-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R2U2ptMbAiKohYSo3E4G8P6RdfuIQrrQPIytkrZ8uilDL6t2vwVzXIy+KsfAdSzA 0N6eL/A9EsuDCnp6x6cQBQ== 0000950123-99-005616.txt : 19990615 0000950123-99-005616.hdr.sgml : 19990615 ACCESSION NUMBER: 0000950123-99-005616 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 19990614 GROUP MEMBERS: EM LABORATORIES INC GROUP MEMBERS: EM SUBSIDIARY, INC. GROUP MEMBERS: MERCK KGAA SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: VWR SCIENTIFIC PRODUCTS CORP CENTRAL INDEX KEY: 0000788043 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-PROFESSIONAL & COMMERCIAL EQUIPMENT & SUPPLIES [5040] IRS NUMBER: 911319190 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: SEC FILE NUMBER: 005-44027 FILM NUMBER: 99645506 BUSINESS ADDRESS: STREET 1: 1310 GOSHEN PARKWAY CITY: WEST CHESTER STATE: PA ZIP: 19380 BUSINESS PHONE: 6104311700 MAIL ADDRESS: STREET 1: 1310 GOSHEN PARKWAY STREET 2: 1310 GOSHEN PARKWAY CITY: WEST CHESTER STATE: PA ZIP: 19380 FORMER COMPANY: FORMER CONFORMED NAME: VWR CORP DATE OF NAME CHANGE: 19920703 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: EM LABORATORIES INC CENTRAL INDEX KEY: 0000944390 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 133823759 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: 7 SKYLINE DRIVE CITY: HAWTHORNE STATE: NY ZIP: 10532 BUSINESS PHONE: 9145924660 MAIL ADDRESS: STREET 1: 7 SKYLINE DRIVE CITY: HAWTHORNE STATE: NY ZIP: 10532 SC 14D1 1 SCHEDULE 14D1 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------- SCHEDULE 14D-1 TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 VWR SCIENTIFIC PRODUCTS CORPORATION (NAME OF SUBJECT COMPANY) EM SUBSIDIARY, INC. EM LABORATORIES, INCORPORATED MERCK KGaA, DARMSTADT, GERMANY (BIDDERS) COMMON STOCK, PAR VALUE $1.00 PER SHARE (TITLE OF CLASS OF SECURITIES) 918435108 (CUSIP NUMBER OF CLASS OF SECURITIES) STEPHEN J. KUNST VICE PRESIDENT AND SECRETARY EM SUBSIDIARY, INCORPORATED C/O EM LABORATORIES, INC. 7 SKYLINE DRIVE HAWTHORNE, NEW YORK 10532 (914) 592-4660 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS) COPY TO: KLAUS H. JANDER, ESQ. RICHARD T. MCDERMOTT, ESQ. ROGERS & WELLS LLP 200 PARK AVENUE NEW YORK, NEW YORK 10166 (212) 878-8000 CALCULATION OF FILING FEE Transaction Valuation*: $637,761,832.00 Amount of Filing Fee: $127,552.00 - --------------- * For purposes of calculating the fee only. This amount assumes the purchase of 17,236,806 shares of common stock, par value $1.00 per share (the "Shares") of VWR Scientific Products Corporation at a price per share of $37.00, net to the seller in cash, without interest thereon. The amount of the filing fee, calculated in accordance with Section 14(g)(3) and Rule 0-11(d) under the Securities Exchange Act of 1934, as amended, equals 1/50th of one percent of the aggregate of the cash offered by the Bidders. [ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. Amount Previously Paid: Not Applicable Filing Party: Not Applicable Form or registration no.: Not Applicable Date Filed: Not Applicable
(Continued on following pages) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 SCHEDULE 14D-1 CUSIP NO. 918435108 PAGE 2 - --------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS EM SUBSIDIARY, INC. S.S. OR I.R.S. IDENTIFICATION NUMBER OF ABOVE PERSONS - --------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [X] - --------------------------------------------------------------------------- 3 SEC USE ONLY - --------------------------------------------------------------------------- 4 SOURCES OF FUNDS AF - --------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(e) or 2(f) [ ] - --------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Pennsylvania - --------------------------------------------------------------------------- 7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 15,538,784 - --------------------------------------------------------------------------- 8 CHECK IF THE AGGREGATE AMOUNT IN ROW 7 EXCLUDES CERTAIN SHARES [ ] - --------------------------------------------------------------------------- 9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 7 49.9% - --------------------------------------------------------------------------- 10 TYPE OF REPORTING PERSON CO - ---------------------------------------------------------------------------
3 SCHEDULE 14D-1 CUSIP NO. 918435108 PAGE 3 - --------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS EM LABORATORIES, INCORPORATED S.S. OR I.R.S. IDENTIFICATION NUMBER OF ABOVE PERSONS - --------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [X] - --------------------------------------------------------------------------- 3 SEC USE ONLY - --------------------------------------------------------------------------- 4 SOURCES OF FUNDS AF - --------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(e) or 2(f) [ ] - --------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION New York - --------------------------------------------------------------------------- 7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 15,538,784 - --------------------------------------------------------------------------- 8 CHECK IF THE AGGREGATE AMOUNT IN ROW 7 EXCLUDES CERTAIN SHARES [ ] - --------------------------------------------------------------------------- 9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 7 49.9% - --------------------------------------------------------------------------- 10 TYPE OF REPORTING PERSON CO - ---------------------------------------------------------------------------
4 SCHEDULE 14D-1 CUSIP NO. 918435108 PAGE 4 - --------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS MERCK KGaA, DARMSTADT, GERMANY S.S. OR I.R.S. IDENTIFICATION NUMBER OF ABOVE PERSONS - --------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [X] - --------------------------------------------------------------------------- 3 SEC USE ONLY - --------------------------------------------------------------------------- 4 SOURCES OF FUNDS WC - --------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(e) or 2(f) [ ] - --------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Germany - --------------------------------------------------------------------------- 7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 15,538,784 - --------------------------------------------------------------------------- 8 CHECK IF THE AGGREGATE AMOUNT IN ROW 7 EXCLUDES CERTAIN SHARES [ ] - --------------------------------------------------------------------------- 9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 7 49.9% - --------------------------------------------------------------------------- 10 TYPE OF REPORTING PERSON CO - ---------------------------------------------------------------------------
5 ITEM 1. SECURITY AND SUBJECT COMPANY. (a) The name of the subject company is VWR Scientific Products Corporation, a Pennsylvania corporation (the "Company"). The address of the Company's principal executive offices is 1310 Goshen Parkway, West Chester, Pennsylvania 19380. (b) This Statement relates to the offer by EM Subsidiary, Inc., a Pennsylvania corporation ("Purchaser"), a wholly-owned subsidiary of EM Laboratories, Inc., a New York corporation ("Parent") that is an indirect subsidiary of Merck KGaA, Darmstadt, Germany, a Germany company ("Merck KGaA"), to purchase all the outstanding shares of common stock, par value $1.00 per share (the "Shares") of the Company which are not owned by the Purchaser and its stockholders at a purchase price of $37.00 per Share, net to the seller in cash without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated June 14, 1999 (the "Offer to Purchase"), and the related Letter of Transmittal (which, together with any supplements or amendments thereto, collectively constitute the "Offer"), copies of which are filed as Exhibits (a)(1) and (a)(2) hereto, respectively. As of May 31, 1999, there were 28,968,627 Shares outstanding, of which the Purchaser beneficially owns 15,538,784. (c) The information set forth in Section 7 ("Price Range of Shares; Dividends") of the Offer to Purchase is incorporated herein by reference. ITEM 2. IDENTITY AND BACKGROUND. (a)-(d), (g) This Statement is being filed by Purchaser, Parent and Merck KGaA (collectively, the "Bidders"). Purchaser is a wholly-owned subsidiary of Parent. Parent is an indirect subsidiary of Merck KGaA. The information set forth in the Offer to Purchase under "Introduction," in Section 9 ("Certain Information Concerning Purchaser, Parent, Merck KGaA and Certain Related Parties") and in Schedule I to the Offer to Purchase is incorporated herein by reference. (e)-(f) During the last five years, none of the Bidders nor to the best of their knowledge, any of the persons listed in Schedule I to the Offer to Purchase, (i) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of any such proceeding was or is subject to a judgment, decree or final order enjoining further violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY. (a)-(b) The information set forth in Section 11 ("Background of the Offer; Contacts with the Company") of the Offer to Purchase is incorporated herein by reference. ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a)-(b) The information set forth in Section 10 ("Source and Amount of Funds") of the Offer to Purchase is incorporated herein by reference. (c) Not applicable. ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER. (a)-(e) The information set forth in Section 12 ("Purpose of the Offer and the Proposed Merger; Plans for the Company") and Section 15 ("The Merger") of the Offer to Purchase is incorporated herein by reference. (f)-(g) The information set forth in Section 13 ("Certain Effects of the Transaction") of the Offer to Purchase is incorporated herein by reference. 5 6 ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a)-(b) The information set forth in the "Introduction," Section 12 ("Purpose of the Offer and the Proposed Merger; Plans for the Company"), Section 9 ("Certain Information Concerning Purchaser, Parent, Merck KGaA and Certain Other Related Parties"), and Section 15 ("The Merger") of the Offer to Purchase is incorporated herein by reference. ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES. The information set forth in the "Introduction," Section 11 ("Background of the Offer; Contacts with the Company"), Section 12 ("Purpose of the Offer and the Proposed Merger; Plans for the Company"), Section 9 ("Certain Information Concerning Purchaser, Parent, Merck KGaA and Certain Related Parties"), and in Section 15 ("The Merger") of the Offer to Purchase is incorporated herein by reference. ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth in the "Introduction" and Section 18 ("Fees and Expenses") of the Offer to Purchase is incorporated herein by reference. ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDER. Not applicable. ITEM 10. ADDITIONAL INFORMATION. (a) The information set forth in Section 11 ("Background of the Offer; Contacts with the Company"), Section 12 ("Purpose of the Offer and the Proposed Merger; Plans for the Company"), and Section 15 ("The Merger") of the Offer to Purchase is incorporated herein by reference. (b)-(c) The information set forth in Section 17 ("Certain Legal Matters; Regulatory Approvals") the Offer to Purchase is incorporated herein by reference. (d) Not applicable. (e) The information set forth in Section 17 ("Certain Legal Matters; Regulatory Approvals") the Offer to Purchase is incorporated herein by reference. (f) The information set forth in the Offer to Purchase, the related Letter of Transmittal and the Agreement and Plan of Merger, dated June 8, 1999, by and among Parent, Purchaser and the Company, the Shareholder Agreement, dated June 8, 1999, the Standstill Agreement, dated February 27, 1995, and Amendment No. 1 to the Standstill Agreement, dated September 15, 1995 copies of which are filed as Exhibits (a)(1), (a)(2), (c)(1), (c)(2), (c)(3), (c)(4), (c)(5), (c)(6) and (c)(7) hereto, respectively, is incorporated herein by reference in its entirety. 6 7 ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
EXHIBIT NO. DESCRIPTION - ----------- ----------- (a)(1) Offer to Purchase, dated June 14, 1999. (a)(2) Letter of Transmittal. (a)(3) Notice of Guaranteed Delivery. (a)(4) Form of letter dated June 14, 1999, to brokers, dealers, commercial banks, trust companies and other nominees. (a)(5) Form of letter to be used by brokers, dealers, commercial banks, trust companies and nominees to their clients. (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Summary Advertisement, dated June 14, 1999. (a)(8) Press Release, dated June 9, 1999 (in German with English translation). (c)(1) Agreement and Plan of Merger, dated June 8, 1999. (c)(2) Shareholder Agreement, dated June 8, 1999. (c)(3) Standstill Agreement, dated February 27, 1995. (c)(4) Amendment Number One to the Standstill Agreement, dated September 15, 1995. (c)(5) Common Share and Warrant Purchase Agreement, dated February 27, 1995.* (c)(6) Common Share and Debenture Purchase Agreement, dated May 24, 1995.* (c)(7) Subordinated Debenture, dated September 15, 1995.*
- --------------- * Incorporated by reference to the Schedule 14D-9 filed by the Company on June 14, 1999. 7 8 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: June 14, 1999 EM SUBSIDIARY, INC. By: /s/ DIETER JANSSEN ---------------------------------- Name: Dieter Janssen Title: President EM LABORATORIES, INCORPORATED By: /s/ STEPHEN J. KUNST ---------------------------------- Name: Stephen J. Kunst Title: Vice-President & Secretary MERCK KGaA, DARMSTADT, GERMANY By: /s/ KLAUS-PETER BRANDIS ---------------------------------- Name: Klaus-Peter Brandis Title: Departmental Director (Abteilungsdirektor) 8 9 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION - ----------- ----------- (a)(1) Offer to Purchase, dated June 14, 1999. (a)(2) Letter of Transmittal. (a)(3) Notice of Guaranteed Delivery. (a)(4) Form of letter, dated June 14, 1999, to brokers, dealers, commercial banks, trust companies and other nominees. (a)(5) Form of letter to be used by brokers, dealers, commercial banks, trust companies and nominees to their clients. (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Form of Summary Advertisement, dated June 14, 1999. (a)(8) Press Release, dated June 9, 1999 (in German with English translation). (c)(1) Agreement and Plan of Merger, dated June 8, 1999. (c)(2) Shareholder Agreement, dated June 8, 1999. (c)(3) Standstill Agreement, dated February 27, 1995. (c)(4) Amendment Number One to the Standstill Agreement, dated September 15, 1995. (c)(5) Common Share and Warrant Purchase Agreement, dated February 27, 1995.* (c)(6) Common Share and Debenture Purchase Agreement, dated May 24, 1995.* (c)(7) Subordinated Debenture, dated September 15, 1995.*
- --------------- * Incorporated by reference to the Schedule 14D-9 filed by the Company on June 14, 1999. EX-99.A.1 2 OFFER TO PURCHASE 1 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF VWR SCIENTIFIC PRODUCTS CORPORATION AT $37.00 NET PER SHARE BY EM SUBSIDIARY, INC., A WHOLLY OWNED SUBSIDIARY OF EM LABORATORIES, INCORPORATED, AN INDIRECT SUBSIDIARY OF MERCK KGaA, DARMSTADT, GERMANY THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, JULY 13, 1999, UNLESS THE OFFER IS EXTENDED. THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER, DATED JUNE 8, 1999, BY AND AMONG VWR SCIENTIFIC PRODUCTS CORPORATION (THE "COMPANY"), EM LABORATORIES, INCORPORATED ("PARENT") AND EM SUBSIDIARY, INC. ("PURCHASER"). THE BOARD OF DIRECTORS OF THE COMPANY (1) HAS APPROVED (BY UNANIMOUS VOTE, WITH THE AFFILIATED DIRECTORS (AS DEFINED BELOW) NOT PARTICIPATING) EACH OF THE OFFER, THE MERGER, AND THE MERGER AGREEMENT AND THE SHAREHOLDERS AGREEMENT (EACH, AS DEFINED BELOW), (2) HAS DETERMINED THAT THE TERMS OF EACH OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS SHAREHOLDERS (OTHER THAN PARENT AND ITS AFFILIATES), AND (3) RECOMMENDS THAT THE SHAREHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF SHARES WHICH REPRESENTS AT LEAST A MAJORITY OF THE TOTAL NUMBER OF OUTSTANDING SHARES OF THE COMPANY, EXCLUDING ANY SHARES HELD BY PARENT, PURCHASER OR ANY AFFILIATE THEREOF, (2) THE EXPIRATION OR TERMINATION OF ANY APPLICABLE WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, OR ANY SIMILAR APPLICABLE FOREIGN LAW, (3) COMPLIANCE WITH SECTION 721 OF TITLE VII OF THE DEFENSE PRODUCTION ACT OF 1950, AS AMENDED, KNOWN AS THE EXON-FLORIO PROVISIONS, AND (4) THE SATISFACTION OR WAIVER OF CERTAIN CONDITIONS TO THE OBLIGATIONS OF PURCHASER AND THE COMPANY TO CONSUMMATE THE OFFER AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT. SEE SECTION 14. Parent and its affiliates already beneficially own 49.89% of the total number of outstanding Shares of the Company and the Company's Directors and Executive Officers (who beneficially own approximately 4.18% of the total number of Outstanding Shares of the Company) have indicated that they intend to tender their Shares in response to the Offer or vote in favor of the Merger. Furthermore, Purchaser and Parent have entered into a Shareholder Agreement with certain Shareholders of the Company pursuant to which, among other things, such Shareholders have agreed to tender in the Offer, upon the terms and subject to the conditions of the Shareholder Agreement, all Shares owned by such Shareholders (beneficially owning approximately 2.50% of the total number of Outstanding Shares of the Company). Therefore, if the minimum condition (as defined below) is met the merger can be approved without the vote of any other Shareholder. THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. ------------------------ IMPORTANT Any shareholder desiring to tender all or any portion of such shareholder's shares of common stock, par value $1.00, of the Company (the "Shares") should either (i) complete and sign the enclosed Letter of Transmittal (or a facsimile thereof) in accordance with the instructions set forth in the Letter of Transmittal and (A) mail or deliver the Letter of Transmittal (or a facsimile thereof), together with the certificate(s) representing the tendered Shares, and any other required documents to the Depositary (as defined herein) or (B) tender such Shares pursuant to the procedure for book-entry transfer set forth in Section 3 of this Offer to Purchase or (ii) request such shareholder's broker, dealer, commercial bank, trust company or other nominee to effect such transaction for such shareholder. Any shareholder whose Shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such broker, dealer, commercial bank, trust company or other nominee if such shareholder desires to tender such Shares. ANY SHAREHOLDER WHO DESIRES TO TENDER SHARES AND WHOSE CERTIFICATES REPRESENTING SUCH SHARES ARE NOT IMMEDIATELY AVAILABLE OR WHO CANNOT COMPLY WITH THE PROCEDURE FOR BOOK-ENTRY TRANSFER ON A TIMELY BASIS MAY TENDER SUCH SHARES BY FOLLOWING THE PROCEDURES FOR GUARANTEED DELIVERY SET FORTH IN SECTION 3 OF THIS OFFER TO PURCHASE. Questions and requests for assistance may be directed to the Dealer Manager or the Information Agent (as such terms are defined herein) at their respective addresses and telephone numbers set forth on the back cover of this Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of Transmittal, or other tender offer materials may be obtained from the Information Agent. ------------------------ THE DEALER MANAGER FOR THE OFFER IS: LEHMAN BROTHERS June 14, 1999 2 TABLE OF CONTENTS
PAGE ----- INTRODUCTION................................................ 1 THE TENDER OFFER............................................ 4 1. Terms of the Offer; Expiration Date.................... 4 2. Acceptance for Payment and Payment for Shares.......... 5 3. Procedures for Tendering Shares........................ 6 4. Withdrawal Rights...................................... 9 5. Certain Federal Income Tax Consequences................ 9 6. Fairness of the Transaction............................ 10 7. Price Range of Shares; Dividends....................... 21 8. Certain Information Concerning the Company............. 22 9. Certain Information Concerning Purchaser, Parent, Merck KGaA and Certain Related Parties....................... 26 10. Source and Amount of Funds............................. 31 11. Background of the Offer; Contacts with the Company..... 31 12. Purpose of the Offer; the Proposed Merger; Plans for the Company............................................... 34 13. Certain Effects of the Transaction..................... 35 14. Conditions of the Offer................................ 36 15. The Merger............................................. 38 16. Dividends and Distributions............................ 49 17. Certain Legal Matters; Regulatory Approvals............ 49 18. Fees and Expenses...................................... 52 19. Miscellaneous.......................................... 52 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER, PARENT AND MERCK KGaA; GENERAL PARTNERS AND MEMBERS OF THE EXECUTIVE BOARD OF E. MERCK......................................... I-1 SCHEDULE II OPINION OF BT ALEX. BROWN INCORPORATED.................... II-1 SCHEDULE III OPINION OF WARBURG DILLON READ LLC........................ III-1 SCHEDULE IV SECTIONS 1930(a) AND 1571-80 (SUBCHAPTER D OF CHAPTER 15) OF THE PENNSYLVANIA BUSINESS CORPORATION LAW SECTION 1930. DISSENTERS RIGHTS......................................... IV-1 SCHEDULE V AUDITED FINANCIAL STATEMENTS (AND RELATED NOTES) OF THE COMPANY FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996...................................................... V-1 SCHEDULE VI INTERIM FINANCIAL STATEMENTS OF THE COMPANY FOR THE THREE- MONTH PERIOD ENDED MARCH 31, 1999......................... VI-1
i 3 To the Holders of Shares of Common Stock of VWR Scientific Products Corporation: INTRODUCTION EM Subsidiary, Inc., a Pennsylvania corporation ("Purchaser") and a wholly-owned subsidiary of EM Laboratories, Incorporated, a New York corporation ("Parent"), which is an indirect subsidiary of Merck KGaA, Darmstadt, Germany, a German company ("Merck KGaA"), hereby offers to purchase all outstanding shares of common stock, par value $1.00 per share (the "Shares"), of VWR Scientific Products Corporation, a Pennsylvania corporation (the "Company"), at $37.00 per Share, net to the seller in cash without interest thereon (the "Offer Price"), upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, together with any supplements or amendments thereto, collectively constitute the "Offer"). Tendering shareholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the transfer and sale of Shares pursuant to the Offer. However, any tendering shareholder or other payee who fails to complete and sign the Substitute Form W-9 included in the Letter of Transmittal may be subject to a required backup federal income tax withholding of 31% of the gross proceeds payable to such shareholder or other payee pursuant to the Offer. Purchaser will pay all fees and expenses of Lehman Brothers Inc., which is acting as dealer manager for the Offer (in such capacity, the "Dealer Manager"), IBJ Whitehall Bank & Trust Company, which is acting as the depositary (in such capacity, the "Depositary"), and Beacon Hill Partners, Inc., which is acting as the information agent (in such capacity, the "Information Agent"), incurred in connection with the Offer. See Section 18. THE BOARD OF DIRECTORS OF THE COMPANY (1) HAS APPROVED (BY UNANIMOUS VOTE, WITH THE AFFILIATED DIRECTORS (AS DEFINED BELOW) NOT PARTICIPATING) EACH OF THE OFFER, THE MERGER AND THE MERGER AGREEMENT AND THE SHAREHOLDERS AGREEMENT (EACH AS DEFINED HEREIN), (2) HAS DETERMINED THAT THE TERMS OF EACH OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS SHAREHOLDERS (OTHER THAN PARENT AND ITS AFFILIATES) AND (3) RECOMMENDS THAT THE SHAREHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. Five members of the current Board of Directors of the Company, which consists of eleven directors, are representatives of Parent and its affiliates (collectively, the "Affiliated Directors"). The directors who are not Affiliated Directors are referred to herein as the "Unaffiliated Directors". Each of BT Alex. Brown Incorporated ("BT Alex. Brown") (now merged with Deutsche Bank Securities Inc. and known as Deutsche Banc Alex. Brown) and Warburg Dillon Read LLC ("Warburg Dillon Read"), the Company's financial advisors, has delivered to the Company's Board of Directors and Special Committee (the "Special Committee") a written opinion dated June 8, 1999 to the effect that, as of such date and based upon and subject to certain matters stated therein, the $37.00 per Share cash consideration to be received in the Offer and the Merger by holders of Shares (other than Merck KGaA and its affiliates) was fair, from a financial point of view, to such holders. The full text of the opinions of BT Alex. Brown and Warburg Dillon Read are set forth as Schedules to this Offer to Purchase and exhibits to the Company's Solicitation/ Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"), which the Company has filed with the Securities and Exchange Commission and which is being mailed to the Company's shareholders simultaneously with this Offer to Purchase. Shareholders are urged to, and should, read such opinions carefully in their entirety. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF SHARES REPRESENTING AT LEAST A MAJORITY OF THE OUTSTANDING SHARES, EXCLUDING ANY SHARES HELD BY PARENT, PURCHASER, THE COMPANY OR ANY AFFILIATE THEREOF (THE "MINIMUM CONDITION"), (II) THE EXPIRATION OR TERMINATION OF ANY APPLICABLE WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR ACT"), AND SIMILAR APPLICABLE 4 FOREIGN LAWS (THE "HSR CONDITION"), (III) COMPLIANCE WITH SECTION 721 OF TITLE VII OF THE DEFENSE PRODUCTION ACT OF 1950, AS AMENDED, KNOWN AS THE EXON-FLORIO PROVISIONS, AND (IV) THE SATISFACTION OR WAIVER OF CERTAIN CONDITIONS TO THE OBLIGATIONS OF PURCHASER AND THE COMPANY TO CONSUMMATE THE OFFER. SEE SECTION 14. PURCHASER EXPRESSLY RESERVES THE RIGHT, SUBJECT ONLY TO THE APPLICABLE RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION"), TO WAIVE EACH OF THE CONDITIONS (OTHER THAN THE MINIMUM CONDITION, WHICH MAY NOT BE WAIVED WITHOUT THE CONSENT OF THE COMPANY) TO THE OBLIGATIONS OF PURCHASER TO CONSUMMATE THE OFFER AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT. SEE SECTION 14. The Offer is being made pursuant to an Agreement and Plan of Merger, dated June 8, 1999 (the "Merger Agreement"), by and among the Company, Parent and Purchaser. The Merger Agreement provides, among other things, that as soon as practicable after consummation of the Offer and the satisfaction or waiver of the conditions to the Merger (as defined below) and in accordance with the Pennsylvania Business Corporation Law (the "PBCL"), Purchaser shall be merged with and into the Company (the "Merger"), with the Company continuing as the surviving corporation in the Merger (the "Surviving Corporation") and as a wholly-owned subsidiary of Parent. At the effective time of the Merger (the "Effective Time"), each issued and outstanding Share not tendered in the Offer (other than Shares held by the Company, Parent or any subsidiary of Company or Parent, and Shares held by shareholders who properly exercise their dissenters' rights under the PBCL), will be converted into the right to receive the Offer Price (the "Merger Consideration"), without interest thereon. The Merger Agreement is more fully described in Section 15. The Merger Agreement provides that promptly upon the purchase by Purchaser of Shares pursuant to the Offer (but subject to the satisfaction of the Minimum Condition), Purchaser shall be entitled, to the fullest extent permitted by law, to designate at its option up to that number of directors, rounded to the next highest whole number, on the Company's Board of Directors, subject to compliance with Section 14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as will make the percentage of the Company's directors designated by Purchaser equal to the aggregate voting power of the Shares held by Parent or any of its subsidiaries. Any directors designated by Purchaser pursuant to the Merger Agreement and appointed to the Company's Board of Directors will be in addition to directors appointed to the Company's Board of Directors by Parent pursuant to the Standstill Agreement (as defined herein). In addition, the Merger Agreement provides that the Company's Board of Directors must, until the Effective Time, have at least three directors who were directors on the date of the Merger Agreement or who were designated by a majority of the directors of the Company who were directors on the date of the Merger Agreement, in each case excluding directors designated by Parent pursuant to the Standstill Agreement. In the Merger Agreement, the Company has agreed to take any and all actions within the Company's power, to the extent permitted by applicable law, which are reasonably necessary to cause Purchaser's designees to be appointed to the Board of Directors of the Company, including by increasing the size of the Board of Directors or using its best efforts to cause incumbent directors to resign or both. The consummation of the Merger is subject to the satisfaction or waiver of certain conditions, including, if required by applicable law, the approval and adoption of the Merger Agreement by the requisite vote of the shareholders of the Company. See Section 15. Under the Company's Articles of Incorporation and the PBCL, except as otherwise described below, the affirmative vote of a majority of the votes cast by all shareholders entitled to vote thereon is required to approve and adopt the Merger Agreement and the Merger. Consequently, if the Minimum Condition is fulfilled, Purchaser will have sufficient voting power to approve the merger without the vote of any other shareholder. Under the PBCL, if Purchaser acquires, pursuant to the Offer or otherwise, at least 80% of the then outstanding Shares, Purchaser will be able to approve and adopt the Merger Agreement and to effect the Merger without a vote of the Company's shareholders (a "Short-Form Merger"). If Purchaser does acquire sufficient Shares to effect a Short-Form Merger, Parent, Purchaser and the Company have agreed to take all necessary and appropriate action to cause the Merger to become effective as promptly as practicable after such acquisition, without a meeting of the Company's shareholders. If Purchaser does not acquire at least 80% of the then issued and outstanding Shares pursuant to the Offer or otherwise and a vote of the Company's 2 5 shareholders is required under the PBCL to effect the Merger, a longer period of time will be required to effect the Merger. See Section 15. In connection with the execution of the Merger Agreement, Parent and Purchaser entered into a Shareholder Agreement, dated as of June 8, 1999 (the "Shareholder Agreement"), with N. Stewart Rogers and Jerrold B. Harris (the "Share Tender Parties") who beneficially own, in the aggregate, approximately 2.50% of the outstanding Shares as of May 31, 1999. Pursuant to the Shareholder Agreement, each Share Tender Party has, among other things, agreed (i) to tender his Shares pursuant to the Offer and (ii) to vote the Shares beneficially owned by him in favor of the Merger and the Merger Agreement. In addition, pursuant to the Shareholder Agreement, each Share Tender Party has granted to Parent or Purchaser, as Parent may designate, an option (the "Option") to purchase the Shares beneficially owned by such Share Tender Party under certain circumstances. See Section 15. Parent, together with its affiliate, Merck Labor GmbH, a German company, is as of the date of this Offer to Purchase, the beneficial owner of 15,538,784 Shares, representing 49.89% of the issued and outstanding Shares and option. This amount includes 1,176,448 Shares which Merck KGaA has the right to acquire in the event employee stock options are exercised. Pursuant to the Standstill Agreement between EM Industries, Incorporated, a New York corporation and direct parent company of Parent ("EM Industries") and the Company, dated as of February 27, 1995, as amended by that certain Amendment Number One to the Standstill Agreement, by and among EM Industries, Parent, and the Company, dated September 15, 1995 (the "Standstill Agreement"), Parent and its affiliates have the right to maintain a 49.89% interest in the event the Company issues additional Shares. Pursuant to the Merger Agreement, the Standstill Agreement will terminate in its entirety upon the acquisition of Shares by Purchaser pursuant to the Offer. All of the Shares held by Parent and its affiliates will be voted to approve and adopt the Merger Agreement. As discussed above, the Shareholder Agreement provides that each Share Tender Party shall vote the Shares beneficially owned by him in favor of the Merger and the Merger Agreement and shall tender his Shares pursuant to the Offer. In addition, the directors and executive officers of the Company, who together with the Share Tender Parties beneficially own, in the aggregate, approximately 4.18% of the outstanding Shares, have indicated that they intend to tender their Shares in response to the Offer (or, under some circumstances, to retain their Shares but vote them in favor of the Merger). If the Minimum Condition is fulfilled, Purchaser will have sufficient voting power to approve and adopt the Merger under the PBCL even if no other shareholders vote in favor of it. The Company has informed Purchaser that as of the close of business on May 31, 1999, there were 28,968,627 Shares issued and outstanding and 2,723,684 Shares reserved for issuance upon the exercise of outstanding options, warrants or other rights to acquire Shares, of which 1,100,134 Shares are covered by options, warrants or other rights to acquire Shares that are vested. Based upon the foregoing, Purchaser believes that based on the amount of Shares outstanding as of May 31, 1999 the Minimum Condition will be satisfied if at least 8,621,454 Shares are validly tendered and not withdrawn prior to the expiration of the Offer (including those Shares tendered pursuant to the Shareholder Agreement). If the Minimum Condition is satisfied and Purchaser accepts for payment Shares tendered pursuant to the Offer, Purchaser will be able to elect a majority of the members of the Company's Board of Directors and to effect the Merger without the affirmative vote of any other shareholder of the Company. The Merger Agreement and the Shareholder Agreement are more fully discussed in Section 15. Certain Federal income tax consequences of the sale of Shares pursuant to the Offer and the exchange of Shares for the Merger Consideration pursuant to the Merger are described in Section 5. THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. 3 6 THE TENDER OFFER 1. TERMS OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of such extension or amendment), Purchaser will accept for payment and pay for all Shares validly tendered on or prior to the Expiration Date and not previously properly withdrawn as described in Section 4. The term "Expiration Date" means 12:00 Midnight, New York City time, on Tuesday, July 13, 1999, unless and until Purchaser, in its sole discretion (but subject to the terms and conditions of the Merger Agreement and the applicable rules and regulations of the Commission), shall have extended the period during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by Purchaser, shall expire. CONSUMMATION OF THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, SATISFACTION OF EACH OF THE MINIMUM CONDITION AND THE HSR CONDITION. THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS (TOGETHER WITH THE MINIMUM CONDITION AND THE HSR CONDITION, THE "OFFER CONDITIONS"). SEE SECTION 14, WHICH SETS FORTH IN FULL THE OFFER CONDITIONS. IF, PRIOR TO THE EXPIRATION DATE, ANY OR ALL OF THE OFFER CONDITIONS HAVE NOT BEEN SATISFIED, PURCHASER RESERVES THE RIGHT (BUT SHALL NOT BE OBLIGATED) TO (I) TERMINATE THE OFFER AND NOT ACCEPT FOR PAYMENT ANY SHARES AND RETURN ALL TENDERED SHARES TO TENDERING SHAREHOLDERS, (II) WAIVE ALL THE UNSATISFIED CONDITIONS (OTHER THAN THE MINIMUM CONDITION, WHICH MAY ONLY BE WAIVED WITH THE CONSENT OF THE COMPANY) AND, SUBJECT TO COMPLYING WITH THE TERMS OF THE MERGER AGREEMENT AND THE APPLICABLE RULES AND REGULATIONS OF THE COMMISSION, ACCEPT FOR PAYMENT AND PAY FOR ALL SHARES VALIDLY TENDERED PRIOR TO THE EXPIRATION DATE AND NOT PREVIOUSLY WITHDRAWN, (III) SUBJECT TO THE TERMS OF THE MERGER AGREEMENT, EXTEND THE OFFER AND, SUBJECT TO THE RIGHTS OF SHAREHOLDERS TO WITHDRAW SHARES UNTIL THE EXPIRATION DATE, RETAIN THE SHARES THAT HAVE BEEN TENDERED DURING THE PERIOD OR PERIODS FOR WHICH THE OFFER IS EXTENDED OR (IV) SUBJECT TO THE TERMS OF THE MERGER AGREEMENT, OTHERWISE AMEND THE OFFER. Purchaser expressly reserves the right, in its sole discretion (but subject to the terms of the Merger Agreement and the applicable rules and regulations of the Commission), at any time and from time to time, and regardless of whether or not any of the events set forth in Section 14 hereof shall have occurred, by giving oral or written notice of such amendment to the Depositary, to (i) extend the period of time during which the Offer is open and thereby delay acceptance for payment of, and the payment for, any Shares, and (ii) amend the Offer in any other respect. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID BY PURCHASER ON THE OFFER PRICE, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. During any such extension, all Shares previously tendered and not withdrawn will remain subject to the Offer, subject to the rights of a tendering shareholder to withdraw any tendered Shares. See Section 4. There can be no assurance that Purchaser will exercise its right to extend the Offer (other than as may be required by the Merger Agreement or applicable law). Any extension, waiver, amendment or termination will be followed as promptly as practicable by public announcement thereof. In the case of an extension, Rule 14e-l(d) under the Exchange Act requires that the announcement be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date in accordance with the public announcement requirements of Rule 14d-4(c) under the Exchange Act. Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require that any material change in the information published, sent or given to shareholders in connection with the Offer be promptly disseminated to shareholders in a manner reasonably designed to inform shareholders of such change), and without limiting the manner in which Purchaser may choose to make any public announcement, Purchaser will not have any obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a press release to the Dow Jones News Service. In the Merger Agreement, Purchaser has agreed that it will not, without the prior written consent of the Company, extend the Offer, except that Purchaser may, without the consent of the Company, (i) extend the Offer, if at the Expiration Date of the Offer any of the Offer Conditions have not been satisfied or waived, until such time as such conditions are satisfied or waived, (ii) extend the Offer for any period required by any rule, regulation, interpretation or position of the Commission or the staff thereof applicable to the Offer, and (iii) on one or more occasions, extend the Offer for a period of up to an aggregate of 15 business days if, on a 4 7 scheduled expiration date on which the Offer Conditions shall have been satisfied or waived, the number of Shares that have been validly tendered and not withdrawn pursuant to the Offer, when taken together with the Shares owned by Parent, Purchaser or an affiliate thereof do not constitute at least 80% of the then issued and outstanding Shares. However, the terms of the Merger Agreement do not require Purchaser to extend the Offer beyond December 31, 1999 (the "Outside Date"). As used in this Offer to Purchase, "business day" has the meaning set forth in Rule 14D-1 under the Exchange Act. In addition, Purchaser has agreed in the Merger Agreement that it will not, without the prior written consent of the Company, (i) reduce the number of Shares to be purchased in the Offer, (ii) reduce the Offer Price, (iii) impose additional conditions to the Offer or modify the Offer Conditions (other than to waive any of the Offer Conditions to the extent not prohibited by the Merger Agreement), (iv) extend the Offer, except as provided above, (v) change the form of consideration payable in the Offer or (v) change or modify any other terms of the Offer in any manner adverse to the shareholders of the Company. If Purchaser extends the Offer or if Purchaser (whether before or after its acceptance for payment of Shares) is delayed in its acceptance for payment of, or payment for, Shares or is unable to pay for Shares pursuant to the Offer for any reason, then, without prejudice to Purchaser's rights under the Offer, the Depositary may retain tendered Shares on behalf of Purchaser, and such Shares may not be withdrawn except to the extent tendering shareholders are entitled to withdrawal rights as described in Section 4. However, the ability of Purchaser to delay the payment for Shares that Purchaser has accepted for payment is limited by Rule 14e-1 under the Exchange Act, which requires that a bidder pay the consideration offered or return the securities deposited by or on behalf of holders of securities promptly after the termination or withdrawal of such bidder's offer. If Purchaser makes a material change in the terms of the Offer or if it waives a material condition of the Offer, Purchaser will disseminate additional tender offer materials and extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period during which an offer must remain open following material changes in the terms of the Offer, other than a change in price or a change in the percentage of securities sought, will depend upon the facts and circumstances then existing, including the materiality of the changes. With respect to a change in price or, subject to certain limitations, a change in the percentage of securities sought, a minimum of ten business days is generally required to allow for adequate dissemination to shareholders. The Company has provided Purchaser with a list of its shareholders and security position listings for the purpose of disseminating the Offer to shareholders. This Offer to Purchase, the related Letter of Transmittal and other relevant materials will be mailed by Purchaser to record holders of Shares and furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the shareholder list or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Purchaser will purchase by accepting for payment and will pay for all Shares validly tendered and not properly withdrawn on or prior to the Expiration Date. Shares will be accepted as soon as practicable and, in any event, within three business days after the later to occur of (i) the Expiration Date and (ii) the receipt by the Depositary of the certificates representing such tendered Shares (the "Share Certificates"). Any determination concerning the satisfaction of the terms and conditions of the Offer will be within the sole discretion of Purchaser and such determination will be final and binding on all tendering shareholders. In addition, subject to the terms of the Merger Agreement and the applicable rules of the Commission, Purchaser expressly reserves the right to delay acceptance for payment of, or payment for, Shares in order to comply in whole or in part with any applicable law. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) Share Certificates or timely confirmation of a book-entry 5 8 transfer (a "Book-Entry Confirmation") of such Shares into the Depositary's account at The Depository Trust Company (the "Book-Entry Transfer Facility"), pursuant to the procedures set forth in Section 3 of this Offer to Purchase; (ii) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message (as defined below) in connection with a book-entry transfer; and (iii) any other documents required by the Letter of Transmittal. The term "Agent's Message" means a message transmitted by the Book-Entry Transfer Facility to and received by the Depositary and forming a part of a Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has received an express acknowledgment from the participant in the Book-Entry Transfer Facility which is tendering Shares that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that Purchaser may enforce such agreement against such participant. For purposes of the Offer, Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares validly tendered and not properly withdrawn as of the Expiration Date, when Purchaser gives oral or written notice to the Depositary of Purchaser's acceptance for payment of such Shares pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering shareholders for the purpose of receiving payments from Purchaser and transmitting such payments to shareholders whose Shares have been accepted for payment. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID BY PURCHASER ON THE OFFER PRICE, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. Upon the deposit of funds with the Depositary for the purpose of making payments to tendering shareholders, Purchaser's obligation to make such payment shall be satisfied and tendering shareholders must thereafter look solely to the Depositary for payment of amounts owed to them by reason of the acceptance for payment of Shares pursuant to the Offer. If, for any reason whatsoever, acceptance for payment of, or payment for, any Shares validly tendered pursuant to the Offer is delayed or Purchaser is unable to accept for payment or pay for Shares tendered pursuant to the Offer, then without prejudice to Purchaser's rights set forth herein, the Depositary may nevertheless, on behalf of Purchaser and subject to Rule 14e-1(c) under the Exchange Act, retain tendered Shares, and such Shares may not be withdrawn except to the extent that the tendering shareholders are entitled to exercise, and duly exercise, withdrawal rights as described in Section 4. If any tendered Shares are not accepted for payment for any reason or if Share Certificates are submitted for more Shares than are tendered, Share Certificates evidencing unpurchased or untendered Shares will be returned without expense to the tendering shareholder (or, in the case of Shares tendered by book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility pursuant to the procedures set forth in Section 3, such Shares will be credited to the appropriate shareholder's account maintained at the Book-Entry Transfer Facility) as promptly as practicable following the expiration or termination of the Offer. IF, PRIOR TO THE EXPIRATION DATE, PURCHASER INCREASES THE CONSIDERATION OFFERED TO SHAREHOLDERS PURSUANT TO THE OFFER, SUCH INCREASED CONSIDERATION WILL BE PAID TO ALL SHAREHOLDERS WHOSE SHARES ARE PURCHASED PURSUANT TO THE OFFER, REGARDLESS OF WHETHER THOSE SHARES WERE TENDERED PRIOR TO THE INCREASE IN CONSIDERATION. Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to Parent, or to one or more direct or indirect subsidiaries of Merck KGaA, the right to purchase Shares tendered pursuant to the Offer. Any such transfer or assignment will not relieve Purchaser of its obligations under the Offer and will in no way prejudice the rights of tendering shareholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 3. PROCEDURES FOR TENDERING SHARES. Valid Tender of Shares. Except as set forth below, for a shareholder validly to tender Shares pursuant to the Offer, either (i) a properly completed and duly executed Letter of Transmittal (or facsimile thereof), together with any required signature guarantees or, in the case of a book-entry transfer, an Agent's Message, and any other documents required by the Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase and either the Share Certificate evidencing tendered Shares must be received by the Depositary along with the 6 9 Letter of Transmittal at one of such addresses or such Shares must be delivered pursuant to the procedure for book-entry transfer set forth below (and a Book-Entry Confirmation received by the Depositary), in each case prior to the Expiration Date, or (ii) the tendering shareholder must comply with the guaranteed delivery procedures set forth below. THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. Book-Entry Transfer. The Depositary will establish an account with respect to the Shares at the Book-Entry Transfer Facility for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in the Book-Entry Transfer Facility's system may make book-entry delivery of Shares by causing the Book-Entry Transfer Facility to transfer such Shares into the Depositary's account in accordance with the Book-Entry Transfer Facility's procedures for such transfer. Although delivery of Shares may be effected through book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile thereof) properly completed and duly executed, together with any required signature guarantees, or an Agent's Message, and any other required documents, must, in any case, be transmitted to, and received by, the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date, or the tendering shareholder must comply with the guaranteed delivery procedures described below. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. Signature Guarantees. No signature guarantee is required on the Letter of Transmittal if (i) the Letter of Transmittal is signed by the registered holder of Shares (which, for purposes of this Section 3, includes any participant in the Book-Entry Transfer Facility's system whose name appears on a security position listing as the owner of such Shares) tendered therewith and such registered holder has not completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on the Letter of Transmittal or (ii) such Shares are tendered for the account of a firm that is a member of a recognized Medallion Program approved by The Securities Transfer Association Inc., including the Security Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchange Medallion Program (each, an "Eligible Institution"). In all other cases, all signatures on the Letter of Transmittal must be guaranteed by an Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal. If a Share Certificate is registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made, or Share Certificates not tendered or not accepted for payment are to be issued to a person other than the registered holder of the certificates surrendered, the Share Certificate must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered holders or owners appear on such Share Certificate, with the signatures on such Share Certificate or stock powers guaranteed as aforesaid. See Instructions 1 and 5 to the Letter of Transmittal. If Share Certificates are forwarded to the Depositary in multiple deliveries, a properly completed and duly executed Letter of Transmittal (or a facsimile thereof) must accompany each delivery. No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to the Offer and such shareholder's Share Certificates are not immediately available, or such shareholder cannot deliver the Share Certificates and all other required documents in time to reach the Depositary on or prior to the Expiration 7 10 Date, or such shareholder cannot complete the procedure for delivery by book-entry transfer on a timely basis, such Shares may nevertheless be tendered, provided that all of the following conditions are satisfied: (i) such tender is made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by Purchaser with this Offer to Purchase, is received by the Depositary as provided below on or prior to the Expiration Date; and (iii) the Share Certificates (or a Book-Entry Confirmation), representing all tendered Shares in proper form for transfer, together with the Letter of Transmittal (or a facsimile thereof) properly completed and duly executed, together with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message) and any other documents required by the Letter of Transmittal are received by the Depositary within three Nasdaq National Market trading days after the date of execution of such Notice of Guaranteed Delivery. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by facsimile transmission or mailed to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery. Notwithstanding any other provision hereof, payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of Share Certificates for, or of Book-Entry Confirmation with respect to, such Shares, a properly completed and duly executed Letter of Transmittal (or a facsimile thereof), together with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message), and any other documents required by the Letter of Transmittal. Accordingly, payment might not be made to all tendering shareholders at the same time and will depend upon when Share Certificates are received by the Depositary or when Book-Entry Confirmation of such Shares into the Depositary's account at the Book-Entry Transfer Facility is received. Appointment as Proxy. By executing the Letter of Transmittal, a tendering shareholder will irrevocably appoint designees of Purchaser as such shareholder's attorneys-in-fact and proxies, with full power of substitution, in the manner set forth in the Letter of Transmittal, to the full extent of such shareholder's rights with respect to Shares tendered by such shareholder and accepted for payment by Purchaser (and with respect to any and all other Shares or other securities issued or issuable in respect of such Shares on or after the date of this Offer to Purchase). All such powers of attorney and proxies shall be considered irrevocable and coupled with an interest in the tendered Shares (and such other Shares and securities). Such appointment will be effective when, and only to the extent that, Purchaser accepts such Shares for payment. Upon such acceptance for payment, all prior powers of attorney and proxies given by such shareholder with respect to such Shares (and such other Shares and securities) will be revoked without further action, and no subsequent powers of attorney and proxies may be given nor any subsequent written consents executed (and, if given or executed, will not be deemed effective). The designees of Purchaser will, with respect to Shares (and such other Shares and securities) for which such appointment is effective, be empowered to exercise all voting and other rights of such shareholder as they, in their sole discretion, may deem proper at any annual or special meeting of the Company's shareholders or any adjournment or postponement thereof, by written consent in lieu of any such meeting or otherwise. Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon Purchaser's payment for such Shares, Purchaser must be able to exercise full voting and other rights with respect to such Shares and other securities, including rights in respect of voting at any meeting of shareholders and acting by written consent. Proxies are effective only as to Shares accepted for payment pursuant to the Offer. The Offer does not constitute a solicitation of proxies, absent a purchase of Shares, for any meeting of the Company's shareholders. Any solicitation of proxies will be made only pursuant to separate proxy soliciting materials complying with the Exchange Act. Determination of Validity. All questions as to the validity, form and eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by Purchaser in its sole discretion, which determination shall be final and binding on all parties. Purchaser reserves the absolute right 8 11 to reject any and all tenders determined by it not to be in proper form or the acceptance for payment of or payment for which may, in the opinion of Purchaser's counsel, be unlawful. Purchaser also reserves the absolute right to waive any of the conditions of the Offer (other than the Minimum Condition) or any defect or irregularity in any tender of Shares of any particular shareholder whether or not similar defects or irregularities are waived in the case of other Shares. No tender of Shares will be deemed to have been validly made until all defects and irregularities have been cured or waived. None of Parent, Purchaser, any of their affiliates or assigns, the Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding on all parties. Purchaser's acceptance for payment of Shares tendered pursuant to any of the procedures described above will constitute a binding agreement between the tendering shareholder and Purchaser upon the terms and subject to the conditions of the Offer. 4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4, tenders of Shares made pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may be withdrawn at any time on or prior to the Expiration Date and, unless previously accepted for payment by Purchaser pursuant to the Offer, may also be withdrawn at any time after August 13, 1999. If Purchaser extends the Offer, is delayed in its acceptance for payment of Shares, or is unable to purchase Shares validly tendered pursuant to the Offer for any reason, then without prejudice to Purchaser's rights under the Offer, the Depositary may nevertheless, on behalf of Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent that tendering shareholders are entitled to withdrawal rights as described in this Section 4. Any such delay in acceptance for payment will be accompanied by an extension of the Offer to the extent required by law. For a withdrawal to be effective, a written or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses or facsimile numbers set forth on the back cover of this Offer to Purchase. Any notice of withdrawal must specify the name of the person who tendered Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered shareholder, if different from that of the person who tendered such Shares. If Share Certificates to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary, and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution unless such Shares have been tendered for the account of an Eligible Institution. If Shares have been tendered pursuant to the procedure for book-entry transfer as set forth in Section 3, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares and otherwise comply with the Book-Entry Transfer Facility's procedures. Withdrawals of Shares may not be rescinded. Any Shares properly withdrawn will thereafter be deemed not to have been validly tendered for purposes of the Offer. However, withdrawn Shares may be re-tendered at any time prior to the Expiration Date by following one of the procedures described in Section 3. All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by Purchaser, in its sole discretion, whose determination will be final and binding on all parties. None of Parent, Purchaser, any of their affiliates or assigns, the Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. 5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following summary is a general discussion of certain of the expected Federal income tax consequences of the Offer. The summary is based on the Internal Revenue Code of 1986, as amended (the "Code"), and published regulations, rulings and judicial decisions in effect at the date of this Offer to Purchase, all of which are subject to change. The summary does not discuss all aspects of Federal income taxation that may be relevant to a particular holder in light of his or her personal 9 12 circumstances or to certain types of holders subject to special treatment under the Federal income tax laws, such as life insurance companies, financial institutions, tax-exempt organizations and non-U.S. persons. The following summary may not be applicable with respect to Shares acquired through exercise of employee stock options or otherwise as compensation. It also does not discuss any aspects of state or local tax laws or of tax laws of jurisdictions outside the United States of America. THE DESCRIPTION OF FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW IS FOR GENERAL INFORMATION ONLY. HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE SALE OF THEIR SHARES, INCLUDING THE APPLICATION OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS AND POSSIBLE CHANGES IN TAX LAWS. Sales of Shares in response to the Offer will be taxable transactions for Federal income tax purposes under the Code, and may also be taxable transactions under applicable state, local, foreign and other tax laws. For Federal income tax purposes, a tendering shareholder will generally recognize gain or loss equal to the difference between the amount of cash received by the shareholder upon sale of the Shares and the shareholder's tax basis in the Shares that are sold. Under present law, gain or loss will be calculated separately for each block of Shares tendered and purchased pursuant to the Offer. If tendered Shares are held by a tendering shareholder as capital assets, gain or loss recognized by the tendering shareholder will be capital gain or loss, which will be long-term capital gain or loss if the tendering shareholder's holding period for the Shares exceeds one year. For noncorporate shareholders, including individuals, estates and trusts, net capital gain (the excess of net long-term capital gain over net short-term capital loss) currently is taxed at a maximum Federal income tax rate of 20%. (Tendering shareholders subject to the "alternative minimum tax" may be subject to higher effective tax rates on their long-term capital gains). Short-term capital gain recognized by an individual will generally be taxed at the individual's ordinary income tax rate. Capital gains recognized by a tendering corporate shareholder will be taxed at a maximum Federal marginal rate of 35%. A shareholder that tenders Shares may be subject to 31% backup withholding unless the shareholder provides the Depositary (as payer) with such shareholder's correct Taxpayer Identification Number ("TIN") on Substitute Form W-9, included as part of the Letter of Transmittal. If the tendering shareholder is an individual, the TIN is his or her social security number. Certain shareholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, such shareholder must submit to the Depositary a properly completed IRS Form W-8, signed under penalty of perjury, attesting to that individual's exempt status. Exempt shareholders, other than foreign individuals, should file a Substitute Form W-9 certifying the shareholder's exempt status in order to avoid backup withholding. A shareholder that does not furnish its correct TIN to the Depositary, or otherwise establish a basis for exemption from backup withholding, may be subject to a penalty imposed by the Internal Revenue Service ("IRS"). If backup withholding applies to a shareholder, the Depositary is required to withhold 31% from payments to such shareholder. Backup withholding is not an additional tax. Rather, the amount of the backup withholding can be credited against the Federal income tax liability of the person subject to the backup withholding, provided that the required information is given to the IRS. If backup withholding results in an overpayment of tax, a refund can be obtained by the shareholder upon filing an income tax return. 