................... 46
Microtek Pro Forma Combined Financial Information.......................................................... 48
Comparative Rights of Isolyser Shareholders and Microtek Stockholders...................................... 53
Option Proposal............................................................................................ 60
Legal Matters.............................................................................................. 63
Experts.................................................................................................... 63
Stockholder's Proposals.................................................................................... 63
Annex A Agreement and Plan of Merger....................................................................... A-1
Annex B Opinion of Morgan Keegan & Company, Inc............................................................ B-1
Annex C Opinion of Goldman, Sachs & Co..................................................................... C-1
</TABLE>
4
<PAGE>
SUMMARY OF PROXY STATEMENT/PROSPECTUS
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN
THIS PROXY STATEMENT/ PROSPECTUS. THE SUMMARY IS NECESSARILY INCOMPLETE AND
SELECTIVE AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION
CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS, INCLUDING THE APPENDICES HERETO.
THE TERMS "MICROTEK" AND "ISOLYSER" REFER RESPECTIVELY TO MICROTEK MEDICAL, INC.
AND ITS SUBSIDIARIES AND ISOLYSER COMPANY, INC. AND ITS SUBSIDIARIES, UNLESS THE
CONTEXT OTHERWISE REQUIRES.
GENERAL
This Proxy/Statement Prospectus relates to the proposed merger (the
"Merger") of MMI Merger Corp., a wholly-owned subsidiary of Isolyser (the
"Isolyser Subsidiary"), into Microtek pursuant to an Agreement and Plan of
Merger dated March 15, 1996 (the "Merger Agreement"). Under the Merger
Agreement, Microtek will become a wholly-owned subsidiary of Isolyser and
holders of each share of Microtek Common Stock will be entitled to receive such
number of shares of Isolyser Common Stock as are equal to $16.50 divided by the
"Determination Price" of Isolyser Common Stock (the "Exchange Ratio"). Under the
terms of the Merger Agreement, the "Determination Price" will be equal to the
average closing price (but in no event lower than $14.50 or greater than $18.50)
per share of Isolyser Common Stock as reported on The Nasdaq Stock Market
("Nasdaq") for the twenty days immediately preceding the second trading day
prior to the effective date of the Merger. See "The Merger." This Proxy
Statement/Prospectus also relates to a proposed amendment (the "Option
Proposal") to Microtek's 1990 Incentive Stock Option Plan (the "Option Plan") to
increase the number of shares Microtek Common Stock issuable upon exercise of
stock options under the Option Plan from 883,302 to 1,083,302 shares. See
"Option Proposal."
THE PARTIES
ISOLYSER. Isolyser develops and manufactures OREX-Registered Trademark-
Degradables-TM-, a series of products made from a thermoplastic, hot water
soluble polymer that can be configured into an array of products such as woven
and non-woven fabrics, film and thermoformed and extruded items. These products
can be dissolved after use, in hot water in a specially designed
OREX-Registered Trademark- processor similar to a commercial washing machine,
for safe disposal through municipal sewer systems. Isolyser believes that this
line of products provides protection to the hospital staff, patient and
environment while providing cost-effective solutions to the problems associated
with waste reduction and disposal.
MICROTEK. Microtek designs, manufactures and sells a broad range of
surgical and medical supplies for use in targeted niche markets in the health
care industry. Its principal product lines are infection and fluid control
products, including disposable drapes for covering operating room equipment
during surgical procedures and pouches that attach to the surgical drapes to
collect and contain fluids during surgical procedures.
THE MERGER
GENERAL. Pursuant to the proposed Merger, the Isolyser Subsidiary will be
merged into Microtek, and Microtek will become a wholly-owned subsidiary of
Isolyser. Upon completion of the Merger, each share of Microtek Common Stock
will be converted into the right to receive such number of shares of Isolyser
Common Stock as are equal to $16.50 divided by the "Determination Price." The
Merger Agreement defines the "Determination Price" to be equal to the average
closing price per share of the Isolyser Common Stock on Nasdaq for the 20
trading days immediately preceding the two trading days before the consummation
of the Merger; provided, however, that the Determination Price may not be lower
than $14.50 or higher than $18.50. See "The Merger -- General."
ISOLYSER'S REASONS FOR THE MERGER. Upon consultation with its legal and
financial advisors, and following consideration of a number of business issues
and factors, the Board of Directors of Isolyser
5
<PAGE>
has determined that the Merger is in the best interest of Isolyser. See "The
Merger -- Isolyser's Reasons for the Merger" for a discussion of the factors
considered by the Isolyser Board in reaching such determination.
MICROTEK'S REASONS FOR THE MERGER AND RECOMMENDATION OF MICROTEK BOARD OF
DIRECTORS. In reaching its determination to recommend the Merger, the Microtek
Board consulted with Microtek's management and its financial and legal advisors.
See "The Merger -- Microtek's Reasons for the Merger" regarding the factors that
the Microtek Board considered in reaching its decision. The Microtek Board has
determined that the terms of the Merger Agreement, which were established
through arms' length bargaining with Isolyser, are fair to, and in the best
interests of, Microtek and its stockholders. ACCORDINGLY, THE MICROTEK BOARD HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT THE
MICROTEK STOCKHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
OPINION OF ISOLYSER'S FINANCIAL ADVISOR. Morgan Keegan & Company, Inc.
("Morgan Keegan") has delivered its written opinion to the Isolyser Board of
Directors, dated March 15, 1996, to the effect that, as of such date, the
consideration to be paid by Isolyser pursuant to the Merger Agreement is fair,
from a financial point of view, to the shareholders of Isolyser. A copy of the
opinion of Morgan Keegan, which sets forth the assumptions made, matters
considered and limitations on reviews undertaken, is attached to this Proxy
Statement/Prospectus as Annex B, and stockholders of Microtek are urged to read
such opinion in its entirety. See "The Merger -- Opinion of Isolyser's Financial
Advisor."
OPINION OF MICROTEK'S FINANCIAL ADVISOR. On March 15, 1996, Goldman, Sachs
& Co. ("Goldman Sachs") delivered its opinion to the Board of Directors of
Microtek that, as of the date of such opinion, the Exchange Ratio pursuant to
the Merger Agreement is fair to the holders of shares of Microtek Common Stock.
The full text of the written opinion of Goldman Sachs, which sets forth
assumptions made, matters considered and limitations on the review undertaken in
connection with the opinion, is attached hereto as Annex C and is incorporated
herein by reference. HOLDERS OF SHARES OF MICROTEK COMMON STOCK ARE URGED TO,
AND SHOULD, READ SUCH OPINION IN ITS ENTIRETY. See "The Merger -- Opinion of
Microtek's Financial Advisor."
RISK FACTORS. An investment in shares of Isolyser Common Stock involves a
high degree of risk. Isolyser's future performance will depend to a substantial
degree upon market acceptance of and Isolyser's ability to successfully
manufacture, market, deliver and expand its OREX Degradables line of products.
Isolyser only recently began to sell OREX Degradables in material amounts, and
incurred operating and net losses for the years ended December 31, 1994 and 1995
and the three-month period ended March 31, 1996. Accordingly, Microtek
stockholders should carefully consider the risk factors beginning on page 16 of
Isolyser's Annual Report on Form 10-K for the year ended December 31, 1995
incorporated herein by reference including, without limitation, such risk
factors captioned "Limited Operating History; Net Losses," "Risks of New
Products" and "Manufacturing and Supply Risks."
EFFECTIVE DATE OF THE MERGER. It is currently contemplated that the Merger
will be consummated as soon as practicable after the Special Meeting. The Merger
will be effective upon the filing of a Certificate of Merger with the Secretary
of State of Delaware (the "Effective Date").
EXCHANGE OF MICROTEK STOCK CERTIFICATES. As soon as practicable after the
Effective Date, instructions and a letter of transmittal will be furnished to
all Microtek stockholders for use in exchanging their stock certificates for
certificates evidencing the shares of Isolyser Common Stock they will be
entitled to receive as a result of the Merger. STOCKHOLDERS OF MICROTEK SHOULD
NOT SUBMIT THEIR STOCK CERTIFICATES FOR EXCHANGE UNTIL SUCH INSTRUCTIONS AND
LETTER OF TRANSMITTAL ARE RECEIVED. See "The Merger -- Exchange of Certificates
Representing Microtek Shares."
VOTE REQUIRED FOR MERGER PROPOSAL. The affirmative votes of the holders of
a majority of the outstanding shares of Microtek Common Stock are required to
approve the Merger Agreement on behalf of Microtek. See "Special Meeting of
Microtek."
6
<PAGE>
Certain stockholders of Microtek who own of record approximately 46.3% of
the shares of Microtek Common Stock entitled to vote at the Special Meeting have
granted Isolyser a proxy to vote all of their shares of Microtek Common Stock in
favor of the adoption and approval of the Merger Agreement. In addition, those
officers, directors and affiliates of Microtek who have not granted proxies to
Isolyser own of record approximately two % of the shares of Microtek Common
Stock entitled to vote at the Special Meeting. See "Special Meeting of Microtek
- -- Quorum and Voting."
The consummation of the Merger will not require the vote of the stockholders
of Isolyser, and the Merger is not being presented to the stockholders of
Isolyser for their approval. Isolyser, the sole stockholder of the Isolyser
Subsidiary, has also approved and adopted the Merger on behalf of the Isolyser
Subsidiary.
OPERATIONS OF MICROTEK AFTER THE MERGER. Following the Merger, Microtek
will be operated as a wholly-owned subsidiary of Isolyser. Although it is
anticipated that the current executive officers of Microtek will continue as the
executive officers of Microtek following the consummation of the Merger, it is
not anticipated that employment agreements will be entered into between such
executive officers, on the one hand, and either Microtek or Isolyser on the
other. See "The Merger -- Interests of Certain Persons in the Merger."
NO SOLICITATION. The Merger Agreement provides that Microtek will not,
directly or indirectly, (i) solicit or initiate discussions with or (ii) enter
into any negotiations or agreements with, or furnish any information that is not
publicly available to, any third party concerning any proposal for a merger,
sale of substantial assets, sale of shares of stock or securities or other
takeover or business combination transaction (collectively, an "Acquisition
Proposal"), subject to the fiduciary duties of the Microtek Board. See "The
Merger -- Certain Covenants."
NO APPRAISAL RIGHTS. Microtek stockholders will not have appraisal or
dissenters' rights with respect to the Merger.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. Neither Microtek nor Isolyser has
requested, nor will they receive, an advance ruling from the Internal Revenue
Service as to the tax consequences of the Merger. As contemplated by the Merger
Agreement, it is a condition to the closing of the Merger that counsel for
Isolyser deliver an opinion, subject to certain qualifications and conditions,
with respect to certain federal income tax consequences of the Merger including
(i) that the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and (ii) that no gain or loss will be recognized by a Microtek stockholder as a
result of the Merger with respect to shares of Microtek Common Stock converted
solely into Isolyser Common Stock. All Microtek stockholders should read
carefully the discussion in "The Merger -- Certain Federal Income Tax
Consequences" and other sections of this Proxy Statement/Prospectus. They are
urged to consult their own tax advisors as to the specific consequences to them
of the Merger under federal, state, local and any other applicable tax laws. See
"The Merger -- Certain Federal Income Tax Consequences."
ACCOUNTING TREATMENT. It is a condition to the Merger that it shall qualify
as a pooling-of-interests for accounting and financial reporting purposes. See
"The Merger -- Accounting Treatment."
CONDITIONS OF THE MERGER. In addition to approval by the stockholders of
Microtek, consummation of the Merger is subject to the satisfaction or waiver of
a number of conditions and to certain regulatory matters. Other than approval of
the Merger by the Microtek stockholders, substantially all of the conditions to
the Merger may be waived, in whole or in part, by the parties for whose benefit
they have been created, without the approval of their respective stockholders.
However, after approval by the stockholders of Microtek, no amendment or
modification may be made which by law requires further approval by such
stockholders unless such approval is obtained. In addition, the Merger may
7
<PAGE>
be abandoned under certain circumstances, and such abandonment will not require
stockholder approval. See "The Merger -- Conditions to the Merger," "--Amendment
of the Merger Agreement; Waiver of Conditions" and "-- Certain Regulatory
Matters."
TERMINATION. The Merger Agreement may be terminated and the Merger
abandoned, at any time prior to the Effective Date, whether before or after the
approval by the Microtek stockholders, (i) by the mutual consent of Isolyser and
Microtek; (ii) by Isolyser if there has been a material misrepresentation or
breach of warranty in the representations and warranties of Microtek made in the
Merger Agreement, or there has been a material failure by Microtek to comply
with its obligations under the Merger Agreement, subject to certain exceptions;
(iii) by Microtek if there has been a material misrepresentation or breach of
warranty in the representations and warranties of Isolyser made in the Merger
Agreement, or there has been a material failure by Isolyser to comply with its
obligations under the Merger Agreement, subject to certain exceptions; (iv) by
either Isolyser or Microtek if all conditions to that party's obligation to
consummate the Merger have not been satisfied or waived by August 31, 1996,
unless such failure of consummation is due to the failure of the terminating
party to perform or observe the covenants, agreements, and conditions to be
performed or observed by it; (v) by either Isolyser or Microtek if the
consummation of the Merger would violate any nonappealable final order, decree
or judgment of any court or governmental body or agency having competent
jurisdiction; (vi) by Microtek if in the exercise of the good faith judgment of
its Board of Directors (which judgment is based upon the advice of independent,
outside legal counsel) as to its fiduciary duties to its stockholders such
termination is required by reason of an Acquisition Proposal; (vii) by Isolyser,
if the Microtek Board of Directors withdraws or materially modifies or changes
its recommendation to the stockholders of Microtek to approve the Merger
Agreement and the Merger; or (viii) by Microtek, if the Determination Price is
below $13.00 per share. See "The Merger -- Termination of Merger Agreement" and
"-- Amendment of the Merger Agreement; Waiver of Conditions."
TERMINATION FEE. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with the Merger Agreement and the transactions
contemplated thereby will be paid by the party incurring such costs or expenses.
Notwithstanding the foregoing, if (a) Microtek terminates the Merger Agreement
because its Board of Directors, in the exercise of its good faith judgment
(based upon advice of independent, outside counsel) as to its fiduciary duties
to its stockholders determines such termination is required by reason of an
Acquisition Proposal; (b) the Merger Agreement is terminated by Isolyser because
the Microtek Board of Directors withdraws or materially modifies or changes its
recommendation to the stockholders of Microtek to approve the Merger Agreement
and the Merger; or (c) on or before August 31, 1996 and while the Merger
Agreement remains in effect, Microtek enters into a definitive agreement with
respect to an Acquisition Proposal with any corporation, partnership, person or
other entity or group (other than Isolyser or any affiliate of Isolyser), and
such transaction (including any revised transaction based upon the Acquisition
Proposal) is thereafter consummated (whether before or after August 31, 1996),
then Microtek shall pay to Isolyser a fee of $2.5 million. See "The Merger --
Fees and Expenses."
COMPARATIVE RIGHTS OF ISOLYSER SHAREHOLDERS AND MICROTEK
STOCKHOLDERS. Isolyser is incorporated under the laws of the State of Georgia
and Microtek is incorporated under the laws of the State of Delaware.
Stockholders of Microtek will, upon consummation of the Merger and to the extent
they receive Isolyser Common Stock, become stockholders of Isolyser, and their
rights as such will be governed by Georgia law and Isolyser's Articles of
Incorporation and Bylaws. See "Comparative Rights of Isolyser Shareholders and
Microtek Stockholders."
THE OPTION PROPOSAL
GENERAL. The Board of Directors of Microtek has approved, subject to
stockholder approval by the Microtek stockholders, the increase of the number of
shares of Microtek Common Stock subject to the Option Plan from 883,302 shares
to 1,083,302 shares, in order that the Option Plan will have enough available
shares to cover option grants made by the Board of Directors in November and
December 1995, which option grants exceeded the number of then authorized shares
available for
8
<PAGE>
grant pursuant to the Option Plan and were made subject to and contingent upon
stockholder approval. If the Merger Agreement is approved by the Microtek
stockholders and the Merger is consummated, no additional options will be
granted under the Option Plan. In addition, the Merger Agreement prohibits the
further grant of options by Microtek prior to the Merger. See "Option Proposal."
VOTE REQUIRED FOR OPTION PROPOSAL. The affirmative vote of the holders of a
majority of the shares of Microtek Common Stock represented at the Special
Meeting will be required for the approval of the Option Proposal. See "Option
Proposal."
SUMMARY HISTORICAL AND PRO FORMA SELECTED FINANCIAL INFORMATION
The following tables set forth (i) selected consolidated financial
information for Isolyser for and as of each of the five years in the period
ended December 31, 1995, and the three-month period ended March 31, 1995 and
1996, (ii) selected financial information for Microtek for and as of each of the
five years in the period ended November 30, 1995, and the three-month period
ended February 28, 1995 and February 29, 1996, and (iii) selected unaudited pro
forma combined information giving effect to the Merger under the pooling of
interests method of accounting. The selected unaudited pro forma combined
balance sheet information as of March 31, 1996 gives effect to the Merger as
though it had been consummated on that date. The selected unaudited pro forma
combined balance sheet information as of March 31, 1996 also gives effect to
Microtek's acquisition of Venodyne a division of Advanced Instruments, Inc.
("Venodyne") on April 27, 1996 as if such acquisition had ocurred on February
29, 1996. The selected unaudited pro forma combined statements of operations
information for the years ended December 31, 1993, 1994 and 1995 and the
three-month period ended March 31, 1996, gives effect to the Merger as if it had
occurred at the beginning of the earliest year presented. For the year ended
December 31, 1995, the selected unaudited pro forma statement of operations
information also gives effect to Isolyser's acquisitions of SafeWaste
Corporation ("SafeWaste") on May 31, 1995 and White Knight Healthcare, Inc.
("White Knight") effective September 1, 1995 and Microtek's acquisition of
Medi-Plast International, Inc. ("Medi-Plast") on November 30, 1995, and Venodyne
on April 27, 1996 as if such acquisitions had occurred at the beginning of
Isolyser's and Microtek's fiscal years, January 1, 1995 and December 1, 1994,
respectively. For the three-months ended March 31, 1996, the selected unaudited
pro forma statement of operations information also gives effect to Microtek's
acquisition of Venodyne as if such acquisition had occurred at December 1, 1994.
For purposes of this selected unaudited pro forma combined financial statement
information, the balance sheet and statements of operations information combine
Microtek's balance sheet as of February 29, 1996 and its statements of
operations for the years ended November 30, 1993, 1994 and 1995, and the three-
month period ended February 29, 1996, respectively, as Microtek's fiscal year
ends on November 30.
The selected pro forma combined information is not necessarily indicative of
the operating results and financial position that would have been reported had
the Merger and the SafeWaste, White Knight, Medi-Plast and Venodyne acquisitions
occurred at the pro forma dates specified, nor is it necessarily indicative of
future results.
The selected information set forth below should be read in conjunction with
(i) the pro forma combined financial information included elsewhere herein, (ii)
the historical consolidated financial statements and notes thereto and other
financial information included in Isolyser's and Microtek's separate Annual
Reports on Form 10-K for the years ended December 31, 1995 and November 30,
1995, respectively, and Quarterly Reports on Form 10-Q for the three-months
ended March 31, 1996 and February 29, 1996, respectively, incorporated by
reference herein, (iii) the historical financial statements of SafeWaste and
White Knight included in Isolyser's Current Reports on Form 8-K filed with the
Commission on June 15, 1995 and October 3, 1995, respectively, incorporated by
reference herein and (iv) the historical financial statements of Medi-Plast and
Venodyne included in Microtek's Annual Report on Form 10-K for the year ended
November 30, 1995 incorporated by reference herein.
9
<PAGE>
ISOLYSER -- HISTORICAL
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................ $ 2,587 $ 5,502 $ 11,831 $ 46,625 $ 75,414 $ 12,155 $ 31,008
Gross profit......................... 1,264 3,001 4,860 11,508 16,138 2,625 7,128
Income (loss) from operations........ 88 513 261 (2,329) (5,523) (1,204) (988)
Income (loss) before extraordinary
item and cumulative effect of change
in accounting principle (1)......... 162 532 636 (1,919) (2,851) (146) (377)
Net income (loss).................... 266 748 636 (1,862) (2,851) (146) (377)
Income (loss) per common and common
equivalent share:
Income (loss) before extraordinary
item and cumulative effect of
change in accounting principle.... 0.01 0.04 0.04 (0.11) (0.11) (0.01) (0.01)
Net income (loss).................. 0.02 0.06 0.04 (0.10) (0.11) (0.01) (0.01)
Weighted average number of common and
common equivalent shares
outstanding......................... 12,162 13,486 16,053 18,684 25,575 24,468 30,500
BALANCE SHEET DATA:
Working capital...................... $ 4,935 $ 6,656 $ 24,461 $ 80,743 $ 90,766 $ 79,613 $ 88,634
Total assets......................... 5,263 8,058 47,911 105,985 208,712 116,447 208,155
Long-term debt....................... 6,732 9,821 16,481 9,899
Redeemable common stock.............. 26,150 1,717
Total shareholders' equity........... 5,047 7,419 11,281 90,779 174,179 92,073 174,407
</TABLE>
- ------------------------
(1) Isolyser recognized extraordinary benefits from net operating loss
carryforwards of $104,000 and $216,000 in 1991 and 1992, respectively, and
recognized a $57,000 cumulative effect benefit in 1994 from the adoption on
January 1, 1994 of Statement of Financial Accounting Standards ("SFAS") No.
115, "Accounting for Certain Investments in Debt and Equity Securities".
10
<PAGE>
MICROTEK -- HISTORICAL
<TABLE>
<CAPTION>
THREE THREE
MONTHS MONTHS
ENDED ENDED
YEAR ENDED NOVEMBER 30, FEBRUARY FEBRUARY
----------------------------------------------------- 28, 29,
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales......................... $ 20,416 $ 25,753 $ 26,939 $ 26,894 $ 30,059 $ 7,107 $ 9,067
Gross profit...................... 10,398 13,442 13,072 11,947 13,783 2,877 4,352
Income from operations............ 1,171 3,705 2,108 1,402 4,385 677 1,587
Income (loss) before extraordinary
items and cumulative effect of
change in accounting principle
(1).............................. (654) 1,287 1,007 585 2,308 337 730
Net income (loss)................. (1,472) 775 1,031 580 2,308 337 730
Income (loss) per common and
common equivalent share:
Income (loss) before
extraordinary item and
cumulative effect of change in
accounting principle........... (0.46) 0.28 0.20 0.11 0.47 0.07 0.15
Net income (loss)............... (0.87) 0.15 0.20 0.11 0.47 0.07 0.15
Weighted average number of common
and common equivalent shares
outstanding...................... 2,016 3,827 5,059 5,058 4,927 5,036 4,991
BALANCE SHEET DATA:
Working capital................... $ 4,335 $ 7,829 $ 10,784 $ 7,784 $ 10,283 $ 7,695 $ 12,905
Total assets...................... 22,634 23,114 27,084 26,988 45,227 26,581 46,659
Long-term debt.................... 14,044 2,958 4,436 47 16,591 62 18,209
Redeemable preferred stock........ 2,279
Total stockholders' equity........ 2,580 17,749 19,117 19,883 21,119 20,220 21,862
</TABLE>
- ------------------------
(1) Microtek recognized extraordinary charges from the early retirement of
long-term debt of $817,000 and $741,000 in 1991 and 1992 respectively, and
extraordinary benefits from net operating loss carryforwards of $229,000 and
$24,000 in 1992 and 1993, respectively. Microtek recognized a $5,000
cumulative effect charge in 1994 from the adoption on December 1, 1993 of
SFAS No. 109, "Accounting for Income Taxes".
11
<PAGE>
ISOLYSER/MICROTEK -- PRO FORMA COMBINED (1)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS
--------------------------------- ENDED MARCH 31,
1993 1994 1995 1996
--------- --------- ----------- ----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................................ $ 38,769 $ 73,383 $ 151,744 $ 41,053
Gross profit............................................. 17,932 23,455 45,398 12,156
Income (loss) from operations............................ 2,369 (927) 942 567
Income (loss) before extraordinary item and cumulative
effect of change in accounting principle................ 1,643 (720) (1,179) 353
Income (loss) before extraordinary item and cumulative
effect of change in accounting principle per common and
common equivalent share................................. 0.08 (0.03) (0.04) 0.01
Weighted average number of common and common equivalent
shares outstanding...................................... 21,112 23,742 30,811 35,491
BALANCE SHEET DATA:
Working capital.......................................... $ 99,552
Total assets............................................. 260,703
Long-term debt........................................... 33,858
Total shareholders' equity............................... 193,272
</TABLE>
- ------------------------
(1) The selected unaudited pro forma combined financial statement information
gives effect to the Merger of Isolyser and Microtek under the pooling of
interests method of accounting. The selected unaudited pro forma combined
statement of operations information for the year ended December 31, 1995
also gives effect to Isolyser's acquisitions of SafeWaste on May 31, 1995
and White Knight effective September 1, 1995 and Microtek's acquisition of
Medi-Plast on November 30, 1995 and Venodyne on April 27, 1996 as if such
acquisitions had occurred at the beginning of Isolyser's and Microtek's
fiscal years, January 1, 1995 and December 1, 1994, respectively. For the
three-months ended March 31, 1996, the selected unaudited pro forma
statement of operations information also gives effect to Microtek's
acquisition of Venodyne as if such acquisition had occurred at December 1,
1994. The selected unaudited pro forma combined balance sheet information as
of March 31, 1996 also gives effect to Microtek's acquisition of Venodyne on
April 27, 1996 as if such acquisition had occurred on February 29, 1996. For
purposes of this selected unaudited pro forma combined financial statement
information, the balance sheet and statement of operations information
combine Microtek's balance sheet as of February 29, 1996 and its statements
of operations for the years ended November 30, 1993, 1994 and 1995, and the
three month period ended February 29, 1996, respectively, as Microtek's
fiscal year ends on November 30.
Pro forma per share amounts are based on an assumed Exchange Ratio of one
share of Isolyser Common Stock for each share of Microtek Common Stock. The
selected unaudited combined balance sheet information reflects estimated
Merger expenses of $2,750,000. These expenses include investment banking,
legal, accounting and miscellaneous transaction costs of the Merger, and are
excluded from the pro forma statements of operations. Plans for the
integration and consolidation of the companies' operations are currently
being developed, but associated costs are not presently estimable. The
accounting policies utilized by Isolyser and Microtek are currently being
studied from a conformity perspective; however, the impact of any potential
adjustment is not presently expected to be material.
12
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth certain per common share information for
Isolyser and Microtek on both historical and pro forma combined bases. Income
(loss) per common share information represents income (loss) per common share
before extraordinary items and the cumulative effect of changes in accounting
principles. Pro forma combined income (loss) per share is derived from the pro
forma combined financial information presented elsewhere herein, which gives
effect to the Merger under the pooling of interests method of accounting as if
the Merger had occurred at the beginning of the earliest year presented. For the
year ended December 31, 1995, pro forma combined income (loss) per common share
also gives effect to Isolyser's acquisitions of SafeWaste on May 31, 1995 and
White Knight effective September 1, 1995 and Microtek's acquisitions of
Medi-Plast on November 30, 1995, and Venodyne on April 27, 1996, as if such
acquisitions had occurred at the beginning of Isolyer's and Microtek's fiscal
years, January 1, 1995 and December 1, 1994, respectively. For the three-months
ended March 31, 1996 pro forma combined income (loss) per common share of
Isolyser and Microtek, respectively, also gives effect to Microtek's acquisition
of Venodyne as if such acquisition had occurred at December 1, 1994.
Historical book value per common share as of the end of each year and the
three-month period presented is computed by dividing historical shareholders'
equity by the number of common shares outstanding at the end of each period
presented. Pro forma combined book value per common share as of March 31, 1996,
is computed by dividing pro forma combined shareholders' equity on such dates by
the corresponding number of shares of Isolyser Common Stock outstanding on such
dates, adjusted for the shares of Isolyser Common Stock to be issued in the
Merger.
13
<PAGE>
The equivalent pro forma combined per share information for Microtek is
determined by multiplying the Isolyser pro forma combined per share information
by the Exchange Ratio, assumed to be equal to one share of Isolyser Common Stock
for each share of Microtek Common Stock.
<TABLE>
<CAPTION>
PER SHARE OF COMMON STOCK
---------------------------------
INCOME CASH BOOK
(LOSS) DIVIDEND VALUE
--------- ----------- ---------
<S> <C> <C> <C>
Isolyser -- Historical
Year Ended December 31:
1993............................................................................. $ 0.04 $ -- $ 0.82
1994............................................................................. (0.11) -- 3.78
1995............................................................................. (0.11) -- 5.72
Three-months ended March 31, 1996................................................ (0.01) -- 5.70
Isolyser -- Pro Forma Combined
Year Ended December 31:
1993............................................................................. $ 0.08 $ -- $ --
1994............................................................................. (0.03) -- --
1995............................................................................. (0.04) -- --
Three-months ended March 31, 1996................................................ 0.01 -- 5.50
Microtek -- Historical
Year Ended November 30:
1993............................................................................. $ 0.20 $ -- $ 4.06
1994............................................................................. 0.11 -- 4.17
1995............................................................................. 0.47 -- 4.60
Three-months ended February 29, 1996............................................. 0.15 -- 4.76
Microtek -- Equivalent Pro Forma Combined
Year Ended December 31:
1993............................................................................. $ 0.08 $ -- $ --
1994............................................................................. (0.03) -- --
1995............................................................................. (0.04) -- --
Three-months ended February 29, 1996............................................. 0.01 -- 5.50
</TABLE>
14
<PAGE>
COMPARATIVE MARKET PRICE DATA
The Isolyser Common Stock and the Microtek Common Stock are traded and
quoted on Nasdaq. The table below sets forth, for the calendar quarters
indicated, the reported high and low sale prices of the Isolyser Common Stock
and of the Microtek Common Stock as reported on Nasdaq, which in the case of
Isolyser Common Stock is for the period since the Isolyser Common Stock began
trading publicly on October 21, 1994. Neither Isolyser nor Microtek has declared
or paid any cash dividends on their respective Common Stock. Each of Isolyser
and Microtek currently intends to retain any future earnings to finance the
growth and development of its business and therefore does not anticipate paying
any cash dividends in the foreseeable future. In addition, the credit facility
maintained by each of Isolyser and Microtek prohibits the declaration or payment
of cash dividends without the prior written consent of their respective lenders.
<TABLE>
<CAPTION>
ISOLYSER MICROTEK
COMMON STOCK (1) COMMON STOCK
-------------------- --------------------
CALENDAR YEAR HIGH LOW HIGH LOW
- ------------------------------------------------------------------------ --------- --------- --------- ---------
<S> <C> <C> <C> <C>
1994
First Quarter........................................................... -- -- $ 6.50 $ 5.25
Second Quarter.......................................................... -- -- 6.50 5.50
Third Quarter........................................................... -- -- 7.75 5.50
Fourth Quarter.......................................................... $ 12.00 $ 6.44 7.00 4.13
1995
First Quarter........................................................... 9.63 8.13 6.00 4.25
Second Quarter.......................................................... 17.88 8.38 5.88 4.50
Third Quarter........................................................... 21.06 15.38 7.50 5.50
Fourth Quarter.......................................................... 23.00 10.00 9.25 5.75
1996
First Quarter........................................................... 18.25 11.50 16.00 8.50
Second Quarter (through May 20, 1996)................................... 21.00 11.75 18.00 12.50
</TABLE>
- ------------------------
(1) On September 1, 1995, Isolyser declared a two-for-one stock split. The stock
split was effected in the form of a share dividend paid on October 2, 1995
to Isolyser shareholders of record on September 15, 1995. The high and low
prices per share of Isolyser common stock have been retroactively adjusted
to reflect the stock split.
On March 15, 1996, the last full trading day prior to the public
announcement of the execution and delivery of the Merger Agreement, the last
reported sale price of the Isolyser Common Stock on Nasdaq was $16.88 per share
and the last reported sale price of the Microtek Common Stock on Nasdaq was
$11.25 per share.
On May 20, 1996, the most recent practicable date prior to the date of this
Proxy Statement/ Prospectus, the last reported sale price of the Isolyser Common
Stock on Nasdaq was $13.50 per share and the last reported sale price of the
Microtek Common Stock on Nasdaq was $13.13 per share.
Because the market price of Isolyser Common Stock may fluctuate, the market
value of the shares of Isolyser Common Stock that holders of Microtek Common
Stock will receive in the Merger cannot be determined until the Determination
Price has been fixed and the Merger is consummated. After the Determination
Price is fixed, there will be a two-trading day period when the market value of
Isolyser Common Stock may increase or decrease without affecting the amount of
Isolyser Common Stock which Microtek stockholders will receive pursuant to the
Merger. Fluctuations in the market price of Microtek Common Stock will not have
any effect on the Determination Price. Microtek stockholders are urged to obtain
current market quotations for the Isolyser Common Stock and the Microtek Common
Stock. See "The Merger -- General."
15
<PAGE>
SPECIAL MEETING OF MICROTEK
This Proxy Statement/Prospectus is furnished to stockholders of Microtek, in
connection with the solicitation of proxies on behalf of the Microtek Board of
Directors for use at the Special Meeting to be held on June 28, 1996. Proxies in
the form enclosed will be voted at the Special Meeting, if properly executed,
returned to Microtek prior to the meeting and not revoked. A proxy may be
revoked at any time before it is voted by giving written notice to the Secretary
of Microtek. The approximate date on which this Proxy Statement/Prospectus and
the enclosed proxy card will first be sent to stockholders is May 28, 1996.
OUTSTANDING CAPITAL STOCK AND RECORD DATE. The record date for stockholders
of Microtek entitled to vote at the Special Meeting (the "Record Date") is April
30, 1996. At the close of business on that day, there were 4,664,546 shares of
Microtek Common Stock outstanding and entitled to vote at the Special Meeting.
QUORUM AND VOTING. The presence, in person or by proxy, of the holders of a
majority of the outstanding shares of Microtek Common Stock is necessary to
constitute a quorum at the meeting. In deciding all questions, a holder of
Microtek Common Stock is entitled to one vote, in person or by proxy, for each
share held in his or her name on the record date. An abstention will be included
in vote totals and, as such, will have the same effect on each proposal as a
negative vote. Broker non-votes, if any, will not be included in vote totals
and, as such, will have no effect on any proposal. Approval of the Merger
Agreement requires the affirmative vote of holders of a majority of the issued
and outstanding Microtek Common Stock. Certain stockholders of Microtek who at
the Record Date collectively owned approximately 46.3% of the outstanding
Microtek Common Stock have granted Isolyser an irrevocable proxy to vote all of
their Microtek Common Stock in favor of the proposed Merger. The affirmative
vote of the holders of a majority of the shares represented at the Special
Meeting will be required for the approval of the Option Proposal and all other
proposals submitted for a vote at the Special Meeting.
ACTION TO BE TAKEN AT THE SPECIAL MEETING. The accompanying proxy, unless
the stockholder otherwise specifies in the proxy, will be voted (i) for approval
of the Merger Agreement, (ii) for approval of the Option Proposal and (iii) at
the discretion of the proxy holders on any other matter that may properly come
before the meeting or any adjournment thereof. Where stockholders have
appropriately specified how their proxies are to be voted, they will be voted
accordingly. If any other matter of business is brought before the meeting, the
proxy holders may vote the proxies at their discretion. The directors of
Microtek do not know of any such other matter of business. A representative of
KPMG Peat Marwick LLP, Microtek's independent auditors, is expected to be
present at the Special Meeting and will be available to answer questions.
SOLICITATION OF PROXIES. The accompanying proxy is being solicited on
behalf of the Microtek Board of Directors. The expense of preparing, printing
and mailing the form of proxy and the material used in the solicitation thereof
will be borne by Microtek. In addition to the use of the mails, proxies may be
solicited by personal interview, telephone and telegram by directors, officers
and employees of Microtek. Arrangements have also been made with brokerage
houses, banks and other custodians, nominees and fiduciaries for the forwarding
of soliciting materials to the beneficial owners of the shares of Microtek
Common Stock held of record by such persons, and Microtek will reimburse them
for reasonable out-of-pocket expenses incurred by them in connection therewith.
THE MERGER
GENERAL
The terms and conditions of the Merger are set forth in the Merger
Agreement, the text of which is attached to this Proxy Statement/Prospectus as
Annex A. The summary of the Merger Agreement contained in this Proxy
Statement/Prospectus does not purport to be complete and is qualified in its
entirety by reference to the complete text of such document.
16
<PAGE>
At the time the Merger becomes effective, the Isolyser Subsidiary will be
merged with and into Microtek in accordance with Delaware law. As a result of
the Merger, the separate corporate existence of the Isolyser Subsidiary (which
was formed solely for the purposes of the Merger and has not engaged in any
operations or businesses) will cease, and Microtek will continue its existence
as a wholly-owned subsidiary of Isolyser.
Upon the consummation of the Merger, the Microtek Common Stock outstanding
immediately prior to the time the Merger becomes effective (the "Microtek
Shares") will be converted into the right to receive such number of shares of
Isolyser Common Stock (the "Isolyser Shares") as is equal to $16.50 divided by
the "Determination Price." The Determination Price is equal to the average
closing price (but not less than $14.50 or greater than $18.50) per share of
Isolyser Common Stock on Nasdaq for the 20 trading days immediately preceding
the two trading days before the Effective Date. Any fractional shares resulting
from such conversion will entitle the holder to receive cash. See "-- No
Fractional Shares." The shares of capital stock of Isolyser outstanding
immediately prior to the Merger will not be affected as a result of the Merger.
The following table illustrates the consideration to be received by Microtek
stockholders for each outstanding share of Microtek Common Stock assuming
approval of the Merger and without regard to cash payments in lieu of fractional
shares.
<TABLE>
<CAPTION>
AVERAGE
CLOSING DETERMINATION EXCHANGE NOMINAL
PRICE (1) PRICE (1) RATIO (1) VALUE (1)
- --------------- ------------- ---------- ----------
<S> <C> <C> <C>
$ 20.00(2) $18.50 0.8919 $ 17.84
$ 18.50(2) $18.50 0.8919 $ 16.50
$ 17.50(2) $17.50 0.9429 $ 16.50
$ 16.50(2) $16.50 1.0000 $ 16.50
$ 15.50(2) $15.50 1.0645 $ 16.50
$ 14.50(2) $14.50 1.1379 $ 16.50
$ 13.00(3) $14.50 1.1379 $ 14.79
</TABLE>
- ------------------------
(1) The Determination Price is equal to the average closing price (the "Average
Closing Price") per share of Isolyser Common Stock on Nasdaq for the 20
trading days immediately preceding the two trading days before the Effective
Date; provided, that in the event that at the Effective Date the
Determination Price of a share of Isolyser Common Stock is less than $14.50
per share, then the Determination Price shall be deemed to have been $14.50;
and provided, further, that in the event that at the Effective Date the
Determination Price of a share of Isolyser Common Stock is more than $18.50
per share, then the Determination Price shall be deemed to be $18.50. The
Exchange Ratio is equal to the quotient obtained by dividing (a) $16.50 by
(ii) the Determination Price. The nominal value shown is the product of the
Average Closing Price multiplied by the Exchange Ratio. The Average Closing
Price does not necessarily reflect the current market value per share of
Isolyser Common Stock at any given time (including the Effective Date)
because the market price of Isolyser Common Stock may fluctuate and there
will be a two-trading day period when the market value of Isolyser Common
Stock may increase or decrease without affecting the amount of Isolyser
Common Stock which Microtek stockholders will receive pursuant to the
Merger. If the Average Closing Price was equal to the current market value
of a share of Isolyser Common Stock on the Effective Date, the nominal value
stated in the table would represent the market value on the Effective Date
of the shares of Isolyser Common Stock that holders of Microtek Common Stock
will receive in the Merger on a per share basis.
(2) The Merger Agreement provides the Determination Price shall not be lower
than $14.50 or higer than $18.50. Therefore, the Exchange Ratio remains
fixed at (a) 0.8919 at an Average Closing Price $18.50 or more and (b)
1.1379 at an Average Closing Price of $14.50 or less. The formula for
determining the Exchange Ratio would result in Microtek stockholders
receiving a fixed number of Isolyser Shares having a nominal value greater
than $16.50 per share to the extent that the
17
<PAGE>
Average Closing Price exceeds $18.50 per share; a variable number of
Isolyser Shares representing $16.50 in nominal value to the extent that the
Average Closing Price is neither less than $14.50 nor more than $18.50; and
a fixed number of Isolyser Shares having a nominal value less than $16.50
per share to the extent that the Average Closing Price is less than $14.50
per share.
(3) In the event that the Average Closing Price falls below $13.00 per share,
the Board of Directors of Microtek may elect to pursue one of the following
alternatives: (i) terminate the Merger Agreement and abandon the Merger,
(ii) not terminate the Merger Agreement and consummate the Merger at a fixed
Exchange Ratio of 1.1379 Isolyser Shares for each share of Microtek Common
Stock, or (iii) negotiate with Isolyser to increase the Exchange Ratio. In
determining what alternatives to follow under these circumstances, the
Microtek Board of Directors will take into account, consistent with its
fiduciary duties, all relevant facts and circumstances existing at the time
including, without limitation, whether Isolyser is prepared or willing to
increase the Exchange Ratio, an analysis of the reasons for the trading
price of the Isolyser Common Stock, the relative value of the Isolyser
Common Stock compared to other health care common stocks in general, the
factors considered by the Microtek Board in recommending adoption of the
Merger Agreement initially (see "The Merger -- Microtek's Reasons For the
Merger"), and the advice of its financial advisors and legal counsel. By
approving the Merger Agreement, the Microtek stockholders will be deemed to
be authorizing the Microtek Board to determine, in the exercise of its
fiduciary duties, to proceed with any of the alternatives described above in
the event the Average Closing Price is below $13.00 per share. If, however,
the Microtek Board elects to pursue alternative (iii), as described above,
and Isolyser agrees to increase the Exchange Ratio and thereby issue
additional shares of Isolyser Common Stock for each share of Microtek Common
Stock, the proxy statement/prospectus will be recirculated and Microtek
stockholders will be given a further opportunity to reconsider their
investment decision and the revised number of shares of Isolyser Common
Stock to be issued for each share of Microtek Common Stock. See "The Merger
-- Amendment of the Merger Agreement; Waiver of Conditions" and "--
Termination of Merger Agreement."
Microtek will issue a press release on June 27, 1996 (the day prior to the
Microtek stockholders' meeting to consider the Merger Proposal, and the day
following the calculation of the Determination Price) to announce the
Determination Price, Exchange Ratio and exact number of shares of Isolyser
Common Stock to be issued for each share of Microtek Common Stock. From and
after June 26, 1996, Microtek stockholders may call 1(800)844-0988 for
information as to the exact number of shares of Isolyser Common Stock to be
issued for each share of Microtek Common Stock. Microtek has arranged for
Microtek stockholders to submit completed proxies by facsimile transmission. Any
Microtek stockholder who desires to submit his proxy by facsimile transmission
should send a completed copy of his executed proxy to Microtek, c/o Boatmen's
Trust Company, Attention: Linda M. Welch or Michele T. Smith, at (314) 466-2469.
The telephone confirmation number for proxies submitted via facsimile is 1 (800)
456-9852.
Isolyser will treat the Merger as a pooling-of-interests for financial
reporting purposes. See "-- Accounting Treatment." The Merger is intended to be
a tax-free reorganization under the federal income tax laws, and, as such, no
gain or loss will be recognized by the stockholders of Microtek upon their
receipt of the Isolyser Shares in exchange for their Microtek Shares. Gain or
loss will be recognized, however, by holders of Microtek Shares to the extent of
any cash received by the Microtek stockholders for any fractional share amount.
See "-- Certain Federal Income Tax Consequences."
BACKGROUND OF THE MERGER
Microtek completed an initial public offering of its Common Stock in October
1992. During 1993, Baxter International ("Baxter"), which was then Microtek's
largest customer, resumed the internal manufacturing of surgical drape products
previously purchased from Microtek. Primarily as a result of this loss of
business, Microtek's net earnings per share declined from $.15 in fiscal 1992 to
$.11 in fiscal 1994. Microtek management responded to the loss of Baxter's
business by implementing a
18
<PAGE>
strategic plan to reduce operating costs and diversify its customer base.
Nevertheless, the price of Microtek's Common Stock as reported on Nasdaq dropped
from a high of $14.50 in fiscal 1992 to a low of $4.13 in fiscal 1994.
In April 1994, Microtek engaged the firm of Goldman, Sachs to evaluate
various strategic alternatives to enhance stockholder value, including a
possible sale of Microtek. During the course of this engagement, several
companies were approached by Goldman Sachs to determine their interest in
purchasing Microtek. Microtek's management was familiar with Isolyser and had
previously discussed with Isolyser management Isolyser's potential interest in
making a strategic investment in Microtek. On this basis, Goldman Sachs included
Isolyser among the third parties it contacted regarding a proposed sale of
Microtek. After several months, the Microtek Board of Directors determined that
no third party had demonstrated sufficient interest in acquiring Microtek to
merit further negotiations, and on March 3, 1995, Microtek issued a press
release indicating that any discussions regarding a sale of Microtek had been
terminated.