6. FAIRNESS OF THE TRANSACTION. Purchaser understands that, in making their decision to approve the Merger Agreement and the Offer, the Unaffiliated Directors considered the following factors, which, in the view of the Unaffiliated Directors, when taken together, supported such decision: (i) the conclusions and recommendations of the Special Committee; (ii) the factors referred to below as having been taken into account by the Special Committee; and (iii) the fact that the $37.00 per Share Offer Price and the terms and conditions of the Merger Agreement were the result of extensive discussion between the Special Committee and Parent. The Unaffiliated Directors, including the members of the Special Committee, believe that the Offer and the Merger are procedurally fair because, among other things: (i) the Special Committee consisted of 10 13 Unaffiliated Directors appointed to represent the interests of the shareholders other than Shares held by Parent and its affiliates; (ii) the Special Committee was advised by BT Alex. Brown and Warburg Dillon Read as its independent financial advisors to assist it in evaluating the financial aspects of the proposal made by Merck KGaA; (iii) the Minimum Condition (which may not be waived without the consent of the Company) has the effect of requiring the holders of a majority of the Shares (other than Parent and its affiliates) to tender their Shares in response to the Offer in order for it to be consummated; (iv) of the process of the deliberations pursuant to which the Special Committee evaluated the Offer and the Merger and alternatives thereto; (v) of the fact that the $37.00 per Share price and the other terms and conditions of the Merger Agreement resulted from extensive discussions between representatives of the Special Committee, on the one hand, and representatives of Merck KGaA, on the other; and (vi) of the availability of dissenters' rights to the public shareholders under the PBCL. The Unaffiliated Directors and the Special Committee recognized that the Merger was not structured to require the approval of a majority of the shareholders of the Company other than Parent and its affiliates, that Parent and its affiliates currently hold 49.89% of the Shares, all of which Shares will be voted to approve and adopt the Merger Agreement and that, because (i) pursuant to the Shareholder Agreement each Share Tender Party has agreed to vote the Shares beneficially owned by him in favor of the Merger and the Merger Agreement and to tender his Shares pursuant to the Offer and (ii) each of the directors and executive officers of the Company has indicated that he or she intends to tender his or her Shares in response to the Offer or, in certain circumstances, to vote in favor of the Merger, if the Minimum Condition is fulfilled, Purchaser will have sufficient voting power to approve and adopt the Merger Agreement without the vote of any other shareholder. However, the Special Committee and the Unaffiliated Directors also recognized that, since (x) it is a condition to the Merger that Parent shall have purchased all Shares validly tendered and not withdrawn pursuant to the Offer, and (y) it is a condition (which may be waived only with the consent of the Company) to the consummation of the Offer that there be validly tendered and not withdrawn at least a majority of the issued and outstanding Shares without regard to the Shares owned by Parent and its affiliates (i.e., the Minimum Condition), the Merger is effectively conditioned on satisfaction of the Minimum Condition. The Unaffiliated Directors, including the members of the Special Committee, evaluated the Offer and the Merger in light of their knowledge of the business, financial condition and prospects of the Company and after consultation with the Company's legal and financial advisors. In light of the number and variety of factors that the Unaffiliated Directors and the Special Committee considered in connection with their evaluations of the Offer and the Merger, Parent has been informed that neither the Unaffiliated Directors nor the Special Committee found it practicable to assign relative weights to the foregoing factors, and, accordingly, neither the Unaffiliated Directors nor the Special Committee did so. Opinion of BT Alex. Brown Incorporated. The Company engaged BT Alex. Brown Incorporated (now merged with Deutsche Bank Securities Inc., and known as Deutsche Banc Alex. Brown) to act as co-financial advisor to the Company in connection with the Offer and the Merger. On June 8, 1999, at a meeting of the Company's Board (at which only the Unaffiliated Directors were present) and Special Committee held to evaluate the proposed Offer and Merger, BT Alex. Brown rendered an oral opinion, which opinion was subsequently confirmed by delivery of a written opinion dated June 8, 1999, to the effect that, as of that date and based upon and subject to matters stated in its opinion, the $37.00 per Share cash consideration to be received in the Offer and the Merger by the holders of Shares (other than Merck KGaA and its affiliates) was fair, from a financial point of view, to such holders. The full text of BT Alex. Brown's written opinion dated June 8, 1999, which describes the assumptions made, matters considered and limitations of the review undertaken, is attached as Schedule II to this document and is incorporated herein by reference. BT ALEX. BROWN'S OPINION IS DIRECTED TO THE COMPANY'S BOARD AND SPECIAL COMMITTEE, ADDRESSES ONLY THE FAIRNESS OF THE CASH CONSIDERATION TO BE RECEIVED IN THE OFFER AND THE MERGER BY THE HOLDERS OF SHARES (OTHER THAN MERCK KGaA AND ITS AFFILIATES) FROM A FINANCIAL POINT OF VIEW, DOES NOT ADDRESS THE MERITS OF THE UNDERLYING DECISION BY THE COMPANY TO ENGAGE IN THE OFFER AND THE MERGER, AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER OR NOT SUCH SHAREHOLDER SHOULD TENDER SHARES IN THE OFFER OR HOW SUCH SHAREHOLDER SHOULD VOTE WITH RESPECT TO MATTERS 11 14 RELATING TO THE PROPOSED MERGER. The summary of BT Alex. Brown's opinion described below is qualified in its entirety by reference to the full text of its opinion. In connection with BT Alex. Brown's role as the Company's financial advisor, and in arriving at its opinion, BT Alex. Brown: - reviewed publicly available financial and other information concerning the Company and internal analyses and other information furnished to or discussed with BT Alex. Brown by the Company and its advisors; - held discussions with members of the senior management of the Company regarding the business and prospects of the Company; - reviewed the reported prices and trading activity for the Shares; - compared financial and stock market information for the Company with similar information for other companies whose securities are publicly traded; - reviewed the financial terms of recent business combinations which BT Alex. Brown deemed comparable in whole or in part; - reviewed the terms of the Merger Agreement; and - performed other studies and analyses and considered other factors as BT Alex. Brown deemed appropriate. BT Alex. Brown did not assume responsibility for independent verification of, and did not independently verify, any information, whether publicly available or furnished to BT Alex. Brown, concerning the Company, including, without limitation, any financial information, forecasts or projections considered in connection with the rendering of its opinion. For purposes of its opinion, BT Alex. Brown assumed and relied upon the accuracy and completeness of all information it reviewed. BT Alex. Brown did not conduct a physical inspection of any of the properties or assets, and did not prepare or obtain any independent evaluation or appraisal of any of the assets or liabilities, of the Company. With respect to the financial forecasts and projections made available to BT Alex. Brown and used in its analyses, BT Alex. Brown assumed that they were reasonably prepared on bases reflecting the best currently available estimates and judgments as to the matters covered thereby. In rendering its opinion, BT Alex. Brown expressed no view as to the reasonableness of the forecasts and projections or the assumptions on which they are based. BT Alex. Brown's opinion was necessarily based upon economic, market and other conditions existing on, and the information made available to BT Alex. Brown as of, the date of its opinion. For purposes of rendering its opinion, BT Alex. Brown assumed that, in all respects material to its analysis, the representations and warranties of the Company, Parent and Purchaser contained in the Merger Agreement are true and correct; the Company, Parent and Purchaser will each perform all of the covenants and agreements to be performed by it under the Merger Agreement; and all conditions to the obligations of each of the Company, Parent and Purchaser to consummate the Offer and the Merger will be satisfied without any waiver. BT Alex. Brown also assumed that all material governmental, regulatory or other approvals and consents required in connection with the consummation of the Offer and the Merger will be obtained and that in connection with obtaining any necessary governmental, regulatory or other approvals and consents, or any amendments, modifications or waivers to any agreements, instruments or orders to which either the Company, Parent and Purchaser is a party or is subject or by which it is bound, no limitations, restrictions or conditions will be imposed or amendments, modifications or waivers made that would have a material adverse effect on the Company or materially reduce the contemplated benefits of the Offer and the Merger to the Company. In connection with its opinion, BT Alex. Brown was not requested to, and did not, solicit third party indications of interest with respect to the acquisition of all or a part of the Company. No other instructions or limitations were imposed by the Unaffiliated Directors or Special Committee upon BT Alex. Brown with respect to the investigations made or the procedures followed by it in rendering its opinion. 12 15 The following is a summary of the material analyses performed by BT Alex. Brown in connection with its opinion to the Company's Board and Special Committee dated June 8, 1999. THE FINANCIAL ANALYSES SUMMARIZED BELOW INCLUDE INFORMATION PRESENTED IN TABULAR FORMAT. IN ORDER TO FULLY UNDERSTAND BT ALEX. BROWN'S FINANCIAL ANALYSES, THE TABLES MUST BE READ TOGETHER WITH THE TEXT OF EACH SUMMARY. THE TABLES ALONE DO NOT CONSTITUTE A COMPLETE DESCRIPTION OF THE FINANCIAL ANALYSES. CONSIDERING THE DATA SET FORTH BELOW WITHOUT CONSIDERING THE FULL NARRATIVE DESCRIPTION OF THE FINANCIAL ANALYSES, INCLUDING THE METHODOLOGIES AND ASSUMPTIONS UNDERLYING THE ANALYSES, COULD CREATE A MISLEADING OR INCOMPLETE VIEW OF BT ALEX. BROWN'S FINANCIAL ANALYSES. Analysis of Selected Public Companies. BT Alex. Brown compared financial and stock market information for the Company and the following seven selected publicly held companies in the distribution industry: - Arrow Electronics, Inc. - Corporate Express, Inc. - Henry Schein, Inc. - Owens & Minor, Inc. - Patterson Dental Company - PSS World Medical, Inc. - W.W. Grainger, Inc. BT Alex. Brown reviewed adjusted market values, calculated as equity market value, plus debt, less cash, as multiples of latest 12 months earnings before interest, taxes, depreciation and amortization, and earnings before interest and taxes, and equity market values as a multiple of latest 12 months and estimated calendar year 1999 and 2000 net income. All multiples were based on closing stock prices on June 4, 1999. Estimated financial data for the selected companies were based on publicly available research analysts' estimates and estimated financial data for the Company were based both on publicly available research analysts' estimates and internal estimates of the management of the Company. This analysis indicated the following implied adjusted market value and equity market value multiples for the selected companies, as compared to the following implied multiples for the Company based on the cash consideration in the Offer and the Merger of $37.00 per Share:
IMPLIED MULTIPLES OF SELECTED COMPANIES MULTIPLES FOR THE ---------------------- COMPANY IMPLIED BY MEAN RANGE CASH CONSIDERATION ----- ------------- ------------------ ADJUSTED MARKET VALUES: Latest 12 months earnings before interest, taxes, depreciation and amortization............................. 10.0x 7.9x - 13.8x 12.9x Latest 12 months earnings before interest and taxes......... 12.2x 9.5x - 15.3x 17.0x EQUITY MARKET VALUES: Latest 12 months net income................................. 18.3x 13.2x - 25.1x 32.2x Estimated calendar year 1999 net income (research analysts' estimates)................................................ 16.0x 12.0x - 21.4x 27.0x Estimated calendar year 2000 net income (research analysts' estimates)................................................ 13.1x 9.6x - 19.2x 22.9x Estimated calendar year 1999 net income (management estimates)................................................ 16.0x 12.0x - 21.4x 22.5x Estimated calendar year 2000 net income (management estimates)................................................ 13.1x 9.6x - 19.2x 16.2x
13 16 Analysis of Selected Precedent Transactions. BT Alex. Brown reviewed the purchase prices and implied transaction multiples in the following eight selected transactions in the distribution industry, with particular focus on the acquisition of Fisher Scientific International, Inc. by Thomas H. Lee Co.:
ACQUIROR TARGET -------- ------ - - Georgia-Pacific Corporation Unisource Worldwide, Inc. - - Cardinal Health, Inc. Allegiance Corporation - - The Cypress Group L.L.C. WESCO Distribution, Inc. - - Invacare Corporation Suburban Ostomy Supply Co., Inc. - - Henry Schein, Inc. Sullivan Dental Products, Inc. - - Thomas H. Lee Co. Fisher Scientific International, Inc. - - McKesson Corporation General Medical, Inc. - - VWR Scientific Products Corporation Baxter International Inc. (industrial distribution business)
BT Alex. Brown reviewed adjusted market values in the selected transactions as multiples of latest 12 months earnings before interest, taxes, depreciation and amortization, and earnings before interest and taxes, and equity market values as a multiple of latest 12 months net income and forward net income. All multiples were based on publicly available information at the time of announcement of the relevant transaction. This analysis indicated the following implied adjusted market value and equity market value multiples for the selected transactions, as compared to the following implied multiples for the Company based on the cash consideration in the Offer and the Merger of $37.00 per Share:
IMPLIED MULTIPLES OF SELECTED TRANSACTIONS IMPLIED MULTIPLES FOR THE ----------------------- MULTIPLES OF COMPANY IMPLIED BY MEAN RANGES FISHER TRANSACTION CASH CONSIDERATION ----- ------------- ------------------ ------------------ ADJUSTED MARKET VALUES: Latest 12 months earnings before interest, taxes, depreciation and amortization................... 12.7x 8.9x - 18.7x 8.9x 12.9x Latest 12 months earnings before interest and taxes........................................... 16.5x 9.7x - 24.0x 12.8x 17.0x EQUITY MARKET VALUES: Latest 12 months net income....................... 31.5x 16.6x - 44.2x 23.4x 32.2x Forward net income (research analysts' estimates)...................................... 23.7x 15.4x - 36.9x 17.2x 25.1x Forward net income (management estimates)......... 23.7x 15.4x - 36.9x 17.2x 19.3x
Discounted Cash Flow Analysis. BT Alex. Brown performed a discounted cash flow analysis to estimate the present value of the unlevered, after-tax free cash flows that the Company could generate for the fiscal years 1999 through 2003, based both on internal estimates of the management of the Company and on publicly available research analysts' estimates. The range of estimated terminal values for the Company was calculated by applying terminal value multiples ranging from 8.0x to 10.0x to the Company's projected fiscal year 2003 earnings before interest, taxes, depreciation and amortization. The present value of the cash flows and terminal values were calculated using discount rates ranging from 12.0% to 14.0%. This analysis yielded the following implied equity reference ranges for the Company, as compared to the cash consideration in the Offer and the Merger of $37.00 per Share:
IMPLIED PER SHARE EQUITY PER SHARE REFERENCE RANGE FOR THE COMPANY CASH CONSIDERATION - ------------------------------- ------------------ $24.75 - $34.75 $37.00 (research analysts' estimates) $28.72 - $39.90 (management estimates)
Premiums Analysis. BT Alex. Brown reviewed the premiums paid in 96 selected transactions, including eight selected transactions discussed above in "Analysis of Selected Precedent Transactions," 24 selected transactions effected since January 1, 1995 in which the acquiror had a 20% to 50% ownership in the target company prior to the transaction and increased its ownership to 90% or greater following the transaction, and 14 17 64 selected transactions effected since January 1, 1994 having transaction values of between $1.0 billion and $1.5 billion. BT Alex. Brown analyzed the premiums in these transactions based on the target company's stock price one day, one month and three months prior to public announcement of the transaction as compared to the implied premiums for the Company in the Offer and the Merger based on the stock price for the Shares as of June 4, 1999 and one month and three months prior to June 4, 1999. This analysis indicated the following premiums in the selected transactions, as compared to the premiums implied for the Company in the Offer and the Merger:
PREMIUM PREMIUM PREMIUM ONE DAY PRIOR TO ONE MONTH PRIOR TO THREE MONTHS PRIOR TO PUBLIC ANNOUNCEMENT PUBLIC ANNOUNCEMENT PUBLIC ANNOUNCEMENT ------------------------ ----------------------- ------------------------ MEAN RANGE MEAN RANGE MEAN RANGE ---- ---------------- ---- --------------- ---- ---------------- Selected Transactions(8)..... 28.6% 8.0% - 67.2% 36.4% 13.3% - 66.2% 32.7% (28.3)% - 84.6% Selected Transactions(24).... 30.8% 3.2% - 118.6% 32.4% 4.2% - 104.0% 42.6% (9.7)% - 201.9% Selected Transactions(64).... 29.5% (13.9)% - 118.5% 41.2% (9.7)% - 130.7% 46.1% (27.7)% - 164.9%
PREMIUM PREMIUM PREMIUM ONE DAY PRIOR TO ONE MONTH PRIOR TO THREE MONTHS PRIOR TO PUBLIC ANNOUNCEMENT PUBLIC ANNOUNCEMENT PUBLIC ANNOUNCEMENT ------------------------- --------------------------- --------------------------- Fisher Transaction..... 27.4% 30.8% 5.8%
PREMIUM PREMIUM PREMIUM AS OF ONE MONTH PRIOR TO THREE MONTHS PRIOR TO JUNE 4, 1999 JUNE 4, 1999 JUNE 4, 1999 ------------- ------------------ --------------------- Premium Implied for the Company in the Offer and Merger................................... 32.1% 41.0% 57.0%
Other Factors. In rendering its opinion, BT Alex. Brown also reviewed and considered, among other things: - historical and projected financial data for the Company; - historical market prices and trading volumes for the Shares and the relationship between movements in the Shares, movements in the common stock of selected companies and movements in the S&P 500 Index; - selected published analysts' reports, including analysts' estimates as to the earnings per share of the Company; and - a shareholder profile of the Company and business and financial profile of Merck KGaA. The above summary is not a complete description of the opinion of BT Alex. Brown to the Company's Board and Special Committee or the financial analyses performed and factors considered by BT Alex. Brown in connection with its opinion. A copy of BT Alex. Brown's written presentation to the Company's Board and Special Committee in connection with its opinion has been filed as an exhibit to the Rule 13e-3 Transaction Statement on Schedule 13E-3 filed by Merck KGaA, Parent and Purchaser with the Securities and Exchange Commission and will be available for inspection and copying at the principal executive offices of the Company during regular business hours by any interested shareholder of the Company or representative of such shareholder who has been so designated in writing and may be inspected and copied, and obtained from the EDGAR Database accessible through the Commission's Website (http://www.sec.gov/index.html) or by mail, from the Commission. The preparation of a fairness opinion is a complex analytic process involving various determinations as to the most appropriate and relevant methods of financial analyses and the application of those methods to the particular circumstances and, therefore, a fairness opinion is not readily susceptible to summary description. BT Alex. Brown believes that its analyses and the summary above must be considered as a whole and that selecting portions of its analyses and factors or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying BT Alex. Brown analyses and opinion. 15 18 In performing its analyses, BT Alex. Brown considered industry performance, general business, economic, market and financial conditions and other matters existing as of the date of its opinion, many of which are beyond the control of the Company. No company, transaction or business used in such analyses as a comparison is identical to the Company or the Offer or Merger, nor is an evaluation of the results of those analyses entirely mathematical; rather, the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the acquisition, public trading or other values of the companies, business segments or transactions being analyzed. The estimates contained in BT Alex. Brown's analyses and the ranges of valuations resulting from any particular analysis are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than those suggested by its analyses. In addition, analyses relating to the value of businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold. Accordingly, BT Alex. Brown's analyses and estimates are inherently subject to substantial uncertainty. The type and amount of consideration payable in the Offer and the Merger was determined through extensive discussions between the Company and Merck KGaA. Although BT Alex. Brown provided financial advice to the Company during the course of discussions, the decision to enter into the transaction was solely that of the Unaffiliated Directors and Special Committee. BT Alex. Brown's opinion and financial analyses were only one of many factors considered by the Unaffiliated Directors and Special Committee in their evaluation of the Offer and the Merger and should not be viewed as determinative of the views of the Unaffiliated Directors, Special Committee or management with respect to the Offer or the Merger or the consideration payable in the Offer and the Merger. BT Alex. Brown is an internationally recognized investment banking firm and, as a customary part of its investment banking business, is engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, private placements and valuations for estate, corporate and other purposes. The Company selected BT Alex. Brown based on BT Alex. Brown's reputation, expertise and familiarity with the Company. BT Alex. Brown and its affiliates have in the past provided financial services to the Company and Merck KGaA unrelated to the Offer and Merger, for which services BT Alex. Brown and its affiliates have received compensation. In the ordinary course of business, BT Alex. Brown and its successors and affiliates may actively trade or hold the securities and other instruments and obligations of the Company and Merck KGaA for their own account and for the accounts of customers and, accordingly, may at any time hold a long or short position in such securities, instruments or obligations. Pursuant to the terms of BT Alex. Brown's engagement, the Company has agreed to pay BT Alex. Brown for its services an aggregate financial advisory fee of $4,575,000. A portion of such fee was payable upon delivery by BT Alex. Brown of its opinion, with the balance payable upon completion of the Merger. In addition, the Company has agreed to reimburse BT Alex. Brown for its travel and other out-of-pocket expenses, including fees and disbursements of counsel, and to indemnify BT Alex. Brown and related parties against liabilities, including liabilities under the federal securities laws, relating to, or arising out of, its engagement. Opinion of Warburg Dillon Read LLC. On June 8, 1999, at a meeting of the Company's Board (at which only the Unaffiliated Directors were present) and the Special Committee, Warburg Dillon Read rendered its oral opinion to the Unaffiliated Directors and Special Committee that, as of that date, and subject to various assumptions, matters considered and limitations set forth in its opinion, the $37.00 per Share cash consideration to be received in the Offer and the Merger by the holders of Shares (other than Merck KGaA and its affiliates) pursuant to the Merger Agreement was fair, from a financial point of view, to such holders. Warburg Dillon Read's oral opinion was subsequently confirmed by delivery of a written opinion dated June 8, 1999. The full text of Warburg Dillon Read's opinion sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken by Warburg Dillon Read. This opinion is attached as Schedule III to this document and is incorporated in this document by reference. 16 19 WARBURG DILLON READ'S OPINION IS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE CASH CONSIDERATION TO BE RECEIVED IN THE OFFER AND THE MERGER BY THE HOLDERS OF SHARES (OTHER THAN MERCK KGaA AND ITS AFFILIATES) AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF SHARES AS TO WHETHER OR NOT SUCH HOLDER SHOULD TENDER SHARES IN THE OFFER OR HOW SUCH HOLDER SHOULD VOTE WITH RESPECT TO MATTERS RELATING TO THE PROPOSED MERGER. Holders of Shares are urged to read this opinion in its entirety. The summary of Warburg Dillon Read's opinion described below is qualified in its entirety by reference to the full text of its opinion. In arriving at its opinion, Warburg Dillon Read, among other things: - reviewed publicly available business and historical financial information relating to the Company; - reviewed internal financial information and other data relating to the business and financial prospects of the Company, including estimates and financial forecasts prepared by the management of the Company and not publicly available; - conducted discussions with members of the senior management of the Company; - reviewed publicly available financial and stock market data with respect to other companies in lines of business which Warburg Dillon Read believed to be generally comparable to those of the Company and Chemdex Corporation, an entity in which the Company has an equity interest; - compared the financial terms of the Offer and the Merger with the publicly available financial terms of other transactions which Warburg Dillon Read believed to be generally relevant; - reviewed the Merger Agreement; and - conducted other financial studies, analyses and investigations, and considered other information, as Warburg Dillon Read deemed necessary or appropriate. In connection with its review, with the Company's consent, Warburg Dillon Read did not assume any responsibility for independent verification of any of the information provided to or reviewed by Warburg Dillon Read for the purpose of its opinion and, with the Company's consent, relied on such information being complete and accurate in all material respects. In addition, at the Company's direction, Warburg Dillon Read did not make an independent evaluation or appraisal of any of the assets or liabilities, contingent or otherwise, of the Company, nor was Warburg Dillon Read furnished with any evaluation or appraisal. With respect to the financial forecasts and estimates reviewed by Warburg Dillon Read, Warburg Dillon Read assumed, at the direction of the Company, that they were reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of the Company as to the future financial performance of the Company. Warburg Dillon Read's opinion is necessarily based on economic, monetary, market and other conditions existing, and information available to Warburg Dillon Read, on the date of its opinion. In connection with its engagement, Warburg Dillon Read was not requested by the Company to, and Warburg Dillon Read did not, solicit third party indications of interest with respect to the acquisition of all or a part of the Company. No other instructions or limitations were imposed by the Unaffiliated Directors or Special Committee upon Warburg Dillon Read with respect to the investigations made or the procedures followed by it in rendering its opinion. In connection with rendering its opinion to the Company's Board and Special Committee, Warburg Dillon Read performed a variety of financial analyses which are summarized below. The following summary does not purport to be a complete description of all of the analyses performed and factors considered by Warburg Dillon Read in connection with its opinion. A copy of Warburg Dillon Read's written presentation to the Company's Board and Special Committee in connection with its opinion has been filed as an exhibit to the Rule 13e-3 Transaction Statement on Schedule 13E-3 filed by Merck KGaA, Purchaser and Parent with the Securities and Exchange Commission and will be available for inspection and copying at the principal executive offices of the Company during regular business hours by any interested shareholder of the Company or representative of such shareholder who has been so designated in writing and may be inspected and copied, and obtained from the EDGAR Database accessible through the Commission's Web site (http//www.sec.gov/index.html) or by mail, from the Commission. 17 20 Warburg Dillon Read believes that its analyses and the summary below must be considered as a whole and that selecting portions of its analyses and factors or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying Warburg Dillon Read's analyses and opinion. None of the analyses performed by Warburg Dillon Read was assigned a greater significance by Warburg Dillon Read than any other. Warburg Dillon Read arrived at its ultimate opinion based on the results of all the analyses undertaken by it and assessed as a whole. Warburg Dillon Read did not draw conclusions from or with regard to any one factor or method of analysis. The preparation of a fairness opinion is a complex process involving subjective judgments and is not necessarily susceptible to a partial analysis or summary description. With respect to the analysis of selected publicly traded companies and the analysis of selected transactions summarized below, no company used as a comparison is either identical or directly comparable to the Company or the Offer or Merger. These analyses necessarily involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the acquisition, public trading or transaction values of the companies or transactions concerned. The estimates of future performance of the Company provided by the management of the Company in or underlying Warburg Dillon Read's analyses are not necessarily indicative of future results of values, which may be significantly more or less favorable than those estimates. In performing its analyses, Warburg Dillon Read made numerous assumptions about industry performance, general business and economic conditions and other matters, many of which are beyond the control of the Company. Estimates of the financial value of companies do not purport to be appraisals or necessarily reflect the prices at which companies actually may be sold. The type and amount of consideration payable in the Offer and the Merger was determined through extensive discussions between the Company and Merck KGaA. Although Warburg Dillon Read provided financial advice to the Company during the course of discussions, the decision to enter into the transaction was solely that of the Company's Unaffiliated Directors and Special Committee. Warburg Dillon Read's opinion and financial analyses were only one of many factors considered by the Unaffiliated Directors and Special Committee in their evaluation of the Offer and the Merger and should not be viewed as determinative of the views of the Unaffiliated Directors, Special Committee or management with respect to the Offer or the Merger or the consideration payable in the Offer and the Merger. The following is a brief summary of the material analyses performed by Warburg Dillon Read and reviewed with the Unaffiliated Directors and Special Committee in connection with its opinion dated June 8, 1999. THE FINANCIAL ANALYSES SUMMARIZED BELOW INCLUDE INFORMATION PRESENTED IN TABULAR FORMAT. IN ORDER TO FULLY UNDERSTAND WARBURG DILLON READ'S FINANCIAL ANALYSES, THE TABLES MUST BE READ TOGETHER WITH THE TEXT OF EACH SUMMARY. THE TABLES ALONE DO NOT CONSTITUTE A COMPLETE DESCRIPTION OF THE FINANCIAL ANALYSES. CONSIDERING THE DATA SET FORTH BELOW WITHOUT CONSIDERING THE FULL NARRATIVE DESCRIPTION OF THE FINANCIAL ANALYSES, INCLUDING THE METHODOLOGIES AND ASSUMPTIONS UNDERLYING THE ANALYSES, COULD CREATE A MISLEADING OR INCOMPLETE VIEW OF WARBURG DILLON READ'S FINANCIAL ANALYSES. Analysis of Selected Public Companies. Warburg Dillon Read compared selected financial information and operating statistics for the Company with corresponding financial information and operating statistics of the following eight selected publicly held companies in the distribution industry: - Arrow Electronics, Inc. - Corporate Express, Inc. - Henry Schein, Inc. - Fisher Scientific International, Inc. - Owens & Minor, Inc. - Patterson Dental Company - PSS World Medical, Inc. - W.W. Grainger, Inc. 18 21 Warburg Dillon Read reviewed enterprise values, calculated as equity market value, plus debt, less cash, as multiples of latest 12 months sales, earnings before interest, taxes, depreciation and amortization, and earnings before interest and taxes, and equity values as a multiple of estimated calendar year 1999 price-to-earnings and price-to-earnings to five-year estimated earnings per share. All multiples were based on closing stock prices on June 4, 1999. Estimated financial data for the selected companies and the Company were based on publicly available research analysts' estimates. This analysis indicated the following median implied enterprise value and equity value multiples for the selected companies, as compared to the following implied multiples for the Company based on the cash consideration in the Offer and the Merger of $37.00 per Share:
IMPLIED MULTIPLES MULTIPLES FOR THE OF SELECTED COMPANIES COMPANY IMPLIED BY MEDIAN CASH CONSIDERATION --------------------- ------------------ ENTERPRISE VALUES: Latest 12 months sales...................................... 0.69x 1.05x Latest 12 months earnings before interest, taxes, depreciation and amortization............................. 9.0x 12.9x Latest 12 months earnings before interest and taxes......... 12.6x 17.0x EQUITY VALUES: Estimated calendar year 1999 price-to-earnings (research analysts' estimates)...................................... 15.8x 27.2x Estimated calendar year 1999 price-to-earnings to five-year estimated compound annual growth rate for earnings per share (research analysts' estimates)...................... 0.83x 1.41x
Analysis of Selected Precedent Transactions. Warburg Dillon Read reviewed the purchase prices and implied transaction multiples in the following eight selected transactions in the distribution industry announced since January 1997:
ACQUIROR TARGET -------- ------ - - Cardinal Health, Inc. Allegiance Corporation - - The Cypress Group L.L.C. WESCO Distribution, Inc. - - Invacare Corporation Suburban Ostomy Supply Co., Inc. - - Physician Sales & Service, Gulf South Medical Supply, Inc. Inc. - - Henry Schein, Inc. Sullivan Dental Products, Inc. - - Thomas H. Lee Co. Fisher Scientific International Inc. - - McKesson Corporation General Medical, Inc. - - VWR Scientific Products Baxter International Inc. (industrial distribution business) Corporation
Warburg Dillon Read reviewed enterprise values in the selected transactions as multiples of latest 12 months sales, earnings before interest, taxes, depreciation and amortization, and earnings before interest and taxes, and equity values as multiples of latest 12 months net income and latest book value. All multiples were based on publicly available information at the time of announcement of the relevant transaction. This analysis indicated the following implied enterprise value and equity value multiples for the selected transactions, as compared to the following implied multiples for the Company based on the cash consideration in the Offer and the Merger of $37.00 per Share:
IMPLIED MULTIPLES OF SELECTED COMPANIES MULTIPLES FOR THE -------------------------------- COMPANY IMPLIED BY RANGE MEAN MEDIAN CASH CONSIDERATION ------------- ----- ------ --------------------- ENTERPRISE VALUES: Latest 12 months sales.................................... 0.43x - 2.43x 1.07x 0.96x 1.05x Latest 12 months earnings before interest, taxes, depreciation and amortization........................... 8.8x - 25.0x 13.7x 12.5x 12.9x Latest 12 months earnings before interest and taxes....... 9.1x - 26.4x 16.4x 14.7x 17.0x EQUITY VALUES: Latest 12 months earnings per share....................... 15.5x - 41.6x 27.5x 27.0x 31.9x Latest book value......................................... 2.8x - 4.8x 3.8x 3.7x 2.8x
19 22 Discounted Cash Flow Analysis. Warburg Dillon Read performed a discounted cash flow analysis to estimate the present value of the unlevered, after-tax free cash flows that the Company could generate based both on internal estimates of the management of the Company and publicly available research analysts' estimates. The range of estimated terminal values for the Company was calculated by applying terminal value multiples ranging from 8.0x to 10.0x to the Company's projected fiscal year 2003 earnings before interest, taxes, depreciation and amortization. The present value of the cash flows and terminal values were calculated using discount rates ranging from 10.5% to 12.5%. This analysis yielded the following implied equity reference ranges for the Company, as compared to the cash consideration in the Offer and the Merger of $37.00 per Share:
IMPLIED PER SHARE EQUITY PER SHARE REFERENCE RANGE FOR THE COMPANY CASH CONSIDERATION - ------------------------------- ------------------ $24.78 - $35.81 $37.00 (research analysts' estimates) $28.76 - $41.09 (management estimates)
Premiums Analysis. Warburg Dillon Read reviewed the premiums paid in 29 selected transactions effected since January 1995 with transaction values between approximately $56.0 million and $11.0 billion. This analysis indicated the following premiums in the selected transactions based on the target company's closing and average stock prices one day, one week, one month and three months prior to public announcement of the transaction, as compared to the implied premiums for the Company based on the stock price of the Shares one day, one week, one month and three months prior to June 4, 1999:
PREMIUMS PAID IN SELECTED TRANSACTIONS -------------------------------- BASED ON BASED ON CLOSING PRICES AVERAGE PRICES -------------- -------------- MEAN MEDIAN MEAN MEDIAN ---- ------ ---- ------ One Day Prior to Public Announcement........................ 26% 20% 26% 20% One Week Prior to Public Announcement....................... 29% 27% 24% 23% One Month Prior to Public Announcement...................... 35% 30% 30% 25% Three Months Prior to Public Announcement................... 43% 41% 34% 29%
PREMIUMS IMPLIED FOR THE COMPANY -------------------------------- BASED ON BASED ON CLOSING PRICES AVERAGE PRICES -------------- -------------- One Day Prior to June 4, 1999............................... 29% 29% One Week Prior to June 4, 1999.............................. 29% 30% One Month Prior to June 4, 1999............................. 41% 33% Three Months Prior to June 4, 1999.......................... 57% 49%
Other Factors. In rendering its opinion, Warburg Dillon Read also, among other things, reviewed and considered historical and projected financial data for the Company and compared selected financial information and operating statistics for Chemdex Corporation with corresponding financial information and operating statistics for selected publicly held companies in the internet commerce industry. Miscellaneous. The Company has agreed to pay Warburg Dillon Read for its services an aggregate financial advisory fee of $4,575,000. A portion of such fee was paid upon the delivery by Warburg Dillon Read of its opinion with the balance payable upon completion of the Merger. In addition, the Company has agreed to reimburse Warburg Dillon Read for its travel and other out-of-pocket expenses, including fees and disbursements of its counsel, and to indemnify Warburg Dillon Read and related parties against liabilities, including liabilities under federal securities laws, relating to, or arising out of, its engagement. The Company selected Warburg Dillon Read as a co-financial advisor in connection with the Offer and the Merger because Warburg Dillon Read is an internationally recognized investment banking firm with substantial experience in similar transactions. Warburg Dillon Read is continually engaged in the valuation of 20 23 businesses and their securities in connection with mergers and acquisitions, leveraged buyouts, negotiated underwritings, competitive bids, secondary distributions of listed and unlisted securities and private placements. In the past, Warburg Dillon Read and its predecessors have provided investment banking services to Merck KGaA unrelated to the Offer and Merger and have received customary compensation for the rendering of such services. In addition, Warburg Dillon Read's affiliates or parent entity, UBS AG, currently have, or may have in the future, a banking or financing relationship with the Company and/or Merck KGaA. In the ordinary course of business, Warburg Dillon Read, its successors and affiliates may actively trade the securities of the Company and Merck KGaA for their own accounts and the accounts of their customers and, accordingly, may at any time hold a long or short position in these securities. Position of Merck KGaA, Parent and Purchaser regarding Fairness of the Offer and the Merger. Merck KGaA, Parent and Purchaser believe that the consideration to be received by the holders of Shares, pursuant to the Offer and the Merger, is fair to the holders of Shares. Merck KGaA, Parent and Purchaser based their belief solely on (i) the fact that the Unaffiliated Directors and the Special Committee concluded that the Offer and the Merger are fair to, and in the best interests of, the Company, (ii) the historical and projected financial performance of the Company and its financial results, (iii) the fact that the consideration to be paid in the Offer and the Merger represents a premium of approximately 41% over the closing price one-month prior to June 4, 1999, and a premium of approximately 32% over the reported closing price for the Shares on June 4, 1999, (iv) the fact that the terms of the Offer and the Merger and the Merger Agreement were the subject of extensive discussions between the Special Committee and Merck KGaA and Parent, (v) the fact that the Offer and the Merger will each provide consideration to the shareholders entirely in cash, and (vi) notwithstanding the fact that BT Alex. Brown's and Warburg Dillion Read's opinions were provided solely for the information and assistance of the Special Committee and that Merck KGaA, Parent and Purchaser are not entitled to rely on such opinions, the fact that the Special Committee received an opinion from each of BT Alex. Brown and Warburg Dillion Read as to the fairness, from a financial point of view, to the holders of Shares (other than Parent and its affiliates) of the $37.00 per Share cash consideration to be received by such holders in the Offer and the Merger. Merck KGaA, Parent and Purchaser have reviewed the factors considered by the Unaffiliated Directors in support of their decision, as described in the Schedule 14D-9 and above, and had no basis to question their consideration of or reliance on those factors. Merck KGaA, Parent and Purchaser found it impracticable to assign, nor did they assign, relative weights to the individual factors considered in reaching their conclusion as to fairness. 7. PRICE RANGE OF SHARES; DIVIDENDS. The shares trade on the Nasdaq National Market under the symbol VWRX. The following table sets forth, for the periods indicated, the high and low bid quotations per Share on the Nasdaq National Market, as reported by Bloomberg LP.
HIGH LOW ---- --- FISCAL YEAR ENDED DECEMBER 31, 1997: First Quarter............................................. $16 3/4 $13 Second Quarter............................................ 16 5/8 14 1/2 Third Quarter............................................. 22 7/8 15 3/4 Fourth Quarter............................................ 28 1/4 20 3/4 FISCAL YEAR ENDED DECEMBER 31, 1998: First Quarter............................................. 36 27 1/2 Second Quarter............................................ 36 1/2 21 3/8 Third Quarter............................................. 29 3/8 22 15/16 Fourth Quarter............................................ 31 5/16 16 7/8 FISCAL YEAR ENDING DECEMBER 31, 1999: First Quarter............................................. 23 3/4 17 7/8 Second Quarter (through June 8)........................... 31 1/2 22
The following table sets forth, for the periods indicated, the closing sales prices of the Shares on the Nasdaq National Market, as reported by Bloomberg LP. 21 24
HIGH LOW ---- --- FISCAL YEAR ENDED DECEMBER 31, 1997: First Quarter............................................. $17 $13 Second Quarter............................................ 17 14 1/2 Third Quarter............................................. 22 7/8 15 3/4 Fourth Quarter............................................ 28 1/2 20 3/4 FISCAL YEAR ENDED DECEMBER 31, 1998: First Quarter............................................. 36 1/2 27 19/32 Second Quarter............................................ 39 9/16 21 3/8 Third Quarter............................................. 29 3/8 23 Fourth Quarter............................................ 31 3/8 17 FISCAL YEAR ENDING DECEMBER 31, 1999: First Quarter............................................. 23 7/8 17 7/8 Second Quarter (through June 8)........................... 31 1/2 22 3/4
On June 8, 1999, the last full trading day prior to the public announcement after the market closing on such date of the execution of the Merger Agreement and the intention to commence the Offer, the last reported bid quotation of the Shares reported on the Nasdaq National Market was $27 7/8 per Share and the closing sales prices was $27 15/16. On June 11, 1999, the last full trading day before commencement of the Offer, the last reported bid quotation and closing sales price of the Shares reported on the Nasdaq National Market were each $36 9/16 per Share. SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES. No dividends have been paid by the Company on its Shares during the past three years. The Company's existing credit facility limits the Company's payment of dividends to its shareholders and there are also restrictions on the ability of the Company's subsidiaries to pay dividends to the Company. Pursuant to the Merger Agreement, the Company has agreed, from the date of the Merger Agreement until the Effective Time, not to declare, pay or set aside any dividend or other distribution without the prior written consent of Parent. 8. CERTAIN INFORMATION CONCERNING THE COMPANY. The information concerning the Company contained in this Offer to Purchase, including financial information, has been taken from publicly available documents and records on file with the Commission and other public sources and from information furnished to Purchaser, Parent and Merck KGaA by the Company. None of Purchaser, Parent nor Merck KGaA assumes any responsibility for the accuracy or completeness of the information contained in those documents and records, or for any failure by the Company to disclose events that may have occurred or may affect the significance or accuracy of any such information but which are unknown to Purchaser, Parent and Merck KGaA. General. The Company is a Pennsylvania corporation with its principal offices located at 1310 Goshen Parkway, West Chester, Pennsylvania 19380. The telephone number of the Company at such offices is (610) 431-1700. According to the Company's Annual Report for the fiscal year ended December 31, 1998 on Form 10-K, the Company distributes laboratory supplies, chemicals and equipment to life science, educational and industrial organizations throughout the United States and Canada. The Company also distributes critical environment ("cleanroom") supplies and apparel to manufacturers of electronics, medical devices and pharmaceuticals. Summary Financial Information. Set forth below is certain selected consolidated financial information with respect to the Company taken or derived from the audited financial statements contained in the Company's Annual Reports on Form 10-K for the years ended December 31, 1998 and December 31, 1997 (the "Company 10-Ks"), each as filed by the Company with the Commission. More comprehensive financial information is included in the Company 10-Ks and the other documents filed by the Company with the Commission, and the summary financial information set forth below is qualified in its entirety by reference to those reports and other documents. Such reports and other documents may be inspected and copies thereof may be obtained in the manner set forth below under "Available Information." 22 25 VWR SCIENTIFIC PRODUCTS CORPORATION SELECTED SUMMARY CONSOLIDATED FINANCIAL DATA
FISCAL YEAR ENDED DECEMBER 31, ----------------------------------------- 1998 1997 1996 ----------- ----------- ----------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) INCOME STATEMENT DATA Sales................................................ $1,349,948 $1,244,795 $1,117,286 Gross margin......................................... 312,177 277,715 246,907 Net income........................................... 34,248 24,329 7,023 BALANCE SHEET DATA Working capital...................................... 237,546 182,064 143,975 Property and equipment -- net........................ 91,072 50,846 48,184 Total assets......................................... 911,589 717,566 705,302 Short-term debt...................................... -- -- 22,500 Long-term debt....................................... 355,665 232,409 367,965 Shareholders equity.................................. 383,547 342,007 183,437 Total invested capital............................... $ 739,212 $ 574,416 $ 573,902 PER SHARE DATA Net income per share................................. $ 1.19 $ 1.06 $ 0.32 Net income per share on fully diluted basis.......... 1.16 1.04 0.32
Other Financial Information. The book value per share for the fiscal year ended December 31, 1998 was $13.24 and for the three month period ended March 31, 1999, $13.45. The ratio of earnings to fixed charges for the Company in 1998, 1997, and the first quarter of 1999 was 2.7232, 2.0833 and 2.3033, respectively. The Company does not, as a matter of course, make public forecasts or projections as to future performance, sales, earnings or other income statement data. However, in connection with Parent's position as a 49.89% beneficial owner of the Company, and the right of Parent and its affiliates under the Standstill Agreement to designate persons to serve on the Company's Board of Directors, Parent has received and examined certain analyses prepared by the Company which include projections of future financial results. In addition, during the course of the discussions among Merck KGaA, Parent and the Company that led to the execution of the Merger Agreement, the Company provided Merck KGaA and Parent with certain information about the Company and its financial performance which is not publicly available. Such information has been set forth below for the limited purpose of giving the Company's shareholders access to financial projections by the Company's management that were available for review by Merck KGaA and Parent and their advisers in connection with the Offer. 23 26 VWR SCIENTIFIC PRODUCTS 1999 BUDGET (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
1998 ACTUAL 1999 BUDGET % GROWTH ----------- ----------- -------- Net sales................................................. $1,349.70 $1,507.00 11.6% Gross margin.............................................. 312.5 361 15.4% 23.2% 24.0% .8pt. Total operating expenses.................................. 227.2 258.1 13.6% %......................................................... 16.8% 17.1% .3pt. Earnings before interest and taxes........................ 85.4 102.9 20.5% %......................................................... 6.3% 6.8% .5pt. Interest expense.......................................... 27.9 30.1 7.9% Net income................................................ $ 34.3 $ 43.5 26.8% ========= ========= ===== Diluted earnings per share................................ $ 1.20 $ 1.47 22.5% --------- --------- ----- Diluted weighted average number of shares................. 28.8 29.7
VWR SCIENTIFIC PRODUCTS 1999 BUDGET (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
Q1 BUDGET Q2 BUDGET Q3 BUDGET Q4 BUDGET --------- --------- --------- --------- Net sales....................................... 358.0 380.7 402.1 366.2 Gross margin.................................... 83.0 91.6 99.1 87.3 23.2% 24.1% 24.6% 23.8% Total operating expenses........................ 62.7 64.8 66.9 61.7 %............................................... 17.5% 17.0% 17.1% 16.9% Earnings before interest and taxes.............. 20.3 26.8 30.2 25.5 %............................................... 5.7% 7.0% 7.5% 7.0% Interest expense................................ 7.9 7.7 7.4 7.1 Net income...................................... $7.5 $11.4 $13.6 $11.0 ====== ====== ====== ====== Diluted earnings per share...................... $0.25 $0.38 $0.46 $0.37 ------ ------ ------ ------ Diluted weighted average number of shares....... 29.7 29.7 29.7 29.7
24 27 VWR SCIENTIFIC PRODUCTS 1999 BUDGET BALANCE SHEET (IN THOUSANDS)
Q1 Q2 Q3 Q4 ------- ------- ------- ------- ASSETS Receivables......................................... $230.50 $228.40 $240.90 $207.70 Day sales outstanding............................... 54 52 54 51 Inventories......................................... 146.7 157.4 158.3 145.7 FIFO inventory days................................. 48 49 47 47 Other............................................... 12 11.5 11 12 ------- ------- ------- ------- Total current....................................... $ 389.2 $ 397.2 $ 410.2 $ 365.4 Net property........................................ 89.9 90.1 89.9 88.5 Other............................................... 450.6 447.5 444.3 441.2 ------- ------- ------- ------- Total assets........................................ $ 929.7 $ 934.8 $ 944.3 $ 895.0 ======= ======= ======= ======= LIABILITIES Checks outstanding.................................. $ 10.0 $ 10.0 $ 10.0 $ 10.0 Accounts payable.................................... 134.4 141.3 148.2 133.3 ------- ------- ------- ------- Total current liabilities........................... $ 144.4 $ 151.3 $ 158.2 $ 143.3 Bank debt........................................... 209.2 196.1 185.2 139.6 Subordinated debt................................... 154 154 154 154 Shareholders' equity................................ 397 408.4 422 433.1 ------- ------- ------- ------- Total liabilities and shareholders' equity.......... $ 929.7 $ 934.8 $ 944.3 $ 895.0
The foregoing information was prepared by the Company solely for internal use and not for publication or with a view to complying with the published guidelines of the Commission regarding projections or with the guidelines established by the American Institute of Certified Public Accountants and are included in this Offer to Purchase only because they were furnished to Merck KGaA and Parent. The foregoing information is "forward-looking" and inherently subject to significant uncertainties and contingencies, many of which are beyond the control of the Company, including industry performance, general business and economic conditions, changing competition, adverse changes in applicable laws, regulations or rules governing environmental, tax or accounting matters and other matters. It is not possible to predict whether the assumptions made in preparing the foregoing information will be accurate, and actual results may be materially higher or lower than those described above. The inclusion of this information should not be regarded as an indication that Parent, Purchaser, Merck KGaA, the Company or anyone who received this information considered it a reliable predictor of future events, and this information should not be relied upon as such. None of Parent, Purchaser, Merck KGaA or the Company assumes any responsibility for the validity, reasonableness, accuracy or completeness of the projections and the Company has made no representations to Parent, Purchaser or Merck KGaA regarding the financial information described above. None of the Company, Parent, Purchaser, Merck KGaA or any other party intends publicly to update or otherwise publicly revise the projections even if experience or future changes make it clear that the projections will not be realized. Public Offering. Pursuant to a prospectus dated November 18, 1997, the Company made an underwritten public offering of 3,025,000 shares of Common Stock at an offering price of $22.75 per share, resulting in aggregate proceeds to the Company of $65,037,500. Available Information. The Company is subject to the reporting requirements of the Exchange Act and, in accordance therewith, is obligated to file periodic reports, proxy statements and other information with the Commission relating to its business, financial condition and other matters. Certain information as of particular dates concerning the Company's directors and officers, their remuneration, options granted to them, the principal holders of the Company's securities and any material interest of such persons in transactions with the 25 28 Company is required to be disclosed in such reports and proxy statements and distributed to the shareholders of the Company and filed with the Commission. Such reports, proxy statements and other information should be available for inspection at the public reference facilities of the Commission located at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and should also be available for inspection and copying at prescribed rates at the regional offices of the Commission located at Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade Center, Suite 1300, New York, New York 10048. Such reports, proxy statements and other information may also be obtained at the Web site that the Commission maintains at http://www.sec.gov. Copies of this material may also be obtained by mail, upon payment of the Commission's customary fees, from the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, such material should also be available for inspection at the library of the Nasdaq National Market System, 1735 K Street, N.W., Washington, D.C. 20006. 9. CERTAIN INFORMATION CONCERNING PURCHASER, PARENT, MERCK KGAA AND CERTAIN RELATED PARTIES. General. Purchaser, a Pennsylvania corporation and a wholly owned subsidiary of Parent, was organized on June 8, 1999 in connection with the transactions contemplated by the Merger Agreement, including the Offer, and has not carried on any unrelated activities since its organization. The principal offices of Purchaser are located at 7 Skyline Drive, Hawthorne, NY 10532. The telephone number for Purchaser at such office is (914) 592-4660. Parent, a New York corporation, has its principal offices at 7 Skyline Drive, Hawthorne, NY 10532. The telephone number for Parent at such offices is (914) 592-4660. Parent is a holding company for Shares of the Company. Parent is wholly owned by EM Industries, which has its principal offices at 7 Skyline Drive, Hawthorne, NY 10532, and is 39.8% owned by Merck KGaA and 60.2% owned by Merck AG, a corporation organized under the laws of Switzerland ("Merck AG"), which is a holding company and the address of its principal offices is Gotthard StraSSe 20, CH-4660 Zug, Switzerland. Merck AG is substantially wholly owned (approximately 99.9%) by Merck KGaA. Merck KGaA is engaged in the pharmaceutical, laboratory supplies and chemicals business. The address of Merck KGaA's principal offices is Frankfurter StraSSe 250, D-64293 Darmstadt, Germany. Merck KGaA is controlled by E. Merck, which holds a 74% interest in Merck KGaA. The remaining 26% interest in Merck KGaA is held by public shareholders. E. Merck is a German general partnership (offene Handelsgesellschaft), with eight general partners (offene Gesellschafter) and approximately 100 silent partners (stille Gesellschafter). The general partners of E. Merck constitute seven of the eight members of the Executive Board of E. Merck. The Executive Board is responsible for the management of, and controls all business decisions for, E. Merck. Approval of a nine-member Partners Council of E. Merck is required for major transactions over a certain monetary amount. No general partner or silent partner of E. Merck holds 5% or more of the equity interests in E. Merck. The name, citizenship, business address, present principal occupation or employment and material occupations, positions, offices or employment during the last five years of each of the directors and executive officers of Purchaser, Parent and Merck KGaA, and of the general partners and members of the Executive Board of E. Merck and certain other information are set forth in Schedule I hereto. 26 29 Summary Financial Information -- Parent. Parent is not subject to the informational reporting requirements of the Exchange Act and as such, is not required to file reports, proxy statements or other information with the Commission. Set forth below is a summary of certain consolidated financial data with respect to Parent taken or derived from Parent's audited financial statements for the years ended December 31, 1998, December 31, 1997 and December 31, 1996. Such statements have been prepared in accordance with United States generally accepted accounting principles ("US GAAP"), except in the case of unaudited financial statements for normal recurring year-end adjustments. EM LABORATORIES, INCORPORATED SELECTED CONSOLIDATED FINANCIAL DATA
FISCAL YEAR ENDED DECEMBER 31, -------------------------------- 1998 1997 1996 -------- -------- -------- (IN THOUSANDS) INCOME STATEMENT DATA Sales............................................ $ 0 $ 0 $ 0 Operating income................................. 11,452 7,988 1,622 Net income....................................... 11,452 7,988 1,622 BALANCE SHEET DATA Working capital.................................. 11 45 83 Total assets..................................... 180,375 167,046 116,747 Total indebtedness............................... 0 0 0 Shareholders' equity............................. 180,375 167,046 116,747
Summary Financial Information -- Merck KGaA. Merck KGaA is not subject to the informational reporting requirements of the Exchange Act and, therefore, is not required to file reports, proxy statements or other information with the Commission. Set forth below is a summary of certain consolidated financial data with respect to Merck KGaA taken or derived from Merck KGaA's audited financial statements for the years ended December 31, 1998, December 31, 1997 and December 31, 1996. The financial information set forth below was prepared in accordance with uniform accounting policies using the International Accounting Standards Committee's published standards ("IAS"), which differ in certain respects from US GAAP. Such differences between IAS and US GAAP relate to, among other things, translation, recognition and measurement criteria. However, Parent believes that such differences are not material to a decision by a shareholder of the Company whether to sell, transfer or hold any Shares, since such differences would not affect the ability of Merck KGaA to provide the necessary funds to Parent and/or Purchaser to pay for the Shares to be acquired pursuant to the Offer and the Merger. See Section 10. The consolidated financial statements of Merck KGaA are published in Deutsche Marks ("DM"). 27 30 MERCK KGaA, DARMSTADT, GERMANY SELECTED CONSOLIDATED FINANCIAL DATA
FISCAL YEAR ENDED DECEMBER 31, ---------------------------------------- 1998(1) 1998 1997 1996 ------- ------- ------- ------- (IN MILLIONS, EXCEPT AS NOTED) INCOME STATEMENT DATA Sales......................................... $4,364 DM8,115 DM7,974 DM6,953 Operating income.............................. 0.588 1,093 1,354 878 Net income (after minority interests)......... 336 625 731 878 BALANCE SHEET DATA Working capital(2)............................ $ 519 DM965 DM2,311 DM1,034 Total assets.................................. 5,856 10,889 11,276 9,056 Total indebtedness............................ 2,064 3,837 4,326 2,922 Shareholders' equity.......................... 1,802 3,350 3,445 2,883
- --------------- (1) Deutsche Marks have been translated into millions of U.S. Dollars solely for the convenience of the reader on the basis of the Noon Buying Rate (as defined below) on June 11, 1999. (2) Less pension reserves. The following table sets forth, for the periods and dates indicated, certain information concerning the exchange rate for the Deutsche Marks into U.S. Dollars based upon the noon buying rate for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank in New York City (the "Noon Buying Rate").