During fiscal 1995, Microtek achieved net sales and net income exceeding
that reported for any year since its initial public offering. Also in 1995,
Microtek completed several acquisitions and increased its international net
sales. In April 1995, Isolyser and Microtek entered into a joint venture to
facilitate the manufacture in the Dominican Republic of certain Isolyser raw
materials into finished products. As a result of this joint venture, the
management of Isolyser and Microtek maintained contact with one another.
On February 8, 1996, Robert L. Taylor, under his general authority as
Isolyser's Chairman and Chief Executive Officer, telephoned Kimber L. Vought,
the Chief Executive Officer of Microtek, to indicate that Isolyser might have an
interest in acquiring Microtek. Mr. Vought responded by indicating that Microtek
would not be willing to enter into any negotiations regarding such acquisition
unless Isolyser were to provide Microtek with a written offer at a price level
sufficient to warrant Microtek's hiring of a financial advisor to evaluate the
offer. At a teleconference meeting of the Microtek Board on February 13, 1996,
Mr. Vought advised the directors of the contact from Mr. Taylor. The Microtek
Board, after discussing such matters in detail, requested further presentations
from management regarding such a proposed transaction at its scheduled quarterly
meeting on February 20, 1996. At the meeting on February 20, 1996, the Microtek
Board decided to permit Isolyser to clarify its interest in purchasing Microtek
at a sufficiently high price to warrant allowing Isolyser due diligence access
to Microtek.
In order to be responsive to Microtek's request to provide a written offer
at a specific price level to acquire Microtek, Mr. Taylor requested that
Microtek provide certain non-public information in order that Isolyser might
complete its evaluation of Microtek. On February 21, 1996, Microtek entered into
a confidentiality agreement with Isolyser relating to Microtek's furnishing to
Isolyser certain non-public information regarding Microtek. As part of that
confidentiality agreement, Isolyser agreed that, without the prior written
consent of Microtek, it would not, for a period of three years, seek control of
Microtek. On February 29, 1996, informal meetings were held among Isolyser
representatives and Microtek representatives regarding such non-public
information.
On March 1, 1996, Isolyser engaged Morgan Keegan to serve as Isolyser's
financial advisor in connection with the proposed acquisition of Microtek and,
in that capacity, to assist Isolyser in developing an appropriate value range
for such acquisition, negotiate with Microtek and its representatives and, if
requested by Isolyser's Board of Directors, provide its opinion as to the
fairness, from a financial point of view, of the Merger to Isolyser's
shareholders. On March 4, 1996, Isolyser sent to Microtek a proposed letter of
intent to acquire the Common Stock of Microtek in a merger transaction providing
for a fixed exchange ratio of .965 shares of Isolyser Common Stock for each
outstanding share of Microtek Common Stock. Based on then current trading
prices, this ratio resulted in an acquisition consideration of $16.50 per share
of Microtek Common Stock. The Microtek Board met on March 4, 1996 to consider
the letter of intent. The Microtek Board determined that a fixed exchange ratio
would not be in the best interest of Microtek stockholders due to the perceived
volatility of the
19
<PAGE>
Isolyser Common Stock sale price. At such meeting, the Microtek Board decided to
retain Goldman Sachs as its financial advisor to evaluate the proposed offer and
to assist Microtek in its due diligence investigation of Isolyser and in its
negotiation of improved terms for the proposed fixed exchange ratio. Goldman
Sachs thereafter contacted Isolyser's financial advisor to discuss certain
adjustments to the exchange ratio and a termination right in favor of Microtek
in the event that the Isolyser Common Stock price traded below a specified
level. Goldman Sachs and Microtek management reported to the Microtek Board the
proposed resolution of these issues at a teleconference meeting on March 8,
1996. Based upon the proposed resolution, Microtek furnished to Isolyser a
proposed draft of the Merger Agreement on March 10, 1996. Also, on March 8,
1996, Microtek executed a confidentiality agreement with Isolyser (substantially
identical to the agreement executed by Isolyser in favor of Microtek) and
requested certain non-public information regarding Isolyser.
During the week of March 11, representatives of Isolyser and Microtek
negotiated the terms of the Merger Agreement, subject to the approval of the
Boards of Directors of Isolyser and Microtek. During the week of March 11, 1996,
Isolyser's legal counsel, financial advisors and independent accountants
conducted various limited due diligence investigations of Microtek. At a meeting
on March 12, 1996, Isolyser representatives gave a detailed due diligence
presentation to the Microtek Board. The respective Boards of Directors of
Isolyser and Microtek, together with their respective financial advisors and
legal counsel, met on Friday, March 15, 1996, to consider the proposed Merger
and Merger Agreement, at which time the Boards of Isolyser and Microtek
respectively authorized their execution and delivery of the Merger Agreement.
After the close of the market on Friday, March 15, 1996, the Merger Agreement
was executed by Microtek and Isolyser, and a public announcement of the Merger
Agreement and the proposed Merger was made before the commencement of trading on
Monday, March 18, 1996.
ISOLYSER'S REASONS FOR THE MERGER
In approving the Merger Agreement, the Isolyser Board considered the
following business issues which had been the subject of negotiations during the
week of March 11, 1996 in preparing the Merger Agreement: (i) the method of
establishing the consideration payable in respect of the Merger, including the
method of establishing the Determination Price and the right of Microtek to
terminate the Merger Agreement in the event that the average closing price per
share of the Isolyser Common Stock on Nasdaq for the 20 trading days immediately
preceding the two trading days before the Effective Date is less than $13.00;
(ii) the amount of debt payable by Microtek and the potential increase in such
debt to the extent permitted by the Merger Agreement; (iii) the accounting
treatment for the transaction and estimated transaction costs; (iv) the various
representations and warranties of Microtek and the disclosures of Microtek
contained in the Merger Agreement and related disclosure schedules; (v) the
covenants of Isolyser, including, without limitation, the indemnification
provisions contained in the Merger Agreement to indemnify the directors and
officers of Microtek and restrictions on the number of shares issuable by
Isolyser without the consent of Microtek; (vi) the respective termination rights
contained in the Merger Agreement; (vii) the provisions in the Merger Agreement
limiting Microtek's Board in negotiating with third parties in the event of an
unsolicited Acquisition Proposal and the contingent obligation of Microtek to
pay Isolyser $2.5 million under certain circumstances related to such an
Acquisition Proposal; and (viii) the absence of any indemnification provisions
by the shareholders of Microtek in favor of Isolyser. After consideration of
these issues, the Isolyser Board unanimously determined at its special meeting
held on March 15, 1996 that the Merger and the Merger Agreement were in the best
interests of Isolyser and Isolyser's shareholders and, therefore, approved the
Merger Agreement
Isolyser considered a number of factors in the course of its deliberations
at its Board meeting held on March 15, 1996, but did not assign any relative or
specific weight to the factors considered or give prominence to any specific
factor or group of factors. The material factors considered were as follows: (i)
the conversion expertise of Microtek in manufacturing its infection and fluid
control products, and related benefits to Isolyser in Isolyser's growth strategy
to vertically integrate its capabilities in manufacturing
OREX-Registered Trademark- Degradables-TM-; (ii) the relative market position of
Microtek as a low cost
20
<PAGE>
manufacturer and supplier of film products used in the health care marketplace;
(iii) the expertise of Microtek's personnel in selling and marketing its
products in the health care marketplace; (iv) the gross margins enjoyed by
Microtek on its products and the volume of such products which might be included
in Isolyser's procedure trays; (v) the international sales generated by Microtek
and potential improved access to such international markets which could be
afforded Isolyser as a result of the Merger; (vi) the complementary nature of
Microtek's management to Isolyser's management; (vii) Microtek's sales increased
12% in 1995 over 1994; (viii) Microtek's operating income increased 213% in 1995
over 1994; (ix) Microtek would be expected to contribute positively to
Isolyser's net operating results following consummation of the Merger; (x) the
stockholders of Microtek would hold up to approximately 17% of the outstanding
shares of common stock of Isolyser immediately following the Merger; (xi) the
historical trading price of Microtek's and Isolyser's Common Stock; and (xii)
the presentation of Isolyser's financial advisor, Morgan Keegan, and its written
opinion to the effect that, subject to the assumptions made, matters considered
and limits of review as set forth in such opinion, the terms of the Merger were
fair to the shareholders of Isolyser from a financial point of view.
MICROTEK'S REASONS FOR THE MERGER
At a meeting held on March 12, 1996, the Microtek Board discussed with
Goldman Sachs and reviewed with legal counsel the terms of the Merger Agreement,
including the representations, warranties, covenants and closing conditions
contained therein. At a subsequent meeting of the Board held on March 15, 1996,
Goldman Sachs made a presentation to the Microtek Board and delivered its
opinion that, as of March 15, 1996, the Exchange Ratio pursuant to the Merger
Agreement was fair to the holders of the shares of Microtek Common Stock.
At the March 15, 1996 meeting, the Microtek Board unanimously determined
that the Merger was advisable and in the best interests of Microtek stockholders
and approved the Merger Agreement.
In reaching its conclusion to enter into the Merger Agreement and to
recommend adoption of the Merger Agreement by the Microtek stockholders, the
Microtek Board considered the following factors:
(i) An assessment of Microtek's strategic alternatives, which included
remaining a publicly owned independent company. In this regard, the Microtek
Board of Directors concluded, following extensive analysis and discussion
with its legal and financial advisors and among the directors, that the
terms of the Merger Agreement provided the best means for holders of
Microtek Common Stock to maximize the value of their holdings;
(ii) The belief that the Merger will result in a strong combined entity
with complementary businesses, corporate goals and management philosophies;
(iii) Information relating to the financial performance, prospects and
business operations of each of Microtek and Isolyser (which information
included the historical financial information contained in the periodic
public reports of Microtek and Isolyser and the descriptions of their lines
of business contained in such reports);
(iv) The terms and conditions of the Merger Agreement, including the
right of Microtek to negotiate with and provide information to third parties
and terminate the Merger Agreement in the event of an unsolicited
Acquisition Proposal, if such action is required in the exercise of the
fiduciary duties of the Microtek Board of Directors (if the foregoing
termination provision is exercised, Microtek would be obligated to pay
Isolyser $2.5 million (see " -- Fees and Expenses") which the Microtek Board
of Directors did not view as unreasonably precluding any third party from
proposing an alternative transaction), and the unilateral right of Microtek
to terminate the Merger Agreement without penalty if the Determination Price
is less than $13.00 per share;
(v) The presentation of Microtek's financial advisor, Goldman Sachs, and
its written opinion to the effect that, as of March 15, 1996, the Exchange
Ratio pursuant to the Merger Agreement was fair to the holders of shares of
Microtek Common Stock (for a summary of Goldman Sachs'
21
<PAGE>
written opinion, including the assumptions made, matters considered and
limits of review, see "-- Opinion of Microtek's Financial Advisor"). The
full text of the opinion is attached as Annex C hereto and is incorporated
herein by reference;
(vi) The trading price of the Microtek Common Stock since completion of
Microtek's initial public offering and that the Merger consideration
(assuming a Determination Price of $16.50) represents a premium of
approximately 78% over the highest price in fiscal 1995 and approximately
59% over the closing sale price of $10.38 for the Microtek Common Stock on
Nasdaq on February 7, 1996, the day before Microtek became aware of
Isolyser's possible interest in pursuing the proposed Merger; and
(vii) The prices paid in other recent comparable acquisition
transactions.
The Microtek Board of Directors believes that each of these factors supports
its recommendation that the Microtek stockholders approve and adopt the Merger
Agreement and approve the terms of the Merger.
The Microtek Board believes that Microtek and the Microtek stockholders will
receive reasonable protection from a change in circumstances relating to
Isolyser between the date of the Proxy Statement/Prospectus and the Effective
Date through the inclusion in the Merger Agreement of a condition to the closing
of the Merger to the effect that, since December 31, 1995, no event shall have
occurred which would have a material adverse effect on the business, operations,
assets or financial condition of Isolyser or its subsidiaries, taken as a whole.
In view of the wide variety of factors considered in connection with its
evaluation of the Merger, the Microtek Board of Directors did not find it
practicable to, and did not, quantify or otherwise attempt to assign relative
weights to the specific factors considered in reaching its determination that
the terms of the Merger Agreement are fair to, and in the best interests of,
Microtek and its stockholders.
THE MICROTEK BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT MICROTEK
STOCKHOLDERS VOTE TO APPROVE AND ADOPT THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY.
OPINION OF ISOLYSER'S FINANCIAL ADVISOR
Morgan Keegan was retained by Isolyser to act as its financial advisor in
connection with the Merger and to render an opinion to the Board of Directors of
Isolyser as to the fairness, from a financial point of view, to the shareholders
of Isolyser of the consideration to be paid by Isolyser pursuant to the Merger
Agreement. Morgan Keegan was selected by Isolyser based on Morgan Keegan's
experience, expertise and familiarity with Isolyser and its business.
Morgan Keegan is a nationally recognized investment banking firm and is
regularly engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and valuations for various
purposes. Morgan Keegan has previously rendered investment banking services to
Isolyser, including advising Isolyser with respect to the acquisition of White
Knight Healthcare, Inc. in 1995, acting as managing underwriter of Isolyser's
initial public offering in 1994 and lead manager of a follow-on offering of
Isolyser Common Stock in 1995.
On March 15, 1996, at a meeting called to consider the Merger Agreement and
the Merger, representatives of Morgan Keegan made a presentation to the Isolyser
Board of Directors with respect to various aspects of the Merger, including the
financial terms and conditions of the Merger. In addition, Morgan Keegan
delivered its written opinion, dated March 15, 1996, to the Isolyser Board of
Directors to the effect that, as of such date, the consideration to be paid by
Isolyser pursuant to the Merger Agreement is fair, from a financial point of
view, to the shareholders of Isolyser.
THE FULL TEXT OF THE MARCH 15, 1996 WRITTEN OPINION OF MORGAN KEEGAN, WHICH
SETS FORTH THE ASSUMPTIONS MADE, GENERAL PROCEDURES FOLLOWED, OTHER MATTERS
CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN IN
22
<PAGE>
ARRIVING AT SUCH OPINION, IS ATTACHED TO THIS PROXY STATEMENT/PROSPECTUS AS
ANNEX B. MICROTEK STOCKHOLDERS ARE URGED TO READ SUCH OPINION IN ITS ENTIRETY
AND THE SUMMARY OF SUCH OPINION SET FORTH HEREIN IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH OPINION. MORGAN KEEGAN'S OPINION IS DIRECTED
ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, TO THE ISOLYSER
SHAREHOLDERS OF THE CONSIDERATION TO BE PAID BY ISOLYSER PURSUANT TO THE MERGER
AGREEMENT, DOES NOT ADDRESS ANY OTHER ASPECT OF THE PROPOSED MERGER OR ANY
RELATED TRANSACTION AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER
OF MICROTEK AS TO HOW SUCH STOCKHOLDER SHOULD VOTE OR OTHERWISE.
In arriving at its opinion, Morgan Keegan reviewed an unexecuted draft of
the Merger Agreement dated March 15 (which, for purposes of its analysis, it
assumed that any further revisions, including the filling in of blank spaces and
the attachment of final exhibits and appendices, would not materially alter the
terms and provisions of such documents and that such documents would be executed
as finalized); held discussions with various members of management and
representatives of Isolyser and Microtek concerning each company's historical
and current operations, financial condition and prospects; reviewed historical
consolidated financial and operating data that was publicly available or
furnished to it by Isolyser and Microtek; reviewed internal financial analyses,
financial and operating forecasts, reports and other information prepared by
officers and representatives of Isolyser and Microtek; reviewed certain publicly
available information with respect to certain other companies that it believed
to be comparable to Microtek and the trading markets for such other companies'
securities; reviewed certain publicly available information concerning the terms
of certain other transactions that it deemed relevant to its inquiry; and
conducted such other financial studies, analyses and investigations as it deemed
appropriate for the purposes of its opinion.
In connection with its review and analysis and in arriving at its opinion,
Morgan Keegan did not assume responsibility for independent verification of any
of the information provided to or otherwise reviewed by Morgan Keegan and relied
upon its being complete and accurate in all respects. Morgan Keegan also assumed
the correctness of and relied upon the representations and warranties of
Isolyser and Microtek contained in the Merger Agreement. Morgan Keegan also
relied upon the managements of Isolyser and Microtek as to the reasonableness
and achievability of the financial and operating projections and the assumptions
and bases therefore provided to it, and assumed that such projections, including
without limitation, cost savings and operating synergies from the Merger,
reflected the best currently available estimates and judgments of the
managements of Isolyser and Microtek, respectively, and that such projections
and forecasts would be realized in the amounts and time periods then estimated
by the managements of Isolyser and Microtek. Morgan Keegan was not engaged to
assess the achievability of such projections or the assumptions on which they
were based and expressed no view as to such projections or assumptions. Morgan
Keegan was not engaged to, and did not conduct a physical inspection or
appraisal of any of the assets, properties or facilities of either Isolyser or
Microtek, nor was it furnished with any such evaluation or appraisal. Morgan
Keegan assumed that the conditions to the Merger as set forth in the Merger
Agreement would be satisfied; and that the Merger would be consummated on a
timely basis in the manner contemplated by the Merger Agreement and that, as
contemplated by the Merger Agreement, the Merger would be accounted for as a
pooling of interests. Morgan Keegan expressed no opinion as to the price or
trading range at which shares of Isolyser Common Stock will trade after the date
of its opinion, or upon completion of the Merger.
In connection with its presentation to the Isolyser Board of Directors on
March 15, 1996 and in preparing its opinion for the Isolyser Board of Directors,
Morgan Keegan performed a variety of financial and comparative analyses,
including those described below.
CONTRIBUTION ANALYSIS. Morgan Keegan analyzed the pro forma contribution of
each of Isolyser and Microtek to the 1995 and projected 1996 and 1997 operating
results of a combined Isolyser and Microtek. Morgan Keegan calculated that
Microtek would have contributed 24.7%, 18.8% and 14.3% to pro forma combined
1995, 1996 and 1997 sales; 39.6%, 26.1% and 19.2% to pro forma combined 1995,
1996, and 1997 gross profit; 100.7%, 28.6% and 20.8% to pro forma combined 1995,
1996 and 1997 operating cash flow; 285.3%, 29% and 20.5% to pro forma combined
1995, 1996 and 1997
23
<PAGE>
operating income; and 402%, 24.3% and 19.1% to pro forma combined 1995, 1996 and
1997 net income. Morgan Keegan then calculated the range of percentage ownership
by Microtek shareholders of the combined company based on Determination Prices
between $14.50 and $18.50 as from 15.8% to 12.8% and concluded that from
Isolyser's shareholders' perspective, Microtek's percentage contribution to
sales, gross profit, operating cash flow, operating income and net income of the
combined company compares favorably with the percentage ownership of the
combined company proposed as transaction consideration.
COMPARABLE COMPANY ANALYSIS. Morgan Keegan reviewed and compared certain
actual and forecasted financial, operating and stock market information of
Microtek to eight publicly traded companies in the healthcare industry
considered by Morgan Keegan to be comparable to Microtek. These companies
included Arrow International, Inc., Hosposable Products, Inc., Isolyser, Maxxim
Medical, Inc., Medex, Inc., Medical Action Industries, Inc., Sterile Concepts
Holdings, Inc., and Tecnol Medical Products, Inc. Morgan Keegan calculated a
range of market multiples for the comparable companies by dividing adjusted
market value (market capitalization based on the closing price per share on
March 14, 1996 plus debt less cash) by each such company's sales, operating cash
flow, operating income; and by dividing market value by each such company's net
income, book value, and projected 1996 earnings per share. This analysis
indicated that the median multiple for sales was .88x, for operating cash flow
was 9.0x, for operating income was 16.2x, for net income was 22.4x, for book
value was 3.0x and for earnings per share was 17.2x. This compared to
corresponding multiples for Microtek for sales of 2.58x, for operating cash flow
of 13.7x, for operating income of 17.7x, for net income of 25.4x and for book
value of 2.8x. Morgan Keegan also calculated ranges of indicative equity values
for Microtek based upon the comparable company multiples, and for Microtek
assuming a 30% control premium. The median indicative equity values were $23.6
million in respect of sales, $76.0 million in respect of operating cash flow,
$112.0 million in respect of operating income, $82.9 million in respect of net
income, $83.5 million in respect of book value and $80.8 million in respect of
projected 1996 net income. Morgan Keegan concluded that, based on this analysis,
Microtek had an implied equity value range of $76 to $83 million. Morgan Keegan
placed limited emphasis on this method of analysis in rendering its opinion.
MERGERS AND ACQUISITIONS TRANSACTION ANALYSIS. Morgan Keegan reviewed
overall merger and acquisition activity in the healthcare industry and selected
ten transactions occurring between 1992 and the present with publicly available
financial information to analyze on the basis of the purchase prices and
multiples paid or proposed consideration to be paid. Such analysis indicated
median adjusted market values as multiples of latest 12 months sales, operating
cash flow and operating income of 0.94x, 8.9x and 11.0x, respectively; and
median market values as multiples of net income and book value of 20.1x and
3.7x, respectively. Morgan Keegan applied these multiples to Microtek and
calculated median indicative equity values of $16.2 million in respect of sales,
$53.6 million in respect of operating cash flow, $49.5 million in respect of
operating income, $57.1 million in respect of net income, and $77.2 million in
respect of book value. Morgan Keegan also reviewed the premiums paid in the
selected transactions. Such analysis indicated that the per share value of the
consideration paid represented a median premium of 40.0% over the market price
of the acquired company's common stock four weeks prior to the first trading day
following announcement of the transaction. Applying this median premium to
Microtek yielded an indicative equity value of $82.2 million. Morgan Keegan
concluded that, based upon this analysis, Microtek had implied equity value in
the range of $54 to $77 million. In Morgan Keegan's judgment, the application of
merger and acquisition transaction multiples to the pro forma results of
Microtek's fiscal year ended November 30, 1995 understates value. For this, and
other reasons, Morgan Keegan did not rely significantly on this method of
analysis in rendering its opinion.
No company or transaction used in the comparable companies and comparable
transactions analyses for comparative purposes is identical to Microtek.
Accordingly, an analysis of the results of the foregoing necessarily involves
complex considerations and judgments concerning the differences
24
<PAGE>
in financial and operating characteristics of the companies and other factors.
Mathematical analysis (such as determining the average or median) is not, in
itself, a meaningful method of using comparable company or transaction data.
DISCOUNTED CASH FLOW ANALYSIS Morgan Keegan prepared a discounted cash flow
analysis of the projected free cash flow of Microtek for the years 1996 through
2000, based upon five year projections provided by Microtek's management. Using
this information, Morgan Keegan estimated the net present value of Microtek's
projected cash flows by applying discount rates ranging from 13.0% to 17.0%.
Morgan Keegan also determined the residual value of Microtek by applying a range
of terminal operating cash flow multiples of from 7.5x to 10.5x to Microtek's
projected cash flows and discounting these terminal values using discount rates
ranging from 13.0% to 17.0%. The sum of the present value of the free cash flows
and terminal values yielded an implied equity value range for Microtek of $95
million to $116 million.
In rendering its opinion, Morgan Keegan placed significant emphasis on the
discounted cash flow analysis. However, discounted cash flow valuation is
dependent on a number of assumptions, including the accuracy of management's
projections, and the selection of an appropriate terminal value and discount
rate to apply thereto.
PRO FORMA EARNINGS PER SHARE ANALYSIS. Morgan Keegan also analyzed the
effect of the Merger on the financial projections of Isolyser assuming a $16.50
price per share for Microtek Common Stock. Isolyser's stand alone projections
for 1996 and 1997 were compared with the pro forma combined company projections
for earnings per share and other measures of profitability. The pro forma net
income per share figures were then compared to Isolyser's projected earnings per
share to determine the degree of dilution, if any, to Isolyser shareholders
subsequent to the Merger. This analysis indicated that the Merger was accretive
to earnings per share.
The foregoing summary of Morgan Keegan's presentation and analyses does not
purport to be a complete description of such presentation to the Isolyser Board
of Directors or of the analyses performed by Morgan Keegan. The preparation of a
fairness opinion is not necessarily susceptible to partial analysis or summary
description. Morgan Keegan believes that its analyses and the summary set forth
above must be considered as a whole and that selecting portions of its analyses,
without considering all analyses, or of the above summary, without considering
all factors and analyses, would create an incomplete view of the process
underlying the analyses presented to the Isolyser Board of Directors and its
opinion. In addition, Morgan Keegan may have deemed various assumptions more or
less probable than other assumptions, so that the ranges of valuations resulting
from any particular analysis described above should not be taken to represent
the actual value of Microtek or the combined company.
In performing its analyses, Morgan Keegan made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Isolyser or Microtek. The
analyses performed by Morgan Keegan are not necessarily indicative of actual
values or actual future results, which may be significantly more or less
favorable than suggested by such analyses. Such analyses were prepared solely as
part of Morgan Keegan's analysis of the fairness, from a financial point of
view, to the shareholders of Isolyser of the consideration to be paid by
Isolyser pursuant to the Merger Agreement and were discussed with Isolyser's
Board of Directors at the March 15, 1996 meeting. The analyses do not purport to
be appraisals or to reflect prices at which a company might actually be sold or
the prices at which any securities may trade at the present time or at any time
in the future. In addition, as described above, Morgan Keegan's presentation to
Isolyser's Board of Directors and opinion was one of many factors taken into
consideration by the Isolyser Board of Directors in making its determination to
approve the Merger Agreement and the Merger.
In addition to rendering its opinion, as noted above, Morgan Keegan has in
the past provided investment banking services to Isolyser, for which it received
customary fees. Morgan Keegan was also engaged by Isolyser in February, 1996 to
perform investment banking services and act as financial
25
<PAGE>
advisor with respect to other possible acquisition transactions. In the ordinary
course of its business, Morgan Keegan makes a market in Isolyser Common Stock
and may trade such securities for its own account and for the account of its
customers and may at any time hold a short or long position in such securities.
Pursuant to an engagement letter with Isolyser, Morgan Keegan has received a
fee of $150,000 for rendering its opinion with respect to the Merger, and will
receive a fee of $350,000 upon consumation of the Merger in connection with its
advisory service. Isolyser has also agreed to reimburse Morgan Keegan for its
reasonable out-of-pocket expenses and to indemnify Morgan Keegan against certain
liabilities, including liabilities under the federal securities laws.
OPINION OF MICROTEK'S FINANCIAL ADVISOR
On March 15, 1996, Goldman Sachs delivered its written opinion to the Board
of Directors of Microtek that, as of the date of such opinion, the Exchange
Ratio pursuant to the Merger Agreement is fair to the holders of shares of
Microtek Common Stock.
THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS DATED MARCH 15, 1996,
WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED AS ANNEX C TO THIS
PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. STOCKHOLDERS
OF MICROTEK ARE URGED TO, AND SHOULD, READ SUCH OPINION IN ITS ENTIRETY.
In connection with its opinion, Goldman Sachs reviewed, among other things,
(i) the Merger Agreement; (ii) the Annual Reports to Stockholders and Annual
Reports on Form 10-K of Microtek for the four fiscal years ended November 30,
1995 and for Isolyser for the year ended December 31, 1995; Forms S-1, effective
October 20, 1994, and November 17, 1995, of Isolyser and the Prospectus utilized
in connection therewith; (iii) certain interim reports to stockholders and
Quarterly Reports on Form 10-Q of Microtek and of Isolyser; (iv) certain other
communications from Microtek and Isolyser to their respective stockholders; and
(v) certain internal financial analyses and forecasts for Microtek and Isolyser
prepared by their respective managements. Goldman Sachs also held discussions
with members of the senior management of Microtek and of Isolyser regarding the
past and current business operations, financial condition, and future prospects
of their respective companies. In addition, Goldman Sachs reviewed the reported
price and trading activity for the shares of Microtek Common Stock and the
shares of Isolyser Common Stock, compared certain financial and stock market
information for Microtek and for Isolyser with similar information for certain
other companies the securities of which are publicly traded, reviewed the
financial terms of certain recent business combinations in the medical device
and hospital supply industry specifically and in other industries generally and
performed such other studies and analyses as it considered appropriate.
Goldman Sachs relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by it for
purposes of its opinion. In that regard, Goldman Sachs assumed, with the consent
of Microtek, that the financial forecasts for the Company and Isolyser,
including, without limitation, projected cost savings and operating synergies
resulting from the Merger have been reasonably prepared on a basis reflecting
the best currently available judgments and estimates of Microtek and of Isolyser
and that such financial forecasts will be realized in the amounts and at the
times contemplated thereby. In addition, Goldman Sachs has not made an
independent evaluation or appraisal of the assets and liabilities of Microtek or
of Isolyser or any of their subsidiaries and Goldman Sachs has not been
furnished with any such evaluation or appraisal. Goldman Sachs assumed, with the
consent of Microtek, that the consummation of the Merger will be accounted for
as a pooling of interests under generally accepted accounting principles.
The following is a summary of certain of the financial analyses used by
Goldman Sachs in connection with providing its written opinion to Microtek's
Board of Directors on March 15, 1996.
(i) INDEXED COMMON STOCK PRICE HISTORY. Goldman Sachs reviewed the
indexed historical trading prices for the shares of Microtek Common Stock
during the period since the initial public offering of Microtek on October
6, 1992 as compared to the Standard & Poor's 500 index, the
26
<PAGE>
Standard & Poor's Healthcare index, the indexed historical trading prices
for the shares of Isolyser Common Stock and a composite index comprised of
six other comparable publicly traded corporations: AMSCO International,
Inc., Circon Corporation, CONMED Corporation, MAXXIM Medical, Inc., Sterile
Concepts Holdings, Inc., and Tecnol Medical Products, Inc. (the "Selected
Companies"). The Selected Companies were chosen because they are
publicly-traded companies with operations that for purposes of analysis may
be considered similar to Microtek.
(ii) SELECTED COMPANIES ANALYSIS. Goldman Sachs reviewed and compared
certain financial information relating to Microtek and Isolyser to
corresponding financial information, ratios and public market multiples for
the Selected Companies. Goldman Sachs calculated and compared various
financial multiples and ratios. The multiples of Microtek and Isolyser were
calculated using a price of $11.25 per share of Microtek Common Stock and
$17.00 per share of Isolyser Common Stock, the closing prices of such shares
on Nasdaq on March 14, 1996 (the date prior to the date of the fairness
opinion). The multiples and ratios for Microtek were based on the most
recently available public information and information provided by Microtek's
management, and the multiples and ratios for Isolyser were based on the most
recently available public information and information provided by Isolyser's
management and the multiples for each of the Selected Companies were based
on the most recent publicly available information. With respect to the
Selected Companies, Goldman Sachs considered levered market capitalization
(i.e., market value of common equity plus estimated market value of debt
less cash) as a multiple of last twelve months' ("LTM") sales, as a multiple
of LTM earnings before interest, taxes, depreciation and amortization
("EBITDA") and as a multiple of LTM earnings before interest and taxes
("EBIT"). For fiscal 1995 results, Goldman Sachs' analyses of the Selected
Companies indicated levered multiples of LTM sales, which ranged from 0.8x
to 3.0x, with a mean of 1.8x and a median of 1.5x, LTM EBITDA, which ranged
from 5.9x to 15.7x, with a mean of 10.3x and a median of 10.2x, and LTM
EBIT, which ranged from 7.4x to 37.5x, with a mean of 16.2x and a median of
13.7x, compared to levered multiples of 2.3x, 12.4x and 16.1x, respectively,
for Microtek and a levered multiple of 6.3x sales for Isolyser (with
Isolyser's EBITDA and EBIT being not meaningful). For fiscal 1995 results,
Goldman Sachs also considered for the Selected Companies LTM price/ earnings
multiples ("P/E"), which ranged from 13.1x to 25.4x, with a mean of 18.8x
and a median of 17.8x, compared to 22.4x for Microtek (with Isolyser's LTM
P/E being not meaningful); estimated calendar year 1996 and 1997 P/E
(provided by Institutional Brokers Estimate System ("IBES")), which ranged
from 10.5x to 18.4x for estimated calendar year 1996, with a mean of 14.7x
and a median of 14.6x, and 11.1x to 15.5x for estimated calendar year 1997,
with a mean of 13.3x and a median of 12.6x, compared, for Microtek, to 17.3x
for estimated calendar year 1996 and 10.0x for estimated calendar year 1997
and, for Isolyser, to 48.6x for estimated calendar year 1996 and 22.7x for
estimated calendar year 1997; LTM EBITDA margins, LTM EBIT margins and LTM
net income margins, which ranged from 9.5% to 26.5% for LTM EBITDA margins,
with a mean of 16.9% and a median of 15.4%, compared to 18.9% for Microtek
(with Isolyser's LTM EBITDA margins being not meaningful), 5.5% to 20.9% for
LTM EBIT margins, with a mean of 12.4% and a median of 11.0%, compared to
14.6% for Microtek (with Isolyser's LTM EBIT margins being not meaningful),
and 3.0% to 11.9% for LTM net income margins, with a mean of 6.9% and a
median of 5.9%, compared to 7.7% for Microtek (with Isolyser's LTM net
income margins being not meaningful); a five-year compound annual growth
rate of earnings per share ("EPS") for the five fiscal years ending in 2000
(provided by IBES in the case of the Selected Companies, Montgomery
Securities research in the case of Isolyser, and Microtek management in the
case of Microtek as no public estimates were available) ranging from 12.5%
to 20.0%, with a mean of 16.8% and a median of 17.5%, compared to 38.7% for
Microtek and 35.0% for Isolyser; net debt to net capitalization ratios,
which ranged from 5.2% to 47.0%, with a mean of 29.2% and a median of 32.9%,
compared to 47.0% for Microtek and (31.1%) for Isolyser; and a ratio of the
1997 estimated P/E compared to the IBES estimated EPS growth rate ranging
from 0.6x to 0.9x, with a mean and median of 0.8x, compared to 0.3x for
Microtek and 0.6x for Isolyser.
(iii) PRO FORMA MERGER ANALYSIS. Goldman Sachs prepared pro forma
analyses of the financial impact of the Merger. Using earnings estimates for
Microtek and Isolyser prepared by their
27
<PAGE>
respective managements for the years 1996 and 1997, Goldman Sachs compared
the EPS of Isolyser Common Stock, on a stand alone basis, to the EPS of the
common stock of the combined companies on a pro forma basis. Goldman Sachs
performed this analysis based on a price of $16.50 per share of Microtek
Common Stock and a range of per share prices from $14.50 to $18.50 of
Isolyser Common Stock as well as per share prices of $13.00 and $20.00
(values outside of the collar) of Isolyser Common Stock under the following
three scenarios: The first scenario relied on the respective companies'
managements' estimates and combined Microtek and Isolyser as currently
existing (the "First Case"); the second scenario relied on the respective
companies' managements' estimates and combined Microtek and Isolyser as
currently existing but including the consummation of certain acquisition
transactions under consideration by Microtek (the "Second Case"); the third
scenario relied on the respective companies' managements' estimates and
combined Microtek and Isolyser as currently existing but including the
realization of $3.5 million in pre-tax cost savings and operating synergies
(the "Synergies") over two years and the consummation of the possible
acquisitions by Microtek (the "Third Case"). Based on such analyses, the
proposed transaction would be accretive to Isolyser's stockholders on an EPS
basis in all of the above scenarios in the estimated years 1996 and 1997.
(iv) CONTRIBUTION ANALYSIS. Goldman Sachs reviewed certain historical and
estimated future operating and financial information (including, among other
things, revenues; gross profit; EBIT; net income; selling, general, and
administration expenses; net debt; and total assets) for Microtek, Isolyser
and the pro forma combined entity resulting from the Merger based on
Microtek's managements' First Case financial forecasts for Microtek and
Isolyser's managements' financial forecasts for Isolyser. Goldman Sachs
analyzed the relative income statement contribution of Microtek and Isolyser
to the combined companies on a pro forma basis based on the First Case,
based on financial data provided to Goldman Sachs by Microtek and Isolyser
managements. This analysis indicated that Microtek would have contributed
28.5% to combined revenues in 1995 and an estimated 19.3% in 1996 decreasing
to an estimated 9.1% in 2000, 46.1% to combined gross profit in 1995 and an
estimated 30.0 in 1996 decreasing to an estimated 11.5% in 2000, (385.2)% to
combined EBIT (such contribution being negative because Isolyser had
negative EBIT for 1995) in 1995 and an estimated 33.9% in 1996 decreasing to
an estimated 10.0% in 2000, (424)% to combined net income (such contribution
being negative because Isolyser had negative net income in 1995) in 1995 and
an estimated 28.1% in 1996 decreasing to an estimated 9.9% in 2000, and
32.3% to combined selling, general and administration expenses in 1995 and
an estimated 26.5% in 1996 decreasing to an estimated 12.3% in 2000. Goldman
Sachs also analyzed the relative balance sheet contribution of Microtek and
Isolyser to the combined companies on a pro forma basis. This analysis
indicated that, based on fiscal year 1995, Microtek would have contributed
(114.3)% to combined net cash (such contribution being negative because
Isolyser had net cash in 1995) and 17.8% of the total assets to the combined
entity.
(v) SELECTED TRANSACTIONS ANALYSIS. Goldman Sachs analyzed certain
information relating to selected transactions in the medical device and
hospital supply industry since 1988 (the "Selected Transactions"). Such
analysis indicated that for the Selected Transactions (i) levered aggregate
consideration as a multiple of LTM sales ranged from 0.4x to 2.5x, with a
mean of 1.2x and a median of 1.1x, (ii) aggregate equity consideration as a
multiple of LTM net income ranged from 20.8x to 50.0x, with a mean of 35.5x
and a median of 35.1x, (iii) levered aggregate consideration as a multiple
of LTM EBIT ranged from 7.2x to 32.9x, with a mean of 16.1x and a median of
13.8x, and (iv) the percentage premium paid ranged from 15.7% to 100.0%,
with a mean of 52.3% and a median of 45.2%.
(vi) ANALYSIS AT VARIOUS PRICES. Goldman Sachs calculated alternative
values for the levered aggregate consideration and the aggregate equity
consideration based upon Determination Price per share values of Isolyser
Stock ranging from $13.00 to $20.00 per share of Isolyser Common Stock.
In the First Case, those calculations yielded levered aggregate
consideration values ranging from $97.3 million to $113.5 million for
Microtek, assuming $18.8 million in net debt. In the
28
<PAGE>
Second Case, those calculations yielded levered aggregate consideration
values ranging from $105.2 million to $121.3 million for Microtek, assuming
$26.7 million in net debt. In both the First Case and the Second Case, those
calculations yielded aggregate equity consideration values ranging from
$78.5 million to $94.7 million for Microtek and total values delivered for
each share of Microtek Common Stock ranging from $14.79 to $17.84 per such
share. The multiples and ratios for Microtek for actual 1995 were based on
public filings of Microtek; for estimated fiscal year 1996, on Microtek's
management or, where noted, IBES estimates; and for estimated fiscal year
1997 on Microtek's management estimates.
In the First Case, Goldman Sachs considered the levered aggregate
consideration as a multiple of actual 1995 and estimated fiscal 1996 and
1997 net sales, EBITDA and EBIT of Microtek. Goldman Sachs' analyses
indicated levered aggregate consideration multiples of actual 1995 net sales
that ranged from 3.2x to 3.8x, actual 1995 EBITDA that ranged from 17.2x to
20.0x and actual 1995 EBIT that ranged from 22.2x to 25.9x; of estimated
fiscal 1996 net sales that ranged from 2.4x to 2.8x, estimated fiscal 1996
EBITDA that ranged from 9.6x to 11.1x and estimated fiscal 1996 EBIT that
ranged from 12.9x to 15.0x; and of estimated fiscal 1997 net sales that
ranged from 2.1x to 2.5x, estimated fiscal 1997 EBITDA that ranged from 7.5x
to 8.7x and estimated fiscal 1997 EBIT that ranged from 9.4x to 11.0x.
Goldman Sachs also considered the aggregate equity consideration as a
multiple of actual 1995 net income and estimated fiscal 1996 and 1997 net
income (based on management estimates) and 1996 net income (based on IBES
estimates) of Microtek.
In the Second Case, Goldman Sachs considered the levered aggregate
consideration as a multiple of actual 1995 and estimated fiscal 1996 and
1997 net sales, EBITDA and EBIT of Microtek. Goldman Sachs' analyses
indicated levered aggregate consideration multiples of actual 1995 net sales
that ranged from 3.5x to 4.0x, actual 1995 EBITDA that ranged from 18.6x to
21.4x and actual 1995 EBIT that ranged from 24.0x to 27.7x; of estimated
fiscal 1996 net sales that ranged from 2.4x to 2.8x, estimated fiscal 1996
EBITDA that ranged from 9.0x to 10.4x and estimated fiscal 1996 EBIT that
ranged from 12.0x to 13.8x; and of estimated fiscal 1997 net sales that
ranged from 2.0x to 2.3x, estimated fiscal 1997 EBITDA that ranged from 6.6x
to 7.6x and estimated fiscal 1997 EBIT that ranged from 8.1x to 9.4x.
Goldman Sachs also considered the aggregate equity consideration as a
multiple of actual 1995 net income and estimated fiscal 1996 and 1997 net
income (based on management estimates) and 1996 net income (based on IBES
estimates) of Microtek.
In both the First Case and the Second Case, Goldman Sachs considered the
aggregate equity consideration as a multiple of actual 1995 and estimated
fiscal 1996 and 1997 net income (based on management estimates), estimated
fiscal 1996 net income (based on IBES estimates) and actual 1995 book value
per share of Microtek Common Stock. Goldman Sachs' analyses indicated
aggregate equity consideration multiples of actual 1995 net income of
Microtek that ranged from 34.0x to 41.0x; of management estimated 1996 net
income of Microtek that ranged from 21.7x to 26.2x in the First Case and
18.8 to 22.7 in the Second Case; of IBES estimated 1996 net income of
Microtek that ranged from 24.7x to 29.8x; of management estimated 1997 net
income of Microtek that ranged from 14.2x to 17.1x in the First Case and
11.4x to 13.7x in the Second Case; and of Microtek's actual 1995 book value
per share that ranged from 3.7x to 4.5x.
(vii) DISCOUNTED CASH FLOW ANALYSIS. Goldman Sachs performed a discounted
cash flow analysis under the First Case and the Second Case. Goldman Sachs
calculated a net present value of free cash flows for the years 1996 through
2000 using discount rates ranging from 14% to 24%. Goldman Sachs calculated
Microtek's terminal values in the year 2000 based on multiples ranging from
2.00x sales to 3.00x sales. These terminal values were then discounted to
present value using discount rates from 14% to 24%.
Using the foregoing terminal values and discounted cash flows for
Microtek, the implied per share values ranged from $9.34 to $21.90 in the
First Case and from $9.58 to $23.88 in the Second Case.
29
<PAGE>
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all such analyses. No company or
transaction used in the above analyses as a comparison is identical to Microtek
or Isolyser or the contemplated transaction. The analyses were prepared solely
for purposes of Goldman Sachs' providing its opinion to Microtek's Board of
Directors as to the fairness of Exchange Ratio pursuant to the Merger Agreement
to the holders of shares of Microtek Common Stock and do not purport to be
appraisals or necessarily reflect the prices at which businesses or securities
actually may be sold. Analyses based upon forecasts of future results are not
necessarily indicative of actual future results, which may be significantly more
or less favorable than suggested by such analyses. Because such analyses are
inherently subject to uncertainty, being based upon numerous factors or events
beyond the control the parties or their respective advisors, none of Microtek,
Isolyser, Goldman Sachs or any other person assumes responsibility if future
results are materially different from those forecast.
As described above, Goldman Sachs' opinion to the Board of Directors of
Microtek was one of many factors taken into consideration by the Microtek Board
of Directors in making its determination to approve the Merger Agreement. The
foregoing summary does not purport to be a complete description of the analyses
performed by Goldman Sachs and is qualified by reference to the written opinion
of Goldman Sachs set forth in Annex C hereto.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements,
and valuations for estate, corporate and other purposes. Microtek selected
Goldman Sachs as its financial advisor because it is a nationally recognized
investment banking firm that has substantial experience in transactions similar
to the Merger.
Goldman Sachs provides a full range of financial, advisory and brokerage
services and in the course of its normal trading activities may from time to
time effect transactions and hold positions in the securities or options on
securities of Microtek and/or Isolyser for its own account and for the account
of customers.
Pursuant to a letter agreement dated April 15, 1994 (the "First Engagement
Letter"), Microtek engaged Goldman Sachs to act as its financial advisor in
connection with the possible sale of Microtek. Pursuant to a letter agreement
dated March 14, 1996 (the "Second Engagement Letter"), which amended and
supplemented the First Engagement Letter, Microtek engaged Goldman Sachs to act
as its financial advisor in connection with the Merger. Pursuant to the terms of
the Second Engagement Letter, Microtek has agreed to pay Goldman Sachs upon
consummation of the Merger a transaction fee of $1.5 million. Microtek has
agreed to reimburse Goldman Sachs for its reasonable out-of-pocket expenses,
including attorney's fees, and to indemnify Goldman Sachs against certain
liabilities, including certain liabilities under the federal securities laws.
INTEREST OF CERTAIN PERSONS IN THE MERGER
MICROTEK STOCK OPTIONS. Each of Messrs. Lester J. Berry, Kimber L. Vought
and Dan R. Lee (directors and/or executive officers of Microtek) is a party to
option agreements with Microtek pursuant to which he has options to acquire
shares of Microtek Common Stock. See "Option Proposal" for additional
information regarding options held by such individuals. If the Merger is
consummated, Isolyser will assume all outstanding options granted by Microtek
(including those described above) and such optionees will then have options to
purchase Isolyser Common Stock. The result of such assumption will be that the
exercise price for each of the above-referenced options will likely be less than
the market price of Isolyser Common Stock, and that the options, if exercised,
would likely be more valuable immediately after the Merger than they were
immediately prior to the announcement of the Merger. In addition, the option
agreements pursuant to which each of the officers, employees and consultants of
Microtek is a party contain change of control provisions and, as a result of
those
30
<PAGE>
provisions, all of the options held by the officers and employees of Microtek
(including Messrs. Berry, Vought and Lee) will become fully exercisable upon
consummation of the Merger. See "-- Treatment of Outstanding Microtek Options."
EMPLOYMENT OF MICROTEK DIRECTORS AND EXECUTIVE OFFICERS. Messrs. Berry,
Vought and Lee are expected to remain as employees of Microtek after the Merger.
None of these individuals, however, has entered into, and none are expected to
enter into, an employment agreement with Isolyser. After the Merger, each of
these individuals will be eligible to participate in benefit plans provided for
the officers of Isolyser and its subsidiaries.
INDEMNIFICATION. The Merger Agreement provides that (i) Isolyser will
indemnify the present and former officers and directors of Microtek in certain
circumstances; (ii) Isolyser will not amend or repeal any provisions of the
Certificate of Incorporation or Bylaws of Microtek in any manner which would
adversely affect the indemnification provisions contained in the Merger
Agreement; and (iii) for a period of two years from the Effective Date, Microtek
shall maintain directors' and officers' liability insurance covering the
directors and officers covered on the date of the Merger Agreement by Microtek's
directors' and officers' liability insurance policy or cause Isolyser's
directors' and officers' liability insurance policy to cover such persons,
except that neither Microtek nor Isolyser shall be required, in the aggregate,
to expend in premiums for such insurance an amount greater than double the rate
paid by Microtek for the policy period immediately preceding the date of
execution of the Merger Agreement and except that Isolyser shall have no
liability or obligation to maintain such insurance to the extent that any such
policy is not reasonably available on the terms required by the Merger
Agreement. See "-- Certain Covenants."
CHANGE OF CONTROL PROVISIONS. Employment agreements entered into by
Microtek with Mr. Berry, John N. Jordan, the president of the Medi-Plast
division of Microtek, and Joe Prince, the executive vice president, corporate
development of Microtek, contain certain change of control provisions which will
come into effect upon consummation of the Merger. In consideration of Mr.
Berry's agreement to delete certain provisions in his employment agreement
providing for certain cash payments upon a change of control, Mr. Berry's
employment agreement was amended in January 1994 to provide that Microtek would
pay to Mr. Berry a bonus to the extent he did not receive a profit of $300,000
before taxes on his stock option to purchase 40,000 shares of Microtek Common
Stock at an exercise price of $5.25 per share in the event of the consummation
of certain defined change of control transactions which would include the
Merger. Accordingly, it would be anticipated that Mr. Berry would realize in
excess of $300,000 of profit before taxes if he were able to liquidate his stock
options concurrently with the consummation of the Merger. Mr. Berry has agreed
that the relevant time to calculate his profit on his stock options for the
purpose of said provisions of his employment agreement is the date of closing of
the Merger, regardless of when he liquidates his options. Each of Messrs. Jordan
and Prince are parties to employment agreements with Microtek entered into
concurrently with Microtek's acquisition of substantially all of the assets of
Medi-Plast on November 30, 1995, providing for a base salary of $140,000 per
year, bonuses in such amounts as may be established by Microtek's Board of
Directors from time to time in its discretion, insurance (including, without
limitation, major medical, life and disability insurance) and other fringe
benefits in accordance with Microtek's standard insurance practices for
executives and as may be authorized and adopted from time to time by Microtek.
In the event either of Messrs. Jordan or Prince elect to resign their employment
within six months following the Effective Date, they are entitled to their
respective salary, bonus and other benefits over the remaining term of their
respective employment agreements, which expire on November 29, 1998. Microtek is
currently completing separation agreements with Messrs. Jordan and Prince by
means of which Microtek and Isolyser anticipate incurring compensation expenses
in connection with the Merger approximating amounts payable under such
employment agreements.
EFFECTIVE DATE AND CONSEQUENCES OF THE MERGER
If approved by the requisite vote of the stockholders of Microtek and if all
other conditions to the consummation of the Merger are satisfied or waived, the
Merger will become effective, unless the
31
<PAGE>
Merger Agreement is terminated as provided therein, upon the making of certain
filings with the Secretary of State of the State of Delaware pursuant to the
Delaware General Corporation Law (the "DGCL"). At the Effective Date, the
Isolyser Subsidiary will be merged with and into Microtek, which will be the
surviving corporation in the Merger, and the separate corporate existence and
identity of the Isolyser Subsidiary will cease. The corporate existence and
identity of Microtek will continue unaffected by the Merger, although it will
become a wholly-owned subsidiary of Isolyser.
It is currently contemplated that the Effective Date of the Merger will
occur as promptly as practicable after the approval of the Merger by the
Microtek stockholders at the Special Meeting of Microtek, subject to the
conditions described under "-- Conditions to Merger." Upon completion of the
Merger, each Microtek Share will be converted into the right to receive the
number of Isolyser Shares described above under "-- General." The directors of
the Isolyser Subsidiary will be the directors of Microtek after the Effective
Date. The current officers of Microtek are expected to remain as the officers of
Microtek.
In the event that the Microtek stockholders fail to approve the Merger
Agreement, Microtek will continue to pursue its business strategy, including
seeking suitable acquisition candidates to provide Microtek with access to new
markets and customers.
EXCHANGE OF CERTIFICATES REPRESENTING MICROTEK SHARES
Instructions with regard to the surrender of Microtek stock certificates,
together with a letter of transmittal to be used for this purpose, will be
mailed to Microtek stockholders as promptly as practicable after the Effective
Date. In order to receive certificates evidencing the Isolyser Shares, the
stockholders of Microtek will be required to surrender their stock certificates
after the Effective Date, together with a duly completed and executed letter of
transmittal, to SunTrust Bank, which will act as Exchange Agent (the "Exchange
Agent") in connection with the Merger. Promptly after the Effective Date,
Isolyser will deposit in trust with the Exchange Agent certificates representing
the number of whole Isolyser Shares to which the holders of Microtek Shares are
entitled to receive in the Merger together with cash sufficient to pay for
fractional shares. Upon receipt of such stock certificates and letter of
transmittal, the Exchange Agent will issue a stock certificate evidencing the
Isolyser Shares to the registered holder or his transferee for the number of
Isolyser Shares such person is entitled to receive as a result of the Merger,
together with cash in lieu of any fractional share. No interest will be paid or
accrued on the amounts payable upon the surrender of Microtek stock
certificates.
STOCKHOLDERS OF MICROTEK SHOULD NOT SUBMIT THEIR STOCK CERTIFICATES FOR
EXCHANGE UNTIL THE INSTRUCTIONS AND LETTER OF TRANSMITTAL ARE RECEIVED.
If any certificate for the Isolyser Shares is to be issued or any cash
payment for a fractional share is to be made to a person other than the person
in whose name the certificate for the Microtek Shares surrendered in exchange
therefor is registered, it will be a condition of such issuance or payment that
the stock certificate so surrendered be properly endorsed and otherwise in
proper form for transfer, and that the person requesting such issuance or
payment (i) pay in advance any transfer or other taxes required by reason of the
issuance of certificates for the Isolyser Shares or a check representing cash
for a fractional share to a person other than the registered holder of the
Microtek stock certificate surrendered or (ii) establish to the satisfaction of
the Exchange Agent that such tax has been paid or is not applicable.
After the Effective Date, there will be no further transfers on the stock
transfer books of Microtek of the Microtek Shares that were outstanding
immediately prior to the Effective Date. If a certificate representing such
shares is presented for transfer, subject to compliance with the requisite
transmittal procedures, it will be cancelled and exchanged for the applicable
number of Isolyser Shares and cash for any fractional share amount.
Each certificate representing Microtek Shares immediately prior to the
Effective Date will, at the Effective Date, be deemed for all purposes to
represent only the right to receive the number of whole shares of the Isolyser
Shares (and the right to receive cash in lieu of any fraction of an Isolyser
Share) into which the Microtek Shares represented by such certificate were
converted in the Merger.
32
<PAGE>
Until a certificate which formerly represented Microtek Shares is actually
surrendered for exchange and received by the Exchange Agent, the holder thereof
will not be entitled to vote or receive any dividends or other distributions
with respect to Isolyser Common Stock payable to holders of record after the
Effective Date. Subject to applicable law, upon surrender of Microtek stock
certificates such dividends or other distributions will be remitted (without
interest) to the record holder of certificates for the Isolyser Shares issued in
exchange therefor.
Any certificates for the Isolyser Shares and cash sufficient to pay for
fractional shares delivered or made available to the Exchange Agent and not
exchanged for Microtek stock certificates within six months after the Effective
Date will be returned by the Exchange Agent to Isolyser, which will thereafter
act as Exchange Agent. None of Isolyser, Microtek or the Exchange Agent will be
liable to a holder of Microtek Shares for any of the Isolyser Shares, dividends
or other distributions thereon or cash in lieu of fractional shares delivered to
a public official pursuant to applicable abandoned property, escheat or similar
laws.
NO FRACTIONAL SHARES
No fractional shares of Isolyser Common Stock will be issued in connection
with the Merger. All fractional shares of Isolyser Common Stock to which a
holder of Microtek Shares immediately prior to the Effective Date would
otherwise be entitled at the Effective Date will be aggregated. If a fractional
share results from such aggregation, the Microtek stockholder will be entitled
to receive from Isolyser an amount in cash equal to the Determination Price
multiplied by the fraction of a share of Isolyser Common Stock which the
Microtek stockholder would otherwise have received. Except for such payment, no
Microtek stockholder will be entitled to any dividends or other distributions or
other rights of stockholders with respect to any fractional interest.
TREATMENT OF OUTSTANDING MICROTEK OPTIONS
At March 15, 1996, a total of 711,429 shares of Microtek Common Stock were
reserved for issuance upon the exercise of options outstanding under the Option
Plan. Isolyser has agreed to assume all of Microtek's obligations under the
Option Plan in accordance with its terms and conditions as in effect at the
Effective Date, except that (i) all actions to be taken thereunder by the Board
of Directors of Microtek or a committee thereof shall be taken by the Board of
Directors of Isolyser or a committee thereof, (ii) each option shall thereafter
evidence the right to purchase only the number of whole Isolyser Shares (to the
nearest whole share) which would have been issued if the Microtek Shares
represented by the option had been outstanding at the Effective Date, (iii) the
exercise price for each share of Isolyser Common Stock issued upon the exercise
of options will be equal to the option price per share in effect immediately
prior to the Effective Date divided by the Exchange Ratio. In accordance with
the terms of options outstanding under the Option Plan, such options shall
become immediately exercisable upon the Effective Date.
CONDITIONS TO THE MERGER
In addition to customary conditions, the obligations of Isolyser, Microtek
and the Isolyser Subsidiary to consummate the Merger are subject to the
satisfaction, or where permitted, waiver of, certain other conditions, including
(a) the absence of any action, suit or proceeding to restrain, modify, enjoin or
prohibit the carrying out of the transactions contemplated by the Merger
Agreement; (b) receipt of certain governmental approvals; and (c) the receipt of
officer certificates.
In addition, Isolyser's obligation to consummate the Merger is subject to
various additional conditions, including (a) the absence of any material adverse
change with respect to Microtek, (b) receipt of a satisfactory letter from
Microtek's independent accountants with respect to certain financial information
of Microtek, and (c) the receipt of a letter from an independent accountant for
Isolyser dated the Effective Date stating that such firm concurs that the Merger
will qualify as a pooling-of-interests transaction, subject to certain
assumptions.
Microtek's obligation to consummate the Merger is subject to various
additional conditions, including (a) approval and adoption of the Merger
Agreement by the affirmative vote of a majority of the Microtek Shares; (b) the
authorization for listing on Nasdaq of the Isolyser Shares to be issued in
33
<PAGE>
the Merger and upon the exercise of the Options; (c) the absence of any stop
order suspending the effectiveness of the Registration Statement or preventing
the use thereof or of any related prospectus; (d) the receipt by Microtek of an
opinion of Arnall Golden & Gregory, counsel for Isolyser, that subject to
certain exceptions and assumptions, no gain or loss will be recognized by the
Microtek stockholders as a result of the Merger; and (e) the absence of any
material adverse change with respect to Isolyser.
Each of Microtek and Isolyser maintain credit facilities with Chemical Bank
for certain revolving credit and term loans containing covenants prohibiting the
Merger absent obtaining the prior written consent of Chemical Bank. Unless
waived, the obligations of Microtek and Isolyser under the Merger Agreement are
respectively conditioned upon procuring such consent. Although each of Microtek
and Isolyser anticipate obtaining such consent based upon preliminary
conversations with Chemical Bank, there can be no assurance that such consent
will be obtained. In addition, the credit facility maintained by Microtek
includes provisions for a pre-payment penalty in the amount of $480,000 upon
termination of such credit facility at any time prior to November 30, 1996. Each
of Microtek and Isolyser will request that such pre-payment penalty be waived in
connection with this transaction, although there can be no assurance that such
pre-payment penalty, or other amounts, will not be required to be paid in
connection with such credit facilities and the consummation of the Merger.
AMENDMENT OF THE MERGER AGREEMENT; WAIVER OF CONDITIONS
The respective Boards of Directors of Isolyser, the Isolyser Subsidiary and
Microtek may, by written agreement, at any time before or after the approval of
the Merger Agreement by the Microtek Stockholders, amend the Merger Agreement,
provided that after such stockholder approval no amendment or modification may
be made that would adversely affect the Microtek stockholders or alter or change
the number of Isolyser Shares to be received in exchange for the Microtek Shares
without the further approval of such stockholders. A vote in favor of the Merger
by a Microtek stockholder will be deemed to be authorization (but not a
requirement) of Microtek's executive officers and directors to terminate, not
terminate or modify the Merger Agreement if the Determination Price is less than
$13.00 per share. See "-- Termination of Merger Agreement." Each party may, to
the extent legally permitted, extend the time for the performance of any of the
obligations of any other party to the Merger Agreement, waive any inaccuracies
in the representations or warranties of any other party contained in the Merger
Agreement, waive compliance or performance by any other party with any
covenants, agreements or obligations contained in the Merger Agreement or waive
the satisfaction of any condition that is precedent to its performance under the
Merger Agreement.
TERMINATION OF MERGER AGREEMENT
The Merger Agreement may be terminated and the Merger abandoned, at any time
prior to the Effective Date, whether before or after the approval by the
Microtek stockholders, (i) by the mutual consent of Isolyser and Microtek; (ii)
by Isolyser if there has been a material misrepresentation or breach of warranty
in the representations and warranties of Microtek made in the Merger Agreement
or there has been a material failure by Microtek to comply with its obligations
under the Merger Agreement, subject to certain exceptions; (iii) by Microtek if
there has been a material misrepresentation or breach of warranty in the
representations and warranties of Isolyser made in the Merger Agreement or there
has been a material failure by Isolyser to comply with its obligations under the
Merger Agreement, subject to certain exceptions; (iv) by either Isolyser or
Microtek if all conditions to that party's obligation to consummate the Merger
have not been satisfied or waived by August 31, 1996, unless such failure of
consummation is due to the failure of the terminating party to perform or
observe the covenants, agreements, and conditions hereof to be performed or
observed by it; (v) by either Isolyser or Microtek if the consummation of the
Merger would violate any nonappealable final order, decree or judgment of any
court or governmental body or agency having competent jurisdiction; (vi) by
Microtek, if in the exercise of the good faith judgment of its Board of
Directors (which judgment is based upon the advice of independent, outside legal
counsel) as to its fiduciary duties to its stockholders such termination is
required by reason of an Acquisition Proposal; (vii) by Isolyser, if the
Microtek Board of Directors withdraws or materially modifies or changes its
recommendation to the stockholders of Microtek to approve the Merger Agreement
and the Merger; or (viii) by Microtek, if the Average Closing Price is below
$13.00 per share.
34
<PAGE>
If the Average Closing Price is below $13.00 per share, the Board of
Directors of Microtek may elect to pursue one of the following alternatives: (i)
terminate the Merger Agreement and abandon the Merger, (ii) not terminate the
Merger Agreement and consummate the Merger at a fixed Exchange Ratio of 1.1379
Isolyser Shares for each share of Microtek Common Stock, or (iii) negotiate with
Isolyser to increase the Exchange Ratio. In determining what alternatives to
follow under these circumstances, the Microtek Board of Directors will take into
account, consistent with its fiduciary duties, all relevant facts and
circumstances existing at the time including, without limitation, whether
Isolyser is prepared or willing to increase the Exchange Ratio, an analysis of
the reasons for the trading price of the Isolyser Common Stock, the relative
value of the Isolyser Common Stock compared to other health care common stocks
in general, the factors considered by the Microtek Board in recommending
adoption of the Merger Agreement initially (see "The Merger -- Microtek's
Reasons For the Merger"), and the advice of its financial advisors and legal
counsel. By approving the Merger Agreement, the Microtek stockholders will be
deemed to be authorizing the Microtek Board to determine, in the exercise of its
fiduciary duties, to proceed with any of the alternatives described above in the
event the Average Closing Price is below $13.00 per share. If, however, the
Microtek Board elects to pursue alternative (iii), as described above, and
Isolyser agrees to increase the Exchange Ratio and thereby issue additional
shares of Isolyser Common Stock for each share of Microtek Common Stock, this
proxy statement/prospectus will be recirculated and Microtek stockholders will
be given a further opportunity to reconsider their investment decision and the
revised number of shares of Isolyser Common Stock to be issued for each share of
Microtek Common Stock.
If Isolyser or Microtek terminates the Merger Agreement as provided above,
there will be no liability on the part of any party or its officers, directors
or stockholders, except as described in "-- Fees and Expenses" below.
FEES AND EXPENSES
Whether or not the Merger is consummated, all costs and expenses incurred in
connection with the Merger Agreement and the transactions contemplated thereby
will be paid by the party incurring such costs or expenses. Notwithstanding the
foregoing, if (a) Microtek terminates the Merger Agreement because its Board of
Directors, in the exercise of its good faith judgment (based upon advice of
independent, outside legal counsel) as to its fiduciary duties to its
stockholders determines such termination is required by reason of an Acquisition
Proposal; (b) the Merger Agreement is terminated by Isolyser because the
Microtek Board of Directors withdraws or materially modifies or changes its
recommendation to the stockholders of Microtek to approve the Merger Agreement
and the Merger; or (c) on or before August 31, 1996, Microtek enters into a
definitive agreement with respect to an Acquisition Proposal, and such
transaction (including any revised transaction based upon the Acquisition
Proposal) is thereafter consummated (whether before or after August 31, 1996),
then, upon the occurrence of (a), (b) or (c) above, Microtek shall pay to
Isolyser a fee equal to the sum of $2.5 million.
CERTAIN COVENANTS
The Merger Agreement provides that Microtek will not directly or indirectly
(i) solicit or initiate discussions with or (ii) enter into any negotiations or
agreements with, or furnish any information that is not publicly available to,
any third party concerning an Acquisition Proposal involving Microtek; provided,
however, that Microtek may take the actions prohibited by (ii) above if such
action is taken by, or upon the authority of, the Microtek Board in the exercise
of its good faith judgment as to its fiduciary duties to the Microtek
stockholders, which judgment is based upon the written advice of independent,
outside legal counsel. Microtek has agreed to notify Isolyser promptly in
writing if Microtek receives any inquiries or proposals with respect to an
Acquisition Proposal.
Under the Merger Agreement, Microtek is generally obligated prior to the
Effective Date to conduct its operations in the ordinary and usual course of
business consistent with past and current practices, to notify Isolyser of
changes in the normal course of its business and to refrain from taking certain
actions without the consent of Isolyser, including, among other matters, issuing
stock (subject to certain exceptions), declaring dividends, or entering into
transactions outside the ordinary course of business.
35
<PAGE>
Microtek and Isolyser have agreed in the Merger Agreement to indemnify after
the Effective Date Microtek's current and former officers and directors for
claims made against such persons because they were a stockholder, director,
officer, employee or agent of Microtek or its subsidiaries or serving at the
request of Microtek or any subsidiary as a director, officer, employee or agent
of another entity; provided, however, Microtek and Isolyser will have no
obligation to indemnify such a person (a) if a court determines (and such
determination becomes final and non-appealable) that the indemnification is
prohibited by law or (b) if Isolyser asserts that Microtek breached a
representation or warranty in the Merger Agreement with respect to the same
matters for which indemnification is being sought, except if such person proves
that he or she had no actual knowledge of such breach at the Effective Date.
Isolyser will not amend or repeal any provisions of the Certificate of
Incorporation or Bylaws of Microtek in any manner which would adversely affect
the indemnification provisions contained in the Merger Agreement. For a period
of two years from the Effective Date, Microtek shall maintain directors and
officers liability insurance covering the directors and officers covered on the
date of the Merger Agreement by Microtek's directors' and officers' liability
insurance policy or cause Isolyser's directors' and officers' liability
insurance policy to cover such persons, except that neither Microtek nor
Isolyser, shall be required to expend in premiums for such insurance an amount
greater than the rate paid by Microtek for the policy period immediately
preceding the date of execution of the Merger Agreement and except that Isolyser
shall have no liability or obligation to maintain such insurance to the extent
that any such policy is not reasonably available on the terms required by the
Merger Agreement.
CERTAIN REGULATORY MATTERS
Consummation of the Merger is conditioned upon receipt by Isolyser and
Microtek of such regulatory and other approvals as are required under applicable
law, including certain approvals from the Commission. Other than these approvals
and the matters described below, Isolyser and Microtek know of no such
regulatory or other approvals required by law.
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR
Act"), certain acquisition transactions, including the proposed Merger, may not
be consummated unless certain information has been furnished to the Federal
Trade Commission (the "FTC") and the Antitrust Division of the Justice
Department (the "Antitrust Division") and certain waiting period requirements
have expired or been terminated. In accordance with the HSR Act, Isolyser and
Microtek have filed Notification and Report Forms and certain supplementary
materials with the Antitrust Division and the FTC for review in connection with
the proposed Merger.
POTENTIAL RESALES OF ISOLYSER SHARES RECEIVED IN THE MERGER
The Isolyser Shares to be issued to Microtek stockholders in connection with
the Merger will be freely transferable under the Securities Act, except for
shares issued to any person who, at the time of the Special Meeting, may be
deemed to be an "affiliate" of Microtek within the meaning of Rule 145 under the
Securities Act. In general, affiliates of Microtek include any person or entity
who controls, is controlled by or is under common control with Microtek. Rule
145, among other things, imposes certain restrictions upon the resale of
securities received by affiliates in connection with certain reclassifications,
mergers, consolidations or asset transfers. The Isolyser Shares received by
affiliates of Microtek in the Merger will be subject to the applicable resale
limitations of Rule 145.
Additionally, consistent with the requirements of a pooling-of-interests
transaction, affiliates of Isolyser and Microtek will be restricted from
disposing of any Isolyser Common Stock for the period beginning 30 days prior to
the Effective Date until the publication of financial statements by Isolyser
which include at least 30 days of post-Merger operating results. The Merger
Agreement provides that Isolyser shall receive a written undertaking from the
directors, executive officers and certain stockholders of Microtek not to sell
any Microtek Shares (and Isolyser Shares acquired in the Merger) owned directly
or indirectly by them until after the publication of these post-Merger financial
statements.
36
<PAGE>
NASDAQ LISTING OF THE ISOLYSER SHARES
Isolyser will apply for listing on Nasdaq of the Isolyser Shares to be
issued in connection with the Merger and upon the exercise of Microtek options
assumed by Isolyser pursuant to the Merger Agreement. It is expected that such
shares shall be approved for listing on Nasdaq, subject to notice of issuance.
See "-- Conditions to Merger."
ACCOUNTING TREATMENT
Isolyser intends to account for the business combination of Isolyser and
Microtek in its financial statements by the pooling-of-interests method of
accounting. Receipt by Isolyser of a letter from the independent certified
public accountants for Isolyser confirming the appropriateness of this
accounting treatment is a condition precedent to the Merger. Under this method
of accounting, as of the Effective Date, the assets and liabilities of Microtek
would be added to those of Isolyser at their recorded book values and the
stockholders' equity accounts of Isolyser and Microtek would be combined in
Isolyser's consolidated balance sheet. Additionally, all prior period balance
sheets of Isolyser would be restated and combined with those of Microtek in the
same manner. Under the pooling-of-interests basis of accounting, revenues and
expenses of both Isolyser and Microtek for all periods prior to the Effective
Date and for all periods thereafter are combined and reported as operations of
the combined enterprises as if the Merger had taken place prior to the periods
covered by such consolidated financial statements and to reflect the accounting
policies of Isolyser. See "-- Conditions to Merger."
The unaudited pro forma condensed consolidated financial information
contained in this Proxy Statement/Prospectus has been prepared using: (i) the
pooling-of-interests basis of accounting to account for the Merger, and (ii) the
purchase accounting basis to account for Isolyser's completed acquisitions of
White Knight and SafeWaste and Microtek's completed acquisition of Medi-Plast
and Venodyne. Under the purchase basis of accounting, an acquiring enterprise
allocates the cost of an acquired enterprise to the assets acquired and the
liabilities assumed based upon their fair values as of the effective date of the
acquisition. The excess, if any, of the cost of the acquired enterprise over the
sum of the amounts assigned to identifiable assets less liabilities assumed is
treated as goodwill. Financial statements issued after consummation of an
acquisition accounted for as a purchase would reflect such values and prior
period financial statements would not be restated retroactively to reflect the
historical financial position or results of operations of the acquired company.
See "Summary" and "Pro Forma Condensed Consolidated Financial Information."
The terms of the outstanding Microtek options provide that such options
shall become fully exercisable without regard to any vesting criteria specified
in such options upon the occurrence of the Effective Date. Such vesting will
result in the elimination of certain performance-based vesting criteria
contained in stock options issued to each of Messrs. Vought and Lee for the
purchase of 25,000 shares of Microtek Common Stock at an exercise price of $5.75
per share. Applicable accounting standards require that the elimination of such
vesting criteria be accounted for as compensation expense by Microtek to Messrs.
Vought and Lee in an amount equal to the difference between the aggregate fair
market value of the shares underlying such stock options as of the Effective
Date and the aggregate exercise price set forth in such stock options. Such
charges in excess of amounts previously recognized by Microtek through February
29, 1996 will be reflected on Isolyser's consolidated statement of operations
for the period in which the Effective Date occurs.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
It is a condition to the obligation of Microtek to consummate the Merger
that Microtek receive an opinion from Arnall, Golden & Gregory, tax counsel for
Isolyser, to the effect that the Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code
and no gain or loss will be recognized by a Microtek stockholder as a result of
the Merger with respect to shares of Microtek Common Stock converted solely into
Isolyser Common Stock. The effects of any cash received in lieu of fractional
share interests are discussed below.
Assuming that certain representations to be made by Microtek and Isolyser
are true as of the Effective Date, Arnall, Golden & Gregory will be of the
opinion that the Merger will qualify as a
37
<PAGE>
reorganization under the Code with the consequences set forth above. The opinion
will be subject to the qualification that there exists no plan or intention by
the Microtek stockholders to sell or otherwise dispose of fifty percent (50%) or
more of the Isolyser Common Stock received by all former Microtek stockholders
in the Merger. Assuming that the Merger so qualifies, the tax basis of the
Isolyser Shares received by Microtek stockholders in the Merger will be the
same, in each instance, as the tax basis of the Microtek Shares surrendered in
exchange therefor, excluding any basis allocable to fractional share interests
in Isolyser Common Stock for which cash is received. In addition, the holding
period of the Isolyser Shares received in the Merger by Microtek stockholders
will include the period during which the shares of Microtek surrendered in
exchange therefor were held, provided that such shares of Microtek Common Stock
were held as capital assets at the Effective Date.
Holders of Microtek Common Stock who receive cash in the Merger as a result
of the rounding off of fractional share interests in Isolyser Common Stock will
be treated, in each instance, as having received the fractional share interests
and then as having sold such interests for the cash received. This sale will
result in the recognition of gain or loss for federal income tax purposes,
measured by the difference between the amount of cash received and the portion
of the basis of the share of Microtek Common Stock allocable to such fractional
share interests. Such gain or loss will be capital gain or loss, provided that
such share of Microtek Common Stock was held as a capital asset at the Effective
Date, and will be long-term capital gain or loss if such share of Microtek
Common Stock has been held for more than one year.
THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER AND DOES NOT PURPORT TO BE A COMPLETE
ANALYSIS OR LISTING OF ALL POTENTIAL TAX EFFECTS RELEVANT TO A DECISION WHETHER
TO VOTE IN FAVOR OF APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. THE
DISCUSSION DOES NOT ADDRESS THE TAX CONSEQUENCES THAT MAY BE RELEVANT TO A
PARTICULAR MICROTEK STOCKHOLDER SUBJECT TO SPECIAL TREATMENT UNDER CERTAIN
FEDERAL INCOME TAX LAWS, SUCH AS DEALERS IN SECURITIES, BANKS, INSURANCE
COMPANIES, TAX-EXEMPT ORGANIZATIONS, NON-UNITED STATES PERSONS AND STOCKHOLDERS
WHO ACQUIRED THEIR SHARES AS COMPENSATION, NOR ANY CONSEQUENCES ARISING UNDER
THE LAWS OF ANY STATE, LOCALITY OR FOREIGN JURISDICTION. THE DISCUSSION IS BASED
UPON THE CODE, TREASURY REGULATIONS THEREUNDER AND ADMINISTRATIVE RULINGS AND
COURT DECISIONS AS OF THE DATE HEREOF. ALL OF THE FOREGOING ARE SUBJECT TO
CHANGE AND ANY SUCH CHANGE COULD AFFECT THE CONTINUING VALIDITY OF THIS
DISCUSSION. MICROTEK STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE MERGER
TO THEM.
NO APPRAISAL RIGHTS
Pursuant to Delaware law, no holder of record of the Microtek Shares who
objects to the Merger shall have appraisal or dissenters' rights in connection
with the Merger.
38
<PAGE>
ISOLYSER AND MICROTEK
PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial statements give effect
to the Merger of Isolyser and Microtek under the pooling of interests method of
accounting. The unaudited pro forma combined balance sheet as of March 31, 1996
gives effect to the Merger as though it had been consummated on that date. The
unaudited pro forma combined balance sheet as of March 31, 1996 also gives
effect to Microtek's acquisition of Venodyne on April 27, 1996 as if such
acquisition had occurred on February 29, 1996. The unaudited pro forma combined
statements of operations for the years ended December 31, 1993, 1994 and 1995
and for the three-months ended March 31, 1996 give effect to the Merger as if it
had occurred at the beginning of the earliest year presented. For the year ended
December 31, 1995, the unaudited pro forma statement of operations also gives
effect to Isolyser's acquisitions of SafeWaste on May 31, 1995 and White Knight
effective September 1, 1995 and Microtek's acquisitions of Medi-Plast on
November 30, 1995 and Venodyne on April 27, 1996 as if such acquisitions had
occurred at the beginning of Isolyser's and Microtek's fiscal years, January 1,
1995 and December 1, 1994, respectively. For the three-months ended March 31,
1996, the unaudited pro forma statement of operations also gives effect to
Microtek's acquisition of Venodyne as if such acquisition had occurred at
December 1, 1994. For purposes of these unaudited pro forma combined financial
statements, the balance sheet and statements of operations data combine
Microtek's balance sheet as of February 29, 1996 and its statements of
operations for the years ended November 30, 1993, 1994 and 1995, respectively,
as Microtek's fiscal year ends on November 30.
The unaudited combined pro forma financial statements have been prepared by
both Isolyser and Microtek based upon their respective consolidated financial
statements and certain assumptions. Pro forma per share amounts are based on an
assumed Exchange Ratio of one share of Isolyser Common Stock for each share of
Microtek Common Stock. The unaudited pro forma combined statements of operations
do not reflect estimated Merger expenses (estimated at approximately $2,750,000)
or any operating synergies or cost savings which may result from the Merger. In
addition to the assumptions relating to the Merger, the unaudited pro forma
combined statement of operations for the year ended December 31, 1995 and for
the three-months ended March 31, 1996 also includes assumptions related to the
amortization of intangibles, depreciation, financing costs, income taxes and the
issuance of common stock resulting from Isolyser's acquisitions of SafeWaste and
White Knight and Microtek's acquisitions of Medi-Plast and Venodyne accounted
for using the purchase method of accounting. See "Isolyser -- Pro Forma Combined
Financial Information" and "Microtek -- Pro Forma Combined Financial
Information."
The unaudited pro forma combined financial statements also should be read in
conjunction with the historical consolidated financial statements and notes
thereto in Isolyser's and Microtek's separate Annual Reports on Form 10-K for
the year ended December 31, 1995 and November 30, 1995, respectively, and
Quarterly Reports on Form 10-Q for the three-months ended March 31, 1996 and
February 29, 1996, respectively, incorporated by reference herein, the
historical financial statements of SafeWaste and White Knight included in
Isolyser's current reports on Form 8-K filed with the Commission on June 15,
1995 and October 3, 1995, respectively, incorporated by reference herein, and
the historical financial statements of Medi-Plast and Venodyne included in
Microtek's Annual Report on Form 10-K for the year ended November 30, 1995,
incorporated by reference herein.
The pro forma information is not necessarily indicative of the operating
results and financial position that would have been reported had the Merger and
the SafeWaste, White Knight, Medi-Plast and Venodyne acquisitions occurred at
the pro forma dates specified, nor is it necessarily indicative of future
results.
39
<PAGE>
ISOLYSER AND MICROTEK
UNAUDITED COMBINED PRO FORMA BALANCE SHEET
MARCH 31, 1996
ASSETS
<TABLE>
<CAPTION>
PRO FORMA
MICROTEK
WITH PRO FORMA PRO FORMA
ISOLYSER VENODYNE ADJUSTMENTS COMBINED
------------ ----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents............................ $ 45,755 $ 667 $ 3 (2) $ 46,425
Accounts receivable, net............................. 18,619 7,222 (89 )(2) 25,691
(61 )(3)
Inventories, net..................................... 38,551 11,905 12 (2) 50,468
Prepaid inventories.................................. 973 973
Deferred income taxes................................ 2,393 208 2,601
Prepaid expenses and other assets.................... 2,194 544 2,738
------------ ----------- ----------- ------------
Total current assets............................... 108,485 20,546 (135 ) 128,896
------------ ----------- ----------- ------------
Property and equipment, net............................ 58,035 5,581 134 (2) 63,750
Deposits on machinery and equipment.................... 3,532 3,532
Intangible assets, net................................. 37,102 26,382 240 (2) 63,724
Investments in joint ventures.......................... 404 100 (300 )(2) 204
Other assets, net...................................... 597 597
------------ ----------- ----------- ------------
Total assets....................................... $ 208,155 $ 52,609 $ (61 ) $ 260,703
------------ ----------- ----------- ------------
------------ ----------- ----------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank overdraft....................................... $ 1,889 $ 1,889
Accounts payable..................................... 12,455 $ 2,887 $ (61 )(3) 15,281
Accrued compensation................................. 2,463 280 2,743
Other accrued liabilities............................ 1,531 890 2,750 (5) 5,418
247 (4)
Current portion of long term debt.................... 1,513 2,500 4,013
------------ ----------- ----------- ------------
Total current liabilities.......................... 19,851 6,557 2,936 29,344
------------ ----------- ----------- ------------
Long term debt......................................... 9,899 23,959 33,858
Deferred income taxes.................................. 3,728 231 3,959
Other liabilities...................................... 270 270
------------ ----------- ----------- ------------
Total liabilities.................................. 33,748 30,747 2,936 67,431
------------ ----------- ----------- ------------
Shareholders' equity:
Common stock......................................... 31 48 (43 )(6) 36
Additional paid in capital........................... 181,202 20,214 (1,270 )(6) 200,600
(454 )(4)
Retained earnings (deficit).......................... (4,429) 3,333 (2,750 )(5) (4,547 )
(701 )(4)
Unearned shares -- ESOP.............................. (420 ) (420 )
------------ ----------- ----------- ------------
176,804 23,175 (4,310 ) 195,669
Less: shares held in treasury........................ (2,397) (1,313 ) 1,313 (6) (2,397 )
------------ ----------- ----------- ------------
Total shareholders' equity......................... 174,407 21,862 (2,997 ) 193,272
------------ ----------- ----------- ------------
Total Liabilities and Shareholders' Equity............. $ 208,155 $ 52,609 $ (61 ) $ 260,703
------------ ----------- ----------- ------------
------------ ----------- ----------- ------------
</TABLE>
40
<PAGE>
ISOLYSER AND MICROTEK
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
PRO FORMA
ISOLYSER MICROTEK COMBINED
----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net sales.............................................. $ 11,831 $ 26,938 $ 38,769
Cost of goods sold..................................... 6,971 13,866 20,837
----------- ----------- -----------
Gross profit......................................... 4,860 13,072 17,932
----------- ----------- -----------
Operating expenses:
Selling and marketing expenses....................... 2,494 6,988 9,482
General and administrative expenses.................. 1,227 2,576 3,803
Research and development............................. 587 333 920
Amortization of intangibles.......................... 291 1,067 1,358
----------- ----------- -----------
Total operating expenses........................... 4,599 10,964 15,563
----------- ----------- -----------
Income from operations................................. 261 2,108 2,369
Interest income........................................ 799 799
Interest expense....................................... (348) (348 )
Other income........................................... 22 22
----------- ----------- -----------
Income before income tax provision and extraordinary
item.................................................. 1,060 1,782 2,842
Income tax provision................................... 424 775 1,199
----------- ----------- -----------
Income before extraordinary item....................... $ 636 $ 1,007 $ 1,643
----------- ----------- -----------
----------- ----------- -----------
Income before extraordinary item per common and common
equivalent share...................................... $ 0.04 $ 0.20 $ 0.08
----------- ----------- -----------
----------- ----------- -----------
Weighted average number of common and common equivalent
shares outstanding.................................... 16,053 5,059 21,112
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
41
<PAGE>
ISOLYSER AND MICROTEK
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ISOLYSER MICROTEK ADJUSTMENTS COMBINED
----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales.............................................. $ 46,625 $ 26,894 $ (136 )(3) $ 73,383
Cost of goods sold..................................... 35,117 14,947 $ (136 )(3) 49,928
----------- ----------- ----------- -----------
Gross profit......................................... 11,508 11,947 23,455
----------- ----------- ----------- -----------
Operating expenses:
Selling and marketing expenses....................... 7,528 6,572 14,100
General and administrative expenses.................. 4,161 3,230 7,391
Research and development............................. 1,045 201 1,246
Amortization of intangibles.......................... 1,103 402 1,505
Restructuring charge................................. 140 140
----------- ----------- ----------- -----------
Total operating expenses........................... 13,837 10,545 24,382
----------- ----------- ----------- -----------
Income (loss) from operations.......................... (2,329) 1,402 (927 )
Interest income........................................ 1,356 1,356
Interest expense....................................... (321) (373) (694 )
----------- ----------- ----------- -----------
Income (loss) before income tax provision and
cumulative effect of change in accounting principle... (1,294) 1,029 (265 )
Income tax provision................................... 11 444 455
----------- ----------- ----------- -----------
Income (loss) before cumulative effect of change in
accounting principle.................................. $ (1,305) $ 585 $ $ (720 )
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Income (loss) before cumulative effect of change in
accounting principle per common and common equivalent
share................................................. $ (0.11) $ 0.11 $ (0.03 )
----------- ----------- -----------
----------- ----------- -----------
Weighted average number of common and common equivalent
shares outstanding.................................... 18,684 5,058 23,742
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
42
<PAGE>
ISOLYSER AND MICROTEK
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRO FORMA
MICROTEK
PRO FORMA ISOLYSER WITH
WITH SAFEWASTE AND MEDI-PLAST PRO FORMA PRO FORMA
WHITE KNIGHT AND VENODYNE ADJUSTMENTS COMBINED
------------------ ------------ ----------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales......................................... $ 113,179 $ 39,164 $ (599)(3) $ 151,744
Cost of goods sold................................ 86,678 20,267 (599)(3) 106,346
---------- ------------ ----------- ------------
Gross profit.................................... 26,501 18,897 45,398
---------- ------------ ----------- ------------
Operating expenses:
Selling and marketing expenses.................. 18,299 7,662 25,961
General and administrative expenses............. 7,993 4,644 139(2) 12,776
Research and development........................ 959 314 1,273
Amortization of intangibles..................... 3,304 1,065 77(2) 4,446
---------- ------------ ----------- ------------
Total operating expenses...................... 30,555 13,685 216 44,456
---------- ------------ ----------- ------------
Income (loss) from operations..................... (4,054) 5,212 (216) 942
Interest income................................... 2,050 10 2,060
Interest expense.................................. (1,531) (1,604) (3,135)
Losses of joint ventures.......................... (214) (91) 216(2) (89)
Other income...................................... 8 8
---------- ------------ ----------- ------------
Income (loss) before income tax provision
(benefit)........................................ (3,749) 3,535 (214)
Income tax provision (benefit).................... (400) 1,365 965
---------- ------------ ----------- ------------
Net income (loss)................................. $ (3,349) $ 2,170 $ $ (1,179)
---------- ------------ ----------- ------------
---------- ------------ ----------- ------------
Net income (loss) per common and common equivalent
share............................................ $ (0.13) $ 0.44 $ (0.04)
---------- ------------ ------------
---------- ------------ ------------
Weighted average number of common and common
equivalent shares outstanding.................... 25,884 4,927 30,811
---------- ------------ ------------
---------- ------------ ------------
</TABLE>
43
<PAGE>
ISOLYSER AND MICROTEK
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE THREE-MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
PRO FORMA
MICROTEK
WITH PRO FORMA PRO FORMA
ISOLYSER VENODYNE ADJUSTMENTS COMBINED
------------------ ------------ ----------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales......................................... $ 31,008 $ 10,199 $ (154)(3) $ 41,053
Cost of goods sold................................ 23,880 5,171 (154)(3) 28,897
---------- ------------ ----------- ------------
Gross profit.................................... 7,128 5,028 12,156
---------- ------------ ----------- ------------
Operating expenses:
Selling and marketing expenses.................. 4,963 1,874 6,837
General and administrative expenses............. 2,049 1,164 64(2) 3,277
Research and development........................ 297 34 331
Amortization of intangibles..................... 807 308 29(2) 1,144
---------- ------------ ----------- ------------
Total operating expenses...................... 8,116 3,380 93 11,589
---------- ------------ ----------- ------------
Income (loss) from operations..................... (988) 1,648 (93) 567
Interest income................................... 641 641
Interest expense.................................. (229) (376) (605)
Losses of joint ventures.......................... (67) (46) 93(2) (20)
---------- ------------ ----------- ------------
Income (loss) before income tax provision
(benefit)........................................ (643) 1,226 583
Income tax provision (benefit).................... (266) 496 230
---------- ------------ ----------- ------------
Net income (loss)................................. $ (377) $ 730 $ $ 353
---------- ------------ ----------- ------------
---------- ------------ ----------- ------------
Net income (loss) per common and common equivalent
share............................................ $ (0.01) $ 0.15 $ 0.01
---------- ------------ ------------
---------- ------------ ------------
Weighted average number of common and common
equivalent shares outstanding.................... 30,500 4,991 35,491
---------- ------------ ------------
---------- ------------ ------------
</TABLE>
44
<PAGE>
ISOLYSER AND MICROTEK
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION
(1) The unaudited pro forma combined financial statements give effect to the
Merger of Isolyser and Microtek under the pooling of interests method of
accounting. The unaudited pro forma combined statement of operations for the
year ended December 31, 1995 also gives effect to Isolyser's acquisitions of
SafeWaste on May 31, 1995 and White Knight effective September 1, 1995 and
Microtek's acquisitions of Medi-Plast on November 30, 1995 and Venodyne on
April 27, 1996, as if such acquisitions had occurred at the beginning of
Isolyser's and Microtek's fiscal years, January 1, 1995 and December 1,
1994, respectively. The unaudited pro forma combined statement of operations
for the three months ended March 31, 1996 also gives effect to Microtek's
acquisition of Venodyne as if such acquisition had occurred at December 1,
1994. The unaudited pro forma combined balance sheet also gives effect to
Microtek's acquisition of Venodyne on April 27, 1996 as if such acquisition
occurred on February 29, 1996. For purposes of these unaudited pro forma
combined financial statements, the balance sheet and statement of operations
data combine Microtek's balance sheet as of February 29, 1996 and its
statements of operations for the years ended November 30, 1993, 1994 and
1995, and for the three months ended February 29, 1996, respectively, as
Microtek's fiscal year ends on November 30.