AVERAGE PERIOD END RATE(1) HIGH LOW ---------- ------- ------ ------ 1996................................................. 1.5387 1.5070 1.5387 1.4703 1997................................................. 1.7991 1.7394 1.8379 1.6362 1998................................................. 1.6730 1.7592 1.8562 1.5870 1999 (through May 31)................................ 1.8695 1.7797 1.8806 1.6353
- --------------- (1) The average of the Noon Buying Rates on the last day of each month during the period. The Noon Buying Rate on June 11, 1999 was U.S.$1.00=DM1.8594. Except as described in this Offer to Purchase, as of the date hereof, none of Purchaser, Parent, Merck KGaA or their affiliates nor, to the knowledge of Purchaser, Parent or Merck KGaA, any of the persons listed on Schedule I hereto, or any associate or majority owned subsidiary of Purchaser, Parent, Merck KGaA or their affiliates or any of the persons so listed, beneficially owns or has a right to acquire directly or indirectly any Shares, and none of Purchaser, Parent, Merck KGaA or their affiliates nor, to the knowledge of Purchaser, Parent or Merck KGaA, any of the persons or entities referred to above, or any of the respective executive officers, directors or subsidiaries of any of the foregoing, has effected any transactions in the Shares during the past 60 days. Except as described in this Offer to Purchase, since January 1, 1997, there have been no contacts, negotiations or transactions between Purchaser, Parent, Merck KGaA or their affiliates or, to the knowledge of Purchaser, Parent or Merck KGaA, any of the persons listed in Schedule I hereto, or any subsidiary of such persons, on the one hand, and the Company or its executive officers, directors or affiliates, on the other hand, concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, election of directors, or a sale or other transfer of a material amount of assets that would require reporting under the rules of the Commission. Except as otherwise set forth in this Offer to Purchase, none of Purchaser, Parent, Merck KGaA or their affiliates or, to the best knowledge of Purchaser, Parent or Merck KGaA, any of the persons listed in Schedule I hereto, or any subsidiary of such persons, has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company. 28 31 In considering the recommendations of the Unaffiliated Directors and the Special Committee with respect to the Offer and the Merger and the fairness of the consideration to be received in the Offer and the Merger, shareholders should be aware that certain officers and directors of Parent, Purchaser and the Company have interests in the Offer and the Merger which are described below and which may present them with certain potential conflicts of interest. Pursuant to the Standstill Agreement, the Company is required annually to cause representatives of Parent and its affiliates to be nominated for election to the Company's Board of Directors, rounded down to the next whole number, which is commensurate with the proportion of Shares owned by Parent and its affiliates. Parent and its affiliates are also entitled to be represented on any committee of the Company's Board of Directors. Five members of the current Board of Directors, which consists of eleven directors, are representatives of Parent and its affiliates. See also Schedule I, Directors and Executive Officers of Purchaser, Parent and Merck KGaA; General Partners and Members of the Executive Board of E. Merck. Shareholders also should be aware that Parent and Purchaser have certain interests that present actual or potential conflicts of interest in connection with the Offer and the Merger. As a result of the current beneficial ownership by Parent and its affiliates of approximately 49.89% of the Shares and its officers and its affiliates' officers constituting five of the Company's eleven directors, Parent may be deemed to control the Company. (See, however, the description of the Standstill Agreement in Section 11.) Messrs. Jerrold B. Harris, N. Stewart Rogers and Donald P. Nielsen constitute the Special Committee. The Special Committee and the Unaffiliated Directors of Directors were aware of these actual and potential conflicts of interest and considered them along with the other matters described in Section 6 of this Offer to Purchase. The following table sets forth certain information, as of January 31, 1999, regarding the ownership of Shares by each person known by the Company to be the beneficial owner of more than 5% of the issued and outstanding Shares, and any director or executive officer of the Company, Parent or Purchaser who is the beneficial owner of Shares or Options issued by the Company: 29 32 OWNERSHIP OF SHARES
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP(1) PERCENT OF OF SHARES AS OF CLASS AS OF BENEFICIAL OWNER JANUARY 31, 1999 JANUARY 31, 1999 - ---------------- ----------------------- ---------------- DIRECTORS James W. Bernard....................................... 90,718(2) * Richard E. Engebrecht.................................. 95,640 * Jerrold B. Harris...................................... 393,784(5) 1.35% Wolfgang Honn.......................................... --(3) -- Dieter Janssen......................................... --(3) -- Stephen J. Kunst, Esq.................................. --(3) -- Edward A. McGrath, Jr. ................................ 6,078 * Donald P. Nielsen...................................... 23,158 * N. Stewart Rogers...................................... 336,031(4) 1.16% Dr. Harald J. Schroder................................. --(3) -- Walter W. Zywottek..................................... --(3) -- CERTAIN EXECUTIVE OFFICERS David S. Barth......................................... 43,211(8) * David M. Bronson....................................... 51,657(7) * Hal G. Nichter......................................... 47,423(9) * Paul J. Nowak.......................................... 77,367(6) * DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP (17 PERSONS)............................................... 1,228,136(10) 4.18% CERTAIN BENEFICIAL OWNERS Parent and its affiliates.............................. 15,538,784(11) 49.89% FMR Corp. ............................................. 1,990,100(12) 6.87%
- --------------- * Less than one percent. (1) Except as otherwise indicated, beneficial ownership represents sole voting and sole investment power with respect to $1.00 par value common stock, the Company's only outstanding class of stock. (2) Mr. Bernard disclaims any beneficial interest in 40,500 shares (included in the amounts shown in the above table) owned by his spouse. (3) Excludes shares owned by Parent and its affiliates, as to which the named director disclaims beneficial ownership. (4) Mr. N. Stewart Rogers is a trustee of a trust for grandchildren which holds 4,000 shares (included in the amounts shown in the above table). (5) Includes 150,000 shares which Mr. Harris had the right to acquire within 60 days of January 31, 1999 through the exercise of options. Also includes 23,760 shares held under the Company's benefit plans and 23,411 shares of restricted stock for which beneficial ownership is based upon sole voting power. (6) Includes 68,000 shares which Mr. Nowak had the right to acquire within 60 days of January 31, 1999 through the exercise of options. Also includes 8,539 shares held under the Company's benefit plans for which beneficial ownership is based upon sole voting power. (7) Includes 47,000 shares which Mr. Bronson had the right to acquire within 60 days of January 31, 1999 through the exercise of options. Also includes 4,157 shares Mr. Bronson held under the Company's benefit plans for which beneficial ownership is based upon sole voting power. (8) Includes 40,000 shares which Mr. Barth had the right to acquire within 60 days of January 31, 1999 through the exercise of options. Also includes 2,261 shares Mr. Barth held under the Company's benefit plans for which beneficial ownership is based upon sole voting power. 30 33 (9) Includes 37,000 shares which Mr. Nichter had the right to acquire within 60 days of January 31, 1999 through the exercise of options. Also includes 8,693 shares held under the Company's benefit plans for which beneficial ownership is based upon sole voting power. (10) Includes 402,000 shares which certain executive officers had the right to acquire within 60 days of January 31, 1999 through the exercise of options. Members of the group shared voting and/or investment power with other persons as to 4,000 of such shares. (11) Includes shares held by Parent and its affiliates. Includes 1,089,380 shares that Parent and its affiliates have the right, pursuant to the Standstill Agreement, to acquire in the event employee stock options are exercised to maintain a 49.89% interest in the event the Company issues additional shares. (12) As of December 31, 1998, as per the Schedule 13G filed by such beneficial owner with the Commission, includes 1,251,200 shares which the beneficial owner has sole investment power but does not have the sole or shared voting power. No director or officer of Merck KGaA, Parent or Purchaser or their affiliates beneficially owns any Shares. The Company has a strategic relationship with Merck KGaA, which has been a supplier of chemicals and other products to the Company for over 15 years. In the ordinary course of business, the Company purchases products from affiliates of Merck KGaA, and Merck KGaA is currently the Company's second largest supplier of chemicals. Such purchases represent less than 5% of total purchases by the Company. 10. SOURCE AND AMOUNT OF FUNDS. If all the outstanding Shares and shares issuable under Company stock option plans not owned by Parent or Purchaser were tendered in response to the Offer, Purchaser would be required to pay a total of approximately $637,761,830 to purchase the tendered Shares and pay the fees and other expenses related to the Offer. Purchaser plans to obtain all funds necessary for the consummation of the Offer and the Merger through a capital contribution or a loan or combination thereof from Parent, Merck KGaA or another affiliate of Merck KGaA. Any funds obtained by Parent or Purchaser through loans from Merck KGaA or one of its affiliates would be repaid with internally generated funds (including, if the Merger is consummated, those of the Company) and from other sources which may include the proceeds of future refinancings. The plans for repayment of any such borrowings will be based on Parent's and Merck KGaA's review from time to time of the advisability of particular actions, as well as prevailing interest rates, financial and other economic conditions and such other factors as Parent and Merck KGaA may deem appropriate. Any funds provided to Parent or Purchaser by Merck KGaA or any of its affiliates in connection with the Offer and the Merger will be obtained from the working capital of Merck KGaA or such affiliate. While the foregoing represents the current intention of Merck KGaA, Parent and Purchaser with respect to the financial arrangements for the funds necessary to consummate the Offer and the Merger, such financial arrangements may change depending upon such factors as Merck KGaA, Parent and Purchaser may deem appropriate. 11. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY. On February 27, 1995, EM Industries and the Company entered into (i) a Common Share and Warrant Purchase Agreement pursuant to which EM Industries agreed to purchase at a purchase price of $11.00 per share 1,818,181 authorized but previously unissued Shares, together with a warrant (the "Warrant") entitling EM Industries to purchase 967,051 additional Shares, also at a purchase price of $11.00 per share and (ii) a Standstill Agreement dated February 27, 1995. Pursuant to the Standstill Agreement, the Company is required annually to cause representatives of Parent and its affiliates to be nominated for election to the Company's Board of Directors so as to provide Parent and its affiliates with board representation, rounded down to the next whole number, that is commensurate with the proportion of Shares owned by Parent and its affiliates. Parent and its affiliates are also entitled to be represented on any committee of the Company's Board of Directors. Five members of the 31 34 current Board of Directors of the Company, which consists of eleven directors, are Affiliated Directors. See also Schedule I to this Offer to Purchase. Also, pursuant to the Standstill Agreement, EM Industries and its affiliates were (except for permitted purchases to maintain their permitted proportional interest and, except for tender offer provisions later modified by amendment) prohibited from acquiring any additional Shares without the consent of the Unaffiliated Directors. As permitted by the Standstill Agreement, and pursuant to an Assignment and Assumption Agreement, dated April 13, 1995, EM Industries assigned its rights under the Common Share and Warrant Purchase Agreement to Parent. On April 13, 1995, Parent acquired such 1,818,181 Shares and the Warrant. The purchased Shares, together with the Shares acquirable upon exercise of the Warrant, constituted approximately 20.1% of the then issued and outstanding Shares. On May 24, 1995, EM Industries and the Company entered into a Common Share and Debenture Purchase Agreement pursuant to which the Company agreed to issue and sell to EM Industries an additional 6,832,797 Shares at a purchase price of $12.44 per share and a subordinated debenture in the principal amount of $135,000,000 (the "Debenture"). EM Industries also agreed to exercise the Warrant in full. As permitted by the Standstill Agreement, on June 16, 1995 EM Industries assigned its rights under the Common Share and Debenture Purchase Agreement to Parent pursuant to an Assignment and Assumption Agreement. The closing under the Common Share and Debenture Purchase Agreement occurred on September 15, 1995, at which time Parent's ownership of Shares increased to an aggregate 9,617,993 Shares, representing approximately 46.1% of the then issued and outstanding Shares. Also as permitted by the Standstill Agreement, Parent transferred the Debenture to Merck KGaA pursuant to an Assignment and Assumption Agreement, dated September 18, 1995. During the first year of the Debenture, which was transferred to an affiliate of Merck KGaA and Parent, interest on the principal amount thereof was paid in the form of the aggregate number of Shares equivalent to the dollar value of the interest due and payable on each interest payment date, at an issue price deemed to be $12.44 per share (the "Debenture Shares") until such time as the Company issued the aggregate number of Debenture Shares needed to increase the total number of Shares held by Parent and its affiliates to 49.89% of the total issued and outstanding Shares on such date. The Standstill Agreement was amended on September 15, 1995 to grant to Parent and its affiliates (i) the right to maintain a 49.89% interest in the Company and (ii) the right to acquire additional Shares by means of a tender offer commenced on or after April 13, 1999, subject to certain conditions. The Standstill Agreement provides that Parent and its affiliates shall not commence such tender offer unless acceptance of such offer shall have been recommended to the Company's shareholders by a majority vote of the Unaffiliated Directors, and the acquisition of the tendered Shares may not close unless all of the following requirements have been satisfied: (A) such tender offer shall have been made to all holders of Shares; (B) the purchaser shall offer to purchase for cash all Shares tendered; and (C) such offer shall have been accepted by shareholders owning not less than a majority of the outstanding Shares. With respect to calculating whether a tender offer has been accepted by shareholders owning a majority of the outstanding Shares, Shares beneficially owned by Parent and its affiliates shall be excluded from the outstanding Shares. Upon completion of such a tender offer, the Standstill Agreement expires in accordance with its terms. In conjunction with the Company's public offering in 1997, Parent and an affiliate purchased 3,011,719 Shares, for an aggregate cash purchase price of approximately $68.5 million, in order to maintain the 49.89% beneficial ownership of Parent and its affiliate. In addition, Parent and its affiliate purchased 52,163 Shares in 1997 in order to maintain the 49.89% beneficial ownership of Parent and its affiliate as a result of the Company's issuance of Shares under its stock incentive plans at prices ranging from $7.79 to $13.25. In 1998, Parent and an affiliate purchased 239,599 Shares in order to maintain the 49.89% beneficial ownership of Parent and an affiliate as a result of the Company's issuance of Shares under its stock incentive plans at prices ranging from $7.79 to $18.75. As the result of the transactions described above and in accordance with the terms of the Standstill Agreement, on the date of this Offer to Purchase, Parent, together with its affiliates, is the beneficial owner of 15,538,784 Shares, representing 49.89% of the issued and outstanding Shares. 32 35 On September 18, 1998, the Company's Board of Directors designated a group consisting of both Affiliated Directors and Unaffiliated Directors (the "Working Group") to study various means by which the Company could expand its business and better serve its major global customers. The Company's designees on the Working Group were Jerrold B. Harris, Donald P. Nielsen and N. Stewart Rogers; the Merck KGaA and Parent's designees were Wolfgang Honn, Dr. Harald J. Schroder and Walter W. Zywottek. At a meeting of the Working Group held on February 17, 1999, the Parent's designees on the Working Group advised the Company's designees that Merck KGaA and Parent were considering the possibility of formulating a plan or proposal that could result in the acquisition, in accordance with the terms of the Standstill Agreement, of the Shares that were not already owned by affiliates of Merck KGaA, and that Lehman Brothers Inc. ("Lehman Brothers") had been retained to advise Merck KGaA and Parent in that regard. The Parent's designees advised that it had been determined not to formulate such a plan or proposal unless and until Parent had sufficient information to enable it to conclude that there would be a reasonable prospect that any such plan or proposal would be acceptable to Unaffiliated Directors and could be carried out in accordance with the terms of the Standstill Agreement. The Parent's designees further advised that there was no assurance that such a plan or proposal would be formalized and presented to the Company. The Company's designees inquired as to whether Merck KGaA and Parent were also considering the possibility of formulating a plan or proposal for the sale to the Company of the Shares held by Parent and its affiliates. The Special Committee was advised by the Affiliated Director Members of the Working Group that no active consideration was being given to that possibility. At a meeting of the Company's Board of Directors held on February 18, 1999, the Working Group informed the Company's Board of Directors of the substance of the discussions among the members of the Working Group that had taken place the previous day. At that meeting, the Company's Board of Directors appointed the Company's designees on the Working Group to serve as a special committee of the Board of Directors of the Company (the "Special Committee") to conduct any discussions that might occur regarding the matters discussed within the Working Group on February 17, 1999 and to receive and evaluate any plan or proposal that Merck KGaA and Parent might formulate and present. In March 1999, the Company retained BT Alex. Brown and Warburg Dillon Read as financial advisors to render advice and assistance to the Special Committee with respect to the discussions and analysis that would be required in connection with Parent's possible formulation of such a plan or proposal. The Company's Board of Directors also authorized Mr. Harris to participate in preliminary due diligence discussions with Lehman Brothers. On March 29, 1999, the Affiliated Director members of the Working Group and Merck KGaA's and Parent's legal and financial advisors met with the members of the Special Committee and their legal and financial advisors to discuss preliminarily the results of Merck KGaA's and Parent's deliberations. At that meeting, the members of the Special Committee again inquired as to whether Merck KGaA and Parent were also considering the possibility of formulating a plan or proposal for the sale to the Company of the Merck KGaA Shares. The Special Committee was again advised by the Affiliated Director members of the Working Group that no active consideration was being given to that possibility. During April 1999, Merck KGaA and Parent, in consultation with their financial and legal advisors, continued their exploratory work with respect to determining whether it would be feasible or appropriate to formulate such a plan or proposal for the acquisition of the Shares. To facilitate that process, a general discussion was held on April 16, 1999 among Mr. Harris, the Affiliated Director members of the Working Group and other representatives of Merck KGaA and its affiliates. Thereafter, several telephone conferences were held among the legal and financial advisors of the Special Committee, Merck KGaA and Parent. Another discussion was held between the Affiliated and Unaffiliated Directors at a Board Meeting held on April 29, 1999. The Affiliated Director members of the Working Group advised that preliminary work was continuing and that no proposal had been formulated. A telephone conference between members of the Special Committee and the Affiliated Director members of the Working Group was held on May 25, 1999 and a meeting was conducted by those parties on June 1, 1999, again for the purpose of continuing the exploratory work and preliminary considerations of Merck KGaA and its Affiliates, including further tentative discussions concerning price and form of consideration. 33 36 On June 8, 1999, representatives of Parent, after completing additional due diligence work, and in light of extensive discussions between the Special Committee and the Affiliated Director members of the Working Group, formulated a proposal in which the Merger and Offer were contemplated, and thereafter on that date presented such proposal to a representative of the Special Committee during a telephone conference. Also, on June 8, 1999, the Board of Directors of Parent and Purchaser unanimously approved the Merger Agreement, the Shareholder Agreement and the transactions contemplated thereby, including the Offer and the Merger. At a special meeting of the Company's Board of Directors (at which only the Unaffiliated Directors (constituting a quorum) were present) and Special Committee held on June 8, 1999, the Company's legal counsel reviewed with the Unaffiliated Directors and Special Committee the progress of discussions, the material terms of the proposed Merger Agreement and the Unaffiliated Directors' and Special Committee's fiduciary obligations in connection with the proposed Offer and Merger. BT Alex. Brown and Warburg Dillon Read then reviewed their respective financial analyses and rendered separate opinions to the Company's Board of Directors and Special Committee as to the fairness, from a financial point of view, to the holders of Shares (other than Merck KGaA and its affiliates) of the $37.00 per Share cash consideration to be received in the Offer and the Merger by such holders. After considering, among other things, the presentations of management and the Company's legal and financial advisors, the Merger Agreement and the Shareholder Agreement, the Unaffiliated Directors, by unanimous vote, approved the Offer, the Merger Agreement, the Shareholder Agreement and the Merger and recommended that the Company's shareholders accept the Offer and approve and adopt the Merger Agreement and the Merger. On June 8, 1999, Purchaser, Parent and the Company executed the Merger Agreement under which Purchaser agreed to seek tenders of any and all outstanding Shares for $37.00 per Share, and to pay the same amount per Share in the Merger to shareholders other than Purchaser, Parent and their affiliates. The Shareholder Agreement was also signed on June 8, 1999 and the parties made a public announcement of the transaction on the evening of June 8, 1999, New York time, and early on the morning of June 9, 1999, German time. 12. PURPOSE OF THE OFFER AND THE PROPOSED MERGER; PLANS FOR THE COMPANY. Purpose. The purpose of the Offer is to enable Parent pursuant to the terms of the Standstill Agreement to acquire control of, and the entire equity interest in, the Company. Following the Offer, Parent and Purchaser intend to acquire any remaining equity interests in the Company not acquired in the Offer by consummating the Merger. Upon consummation of the Merger, the Company will become a wholly-owned subsidiary of Parent. Accordingly, the Shares will cease to be publicly traded and will no longer be quoted on the Nasdaq National Market. Plans for the Company. It is expected that, initially following the Merger, the business and operations of the Company will continue without substantial change. Parent will continue to evaluate the business and operations of the Company during the pendency of the Offer and after the consummation of the Offer and the Merger, and will take such further actions as it deems appropriate under the circumstances then existing. Such actions could include changes in the Company's business, corporate structures, articles of incorporation, by-laws, capitalization, Board of Directors, management or dividend policy, although, except as disclosed in this Offer to Purchase, Parent has no current plans with respect to any of such matters. The Merger Agreement provides that promptly upon the purchase by Purchaser of Shares pursuant to the Offer (but subject to the satisfaction of the Minimum Condition), Purchaser shall be entitled, to the fullest extent permitted by law, to designate at its option up to that number of directors, rounded to the next highest whole number, on the Company's Board of Directors, subject to compliance with Section 14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as will make the percentage of the Company's directors designated by Purchaser equal to the aggregate voting power of the Shares held by Parent or any of its subsidiaries. See Section 15. The Merger Agreement also provides that the directors of Purchaser at the Effective Time of the Merger will, from and after the Effective Time, be the initial directors of the Company after the Merger. 34 37 Upon consummation of the Merger, Parent may amend and restate the Company's Articles of Incorporation and By-laws to amend or delete provisions that will no longer be appropriate for a privately-held company. Except as described in this Offer to Purchase, none of Purchaser, Parent, Merck KGaA or their affiliates nor, to the best knowledge of Purchaser, Parent or Merck KGaA, any of the persons listed on Schedule I, has any present plans or proposals that would relate to or result in an extraordinary corporate transaction such as a merger, reorganization or liquidation involving the Company or any of its subsidiaries or a sale or other transfer of a material amount of assets of the Company or any of its subsidiaries, any material change in the capitalization or dividend policy of the Company or its subsidiaries or any other material change in the corporate structure, businesses, or the composition of the Company's Board of Directors or management of the Company or any of its subsidiaries. 13. CERTAIN EFFECTS OF THE TRANSACTION. Market for Shares. The purchase of Shares in response to the Offer will reduce the number of Shares that might otherwise trade publicly and will reduce the number of holders of Shares, which could adversely affect the liquidity and market value of the remaining Shares held by the public. Depending upon the number of Shares purchased pursuant to the Offer, the Shares may no longer meet the requirements of the National Association of Securities Dealers Inc. ("NASD") for continued inclusion in the Nasdaq National Market (the top tier of the Nasdaq Stock Market), which require that an issuer have at least 750,000 publicly held shares, held by at least 400 holders of round lots, with a market value of at least $5,000,000 and have net tangible assets of at least $4,000,000. If the Shares were no longer eligible for inclusion in the Nasdaq National Market, they may nevertheless continue to be included in the Nasdaq SmallCap Market. However, if among other things, the number of holders of Shares were to fall below 300, the number of publicly held Shares were to fall below 500,000 or there were not at least two registered and active market makers for Shares, the NASD's rules provide that the Shares would no longer be "qualified" for Nasdaq Stock Market reporting, and the Nasdaq Stock Market would cease to provide any quotations. Shares held directly or indirectly by directors, officers or beneficial owners of more than 10% of Shares ordinarily will not be considered as being publicly held for this purpose. The Company has informed Purchaser that, as of March 31, 1999, there were approximately 1500 holders of record and that, as of the close of business on such date, 28,962,527 Shares were issued and outstanding. If, as a result of the purchase of Shares pursuant to the Offer or otherwise, the Shares no longer meet the requirements of the NASD for continued inclusion in the Nasdaq National Market or in any other tier of the Nasdaq Stock Market and the Shares are no longer included in the Nasdaq National Market or in any other tier of the Nasdaq Stock Market, as the case may be, the market for the Shares could be adversely affected. If the Shares no longer meet the requirements of the NASD for continued inclusion in any tier of the Nasdaq Stock Market, quotations might still be available from other sources. However, the extent of the public market for Shares and the availability of such quotations would depend upon the number of shareholders after the purchase of Shares tendered in response to the Offer, whether securities firms are interested in maintaining a market in the Shares, the possible termination of registration under the Exchange Act as described below and other factors. Exchange Act Registration. The Shares are currently registered under the Exchange Act. Such registration may be terminated upon application by the Company to the Commission if the Shares are not listed on a national securities exchange or quoted on Nasdaq and there are fewer than 300 record holders. The termination of the registration of the Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to holders of Shares and to the Commission and would make certain provisions of the Exchange Act no longer applicable to the Company, such as the short-swing profit recovery provisions of Section 16(b), the requirement of furnishing a proxy statement pursuant to Section 14(d) of the Exchange Act in connection with shareholders' meetings and the related requirements of furnishing an annual report to shareholders and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions. In addition, the ability of "affiliates" of the Company and persons holding "restricted securities" of the Company to dispose of such securities pursuant to Rule 144 or Rule 144A under the Securities Act may be impaired or eliminated. If registration of the Shares under the 35 38 Exchange Act were terminated, the Shares would no longer be "margin securities" or be eligible for Nasdaq reporting. Parent intends to seek to cause the Company to apply for termination of registration of the Shares under the Exchange Act as soon after completion of the Offer as the requirements for such termination are met. If registration of the Shares is not terminated prior to the Merger, then the Shares will be delisted from all stock exchanges and the registration of the Shares under the Exchange Act will be terminated following the consummation of the Merger. Margin Stock. The Shares are currently "margin securities" under the regulations of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which has the effect, among other things, of allowing brokers to extend credit on the collateral of such Shares. Depending upon factors similar to those described above with respect to listing and market quotations, it is possible that, following the Offer, the Shares might no longer constitute "margin securities" for purposes of the Federal Reserve Board's margin regulations and, therefore, could no longer be used as collateral for loans made by brokers. 14. CONDITIONS OF THE OFFER. Purchaser will not be required to accept for payment or, subject to any applicable rules and regulations of the Commission, including Rule 14e-1(c) under the Exchange Act (relating to Purchaser's obligation to pay for or return tendered Shares after termination or withdrawal of the Offer), pay for, and (subject to any such rules or regulations) may delay the acceptance for payment of any tendered Shares and (except as provided in the Merger Agreement) amend or terminate the Offer (whether or not any Shares have been previously purchased or paid for pursuant to the Offer) (A) unless the following conditions shall have been satisfied: (i) there shall be validly tendered and not withdrawn prior to the expiration of the Offer a number Shares which represents a majority of the total number of outstanding Shares of the Company, excluding any Shares held by Parent, Purchaser or any affiliate thereof and (ii) any applicable waiting period under the HSR Act or any similar applicable foreign law, including but not limited to the requirement of the German federal antitrust supervisory authority (Bundeskartelamt), shall have expired or been terminated prior to the expiration of the Offer and the required approval of any governmental entity for the Merger Agreement or the consummation of the transactions contemplated by the Merger Agreement shall have been obtained or (B) if at any time after the date of the Merger Agreement and before the time of payment for any such Shares (whether or not any Shares have previously been accepted for payment or paid for pursuant to the Offer), any of the following events shall occur and be continuing: (a) there shall be threatened or pending by any governmental entity any suit, action or proceeding (i) challenging the acquisition by Parent or Purchaser of any Shares under the Offer, seeking to restrain or prohibit the making or consummation of the Offer or the Merger or the performance of any of the other transactions contemplated by the Merger Agreement or the Shareholder Agreement or seeking to obtain from the Company, Parent or Purchaser any damages that are material in relation to the Company and its subsidiaries taken as a whole, (ii) seeking to prohibit or materially limit the ownership or operation by the Company, Parent or any of their respective subsidiaries of any portion of the business or assets of the Company and its subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as a whole, or to compel the Company or Parent to dispose of or hold separate any portion of the business or assets of the Company and its subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as a whole, as a result of the Offer or any of the other transactions contemplated by the Merger Agreement or the Shareholder Agreement, (iii) seeking to impose limitations on the ability of Parent or Purchaser to acquire or hold, or exercise full rights of ownership of, any Shares to be accepted for payment pursuant to the Offer including, without limitation, the right to vote such Shares on all matters properly presented to the shareholders of the Company, (iv) seeking to prohibit Parent or any of its subsidiaries from effectively controlling in any respect any portion of the business or operations of the Company or its subsidiaries or (v) which otherwise is reasonably likely to have a materially adverse effect on the business, properties, assets, financial condition or results of operations of the Company and its subsidiaries taken as a whole; (b) there shall be enacted, entered, enforced, promulgated or deemed applicable to the Offer or the Merger by any governmental entity any statute, rule, regulation, judgment, order or injunction, other than 36 39 the application to the Offer or the Merger of applicable waiting periods under the HSR Act, that is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (i) through (v) of paragraph (a) above; (c) the Unaffiliated Directors, or any committee designated thereby, shall have withdrawn, or modified or changed (including by amendment of the Schedule 14D-9) their recommendation of the Offer, the Merger or the Merger Agreement or approved or recommended a Takeover Proposal, or shall have resolved to do so, which, in the judgment of Parent with respect to each and every matter referred to above and regardless of the circumstances giving rise to any such condition, makes it inadvisable to proceed with the Offer or with such acceptance for payment of or payment for Shares or to proceed with the Merger; (d) it shall have been publicly disclosed or Parent or Sub shall have otherwise learned that any person or "group" (as defined in Section 13(d)(3) of the Exchange Act), other than Parent or its affiliates or any group of which any of them is a member, shall have acquired beneficial ownership (determined pursuant to Rule 13d-3 under the Exchange Act) of more than 20% of the Shares through the acquisition of stock, the formation of a group or otherwise, or shall have been granted an option, right or warrant, conditional or otherwise, to acquire beneficial ownership of more than 20% of the Shares; (e) any of the representations and warranties of the Company set forth in the Merger Agreement (without giving effect to the materiality limitations contained therein) shall not be true and correct in any respect as though made on and as of such date (except for representations and warranties made as of a specified date which shall not be true and correct as of the specified date), except for any breach or breaches which, in the aggregate, would not have a materially adverse effect on the Company; (f) the Company shall have failed to perform in any material respect any material obligation or to comply in any material respect with any material agreement or covenant of the Company to be performed or complied with by it under the Merger Agreement; (g) there shall have occurred any event that, individually or when considered together with any other matter, has had or is reasonably likely in the future to have a materially adverse effect on the Company; (h) there shall have occurred (i) any general suspension of, or limitation on prices (other than suspensions or limitations triggered by price fluctuations on a trading day) for, trading in securities on any national securities exchange or the over-the-counter market in the United States of America in the Federal Republic of Germany, (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States of America or in the Federal Republic of Germany, (iii) any material limitation (whether or not mandatory) by any government or governmental, administrative or regulatory authority or agency, domestic or foreign, on the extension of credit by banks or other lending institutions, (iv) a commencement of a war or armed hostilities or other national calamity directly involving the United States of America or the Federal Republic of Germany and Parent shall have determined that there is a reasonable likelihood that such event may be of materially adverse significance to it or to the Company, or (v) in the case of any of the foregoing existing at the time of the execution of the Merger Agreement, a material acceleration or worsening thereof; or (i) (i) any applicable waiting period under Section 721 of Title VII of the Defense Production Act of 1950, as amended by Section 5021 of the Omnibus Trade and Competitiveness Act of 1988 and Section 837 of the National Defense Authority Act for Fiscal Year 1993 (the "Exon-Florio Provisions") shall not have expired, (ii) the Committee on Foreign Investment in the United States ("CFIUS") shall have initiated an investigation of the transactions contemplated under this Agreement, or (iii) if CFIUS initiates an investigation, the applicable waiting period under the Exon-Florio Provisions relating to such investigation shall have expired, or such investigation shall have been completed and the President shall have announced a decision to take action pursuant to the Exon-Florio Provisions before the expiration of the period ending on the 15th day (or if such day is not a business day, the next business day) following the completion of such investigation, which has a substantial likelihood of resulting, directly or indirectly, 37 40 in any of the consequences referred to in clauses (i) through (v) of paragraph (a) above or such 15 day waiting period shall not have expired; or (j) the Merger Agreement shall have been terminated in accordance with its terms. The foregoing conditions are for the sole benefit of Parent and Purchaser and, other than the Minimum Condition, may, subject to the terms of the Merger Agreement, be waived by Parent and Purchaser in whole or in part at any time and from time to time in their sole discretion. The failure by Parent or Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts and circumstances shall not be deemed a waiver with respect to any other facts and circumstances and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. 15. THE MERGER. The Merger Agreement. The following is a summary of certain provisions of the Merger Agreement. This summary is qualified in its entirety by reference to the Merger Agreement which is incorporated herein by reference and a copy or form of which has been filed with the Commission as an exhibit to the Schedule 14D-1 (the "Schedule 14D-1"). Defined terms used herein and not defined herein shall have the respective meanings assigned to those terms in the Merger Agreement. The Merger Agreement provides that upon the terms and subject to the conditions thereof, and in accordance with the PBCL, Purchaser shall be merged with and into the Company at the Effective Time. Following the Effective Time, the separate corporate existence of Purchaser shall cease and the Company shall continue as the Surviving Corporation and shall succeed to and assume all the rights and obligations of Purchaser and the Company in accordance with the PBCL. The Offer. The Merger Agreement provides that, so long as the Merger Agreement has not been terminated pursuant to its terms, and subject to the terms of the Merger Agreement, as promptly as practicable but in no event later than five business days after the date of the public announcement by Parent and the Company of the Merger Agreement, Purchaser shall, and Parent shall cause Purchaser to, commence the Offer. In the Merger Agreement, Parent and Purchaser agree that Purchaser will not terminate the Offer between scheduled expiration dates (except in the event that the Merger Agreement is terminated) and that, in the event that Purchaser would otherwise be entitled to terminate the Offer at any scheduled expiration date due to the failure of one or more of the Offer Conditions, unless the Merger Agreement has been terminated, Purchaser will, and Parent will cause Purchaser to, extend the Offer until such date as the Offer Conditions have been satisfied or such later date as required by applicable law; provided, however, that Purchaser is not required to extend the Offer beyond the Outside Date. Purchaser may, at any time, transfer or assign to one or more corporations directly or indirectly wholly-owned by Parent the right to purchase all or any portion of the Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve Purchaser of its obligations under the Offer or prejudice the rights of tendering shareholders to receive payment for Shares validly tendered and accepted for payment. Recommendation. In the Merger Agreement, the Company represents and warrants that the Company's Board of Directors, at a meeting duly called and held, duly adopted (by unanimous vote, with the Affiliated Directors not participating) resolutions approving the Offer, the Merger Agreement, the Merger and the Shareholder Agreement, determining that the terms of the Offer and the Merger are fair to, and in the best interests of, the Company's shareholders (other than Parent and its affiliates) and recommending that the Company's shareholders accept the Offer and approve and adopt the Merger Agreement and the Merger. Counsel to the Company has advised that the only vote of holders of any class or series of the Company's capital stock required to adopt the Merger Agreement and the transactions contemplated thereby, including the Merger, is the affirmative vote of a majority of the votes cast by all holders of the Shares present in person or proxy at a duly-convened meeting of shareholders, and if Section 1924(b)(1)(ii) of the PBCL (concerning approval by shareholders of a plan of merger) is applicable to the Merger, no such vote shall be required. No other state takeover or control share statute or similar statute or regulation applies or purports to apply to the Offer, the Merger, the Shareholder Agreement or any of the transactions contemplated by the Merger Agreement or the Shareholder Agreement. 38 41 The Merger Agreement provides that if any "fair price" or "control share acquisition" statute or other similar statute or regulation shall become applicable to the transactions contemplated hereby, Parent and the Company and their respective Boards of Directors will use all reasonable efforts to grant or obtain such approvals and take such actions as are necessary so that the transactions contemplated by the Merger Agreement may be consummated as promptly as practicable on the terms contemplated by the Merger Agreement and otherwise act to minimize the effects of any such statute or regulation on the transactions contemplated by the Merger Agreement. Each of the Unaffiliated Directors of the Company has indicated to the Company that he intends to tender and sell his Shares in response to the Offer, except that Unaffiliated Directors whose sales of their Shares in response to the Offer might result in liability under Section 16(b) of the Exchange Act intend that if they do not tender and sell their Shares in response to the Offer, they shall vote their Shares in favor of the Merger. Cancellation and Conversion. At the Effective Time (A) each Share that is not automatically cancelled as described in clause (B) of this paragraph or does not become the right to receive fair payment as described in clause (C) of this paragraph will become the right to receive $37.00 in cash, without interest or dividends, (B) each Share owned by Parent, Purchaser or any other affiliate of Parent, and each Share owned by the Company or any subsidiary of the Company, will be automatically cancelled and no consideration will be delivered in exchange for any such Shares, and (C) each Share held by a person who has not voted in favor of or consented to the Merger and complies in all respect with Sections 1930 and 1575 through 1580 of the PBCL shall become the right to receive payment of the fair value of such Shares in accordance with Sections 1930 and 1575 through 1580 of the PBCL. See discussion of dissenters' rights below in this Section 15. Stock of Purchaser. At the Effective Time, each share of common stock of Purchaser that is outstanding immediately before the Effective Time will be converted into and become one share of common stock of the Surviving Corporation. Therefore, the Parent, as the sole shareholder of Purchaser, will become the sole shareholder of the Company. Company Options and Warrants. Pursuant to the Merger Agreement, in connection with the consummation of the Offer, either (i) all outstanding options to purchase Shares under the Company's stock option plans (whether or not vested on the date of the Merger Agreement) will be cancelled and the holders of such options will be entitled upon the consummation of the Offer to receive from Purchaser cash in an amount equal to the excess, if any, of the Offer Price over the exercise price per share, or (ii) the Company will take all such steps as will be necessary to achieve substantially the same result as described above. Options otherwise unexercisable prior to the expiration of the Offer will be accelerated to enable the holders thereof to participate in the Offer. Articles, By-Laws, Directors and Officers. The Merger Agreement provides that the Articles of Incorporation of the Company, as in effect immediately prior to the Effective Time, shall be the Articles of Incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law. The By-laws of the Company shall be amended as of the Effective Time to read in their entirety as the By-laws of Purchaser, as in effect immediately prior to the Effective Time, until thereafter changed or amended as provided therein, by the Articles of Incorporation of the Surviving Corporation or by applicable law. The directors of Purchaser immediately prior to the Effective Time shall be the directors of the Surviving Corporation, until the next annual meeting of shareholders of the Surviving Corporation (or the earlier of their resignation or removal) and until their respective successors are duly elected and qualified, as the case may be. The officers of the Company immediately prior to the Effective Time shall be the officers of the Surviving Corporation until the earlier of their resignation or removal and until their respective successors are duly elected and qualified, as the case may be. Shareholder Vote Required To Approve The Merger. If the approval of the Company's shareholders of the Merger Agreement and the Merger is required by law, the Merger Agreement requires that (A) Company shall, at Parent's request, as soon as practicable following the expiration of the Offer in accordance with the terms of the Merger Agreement, duly call, give notice of, convene and hold a meeting of its shareholders (the 39 42 "Shareholders Meeting") for the purpose of obtaining such approval and (B) the Company, through its Board of Directors (but subject to the right of the Unaffiliated Directors to withdraw or modify its approval or recommendation of the Offer, the Merger and the Agreement as set forth in the Merger Agreement), recommend to its shareholders that the shareholders approve the Merger. Under the PBCL, if Purchaser acquires, pursuant to the Offer or otherwise, at least 80% of the then outstanding Shares, Purchaser's Board of Directors will be able to effect a "short-form merger." Pursuant to the Merger Agreement, Purchaser may extend the Offer under certain circumstances in the event that the number of Shares validly tendered and not withdrawn, when taken together with the Shares held by Parent and its affiliates, does not constitute at least 80% of the then issued and outstanding Shares. If Purchaser or any other Subsidiary of Parent acquires 80% or more of the then outstanding Shares, the parties have agreed, at the request of Parent, to take all necessary and appropriate actions to cause the Merger to become effective in accordance with Section 1924(b)(1)(ii) of the PBCL, as promptly as practicable after such acquisition without a meeting of the Shareholders of the Company, including, without limitation, adoption by the Board of Directors of Purchaser of a short-form plan of merger in accordance with the PBCL and consistent with the terms of the Merger. If Purchaser or any other Subsidiary of Parent does not acquire at least 80% of the then issued and outstanding Shares pursuant to the Offer or otherwise, a vote of the Company's shareholders will be required under the PBCL to effect the Merger and a significantly longer period of time will be required to effect the Merger. Interim Operations. The Merger Agreement provides that during the period from the date of the Merger Agreement until the earlier of the Effective Time or such time as Parent's and Purchaser's designees shall constitute a majority of the Company's Board of Directors, the Company will, and will cause each of its subsidiaries to, in all material respects, except as contemplated by the Merger Agreement, carry on its business in the ordinary course as previously conducted and, to the extent consistent therewith, with no less diligence and effort than would be applied in the absence of the Merger Agreement, seek to preserve intact their current business organizations, keep available the services of their current officers and employees and preserve their relationships with customers, suppliers and others having business dealings with them to the end that goodwill and ongoing businesses shall be unimpaired at the Effective Time. In addition, except as otherwise contemplated by the Merger Agreement, during such period, the Company shall not, and shall not permit any of its subsidiaries to, without the prior written consent of Parent (which consent shall not be unreasonably withheld or delayed): (a) amend or propose to amend its Articles of Incorporation or By-laws (or comparable governing instruments) or change the number of directors constituting the entire Board of Directors of the Company or the Board of Directors of any of the Company's subsidiaries; (b) authorize for issuance, issue, deliver, grant, sell, pledge, or otherwise dispose of or propose to issue, deliver, grant, sell, pledge or otherwise dispose of any shares of, or any options, warrants, commitments, subscriptions or rights of any kind to acquire or sell any shares of, the capital stock or other securities of the Company or any of the Company's subsidiaries including, but not limited to, stock appreciation rights, phantom stock, any securities convertible into or exchangeable for shares of stock of any class of the Company or any of its subsidiaries other than the issuance of Shares upon the exercise of stock options of the Company granted prior to the date of the Merger Agreement; (c) split, combine or reclassify any shares of its capital stock or declare, pay or set aside any dividend or other distribution (whether in cash, stock, securities or other property or any combination thereof) in respect of its capital stock, or directly or indirectly redeem, purchase or otherwise acquire or offer to acquire, directly or indirectly, any shares of its capital stock or other securities; (d) (i) except in the ordinary course of business consistent with past practice, (1) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, indirectly, continently or otherwise) for the obligations of any person or (2) make any loans, advances or capital contributions to, or investments in, any other person (other than to one of its subsidiaries); (ii) acquire the stock or the assets of, or merge or consolidate with, any other person; (iii) voluntarily incur any liability or obligation (absolute, accrued, contingent or otherwise) other than in the ordinary course of business consistent with 40 43 past practice; or (iv) sell, transfer, mortgage, pledge or otherwise dispose of, or encumber, or agree to sell, transfer, mortgage, pledge or otherwise dispose of or encumber, any assets or properties, real, personal or mixed of the Company and its subsidiaries other than sales of products in the ordinary course of business and in a manner consistent with past practice; (v) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise as an accommodation become responsible for, the obligations of any person, or make any loans, advances or capital contributions to, or investments in, any other person (other than in the ordinary course of business consistent with past practice); (vi) enter into any contract or agreement, other than in the ordinary course of business consistent with past practice, or amend, alter or terminate any contract that is material to the Company; or (vii) authorize any capital expenditure except in compliance with procedures heretofore established by resolutions only adopted by the Board of Directors of the Company; (e) increase in any manner the compensation of any of its directors, officers or employees or (other than in the ordinary course of business consistent with past practice) enter into, establish, amend or terminate any benefit plan, employment, consulting, retention, change in control, collective bargaining, bonus or other incentive compensation, profit sharing, health or other welfare, stock option or other equity, pension, retirement, vacation, severance, deferred compensation or other compensation or benefit plan, policy, agreement, trust, fund or arrangement with, for or in respect of, any shareholder, officer, director, other employee, agent, consultant or affiliate other than as required pursuant to the terms of agreements in effect on the date of the Merger Agreement and disclosed to Parent prior to the execution of the Merger Agreement; (f) except as may be required as a result of a change in law or in generally accepted accounting principles, change any of the accounting practices or principles used by it; (g) make any material tax election, settle or compromise any material federal, state, local or foreign tax liability, or waive any statute of limitations for any tax claim or assessment; (h) settle or compromise any material pending or threatened suit, action or claim; (i) adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company or any of its subsidiaries (other than the Merger); (j) pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction (i) in the ordinary course of business and consistent with past practice of liabilities reflected or reserved against in the financial statements of the Company or incurred in the ordinary course of business and consistent with past practice and (ii) of liabilities required to be paid, discharged or satisfied pursuant to the terms of any contract in existence on the date hereof or entered into in accordance with the terms of the Merger Agreement; (k) permit any insurance policy naming the Company or any of its subsidiaries as a beneficiary or a loss payable payee to be cancelled or terminated without notice to Parent, except in the ordinary course of business and consistent with past practice; or (l) take, or offer or propose to take, or agree to take in writing or otherwise, any of the actions described above or take or omit to take any action which would make any of the representations or warranties of the Company contained in the Merger Agreement untrue and incorrect in any material respect as of the date when made if such action had then been taken or omitted, or would result in any of the Offer Conditions or the conditions set forth in the Merger Agreement not being satisfied. In the Merger Agreement, Parent agreed that for the one-year period following the consummation of the Offer, all persons who, as of the date of the Merger Agreement, were employees of the Company or any of its Subsidiaries and who are involuntarily terminated by the Company or the Surviving Corporation will be entitled to receive severance pay and benefits equal to the severance pay and benefits provided for in the Company's severance pay plan. 41 44 No Solicitation. In the Merger Agreement the Company has agreed that it shall not, nor shall it permit any of its subsidiaries to, nor shall it permit any of its executive officers, directors, authorized representatives or authorized agents to, directly or indirectly, (i) solicit, initiate or knowingly encourage (including by way of furnishing non-public information) any inquiries or the making of any proposal which constitutes, or may reasonably be expected to lead to, any Takeover Proposal or (ii) except as expressly permitted as described in the immediately succeeding paragraph, participate in any discussions or negotiations regarding any Takeover Proposal. For purposes of the Merger Agreement, "Takeover Proposal" means (x) any inquiry, proposal or offer from any person relating to any direct or indirect acquisition or purchase of any of the assets of the Company or its subsidiaries (other than the purchase of inventory or other assets in the ordinary course of business) or any of the Shares then outstanding, any tender offer or exchange offer for any of the Shares then outstanding, or any merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving the Company or any of its subsidiaries, other than the transactions contemplated by this Agreement or (y) any other transaction the consummation of which could reasonably be expected to impede, interfere with, prevent or delay the Offer and/or the Merger or which would reasonably be expected to dilute the benefits to Parent of the transactions contemplated by the Merger Agreement and the Shareholders Agreement. The Merger Agreement provides that neither the Unaffiliated Directors nor any committee designated thereby may withdraw or modify, or propose publicly to (i) withdraw or modify, in a manner adverse to Parent, the approval or recommendation by Unaffiliated Directors or such committee of the Offer, the Merger or the Merger Agreement (or any transaction contemplated thereby); provided, that the Unaffiliated Directors may, (A) in response to any Takeover Proposal, suspend such recommendation for a period of up to 24 hours pending the analysis by the Unaffiliated Directors of such Takeover Proposal, which analysis may include to the extent necessary discussions with a person making such Takeover Proposal regarding same, or (B) at any time prior to the consummation of the Offer, modify or withdraw such recommendation, but only if the Unaffiliated Directors determine in good faith, based on a written opinion of Drinker Biddle & Reath LLP that it would be a breach of its fiduciary duties not to so modify or withdraw such recommendation, (ii) approve or recommend, or propose publicly to approve or recommend, any Takeover Proposal or (iii) cause the Company to enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement related to any Takeover Proposal. The Merger Agreement provides that in the event of a withdrawal of the recommendation, Purchaser must terminate the Offer and any party may terminate the Merger Agreement. Indemnification; Exculpation and Insurance. The Merger Agreement provides that all rights to indemnification and exculpation from liabilities for acts or omissions occurring at or prior to the Effective Time existing in favor of the present or former directors, officers or employees of the Company as provided in the Company's Articles of Incorporation or By-laws or pursuant to agreements existing on the date of the Merger Agreement shall be assumed by the Surviving Corporation, and Parent shall cause the Surviving Corporation to honor such obligations in accordance with the terms thereof, without further action, as of the Effective Time, and such rights shall continue in full force and effort in accordance with their respective terms. Such rights, and the Surviving Corporation's and Parent's related obligations, shall apply in all respects to the present or former directors, officers and employees of each of the Company's subsidiaries as though such directors, officers and employees were entitled to indemnification rights pursuant to the Company's Articles of Incorporation or By-laws as in effect on the date of the Merger Agreement or pursuant to such agreements, as the case may be. In addition, from and after the Effective Time, directors and officers of the Company who become or remain directors or officers of Parent shall be entitled to the same indemnity rights and protections (including those provided by directors' and officers' liability insurance) as are afforded to other directors and officers of Parent. The Merger Agreement also provides that Parent shall, and shall cause the Surviving Corporation or one of its affiliates to, maintain in effect for six years after the Effective Time policies of directors' and officers' liability insurance equivalent in all material respects to those maintained by or on behalf of the Company and the Company's subsidiaries on the date of the Merger Agreement (and having coverage and containing terms and conditions which in the aggregate are not less advantageous to the persons presently covered by such 42 45 policies as insured) with respect to claims arising from any actual or alleged wrongful act or omission occurring at or prior to the Effective Time for which a claim has not been made against any director or officer of the Company or any director or officer of the Company subsidiaries prior to the Effective Time. Conditions to Consummation of the Merger. The Merger Agreement provides that the respective obligations of the Company, Parent and Purchaser to effect the Merger are subject to the satisfaction or waiver of the following conditions: (a) subject to the satisfaction, or waiver by Purchaser, of all of the Offer Conditions (it being understood that pursuant to the Merger Agreement Purchaser may not waive the Minimum Condition without the prior written consent of the Company), Purchaser shall have accepted for payment all Shares validly tendered in the Offer and not withdrawn, provided that neither Parent nor Purchaser may invoke this condition if Purchaser fails to purchase Shares so tendered and not withdrawn in violation of the terms of the Merger Agreement or the Offer; (b) if required by applicable law or the constituent documents of the Company, Parent or Purchaser, the Merger and Merger Agreement shall have been approved at or prior to the Effective Time by the requisite vote of the shareholders of the Company in accordance with the PBCL and the Company's Articles of Incorporation and By-laws; (c) no order, statute, rule, regulation, executive order, stay, decree, judgment or injunction shall have been enacted, entered, promulgated or enforced by any court or other governmental entity that temporarily, preliminarily or permanently prohibits or prevents the consummation of the Merger and that has not been vacated, dismissed or withdrawn prior to the Effective Time; and (d) the waiting period (and any extension thereof) applicable to the Merger under the HSR Act and any similar foreign laws shall have been terminated or shall have expired and all consents necessary for the consummation of the Merger shall have been obtained. In addition, the obligations of Parent and Purchaser to consummate the Merger are subject to the satisfaction or waiver of the conditions (which may be waived in whole or in part by Parent) that the Company shall have performed in all material respects all obligations required to be performed by the Company under the Merger Agreement at or before the earlier of (x) such time as Parent's or Purchaser's designees constitute a majority of the Company's Board of Directors and (y) the Effective time; provided that no failure by the Company to have so performed any such obligation shall constitute a failure of satisfaction of the foregoing condition where the Company's failure of performance was caused by Parent. Representations and Warranties. In the Merger Agreement, the Company has made customary representations and warranties to Parent and Purchaser with respect to, among other things, its organization, capitalization, public filings, conduct of business, compliance with laws, litigation, non-contravention, consents and approvals, opinions of financial advisors and environmental liabilities. Termination. The Merger Agreement provides that it may be terminated at any time prior to the Effective Time, whether before or after the approval by the shareholders of the Company (if required by applicable law): (a) by the mutual written consent of Parent, Purchaser and the Company; (b) by either Parent or the Company: (i) if (x) as a result of the failure of any of the Offer Conditions the Offer shall have terminated or expired in accordance with its terms without Purchaser having accepted for payment any Shares pursuant to the Offer or (y) Purchaser shall have, consistent with its obligations under the Merger Agreement, failed to pay for the Shares prior to the Outside Date; provided, however, that such right to terminate the Merger Agreement shall not be available to any party whose failure to perform any of its obligations under the Merger Agreement results in the failure of any such Offer Condition or if the failure of such condition results from facts or circumstances that constitute a breach of any representation or warranty under the Merger Agreement by such party; or (ii) if any governmental entity shall have issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the transactions contemplated by the Merger Agreement and such order, decree or ruling or other action shall have become final and nonappealable; provided, however, that Parent or the Company, as the case may be, may not terminate the Merger Agreement if it has not complied with its obligations under the Merger Agreement with respect to any such order, decree, ruling, or other action; (c) by either Parent or Purchaser if the Company shall have breached in any material respect any of its material covenants or other agreements contained in the Merger Agreement which breach or failure to perform is incapable of being cured or, the Company having been given reasonable written notice of such breach by Parent, has not been cured within one business day prior to the then scheduled Expiration Time; (d) by any of the Company, Parent or Purchaser if either Parent or 43 46 Purchaser is entitled to terminate the Offer because the Unaffiliated Directors, or any committee designated thereby, has withdrawn, modified or changed (including by amendment of the Schedule 14D-9) their recommendation of the Offer, the Merger or the Merger Agreement or approved or recommended a Takeover Proposal, or shall have resolved to do so; provided that the temporary suspension of the recommendation of the Company's Board of Directors referred to in the Merger Agreement shall not give rise to such right of termination; (e) by the Company, if Parent or Purchaser shall have breached in any material respect any of its material covenants or other agreements contained in the Merger Agreement, which breach or failure to perform is incapable of being cured or, Parent having been given reasonable written notice of such breach by the Company, has not been cured within one business day prior to the then scheduled Expiration Date; or (f) by the Company, if the Offer has not been timely commenced in accordance with the Merger Agreement. Effect of Termination. If the Merger Agreement is terminated, neither the Company nor Purchaser will be required to complete the Merger. Termination of the Merger Agreement will not relieve any party thereto from any liability for any breach of the Merger Agreement that occurs before the Merger Agreement is terminated. Fees and Expenses. Under the Merger Agreement, all fees, costs and expenses incurred in connection with the Merger Agreement and the transactions contemplated thereby shall be paid by the party incurring such fees, costs or expenses, whether or not the Offer or the Merger is consummated. However, if the Merger Agreement is terminated by Parent pursuant to paragraph (d) in the paragraph entitled "Termination" above, the Merger Agreement provides that the Company shall promptly pay Parent upon its request all reasonable out-of-pocket charges and expenses incurred by Parent or its affiliates in connection with the Merger Agreement and the transactions contemplated thereby, including without limitation reasonable and documented attorneys' and accountants' fees and disbursements and fees and expenses of Parent's financial advisor and any information agent and depositary retained in connection with the Offer and all printing and mailing fees and expenses, in an amount not to exceed $8,000,000. Board of Directors. The Merger Agreement provides that promptly after such time as Purchaser purchases Shares pursuant to the Offer (but subject to the satisfaction of the Minimum Condition), Purchaser shall be entitled, to the fullest extent permitted by law, to designate at its option up to that number of directors, rounded to the next highest whole number, of the Company's Board of Directors, subject to compliance with Section 14(f) of the Exchange Act, as will make the percentage of the Company's directors designated by Purchaser equal to the aggregate voting power of the Shares held by Parent or any of its Subsidiaries; provided, however, that in the event that Purchaser's designees are elected to the Board of Directors of the Company, until the Effective Time, such Board of Directors shall have (i) at least three Unaffiliated Directors who are directors on June 8, 1999 or are designated by a majority of the Unaffiliated Directors of the Company who were directors on June 8, 1999 and (ii) the number of Affiliated Directors required by the Standstill Agreement which shall be in addition to the number of directors designated by Purchaser pursuant to the Merger Agreement; and provided, further that, in such event, if the number of Unaffiliated Directors shall be reduced below three for any reason whatsoever, the remaining Unaffiliated Directors shall, to the fullest extent permitted by law, designate a person to fill such vacancy who shall be deemed to be an Unaffiliated Director for purposes of the Merger Agreement or, if no Unaffiliated Directors then remain, the other directors shall designate three persons to fill such vacancies who shall not be officers or Affiliates of the Company or any of its subsidiaries, or officers or affiliates of Parent, of any of its subsidiaries or of any other entity in which Parent owns, directly or indirectly, any material amount of capital stock or other significant ownership interest, and such persons shall be deemed to be Unaffiliated Directors for purposes of the Merger Agreement. Following the election or appointment of Purchaser's designees and prior to the Effective Time, any termination or amendment of the Merger Agreement by the Company, any extension by the Company of the time for the performance of any of the obligations or other acts of Purchaser or waiver or assertion of any of the Company's rights under the Merger Agreement, and any other consent or action by the Board of Directors of the Company with respect to the Merger Agreement (other than recommending or reconfirming the recommendation that the holders of the Shares approve and adopt the Merger Agreement and the Merger, and making determinations in connection therewith, which recommendations and determinations may be 44 47 made by a majority of the Board of Directors as constituted at any time after such election or appointment of Purchaser's designees pursuant to the Merger Agreement) shall to the fullest extent permitted by applicable law require the concurrence of a majority of the Unaffiliated Directors and, to the fullest extent permitted by law, no other action by the Company, including any action by any other director of the Company, shall be required to approve such actions. To the fullest extent permitted by applicable law, the Company shall take all actions requested by Parent that are reasonably necessary to effect the election of any such designee, including mailing to its shareholders the Information Statement containing the information required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, and the Company agrees to make such mailing with the mailing of the Schedule 14D-9 (provided that Purchaser shall have provided to the Company on a timely basis all information required to be included in the Information Statement with respect to Purchaser's designees). Parent and Purchaser shall be solely responsible for any information with respect to either of them and their nominees, officers, directors and Affiliates required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. In connection with the foregoing, the Company shall promptly, at the option of Parent, to the fullest extent permitted by law, either increase the size of the Company's Board of Directors and/or obtain the resignation of such number of its current directors as is necessary to enable Purchaser's designees to be elected or appointed to the Company's Board of Directors as provided above. Shareholder Agreement. The following is a summary of the material terms of the Shareholder Agreement. This summary is qualified in its entirety by reference to the copy of the Shareholder Agreement filed with the Commission as an Exhibit to the Schedule 14D-1 and incorporated herein by reference. The Shareholder Agreement may be examined and copies may be obtained at the place and in the manner set forth in Section 14 of this Offer to Purchase. In connection with the execution of the Merger Agreement, the Share Tender Parties, who beneficially own approximately 727,800 Shares, or approximately 2.50% of the issued and outstanding Shares (the "Option Shares"), entered into the Shareholder Agreement with Parent and Purchaser pursuant to which they have agreed to tender their Shares (or cause the record owner of such Shares validly to tender), and not to withdraw any Shares so tendered not later than the fifth business day after commencement of the Offer pursuant to of the Merger Agreement and Rule 14d-2 under the Exchange Act; provided, however, that in the event that the Unaffiliated Directors (or any committee designated thereby) withdraw, or propose publicly to withdraw, the approval or recommendation by such Unaffiliated Directors or such committee of the Offer, the Merger or Merger Agreement (or any transaction contemplated thereby), they shall each have the right to withdraw any Shares that they have tendered. The Share Tender Parties have also granted to Parent and Purchaser, as Parent may designate, an irrevocable option (the "Option") to purchase the Option Shares owned by them and any additional Shares acquired by either of them (whether by exercise of options or by means of a purchase, distribution, dividend or otherwise) at $37.00 per Share or such higher price as may be paid by Parent or Purchaser pursuant to the Offer. Parent or Purchaser may exercise, but are not required to exercise, the Option from time to time, in whole or in part, on or after the date of the consummation of the Offer but prior to the Effective Time if the Offer is consummated but (whether due to improper tender or withdrawal of tender) Purchaser has not accepted for payment and paid for all of the Option Shares. However, Parent and Purchasers' obligation to purchase Shares upon exercise of the Option shall be subject to the conditions that (i) no preliminary or permanent injunction or other order issued by any court or governmental, administrative or regulatory agency or authority prohibiting the exercise of the Option pursuant to the Shareholder Agreement shall be in effect (and no action or proceeding shall have been commenced or threatened for the purpose of obtaining such an injunction or order); (ii) any applicable waiting period under the HSR Act or similar foreign law required for the purchase of the Shares upon such exercise shall have expired; and (iii) there shall have been no material breach of the representations, warranties or covenants of any Share Tender Party contained in the Shareholder Agreement; provided, that any failure by Parent or Purchaser to purchase Shares upon exercise of the Option as a result of the nonsatisfaction of any of such 45 48 conditions shall not affect or prejudice Parent or Purchaser's right to purchase such Shares upon the subsequent satisfaction of such conditions. In the Shareholder Agreement, the Share Tender Parties have made certain customary representations, warranties and covenants, including with respect to (i) ownership of the Shares, (ii) the absence of liens and encumbrances on and in respect of the Share Tender Parties' Shares, (iii) their authority to enter into and perform their respective obligations under the Shareholder Agreement, (iv) their ability to enter into the Shareholder Agreement without violating other agreements to which they are party, and (v) the absence of restrictions on the transfer of the Option Shares. The Shareholder Agreement provides for its termination upon the earlier of (i) the Effective Time or (ii) the termination of the Merger Agreement in accordance with its terms. Dissenters' Rights. NO DISSENTERS' RIGHTS ARE AVAILABLE IN CONNECTION WITH THE OFFER. However, if the Merger is consummated, shareholders who do not sell their Shares pursuant to the Offer and who fully comply with the statutory dissenters procedures set forth in the PBCL, the relevant portions of which are attached to this Offer to Purchase as Schedule IV, will be entitled to receive, in lieu of the Merger Consideration, cash for the fair value of their Shares (which may be more than, equal to, or less than the Merger Consideration) as determined pursuant to the procedures prescribed by the PBCL. Merely voting against the Merger Agreement (if a vote of the Company's shareholders is required to effect the Merger under the PBCL) will not perfect a shareholder's dissenters' rights. Shareholders are urged to review carefully the dissenting shareholders' rights provisions of the PBCL, a description of which is provided below and the full text of which is attached to this Offer to Purchase as Schedule IV and incorporated herein by reference. SHAREHOLDERS WHO FAIL TO COMPLY STRICTLY WITH THE APPLICABLE PROCEDURES WILL FORFEIT THEIR DISSENTERS' RIGHTS IN CONNECTION WITH THE MERGER. See Schedule IV to this Offer to Purchase. Sections 1571-1580 of the PBCL ("Subchapter D") and Section 1930(a) of the PBCL, copies of which are attached to this Offer to Purchase as Schedule IV, entitle any holder of record of Shares who objects to the Merger, in lieu of receiving the consideration for such Shares provided under the Merger Agreement, to demand in writing that he or she be paid in cash the fair value of his Shares. Section 1572 of the PBCL defines "fair value" as: "The fair value of shares immediately before the effectuation of the corporate action to which the dissenter objects, taking into account all relevant factors, but excluding any appreciation or depreciation in anticipation of the corporate action." Any shareholder contemplating making a demand for fair value is urged to review carefully the provisions of Subchapter D, particularly the procedural steps required to perfect his or her dissenters' rights thereunder. DISSENTERS' RIGHTS WILL BE LOST IF THE PROCEDURAL REQUIREMENTS OF SUBCHAPTER D ARE NOT FULLY AND PRECISELY SATISFIED. The following summary does not purport to be a complete statement of the provisions of Subchapter D of the PBCL and is qualified in its entirety by reference to Schedule IV to this Offer to Purchase and the PBCL. Filing Notice of Intention to Demand Fair Value; No Change in Beneficial Ownership; No Vote for Merger. Before the vote of the shareholders is taken on the Merger (if a vote of the Company's shareholders is required to effect the Merger under the PBCL), the dissenting shareholder must deliver to the Company a written notice of intention to demand that he be paid the fair value of his Shares if the Merger is effected. Such written notice must be sent to the Secretary of the Company at Goshen Corporate Park West, 1310 Goshen Parkway, West Chester, PA 19350. A VOTE AGAINST THE MERGER IS NOT SUFFICIENT TO SATISFY THE REQUIREMENT OF DELIVERING A WRITTEN NOTICE TO THE COMPANY. In addition, the shareholder must not effect any change in the beneficial ownership of his Shares from the date of filing the notice with the Company through the consummation of the Merger, and Shares for which payment of fair value is sought must not be voted in favor of the Merger, and the shareholder must vote against, or abstain from voting in favor of, the Merger. Failure of a dissenting shareholder to comply with any of the foregoing will result in the forfeiture of any right to demand payment of fair value for his Shares. Record Owners and Beneficial Owners. A record holder of Shares held in whole or in part for the benefit of one or more other persons may assert dissenters' rights as to fewer than all of the Shares registered in his or 46 49 her name only if he or she dissents with respect to all the Shares beneficially owned by any one person and discloses the name and address of the person or persons on whose behalf he or she dissents. A beneficial owner of Shares who is not the record holder may assert dissenters' rights with respect to Shares held on his or her behalf if he or she submits to the Company the written consent of the record holder not later than the time of assertion of dissenters' rights. A beneficial owner may not dissent with respect to fewer than all of the Shares owned by him or her whether or not such Shares are registered in his or her name. Notice to Demand Payment. If the Merger is effected as a Short-Form Merger, without a vote of the Company's shareholders, the Company will mail to all shareholders (other than Purchaser, Parent and their respective subsidiaries) a notice of the consummation of the Merger. The notice will also state where and when a demand for payment must be sent and certificates for Shares deposited in order to obtain payment of fair value for the Shares (which may be more than, equal to, or less than the Merger Consideration) and must be accompanied by a copy of Subchapter D and a form for demanding payment. The time set for the receipt of demands and the deposit of certificates shall not be less than 30 days from the mailing of the notice. Failure by a shareholder to demand payment or deposit certificates pursuant to such notice will cause such shareholder to lose all right to the payment of the fair value of his Shares and reinstate such shareholder's right to receive the Merger Consideration. If the Merger has not been effected within 60 days after the date set for demanding payment and depositing certificates, the Company will return any certificates that have been deposited. The Company, however, may at any later time send a new notice regarding demand for payment and deposit of certificates with like effect. In the event that Purchaser does not acquire at least 80% of the then outstanding Shares pursuant to the Offer or otherwise and the Merger is approved at a meeting of the Company's shareholders, the Company will mail to all dissenters who gave due notice of their intention to demand payment of fair value and who refrained from voting in favor of the Merger a notice stating where and when a demand for payment must be sent and certificates for Shares deposited in order to obtain payment of fair value for the Shares (which may be more than, equal to, or less than the Merger Consideration). The notice shall be accompanied by a copy of Subchapter D and a form for demanding payment. The time set for the receipt of demands and the deposit of certificates shall not be less than 30 days from the mailing of the notice. Failure by a shareholder to demand payment or deposit certificates pursuant to such notice will cause such shareholder to lose all right to the payment of the fair value of his Shares and reinstate such shareholder's right to receive the Merger Consideration. If the Merger has not been effected within 60 days after the date set for demanding payment and depositing certificates, the Company shall return any certificates that have been deposited. The Company, however, may at any later time send a new notice regarding demand for payment and deposit of certificates with like effect. Payment of Fair Value of Shares. Promptly after the consummation of the Merger or upon timely receipt of demand for payment if the Merger has already been effected, the Company shall either (a) remit to dissenters who have made timely demand and deposited their certificates the amount the Company estimates to be the fair value of their Shares or (b) give written notice that no remittance will be made under Section 1577 of the PBCL. Such remittance or notice will be accompanied by (i) the closing balance sheet and statement of income of the Company for a fiscal year ending not more than 16 months prior to the date of remittance or notice together with the latest available interim financial statements, (ii) a statement of the Company's estimate of the fair value of the Shares, and (iii) a notice of the right of the dissenting shareholder to demand payment or supplemental payment, as the case may be, accompanied by a copy of Subchapter D. If the Company does not remit the amount of its estimate of the fair value of the Shares, it shall return all certificates that have been deposited and may make a notation thereon that a demand for payment has been made. If Shares with respect to which notation has been so made shall be transferred, each new certificate issued therefor shall bear a similar notation together with the name of the original dissenting holder or owner of such Shares. A transferee of such Shares shall not acquire by such transfer any rights in the Company other than those that the original dissenter had after making demand for payment of fair value for such Shares. 47 50 Estimate by Dissenter of Fair Value of Shares. If a dissenting shareholder believes that the amount estimated or paid by the Company for his or her Shares is less than their fair value, the shareholder may send to the Company his or her own estimate of the fair value which shall be deemed a demand for payment of the amount or the deficiency. If the dissenter does not file his or her own estimate of fair value within 30 days after the mailing by the Company of its remittance or estimate of fair value, the dissenter shall be entitled to no more than the amount remitted to him or her or estimated by the Company. Valuation Proceedings. Within 60 days after the latest of (i) the consummation of the Merger, (ii) timely receipt of any demands for payment and (iii) timely receipt of any shareholder estimates of fair value, if any demands for payment remain unsettled, the Company may file in court an application for relief requesting that the fair value of the Shares be determined by the court. Each dissenter whose demand has not been settled shall be made a party to the proceeding and shall be entitled to recover the amount by which the fair value of his or her Shares is found to exceed the amount, if any, previously remitted, plus interest. Such interest shall accrue on such amount from consummation of the Merger until the date of payment at such rate as is fair and equitable under the circumstances, taking into account all relevant factors including the average rate currently paid by the Company on its principal bank loans. If the Company fails to file an application within the 60-day period, any dissenter who has not settled his or her claim may do so in the name of the Company within 30 days after the expiration of this 60-day period. If no dissenter files an application within such 30-day period, each dissenter who has not settled his or her claim shall be paid no more than the Company's estimate of the fair value of his Shares and may bring an action to recover any amount not previously remitted. Costs and Expenses of Valuation Proceedings. The costs and expenses of any valuation proceedings, including the reasonable compensation and expenses of any appraiser appointed by the court, shall be determined by the court and assessed against the Company, except that any part of such costs and expenses may be apportioned and assessed as the court deems appropriate against all or some of the dissenters whose action in demanding supplemental payment is found by the court to be dilatory, obdurate, arbitrary, vexatious or in bad faith. The court may also assess against the Company the fees and expenses of counsel and experts for any or all of the dissenters if the Company fails to comply substantially with Subchapter D or acts in bad faith or in a dilatory, obdurate, arbitrary or vexatious manner. The court can also assess any such fees or expenses incurred by the Company against a dissenter if such dissenter is found to have acted in bad faith or in a dilatory, obdurate, arbitrary or vexatious manner. If the court finds that the services of counsel for any dissenter were of substantial benefit to the other dissenters and should not be assessed against the Company, it may award to such counsel reasonable fees to be paid out of the amounts awarded to the dissenters who were benefited. Section 1712 of the PBCL provides that a director of a Pennsylvania corporation stands in a fiduciary relation to such corporation and must perform his duties as a director in good faith, in a manner he reasonably believes to be in the best interests of the corporation and with such care, including reasonable inquiry, skill and diligence, as a person of ordinary prudence would use under similar circumstances. Section 1105 of the PBCL provides in substance that a shareholder of a Pennsylvania corporation shall not have any right to obtain, in the absence of fraud or fundamental unfairness, an injunction against any proposed merger, nor any right to claim the right to valuation and payment of the fair value of his or her Shares because of such merger, except that he or she may dissent and claim such payment if and to the extent provided in Subchapter D, described above. Absent fraud or fundamental unfairness, such dissenters' rights are the exclusive remedy of such shareholders. However, the United States Court of Appeals, Third Circuit, interpreting the predecessor statute to Section 1105 of the PBCL in Herskowitz v. NutriSystem, Inc., concluded that dissenters' rights co-exist with common law causes of action, such as rescission or money damages, in the context of an action for breach of fiduciary duty or misrepresentation in a cash-out merger. Shareholders should be aware that due to the enactment of the PBCL in 1988 it is unclear whether the decision in Herskowitz remains applicable to dissenters' rights. IN VIEW OF THE COMPLEXITIES OF THESE PROVISIONS OF PENNSYLVANIA LAW, SHAREHOLDERS WHO ARE CONSIDERING DISSENTING FROM THE MERGER SHOULD CONSULT THEIR OWN LEGAL COUNSEL. 48 51 The foregoing summary of the PBCL is not complete. A copy of the text of the relevant sections of the PBCL is reprinted as Schedule IV to this Offer to Purchase. You should read these sections in their entirety if you are considering the possibility of seeking appraisal of your shares. 16. DIVIDENDS AND DISTRIBUTIONS. The Company has agreed that, from the date of the Merger Agreement until the effective time of the Merger, the Company will neither split, combine or reclassify any Shares of its capital stock nor declare, pay, or set aside any dividends or other distributions in respect of its capital stock. The Company's credit facility, entered into on September 14, 1995, as amended, prohibits the Company from paying dividends during the term of the credit facility. 17. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS. General. Except as otherwise disclosed in this Offer to Purchase, based upon its examination of publicly available filings by the Company with the Commission and other publicly available information concerning the Company, neither Parent nor Purchaser is aware of any licenses or other regulatory permits that appear to be material to the business of the Company and its subsidiaries, taken as a whole, that might be adversely affected by Purchaser's acquisition of Shares (and the indirect acquisition of the stock of its subsidiaries) as contemplated herein, or of any filings, approvals or other actions by or with any governmental entity that would be required prior to the acquisition of Shares (or the indirect acquisition of the stock of its subsidiaries) by Purchaser pursuant to the Offer as contemplated herein. Going Private Transactions. The Commission has adopted Rule 13e-3 under the Exchange Act which is applicable to certain "going private" transactions. Purchaser will be required to comply with Rule 13e-3 under the Exchange Act, which requires, among other things, that certain financial information concerning the Company and certain information relating to the fairness of the Merger and the consideration offered to minority shareholders in the Merger or such alternative transaction, be filed with the Commission and disclosed to shareholders prior to consummation of the Merger. This Offer to Purchase contains information required by Rule 13e-3. Merck KGaA, Parent and Purchaser have filed a Transaction Statement on Schedule 13e-3 with respect to the Offer, and may file amendments thereto. The Schedule 13E-3 and any exhibits or amendments to it may be inspected at, and copies obtained from the places described in Section 8 of this Offer to Purchase (except that they will not be available from the regional offices of the Commission). State Anti-Takeover Laws. The Company is incorporated under the laws of the Commonwealth of Pennsylvania. The Pennsylvania legislature has enacted a number of anti-takeover statutes designed to make corporate takeovers more difficult under certain circumstances. The Company has opted out of the application of the Control Transactions Statute, the Business Combination Statute, the Control Share Acquisition Statute and the Disgorgement Statute (Subchapters E, F, G and H, respectively, of Chapter 25 of the PBCL). Opting out of the Control Share Acquisition Statute also has the effect of making Subchapters I and J of the PBCL, which relate to certain labor matters, inapplicable. Accordingly, there are no statutorily-imposed supermajority shareholder voting requirements applicable to the Merger. In addition, Pennsylvania has adopted a Takeover Disclosure Law which purports to regulate attempts to acquire a corporation which (i) is incorporated in Pennsylvania or (ii) has its principal place of business and substantial assets located in Pennsylvania. Because the Company's Board of Directors has recommended acceptance of the Offer, the Offer is exempt from the registration requirements of such law, provided that certain information is filed with the Pennsylvania Securities Commission and Purchaser undertakes to notify the Company's shareholders that such filing must be made with the Pennsylvania Securities Commission, must include substantial additional information about the Offer and must be available for inspection at the offices of the Pennsylvania Securities Commission, 1010 N. 7th Street, 2nd Floor, Harrisburg, Pennsylvania 17102, during normal business hours. Purchaser intends to make such filing, and the distribution of this Offer to the Company's shareholders constitutes the required notification to them. A number of other states have adopted takeover laws and regulations which purport to varying degrees to be applicable to attempts to acquire securities of corporations which are incorporated in such states or which have or whose business operations have substantial economic effects in such states, or which have substantial assets, security holders, principal executive offices or principal places of business therein. In 1982, in Edgar v. Mite Corp., the Supreme Court of the United States invalidated on constitutional grounds the Illinois 49 52 Business Takeovers Act, which as a matter of state securities law made takeovers of corporations meeting certain requirements more difficult. However, in 1987, in CTS Corp. v. Dynamics Corp. of America, the Supreme Court of the United States held that the State of Indiana could, as a matter of corporate law and in particular those aspects of corporate law concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without the prior approval of the remaining shareholders, provided that such laws were applicable only under certain conditions. Subsequently, a number of Federal courts ruled that various state takeover statutes were unconstitutional insofar as they apply to corporations incorporated outside of the state of enactment. The Company, directly or through its subsidiaries, conducts business in a number of states throughout the United States, some of which have enacted takeover laws. Purchaser does not know whether any of these laws will, by their terms, apply to the Offer or the Merger and has not complied with any such laws. Should any person seek to apply any state takeover law, Purchaser will take such action as then appears desirable, which may include challenging the validity or applicability of any such statute in appropriate court proceedings. In the event it is asserted that one or more state takeover laws is applicable to the Offer or the Merger, and an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer, Purchaser might be required to file certain information with, or receive approvals from, the relevant state authorities. In addition, if enjoined, Purchaser might be unable to accept for payment any Shares tendered pursuant to the Offer, or be delayed in continuing or consummating the Offer and the Merger. In such event, Purchaser may not be obligated to accept for payment any Shares tendered. Pursuant to the Merger Agreement, the Company and the Company's Board of Directors will grant such approvals and take such actions as are necessary so that the transactions contemplated under the Merger Agreement may be consummated as promptly as practicable on the terms contemplated thereby and otherwise act to minimize the effects of any such statute or regulation on the transactions contemplated thereby. Other Governmental or Foreign Approvals. The Company, directly or through its subsidiaries, owns property in a number of foreign countries and jurisdictions. In connection with the acquisition of the Shares pursuant to the Offer, the laws of certain of those foreign countries and jurisdictions may require the filing of information with, or the obtaining of the approval of, governmental authorities in such countries and jurisdictions. The governments in such countries and jurisdictions might attempt to impose additional conditions on the Company's operations conducted in such countries and jurisdictions as a result of the acquisition of the Shares pursuant to the Offer or the Merger. The Company has represented to Parent that, except for filings, permits, authorizations, consents and approvals as may be required under, and other applicable requirements of, the Exchange Act, the HSR Act, the PBCL, state takeover laws and foreign and supranational laws relating to antitrust and anti-competition clearances, neither the execution, delivery or performance of the Merger Agreement by the Company nor the consummation by the Company of the transactions contemplated thereby will require any filing with, or permit, authorization, consent or approval of, any governmental authority or other person, firm, corporation or other legal entity (except where the failure to obtain such permits, authorizations, consents or approvals or to make such filings would not reasonably be expected to have a materially adverse effect on the Company or prevent or delay the consummation of the Offer and/or the Merger). Antitrust. Under the HSR Act and the rules and regulations promulgated thereunder by the Federal Trade Commission ("FTC"), certain acquisition transactions may not be consummated unless certain information has been furnished to the Antitrust Division of the Department of Justice and the FTC and certain waiting period requirements have been satisfied. The acquisition of Shares pursuant to the Offer is subject to such requirements. There may be similar antitrust requirements in other jurisdictions. Parent will file with the FTC and the Antitrust Division a Premerger Notification and Report Form in connection with the acquisition of Shares pursuant to the Merger Agreement and the Shareholder Agreement. Under the provisions of the HSR Act applicable to the Offer, the purchase of Shares pursuant to the Offer may not be consummated until the expiration of a 15-calendar day waiting period following the filing by Parent, unless both the Antitrust Division and the FTC terminate the waiting period prior thereto. If, within such 15-calendar day waiting period, either the Antitrust Division or the FTC requests additional information 50 53 or documentary material from Parent, the waiting period will be extended for an additional 10 calendar days following substantial compliance by Parent with such request. Thereafter, the waiting period could be extended only by court order. If the acquisition of Shares is delayed pursuant to a request by the FTC or the Antitrust Division for additional information or documentary material pursuant to the HSR Act, the Offer may, but need not, be extended and, in any event, the purchase of and payment for Shares will be deferred until 10 days after the request is substantially complied with, unless the waiting period is sooner terminated by the FTC and the Antitrust Division. Only one extension of such waiting period pursuant to a request for additional information is authorized by the HSR Act and the rules promulgated thereunder, except by court order. Any such extension of the waiting period will not give rise to any withdrawal rights not otherwise provided for by applicable law. The foregoing provisions also apply to the purchase of the Shares pursuant to the Option. The FTC and the Antitrust Division frequently scrutinize the legality under the antitrust laws of transactions such as the proposed acquisition of Shares by Purchaser pursuant to the Offer. At any time before or after the purchase by Purchaser of Shares pursuant to the Offer, either of the FTC or the Antitrust Division, or both, could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the purchase of Shares pursuant to the Offer or seeking the divestiture of Shares purchased by Purchaser or the divestiture of substantial assets of Parent, its subsidiaries or the Company or other ancillary measures. Private parties and state attorneys general may also bring legal action under federal or state antitrust laws under certain circumstances. Under German laws and regulations relating to the regulation of monopolies and competition, certain acquisition transactions may not be consummated in Germany unless certain information has been furnished to the Bundeskartelamt, the German antitrust authority (the "BKA") and certain waiting period requirements have been satisfied without issuance by the BKA of an order to refrain. The purchase of Shares by Purchaser pursuant to the Offer and the consummation of the Merger may be subject to such requirements. Under such laws, the BKA has one month from the time of filing of such information with the BKA to advise the parties of its intention to investigate the Offer and the Merger, in which case the BKA has four months from the date of filing in which to take steps to oppose the Offer and the Merger. Merck KGaA intends to file promptly the required notification with the BKA and request early termination of the one-month waiting period. While Merck KGaA and Parent do not believe that there is any basis for the BKA to investigate the Offer and the Merger and Merck KGaA and Parent believe that early termination of the waiting period will be granted, there can be no assurance that the BKA will not investigate or oppose the transactions or that early termination of the waiting period will be granted. In addition, Parent may make additional filings or reports under the antitrust laws of other nations. Although Purchaser believes that the acquisition of Shares pursuant to the Offer would not violate the antitrust laws, there can be no assurance that a challenge to the Offer on antitrust grounds will not be made or, if such challenge is made, what the outcome will be. See Section 14 for certain conditions of the Offer, including conditions with respect to litigation and certain government actions. Exon-Florio. Under Section 721 of Title VII of the United States Defense Production Act of 1950, as amended by Section 5021 of the Omnibus Trade and Competitiveness Act of 1988 ("Exon-Florio"), the President of the United States is authorized to prohibit or suspend acquisitions, mergers or takeovers by foreign persons of persons engaged in interstate commerce in the United States if the President determines, after investigation, that such foreign persons in exercising control of such acquired persons might take action that threatens to impair the national security of the United States and that other provisions of existing law do not provide adequate authority to protect national security. Pursuant to Exon-Florio, notice of an acquisition by a foreign person may be made to the Committee on Foreign Investment in the United States ("CFIUS"), which is comprised of representatives of the Departments of the Treasury, State, Commerce, Defense and Justice, the Office of Management and Budget, the United States Trade Representative's Office and the Council of Economic Advisors and which has been selected by the President to administer Exon-Florio, either voluntarily by the parties to such proposed acquisition, merger or takeover or by any member of CFIUS. 51 54 A determination that an investigation is called for must be made within 30 days after notification of a proposed acquisition, merger or takeover is first filed with CFIUS. Any such investigation must be completed within 45 days of such determination. Any decision by the President to take action must be announced within 15 days of the completion of the investigation. Although Exon-Florio does not require the filing of a notification, nor does it prohibit the consummation of an acquisition, merger or takeover if notification is not made, such an acquisition, merger or takeover thereafter remains indefinitely subject to divestment should the President subsequently determine that the national security of the United States has been threatened or impaired. Under the Merger Agreement, Parent and Purchaser are not obligated to commence the Offer and accept for payment, and pay for, any Shares tendered pursuant to the Offer unless (i) the period of time for any applicable review by CFIUS has expired and CFIUS has not initiated an investigation of the Offer or Merger, or (ii) if CFIUS timely initiates such an investigation, (A) it has not completed the investigation when the applicable waiting period under the Exon-Florio Act has expired, or (B) CFIUS timely completes such investigation but the President does not announce a decision by the end of the applicable waiting period that would have a materially adverse effect on the Company. Purchaser believes that the acquisition of Shares pursuant to the Offer will not have any of the effects referred to in Exon-Florio. 18. FEES AND EXPENSES. Lehman Brothers is acting as Dealer Manager in connection with the Offer and serving as financial advisor to Parent and Purchaser in connection with the acquisition of the Company. Merck KGaA has agreed, pursuant to an engagement letter dated as of May 26, 1999, to pay to Lehman Brothers an advisory fee of 1% of the consideration to be paid by Purchaser and Parent pursuant to the Offer and the Merger upon the consummation of the Offer and the Merger. Merck KGaA has also agreed to reimburse Lehman Brothers upon request for its reasonable expenses (including professional and legal fees and disbursements) incurred in connection with its engagement by Merck KGaA, and to indemnify Lehman Brothers against certain liabilities and expenses in connection with its engagement, including certain liabilities under the federal securities laws. Purchaser has retained IBJ Whitehall Bank and Trust Company to act as the Information Agent and to act as the Depositary in connection with the Offer. The Information Agent may contact holders of Shares by mail, telephone, facsimile and personal interview and may request brokers, dealers and other nominee shareholders to forward the Offer materials to beneficial owners. The Information Agent and the Depositary will receive reasonable and customary compensation for services relating to the Offer and will be reimbursed for certain out-of-pocket expenses. Parent and Purchaser have also agreed to indemnify the Information Agent and the Depositary against certain liabilities and expenses in connection with the Offer, including certain liabilities under the federal securities laws. Purchaser will not pay any fees or commissions to any broker or dealer or any other person for soliciting tenders of Shares pursuant to the Offer (other than to the Dealer Manager, the Information Agent and the Depositary). Brokers, dealers, commercial banks and trust companies will, upon request, be reimbursed by Purchaser for customary mailing and handling expenses incurred by them in forwarding offering materials to their customers. The Merger Agreement provides that all fees, costs and expenses incurred in connection with the Merger Agreement and the transactions contemplated thereby shall be paid by the party incurring such fees, costs or expenses, whether or not the Offer or the Merger is consummated. 19. MISCELLANEOUS. The Offer is being made solely by this Offer to Purchase and the related Letter of Transmittal and is being made to all shareholders of the Company. Purchaser is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid state statute. If Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares pursuant thereto, Purchaser will make a good faith effort to comply with any such state statute. If after such good faith effort Purchaser cannot comply with such state statute, the Offer will not be made to, nor will tenders be accepted from or on behalf of, the shareholders in such state. In any jurisdiction where the 52 55 securities, "blue sky" or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of Purchaser by the Dealer Manager or one or more registered brokers or dealers that are licensed under the laws of such jurisdiction. Purchaser, Parent and Merck KGaA have filed with the Commission a Tender Offer Statement on Schedule 14D-1 (including exhibits) pursuant to Rule 14d-3 under the Exchange Act, furnishing certain additional information with respect to the Offer and may file amendments thereto. Parent, Purchaser and Merck KGaA have filed a Transaction Statement on Schedule 13e-3 with respect to the Offer, and may file amendments thereto. Such statements and any amendments thereto, including exhibits, which furnish certain additional information with respect to the Offer, may be inspected and copies may be obtained from the offices of the Commission (except that they will not be available at the regional offices of the Commission) in the manner set forth in Section 8 of this Offer to Purchase. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION ON BEHALF OF PURCHASER, PARENT OR MERCK KGaA THAT IS NOT CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. EM SUBSIDIARY, INC. June 14, 1999 53 56 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER, PARENT AND MERCK KGAA AND GENERAL PARTNERS AND MEMBERS OF THE EXECUTIVE BOARD OF E. MERCK 1. Directors and Executive Officers of Purchaser. The name, business address, present principal occupation or employment and material occupations, positions, offices or employment during the last five years of each director and executive officer of Purchaser and certain other information are set forth below. Unless otherwise indicated, the business address of each such director and executive officer is 7 Skyline Drive, Hawthorne, NY 10532. Unless otherwise indicated, each occupation set forth opposite an individual's name refers to employment with Purchaser. Stephen J. Kunst and Richard K. Hackett are citizens of the United States and Dieter Janssen is a citizen of Germany.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES OR EMPLOYMENT HELD NAME AND BUSINESS ADDRESS DURING THE LAST FIVE YEARS - ------------------------- --------------------------------------------------------------- Dieter Janssen...................... Director, President and Chief Executive Officer of Purchaser since June of 1999; Group Vice President and Chief Financial Officer of EM Industries, Incorporated ("EMI") since 1994; previously, 1994-1996, Divisional Manager of Purchasing and Controlling for MEPRO, an affiliate of Merck KGaA; Director of VWR Scientific Products Corporation ("VWR"), 49.89% of the shares of which are owned by Merck KGaA; previously, 1988-1994, Chief Financial Officer of Merck S.A., Caracas, an affiliate of Merck KGaA. Stephen J. Kunst.................... Director, Vice President and Secretary of Purchaser since June of 1999; Director, Vice President and Secretary of Parent; Group Vice President and General Counsel of EMI; previously, 1989-1995, Vice President, Administrative Services of EMI; Director, Director of VWR. Richard K. Hackett.................. Vice President and Treasurer of Purchaser since June of 1999; Vice President, Finance of EMI.
2. Directors and Executive Officers of Parent. The name, business address, present principal occupation or employment and material occupations, positions, offices or employment's during the last five years of each director and executive officer of Parent and certain other information are set forth below. Unless otherwise indicated, the business address of each such director and executive officer is 7 Skyline Drive, Hawthorne, NY 10532. Unless otherwise indicated, each occupation set forth opposite an individual's name refers to employment with Parent. Peter A. Wriede is a citizen of the United States
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES OR EMPLOYMENT HELD NAME AND BUSINESS ADDRESS DURING THE LAST FIVE YEARS ------------------------- --------------------------------------------------------------- DIRECTORS Peter A. Wriede..................... Director of EMI; President and Chief Executive Officer of EMI, since April, 1998; Regional Manager, North America, of Merck KGaA previously, 1994-1998, Director and General Manager of the Pigments & Cosmetics Division of Merck KGaA; previously, 1987-1994, Group Vice President in charge of the Specialty Chemicals Division of EMI; Director of Dey, Inc., an indirect subsidiary of Merck KGaA; Director. President and Chief Executive Officer of Parent.
3. Directors and Executive Officers of Merck KGaA and E. Merck. The name, business address, present principal occupation or employment and material occupations, positions, offices or employment during the last five years of each director and executive officer of Merck KGaA and each general partner of E. Merck I-1 57 (other than positions with the same organization, or comparable positions with multiple related organizations) and certain other information are set forth below. Unless otherwise indicated, the business address of each such director and executive officer is Frankfurter Strasse 250, D-64293 Darmstadt, Germany. Unless otherwise indicated, each occupation set forth opposite an individual's name refers to employment with Merck KGaA. All directors and executive officers listed below are citizens of Germany.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES OR EMPLOYMENT HELD NAME AND BUSINESS ADDRESS DURING THE LAST FIVE YEARS - ------------------------- --------------------------------------------------------------- Dr. Heinrich Hornef................. Chairman, Supervisory Board (Aufsichtsrat); Merck KGaA; Member of partners council of SAP, Walldorf, a computer industry/software company, of Neurottstrasse 16.69190 Germany and of Friatec AG, a machine building/engineering company, of Steinzeugstrasse 50, 68229 Mannheim, Germany. Flavio Battisti..................... Vice Chairman, Supervisory Board (Aufsichtsrat); Merck KGaA. Michael Fletterich.................. Supervisory Board Member (Aufsichtsrat) since October, 1998; previously, member of works council of Merck KGaA. Jon Baumhauer....................... Supervisory Board Member (Aufsichtsrat); Merck KGaA; Chief Executive Officer, Matthias Kraus KG, a beverage manufacturer, of Mariastrasse 14, 80639 Munchen, Germany. Klaus Brauer........................ Supervisory Board Member (Aufsichtsrat); Merck KGaA; Member of partners council of Peguform-Werke GmbH, a plastics industry company, of Schlossmattenstrasse 18, 79268 Botzingen, Germany. Prof. Dr. Christoph Clemm........... Supervisory Board Member (Aufsichtsrat); Merck KGaA. Dr. Michael Kasper.................. Supervisory Board Member (Aufsichtsrat); Merck KGaA. Brigitte Niems...................... Supervisory Board Member (Aufsichtsrat); Merck KGaA. Dr. Arend Oetker.................... Supervisory Board Member (Aufsichtsrat); Merck KGaA; Member of partners councils of Cognos AG, an education/counseling company, of Kielortallee 1,20144 Hamburg, Germany, Jungheinrich AG, a warehousing/transport/service company of Friedrich-Ebert- Damm 129,22047 Hamburg, Germany, VAW Aluminum AG, an aluminum manufacturer, of Georg-von-Boeselager-Strasse 25, 53117 Bonn, Germany. Hans Schonhals...................... Supervisory Board Member (Aufsichtsrat); Merck KGaA; Member of partners councils of Pirelli Deutschland AG, a tire-industry business, of 64741 Breuberg Germany, Rohm GmbH, a plastic- industry/chemistry company, of Kirschenallee, 64293 Darmstadt, Germany. Dr. Gerhard Ziener.................. Supervisory Board Member (Aufsichtsrat); Merck KGaA; Member of advisory boards of Benckiser Holding GmbH, a machine-building company, of Ludwig-Bertram-Strasse 8, 67059 Ludwigshafen, Germany and Dohler GmbH, a good stuffs company, of Riedstrasse 9, 64295 Darmstadt, Germany. Peter Zuhlsdorff.................... Supervisory Board Member (Aufsichtsrat); Merck KGaA; Member of partners councils of Deutz AG, a vehicle engineering company, of Muhlheimer Strasse107, 51063 Koln, Germany, GFK AG, an opinion research company, of Nordwestring 101, 90419 Nurnberg, Germany, and Deutsche Hypothekenbank AG, a banking company, of Taunusanlage 9, 60329 Frankfurt, Germany. Dr. Walter Bardorff................. Director (Direktor); Merck KGaA.
I-2 58
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES OR EMPLOYMENT HELD NAME AND BUSINESS ADDRESS DURING THE LAST FIVE YEARS - ------------------------- --------------------------------------------------------------- Dr. Michael Becker.................. Director (Direktor) since October 1998; Merck KGaA; previously, Director of BASFAG, Ludwigshafen, Germany. Dr. Klaus Bofinger.................. Director (Direktor); Merck KGaA. Rolf Peter Deutsch.................. Director (Direktor); Merck KGaA. Prof. Dr. Christian Flamig.......... Director (Direktor); Merck KGaA. Dr. Jurgen Gehlhaus................. Director (Direktor); Merck KGaA. Dr. Hartmut Hartner................. Director (Direktor); Merck KGaA. Dr. Ullrich Hanstein................ Director (Direktor); Merck KGaA. Dr. Hans-Joachim Lohrisch........... Director (Direktor); Merck KGaA. Dr. Ingeborg Lues................... Director (Direktor); Merck KGaA. Prof. Dr. Hans-Eckart Radunz........ Director (Direktor); Merck KGaA. Dr. Karl Roser...................... Director (Direktor); Merck KGaA. Prof. Dr. Erhard Schnurr............ Director (Direktor); Merck KGaA. Jurgen Schupp....................... Director (Direktor); Merck KGaA. Gerardo Uflerbaumer................. Director (Direktor); Merck KGaA. Dr. Gregor Wehner................... Director (Direktor); Merck KGaA. Prof. Dr. Gerd Bauer................ Departmental Director (Abteilungsdirektor); Merck KGaA. Heinrich Bausch..................... Departmental Director (Abteilungsdirektor); Merck KGaA. York Bernau......................... Departmental Director (Abteilungsdirektor); Merck KGaA. Rudolf Bracher...................... Departmental Director (Abteilungsdirektor); Merck KGaA. Klaus-Peter Brandis................. Departmental Director (Abteilungsdirektor); Merck KGaA. Dr. Jurgen Eichler.................. Departmental Director (Abteilungsdirektor); Merck KGaA. Hans Friedrich Geiss................ Departmental Director (Abteilungsdirektor); Merck KGaA. Dr. Rolf Foehring................... Departmental Director (Abteilungsdirektor); Merck KGaA. Dr. Sigmar Herberg.................. Departmental Director (Abteilungsdirektor); Merck KGaA. Dr. Manfred Muller.................. Departmental Director (Abteilungsdirektor); Merck KGaA. Winfried Muller..................... Departmental Director (Abteilungsdirektor); Merck KGaA. Dr. Bernd Reckmann.................. Departmental Director (Abteilungsdirektor); General Manager, Scientific Laboratory Products, since April 1998; previously, 1997 to April 1998, General Manager, Environmental and Bioanalysis, Laboratory Products Division; 1994 to 1996, Director of Marketing and Sales, Diagnostic Products Division; previously, Director of Marketing and Sales, Immuno Diagnostic Products, Diagnostic Products Division.; Merck KGaA Friedrich Schmitt................... Departmental Director (Abteilungsdirektor); Merck KGaA. Joachim Szebel...................... Departmental Director (Abteilungsdirektor); Merck KGaA. Gerhard Weber....................... Departmental Director (Abteilungsdirektor); Merck KGaA. Dr. Axel Wietersheim V.............. Departmental Director (Abteilungsdirektor); Merck KGaA. Prof. Dr. Hans Joachim Langmann..... Executive Board Member (Geschaftsleitung), E. Merck and Merck KGaA; general partner, E. Merck. Wolfgang Honn....................... Executive Board Member (Geschaftsleitung), E. Merck and Merck KGaA; general partner, E. Merck; Director of the Company.
I-3 59
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES OR EMPLOYMENT HELD NAME AND BUSINESS ADDRESS DURING THE LAST FIVE YEARS - ------------------------- --------------------------------------------------------------- Dr. Michael Romer................... Executive Board Member (Geschaftsleitung), E. Merck and Merck KGaA; general partner, E. Merck. Prof. Dr. Bernhard Scheuble......... Executive Board Member (Geschaftsleitung), E. Merck and Merck KGaA; general partner, E. Merck. Prof. Dr. Thomas Schreckenbach...... Executive Board Member (Geschaftsleitung), E. Merck and Merck KGaA; general partner, E. Merck. Dr. Harald J. Schroder.............. Executive Board Member (Geschaftsleitung), E. Merck and Merck KGaA; general partner, E. Merck; see also Part 2 of this Schedule I. Dr. Johannes Sombroek............... Executive Board Member (Geschaftsleitung), E. Merck and Merck KGaA; general partner, E. Merck. Peter Merck......................... General partner, E. Merck. Jon Baumhauer....................... Chairman, Partners Council E. Merck; see also above. Dr. Heinrich Hornef................. Partners Council Member, E. Merck. Karl-Heinrich Kraft................. Partners Council Member, E. Merck. Albrecht Merck...................... Partners Council Member, E. Merck. Dr. Arend Oetker.................... Partners Council Member, E. Merck. Dr. Frank Stangenberg-Haverkamp..... Partners Council Member, E. Merck. Peter Zuhlsdorff.................... Partners Council Member, E. Merck. Prof. Dr. Christoph Clemm........... Partners Council Member, E. Merck; see also above.
I-4 60 SCHEDULE II [LETTERHEAD OF BT ALEX. BROWN INCORPORATED] June 8, 1999 The Board of Directors and Special Committee of the Board of Directors VWR Scientific Products Corporation 1310 Goshen Parkway Westchester, Pennsylvania 19380 Members of the Board and Special Committee: BT Alex. Brown Incorporated ("BT Alex. Brown") has acted as financial advisor to VWR Scientific Products Corporation ("VWR") in connection with the proposed transaction involving VWR and Merck KGaA ("Merck") pursuant to the Agreement and Plan of Merger, dated June 8, 1999 (the "Merger Agreement"), among EM Laboratories, Incorporated, an indirect subsidiary of Merck ("EM"), EM Subsidiary, Inc., a wholly owned subsidiary of EM("Sub"), and VWR, which provides, among other things, for (i) the commencement by Sub of a tender offer to purchase all outstanding shares of the common stock, par value $1.00 per share, of VWR (the "VWR Common Stock" and, such tender offer, the "Tender Offer") at a purchase price of $37.00 per share, net to the seller in cash (the "Cash Consideration"), and (ii) subsequent to the Tender Offer, the merger of Sub with and into VWR (the "Merger" and, together with the Tender Offer, the "Transaction") pursuant to which each outstanding share of VWR Common Stock not previously tendered will be converted into the right to receive the Cash Consideration. You have requested BT Alex. Brown's opinion as to the fairness, from a financial point of view, of the Cash Consideration to the holders of VWR Common Stock (other than Merck and its affiliates). In connection with BT Alex. Brown's role as financial advisor to VWR, and in arriving at its opinion, BT Alex. Brown has reviewed certain publicly available financial and other information concerning VWR and certain internal analyses and other information furnished to or discussed with it by VWR and its advisors. BT Alex. Brown has also held discussions with members of the senior management of VWR regarding the business and prospects of VWR. In addition, BT Alex. Brown has (i) reviewed the reported prices and trading activity for VWR Common Stock, (ii) compared certain financial and stock market information for VWR with similar information for certain other companies whose securities are publicly traded, (iii) reviewed the financial terms of certain recent business combinations which it deemed comparable in whole or in part, (iv) reviewed the terms of the Merger Agreement, and (v) performed such other studies and analyses and considered such other factors as it deemed appropriate. BT Alex. Brown has not assumed responsibility for independent verification of, and has not independently verified, any information, whether publicly available or furnished to it, concerning VWR, including, without limitation, any financial information, forecasts or projections considered in connection with the rendering of its opinion. Accordingly, for purposes of its opinion, BT Alex. Brown has assumed and relied upon the accuracy and completeness of all such information and BT Alex. Brown has not conducted a physical inspection of any of the properties or assets, and has not prepared or obtained any independent evaluation or appraisal of any of the assets or liabilities, of VWR. With respect to the financial forecasts and projections made available to BT Alex. Brown and used in its analyses, BT Alex. Brown has assumed that they have been reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of VWR as to the matters covered thereby. In rendering its opinion, BT Alex. Brown expresses no view as to the reasonableness of such forecasts and projections or the assumptions on which they are based. BT Alex. Brown's opinion is necessarily based upon economic, market and other conditions as in effect on, and the information made available to it as of, the date hereof. For purposes of rendering its opinion, BT Alex. Brown has assumed that, in all respects material to its analysis, the representations and warranties of VWR, EM and Sub contained in the Merger Agreement are true and correct, VWR, EM and Sub will each perform all of the covenants and agreements to be performed II-1 61 by it under the Merger Agreement and all conditions to the obligations of each of VWR, EM and Sub to consummate the Transaction will be satisfied without any waiver thereof. BT Alex. Brown has also assumed that all material governmental, regulatory or other approvals and consents required in connection with the consummation of the Transaction will be obtained and that in connection with obtaining any necessary governmental, regulatory or other approvals and consents, or any amendments, modifications or waivers to any agreements, instruments or orders to which either VWR, EM or Sub is a party or is subject or by which it is bound, no limitations, restrictions or conditions will be imposed or amendments, modifications or waivers made that would have a material adverse effect on VWR or materially reduce the contemplated benefits of the Transaction to VWR. In connection with its engagement, BT Alex. Brown was not requested to, and did not, solicit third party indications of interest with respect to the acquisition of all or a part of VWR. This opinion is addressed to, and for the use and benefit of, the Board of Directors and Special Committee of the Board of Directors of VWR and is not a recommendation to any shareholder as to whether or not such shareholder should tender shares of VWR Common Stock in the Tender Offer or how such shareholder should vote with respect to matters relating to the proposed Merger. This opinion is limited to the fairness, from a financial point of view, of the Cash Consideration to the holders of VWR Common Stock (other than Merck and its affiliates), and BT Alex. Brown expresses no opinion as to the merits of the underlying decision by VWR to engage in the Transaction. BT Alex. Brown, as a customary part of its investment banking business, is engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, private placements and valuations for estate, corporate and other purposes. We have acted as financial advisor to VWR in connection with the Transaction and will receive a fee for our services, a significant portion of which is contingent upon the consummation of the Transaction and a portion of which is payable upon delivery of this opinion. BT Alex. Brown and its affiliates have in the past provided financial services to VWR and Merck unrelated to the proposed Transaction, for which services BT Alex. Brown and its affiliates have received compensation. BT Alex. Brown maintains a market in VWR Common Stock and regularly publishes research reports regarding the businesses and securities of VWR, Merck and other publicly traded companies in the distribution industry. In the ordinary course of business, BT Alex. Brown and its affiliates may actively trade or hold the securities and other instruments and obligations of VWR and Merck for their own account and for the accounts of customers and, accordingly, may at any time hold a long or short position in such securities, instruments or obligations. Based upon and subject to the foregoing, it is BT Alex. Brown's opinion that, as of the date of this letter, the Cash Consideration to be received in the Transaction by holders of VWR Common Stock (other than Merck and its affiliates) is fair, from a financial point of view, to such holders. Very truly yours, /s/ BT ALEX. BROWN INCORPORATED BT ALEX. BROWN INCORPORATED II-2 62 SCHEDULE III [LETTERHEAD OF WARBURG DILLON READ LLC] June 8, 1999 The Board of Directors and Special Committee of the Board of Directors VWR Scientific Products Corporation 1310 Goshen Parkway Westchester, Pennsylvania 19380 Dear Members of the Board and Special Committee: We understand that VWR Scientific Products Corporation ("VWR") is considering a transaction whereby (i) EM Laboratories, Incorporated ("EM"), an indirect subsidiary of Merck KGaA ("Merck"), will cause EM Subsidiary, Inc., a wholly owned subsidiary of EM ("Sub"), to commence a tender offer to purchase all outstanding shares of the common stock, par value $1.00 per share, of VWR ("VWR Common Stock" and, such tender offer, the "Tender Offer") at a purchase price of $37.00 per share, net to the seller in cash (the "Cash Consideration"), and (ii) subsequent to the Tender Offer, Sub will be merged with and into VWR (the "Merger" and, together with the Tender Offer, the "Transaction") pursuant to which each outstanding share of VWR Common Stock not previously tendered will be converted into the right to receive the Cash Consideration. The terms and conditions of the Transaction are more fully set forth in the Agreement and Plan of Merger, dated June 8, 1999, among EM, Sub and VWR (the "Merger Agreement"). You have requested our opinion as to the fairness, from a financial point of view, of the Cash Consideration to be received in the Transaction by holders of VWR Common Stock (other than Merck and its affiliates). Warburg Dillon Read LLC ("WDR") has acted as financial advisor to the Board of Directors and the Special Committee in connection with the Transaction and will receive a fee for its services, a significant portion of which is contingent upon the consummation of the Transaction and a portion of which is payable upon delivery of this opinion. In the past, WDR and its predecessors have provided investment banking services to Merck unrelated to the proposed Transaction and received customary compensation for the rendering of such services. In addition, WDR's affiliates or parent entity, UBS AG, currently have, or may have in the future, a banking or financing relationship with VWR and/or Merck. In the ordinary course of business, WDR, its successors and affiliates may trade securities of VWR and Merck for their own accounts and, accordingly, may at any time hold a long or short position in such securities. Our opinion does not address VWR's underlying business decision to effect the Transaction or constitute a recommendation to any shareholder of VWR as to whether or not such shareholder should tender shares of VWR Common Stock in the Tender Offer or how such shareholder should vote with respect to the Merger. At your direction, we have not been asked to, nor do we, offer any opinion as to the material terms of the Merger Agreement and the obligations thereunder, or the form of the Transaction. In rendering this opinion, we have assumed, with your consent, that each of VWR, EM and Sub will comply with all material terms of the Merger Agreement, as applicable, and that the Transaction will be validly consummated in accordance with its terms. In connection with our engagement, we were not requested to, and we did not, solicit third party indications of interest with respect to the acquisition of all or a part of VWR. In arriving at our opinion, we have, among other things: (i) reviewed certain publicly available business and historical financial information relating to VWR; (ii) reviewed certain internal financial information and other data relating to the business and financial prospects of VWR, including estimates and financial forecasts prepared by the management of VWR, that were provided to us by VWR and not publicly available; (iii) conducted discussions with members of the senior management of VWR; (iv) reviewed publicly available financial and stock market data with respect to certain other companies in lines of business we believe to be generally comparable to those of VWR and Chemdex Corporation, a company in which VWR III-1 63 has an equity interest; (v) compared the financial terms of the Transaction with the publicly available financial terms of certain other transactions which we believe to be generally relevant; (vi) reviewed the Merger Agreement; and (vii) conducted such other financial studies, analyses, and investigations, and considered such other information as we deemed necessary or appropriate. In connection with our review, with your consent, we have not assumed any responsibility for independent verification of any of the information provided to or reviewed by us for the purpose of this opinion and have, with your consent, relied on its being complete and accurate in all material respects. In addition, at your direction, we have not made any independent evaluation or appraisal of any of the assets or liabilities (contingent or otherwise) of VWR, nor have we been furnished with any such evaluation or appraisal. With respect to the financial forecasts and estimates referred to above, we have assumed, at your direction, that they have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of VWR as to the future performance of VWR. Our opinion is necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to us, as of the date of this letter. Based upon and subject to the foregoing, it is our opinion that, as the date hereof, the Cash Consideration to be received in the Transaction by the holders of VWR Common Stock (other than Merck and its affiliates) is fair, from a financial point of view, to such holders. Very truly yours, WARBURG DILLON READ LLC III-2 64 SCHEDULE IV SECTIONS 1930(a) AND 1571-80 (SUBCHAPTER D OF CHAPTER 15) OF THE PENNSYLVANIA BUSINESS CORPORATION LAW SECTION 1930. DISSENTERS RIGHTS (a) General Rule. If any shareholder of a domestic business corporation that is to be a party to a merger or consolidation pursuant to a plan of merger or consolidation objects to the plan of merger or consolidation and complies with the provisions of Subchapter D of Chapter 15 (relating to dissenters rights), the shareholder shall be entitled to the rights and remedies of dissenting shareholders therein provided, if any. See also section 1906(c) (relating to dissenters rights upon special treatment). CHAPTER 15 SUBCHAPTER D. -- DISSENTERS RIGHTS SECTION 1571. APPLICATION AND EFFECT OF SUBCHAPTER (a) General Rule. Except as otherwise provided in subsection (b), any shareholder of a business corporation shall have the right to dissent from, and to obtain payment of the fair value of his shares in the event of, any corporate action, or to otherwise obtain fair value for his shares, where this part expressly provides that a shareholder shall have the rights and remedies provided in this subchapter. See: Section 1906(c) (relating to dissenters rights upon special treatment). Section 1930 (relating to dissenters rights). Section 1931(d) (relating to dissenters rights in share exchanges). Section 1932(c) (relating to dissenters rights in asset transfers). Section 1952(d) (relating to dissenters rights in division). Section 1962(c) (relating to dissenters rights in conversion). Section 2104(b) (relating to procedure). Section 2324 (relating to corporation option where a restriction on transfer of a security is held invalid). Section 2325(b) (relating to minimum vote requirement). Section 2704(c) (relating to dissenters rights upon election). Section 2705(d) (relating to dissenters rights upon renewal of election). Section 2907(a) (relating to proceedings to terminate breach of qualifying conditions). Section 7104(b)(3) (relating to procedure). (b) Exceptions. (1) Except as otherwise provided in paragraph (2), the holders of the shares of any class or series of shares that, at the record date fixed to determine the shareholders entitled to notice of and to vote at the meeting at which a plan specified in any of section 1930, 1931(d), 1932(c) or 1952(d) is to be voted on, are either: (i) listed on a national securities exchange; or (ii) held of record by more than 2,000 shareholders; shall not have the right to obtain payment of the fair value of any such shares under this subchapter. (2) Paragraph (1) shall not apply to and dissenters rights shall be available without regard to the exception provided in that paragraph in the case of: (i) Shares converted by a plan if the shares are not converted solely into shares of the acquiring, surviving, new or other corporation or solely into such shares and money in lieu of fractional shares. (ii) Shares of any preferred or special class unless the articles, the plan or the terms of the transaction entitle all shareholders of the class to vote thereon and require for the adoption of the IV-1 65 plan or the effectuation of the transaction the affirmative vote of a majority of the votes cast by all shareholders of the class. (iii) Shares entitled to dissenters rights under section 1906(c) (relating to dissenters rights upon special treatment). (3) The shareholders of a corporation that acquires by purchase, lease, exchange or other disposition all or substantially all of the shares, property or assets of another corporation by the issuance of shares, obligations or otherwise, with or without assuming the liabilities of the other corporation and with or without the intervention of another corporation or other person, shall not be entitled to the rights and remedies of dissenting shareholders provided in this subchapter regardless of the fact, if it be the case, that the acquisition was accomplished by the issuance of voting shares of the corporation to be outstanding immediately after the acquisition sufficient to elect a majority or more of the directors of the corporation. (c) Grant of Optional Dissenters Rights. The bylaws or a resolution of board of directors may direct that all or a part of the shareholders shall have dissenters rights in connection with any corporate action or other transaction that would otherwise not entitle such shareholders to dissenters rights. (d) Notice of Dissenters Rights. Unless otherwise provided by statute, if a proposed corporate action that would give rise to dissenters rights under this subpart is submitted to a vote at a meeting of shareholders, there shall be included in or enclosed with the notice of meeting: (1) a statement of the proposed action and a statement that the shareholders have a right to dissent and obtain payment of the fair value of their shares by complying with the terms of this subchapter; and (2) a copy of this subchapter. (e) Other Statutes. The procedures of this subchapter shall also be applicable to any transaction described in any statute other than this part that makes reference to this subchapter for the purpose of granting dissenters rights. (f) Certain Provisions of Articles Ineffective. This subchapter may not be relaxed by any provision of the articles. (g) Cross References. See sections 1105 (relating to restriction on equitable relief), 1904 (relating to a de facto transaction doctrine abolished) and 2512 (relating to dissenters rights procedure). SECTION 1572. DEFINITIONS The following words and phrases when used in this subchapter shall have the meanings given to them in this section unless the context clearly indicates otherwise: "Corporation." The issuer of the shares held or owned by the dissenter before the corporate action or the successor by merger, consolidation, division, conversion or otherwise of that issuer. A plan of division may designate which of the resulting corporations is the successor corporation for the purposes of this subchapter. The successor corporation in a division shall have sole responsibility for payments to dissenters and other liabilities under this subchapter except as otherwise provided in the plan of division. "Dissenter." A shareholder or beneficial owner who is entitled to and does assert dissenters rights under this subchapter and who has performed every act required up to the time involved for the assertion of those rights. "Fair Value." The fair value of shares immediately before the effectuation of the corporate action to which the dissenter objects, taking into account all relevant factors, but excluding any appreciation or depreciation in anticipation of the corporate action. IV-2 66 "Interest." Interest from the effective date of the corporate action until the date of payment at such rate as is fair and equitable under all the circumstances, taking into account all relevant factors, including the average rate currently paid by the corporation on its principal bank loans. SECTION 1573. RECORD AND BENEFICIAL HOLDERS AND OWNERS (a) Record Holders of Shares. A record holder of shares of a business corporation may assert dissenters rights as to fewer than all of the shares registered in his name only if he dissents with respect to all the shares of the same class or series beneficially owned by any one person and discloses the name and address of the person or persons on whose behalf he dissents. In that event, his rights shall be determined as if the shares as to which he has dissented and his other shares were registered in the names of different shareholders. (b) Beneficial Owners of Shares. A beneficial owner of shares of a business corporation who is not the record holder may assert dissenters rights with respect to shares held on his behalf and shall be treated as a dissenting shareholder under the terms of this subchapter if he submits to the corporation not later than the time of the assertion of dissenters rights a written consent of the record holder. A beneficial owner may not dissent with respect to some but less than all shares of the same class or series owned by the owner, whether or not the shares so owned by him are registered in his name. SECTION 1574. NOTICE OF INTENTION TO DISSENT If the proposed corporate action is submitted to a vote at a meeting of shareholders of a business corporation, any person who wishes to dissent and obtain payment of the fair value of his shares must file with the corporation, prior to the vote, a written notice of intention to demand that he be paid the fair value for his shares if the proposed action is effectuated, must effect no change in the beneficial ownership of his shares from the date of such filing continuously through the effective date of the proposed action and must refrain from voting his shares in approval of such action. A dissenter who fails in any respect shall not acquire any right to payment of the fair value of his shares under this subchapter. Neither a proxy nor a vote against the proposed corporate action shall constitute the written notice required by this section. SECTION 1575. NOTICE TO DEMAND PAYMENT (a) General Rule. If the proposed corporate action is approved by the required vote at a meeting of shareholders of a business corporation, the corporation shall mail a further notice to all dissenters who gave due notice of intention to demand payment of the fair value of their shares and who refrained from voting in favor of the proposed action. If the proposed corporate action is to be taken without a vote of shareholders, the corporation shall send to all shareholders who are entitled to dissent and demand payment of the fair value of their shares a notice of the adoption of the plan or other corporate action. In either case, the notice shall: (1) State where and when a demand for payment must be sent and certificates for certificated shares must be deposited in order to obtain payment. (2) Inform holders of uncertificated shares to what extent transfer of shares will be restricted from the time that demand for payment is received. (3) Supply a form for demanding payment that includes a request for certification of the date on which the shareholder, or the person on whose behalf the shareholder dissents, acquired beneficial ownership of the shares. (4) Be accompanied by a copy of this subchapter. (b) Time for Receipt of Demand for Payment. The time set for receipt of the demand and deposit of certificated shares shall be not less than 30 days from the mailing of the notice. IV-3 67 SECTION 1576. FAILURE TO COMPLY WITH NOTICE TO DEMAND PAYMENT, ETC. (a) Effect of Failure of Shareholder to Act. A shareholder who fails to timely demand payment, or fails (in the case of certificated shares) to timely deposit certificates, as required by a notice pursuant to section 1575 (relating to notice to demand payment) shall not have any right under this subchapter to receive payment of the fair value of his shares. (b) Restriction on Uncertificated Shares. If the shares are not represented by certificates, the business corporation may restrict their transfer from the time of receipt of demand for payment until effectuation of the proposed corporate action or the release of restrictions under the terms of section 1577(a) (relating to failure to effectuate corporate action). (c) Rights Retained by Shareholder. The dissenter shall retain all other rights of a shareholder until those rights are modified by effectuation of the proposed corporate action. SECTION 1577. RELEASE OF RESTRICTIONS OR PAYMENT FOR SHARES (a) Failure to Effectuate Corporate Action. Within 60 days after the date set for demanding payment and depositing certificates, if the business corporation has not effectuated the proposed corporate action, it shall return any certificates that have been deposited and release uncertificated shares from any transfer restrictions imposed by reason of the demand for payment. (b) Renewal of Notice to Demand Payment. When the uncertificated shares have been released from transfer restrictions and deposited certificates have been returned, the corporation may at any later time send a new notice conforming to the requirements of section 1575 (relating to notice to demand payment), with like effect. (c) Payment of Fair Value of Shares. Promptly after effectuation of the proposed corporate action, or upon timely receipt of demand for payment if the corporate action has already been effectuated, the corporation shall either remit to dissenters who have made demand and (if their shares are certificated) have deposited their certificates the amount that the corporation estimates to be the fair value of the shares, or give written notice that no remittance under this section will be made. The remittance or notice shall be accompanied by: (1) The closing balance sheet and statement of income of the issuer of the shares held or owned by the dissenter for a fiscal year ending not more than 16 months before the date of remittance or notice together with the latest available interim financial statements. (2) A statement of the corporation's estimate of the fair value of the shares. (3) A notice of the right of the dissenter to demand payment or supplemental payment, as the case may be, accompanied by a copy of this subchapter. (d) Failure to Make Payment. If the corporation does not remit the amount of its estimate of the fair value of the shares as provided by subsection (c), it shall return any certificates that have been deposited and release uncertificated shares from any transfer restrictions imposed by reason of the demand for payment. The corporation may make a notation on any such certificate or on the records of the corporation relating to any such uncertificated shares that such demand has been made. If shares with respect to which notation has been so made shall be transferred, each new certificate issued therefor or the records relating to any transferred uncertificated shares shall bear a similar notation, together with the name of the original dissenting holder or owner of such shares. A transferee of such shares shall not acquire by such transfer any rights in the corporation other than those that the original dissenter had after making demand for payment of their fair value. IV-4 68 SECTION 1578. ESTIMATE BY DISSENTER OF FAIR VALUE OF SHARES (a) General Rule. If the business corporation gives notice of its estimate of the fair value of the shares, without remitting such amount, or remits payment of its estimate of the fair value of a dissenter's shares as permitted by section 1577(c) (relating to payment of fair value of shares) and the dissenter believes that the amount stated or remitted is less than the fair value of his shares, he may send to the corporation his own estimate of the fair value of the shares, which shall be deemed a demand for payment of the amount or the deficiency. (b) Effect of Failure to File Estimate. Where the dissenter does not file his own estimate under subsection (a) within 30 days after the mailing by the corporation of its remittance or notice, the dissenter shall be entitled to no more than the amount stated in the notice or remitted to him by the corporation. SECTION 1579. VALUATION PROCEEDINGS GENERALLY (a) General Rule. Within 60 days after the latest of: (1) Effectuation of the proposed corporate action; (2) Timely receipt of any demands for payment under section 1575 (relating to notice to demand payment); or (3) Timely receipt of any estimates pursuant to section 1578 (relating to estimate by dissenter of fair value of shares); If any demands for payment remain unsettled, the business corporation may file in court an application for relief requesting that the fair value of the shares be determined by the court. (b) Mandatory Joinder of Dissenters. All dissenters, wherever residing, whose demands have not been settled shall be made parties to the proceeding as in an action against their shares. A copy of the application shall be served on each such dissenter. If a dissenter is a nonresident, the copy may be served on him in the manner provided or prescribed by or pursuant to 42 Pa.C.S. Ch. 53 (relating to bases of jurisdiction and interstate and international procedure). (c) Jurisdiction of the Court. The jurisdiction of the court shall be plenary and exclusive. The court may appoint an appraiser to receive evidence and recommend a decision on the issue of fair value. The appraiser shall have such power and authority as may be specified in the order of appointment or in any amendment thereof. (d) Measure of Recovery. Each dissenter who is made a party shall be entitled to recover the amount by which the fair value of his shares is found to exceed the amount, if any, previously remitted, plus interest. (e) Effect of Corporation's Failure to File Application. If the corporation fails to file an application as provided in subsection (a), any dissenter who made a demand and who has not already settled his claim against the corporation may do so in the name of the corporation at any time within 30 days after the expiration of the 60-day period. If a dissenter does not file an application within the 30-day period, each dissenter entitled to file an application shall be paid the corporation's estimate of the fair value of the shares and no more, and may bring an action to recover any amount not previously remitted. SECTION 1580. COSTS AND EXPENSES OF VALUATION PROCEEDINGS (a) General Rule. The costs and expenses of any proceeding under section 1579 (relating to valuation proceedings generally), including the reasonable compensation and expenses of the appraiser appointed by the court, shall be determined by the court and assessed against the business corporation except that any part of the costs and expenses may be apportioned and assessed as the court deems appropriate against all or some of the dissenters who are parties and whose action in demanding supplemental payment under section 1578 (relating to estimate by dissenter of fair value of shares) the court finds to be dilatory, obdurate, vexatious or in bad faith. IV-5 69 (b) Assessment of Counsel Fees and Expert Fees Where Lack of Good Faith Appears. Fees and expenses of counsel and of experts for the respective parties may be assessed as the court deems appropriate against the corporation and in favor of any or all dissenters if the corporation failed to comply substantially with the requirements of this subchapter and may be assessed against either the corporation or a dissenter, in favor of any other party, if the court finds that the party against whom the fees and expenses are assessed acted in bad faith or in a dilatory, obdurate, arbitrary or vexatious manner in respect to the rights provided by this subchapter. (c) Award of Fees for Benefits to Other Dissenters. If the court finds that the services of counsel for any dissenter were of substantial benefit to other dissenters similarly situated and should not be assessed against the corporation, it may award to those counsel reasonable fees to be paid out of the amounts awarded to the dissenters who were benefited. IV-6 70 SCHEDULE V AUDITED FINANCIAL STATEMENTS (AND RELATED NOTES) OF THE COMPANY FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 V-1 71 VWR SCIENTIFIC PRODUCTS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, -------------------------------------- 1998 1997 1996 ---------- ---------- ---------- (THOUSANDS, EXCEPT PER SHARE DATA) Sales.................................................. $1,349,948 $1,244,795 $1,117,286 Cost of sales.......................................... 1,037,771 967,080 870,379 ---------- ---------- ---------- Gross margin........................................... 312,177 277,715 246,907 Operating expenses..................................... 201,478 177,995 172,407 Depreciation and amortization.......................... 25,267 22,148 20,740 Acquisition-related expenses........................... 253 5,128 ---------- ---------- ---------- Total operating expenses............................... 226,745 200,396 198,275 ---------- ---------- ---------- Operating income....................................... 85,432 77,319 48,632 Interest expense and other............................. 27,910 35,355 36,827 ---------- ---------- ---------- Income before income taxes and extraordinary charge.... 57,522 41,964 11,805 Income taxes........................................... 22,585 17,229 4,782 ---------- ---------- ---------- Income before extraordinary charge..................... 34,937 24,735 7,023 Extraordinary charge, net of income taxes.............. 689 406 ---------- ---------- ---------- Net income............................................. $ 34,248 $ 24,329 $ 7,023 ========== ========== ========== Basic earnings per share: Income before extraordinary charge..................... $ 1.21 $ 1.08 $ 0.32 Extraordinary charge................................... (.02) (.02) ---------- ---------- ---------- Net income............................................. $ 1.19 $ 1.06 $ 0.32 ========== ========== ========== Diluted earnings per share: Income before extraordinary charge..................... $ 1.18 $ 1.05 $ 0.32 Extraordinary charge................................... (.02) (.01)* ---------- ---------- ---------- Net income............................................. $ 1.16 $ 1.04 $ 0.32 ========== ========== ========== Weighted average shares outstanding: Basic................................................ 28,790 22,969 21,892 Diluted.............................................. 29,594 23,494 22,290
- --------------- * Difference due to rounding. See Notes to Consolidated Financial Statements. V-2 72 VWR SCIENTIFIC PRODUCTS CORPORATION CONSOLIDATED BALANCE SHEETS
DECEMBER 31, ---------------------- 1998 1997 --------- --------- (THOUSANDS, EXCEPT PER SHARE DATA) ASSETS Current assets: Trade receivables, less reserves of $3,417 and $2,512..... $191,068 $180,345 Other receivables......................................... 24,564 6,632 Inventories............................................... 140,826 103,445 Other..................................................... 13,431 11,166 -------- -------- Total current assets................................... 369,889 301,588 Property and equipment -- net............................. 91,072 50,846 Excess of cost over net assets of businesses acquired -- net........................................ 439,091 354,961 Other assets -- net....................................... 11,537 10,171 -------- -------- $911,589 $717,566 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Bank checks outstanding, less cash in bank................ $ 9,658 $ 10,077 Accounts payable.......................................... 102,125 91,887 Accrued liabilities....................................... 20,560 17,560 -------- -------- Total current liabilities.............................. 132,343 119,524 -------- -------- Long-term debt: Revolving credit facility................................. 202,490 81,462 Subordinated debenture.................................... 153,175 150,947 -------- -------- Total long-term debt................................... 355,665 232,409 -------- -------- Deferred income taxes and other............................. 40,034 23,626 Shareholders' equity: Preferred stock, $1 par value, 25,000,000 shares authorized, none issued Common stock, $1 par value, 120,000,000 shares authorized, 28,967,505 and 28,487,251 shares issued, respectively................. 28,968 28,487 Additional paid-in capital................................ 287,149 280,068 Retained earnings......................................... 70,046 35,798 Treasury stock at cost, 4,978 shares...................... (94) (94) Unamortized ESOP contribution............................. (795) (1,144) Unamortized restricted stock awards....................... (142) (184) Accumulated other comprehensive loss...................... (1,585) (924) -------- -------- Total shareholders' equity............................. 383,547 342,007 -------- -------- $911,589 $717,566 ======== ========
See Notes to Consolidated Financial Statements. V-3 73 VWR SCIENTIFIC PRODUCTS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, ----------------------------------- 1998 1997 1996 --------- --------- --------- (THOUSANDS) OPERATING ACTIVITIES Net income.............................................. $ 34,248 $ 24,329 $ 7,023 Adjustments to reconcile net income to cash provided by (used in) operating activities: Depreciation and amortization, including deferred debt issuance costs..................................... 25,686 23,234 22,051 Debentures and stock issued in lieu of payment of interest........................................... 2,228 12,138 19,114 Provision for deferred taxes.......................... 16,377 7,372 4,284 Loss on early extinguishment of debt.................. 1,138 680 Change in operating assets and liabilities, net of effect of businesses acquired: Trade receivables.................................. 10,122 (19,110) (27,723) Other receivables.................................. (14,452) 527 (3,851) Inventories........................................ (15,206) 3,364 (55,262) Other current assets............................... (2,226) (5,927) (2,367) Accounts payable................................... 4,172 (1,112) 19,761 Accrued liabilities and other...................... (2,061) 2,490 (11,162) --------- --------- --------- Cash provided by (used in) operating activities......... 60,026 47,985 (28,132) --------- --------- --------- INVESTING ACTIVITIES Acquisition of businesses, net of cash acquired......... (131,814) 1,683 Sale of joint venture investment........................ 2,881 Capital expenditures, net............................... (40,488) (11,551) (23,417) Proceeds from sale of property and equipment............ 5,664 Other................................................... (165) --------- --------- --------- Cash used in investing activities....................... $(172,302) $ (11,551) $ (13,354) --------- --------- --------- FINANCING ACTIVITIES Proceeds from long-term debt............................ $ 469,778 $ 224,006 $ 206,788 Repayment of long-term debt............................. (361,993) (394,200) (174,459) Net proceeds from common stock issuance................. 132,708 Net change in bank checks outstanding................... (419) (197) 8,526 Proceeds from exercise of stock options................. 3,003 560 308 Proceeds from shares issued under Merck KGaA ownership rights................................................ 3,084 547 Deferred debt issuance costs and other.................. (1,177) 142 323 --------- --------- --------- Cash provided by (used in) financing activities......... $ 112,276 $ (36,434) $ 41,486 --------- --------- --------- Net change in cash...................................... 0 0 0 Cash at beginning of year............................... 0 0 0 --------- --------- --------- Cash at end of year..................................... $ 0 $ 0 $ 0 ========= ========= ========= Supplemental disclosures of cash flow information: Cash paid during the year for: Interest, net of 1998 capitalized interest of $1,185............................................. $ 24,872 $ 20,797 $ 18,584 Income taxes.......................................... 17,036 7,101 1,175
See Notes to Consolidated Financial Statements. V-4 74 VWR SCIENTIFIC PRODUCTS CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
UNAMORTIZED ESOP COMMON CONTRIBUTION, ACCUMULATED STOCK ADDITIONAL RESTRICTED OTHER $1 PAR PAID-IN RETAINED TREASURY STOCK COMPREHENSIVE VALUE CAPITAL EARNINGS STOCK AWARDS INCOME/LOSS* TOTAL ------- ---------- -------- -------- ------------- ------------- -------- (THOUSANDS, EXCEPT PER SHARE DATA) Balance at December 31, 1995....... $21,068 $137,753 $ 4,457 $ (9) $(2,468) $ (712) $160,089 Comprehensive Income Net income....................... 7,023 7,023 Other comprehensive income -- foreign currency translation adjustment..................... 40 40 -------- Total Comprehensive Income......... 7,063 ======== Issuance of 1,230,315 shares of common stock as payment for debenture interest............... 1,230 14,075 15,305 Allocation of shares to ESOP participants..................... 293 293 Restricted stock awards............ 4 52 (56) Amortization of restricted stock... 398 398 Exercise of stock options.......... 44 264 308 Other.............................. 1 13 (9) (36) 12 (19) ------- -------- ------- ---- ------- ------- -------- Balance at December 31, 1996....... 22,347 152,157 11,471 (45) (1,821) (672) 183,437 ======= ======== ======= ==== ======= ======= ======== Comprehensive Income Net income....................... 24,329 24,329 Other comprehensive income -- foreign currency translation adjustment..................... (252) (252) -------- Total Comprehensive Income......... 24,077 ======== Issuance of 6,036,719 shares of common stock..................... 6,037 126,671 132,708 Allocation of shares to ESOP participants..................... 320 320 Amortization of restricted stock... 173 173 Exercise of stock options.......... 51 509 560 Shares issued under Merck KGaA ownership rights................. 52 495 547 Tax benefit on exercise of stock options.......................... 236 236 Other.............................. (2) (49) (51) ------- -------- ------- ---- ------- ------- -------- Balance at December 31, 1997....... 28,487 280,068 35,798 (94) (1,328) (924) 342,007 ======= ======== ======= ==== ======= ======= ======== Comprehensive Income Net income....................... 34,248 34,248 Other comprehensive income -- foreign currency translation adjustment..................... (661) (661) -------- Total Comprehensive Income......... 33,587 ======== Allocation of shares to ESOP participants..................... 349 349 Amortization of restricted stock... 137 137 Exercise of stock options.......... 238 2,765 3,003 Restricted stock awards............ 3 92 (95) Shares issued under Merck KGaA ownership rights................. 240 2,844 3,084 Tax benefit on exercise of stock options.......................... 1,380 1,380 ------- -------- ------- ---- ------- ------- -------- Balance at December 31, 1998....... $28,968 $287,149 $70,046 $(94) $ (937) $(1,585) $383,547 ======= ======== ======= ==== ======= ======= ========
- --------------- * Accumulated other comprehensive income/(loss) consists only of foreign currency. V-5 75 VWR SCIENTIFIC PRODUCTS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation VWR Scientific Products Corporation ("VWR" or "the Company") distributes laboratory supplies, chemicals, and equipment to life science, educational and industrial organizations throughout the United States and Canada. The Company also distributes critical environment (cleanroom) supplies and apparel to manufacturers of electronics, medical devices and pharmaceuticals. The consolidated financial statements include the accounts of VWR Scientific Products Corporation and all of its subsidiaries. Significant intercompany accounts and transactions have been eliminated. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Capitalization, Depreciation and Amortization Property and equipment are recorded at cost. Depreciation is computed using the straight-line method for financial reporting purposes and, generally, accelerated methods for income tax purposes. Acquisition and development costs for significant business systems and related software for internal use are capitalized and amortized over their estimated useful lives, ranging from two to twelve years. The Company capitalizes the costs of developing and producing catalogs, which are used by customers for ordering products. Such costs are amortized over the period of use, generally two to three years. Excess of Cost Over Net Assets of Businesses Acquired Excess of cost over net assets of businesses acquired is primarily the result of the acquisition of the Industrial Distribution Business of Baxter Healthcare in 1995 and The Science Kit Group of Companies ("Science Kit") in 1998 and is being amortized on a straight-line basis over 40 years. Accumulated amortization at December 31, 1998 and 1997 was $34.5 million and $23.8 million, respectively. The carrying value of excess of cost over net assets of businesses acquired is evaluated periodically in relation to the operating performance and expected future undiscounted cash flows of the underlying businesses. Revenue Recognition The Company recognizes revenue when products are shipped. Concentrations of Credit Risk Trade receivables reflect VWR's diverse customer base and the customer base's wide geographic dispersion. As a result, at December 31, 1998, the Company had no significant concentrations of credit risk. Foreign Currency Transactions The Company utilizes foreign currency contracts to reduce its exposure to market risks from changes in foreign exchange rates. The Company hedges foreign currency transactions on a continuous basis for periods consistent with its committed exposures. The primary purpose of the foreign currency hedging activities is to protect Canadian purchases of United States supplied goods from currency exchange rate fluctuations. Unrealized gains and losses from these contracts are recognized in operations as the related transactions occur. At December 31, 1998, open foreign exchange contracts were $13.3 million. V-6 76 VWR SCIENTIFIC PRODUCTS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) New Accounting Standards In March 1998, the Accounting Standards Executive Committee issued Statement of Position 98-1 ("SOP 98-1"), "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." SOP 98-1 requires all costs related to the development of internal use software other than those incurred during the application development stage to be expensed as incurred. Costs incurred during the application development stage are required to be capitalized and amortized over the estimated useful life of the software. SOP 98-1 is effective for the Company's first quarter ending March 31, 1999. Adoption is not expected to have a material effect on the Company's consolidated financial statements. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS"), "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 is effective for fiscal years beginning after June 15, 1999. SFAS No. 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designed as part of a hedge transaction and, if it is, the type of hedge transaction. The Company is evaluating the effect of this standard on its financial statements. 2. ACQUISITIONS On July 31, 1998, the Company acquired all of the outstanding shares of Science Kit, a privately held supplier of science education products to school systems and educational institutions in the United States and Canada, for $110 million, subject to adjustment. Revenues for Science Kit were $66 million in 1997. The acquisition has been accounted for under the purchase method of accounting and the Company has included Science Kit's results of operations from the date of the acquisition. The cost of the acquisition has been preliminarily allocated on the basis of the estimated fair value of the assets acquired and liabilities assumed. The purchase price was financed by a portion of the proceeds received from borrowings under the Company's unsecured five-year revolving credit facility entered into on July 31, 1998. In addition, in 1998 the Company acquired two other companies, A.J. Reynolds Co., Inc. and HPC Scientific & Technology, Inc., for an aggregate purchase price of $22.6 million. Combined fiscal year 1997 revenues for these two companies were approximately $32 million. Both were accounted for under the purchase method of accounting and were financed by borrowings under the Company's credit facility in place at the date of acquisition. The following unaudited pro forma information has been prepared assuming that the acquisitions had occurred at the beginning of the years presented. Pro forma adjustments include: increased amortization for the cost over net assets acquired; increased interest expense from the acquisition debt; and related income tax effects. The following unaudited pro forma information is provided for information purposes only and does not purport to be indicative of VWR's results of operations that would actually have been achieved had the acquisitions been completed on January 1, 1997.