(2) To consolidate the accounts of the joint venture between Isolyser and
Microtek.
(3) To eliminate inter-company trade transactions and balances between Isolyser
and Microtek.
(4) Reflects additional compensation expense of $454,000, before income tax
benefit of $173,000, resulting from the accelerated vesting of certain
performance based stock options held by certain officers of Microtek. The
related stock option agreements provide for complete vesting upon a change
in control of Microtek. Also reflects currently anticipated severance
expense of $677,000, before income tax benefit of $257,000, resulting from
the Merger.
(5) Reflects estimated Merger expenses of $2,750,000. These expenses include
investment banking, legal, accounting and miscellaneous transaction costs of
the Merger, and are excluded from the pro forma statements of operations.
Plans for the integration and consolidation of the companies' operations are
currently being developed, but associated costs are not presently estimable.
The accounting policies utilized by Isolyser and Microtek are currently
being studied from a conformity perspective; however, the impact of any
potential adjustment is not presently expected to be material.
(6) Reflects the assumed issuance of shares of Isolyser's $.001 par value common
stock in exchange for all outstanding common shares of Microtek as of March
31, 1996, utilizing an assumed Exchange Ratio of one-for-one, and the
assumed cancellation of Microtek common shares held in treasury. Upon
consummation of the Merger, all rights to shares of Microtek common stock
pursuant to Microtek issued stock options shall immediately convert to
equivalent rights with respect to Isolyser common stock utilizing the
assumed Exchange Ratio.
45
<PAGE>
ISOLYSER
PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined statement of operations for the
year ended December 31, 1995 gives effect to Isolyser's acquisition of SafeWaste
on May 31, 1995 and of White Knight effective September 1, 1995 as if such
acquisitions had occurred on January 1, 1995. Both of these acquisitions have
been accounted for using the purchase method of accounting.
The pro forma combined financial statement should be read in conjunction
with the historical consolidated financial statements of Isolyser included in
its Annual Report on Form 10-K for the year ended December 31, 1995,
incorporated by reference herein, and the historical financial statements of
SafeWaste and White Knight included in Isolyser's current reports on Form 8-K
filed with the Commission June 15, 1995, as amended on July 17, 1995, and
October 3, 1995, respectively, incorporated by reference herein.
The pro forma information is not necessarily indicative of the results that
would have been reported had such transactions occurred on January 1, 1995, nor
is it necessarily indicative of future results.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
INTER-COMPANY PRO FORMA PRO FORMA
ISOLYSER SAFEWASTE (1) WHITE KNIGHT (1) ELIMINATIONS (2) ADJUSTMENTS (3) COMBINED
-------- ------------- ---------------- ----------------- --------------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Net sales........... $ 75,414 $ 260 $38,590 $(1,085) $113,179
Cost of goods
sold............... 59,276 224 28,218 (1,085) $ 45(4) 86,678
-------- ------ -------- ------- ------- ---------
Gross profit...... 16,138 36 10,372 (45) 26,501
-------- ------ -------- ------- ------- ---------
Operating expenses:
Selling and
marketing
expenses......... 12,763 67 5,469 18,299
General and
administrative
expenses......... 6,038 187 2,019 (251)(5) 7,993
Research and
development...... 959 959
Amortization of
intangibles...... 1,901 10 85 1,308(6) 3,304
-------- ------ -------- ------- ------- ---------
Total operating
expenses....... 21,661 264 7,573 1,057 30,555
-------- ------ -------- ------- ------- ---------
Income (loss) from
operations......... (5,523) (228) 2,799 (1,102) (4,054)
Interest income..... 3,205 3 (1,158)(7) 2,050
Interest expense.... (830) (3) (1,153) 455(8) (1,531)
Equity in losses of
joint ventures..... (169) (28) (17)(9) (214)
-------- ------ -------- ------- ------- ---------
Income (loss) before
income tax
provision
(benefit).......... (3,317) (256) 1,646 (1,822) (3,749)
Income tax provision
(benefit).......... (465) 632 (567)(10) (400)
-------- ------ -------- ------- ------- ---------
Net income (loss)... $ (2,852) $(256) $ 1,014 $ $(1,255) $ (3,349)
-------- ------ -------- ------- ------- ---------
-------- ------ -------- ------- ------- ---------
Net loss per common
and common
equivalent share... $ (.11) $ (.13)
-------- ---------
-------- ---------
Weighted average
number of common
and common
equivalent shares
outstanding........ 25,575 25,884(11)
-------- ---------
-------- ---------
</TABLE>
46
<PAGE>
ISOLYSER
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
(1) Reflects for the year ended December 31, 1995, the historical operating
results of SafeWaste through May 31, 1995, and White Knight through August
31, 1995.
(2) Eliminates inter-company sales by SafeWaste and White Knight to Isolyser.
(3) Effective September 1, 1995, Isolyser acquired White Knight. The purchase
price of White Knight included the payment of $22,500,000 in cash and the
issuance of $7,000,000 in Isolyser Common Stock to the shareholders of White
Knight, and the payment of approximately $1,388,000 in expenses. The cash
portion of the purchase price is also subject to certain closing date
adjustments, which Isolyser expects to resolve in 1996.
Based on a purchase price allocation, White Knight's historical accounts
were adjusted to reflect (i) a $1,468,000 increase in inventories, (ii) a
$2,943,000 increase in property and equipment, (iii) a $21,512,000 increase
in intangible assets, (iv) a net $2,592,000 increase in deferred income tax
liabilities, resulting from the fact that the tax basis of the acquired net
assets of White Knight will not be adjusted as a result of the acquisition,
and (iv) a net $874,000 increase in other liabilities. The $21,512,000
adjustment to intangible assets consisted of $4,124,000 allocated to
customer lists and $17,388,000 allocated to goodwill. Customer lists and
goodwill are being amortized using the straight-line method over 7 and 20
years, respectively.
Through borrowings under its credit facility and from existing cash
balances, Isolyser repaid $13,455,000 of White Knight's long-term
indebtedness, including $9,276,000 of revolving credit borrowings from a
bank and $4,179,000 of subordinated notes payable.
(4) Reflects an increase in depreciation expense as a result of the purchase
price adjustment to property and equipment.
(5) Reflects the elimination of salaries and benefits paid to employees of
White Knight who were terminated and not replaced.
(6) Reflects an increase in amortization expense as a result of the acquisition
of SafeWaste and White Knight. Amortization of goodwill arising from the
SafeWaste and White Knight acquisitions is over 10 and 20 years,
respectively. Amortization of customer lists is over 5 to 7 years.
(7) Reflects a net reduction in interest income on cash equivalents assuming
the acquisitions had occurred on January 1, 1995 and that the cash
equivalents had been used to fund the acquisitions.
(8) Reflects a reduction in interest expense for approximately $9,276,000 of
White Knight indebtedness refinanced under Isolyser's credit facilities at
lower effective interest rates.
(9) Reflects an additional expense for the amortization of the difference
between the value assigned to SafeWaste's investment in a joint venture over
its share of the underlying equity. This difference is being amortized over
5 years.
(10) Adjusts income tax benefit to reflect the pro forma effect on income tax
benefit resulting from the acquisition of SafeWaste and White Knight. The
pro forma effective tax rate differs from the federal and state statutory
tax rates due to non-deductible goodwill amortization expense arising from
Isolyser's acquisitions.
(11) Weighted average common shares outstanding is calculated assuming the
acquisitions of SafeWaste and White Knight occurred on January 1, 1995.
47
<PAGE>
MICROTEK
PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined balance sheet as of February 29,
1996 gives effect to Microtek's April 27, 1996 acquisition of Venodyne as if
such acquisition had occurred on February 29, 1996. The following unaudited pro
forma combined statements of operations for the year ended November 30, 1995 and
for the three-months ended February 29, 1996 gives effect to Microtek's
acquisitions of Venodyne on April 27, 1996 and Medi-Plast on November 30, 1995
as if such acquisitions had occurred on December 1, 1994. These acquisitions
have been accounted for using the purchase method of accounting.
The pro forma combined financial statements should be read in conjunction
with the historical consolidated financial statements of Microtek and the
historical financial statements of Medi-Plast and Venodyne included in
Microtek's Annual Report on Form 10-K for the year ended November 30, 1995,
incorporated by reference herein.
The pro forma combined information is not necessarily indicative of the
results that would have been reported had such transaction occurred on the pro
forma dates specified, nor is it necessarily indicative of future results.
48
<PAGE>
MICROTEK
UNAUDITED COMBINED PRO FORMA BALANCE SHEET
FEBRUARY 29, 1996
ASSETS
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
MICROTEK VENODYNE (1) ADJUSTMENTS (2) COMBINED
--------- ------------- --------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Current assets:
Cash.................................................... $ 667 $ 667
Accounts receivable, net................................ 6,269 $ 953 7,222
Inventories, net........................................ 11,595 310 11,905
Deferred income taxes................................... 208 208
Prepaid expenses and other assets....................... 522 22 544
--------- ------------- -----------
Total current assets.................................. 19,261 1,285 20,546
--------- ------------- -----------
Property and equipment, net............................... 5,394 187 5,581
Intangible assets, net.................................... 21,904 180 $ 4,298 26,382
Investment in joint venture............................... 100 100
--------- ------------- ------- -----------
Total assets.......................................... $ 46,659 $ 1,652 $ 4,298 $ 52,609
--------- ------------- ------- -----------
--------- ------------- ------- -----------
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Current liabilities:
Accounts payable........................................ $ 2,747 $ 140 $ 2,887
Accrued compensation.................................... 280 280
Other accrued liabilities............................... 830 60 890
Current portion of long term debt....................... 2,500 2,500
--------- ------------- -----------
Total current liabilities............................. 6,357 200 6,557
Long term debt............................................ 18,209 $ 5,750 23,959
Deferred income taxes..................................... 231 231
--------- ------------- ------- -----------
Total liabilities..................................... 24,797 200 5,750 30,747
Shareholders' equity:
Common stock............................................ 48 48
Additional paid in capital.............................. 20,214 20,214
Retained earnings....................................... 3,333 3,333
Unearned shares -- ESOP................................. (420) (420)
Parent's equity in division............................. 1,452 (1,452) 0
--------- ------------- ------- -----------
23,175 1,452 (1,452) 23,175
Less: shares held in treasury........................... (1,313) (1,313)
--------- ------------- ------- -----------
Total shareholders' equity............................ 21,862 1,452 (1,452) 21,862
--------- ------------- ------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY................ $ 46,659 $ 1,652 $ 4,298 $ 52,609
--------- ------------- ------- -----------
--------- ------------- ------- -----------
</TABLE>
49
<PAGE>
MICROTEK
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1995
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
MICROTEK MEDI-PLAST (1) VENODYNE (1) ADJUSTMENTS COMBINED
-------- -------------- ------------ ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales.............................................. $ 30,059 $5,144 $3,961 $39,164
Cost of goods sold..................................... 16,276 2,780 1,594 $(383)(3) 20,267
-------- ------- ------------ ----------- ---------
Gross profit......................................... 13,783 2,364 2,367 383 18,897
-------- ------- ------------ ----------- ---------
Operating expenses:
Selling and marketing expenses....................... 5,471 1,377 1,611 (547)(4) 7,662
(250)(5)
General and administrative expenses.................. 3,326 807 629 (118)(3) 4,644
Research and development............................. 168 146 314
Amortization of intangibles.......................... 433 632(6) 1,065
-------- ------- ------------ ----------- ---------
Total operating expenses........................... 9,398 2,184 2,386 (283) 13,685
-------- ------- ------------ ----------- ---------
Income (loss) from operations.......................... 4,385 180 (19) 666 5,212
Interest income........................................ 10 10
Interest expense....................................... (549) (57) (998)(7) (1,604)
Losses of joint venture................................ (91) (91)
Other income........................................... 8 8
-------- ------- ------------ ----------- ---------
Income (loss) before income tax provision (benefit).... 3,753 123 (9) (332) 3,535
Income tax provision (benefit)......................... 1,445 (3) (77)(8) 1,365
-------- ------- ------------ ----------- ---------
Net income (loss)...................................... $ 2,308 $ 123 $ (6) $(255) $ 2,170
-------- ------- ------------ ----------- ---------
-------- ------- ------------ ----------- ---------
Net income per common and common equivalent share...... $ 0.47 $ 0.44
-------- ---------
-------- ---------
Weighted average number of common and common equivalent
shares outstanding.................................... 4,927 4,927
-------- ---------
-------- ---------
</TABLE>
50
<PAGE>
MICROTEK
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED FEBRUARY 29, 1996
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
MICROTEK VENODYNE (1) ADJUSTMENTS COMBINED
----------- -------------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales.............................................. $ 9,067 $ 1,132 $ 10,199
Cost of goods sold..................................... 4,715 456 5,171
----------- ------- -----------
Gross profit......................................... 4,352 676 5,028
----------- ------- -----------
Operating expenses:
Selling and marketing expenses....................... 1,460 469 $ (55)(5) 1,874
General and administrative expenses.................. 1,040 124 1,164
Research and development............................. 34 34
Amortization of intangibles.......................... 265 43(6) 308
----------- ------- ----------- -----------
Total operating expenses........................... 2,765 627 (12) 3,380
----------- ------- ----------- -----------
Income from operations................................. 1,587 49 12 1,648
Interest expense....................................... (316 ) (60)(7) (376 )
Losses of joint venture................................ (46 ) (46 )
----------- ------- ----------- -----------
Income (loss) before income tax provision.............. 1,225 49 (48) 1,226
Income tax provision (benefit)......................... 495 19 (18)(8) 496
----------- ------- ----------- -----------
Net income (loss)...................................... $ 730 $ 30 $ (30) $ 730
----------- ------- ----------- -----------
----------- ------- ----------- -----------
Net income per common and common equivalent share...... $ 0.15 $ 0.15
----------- -----------
----------- -----------
Weighted average number of common and common equivalent
shares outstanding.................................... 4,991 4,991
----------- -----------
----------- -----------
</TABLE>
51
<PAGE>
MICROTEK
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
(1) Reflects the historical operating results of Medi-Plast for the twelve
months ended October 30, 1995, the historical balance sheet of Venodyne as
of February 24, 1996 and the historical operating results of Venodyne for
the year ended November 30, 1995 and the three months ended February 24,
1996.
(2) On April 27, 1996, Microtek purchased Venodyne through the issuance of a
$5.75 million note payable. The purchase price may be increased by a
contingent payment (not to exceed $1.0 million) based upon the future gross
margin from the Company's sale of Venodyne products. Goodwill of $4.3
million recorded in conjunction with the acquisition is being amortized
using the straight-line method over 25 years.
(3) Reflects a reduction in rent expense as a result of new contractual
arrangements for facilities leased from the previous owners of Medi-Plast.
(4) Reflects a reduction in compensation expense as a result of new employment
contracts entered into with certain Medi-Plast employees on November 30,
1995.
(5) Reflects the elimination of sales commissions associated with a sales
commission agreement which was terminated in conjunction with the Venodyne
acquisition.
(6) Reflects an increase in amortization expense as a result of the
acquisitions. Amortization of goodwill arising from the Medi-Plast and
Venodyne acquisitions is being amortized over 25 years.
(7) Reflects an increase in interest expense associated with debt issued in
conjunction with the acquisitions.
(8) Adjusts income tax expense to reflect the pro forma effect on income tax
expense resulting from the acquisitions, and to record income tax expense on
the pre-tax earnings of Medi-Plast. Prior to the acquisitions, Medi-Plast
was an S Corporation and accordingly was not subject to federal and state
income tax.
52
<PAGE>
COMPARATIVE RIGHTS OF ISOLYSER SHAREHOLDERS
AND MICROTEK STOCKHOLDERS
GENERAL
If the Merger is consummated, holders of Microtek Common Stock will become
holders of Isolyser Common Stock, and the rights of such former Microtek
shareholders will be governed by the laws of the State of Georgia and by the
Isolyser Articles of Incorporation, as amended (the "Isolyser Articles of
Incorporation"), and the Amended and Restated Bylaws of Isolyser (the "Isolyser
Bylaws"). The rights of Isolyser shareholders under the Georgia Business
Corporation Code ("GBCC"), the Isolyser Articles of Incorporation and the
Isolyser Bylaws differ in certain respects from the rights of Microtek
stockholders under the DGCL, the Microtek Certificate of Incorporation (the
"Microtek Certificate of Incorporation") and the Amended and Restated Bylaws of
Microtek (the "Microtek Bylaws"). Certain of these differences are summarized
below. This summary is qualified in its entirety by reference to the full text
of such documents. In addition, the following summary does not purport to be a
complete statement of the rights of Isolyser shareholders under applicable
Georgia law as compared with the rights of Microtek stockholders under
applicable Delaware Law. This summary is qualified in its entirety by reference
to the DGCL and the GBCC.
AUTHORIZED CAPITAL STOCK
Isolyser is authorized to issue up to 100,000,000 shares of Isolyser Common
Stock and up to 10,000,000 shares of Isolyser Preferred Stock, of which
30,605,035 shares of Isolyser Common Stock and no shares of Isolyser Preferred
Stock were issued and outstanding on April 30, 1996. As of April 30, 1996,
319,544 shares of Isolyser Common Stock were held in treasury. The holders of
Isolyser Common Stock are entitled to one vote per share on all matters
submitted to a vote of stockholders. Subject to the rights of any holders of
Preferred Stock, the holders of shares of Isolyser Common Stock are entitled to
receive such dividends as may be declared from time to time by Isolyser's Board
of Directors and are entitled to share ratably in all assets of Isolyser
available for distribution to shareholders upon liquidation. The Isolyser
Articles of Incorporation authorizes Isolyser's Board of Directors, without
further stockholder approval, to issue Isolyser Preferred Stock and to fix, with
respect to any series of Isolyser Preferred Stock, the dividend rights and
terms, conversion rights, voting rights, redemption rights and terms,
liquidation preferences, sinking funds and other rights, preferences, privileges
and restrictions applicable to each series of Isolyser Preferred Stock issued.
Notwithstanding the foregoing, pursuant to Isolyser's acquisition of MedSurg
Industries, Inc. in December, 1993, certain shareholders of Isolyser holding in
the aggregate approximately 20% of the outstanding Isolyser Common Stock entered
into a voting agreement with MedInvest Enterprises, Inc. providing that they
would vote their shares in favor of Michael Sahady's election to the Isolyser
Board of Directors for so long as Mr. Sahady remains an executive officer of
Isolyser.
Microtek is authorized to issue up to 15,000,000 shares of Microtek Common
Stock and up to 1,705,290 shares of Microtek Preferred Stock, of which 4,664,546
shares of Microtek Common Stock and no shares of Microtek Preferred Stock were
issued and outstanding on April 30, 1996. Of the authorized shares of Preferred
Stock, 705,290 shares are classified as Redeemable Convertible Preferred Stock
with no par value. The remaining 1,000,000 shares of Preferred Stock may be
issued from time to time in one or more series. Each such series has such rights
as shall be stated in the resolutions providing for the issuance of such series
of Preferred Stock by the Board of Directors. The holders of Microtek Common
Stock are entitled to one vote per share on all matters to be voted on by
Microtek shareholders generally. The holders of Microtek Preferred stock are not
entitled to receive dividends unless otherwise provided by the Board of
Directors. The holders of Microtek Common Stock are entitled to receive such
dividends as may be declared from time to time by Microtek's Board of Directors
and are entitled to share ratably in all assets of Microtek available for
distribution to stockholders upon liquidation, subject to the rights of any
holders of Microtek Preferred Stock. Except
53
<PAGE>
as otherwise required by the DGCL or resolutions of Microtek's Board of
Directors authorizing the issuance of any class or series of Microtek Preferred
Stock, all rights and all voting power is vested exclusively in the holders of
Microtek Common Stock.
ANTI-TAKEOVER PROTECTION
The GBCC generally requires the affirmative vote of a majority of all votes
entitled to be cast on the matter, voting as a single group, to approve mergers
and share exchanges. Shareholders of the surviving corporation need not approve
a merger if (i) the articles of incorporation of the surviving corporation will
not differ from its articles before the merger, (ii) each shareholder of the
surviving corporation whose shares were outstanding immediately before the
effective date of the merger will hold the same number and type of shares
immediately after the merger, and (iii) the number and kind of shares
outstanding immediately after the merger, plus the number and kind of shares
issuable as a result of the merger, do not exceed the total number and kind of
shares of the surviving corporation authorized by its articles of incorporation
immediately before the merger. Neither the Isolyser Articles of Incorporation
nor the Isolyser Bylaws contain a provision which alters the GBCC voting
requirements with respect to mergers.
Under the DGCL, a merger or consolidation generally must be approved by the
affirmative vote of the holders of a majority of all of the outstanding shares
of each constituent corporation. Stockholders of the surviving corporation need
not authorize a merger if: (i) the agreement of merger does not amend in any
respect the certificate of incorporation of the surviving corporation, (ii) each
share of stock of the surviving corporation outstanding immediately prior to the
effective date of the merger is to be an identical outstanding or treasury share
of the surviving corporation after the effective date of the merger, and (iii)
either no shares of common stock of the surviving corporation and no shares,
securities or obligations convertible into such stock are to be issued or
delivered under the plan of merger, or the authorized unissued shares or the
treasury shares of common stock of the surviving corporation to be issued or
delivered under the plan of merger plus those initially issuable upon conversion
of any other shares, securities or obligations to be issued or delivered under
this plan do not exceed 20% of the shares of common stock of the surviving
corporation outstanding immediately prior to the effective date of the merger.
Neither the Microtek Certificate Incorporation nor the Microtek Bylaws contain a
provision which alters the DGCL voting requirements with respect to mergers.
The provision of the GBCC concerning "Business Combinations with Interested
Shareholders" (the "Business Combinations Provision") generally prohibits
certain "resident domestic (Georgia) corporations" from entering into certain
business combination transactions with any "interested shareholder" (generally
defined as any person other than the corporation or its subsidiaries
beneficially owning at least 10% of the voting stock of the corporation), unless
the corporation's board of directors approves the business combination (a) prior
to the date the interested shareholder became an interested shareholder or
acquired 90% or more of the outstanding voting stock of the corporation), unless
the corporation's board of directors approves the business combination (a) prior
to the date the interested shareholder became an interested shareholder or
acquired 90% or more of the outstanding voting stock of the corporation as part
of the transaction in which it became an interested shareholder; or (b) after
the date the interested shareholder became an interested shareholder, if it
acquired 90% or more of the outstanding voting stock of the corporation and a
majority of the remaining outstanding voting stock approved the business
combination. A Georgia corporation's bylaws must specify that all requirements
of the Business Combinations Provision apply to the corporation in order for the
Business Combination Provision to apply. The Isolyser Bylaws do not contain a
provision electing to be governed by the Business Combinations Provision.
The GBCC also contains a provision concerning "Fair Price Requirements" (the
"Fair Price Provision") which imposes certain requirements on "business
combinations" of a Georgia corporation with any person who is an "interested
shareholder" of that corporation. Under the Fair Price
54
<PAGE>
Provision, business combinations with interested shareholders must meet one of
three criteria designed to protect the minority shareholders: (i) the
transaction must be unanimously approved by the "continuing directors" of the
corporation (generally directors who served prior to the time the interested
shareholder acquired 10% ownership and who are unaffiliated with the interested
shareholder); or (ii) the transaction must be approved by two-thirds of the
continuing directors and a majority of shares held by shareholders other than
the interested shareholder; or (iii) the terms of the transactions must meet
specified fair pricing criteria and certain other tests. A Georgia corporation's
bylaws must specify that all requirements of the Fair Price Provision apply to
the corporation in order for the Fair Price Provision to apply. The Isolyser
Bylaws do contain a provision electing to be governed by the Fair Price
Provision.
In addition to the DGCL's general requirements, Section 203 of the DGCL,
"Business Combinations with Interested Stockholders," prohibits a corporation
that does not opt out of its provisions from entering into certain business
combination transactions with "interested stockholders" (generally defined to
include persons beneficially owning 15% or more of the corporation's outstanding
capital stock) unless certain supermajority votes are obtained. Microtek has not
opted out of Section 203 in its Certificate of Incorporation and consequently is
subject to the restrictions contained in Section 203. Microtek has represented
to Isolyser that the provisions of Section 203 are inapplicable to the Merger
and the transactions contemplated by the Merger Agreement.
APPRAISAL RIGHTS
The GBCC grants shareholders the right to dissent and receive payment of the
fair value of their shares in the event of certain amendments or changes to the
articles of incorporation adversely affecting their shares, or certain business
transactions, including certain mergers. This right is not available when the
affected shares are listed on a national securities exchange or held of record
by more than 2,000 shareholders unless (a) the articles of incorporation or a
resolution of the board of directors approving the transaction provide
otherwise, or (b) in a plan of merger or share exchange, the holders of such
shares are required to accept anything other than shares of the surviving
corporation or another publicly held corporation, except for payments in lieu of
fractional shares. The Isolyser Articles of Incorporation do not modify this
limitation on dissenters' appraisal rights.
Under the DGCL, stockholders have dissenters' rights similar to the rights
of shareholders of Georgia corporations described above. In addition, under the
DGCL, stockholders of corporations being acquired pursuant to a merger have the
right to serve upon the corporation a written demand for appraisal of their
shares when the stockholders receive any form of consideration for their shares
other than (a) shares of the surviving corporation, (b) shares of any other
corporation listed on a national securities exchange or held of record by more
than 2,000 shareholders, or (c) cash in lieu of fractional shares or any
combination thereof. Stockholders who perfect their appraisal rights are
entitled to receive cash from the corporation equal to the value of their shares
as established by judicial appraisal. Corporations may enlarge these statutory
rights by including in their certificate of incorporation a provision allowing
appraisal rights in any merger in which the corporation is a constituent
corporation. The Microtek Certificate of Incorporation contains no provision
enlarging such appraisal rights.
AMENDMENTS TO CERTIFICATE OR ARTICLES OF INCORPORATION
Under the GBCC, the board of directors may adopt certain amendments to the
articles of incorporation, including, among others, amendments to (a) delete the
names and addresses of the initial directors, initial registered agent or
registered office, (b) change each issued and unissued authorized share of an
outstanding class of stock into a greater number of whole shares if the
corporation has only shares of that class outstanding, (c) change the corporate
name, (d) extend the corporation's duration if it was incorporated at a time the
law required limited duration, or (e) change or eliminate the par value of each
issued and unissued share of an outstanding class if the corporation has only
shares of that class outstanding. All other amendments must be approved by the
board of
55
<PAGE>
directors and by the shareholders by a majority of the votes entitled to be cast
on the amendment by each voting group entitled to vote on the amendment, with
each class voting separately. The Isolyser Articles of Incorporation do not
modify this voting requirement.
The DGCL permits a corporation to amend its certificate of incorporation so
long as the amended certificate of incorporation contains only provisions which
would be lawful and proper to insert in an original certificate of incorporation
filed at the time the amendment is filed. Without limiting the general power of
amendment, the DGCL specifically allows a corporation to amend its certificate
of incorporation so as to (a) change its corporate name, (b) change the nature
of its business or its corporate powers and purposes, (c) increase, decrease or
reclassify its authorized capital stock, (d) cancel or otherwise affect the
right of the holders of the shares of any class to receive accrued, undeclared
dividends, (e) create a new class of stock, or (f) change the duration of the
corporate charter. All amendments must be approved by the board of directors and
the stockholders by the affirmative vote of a majority of the outstanding stock
entitled to vote thereon, and a majority of the outstanding stock of each class
entitled to vote thereon as a class. Microtek's Certificate of Incorporation
does not provide for any super majority voting requirement with respect to any
amendment to Microtek's Certificate of Incorporation.
AMENDMENTS TO BYLAWS
The GBCC permits a corporation's board of directors to amend, repeal or
adopt bylaws, unless (a) the articles of incorporation reserve this power
exclusively to the shareholders or (b) the shareholders expressly reserve the
power to amend or repeal a particular bylaw. The shareholders alone may amend,
repeal or adopt bylaws limiting the authority of the board of directors or
establishing staggered terms for directors. In addition, the board of directors
may not amend, repeal or adopt a bylaw fixing a greater shareholder quorum or
voting requirement. The Isolyser Bylaws provide that the Board of Directors has
the power to alter, amend or repeal the Bylaws or adopt new Bylaws, but any of
such Bylaws may be altered, amended or repealed, or new Bylaws adopted by the
Shareholders. The Shareholders may prescribe that any Bylaws adopted by them
shall not be changed by the Board of Directors. Action taken by the Shareholders
with respect to the Bylaws shall be taken by affirmative vote of a majority of
such Shareholders entitled to elect Directors and present at a duly convened
Shareholders' meeting. Action taken by the Board of Directors with respect to
the Bylaws must be by affirmative vote of a majority of all Directors then
holding office.
Under the DGCL, the power to adopt, amend or repeal bylaws rests with those
stockholders entitled to vote, provided that any corporation's certificate of
incorporation may additionally confer such power upon the directors. Conferring
the power to adopt, amend or repeal bylaws upon the directors may not divest,
nor limit, the stockholders' power to adopt, amend or repeal bylaws. The
Microtek Certificate of Incorporation does not authorize Microtek's Board of
Directors to adopt, alter, amend, or repeal the Microtek Bylaws. The Microtek
Bylaws may be amended or repealed at any meeting of stockholders where a quorum
is present; however, notice of such meeting of stockholders must disclose the
substance of the proposed amendment or repeal.
PREEMPTIVE RIGHTS
Under the GBCC, the shareholders of all corporations do not have preemptive
rights except to the extent the articles of incorporation so provide. The
shareholders of corporations in existence on July 1, 1989 whose: (i)
shareholders had such rights as of that date; or (ii) articles of incorporation
have been restated or amended on or after July 1, 1989, with notice to the
shareholders that such restatement or amendment would cause the shareholders of
the corporation to have preemptive rights, shall have preemptive rights unless
the articles of incorporation expressly provide otherwise. Isolyser was
incorporated in 1987; however, its articles of incorporation expressly
eliminated preemptive rights. Consequently, holders of shares of Isolyser Common
Stock do not have preemptive rights.
The DGCL does not automatically confer preemptive rights on stockholders',
therefore, stockholders have no preemptive rights unless and except to the
extent the corporation's certificate of
56
<PAGE>
incorporation expressly grants such rights. The Microtek Certificate of
Incorporation does not contain a provision expressly granting preemptive rights.
Consequently, holders of shares of Microtek capital stock do not have preemptive
rights.
STOCKHOLDER ACTION WITHOUT MEETING
Under the GBCC, any action required or permitted to be taken by vote may be
taken without a meeting by written consent, setting forth the action so taken
and signed by the holders of all of the shares entitled to vote on the action,
provided that the articles of incorporation may permit action by written consent
of the holders of less than all outstanding shares. The Isolyser Articles of
Incorporation do not contain a provision that permits action by less than
unanimous written consent.
Unless a corporation's certificate of incorporation otherwise provides, the
DGCL permits any action required to be taken at an annual or special meeting of
stockholders to be taken without a meeting, without prior notice and without a
vote, if a written consent or consents setting forth the action taken is signed
by the holders of outstanding stock having not less than the minimum number of
votes necessary to authorize or take such action at a meeting where all shares
entitled to vote thereon were present and voted, and shall be delivered to the
corporation in accordance with the DGCL. Microtek's Bylaws allow the
stockholders to take action without a meeting if all the stockholders who would
have been entitled to vote, or less than all such stockholders but not less than
the holders of a majority of the stock entitled to vote thereon if such meeting
were held, consent in writing to such corporate action; provided that the
written consent shall be signed by the holders of stock having not less than the
minimum number of votes that would be necessary to take such action at a meeting
at which all shares entitled to vote thereon were present and provided that
prompt notice must be given to all stockholders of the taking of corporate
action without a meeting and by less than unanimous consent.
STOCKHOLDER ACTION -- QUORUM REQUIREMENT
According to the GBCC, shares entitled to vote as a separate group may take
action on a matter at a meeting only if a quorum of those shares exist with
respect to that matter. Unless a corporation's articles of incorporation or the
GBCC provides otherwise, a majority of the votes entitled to be cast on the
matter by the voting group constitutes a quorum of that voting group for action
on that matter. The GBCC further provides that if a quorum exists, action on a
matter (other than the election of directors) by a voting group is approved if
the votes cast within the voting group favoring the action exceed the votes cast
opposing the action unless the GBCC, the articles of incorporation, or a
provision of the bylaws adopted by the shareholders in accordance with the GBCC
or any successor statute, requires a greater number of affirmative votes.
According to the GBCC, unless otherwise provided in the articles of
incorporation, directors are elected by a plurality of votes cast by the shares
entitled to vote in the election at a meeting at which a quorum is present. The
articles of incorporation or a bylaw adopted according to the GBCC may provide
for a greater or lesser quorum (but not less than one-third of the votes
entitled to be cast) or a greater voting requirement for shareholders (or voting
groups of shareholders) than is provided for in the GBCC; however, an amendment
to the articles of incorporation or bylaws that changes or deletes a greater
quorum or voting requirement must meet the same quorum requirement and be
adopted by the same vote and voting groups required to take action under the
quorum and voting requirements prescribed in the provision being amended.
Neither the Isolyser Articles of Incorporation nor the Isolyser Bylaws modify
the GBCC's quorum or voting requirements for shareholder action. See "--
Amendments to Certificate or Articles of Incorporation" and "-- Amendments to
Bylaws."
The DGCL allows a corporation's certificate of incorporation or bylaws to
specify the number of shares and/or the amount of other securities having voting
power whose holders shall be present or represented by proxy at any meeting in
order to constitute a quorum for, and the votes that shall be necessary for, the
transaction of any business, but requires the quorum to consist of at least
one-third of the shares entitled to a vote at the meeting. Absent specifications
in the certificate of incorporation or bylaws of the corporation, a majority of
the shares entitled to vote, present in person or represented
57
<PAGE>
by proxy, constitutes a quorum at a stockholders' meeting, and in all matters
other than the election of directors, the affirmative vote of a majority of
shares present in person or represented by proxy at the meeting and entitled to
vote will be the action of the stockholders. Directors are elected by a
plurality of the votes of the shares present in person or represented by proxy
at the meeting and entitled to vote on the election. Where a separate vote by
class or classes is required, a majority of the outstanding shares of such class
or classes, present in person or represented by proxy, constitutes a quorum
entitled to take action with respect to the vote on that matter, and the
affirmative vote of the majority of shares of the class or classes present in
person or represented by proxy at the meeting and entitled to vote is the act of
the class. The Microtek Certificate of Incorporation contains no provisions
modifying the DGCL quorum and voting requirements for stockholder action. See
"-- Amendments to Certificate of Articles of Incorporation" and "-- Amendments
to Bylaws".
ANNUAL MEETING OF STOCKHOLDERS
The GBCC provides that the corporation shall hold a meeting of shareholders
at a time stated in or fixed in accordance with the bylaws. The Isolyser Bylaws
state that the annual meeting of shareholders will be held following the close
of each fiscal year on the date and at the time designated, from time to time,
by Isolyser's Board of Directors.
The DGCL requires a corporation to hold an annual meeting of stockholders to
elect directors and transact any other proper business as the bylaws designate.
The Microtek Bylaws state that the annual meeting of stockholders will be held
on the first Monday in August in each year if not a legal holiday and if a legal
holiday, then on the next full business days at 11:00 a.m., unless the Board of
Directors provides otherwise.
SPECIAL MEETINGS OF STOCKHOLDERS
The GBCC permits the board of directors or any person specified in the
corporation's articles of incorporation or bylaws to call special meetings of
shareholders. A special meeting may also be called by the holders of at least
25%, or such greater or lesser percentages as the articles of incorporation or
bylaws provide, of all of the votes entitled to be cast on any issue proposed to
be considered at a special meeting. The Isolyser Bylaws provide that a special
meeting may be called only by (a) the Board of Directors; (b) the President; (c)
the Secretary; (d) two or more Directors; or (e) the holders of at least 25% of
all the votes entitled to be cast on any issue proposed to be considered at the
special meeting. The Isolyser Bylaws require that written notice of the time,
place and specific purpose or purposes for which the meeting is called be
delivered not less than ten nor more than sixty days before the date of the
meeting, either personally or by first class mail to each shareholder of record
entitled to vote at such meeting.
Under the DGCL, special meetings of stockholders may be called by the board
of directors or those persons authorized by the corporation's certificate of
incorporation or the bylaws. The Microtek Bylaws authorize Microtek's Board of
Directors to call a special meeting and provide that a special meeting may also
be called by the President, or by stockholders owning a majority in amount of
the entire capital stock of Microtek. Such request shall state the specific
purpose or purposes of the special meeting. Written notice of the time, place
and specific purposes of such meeting must be given by mail to each stockholder
entitled to vote at the meeting not less than ten nor more than sixty days prior
to the scheduled date of the special meeting.
CUMULATIVE VOTING
Neither the GBCC nor the DGCL grant shareholders the right to cumulate their
votes for directors unless the certificate or articles of incorporation so
provide. Neither the Microtek Certificate of Incorporation nor the Isolyser
Articles of Incorporation authorize cumulative voting.
NUMBER AND ELECTION OF DIRECTORS
Under the GBCC, a board of directors must consist of one or more
individuals, with the number specified in or affixed in accordance with the
articles of incorporation or bylaws. The articles of incorporation or bylaws may
authorize the shareholders or the board of directors to fix or change the
58
<PAGE>
number of directors or may establish a variable range for the size of the board
of directors by fixing a minimum and maximum number of directors. The GBCC
further permits the articles of incorporation or a bylaw adopted by the
shareholders to divide the directors into two or three classes, with each class
as nearly equal in number as possible. The term of office of one class of
directors shall expire each year, and no two classes' terms of office shall
expire in the same year. The Isolyser Bylaws set the number of directors between
three and twenty, with the specific number to be determined by Isolyser's Board
of Directors.
Under the DGCL, the number of directors shall be fixed or determined in the
manner the bylaws provide, unless the corporation's certificate of incorporation
fixes the number of directors, in which case the number of directors may only be
changed by amending the certificate of incorporation. The DGCL permits the
certificate of incorporation or bylaws to divide the directors into one, two or
three classes, with the term of office of one class of directors to expire each
year and the terms of office of no two classes to expire during the same year.
The Microtek Bylaws currently set the number of directors at no fewer than
five and no more than nine, with Microtek's Board of Directors or shareholders,
at any annual or special meeting, to fix the exact number. Moreover, any holders
of Microtek Preferred Stock issued in the future will have those rights
regarding the election of directors as are fixed by Microtek's Board of
Directors at that time. Currently, the Board consists of seven members.
REMOVAL OF DIRECTORS
Under the GBCC, except as the articles of incorporation otherwise provide, a
corporation's shareholders may remove any director, with or without cause, by
the vote of the holders of a majority of the outstanding shares of the
corporation entitled to vote. The GBCC permits the articles of incorporation or
a bylaw adopted by the shareholders to govern the removal of directors.
Directors elected to staggered terms may be removed only for cause, unless the
articles of incorporation or a bylaw adopted by the shareholders provide
otherwise. Neither the Isolyser Articles of Incorporation nor the Isolyser
Bylaws alter the provisions of the GBCC with respect to removal of directors.
The DGCL permits any director or the entire board of directors to be
removed, with or without cause, by the holders of a majority of the stock
entitled to vote for directors, except (a) if the corporation's board of
directors is classified, stockholders of the corporation may only effect removal
for cause unless the certificate of incorporation otherwise provides; or (b) if
the corporation's board of directors is voted for cumulatively, if less than the
entire board is to be removed, no director may be removed without cause if the
votes cast against his removal would be sufficient to elect him if then
cumulatively voted at an election of the entire board of directors, or, if there
be classes of directors, at an election of the class of directors of which he is
a part. The Microtek Bylaws allow for the removal of any director or the entire
board of directors, with or without cause, at any time by the holders of the
majority of the shares then entitled to vote an election of directors.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the GBCC, a corporation may indemnify any director or officer made a
party to a proceeding if such director or officer acted in a manner he believed
in good faith to be in or not opposed to the best interests of the corporation
and, in the case of any criminal proceeding, had no reasonable cause to believe
his conduct was unlawful. A corporation may not indemnify a director in a
derivative proceeding, or in a proceeding by or in the right of the corporation,
in which the director is adjudged liable to the corporation, or in connection
with any other proceeding in which he is adjudged liable on the basis he
improperly received a personal benefit. The corporation may not indemnify a
director unless a determination is made that he has met the applicable standard
of conduct. The corporation is required to indemnify a director to the extent
that the director has been successful, on the merits or otherwise, in the
defense of any proceeding to which he was a party because of his status as a
director of the corporation. The GBCC also provides that a company's Articles of
Incorporation or a Bylaw or agreement approved by shareholders may provide a
director with additional indemnification without
59
<PAGE>
regard to certain of the aforementioned limitations. The Isolyser Bylaws, as
approved by Isolyer's shareholders, provide that Isolyser's directors and
officers will be indemnified to the fullest extent permitted and in the manner
required under the GBCC.
The DGCL allows corporations to indemnify their directors and officers
against civil and criminal liabilities incurred if the directors and officers
acted in good faith and in a manner the directors and officers reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action, if they had no reasonable cause to believe
their conduct was unlawful. The Microtek Certificate of Incorporation and the
Microtek Bylaws provide that Microtek's directors and officers will be
indemnified to the fullest extent permitted and in the manner required by the
DGCL.
LIMITATION OF PERSONAL LIABILITY OF DIRECTORS
Under the GBCC, the articles of incorporation may limit a director's
personal liability to the corporation or its shareholders for monetary damages
for breach of the duty of care or other duty as a director, except (a) for any
appropriation, in violation of his duties, of any business opportunity of the
corporation, (b) for acts or omissions involving the director's intentional
misconduct or a knowing violation of law, (c) for unlawful distributions of the
corporation's assets, or (d) for any transaction from which the director
received an improper personal benefit. No such provision shall eliminate or
limit a director's liability for any act or omission occurring prior to the date
the provision becomes effective.
The Isolyser Articles of Incorporation limit a director's personal liability
to Isolyser or its shareholders for monetary damages for breaches of the duty of
care or the director's other duties to the extent permissible under the GBCC.
The DGCL allows a corporation's certificate of incorporation to eliminate or
limit a director's personal liability to the corporation or its stockholders for
monetary damages for the director's breach of his fiduciary duty as a director.
However, the corporation may not eliminate or limit a director's liability (a)
for any breach of the director's duty of loyalty to the corporation or its
stockholders, (b) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (c) for an unlawful
payment of dividends or an unlawful stock purchase or redemption or (d) for any
transaction from which the director derived any improper personal benefit. No
provision may retroactively eliminate or limit a director's liability.
The Microtek Certificate of Incorporation limits a director's personal
liability to Microtek or its stockholders for monetary damages to the full
extent permitted by the DGCL, and states that any repeal or modification of the
DGCL provision will be prospective only, and will not adversely affect any
limitation on the personal liability existing at or before the time of such
repeal or modification applicable to any Microtek director.
OPTION PROPOSAL
In 1990, Microtek established the Option Plan to encourage the ownership of
Microtek Common Stock by Microtek employees. All employees are eligible to
participate in the Option Plan, subject to length of service criteria. The
intention of Microtek in administering the Option Plan is to provide employees
with an ongoing incentive to increase earnings and productivity, to acknowledge
superior service contributions by employees and to recognize promotions of
employees. Each option granted pursuant to the Option Plan intended to qualify
as an incentive stock option under Section 422 of the Code must have an exercise
price equal to the fair market value of the Microtek Common Stock on the date of
grant. All other options may be granted at such exercise prices as the Board
shall determine. Pursuant to the November 1995 recommendation of Microtek's
Compensation Committee, the Microtek Board amended the Option Plan, subject to
the approval of the Microtek stockholders, to increase the number of shares of
Microtek Common Stock subject to the plan from 883,302 shares to 1,083,302
shares (the "Option Proposal"). Approval of this amendment requires the
affirmative vote
60
<PAGE>
of the holders of a majority of the shares of Common Stock represented at the
Special Meeting. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
OPTION PROPOSAL. As of the date of the Microtek Board resolved to recommend the
Option Proposal to the Microtek Stockholders, the members of the Microtek Board
beneficially owned in excess of 50% of the shares of Common Stock to be
represented at the Special Meeting and have advised Microtek that they will vote
in favor of the Option Proposal.