YEAR ENDED DECEMBER 31, ---------------------------- 1998 1997 ------------ ------------ (THOUSANDS, EXCEPT PER SHARE DATA) Sales....................................................... $1,402,790 $1,343,399 Net income.................................................. $ 31,280 $ 24,000 Basic earnings per share.................................... $ 1.09 $ 1.04 Diluted earnings per share.................................. $ 1.06 $ 1.02
V-7 77 VWR SCIENTIFIC PRODUCTS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 3. INVENTORIES Inventories consist of purchased goods for sale and are valued at the lower of cost or market. Cost determined using the last-in, first-out (LIFO) method comprised 95% and 89% of inventory carrying value at December 31, 1998 and 1997, respectively. Cost of the remaining inventories is determined using the first-in, first-out (FIFO) method. LIFO cost at December 31, 1998 and 1997 was approximately $33.7 million and $32.9 million, respectively, less than current cost. 4. FIXED ASSETS Net property and equipment at December 31, 1998 and 1997, is:
1998 1997 -------- -------- (IN THOUSANDS) Land........................................................ $ 2,404 $ 738 Buildings................................................... 22,506 15,340 Equipment and computer software............................. 124,478 76,636 Capital additions in process................................ 1,257 7,247 -------- -------- 150,645 99,961 Less accumulated depreciation............................... (59,573) (49,115) -------- -------- Net property and equipment.................................. $ 91,072 $ 50,846 ======== ========
Depreciation expense for the years ended December 31, 1998, 1997, and 1996, was $9.9 million, $8.7 million, and $7.2 million, respectively. 5. LONG-TERM DEBT AND REVOLVING CREDIT FACILITIES On July 31, 1998, the Company entered into a $250 million, five-year, unsecured Revolving Credit Facility ("Credit Facility"). The Credit Facility replaced the Company's former $150 million secured revolving credit facility entered into on September 14, 1995. The Credit Facility provides for the ability to borrow the equivalent in Canadian dollars up to $17 million U.S. dollars. The Credit Facility provides that the available line of credit will decrease to $225 million in July 2001 and to $200 million in July 2002. The Credit Facility bears an interest rate based on the London Interbank Offered Rate ("LIBOR") or the prime rate, plus the applicable margin. The Company is required to pay commitment fees on the unused portion of the Credit Facility, between .20% and .30%. The margin on interest and the commitment fees will vary depending on the relationship between the Company's earnings before interest, taxes, depreciation and amortization ("EBITDA") and total debt. The Credit Facility includes various financial covenants related to total leverage, interest coverage, and net worth. On September 15, 1995, the Company issued a debenture ("Debenture") to EM Laboratories, Incorporated, ("EML") an affiliate of Merck KGaA, Germany in the principal amount of $135 million. The Debenture has been assigned to another affiliate of EML. The Debenture matures in a single installment in September 2005 and is callable at face value, at the Company's option, beginning in September 2000. The Debenture bears interest at 13% per annum, due quarterly. Until such time as Merck KGaA and its affiliates obtained an ownership of 49.89% of the aggregate number of issued and outstanding common shares, interest was payable solely in common shares at a price of $12.44 per share, and thereafter, until September 1, 1997, interest on the Debenture was deferred, with accumulated interest thereon, until the Debenture matures. Interest on the Debenture is payable quarterly in cash after September 1, 1997 through the maturity date. V-8 78 VWR SCIENTIFIC PRODUCTS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) At December 31, 1998 and 1997, the approximate weighted average interest rate on outstanding borrowings under the credit facilities was 6.4% and 6.9%, respectively. Interest expense under the credit facilities for the years ended December 31, 1998, 1997, and 1996, was $8.5 million, $15.9 million, and $17.6 million, respectively, resulting in a weighted average interest rate of 6.4%, 7.1%, and 7.4%, respectively. The carrying value of the Credit Facility approximates its fair value. The fair value of the Debenture is not readily determinable due to the nature of the instrument. In 1998, the Company recorded an extraordinary charge in the amount of $1.1 million ($0.7 million net of tax) representing the write-off of unamortized debt issuance costs related to the refinancing of the Company's former $150 million revolving credit facility. Outstanding borrowings under the term loan portion of the former credit facility were repaid in 1997 using a portion of the net proceeds received from the Company's sale of common shares as described in Note 7. As a result, an extraordinary charge was recorded for 1997 of $0.7 million ($0.4 million net of tax) representing the write-off of $0.9 million of unamortized debt issuance costs related to the early extinguishment of the term loan under the Company's former credit facility, net of $0.2 million of gains on the termination of interest rate swap agreements related to the former credit facility. The Company has entered into various interest rate swap agreements with financial institutions which effectively change the Company's interest rate exposure on a notional amount of debt from variable rates to fixed rates. The notional amounts of the swaps are based upon obligations under the Credit Facility and expected actual debt levels during the term of the Credit Facility. The Company provides protection to meet actual exposures and does not speculate in derivatives. At December 31, 1998, the Company had a notional amount of $40 million of swaps in effect. These swaps expire in 1999 and 2000. The amount of floating rate debt protected by the swaps ranges from $40 million to $10 million during the period outstanding with fixed rates ranging from 5.9% to 6.4%. Net receipts or payments under the agreements are recognized as an adjustment to interest expense. At December 31, 1998, the fair market value of the swap agreements, which is not recorded in the consolidated financial statements, is a net payable of approximately $0.2 million. The fair market value of the swap agreements is based on the present value of the future cash flows determined by the difference between the contracts' fixed interest rate and the then-current replacement interest rate. The other parties to the interest rate swap agreements expose the Company to credit loss in the event of nonperformance although the Company does not anticipate such nonperformance. 6. INCOME TAXES Taxes on income are based on income before income taxes and extraordinary charge as follows:
1998 1997 1996 ------- ------- ------- (THOUSANDS) Domestic.............................................. $53,191 $38,148 $10,187 Canada................................................ 4,331 3,816 1,618 ------- ------- ------- $57,522 $41,964 $11,805 ======= ======= =======
V-9 79 VWR SCIENTIFIC PRODUCTS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The provision for income taxes consists of:
1998 1997 1996 ------- ------- ------ (THOUSANDS) Current: Federal.............................................. $ 3,014 $ 7,037 $ 70 State................................................ 731 697 Foreign.............................................. 2,463 2,123 428 ------- ------- ------ 6,208 9,857 498 ------- ------- ------ Deferred: Federal.............................................. 13,881 5,876 3,460 State................................................ 2,600 1,399 603 Foreign.............................................. (104) 97 221 ------- ------- ------ 16,377 7,372 4,284 ------- ------- ------ Total tax provision.................................... $22,585 $17,229 $4,782 ======= ======= ======
The reconciliation of tax computed at the federal statutory tax rate of 35% of income before income taxes to the actual income tax provision is as follows:
1998 1997 1996 ------- ------- ------ (THOUSANDS) Statutory tax.......................................... $20,133 $14,687 $4,132 State income taxes net of federal tax benefit.......... 2,165 1,362 392 Foreign rate differential.............................. 635 667 151 Other -- net........................................... (348) 513 107 ------- ------- ------ Total tax provision.................................... $22,585 $17,229 $4,782 ======= ======= ======
Deferred tax liabilities (assets) as of December 31, 1998 and 1997 are comprised of the following:
1998 1997 ------- ------- (THOUSANDS) Depreciation................................................ $14,122 $ 3,438 Pension..................................................... 3,395 3,718 Goodwill amortization....................................... 20,361 14,015 ------- ------- Deferred tax liabilities............................... 37,878 21,171 ------- ------- Postretirement benefits..................................... (763) (698) Other compensation benefits................................. (1,896) (1,035) State net operating loss carryforwards...................... (485) (683) Inventory capitalization.................................... (1,337) (1,610) Other -- net................................................ (2,264) (1,097) ------- ------- Deferred tax assets.................................... (6,745) (5,123) ------- ------- Net deferred tax liability.................................. $31,133 $16,048 ======= =======
In 1998 and 1997, tax benefits of $1.4 million and $0.2 million, respectively related to the exercise of employee stock options were recorded as additional paid-in capital. Net current deferred tax assets are $5.0 million and $3.8 million at December 31, 1998 and 1997, respectively. The Company has state net operating loss carryforwards that expire at various times through 2013. V-10 80 VWR SCIENTIFIC PRODUCTS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 7. SHAREHOLDERS' EQUITY Merck KGaA and its affiliates, including EML, beneficially own 49.89% of the issued and outstanding common shares as of December 31, 1998. In connection with an April 1995 agreement to purchase securities from the Company, EML entered into a Standstill Agreement with the Company, pursuant to which EML agreed that it and its affiliates would not, subject to certain specified exceptions, for a period of four years, increase its beneficial ownership of the Company's common shares above 49.89% without the prior consent of the Company. Under the terms of the Debenture, interest was payable in common shares, at an issue price per share of $12.44, until Merck KGaA's beneficial ownership reached 49.89%. In addition, upon issuance of stock by the Company, including its stock incentive plans, Merck KGaA has the option to purchase additional shares from the Company to retain its 49.89% ownership interest for which the purchase price equals the price the Company receives for the stock. In November 1997, the Company completed a public offering of 3,025,000 common shares and a concurrent private placement with affiliates of Merck KGaA of 3,011,719 common shares, resulting in proceeds of $132.7 million (net of issuance costs of $4.6 million). The net proceeds were used to repay the outstanding amount of the Company's term loan of $88.8 million and $43.9 million of the revolver, both under the Company's former credit facility. 8. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share (in thousands):
1998 1997 1996 ------ ------ ------ Basic weighted average common shares outstanding......... 28,790 22,969 21,892 Net effect of dilutive stock options..................... 403 263 199 Effect of Merck KGaA ownership rights.................... 401 262 199 ------ ------ ------ Diluted weighted average common shares outstanding....... 29,594 23,494 22,290 ====== ====== ======
Shares issued in connection with the 1997 public offering and concurrent private placement with affiliates of Merck KGaA totaling approximately 6 million shares are included in the weighted average shares outstanding for approximately one month in 1997. Shares issued in payment of Debenture interest during 1996 were included in the share calculation as interest expense was recognized. 9. STOCK AND INCENTIVE PROGRAMS The Company follows Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for its employee stock-based compensation. The Company has adopted the disclosure-only option under SFAS No. 123, "Accounting for Stock-Based Compensation." The Company's stock incentive plans allow for the grant of nonqualified and incentive stock options or restricted stock awards. In addition to outstanding options, 572,400 shares were available for issuance at December 31, 1998. Stock Options Options have been granted to certain officers and managers to purchase common stock of the Company at its fair market value at the date of grant. Options contain various vesting provisions ranging from 4 to 9 years. Beginning in 1995, grants issued vest at the earlier of nine years following issuance or in 50% allotments based on the performance of the Company's stock over a certain period of time. V-11 81 VWR SCIENTIFIC PRODUCTS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Changes in options outstanding were:
AVERAGE SHARES PRICE --------- ------- Outstanding at December 31, 1995............................ 1,241,601 $11.28 Exercised................................................. (43,983) 7.03 Granted................................................... 189,000 13.25 Cancelled................................................. (60,000) 12.00 --------- ------ Outstanding at December 31, 1996............................ 1,326,618 $11.67 Exercised................................................. (51,460) 11.19 Granted................................................... 167,000 18.75 Cancelled................................................. (66,200) 11.82 --------- ------ Outstanding at December 31, 1997............................ 1,375,958 $12.51 Exercised................................................. (237,774) 12.63 Granted................................................... 1,308,500 32.13 Cancelled................................................. (53,500) 22.86 --------- ------ Outstanding at December 31, 1998............................ 2,393,184 $22.99 ========= ======
At December 31, 1998, there were 1,088,184 options exercisable at exercise prices ranging from $7.79 to $18.75, with an average exercise price of $12.15. Exercisable options at December 31, 1998 have a weighted average remaining life of 6 years. In addition, there were 1,296,000 options outstanding at an exercise price of $32.13 with a remaining life of 9 years, which were not included in the computation of diluted earnings per share because the effect would be antidilutive. Pro forma disclosure, as required by SFAS No. 123, regarding net income and earnings per share has been determined as if the Company had accounted for its employee stock options under the fair value method. Option valuation models use highly subjective assumptions to determine the fair value of traded options with no vesting or trading restrictions. Because options granted under the Company's Stock Option Plans have vesting requirements and cannot be traded, and because changes in the assumptions can materially affect the fair value estimate, in management's opinion, the existing valuation models do not necessarily provide a reliable measure of the fair value of its employee stock options. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions for 1998, 1997 and 1996: risk-free interest rate of 5.3%, 6.4% and 5.6%, respectively; no dividends; a volatility factor of the expected market price of the Company's common stock of 0.683, 0.476, and 0.416, respectively; and a weighted average expected life of the options of 7 years. For purposes of pro forma disclosures, the estimated fair value of the options ($22.37, $10.90, and $6.99 for the 1998, 1997 and 1996 grants, respectively) is amortized to expense over the options' assumed vesting period. SFAS No. 123 requires only that the income effects of options granted beginning in 1995 be included in the pro forma disclosures. Since a portion of the Company's stock options vest over several years and additional options may be granted each year, the pro forma effect on net income reported below is not V-12 82 VWR SCIENTIFIC PRODUCTS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) representative of the effect of fair value stock option expense on future years' pro forma net income. The Company's pro forma information follows:
YEARS ENDED DECEMBER 31, ---------------------------------- 1998 1997 1996 --------- --------- -------- (THOUSANDS, EXCEPT PER SHARE DATA) Pro forma net income................................... $30,857 $21,255 $6,152 Pro forma basic earnings per share..................... 1.07 0.93 0.28 Pro forma diluted earnings per share................... 1.06 0.90 0.28
Savings Investment Plan The Company has a savings investment plan whereby it matches 50% of the employee's contribution up to 3% of the employee's pay. Depending on the Company's profitability in any year, the Company will make an additional match of 50% of the employee contributions between 3% and 7.5% of their pay. Expenses under this plan for the years ended December 31, 1998, 1997, and 1996, were $1.1 million, $0.9 million, and $0.9 million, respectively. Employee Stock Ownership Plan In September 1990, the Company established an employee stock ownership plan (ESOP) by, in effect, contributing 400,000 treasury shares ($2.9 million fair value) to the ESOP of which 290,360 shares have been allocated to participants at December 31, 1998. All domestic full-time and part-time employees, except certain union employees, are eligible to participate in the plan. The ESOP shares will be allocated equally to individual participants' accounts over a period up to ten years. Vesting occurs equally over an employment period of five years at which time the employee is 100% vested in the plan. The total number of shares to be allocated in a year is the higher of an amount based on the Company's profitability or the minimum allocation required per the ESOP agreement. Expenses are recognized based on shares allocated for the year and are reduced for dividends paid, if any, on unallocated shares. V-13 83 VWR SCIENTIFIC PRODUCTS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 10. POSTRETIREMENT BENEFITS Pension Plan The Company has a defined benefit pension plan covering substantially all of its domestic employees, except for employees covered by independently operated collective bargaining plans. The following table summarizes the balance sheet impact, including the benefit obligations, assets, funded status and rate assumptions associated with the Company's pension plan.
1998 1997 ------- ------- (THOUSANDS) Change in benefit obligation: Benefit obligation at January 1........................... $53,158 $44,927 Service cost.............................................. 2,947 2,179 Interest cost............................................. 4,355 3,587 Plan amendments........................................... 689 0 Actuarial losses.......................................... 7,527 4,950 Acquisitions.............................................. 6,146 0 Benefits paid............................................. (2,395) (2,485) ------- ------- Benefit obligation at December 31........................... $72,427 $53,158 ------- ------- Change in plan assets: Fair value of plan assets at January 1.................... $62,339 $50,043 Actual return on plan assets.............................. 13,421 12,272 Company contributions..................................... 928 2,509 Acquisitions.............................................. 8,527 0 Benefits paid............................................. (2,395) (2,485) ------- ------- Fair value of plan assets at December 31.................... $82,820 $62,339 ------- ------- Funded status of plans:..................................... $10,393 $ 9,181 Unrecognized transition (asset)........................... 164 216 Unrecognized net (gain) loss.............................. (1,181) (1,481) Unrecognized prior service cost........................... 382 (362) ------- ------- Prepaid benefit cost........................................ $ 9,758 $ 7,554 ======= ======= Assumptions as of December 31: Discount rate............................................. 7.00% 7.50% Assumed rate of return on plan assets..................... 10.00% 10.00% Assumed annual rate of compensation increase.............. 4.00% 4.00% ======= =======
V-14 84 VWR SCIENTIFIC PRODUCTS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Net periodic pension cost includes the following components.
1998 1997 1996 ------- ------- ------- (THOUSANDS) Service cost................................................ $ 2,947 $ 2,180 $ 2,234 Interest cost............................................... 4,355 3,587 3,289 Assumed return on plan assets............................... (6,381) (4,983) (4,305) Amortization of transition asset............................ 16 51 51 Amortization of prior service cost.......................... (57) (101) (101) Recognition of actuarial (gains) losses..................... 0 2 233 ------- ------- ------- Net periodic pension cost................................... $ 880 $ 736 $ 1,401 ======= ======= =======
The Company maintains a supplemental pension plan for certain senior officers. Expenses incurred under this plan in 1998, 1997, and 1996 were approximately $0.1 million, $0.1 million, and $0.2 million, respectively. Certain employees are covered under union-sponsored, collectively bargained plans. Expenses under these plans for each of the years ended December 31, 1998, 1997, and 1996, were $0.6 million, $0.3 million, and $0.5 million, respectively, as determined in accordance with negotiated labor contracts. Retiree Medical Benefits Program The Company provides health benefits to certain retirees and a limited number of active employees and their spouses. These benefit plans are unfunded. The accumulated postretirement benefit obligation was $1.8 million and $1.7 million at December 31, 1998 and 1997, respectively. The weighted average discount rate used in determining the accumulated postretirement benefit obligation was 7.0% and 7.5% at December 31, 1998 and 1997, respectively. The annual expense for such benefits was not material. 11. LEASES The Company leases office and warehouse space and computer equipment under operating leases, certain of which extend up to 16 years, subject to renewal options. Rental expense was $10.9 million, $9.8 million, and $9.8 million for the years ended December 31, 1998, 1997, and 1996, respectively. Future minimum lease payments as of December 31, 1998, under noncancelable operating leases having initial lease terms of more than one year are:
(THOUSANDS) ----------- Years Ending December 31 1999........................................ $ 8,096 2000........................................ 7,277 2001........................................ 6,065 2002........................................ 5,482 2003........................................ 3,914 Thereafter.................................. 25,041 ------- Total minimum payments........................... $55,875 =======
V-15 85 VWR SCIENTIFIC PRODUCTS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 12. CONTINGENCIES AND COMMITMENTS The Company is involved in various environmental, contractual, and product liability cases and claims, which are considered routine to the Company's business. In the opinion of management, the potential financial impact of these matters is not material to the consolidated financial statements. The Company is party to various distribution agreements which require the Company to purchase a minimum dollar amount of products. The minimum for 1998 was $100 million. The accumulated shortfall under these agreements at December 31, 1998 was approximately $20 million. The Company has renegotiated or is in the process of renegotiating certain of these contracts and the Company expects that the accumulated deficiency will be satisfied through a combination of purchases and contract extensions. Obligations under these contracts for the years 1999 and 2000 are expected to be $92 million and $120 million, respectively. Purchases under this contract are not expected to have a material effect on the Company's financial condition or results of operations for 1999. 13. TRANSACTIONS WITH AFFILIATES In the ordinary course of business, the Company purchases inventory from affiliates of Merck KGaA. Such purchases represent less than 5% of total purchases. 14. QUARTERLY FINANCIAL DATA (UNAUDITED)
BASIC DILUTED NET EARNINGS EARNINGS GROSS OPERATING INCOME (LOSS) (LOSS) SALES MARGIN INCOME (LOSS) PER SHARE PER SHARE ---------- -------- --------- ------- --------- --------- (THOUSANDS, EXCEPT PER SHARE DATA) Year Ended -- December 31, 1998 First Quarter............... $ 320,478 $ 71,638 $19,612 $ 7,918 $ .28 $ .27 Second Quarter.............. 330,998 73,330 20,530 8,826 .31 .30 Third Quarter............... 360,515 86,003 27,313 11,029 .38 .37 Fourth Quarter.............. 337,957 81,206 17,977 6,475 .22 .22 ---------- -------- ------- ------- ----- ----- Total......................... $1,349,948 $312,177 $85,432 $34,248 $1.19 $1.16 ========== ======== ======= ======= ===== ===== Year Ended -- December 31, 1997 First Quarter............... $ 290,826 $ 63,416 $15,393 $ 3,551 $ .16 $ .16 Second Quarter.............. 310,513 68,504 19,881 6,080 .27 .27 Third Quarter............... 329,079 74,113 22,984 8,395 .38 .37 Fourth Quarter.............. 314,377 71,682 19,061 6,303 .25 .25 ---------- -------- ------- ------- ----- ----- Total......................... $1,244,795 $277,715 $77,319 $24,329 $1.06 $1.04* ========== ======== ======= ======= ===== =====
NOTE: The first quarter of 1997 includes $253 of acquisition-related expenses from the Baxter Industrial acquisition. The third quarter of 1998 and the fourth quarter of 1997 include extraordinary charges of $689 (net of tax) or $0.02 per basic and diluted share, and $406 (net of tax) or $0.02 per basic share and $0.01 per diluted share, respectively, due to the early extinguishment of debt. * The sum of the quarterly earnings per share does not equal the total earnings per share due to different weighted average share amounts outstanding for quarterly and annual reporting purposes. V-16 86 REPORT OF INDEPENDENT AUDITORS To the Shareholders of VWR Scientific Products Corporation: We have audited the accompanying consolidated balance sheets of VWR Scientific Products Corporation as of December 31, 1998 and 1997, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1998. Our audits also include the financial statement schedule listed in the index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of VWR Scientific Products Corporation at December 31, 1998 and 1997, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. By LOGO ERNST & YOUNG LLP Philadelphia, Pennsylvania February 25, 1999 V-17 87 SCHEDULE VI INTERIM FINANCIAL STATEMENTS OF THE COMPANY FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1999 VWR SCIENTIFIC PRODUCTS CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 DECEMBER 31, 1998 -------------- ----------------- (UNAUDITED) (THOUSANDS) ASSETS Trade receivables, net...................................... $231,746 $191,068 Other receivables........................................... 8,584 24,564 Inventories................................................. 125,442 140,826 Other....................................................... 16,424 13,431 -------- -------- Total current assets........................................ 382,196 369,889 Property and equipment, net................................. 91,580 91,072 Excess of cost over net assets of businesses acquired and other assets, net......................................... 449,707 450,628 -------- -------- $923,483 $911,589 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Bank checks outstanding, less cash in bank.................. $ 3,228 $ 9,658 Accounts payable and accrued liabilities.................... 139,684 122,685 -------- -------- Total current liabilities................................... 142,912 132,343 Revolving credit facility................................... 197,391 202,490 Debenture................................................... 153,594 153,175 -------- -------- Total long-term debt........................................ 350,985 355,665 Deferred income taxes and other............................. 40,110 40,034 Shareholders' equity........................................ 389,476 383,547 -------- -------- $923,483 $911,589 ======== ========
See Notes to Condensed Consolidated Financial Statements. VI-1 88 VWR SCIENTIFIC PRODUCTS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, ---------------------- 1999 1998 --------- --------- (UNAUDITED) (THOUSANDS, EXCEPT PER SHARE DATA) Sales....................................................... $360,265 $320,478 Cost of sales............................................... 277,178 248,840 -------- -------- Gross margin................................................ 83,087 71,638 Operating expenses.......................................... 55,719 45,979 Depreciation and amortization............................... 7,388 6,047 -------- -------- Total operating expenses.................................... 63,107 52,026 Operating income............................................ 19,980 19,612 Interest expense............................................ 7,841 6,249 -------- -------- Income before income taxes.................................. 12,139 13,363 Income taxes................................................ 4,855 5,445 -------- -------- Net income.................................................. $ 7,284 $ 7,918 ======== ======== Earnings per share: Basic earnings per share.................................... $ 0.25 $ 0.28 Diluted earnings per share.................................. $ 0.25 $ 0.27 Basic weighted average number of common shares outstanding............................................... 28,963 28,592 Diluted weighted average number of common shares outstanding............................................... 29,501 29,526
See Notes to Condensed Consolidated Financial Statements. VI-2 89 VWR SCIENTIFIC PRODUCTS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, -------------------- 1999 1998 -------- -------- (UNAUDITED) (THOUSANDS) OPERATING ACTIVITIES: Net income.................................................. $ 7,284 $ 7,918 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization, including deferred debt issuance costs............................................ 7,451 6,179 Debentures issued in lieu of payment of interest............ 419 560 Changes in assets and liabilities: Receivables............................................... (28,178) (10,927) Inventories............................................... 15,144 (2,893) Other current assets...................................... (4,517) (1,635) Accounts payable and other................................ 15,465 27,574 Deferred taxes and other.................................. 91 1,330 -------- -------- Cash provided by operating activities....................... 13,159 28,106 -------- -------- INVESTING ACTIVITIES: Additions to property and equipment, net.................... (3,340) (6,834) Acquisition of businesses................................... 2,317 Other....................................................... (767) -------- -------- Cash used in investing activities........................... (1,790) (6,834) -------- -------- FINANCING ACTIVITIES: Proceeds from long-term debt................................ 60,675 40,401 Repayment of long-term debt................................. (65,774) (62,374) Net change in bank checks outstanding....................... (6,430) (1,856) Proceeds from exercise of stock options..................... 1,288 Proceeds from shares issued under Merck KGaA ownership rights.................................................... 1,256 Other....................................................... 160 13 -------- -------- Cash used in financing activities........................... (11,369) (21,272) -------- -------- Net change in cash.......................................... 0 0 Cash at beginning of period................................. 0 0 -------- -------- Cash at end of period....................................... $ 0 $ 0 ======== ======== Supplemental disclosures of cash flow information: Cash paid (received) during period for: Interest.................................................. $ 7,537 $ 6,119 Income taxes.............................................. $(10,603) $ (1,217)
See Notes to Condensed Consolidated Financial Statements. VI-3 90 VWR SCIENTIFIC PRODUCTS CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements of VWR Scientific Products Corporation (the Company) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 1999 are not necessarily indicative of the results which may be expected for the year ended December 31, 1999. Refer to the consolidated financial statements and footnotes thereto included in the Company's 1998 Annual Report on Form 10-K for further information. New Accounting Standards Effective January 1, 1999, the Company adopted Accounting Standards Executive Committee Statement of Position 98-1 (SOP 98-1), Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. SOP 98-1 requires all costs related to the development of internal use software other than those incurred during the application development stage to be expensed as incurred. Costs incurred during the application development stage are required to be capitalized and amortized over the estimated useful life of the software. Adoption is not expected to have a material effect on the Company's consolidated financial statements. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards, Accounting for Derivative Instruments and Hedging Activities, (SFAS No. 133). SFAS No. 133 is effective for fiscal years beginning after June 15, 1999. SFAS No. 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designed as part of a hedge transaction and, if it is, the type of hedge transaction. The Company is evaluating the effect of this standard on its financial statements. 2. INVENTORY PRICING Inventory valued using the LIFO method comprised approximately 95% of inventory at March 31, 1999 and December 31, 1998. Cost of the remaining inventories is determined using the FIFO method. Because the actual inventory determination under the LIFO method is an annual calculation, interim financial results are based on estimated LIFO amounts and are subject to final year-end LIFO inventory adjustments. Inventory values under the LIFO method at March 31, 1999 and December 31, 1998 were approximately $35.0 million and $33.7 million, respectively, less than current cost. VI-4 91 VWR SCIENTIFIC PRODUCTS CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) 3. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share:
THREE MONTHS ENDED MARCH 31, ------------------ 1999 1998 ------- ------- (THOUSANDS) Basic weighted average common shares outstanding............ $28,963 $28,592 Net effect of dilutive stock options........................ 269 468 Effect of Merck KGaA ownership rights....................... 269 466 ------- ------- Diluted weighted average common shares outstanding.......... $29,501 $29,526 ======= =======
Upon issuance of stock by the Company, including its stock incentive plans, Merck KGaA has the option to purchase additional shares from the Company to retain its 49.89% ownership interest pursuant to a Standstill Agreement. There were 1,296,000 options outstanding at an exercise price of $32.13 which were not included in the computation of diluted earnings per share because the effect would be antidilutive. 4. COMPREHENSIVE INCOME Comprehensive income is comprised of net income and other comprehensive income. Other comprehensive income includes certain changes in equity that are excluded from net income, such as translation adjustments. Comprehensive income for the three months ended March 31, 1999 and 1998 was $5.9 million and $7.9 million, respectively. VI-5 92 Facsimile copies of the Letter of Transmittal, properly completed and duly executed, will be accepted. The Letter of Transmittal, Share Certificates and any other required documents should be sent or delivered by each shareholder of the Company or his or her broker, dealer, commercial bank, trust company or other nominee to the Depositary as follows: The Depositary for the Offer is: IBJ WHITEHALL BANK & TRUST COMPANY By Mail: By Facsimile Transmission: By Hand or Overnight Delivery: P.O. Box 84 (for Eligible Institutions only) One State Street Plaza Bowling Green Station (212) 858-2611 New York, New York 10004 New York, New York 10274-0084 Attn: Securities Processing Attn: Reorganization Operations Confirm by Telephone: Window, Subcellar One, (SC-1) Department (212) 858-2103
Questions and requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers listed below. Additional copies of this Offer to Purchase and the related Letter of Transmittal and other tender offer materials may be obtained from the Information Agent. You may also contact your broker, dealer, commercial bank or trust company for assistance concerning the Offer. The Information Agent for the Offer is: Beacon Hill Partners, Inc. 90 Broad Street -- 20th Floor New York, New York 10004 Banks and Brokers Call Collect: (212) 843-8500 All Others Call Toll-Free: (800) 357-8212 The Dealer Manager for the Offer is: LEHMAN BROTHERS Three World Financial Center 200 Vesey Street New York, New York 10285 Call Collect: (212) 526-5580 or (212) 526-2843 EX-99.A.2 3 LETTER OF TRANSMITTAL 1 LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK OF VWR SCIENTIFIC PRODUCTS CORPORATION PURSUANT TO THE OFFER TO PURCHASE DATED JUNE 14, 1999 BY EM SUBSIDIARY, INC., A WHOLLY OWNED SUBSIDIARY OF EM LABORATORIES, INCORPORATED, AN INDIRECT SUBSIDIARY OF MERCK KGaA, DARMSTADT, GERMANY THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, JULY 13, 1999, UNLESS THE OFFER IS EXTENDED. The Depositary for the Offer is: IBJ WHITEHALL BANK & TRUST COMPANY By Mail: By Facsimile Transmission: By Hand or Overnight Delivery: P.O. Box 84 (for Eligible Institutions only) One State Street Plaza Bowling Green Station (212) 858-2611 New York, New York 10004 New York, New York 10274-0084 Attention: Securities Processing Attention: Reorganization Confirm by Telephone: Window, Subcellar One, (SC-1) Operations Department (212) 858-2103
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. This Letter of Transmittal is to be completed by shareholders, either if certificates for Shares (as defined below) are to be forwarded herewith or, unless an Agent's Message (as defined in the Offer to Purchase (as defined below)) is utilized, if tenders of Shares are to be made by book-entry transfer into the account of the IBJ Whitehall Bank & Trust Company, as Depositary (the "Depositary"), at The Depository Trust Company ("DTC" or the "Book-Entry Transfer Facility") pursuant to the procedures set forth in Section 3 of the Offer to Purchase. Shareholders who tender Shares by book-entry transfer are referred to herein as "Book-Entry Shareholders." Holders of Shares whose certificates for such Shares (the "Share Certificates") are not immediately available or who cannot deliver the Share Certificates and all other required documents to the Depositary prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase), or who cannot complete the procedure for book-entry transfer on a timely basis, must tender their Shares according to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. 2
- --------------------------------------------------------------------------------------------------------------------------- DESCRIPTION OF SHARES TENDERED - --------------------------------------------------------------------------------------------------------------------------- NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARE CERTIFICATE(S) AND SHARES TENDERED (PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) (ATTACH ADDITIONAL SIGNED LIST IF APPEAR(S) ON CERTIFICATE(S)) NECESSARY) - --------------------------------------------------------------------------------------------------------------------------- TOTAL NUMBER SHARES OF SHARES NUMBER CERTIFICATE REPRESENTED BY OF SHARES NUMBER(S)* CERTIFICATE(S) TENDERED** ---------------------------------------------------------- ---------------------------------------------------------- ---------------------------------------------------------- ---------------------------------------------------------- ---------------------------------------------------------- ---------------------------------------------------------- TOTAL SHARES: - --------------------------------------------------------------------------------------------------------------------------- * NEED NOT BE COMPLETED BY BOOK-ENTRY SHAREHOLDERS. ** UNLESS OTHERWISE INDICATED, ALL SHARES REPRESENTED BY CERTIFICATES DELIVERED TO THE DEPOSITARY WILL BE DEEMED TO HAVE BEEN TENDERED. SEE INSTRUCTION 4. - ---------------------------------------------------------------------------------------------------------------------------
NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY [ ] CHECK HERE IF SHARES ARE BEING TENDERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER): Name of Tendering Institution - -------------------------------------------------------------------------------- Check box of Book-Entry Transfer Facility: [ ] The Depository Trust Company Account Number Transaction Code Number - --------------------------------- --------------------------------- [ ] CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Owner(s): - ------------------------------------------------------------------------------- Window Ticket Number (if any): - ------------------------------------------------------------------------------- Date of Execution of Notice of Guaranteed Delivery: - ------------------------------------------------------------------------------- Name of Institution that Guaranteed Delivery: - ------------------------------------------------------------------------------- If delivery by Book-Entry Transfer, check box of Book-Entry Transfer Facility: [ ] The Depository Trust Company Account Number Transaction Code Number - --------------------------------- --------------------------------- 2 3 Ladies and Gentlemen: The undersigned hereby tenders to EM Subsidiary, Inc., a Pennsylvania corporation ("Purchaser") and a wholly owned subsidiary of EM Laboratories, Incorporated, a New York corporation ("Parent"), which is an indirect subsidiary of Merck KGaA, a German company, the above-described shares of Common Stock, par value $1.00 per share (the "Shares"), of VWR Scientific Products Corporation, a Pennsylvania corporation (the "Company"), at a purchase price of $37.00 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase dated June 14, 1999 (the "Offer to Purchase") and in this Letter of Transmittal (which, together with any supplements or amendments thereto, collectively constitute the "Offer"). The undersigned understands that Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to one or more of its affiliates, the right to purchase all or any portion of the Shares tendered pursuant to the Offer, receipt of which is hereby acknowledged. Subject to, and effective upon, acceptance for payment for the Shares tendered herewith in accordance with the terms of the Offer, the undersigned hereby sells, assigns and transfers to, or upon the order of, Purchaser all right, title and interest in and to all of the Shares that are being tendered hereby and any and all dividends, distributions (including additional Shares) or rights declared, paid or issued with respect to the tendered Shares on or after the date hereof and payable or distributable to the undersigned on a date prior to the transfer to the name of Purchaser or nominee or transferee of Purchaser on the Company's stock transfer records of the Shares tendered herewith (collectively, a "Distribution"), and appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares (and any Distribution) with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest) to (a) deliver such Share Certificates (as defined herein) (and any Distribution) or transfer ownership of such Shares (and any Distribution) on the account books maintained by the Book-Entry Transfer Facility, together in either case with appropriate evidences of transfer, to the Depositary for the account of Purchaser, (b) present such Shares (and any Distribution) for transfer on the books of the Company and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares (and any Distribution), all in accordance with the terms and subject to the conditions of the Offer. The undersigned irrevocably appoints designees of Purchaser as such shareholder's attorneys-in-fact and proxies, with full power of substitution, to the full extent of such shareholder's rights with respect to the Shares tendered by such shareholder and accepted for payment by Purchaser (and with respect to any and all other Shares or other securities issued or issuable in respect of such Shares on or after the date hereof). All such powers of attorney and proxies shall be considered irrevocable and coupled with an interest in the tendered Shares. Such appointment shall be effective when, and only to the extent that, Purchaser accepts such Shares for payment. Upon such acceptance for payment, all prior powers of attorney and proxies given by such shareholder with respect to such Shares (and such other Shares and securities) shall be revoked without further action, and no subsequent powers of attorney and proxies may be given nor any subsequent written consents executed (and, if given or executed, shall not be deemed effective). The designees of Purchaser shall, with respect to the Shares for which such appointment is effective, be empowered to exercise all voting and other rights of such shareholder as they in their sole discretion may deem proper at any annual or special meeting of the Company's shareholders or any adjournment or postponement thereof, by written consent in lieu of any such meeting or otherwise. Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon Purchaser's payment for such Shares, Purchaser must be able to exercise full voting rights with respect to such Shares and other securities, including voting at any meeting of shareholders. The undersigned hereby represents and warrants that (a) the undersigned has full power and authority to tender, sell, assign and transfer the Shares (and any Distribution) tendered hereby and (b) when the Shares are accepted for payment by Purchaser, Purchaser shall acquire good, marketable and unencumbered title to the Shares (and any Distribution), free and clear of all liens, restrictions, charges and encumbrances, and the same shall not be subject to any adverse claim. The undersigned, upon request, shall execute and deliver any additional documents deemed by the Depositary or Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered hereby (and any Distribution). In addition, the undersigned shall promptly remit and transfer to the Depositary for the account of Purchaser any and all Distributions in respect of the Shares tendered hereby, accompanied by appropriate documentation of transfer; and pending such remittance or appropriate assurance thereof, Purchaser shall be, subject to applicable law, entitled to all rights and privileges as owner of any such Distribution and may withhold the entire purchase price or deduct from the purchase price the amount or value thereof, as determined by Purchaser in its sole discretion. 3 4 All authority herein conferred or agreed to be conferred shall not be affected by and shall survive the death or incapacity of the undersigned and any obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Tenders of Shares made pursuant to the Offer may be withdrawn at any time prior to the Expiration Date. Thereafter, such tenders are irrevocable except that they may be withdrawn after August 13, 1999, unless theretofore accepted for payment as provided in the Offer to Purchase. See Section 4 of the Offer to Purchase. The undersigned understands that tenders of Shares pursuant to any of the procedures described in Section 3 of the Offer to Purchase and in the instructions hereto will constitute a binding agreement between the undersigned and Purchaser upon the terms and subject to the conditions set forth in the Offer, including the undersigned's representation that the undersigned owns the Shares being tendered. Unless otherwise indicated herein under "Special Payment Instructions," please issue the check for the purchase price and/or issue or return any certificate(s) for Shares not tendered or not accepted for payment in the name(s) of the registered holder(s) appearing under "Description of Shares Tendered." Similarly, unless otherwise indicated herein under "Special Delivery Instructions," please mail the check for the purchase price and/or any certificate(s) for Shares not tendered or not accepted for payment (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing under "Description of Shares Tendered." In the event that both the Special Delivery Instructions and the Special Payment Instructions are completed, please issue the check for the purchase price and/or any certificate(s) for Shares not tendered or accepted for payment in the name of, and deliver such check and/or such certificates to, the person(s) so indicated. The undersigned recognizes that Purchaser has no obligation, pursuant to the Special Payment Instructions, to transfer any Shares from the name(s) of the registered holder(s) thereof if Purchaser does not accept for payment any of the Shares so tendered. 4 5 ------------------------------------------------------------ SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if certificate(s) for Shares not tendered or not accepted for payment and/or the check for the purchase price of Shares accepted for payment are to be issued in the name of someone other than the undersigned. Issue [ ] check [ ] Certificate to: Name ----------------------------------------------------- (PLEASE PRINT) Address -------------------------------------------------- ------------------------------------------------------------ (INCLUDE ZIP CODE) ------------------------------------------------------------ (TAX ID. OR SOCIAL SECURITY NO.) (SEE SUBSTITUTE FORM W-9 ON PAGE 10) ------------------------------------------------------------ ------------------------------------------------------------ SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if certificate(s) for Shares not tendered or not accepted for payment and/or the check for the purchase price of Shares accepted for payment are to be sent to someone other than the undersigned or the undersigned at an address other than that shown above. Mail [ ] check [ ] Certificate to: Name ----------------------------------------------------- (PLEASE PRINT) Address -------------------------------------------------- ------------------------------------------------------------ (INCLUDE ZIP CODE) ------------------------------------------------------------ (TAX ID. OR SOCIAL SECURITY NO.) (SEE SUBSTITUTE FORM W-9 ON PAGE 10) ------------------------------------------------------------ 5 6 SIGN HERE AND COMPLETE SUBSTITUTE FORM W-9 ON PAGE 10 X - -------------------------------------------------------------------------------- X - -------------------------------------------------------------------------------- (SIGNATURE(S) OF HOLDER(S)) Dated: ......................................................................... (Must be signed by the registered holder(s) exactly as name(s) appear(s) on Share Certificate(s) or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, please provide the following information and see Instruction 5.) Name(s) ------------------------------------------------------------------------ (PLEASE PRINT) Capacity (full title) ----------------------------------------------------------------- Address------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone Number ------------------------------------------------------ Tax Identification or Social Security Number ------------------------------------------------ COMPLETE SUBSTITUTE FORM W-9 ON PAGE 10 GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 1 AND 5) AUTHORIZED SIGNATURE -------------------------------------------------------- NAME ------------------------------------------------------------------------- NAME OF FIRM ------------------------------------------------------------------ (PLEASE PRINT) ADDRESS ------------------------------------------------------------------------ (INCLUDE ZIP CODE) AREA CODE AND TELEPHONE NUMBER --------------------------------------------- DATED: - -------------------------------------------------------------------------------- 6 7 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. GUARANTEE OF SIGNATURES. No signature guarantee is required on this Letter of Transmittal (a) if this Letter of Transmittal is signed by the registered holder(s) of Shares tendered herewith, unless such holder(s) has completed either the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" above or (b) if such Shares are tendered for the account of a firm which is a bank, broker, dealer, credit union, savings association or other entity which is a member in good standing of the Securities Transfer Agents Medallion Program (each of the foregoing being referred to as an "Eligible Institution"). In all other cases, all signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution. See Instruction 5 of this Letter of Transmittal. 2. REQUIREMENTS OF TENDER. This Letter of Transmittal is to be completed by shareholders either if Share Certificates are to be forwarded herewith or, unless an Agent's Message is utilized, if tenders are to be made pursuant to the procedure for tender by book-entry transfer set forth in Section 3 of the Offer to Purchase. Share Certificates evidencing tendered Shares, or timely confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such Shares into the Depositary's account at the Book-Entry Transfer Facility, as well as this Letter of Transmittal (or a facsimile hereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message in connection with a book-entry transfer, and any other documents required by this Letter of Transmittal, must be received by the Depositary at one of its addresses set forth herein prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase). Shareholders whose Share Certificates are not immediately available or who cannot deliver their Share Certificates and all other required documents to the Depositary prior to the Expiration Date or who cannot complete the procedure for delivery by book-entry transfer on a timely basis may tender their Shares by properly completing and duly executing a Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. Pursuant to such procedure: (i) such tender must be made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by the Purchaser, must be received by the Depositary prior to the Expiration Date; and (iii) the Share Certificates (or a Book-Entry Confirmation) representing all tendered Shares, in proper form for transfer, in each case together with the Letter of Transmittal (or a facsimile thereof, properly completed and duly executed, with any required signature guarantees (or, in the case of a book-entry delivery, an Agent's Message) and any other documents required by this Letter of Transmittal, must be received by the Depositary within three NASDAQ National Market trading days after the date of execution of such Notice of Guaranteed Delivery. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted, and no fractional Shares will be purchased. All tendering shareholders, by execution of this Letter of Transmittal (or a facsimile hereof), waive any right to receive any notice of the acceptance of their Shares for payment. 3. INADEQUATE SPACE. If the space provided herein is inadequate, the Share Certificate numbers and/or the number of Shares and any other required information should be listed on a separate signed schedule attached hereto. 4. PARTIAL TENDERS. (Not Applicable to Book-Entry Shareholders) If fewer than all the Shares evidenced by any Share Certificate submitted are to be tendered, fill in the number of Shares which are to be tendered in the box entitled "Number of Shares Tendered." In such cases, new Share Certificates for the Shares that were evidenced by your old Share Certificates, but were not tendered by you, will be sent to you, unless otherwise provided in the appropriate box on this Letter of Transmittal, as soon as practicable after the Expiration Date. All Shares represented by Share Certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond with the name(s) as written on the face of the Share Certificate(s) without alteration, enlargement or any change whatsoever. If any of the Shares tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. 7 8 If any of the tendered Shares is registered in different names on several Share Certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of Share Certificates. If this Letter of Transmittal or any Share Certificates or stock powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and proper evidence satisfactory to Purchaser of their authority to so act must be submitted. If this Letter of Transmittal is signed by the registered holder(s) of the Shares listed and transmitted hereby, no endorsements of Share Certificates or separate stock powers are required unless payment is to be made to or Share Certificates for Shares not tendered or not purchased are to be issued in the name of a person other than the registered holder(s). Signatures on such Share Certificates or stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Share Certificate(s) listed, the certificate(s) must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on the Share Certificate(s). Signatures on such Share Certificates or stock powers must be guaranteed by an Eligible Institution. 6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction 6, Purchaser will pay any stock transfer taxes with respect to the transfer and sale of Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price is to be made to, or if certificate(s) for Shares not tendered or accepted for payment are to be registered in the name of, any person other than the registered holder(s), or if tendered Share Certificate(s) are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder(s) or such person) payable on account of the transfer to such person will be deducted from the purchase price unless satisfactory evidence of the payment of such taxes or an exemption therefrom, is submitted. EXCEPT AS OTHERWISE PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE SHARE CERTIFICATE(S) LISTED IN THIS LETTER OF TRANSMITTAL. 7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued in the name of, and/or certificates for Shares not tendered or not accepted for payment are to be issued or returned to, a person other than the signer of this Letter of Transmittal or if a check and/or such Share Certificates are to be returned to a person other than the person(s) signing this Letter of Transmittal or to an address other than that shown in this Letter of Transmittal, the appropriate boxes on this Letter of Transmittal must be completed. 8. WAIVER OF CONDITIONS. Subject to the terms and conditions of the Merger Agreement, the conditions of the Offer (other than the Minimum Condition) may be waived by Purchaser in whole or in part at any time and from time to time in its sole discretion. 9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income tax law, a shareholder whose tendered Shares are accepted for payment is required to provide the Depositary with such shareholder's correct taxpayer identification number ("TIN") (e.g., social security number or employer identification number) on the Substitute Form W-9 below. If the Depositary is not provided with the correct TIN, the Internal Revenue Service may subject the shareholder or other payee to a $50 penalty. In addition, payments that are made to such shareholder or other payee with respect to Shares purchased pursuant to the Offer may be subject to 31% backup withholding. Certain shareholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, the shareholder must submit a Form W-8, signed under penalties of perjury, attesting to that individual's exempt status. A Form W-8 can be obtained from the Depositary. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for more instructions. If backup withholding applies, the Depositary is required to withhold 31% of any such payments made to the shareholder or other payee. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. 8 9 The box in Part 3 of the Substitute Form W-9 may be checked if the tendering shareholder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked, the shareholder or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Notwithstanding that the box in Part 3 is checked and the Certificate of Awaiting Taxpayer Identification Number is completed, the Depositary will withhold 31% of all payments made prior to the time a properly certified TIN is provided to the Depositary. The shareholder is required to give the Depositary the TIN of the record owner of the Shares, or of the last transferee appearing on the transfers attached to, or endorsed on, the Shares. If the Shares are in more than one name or are not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. 10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions or requests for assistance may be directed to the Dealer Manager or the Information Agent at their respective addresses and telephone numbers set forth below. Additional copies of the Offer to Purchase, this Letter of Transmittal and the Notice of Guaranteed Delivery may also be obtained from the Information Agent or from brokers, dealers, commercial banks or trust companies. 11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Share Certificate representing Shares has been lost, destroyed or stolen, the shareholder should promptly notify the Depositary. The shareholder will then be instructed as to the steps that must be taken in order to replace the Share Certificate. This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost or destroyed certificates have been followed. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF), TOGETHER WITH SHARE CERTIFICATES OR CONFIRMATION OF BOOK ENTRY TRANSFER OR THE NOTICE OF GUARANTEED DELIVERY, AND ALL OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE. 9 10 TO BE COMPLETED BY ALL TENDERING SHAREHOLDERS (SEE INSTRUCTION 9) - ------------------------------------------------------------------------------------------------------------------------------- PAYER'S NAME: IBJ WHITEHALL BANK & TRUST COMPANY - ------------------------------------------------------------------------------------------------------------------------------- SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE Social Security Number FORM W-9 BOX AT THE RIGHT AND CERTIFY BY SIGNING or DEPARTMENT OF THE TREASURY AND DATING BELOW. Employer Identification Number INTERNAL REVENUE SERVICE ------------------------------ ------------------------------------------------------------------------------------- PART 2 -- CERTIFICATION -- Under penalties of perjury, I certify that: (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me) and Payer's Request for (2) I am not subject to backup withholding because: (a) I am exempt from backup Taxpayer Identification withholding, or (b) I have not been notified by the Internal Revenue Service (the Number ("TIN") "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been notified by the IRS that you are currently subject to backup withholding because of under-reporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out such Item (2). SIGN HERE Signature: Date: ------------------------------------ ---------------------------- ------------------------------------------------------------------------------------- PART 3 -- Awaiting TIN [ ] - -------------------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE MERGER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office, or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all reportable payments made to me will be withheld. Signature: Date: - --------------------------- ------------------------------ 10 11 [THIS PAGE INTENTIONALLY LEFT BLANK] 12 The Information Agent for the Offer is: BEACON HILL PARTNERS, INC. 90 Broad Street New York, New York 10004 Banks and Brokers Call Collect: (212) 843-8500 All Others Call Toll-Free: (800) 357-8212 The Dealer Manager for the Offer is: LEHMAN BROTHERS Three World Financial Center 200 Vesey Street New York, New York 10285 Call Collect: (212) 526-5580 or (212) 526-2843 June 14, 1999 EX-99.A.3 4 NOTICE OF GUARANTEED DELIVERY 1 NOTICE OF GUARANTEED DELIVERY TO TENDER SHARES OF COMMON STOCK OF VWR SCIENTIFIC PRODUCTS CORPORATION As set forth in Section 3 of the Offer to Purchase described below, this instrument or one substantially equivalent hereto must be used to accept the Offer (as defined below) if certificates for Shares (as defined below) are not immediately available or the certificates for Shares and all other required documents cannot be delivered to the Depositary (as indicated below) prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase) or if the procedure for delivery by book-entry transfer cannot be completed on a timely basis. This instrument may be delivered by hand or transmitted by facsimile transmission or mail to the Depositary. The Depositary for the Offer is: IBJ WHITEHALL BANK & TRUST COMPANY By Mail: By Facsimile Transmission: By Hand or Overnight Delivery: P.O. Box 84 (for Eligible Institutions only) One State Street Plaza Bowling Green Station (212) 858-2611 New York, New York 10004 New York, New York 10274-0084 Attention: Securities Processing Attention: Reorganization Confirm by Telephone: Window, Subcellar One, (SC-1) Operations Department (212) 858-2103
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN ELIGIBLE INSTITUTION UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX IN THE LETTER OF TRANSMITTAL. THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED 2 Ladies and Gentlemen: The undersigned hereby tender(s) to EM Subsidiary, Inc., a Pennsylvania corporation and a wholly owned subsidiary of EM Laboratories, Incorporated, a New York corporation, an indirect subsidiary of Merck KGaA, Darmstadt, Germany, a German company, upon the terms and subject to the conditions set forth in the Offer to Purchase dated June 14, 1999 (the "Offer to Purchase"), and in the related Letter of Transmittal (which, together with any supplements or amendments thereto, collectively constitute the "Offer"), receipt of which is hereby acknowledged, the number of shares of common stock, par value $1.00 per share (the "Shares"), of VWR Scientific Products Corporation, a Pennsylvania corporation, pursuant to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. Signature(s) --------------------------------------------- Name(s) of Record Holders ----------------------------------------------------------- Please Type or Print Number of Shares ---------------------------------------- Certificate Nos. (If Available) ----------------------------------------------------------- ----------------------------------------------------------- Dated ---------------------------------------------------- Address(es) --------------------------------------------- ----------------------------------------------------------- Zip Code Area Code and Tel. No(s) ------------------------------ Check box if Shares will be tendered by book-entry transfer [ ] The Depository Trust Company Account Number ---------------------------------------- ----------------------------------------------------------- GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm which is a bank, broker, dealer, credit union, savings association or other entity which is a member in good standing of the Securities Transfer Agents Medallion Program, (a) represents that the above named person(s) "own(s)" the Shares tendered hereby within the meaning if Rule 14e-4 under the Securities Exchange Act of 1934, as amended ("Rule 14e-4"), (b) represents that such tender of Shares complies with Rule 14e-4, and (c) guarantees to deliver to the Depositary either the certificates evidencing all tendered Shares, in proper form for transfer, or to deliver Shares pursuant to the procedure for book-entry transfer into the Depositary's account at The Depository Trust Company (the "Book-Entry Transfer Facility"), in either case together with the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees or an Agent's Message (as defined in the Offer to Purchase) in the case of a book-entry delivery, and any other required documents, all within three NASDAQ National Market trading days after the date hereof. ---------------------------------------------------------- Name of Firm ---------------------------------------------------------- Address ---------------------------------------------------------- Zip Code Area Code and Tel No. ------------------------------------- ----------------------------------------------------------- Authorized Signature Name ----------------------------------------------------- Please Type or Print Title ------------------------------------------------------ Dated ----------------------------------------------------- NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. 2 EX-99.A.4 5 BROKER LETTER 1 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF VWR SCIENTIFIC PRODUCTS CORPORATION AT $37.00 NET PER SHARE BY EM SUBSIDIARY, INC., A WHOLLY-OWNED SUBSIDIARY OF EM LABORATORIES, INCORPORATED, AN INDIRECT SUBSIDIARY OF MERCK KGaA, DARMSTADT, GERMANY THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, JULY 13, 1999, UNLESS THE OFFER IS EXTENDED. June 14, 1999 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: We have been appointed by EM Subsidiary, Inc., a Pennsylvania corporation ("Purchaser"), a wholly-owned subsidiary of EM Laboratories, Incorporated, a New York corporation ("Parent"), which is an indirect subsidiary of Merck KGaA, Darmstadt, Germany, a German company, to act as Dealer Manager in connection with Purchaser's offer to purchase for cash all the outstanding shares of common stock, par value $1.00 per share, (the "Shares"), of VWR Scientific Products Corporation, a Pennsylvania corporation (the "Company") other than Shares held by Parent, Purchaser or any affiliate thereof at a purchase price of $37.00 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase dated June 14, 1999 (the "Offer to Purchase") and in the related Letter of Transmittal (which, together with any supplements or amendments thereto, constitute the "Offer") enclosed herewith. Holders of Shares whose certificates for such Shares (the "Share Certificates") are not immediately available or who cannot deliver their Share Certificates and all other required documents to the Depositary (as defined below) prior to the Expiration Date (as defined in the Offer to Purchase), or who cannot complete the procedures for book-entry transfer on a timely basis, must tender their Shares according to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. Please furnish copies of the enclosed materials to those of your clients for whom you hold Shares registered in your name or in the name of your nominee. Enclosed herewith for your information and forwarding to your clients are copies of the following documents: 1. The Offer to Purchase; 2. The Letter of Transmittal to tender Shares for your use and for the information of your clients. Facsimile copies of the Letter of Transmittal may be used to tender Shares; 3. The Notice of Guaranteed Delivery to be used to accept the Offer if Share Certificates are not immediately available or if such Share Certificates and all other required documents cannot be delivered to IBJ Whitehall Bank & Trust Company (the "Depositary") by the Expiration Date, or if the procedure for book-entry transfer cannot be completed by the Expiration Date; 4. The Letter to Shareholders of the Company from the President and CEO of the Company, accompanied by the Company's Solicitation/Recommendation Statement on Schedule 14D-9; 2 5. A printed form of letter which may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer; 6. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on a Substitute Form W-9; and 7. A return envelope addressed to the Depositary. YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, JULY 13, 1999, UNLESS THE OFFER IS EXTENDED. In order to take advantage of the Offer, (i) a duly executed and properly completed Letter of Transmittal and any required signature guarantees, or an Agent's Message (as defined in the Offer to Purchase) in connection with a book-entry delivery of Shares, and other required documents should be sent to the Depositary and (ii) either Share Certificates representing the tendered Shares should be delivered to the Depositary, or such Shares should be tendered by book-entry transfer into the Depositary's account maintained at the Book-Entry Transfer Facility (as described in the Offer to Purchase), all in accordance with the instructions set forth in the Letter of Transmittal and the Offer to Purchase. If holders of Shares wish to tender, but it is impracticable for them to deliver their Share Certificates or other required documents on or prior to the Expiration Date or to comply with the book-entry transfer procedures on a timely basis, a tender may be effected by following the guaranteed delivery procedures specified in Section 3 of the Offer to Purchase. Purchaser will not pay any commissions or fees to any broker, dealer or other person (other than the Dealer Manager, the Depositary and Beacon Hill Partners, Inc. (the "Information Agent"), as described in the Offer to Purchase) for soliciting tenders of Shares pursuant to the Offer. Purchaser will, however, upon request, reimburse you for customary clerical and mailing expenses incurred by you in forwarding any of the enclosed materials to your clients. Purchaser will not pay or cause to be paid any stock transfer taxes payable on the transfer of Shares to it, except as otherwise provided in Instruction 6 of the Letter of Transmittal. Any inquiries you may have with respect to the Offer should be addressed to Lehman Brothers Inc., as the Dealer Manager, or the Information Agent at their respective addresses and telephone numbers set forth on the back cover of the Offer to Purchase. Additional copies of the enclosed materials may be obtained from the Information Agent. Very truly yours, LEHMAN BROTHERS NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON TO BE THE AGENT OF PURCHASER, PARENT, THE COMPANY, THE DEALER MANAGER, THE DEPOSITARY, OR THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN. 2 EX-99.A.5 6 CLIENT LETTER 1 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF VWR SCIENTIFIC PRODUCTS CORPORATION AT $37.00 NET PER SHARE BY EM SUBSIDIARY, INC., A WHOLLY OWNED SUBSIDIARY OF EM LABORATORIES, INCORPORATED, AN INDIRECT SUBSIDIARY OF MERCK KGaA, DARMSTADT, GERMANY THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, JULY 13, 1999, UNLESS THE OFFER IS EXTENDED. To Our Clients: Enclosed for your consideration is an Offer to Purchase, dated June 14, 1999, (the "Offer to Purchase") and the related Letter of Transmittal (which, together with any supplements or amendments thereto, constitute the "Offer") relating to the Offer by EM Subsidiary, Inc., a Pennsylvania corporation ("Purchaser"), a wholly owned subsidiary of EM Laboratories, Incorporated, a New York corporation ("Parent"), which is an indirect subsidiary of Merck KGaA, Darmstadt, Germany, a German company, to purchase all outstanding shares of common stock, par value $1.00 per share (the "Shares"), of VWR Scientific Products Corporation, a Pennsylvania corporation (the "Company"), (other than Shares held by Parent, Purchaser or any affiliates thereof) at a purchase price of $37.00 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer. WE ARE THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT. We request instructions as to whether you wish to have us tender on your behalf any or all of such Shares held by us for your account, pursuant to the terms and subject to the conditions set forth in the Offer to Purchase. Your attention is directed to the following: 1. The tender price is $37.00 per Share, net to the seller in cash, without interest thereon. 2. The Offer is being made for all outstanding Shares (other than Shares held by Parent, Purchaser or any affiliates thereof). 3. The Board of Directors of the Company (i) has approved (by unanimous vote of directors who are not representatives of Parent and its affiliates) each of the Offer, the Merger, and the Merger Agreement and the Shareholder Agreement (each, as defined below), (ii) has determined that the terms of each of the Offer and the Merger, are fair to, and in the best interest of, the Company and its shareholders (other than Parent and its affiliates) and (iii) recommends that the shareholders of the Company accept the Offer and tender their Shares pursuant to the Offer. 4. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of June 8, 1999 (the "Shareholder Agreement") (the "Merger Agreement"), by and among Parent, Purchaser and the Company, pursuant to which, following the consummation of the Offer, Purchaser will be merged with and into the Company, with the Company surviving the merger as a wholly owned subsidiary of Parent (the "Merger"). At the effective time 2 of the Merger, each outstanding Share not tendered (other than Shares owned by Parent, Purchaser, the Company or any of their subsidiaries, or by shareholders, if any, who are entitled to and who properly exercise dissenters' rights under Pennsylvania law) will be converted into the right to receive in cash $37.00 per Share, without interest, as set forth in the Merger Agreement and described in the Offer to Purchase. 5. Parent and Purchaser have also entered into a Shareholder Agreement, dated as of June 8, 1999, with certain shareholders of the Company (the "Share Tender Parties"), pursuant to which, among other things, each Share Tender Party has agreed to tender in the Offer upon the terms and subject to the conditions of such Shareholders Agreement, all the Shares owned by such Share Tender Parties. These Shares represent approximately 2.5% of the outstanding Shares (determined on a fully diluted basis) as of June 8, 1999. Parent and its affiliates own approximately 49.9% of the outstanding Shares. 6. The Offer and withdrawal rights will expire at 12:00 Midnight, New York City time, on Tuesday, July 13, 1999 (the "Expiration Date"), unless the Offer is extended. 7. Tendering shareholders will not be obligated to pay brokerage fees or commissions or, except as otherwise provided in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase of Shares by the Purchaser pursuant to the Offer. 