As of March 15, 1996 (and provided the Option Proposal is approved), options
to purchase an aggregate of 930,597 shares of Microtek Common Stock (net of
options cancelled) had been granted pursuant to the Option Plan, options to
purchase 219,168 shares had been exercised and options to purchase 711,429
shares remained outstanding. As a result, no shares remain available for
additional option grants under the Option Plan; however, options to purchase an
additional 47,295 shares of Common Stock have been granted, subject to obtaining
stockholder approval of the Option Proposal. If the Merger Agreement is approved
by the Microtek stockholders and the Merger is consummated, no additional
options will be granted under the Option Plan. In addition, the Merger Agreement
prohibits the further grant of options by Microtek prior to the Merger.
As of March 15, 1996, the following executive officers had been granted
options under the Option Plan in the amounts indicated: Kimber L. Vought, Chief
Executive Officer, 204,005 shares (including options to purchase 22,045 shares
granted subject to stockholder approval); Dan R. Lee, Vice President-Chief
Operating and Financial Officer, 208,300 shares and Lester J. Berry, Executive
Vice President, 50,000 shares.
The following discussion addresses certain anticipated federal income tax
consequences to recipients of awards made under the Option Plan. It is based on
the Code and interpretations thereof as in effect on the date of this Proxy
Statement/Prospectus.
An optionee to whom a nonqualified stock option is granted will not
recognize income as a result of the grant of the option. However, upon exercise
of the nonqualified stock option, the optionee will generally recognize ordinary
compensation income equal to the excess, if any, of the fair market value of the
shares received pursuant to exercise of the option (the "Option Shares") over
the exercise price. Taxation will be deferred until the date of exercise of a
nonqualified stock option, subject to certain exceptions, if either (i) the
Option Shares are subject to restrictions imposed by the Committee which could
result in a substantial risk of their forfeiture or (ii) the optionee is subject
to the forfeiture provisions of Section 16(b) of the Exchange Act, unless, in
either event, the optionee makes an election pursuant to Section 83(b) of the
Code (an "83(b) Election"), within 30 days of receipt of the Option Shares, to
be taxed on the date of receipt of the Option Shares. If no 83(b) Election is
made, the optionee will recognize ordinary compensation income at the time the
Option Shares are no longer subject to such restrictions or the optionee is no
longer subject to Section 16(b) liability as a result of the transfer of the
Option Shares, in an amount equal to the excess of the value of the Option
Shares at such time over the amount paid for them. The optionee's tax basis for
the Option Shares will be equal to the exercise price paid by the optionee plus
the amount includable in the optionee's gross income as compensation, and the
optionee's holding period for the Option Shares will commence on the date on
which the Option Shares are acquired.
An optionee to whom an incentive stock option which qualifies under Section
422 of the Code is granted generally will not recognize income at the time of
grant of the Incentive Stock Option or at the time of its exercise. However, the
excess of the fair market value of the Shares subject to the option (the
"Incentive Shares") over the exercise price of the option at the time of its
exercise is an adjustment to taxable income in determining an optionee's
alternative minimum taxable income and ultimately his alternative minimum tax
(AMT). As a result, this adjustment could cause the optionee to be subject to
AMT or increase the optionee's AMT liability.
If an optionee who has exercised an incentive stock option does not sell the
Incentive Shares until more than one year after exercise and more than two years
after the date of grant, such optionee will normally recognize long term capital
gain or loss equal to the difference, if any, between the selling
61
<PAGE>
price of the Incentive Shares and the exercise price. If the optionee sells the
Incentive Shares before the time periods expire (a "disqualifying disposition")
he or she will recognize ordinary compensation income equal to the lesser of (i)
the difference, if any, between the fair market value of the Incentive Shares on
the date of exercise and the exercise price of the option, and (ii) the
difference, if any, between the selling price for the Incentive Shares and the
exercise price of the option. Any other gain or loss on such sale will normally
be capital gain or loss. The tax basis of the Incentive Shares to the optionee,
for purposes of computing such other gain or loss, should be equal to the
exercise price paid (plus, in the case of an early disposition, the amount
includable in the optionee's gross income as compensation, if any).
With respect to either nonqualified or incentive stock options, if an
optionee delivers shares of the issuing company's common stock in part or full
payment of the option price, the optionee generally will be treated as having
exchanged such shares for an equivalent number of the shares received upon
exercise of the option (the "Exchange Shares"), and no gain or loss will be
recognized with respect to the shares surrendered to the company in payment of
the option price. In such a case, the optionee will have a tax basis in the
Exchange Shares which is the same as the optionee's tax basis in the shares of
stock delivered in payment of the option price. The remaining Shares received
upon exercise of the option (other than the Exchange Shares) will, in the case
of nonqualified stock options, have a tax basis equal to the income recognized
on the exercise of the option plus any cash consideration paid by the optionee
pursuant to the exercise of the option, and in the case of incentive stock
options, will have a tax basis equal to any cash consideration paid by the
optionee pursuant to the exercise of the option.
The discussion set forth above is intended only as a summary and does not
purport to be a complete enumeration or analysis of all potential tax effects
relevant to recipients of awards under the Option Plan. It is strongly
recommended that all award recipients consult their own tax advisors concerning
the federal, state and local income and other tax considerations relating to
such awards and rights thereunder. In particular, it is recommended that each
award recipient consult his or her own tax advisor as to the AMT consequences of
an award, the special tax considerations for an award recipient who is subject
to Section 16(b), whether it would be beneficial to make a Section 83(b)
Election, whether to exchange shares in order to exercise an option, and as to
any state tax consequences relating to awards under the Option Plan.
The Option Plan may establish for officers and directors of Microtek an
exemption from the provisions of Section 16(b) of the Exchange Act for the
grants of options. Section 16(b) provides for recovery by Microtek of profits
made by officers and directors on short-term trading in shares of common stock
of Microtek. Grants of options to purchase common stock under the Option Plan by
officers and employee-directors of Microtek may be entitled to an exemption from
the operation of Section 16(b), provided certain conditions are met under the
rules and regulations of the Commission.
The following table sets forth certain information with respect to options
which have been granted subject to stockholder approval pursuant to the Option
Plan to the following:
AMENDED PLAN BENEFITS
<TABLE>
<CAPTION>
NAME AND POSITION NUMBER OF OPTIONS
- ---------------------------------------------------------------------------------------------- ------------------
<S> <C>
Kimber L. Vought 22,045
Dan R. Lee 0
Lester J. Berry 0
Executive Group 22,045
Non-Executive Director Group 0
Non-Executive Officer Employee Group 25,250
</TABLE>
The exercise price of all options referenced above was set at the fair
market value of the Microtek Common Stock on the date of grant.
62
<PAGE>
LEGAL MATTERS
The validity of the shares of Isolyser Common Stock to be issued in
connection with the Merger is being passed upon for Isolyser by Arnall Golden &
Gregory, Atlanta, Georgia.
EXPERTS
The consolidated financial statements and the related financial statement
schedule of Isolyser as of December 31, 1994 and 1995 and for each of the three
years in the period ended December 31, 1995 incorporated in this proxy
statement/prospectus by reference from Isolyser's Annual Report on Form 10-K for
the year ended December 31, 1995 have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report which is incorporated by
reference herein and have been so incorporated in reliance upon the report of
such firm given upon their authority as experts in accounting and auditing.
The consolidated financial statements of Microtek as of November 30, 1994
and 1995, and for each of the years in the three-year period ended November 30,
1995 have been incorporated by reference herein in reliance upon the report of
KPMG Peat Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of such firm as experts in accounting
and auditing.
The financial statements of Medi-Plast as of December 31, 1993 and 1994 and
for each of the years in the two-year period ended December 31, 1994 have been
incorporated in this proxy statement/prospectus by reference in reliance upon
the report of Olin J. Harrell, CPA, independent certified public accountant,
incorporated by reference herein, in reliance upon the authority of such
accountant as an expert in accounting and auditing.
The statement of divisional assets, liabilities and parent's equity of
Venodyne as of February 24, 1996, and the related statements of divisional
income and cash flows for the 11 month period then ended, have been incorporated
in this proxy statement/prospectus by reference in reliance upon the report of
Wolf & Company, P.C., independent auditors, incorporated by reference herein, in
reliance upon the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of White Knight as of December 31,
1993 and 1994 and for each of the years in the three-year period ended December
31, 1994, and the statements of operations and accumulated deficit and cash
flows of CliniTech (a former division of Sterile Concepts) for the year ended
September 30, 1992 and for the period from October 1, 1992 to February 8, 1993,
incorporated in this proxy statement/prospectus by reference to Isolyser's
Current Report on Form 8-K filed with the Commission on October 3, 1995, have
been so incorporated in reliance upon the reports of KPMG Peat Marwick LLP,
independent certified public accountants, and upon the authority of said firm as
experts in accounting and auditing.
The financial statements of SafeWaste as of December 31, 1994 and for the
year then ended incorporated in this proxy statement/prospectus by reference
from Isolyser's Current Report on Form 8-K filed with the Commission on June 15,
1995 have been audited by Ernst & Young LLP, independent auditors, as stated in
their report, which is incorporated by reference herein, and have been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
STOCKHOLDERS' PROPOSALS
If the Merger does not occur, Microtek will have an annual meeting of
stockholders in late 1996. If an annual meeting of Microtek stockholders is to
occur in 1996, any proposals from stockholders to be presented for consideration
for inclusion in the proxy material in connection with such annual meeting must
be submitted in accordance with the rules of the Commission and received by the
Secretary of Microtek at Microtek's principal executive offices no later than
the close of business on September 30, 1996.
63
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER
AMONG
ISOLYSER COMPANY, INC.
(A GEORGIA CORPORATION)
MMI MERGER CORP.
(A DELAWARE CORPORATION)
AND
MICROTEK MEDICAL, INC.
(A DELAWARE CORPORATION)
Dated: March 15, 1996
<PAGE>
This Agreement and Plan of Merger (the "Agreement") is made as of the 15th
day of March, 1996, among Isolyser Company, Inc., a Georgia corporation ("ICI");
MMI Merger Corp., a Delaware corporation (the "Merger Corp."), which is wholly
owned, directly or indirectly, by ICI; and Microtek Medical, Inc., a Delaware
corporation ("MMI").
In consideration of the mutual covenants and agreements contained herein,
the parties hereto covenant and agree as follows:
ARTICLE 1.
THE MERGER
1.1. MERGER. In accordance with the provisions of the business corporation
laws of the State of Delaware, at the Effective Date (as hereinafter defined),
Merger Corp. shall be merged (the "Merger") into MMI, and MMI shall be the
surviving corporation (the "Surviving Corporation") and as such shall continue
to be governed by the laws of the State of Delaware.
1.2. CONTINUING OF CORPORATE EXISTENCE. Except as may otherwise be set
forth herein, the corporate existence and identity of MMI, with all its
purposes, powers, franchises, privileges, rights and immunities, shall continue
unaffected and unimpaired by the Merger, and the corporate existence and
identity of Merger Corp., with all its purposes, powers, franchises, privileges,
rights and immunities, at the Effective Date shall be merged with and into that
of MMI, and the Surviving Corporation shall be vested fully therewith and the
separate corporate existence and identity of Merger Corp. shall thereafter cease
except to the extent continued by statute.
1.3. EFFECTIVE DATE. The Merger shall become effective upon the occurrence
of the filing of the certificate of merger (the "Effective Date") with the
Secretary of State of the State of Delaware on the Closing Date (as defined
herein) pursuant to the provisions of the Delaware General Corporation Law
("DGCL").
1.4. CORPORATE GOVERNMENT.
(a) The Certificate of Incorporation of Merger Corp, as in effect on the
Effective Date, shall continue in full force and effect and shall be the
Certificate of Incorporation of the Surviving Corporation.
(b) The Bylaws of Merger Corp., as in effect as of the Effective Date,
shall continue in full force and effect and shall be the Bylaws of the
Surviving Corporation.
(c) The members of the Board of Directors of the Surviving Corporation
shall be the persons holding such offices in Merger Corp. as of the
Effective Date, and the officers of the Surviving Corporation shall be the
persons holding such offices in MMI as of the Effective Date.
1.5. RIGHTS AND LIABILITIES OF THE SURVIVING CORPORATION. The Surviving
Corporation shall have the following rights and obligations:
(a) The Surviving Corporation shall have all the rights, privileges
immunities and powers and shall be subject to all the duties and liabilities
of a corporation organized under the laws of the State of Delaware.
(b) The Surviving Corporation shall possess all of the rights,
privileges immunities and franchises, of either a public or private nature,
of MMI and Merger Corp. and all property, real, personal and mixed, and all
debts due on whatever account, including subscription to shares, and all
other choses in action, and every other interest of or belonging or due to
MMI and Merger Corp. shall be taken and deemed to be transferred or invested
in the Surviving Corporation without further act or deed.
(c) At the Effective Date, the Surviving Corporation shall thenceforth
be responsible and liable for all liabilities and obligations of MMI and
Merger Corp. and any claim existing or action
A-1
<PAGE>
or proceeding pending by or against Merger Corp. or MMI may be prosecuted as
if the Merger had not occurred, or the Surviving Corporation may be
substituted in its place. Neither the rights of creditors nor any liens upon
the property of Merger Corp. or MMI shall be impaired by the Merger.
1.6. CLOSING. Consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Arnall Golden &
Gregory in Atlanta, Georgia, commencing at 10:00 a.m., local time, on the date
(i) on which the Special Meeting of MMI's stockholders described in Section 5.8
occurs or (ii) as soon as possible thereafter when each of the other conditions
set forth in Articles 6 and 7 have been satisfied or waived, and shall proceed
promptly to conclusion, or at such other place, time and date as shall be fixed
by mutual agreement between ICI and MMI. The day on which the Closing shall
occur is referred to herein as the "Closing Date." Each party will cause to be
prepared, executed and delivered the Certificate of Merger to be filed with the
Secretary of State of Delaware and all other appropriate and customary documents
as any party or its counsel may reasonably request for the purpose of
consummating the transactions contemplated by this Agreement. All actions taken
at the Closing shall be deemed to have been taken simultaneously at the time the
last of any such actions is taken or completed.
1.7. TAX CONSEQUENCES. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a)(2)(E) of the Internal
Revenue Code of 1986, as amended (the "Code"), and that this Agreement shall
constitute a "plan of reorganization" for the purposes of Section 368 of the
Code.
1.8. POOLING OF INTERESTS. It is the intention of the parties hereto that
the Merger will be treated for financial reporting purposes as a pooling of
interests.
ARTICLE 2.
CONVERSION OF SHARES; TREATMENT OF OPTIONS
2.1. CONVERSION OF SHARES. The manner and basis of converting shares of
the common stock, $.01 par value, of MMI (the "MMI Common Stock") into Common
Stock, $.001 par value, of ICI ("ICI Common Stock"), shall be as follows:
(a) Except as provided in Section 2.3, each share of MMI Common Stock
which shall be outstanding immediately prior to the Effective Date shall at
the Effective Date, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into the right to receive such
number of shares of ICI Common Stock (such number, computed to four decimal
places, being referred to herein as the "Exchange Ratio") as is equal to the
quotient obtained by dividing (i) $16.50 by (ii) the "Determination Price"
(as such term is defined hereinafter) of a share of ICI Common Stock. For
the purposes of this Agreement, the term "Determination Price" shall mean
the average per share closing price of ICI Common Stock as reported on The
Nasdaq Stock Market ("NMS") over the twenty (20) trading days immediately
preceding the second trading day prior to the Effective Date; provided,
however, that in the event that at the Effective Date the Determination
Price of a share of ICI Common Stock is less than $14.50 per share, then the
Determination Price shall be deemed to have been $14.50; and provided,
further, that in the event that at the Effective Date the Determination
Price of a share of ICI Common Stock is more than $18.50 per share, then the
Determination Price shall be deemed to be $18.50.
(b) Each share of MMI Common Stock held in the treasury of MMI and each
share of MMI Common Stock owned by ICI or any direct or indirect
wholly-owned subsidiary of ICI or of MMI shall automatically be canceled and
extinguished without any conversion thereof and no payment will be made with
respect thereto.
A-2
<PAGE>
(c) Each share of Common Stock, $.001 par value, of Merger Corp. which
shall be outstanding immediately prior to the Effective Date shall at the
Effective Date, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into one share of newly issued MMI
Common Stock.
2.2. FRACTIONAL SHARES. No scrip or fractional shares of ICI Common Stock
shall be issued in the Merger, nor will any outstanding fractional share
interest entitle the owner thereof to vote, to receive dividends or to exercise
any other right of a stockholder of the Surviving Corporation. All fractional
shares of ICI Common Stock to which a holder of MMI Common Stock immediately
prior to the Effective Date would otherwise be entitled at the Effective Date
shall be aggregated. If a fractional share results from such aggregation, such
stockholder shall be entitled, after the later of (a) the Effective Date or (b)
the surrender of such stockholder's "Certificate" (as defined in Section 2.5) or
Certificates that represent such shares of MMI Common Stock, to receive from ICI
an amount in cash in lieu of such fractional share, equal to such fraction
multiplied by the Determination Price. ICI will make available to the "Exchange
Agent" (as defined in Section 2.5) the cash necessary for the purpose of paying
cash for fractional shares.
2.3. DISSENTING SHARES. To the extent that appraisal rights are available
under the DGCL, shares of MMI Common Stock that are issued and outstanding
immediately prior to the Effective Date and that have not been voted for
adoption of the Merger and with respect of which appraisal rights have been
properly demanded in accordance with the applicable provisions of the DGCL
("Dissenting Shares") shall not be converted into the right to receive the
consideration provided for in Sections 2.1 and 2.2 at or after the Effective
Date unless and until the holder of such shares withdraws his demand for such
appraisal (in accordance with the applicable provisions of the DGCL) or becomes
ineligible for such appraisal. If a holder of Dissenting Shares withdraws his
demand for such appraisal (in accordance with the applicable provisions of the
DGCL) or becomes ineligible for such appraisal, then, as of the Effective Date
or the occurrence of such event, whichever later occurs, such holder's
Dissenting Shares shall cease to be Dissenting Shares and shall be converted
into and represent the right to receive the consideration provided for in
Sections 2.1 and 2.2. If any holder of MMI Common Stock shall assert the right
to be paid the fair value of such MMI Common Stock as described above, MMI shall
give ICI prompt written notice thereof and ICI shall have the right to
participate in and direct all negotiations and proceedings with respect to any
such demands. MMI shall not, except with the prior written consent of ICI,
voluntarily make any payment with respect to, or settle or offer to settle, any
such demand for payment. After the Effective Date, ICI will cause the Surviving
Corporation to pay its statutory obligations to holders of Dissenting Shares.
2.4. STOCK OPTIONS.
(a) At the Effective Date, all options (the "Options") then outstanding
under MMI's 1990 Incentive Stock Option Plan (the "MMI Stock Option Plan")
shall remain outstanding following the Effective Date. At the Effective
Date, subject to ICI having obtained all requisite shareholder approval,
such Options shall, by virtue of the Merger and without any further action
on the part of MMI or the holder of any such Option, be assumed by ICI in
accordance with their terms and conditions as in effect at the Effective
Date (and the terms and conditions of the MMI Stock Option Plan), except
that (i) each such Option shall be exercisable for that whole number of
shares of ICI Common Stock (to the nearest whole share) into which the
number of shares of MMI Common Stock subject to such Option immediately
prior to the Effective Date would be converted under Section 2.1; (ii) the
option price per share of the MMI Common Stock shall be an amount equal to
the option price per share of MMI Common Stock subject to such Option in
effect immediately prior to the Effective Date divided by the Exchange Ratio
(the price per share, as so determined, being rounded upward to the nearest
full cent); and (iii) all actions to be taken thereunder by the Board of
Directors of MMI or a committee thereof shall be taken by the Board of
Directors of ICI or a committee thereof. In the event that ICI shall not
have obtained all requisite shareholder approval, ICI shall nevertheless
assume the Options as set forth in the preceding sentence except that such
Options may, to the extent provided by the Code, cease to be
A-3
<PAGE>
incentive stock options under Section 422 of the Code. No payment shall be
made for fractional interests. From and after the date of this Agreement, no
additional options shall be granted by MMI under the MMI Stock Option Plan
or otherwise.
(b) It is intended that the assumed Options, as set forth herein, shall
not give to any holder thereof any benefits in addition to those which such
holder had prior to the assumption of the Option. ICI shall take all
necessary corporate action necessary to reserve for issuance a sufficient
number of shares of ICI Common Stock for delivery upon exercise of the
Options. As soon as practicable after the Effective Date, ICI shall file a
registration statement, or an amendment to an existing registration
statement, under the Securities Act of 1933, as amended (the "Securities
Act"), on Form S-8 (or other successor form) with respect to the shares of
ICI Common Stock subject to such Options and shall use its best efforts to
maintain the effectiveness of such registration statement for so long as ICI
shall be obligated to file reports under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). In addition, ICI will cause such
shares to be listed on the NMS.
(c) Approval by the stockholders of MMI of this Agreement shall
constitute authorization and approval of any and all of the actions
described in this Section 2.4.
2.5. EXCHANGE AGENT.
(a) ICI shall authorize SunTrust Bank, Atlanta, Georgia, to serve as
exchange agent hereunder (the "Exchange Agent"). Promptly after the
Effective Date, ICI shall deposit or shall cause to be deposited in trust
with the Exchange Agent certificates representing the number of whole shares
of ICI Common Stock to which the holders of MMI Common Stock (other than
holders of Dissenting Shares) are entitled pursuant to this Article 2,
together with cash sufficient to pay for fractional shares then known to ICI
(such cash amounts and certificates being hereinafter referred to as the
"Exchange Fund"). The Exchange Agent shall, pursuant to irrevocable
instructions received from ICI, deliver the number of shares of ICI Common
Stock and pay the amounts of cash provided for in this Article 2 out of the
Exchange Fund. Additional amounts of cash, if any, needed from time to time
by the Exchange Agent to make payments for fractional shares shall be
provided by ICI and shall become part of the Exchange Fund. The Exchange
Fund shall not be used for any other purpose, except as provided in this
Agreement, or as otherwise agreed to by ICI, Merger Corp. and MMI prior to
the Effective Date.
(b) As soon as practicable after the Effective Date, the Exchange Agent
shall mail and otherwise make available to each record holder (other than
holders of Dissenting Shares) who, as of the Effective Date, was a holder of
an outstanding certificate or certificates which immediately prior to the
Effective Date represented shares of MMI Common Stock (the "Certificates"),
a form of letter of transmittal and instructions for use in effecting the
surrender of the Certificates for payment therefor and conversion thereof,
which letter of transmittal shall comply with all applicable rules of the
NMS. Delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to
the Exchange Agent and the form of letter of transmittal shall so reflect.
Upon surrender to the Exchange Agent of a Certificate, together with such
letter of transmittal duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor (i) one or more certificates as
requested by the holder (properly issued, executed and countersigned, as
appropriate) representing that number of whole shares of ICI Common Stock to
which such holder of MMI Common Stock shall have become entitled pursuant to
the provisions of this Article 2, and (ii) as to any fractional share, a
check representing the cash consideration to which such holder shall have
become entitled pursuant to Section 2.2, and the Certificate so surrendered
shall forthwith be cancelled. No interest will be paid or accrued on the
cash payable upon surrender of the Certificates. ICI shall pay any transfer
or other taxes required by reason of the issuance of a certificate
representing shares of ICI Common Stock; provided, however, that such
certificate is issued in the name of the person in whose name the
Certificate surrendered in exchange therefor is registered; provided
further,
A-4
<PAGE>
however, that ICI shall not pay any transfer or other tax if the obligation
to pay such tax under applicable law is solely that of the stockholder or if
payment of any such tax by ICI otherwise would cause the Merger to fail to
qualify as a tax free reorganization under the Code. If any portion of the
consideration to be received pursuant to this Article 2 upon exchange of a
Certificate (whether a certificate representing shares of ICI Common Stock
or a check representing cash for a fractional share) is to be issued or paid
to a person other than the person in whose name the Certificate surrendered
in exchange therefor is registered, it shall be a condition of such issuance
and payment that the Certificate so surrendered shall be properly endorsed
or otherwise in proper form for transfer as the Exchange Agent may require
and that the person requesting such exchange shall pay in advance any
transfer or other taxes required by reason of the issuance of a certificate
representing shares of ICI Common Stock or a check representing cash for a
fractional share to such other person, or establish to the satisfaction of
the Exchange Agent that such tax has been paid or that no such tax is
applicable. From the Effective Date until surrender in accordance with the
provisions of this Section 2.5, each Certificate (other than Certificates
representing treasury shares of MMI and Certificates representing Dissenting
Shares) shall represent for all purposes only the right to receive the
consideration provided in Sections 2.1 and 2.2. No dividends that are
otherwise payable on ICI Common Stock will be paid to persons entitled to
receive ICI Common Stock until such persons surrender their Certificates.
After such surrender, there shall be paid to the person in whose name ICI
Common Stock shall be issued any dividends on such ICI Common Stock that
shall have a record date on or after the Effective Date and prior to such
surrender. If the payment date for any such dividend is after the date of
such surrender, such payment shall be made on such payment date. In no event
shall the persons entitled to receive such dividends be entitled to receive
interest on such dividends. All payments in respect of shares of MMI Common
Stock that are made in accordance with the terms hereof shall be deemed to
have been made in full satisfaction of all rights pertaining to such
securities.
(c) In the case of any lost, mislaid, stolen or destroyed Certificates,
the holder thereof may be required, as a condition precedent to the delivery
to such holder of the consideration described in this Article 2, to deliver
to ICI a bond in such reasonable sum as ICI may direct as indemnity against
any claim that may be made against the Exchange Agent, ICI or the Surviving
Corporation with respect to the Certificate alleged to have been lost,
mislaid, stolen or destroyed.
(d) After the Effective Date, there shall be no transfers on the stock
transfer books of the Surviving Corporation of the shares of MMI Common
Stock that were outstanding immediately prior to the Effective Date. If,
after the Effective Date, Certificates are presented to the Surviving
Corporation for transfer, they shall be cancelled and exchanged for the
consideration described in this Article 2.
(e) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of MMI for six months after the Effective Date shall be
returned to ICI, upon demand, and any holder of MMI Common Stock who has not
theretofore complied with Section 2.5(b) shall thereafter look only to ICI
for issuance of the number of shares of ICI Common Stock and other
consideration to which such holder has become entitled pursuant to this
Article 2; provided, however, that neither the Exchange Agent nor any party
hereto shall be liable to a holder of shares of MMI Common Stock for any
amount required to be paid to a public official pursuant to any applicable
abandoned property, escheat or similar law.
2.6. ADJUSTMENT. If, between the date of this Agreement and the Closing
Date or the Effective Date, as the case may be, (i) the outstanding shares of
MMI Common Stock or ICI Common Stock shall have been changed into a different
number of shares or a different class by reason of any classification,
recapitalization, split-up, combination, exchange of shares, or readjustment or
a stock dividend thereon shall be declared with a record date within such period
or (ii) MMI shall have issued additional shares of MMI Common Stock (other than
upon the exercise of employee stock options granted prior to the date hereof) or
options or warrants to purchase the same, or securities convertible into the
A-5
<PAGE>
same, the number of shares of ICI Common Stock issued pursuant to the Merger
shall be adjusted to accurately reflect such change (it being acknowledged that
MMI elsewhere herein covenants not to take any of the actions described in (i)
or (ii) above).
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF MMI
Except as set forth on "MMI's Disclosure Schedule" (which term shall mean
the written information delivered by MMI to ICI prior to the execution of this
Agreement; provided, that information shall be deemed to be disclosed in
accordance with a given provision of this Agreement only to the extent that
specific written reference to such provision of this Agreement is made in
connection with the disclosure of such information at the time of such
delivery), MMI hereby represents and warrants to ICI and Merger Corp. as
follows:
3.1. ORGANIZATION AND GOOD STANDING OF MMI. Each of MMI and the "MMI
Subsidiaries" (as defined in Section 3.2) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation. Accurate and complete copies of MMI's certificate of
incorporation and bylaws, in each case as in effect on the date hereof, have
heretofore been delivered to ICI.
3.2. CAPITAL STOCK OF MMI SUBSIDIARIES AND OTHER OWNERSHIP
INTERESTS. MMI's Disclosure Schedule sets forth a true and complete list of all
corporations, partnerships and other entities in which MMI owns any equity
interest (the "MMI Subsidiaries"), the jurisdiction in which each MMI Subsidiary
is incorporated or organized, and all shares of capital stock or other ownership
interests authorized, issued and outstanding of each MMI Subsidiary. The shares
of capital stock or other equity interests of each MMI Subsidiary have been duly
authorized and are validly issued, fully paid and nonassessable and free of any
preemptive right. All shares of capital stock or other equity interests of each
MMI Subsidiary owned by MMI or any of its subsidiaries are set forth on MMI's
Disclosure Schedule and are owned by MMI, either directly or indirectly as set
forth in MMI's Disclosure Schedule, free and clear of all liens, encumbrances,
equities or claims.
3.3. FOREIGN QUALIFICATION. MMI and each of the MMI Subsidiaries are duly
qualified or licensed to do business and are in good standing as a foreign
corporation in every jurisdiction where the failure so to qualify could have a
material adverse effect on (a) the business, operations, prospects, assets or
financial condition of MMI and the MMI Subsidiaries taken as a whole or (b) the
validity or enforceability of, or the ability of MMI to perform its obligations
under, this Agreement and the other documents contemplated hereby (an "MMI
Material Adverse Effect").
3.4. CORPORATE POWER AND AUTHORITY. Each of MMI and the MMI Subsidiaries
has the corporate power and authority and all licenses and permits required by
governmental authorities to own, lease and operate its properties and assets and
to carry on its business as currently being conducted. MMI has the corporate
power and authority to execute and deliver this Agreement and the agreements,
documents and instruments contemplated hereby and, subject to the approval of
this Agreement and the Merger by its stockholders, to perform its obligations
under this Agreement and the other documents executed or to be executed by MMI
in connection with this Agreement and to consummate the Merger. The execution,
delivery, and performance by MMI of this Agreement and the other documents
executed or to be executed by MMI in connection with this Agreement have been
duly authorized by all necessary corporate action.
3.5. BINDING EFFECT. This Agreement and the other documents executed or to
be executed by MMI in connection with this Agreement have been or will have been
duly executed and delivered by MMI and are or will be, when executed and
delivered, the legal, valid and binding obligations of MMI enforceable in
accordance with their terms except that:
(a) enforceability may be limited by bankruptcy, insolvency or other
similar laws affecting creditors' rights;
A-6
<PAGE>
(b) the availability of equitable remedies may be limited by equitable
principles of general applicability; and
(c) rights to indemnification may be limited by considerations of public
policy.
3.6. ABSENCE OF RESTRICTIONS AND CONFLICTS. Subject only to the approval
of the adoption of this Agreement and the Merger by MMI's stockholders as
described in Section 5.8 and the following sentence of this Section, the
execution, delivery and performance of this Agreement and the other documents
executed or to be executed by MMI in connection with this Agreement and the
consummation of the Merger and the other transactions contemplated by this
Agreement and the fulfillment of and compliance with the terms and conditions of
this Agreement do not and will not, with the passing of time or the giving of
notice or both, violate or conflict with, constitute a breach of or default
under, result in the loss of any material benefit under, permit or result in the
acceleration or termination of any obligation under, or result in the creation
of any lien, security interest, charge or encumbrance upon any of the properties
or assets of MMI or any of the MMI Subsidiaries under, (i) any term or provision
of the Articles or Certificate of Incorporation or Bylaws of MMI or any MMI
Subsidiary, (ii) any "MMI Material Contract" (as defined in Section 3.13), (iii)
any judgment, decree, permit, concession, license, or order of any court or
governmental authority or agency to which MMI or any MMI Subsidiary is a party
or by which MMI, any MMI Subsidiary or any of their respective properties is
bound or (iv) any statute, law, regulation or rule applicable to MMI or any MMI
Subsidiary. Except for compliance with the applicable requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), the
Securities Act, the Exchange Act, and applicable state securities laws, no
consent, approval, order or authorization of, or registration, declaration or
filing with, any governmental agency or public or regulatory unit, agency, body
or authority is required in connection with the execution, delivery or
performance of this Agreement by MMI, the consummation by MMI of the
transactions contemplated hereby or the ownership and operation by MMI of its
business and properties after the Effective Date in substantially the same
manner as now owned and operated.
3.7. CAPITALIZATION OF MMI.
(a) The authorized capital stock of MMI consists of 15,000,000 shares of
common stock, $.01 par value, and 1,000,000 shares of preferred stock, no
par value. As of the date hereof, there were (i) 4,593,220 shares of MMI
Common Stock issued and outstanding (not including 236,064 shares held in
the treasury), (ii) no shares of preferred stock, and (iii) 711,429 shares
of MMI Common Stock reserved for issuance upon the exercise of outstanding
Options granted under the MMI Option Plan, the terms of which are summarized
in MMI's Disclosure Schedule. No subsidiary of MMI holds any shares of the
capital stock of MMI. Since February 29, 1996, MMI has not (i) issued any
shares of capital stock except pursuant to the exercise of then outstanding
Options in accordance with their terms or (ii) repurchased or redeemed any
shares of MMI capital stock.
(b) All of the issued and outstanding shares of MMI Common Stock have
been duly authorized and validly issued and are fully paid, nonassessable
and free of preemptive rights.
(c) To MMI's knowledge, there are no voting trusts, stockholder
agreements or other voting arrangements by the stockholders of MMI.
(d) Except as set forth in subsection (a) above, there is no outstanding
subscription, contract, convertible or exchangeable security, option,
warrant, call or other right obligating MMI or any of MMI Subsidiaries to
issue, sell, exchange or otherwise dispose of, or to purchase, redeem or
otherwise acquire, shares of, or securities convertible into or exchangeable
for, capital stock of MMI or MMI Subsidiaries.
3.8 MMI SEC REPORTS. MMI has made available to ICI and Merger Corp. (i)
MMI's Annual Reports on Form 10-K, including all exhibits filed thereto and
items incorporated therein by reference, (ii) MMI's Quarterly Reports on Form
10-Q, including all exhibits thereto and items incorporated therein by
reference, (iii) proxy statements relating to MMI's meetings of stockholders and
(iv) all other reports or registration statements (as amended or supplemented
prior to the date
A-7
<PAGE>
hereof), filed by MMI with the Securities and Exchange Commission (the "SEC")
since December 31, 1993, including all exhibits thereto and items incorporated
therein by reference (items (i) through (iv) being referred to as the "MMI SEC
Reports"). As of their respective dates, the MMI SEC Reports did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Since December 31,
1993, MMI has filed all forms, reports and documents with the SEC required to be
filed by it pursuant to the federal securities laws and the SEC rules and
regulations thereunder, each of which complied as to form, at the time such
form, report or document was filed, in all material respects with the applicable
requirements of the Securities Act and the Exchange Act and the applicable rules
and regulations thereunder.
3.9. FINANCIAL STATEMENTS AND RECORDS OF MMI. MMI has made available to
ICI and Merger Corp. true, correct and complete copies of (i) the consolidated
balance sheets of MMI and the MMI Subsidiaries as of November 30, 1994 and 1995
and the consolidated statements of income, stockholders' equity and cash flows
for the fiscal years then ended, including the notes thereto, in each case
examined by and accompanied by the report of KPMG Peat Marwick L.L.P. and (ii)
the unaudited balance sheet of MMI and the MMI Subsidiaries as of February 29,
1996 and the related unaudited statements of income, stockholders' equity and
cash flows for the fiscal quarter then ended (collectively the "MMI Financial
Statements"). The MMI Financial Statements have been prepared from, and are in
accordance with, the books and records of MMI and the MMI Subsidiaries and
present fairly, in all material respects, the assets, liabilities and financial
position of MMI as of the dates thereof and the results of operations and
changes in financial position thereof for the periods then ended, in each case
in conformity with generally accepted accounting principles, consistently
applied, except as noted therein. Since February 29, 1996, there has been no
change in accounting principles applicable to, or methods of accounting utilized
by, MMI, except as noted in the MMI Financial Statements. The statements of
income and cash flow contained in the MMI Financial Statements do not contain
any material items of special or nonrecurring income, except as specifically
identified therein. On or before the 20th day of each calendar month following
the date of this Agreement, MMI shall deliver to ICI unaudited financial
statements (including a balance sheet and statements of income and cash flow) as
of the end of the previous month and for the year to date. The books and records
of MMI have been and are being maintained in accordance with good business
practice, reflect only valid transactions, are complete and correct in all
material respects, and present fairly in all material respects the basis for the
financial position and results of operations of MMI set forth in the MMI
Financial Statements.
3.10. ABSENCE OF CERTAIN CHANGES. Since February 29, 1996, MMI and the MMI
Subsidiaries have not, except as may result from the transactions contemplated
by this Agreement:
(a) suffered any change in the business, results of operations, working
capital, assets, liabilities or condition (financial or otherwise) or the
manner of conducting the business of MMI and MMI Subsidiaries taken as a
whole, except as reflected on the MMI Financial Statements and except for
such changes that would not have an MMI Material Adverse Effect;
(b) suffered any damage or destruction to or loss of the assets of MMI
or any MMI Subsidiary, whether or not covered by insurance, which property
or assets are material to the operations or business of MMI and MMI
Subsidiaries taken as a whole;
(c) forgiven, compromised, canceled, released, waived or permitted to
lapse any material rights or claims;
(d) entered into or terminated any material agreement, commitment or
transaction, or agreed or made any changes in material leases or agreements,
or suffered any of the foregoing to occur, other than renewals or extensions
thereof and leases, agreements, transactions and commitments entered into in
the ordinary course of business (excluding the pending asset acquisitions
described in the MMI Disclosure Schedule);
A-8
<PAGE>
(e) written up, written down or written off the book value of any
material amount of assets;
(f) declared, paid or set aside for payment any dividend or distribution
with respect to MMI's capital stock;
(g) redeemed, purchased or otherwise acquired, or sold, granted or
otherwise disposed of, directly or indirectly, any of MMI's capital stock or
securities (other than shares issued upon exercise of the Options) or any
rights to acquire such capital stock or securities, or agreed to changes in
the terms and conditions of any such rights outstanding as of the date of
this Agreement;
(h) increased the compensation of or paid any bonuses to any employees
or contributed to any employee benefit plan, other than in accordance with
established policies, practices or requirements and as provided in Section
5.1 hereof;
(i) entered into any employment, consulting, compensation or collective
bargaining agreement with any person or group, or experienced any
resignations of, or had any terminations or disputes involving the
employment or contract relationship with any of its employees or sales
representatives which could have a MMI Material Adverse Effect on the
Surviving Corporation;
(j) entered into, adopted or amended any employee benefit plan;
(k) entered into any transaction other than in the ordinary course of
business; or
(l) entered into any agreement to do any of the foregoing.
3.11. NO MATERIAL UNDISCLOSED LIABILITIES. There are no liabilities or
obligations of MMI or the MMI Subsidiaries of any nature, whether absolute,
accrued, contingent or otherwise, other than the liabilities and obligations
that are fully reflected, accrued or reserved against in the MMI Financial
Statements, for which the reserves are appropriate and reasonable, or incurred
in the ordinary course of business and consistent with past practices since
February 29, 1996.
3.12. TAX RETURNS; TAXES. Each of MMI and the MMI Subsidiaries have duly
and timely filed all federal, state, county, local and foreign tax returns and
reports required to be filed by it, including those with respect to income,
payroll, property, withholding, social security, unemployment, franchise, excise
and sales taxes and all such returns and reports are true and correct in all
material respects; have either paid in full all taxes that have become due as
reflected on any return or report and any interest and penalties with respect
thereto or have fully accrued on its books or have established adequate reserves
for all taxes payable but not yet due; and have made cash deposits with
appropriate governmental authorities representing estimated payments of taxes,
including income taxes and employee withholding tax obligations. No extension or
waiver of any statute of limitations or time within which to file any return has
been granted to or requested by MMI or the MMI Subsidiaries with respect to any
tax. No unsatisfied deficiency, delinquency or default for any tax, assessment
or governmental charge has been claimed, proposed or assessed against MMI or the
MMI Subsidiaries, nor has MMI or the MMI Subsidiaries received notice of any
such deficiency, delinquency or default. There is no audit, examination,
deficiency or refund litigation or matter in controversy with respect to any
taxes. MMI and the MMI Subsidiaries have no material tax liabilities other than
those reflected on the MMI Financial Statements and those arising in the
ordinary course of business since February 29, 1996. MMI will make available to
ICI true, complete and correct copies of MMI's consolidated federal tax returns
for the last five years and make available such other tax returns requested by
ICI.
3.13. MATERIAL CONTRACTS. MMI will furnish or make available accurate and
complete copies of the MMI Material Contracts (as defined herein) applicable to
MMI or any of the MMI Subsidiaries to ICI. All of the MMI Material Contracts are
valid, binding and enforceable. There is not under any of the MMI Material
Contracts any existing breach, default or event of default by MMI or any of the
MMI Subsidiaries nor event that with notice or lapse of time or both would
constitute a breach, default or event of default by MMI or any of the MMI
Subsidiaries nor does MMI know of, and MMI has not received notice of, or made a
claim with respect to, any breach or default by any other party thereto
A-9
<PAGE>
which would, severally or in the aggregate, have an MMI Material Adverse Effect.
As used herein, the term "MMI Material Contracts" shall mean all contracts and
agreements filed, or required to be filed, as exhibits to MMI's Annual Report on
Form 10-K for the year ended November 30, 1995, any contracts and agreements
entered into since November 30, 1995 which would be required to be filed as an
exhibit to MMI's Annual Report on Form 10-K for the year ending November 30,
1996, any note, bond, mortgage, indenture, license agreement, lease or other
instrument or obligation to which any of MMI or the MMI Subsidiaries is a party
or by which any of them or any of their properties or assets may be subject.
Except as set forth in the MMI Disclosure Schedule, neither MMI nor any MMI
Subsidiary is a party to any legally binding contract to sell or purchase goods
or services which is not terminable on less than six months notice; any power of
attorney; any agreement containing covenants by it not to compete or restricting
the customers from whom or the area in which it may solicit or conduct its
business; any contract arrangement or commitment for the acquisition of any
other business or assets not made in the ordinary course of business; any
contracts, arrangements or commitments for capital expenditures in excess of
$50,000 in the aggregate; and any contract, arrangement or commitment for
payment of severance or other fees to any existing or former employee,
consultant or sales representative.
3.14. LITIGATION AND GOVERNMENT CLAIMS. Except as disclosed in the MMI SEC
Reports, there is no pending suit, claim, action or litigation, or
administrative, arbitration or other proceeding or governmental investigation or
inquiry, or any pending change in any environmental, zoning or building laws,
regulations or ordinances against MMI or the MMI Subsidiaries to which their
businesses or assets are subject which would, severally or in the aggregate,
have an MMI Material Adverse Effect. To the knowledge of MMI, there are no such
proceedings threatened or contemplated, or any unasserted claims (whether or not
the potential claimant may be aware of the claim) of any nature that might be
asserted against MMI or the MMI Subsidiaries which would, severally or in the
aggregate, have an MMI Material Adverse Effect. Neither MMI nor any MMI
Subsidiary is subject to any judgment, decree, injunction, rule or order of any
court, or any governmental restriction applicable to MMI or any MMI Subsidiary
which is reasonably likely (i) to have an MMI Material Adverse Effect or (ii) to
cause a material limitation on ICI's ability to operate the business of MMI
after the Closing.
3.15. COMPLIANCE WITH LAWS. MMI and the MMI Subsidiaries each have all
material authorizations, approvals, licenses and orders to carry on their
respective businesses as they are now being conducted, to own or hold under
lease the properties and assets they own or hold under lease and to perform all
of their obligations under the agreements to which they are a party, except for
instances which would not have an MMI Material Adverse Effect. MMI and the MMI
Subsidiaries have been and are in compliance with all applicable laws,
regulations and administrative orders of any country, state or municipality or
of any subdivision of any thereof to which their respective businesses and their
employment of labor or their use or occupancy of properties or any part hereof
are subject, the failure to obtain or the violation of which would have an MMI
Material Adverse Effect.
3.16. EMPLOYEE BENEFIT PLANS. Each employee benefit plan, as such term is
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), of MMI or the MMI Subsidiaries (collectively the "MMI
Employee Plans") complies in all material respects with all applicable
requirements of ERISA and the Code, and other applicable laws. None of the MMI
Employee Plans is an employee pension benefit plan subject to Title IV or Part 3
of Subtitle B of Title I of ERISA or a multiemployer plan, as such terms are
defined in ERISA. Neither MMI nor any MMI Subsidiary, nor any of their
respective directors, officers, employees or agents has, with respect to any MMI
Employee Plan, engaged in any "prohibited transaction," as such term is defined
in the Code or ERISA, nor has any MMI Employee Plan engaged in such prohibited
transaction which could result in any taxes or penalties or other prohibited
transactions, which in the aggregate could have an MMI Material Adverse Effect.