8. The Offer is conditioned upon, among other things, (i) there being validly tendered and not withdrawn prior to the Expiration Date a number of Shares representing at least a majority of the outstanding Shares, excluding any Shares held by Parent, Purchaser or any affiliate thereof, (ii) the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and similar applicable foreign laws, (iii) compliance with Section 721 of Title VII of the Defense Production Act of 1950, as amended, known as the Exon-Florio provisions, and (iv) the satisfaction or waiver of other certain conditions to the obligations of Purchaser and the Company to consummate the Offer and the transactions contemplated by the Merger Agreement. For purposes of the Offer, Purchaser will be deemed to have accepted for payment, and thereby purchase, Shares validly tendered and not properly withdrawn as of the Expiration Date when Purchaser gives notice to IBJ Whitehall Bank & Trust Company (the "Depositary") of the Purchaser's acceptance for payment of such Shares. Payment for Shares purchased pursuant to the Offer will be made by deposit of the purchase price with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payment from Purchaser and transmitting payment to tendering stockholders whose Shares have been accepted for payment. In all cases, payment for Shares purchased pursuant to the Offer will be made only after timely receipt by the Depositary of (a) certificates representing Shares ("Share Certificates") (or a timely Book-Entry Confirmation (as defined in the Offer to Purchase) with respect to such Shares) into the account maintained by the Depositary at The Depository Trust Company (the "Book-Entry Transfer Facility"), pursuant to the procedures set forth in Section 3 of the Offer to Purchase, (b) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees or an Agent's Message (as defined in the Offer to Purchase), in connection with a book-entry delivery, and (c) any other documents required by the Letter of Transmittal. Accordingly, payment may not be made to all tendering stockholders at the same time depending upon when Share Certificates or Book Entry Confirmations are actually received by the Depositary. Under no circumstances will interest be paid on the purchase price of the Shares to be paid by the Purchaser, regardless of any extension of the Offer or any delay in making such payment. The Offer is being made solely by the Offer to Purchase and related Letter of Transmittal and any auxiliary documents thereto and is being made to all holders of Shares. Purchaser is not aware of any state where the making of Offers is prohibited by administrative or judicial action pursuant to any valid state statute. If Purchaser becomes aware of any valid state statute prohibiting the making of the Offer, Purchaser will make a good faith effort to comply with such statute. If, after such good faith effort, Purchaser cannot comply with such state statute, the Offer will not be made to nor will tenders be accepted from or on behalf of the holders of Shares in such state. In any jurisdiction where the securities, "blue sky" or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of Purchaser by Lehman Brothers Inc., as Dealer Manager, or one or more registered brokers or dealers licensed under the laws of such jurisdiction. IF YOU WISH TO HAVE US TENDER ANY OR ALL OF THE SHARES HELD BY US FOR YOUR ACCOUNT, PLEASE SO INSTRUCT US BY COMPLETING, EXECUTING AND RETURNING TO US THE INSTRUCTION FORM CONTAINED IN THIS LETTER. IF YOU AUTHORIZE THE TENDER OF YOUR SHARES, ALL SUCH SHARES WILL BE TENDERED UNLESS OTHERWISE SPECIFIED IN SUCH INSTRUCTION FORM. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION DATE. 2 3 INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF VWR SCIENTIFIC PRODUCTS CORPORATION BY EM SUBSIDIARY, INC., A WHOLLY OWNED SUBSIDIARY OF EM LABORATORIES, INCORPORATED, AN INDIRECT SUBSIDIARY OF MERCK KGaA, DARMSTADT, GERMANY The undersigned acknowledge(s) receipt of your letter enclosing the Offer to Purchase dated June 14, 1999, (the "Offer to Purchase"), and the related Letter of Transmittal (which, together with any supplements or amendments thereto, constitute the "Offer") pursuant to an offer by EM Subsidiary, Inc., a Pennsylvania corporation, a wholly-owned subsidiary of EM Laboratories, Incorporated, a New York corporation, which is an indirect subsidiary of Merck KGaA, Darmstadt, Germany, a German company to purchase all outstanding shares (other than Shares held by Parent, Purchaser or any affiliate thereof) of common stock, par value $1.00 per share (the "Shares"), of VWR Scientific Products Corporation, a Pennsylvania corporation, at a purchase price of $37.00 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer. This will instruct you to tender the number of Shares indicated below (or if no number is indicated below, all Shares) that are held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer. Date: - --------------------------- NUMBER OF SHARES TO BE TENDERED:* --------------------- SHARES SIGN HERE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SIGNATURE(S) - -------------------------------------------------------------------------------- PLEASE PRINT NAME(S) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ADDRESS(ES) - -------------------------------------------------------------------------------- AREA CODE AND TELEPHONE NUMBER - -------------------------------------------------------------------------------- TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER - --------------- * UNLESS OTHERWISE INDICATED, IT WILL BE ASSUMED THAT ALL SHARES HELD BY US FOR YOUR ACCOUNT ARE TO BE TENDERED. EX-99.A.6 7 GUIDELINES FOR CERTIFICATION OF TAXPAYER ID # 1 EXHIBIT (a)(6) GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 Guidelines for Determining the Proper Identification Number for the Payee (You) to Give the Payer.--Social security numbers have nine digits separated by two hyphens: i.e., 000-00-0000. Employee identification numbers have nine digits separated by only one hyphen: i.e., 00-0000000. The table below will help determine the number to give the payer. All "Section" references are to the Internal Revenue Code of 1986, as amended. "IRS" is the Internal Revenue Service. - --------------------------------------------------------------------------- Give the social security number For this type of account: of-- - --------------------------------------------------------------------------- 1. Individual The individual 2. Two or more individuals The actual owner of the account (joint account) or, if combined funds, the first individual on the account(1) 3. Custodian account of a minor The minor(2) (Uniform Gift to Minors Act) 4. a. The usual revocable savings The grantor-trustee(1) trust account (grantor is also trustee) b. So-called trust account that The actual owner(1) is not a legal or valid trust under state law 5. Sole proprietorship The owner(3) - --------------------------------------------------------------------------- Give the employer identification For this type of account: number of-- - --------------------------------------------------------------------------- 6. Sole proprietorship The owner(3) 7. A valid trust, estate, or pension The legal entity(4) trust 8. Corporate The corporation 9. Association, club, religious, The organization charitable, educational, or other tax-exempt organization account 10. Partnership The partnership 11. A broker or registered nominee The broker or nominee 12. Account with the Department of The public entity Agriculture in the name of a public entity (such as a state or local government, school district, or prison) that receives agricultural program payments - --------------------------------------------------------------------------- (1) List first and circle the name of the person whose number you furnish. If only one person on a joint account has a social security number, that person's number must be furnished. (2) Circle the minor's name and furnish the minor's social security number. (3) You must show your individual name, but you may also enter your business or "doing business as" name. You may use either your social security number or your employer identification number (if you have one). (4) List first and circle the name of the legal trust, estate, or pension trust. (Do not furnish the taxpayer identification number of the personal representative or trustee unless the legal entity itself is not designated in the account title.) NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. - -------------------------------------------------------------------------- OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5. Application for a Social Security Card, at the local Social Administration office, of Form SS-4, Application for Employer Identification Number, by calling 1 (800) TAX-FORM, and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from withholding include: - - An organization exempt from tax under Section 501(a), an individual retirement account (IRA), or a custodial account under Section 403(b)(7), if the account satisfies the requirements of Section 401(f)(2). - - The United States or a state thereof, the District of Columbia, a possession of the United States, or a political subdivision or wholly-owned agency or instrumentality of any one or more of the foregoing. - - An international organization or any agency or instrumentality thereof. - - A foreign government and any political subdivision, agency or instrumentality thereof. Payees that may be exempt from backup withholding include: - - A corporation. - - A financial institution. - - A dealer in securities or commodities required to register in the United States, the District of Columbia, or a possession of the United States. - - A real estate investment trust. - - A common trust fund operated by a bank under Section 584(a). - - An entity registered at all times during the tax year under the Investment Company Act of 1940. - - A middleman known in the investment community as a nominee or who is listed in the most recent publication of the American Society of Corporate Secretaries, Inc., Nominee List. - - A futures commission merchant registered with the Commodity Futures Trading Commission. - - A foreign central bank of issue. Payments of dividends and patronage dividends generally exempt from backup withholding include: - - Payments to nonresident aliens subject to withholding under Section 1441. - - Payments to partnerships not engaged in a trade or business in the United States and that have at least one nonresident alien partner. - - Payments of patronage dividends not paid in money. - - Payments made by certain foreign organizations. - - Section 404(k) payments made by an ESOP. Payments of interest generally exempt from backup withholding include: - - Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and you have not provided your correct taxpayer identification number to the payer. - - Payments of tax-exempt interest (including exempt-interest dividends under Section 852) - - Payments described in Section 6049(b)(5) to nonresident aliens. - - Payments on tax-free covenant bonds under Section 1451. - - Payments made by certain foreign organizations. - - Mortgage interest paid to you. Certain payments, other than payments of interest, dividends, and patronage dividends, that are exempt from information reporting are also exempt from backup withholding. For details, see the regulations under sections 6041, 6041A, 6042, 6044, 6045, 6049, 6050A and 6050N. EXEMPT PAYEES DESCRIBED ABOVE MUST FILE FORM W-9 OR A SUBSTITUTE FORM W-9 TO AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" IN PART II OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE OF INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. PRIVACY ACT NOTICE.--Section 6109 requires you to provide your correct taxpayer identification number to payers, who must report the payments to the IRS. The IRS uses the number for identification purposes and may also provide this information to various government agencies for tax enforcement or litigation purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to payer. Certain penalties may also apply. PENALTIES (1) FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make a false statement with no reasonable basis that results in no backup withholding, you are subject to a $500 penalty. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. EX-99.A.7 8 FORM OF SUMMARY ADVERTISEMENT 1 EXHIBIT (a)(7) =============================================================================== This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares (as defined below). The Offer (as defined below) is made solely by the Offer to Purchase dated June 14, 1999 and the related Letter of Transmittal, and is being made to all holders of Shares. Purchaser (as defined below) is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid state statute. If Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of the Shares pursuant thereto, Purchaser shall make a good faith effort to comply with such statute or seek to have such statute declared inapplicable to the Offer. If, after such good faith effort, Purchaser cannot comply with such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) holders of Shares in such state. Notice of Offer to Purchase for Cash All Outstanding Shares of Common Stock of VWR SCIENTIFIC PRODUCTS CORPORATION at $37.00 Net Per Common Share by EM SUBSIDIARY, INC., a wholly-owned subsidiary of EM LABORATORIES, INCORPORATED, an indirect subsidiary of MERCK KGaA, DARMSTADT, GERMANY EM Subsidiary, Inc., a Pennsylvania corporation ("Purchaser"), a wholly-owned subsidiary of EM Laboratories, Incorporated, a New York corporation ("Parent"), that is an indirect subsidiary of Merck KGaA, Darmstadt, Germany, a German company, is offering to purchase all outstanding shares of common stock, par value $1.00 per share (the "Shares"), of VWR Scientific Products Corporation, a Pennsylvania corporation (the "Company"), at a price of $37.00 per Share, net to the seller in cash without interest thereon upon the terms and subject to the conditions set forth in the Offer to Purchase, dated June 14, 1999 (the "Offer to Purchase"), and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). =============================================================================== 2 THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, JULY 13, 1999, UNLESS THE OFFER IS EXTENDED. The Offer is conditioned upon (1) there being validly tendered and not withdrawn prior to the expiration of the Offer a number of Shares representing at lease a majority of the outstanding Shares, excluding any Shares held by Parent, Purchaser or any affiliate thereof, (2) the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and similar applicable foreign laws, (3) compliance with the Section 721 of Title VII of the Defense Production Act of 1950, as amended, known as the Exon-Florio provisions, and (4) the satisfaction or waiver of certain other conditions to the obligations of Purchaser and the Company to consummate the Offer and the transactions contemplated by the Merger Agreement (as defined below). The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of June 8, 1999 (the "Merger Agreement"), by and among Parent, Purchaser and the Company pursuant to which, following the consummation of the Offer, Purchaser will be merged with and into the Company, with the Company surviving the merger as a wholly-owned subsidiary of Parent (the "Merger"). At the effective time of the Merger, each outstanding Share not tendered (other than Shares owned by the Parent, Purchaser, the Company or any of their affiliates, or by shareholders, if any, who are entitled to and who properly exercise dissenters' rights under Pennsylvania Law) will be converted into the right to receive $37.00 in cash, without interest thereon. Parent and Purchaser have also entered into a Shareholder Agreement, dated as of June 8, 1999 (the "Shareholder Agreement"), with certain shareholders of the Company (the "Shareholders"), pursuant to which, among other things, each Shareholder has agreed to tender in the Offer upon the terms and subject to the conditions of such Shareholder Agreement, all the Shares owned by such Shareholder. These shares represent approximately 2.5% of the outstanding Shares (determined on a fully-diluted basis) as of June 8, 1999. Parent and its affiliates own approximately 49.9% of the outstanding Shares. The Board of Directors of the Company (the "Board") (1) has approved (by unanimous vote of Directors who are not representatives of the Parent and its affiliates) each of the Offer, the Merger and the Merger Agreement, (2) has determined that the terms of each of the Offer and the Merger are fair to, and in the best interests of, the Company and its Shareholders and (3) recommends that the Shareholders of the Company accept the Offer and tender their Shares pursuant to the Offer. For purposes of the Offer, Purchaser will be deemed to have accepted for payment, and thereby purchase Shares, validly tendered and not properly withdrawn as of the Expiration Date (as defined below) when Purchaser gives notice to IBJ Whitehall Bank & Trust Company (the "Depositary") of Purchaser's acceptance for payment of such Shares. Payment for Shares purchased pursuant to the Offer will be made by deposit of the purchase price with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payment from Purchaser and transmitting payment to tendering stockholders whose Shares have been accepted for payment. In all cases, payment for Shares purchased pursuant to the Offer will be made only after timely receipt by the Depositary of (a) certificates representing Shares ("Share Certificates") (or a timely confirmation of the book-entry transfer of Shares ("Book Entry Confirmation") into an account maintained by the Depositary at The Depository Trust Company (the "Book Entry Transfer Facility")), pursuant to the procedures set forth in the Offer to Purchase, (b) the Letter of Transmittal (or a facsimile of one), properly completed and duly executed, with any required signature guarantees or an Agent's Message (as defined in the Offer to Purchase), in connection with a book-entry delivery, and (c) any other documents required by the Letter of Transmittal. Accordingly, payment may not be made to all tendering stockholders at the same time, depending upon when Share Certificates or Book-Entry Confirmations are actually received by the Depositary. Under no circumstances will interest be paid on the purchase price of the Shares, regardless of any extension of the Offer or any delay in paying for Shares. The term "Expiration Date" means 12:00 Midnight, New York City time, on Tuesday, July 13, 1999 unless and until Purchaser, in its sole discretion, but subject to the terms of the Merger Agreement, shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date on which the Offer, as so extended by Purchaser, shall expire. Purchaser expressly reserves the right, in its sole discretion (but subject to the terms of the Merger Agreement), at any time or from time to time, and regardless of whether or not any of the events set forth in the Offer to Purchase shall have occurred (i) to extend the period of time during which the Offer is open and thereby delay acceptance for payment of, and the payment for, any Shares, by giving notice of such extension to the Depositary or (ii) to otherwise amend the Offer. Purchaser shall not have any obligation to pay interest on the purchase price for tendered Shares, whether or not Purchaser exercises its right to extend the Offer. There can be no assurance that Purchaser will exercise the right to extend the Offer. Any such extension will be followed by a public announcement thereof no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Time. During any such extension, all Shares previously tendered and not withdrawn will remain subject to the Offer, subject to the right of a tendering stockholder to withdraw such stockholder's Shares. 3 ================================================================================ Except as otherwise provided below, tenders of Shares are irrevocable. Shares tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment and paid for by Purchaser pursuant to the Offer, may also be withdrawn at any time after August 13, 1999. For a withdrawal to be effective, a written or facsimile transmission of a notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of the Offer to Purchase and must specify the name of the person having tendered the Shares to be withdrawn, the number of Shares to be withdrawn and (if Share Certificates have been tendered) the name of the registered holder of the Shares to be withdrawn, if different from the name of the person who tendered the Shares. If Share Certificates evidencing Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of those Share Certificates, the serial numbers shown on the particular Share Certificates to be withdrawn must be submitted to the Depositary and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution (as such term is defined in the Offer to Purchase), unless the Shares have been tendered for the account of an Eligible Institution. If Shares have been delivered pursuant to the procedures for book-entry transfer as set forth in the Offer to Purchase, any notice of withdrawal must also specify the name and number of the account as the Book-Entry Transfer Facility to be credited with the withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility's procedures. Withdrawals of tenders of Shares may not be rescinded, and any Shares properly withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares may be retendered by again following one of the procedures described in the Offer to Purchase at any time prior to the Expiration Date. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by Purchaser, in its sole discretion, whose determination will be final and binding. The Offer to Purchase and the related Letter of Transmittal and other relevant materials will be mailed to record holders of Shares and furnished to brokers, dealers, banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder lists or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. The Offer to Purchase and Letter of Transmittal contain important information which should be read before any decision is made with respect to the Offer. Questions and requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers set forth below. Copies of the Offer to Purchase and the related Letter of Transmittal and other tender offer materials may be obtained from the Information Agent as its address and telephone number set forth below and will be furnished promptly at Purchaser's expense. No fees or commissions will be paid to brokers, dealers or other persons (other than the Dealer Manager, Depositary and Information Agent) for soliciting tenders of Shares pursuant to the Offer. The Information Agent for the Offer is: BEACON HILL PARTNERS, INC. 90 Broad Street - 20th Floor New York, New York 10004 Call Toll-Free: 1-800-755-5001 Banks and Brokers call collect: (212) 843-8500 The Dealer Manager for the Offer is: LEHMAN BROTHERS Three World Financial Center 200 Vesey Street New York, New York 10285 Call collect: (212) 526-5580 or (212) 526-2843 June 14, 1999 ================================================================================ EX-99.A.8 9 PRESS RELEASE 1 EXHIBIT (a)(8) MERCK KGaA, DARMSTADT, GERMANY TO MAKE TENDER OFFER FOR ALL OUTSTANDING SHARES OF VWR SCIENTIFIC PRODUCTS CORPORATION. Merck KGaA, Darmstadt, Germany announced that its indirect subsidiary EM Laboratories, Inc., Hawthorne, New York, has entered into an Agreement and Plan of Merger, dated as of June 8, 1999, by which a Merck KGaA subsidiary set up specifically for this transaction will make a tender offer to acquire all of the Common Stock of VWR Scientific Products Corporation, West Chester, PA, USA (VWRX) not currently held by EM Laboratories and its affiliates for US $37.00 per share. The tender offer will be made for approx. 15,000,000 shares and all outstanding options. The offer will be followed by a merger in which any remaining stock of VWR will be exchanged for cash at the same price per share paid in the tender offer. The tender offer is conditioned on the receipt of a majority of the VWR Common Stock not held by EM Laboratories and its affiliates, as well as approval of the antitrust authorities and other customary conditions. The Merck Group already holds a 49.9% equity position in the company. The planned acquisition of all remaining shares of VWR will consolidate Merck's laboratory distribution business in the North American market place. With sales in excess of US $1.3 billion, VWR is one of the leading suppliers of laboratory equipment, chemicals, production supplies, science education materials and general supplies to the scientific market place. VWR operates an extensive distribution network consisting of five highly automated regional distribution centers and over 50 service centers and just-in-time facilities. VWR currently offers over 350,000 products from more than 1,800 vendors and is a pioneer in integrated business services and electronic commerce solutions. With the acquisition of VWR, together with the recently established Merck Eurolab N.V., the holding and management company for Merck KGaA's European laboratory distribution activities, the Merck Group will further improve its ability to offer its customers enhanced services in the laboratory supply business. Merck KGaA is a worldwide operating group of companies with activities in pharmaceuticals, specialty chemicals and the production and distribution of laboratory products. In 1998 annual revenues exceeded DM 8 billion. 2 Merck plant Ubernahme von VWR Angebot an US-Aktionare Darmstadt/New York, 9. Juni 1999 -- Die Merck-Gruppe hat durch ihre US-Tochter EM Laboratories, Inc. am Dienstag abend in New York (8.6) eine Vereinbarung abgeschlossen, nach der eine speziell zu diesem Zweck gegrundete Merck Gesellschaft ein offentliches Angebot zur Ubernahme aller ausstehenden Aktien der VWR Scientific Products Corporation, West Chester, PA, USA (VWRX) zum Preis von USD 37,00 pro Aktie abgeben wird. Merck wird ca. 15 Millionen Aktien sowie alle ausstehenden Optionen uebernehmen. Diesem Angebot wird eine Fusion mit der neuen Gesellschaft folgen, in der alle dann ausstehenden Aktien zum gleichen Preis umgetauscht werden. Das offentliche Angebot ist abhangig vom Erhalt der Mehrheit der ausstehenden Aktien, die nicht bereits im Besitz von EM Laboratories, Inc. oder einer anderen Merck Gesellschaft sind. Wie die Merck-Pressestelle mitteilt, bedarf das Angebot der Zustimmung der Kartellbehorden. 3 Durch die geplante Ubernahme der ausstehenden Aktien von VWR SP, an der die Merck-Gruppe bereits 49,9 Prozent der Anteile halt, wird das Labordistributionsgeschaft von Merck auf dem amerikanischen Markt arrondiert. Mit VWR Scientific Products Corporation und der Anfang des Jahres gegrundeten Merck Eurolab N.V. kann die Merck-Gruppe ihren Kunden Produkte und Dienstleistungen fur die Laborvollversorgung noch besser anbieten. Mit einem Umsatz von mehr als USD 1,3 Mrd. im vergangenen Jahr ist VWR Scientific Products Corporation einer der fuhrenden Anbieter von Laborgeraten, Laborchemikalien, Verbrauchsmaterialien fuer Reinstraume, Lehrmittel fur den Chemie-, Biologie- und Physikunterricht sowie von Dienstleistungen fur alle Bereiche von Forschung, Lehre und Industrie. Mit einem grossflachigen Netzwerk, bestehend aus funf vollautomatisierten regionalen Distributionszentren, komplettiert durch uber 50 lokale Servicezentren, bietet VWR SP uber 350.000 Produkte von mehr als 1.800 Lieferanten an. 4 VWR SP ist der Pionier fur integrierte Geschaftsprozesse im Laborbereich und ist fuhrend in der Implementierung von Electronic-Commerce Losungen. Merck KGaA ist ein weltweit operierendes Unternehmen mit den Bereichen Pharma, Labor und Spezialchemie und erzielte 1998 einen Jahresumsatz von mehr als 8 Mrd. DM, davon entfallen auf den Laborbereich 1,9 Mrd DM. EX-99.C.1 10 AGREEMENT AND PLAN OF MERGER 1 EXHIBIT (c)(1) AGREEMENT AND PLAN OF MERGER dated JUNE 8, 1999 among EM LABORATORIES, INCORPORATED, EM SUBSIDIARY, Inc. and VWR SCIENTIFIC PRODUCTS CORPORATION 2 TABLE OF CONTENTS
PAGE ARTICLE I - THE OFFER.................................................................................. 2 Section 1.1. The Offer............................................................................. 2 Section 1.2. Company Actions....................................................................... 3 Section 1.3. Standstill Agreement.................................................................. 5 ARTICLE II - THE MERGER................................................................................. 5 Section 2.1. The Merger............................................................................ 5 Section 2.2. Effective Time; Closing............................................................... 5 Section 2.3. Effects of the Merger................................................................. 5 Section 2.4. Articles of Incorporation and By-laws; Officers and Directors......................... 5 ARTICLE III - EFFECT OF THE MERGER ON THE STOCK OF THE CONSTITUENT CORPORATIONS; SURRENDER OF CERTIFICATES............................................................................... 6 Section 3.1. Effect on Stock....................................................................... 6 Section 3.2. Surrender of Certificates............................................................. 6 ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................................. 8 Section 4.1. Organization.......................................................................... 8 Section 4.2. Subsidiaries.......................................................................... 9 Section 4.3. Capital Structure..................................................................... 9 Section 4.4. Authorization; Binding Agreement..................................................... 10 Section 4.5. Consents and Approvals; No Violations................................................ 10 Section 4.6. SEC Documents and Other Reports...................................................... 10 Section 4.7. Absence of Materially Adverse Change................................................. 11 Section 4.8. Information Supplied................................................................. 11 Section 4.9. Compliance with Laws................................................................. 12 Section 4.10. Permits.............................................................................. 12 Section 4.11. Contracts............................................................................ 12 Section 4.12. Taxes and Tax Returns................................................................ 12 Section 4.13. Litigation and Liabilities........................................................... 14 Section 4.14. Employee Benefit Plans............................................................... 14 Section 4.15. Environmental Matters................................................................ 16
-i- 3 TABLE OF CONTENTS (CONTINUED)
PAGE Section 4.16. Charter Provisions................................................................... 18 Section 4.17. Intellectual Property................................................................ 18 Section 4.18. Labor Relations...................................................................... 18 Section 4.19. Insurance............................................................................ 19 Section 4.20. Finders and Investment Bankers....................................................... 19 Section 4.21. Contracts; Indebtedness.............................................................. 19 ARTICLE V - REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.......................................... 19 Section 5.1. Organization......................................................................... 19 Section 5.2. Authority............................................................................ 19 Section 5.3. Consents and Approvals; No Violations................................................ 20 Section 5.4. Information Supplied................................................................. 20 Section 5.5. Interim Operations of Sub............................................................ 21 Section 5.6. Finders and Investment Bankers....................................................... 21 Section 5.7. Financing............................................................................ 21 ARTICLE VI - COVENANTS RELATING TO CONDUCT OF BUSINESS................................................. 21 Section 6.1. Conduct of Business by the Company Pending the Merger................................ 21 Section 6.2. No Solicitation...................................................................... 23 Section 6.3. Disclosure to Parent; Delivery of Certain Filings.................................... 24 ARTICLE VII - ADDITIONAL AGREEMENTS..................................................................... 24 Section 7.1. Shareholder Approval; Preparation of Proxy Statement................................. 24 Section 7.2. Access to Information................................................................ 25 Section 7.3. Expenses............................................................................. 26 Section 7.4. Public Announcements................................................................. 26 Section 7.5. State Takeover Laws.................................................................. 26 Section 7.6. Indemnification, Exculpation and Insurance........................................... 26 Section 7.7. Notification of Certain Matters...................................................... 27 Section 7.8. Board of Directors................................................................... 27 Section 7.9. Additional Agreements................................................................ 28 Section 7.10. Certain Litigation................................................................... 29
-ii- 4 TABLE OF CONTENTS (CONTINUED)
PAGE Section 7.11. Severance Payments................................................................... 29 ARTICLE VIII - CONDITIONS PRECEDENT...................................................................... 29 Section 8.1. Conditions to Each Party's Obligation to Effect the Merger........................... 29 Section 8.2. Conditions of Obligations of Parent and Sub.......................................... 30 ARTICLE IX - TERMINATION AND AMENDMENT................................................................. 30 Section 9.1. Termination.......................................................................... 30 Section 9.2. Effect of Termination and Abandonment................................................ 31 Section 9.3. Amendment............................................................................ 32 Section 9.4. Waiver............................................................................... 32 ARTICLE X - GENERAL PROVISIONS........................................................................ 32 Section 10.1. Non-Survival of Representations and Warranties and Agreements........................ 32 Section 10.2. Notices.............................................................................. 32 Section 10.3. Interpretation; Definitions.......................................................... 33 Section 10.4. Counterparts......................................................................... 37 Section 10.5. Entire Agreement; No Third-Party Beneficiaries....................................... 38 Section 10.6. Governing Law........................................................................ 38 Section 10.7. Assignment........................................................................... 38 Section 10.8. Severability......................................................................... 38 Section 10.9. Enforcement of this Agreement........................................................ 38 Section 10.10. Obligations of Subsidiaries.......................................................... 38 Section 10.11. Merger of the Company into Sub....................................................... 38
-iii- 5 AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER, dated June 8, 1999 (this "Agreement") among EM Laboratories, Incorporated, a New York corporation ("Parent"), EM Subsidiary, Inc., a Pennsylvania corporation and a wholly-owned subsidiary of Parent ("Sub"), and VWR Scientific Products Corporation, a Pennsylvania corporation (the "Company") (Sub and the Company being hereinafter collectively referred to as the "Constituent Corporations"). Except as otherwise set forth herein, capitalized (and certain other) terms used herein shall have the meanings set forth in Section 10.3. W I T N E S S E T H: WHEREAS, the respective Boards of Directors of Parent, Sub and the Company have approved the acquisition of the Company by Parent on the terms and subject to the conditions set forth in this Agreement; WHEREAS, in furtherance of such acquisition, Parent proposes to cause Sub to make a cash tender offer (as it may be amended from time to time as permitted under this Agreement, the "Offer") to acquire all of the issued and outstanding shares of Common Stock, par value $1.00, of the Company (the "Shares") (other than Shares owned by Parent or any Affiliate thereof and excluding Shares owned by the Company or by any Subsidiary of the Company) at a purchase price of $37.00 per Share (such purchase price being referred to as the "Offer Price"), net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in this Agreement; and the Unaffiliated Directors have unanimously adopted resolutions approving the Offer, this Agreement and the Merger and recommending that the Company's shareholders accept the Offer and adopt this Agreement; WHEREAS, the respective Boards of Directors of Sub and the Company have each approved the merger of Sub with and into the Company (the "Merger"), upon the terms and subject to the conditions set forth in this Agreement, whereby each of the Shares, other than Shares owned directly or indirectly by Parent, Sub or the Company and Dissenting Shares, will be converted into the right to receive the price per Share paid in the Offer; WHEREAS, the Unaffiliated Directors have unanimously approved the terms of the Shareholders Agreement (the "Shareholders Agreement") to be entered into by Parent, Sub and certain holders of Shares, pursuant to which such holders have, among other things, agreed to vote such shares in favor of the Merger and tender such shares pursuant to the Offer; and WHEREAS, Parent, Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Offer and the Merger and also to prescribe various conditions to the Offer and the Merger. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Parent, Sub and the Company hereby agree as follows: 6 ARTICLE I - THE OFFER Section 1.1 The Offer. (a) Provided that this Agreement shall not have been terminated in accordance with Section 9.1, and subject to the provisions of this Agreement, as promptly as practicable but in no event later than five business days after the date of the public announcement by Parent and the Company of this Agreement, Sub shall, and Parent shall cause Sub to, commence the Offer. The offer to purchase which is sent to the Company's shareholders in connection with the Offer shall provide for an initial expiration date for the Offer (the "Expiration Date"") of 20 business days (as defined in Rule 14d-1 under the Exchange Act) from the date of commencement of the Offer. The obligation of Sub to, and of Parent to cause Sub to, commence the Offer and accept for payment, and pay for, any Shares tendered pursuant to the Offer shall be subject only to the conditions set forth in Exhibit A (the "Offer Conditions") (all of which are for the benefit of, and may be asserted by Sub regardless of the circumstances giving rise to any such condition and any of which may be waived in whole or in part by Sub in its sole discretion, provided that, without the prior written consent of the Company, Sub shall not waive the Minimum Condition (as defined in Exhibit A)). Sub expressly reserves the right to modify the terms of the Offer, except that, without the prior written consent of the Company, Sub shall not (i) reduce the number of Shares to be purchased in the Offer, (ii) reduce the Offer Price, (iii) impose any conditions to the Offer in addition to the Offer Conditions or modify the Offer Conditions (other than to waive any Offer Conditions to the extent not prohibited by this Agreement), (iv) except as provided in the next sentence, extend the Offer, (v) change the form of consideration payable in the Offer or (vi) make any other change or modification in any of the terms of the Offer in any manner that is adverse to the holders of Shares. Notwithstanding the foregoing, Sub may, without the consent of the Company, (i) extend the Offer, if at the Expiration Date or extended expiration date of the Offer any of the Offer Conditions shall not be satisfied or waived, until such time as such conditions are satisfied or waived, (ii) extend the Offer for any period required by any rule, regulation, interpretation or position of the SEC or the staff thereof applicable to the Offer and (iii) on one or more occasions, extend the Offer for a period of up to an aggregate of 15 business days if, on a scheduled expiration date on which the Offer Conditions shall have been satisfied or waived, the number of Shares that have been validly tendered and not withdrawn pursuant to the Offer, when taken together with the Shares owned by Parent, Sub or an Affiliate thereof do not constitute at least 80% of the then issued and outstanding Shares. Parent and Sub agree that Sub shall not terminate the Offer between scheduled expiration dates (except in the event that this Agreement is terminated pursuant to Section 9.1) and that, in the event that Sub would otherwise be entitled to terminate the Offer at any scheduled expiration date thereof due to the failure of one or more of the Offer Conditions, unless this Agreement shall have been terminated pursuant to Section 9.1, Sub shall, and Parent shall cause Sub to, extend the Offer until such date as the Offer Conditions have been satisfied or such later date as required by applicable law; provided, however, that nothing herein shall require Sub to extend the Offer beyond the Outside Date; provided, further, that neither Parent nor Sub shall be obligated to make any such extension if, in the reasonable belief of Parent or Sub, as applicable, all Offer Conditions are not capable of being satisfied prior to the Outside Date. Subject to the terms and conditions of the Offer and this Agreement, Sub shall, and Parent shall cause Sub to, accept for payment and pay for, all 2 7 Shares validly tendered and not withdrawn pursuant to the Offer that Sub is permitted to accept for payment and pay for under applicable law, as soon as practicable (and, in any event, within three business days after the later of the expiration of the Offer and the receipt by the depository for the Offer of the certificates representing such tendered Shares). If this Agreement is terminated pursuant to Section 9.1(d), Parent or Sub shall terminate the Offer. Sub may, at any time, transfer or assign to one or more corporations directly or indirectly wholly-owned by Parent the right to purchase all or any portion of the Shares tendered pursuant to the Offer, but any such transfer or assignment shall not relieve Sub of its obligations under the Offer or prejudice the rights of tendering shareholders to receive payment for Shares validly tendered and accepted for payment. (b) On the date of commencement of the Offer, Parent and Sub shall file with the SEC (i) a Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") and (ii) a Rule 13e-3 Transaction Statement on Schedule 13E-3 (the "Schedule 13E-3") with respect to the Offer, which shall contain an offer to purchase and a related letter of transmittal and summary advertisement (such Schedule 14D-1 and Schedule 13E-3 and the documents included therein pursuant to which the Offer shall be made, together with any supplements or amendments thereto, the "Offer Documents"), and Parent and Sub shall cause the Offer Documents to be disseminated to holders of Shares as and to the extent required by applicable federal securities laws. Parent, Sub and the Company each agrees promptly to correct any information provided by it for use in the Offer Documents if and to the extent that such information shall have become false or misleading in any material respect, and Parent and Sub further agree to take all steps necessary to cause the Schedule 14D-1 and the Schedule 13E-3 as so corrected to be filed with the SEC and the other Offer Documents as so corrected to be disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws. The Company and its counsel shall be given reasonable opportunity to review and comment upon the Offer Documents prior to their filing with the SEC or dissemination to the Company's shareholders. Parent and Sub agree to provide the Company and its counsel any comments Parent, Sub or their counsel may receive from the SEC or its staff with respect to the Offer Documents promptly after the receipt of such comments and to cooperate with the Company and its counsel in responding to such comments. (c) Parent shall provide or cause to be provided to Sub on a timely basis all funds necessary to accept for payment, and pay for, any Shares that are validly tendered and not withdrawn pursuant to the Offer and that Sub is permitted to accept for payment under applicable law and pay for, pursuant to the Offer. Section 1.2. Company Actions. (a) The Company hereby approves of and consents to the Offer and represents and warrants that the Board of Directors of the Company, at a meeting duly called and held, duly adopted (by unanimous vote, with the Affiliated Directors (as defined in the Standstill Agreement) not participating) resolutions approving the Offer, this Agreement, the Merger and the Shareholders Agreement, determining that the Offer and the Merger are fair to, and in the best interests of, the Company's shareholders and recommending that the Company's shareholders accept the Offer and approve and adopt this Agreement and the Merger. Simultaneously with the execution of this Agreement, each of the Unaffiliated Directors of the 3 8 Company has indicated to the Company that he intends to tender and sell his Shares in response to the Offer, except that Unaffiliated Directors whose sales of their Shares in response to the Offer might result in liability under Section 16(b) of the Exchange Act intend that if they do not tender and sell their Shares in response to the Offer, they shall vote their Shares in favor of the Merger. The Company represents and warrants that its Board of Directors has received the opinion of each of BT Alex. Brown Incorporated ("BT Alex. Brown") and Warburg Dillon Read LLC ("Warburg Dillon Read") to the effect that, as of the date of this Agreement, the cash consideration to be received in the Offer and the Merger by holders of Shares (other than Parent and Affiliates thereof) is fair to such holders from a financial point of view. The Company hereby consents to the inclusion in the Offer Documents of the recommendations of the Company's Board of Directors described in this Section 1.2. (b) On the date the Offer Documents are filed with the SEC, the Company shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as amended from time to time, the "Schedule 14D-9") containing the recommendation described in Section 1.2(a) and shall cause the Schedule 14D-9 to be disseminated to the Company's shareholders as and to the extent required by applicable federal securities laws. Each of the Company, Parent and Sub agrees promptly to correct any information provided by it for use in the Schedule 14D-9 if and to the extent that such information shall have become false or misleading in any material respect, and the Company further agrees to take all steps necessary to amend or supplement the Schedule 14D-9 and to cause the Schedule 14D-9 as so amended or supplemented to be filed with the SEC and disseminated to the Company's shareholders, in each case as and to the extent required by applicable federal securities laws. Parent and its counsel shall be given reasonable opportunity to review and comment upon the Schedule 14D-9 prior to its filing with the SEC or dissemination to the Company's shareholders. The Company agrees to provide Parent and its counsel any comments the Company or its counsel may receive from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt of such comments and to cooperate with Parent, Sub and their counsel in responding to such comments. (c) In connection with the Offer and the Merger, the Company shall cause its transfer agent to furnish Sub promptly with mailing labels containing the names and addresses of the record holders of Shares as of a recent date and of those Persons becoming record holders subsequent to such date, together with copies of all lists of shareholders, security position listings and computer files and all other information in the Company's possession or control regarding the beneficial owners of Shares, and shall furnish to Sub such information and assistance (including updated lists of shareholders, security position listings and computer files) as Parent or Sub may reasonably request in communicating the Offer to the record and beneficial holders of Shares. Subject to the requirements of applicable law, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Merger, Parent and Sub and their Affiliates, associates and agents shall hold in confidence the information contained in any such labels, listings and files, shall use such information only in connection with the Offer and the Merger and, if this Agreement shall be terminated, shall promptly, upon request, deliver, and shall use reasonable efforts to cause their Affiliates, associates and agents to deliver, to the Company all copies of such information then in their possession or control. 4 9 Section 1.3. Standstill Agreement. Effective upon the acquisition of Shares pursuant to the Offer, the Standstill Agreement shall terminate in its entirety. ARTICLE II - THE MERGER Section 2.1. The Merger. Upon the terms and subject to the conditions hereof, and in accordance with the PBCL, Sub shall be merged with and into the Company at the Effective Time. Following the Effective Time, the separate corporate existence of Sub shall cease and the Company shall continue as the surviving corporation (the "Surviving Corporation") and shall succeed to and assume all the rights and obligations of Sub and the Company in accordance with the PBCL. Section 2.2. Effective Time; Closing. As promptly as practicable after the satisfaction or, if permissible, waiver of the conditions set forth in Article VIII, the parties hereto shall cause the Merger to be consummated by delivering to the Secretary of State of the Commonwealth of Pennsylvania the articles of merger, in such form as required by, and executed and acknowledged in accordance with, the relevant provisions of the PBCL (the "Articles of Merger"), and shall make all other filings and recordings required by the PBCL in connection with the Merger. The Merger shall become effective at the time of filing of the Articles of Merger with the Secretary of State of the Commonwealth of Pennsylvania, or at such later time, which shall be as soon as reasonably practicable, specified as the effective time in the Articles of Merger (the "Effective Time"). Prior to such filing, a closing shall be held at the offices of Rogers & Wells LLP, 200 Park Avenue, New York, New York 10166, USA, or such other place as the parties shall agree, for the purpose of confirming the satisfaction or waiver, as the case may be, of the conditions set forth in Article VIII. Section 2.3. Effects of the Merger. The Merger shall have the effects set forth in Section 1929 of the PBCL. Section 2.4. Articles of Incorporation and By-laws; Officers and Directors. (a) The Articles of Incorporation of the Company, as in effect immediately prior to the Effective Time, shall be the Articles of Incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law. (b) The By-laws of the Company shall be amended as of the Effective Time to read in their entirety as the By-laws of Sub, as in effect immediately prior to the Effective Time, until thereafter changed or amended as provided, therein, by the Articles of Incorporation of the Surviving Corporation or by applicable law. (c) The directors of Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation, until the next annual meeting of shareholders of the Surviving Corporation (or the earlier of their resignation or removal) and until their respective successors are duly elected and qualified, as the case may be. (d) The officers of the Company immediately prior to the Effective Time shall be the officers of the Surviving Corporation until the earlier of their resignation or removal and until their respective successors are duly elected and qualified, as the case may be. 3 10 ARTICLE III - EFFECT OF THE MERGER ON THE STOCK OF THE CONSTITUENT CORPORATIONS; SURRENDER OF CERTIFICATES Section 3.1. Effect on Stock. As of the Effective Time, by virtue of the Merger and without any action on the part of any of Sub, the Company or the holders of any securities of the Constituent Corporations and in accordance with Section 1906 of the PBCL: (a) Capital Stock of Sub. Each issued and outstanding share of capital stock of Sub shall be converted into and become one validly issued, fully paid and nonassessable share of common stock, $1.00 par value, of the Surviving Corporation. (b) Treasury Stock and Parent Owned Stock. Each Share that is owned by the Company or by any Subsidiary of the Company and each Share that is owned by Parent, Sub or any other Subsidiary of Parent shall automatically be cancelled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor. (c) Conversion of Shares. Subject to Section 3.1(d), each Share issued and outstanding (other than Shares to be cancelled in accordance with Section 3.1(b)), shall be cancelled and be converted into the right to receive from the Surviving Corporation in cash, without interest or dividends, the price per Share paid in the Offer (the "Merger Consideration"). As of the Effective Time, all such Shares shall be cancelled, and when so cancelled, shall no longer be outstanding and shall automatically be retired and shall cease to exist, and each holder of a certificate representing any such Shares shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration for each such Share, without interest or dividends. (d) Shares of Dissenting Shareholders. Notwithstanding anything in this Agreement to the contrary, any issued and outstanding Shares held by a Person (a "Dissenting Shareholder") who has not voted in favor of or consented to the Merger and complies in all respects with Sections 1930 and 1575 through 1580 of the PBCL concerning the right of holders of Shares to require appraisal of their Shares ("Dissenting Shares") shall not be converted as described in Section 3.1(c), but shall become the right to receive payment of the fair value of such Shares in accordance with Sections 1930 and 1575 through 1580 of the PBCL. If, after the Effective Time, a holder of Dissenting Shares withdraws his demand for appraisal or fails to perfect or otherwise loses his right of appraisal, in any case pursuant to the PBCL, his Shares shall be deemed to be converted as of the Effective Time into the right to receive the Merger Consideration for each such Share, without interest or dividends. The Company shall give Parent prompt notice of any demands for appraisal of Shares received by the Company. The Company shall not, without the prior written consent of Parent, make any payment with respect to, or settle or offer to settle, any such demands. Section 3.2. Surrender of Certificates. (a) Paying Agent. Prior to the Effective Time, Parent shall designate a bank or trust company who shall be reasonably satisfactory to the Company to act as paying agent in the Merger (the "Paying Agent"), and from time to time, on, prior to or after the Effective Time, 6 11 Parent shall make available, or cause the Surviving Corporation to make available, to the Paying Agent cash in the amounts necessary for the payment of the Merger Consideration as provided in Section 3.1 upon surrender as part of the Merger of certificates formerly representing Shares. Funds made available to the Paying Agent shall be invested by the Paying Agent as directed by Parent (it being understood that any and all interest or income earned on funds made available to the Paying Agent pursuant to this Agreement shall be turned over to Parent). (b) Exchange Procedure. As soon as reasonably practicable after the Effective Time, the Surviving Corporation shall cause the Paying Agent to mail to each holder of record of a certificate or certificates that immediately prior to the Effective Time represented Shares (the "Certificates"), (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Paying Agent and shall be in a form and have such other provisions as Parent may reasonably specify) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration as provided in Section 3.1. Upon surrender of a Certificate for cancellation to the Paying Agent or to such other agent or agents as may be appointed by Parent, together with such letter of transmittal, duly executed, and such other documents as may reasonably be required by the Paying Agent, the holder of such Certificate shall be entitled to receive in exchange therefor the amount of cash, without interest or dividends, into which the Shares theretofore represented by such Certificate shall have been converted pursuant to Section 3.1, and the Certificate so surrendered shall forthwith be cancelled. In the event of a transfer of ownership of Shares that is not registered in the transfer records of the Company, payment may be made to a Person other than the Person in whose name the Certificate so surrendered is registered, if such Certificate shall be properly endorsed or otherwise be in proper form for transfer and the Person requesting such payment shall pay any transfer or other taxes required by reason of the payment to a Person other than the registered holder of such Certificate or establish to the satisfaction of the Surviving Corporation that such tax has been paid or is not applicable. Until surrendered as contemplated by this Section 3.2, each Certificate (other than Certificates representing Dissenting Shares) shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the amount of cash, without interest or dividends, into which the Shares of stock theretofore represented by such Certificate shall have been converted pursuant to Section 3.1. No interest shall be paid or shall accrue on the cash payable upon the surrender of any Certificate. Parent or the Paying Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Shares such amounts as Parent or the Paying Agent is required to deduct and withhold with respect to the making of such payment under the Code or under any provision of state, local or foreign tax law. To the extent that amounts are so withheld by Parent or the Paying Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Shares in respect of which such deduction and withholding was made by the Parent or the Paying Agent. (c) No Further Ownership Rights in Shares. All cash paid upon the surrender of Certificates in accordance with the terms of this Article III shall be deemed to have been paid in full satisfaction of all rights pertaining to the Shares theretofore represented by such Certificates. At the Effective Time, the stock transfer books of the Company shall be closed, and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the Shares that were outstanding immediately prior to the Effective Time. If, after the Effective 7 12 Time, Certificates are presented to the Surviving Corporation or the Paying Agent for any reason, they shall be cancelled and exchanged as provided in this Article III. (d) Termination of Payment Fund. Any portion of the funds made available to the Paying Agent to pay the Merger Consideration which remains undistributed to the holders of Shares for six months after the Effective Time shall be delivered to Parent, upon demand, and any holders of Shares who have not theretofore complied with this Article III and the instructions set forth in the letter of transmittal mailed to such holders after the Effective Time shall thereafter look only to the Surviving Corporation (subject to abandoned property, escheat or other similar laws) for payment of the Merger Consideration to which they are entitled, without interest or dividends. (e) No Liability. None of Parent, Sub, the Company or the Paying Agent shall be liable to any Person in respect of any cash delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. (f) Company Options. The Company hereby represents and warrants that either (i) all outstanding options to purchase Shares (the "Company Options"") granted under the Company's 1986 Long Term Incentive Stock Plan and the 1995 Stock Incentive Plan (the "Company Option Plans"), whether or not then exercisable or vested, shall, pursuant to the terms of the Company Option Plans, be cancelled as of the consummation of the Offer and the holders thereof shall be entitled to receive from Parent upon consummation of the Offer, in respect of each Share subject to such Company Option, an amount in cash equal to the excess, if any, of the Merger Consideration over the exercise price per share thereof (such payment to be net of applicable withholding taxes) or (ii) the Company shall take all such steps as shall be necessary to achieve substantially the same result as described in clause (i) of this paragraph (f). (g) Company Option Plans. The Company hereby represents and warrants that all Company Option Plans provide, or have been or will be amended as and when required to provide for the actions described in Section 3.2(f) hereof. The Company shall cause the Company Option Plans to terminate as of the Effective Time. ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE COMPANY In addition to the representations and warranties of the Company in Sections 1.2 and 3.2(f) and (g) hereof, the Company represents and warrants to Parent and Sub as follows: Section 4.1. Organization. The Company and each of its Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has requisite corporate power and authority to carry on its business as now being conducted. The Company and each of its Subsidiaries is duly qualified or licensed to do business and in good standing in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification or licensing necessary, except in such jurisdictions where the failure to be so duly qualified or licensed and in good standing would not reasonably be expected to have a Materially Adverse Effect on the Company or prevent or materially delay the consummation of the Offer and/or the Merger. The Company has delivered to Parent complete and correct copies of its Articles of Incorporation and 8 13 By-laws and has made available to Parent the Articles of Incorporation and By-laws (or similar organizational documents) of each of its Subsidiaries. Section 4.2. Subsidiaries. Exhibit A of the Company Letter lists each Subsidiary of the Company. All of the outstanding shares of capital stock of each Subsidiary that is a corporation have been validly issued and are fully paid and nonassessable. Except as set forth in Item 4.2 of the Company Letter, all of the outstanding shares of capital stock of each Subsidiary of the Company are owned by the Company, free and clear of all Liens. Except as set forth in Item 4.2 of the Company Letter and except for the capital stock of its Subsidiaries, the Company does not own, directly or indirectly, any material capital stock or other ownership interest in any corporation, partnership, joint venture, limited liability company or other entity. Section 4.3. Capital Structure. The authorized capital stock of the Company consists of 25,000,000 shares of Preferred Stock, $1.00 par value (the "Preferred Stock") and 120,000,000 shares of Common Stock, par value $1.00. At the close of business on March 31, 1999, (i) no shares of Preferred Stock were outstanding, (ii) 28,962,527 shares of Common Stock were issued and outstanding, (iii) 4,978 shares of Common Stock were held by the Company in treasury and (iv) 2,396,184 shares of Common Stock were reserved for issuance pursuant to outstanding Company Options or other rights to purchase Shares under the Company Option Plans, the Company's Employee Stock Ownership Plan and the Company's Executive Bonus Plan. Except (i) as set forth above and (ii) as provided in the Standstill Agreement, as of the date hereof, there are no outstanding (A) shares of capital stock or other voting securities of the Company, (B) securities of the Company convertible into or exchangeable for shares of capital stock or voting securities of the Company, (C) options or other rights to acquire from the Company, or other obligations, arrangements or commitments of the Company to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of the Company or (D) equity equivalents, stock appreciation rights, phantom stock, interests in the ownership or earnings of the Company or other similar rights (collectively, "Company Securities"). Each outstanding Share is, and each Share which may be issued pursuant to the Company Option Plans and the other agreements and instruments listed above will be, when issued, duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights. There are no outstanding bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matter on which the Company's shareholders may vote. Except as set forth above or in Item 4.3 of the Company Letter, there are no securities, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind to which the Company or any of its Subsidiaries is a party or by which any of them is bound obligating the Company or any of its Subsidiaries to issue, deliver or sell or create, or cause to be issued, delivered or sold or created, additional shares of capital stock or other voting securities or equity equivalents of the Company or of any of its Subsidiaries or obligating the Company or any of its Subsidiaries to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, arrangement or undertaking. There are no outstanding contractual obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any Company Securities, or any shares of capital stock of any Subsidiaries of the Company. 9 14 Section 4.4. Authorization; Binding Agreement. The Company has all requisite corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, including, but not limited to, the Offer and the Merger, have been duly and validly authorized by the Company's Board of Directors and no other corporate proceedings on the part of the Company or any of its Subsidiaries are necessary to authorize the execution and delivery of this Agreement or to consummate the transactions contemplated hereby (other than the adoption of this Agreement by the shareholders of the Company to the extent required by the PBCL). This Agreement has been duly and validly executed and delivered by the Company and constitutes the legal, valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except to the extent that enforceability hereof may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and by principles of equity regarding the availability of remedies. The Board of Directors of the Company has approved this Agreement, the Shareholder Agreement and the transactions contemplated hereby and thereby (including but not limited to the Offer, the Merger and the matters provided for in the Shareholder Agreement) so as to render inapplicable hereto and thereto the limitation on business combinations contained in Chapter 25 of the PBCL (or any similar provision). As a result, the only vote of holders of any class or series of the Company's capital stock required to adopt this Agreement and the transactions contemplated hereby, including the Merger, is the affirmative vote of a majority of the outstanding Shares, and if Section 1924(b)(1)(ii) of the PBCL is applicable to the Merger, no such vote shall be required. No other state takeover or control share statute or similar statute or regulation applies or purports to apply to the Offer, the Merger, the Shareholder Agreement or any of the transactions contemplated hereby or thereby. Section 4.5. Consents and Approvals; No Violations. Except as set forth in Item 4.5 of the Company Letter, except for filings, permits, authorizations, consents and approvals as may be required under, and other applicable requirements of, the Exchange Act, the HSR Act, the PBCL, state takeover laws and foreign and supranational laws relating to antitrust and anticompetition clearances, neither the execution, delivery or performance of this Agreement by the Company nor the consummation by the Company of the transactions contemplated hereby nor the consummation of the transactions contemplated by the Shareholders Agreement by the parties thereto will (i) conflict with or result in any breach of any provision of the Articles of Incorporation or By-laws of the Company or of the similar organizational documents of any of its Subsidiaries, (ii) require any filing with, or permit, authorization, consent or approval of, any Governmental Entity or other Person, (iii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, amendment, cancellation or acceleration) under, any of the material terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, contract, agreement or other instrument or obligation to which the Company or any of its Subsidiaries is a party or by which any of them or any of their properties or assets may be bound or (iv) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Company, any of its Subsidiaries or any of their properties or assets. Section 4.6. SEC Documents and Other Reports. The Company has filed with the SEC all documents required to be filed by it since August 31, 1995 under the Securities Act 10 15 or the Exchange Act (the "Company SEC Documents"). As of their respective filing dates, the Company SEC Documents complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, each as in effect on the date so filed, and at the time filed with the SEC none of the Company SEC Documents, including the financial statements of the Company and the notes thereto, contained any untrue statement of a material fact or omitted 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. The financial statements of the Company (including the notes thereto) included in the Company SEC Documents comply as of their respective dates as to form in all material respects with the then applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles (except in the case of the unaudited statements, as permitted by Form 10-Q under the Exchange Act) applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto) and fairly present the consolidated financial position of the Company and its consolidated Subsidiaries as at the dates thereof and the consolidated results of their operations and their consolidated cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments and to any other adjustments described therein none of which were or will be material in amount or effect). The Company has heretofore furnished or made available to Parent a complete and correct copy of any amendments or modifications which have not yet been filed with the SEC to executed agreements, documents or other instruments which previously had been filed by the Company with the SEC pursuant to the Securities Act or the Exchange Act. No Subsidiary is required to file any form, report or other document with the SEC. Section 4.7. Absence of Materially Adverse Change. Except as disclosed in Item 4.7 of the Company Letter, since December 31, 1998, the Company and its Subsidiaries have conducted their respective businesses in all material respects only in the ordinary course, and there has not been (i) any Materially Adverse Change with respect to the Company, (ii) any declaration, setting aside or payment of any dividend or other distribution with respect to its capital stock or any redemption, purchase or other acquisition of any of its capital stock, (iii) any split, combination or reclassification of any of its capital stock or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, (iv) any change in accounting methods, principles or practices by the Company materially affecting its assets, liabilities, business or results of operations, (v) any grant by the Company or its Subsidiaries to any officer of the Company or its Subsidiaries of any increase in compensation, except as was required under employment agreements in effect as of December 31, 1998 or as were made in the ordinary course of business consistent with past practice, (vi) any grant by the Company or its Subsidiaries to any such officer of any increase in severance or termination pay, except as part of a standard employment package to any person promoted or hired, or as was required under employment, severance or termination agreements in effect as of December 31, 1998, (vii) any revaluation by the Company of any of its material assets or (viii) any other action or omission of the type described in subparagraphs (a), (b), (c), (e), (f), (g), (h), (j), (k), (l), (m), (n) or (o) of Section 6.1. Section 4.8. Information Supplied. None of the information supplied or to be supplied by the Company specifically for inclusion or incorporation by reference in (i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the information to be filed by the Company in 11 16 connection with the Offer pursuant to Rule 14f-1 promulgated under the Exchange Act (the "Information Statement") or (iv) the proxy statement (together with any amendments or supplements thereto, the "Proxy Statement") relating to the Shareholders Meeting, will, in the case of the Offer Documents, the Schedule 14D-9 and the Information Statement, at the respective times the Offer Documents, the Schedule 14D-9 and the Information Statement are filed with the SEC or first published, sent or given to the Company's shareholders, or, in the case of the Proxy Statement, at the time the Proxy Statement is first mailed to the Company's shareholders or at the time of the Shareholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Shareholders Meeting which has become false or misleading. The Schedule 14D-9, the Information Statement and the Proxy Statement will comply as to form in all material respects with the requirements of the Exchange Act, except that no representation or warranty is made by the Company with respect to statements made or incorporated by reference therein based on information supplied by Parent or Sub specifically for inclusion or incorporation by reference therein. Section 4.9. Compliance with Laws. Except as set forth in the Company SEC Documents, the business and operations of the Company and each of its Subsidiaries have been operated in compliance with all Laws applicable thereto, except for any instances of non-compliance which, individually or in the aggregate, have not had and would not be reasonably likely in the future to have a Materially Adverse Effect on the Company. Section 4.10. Permits. (i) The Company and its Subsidiaries have all material permits, certificates, licenses, approvals and other authorizations required in connection with the operation of their respective businesses (collectively, "Company Permits"), (ii) neither the Company nor any of its Subsidiaries is in violation in any material respect of any Company Permit and (iii) no proceedings are pending or, to the knowledge of the Company, threatened, to revoke or limit any Company Permit. Section 4.11. Contracts. Except as set forth in Item 4.11 of the Company Letter, neither the Company nor any of its Subsidiaries is a party or is subject to any note, bond, mortgage, indenture, contract, lease, license, agreement or instrument that is required to be described in or filed as an exhibit to any Company SEC Document (collectively, the "Company Material Contracts") which is not so described in or filed as required by the Securities Act or the Exchange Act. All such Company Material Contracts are valid and binding and are in full force and effect and enforceable against the Company or such Subsidiary and, to the knowledge of the Company, against the other parties thereto in accordance with their respective terms, except to the extent that enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and by principles of equity regarding the availability of remedies. Neither the Company nor any of its Subsidiaries is in violation or breach of or default under any such Company Material Contract. Section 4.12. Taxes and Tax Returns. Except as set forth in Item 4.12 of the Company Letter: 12 17 (a) The Company and each of its Subsidiaries and any consolidated, combined, unitary or aggregate group for tax purposes of which the Company or any of its Subsidiaries is or has been a member has timely filed, or caused to be timely filed all Tax Returns required to be filed by it, and has paid, collected or withheld, or caused to be paid, collected or withheld, all Taxes required to be paid, collected or withheld, other than such Taxes for which adequate reserves in the Company's financial statements have been established in accordance with generally accepted accounting principles, consistently applied, or which are being contested in good faith. All such Tax Returns were true, correct and complete in all material respects. None of the Tax Returns contains any position which is or would be subject to penalties under Section 6662 of the Code (or any corresponding provision of state, local or foreign Tax law). There are no claims or assessments pending against the Company or any of its Subsidiaries for any alleged deficiency in any Tax, and the Company has not been notified in writing of any proposed Tax claims or assessments against the Company or any of its Subsidiaries (other than in each case, claims or assessments for which adequate reserves in the Company's financial statements have been established or which are being contested in good faith or are immaterial in amount). Neither the Company nor any of its Subsidiaries has any waivers or extensions of any applicable statute of limitations to assess any Taxes. There are no outstanding requests by the Company or any of its Subsidiaries for any extension of time within which to file any Tax Return or within which to pay any material amounts of Taxes shown to be due on any return. No claim has been made in writing to the Company or to any of its Subsidiaries in the past three years by an authority in a jurisdiction where the Company or its Subsidiaries do not file Tax Returns that it is or may be subject to taxation by that jurisdiction, nor is there any meritorious basis for an investigation or other proceeding that would result in such an assessment. To the best knowledge of the Company, there are no liens for Taxes on the assets of the Company or any of its Subsidiaries except for statutory liens for current Taxes not yet due and payable. (b) Section 4.12 of the Company Letter sets forth (1) the taxable years of the Company and its Subsidiaries as to which the respective statutes of limitations have not expired, and (2) with respect to such years, sets forth those years for which examinations have been completed, those years for which examinations are presently being conducted, those years for which examinations have not been initiated, and those years for which Tax Returns have not yet been filed. (c) All material elections with respect to Tax affecting the Company as of the date hereof are set forth in Section 4.12(c) of the Company Letter. (d) Neither the Company nor any of its Subsidiaries has filed a consent under Section 341(f) of the Code concerning collapsible corporations. Neither the Company nor any of its Subsidiaries has made any payments, or is obligated to make any payments, or is a party to any agreement that under certain circumstances could obligate it to make any payments that will not be deductible under Sections 162(m) or 280G of the Code or any similar provision of foreign, state or local law. Neither the Company nor any of its Subsidiaries is a party to or bound by any tax indemnity, tax sharing or tax allocation agreement or arrangement. Except for the group of which the Company is presently the common parent, neither the Company nor any of its Subsidiaries has ever been a member of an affiliated group of corporations, within the meaning of Section 1504 of the Code. 13 18 (e) Neither the Company nor any of its Subsidiaries has (i) a material amount of income reportable for a period ending after the Effective Time, but attributable to a transaction (e.g., an installment sale) occurring in or a change in accounting method made for a period ending on or prior to the Effective Time which resulted in a deferred reporting of income from such transaction or from such change in accounting method (other than a deferred intercompany transaction); or (ii) deferred gain or loss arising out of any deferred intercompany transaction. Neither the Company nor any of its Subsidiaries has any excess loss account (as defined in Treasury Regulation Section 1.1502-19) with respect to the stock of any of its Subsidiaries. No "ownership change" (within the meaning of Section 382(g) of the Code) has, to the Company's knowledge, occurred prior to the date hereof which currently limits the Company's ability to utilize any net operating loss carryovers under Section 382 of the Code. (f) For purposes of this Agreement, the term "Tax" shall mean any federal, state, local, foreign or provincial income, gross receipts, property, sales, use, license, excise, franchise, employment, payroll, alternative or added minimum, ad valorem, transfer or excise tax, or any other tax, custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or penalty imposed by any Governmental Entity. The term "Tax Return" shall mean a report, return or other information (including any attached schedules or any amendments to such report, return or other information) required to be supplied to or filed with a Governmental Entity with respect to any Tax, including an information return, claim for refund, amended return or declaration or estimated Tax. Section 4.13. Litigation and Liabilities. Except as disclosed in the Company SEC Documents and except as set forth in Item 4.13 of the Company Letter or otherwise disclosed in writing to Parent, (a) there is no suit, action, arbitration, investigation, claim, proceeding or audit ("Litigation") pending or, to the best knowledge of the Company, threatened against the Company or any of its Subsidiaries, nor is there any judgment, decree, writ, award, injunction, rule or order of any Governmental Entity outstanding against the Company or any of its Subsidiaries that are reasonably likely, individually or in the aggregate, to have a Materially Adverse Effect; (b) there are no obligations or liabilities, contingent, absolute, determined, determinable or otherwise, including, without limitation, those relating to environmental and occupational safety and health matters, that are reasonably likely, individually or in the aggregate, to have a Materially Adverse Effect and (c) as of the date hereof, no facts are known to the executive officers or directors of the Company on the date hereof that could reasonably be expected to form the basis for valid claims as to which rights to indemnification and advancement of expenses to the executive officers or directors of the Company or any Subsidiary would be applicable. Section 4.14. Employee Benefit Plans. (a) As used in this Agreement, "Benefit Plan" shall mean any employee benefit plan, including, without limitation, (i) any employee benefit plan as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, together with all regulations thereunder ("ERISA") maintained or contributed to by the Company or any Subsidiary during the three-year period preceding the date hereof, whether or not such plan is subject to any or all of ERISA's provisions, and (ii) whether or not described in the preceding clause, any pension, profit sharing, severance, employment, change-in-control, bonus, stock 14 19 bonus, deferred or supplemental compensation, retiree medical or life insurance, death benefit or insurance, retirement, thrift, stock purchase or stock option plan or any other compensation, welfare, fringe benefit, perquisite or retirement plan, or other material program, policy or arrangement of any kind or nature whatsoever, whether oral or written, maintained or contributed to by the Company or any of the Subsidiaries or otherwise providing for compensation, benefits for or the welfare of any or all of the current or former employees, directors, consultants or agents of the Company or any of its Subsidiaries or their beneficiaries or dependents. Except as set forth in Item 4.14 of the Company Letter, neither the Company nor any of its Subsidiaries contributes to or has at any time during the six-year period preceding the date of this Agreement contributed to, or has any outstanding liability with respect to, any Multiemployer Plan as defined in Section 3(37) of ERISA. (b) Except as set forth in Item 4.14 of the Company Letter and except for such instances of non-compliance with ERISA and the regulations promulgated thereunder that, individually or in the aggregate, have not had and would not be reasonably likely in the future to have a Materially Adverse Effect on the Company: (i) each Benefit Plan has been established and administered in accordance with its terms and in compliance with applicable provisions of ERISA, the Code and all other applicable laws, rules and regulations; (ii) the Company has received no notice from any Governmental Entity questioning or challenging such compliance; (iii) each Benefit Plan which is intended to be tax-qualified under Code Sections 401(a) and (k) (as applicable) is so qualified in form and operation and has received a favorable determination letter as to its qualification, and nothing has occurred, whether by action or failure to act, that would cause the loss of such qualification; (iv) no event has occurred and no condition exists with respect to a Benefit Plan or other plan (whether or not covering employees of the Company or any of its Subsidiaries) that would subject the Company or any of its Subsidiaries, either directly or by reason of their affiliation with an ERISA Affiliate (as hereinafter defined) to any material tax, fine, lien or penalty imposed by ERISA, the Code or other applicable laws, rules and regulations; (v) for each Benefit Plan with respect to which a Form 5500 has been filed, no material change has occurred with respect to the matters covered by the most recent Form 5500 since the date thereof; (vi) no "reportable event" (as such term is defined in ERISA Section 4043) other than any event with respect to which reporting is waived pursuant to the regulations under ERISA Section 4043, "prohibited transactions" (as such term is defined in ERISA Section 406 and Code Section 4975), "accumulated funding deficiency" (as such term is defined in ERISA Section 302 and Code Section 412 (whether or not waived)) or failure to make by its due date a required installment under Code Section 412(m) has occurred with respect to any Benefit Plan, or any other plan maintained for employees of any ERISA Affiliate of the Company or any of its Subsidiaries. "ERISA Affiliate," as applied to any Person, means (i) any corporation which is a member of a controlled group of corporations (within the meaning of Code Section 414(b)) of which that Person is a member, (ii) any trade or business (whether or not incorporated) which is a member of a group of trades or businesses under common control (within the meaning of Code Section 414(c)) of which that Person is a member and (iii) any member of an affiliated service group (within the meaning of Code Section 414(m) and (o)) of which that Person, any corporation described in clause (i) above or any trade or business described in clause (ii) above is a member. (c) With respect to any Benefit Plan, (i) no actions, suits or claims (other than routine claims for benefits in the ordinary course) are pending or, to the knowledge of the 15 20 Company, threatened and (ii) no facts or circumstances exist, to the knowledge of the Company, that could reasonably be expected to give rise to any such actions, suits or claims. (d) Except as set forth in Item 4.14 of the Company Letter, no Benefit Plan exists that could result in the payment to any present or former employee, director, consultant or agent of the Company or any of its Subsidiaries of any money or other property, or accelerate or provide any other rights or benefits, to any such Person as a result of the transactions contemplated by this Agreement, whether or not such payment would constitute a parachute payment within the meaning of Code Section 280G, and no payment in respect of a Benefit Plan would constitute an excess parachute payment under Code Section 280G. (e) With respect to each Benefit Plan, the Company has made available to Parent a true and correct copy of (i) the Benefit Plans and all amendments thereto, (ii) the most recent annual report on Form 5500 filed with the IRS, (iii) each trust agreement and group annuity contract, if any, and all amendments thereto relating to such Benefit Plan, (iv) the most recent actuarial report or valuation relating to any such Benefit Plan subject to Title IV of ERISA, (v) the most recent IRS determination letter with respect to any such Benefit Plan which is intended to be "qualified" within the meaning of Section 401(a) of the Code and (vi) the most recent summary plan descriptions. (f) As of the date hereof, all material payments required to be made by or under any Benefit Plan, any related trusts, or any related collective bargaining agreement have been made or are being processed in accordance with normal operating procedures, and except as set forth in the Company's financial statements, all material amounts required to be reflected thereon have been properly accrued to date as liabilities under or with respect to each Benefit Plan for the current year. (g) Except as identified in Item 4.14 of the Company Letter, no Benefit Plan is or has ever been subject to Title IV of ERISA. (h) Except as identified in Item 4.14 of the Company Letter, neither the Company nor any of its Subsidiaries has any post-retirement or similar obligations under any employee welfare benefit plan (as such term is defined in Section 3(1) of ERISA) or otherwise to provide health or death benefits to or in respect of current or former employees, directors, agents or consultants, except as specifically required by the continuation requirements of Part 6 of Title I of ERISA. Section 4.15. Environmental Matters. (a) Except as set forth in Item 4.15 of the Company Letter and except as, individually or in the aggregate, have not had and are not reasonably likely in the future to have a Materially Adverse Effect on the Company or prevent or materially delay the consummation of the Offer or the Merger: (i) the Company and its Subsidiaries are, and within the period of all applicable statutes of limitation have been, in material compliance with all Environmental Laws (as hereinafter defined); 16 21 (ii) the Company and its Subsidiaries hold all Environmental Permits (as hereinafter defined) (each of which is in full force and effect) required for any of their current operations and for any property owned, leased, or otherwise operated by any of them (collectively, the "Premises"), and are, and within the period of all applicable statutes of limitation have been, in material compliance with the terms of all such Environmental Permits. No event has occurred which, with the passage of time or the giving of notice or both, would constitute material non-compliance with Environmental Laws; (iii) no review by, or approval of, any Governmental Entity or other Person is required under any Environmental Law in connection with the execution or delivery of this Agreement or the transfer of title to the Premises, if any, contemplated in connection therewith; (iv) neither the Company nor any of its Subsidiaries has received any written notice of an Environmental Claim (as hereinafter defined) that remains unresolved and, to the knowledge of the Company, no such Environmental Claims are currently pending or threatened; (v) to the knowledge of the Company neither the Company nor any of its Subsidiaries has reason to believe that any Hazardous Materials presently on the Premises or on any other property are reasonably likely to form the basis of any Environmental Claim against any of them; and (vi) the Company is involved in various environmental, contractual, warranty and public liability cases and claims that are considered routine to the Company's business and, in the opinion of the Company's management, the potential financial impact of these matters is not material to the business, properties, assets, prospects, operations or condition (financial or otherwise) of the Company and its Subsidiaries. (b) For purposes of this Agreement, the terms below shall have the following meanings: "Environmental Claim" means any claim, demand, action, suit, complaint, proceeding, directive, investigation, lien, demand letter, or notice of alleged noncompliance, violation or liability, by any Person or entity asserting liability or potential liability (including without limitation, liability or potential liability for enforcement, investigatory costs, remediation costs, operation and maintenance costs, governmental response costs, natural resource damages, property damage, personal injury, fines or penalties), regardless of legal theory, arising out of, based on or resulting from (i) the presence, discharge, emission, release or threatened release of any Hazardous Materials at any location including, without limitation, the Premises, or (ii) the condition of the Premises or the present use thereof, or (iii) otherwise relating to obligations or liabilities under any Environmental Law. "Environmental Laws" means any and all laws, rules, orders, regulations, statutes, ordinances, guidelines, codes, decrees or other legally enforceable requirement (including, 17 22 without limitation, common law) of any foreign government, the United States or any Governmental Entity regulating, relating to or imposing liability or standards of conduct concerning protection of human health or the environment, including, without limitation, ambient air, surface waters, ground waters, lands, sub-surface strata, biota and cultural properties. "Environmental Permit" means all permits, licenses, registrations, approvals, exemptions and other filings with or authorizations by any Governmental Entity under any Environmental Law. "Hazardous Materials" means all hazardous or toxic substances, wastes, materials or chemicals, petroleum (including crude oil or any fraction thereof), petroleum products, asbestos, asbestos-containing materials, pollutants and contaminants that are regulated pursuant to any Environmental Laws. Section 4.16. Charter Provisions. The actions of the Board of Directors of the Company previously taken and/or taken in approving the Offer (including the purchase of Shares pursuant to the Offer), the Merger, this Agreement, the Shareholders Agreement and the transactions contemplated by this Agreement and the Shareholders Agreement, are sufficient to render irrevocably inapplicable (i) Article VII of the Company's Articles of Incorporation and (ii) any state anti-takeover law to (A) the Offer, the Merger, this Agreement and the Shareholders Agreement, (B) the transactions contemplated by this Agreement and/or the Shareholders Agreement and (C) any other transaction between Parent and any of its Affiliates on the one hand, and the Company and any of its Affiliates, on the other hand, consummated after the date that Sub acquires Shares pursuant to the Offer. Pursuant to the Company's Articles of Incorporation, Section 2538(a) and Subchapters E, F, G and H of Chapter 25 of the PBCL are not applicable to the Company. Section 4.17. Intellectual Property. Except as set forth in Item 4.17 of the Company Letter, with respect to all patents, trademarks, trade names, service marks, copyrights and any applications therefor, technology, know-how, trade secrets, computer software programs or applications, trade names and tangible or intangible proprietary information or materials that are used in the respective businesses of the Company and its Subsidiaries as currently conducted, the Company has no knowledge (a) that such use violates the rights of any third Person or (b) of any pending or threatened litigation involving such use, which violation or litigation in the aggregate has or could be reasonably expected to have a Materially Adverse Effect on the Company. Section 4.18. Labor Relations. No representation election, arbitration proceeding, grievance (other than with respect to incidents in the ordinary course of business), labor strike, dispute (other than with respect to incidents in the ordinary course of business), slowdown, stoppage or other labor trouble is pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries. No complaint against the Company or any of its Subsidiaries is pending or, to the knowledge of the Company, threatened before the National Labor Relations Board, the Equal Employment Opportunity Commission or any similar foreign, state or local agency, by or on behalf of any employee of the Company or any of its Subsidiaries. The Company and each of its Subsidiaries is in compliance in all material respects 18 23 with all laws and regulations governing workplace safety, terms and conditions of employment, payment of wages and overtime, employment of non-citizens, discrimination in the workplace, and other employment and labor laws. Neither the Company nor any of its Subsidiaries has engaged in any unfair labor practice. Section 4.19. Insurance. All insurance policies carried by, or covering, the Company and its Subsidiaries with respect to their businesses, assets and properties are, in respect of the risks insured against and the amount of coverage provided, consistent with insurance policies customarily carried by Persons similarly situated who engage in businesses similar to the businesses of the Company and its Subsidiaries. All such insurance policies are in full force and effect, and no notice of cancellation has been given with respect to any such policy. All premiums due on such policies have been paid in a timely manner and the Company and its Subsidiaries have complied in all material respects with the terms and provisions of such policies. Section 4.20. Finders and Investment Bankers. Neither the Company nor any of its officers or directors has employed any broker, finder or financial advisor or otherwise incurred any liability for any brokerage fees, commissions or financial advisors' or finders' fees in connection with the transactions contemplated hereby, other than pursuant to an agreement or agreements with BT Alex. Brown and Warburg Dillon Read, copies of which has been provided to Parent. Section 4.21. Contracts; Indebtedness. Except as disclosed in the Company SEC Documents or as listed under Item 4.21 or other Items of the Company Letter, (a) there are no contracts or agreements that are material to the business, properties, assets, financial condition or results of operations of the Company and its Subsidiaries taken as a whole, and (b) neither the Company nor any of its Subsidiaries is in violation of or in default under (nor does there exist any condition which upon the passage of time or the giving of notice would cause such a violation of or default under) any loan or credit agreement, note, bond, mortgage, indenture, lease, permit, concession, franchise, license or any other contract, agreement, arrangement or understanding, to which it is a party or by which it or any of its properties or assets is bound, except for violations or defaults that could not reasonably be expected to result in a Materially Adverse Effect on the Company. ARTICLE V - REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB Parent and Sub represent and warrant to the Company as follows: Section 5.1. Organization. Each of Parent and Sub is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has requisite corporate power and authority to carry on its business as now being conducted. Section 5.2. Authority. Parent and Sub have the requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by Parent and Sub, and the consummation by Parent and Sub of the Merger and of the other transactions 19 24 contemplated hereby have been duly authorized by all necessary corporate action on the part of Parent and Sub, and no other corporate proceedings on the part of Parent or Sub or their respective Boards of Directors are necessary to authorize or approve this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Parent and Sub and constitutes the legal, valid and binding agreement of the Parent and Sub, enforceable against the Parent and Sub in accordance with its terms, except to the extent that enforceability hereof may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and by principles of equity regarding the availability of remedies. Section 5.3. Consents and Approvals; No Violations. Except as set forth in Item 5.3 of the Parent Letter, except for filings, permits, authorizations, consents and approvals as may be required under, and other applicable requirements of, the Exchange Act, the HSR Act, the PBCL, state takeover laws and foreign and supranational laws relating to antitrust and anticompetition clearances, neither the execution, delivery or performance of this Agreement by Parent and Sub nor the consummation by Parent and Sub of the transactions contemplated hereby will (i) conflict with or result in any breach of any provision of the respective Articles of Incorporation or By-laws of Parent and Sub, (ii) require any filing with, or permit, authorization, consent or approval of, any Governmental Entity, (iii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, amendment, cancellation or acceleration) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, lease, contract, agreement or other instrument or obligation to which Parent or any of its Subsidiaries is a party or by which any of them or any of their properties or assets may be bound or (iv) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Parent, any of its Subsidiaries or any of their properties or assets. Section 5.4. Information Supplied. None of the information supplied or to be supplied by Parent or Sub specifically for inclusion or incorporation by reference in (i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the Information Statement or (iv) the Proxy Statement will, in the case of the Offer Documents, the Schedule 14D-9 and the Information Statement, at the respective times the Offer Documents, the Schedule 14D-9 and the Information Statement are filed with the SEC or first published, sent or given to the Company's shareholders, or, in the case of the Proxy Statement, at the time the Proxy Statement is first mailed to the Company's shareholders or at the time of the Shareholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Shareholders Meeting which has become false or misleading, except that no representation or warranty is made by Parent or Sub in connection with any of the foregoing with respect to statements made or incorporated by reference therein based on information supplied by the Company or any of its representatives specifically for inclusion or incorporation by reference therein. The Offer Documents will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder, except that no representation or warranty is made by Parent or Sub in connection with any of the foregoing with respect to statements made or incorporated by reference therein based on 20 25 information supplied by the Company or any of its representatives specifically for inclusion or incorporation by reference therein. Section 5.5. Interim Operations of Sub. Sub was formed solely for the purpose of engaging in the transactions contemplated hereby, has engaged in no other business activities and has conducted its operations only as contemplated hereby. Section 5.6. Finders and Investment Bankers. Neither Parent nor Sub nor any of their respective officers or directors has employed any broker, finder or financial advisor or otherwise incurred any liability for any brokerage fees, commissions or financial advisors' or finders' fees in connection with the transactions contemplated hereby, other than pursuant to an agreement with Lehman Brothers. Section 5.7. Financing. Parent has or will have, and shall provide Sub with, the funds necessary to consummate the Offer and the Merger and the transactions contemplated hereby in accordance with the terms hereof. ARTICLE VI - COVENANTS RELATING TO CONDUCT OF BUSINESS Section 6.1. Conduct of Business by the Company Pending the Merger. During the period from the date of this Agreement until the earlier of the Effective Time or such time as Parent's and Sub's designees shall constitute a majority of the Board of Directors of the Company, the Company shall, and shall cause each of its Subsidiaries to, in all material respects, except as contemplated by this Agreement, carry on its business in the ordinary course as currently conducted and, to the extent consistent therewith, with no less diligence and effort than would be applied in the absence of this Agreement, seek to preserve intact their current business organizations, keep available the services of their current officers and employees and preserve their relationships with customers, suppliers and others having business dealings with them to the end that goodwill and ongoing businesses shall be unimpaired at the Effective Time. Without limiting the generality of the foregoing, and except as otherwise contemplated by this Agreement, during such period, the Company shall not, and shall not permit any of its Subsidiaries to, without the prior written consent of Parent (which consent shall not be unreasonably withheld or delayed): (a) amend or propose to amend its Articles of Incorporation or By-laws (or comparable governing instruments) or change the number of directors constituting the entire Board of Directors of the Company or any of its Subsidiaries; (b) authorize for issuance, issue, deliver, grant, sell, pledge, or otherwise dispose of or propose to issue, deliver, grant, sell, pledge or otherwise dispose of any shares of, or any options, warrants, commitments, subscriptions or rights of any kind to acquire or sell any shares of, the capital stock or other securities of the Company or any of its Subsidiaries including, but not limited to, stock appreciation rights, phantom stock, any securities convertible into or exchangeable for shares of stock of any class of the Company or any of its Subsidiaries; provided, however, that the foregoing shall not prohibit the issuance of Shares upon the exercise of Company Options granted prior to the date of this Agreement; 21 26 (c) split, combine or reclassify any shares of its capital stock or declare, pay or set aside any dividend or other distribution (whether in cash, stock, securities or other property or any combination thereof) in respect of its capital stock, or directly or indirectly redeem, purchase or otherwise acquire or offer to acquire, directly or indirectly, any shares of its capital stock or other securities; (d) (i) except in the ordinary course of business consistent with past practice (1) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, indirectly, continently or otherwise) for the obligations of any Person or (2) make any loans, advances or capital contributions to, or investments in, any other Person (other than to one of its Subsidiaries); (ii) acquire the stock or the assets of, or merge or consolidate with, any other Person; (iii) voluntarily incur any liability or obligation (absolute, accrued, contingent or otherwise) other than in the ordinary course of business consistent with past practice; or (iv) sell, transfer, mortgage, pledge or otherwise dispose of, or encumber, or agree to sell, transfer, mortgage, pledge or otherwise dispose of or encumber, any assets or properties, real, personal or mixed of the Company and its Subsidiaries other than sales of products in the ordinary course of business and in a manner consistent with past practice; (v) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise as an accommodation become responsible for, the obligations of any Person, or make any loans, advances or capital contributions to, or investments in, any other Person (other than in the ordinary course of business consistent with past practice); (vi) enter into any contract or agreement, other than in the ordinary course of business consistent with past practice, or amend, alter or terminate any Company Material Contract; or (vii) authorize any capital expenditure except in compliance with procedures heretofore established by resolutions duly adopted by the Board of Directors of the Company; (e) increase in any manner the compensation of any of its directors, officers or employees (other than in the ordinary course of business consistent with past practice) or enter into, establish, amend or terminate any Benefit Plan, employment, consulting, retention, change in control, collective bargaining, bonus or other incentive compensation, profit sharing, health or other welfare, stock option or other equity, pension, retirement, vacation, severance, deferred compensation or other compensation or benefit plan, policy, agreement, trust, fund or arrangement with, for or in respect of, any shareholder, officer, director, other employee, agent, consultant or Affiliate other than as required pursuant to the terms of agreements in effect on the date of this Agreement and set forth in Item 6.1 of the Company Letter; (f) except as may be required as a result of a change in Law or in generally accepted accounting principles, change any of the accounting practices or principles used by it; (g) make any material Tax election, settle or compromise any material federal, state, local or foreign Tax liability, or waive any statute of limitations for any Tax claim or assessment; (h) settle or compromise any material pending or threatened suit, action or claim; 22 27 (i) adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company or any of its Subsidiaries (other than the Merger); (j) pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction (i) in the ordinary course of business and consistent with past practice of liabilities reflected or reserved against in the financial statements of the Company or incurred in the ordinary course of business and consistent with past practice and (ii) of liabilities required to be paid, discharged or satisfied pursuant to the terms of any contract in existence on the date hereof or entered into in accordance with this Section 6.1; (k) permit any insurance policy naming the Company or any of its Subsidiaries as a beneficiary or a loss payable payee to be cancelled or terminated without notice to Parent, except in the ordinary course of business and consistent with past practice; or (l) take, or offer or propose to take, or agree to take, in writing or otherwise, any of the actions described in this Section 6.1 or take or omit to take any action which would make any of the representations or warranties of the Company contained in this Agreement untrue and incorrect in any material respect as of the date when made if such action had then been taken or omitted, or would result in any of the Offer Conditions or the conditions set forth in Article VIII hereof not being satisfied. The Company shall, and the Company shall cause each of its Subsidiaries to, use its or their best efforts to comply in all material respects with all Laws applicable to it or any of its properties, assets or business and maintain in full force and effect all the Company Permits necessary for such business. Section 6.2. No Solicitation. (a) The Company shall not, nor shall it permit any of its Subsidiaries to, nor shall it permit any of its executive officers, directors, authorized representatives or authorized agents to, directly or indirectly, (i) solicit, initiate or knowingly encourage (including by way of furnishing non-public information) any inquiries or the making of any proposal which constitutes, or may reasonably be expected to lead to, any Takeover Proposal or (ii), except as expressly permitted pursuant to paragraph (b) of this Section 6.2, participate in any discussions or negotiations regarding any Takeover Proposal. For purposes of this Agreement, "Takeover Proposal" means (x) any inquiry, proposal or offer from any Person relating to any direct or indirect acquisition or purchase of any of the assets of the Company or its Subsidiaries (other than the purchase of inventory or other assets in the ordinary course of business) or any of the Shares then outstanding, any tender offer or exchange offer for any of the Shares then outstanding, or any merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving the Company or any of its Subsidiaries, other than the transactions contemplated by this Agreement or (y) any other transaction the consummation of which could reasonably be expected to impede, interfere with, prevent or delay the Offer and/or the Merger or which would reasonably be expected to dilute the benefits to Parent of the transactions contemplated by this Agreement and the Shareholders Agreement. 23 28 (b) Neither the Unaffiliated Directors nor any committee designated thereby shall withdraw or modify, or propose publicly to (i) withdraw or modify, in a manner adverse to Parent, the approval or recommendation by Unaffiliated Directors or such committee of the Offer, the Merger or this Agreement (or any transaction contemplated thereby); provided that, the Unaffiliated Directors may, (A) in response to any Takeover Proposal, suspend such recommendation for a period of up to 24 hours pending the analysis by the Unaffiliated Directors of such Takeover Proposal, which analysis may include to the extent necessary discussions with a Person making such Takeover Proposal regarding same, or (B) at any time prior to the consummation of the Offer, modify or withdraw such recommendation, but only if the Unaffiliated Directors determine in good faith, based on a written opinion of Drinker Biddle & Reath LLP (a "Written Opinion"), that it would be a breach of its fiduciary duties not to so modify or withdraw such recommendation, (ii) approve or recommend, or propose publicly to approve or recommend, any Takeover Proposal or (iii) cause the Company to enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement (each, an "Acquisition Agreement") related to any Takeover Proposal. (c) In addition to the obligations of the Company contained in paragraphs (a) and (b) of this Section 6.2, the Company shall immediately advise Parent orally and in writing of any request for information or of any Takeover Proposal, the material terms and conditions of such request or Takeover Proposal and the identity of the Person making such request or Takeover Proposal. (d) Subject to Section 6.2(e), nothing contained in this Section 6.2 shall prohibit the Company from taking and disclosing to its shareholders a position contemplated by Rules 14d-9 and 14e-2 promulgated under the Exchange Act or from making any disclosure to the Company's shareholders if, in the good faith judgment of the Board of Directors of the Company, based on a Written Opinion, such disclosure is required under applicable law. (e) If Sub purchases Shares pursuant to the Offer, the Company and its Board of Directors shall take all actions legally permitted to permit the Merger to occur. Section 6.3. Disclosure to Parent; Delivery of Certain Filings. The Company shall promptly advise Parent orally and in writing if there occurs, to the knowledge of the Company, any change or event which results in the executive officers of the Company having a good faith belief that such change or event has resulted in or is reasonably likely to result in a Materially Adverse Effect on the Company or that such change or event could materially delay the consummation of the Offer and/or the Merger. The Company shall provide to Parent, and Parent shall provide to the Company, copies of all filings made by the Company or Parent, as the case may be, with any Governmental Entity in connection with this Agreement and the transactions contemplated hereby. ARTICLE VII - ADDITIONAL AGREEMENTS Section 7.1. Shareholder Approval; Preparation of Proxy Statement. (a) If the approval of the Company's shareholders of this Agreement and the Merger is required by law, the Company shall, at Parent's request, as soon as practicable 24 29 following the expiration of the Offer in accordance with the terms of Section 1.1 of this Agreement, so long as permitted by law, duly call, give notice of, convene and hold a meeting of its shareholders (the "Shareholders Meeting") for the purpose of obtaining such approval. The Company shall, through its Board of Directors (but subject to the right of the Company's Board of Directors to withdraw or modify its approval or recommendation of the Offer, the Merger and this Agreement as set forth in Section 6.2(b)), recommend to its shareholders that the shareholders approve the Merger. Notwithstanding the foregoing, if Sub or any other Subsidiary of Parent shall acquire 80% or more of the then outstanding Shares, the parties shall, at the request of Parent, take all necessary and appropriate actions to cause the Merger, pursuant to the terms thereof, to become effective in accordance with Section 1924(b)(1)(ii) of the PBCL, as promptly as practicable after such acquisition without a meeting of the Shareholders of the Company, including, without limitation, adoption by the board of directors of Sub of a short-form plan of merger in accordance with the PBCL and consistent with the terms of the Merger. (b) If the approval of the Company's shareholders of this Agreement and the Merger is required by law, the Company shall, at Parent's request, as soon as practicable following the expiration of the Offer in accordance with the terms of Section 1.1, and to the extent permitted by law, prepare and file a preliminary Proxy Statement with the SEC and shall use all reasonable efforts to respond to any comments of the SEC or its staff, and, to the extent permitted by law, to cause the Proxy Statement to be mailed to the Company's shareholders as promptly as practicable after responding to all such comments to the satisfaction of the staff. The Company shall notify Parent promptly of the receipt of any comments from the SEC or its staff and of any request by the SEC or its staff for amendments or supplements to the Proxy Statement or for additional information and shall supply Parent with copies of all correspondence between the Company or any of its representatives, on the one hand, and the SEC or its staff, on the other hand, with respect to the Proxy Statement or the Merger. If at any time prior to the Shareholders Meeting there shall occur any event that should be set forth in an amendment or supplement to the Proxy Statement, the Company shall promptly prepare and mail to its shareholders such an amendment or supplement. Parent shall cooperate with the Company in the preparation of the Proxy Statement or any amendment or supplement thereto. Parent and its counsel shall be given a reasonable opportunity to review and comment upon the Proxy Statement and any such correspondence prior to its filing with the SEC or dissemination to the Company's shareholders, and the Company shall not so file or disseminate any Proxy Statement, or any amendment or supplement thereto, to which Parent reasonably objects. (c) Parent agrees to cause all Shares purchased pursuant to the Offer and all other Shares of the Company entitled to vote on the Merger owned by Parent or any Subsidiary of Parent to be voted in favor of the Merger. Section 7.2. Access to Information. Between the date of this Agreement and the Effective Time, the Company shall give, and shall cause its accountants and legal counsel to give, Parent and its respective authorized representatives (including, without limitation, its financial advisors, accountants and legal counsel), at all reasonable times, access as reasonably requested to all personnel, offices and other facilities and to all contracts, agreements, commitments, books and records of or pertaining to the Company and its Subsidiaries, shall permit the foregoing Persons to make such reasonable inspections as they may require and, as permitted under applicable law and subject to certain restrictions existing as of the date of this 25 30 Agreement that are known to all parties hereto, shall cause its officers promptly to furnish Parent with (a) such financial and operating data and other information with respect to the business and properties of the Company and its Subsidiaries as Parent may from time to time reasonably request, and (b) a copy of each report, schedule and other document filed or received by the Company or any of its Subsidiaries pursuant to the requirements of applicable securities laws or the NASD. Section 7.3. Expenses. All fees, costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such fees, costs or expenses, whether or not the Offer or the Merger is consummated, subject to the rights of Parent under Section 9.2 hereof. Section 7.4. Public Announcements. Parent and the Company shall consult with each other before issuing any press release or otherwise making any public statements with respect to the transactions contemplated by this Agreement and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable law, fiduciary duties or by obligations pursuant to any listing agreement with or regulation of the NASD. Section 7.5. State Takeover Laws. If any "fair price" or "control share acquisition" statute or other similar statute or regulation shall become applicable to the transactions contemplated hereby, Parent and the Company and their respective Boards of Directors shall use all reasonable efforts to grant or obtain such approvals and take such actions as are necessary so that the transactions contemplated hereby may be consummated as promptly as practicable on the terms contemplated hereby and otherwise act to minimize the effects of any such statute or regulation on the transactions contemplated hereby. Section 7.6. Indemnification, Exculpation and Insurance. (a) All rights to indemnification and exculpation from liabilities for acts or omissions occurring at or prior to the Effective Time existing in favor of the current or former directors, officers or employees of the Company as provided in the Company's Articles of Incorporation or By-laws or pursuant to agreements existing on the date of this Agreement shall be assumed by the Surviving Corporation, and Parent shall cause the Surviving Corporation to honor such obligations in accordance with the terms thereof, without further action, as of the Effective Time, and such rights shall continue in full force and effort in accordance with their respective terms. Such rights, and the Surviving Corporation's and Parent's related obligations, shall apply in all respects to the current or former directors, officers and employees of each of its Subsidiaries as though such directors, officers and employees were entitled to indemnification rights pursuant to the Company's Articles of Incorporation or By-laws as in effect on the date hereof or pursuant to such agreements, as the case may be. In addition, from and after the Effective Time, directors and officers of the Company who become or remain directors or officers of Parent shall be entitled to the same indemnity rights and protections (including those provided by directors' and officers' liability insurance) as are afforded to other directors and officers of Parent. Notwithstanding any other provision hereof, the provisions of this Section 7.6(a) are intended to be for the benefit of, and shall be enforceable by, each indemnified party, his or her heirs and his or her representatives and (ii) are in addition to, and not in 26 31 substitution for, any other rights to indemnification or contribution that any such person may have by contract or otherwise. (b) Parent shall, and shall cause the Surviving Corporation or one of its Affiliates to, maintain in effect for six years after the Effective Time policies of directors' and officers' liability insurance equivalent in all material respects to those maintained by or on behalf of the Company and its Subsidiaries on the date hereof (and having coverage and containing terms and conditions which in the aggregate are not less advantageous to the persons currently covered by such policies as insured) with respect to claims arising from any actual or alleged wrongful act or omission occurring at or prior to the Effective Time for which a claim has not been made against any director or officer of the Company or any director or officer of its Subsidiaries prior to the Effective Time. Section 7.7. Notification of Certain Matters. Parent shall give prompt notice to the Company, and the Company shall give prompt notice to Parent, of: (i) the occurrence, or non-occurrence, in each case, to the knowledge of the Company or Parent, as the case may be, of any event the occurrence, or non-occurrence, of which results in the executive officers of the Company or Parent, as the case may be, having a good faith belief that such change or event would be reasonably likely to cause (x) any representation or warranty of such entity contained in this Agreement that is not qualified as to materiality to be untrue or inaccurate in any material respect, (y) any representation or warranty of such entity contained in this Agreement that is qualified as to materiality to be untrue or inaccurate in any respect, or (z) any covenant, condition or agreement of such entity contained in this Agreement not to be complied with or satisfied in all material respects; and (ii) the executive officers of the Company or Parent, as the case may be, believing in good faith that the Company or Parent, as the case may be, has, to the knowledge of the Company or Parent, as the case may be, failed to comply with in all material respects or satisfy in all material respects any covenant, condition or agreement of such entity to be complied with or satisfied by it hereunder; provided, however, that the delivery of any notice pursuant to this Section 7.7 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice. Each of the Company, Parent and Sub shall give prompt notice to the other parties hereof of any notice or other communication from any third party alleging that the consent of such third party is or may be required in connection with the transactions contemplated by this Agreement. Section 7.8. Board of Directors. Promptly after such time as Sub purchases Shares pursuant to the Offer (but subject to the satisfaction of the Minimum Condition), Sub shall be entitled, to the fullest extent permitted by law, to designate at its option up to that number of directors, rounded to the next highest whole number, of the Company's Board of Directors, subject to compliance with Section 14(f) of the Exchange Act, as shall make the percentage of the Company's directors designated by Sub equal to the aggregate voting power of the Shares held by Parent or any of its Subsidiaries; provided, however, that in the event that Sub's designees are elected to the Board of Directors of the Company, until the Effective Time, such Board of Directors shall have (i) at least three Unaffiliated Directors who are directors on the date of this Agreement or are designated by a majority of the Unaffiliated Directors of the Company who were directors on the date hereof and (ii) the number of Affiliated Directors required by the Standstill Agreement which shall be in addition to the number of directors designated by Sub pursuant to this Section 7.8; and provided, further that, in such event, if the 27 32 number of Unaffiliated Directors shall be reduced below three for any reason whatsoever, the remaining Unaffiliated Directors shall, to the fullest extent permitted by law, designate a person to fill such vacancy who shall be deemed to be an Unaffiliated Director for purposes of this Agreement or, if no Unaffiliated Directors then remain, the other directors shall designate three persons to fill such vacancies who shall not be officers or Affiliates of the Company or any of its Subsidiaries, or officers or Affiliates of Parent, of any of its Subsidiaries or of any other entity in which Parent owns, directly or indirectly, any material amount of capital stock or other significant ownership interest, and such persons shall be deemed to be Unaffiliated Directors for purposes of this Agreement. Following the election or appointment of Sub's designees pursuant to this Section 7.8 and prior to the Effective Time, any termination or amendment of this Agreement by the Company, any extension by the Company of the time for the performance of any of the obligations or other acts of Sub or waiver or assertion of any of the Company's rights hereunder, and any other consent or action by the Board of Directors of the Company with respect to this Agreement (other than recommending or reconfirming the recommendation that the holders of the Shares approve and adopt this Agreement and the Merger, and making determinations in connection therewith, which recommendations and determinations may be made by a majority of the Board of Directors as constituted at any time after such election or appointment of Sub's designees pursuant to this Section) shall to the fullest extent permitted by applicable law require the concurrence of a majority of the Unaffiliated Directors and, to the fullest extent permitted by law, no other action by the Company, including any action by any other director of the Company, shall be required to approve such actions. To the fullest extent permitted by applicable law, the Company shall take all actions requested by Parent which are reasonably necessary to effect the election of any such designee, including mailing to its shareholders the Information Statement containing the information required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, and the Company agrees to make such mailing with the mailing of the Schedule 14D-9 (provided that Sub shall have provided to the Company on a timely basis all information required to be included in the Information Statement with respect to Sub's designees). Parent and Sub shall be solely responsible for any information with respect to either of them and their nominees, officers, directors and Affiliates required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. In connection with the foregoing, the Company shall promptly, at the option of Parent, to the fullest extent permitted by law, either increase the size of the Company's Board of Directors and/or obtain the resignation of such number of its current directors as is necessary to enable Sub's designees to be elected or appointed to the Company's Board of Directors as provided above. Section 7.9. Additional Agreements. (a) Subject to the terms and conditions herein provided, each of the parties hereto agrees to use all reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement, including using all reasonable efforts to obtain all necessary waivers, consents and approvals (including, without limitation, obtaining consents from landlords under leases providing for various remedies in the event of a change in control of the tenant) and effect all necessary registrations and filings. In case at any time after the Effective Time any further action is necessary or 28 33 desirable to carry out the purposes of this Agreement, the proper officers and/or directors of Parent, Sub and the Company shall take all such actions. (b) Each of Parent, Sub and the Company agrees to use its reasonable best efforts promptly to take all reasonable steps to secure all clearances under the HSR Act and under any applicable foreign laws relating to the regulation of competition, or from federal, state or foreign governments or governmental authorities or agencies with respect to the transactions contemplated by this Agreement. Notwithstanding any other provision hereof, in no event shall Parent, Sub or any of their Affiliates (collectively, the "Parent Group") be required to take or fail to take any action in order to obtain or grant a consent arising out of any contractual or legal obligation of or applicable to the Company or its Subsidiaries, other than obligations such as those under the HSR Act which apply to both the Company and the Parent Group and then only to the extent applicable to the Parent Group, and in no event shall any member of the Parent Group be required to enter into or offer to enter into any divestiture, hold-separate, business limitation or similar agreement or undertaking in connection with this Agreement or the transactions contemplated hereby or otherwise. Section 7.10. Certain Litigation. The Company agrees that it shall not settle any litigation commenced after the date hereof against the Company or any of its directors by any shareholder of the Company relating to the Offer, the Merger, this Agreement or the Shareholders Agreement without the prior written consent of Parent. In addition, the Company shall not voluntarily cooperate with any third party that may hereafter seek to restrain or prohibit or otherwise oppose the Offer or the Merger and shall cooperate with Parent and Sub to resist any such effort to restrain or prohibit or otherwise oppose the Offer or the Merger. Section 7.11. Severance Payments. Parent hereby agrees that for a period of one year after the consummation of the Offer, all persons who, as of the date of this Agreement, are employees of the Company or any of its Subsidiaries and who are involuntarily terminated by the Company or the Surviving Corporation shall be entitled to receive severance pay and benefits equal to the severance pay and benefits provided for in the Company's severance pay plan, a description of which plan is set forth as Exhibit D to the Company Letter. ARTICLE VIII - CONDITIONS PRECEDENT Section 8.1. Conditions to Each Party's Obligation to Effect the Merger. The respective obligations of each party to effect the Merger shall be subject to the fulfillment at or prior to the Effective Time of the following conditions: (a) Offer. Subject to the satisfaction or waiver by Sub of all of the Offer Conditions (it being understood that pursuant to Section 1.1(a) Sub cannot waive the Minimum Condition without the prior written consent of the Company), Sub shall have accepted for payment all Shares validly tendered in the Offer and not withdrawn. Neither Parent nor Sub may invoke this condition if Sub fails to purchase Shares so tendered and not withdrawn in violation of the terms of this Agreement or the Offer. (b) Shareholder Approval. If required by any applicable law or the constituent documents of any party hereto, this Agreement and the Merger shall have been approved at or 29 34 prior to the Effective Time by the requisite vote of the shareholders of the Company in accordance with the PBCL and the Company's Articles of Incorporation and By-laws, which the Company has represented shall be solely the affirmative vote of a majority of the outstanding Shares. (c) No Injunction or Action. No order, statute, rule, regulation, executive order, stay, decree, judgment or injunction shall have been enacted, entered, promulgated or enforced by any court or other Governmental Entity which temporarily, preliminarily or permanently prohibits or prevents the consummation of the Merger which has not been vacated, dismissed or withdrawn prior to the Effective Time. (d) Other Approvals. On or prior to the Effective Time, the waiting period (and any extension thereof) applicable to the Merger under the HSR Act and any similar foreign Laws shall have been terminated or shall have expired and all consents necessary for the consummation of the Merger shall have been obtained. Section 8.2. Conditions of Obligations of Parent and Sub. The obligations of Parent and Sub to effect the Merger are subject to the satisfaction of the condition (which may be waived in whole or in part by Parent) that the Company shall have performed in all material respects all obligations required to be performed by it under this Agreement on or before the earlier of (i) such time as Parent's or Sub's designees shall constitute at least a majority of the Company's Board of Directors pursuant to Section 2.4 of this Agreement and (ii) the Effective Time; provided, however, that no failure by the Company to have so performed any such obligation shall constitute a failure of satisfaction of the foregoing condition where the Company's failure of performance was caused by Parent. ARTICLE IX - TERMINATION AND AMENDMENT Section 9.1. Termination. This Agreement may be terminated at any time prior to the Effective Time, whether before or after the approval of this Agreement and the Merger by the shareholders of the Company (if required by applicable law): (a) by mutual written consent of Parent, Sub and the Company; (b) by any of Parent, Sub or the Company: (i) if (x) as a result of the failure of any of the Offer Conditions set forth in Exhibit A, the Offer shall have terminated or expired in accordance with its terms without Sub having accepted for payment any Shares pursuant to the Offer or (y) Sub shall have, consistent with its obligations hereunder, failed to pay for the Shares prior to December 31, 1999 (the "Outside Date"); provided, however, that the right to terminate this Agreement pursuant to this Section 9.1(b)(i) shall not be available to any party whose failure to perform any of its obligations under this Agreement results in the failure of any such Offer Condition or if the failure of such condition results from facts or circumstances that constitute a breach of any representation or warranty under this Agreement by such party; or 30 35 (ii) if any Governmental Entity shall have issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the transactions contemplated by this Agreement and such order, decree or ruling or other action shall have become final and nonappealable; provided, however, that Parent or the Company, as the case may be, may not terminate this Agreement pursuant to this Section 9.1 if it has not complied with its obligations under Section 7.09 hereof with respect to any such order, decree, ruling, or other action; (c) by either Parent or Sub if the Company shall have breached in any material respect any of its material covenants or other agreements contained in this Agreement which breach or failure to perform is incapable of being cured or, the Company having been given reasonable written notice of such breach by Parent, has not been cured within one business day prior to the then scheduled Expiration Date; (d) by any of Company, Parent or Sub if either Parent or Sub is entitled to terminate the Offer as a result of the occurrence of any event set forth in paragraph (c) of Exhibit A; provided that the temporary suspension of the recommendation of the Company's Board of Directors referred to herein in accordance with Section 6.2(b) shall not give rise to a right of termination pursuant to this Section 9.1(d); (e) by the Company if Parent or Sub shall have breached in any material respect any of its material covenants or other agreements contained in this Agreement, which breach or failure to perform is incapable of being cured or, Parent having been given reasonable written notice of such breach by the Company, has not been cured within one business day prior to the then scheduled Expiration Date; or (f) by the Company, if the Offer has not been timely commenced in accordance with Section 1.1. Section 9.2. Effect of Termination and Abandonment. (a) In the event of termination of this Agreement and the abandonment of the Offer or the Merger pursuant to this Article IX, this Agreement (other than Sections 4.20, 5.6, 7.3, this Section 9.2, Article X, the penultimate sentence of Section 1.1(a) and the last sentence of 1.2(c)) shall become void and of no effect with no liability on the part of any party hereto (or of any of its directors, officers, employees, agents, legal or financial advisors or other representatives); provided, however, that no such termination shall relieve any party hereto from any liability for any breach of this Agreement prior to termination. If this Agreement is terminated as provided herein, each party shall hold in confidence all materials obtained from, or based on or otherwise reflecting or generated in whole or in part from information obtained from, any other party hereto in connection with the transactions contemplated by this Agreement, and shall not use any such materials for the purpose of competing with the businesses of the other parties hereto, whether obtained before or after the execution hereof. (b) In the event that this Agreement is terminated by Parent pursuant to Section 9.1(d) hereof, then the Company shall promptly pay Parent upon its request all 31 36 reasonable out-of-pocket charges and expenses incurred by Parent or its Affiliates in connection with this Agreement and the transactions contemplated hereby, including without limitation reasonable and documented attorneys' and accountants' fees and disbursements and fees and expenses of Parent's financial advisor and any information agent and depositary retained in connection with the Offer and all printing and mailing fees and expenses, in an amount not to exceed $8,000,000. Section 9.3. Amendment. This Agreement may be amended by action taken by Parent, Sub and the Company at any time before or after approval hereof by the shareholders of the Company (if required), but, after any such approval, no amendment shall be made which in any way materially adversely affects the rights of such shareholders, without the further approval of such shareholders. Without the prior approval of a majority of the then serving Unaffiliated Directors, if any are then serving on the Board, this Agreement may not be amended at any time (a) subsequent to the purchase by Sub of any Shares pursuant to the Offer and (b) prior to the Effective Time. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. Section 9.4. Waiver. At any time prior to the Effective Time, the parties hereto may (a) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant thereto and (c) subject to the terms of this Agreement, waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party and, after the purchase of Shares pursuant to the Offer, but prior to the Effective Time, as to the Company, only if such waiver is approved by a majority of the then serving Unaffiliated Directors, if any are then serving on the Board. ARTICLE X - GENERAL PROVISIONS Section 10.1. Non-Survival of Representations and Warranties and Agreements. None of the representations and warranties in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time. This Section 10.1 shall not limit any covenant or agreement of the parties which by its terms contemplates performance after the Effective Time of the Merger. Section 10.2. Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied (which is confirmed) or sent by overnight courier (providing proof of delivery) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) if to Parent or Sub, to: EM Laboratories, Incorporated 7 Skyline Drive Hawthorne, New York 10532 Attn: President and Chief Executive Officer Telecopy: (914) 592-8775 32 37 with copies to: Rogers & Wells LLP 200 Park Avenue New York, New York 10166 Attn: Klaus H. Jander, Esq. Telecopy: (212) 878-3025 (b) if to the Company, to: VWR Scientific Products Corporation 1310 Goshen Parkway West Chester, Pennsylvania 19380 Attn: Jerrold B. Harris Telecopy: (610) 436-1760 with copies to: Drinker Biddle & Reath LLP 1000 Westlakes Drive, Suite 300 Berwyn, Pennsylvania 19312 Attn: Thomas E. Wood, Esq. Telecopy: (610) 993-8585 Section 10.3. Interpretation; Definitions. When a reference is made in this Agreement to an Article or a Section, such reference shall be to an Article or a Section of this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." As used in this Agreement, the phrase "made available" shall mean that the information referred to has been made available if requested by the party to whom such information is to be made available. As used in this Agreement, the following terms have the meanings specified or referred to in this Section 10.3 and shall be equally applicable to both the singular and plural forms. Any agreement referred to below shall mean such agreement as amended, supplemented or modified from time to time to the extent permitted by the applicable provisions thereof and by this Agreement. "Acquisition Agreement" shall have the meaning set forth in Section 6.2(b). "Affiliate" with respect to any Person, means any other Person controlling, controlled by or under common control with such Person. 33 38 "Affiliated Directors" shall have the meaning set forth in the Standstill Agreement. "Agreement" means this Agreement and Plan of Merger, dated as of June 8, 1999, among Parent, Sub and the Company. "Articles of Merger" shall have the meaning set forth in Section 2.2. "Benefit Plans" shall have the meaning set forth in Section 4.14(a). "Certificate" shall have the meaning set forth in Section 3.2(b). "Code" means the Internal Revenue Code of 1986, as amended. "Company" shall have the meaning set forth in the introductory paragraph of this Agreement. "Company Option Plans" shall have the meaning set forth in Section 3.2(f). "Company Options" shall have the meaning set forth in Section 3.2(f). "Company Letter" means the letter from the Company to Parent dated the date hereof, which letter relates to this Agreement and is designated therein as the Company Letter. "Company Material Contract" shall have the meaning set forth in Section 4.11. "Company Permits" shall have the meaning set forth in Section 4.10. "Company SEC Documents" shall have the meaning set forth in Section 4.6. "Company Securities" shall have the meaning set forth in Section 4.3. "Constituent Corporations" shall have the meaning set forth in the introductory paragraph of this Agreement. "Dissenting Shares" shall have the meaning set forth in Section 3.1(d). "Dissenting Shareholder" shall have the meaning set forth in Section 3.1(d). "Effective Time" shall have the meaning set forth in Section 2.2. "Environmental Claim" shall have the meaning set forth in Section 4.15. "Environmental Laws" shall have the meaning set forth in Section 4.15. "Environmental Permits" shall have the meaning set forth in Section 4.15. "ERISA" shall have the meaning set forth in Section 4.14. 34 39 "ERISA Affiliate" shall have the meaning set forth in Section 4.14(b). "Exchange Act" means the Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder. "Expenses" means documented and reasonable out-of-pocket fees and expenses incurred or paid by or on behalf of Parent in connection with the Offer, the Merger or the consummation of any of the transactions contemplated by this Agreement, including all fees and expenses of law firms, commercial banks, investment banking firms, accountants, experts and consultants to Parent. "Expiration Date" shall have the meaning set forth in Section 1.1(a). "Governmental Entity" means any Federal, state, local or foreign government or any court, tribunal, administrative agency or commission or other governmental or other regulatory authority or agency, domestic, foreign or supranational. "Hazardous Materials" shall have the meaning set forth in Section 4.15. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Information Statement" shall have the meaning set forth in Section 4.8. "knowledge" shall mean, with respect to the Company, the actual knowledge of its executive officers and the actual knowledge of the senior officer of each of its foreign Subsidiaries and, with respect to Parent, the actual knowledge of its executive officers of Parent. "Law" means any law, statute, rule, regulation, ordinance and other pronouncement having the effect of law of the United States, any foreign country or any domestic or foreign state, county, city or other political subdivision or of any Governmental Entity. "Liens" means any pledges, claims, liens, charges, encumbrances and security interests of any kind or nature whatsoever. "Litigation" shall have the meaning set forth in Section 4.14. "Materially Adverse Change" or "Materially Adverse Effect" means, when used in connection with the Company or Parent, as the case may be, any change or effect (or any development that, insofar as can reasonably be foreseen, is likely to result in any change or effect) or fact or condition (or any development that, insofar as can reasonably be foreseen, is likely to result in any fact or condition), except in respect of general economic or financial conditions in the industry of which the Company, or Parent, as the case may be, is a part, that is materially adverse to the business, properties, assets, condition (financial or otherwise) or results of operations of the Company and its Subsidiaries taken as a whole, or Parent and its Subsidiaries taken as a whole, as the case may be. 35 40 "Merger" shall have the meaning set forth in the third Whereas provision of this Agreement. "Merger Consideration" shall have the meaning set forth in Section 3.1(c). "Minimum Condition" shall have the meaning set forth in Exhibit A of this Agreement. "NASD" shall mean the National Association of Securities Dealers, Inc. "Offer" shall have the meaning set forth in the second Whereas provision of this Agreement. "Offer Conditions" shall have the meaning set forth in Section 1.1(a). "Offer Documents" shall have the meaning set forth in Section 1.1(b). "Offer Price" shall have the meaning set forth in the second Whereas provision of this Agreement. "Outside Date" shall have the meaning set forth in Section 9.1(b)(i). "Parent" shall have the meaning set forth in the introductory paragraph of this Agreement. "Parent Group" shall have the meaning set forth in Section 7.09(b). "Parent Letter" means the letter from Parent to the Company dated the date hereof, which letter relates to this Agreement and is designated therein as the Parent Letter. "Paying Agent" shall have the meaning set forth in Section 3.2(a). "PBCL" means the Business Corporation Law of 1988, as amended, of the Commonwealth of Pennsylvania. "Person" shall mean any individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization or other entity. "Preferred Stock" shall have the meaning set forth in Section 4.3. "Premises" shall have the meaning set forth in Section 4.15(a)(ii). "Proxy Statement" shall have the meaning set forth in Section 4.8. "Schedule 13E-3" shall have the meaning set forth in Section 1.1(b). "Schedule 14D-1" shall have the meaning set forth in Section 1.1(b). "Schedule 14D-9" shall have the meaning set forth in Section 1.2(b). 36 41 "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended, together with the rules and regulations promulgated thereunder. "Shares" shall have the meaning set forth in the second Whereas provision of this Agreement. "Standstill Agreement" means the Standstill Agreement by and between EM Industries, Incorporated and the Company, dated as of February 27, 1995, as amended by Amendment No. 1 to the Standstill Agreement, dated September 15, 1995, by and among EM Industries, Incorporated, Parent and the Company. "Shareholders Agreement" shall have the meaning set forth in the fifth Whereas provision of this Agreement. "Shareholders Meeting" shall have the meaning set forth in Section 7.1(a). "Sub" shall have the meaning set forth in the introductory paragraph of this Agreement. "Subsidiary" or "Subsidiary" of any Person means another Person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its Board of Directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by such first Person. "Surviving Corporation" shall have the meaning set forth in Section 2.1. "Takeover Proposal" shall have the meaning set forth in Section 6.2(a). "Tax" shall have the meaning set forth in Section 4.12(f). "Tax Return" shall have the meaning set forth in Section 4.12(f). "Transfer Taxes" shall have the meaning set forth in Section 7.5. "Unaffiliated Directors" shall have the meaning set forth in the Standstill Agreement. "Written Opinion" shall have the meaning set forth in Section 6.2(b). Section 10.4. Counterparts. This Agreement may be executed in counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. 37 42 Section 10.5. Entire Agreement; No Third-Party Beneficiaries. Except for the Standstill Agreement and the Shareholders Agreement, this Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. This Agreement is not intended to confer upon any Person other than the parties hereto any rights or remedies hereunder. Section 10.6. Governing Law. This Agreement shall be exclusively governed by, construed in accordance with, and interpreted according to the substantive law of the Commonwealth of Pennsylvania without giving effect to the principles of conflict of laws. Section 10.7. Assignment. Except as otherwise provided in Section 1.1(a), neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned or delegated by any of the parties hereto without the prior written consent of the other parties except that either Parent or Sub shall have the right without the consent of the Company to assign all of its respective rights and delegate all of its respective obligations under this Agreement to any Affiliate of either Parent or Sub, subject in any case to Parent's guarantee of the performance by such Affiliate of all of Parent's and Sub's obligations hereunder, including without limitation the obligation to pay the Offer Price and the Merger Consideration, and the Company shall take all action necessary to permit such assignee to consummate the Merger after the purchase of Shares. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns. Section 10.8. Severability. In case any provision in this Agreement shall be held invalid, illegal or unenforceable in a jurisdiction, such provision shall be modified or deleted, as to the jurisdiction involved, only to the extent necessary to render the same valid, legal and enforceable, and the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby nor shall the validity, legality or enforceability of such provision be affected thereby in any other jurisdiction. Section 10.9. Enforcement of this Agreement. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, such remedy being in addition to any other remedy to which any party is entitled at law or in equity. Section 10.10. Obligations of Subsidiaries. Whenever this Agreement requires any Subsidiary of Parent (including Sub) or of the Company to take any action, such requirement shall be deemed to include an undertaking on the part of Parent or the Company, as the case may be, to cause such Subsidiary to take such action. Section 10.11. Merger of the Company into Sub. If at any time prior to the Effective Time Parent notifies the Company that it desires for the Company to be merged with and into Sub (in lieu of Sub merging with and into the Company), the Company, Parent and Sub shall promptly negotiate in good faith an amendment to and restatement of this Agreement which 38 43 provides for such changes to this Agreement as are necessary or appropriate to effectuate such merger (and upon finalization thereof, the parties shall promptly enter into such amendment and restatement). 