3.17. LABOR RELATIONS. Each of MMI and the MMI Subsidiaries is in
compliance in all respects with all laws (including Federal and state laws and
the laws of another country or governmental entity
A-10
<PAGE>
thereof) respecting employment and employment practices, terms and conditions of
employment, wages and hours, and is not engaged in any unfair labor or unlawful
employment practice, except in any case which would not have an MMI Material
Adverse Effect. There is no unlawful employment practice discrimination charge
pending before the EEOC or EEOC recognized state "referral agency." There is no
unfair labor practice charge or complaint against MMI or any of the MMI
Subsidiaries pending before the National Labor Review Board. There is no labor
strike, dispute, slowdown or stoppage actually pending or, to the knowledge of
MMI, threatened against or involving or affecting MMI or any of the MMI
Subsidiaries and no National Labor Review Board representation question exists
respecting their respective employees. No grievances or arbitration proceeding
is pending and no written claim therefor exists. There is no collective
bargaining agreement that is binding on MMI or any of the MMI Subsidiaries.
3.18. INTELLECTUAL PROPERTY. MMI and the MMI Subsidiaries own or have
valid, binding and enforceable rights to use all patents, trademarks, trade
names, service marks, service names, copyrights, applications therefor and
licenses or other rights in respect thereof ("MMI Intellectual Property") used
or held for use in connection with the business of MMI or the MMI Subsidiaries,
without any conflict with the rights of others, except for such conflicts as do
not have an MMI Material Adverse Effect. Neither MMI nor any of the MMI
Subsidiaries has received any notice from any other person pertaining to or
challenging the right of MMI or any of the MMI Subsidiaries to use any MMI
Intellectual Property or any trade secrets, proprietary information, inventions,
know-how, processes and procedures owned or used or licensed to MMI or the MMI
Subsidiaries.
3.19. PROPERTIES. MMI and the MMI Subsidiaries have good and marketable
title, free and clear of all liens, claims or encumbrances (other than for the
MMI Material Contracts) to all of their material properties and assets whether
tangible or intangible, real, personal or mixed, reflected on the MMI Financial
Statements as being owned by MMI or the MMI Subsidiaries. All buildings and all
fixtures, equipment and other property and assets which are material to its
business held under leases or subleases by any of MMI or the MMI Subsidiaries
are held under valid instruments enforceable in accordance with their respective
terms. Substantially all of MMI's and MMI Subsidiaries' equipment and properties
have been well maintained and are in good and serviceable condition, reasonable
wear and tear excepted.
3.20. INSURANCE. MMI and each of the MMI Subsidiaries is presently
insured, and during each of the past five (5) calendar years has been insured
for reasonable amounts against such risks as companies engaged in similar
business would, in accordance with good business practice, customarily be
insured.
3.21. ENVIRONMENTAL MATTERS. MMI and the MMI Subsidiaries are in
compliance with all applicable federal, state, local and foreign laws relating
to emissions, discharges and releases of hazardous materials into the
environment and the generation, treatment, storage, transportation and disposal
of hazardous waste, including, without limitation, any applicable provisions of
the Resource Conservation and Recovery Act of 1976 or the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, except as would
not cause a MMI Material Adverse Effect. There are no conditions at, on, under
or related to any real property owned or operated by MMI or the MMI Subsidiaries
which presently or potentially poses a significant hazard to human health or the
environment, and there has been no production, use, treatment, storage,
transportation or disposal by MMI or any of the MMI Subsidiaries of any
Hazardous Substance (as hereinbelow defined) nor any release or threatened
release by MMI or any MMI subsidiary of any Hazardous Substance. No Hazardous
Substance is now or ever has been stored by MMI or the MMI Subsidiaries in
underground tanks, pits or surface impoundments. For purposes of the foregoing,
the term "Hazardous Substance" means any hazardous or toxic substance, material
or waste (including, without limitation, petroleum products and by-products)
which is regulated by any applicable federal, state, local or foreign authority.
A-11
<PAGE>
3.22. REGISTRATION OBLIGATIONS. Neither MMI nor any of the MMI
Subsidiaries is under any obligation, contingent or otherwise, which will
survive the Merger to register any of its securities under the Securities Act.
3.23. STATE TAKEOVER LAWS. MMI and the MMI Subsidiaries have taken all
steps to exempt the transactions contemplated by this Agreement, and this
Agreement is not subject to, any applicable state takeover law including,
without limitation, DGCL Section 203.
3.24. ACCOUNTING, TAX AND REGULATORY MATTERS. Neither MMI nor any of the
MMI Subsidiaries has taken or agreed to take any action or has any knowledge of
any fact or circumstances that would prevent the transactions contemplated
hereby from qualifying for pooling of interest accounting treatment or as a
reorganization within the meaning of Section 368 of the Code.
3.25. ACCURACY OF DISCLOSURES. None of the information supplied by MMI or
any MMI Subsidiary for inclusion in the Registration Statement or Proxy
Statement (as such terms are defined in Section 5.7) will, in the case of the
Proxy Statement or any amendments or supplements thereto, at the time of mailing
of the Proxy Statement and any amendments or supplements thereto, and at the
time of the meeting of stockholders of MMI in accordance therewith, or, in the
case of the Registration Statement at the time it becomes effective and at the
Effective Date, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading. The Registration Statement will comply as to form in all
material respects with the provisions of the Securities Act, and the rules and
regulations promulgated thereunder. The Proxy Statement will comply as to form
in all material respects with the provisions of the Exchange Act and the rules
and regulations thereunder.
3.26. BROKERS AND FINDERS. None of MMI, the MMI Subsidiaries or, to MMI's
knowledge, any of their respective officers, directors and employees has
employed any broker, finder or investment bank or incurred any liability for any
investment banking fees, financial advisory fees, brokerage fees or finders'
fees in connection with the transactions contemplated hereby, except that MMI
has engaged Goldman, Sachs & Co. as financial advisor pursuant to a written
agreement, a true and complete copy of which has been delivered to ICI. Other
than the foregoing arrangements and other than certain fees that may be paid to
ICI's financial advisor as contemplated by Section 4.24 hereof, MMI is not aware
of any claim for payment of any finder's fees, brokerage or agent's commissions
or other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby. MMI has
delivered to ICI all contracts, agreements and documents, including summaries of
oral agreements, that relate to the engagement of and the payment of fees to its
financial advisors.
3.27. OPINION OF FINANCIAL ADVISOR. MMI has received (and upon receipt
thereof will promptly deliver to ICI a photocopy thereof) the opinion of its
financial advisor (addressed solely to the MMI Board of Directors and not to be
relied upon by any other person) to the effect that, as of the date hereof, the
consideration is fair to the holders of MMI Common Stock.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF ICI AND MERGER CORP.
Except as set forth on "ICI's Disclosure Schedule" (which term shall mean
the written information delivered by ICI to MMI prior to the execution of this
Agreement; provided, that information shall be deemed to be disclosed in
accordance with a given provision of this Agreement only to the extent that
specific written reference to such provision of this Agreement is made in
connection with the disclosure of such information at the time of such
delivery), ICI and Merger Corp. hereby represent and warrant to MMI as follows:
4.1. ORGANIZATION AND GOOD STANDING OF ICI. Each of ICI, Merger Corp. and
the ICI Subsidiaries (as defined in Section 4.2) is a corporation duly
organized, validly existing and in good standing
A-12
<PAGE>
under the laws of the jurisdiction of its incorporation. Accurate and complete
copies of ICI's articles of incorporation and bylaws, in each case as in effect
on the date hereof, have heretofore been delivered to MMI.
4.2. CAPITAL STOCK OF ICI SUBSIDIARIES AND OTHER OWNERSHIP
INTERESTS. ICI's Disclosure Schedule sets forth a true and complete list of all
corporations, partnerships and other entities in which ICI owns any equity
interest (the "ICI Subsidiaries"), the jurisdiction in which each ICI Subsidiary
is incorporated or organized, and all shares of capital stock or other ownership
interests authorized, issued and outstanding of each ICI Subsidiary. The shares
of capital stock or other equity interests of each ICI Subsidiary have been duly
authorized and are validly issued, fully paid and nonassessable.
4.3. FOREIGN QUALIFICATION. ICI and each of the ICI Subsidiaries are duly
qualified or licensed to do business and are in good standing as a foreign
corporation in every jurisdiction where the failure so to qualify could have a
material adverse effect on (a) the business, operations, prospects, assets or
financial condition of ICI and the ICI Subsidiaries taken as a whole or (b) the
validity or enforceability of, or the ability of ICI to perform its obligations
under, this Agreement and the other documents contemplated hereby (an "ICI
Material Adverse Effect").
4.4. CORPORATE POWER AND AUTHORITY. Each of ICI and the ICI Subsidiaries
has the corporate power and authority and all licenses and permits required by
governmental authorities to own, lease and operate its properties and assets and
to carry on its business as currently being conducted. Each of ICI and Merger
Corp. has the corporate power and authority to execute and deliver this
Agreement and, except as set forth in ICI's Disclosure Schedule, to perform its
obligations under this Agreement and the other documents executed or to be
executed by ICI in connection with this Agreement and to consummate the Merger.
Except as set forth in ICI's Disclosure Schedule, the execution, delivery, and
performance by ICI and Merger Corp. of this Agreement and the other documents
executed or to be executed by ICI or Merger Corp., as applicable, in connection
with this Agreement have been duly authorized by all necessary corporate action.
4.5. BINDING EFFECT. This Agreement and the other documents executed or to
be executed by ICI and Merger Corp. in connection with this Agreement have been
or will have been duly executed and delivered by ICI and Merger Corp. and are or
will be, when executed and delivered, the legal, valid and binding obligations
of ICI and Merger Corp., enforceable in accordance with their terms except that:
(a) enforceability may be limited by bankruptcy, insolvency or other
similar laws affecting creditors' rights;
(b) the availability of equitable remedies may be limited by equitable
principles of general applicability; and
(c) rights to indemnification may be limited by considerations of public
policy.
4.6. ABSENCE OF RESTRICTIONS AND CONFLICTS. The consummation of the Merger
and the other transactions contemplated by this Agreement and the fulfillment of
and compliance with the terms and conditions of this Agreement do not and will
not, with the passing of time or the giving of notice or both, violate or
conflict with, constitute a breach of or default under, result in the loss of
any material benefit under, permit or result in the acceleration or termination
of any obligation under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of ICI or
any of the ICI Subsidiaries under, (i) any term or provision of the Articles or
Certificate of Incorporation or Bylaws of ICI or any ICI Subsidiary, (ii) any
"ICI Material Contract" (as defined in Section 4.13), (iii) any judgment,
decree, permit, concession, license or order of any court or governmental
authority or agency to which ICI or any ICI Subsidiary is a party or by which
ICI, any ICI Subsidiary or any of their respective properties is bound, or (iv)
any statute, law, regulation or rule applicable to ICI or any ICI Subsidiary.
Except for compliance with the applicable requirements of the HSR Act, the
Securities Act, the Exchange Act, the NMS and applicable state securities laws,
no
A-13
<PAGE>
consent, approval, order or authorization of, or registration, declaration or
filing with, any governmental agency or public or regulatory unit, agency, body
or authority is required in connection with the execution, delivery or
performance of this Agreement by ICI, the consummation by ICI of the
transactions contemplated hereby or the ownership and operation of MMI by ICI
after the Effective Date in substantially the same manner as now owned and
operated.
4.7. CAPITALIZATION OF ICI.
(a) The authorized capital stock of ICI consists of 100,000,000 shares
of ICI Common Stock, $.001 par value; and 10,000,000 shares of preferred
stock, no par value. As of the date hereof, there are (i) 30,546,186 shares
of Common Stock outstanding, (ii) no shares of the Preferred Stock
outstanding, and (iii) 2,756,886 shares reserved for issuance upon the
exercise of outstanding options (the "ICI Options") granted under ICI's
stock option plans.
(b) All of the issued and outstanding shares of ICI Common Stock have
been duly authorized and validly issued and are fully paid, nonassessable
and free of preemptive rights.
(c) To ICI's knowledge, there are no voting trusts, stockholder
agreements or other voting arrangements by the stockholders of ICI.
(d) Except as set forth in subsection (a) above, there is no outstanding
subscription, contract, convertible or exchangeable security, option,
warrant, call or other right obligating ICI or any of the ICI Subsidiaries
to issue, sell, exchange or otherwise dispose of, or to purchase, redeem or
otherwise acquire, shares of, or securities convertible into or exchangeable
for, capital stock of ICI or the ICI Subsidiaries.
4.8. ICI SEC REPORTS. ICI has made available to MMI (i) ICI's Annual
Reports on Form 10-K, including all exhibits filed thereto and items
incorporated therein by reference, (ii) ICI's Quarterly Reports on Form 10-Q,
including all exhibits thereto and items incorporated therein by reference,
(iii) proxy statements relating to ICI's meetings of stockholders and (iv) all
other reports or registration statements (as amended or supplemented prior to
the date hereof), filed by ICI with the SEC since December 31, 1993, including
all exhibits thereto and items incorporated therein by reference (items (i)
through (iv) being referred to as the "ICI SEC Reports"). As of their respective
dates, the ICI SEC Reports did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. Since December 31, 1993, ICI has filed all material
forms, reports and documents with the SEC required to be filed by it pursuant to
the federal securities laws and the SEC rules and regulations thereunder, each
of which complied as to form, at the time such form, report or document was
filed, in all material respects with the applicable requirements of the
Securities Act and the Exchange Act and the applicable rules and regulations
thereunder.
4.9. FINANCIAL STATEMENTS AND RECORDS OF ICI. ICI has made available to
MMI true, correct and complete copies of the consolidated balance sheets of ICI
and the ICI Subsidiaries as of December 31, 1994 and 1995, and the consolidated
statements of income, stockholders' equity and cash flows for the fiscal years
then ended, including the notes thereto, which financial statements as of
December 31, 1994 and for the fiscal year then ended have been examined by and
accompanied by the report of Deloitte & Touche LLP (the "ICI Financial
Statements"). The ICI Financial Statements have been prepared from, and are in
accordance with, the books and records of ICI and the ICI Subsidiaries and
present fairly, in all material respects, the assets, liabilities and financial
position of ICI as of the dates thereof and the results of operations and
changes in financial position thereof for the periods then ended, in each case
in conformity with generally accepted accounting principles, consistently
applied, except as noted therein. Since December 31, 1995, there has been no
change in accounting principles applicable to, or methods of accounting utilized
by, ICI, except as noted in the ICI Financial Statements or as is required under
generally accepted accounting principles. The statements of income and cash flow
contained in the ICI Financial Statements do not contain any material items of
special or nonrecurring income, except as specifically identified therein. On or
before the 20th day of each
A-14
<PAGE>
calendar month following the date of this Agreement, ICI shall deliver to MMI
unaudited financial statements (including a balance sheet and statements of
income and cash flow) as of the end of the previous month and for the year to
date. The books and records of ICI have been and are being maintained in
accordance with good business practice, reflect only valid transactions, are
complete and correct in all material respects, and present fairly in all
material respects the basis for the financial position and results of operations
of ICI set forth in the ICI Financial Statements.
4.10. ABSENCE OF CERTAIN CHANGES. Since December 31, 1995, ICI and the ICI
Subsidiaries have not, except as may result from the transactions contemplated
by this Agreement:
(a) suffered any material adverse change in the business, results of
operations, working capital, assets, liabilities or condition (financial or
otherwise) or the manner of conducting the business of ICI and ICI
Subsidiaries taken as a whole, except as reflected on the ICI Financial
Statements and except for such changes that would not have an ICI Material
Adverse Effect;
(b) suffered any damage or destruction to or loss of the assets of ICI
or any ICI Subsidiary, whether or not covered by insurance, which would be
expected to result in an ICI Material Adverse Effect;
(c) forgiven, compromised, canceled, released, waived or permitted to
lapse any material rights or claims;
(d) entered into or terminated any material agreement, commitment or
transaction, or agreed or made any changes in material leases or agreements,
or suffered any of the foregoing to occur, other than renewals or extensions
thereof and leases, agreements, transactions and commitments entered into in
the ordinary course of business, except in any such case as does not have an
ICI Material Adverse Effect;
(e) written up, written down or written off the book value of any
material amount of assets;
(f) declared, paid or set aside for payment any dividend or distribution
with respect to ICI's capital stock;
(g) redeemed, purchased or otherwise acquired, or sold, granted or
otherwise disposed of, directly or indirectly, any of ICI's capital stock or
securities (other than shares issued upon exercise of the ICI Options) or
any rights to acquire such capital stock or securities, or agreed to changes
in the terms and conditions of any such rights outstanding as of the date of
this Agreement, except as provided in Section 5.2 hereof;
(h) increased the compensation of or paid any bonuses to any employees
or contributed to any employee benefit plan, other than in accordance with
established policies, practices or requirements and except as provided in
Section 5.2 hereof;
(i) entered into any employment, consulting, compensation or collective
bargaining agreement with any person or group, except in any such case which
does not have an ICI Material Adverse Effect on the Surviving Corporation;
(j) entered into, adopted or amended any employee benefit plan except
in any such case as does not have an ICI Material Adverse Effect; or
(k) entered into any agreement to do any of the foregoing.
4.11. NO MATERIAL UNDISCLOSED LIABILITIES. There are no liabilities or
obligations of ICI or the ICI Subsidiaries of any nature, whether absolute,
accrued, contingent or otherwise, other than:
(a) the liabilities and obligations that are fully reflected, accrued or
reserved against in the ICI Financial Statements, for which the reserves are
appropriate and reasonable, or incurred in the ordinary course of business
and consistent with past practices since December 31, 1995; or
(b) liabilities or obligations not inconsistent with the terms of
Section 5.2.
A-15
<PAGE>
4.12. TAX RETURNS; TAXES. Each of ICI and the ICI Subsidiaries have duly
and timely filed all federal, state, county, local and foreign tax returns and
reports required to be filed by it, including those with respect to income,
payroll, property, withholding, social security, unemployment, franchise, excise
and sales taxes and all such returns and reports are true and correct in all
material respects; have either paid in full all taxes that have become due as
reflected on any return or report and any interest and penalties with respect
thereto or have fully accrued on its books or have established adequate reserves
for all taxes payable but not yet due; and have made cash deposits with
appropriate governmental authorities representing estimated payments of taxes,
including income taxes and employee withholding tax obligations. Except as set
forth in ICI's Disclosure Schedule, no unsatisfied deficiency, delinquency or
default for any tax, assessment or governmental charge has been claimed,
proposed or assessed against ICI or the ICI Subsidiaries, nor has ICI or the ICI
Subsidiaries received notice of any such deficiency, delinquency or default.
Except as set forth in ICI's Disclosure Schedule, there is no audit,
examination, deficiency or refund litigation or matter in controversy with
respect to any taxes. ICI and the ICI Subsidiaries have no material tax
liabilities other than those reflected on the ICI Financial Statements and those
arising in the ordinary course of business since December 31, 1995. ICI will
make available to MMI true, complete and correct copies of ICI's consolidated
federal tax returns for the last five years and make available such other tax
returns requested by MMI.
4.13. MATERIAL CONTRACTS. ICI will furnish or make available accurate and
complete copies of the ICI Material Contracts to MMI. All of the ICI Material
Contracts are valid, binding and enforceable. There is not under any of the ICI
Material Contracts any existing breach, default or event of default by ICI or
any of the ICI Subsidiaries nor event that with notice or lapse of time or both
would constitute a breach, default or event of default by ICI or any of the ICI
Subsidiaries nor does ICI know of, and ICI has not received notice of, or made a
claim with respect to, any breach or default by any other party thereto which
would, severally or in the aggregate, have an ICI Material Adverse Effect. As
used herein, the term "ICI Material Contracts" shall mean all of contracts and
agreements filed, or required to be filed, as exhibits to ICI's Annual Report on
Form 10-K for the year ended December 31, 1995 and any contract or agreement
entered into since December 31, 1995 which would be required to be filed as an
exhibit to ICI's Annual Report on Form 10-K for the year ending December 31,
1996, any note, bond, mortgage, indenture, license agreement, lease or other
instrument or obligation to which any of ICI or the ICI Subsidiaries is a party
or by which any of them or any of their properties or assets may be subject.
4.14. LITIGATION AND GOVERNMENT CLAIMS. Except as disclosed in the ICI SEC
Reports, there is no pending suit, claim, action or litigation, or
administrative, arbitration or other proceeding or governmental investigation or
inquiry, or any pending change in any environmental, zoning or building laws,
regulations or ordinances against ICI or the ICI Subsidiaries to which their
businesses or assets are subject which would, severally or in the aggregate,
reasonably be expected to result in an ICI Material Adverse Effect. To the
knowledge of ICI, there are no such proceedings threatened or contemplated, or
any unasserted claims (whether or not the potential claimant may be aware of the
claim) of any nature that might be asserted against ICI or the ICI Subsidiaries
which would, severally or in the aggregate, have an ICI Material Adverse Effect.
Neither ICI nor any ICI Subsidiary is subject to any judgment, decree,
injunction, rule or order of any court, or any governmental restriction
applicable to ICI or any ICI Subsidiary which is reasonably likely (i) to have
an ICI Material Adverse Effect or (ii) to cause a material limitation on ICI's
ability to operate the business of MMI after the Closing.
4.15. COMPLIANCE WITH LAWS. ICI and the ICI Subsidiaries each have all
material authorizations, approvals, licenses and orders to carry on their
respective businesses as they are now being conducted, to own or hold under
lease the properties and assets they own or hold under lease and to perform all
of their obligations under the agreements to which they are a party, except for
instances which would not have an ICI Material Adverse Effect. ICI and the ICI
Subsidiaries have been and are in compliance with all applicable laws,
regulations and administrative orders of any country, state or
A-16
<PAGE>
municipality or of any subdivision of any thereof to which their respective
businesses and their employment of labor or their use or occupancy of properties
or any part hereof are subject, the failure to obtain or the violation of which
would have an ICI Material Adverse Effect.
4.16. EMPLOYEE BENEFIT PLANS. Each employee benefit plan, as such term is
defined in Section 3(3) of ERISA, of ICI or the ICI Subsidiaries (collectively
the "ICI Employee Plans") complies in all material respects with all applicable
requirements of ERISA and the Code and other applicable laws. None of the ICI
Employee Plans is an employee pension benefit plan subject to Title IV or Part 3
of Subtitle B of Title I of ERISA or a multiemployer plan, as such terms are
defined in ERISA. Neither ICI nor any ICI Subsidiary, nor any of their
respective directors, officers, employees or agents has, with respect to any ICI
Employee Plan, engaged in any "prohibited transaction," as such term is defined
in the Code or ERISA, nor has any ICI Employee Plan engaged in such prohibited
transaction which could result in any taxes or penalties or other prohibited
transactions, which in the aggregate could have an ICI Material Adverse Effect.
4.17. LABOR RELATIONS. Each of ICI and the ICI Subsidiaries is in
compliance in all respects with all federal and state laws respecting employment
and employment practices, terms and conditions of employment, wages and hours,
and is not engaged in any unfair labor or unlawful employment practice, except
in any case which would not have an ICI Material Adverse Effect. There is no
unlawful employment practice discrimination charge pending before the EEOC or
EEOC recognized state "referral agency." There is no unfair labor practice
charge or complaint against ICI or any of the ICI Subsidiaries pending before
the National Labor Review Board. There is no labor strike, dispute, slowdown or
stoppage actually pending or, to the knowledge of ICI, threatened against or
involving or affecting ICI or any of the ICI Subsidiaries and no National Labor
Review Board representation question exists respecting their respective
employees. No grievances or arbitration proceeding is pending and no written
claim therefor exists.
4.18. INTELLECTUAL PROPERTY. ICI and the ICI Subsidiaries own or have
valid, binding and enforceable rights to use all patents, trademarks, trade
names, service marks, service names, copyrights, applications therefor and
licenses or other rights in respect thereof ("ICI Intellectual Property") used
or held for use in connection with the business of ICI or the ICI Subsidiaries,
without any conflict with the rights of others, except for such conflicts as do
not have an ICI Material Adverse Effect. Neither ICI nor any of the ICI
Subsidiaries has received any notice from any other person pertaining to or
challenging the right of ICI or any of the ICI Subsidiaries to use any ICI
Intellectual Property or any trade secrets, proprietary information, inventions,
know-how, processes and procedures owned or used or licensed to ICI or the ICI
Subsidiaries, except with respect to rights the loss of which, individually or
in the aggregate, would not have an ICI Material Adverse Effect.
4.19. PROPERTIES. ICI and the ICI Subsidiaries have good and marketable
title, free and clear of all liens, claims or encumbrances (other than for the
ICI Material Contracts) to all of their material properties and assets whether
tangible or intangible, real, personal or mixed, reflected on the ICI Financial
Statements as being owned by ICI or the ICI Subsidiaries. All buildings and all
fixtures, equipment and other property and assets which are material to its
business held under leases or subleases by any of ICI or the ICI Subsidiaries
are held under valid instruments enforceable in accordance with their respective
terms. Substantially all of ICI's and ICI Subsidiaries' equipment and properties
have been well maintained and are in good and serviceable condition, reasonable
wear and tear excepted.
4.20. INSURANCE. ICI and each of the ICI Subsidiaries is presently
insured, and during each of the past five (5) calendar years has been insured
for reasonable amounts against such risks as companies engaged in similar
business would, in accordance with good business practice, customarily be
insured.
4.21. ENVIRONMENTAL MATTERS. ICI and the ICI Subsidiaries are in
compliance with all applicable federal, state, local and foreign laws relating
to emissions, discharges and releases of hazardous materials into the
environment and the generation, treatment, storage, transportation and disposal
of
A-17
<PAGE>
hazardous waste, including, without limitation, any applicable provisions of the
Resource Conservation and Recovery Act of 1976 or the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, except as would
not cause an ICI Material Adverse Effect. There are no conditions at, on, under
or related to any real property owned or operated by ICI or the ICI Subsidiaries
which presently or potentially poses a significant hazard to human health or the
environment, and there has been no production, use, treatment, storage,
transportation or disposal by ICI or any of the ICI Subsidiaries of any
Hazardous Substance (as hereinbelow defined) nor any release or threatened
release by ICI or any ICI subsidiary of any Hazardous Substance. No Hazardous
Substance is now or ever has been stored by ICI or the ICI Subsidiaries in
underground tanks, pits or surface impoundments. For purposes of the foregoing,
the term "Hazardous Substance" means any hazardous or toxic substance, material
or waste (including, without limitation, petroleum products and by-products)
which is regulated by any applicable federal, state, local or foreign authority.
4.22. ACCOUNTING, TAX AND REGULATORY MATTERS. Neither ICI nor any of the
ICI Subsidiaries has taken or agreed to take any action or has any knowledge of
any fact or circumstances that would prevent the transactions contemplated
hereby from qualifying for pooling of interest accounting treatment or as a
reorganization within the meaning of Section 368 of the Code.
4.23. ACCURACY OF DISCLOSURES. None of the information supplied by ICI or
any ICI Subsidiary for inclusion in the Registration Statement or Proxy
Statement will, in the case of the Proxy Statement or any amendments or
supplements thereto, at the time of mailing of the Proxy Statement and any
amendments or supplements thereto, and at the time of the meeting of
stockholders of MMI in accordance therewith, or, in the case of the Registration
Statement at the time it becomes effective and at the Effective Date, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Registration Statement will comply as to form in all material
respects with the provisions of the Securities Act, and the rules and
regulations promulgated thereunder. The Proxy Statement will comply as to form
in all material respects with the provisions of the Exchange Act and the rules
and regulations thereunder.
4.24. BROKERS AND FINDERS. None of ICI, the ICI Subsidiaries or, to ICI's
knowledge, any of their respective officers, directors and employees has
employed any broker, finder or investment bank or incurred any liability for any
investment banking fees, financial advisory fees, brokerage fees or finders'
fees in connection with the transactions contemplated hereby, except that ICI
has engaged Morgan Keegan & Company, Inc. as its financial advisor. Other than
the foregoing arrangements and other than certain fees that may be paid to MMI's
financial advisors as contemplated by Section 3.26 hereof, ICI is not aware of
any claim for payment of any finder's fees, brokerage or agent's commissions or
other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby.
ARTICLE 5.
CERTAIN COVENANTS AND AGREEMENTS
5.1. CONDUCT OF BUSINESS BY MMI. From the date hereof to the Effective
Date, MMI will, and will cause each MMI Subsidiary to, except as required in
connection with the Merger and the other transactions contemplated by this
Agreement and except as otherwise disclosed in MMI's Disclosure Schedule or
consented to in writing by ICI:
(a) Carry on its business in the ordinary and regular course in
substantially the same manner as heretofore conducted and not engage in any
new line of business or enter into any agreement, transaction or activity or
make any commitment except those in the ordinary and regular course of
business and not otherwise prohibited under this Section 5.1;
(b) Neither change nor amend its Certificate or Articles of
Incorporation or Bylaws;
A-18
<PAGE>
(c) Other than pursuant to the exercise of the Options outstanding on
the date hereof, not issue, sell or grant options, warrants or rights to
purchase or subscribe to, or enter into any arrangement or contract with
respect to the issuance or sale of any of the capital stock of MMI or any of
the MMI Subsidiaries or rights or obligations convertible into or
exchangeable for any shares of the capital stock of MMI or any of the MMI
Subsidiaries and not alter the terms of any presently outstanding options or
the MMI Stock Option Plan or make any changes (by split-up, combination,
reorganization or otherwise) in the capital structure of MMI or any of MMI's
Subsidiaries;
(d) Not declare, pay or set aside for payment any dividend or other
distribution in respect of the capital stock or other equity securities of
MMI and not redeem, purchase or otherwise acquire any shares of the capital
stock or other securities of MMI or any of the MMI Subsidiaries or rights or
obligations convertible into or exchangeable for any shares of the capital
stock or other securities of MMI or any of the MMI Subsidiaries or
obligations convertible into such, or any options, warrants or other rights
to purchase or subscribe to any of the foregoing;
(e) Not acquire or enter into any agreement to acquire, by merger,
consolidation or purchase of stock or assets, any business or entity or
product line (other than the pending asset acquisitions described in the MMI
Disclosure Schedule);
(f) Use its reasonable efforts to preserve intact the corporate
existence, goodwill and business organization of MMI and the MMI
Subsidiaries, to keep the officers and employees of MMI and the MMI
Subsidiaries available to MMI and to preserve the relationships of MMI and
the MMI Subsidiaries with suppliers, customers and others having business
relations with any of them, except for such instances which would not have
an MMI Material Adverse Effect;
(g) Not (i) create, incur or assume any long-term debt (including
obligations in respect of capital leases which individually or in the
aggregate involve annual payments in excess of $10,000) or, except in the
ordinary course of business under existing lines of credit, create, incur or
assume any short-term debt for borrowed money, (ii) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person other
than MMI Subsidiaries, (iii) make any loans or advances to any other person
other than the MMI Subsidiaries, except in the ordinary course of business
and consistent with past practice, or (iv) make any capital contributions
to, or investments in, any person other than the MMI Subsidiaries; provided,
however, that MMI may incur long-term debt under its credit facility with
Chemical Bank, as may be amended upon terms not materially less favorable to
MMI in connection with the pending asset acquisitions described in the MMI
Disclosure Schedule up to an aggregate principal amount of $10.0 million; or
(h) Not (i) enter into, modify or extend in any manner the terms of any
employment, severance or similar agreements with officers, directors,
employees and sales representatives, (ii) grant any increase in the
compensation of officers or directors, whether now or hereafter payable or
(iii) grant any increase in the compensation of any other employees except
for compensation increases in the ordinary course of business and consistent
with past practice.
In connection with the continued operation of the business of MMI and the
MMI Subsidiaries between the date of this Agreement and the Effective Date, MMI
shall confer in good faith and on a regular and frequent basis with one or more
representatives of ICI designated in writing to report operational matters of
materiality and the general status of ongoing operations. In addition, MMI will
allow ICI employees or agent to be present at MMI's business locations to
observe the business and operations of MMI and the MMI Subsidiaries. MMI agrees
to participate in the staff meetings of ICI as may be requested by ICI. MMI
acknowledges that ICI does not and will not waive any rights it may have under
this Agreement as a result of such consultations nor shall ICI be responsible
for any decisions made by MMI's officers and directors with respect to matters
which are the subject of such consultation.
A-19
<PAGE>
5.2. CONDUCT OF BUSINESS BY ICI. From the date hereof to the Effective
Date, ICI will, and will cause Merger Corp. and each of the ICI Subsidiaries to,
except as required in connection with the Merger and the other transactions
contemplated by this Agreement and except as otherwise disclosed in ICI's
Disclosure Schedule or consented to in writing by MMI:
(a) Carry on its businesses in the ordinary and regular course in
substantially the same manner as heretofore conducted and not engage in any
new line of business;
(b) Neither change nor amend its Certificate or Articles of
Incorporation or Bylaws;
(c) Other than pursuant to the exercise of ICI Options outstanding on
the date hereof, not issue, sell or grant options (other than employee stock
options granted under ICI's existing stock option plans as such plans may
hereafter be amended), warrants or rights to purchase or subscribe to, or
enter into any arrangement or contract with respect to the issuance or sale
of more than 500,000 shares of the capital stock of ICI or rights or
obligations convertible into or exchangeable for any shares of the capital
stock of ICI;
(d) Not declare, pay or set aside for payment any dividend or other
distribution in respect of the capital stock or other equity securities of
ICI and not redeem, purchase or otherwise acquire any shares of the capital
stock or other securities of ICI or rights or obligations convertible into
or exchangeable for any shares of the capital stock or other securities of
ICI or obligations convertible into such, or any options, warrants or other
rights to purchase or subscribe to any of the foregoing;
(e) Use its reasonable efforts to preserve intact the corporate
existence, goodwill and business organization of ICI and the ICI
Subsidiaries, to keep the executive officers of ICI and the ICI Subsidiaries
available to ICI and to preserve the relationships of ICI and the ICI
Subsidiaries with suppliers, customers and others having business relations
with any of them, except for such instances which would not have an ICI
Material Adverse Effect;
(f) Not (i) create, incur or assume any long-term debt or, except in the
ordinary course of business under existing lines of credit, create, incur or
assume any short-term debt for borrowed money, (ii) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person other
than ICI Subsidiaries (except in the ordinary course of business and
consistent with past practice), (iii) make any loans or advances to any
other person other than the ICI Subsidiaries, except in the ordinary course
of business and consistent with past practice, or (iv) make any capital
contributions to, or investments in, any person other than the ICI
Subsidiaries, except in each case where such action would not have an ICI
Material Adverse Effect; or
(g) Except in instances which would not have an ICI Material Adverse
Effect, not enter into, modify or extend in any manner the terms of any
employment, severance or similar agreements with officers and directors nor
grant any increase in the compensation of officers, directors or employees,
whether now or hereafter payable (except for compensation increases in the
ordinary course of business and consistent with past practice).
In connection with the continued operation of the business of ICI and the
ICI Subsidiaries between the date of this Agreement and the Effective Date, ICI
shall confer in good faith and on a regular and frequent basis with one or more
representatives of MMI designated in writing to report operational matters of
materiality and the general status of ongoing operations. ICI acknowledges that
MMI does not and will not waive any rights it may have under this Agreement as a
result of such consultations nor shall MMI be responsible for any decisions made
by ICI's officers and directors with respect to matters which are the subject of
such consultation.
5.3. NOTICE OF ANY MATERIAL CHANGE. Each of MMI and ICI shall, promptly
after the first notice or occurrence thereof but not later than the Closing
Date, advise the other in writing of any event or
A-20
<PAGE>
the existence of any state of facts that would (i) make any of its
representations and warranties in this Agreement untrue in any material respect,
or (ii) otherwise constitute an MMI Material Adverse Effect or ICI Material
Adverse Effect, as the case may be.
5.4. INSPECTION AND ACCESS TO INFORMATION.
(a) Between the date of this Agreement and the Effective Date, each
party hereto will, and will cause each of its subsidiaries to, provide each
other party and its accountants, counsel and other authorized
representatives full access, during reasonable business hours and under
reasonable circumstances to any and all of its premises, properties,
contracts, commitments, books, records and other information (including tax
returns filed and those in preparation) and will cause their respective
officers to furnish to the other party and its authorized representatives
any and all financial, technical and operating data and other information
pertaining to its business, as each other party shall from time to time
request.
(b) Those certain letter agreements dated February 22, 1996 and March 8,
1996 relative to, without limitation, the protection of the confidential
information of MMI (the "MMI CA") and ICI (the "ICI CA"), respectively,
shall remain in full force and effect except as modified by the terms of
this Agreement. In the event of any inconsistency between the terms of the
MMI CA and the ICI CA, on the one hand, and this Agreement, on the other
hand, this Agreement shall control.
5.5. ANTITRUST LAWS. As soon as practicable, each of ICI and MMI shall
make any and all filings which are required under the HSR Act. Each of ICI and
MMI will assist the other as may be reasonably requested in connection with the
preparation of such filings.
5.6. POOLING. From and after the date hereof and until the Effective Date,
neither ICI nor MMI nor any of their respective subsidiaries or other affiliates
shall (i) knowingly take any action, or knowingly fail to take any action, that
would jeopardize the treatment of the Merger as a "pooling of interest" for
accounting purposes or (ii) knowingly take any action, or knowingly fail to take
any action, that would jeopardize qualification of the Merger as a
reorganization within the meaning of Section 368(a)(2)(E) of the Code.
5.7. REGISTRATION STATEMENT AND PROXY STATEMENT.
(a) ICI shall promptly prepare and file a registration statement on Form
S-4 (which registration statement, in the form it is declared effective by
the SEC, together with any and all amendments and supplements thereto and
all information incorporated by reference therein, is referred to herein as
the "Registration Statement") under and pursuant to the provisions of the
Securities Act for the purpose of registering ICI Common Stock to be issued
in the Merger. ICI will use its reasonable efforts to receive and respond to
the comments of the SEC, and MMI shall promptly mail to its stockholders the
proxy statement in its definitive form contained in the Registration
Statement (the "Proxy Statement"). Such Proxy Statement shall also serve as
the prospectus to be included in the Registration Statement. In addition,
MMI shall cause its auditors to prepare and deliver such reports and
consents as ICI may reasonably require for inclusion in the Registration
Statement and such other filings as ICI deems necessary, including, without
limitation, such auditors' consent to the incorporation by reference of such
auditors' reports into ICI's registration statements on Form S-8.
(b) Each of ICI and MMI agrees to provide as promptly as practicable to
the other such information concerning its business and financial statements
and affairs as, in the reasonable judgment of the other party, may be
required or appropriate for inclusion in the Registration Statement and the
Proxy Statement or in any amendments or supplements thereto, and to cause
its counsel and auditors to cooperate with the other's counsel and auditors
in the preparation of the Registration Statement and the Proxy Statement.
(c) At the time the Registration Statement becomes effective and at the
Effective Date, as such Registration Statement is then amended or
supplemented, and at the time the Proxy Statement is mailed to MMI's
stockholders, such Registration Statement and Proxy Statement
A-21
<PAGE>
will (i) not contain any untrue statement of a material fact, or omit to
state any material fact required to be stated therein as necessary, in order
to make the statements therein, in light of the circumstances under which
they were made, not misleading and (ii) comply in all material respects with
the provisions of the Securities Act and Exchange Act, as applicable, and
the rules and regulations thereunder; provided, however, no representation
is made by ICI or MMI with respect to statements made in the Registration
Statement and Proxy Statement based on information supplied by the other
party expressly for inclusion or incorporation by reference in the Proxy
Statement or Registration Statement or information omitted with respect to
the other party.
5.8. MMI STOCKHOLDERS' MEETING.
(a) MMI shall call a meeting of its stockholders to be held as soon as
practicable after the date hereof for the purpose of voting upon matters
relating to this Agreement.
(b) MMI will use its reasonable efforts to hold its stockholders'
meeting as promptly as practicable as may be directed by ICI and to obtain
stockholder approval and will, through its Board of Directors, recommend to
its stockholders approval of the Merger and this Agreement at the
stockholders' meeting; provided, however, that such recommendation is
subject to any action taken by, or upon the authority of, the Board of
Directors of MMI in the exercise of its good faith judgment as to its
fiduciary duties to the stockholders of MMI exercised in accordance with the
provisions of Section 5.13.
5.9. LISTING APPLICATION. ICI will file a listing application with the NMS
to approve for listing, subject to official notice of issuance, the shares of
ICI Common Stock to be issued in the Merger. ICI shall use its reasonable
efforts to cause the shares of ICI Common Stock to be issued in the Merger to be
approved for listing on the NMS, subject to official notice of issuance, prior
to the Effective Date.
5.10. AFFILIATES. At least 30 days prior to the Closing Date, MMI shall
deliver to ICI a letter identifying all persons who are, at the time the Merger
is submitted to a vote to the stockholders of MMI, "affiliates" of MMI for
purposes of Rule 145 under the Securities Act. Each person who is identified as
an "affiliate" in such letter will deliver to ICI on or before 30 days prior to
the Closing Date a written statement, in form satisfactory to ICI and MMI, that
such person will not offer to sell, transfer or otherwise dispose of any of the
shares of MMI Common Stock or ICI Common Stock issued to such person, except (i)
in accordance with the applicable provisions of the Securities Act and the rules
and regulations thereunder and (ii) until such time as financial results
covering at least 30 days of combined operations of ICI and MMI have been
published (the "Publication Date"). ICI hereby covenants to file a Form 8-K or
10-Q (as applicable) satisfying such publication requirement as soon as
practicable after the completion of any month which contains at least 30 days of
combined operations. ICI shall be entitled to place legends on any certificates
of ICI Common Stock issued to such affiliates to restrict transfer of such
shares as set forth above.
5.11. REASONABLE EFFORTS; FURTHER ASSURANCES; COOPERATION. Subject to the
other provisions of this Agreement, the parties hereto shall each use their
reasonable efforts to perform their obligations herein and to take, or cause to
be taken or do, or cause to be done, all things necessary, proper or advisable
under applicable law to obtain all regulatory approvals and satisfy all
conditions to the obligations of the parties under this Agreement and to cause
the Merger and the other transactions contemplated herein to be carried out
promptly in accordance with the terms hereof and shall cooperate fully with each
other and their respective officers, directors, employees, agents, counsel,
accountants and other designees in connection with any steps required to be
taken as a part of their respective obligations under this Agreement, including
without limitation:
(a) MMI and ICI shall promptly make their respective filings and
submissions and shall take, or cause to be taken, all actions and do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to comply with the provisions of the HSR Act.
A-22
<PAGE>
(b) Each party shall give prompt written notice to the other of (i) the
occurrence, or failure to occur, of any event which occurrence or failure
would be likely to cause any representation or warranty of MMI or ICI, as
the case may be, contained in this Agreement to be untrue or inaccurate in
any material respect at any time from the date hereof to the Effective Date
or that will or may result in the failure to satisfy any of the conditions
specified in Articles 6 and 7 and (ii) any failure of MMI or ICI, as the
case may be, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder.
(c) MMI has obtained (and will promptly deliver copies to ICI)
agreements from Messrs. Vought, Lee and Berry and Micro Partners, L.P. and
Kitty Hawk Capital Limited Partnership, II (i) not to perfect appraisal
rights with respect to the Merger (to the extent applicable) and (ii) to
vote all shares of MMI Common Stock beneficially owned by such person in
favor of the approval of this Agreement and the Merger (which agreements
shall contain a proxy in favor of ICI with respect to the shares of MMI
Common Stock beneficially owned by such persons).
5.12. PUBLIC ANNOUNCEMENTS. The timing and content of all announcements
regarding any aspect of this Agreement or the Merger to the financial community,
government agencies, employees or the general public shall be mutually agreed
upon in advance (unless ICI or MMI is advised by counsel that any such
announcement or other disclosure not mutually agreed upon in advance is required
to be made by law or applicable stock exchange rule and then only after making a
reasonable attempt to comply with the provisions of this Section). Subject to
the preceding sentence, the parties acknowledge their respective intention to
make a public announcement of the transactions contemplated by this Agreement
promptly following the execution and delivery of this Agreement.
5.13. NO SOLICITATIONS. From the date hereof until the Effective Date or
until this Agreement is terminated or abandoned as provided in this Agreement,
neither MMI nor any of the MMI Subsidiaries shall directly or indirectly (i)
solicit, initiate or encourage discussion with or (ii) enter into negotiations
or agreements with, or furnish any information that is not publicly available
to, any corporation, partnership, person or other entity or group (other than
ICI, an affiliate of ICI or their authorized representatives pursuant to this
Agreement) concerning any proposal for a merger, sale of substantial assets,
sale of shares of stock or securities or other takeover or business combination
transaction (the "Acquisition Proposal") involving MMI or any of the MMI
Subsidiaries, and MMI will exercise its reasonable efforts to cause its
officers, directors, advisors and its financial and legal representatives and
consultants not to take any action contrary to the foregoing provisions of this
sentence; provided, however, that MMI, its officers, directors, advisors and its
financial and legal representatives and consultants shall not be prohibited from
taking any action described in (ii) above to the extent such action is taken by,
or upon the authority of, the Board of Directors of MMI in the exercise of good
faith judgment as to its fiduciary duties to the stockholders of MMI based upon
the advice of independent legal counsel in recognition of, without limitation,
the long-term corporate objectives of MMI sought to be achieved by the Merger.
MMI will notify ICI promptly in writing if MMI becomes aware that any inquiries
or proposals are received by, any information is requested from or any
negotiations or discussions are sought to be initiated with, MMI with respect to
an Acquisition Proposal, and MMI shall promptly deliver to ICI any written
inquiries or proposals received by MMI relating to an Acquisition Proposal. Each
time, if any, that the Board of Directors of MMI determines that it must enter
into negotiations with, or furnish any information that is not publicly
available to, any corporation, partnership, person or other entity or group
(other than ICI, an affiliate of ICI or their authorized representatives)
concerning any Acquisition Proposal, MMI will give ICI prompt notice of such
determination (which shall include a copy of the non-public information which
MMI has delivered to such other person or entity) and shall require the
recipient of such information to execute and deliver to MMI a confidentiality
agreement substantially identical to the MMI CA as a condition precedent to
furnishing any such information (failing which, without limitation of any other
right of ICI, the fifth paragraph of the MMI CA shall no longer be of any force
or effect). In the event of the
A-23
<PAGE>
execution of any Acquisition Proposal by MMI, ICI may terminate this Agreement
in the exercise of its discretion. The second preceding sentence of this Section
shall survive any termination of this Agreement.
ARTICLE 6.
CONDITIONS PRECEDENT TO OBLIGATIONS OF MMI
Except as may be waived by MMI, the obligations of MMI to consummate the
transactions contemplated by this Agreement shall be subject to the satisfaction
on or before the Closing Date of each of the following conditions:
6.1. COMPLIANCE. ICI shall have, or shall have caused to be, satisfied or
complied with and performed in all material respects all terms, covenants, and
conditions of this Agreement to be complied with or performed by ICI on or
before the Closing Date.
6.2. REPRESENTATIONS AND WARRANTIES. All of the representations and
warranties made by ICI in this Agreement and in all certificates and other
documents delivered by ICI to MMI pursuant hereto shall have been true and
correct in all material respects as of the date hereof, and shall be true and
correct in all material respects at the Closing Date with the same force and
effect as if such representations and warranties had been made at and as of the
Closing Date, except for changes permitted or contemplated by this Agreement and
except that if information which would constitute a breach of the
representations and warranties of ICI made in this Agreement is disclosed in the
Proxy Statement on the date such Proxy Statement is mailed to MMI's
stockholders, then MMI shall be deemed to have waived this condition to the
performance of its obligations hereunder.
6.3. MATERIAL ADVERSE CHANGES. Subsequent to December 31, 1995, there
shall not have occurred any ICI Material Adverse Effect except as set forth in
the ICI Disclosure Schedule.
6.4. NMS LISTING. ICI Common Stock issuable pursuant to the Merger and
pursuant to the exercise of the Options after the Effective Date shall have been
authorized for listing on the NMS.
6.5. CERTIFICATES. MMI shall have received a certificate or certificates,
executed on behalf of ICI by an executive officer of ICI, to the effect that the
conditions contained in Sections 6.2 and 6.3 hereof have been satisfied.
6.6. STOCKHOLDER APPROVAL. This Agreement shall have been approved and
adopted by the affirmative vote of the holders of a majority of all of the
outstanding shares of MMI Common Stock.
6.7. EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration Statement
shall have become effective and no stop order shall been issued by the SEC or
any other governmental authority suspending the effectiveness of the
Registration Statement or preventing or suspending the use thereof or any
related prospectus.
6.8. CONSENTS; LITIGATION. Other than the filing of the Certificate of
Merger as described in Article 1, all authorizations, consents, orders or
approvals of, or declarations or filings with, or expirations or terminations of
waiting periods (including the waiting period under the HSR Act) imposed by any
governmental entity, and all required third-party consents, the failure to
obtain which would have a material adverse effect on ICI and its subsidiaries,
including the Surviving Corporation and its subsidiaries, taken as a whole,
shall have been filed, occurred or been obtained. ICI shall have received all
state securities or Blue Sky permits and other authorizations necessary to issue
ICI Common Stock pursuant to the Merger and the other terms of this Agreement.
In addition, no action, suit or proceeding shall have been instituted before any
court or other governmental entity to restrain, modify, enjoin or prohibit the
carrying out of the transactions contemplated hereby.
6.9. TAX OPINION. MMI shall have received a favorable opinion of Arnall
Golden & Gregory based upon certain factual representations of MMI, ICI and
Merger Corp. reasonably requested by such counsel, and containing such
qualifications as such counsel reasonably deems appropriate
A-24
<PAGE>
relative to factual matters not otherwise verified to such counsel's
satisfaction, dated the Closing Date, to the effect that the Merger will
constitute a reorganization for federal income tax purposes within the meaning
of Section 368(a) of the Code and that accordingly:
(a) No gain or loss will be recognized by the shareholders of MMI upon
the conversion of their shares of MMI Common Stock into shares of ICI Common
Stock pursuant to the terms of the Merger (except to the extent cash is
received in lieu of fractional shares);
(b) The tax basis of the shares of ICI Common Stock received by a
shareholder of MMI on the conversion of MMI Common Stock pursuant to the
Merger will be the same as the basis of the shares of the MMI Common Stock
converted (less any portion of such basis allocable to any fractional
interest in any share of ICI Common Stock); and
(c) The holding period of the ICI Common Stock into which shares of MMI
Common Stock are converted will include the period that such shares of MMI
Common Stock were held by the holder, provided such shares were held as a
capital asset by such holder.
ARTICLE 7.
CONDITIONS PRECEDENT TO OBLIGATIONS OF ICI AND MERGER CORP.
Except as may be waived by ICI and Merger Corp., the obligations of ICI and
Merger Corp. to consummate the transactions contemplated by this Agreement shall
be subject to the satisfaction, on or before the Closing Date, of each of the
following conditions:
7.1. COMPLIANCE. MMI shall have, or shall have caused to be, satisfied or
complied with and performed in all material respects all terms, covenants, and
conditions of this Agreement to be complied with or performed by it on or before
the Closing Date.
7.2. REPRESENTATIONS AND WARRANTIES. All of the representations and
warranties made by MMI in this Agreement and in all certificates and other
documents delivered by MMI pursuant hereto, shall have been true and correct in
all material respects as of the date hereof, and shall be true and correct in
all material respects at the Closing Date with the same force and effect as if
such representations and warranties had been made at and as of the Closing Date,
except for changes permitted or contemplated by this Agreement and except that
if information which would constitute a breach of the representations and
warranties of MMI made in this Agreement is disclosed in the Proxy Statement on
the date such Proxy Statement is mailed to MMI's stockholders, then ICI shall be
deemed to have waived this condition to the performance of its obligations
hereunder.
7.3. MATERIAL ADVERSE CHANGES. Since February 29, 1996, there shall not
have occurred any MMI Material Adverse Effect.
7.4. CERTIFICATES. ICI shall have received a certificate or certificates,
executed on behalf of MMI by an executive officer of MMI, to the effect that the
conditions in Sections 7.2 and 7.3 hereof have been satisfied.
7.5. DISSENTERS' RIGHTS. To the extent appraisal rights are available to
MMI's stockholders in connection with the Merger, no more than 10% of the
outstanding shares of MMI Common Stock shall (a) qualify as Dissenting Shares,
(b) be subject to payment in lieu of fractional shares as provided in Section
2.2 hereof or (c) be treasury shares of MMI.
7.6. CONSENTS; LITIGATION. Other than the filing of the Certificate of
Merger as described in Article 1, all authorizations, consents, orders or
approvals of, or declarations or filings with, or expirations or terminations of
waiting periods (including the waiting period under the HSR Act) imposed by, any
governmental entity, and all required third-party consents, the failure to
obtain which would have a material adverse effect on ICI and its subsidiaries,
including the Surviving Corporation and its subsidiaries, taken as a whole,
shall have been filed, occurred or been obtained. ICI shall have received all
state securities or Blue Sky permits and other authorizations necessary to issue
ICI
A-25
<PAGE>
Common Stock pursuant to the Merger and the other terms of this Agreement. In
addition, no action, suit or proceeding shall have been instituted before any
court or other governmental entity to restrain, modify, enjoin or prohibit the
carrying out of the transactions contemplated hereby.
7.7. COMFORT LETTER. ICI shall have received from KPMG Peat Marwick
L.L.P., certified public accountants for MMI, (a) "comfort" letters dated the
date of the Proxy Statement, the effective date of the Registration Statement
and the Closing Date (or such other date reasonably acceptable to ICI) with
respect to certain financial statements and other financial information included
in the Registration Statement in customary form, (b) the consents referred to in
Section 5.7(a) in respect of any filing previously or concurrently being made
with the SEC, and (c) a letter addressed to ICI and Deloitte & Touche LLP, in
form and substance reasonably satisfactory to ICI, to the effect that MMI
qualifies as an entity such that the Merger will qualify as a "pooling of
interests" transaction under generally accepted accounting principles.
7.8. POOLING LETTERS. ICI shall have received a letter from Deloitte &
Touche LLP, certified public accountants for ICI, dated the Closing Date,
addressed to ICI, in form and substance reasonably satisfactory to ICI, stating
that the Merger will qualify as a "pooling of interests" transaction under
generally accepted accounting principles.
ARTICLE 8.
INDEMNIFICATION AND INSURANCE
8.1 INDEMNIFICATION. In the event of any claim, action, suit, proceeding
or investigation, whether civil, criminal or administrative, including, without
limitation, any such claim, action, suit, proceeding or investigation in which
any of the present or former officers or directors (the "Managers") of MMI or
any of the MMI Subsidiaries is, or is threatened to be, made a party by reason
of the fact that he or she served as a Manager of MMI or any of the MMI
Subsidiaries, or is or was serving at the request of MMI or any of the MMI
Subsidiaries as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, whether before or after
the Effective Date, MMI shall indemnify and hold harmless, and from and after
the Effective Date each of the Surviving Corporation and ICI shall indemnify and
hold harmless, as and to the full extent permitted by applicable law (including
by advancing expenses promptly as statements therefor are received), each such
Manager against any losses, claims, damages, liabilities, costs, expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with any such claim, action, suit, proceeding or investigation, and
in the event of any such claim, action, suit proceeding or investigation
(whether arising before or after the Effective Date), (i) if MMI (prior to the
Effective Date) or ICI or the Surviving Corporation (after the Effective Date)
have not promptly assumed the defense of such matter, the Managers may retain
counsel satisfactory to them, and MMI, or the Surviving Corporation and ICI
after the Effective Date, shall pay all reasonable fees and expenses of such
counsel for the Managers promptly, as statements therefor are received, and (ii)
MMI, or the Surviving Corporation and ICI after the Effective Date, will use
their respective reasonable efforts to assist in the vigorous defense of any
such matter; provided that neither MMI nor the Surviving Corporation or ICI
shall be liable for any settlement effected without its prior written consent;
provided further that the Surviving Corporation and ICI shall have no obligation
under the foregoing provisions of this Section 8.1 to any Manager when and if a
court of competent jurisdiction shall ultimately determine, and such
determination shall have become final and non-appealable, (x) that
indemnification of such Manager in the manner contemplated hereby is prohibited
by applicable law, or (y) that MMI has breached a representation or warranty
hereunder with respect to the same matters for which indemnification is being
sought by such Manager and such Manager fails to prove that such Manager had no
actual knowledge of such breach at the Effective Date; and provided further that
such Manager shall have satisfied any and all applicable conditions precedent to
such indemnification under applicable law. Upon the finality of any such
determination that the Surviving Corporation or ICI is not liable for any such
indemnification claims, the Manager will reimburse ICI and the Surviving
Corporation for any fees, expenses and costs incurred by ICI or the Surviving
Corporation
A-26
<PAGE>
in connection with the defense of such claims. Any Manager wishing to claim
indemnification under this Section 8.1, upon learning of any such claim, action,
suit, proceeding or investigation, shall notify MMI and ICI, thereof (provided
that the failure to give such notice shall not affect any obligations hereunder,
except to the extent that the indemnifying party is actually and materially
prejudiced thereby). ICI further covenants not to amend or repeal any provisions
of the Certificate of Incorporation or Bylaws of MMI in any manner which would
adversely affect the indemnification or exculpatory provisions contained herein.
The provisions of this Section 8.1 are intended to be for the benefit of, and
shall be enforceable by, each indemnified party and his or her heirs and
representatives, and shall survive the Closing for a period expiring six years
from the Effective Date.
8.2. DIRECTORS' AND OFFICERS' INSURANCE. For a period of two years from
the Effective Date, the Surviving Corporation shall either, in its discretion
(x) maintain in effect MMI's current directors' and officers' liability
insurance covering those Managers who are currently covered on the date of this
Agreement by MMI's directors' and officers' liability insurance policy (a copy
of which has been heretofore delivered to ICI) the "Indemnified Parties");
PROVIDED HOWEVER, that the Surviving Corporation may substitute for such MMI
policies, policies with at least the same coverage containing terms and
conditions which are no less advantageous to the Managers and provided that said
substitution does not result in any gaps or lapses in coverage with respect to
matters occurring prior to the Effective Date or (y) to the extent applicable,
cause ICI's directors' and officers' liability insurance, if any, then in effect
to cover those persons who are covered on the date of this Agreement by MMI's
directors' and officers' liability insurance policy with respect to those
matters covered by MMI's directors' and officers' liability insurance policy. In
no event, however, shall the Surviving Corporation or ICI be required by this
Section 8.2 to expend a premium for such insurance in an amount equal to double
the rate paid by MMI for the policy period immediately preceding the date of
execution of this Agreement. The provisions of this Section 8.2 are intended to
be for the benefit of, and shall be enforceable by, each Manager and his or her
heirs and representatives. Notwithstanding the foregoing, ICI shall have no
liability or obligation under this Section 8.2 to the extent the policy referred
to in this Section is not reasonably available on the terms set forth in this
Section.
ARTICLE 9.
MISCELLANEOUS
9.1. TERMINATION. In addition to the provisions regarding termination set
forth elsewhere herein, this Agreement and the transactions contemplated hereby
may be terminated at any time on or before the Closing Date:
(a) by mutual consent of MMI and ICI;
(b) by ICI if there has been a material misrepresentation or breach of
warranty in the representations and warranties of MMI set forth herein or a
failure to perform in any material respect a covenant on the part of MMI
with respect to its representations, warranties and covenants set forth in
this Agreement, except for any such misrepresentation, breach or failure to
perform which was disclosed in the Proxy Statement on the date it is mailed
to MMI's stockholders to the extent that ICI has expressly agreed in writing
to such specific disclosure;
(c) by MMI if there has been a material misrepresentation or breach of
warranty in the representations and warranties of ICI set forth herein or a
failure to perform in any material respect a covenant on the part of ICI
with respect to its representations, warranties and covenants set forth in
this Agreement, except for any such misrepresentation, breach or failure to
perform which was disclosed in the Proxy Statement on the date it is mailed
to MMI's stockholders to the extent that MMI has expressly agreed in writing
to such specific disclosure (and, in no event whatsoever shall MMI have any
right or remedy in respect of any breach or violation by ICI of Section
5.2(c) hereof other than to exercise any termination right of MMI under this
Section 9.1(c));
A-27
<PAGE>
(d) by either ICI or MMI if the transactions contemplated by this
Agreement have not been consummated by August 31, 1996, unless such failure
of consummation is due to the failure of the terminating party to perform or
observe the covenants, agreements, and conditions hereof to be performed or
observed by it at or before the Closing Date (except for any breach by ICI
of Section 5.2(c) hereof);
(e) by either MMI or ICI if the transactions contemplated hereby violate
any nonappealable final order, decree or judgment of any court or
governmental body or agency having competent jurisdiction;
(f) by MMI if, in the exercise of the good faith judgment of its Board
of Directors as to its fiduciary duties to its stockholders exercised in
accordance with the provisions of Section 5.13, such termination is required
by reason of an Acquisition Proposal;
(g) by ICI if the MMI Board of Directors withdraws or materially
modifies or changes its recommendation to the stockholders of MMI to approve
this Agreement and the Merger; or
(h) by MMI if the Determination Price is less than $13.00 per share.
9.2. EXPENSES.
(a) Except as provided in (b) below, if the transactions contemplated by
this Agreement are not consummated, each party hereto shall pay its own
expenses incurred in connection with this Agreement and the transactions
contemplated hereby.
(b) If, (i) this Agreement is terminated by MMI pursuant to Section
9.1(f) hereof, (ii) this Agreement is terminated by ICI pursuant to Section
9.1(g) or (iii) on or before August 31, 1996, MMI enters into a definitive
agreement with respect to an Acquisition Proposal with any corporation,
partnership, person or other entity or group (other than ICI or any
affiliate of ICI), and such transaction (including any revised transaction
based upon the Acquisition Proposal) is thereafter consummated (whether
before or after August 31, 1996), then MMI shall pay ICI a cash fee equal to
the sum of $2.5 Million, which such fee shall be payable in same day funds
to an account specified by ICI. This Section shall survive any termination
of this Agreement.
9.3. ENTIRE AGREEMENT. This Agreement, the MMI CA, the ICI CA and the
exhibits hereto contain the complete agreement among the parties with respect to
the transactions contemplated hereby and supersede all prior agreements and
understandings among the parties with respect to such transactions. Section and
other headings are for reference purposes only and shall not affect the
interpretation or construction of this Agreement. The parties hereto have not
made any representation or warranty except as expressly set forth in this
Agreement or in any certificate or schedule delivered pursuant hereto. The
obligations of any party under any agreement executed pursuant to this Agreement
shall not be affected by this section.
9.4. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND COVENANTS. The
representations and warranties of each party contained herein or in any exhibit,
certificate, document or instrument delivered pursuant to this Agreement, and
the covenants and agreements of the parties (other than those contained in 2.5,
8.1 and 8.2) shall not survive the Closing.
9.5. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and such counterparts together shall constitute only one original.
A-28
<PAGE>
9.6. NOTICES. All notices, demands, requests or other communications that
may be or are required to be given, served, or sent by any party to any other
party pursuant to this Agreement shall be in writing and shall be mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, or transmitted by hand delivery or facsimile transmission, addressed as
follows:
(i) If to ICI:
4320 International Boulevard, N.W.
Norcross, Georgia 30093
Attention: Robert L. Taylor, President and Chief Executive Officer
Facsimile: (770) 381-7581
with a copy (which shall not constitute notice) to:
Arnall Golden & Gregory
2800 One Atlantic Center
1201 W. Peachtree Street
Atlanta, Georgia 30309
Attention: Stephen D. Fox
Facsimile: (404) 873-8529
(ii) If to MMI:
Post Office Box 2487
Columbus, Mississippi 39704
Attention: Kimber L. Vought, President and Chief Executive Officer
Facsimile: (601) 329-9176
with a copy (which shall not constitute notice) to:
Crouch & Hallett, L.L.P.
717 North Harwood Street
Suite 1400
Dallas, Texas 75201
Attention: Bruce H. Hallett
Facsimile: (214) 953-0576
Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served or sent.
Each notice, demand, request or communication that is mailed, delivered or
transmitted in the manner described above shall be deemed sufficiently given,
served, sent, and received for all purposes at such time as it is delivered to
the addressee (with the return receipt, the delivery receipt, the confirmation
of facsimile delivery or the affidavit of messenger being deemed conclusive
evidence of such delivery) or at such time as delivery is refused by the
addressee upon presentation.
9.7. SUCCESSORS; ASSIGNMENTS. This Agreement and the rights, interests and
obligations hereunder shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned, by operation of law or otherwise, by any of the parties hereto without
the prior written consent of the other.
9.8. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware (except the choice of law
rules thereof).
9.9. AMENDMENT, WAIVER AND OTHER ACTION. To the extent permitted by law,
this Agreement may be amended by a subsequent writing signed by each of ICI and
MMI upon the approval of the Boards of Directors of each of ICI and MMI;
provided, however, that the provisions hereof relating to the manner or basis in
which shares of MMI Common Stock will be exchanged for ICI Common Stock shall
not be amended after the stockholder meeting of MMI to adopt this Agreement
without the
A-29
<PAGE>
requisite approval of the holders of issued and outstanding shares of MMI Common
Stock. Prior to or at the Effective Date, each of ICI and MMI shall have the
right to waive any default in the performance of any term of this Agreement by
the other, to waive or extend the time for the compliance or fulfillment by the
other of any and all of the other's obligations under this Agreement and to
waive any or all of the conditions precedent to its obligations under this
Agreement, except any condition which, if not satisfied, will result in the
violation of any law or applicable governmental regulation.
9.10. SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable, such provision shall be fully severable, and
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision were never a part hereof; the remaining provisions
hereof shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance; and in lieu of
such illegal, invalid or unenforceable provision, there shall be added
automatically as part of this Agreement, a provision as similar in its terms to
such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
9.11. NO THIRD PARTY BENEFICIARIES. Article 8 is intended for the benefit
of each "Manager" (as defined in Article 8) and may be enforced by such persons.
Other than as expressly set forth in this Section 9.11, nothing expressed or
implied in this Agreement is intended, or shall be construed, to confer upon or
give any person, firm or corporation other than the parties hereto, any rights,
remedies, obligations or liabilities under or by reason of this Agreement or
result in such person, firm or corporation being deemed a third party
beneficiary of this Agreement.
9.12. MUTUAL CONTRIBUTION. The parties to this Agreement and their counsel
have mutually contributed to its drafting. Consequently, no provision of this
Agreement shall be construed against any party on the ground that such party
drafted the provision or caused it to be drafted or the provision contains a
covenant of such party.
9.13. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties hereto and delivered to each of the other parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MICROTEK MEDICAL, INC.
By: /s/ Kimber L. Vought
--------------------------------------
ISOLYSER COMPANY, INC.
By: /s/ Robert L. Taylor
--------------------------------------
MMI MERGER CORP.
By: /s/ Robert L. Taylor
--------------------------------------
A-30
<PAGE>
MORGAN KEEGAN & COMPANY, INC.
MORGAN KEEGAN TOWER
FIFTY FRONT STREET
MEMPHIS, TENNESSEE 38103
901/524-4100 TELEX 69-74324
WATS 800/366-7426
MEMBERS NEW YORK STOCK EXCHANGE, INC.
ANNEX B
March 15, 1996
Board of Directors
Isolyser Company, Inc.
4320 International Boulevard
Norcross, GA 30093
Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the shareholders of Isolyser Company, Inc. (the "Company") of the
consideration to be paid by the Company in connection with its proposed
acquisition of Microtek Medical, Inc. ("Microtek" or the "Seller") (the
"Transaction") pursuant to and in accordance with the terms of that certain
Agreement and Plan of Merger (the "Agreement") proposed to be entered into by
and among the Company, a wholly owned subsidiary of the Company ("Merger Corp.")
and the Seller. Capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to them in the Agreement.
You have advised us that, pursuant to the Agreement, Merger Corp. will be
merged with and into the Seller, and the Seller will become a wholly owned
subsidiary of the Company. The Agreement provides that, upon consummation of the
Transaction, each issued and outstanding share of the Seller's Common Stock,
$.01 par value (the "Seller Common Stock"), will be converted into the right to
receive such number of shares of Company Common Stock, $.001 par value, as is
equal to the quotient obtained by dividing $16.50 by the Determination Price
(subject to adjustment as described in the Agreement). The shares of Company
Common Stock issuable to the holders of the issued and outstanding shares of the
Seller Common Stock pursuant to the terms of the Agreement are hereinafter
referred to collectively as the "Transaction Consideration."
Morgan Keegan & Company, Inc. ("Morgan Keegan"), as part of its investment
banking business, is regularly engaged in the valuation of businesses and
securities in connection with mergers and acquisitions, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for various purposes. We have been retained by the Board of
Directors of the Company for the purpose of, and will receive a fee for,
rendering this opinion. We have not advised any party in connection with the
Transaction other than the Company and we make no recommendation to the
shareholders of the Company.
In connection with our opinion, we have (1) reviewed an unexecuted draft of
the Agreement dated March 15, 1996; (which, for purposes of our analysis, we
have assumed that any further revisions, including the filling in of blank
spaces and the attachment of final exhibits and appendices, will not materially
alter the terms and provisions of such documents and that such documents will be
executed as finalized); (2) held discussions with various members of management
and representatives of the Company and the Seller concerning each company's
historical and current operations, financial condition and prospects; (3)
reviewed historical consolidated financial and operating data that was
B-1
<PAGE>
Isolyser Company, Inc.
March 15, 1996
Page 2
publicly available or furnished to us by the Company and Seller; (4) reviewed
internal financial analyses, financial and operating forecasts, reports and
other information prepared by officers and representatives of the Company and
the Seller; (5) reviewed certain publicly available information with respect to
certain other companies that we believe to be comparable to the Seller and the
trading markets for such other companies' securities; (6) reviewed certain
publicly available information concerning the terms of certain other
transactions that we deemed relevant to our inquiry; (7) conducted such other
financial studies, analyses and investigations as we deemed appropriate for the
purposes of this opinion.
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided us or publicly available and have assumed and relied upon
the representations and warranties of the Company and Seller contained in the
Agreement. We have not been engaged to, and have not independently attempted to,
verify any of such information. We have also relied upon the managements of the
Company and Seller as to the reasonableness and achievability of the financial
and operating projections and the assumptions and bases therefor provided to us
and, with your consent, we have assumed that such projections, including and
without limitation cost savings and operating synergies from the Transaction,
reflect the best currently available estimates and judgments of such respective
managements of the Company and Seller and that such projections and forecasts
will be realized in the amounts and time periods currently estimated by the
managements of the Company and Seller. We have not been engaged to assess the
achievability of such projections or the assumptions on which they were based
and express no view as to such projections or assumptions. In addition, we have
not conducted a physical inspection or appraisal of any of the assets,
properties or facilities of either the Company or Seller nor have we been
furnished with any such evaluation or appraisal. We have also assumed that the
conditions to the Transaction as set forth in the Agreement would be satisfied;
and that the Transaction would be consummated on a timely basis in the manner
contemplated in the Agreement and that, as contemplated by the Agreement, the
Merger will be accounted for as a pooling of interests. Our opinion is based
upon analyses of the foregoing factors in light of our assessment of general
economic, financial and market conditions as they exist and can be evaluated by
us as of the date hereof. We express no opinion as to the price or trading range
at which shares of the Company's Common Stock will trade following the date
hereof, or upon completion of the Transaction.
Morgan Keegan has provided other investment banking services to the Company,
including advising it with respect to the acquisition of White Knight
Healthcare, Inc. in 1995, acting as managing underwriter of the Company's
initial public offering in 1994 and lead manager of a follow-on offering of
Common Stock of the Company in 1995. In the ordinary course of our business, we
serve as a market maker for the Company's Common Stock and trade shares for our
own account and the accounts of our customers. Accordingly, we may at any time
hold long or short positions in the Company's Common Stock.
It is understood that this opinion is not to be quoted or referred to, in
whole or in part (including excerpts or summaries), in any filing, report,
document, release or other communication used in connection with the Transaction
(unless required to be quoted or referred to by applicable regulatory
requirements), nor shall this opinion be used for any other purposes, without
our prior written consent, which consent shall not be unreasonably withheld.
Furthermore, our opinion is directed to the Company's Board of Directors and
does not constitute a recommendation to any shareholder of the Company.
B-2
<PAGE>
Isolyser Company, Inc.
March 15, 1996
Page 3
Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is our opinion that, as of the date hereof, the
Transaction Consideration is fair, from a financial point of view, to the
shareholders of the Company.
Yours very truly,
/s/ MORGAN KEEGAN & COMPANY, INC.
MORGAN KEEGAN & COMPANY, INC.
B-3
<PAGE>
[LOGO]
APPENDIX C
PERSONAL AND CONFIDENTIAL
March 15, 1996
Board of Directors
Microtek Medical, Inc.
512 Lehmberg Road
Columbus, MS 39702
Gentlemen:
You have requested our opinion as to the fairness to the holders of the
outstanding shares of Common Stock, par value $.01 per share (the "Shares"), of
Microtek Medical, Inc. (the "Company") of the Exchange Ratio (as defined below)
of shares (or fraction thereof) of Common Stock, par value $.001 per share (the
"Isolyser Shares"), of Isolyser Company, Inc. ("Isolyser") to be received for
each Share pursuant to the Agreement and Plan of Merger dated as of March 15,
1996, among Isolyser, MMI Merger Corp. ("MMI"), a wholly-owned subsidiary of
Isolyser, and the Company (the "Agreement"). Pursuant to the Agreement, MMI will
be merged with the Company (the "Merger") and each outstanding Share not held in
the treasury of the Company or owned by Isolyser or any direct or indirect
wholly-owned subsidiary of Isolyser or the Company will be converted into the
right to recieve that number of Isolyser Shares equal to the quotient, computed
to four decimal places (the "Exchange Ratio"), of $16.50 divided by the average
per Isolyser Share closing price as reported on the NASDAQ National Market
System for the twenty days immediately preceding the second trading day prior to
the Effective Date (as defined in the Agreement), except that in no event will
the Exchange Ratio be less than 0.8919 or greater than 1.1379.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having provided certain investment banking services to
the Company from time to time, including having acted as its financial advisor
in connection with, and having participated in certain of the negotiations
leading to, the Agreement.
C-1
<PAGE>
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of the
Company for the four fiscal years ended November 30, 1995, and of Isolyser for
the two years ended December 31, 1995; Form S-1 dated October 20, 1994, of
Isolyser; certain interim reports to stockholders and Quarterly Reports on Form
10-Q of the Company and of Isolyser; certain other communications from the
Company and Isolyser to their respective stockholders; and certain internal
financial analyses and forecasts for the Company and Isolyser prepared by their
respective managements. We also have held discussions with members of the senior
management of the Company and of Isolyser regarding the past and current
business operations, financial condition and future prospects of their
respective companies. In addition, we have reviewed the reported price and
trading activity for the Shares and for the Isolyser Shares, compared certain
financial and stock market information for the Company and for Isolyser with
similar information for certain other companies the securities of which are
publicly traded, reviewed the financial terms of certain recent business
combinations in the medical device and hospital supply industry specifically and
in other industries generally and performed such other studies and analyses as
we considered appropriate.
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of this opinion. In that regard, we have assumed, with your consent,
that the financial forecasts for the Company and Isolyser, including, without
limitation, projected cost savings and operating synergies resulting from the
Merger have been reasonably prepared on a basis reflecting the best currently
available judgments and estimates of the Company and of Isolyser and that such
financial forecasts will be realized in the amounts and at the times
contemplated thereby. In addition, we have not made an independent evaluation or
appraisal of the assets and liabilities of the Company or Isolyser or any of
their subsidiaries and we have not been furnished with any such evaluation or
appraisal. We have assumed, with your consent, that the consummation of the
Merger will be accounted for as a pooling of interests under generally accepted
accounting principles.
Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is our opinion that as of the date hereof the Exchange
Ratio pursuant to the Agreement is fair to the holders of Shares.
Very truly yours,
[LOGO]
GOLDMAN, SACHS & CO.
C-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to Section 41-2-851 through 14-2-857 of the Georgia Business
Corporation Code, as amended, the directors, officers, employees and agents of
the Registrant may, and in some cases must, be indemnified by the Registrant
under certain circumstances against expenses and liabilities incurred by or
imposed upon them as a result of actions, suits or proceedings brought against
them as directors, officers, employees and agents of the Registrant (including
action, suits or proceedings brought against them for violations of the federal
securities laws). Article Nine of the Registrant's Bylaws provides for
indemnification of directors to the fullest extent permitted by the Georgia
Business Corporation Code. These provisions generally mirror Section 41-2-851
through 14-2-857 of the Georgia Business Corporation Code.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to directors, officers or
persons controlling the Registrant pursuant to the foregoing provisions of the
Georgia Business Corporation Code and the Registrant's Bylaws, the Registrant
has been informed that indemnification is considered by the Securities and
Exchange Commission to be against public policy and therefore unenforceable.
ITEM 21.
(a) Exhibits
<TABLE>
<C> <S>
2.1 Articles of Merger of MedSurg Industries, Inc. and MedSurg Acquisition Corp. dated
December 31, 1993 (incorporated by reference to Exhibit 2.1 filed with the Company's
Registration Statement on Form S-1, File No. 33-83474)
2.2 Plan and Agreement of Merger dated December 31, 1993 of MedSurg Industries, Inc. and
MedSurg Acquisition Corp. (incorporated by reference to Exhibit 2.2 filed with the
Company's Registration Statement on Form S-1, File No. 33-83474)
2.3 Certificate of Merger and Name Change of MedSurg Industries, Inc. and MedSurg
Acquisition Corp. dated January 7, 1994 (incorporated by reference to Exhibit 2.3
filed with the Company's Registration Statement on Form S-1, File No. 33-84374)
2.4 Articles of Merger of Creative Research and Manufacturing, Inc. and Creative
Acquisition Corp. dated December 31, 1993 (incorporated by reference to Exhibit 2.4
filed with the Company's Registration Statement on Form S-1, File No. 33-83474)
2.5 Plan and Agreement of Merger dated December 31, 1993 of Creative Research and
Manufacturing, Inc. and Creative Acquisition Corp. (incorporated by reference to
Exhibit 2.5 filed with the Company's Registration Statement on Form S-1, File No.
33-83474)
2.6 Certificate of Merger and Name Change of Creative Research and Manufacturing, Inc.
and Creative Acquisition Corp. dated January 7, 1994 (incorporated by reference to
Exhibit 2.6 filed with the Company's Registration Statement on Form S-1, File No.
33-83474)
2.7 Agreement and Plan of Merger dated as of July 28, 1995 among the Company, White
Knight Acquisition Corp. and White Knight Healthcare, Inc. (incorporated by
reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed October
3, 1995)
2.8 Agreement and Plan of Merger dated as of May 1, 1995 among the Company, Isolyser/
SafeWaste Acquisition Corp. and SafeWaste Corporation (incorporated by reference to
Exhibit 2.1 to the Company's Current Report on Form 8-K filed on June 15, 1995)
2.9 Articles of Merger dated May 31, 1995 of SafeWaste Corporation With and Into
Isolyser/ SafeWaste Acquisition Corp. (incorporated by reference to Exhibit 2.2 to
the Company's Current Report on Form 8-K filed on June 15, 1995)
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
2.10 Certificate of Merger dated May 31, 1995 of Isolyser/SafeWaste Acquisition Corp. and
SafeWaste Corporation (incorporated by reference to Exhibit 2.3 to the Company's
Current Report on Form 8-K filed on June 15, 1995)
2.11 Articles of Merger of White Knight Healthcare, Inc., and White Knight Acquisition
Corp., dated September 18, 1995 (incorporated by reference to Exhibit 2.2 to the
Company's Current Report on Form 8-K filed on October 3, 1995)
2.12 Certificate of Merger of White Knight Healthcare, Inc., and White Knight Acquisition
Corp., dated September 18, 1995 (incorporated by reference to Exhibit 2.3 to the
Company's Current Report on Form 8-K filed October 3, 1995)
2.13 Stock Purchase Agreement dated December 31, 1993 between the Company, MedSurg
Acquisition Corp., Creative Acquisition Corp., MedSurg Industries, Inc., Creative
Research and Manufacturing, Inc. and MedInvest Enterprises, Inc. (incorporated by
reference to Exhibit 2.7 to the Company's Registration Statement on Form S-1, File
No. 33-83474)
2.14 Agreement and Plan of Merger dated March 15, 1996 among the Company, Microtek
Medical, Inc. and MMI Merger Corp. (incorporated by reference to Appendix A to the
Proxy Statement/Prospectus contained in this Registration Statement)
3.1 Articles of Incorporation of Isolyser Company, Inc. (incorporated by reference to
Exhibit 3.1 filed with the Company's Registration Statement on Form S-1, File No.
33-83474)
3.2 Amended and Restated Bylaws of Isolyser Company, inc. (incorporated by reference to
Exhibit 3.2 filed with the Company's Registration Statement on Form S-1, File No.
33-83474)
4.1 Specimen Certificate of Common Stock (incorporated by reference to Exhibit 4.1 filed
with the Company's Registration Statement on Form S-1, File No. 33-83474)
5.1 Opinion of Arnall Golden & Gregory
8.1 Opinion of Arnall Golden & Gregory as to certain tax matters
9.1 Voting Agreement, dated December 31, 1993, among HTI Investments Ltd. J.V., Robert
L. Taylor, Travis W. Honeycutt, Life-Aid Services, Inc. and MedInvest Enterprises,
Inc. (incorporated by reference to Exhibit 9.1 filed with the Company's Registration
Statement on Form S-1, File No. 33-83474)
10.1 Employment Agreement dated December 31, 1993 between Michael Sahady, MedSurg
Industries, Inc., Creative Research and Manufacturing, Inc. and the Company
(incorporated by reference to Exhibit 10.1 filed with the Company's Registration
Statement on Form S-1, File No. 33-83474)
10.2 Employment Agreement dated December 31, 1993 between Kenneth Newsome, MedSurg
Industries, Inc., Creative Research and Manufacturing, Inc. and the Company
(incorporated by reference to Exhibit 10.2 filed with the Company's Registration
Statement on Form S-1, File No. 33-83474)
10.3 Stock Option Plan and First Amendment to Stock Option Plan (incorporated by
reference to Exhibit 4.1 filed with the Company's Registration Statement on Form
S-8, File No. 33-85668)
10.4 Second Amendment to Stock Option Plan (incorporated by reference to Exhibit 4.1
filed with the Company's Registration Statement on Form S-8, File No. 33-85668)
10.5 Form of Third Amendment to Stock Option Plan (incorporated by reference to Exhibit
10.37 filed with the Company's Annual Report on Form 10-K for the period ended
December 31, 1994)
10.6 Form of Incentive Stock Option Agreement pursuant to Stock Option Plan (incorporated
by reference to Exhibit 4.2 filed with the Company's Registration Statement on Form
S-8, File No. 33-85668)
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
10.7 Form of Non-Qualified Stock Option Agreement pursuant to Stock Option Plan
(incorporated by reference to Exhibit 4.3, filed with the Company's Registration
Statement on Form S-8, File No. 33-85668)
10.8 Form of Option for employees of the Company outside of Stock Option Plan
(incorporated by reference to Exhibit 10.6 filed with the Company's Registration
Statement on Form S-1, File No. 33-83474)
10.9 Contract for Sterilization Facility, dated October 18, 1993, between Sterile
Technologies, Inc. and MedSurg Industries, Inc. (incorporated by reference to
Exhibit 10.14 filed with the Company's Registration Statement on Form S-1, File No.
33-83474)
10.10 Distribution Agreement, dated August 30, 1993, between Curtin Matheson Scientific,
Inc. and the Company (incorporated by reference to Exhibit 10.17 filed with the
Company's Registration Statement on Form S-1, File No. 33-83474)
10.11 Exclusive Distribution Agreement, effective March 1, 1992, between Baxter Healthcare
Corporation, through its Pharmaseal Division and the Company (incorporated by
reference to Exhibit 10.18 filed with the Company's Registration Statement on Form
S-1, File No. 33-83474)
10.12 Commission Agreement, dated September 10, 1993, between Brian Haynes, Charles D.
Leddon and the Company (incorporated by reference to Exhibit 10.19 filed with the
Company's Registration Statement on Form S-1 File No. 33-83474)
10.13 401(k) Retirement Plan of MedSurg Industries, Inc. (incorporated by reference to
Exhibit 10.13 filed with the Company's Registration Statement on Form S-1 File No.
33-97086)
10.14 Non-Competition Agreement, dated February 28, 1993, between Charles Atkins and
Company, Ltd., Scherer Healthcare, Inc., Atlanta Healthcare Services, Inc., Charles
R. Atkins, III and the Company (incorporated by reference to Exhibit 10.22 filed
with the Company's Registration Statement on Form S-1, File No. 33-83474)
10.15 Covenant and Agreement Not to Compete, dated December 31, 1993, between MedSurg
Industries, Inc., Creative Research and Manufacturing, Inc., MedInvest Enterprises,
Inc., MedSurg Acquisition Corp., Creative Acquisition Corp. and the Company
(incorporated by reference to Exhibit 10.23 filed with the Company's Registration
Statement on Form S-1, File No. 33-83474)
10.16 Sublicense Agreement, dated March 31, 1987, between Sherwood Medical Company and
MedSurg Industries, Inc. (incorporated by reference to Exhibit 10.24 filed with the
Company's Registration Statement on Form S-1, File No. 33-83474)
10.17 Lease Agreement, dated July 29, 1993, between Richard E. Curtis, Trustee and MedSurg
Industries, Inc. (incorporated by reference to Exhibit 10.25 filed with the
Company's Registration Statement on Form S-1, File No. 33-83474)
10.18 First Lease Amendment, dated February 28, 1994, between Richard E. Curtis, Trustee
and MedSurg Industries, Inc. (incorporated by reference to Exhibit 10.26 filed with
the Company's Registration Statement on Form S-1, File No. 33-83474)
10.19 Lease Agreement, dated October 21, 1991, between Weeks Master Partnership, L.P. and
the Company (incorporated by reference to Exhibit 10.27 filed with the Company's
Registration Statement on Form S-1, File No. 33-83474)
10.20 Lease, dated September 28, 1984, between M.S.I. Limited Partnership and MedSurg
Industries, Inc. (incorporated by reference to Exhibit 10.28 filed with the
Company's Registration Statement on Form S-1, File No. 33-83474)
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.21 Amendment No. 1 to Lease, dated October 10, 1984, between M.S.I. Limited Partnership
and MedSurg Industries, Inc. (incorporated by reference to Exhibit 10.29 filed with
the Company's Registration Statement on Form S-1, File No. 33-83474)
10.22 Agreement and Second Amendment to Lease, dated December 31, 1993, between M.S.I.
Limited Partnership and MedSurg Industries, Inc. (incorporated by reference to
Exhibit 10.30 filed with the Company's Registration Statement on Form S-1, File No.
33-83474)
10.23 Third Amendment to Lease, dated September 9, 1994, between M.S.I. Limited
Partnership and Medsurg Industries, Inc. (incorporated by reference to Exhibit 10.31
filed with the Company's Registration Statement on Form S-1, File No. 33-83474)
10.24 Lease Agreement, dated October 4, 1990, between Minnetonka Business Associates and
Creative Research and Manufacturing, Inc. (incorporated by reference to Exhibit
10.35 filed with the Company's Registration Statement on Form S-1, File No.
33-83474)
10.25 Agreement to Extend Lease, dated October 7, 1991, between Minnetonka Business
Associates and Creative Research and Manufacturing, Inc. (incorporated by reference
to Exhibit 10.36 filed with the Company's Registration Statement on Form S-1, File
No. 33-83474)
10.26 Agreement to Extend Lease, dated June 23, 1993, between Minnetonka Business
Associates and Creative Research and Manufacturing, Inc. (incorporated by reference
to Exhibit 10.37 filed with the Company's Registration Statement on Form S-1, File
No. 33-83474)
10.27 Agreement to Extend Lease dated June 27, 1995, between 7100 Building Company Limited
Partnership and Creative Research and Manufacturing, Inc. (incorporated by reference
to Exhibit 10.27 filed with the Company's Registration Statement on Form S-1 File
No. 33-97086)
10.28 Standard Terms and Conditions of Sale, dated December 31, 1993, between ABB Sanitec,
Inc. and the Company (incorporated by reference to Exhibit 10.38 filed with the
Company's Registration Statement on Form S-1, File No. 33-83474)
10.29 Private Label Supply Agreement, dated September 22, 1993, between National Steel &
Copper Plate Co. and the Company (incorporated by reference to Exhibit 10.39 filed
with the Company's Registration Statement on Form S-1, File No. 33-83474)
10.30 Storz-Atkins Agreement, effective September 1, 1989, between Charles Atkins &
Company Ltd. and Storz Instrument Company, as assigned to the Company on February
28, 1993 (incorporated by reference to Exhibit 10.43 filed with the Company's
Registration Statement on Form S-1, File No. 33-83474)
10.31 Order Confirmation No. 594NW01 (Two Complete Thermobonding Installations) dated May
27, 1994 between the Company and Greenville Machinery Corporation and Amendments to
Order Confirmation No. 594NW01 dated July 7, 1994 and September 19, 1994
(incorporated by reference to Exhibit 10.44 filed with the Company's Registration
Statement on Form S-1, File No. 33-83474)
10.32 Form of Indemnity Agreement entered into between the Company and certain of its
officers and directors (incorporated by reference to Exhibit 10.45 filed with the
Company's Registration Statement on Form S-1, File No. 33-83474)
10.33 Agreement for Purchase and Sale of Real Property dated October , 1994 between
Eaton Subsidiary Corporation, Eaton Corporation and the Company (incorporated by
reference to Exhibit 10.46 filed with the Company's Registration Statement on Form
S-1 File No. 33-83474)
10.34 Credit Agreement, dated November 28, 1994 between Chemical Bank and the Company
(incorporated by reference to Exhibit 10.1 filed with the Company's Quarterly Report
on Form 10-Q for the period ended September 30, 1994)
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S>
10.35 First Amendment Agreement, dated February 7, 1995 between Chemical Bank and the
Company (incorporated by reference to Exhibit 10.35 filed with the Company's
Registration Statement on Form S-1 File No. 33-97086)
10.36 Second Amendment Agreement, dated May 31, 1995 between Chemical Bank and the Company
(incorporated by reference to Exhibit 10.36 filed with the Company's Registration
Statement on Form S-1 File No. 33-97086)
10.37 Third Amendment and Waiver Agreement, dated September 15, 1995 between Chemical Bank
and the Company (incorporated by reference to Exhibit 10.37 filed with the Company's
Registration Statement on Form S-1 File No. 33-97086)
10.38 Form of Cross Indemnity Agreement between HTI Investments Ltd. N.V. and the Company
(incorporated by reference to Exhibit 10.48 filed with the Company's Registration
Statement on Form S-1, File No. 33-83474)
10.39 Lease Agreement, dated November 18, 1994, between Weeks Realty, L.P. and the Company
(incorporated by reference to Exhibit 10.38 filed with the Company's Annual Report
on Form 10-K for the period ended December 31, 1994)
10.40 1995 Nonemployee Director Stock Option Plan (incorporated by reference to Exhibit
10.39 filed with the Company's Annual Report on Form 10-K for the period ended
December 31, 1994)
10.41 Agreement and Lease dated October 1, 1992 between Industrial Development Authority
of the City of Douglas, Arizona and White Knight Healthcare, Inc. (incorporated by
reference to Exhibit 10.41 filed with the Company's Registration Statement on Form
S-1 File No. 33-97086)
10.42 Product Purchase and Supply Agreement dated February 8, 1993 between White Knight
Healthcare, Inc. and Sterile Concepts, Inc. (incorporated by reference to Exhibit
10.42 filed with the Company's Registration Statement on Form S-1 File No. 33-97086)
10.43 Non-Negotiable Promissory Note in the original principal amount of $2,304,000.00
dated February 8, 1993 between White Knight Healthcare, Inc. and Sterile Concepts,
Inc. (incorporated by reference to Exhibit 10.43 filed with the Company's
Registration Statement on Form S-1 File No. 33-97086)
10.44 Non-Negotiable Promissory Note in the original principal amount of $1,278,500.00
dated February 8, 1993 between White Knight Healthcare, Inc. and Sterile Concepts,
Inc. (incorporated by reference to Exhibit 10.44 filed with the Company's
Registration Statement on Form S-1 File No. 33-97086)
10.45 Non-Negotiable Promissory Note and Security Agreement in the original principal
amount of $213,668.45 dated February 8, 1993 between White Knight Healthcare, Inc.
and Sterile Concepts, Inc. (incorporated by reference to Exhibit 10.45 filed with
the Company's Registration Statement on Form S-1 File No. 33-97086)
10.46 Form of Non-Negotiable Promissory Note in the original Principal amount of $750,000
dated September 15, 1995 between the Company and Ali R. Momtaz (incorporated by
reference to Exhibit 10.46 filed with the Company's Registration Statement on Form
S-1 File No. 33-97086)
10.47 Option Contract dated August 22, 1995, among the Company and Spartanburg County
(incorporated by reference to Exhibit 10.47 filed with the Company's Registration
Statement on Form S-1 File No. 33-97086)
10.48 Distribution and Marketing Agreement dated September 15, 1995 between the Company
and Sterile Concepts, Inc. (incorporated by reference to Exhibit 10.48 filed with
the Company's Registration Statement on Form S-1 File No. 33-97086)
</TABLE>
II-5
<PAGE>
<TABLE>
<C> <S>
10.49 Agreement, dated November 1, 1992 between Struble & Moffitt Company and United Food
and Commercial Workers Union Local 1360, chartered by United Food and Commercial
Workers, AFL-CIO (incorporated by reference to Exhibit 10.49 filed with the
Company's Registration Statement on Form S-1 File No. 33-97086)
10.50 Agreement, dated March 18, 1995 between White Knight Hospital Disposables and United
Food and Commercial Workers Local 99R (incorporated by reference to Exhibit 10.50
filed with the Company's Registration Statement on Form S-1 File No. 33-97086)
10.51 Labor Contract, dated July 22, 1994, between Union of Industrial, Related and
Similar Workers of the Municipality of Agua Prieta, Sonora, C.R.O.M. and Industrias
Apson, S.A. de C.V. (incorporated by reference to Exhibit 10.51 filed with the
Company's Registration Statement on Form S-1 File No. 33-97086)
10.52 Joint Venture Agreement, dated March 31, 1995 by and among the Company, Microtek
Medical, Inc., and Synergon Medical, L.L.C. (incorporated by reference to Exhibit
10.52 filed with the Company's Registration Statement on Form S-1 File No. 33-97086)
10.53 Lease Agreement dated June 21, 1995 between Caballeros Blanca, S.A. de C.V. and
Constuctora Immobiliaria del Norte de Doahuila, S.A. de C.V. (incorporated by
reference to Exhibit 10.53 filed with the Company's Registration Statement on Form
S-1 File No. 33-97086)
10.54 Lease Agreement, dated June 1, 1994, between White Transfer & Storage Company, Inc.,
and White Knight Health Care, Inc, as amended by Letter Agreements, dated June 21,
1995 and August 21, 1995 (incorporated by reference to Exhibit 10.54 filed with the
Company's Registration Statement on Form S-1 File No. 33-97086)
10.55 Lease, dated August 1, 1987, between HARP, a division of M.B. Haynes Electric
Corporation, and Mars/White Knight, a division of Work Wear Corporation, Inc., as
amended by Addendum No. 1 dated July 6, 1987, Addendum No. 2 dated July 6, 1987,
Addendum No. 3 dated May 14, 1990, Addendum No. 4, dated June 17, 1992, second
Addendum No. 4 dated June 28, 1993, Addendum No. 5 dated May 26, 1994, Addendum No.
6 dated July 11, 1995, and Addendum No. 7 dated September 22, 1995 (incorporated by
reference to Exhibit 10.55 filed with the Company's Registration Statement on Form
S-1 File No. 33-97086)
10.56 Lease, dated October 1, 1995, between SafeWaste Corporation and Highwoods/Forsyth
Limited Partnership (incorporated by reference to Exhibit 10.56 filed with the
Company's Registration Statement on Form S-1 File No. 33-97086)
10.57 1995 Employee Stock Purchase Plan, as amended by First Amendment dated July 1, 1995
(incorporated by reference to Exhibit 10.57 filed with the Company's Registration
Statement on Form S-1 File No. 33-97086)
10.58 Second Amendment to 1995 Employee Stock Purchase Plan (incorporated by reference to
Exhibit 10.58 filed with the Company's Annual Report on Form 10-K for the year ended
December 31, 1995)
10.59 Fourth Amendment to Stock Option Plan (incorporated by reference to Exhibit 10.59
filed with the Company's Annual Report on Form 10-K for the year ended December 31,
1995)
11.1 Statement re: computation of per share earnings (incorporated by reference to
Exhibit 11.1 filed with the Company's Annual Report on Form 10-K for the year ended
December 31, 1995)
21.1 Subsidiaries of the Company (incorporated by reference to Exhibit 21.1 filed with
the Company's Annual Report on Form 10-K for the year ended December 31, 1995)
23.1 Consent of Deloitte & Touche LLP
23.2 Consent KPMG Peat Marwick LLP
23.3 Consent KPMG Peat Marwick LLP
</TABLE>
II-6
<PAGE>
<TABLE>
<C> <S>
23.4 Consent of Ernst & Young LLP
23.5 Consent of Arnall Golden & Gregory (included in their opinion filed as Exhibit 5.1)
23.6 Consent of Arnall Golden & Gregory (included in their opinion filed as Exhibit 8.1)
23.7 Consent of Morgan Keegan & Company, Inc.
23.8 Consent of Goldman Sachs & Co., Inc.
23.9 Consent of Olin J. Harrell, CPA
23.10 Consent of KPMG Peat Marwick LLP
23.11 Consent of Wolf & Company, P.C.
</TABLE>
(b) Financial Statement Schedule:
Schedule II -- Valuation and Qualifying Accounts (incorporated by
reference from the Company's Annual Report on Form 10-K for the year ended
December 31, 1995)
Other schedules are omitted because they are not applicable or because
required information is included in the consolidated financial statements
or notes thereto.
(c) The Fairness Opinions of Goldman Sachs & Co., Inc. and Morgan Keegan &
Company, Inc. are attached as Annexes C and B, respectively to the Proxy
Statement/Prospectus contained in this Registration Statement.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of any
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion, of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Registration Statement, within one business
day of receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the Registration Statement
through the date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, in the City of Atlanta, State of Georgia, on May 22, 1996.
ISOLYSER COMPANY, INC
By: /s/ ROBERT L. TAYLOR
-----------------------------------------
Robert L. Taylor
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on May 22, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------- --------------------------------------
<C> <S>
/s/ ROBERT L. President, Chief Executive Officer and
TAYLOR Chairman of the Board of Directors
- ---------------------------------------- (principal executive officer)
Robert L. Taylor
/s/ TRAVIS W.
HONEYCUTT* Executive Vice President, Secretary
- ---------------------------------------- and Director
Travis W. Honeycutt
/s/ MICHAEL
SAHADY* Executive Vice President and Director
- ----------------------------------------
Michael Sahady
/s/ C. FRED Senior Vice President of Finance,
HARLOW* Chief Financial Officer, Treasurer
- ---------------------------------------- and Director (principal financial and
C. Fred Harlow accounting officer)
- ---------------------------------------- Director
Rosdon Hendrix
- ---------------------------------------- Director
Jamal Silim
- ---------------------------------------- Director
Kenneth F. Davis
By: /s/ ROBERT L.
TAYLOR
- ----------------------------------------
Robert L. Taylor, Attorney-in-Fact
</TABLE>
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS PAGE
- ----------- ---------
<C> <S> <C>
2.1 Articles of Merger of MedSurg Industries, Inc. and MedSurg Acquisition Corp. dated December 31,
1993 (incorporated by reference to Exhibit 2.1 filed with the Company's Registration Statement
on Form S-1, File No. 33-83474)
2.2 Plan and Agreement of Merger dated December 31, 1993 of MedSurg Industries, Inc. and MedSurg
Acquisition Corp. (incorporated by reference to Exhibit 2.2 filed with the Company's
Registration Statement on Form S-1, File No. 33-83474)
2.3 Certificate of Merger and Name Change of MedSurg Industries, Inc. and MedSurg Acquisition Corp.
dated January 7, 1994 (incorporated by reference to Exhibit 2.3 filed with the Company's
Registration Statement on Form S-1, File No. 33-84374)
2.4 Articles of Merger of Creative Research and Manufacturing, Inc. and Creative Acquisition Corp.
dated December 31, 1993 (incorporated by reference to Exhibit 2.4 filed with the Company's
Registration Statement on Form S-1, File No. 33-83474)
2.5 Plan and Agreement of Merger dated December 31, 1993 of Creative Research and Manufacturing,
Inc. and Creative Acquisition Corp. (incorporated by reference to Exhibit 2.5 filed with the
Company's Registration Statement on Form S-1, File No. 33-83474)
2.6 Certificate of Merger and Name Change of Creative Research and Manufacturing, Inc. and Creative
Acquisition Corp. dated January 7, 1994 (incorporated by reference to Exhibit 2.6 filed with the
Company's Registration Statement on Form S-1, File No. 33-83474)
2.7 Agreement and Plan of Merger dated as of July 28, 1995 among the Company, White Knight
Acquisition Corp. and White Knight Healthcare, Inc. (incorporated by reference to Exhibit 2.1 to
the Company's Current Report on Form 8-K filed October 3, 1995)
2.8 Agreement and Plan of Merger dated as of May 1, 1995 among the Company, Isolyser/ SafeWaste
Acquisition Corp. and SafeWaste Corporation (incorporated by reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K filed on June 15, 1995)
2.9 Articles of Merger dated May 31, 1995 of SafeWaste Corporation With and Into Isolyser/SafeWaste
Acquisition Corp. (incorporated by reference to Exhibit 2.2 to the Company's Current Report on
Form 8-K filed on June 15, 1995)
2.10 Certificate of Merger dated May 31, 1995 of Isolyser/SafeWaste Acquisition Corp. and SafeWaste
Corporation (incorporated by reference to Exhibit 2.3 to the Company's Current Report on Form
8-K filed on June 15, 1995)
2.11 Articles of Merger of White Knight Healthcare, Inc., and White Knight Acquisition Corp., dated
September 18, 1995 (incorporated by reference to Exhibit 2.2 to the Company's Current Report on
Form 8-K filed on October 3, 1995)
2.12 Certificate of Merger of White Knight Healthcare, Inc., and White Knight Acquisition Corp.,
dated September 18, 1995 (incorporated by reference to Exhibit 2.3 to the Company's Current
Report on Form 8-K filed October 3, 1995)
2.13 Stock Purchase Agreement dated December 31, 1993 between the Company, MedSurg Acquisition Corp.,
Creative Acquisition Corp., MedSurg Industries, Inc., Creative Research and Manufacturing, Inc.
and MedInvest Enterprises, Inc. (incorporated by reference to Exhibit 2.7 to the Company's
Registration Statement on Form S-1, File No. 33-83474)
2.14 Agreement and Plan of Merger dated March 15, 1996 among the Company, Microtek Medical, Inc. and
MMI Merger Corp. (incorporated by reference to Appendix A to the Proxy Statement/Prospectus
contained in this Registration Statement)
3.1 Articles of Incorporation of Isolyser Company, Inc. (incorporated by reference to Exhibit 3.1
filed with the Company's Registration Statement on Form S-1, File No. 33-83474)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS PAGE
- ----------- ---------
<C> <S> <C>
3.2 Amended and Restated Bylaws of Isolyser Company, inc. (incorporated by reference to Exhibit 3.2
filed with the Company's Registration Statement on Form S-1, File No. 33-83474)
4.1 Specimen Certificate of Common Stock (incorporated by reference to Exhibit 4.1 filed with the
Company's Registration Statement on Form S-1, File No. 33-83474)
5.1 Opinion of Arnall Golden & Gregory
8.1 Opinion of Arnall Golden & Gregory as to certain tax matters
9.1 Voting Agreement, dated December 31, 1993, among HTI Investments Ltd. J.V., Robert L. Taylor,
Travis W. Honeycutt, Life-Aid Services, Inc. and MedInvest Enterprises, Inc. (incorporated by
reference to Exhibit 9.1 filed with the Company's Registration Statement on Form S-1, File No.
33-83474)
10.1 Employment Agreement dated December 31, 1993 between Michael Sahady, MedSurg Industries, Inc.,
Creative Research and Manufacturing, Inc. and the Company (incorporated by reference to Exhibit
10.1 filed with the Company's Registration Statement on Form S-1, File No. 33-83474)
10.2 Employment Agreement dated December 31, 1993 between Kenneth Newsome, MedSurg Industries, Inc.,
Creative Research and Manufacturing, Inc. and the Company (incorporated by reference to Exhibit
10.2 filed with the Company's Registration Statement on Form S-1, File No. 33-83474)
10.3 Stock Option Plan and First Amendment to Stock Option Plan (incorporated by reference to Exhibit
4.1 filed with the Company's Registration Statement on Form S-8, File No. 33-85668)
10.4 Second Amendment to Stock Option Plan (incorporated by reference to Exhibit 4.1 filed with the
Company's Registration Statement on Form S-8, File No. 33-85668)
10.5 Form of Third Amendment to Stock Option Plan (incorporated by reference to Exhibit 10.37 filed
with the Company's Annual Report on Form 10-K for the period ended December 31, 1994)
10.6 Form of Incentive Stock Option Agreement pursuant to Stock Option Plan (incorporated by
reference to Exhibit 4.2 filed with the Company's Registration Statement on Form S-8, File No.
33-85668)
10.7 Form of Non-Qualified Stock Option Agreement pursuant to Stock Option Plan (incorporated by
reference to Exhibit 4.3, filed with the Company's Registration Statement on Form S-8, File No.
33-85668)
10.8 Form of Option for employees of the Company outside of Stock Option Plan (incorporated by
reference to Exhibit 10.6 filed with the Company's Registration Statement on Form S-1, File No.
33-83474)
10.9 Contract for Sterilization Facility, dated October 18, 1993, between Sterile Technologies, Inc.
and MedSurg Industries, Inc. (incorporated by reference to Exhibit 10.14 filed with the
Company's Registration Statement on Form S-1, File No. 33-83474)
10.10 Distribution Agreement, dated August 30, 1993, between Curtin Matheson Scientific, Inc. and the
Company (incorporated by reference to Exhibit 10.17 filed with the Company's Registration
Statement on Form S-1, File No. 33-83474)
10.11 Exclusive Distribution Agreement, effective March 1, 1992, between Baxter Healthcare
Corporation, through its Pharmaseal Division and the Company (incorporated by reference to
Exhibit 10.18 filed with the Company's Registration Statement on Form S-1, File No. 33-83474)
10.12 Commission Agreement, dated September 10, 1993, between Brian Haynes, Charles D. Leddon and the
Company (incorporated by reference to Exhibit 10.19 filed with the Company's Registration
Statement on Form S-1 File No. 33-83474)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS PAGE
- ----------- ---------
<C> <S> <C>
10.13 401(k) Retirement Plan of MedSurg Industries, Inc. (incorporated by reference to Exhibit 10.13
filed with the Company's Registration Statement on Form S-1 File No. 33-97086)
10.14 Non-Competition Agreement, dated February 28, 1993, between Charles Atkins and Company, Ltd.,
Scherer Healthcare, Inc., Atlanta Healthcare Services, Inc., Charles R. Atkins, III and the
Company (incorporated by reference to Exhibit 10.22 filed with the Company's Registration
Statement on Form S-1, File No. 33-83474)
10.15 Covenant and Agreement Not to Compete, dated December 31, 1993, between MedSurg Industries,
Inc., Creative Research and Manufacturing, Inc., MedInvest Enterprises, Inc., MedSurg
Acquisition Corp., Creative Acquisition Corp. and the Company (incorporated by reference to
Exhibit 10.23 filed with the Company's Registration Statement on Form S-1, File No. 33-83474)
10.16 Sublicense Agreement, dated March 31, 1987, between Sherwood Medical Company and MedSurg
Industries, Inc. (incorporated by reference to Exhibit 10.24 filed with the Company's
Registration Statement on Form S-1, File No. 33-83474)
10.17 Lease Agreement, dated July 29, 1993, between Richard E. Curtis, Trustee and MedSurg Industries,
Inc. (incorporated by reference to Exhibit 10.25 filed with the Company's Registration Statement
on Form S-1, File No. 33-83474)
10.18 First Lease Amendment, dated February 28, 1994, between Richard E. Curtis, Trustee and MedSurg
Industries, Inc. (incorporated by reference to Exhibit 10.26 filed with the Company's
Registration Statement on Form S-1, File No. 33-83474)
10.19 Lease Agreement, dated October 21, 1991, between Weeks Master Partnership, L.P. and the Company
(incorporated by reference to Exhibit 10.27 filed with the Company's Registration Statement on
Form S-1, File No. 33-83474)
10.20 Lease, dated September 28, 1984, between M.S.I. Limited Partnership and MedSurg Industries, Inc.
(incorporated by reference to Exhibit 10.28 filed with the Company's Registration Statement on
Form S-1, File No. 33-83474)
10.21 Amendment No. 1 to Lease, dated October 10, 1984, between M.S.I. Limited Partnership and MedSurg
Industries, Inc. (incorporated by reference to Exhibit 10.29 filed with the Company's
Registration Statement on Form S-1, File No. 33-83474)
10.22 Agreement and Second Amendment to Lease, dated December 31, 1993, between M.S.I. Limited
Partnership and MedSurg Industries, Inc. (incorporated by reference to Exhibit 10.30 filed with
the Company's Registration Statement on Form S-1, File No. 33-83474)
10.23 Third Amendment to Lease, dated September 9, 1994, between M.S.I. Limited Partnership and
Medsurg Industries, Inc. (incorporated by reference to Exhibit 10.31 filed with the Company's
Registration Statement on Form S-1, File No. 33-83474)
10.24 Lease Agreement, dated October 4, 1990, between Minnetonka Business Associates and Creative
Research and Manufacturing, Inc. (incorporated by reference to Exhibit 10.35 filed with the
Company's Registration Statement on Form S-1, File No. 33-83474)
10.25 Agreement to Extend Lease, dated October 7, 1991, between Minnetonka Business Associates and
Creative Research and Manufacturing, Inc. (incorporated by reference to Exhibit 10.36 filed with
the Company's Registration Statement on Form S-1, File No. 33-83474)
10.26 Agreement to Extend Lease, dated June 23, 1993, between Minnetonka Business Associates and
Creative Research and Manufacturing, Inc. (incorporated by reference to Exhibit 10.37 filed with
the Company's Registration Statement on Form S-1, File No. 33-83474)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS PAGE
- ----------- ---------
<C> <S> <C>
10.27 Agreement to Extend Lease dated June 27, 1995, between 7100 Building Company Limited Partnership
and Creative Research and Manufacturing, Inc. (incorporated by reference to Exhibit 10.27 filed
with the Company's Registration Statement on Form S-1 File No. 33-97086)
10.28 Standard Terms and Conditions of Sale, dated December 31, 1993, between ABB Sanitec, Inc. and
the Company (incorporated by reference to Exhibit 10.38 filed with the Company's Registration
Statement on Form S-1, File No. 33-83474)
10.29 Private Label Supply Agreement, dated September 22, 1993, between National Steel & Copper Plate
Co. and the Company (incorporated by reference to Exhibit 10.39 filed with the Company's
Registration Statement on Form S-1, File No. 33-83474)
10.30 Storz-Atkins Agreement, effective September 1, 1989, between Charles Atkins & Company Ltd. and
Storz Instrument Company, as assigned to the Company on February 28, 1993 (incorporated by
reference to Exhibit 10.43 filed with the Company's Registration Statement on Form S-1, File No.
33-83474)
10.31 Order Confirmation No. 594NW01 (Two Complete Thermobonding Installations) dated May 27, 1994
between the Company and Greenville Machinery Corporation and Amendments to Order Confirmation
No. 594NW01 dated July 7, 1994 and September 19, 1994 (incorporated by reference to Exhibit
10.44 filed with the Company's Registration Statement on Form S-1, File No. 33-83474)
10.32 Form of Indemnity Agreement entered into between the Company and certain of its officers and
directors (incorporated by reference to Exhibit 10.45 filed with the Company's Registration
Statement on Form S-1, File No. 33-83474)
10.33 Agreement for Purchase and Sale of Real Property dated October , 1994 between Eaton Subsidiary
Corporation, Eaton Corporation and the Company (incorporated by reference to Exhibit 10.46 filed
with the Company's Registration Statement on Form S-1 File No. 33-83474)
10.34 Credit Agreement, dated November 28, 1994 between Chemical Bank and the Company (incorporated by
reference to Exhibit 10.1 filed with the Company's Quarterly Report on Form 10-Q for the period
ended September 30, 1994)
10.35 First Amendment Agreement, dated February 7, 1995 between Chemical Bank and the Company
(incorporated by reference to Exhibit 10.35 filed with the Company's Registration Statement on
Form S-1 File No. 33-97086)
10.36 Second Amendment Agreement, dated May 31, 1995 between Chemical Bank and the Company
(incorporated by reference to Exhibit 10.36 filed with the Company's Registration Statement on
Form S-1 File No. 33-97086)
10.37 Third Amendment and Waiver Agreement, dated September 15, 1995 between Chemical Bank and the
Company (incorporated by reference to Exhibit 10.37 filed with the Company's Registration
Statement on Form S-1 File No. 33-97086)
10.38 Form of Cross Indemnity Agreement between HTI Investments Ltd. N.V. and the Company
(incorporated by reference to Exhibit 10.48 filed with the Company's Registration Statement on
Form S-1, File No. 33-83474)
10.39 Lease Agreement, dated November 18, 1994, between Weeks Realty, L.P. and the Company
(incorporated by reference to Exhibit 10.38 filed with the Company's Annual Report on Form 10-K
for the period ended December 31, 1994)
10.40 1995 Nonemployee Director Stock Option Plan (incorporated by reference to Exhibit 10.39 filed
with the Company's Annual Report on Form 10-K for the period ended December 31, 1994)
10.41 Agreement and Lease dated October 1, 1992 between Industrial Development Authority of the City
of Douglas, Arizona and White Knight Healthcare, Inc. (incorporated by reference to Exhibit
10.41 filed with the Company's Registration Statement on Form S-1 File No. 33-97086)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS PAGE
- ----------- ---------
<C> <S> <C>
10.42 Product Purchase and Supply Agreement dated February 8, 1993 between White Knight Healthcare,
Inc. and Sterile Concepts, Inc. (incorporated by reference to Exhibit 10.42 filed with the
Company's Registration Statement on Form S-1 File No. 33-97086)
10.43 Non-Negotiable Promissory Note in the original principal amount of $2,304,000.00 dated February
8, 1993 between White Knight Healthcare, Inc. and Sterile Concepts, Inc. (incorporated by
reference to Exhibit 10.43 filed with the Company's Registration Statement on Form S-1 File No.
33-97086)
10.44 Non-Negotiable Promissory Note in the original principal amount of $1,278,500.00 dated February
8, 1993 between White Knight Healthcare, Inc. and Sterile Concepts, Inc. (incorporated by
reference to Exhibit 10.44 filed with the Company's Registration Statement on Form S-1 File No.
33-97086)
10.45 Non-Negotiable Promissory Note and Security Agreement in the original principal amount of
$213,668.45 dated February 8, 1993 between White Knight Healthcare, Inc. and Sterile Concepts,
Inc. (incorporated by reference to Exhibit 10.45 filed with the Company's Registration Statement
on Form S-1 File No. 33-97086)
10.46 Form of Non-Negotiable Promissory Note in the original Principal amount of $750,000 dated
September 15, 1995 between the Company and Ali R. Momtaz (incorporated by reference to Exhibit
10.46 filed with the Company's Registration Statement on Form S-1 File No. 33-97086)
10.47 Option Contract dated August 22, 1995, among the Company and Spartanburg County (incorporated by
reference to Exhibit 10.47 filed with the Company's Registration Statement on Form S-1 File No.
33-97086)
10.48 Distribution and Marketing Agreement dated September 15, 1995 between the Company and Sterile
Concepts, Inc. (incorporated by reference to Exhibit 10.48 filed with the Company's Registration
Statement on Form S-1 File No. 33-97086)
10.49 Agreement, dated November 1, 1992 between Struble & Moffitt Company and United Food and
Commercial Workers Union Local 1360, chartered by United Food and Commercial Workers, AFL-CIO
(incorporated by reference to Exhibit 10.49 filed with the Company's Registration Statement on
Form S-1 File No. 33-97086)
10.50 Agreement, dated March 18, 1995 between White Knight Hospital Disposables and United Food and
Commercial Workers Local 99R (incorporated by reference to Exhibit 10.50 filed with the
Company's Registration Statement on Form S-1 File No. 33-97086)
10.51 Labor Contract, dated July 22, 1994, between Union of Industrial, Related and Similar Workers of
the Municipality of Agua Prieta, Sonora, C.R.O.M. and Industrias Apson, S.A. de C.V.
(incorporated by reference to Exhibit 10.51 filed with the Company's Registration Statement on
Form S-1 File No. 33-97086)
10.52 Joint Venture Agreement, dated March 31, 1995 by and among the Company, Microtek Medical, Inc.,
and Synergon Medical, L.L.C. (incorporated by reference to Exhibit 10.52 filed with the
Company's Registration Statement on Form S-1 File No. 33-97086)
10.53 Lease Agreement dated June 21, 1995 between Caballeros Blanca, S.A. de C.V. and Constuctora
Immobiliaria del Norte de Doahuila, S.A. de C.V. (incorporated by reference to Exhibit 10.53
filed with the Company's Registration Statement on Form S-1 File No. 33-97086)
10.54 Lease Agreement, dated June 1, 1994, between White Transfer & Storage Company, Inc., and White
Knight Health Care, Inc, as amended by Letter Agreements, dated June 21, 1995 and August 21,
1995 (incorporated by reference to Exhibit 10.54 filed with the Company's Registration Statement
on Form S-1 File No. 33-97086)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS PAGE
- ----------- ---------
<C> <S> <C>
10.55 Lease, dated August 1, 1987, between HARP, a division of M.B. Haynes Electric Corporation, and
Mars/White Knight, a division of Work Wear Corporation, Inc., as amended by Addendum No. 1 dated
July 6, 1987, Addendum No. 2 dated July 6, 1987, Addendum No. 3 dated May 14, 1990, Addendum No.
4, dated June 17, 1992, second Addendum No. 4 dated June 28, 1993, Addendum No. 5 dated May 26,
1994, Addendum No. 6 dated July 11, 1995, and Addendum No. 7 dated September 22, 1995
(incorporated by reference to Exhibit 10.55 filed with the Company's Registration Statement on
Form S-1 File No. 33-97086)
10.56 Lease, dated October 1, 1995, between SafeWaste Corporation and Highwoods/ Forsyth Limited
Partnership (incorporated by reference to Exhibit 10.56 filed with the Company's Registration
Statement on Form S-1 File No. 33-97086)
10.57 1995 Employee Stock Purchase Plan, as amended by First Amendment dated July 1, 1995
(incorporated by reference to Exhibit 10.57 filed with the Company's Registration Statement on
Form S-1 File No. 33-97086)
10.58 Second Amendment to 1995 Employee Stock Purchase Plan (incorporated by reference to Exhibit
10.58 filed with the Company's Annual Report on Form 10-K for the year ended December 31, 1995)
10.59 Fourth Amendment to Stock Option Plan (incorporated by reference to Exhibit 10.59 filed with the
Company's Annual Report on Form 10-K for the year ended December 31, 1995)
11.1 Statement re: computation of per share earnings (incorporated by reference to Exhibit 11.1 filed
with the Company's Annual Report on Form 10-K for the year ended December 31, 1995)
21.1 Subsidiaries of the Company (incorporated by reference to Exhibit 21.1 filed with the Company's
Annual Report on Form 10-K for the year ended December 31, 1995)
23.1 Consent of Deloitte & Touche LLP
23.2 Consent KPMG Peat Marwick LLP
23.3 Consent KPMG Peat Marwick LLP
23.4 Consent of Ernst & Young LLP
23.5 Consent of Arnall Golden & Gregory (included in their opinion filed as Exhibit 5.1)
23.6 Consent of Arnall Golden & Gregory (included in their opinion filed as Exhibit 8.1)
23.7 Consent of Morgan Keegan & Company, Inc.
23.8 Consent of Goldman Sachs & Co., Inc.
23.9 Consent of Olin J. Harrell, CPA
23.10 Consent of KPMG Peat Marwick LLP
23.11 Consent of Wolf & Company, P.C.
</TABLE>
<PAGE>
EXHIBIT 5.1
ARNALL GOLDEN & GREGORY
2800 ONE ATLANTIC CENTER
1201 WEST PEACHTREE STREET
ATLANTA, GEORGIA 30309-3400
May 22, 1996
Isolyser Company, Inc.
4320 International Boulevard, N.W.
Norcross, Georgia 30093
Re: Registration Statement on Form S-4 (Registration No. 333-3436)
Gentlemen:
This opinion is rendered in connection with the proposed issue and sale
by Isolyser Company, Inc., a Georgia corporation (the "Company"), of up to
5,890,793 shares of the Company's Common Stock, $.001 par value (the
"Shares"), upon the terms and conditions set forth in Registration Statement
No. 333-3436 on Form S-4 (the "Registration Statement") filed by the Company
with the Securities & Exchange Commission under the Securities Act of 1933,
as amended. We have acted as counsel for the Company in connection with the
proposed issuance and sale of the Shares by the Company.
In rendering the opinion contained herein, we have relied in part upon
examination of the Company's corporate records, documents, certificates and
other instruments and the examination of such questions of law as we have
considered necessary or appropriate for the purpose of tis opinion. Based
upon the foregoing, we are of the opinion that the Shares have been duly and
validly authorized and when sold in the manner contemplated by the
Registration Statement, and upon receipt by the Company of payment therefor
as provided in the Registration Statement, they will be legally issued, fully
paid and non-assessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and the reference to this firm under the caption "Legal
Matters" in the Prospectus contained therein. This consent is not to be
construed as an admission that we are a party whose consent is required to be
filed with the Registration Statement under the provisions of the Securities
Act of 1933, as amended.
Sincerely,
ARNALL GOLDEN & GREGORY
ARNALL GOLDEN & GREGORY
<PAGE>
ARNALL GOLDEN & GREGORY
2800 ONE ATLANTIC CENTER
1201 WEST PEACHTREE STREET
ATLANTA, GEORGIA 30309-3400
May 22, 1996
Microtek Medical, Inc.
512 Lehmberg Road
Columbus, Mississippi 39702
Gentlemen:
You have asked for our opinion as to the federal income tax consequences
of a transaction (the "Merger") pursuant to which MMI Merger Corp.
("Subsidiary"), a Delaware corporation and a newly organized, wholly-owned
subsidiary of Isolyser Company, Inc. ("Isolyser"), a Georgia corporation,
will be merged with and into Microtek Medical, Inc. ("Microtek"), a Delaware
corporation, with the Microtek shareholders receiving common voting stock of
Isolyser. In expressing this opinion, we have reviewed the Agreement and
Plan of Merger (the "Agreement") dated March 15, 1996, among Isolyser,
Subsidiary and Microtek, the Form S-4 Registration Statement under the
Securities Act of 1933 relating to the Merger (Registration No. 333-3436)
(the "Registration Statement") as filed with the Securities and Exchange
Commission on April 10, 1996, and, thereafter amended, and such other
documents as we have deemed relevant. Additionally, we have had such
discussions with officers and directors of Isolyser and Microtek and others
as we have deemed relevant and have been provided certain representations in
writing from management of Isolyser and Microtek.
Pursuant to the Agreement and for business reasons described in the
Registration Statement, Isolyser will acquire all of the outstanding stock of
Microtek. The above will be accomplished by a merger of Subsidiary with and
into Microtek pursuant to the applicable laws of Delaware. Microtek will be
the surviving corporation in the transaction. Pursuant to the Merger,
holders of each share of Microtek common stock will be entitled to receive
such number of shares of Isolyser common stock as are equal to $16.50 divided
by the average closing price of Isolyser common stock over a specified
twenty-day trading period, but no lower than $14.50 or greater than $18.50.
The Agreement further provides that each share of common stock of Subsidiary
held by Isolyser immediately prior to the Merger will be converted into and
become one share of common stock of Microtek. Under applicable law, Microtek
stockholders have no appraisal or dissenters' rights.
<PAGE>
Microtek Medical, Inc.
May 22, 1996
Page 2
No fractional shares of Isolyser common stock will be issued to Microtek
stockholders in connection with the Merger, but fractional shares of any
Microtek stockholder will be combined and cash will be paid for any resulting
fractional share.
In expressing this opinion we have assumed that the information
contained in the Registration Statement is current, accurate and complete.
In addition, we have relied upon the factual and other statements and
representations made to us by officers and directors of Isolyser and
Microtek, and have not made any independent investigation of any facts
pertaining to the Merger. Among the representations we have relied upon are
the following:
(a) After consummation of the Merger, Microtek will hold at least 90
percent of the fair market value of its net assets and 70 percent of the fair
market value of its gross assets. (b) After consummation of the Merger,
Microtek will also hold at least 90 percent of the fair market value of the
net assets and 70 percent of the fair market value of the gross assets of
Subsidiary. (c) Isolyser has no intention of liquidating Microtek, but
proposes to retain the Microtek common stock and to continue the business of
Microtek as an operating subsidiary.
In expressing the opinions contained herein we have also assumed, with
your permission, that there exists no plan or intention by the stockholders
of Microtek to sell or otherwise dispose of 50 percent or more of the shares
of Isolyser to be received by them in the Merger, and that, as the Agreement
contemplates, Microtek stockholders will exchange an amount of Microtek stock
in the Merger representing at least 80 percent of the combined voting and
equity interests of Microtek.
Based upon and subject to the foregoing, we are of the opinion that:
1. Provided the Merger qualifies as a merger under the applicable laws
of Delaware, the Merger will constitute a reorganization within the
meaning of IRC Section 368 (a) (1) (A). The reorganization will
not be disqualified by reason of the fact that stock of Isolyser is
used in the transaction (IRC Section 368(a) (2) (E)). Isolyser,
Subsidiary, and Microtek will each be "a party to a
re-organization" within the meaning of IRC Section 368(b).
2. No gain or loss will be recognized to the stockholders of Microtek
upon the exchange of their Microtek stock solely for Isolyser
voting common stock (IRC Section 354(a) (1)).
<PAGE>
Microtek Medical, Inc.
May 22, 1996
Page 3
3. The holding period for purposes of income taxation of the Isolyser
voting common stock to be received by the stockholders of Microtek
will include the holding period of the Microtek stock exchanged
therefor, provided that the Microtek stock is held as a capital
asset on the date of the exchange (Section 1223(l)).
4. The tax basis of the shares of Isolyser common stock received by a
stockholder of Microtek on the exchange of Microtek stock pursuant
to the Merger will be the same as the basis of the shares of
Microtek common stock exchanged (less any portion of such basis
allocable to any fractional interest in any share of Isolyser
common stock).
5. Cash payments received by Microtek stockholders in lieu of
fractional share interests of Isolyser common stock will be treated
as if the fractional shares were distributed as part of the
exchange and then were redeemed by Isolyser. These cash payments
will be treated as having been received by Microtek stockholders as
full payment in exchange for fractional shares redeemed, and will
be treated as received in a redemption subject to the provisions of
Section 302 of the Code.
This opinion is being provided for purposes of satisfying the conditions
specified at Section 6.9 of the Agreement. It is not intended as specific
tax advice to any shareholder. Further, our opinion is only valid to the
extent that the representations and conditions upon which it is based are
true and correct.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and the reference to this firm under the caption "The
Merger -- Certain Federal Income Tax Consequences" in the Registration
Statement. This consent is not to be construed as an admission that we are a
party whose consent is required to be filed with the Registration Statement
under the provisions of the Securities Act of 1933, as amended.
ARNALL GOLDEN & GREGORY
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors and Shareholders of Isolyser Company, Inc.
We consent to the incorporation by reference in Amendment No. 1 to
Registration Statement No. 333-3436 of Isolyser Company, Inc. on Form S-4 of
our report dated February 9, 1996 (March 26, 1996 as to Note 13), appearing
in the Annual Report on Form 10-K of Isolyser Company, Inc. for the year
ended December 31, 1995 and to the reference to us as experts in the Proxy
Statement/Prospectus, which is part of this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Atlanta, Georgia
May 21, 1996
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
-----------------------------
The Board of Directors
Microtek Medical, Inc.:
We consent to the use of our report incorporated by reference in the proxy
statement/prospectus of Microtek Medical, Inc. and Isolyser Company, Inc. and
to the reference to our firm under the heading "Experts" in the proxy
statement/prospectus.
/s/ KPMG PEAT MARWICK LLP
Jackson, Mississippi KPMG PEAT MARWICK LLP
May 21, 1996
<PAGE>
Exhibit 23.3
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
White Knight Healthcare, Inc.:
We consent to the use of our report incorporated by reference in the proxy
statement/prospectus of Microtek Medical, Inc. and Isolyser Company, Inc. and
to the reference to our firm under the heading "Experts" in the proxy
statement/prospectus.
Greenville, South Carolina KPMG Peat Marwick LLP
May 21, 1996
<PAGE>
EXHIBIT 23.4
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 15, 1995, except for the first paragraph
of Note 7, as to which the date is May 31, 1995, with respect to the
financial statements of SafeWaste Corporation incorporated by reference in
Amendment No. 1 to the Registration Statement (Form S-4 No. 33-33436) and
related Prospectus of Isolyser Company, Inc. for the registration of shares
of its common stock.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG
May 21, 1996
Charlotte, North Carolina
<PAGE>
EXHIBIT 23.7
MORGAN KEEGAN & COMPANY, INC.
CONSENT OF MORGAN KEEGAN & COMPANY, INC.
We hereby consent to the use of our opinion dated March 15, 1996 as an
exhibit to the Registration Statement on Form S-4 relating to the merger of
Microtek Medical with and into MMI Merger Corp., a wholly-owned subsidiary of
Isolyser Company, Inc., and as an Annex to the Proxy Statement/Prospectus
contained in such Registration Statement, and to the references to our firm
name under the captions "Summary", "The Merger - Background of the Merger",
"The Merger - Isolyser's Reasons for the Merger; and "The Merger - Opinion of
Isolyser's Financial Advisor" in such Proxy Statement/Prospectus. In giving
such consent, we do not thereby admit and we hereby disclaim that we come
within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended, and the rules and regulations of the
Securities and Exchange Commission thereunder, nor do we thereby admit that
we are experts with respect to any part of such Registration Statement within
the meaning of the term "experts" as used in the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange
Commission thereunder.
MORGAN KEEGAN & COMPANY, INC.
By: /s/ JAMES DWYER
--------------------------
Title: Senior Vice President
--------------------------
May 20, 1996
<PAGE>
[GOLDMAN, SACHS & CO. LETTERHEAD]
PERSONAL AND CONFIDENTIAL
- -------------------------
May 16, 1996
Board of Directors
Microtek Medical, Inc.
512 Lehmberg Road
Columbus, MS 39702
Re: Registration Statement File No. 33-33436 of
Isolyser Company, Inc.
Gentlemen:
Reference is made to our opinion letter dated March 15, 1996 with respect to
the fairness to the holders of the outstanding shares of Common Stock, par
value $.01 per share (the "Shares"), of Microtek Medical, Inc. ("Microtek")
of the Exchange Ratio (as defined below) of shares (or fraction thereof) of
Common Stock, par value $.001 per share (the "Isolyser Shares"), of Isolyser
Company, Inc. ("Isolyser") to be received for each Share pursuant to the
Agreement and Plan of Merger dated as of March 15, 1996, among Isolyser, MMI
Merger Corp. ("MMI"), a wholly-owned subsidiary of Isolyser, and Microtek
(the "Agreement"). Pursuant to the Agreement, MMI will be merged with
Microtek and each outstanding Share not held in the treasury of Microtek or
owned by Isolyser or any direct or indirect wholly-owned subsidiary of
Isolyser or Microtek will be converted into the right to receive that number
of Isolyser Shares equal to the quotient, computed to four decimal places
(the "Exchange Ratio"), of $16.50 divided by the average per Isolyser Share
closing price as reported on the NASDAQ National Market System for the twenty
days immediately preceding the second trading day prior to the Effective Date
(as defined in the Agreement), except that in no event will the Exchange
Ratio be less thant 0.8919 or greater than 1.1379.
The foregoing opinion letter is for the information and assistance of the
Board of Directors of Microtek in connection with its consideration of the
transaction contemplated therein and is not to be used, circulated, quoted or
otherwise referred to for any purpose, nor is it to be filed with, included in
or referred to in whole or in part in any registration statement, proxy
statement or any other document, except in accordance with our prior written
consent.
In that regard, we hereby consent to the reference to the opinion of our Firm
under the captions "Summary - Opinion of Microtek's Financial Advisor" and
"The Merger - Opinion of Microtek's Financial Advisor" and to the inclusion
of the foregoing opinion in the Proxy Statement included in the above-mentioned
Registration Statement. In giving such consent, we do not thereby admit that
<PAGE>
Microtek Medical, Inc.
May 16, 1996
Page Two
we come within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933 or the rules and regulations of
the Securities and Exchange Commission thereunder.
Very truly yours,
[SIGNATURE]
GOLDMAN, SACHS & CO.
<PAGE>
EXHIBIT 23.9
INDEPENDENT AUDITOR'S CONSENT
-----------------------------
The Board of Directors
Medi-Plast International, Inc.
I consent to the use of my report incorporated by reference in the proxy
statement/prospectus of Microtek Medical, Inc. and Isolyser Company, Inc. and
to the reference to my firm under the heading "Experts" in the proxy
statement/prospectus.
Olin J. Harrell, CPA
Atlanta, Georgia
May 21, 1996
<PAGE>
EXHIBIT 23.10
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related prospectus of Isolyser Company,
Inc. for the registration of shares of its common stock and to the
incorporation by reference therein of our report dated August 28, 1995, with
respect to the statements of operations and accumulated deficit and cash
flows of CliniTech (a former division of Sterile concepts, Inc.) for the year
ended September 30, 1992 and for the period from October 1, 1992 to February
8, 1993, included in its Current Report on Form 8-K filed with the Securities
and Exchange Commission on October 3, 1995.
/s/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
Richmond, Virginia
May 21, 1996
<PAGE>
Exhibit 23.11
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Amendment No. 1 to
Registration Statement No. 333-3436 of Isolyser Company, Inc. on Form S-4 of
our report dated April 5, 1996 on the financial statements of the Venodyne
Division of Advanced Instruments, Inc., as of February 24, 1996 and the
eleven month period then ended, appearing in the Annual Report on Form 10KA
of Microtek Medical, Inc. for the year ended November 30, 1995 and
incorporated by reference herein. We also consent to the reference to us
under the heading "Experts" in the proxy statement/prospectus.
/s/ Wolf & Company, P.C.
WOLF & COMPANY, P.C.
Boston, Massachusetts
May 21, 1996