39 44 IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement to be signed by their respective officers thereunto duly authorized all as of the date first written above. EM LABORATORIES, INCORPORATED By: /s/ Stephen J. Kunst ---------------------------------- Name: Stephen J. Kunst Title: Vice-President & Secretary EM SUBSIDIARY, INC. By: /s/ Dieter Janssen ---------------------------------- Name: Dieter Janssen Title: President VWR SCIENTIFIC PRODUCTS CORPORATION By: /s/ Jerrold B. Harris ---------------------------------- Name: Jerrold B. Harris Title: President/CEO 40 45 EXHIBIT A CONDITIONS OF THE OFFER Notwithstanding any other provision of the Offer, Sub shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) promulgated under the Exchange Act (relating to Sub's obligation to pay for or return tendered Shares after termination or withdrawal of the Offer), pay for, and (subject to any such rules or regulations) may delay the acceptance for payment of any tendered Shares and (except as provided in this Agreement) amend or terminate the Offer (whether or not any Shares have been theretofore purchased or paid for pursuant to the Offer) (A) unless the following conditions shall have been satisfied: (i) there shall be validly tendered and not withdrawn prior to the expiration of the Offer a number of Shares which represents a majority of the total number of outstanding Shares, excluding any Shares held by Parent, Sub or any Affiliate thereof (the "Minimum Condition") and (ii) any applicable waiting period under the HSR Act or any similar applicable foreign Law, including but not limited to the requirements of the German federal antitrust supervisory authority (Bundeskartelamt), shall have expired or been terminated prior to the expiration of the Offer and the required approval of any Governmental Entity for this Agreement or the consummation of the transactions contemplated by this Agreement shall have been obtained or (B) if at any time after the date of this Agreement and before the time of payment for any such Shares (whether or not any Shares have theretofore been accepted for payment or paid for pursuant to the Offer), any of the following events shall occur and be continuing: (a) there shall be threatened or pending by any Governmental Entity any suit, action or proceeding (i) challenging the acquisition by Parent or Sub of any Shares under the Offer, seeking to restrain or prohibit the making or consummation of the Offer or the Merger or the performance of any of the other transactions contemplated by this Agreement or the Shareholders Agreement or seeking to obtain from the Company, Parent or Sub any damages that are material in relation to the Company and its subsidiaries taken as a whole, (ii) seeking to prohibit or materially limit the ownership or operation by the Company, Parent or any of their respective Subsidiaries of any portion of the business or assets of the Company and its Subsidiaries, taken as a whole, or Parent and its Subsidiaries, taken as a whole, or to compel the Company or Parent to dispose of or hold separate any portion of the business or assets of the Company and its Subsidiaries, taken as a whole, or Parent and its Subsidiaries, taken as a whole, as a result of the Offer or any of the other transactions contemplated by this Agreement or the Shareholders Agreement, (iii) seeking to impose limitations on the ability of Parent or Sub to acquire or hold, or exercise full rights of ownership of, any Shares to be accepted for payment pursuant to the Offer including, without limitation, the right to vote such Shares on all matters properly presented to the shareholders of the Company, (iv) seeking to prohibit Parent or any of its Subsidiaries from effectively controlling in any respect any portion of the business or operations of the Company or its Subsidiaries or (v) which otherwise is reasonably likely to have a Materially Adverse Effect on the business, properties, assets, financial condition or results of operations of the Company and its Subsidiaries taken as a whole; 46 (b) there shall be enacted, entered, enforced, promulgated or deemed applicable to the Offer or the Merger by any Governmental Entity any statute, rule, regulation, judgment, order or injunction, other than the application to the Offer or the Merger of applicable waiting periods under the HSR Act, that is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (i) through (v) of paragraph (a) above; (c) the Unaffiliated Directors, or any committee designated thereby, shall have withdrawn, or modified or changed (including by amendment of the Schedule 14D-9) their recommendation of the Offer, the Merger or this Agreement or approved or recommended a Takeover Proposal, or shall have resolved to do so; (d) it shall have been publicly disclosed or Parent or Sub shall have otherwise learned that any Person or "group" (as defined in Section 13(d)(3) of the Exchange Act), other than Parent or its Affiliates or any group of which any of them is a member, shall have acquired beneficial ownership (determined pursuant to Rule 13d-3 under the Exchange Act) of more than 20% of the Shares through the acquisition of stock, the formation of a group or otherwise, or shall have been granted an option, right or warrant, conditional or otherwise, to acquire beneficial ownership of more than 20% of the Shares; (e) any of the representations and warranties of the Company set forth in this Agreement (without giving effect to the materiality limitations contained herein) shall not be true and correct in any respect as of the date of consummation of the Offer as though made on and as of such date (except for representations and warranties made as of a specified date, which shall not be true and correct as of the specified date), except for any breach or breaches which, in the aggregate, would not have a Materially Adverse Effect on the Company; (f) the Company shall have failed to perform in any material respect any material obligation or to comply in any material respect with any material agreement or covenant of the Company to be performed or complied with by it under this Agreement; (g) there shall have occurred any event that, individually or when considered together with any other matter, has had or is reasonably likely in the future to have a Materially Adverse Effect on the Company; (h) there shall have occurred (i) any general suspension of, or limitation on prices (other than suspensions or limitations triggered by price fluctuations on a trading day) for, trading in securities on any national securities exchange or the over-the-counter market in the United States of America or the Federal Republic of Germany, (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States of America or in the Federal Republic of Germany, (iii) any material limitation (whether or not mandatory) by any government or governmental, administrative or regulatory authority or agency, domestic or foreign, on, the extension of credit by banks or other lending A-2 47 institutions, (iv) a commencement of a war or armed hostilities or other national calamity directly or indirectly involving the United States of America or the Federal Republic of Germany and Parent shall have determined that there is a reasonable likelihood that such event may be of materially adverse significance to it or the Company, or (v) in the case of any of the foregoing existing at the time of the execution of this Agreement, a material acceleration or worsening thereof; (i) any applicable waiting period under Section 721 of Title VII of the Defense Production Act of 1950, as amended by Section 5021 of the Omnibus Trade and Competitiveness Act of 1988 and Section 837 of the National Defense Authority Act for Fiscal Year 1993 (the "Exon-Florio Provisions") shall not have expired, (b) the Committee on Foreign Investment in the United States ("CFIUS") shall have initiated an investigation of the transactions contemplated under this Agreement, or (c) if CFIUS initiates an investigation, the applicable waiting period under the Exon-Florio Provisions relating to such investigation shall have expired, or such investigation shall have been completed and the President shall have announced a decision to take action pursuant to the Exon-Florio Provisions before the expiration of the period ending on the 15th day (or if such day is not a business day, the next business day) following the completion of such investigation, which has a substantial likelihood of resulting, directly or indirectly, in any of the consequences referred to in clauses (i) through (v) of paragraph (a) above or such 15 day waiting period shall not have expired; or (j) this Agreement shall have been terminated in accordance with its terms. The foregoing conditions are for the sole benefit of Parent and Sub and may, subject to the terms of this Agreement, be waived by Parent and Sub in whole or in part at any time and from time to time in their sole discretion. The failure by Parent or Sub at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts and circumstances shall not be deemed a waiver with respect to any other facts and circumstances and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. Terms used but not defined herein shall have the meanings assigned to such terms in the Agreement to which this Exhibit A is a part. A-3 EX-99.C.2 11 SHAREHOLDER AGREEMENT 1 Exhibit (c)(2) SHAREHOLDER AGREEMENT This Shareholder Agreement, dated as of June 8, 1999 (this "Agreement"), is made and entered into among EM Laboratories, a New York corporation ("Parent"), EM Subsidiary, Inc., a Pennsylvania corporation and a wholly owned subsidiary of Parent ("Sub"), and each of the parties listed on the signature pages hereto (each a "Shareholder," and collectively, the "Shareholders"). WHEREAS, each of the Shareholders is, as of the date hereof, the beneficial owner of the number of shares of common stock, par value $1.00 per share (the "Common Stock"), of VWR Scientific Products Corporation, a Pennsylvania corporation (the "Company"), set forth opposite his name on Annex I hereto; WHEREAS, concurrently herewith, Parent, Sub and the Company have entered into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), which provides, upon the terms and subject to the conditions set forth therein, for (i) the commencement by Sub of a tender offer (the "Offer") for all of the issued and outstanding shares of Common Stock of the Company and (ii) the subsequent merger of Sub with and into the Company (the "Merger"); WHEREAS, as a condition to the willingness of Parent and Sub to enter into the Merger Agreement and in order to induce Parent and Sub to enter into the Merger Agreement, Shareholders have agreed to enter into this Agreement; and WHEREAS, capitalized terms used but not defined in this Agreement have the meaning given to those terms in the Merger Agreement. NOW, THEREFORE, in consideration of the execution and delivery by Parent and Sub of the Merger Agreement and the mutual representations, warranties, covenants and agreements set forth herein and therein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be bound hereby, the parties hereto agree as follows: ARTICLE I. TENDER OF SHARES Section 1.1. Tender. Each Shareholder hereby agrees validly to tender his Shares (or cause the record owner of such Shares validly to tender), and not to withdraw any Shares so tendered, promptly, and in any event not later than the fifth business day after commencement of the Offer pursuant to Section 1.1 of the Merger Agreement and Rule 14d-2 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"); provided, however, that in the event that the Unaffiliated Directors (as defined in the Merger Agreement) (or any committee designated thereby) shall withdraw, or propose publicly to withdraw, the approval or recommendation by such Unaffiliated Directors or such committee of the Offer, the Merger or Merger Agreement (or any transaction contemplated thereby), each Shareholder shall have the right to withdraw any Shares so tendered. Sub hereby agrees to purchase all the Shareholder's Shares so tendered at the Purchase Price or any higher price that may be paid in the Offer; provided, however, that Sub's obligation to accept for payment and pay for the Common Stock (including the Shares) in the Offer is subject to all the terms and conditions of the Offer set forth in the Merger Agreement. 2 Section 1.2. Certain Warranties. Without limiting the generality or effect of any other term or condition of the Offer, the transfer by each of the Shareholders of his Shares to Sub in the Offer shall pass to and unconditionally vest in Sub good and valid title to the Shares, free and clear of all liens, claims, restrictions, security interests, pledges, limitations and Encumbrances (as defined herein) whatsoever. Section 1.3. Disclosure. Each Shareholder hereby authorizes Parent and Sub to publish and disclose in the Offer Documents and, if approval of the Company's shareholders is required under applicable law, the Proxy Statement (including all documents and schedules filed with the SEC), his identity and ownership of the Shares and the nature of his commitments, arrangements and understandings under this Agreement provided that each Shareholder is provided with a reasonable opportunity to review in advance any such disclosure contained in the Offer Documents or the Proxy Statement. ARTICLE II. GRANT OF PROXY Section 2.1. Proxy. Each Shareholder hereby irrevocably appoints Parent and Sub (and any nominee of either Parent or Sub) and each of them, with full power of substitution and re-substitution, (i) as proxies for such Shareholder to vote all of his Shares for and in the name, place, and stead of such Shareholder at any meeting of the holders of Common Stock or any adjournments or postponements thereof or pursuant to any consent in lieu of a meeting, or otherwise, with respect only to the approval of this Agreement, the Merger Agreement, the Offer, the transactions contemplated by the Merger Agreement, any matters related to or in connection with the Merger and any corporate action, the consummation of which would violate, frustrate the purposes of, prevent or delay the consummation of the transactions contemplated by the Merger Agreement (including, without limitation, any proposal to amend the Articles of Incorporation or By-laws of the Company or approve any merger, consolidation, sale or purchase of any assets, issuance of Common Stock or any other equity security of the Company (or a security convertible into an equity security of the Company), reorganization, recapitalization, liquidation, winding up of or by the Company or any similar transaction) and (ii) as his true and lawful attorneys-in-fact to execute one or more consents or other instruments from time to time in order to take such actions informally without notice of a meeting of the shareholders of the Company; provided, however, that in the event that the Unaffiliated Directors (as defined in the Merger Agreement) (or any committee designated thereby) shall withdraw, or propose publicly to withdraw, the approval or recommendation by such Unaffiliated Directors or such committee of the Offer, the Merger or Merger Agreement (or any transaction contemplated thereby), such appointment of Parent and Sub as proxies shall become immediately revocable. Each Shareholder agrees that the foregoing proxy and power-of-attorney granted to Parent and Sub (and their respective nominees) in this subsection shall be irrevocable during the term of this Agreement and shall be deemed to be coupled with an interest. Each Shareholder represents that any proxies heretofore given in respect of his Shares are not irrevocable, and that such proxies are hereby revoked. ARTICLE III. OPTION Section 3.1. Grant of Option. Each Shareholder hereby grants to Parent or Sub, as Parent may designate (each, an "Optionee"), an irrevocable option (the "Option") to purchase the number of shares of Common Stock opposite such Shareholder's name on Annex I hereto and any additional shares of Common Stock acquired by such Shareholder in any capacity (whether by exercise of options, warrants or rights, the conversion or exchange of convertible or exchangeable securities or by means of a purchase, distribution, dividend or otherwise) (collectively, the "Shares") at a purchase price of $37.00 per share or such higher price as may be paid by Parent or Sub pursuant to the Offer (the "Purchase Price"). 2 3 Section 3.2. Exercise of Option. (a) Parent or Sub may exercise, but shall not be required to exercise, the Option from time to time, in whole or in part, on or after the date of the consummation of the Offer but prior to the Effective Date if the Offer is consummated but (whether due to improper tender or withdrawal of tender) Sub has not accepted for payment and paid for all of a Shareholder's Shares. (b) Parent and Sub's obligation to purchase Shares upon exercise of the Option shall be subject to the conditions that: (i) no preliminary or permanent injunction or other order issued by any court or governmental, administrative or regulatory agency or authority prohibiting the exercise of the Option pursuant to this Agreement shall be in effect (and no action or proceeding shall have been commenced or threatened for the purpose of obtaining such an injunction or order); (ii) any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") or similar foreign law required for the purchase of the Shares upon such exercise shall have expired; and (iii) there shall have been no material breach of the representations, warranties or covenants of any Shareholder contained in this Agreement; provided, that any failure by Parent or Sub to purchase Shares upon exercise of the Option at any Closing (as defined below) as a result of the nonsatisfaction of any of such conditions shall not affect or prejudice Parent or Sub's right to purchase such Shares upon the subsequent satisfaction of such conditions. (c) In the event that Parent or Sub, as the case may be, wishes to exercise the Option, Parent or Sub, as the case may be, shall send a written notice to the Shareholders specifying the total number of such Shareholder's Shares it wishes to purchase and the place and date for the closing of such purchase (each, a "Closing") at least three business days prior to such Closing; and (d) At any Closing, (i) each Shareholder shall deliver to Parent or Sub (in accordance with Parent or Sub's instructions) a certificate or certificates (the "Certificates") representing all of such Shareholder's Shares being purchased by Sub at the Closing, duly endorsed or accompanied by stock powers duly executed in blank and (ii) Sub shall deliver to such Shareholder a certified or bank cashier's check or checks payable to or upon the order of such Shareholder in an amount equal to (A) the number of such Shareholder's Shares being purchased at the Closing multiplied by (B) the Purchase Price. ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER Each Shareholder severally, and not jointly, represents and warrants to Parent and Sub as follows: Section 4.1. Title to Shares. Such Shareholder is the sole beneficial owner of the Shares (as may be adjusted from time to time pursuant to Section 7.1 hereof) set forth opposite his name on Annex I to this Agreement, free and clear of any pledge, lien, security interest, mortgage, charge, claim, equity, option, proxy, voting restriction, voting trust or agreement, understanding, arrangement, right of first refusal, limitation on disposition, adverse claim of ownership or use or encumbrance of any kind ("Encumbrances"), other than restrictions imposed by applicable securities laws or pursuant to this Agreement and the Merger Agreement, and except that as of the date hereof 40,000 Shares owned by N. Stewart Rogers are pledged as security for a loan. 3 4 Section 4.2. Total Shares. On the date hereof, the Shares opposite such Shareholder's name on Annex I hereto constitute all of the Shares owned by such Shareholder. Such Shareholder has the exclusive right to vote or dispose of (or exercise the voting or disposition of) such Shares and Shareholder owns no options to purchase or rights to subscribe for or otherwise acquire any securities of the Company other than as set forth on Annex I hereto. Section 4.3. Due Authorization. Each Shareholder has the legal capacity to execute and deliver this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by or on behalf of such Shareholder and, assuming its due authorization, execution and delivery by Parent and Sub, constitutes a legal, valid and binding obligation of such Shareholder, enforceable against such Shareholder in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium or other laws effecting creditors' rights generally and by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law). Section 4.4. No Conflicts; Required Filings and Consents. (a) The execution and delivery of this Agreement by such Shareholder do not, and the performance by such Shareholder of such Shareholder's obligations under this Agreement will not (i) conflict with or violate any law applicable to such Shareholder or by which such Shareholder or any of such Shareholder's properties is bound or affected or (ii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, acceleration or cancellation of, or result in the creation of a lien or encumbrance on any assets of such Shareholder, including, without limitation, his Shares, pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which such Shareholder is a party or by which such Shareholder or any of such Shareholder's assets is bound or affected, except for any such breaches, defaults or other occurrences that would not prevent or delay the performance by such Shareholder of such Shareholder's obligations under this Agreement. (b) The execution and delivery of this Agreement by such Shareholder do not, and the performance by such Shareholder of such Shareholder's obligations under this Agreement will not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority (other than any necessary filing under the HSR Act or similar foreign laws or the Exchange Act), domestic or foreign, except where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay the performance by such Shareholder of such Shareholder's obligations under this Agreement. There is no beneficiary or holder of a voting trust certificate or other interest of any trust of which such Shareholder is trustee whose consent is required for the execution and delivery of this Agreement or the consummation by Shareholder of the transactions contemplated hereby. Section 4.5. No Finder's Fees. No broker, investment banker, financial adviser or other person is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of such Shareholder. Such Shareholder hereby acknowledges that he is not entitled to receive any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated hereby or by the Merger Agreement. 4 5 ARTICLE V. REPRESENTATIONS AND WARRANTIES OF SUB AND PURCHASER Parent and Sub hereby, jointly and severally, represent and warrant to each Shareholder as follows: Section 5.1. Due Organization, Authorization, etc. Sub and Parent are corporations duly organized, validly existing and in good standing under the laws of their respective jurisdictions of incorporation. Sub and Parent have all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by each of Sub and Parent have been duly authorized by all necessary corporate action on the part of Sub and Parent, respectively. This Agreement has been duly executed and delivered by each of Sub and Parent and, assuming its due authorization, execution and delivery by each Shareholder, constitutes a legal, valid and binding obligation of each of Sub and Parent, enforceable against Sub and Parent in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium or other laws affecting rights of creditors generally and by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law). Section 5.2. Funds. Parent has sufficient funds available to it to pay for the Shareholder Shares in accordance with this Agreement and the Merger Agreement. Section 5.3. No Conflicts. (a) The execution and delivery of this Agreement by Parent and Sub do not, and the performance by Parent and Sub of their obligations under this Agreement will not (i) conflict with or violate any law applicable to Parent or Sub or by which Parent or Sub any of their properties is bound or affected or (ii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, acceleration or cancellation of, or result in the creation of a lien or encumbrance on any assets of Parent or Sub, pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Parent or Sub is a party or by which Parent or Sub or any of their assets is bound or affected, except for any such breaches, defaults or other occurrences that would not prevent or delay the performance by Parent or Sub of their obligations under this Agreement. (b) The execution and delivery of this Agreement by Parent and Sub do not, and the performance by Parent and Sub of their obligations under this Agreement will not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority (other than any necessary filing under the HSR Act or similar foreign laws or the Exchange Act), domestic or foreign, except where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay the performance by Parent or Sub of their obligations under this Agreement. Section 5.4. Purchase Without View to Distribute. Any Shareholder Shares acquired by Sub hereunder are not being acquired with a view to distribution within the meaning of the Securities Act of 1933, as amended (the "1933 Act"), and the rules and regulations thereunder, and Sub will not distribute such Shareholder Shares in violation of the 1933 Act. 5 6 ARTICLE VI. COVENANTS OF THE SHAREHOLDERS Section 6.1. No Inconsistent Arrangements. Each Shareholder hereby covenants and agrees that, except as contemplated by this Agreement and the Merger Agreement, he shall not (i) transfer (which term shall include, without limitation, any sale, gift, pledge or other disposition), or consent to any transfer of, any or all of his Shares or any interest therein, (ii) enter into any contract, option or other agreement or understanding with respect to any transfer of any or all of such shares or any interest therein, (iii) grant any proxy, power-of-attorney or other authorization in or with respect to his Shares, (iv) deposit his Shares into a voting trust or enter into a voting agreement or arrangement with respect to his Shares, or (v) take any other action that would in any way restrict, limit or interfere with the performance of his obligations hereunder or the transactions contemplated hereby or by the Merger Agreement. Section 6.2. Each Shareholder covenants and agrees that, during the term of this Agreement, he shall not, directly or indirectly through any officer, director, agent or other representative, solicit, initiate or encourage, or take any other action designed or reasonably likely to facilitate, any inquiries or the making of any proposal from any person (other than Parent, Sub and any of their Affiliates (as defined below)) relating to (i) any acquisition of all or any shares of Common Stock of the Company or (ii) any transaction that constitutes a Takeover Proposal, or participate in any negotiations regarding, or furnish to any person any information with respect to, or otherwise cooperate in any way with, or assist or participate in or facilitate or encourage, any effort or attempt by any person to do or seek to do any of the foregoing. Such Shareholder immediately shall cease and cause to be terminated all existing discussions or negotiations of such Shareholder and his agents or other representatives with any person conducted heretofore with respect to any of the foregoing. Such Shareholder shall notify Parent and Sub promptly if any such proposal or offer, or any inquiry or contact with any person with respect thereto, is made and shall, in any such notice to Parent and Sub, indicate in reasonable detail the identity of the person making such proposal, offer, inquiry or contact and the terms and conditions of such proposal, offer, inquiry or contact. Notwithstanding any provision of this Section 6.2 to the contrary, if such Shareholder or any agent or representative of such Shareholder is a member of the Board of Directors of the Company, such member of the Board of Directors of the Company may take actions in such capacity to the extent permitted by Section 6.2 of the Merger Agreement. As used in this Agreement, with respect to any person, "Affiliate" shall mean any entity directly or indirectly controlling, controlled by, or under common control with, such person. Section 6.3. Waiver of Appraisal Rights. Each Shareholder hereby waives any rights of appraisal or rights to dissent from the Merger. ARTICLE VII. MISCELLANEOUS Section 7.1. Certain Events. In the event of any stock split, stock dividend, merger, reorganization, recapitalization or other change in the capital structure of the Company affecting the Shares or the acquisition of additional shares of capital stock or other securities or rights of the Company by any Shareholder, the number of such Shareholder's Shares shall be adjusted appropriately, and this Agreement and the rights and obligations hereunder shall attach to any additional shares of Common Stock or other securities or rights of the Company issued to or acquired by any such Shareholder in respect of such Shareholder Shares. Section 7.2. Termination. This Agreement shall terminate and be of no further force and effect automatically and without any required action of the parties hereto upon the earlier to occur of (A) the 6 7 Effective Time and (B) the calendar day immediately after the termination of the Merger Agreement in accordance with its terms; provided, however, that Articles III, IV, V, VI and VII of this Agreement shall survive the termination of this Agreement until the earlier to occur of the Closing of the exercise of the Option and the expiration of the Option. No such termination of this Agreement shall relieve any party hereto from any liability for any breach of this Agreement prior to termination. Section 7.3. Expenses. All costs and expenses incurred in connection with the transactions contemplated by this Agreement shall be for the account of the party incurring such costs and expenses. Section 7.4. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered in person, by facsimile, receipt confirmed, or on the next business day when sent by overnight courier or on the second succeeding business day when sent by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) if to Parent or Sub, to: EM Industries, Incorporated 7 Skyline Drive Hawthorne, New York 10532 Attention: Stephen J. Kunst Facsimile: (914) 592-8775 with copies to: Rogers & Wells LLP 200 Park Avenue New York, New York 10166 Attention: Klaus H. Jander, Esq. Facsimile: (212) 878-3025 (b) If to Shareholders, to the address set forth in Annex I hereto: Section 7.5. Severability. In case any provision in this Agreement shall be held invalid, illegal or unenforceable by a court of competent jurisdiction, such provision shall be modified or deleted, as to the jurisdiction involved, only to the extent necessary to render the same valid, legal and enforceable, and the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby nor shall the validity, legality or enforceability of such provision be affected thereby in any other jurisdiction. Section 7.6. Entire Agreement. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, among the parties, or any of them, with respect thereto. Section 7.7. Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties, and any such purported assignment shall be null and void; provided, however, that either of Parent or Sub may, without the prior written consent of any Shareholder, assign its rights and obligations to any of its direct or indirect wholly owned subsidiaries. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of and be enforceable by, the 7 8 parties and their respective successors and assigns, and the provisions of this Agreement are not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. Section 7.8. Amendment. This Agreement may not be modified, amended, altered or supplemented, except upon the execution and delivery of a written agreement executed by all of the parties hereto; provided that Annex I hereto may be supplemented by Parent by adding the name and other relevant information concerning any shareholder of the Company who agrees to be bound by the terms of this Agreement without the agreement of any other party hereto, and thereafter such added shareholder shall be treated as a "Shareholder" for all purposes of this Agreement. Section 7.9. Further Assurances. Each Shareholder shall, upon request of Parent or Sub, execute and deliver any additional documents and take such further actions as may reasonably be deemed by Parent or Sub to be reasonably necessary or desirable to consummate, in the most expeditious manner practicable, the transactions contemplated by this Agreement. Section 7.10. No Waiver. The failure of any party hereto to exercise any right, power, or remedy provided under this agreement or otherwise available in respect hereof at law or in equity, or to insist upon compliance by any other party hereto with his or its obligations hereunder, any custom or practice of the parties at variance with the terms hereof shall not constitute a waiver by such party of his or its right to exercise any such or other right, power or remedy or to demand such compliance. Section 7.11. Specific Performance. Each of the parties hereto acknowledges and agrees that in the event of any breach of this Agreement, each non-breaching party would be irreparably and immediately harmed and could not be made whole by monetary damages. It is accordingly agreed that the parties hereto (i) shall waive, in any action for specific performance, the defense of adequacy of a remedy at law and (ii) shall be entitled, in addition to any other remedy to which they may be entitled at law or in equity, to compel specific performance of this Agreement. Section 7.12. Governing Law. This Agreement shall be governed by, and construed in accordance with, the internal laws of the Commonwealth of Pennsylvania without regard to its conflict of laws principles. Section 7.13. Headings. The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. Section 7.14. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 8 9 IN WITNESS WHEREOF, each of Parent and Sub has caused this Agreement to be executed by its officer thereunto duly authorized and each Shareholder has caused this Agreement to be executed, or duly executed by an authorized signatory, as of the date first written above. EM LABORATORIES, INCORPORATED By: /s/ Stephen J. Kunst --------------------------------------- Name: Stephen J. Kunst Title: Vice-President and Secretary EM SUBSIDIARY, INC. By: /s/ Dieter Janssen --------------------------------------- Name: Dieter Janssen Title: President By: /s/ Jerrold B. Harris --------------------------------------- Jerrold B. Harris By: /s/ N. Stewart Rogers --------------------------------------- N. Stewart Rogers 9 10 ANNEX I
Shareholder Shares Options Address 706 Haldane Drive Kennett Square, PA 19348, with a copy to Jerrold B. Harris Dinker Biddle & Reath LLP, 1000-Westlakes Drive, Berwyn, PA 19312, Attn: Thomas E. Wood, Esq. 4 Lindley Road Mercer Island, WA 98040, with a copy to N. Stewart Rogers Richard B. Dodd, Esq., Preston Gates & Ellis LLP, 5000 Columbia Seafirst Center, 701 Fifth Avenue, Seattle, WA 98104-7078.
EX-99.C.3 12 STANDSTILL AGREEMENT 1 EXHIBIT (c)(3) STANDSTILL AGREEMENT by and between VWR CORPORATION and EM INDUSTRIES, INCORPORATED February 27, 1995 2 TABLE OF CONTENTS
Page ARTICLE 1. DEFINITIONS........................................................................................... 6 1.1 Act................................................................................................. 6 1.2 Affiliate........................................................................................... 6 1.3 Affiliated Director................................................................................. 7 1.4 Assignee............................................................................................ 7 1.5 Board............................................................................................... 7 1.6 Business Day........................................................................................ 7 1.7 Commission.......................................................................................... 7 1.8 Common Share and Warrant Purchase Agreement........................................................ 7 1.9 Common Stock....................................................................................... 7 1.10 Common Stock Equivalents........................................................................... 7 1.11 Effective Date.................................................................................... 7 1.12 Exchange Act...................................................................................... 7 1.13 Holder............................................................................................ 8 1.14 Investment Banking Firm........................................................................... 8 1.15 Market Disposition Program........................................................................ 8 1.16 Notice of Exercise................................................................................ 8 1.17 Notice of Issue................................................................................... 8 1.18 Notice of Proposed Sale........................................................................... 8 1.19 Percentage Limitation............................................................................. 8 1.20 Permitted Percentage.............................................................................. 8 1.21 Person............................................................................................ 8
1 3 1.22 Principal Trading Market.......................................................................... 8 1.23 Private Sale...................................................................................... 8 1.24 Purchaser......................................................................................... 8 1.25 Purchaser Affiliate............................................................................... 9 1.26 Registrable Securities............................................................................ 9 1.27 Registration Expenses............................................................................. 9 1.28 Restriction Termination Date...................................................................... 9 1.29 Selling Expenses.................................................................................. 9 1.30 Twenty Day Average................................................................................ 9 1.31 Unaffiliated Director............................................................................. 9 1.32 Voting Securities................................................................................. 9 1.33 13D Group......................................................................................... 9 ARTICLE 2. RESTRICTIONS ON ACQUISITION OF ADDITIONAL SHARES BY PURCHASER......................................... 9 2.1 No Purchases Before Effective Date................................................................. 9 2.2 No Purchases Beyond Percentage Limitation.......................................................... 9 2.3 Permitted Purchase Due to Increases in Common Stock Equivalents.................................... 10 2.4 Procedures Concerning Purchaser's Acquisition of Shares From Company in Response to Increases in Common Stock Equivalents.......................................................... 10 2.5 Limitation on Purchaser's Right to Purchase Common Stock Pursuant to Section 2.3 in the Event of a Business Acquisition by Company..................................................... 11 2.6 Permitted Purchase If Company Proposes to Issue Voting Securities for Cash......................... 11 2.7 Permitted Purchase in Response To Third Party Tender Offer or Exchange Offer....................... 12 2.8 Permitted Purchase With Board Approval............................................................. 13 2.9 Permitted Purchase by 100% Tender Offer After Four Years........................................... 13
2 4 2.10 Requirements for Tender Offers .................................................................... 13 2.11 Mandatory Disposal of Excess Shares ............................................................... 13 2.12 Monthly Report of Ownership ....................................................................... 14 2.13 General Rule Regarding Acquisition of Voting Securities ........................................... 14 2.14 Requirements of Trading Exchange or Stock Quotation System ........................................ 14 ARTICLE 3. SALES OF SHARES BY PURCHASER AND RELATED RIGHTS AND OBLIGATIONS OF PURCHASER AND COMPANY.............. 15 3.1 General Restrictions on Resale or Other Disposition................................................ 15 3.2 Allowed Sales Pursuant to Registration Rights...................................................... 15 3.3 Allowed Sales Pursuant to Rule 144................................................................. 15 3.4 Allowed Private Sales to Third Parties or Pursuant to Tender Offer................................. 15 3.5 Allowed Transfers by EMI and Purchaser Affiliates.................................................. 15 3.6 Allowed Transfers Upon Approved Business Disposition............................................... 15 3.7 Right of First Refusal............................................................................. 16 3.8 Procedures for Right of First Refusal.............................................................. 16 3.9 Purchaser's Covenants With Respect to Distribution of Shares....................................... 18 3.10 Company's Undertaking to Cooperate in Rule 144 Transactions....................................... 18 ARTICLE 4. LEGENDS AND STOP TRANSFER ORDERS...................................................................... 18 4.1 Placement of Legends and Entry of Stop Transfer Orders............................................. 18 4.2 Removal of Legends and Stop Transfer Orders........................................................ 19 ARTICLE 5. CERTAIN AGREEMENTS OF PURCHASER AND COMPANY........................................................... 19 5.1 Future Actions..................................................................................... 19 5.2 Acquisitions and Transfers in Contravention of Agreement........................................... 20 5.3 Company's Issuance of Securities................................................................... 20
3 5 ARTICLE 6. BOARD OF DIRECTORS.................................................................................... 20 6.1 Size of Board...................................................................................... 20 6.2 Terms.............................................................................................. 20 6.3 Vacancies.......................................................................................... 21 6.4 Proportional Representation........................................................................ 21 ARTICLE 7. REGISTRATION RIGHTS................................................................................... 21 7.1 Duration of Registration Rights.................................................................... 21 7.2 Demand Registration Covenant....................................................................... 22 7.3 Participation Registration Covenant................................................................ 23 7.4 Company's Obligations in Connection with Registrations............................................. 23 7.5 Conditions to Obligations of Company Under Registration Covenants.................................. 24 7.6 Expenses........................................................................................... 26 7.7 Assignability of Registration Rights............................................................... 26 7.8 Indemnification.................................................................................... 26 ARTICLE 8. TERMINATION........................................................................................... 29 8.1 Termination........................................................................................ 29 8.2 Extended Cure Period............................................................................... 29 ARTICLE 9. REPRESENTATIONS AND WARRANTIES........................................................................ 29 9.1 Of Company......................................................................................... 29 9.2 Of EMI............................................................................................. 30 ARTICLE 10. MISCELLANEOUS........................................................................................ 30 10.1 Specific Enforcement.............................................................................. 30 10.2 Severability...................................................................................... 31
4 6 10.3 Expenses.......................................................................................... 31 10.4 Assignment; Successors............................................................................ 31 10.5 Amendments........................................................................................ 31 10.6 Notices........................................................................................... 31 10.7 Attorneys' Fees................................................................................... 32 10.8 Integration....................................................................................... 32 10.9 Waivers........................................................................................... 32 10.10 Governing Law.................................................................................... 32 10.11 Counterparts..................................................................................... 33 10.12 Cooperation...................................................................................... 34 10.13 Section Headings and Captions.................................................................... 34
5 7 STANDSTILL AGREEMENT THIS STANDSTILL AGREEMENT (the "Agreement") is made this 27th day of February, 1995, by and between VWR CORPORATION, a Pennsylvania corporation ("Company") and EM Industries, Incorporated, a New York corporation ("EMI"). RECITALS A. Company and EMI have entered into a Common Share and Warrant Purchase Agreement pursuant to which, among other things, Company shall issue and sell to EMI Common Stock (as defined below) of Company and a common share purchase warrant (the "Warrant"). B. The parties seek to regulate the acquisition and disposition by Purchaser (as defined below) of Company's Voting Securities, provide for EMI representation on Company's Board, and generally foster a constructive and mutually beneficial relationship. C. EMI and Company acknowledge that Company has made, prior to the date hereof, a careful evaluation of Purchaser's investment objectives with regard to its ownership of Voting Securities, and the compatibility of Purchaser's management and objectives with the management and objectives of Company; that such factors were critical to Company in its decision to enter into this Agreement; that, absent the provisions of Articles 2 through 4 hereof, Purchaser's ownership of Voting Securities would present an unusual opportunity for it to gain effective control of Company and Company might have reached a different decision with regard to entering into this Agreement and the Common Share and Warrant Purchase Agreement; that, therefore, the provisions of Articles 2 through 4 were a material inducement to Company to enter into this Agreement and the Common Share and Warrant Purchase Agreement; and, that the primary purposes of Articles 2 through 4 are that, so long as such provisions remain in effect and except as permitted by such provisions, the Voting Securities owned by Purchaser not come to rest in the hands of any single holder or group of holders other than Purchaser, and Purchaser's ownership of Voting Securities not be increased, other than as provided for in this Agreement or with the consent of Company. EMI acknowledges that such purposes are reasonable and that the provisions of Articles 2 through 4 are reasonable in view of such purposes. NOW, THEREFORE, in consideration of the mutual agreements and covenants set forth herein and in the Common Share and Warrant Purchase Agreement, and for other good and valuable consideration, the parties agree as follows: ARTICLE 1. DEFINITIONS As used in this Agreement, in addition to other terms defined elsewhere herein, the following terms have the respective meanings set forth below: 1.1 Act. "Act" means the Securities Act of 1933, as amended. 1.2 Affiliate. "Affiliate" means any Person directly or indirectly controlled by, controlling or under common control with another Person. For purposes of this definition, "control" means the power to direct the management or policies of the Person in question. 6 8 1.3 Affiliated Director. "Affiliated Director" means any member of the Board who has been designated by EMI under Article 6 for nomination or appointment as a director of Company. 1.4 Assignee. See Section 10.4. 1.5 Board. "Board" means the Board of Directors of Company as constituted from time to time. 1.6 Business Day. "Business Day" means any Monday through Friday, inclusive, excluding any such day which is a Federal or Commonwealth of Pennsylvania holiday. 1.7 Commission. "Commission" means the Securities and Exchange Commission of the United States. 1.8 Common Share and Warrant Purchase Agreement. "Common Share and Warrant Purchase Agreement" means the Common Share and Warrant Purchase Agreement, dated February 27, 1995, between Company and EMI. 1.9 Common Stock. "Common Stock" means the common shares of Company, par value $1.00 per share or such other par value as may be established from time to time. 1.10 Common Stock Equivalents. "Common Stock Equivalents" means the sum of the following, determined at any time during the term of this Agreement: (a) the total number of shares of issued and outstanding Common Stock, plus (b) the number of shares of Common Stock reserved for issuance pursuant to stock options granted (but not yet exercised) under Company's stock option plans, and plus (c) the number of votes which may be cast for the election of directors (whether directly or by formula) as a result of ownership of any Voting Securities other than Common Stock; provided, however, the shares of Common Stock described in (b) above shall not be included in Common Stock Equivalents until the earlier of (i) the date the options are exercisable, or (ii) the end of the fiscal year of Company during which such options were granted; provided, further, that the votes described in (c) above shall not be included in Common Stock Equivalents until the Voting Securities other than Common Stock are able to be voted for the election of directors. 1.11 Effective Date. "Effective Date" means the date the acquisition of Common Stock by Purchaser is consummated pursuant to the terms of the Common Share and Warrant Purchase Agreement. 1.12 Exchange Act. "Exchange Act" means the Securities Exchange Act of 1934, as amended. 1.13 Holder. "Holder" means Purchaser and any Person to whom the registration rights under Article 7 have been transferred in compliance with Section 7.7. 1.14 Investment Banking Firm. "Investment Banking Firm" means an internationally recognized investment banking firm. 1.15 Market Disposition Program. See Section 3.8(a). 7 9 1.16 Notice of Exercise. See Section 3.8(b)(iii). 1.17 Notice of Issue. See Section 2.6. 1.18 Notice of Proposed Sale. See Section 3.8(a). 1.19 Percentage Limitation. See Section 2.2. 1.20 Permitted Percentage. "Permitted Percentage" means the Percentage Limitation or, if the percentage of Common Stock Equivalents owned by Purchaser increases as a consequence of (a) a reduction in the number of outstanding Voting Securities other than as a result of (1) the expiration of rights to acquire Common Stock under Company's stock option plans or (2) the lapse of rights to vote for the election of directors as a result of ownership of any Voting Securities other than Common Stock, (b) Purchaser's acquisitions of Voting Securities with Board approval in accordance with Section 2.8, or (c) Purchaser's acquisitions of Voting Securities in a tender offer permitted by Section 2.7, following which Company fails to repurchase shares of Voting Securities in accordance with Section 2.7(b), such greater percentage of Common Stock Equivalents owned by Purchaser after such reduction, acquisition, or failure, respectively. The Permitted Percentage shall be reduced from time to time if, upon the issuance by Company of Common Stock Equivalents, Purchaser either does not or is not permitted by this Agreement to purchase its full Permitted Percentage of such issuance. 1.21 Person. "Person" means any individual, partnership, association, corporation, trust, limited liability company or other entity, including without limitation employee pension, profit sharing, and other benefit plans and trusts. 1.22 Principal Trading Market. "Principal Trading Market" means the principal trading exchange or national automated stock quotation system on which the Common Stock is traded or quoted. 1.23 Private Sale. See Section 3.8(a). 1.24 Purchaser. "Purchaser" means EMI and Purchaser Affiliates, jointly and severally. 1.25 Purchaser Affiliate. "Purchaser Affiliate" means any Affiliate of EMI. 1.26 Registrable Securities. See Section 7.1. 1.27 Registration Expenses. See Section 7.6(a). 1.28 Restriction Termination Date. See Section 7.1. 1.29 Selling Expenses. See Section 7.6(a). 1.30 Twenty Day Average. "Twenty Day Average" means the average closing sale price of Common Stock on the Principal Trading Market for the twenty (20) trading days preceding the earlier of the closing of, or public announcement date concerning, the issuance of Voting Securities by Company. 8 10 1.31 Unaffiliated Director. "Unaffiliated Director" means a director on the Board who is not an Affiliated Director. 1.32 Voting Securities. "Voting Securities" means Common Stock and any other Company securities entitled to vote for the election of directors, or any security (including any preferred stock of Company) convertible into or exchangeable for or exercisable for the purchase of Common Stock or other Company securities entitled to vote for the election of directors. 1.33 13D Group. "13D Group" means any group of Persons formed for the purpose of acquiring, holding, voting or disposing of Voting Securities required under Section 13(d) of the Exchange Act and the rules and regulations thereunder (as now in effect) to file a statement on Schedule 13D with the Commission as a "person" within the meaning of Section 13(d)(3) of the Exchange Act disclosing beneficial ownership of Voting Securities representing more than 5% of any class of Voting Securities. ARTICLE 2. RESTRICTIONS ON ACQUISITION OF ADDITIONAL SHARES BY PURCHASER 2.1 No Purchases Before Effective Date. Except as provided in Section 2.7, Purchaser shall not, between the date of execution of this Agreement and the Effective Date, acquire in any way or hold record or beneficial ownership of any Voting Securities. 2.2 No Purchases Beyond Percentage Limitation. Except as otherwise permitted herein, Purchaser shall not, directly or indirectly, acquire any Voting Securities beyond its "Percentage Limitation." The "Percentage Limitation" shall be 20.1% of the Common Stock Equivalents. 2.3 Permitted Purchase Due to Increases in Common Stock Equivalents. If the Common Stock Equivalents increase at any time and, as a consequence thereof Purchaser's aggregate ownership of Common Stock Equivalents falls below the Percentage Limitation, Purchaser may acquire additional shares of Common Stock up to the Percentage Limitation, as follows: (a) Purchaser may at any time do so by open-market purchases, partial tender offer, or private transaction; and/or (b) Purchaser may, in accordance with Section 2.4, purchase unissued or treasury shares of Common Stock from Company. 2.4 Procedures Concerning Purchaser's Acquisition of Shares From Company in Response to Increases in Common Stock Equivalents. (a) Within thirty (30) days after any increase in Common Stock Equivalents (other than an increase previously notified to EMI under Section 2.6), Company shall give EMI written notice setting forth the number of Common Stock Equivalents prior to the increase, the number of Common Stock Equivalents after the increase, Purchaser's Percentage Limitation, the number of shares of Common Stock Purchaser may purchase as a consequence of said increase, and the per share purchase price for such shares. 9 11 (b) The purchase price per share of Common Stock purchased under Section 2.3(b) shall be established as follows: (i) if the Common Stock Equivalents increased as a result of issuance by Company of one or more Voting Securities (other than issuance of options under Company's stock option plans), the price per share shall be the lesser of the Twenty Day Average or the aggregate fair market value of all consideration received by Company for such Voting Securities as determined in good faith by the Board (including attribution of the consideration received with respect to each Voting Security other than Common Stock) within thirty (30) days after the issuance, divided by the number of Common Stock Equivalents issued by Company; or (ii) if the Common Stock Equivalents increased as a result of Company's issuance of stock options under Company's stock option plans, the purchase price shall be the exercise price of such stock options. (c) Purchaser shall have the right to purchase from Company a number of shares of Common Stock equal to its Percentage Limitation multiplied by the increase in the Common Stock Equivalents. Purchaser shall have sixty (60) days from receipt of Company's notice pursuant to Section 2.4.(a) above to notify Company in writing whether it elects to purchase any of such shares of Common Stock and, if it so elects, the number of shares it elects to purchase. At the time Purchaser delivers its notice to Company, there shall be a binding agreement between Purchaser and Company for the purchase and sale of the number of shares of Common Stock elected by Purchaser. Purchaser shall pay the purchase price to Company in immediately available funds, and Company shall deliver certificates representing the shares to Purchaser, on a date specified by Purchaser in its notice, which date shall not be more than ten (10) days after Purchaser delivers its notice to Company. 2.5 Limitation on Purchaser's Right to Purchase Common Stock Pursuant to Section 2.3 in the Event of a Business Acquisition by Company. (a) Notwithstanding Section 2.3, Purchaser shall have no right to purchase additional shares of Common Stock if (i) the Common Stock Equivalents increased due to issuance by Company of Voting Securities in connection with Company's acquisition of a business entity from a third party, (ii) during the one year period following closing of such an acquisition, Company repurchases a number of shares of Voting Securities equal to or greater than the number of shares of Common Stock Equivalents issued to the third party, and (iii) Company's plan to repurchase shares was approved by a majority of the Board and notice thereof was given to Purchaser prior to the closing of the acquisition. If Company does not within the one year period repurchase a number of shares of Voting Securities equal to the number of Common Stock Equivalents issued to the third party, Purchaser shall have all rights under Section 2.3 to purchase shares of Common Stock up to its Percentage Limitation. For purposes of Section 2.4, Company shall give notice to Purchaser in accordance with Section 2.4(a) within thirty (30) days after the end of the one year period, and the purchase price to be paid by Purchaser to purchase shares from Company shall be established in accordance with Section 2.4(b)(i) as of the date of the closing of the business acquisition. Except as modified by the preceding sentence, the provisions of Section 2.4 shall govern any such purchase. 10 12 (b) The limitation contained in Section 2.5(a) shall only apply to increases of fifteen percent (15%) or less in the Common Stock Equivalents. If in connection with an acquisition Company issues Voting Securities which cause the Common Stock Equivalents to increase more than fifteen percent (15%), Purchaser shall have all rights under Section 2.3 to purchase Common Stock in connection with such increase over fifteen percent (15%). 2.6 Permitted Purchase If Company Proposes to Issue Voting Securities for Cash. If Company proposes to issue Voting Securities solely for cash pursuant to a registered offering or a private placement, and as a consequence thereof Purchaser's aggregate ownership of Common Stock Equivalents would fall below its Percentage Limitation, Company shall give EMI written notice of such fact (the "Notice of Issue") at least thirty (30) days prior to the anticipated date of such issuance stating the anticipated number of Common Stock Equivalents to be issued and the anticipated price per Common Stock Equivalent. Purchaser shall have the right to purchase from Company the number of shares of Common Stock required for Purchaser to own in the aggregate the Percentage Limitation of the Common Stock Equivalents following the issuance of the shares actually issued in such registered offering or private placement. Purchaser shall have fifteen (15) days from receipt of the Notice of Issue to notify Company in writing whether it elects to purchase any of such shares of Common Stock and, if it so elects, the number of shares it elects to purchase. At the time Purchaser delivers its election to Company, there shall be a binding agreement between Purchaser and Company for the purchase and sale of the number of shares of Common Stock elected by Purchaser, subject to the consummation of such sale described in the Notice of Issue. The purchase price per share shall be the price per Common Stock Equivalent at which the Voting Securities are actually issued by Company; provided, however, that without Purchaser's consent the purchase price shall not be more than one hundred twenty percent (120%) of the anticipated price per Common Stock Equivalent set forth in the Notice of Issue. Purchaser shall pay the purchase price to Company in immediately available funds, and Company shall deliver certificates representing the shares of Common Stock to Purchaser, on the date of Company's issuance of the Voting Securities. 2.7 Permitted Purchase in Response To Third Party Tender Offer or Exchange Offer. (a) If a tender or exchange offer is made by any Person or 13D Group (other than Purchaser or any Person acting in concert with Purchaser) to acquire Voting Securities, Purchaser may make a tender offer for up to an equivalent number of shares of such Voting Securities as are sought to be purchased by the party making the other tender offer. If Purchaser initiates a tender offer under this Section 2.7, the tender offer may be on such terms as Purchaser shall elect and Company agrees that it shall not in any way (whether by active opposition, Board announcement or otherwise) contest said tender offer. (b) If, following such a tender offer by Purchaser, it owns in the aggregate more than the Percentage Limitation of the Common Stock Equivalents, Company shall have the right, exercisable at any time during the six month period following completion of Purchaser's tender offer, to demand the purchase from Purchaser a number of shares of such Voting Securities as will cause Purchaser to own in the aggregate the Percentage Limitation of 11 13 the Common Stock Equivalents following such purchase; provided, however, that Purchaser shall not be obligated to sell any Common Stock Equivalents to Company pursuant to this Section 2.7 until such time as such sale would not subject Purchaser to liability under Section 16(b) of the Exchange Act or any other applicable provision of federal or state law; and, provided further, that Purchaser shall not be entitled to vote such Common Stock Equivalents between the time of Company's demand to purchase pursuant to this Section 2.7(b) and Purchaser's sale of such Common Stock Equivalents. Company shall, within said six month period, notify EMI in writing whether it elects to purchase any of such shares and, if it so elects, the number of shares it elects to purchase. At the time Company delivers its notice to EMI, there shall be a binding agreement between Purchaser and Company for the purchase and sale of the number of shares of such Voting Securities elected by Company. (c) The purchase price per share shall be the price per share paid by Purchaser in such tender offer to the tendering shareholders. In addition, Company shall reimburse Purchaser for Purchaser's pro-rata share of the costs and expenses incurred in conducting said tender offer. The pro-rata share of costs and expenses shall be the aggregate of all costs and expenses (including Purchaser's cost of borrowing, not to exceed the lesser of the prime interest rate plus 1% and Company's then-current cost of borrowing) actually incurred by Purchaser, divided by the number of shares of Voting Securities acquired by it in the tender offer. Company shall pay the purchase price and the costs and expenses described in this paragraph to Purchaser in immediately available funds, and Purchaser shall deliver certificates representing the shares to Company, on a date specified by Company in its notice, which date shall not be more than twenty (20) days after Company delivers its notice to EMI. (d) If Company's purchase is subject to or is voluntarily submitted for shareholder approval, Purchaser shall vote all its Voting Securities in favor of the purchase. (e) If Company does not elect to purchase shares from Purchaser, or elects to purchase only a portion of the shares under Section 2.7(b), Purchaser shall be entitled to retain the shares over the Percentage Limitation but the Percentage Limitation shall remain 20.1%. 2.8 Permitted Purchase With Board Approval. Notwithstanding any other provision of this Agreement, Purchaser may purchase additional shares of Voting Securities at any time, if two thirds (2/3) of the Unaffiliated Directors approve such purchase in advance. 2.9 Permitted Purchase by 100% Tender Offer After Four Years. Notwithstanding any other provision of this Agreement, commencing on the fourth anniversary of the Effective Date, Purchaser shall have the right to acquire additional shares of Common Stock by means of a tender offer in accordance with Section 2.10 below. 2.10 Requirements for Tender Offers. (a) Whenever Purchaser shall make a tender offer for shares of Common Stock under Section 2.9, Purchaser may not close the acquisition of the tendered shares unless all of the following requirements have been satisfied: (i) Purchaser's offer shall have been made to all holders of Common Stock; 12 14 (ii) Purchaser shall offer to purchase for cash all shares tendered; and (iii) Purchaser's offer shall have been accepted by shareholders owning not less than two-thirds (2/3) of the outstanding Common Stock. (b) With respect to calculating whether Purchaser's offer has been accepted by shareholders owning two-thirds (2/3) of the outstanding Common Stock, Common Shares beneficially owned by Purchaser shall be excluded from the outstanding Common Stock. 2.11 Mandatory Disposal of Excess Shares. If in violation of any provision of this Article 2 Purchaser shall at any time hold in the aggregate in excess of its then Permitted Percentage, Purchaser shall be required to dispose of such excess shares by promptly selling, subject to Company's right of first refusal under Section 3.7, sufficient Voting Securities so that after such sale Purchaser shall own in the aggregate not more than its then Permitted Percentage, provided, however, that Purchaser shall not be obligated to sell any Voting Securities to Company pursuant to this Section 2.11 until such time as such sale would not subject Purchaser to liability under Section 16(b) of the Exchange Act or any other applicable provision of federal or state law; and, provided further, that Purchaser shall not be entitled to vote such Voting Securities between the time of Company's demand that Purchaser dispose of such Voting Securities pursuant to this Section 2.11 and Purchaser's disposal of such Voting Securities. If Purchaser fails to dispose of shares of Voting Securities within one hundred eighty (180) days after receipt of notice from Company advising EMI of its obligation so to dispose of shares (it being understood that giving of notice by Company is not a precondition to Purchaser's obligation to dispose of excess shares), Company shall have the right to redeem at par value from Purchaser a number of shares of Common Stock so that after such redemption the shares of Voting Securities owned by Purchaser do not exceed Purchaser's then Permitted Percentage. Any Voting Securities held by Purchaser in contravention of this Section 2.11 may not be voted in any manner on which shareholders of Company are entitled to vote and Company shall not be required to count any such votes, if cast, in determining the result of shareholder voting on any matter. 2.12 Monthly Report of Ownership. During the term of this Agreement, Purchaser will furnish to Company, within ten (10) days after the end of each calendar month in which Purchaser acquires or disposes of any Voting Securities, a statement showing the number of shares of Voting Securities acquired or disposed of during the just ended month and the aggregate number of shares of Voting Securities held by Purchaser at the end of such month. To the extent that any such acquisition or disposition must be reported to the Commission, Purchaser may fulfill the statement requirement in this Section 2.12 by providing to Company a copy of such report to the Commission. 2.13 General Rule Regarding Acquisition of Voting Securities. Purchaser agrees that any and all acquisitions of Voting Securities shall be made in compliance with all applicable federal and state securities laws. EMI agrees to indemnify, defend and hold harmless Company, its officers, directors and employees from and against any and all losses, claims, liabilities, assertions and expenses incurred or suffered by any of them, including attorneys' fees and costs 13 15 of litigation, as a consequence of a claim by any party other than Company or any of its Affiliates that Purchaser breached its obligations set forth in the preceding sentence. 2.14 Requirements of Trading Exchange or Stock Quotation System. Notwithstanding any other provision of this Agreement, if, by reason of the listing or other requirements of the principal trading exchange or national automated stock quotation system on which the Company's Common Stock is then traded or quoted, the issuance by Company of any additional Voting Securities to Purchaser pursuant to this Article 2 requires approval of Company's shareholders, then Company's obligation to issue and sell such additional Voting Securities to Purchaser shall be subject to receipt of such shareholder approval, which Company shall use its best efforts to obtain as soon as possible after the date on which Purchaser shall otherwise become entitled to purchase such additional Voting Securities from Company pursuant to this Article 2. ARTICLE 3. SALES OF SHARES BY PURCHASER AND RELATED RIGHTS AND OBLIGATIONS OF PURCHASER AND COMPANY 3.1 General Restrictions on Resale or Other Disposition. During the term of this Agreement, Purchaser shall not sell, transfer any beneficial interest in, pledge, hypothecate or otherwise dispose of any Voting Securities except in compliance with Article 3. 3.2 Allowed Sales Pursuant to Registration Rights. Subject to Company's right of first refusal under Section 3.7, Purchaser may at any time sell Common Stock by means of an offering made pursuant to the registration rights set forth in Article 7 below. 3.3 Allowed Sales Pursuant to Rule 144. Subject to Company's right of first refusal under Section 3.7, Purchaser may at any time sell Common Stock pursuant to Rule 144 of the General Rules and Regulations under the Act, provided that Purchaser shall notify Company at least two Business Days prior to the date of entering any sale or transfer order of Common Stock pursuant to Rule 144, and provided further that, if Company shall thereupon notify EMI of the pendency of its public offering of any Voting Securities, Purchaser shall not effect any sales under Rule 144 within 10 days prior to the commencement of or during such offering. 3.4 Allowed Private Sales to Third Parties or Pursuant to Tender Offer. Subject to Company's right of first refusal under Section 3.7, Purchaser may at any time make private sales of Voting Securities to a third person, including sales pursuant to a tender offer or exchange offer. 3.5 Allowed Transfers by EMI and Purchaser Affiliates. EMI and Purchaser Affiliates may at any time transfer Voting Securities among themselves, provided that such transfer would have no clear, adverse impact of a financial character on Company, and would not adversely affect the liabilities and/or responsibilities of EMI to Company, provided that the transferee shall agree in advance in writing to be bound by the terms of this Agreement. 3.6 Allowed Transfers Upon Approved Business Disposition. Purchaser may dispose of Voting Securities in conjunction with a merger or consolidation in which Company is 14 16 acquired, or in conjunction with a sale of all or substantially all of Company's assets, provided a majority of the Board approved such merger, consolidation, or sale. 3.7 Right of First Refusal. If during the term of this Agreement, Purchaser desires to sell all or part of its Voting Securities pursuant to Section 2.11, 3.2, 3.3 or 3.4, Company shall have a right of first refusal to purchase said Voting Securities in accordance with the procedures set forth in Section 3.8 below. 3.8 Procedures for Right of First Refusal. (a) If Purchaser desires to sell a third party all or part of its Voting Securities pursuant to Section 3.4 above ("Private Sale"), or if Purchaser desires to sell all or part of its Common Stock in the open market pursuant to Section 3.2 or 3.3 above ("Market Disposition Program"), Purchaser shall transmit to Company a written notice ("Notice of Proposed Sale") setting forth: (i) if a Private Sale, (A) as to each Person to whom such sale is proposed to be made: (1) the name, address and principal business activity of such Person; (2) the number of shares of Voting Securities proposed to be sold to such Person; (3) the manner in which the sale is proposed to be made; and (4) the price at which or other consideration for which, and the material terms upon which, such sale is proposed to be made, and (B) representing that the Private Sale is bona fide; and (ii) if sales pursuant to a Market Disposition Program: (A) the approximate date the sales are scheduled to commence; and (B) the amount of Common Stock sought to be disposed of. (b) Upon receipt of the Notice of Proposed Sale Company shall have an option to purchase, in the case of a Private Sale, all but not less than all of the Voting Securities proposed to be sold, and in the case of a Market Disposition Program, all, if the Market Disposition Program is a firm commitment public offering, or, if it is not such an offering, any part, of the Common Stock proposed to be disposed of, on the following terms and conditions; (i) If the option arises in connection with a Private Sale, the purchase price shall be the price specified in the Notice of Proposed Sale. (ii) If the option arises in connection with a Market Disposition Program, the purchase price per share of Common Stock shall be the Twenty Day Average determined as if the day Purchaser delivers the Notice of Proposed Sale to Company is the closing date of an issuance of securities by Company in the absence of any public announcement. (iii) If a majority of the Unaffiliated Directors determine to exercise the option, they shall direct Company to send a written notice (the "Notice of Exercise") to EMI within thirty (30) days after the Notice of Proposed Sale is received by Company specifying the number of shares Company is purchasing; provided, however, that in the case of a tender offer or exchange offer, EMI must receive the Notice of Exercise not less than forty-eight (48) hours prior to the earlier of (A) the expiration of the tender offer or exchange offer or (B) 15 17 any date after which shares tendered may be treated less favorably than shares tendered prior thereto. If approval of such purchase by Company's shareholders is required by law or Company's Restated Articles of Incorporation, and if the Private Sale is in response to a tender offer, Company shall waive its right of first refusal granted under Section 3.7; otherwise, Company's Notice of Exercise shall be subject to receipt of such shareholder approval, which Company shall use its best efforts to obtain as soon as possible, and in any event within one hundred twenty (120) days after, the date of the Notice of Exercise. Company's failure to obtain shareholder approval within the one hundred twenty (120) day period shall give Purchaser the right to proceed with the proposed sale under Section 3.8(c). If such repurchase is subject to shareholder approval, Purchaser shall vote all its Voting Securities in favor of the purchase. (iv) Upon EMI's receipt of the Notice of Exercise, there shall be a binding agreement between Purchaser and Company for the purchase and sale of the number of shares contained in the Notice of Exercise. The closing of the purchase and sale shall occur on the thirtieth Business Day following EMI's receipt of the Notice of Exercise. At the closing Purchaser will deliver to Company certificates for the Voting Securities to be sold, duly endorsed for transfer or accompanied by a duly executed stock power, and Company will deliver to Purchaser the purchase price as follows: if Company's purchase is following Purchaser's proposed Private Sale, Company shall pay Purchaser the price specified in the Notice of Proposed Sale in the same manner (and the sale shall be upon the same terms) specified therein, and if Company's purchase is following Purchaser's proposed Market Disposition Program, Company shall pay Purchaser at the closing for the shares purchased in immediately available funds; provided, however, that if Company receives a Notice of Proposed Sale on or before the third anniversary of the Effective Date, Company shall have the option to pay Purchaser by delivery at the closing of ten (10%) percent of the purchase price in immediately available funds, and the balance by delivery of a promissory note providing terms specified in the next succeeding sentence; provided, further, that notwithstanding the preceding proviso, if the Notice of Proposed Sale received by Company on or before the third anniversary describes a proposed Private Sale in response to a tender offer, Company shall pay the purchase price in the same manner (and the sale shall be upon the same terms) specified in the Notice of Proposed Sale. The promissory note shall provide for: fixed interest at a rate equal to the Company's then-current cost of borrowing; equal annual installments including interest payable on each anniversary of the closing in immediately available funds, with each installment in an amount sufficient to amortize the promissory note in ten annual payments; and for the entire unpaid balance including accrued and unpaid interest to be payable on the fifth anniversary of the closing. (v) Company may assign its right to purchase the Voting Securities and may designate in the Notice of Exercise one or more Persons to take title to all or any part of the Voting Securities, but this shall not relieve Company of its obligation to pay the purchase price. (c) If following receipt of a Notice of Proposed Sale Company fails to give EMI a Notice of Exercise within the prescribed time period, Purchaser shall be free to effect such sale on the following terms and conditions: 16 18 (i) if a Private Sale was proposed, Purchaser may effect such sale at any time during the period ending one hundred twenty (120) days after the date Company's Notice of Exercise was required to be given, to the Person or Persons specified in the Notice of Proposed Sale for the consideration and on the terms specified in said notice; and (ii) if a Market Disposition Program was proposed, Purchaser may effect such sales at any time during the period ending one hundred eighty (180) days after the date Company's Notice of Exercise required to be given. (d) If Purchaser does not make the sales within the time periods provided above, the Voting Securities so proposed to be sold will once again become subject to this Agreement to the same extent as if such sales had not been proposed. 3.9 Purchaser's Covenants With Respect to Distribution of Shares. In any transaction or transactions under Section 3.2 or 3.3, Purchaser shall use its reasonable best efforts, and shall cause any underwriter involved to use its reasonable best efforts, to sell the Common Stock in the United States and in a manner which will effect the broadest distribution reasonably possible, with no sales to any one person or group (as defined in the Exchange Act) in excess of 10% of the Common Stock sold in such sale. 3.10 Company's Undertaking to Cooperate in Rule 144 Transactions. In the event of any proposed sales of Common Stock by Purchaser under Section 3.3, Company shall cooperate with Purchaser to enable such sales to be made in accordance with applicable laws, rules and regulations, the requirements of Company's transfer agent, and the reasonable requirements of the broker through which the sales are proposed to be executed, and shall, upon request, furnish unlegended certificates representing Common Stock in such numbers and denominations as Purchaser shall reasonably require for delivery in connection with such sales. ARTICLE 4. LEGENDS AND STOP TRANSFER ORDERS 4.1 Placement of Legends and Entry of Stop Transfer Orders. Purchaser agrees: (a) that, within ten (10) Business Days after its acquisition of any certificates evidencing Voting Securities (or, in the case of Voting Securities currently owned by Purchaser, within ten (10) Business Days after the date hereof) to submit such certificates to Company for placing on the face thereof the following legends: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW AND ARE SUBJECT TO THE RESTRICTIONS ON DISPOSITION SET FORTH IN AND TO THE OTHER PROVISIONS OF A COMMON SHARE AND WARRANTY PURCHASE AGREEMENT, DATED FEBRUARY 27, 1995, BETWEEN VWR CORPORATION AND EM INDUSTRIES, INCORPORATED, AND A STANDSTILL AGREEMENT, DATED FEBRUARY 27, 1995, BETWEEN VWR CORPORATION AND EM INDUSTRIES, INCORPORATED. COPIES 17 19 OF SUCH AGREEMENTS ARE ON FILE AT THE RESPECTIVE OFFICES OF VWR CORPORATION AND EM INDUSTRIES INCORPORATED."; and such additional legends designed to ensure compliance with Federal and State laws as counsel for Company may reasonably request; and (b) to the entry of stop transfer orders with the transfer agents of any such Voting Securities, against the transfer of such legended certificates except in compliance with this Agreement. 4.2 Removal of Legends and Stop Transfer Orders. Company agrees that it will, upon receipt of an opinion from its counsel that it is appropriate so to do and upon the presentation to its transfer agent of the certificates containing the legends provided for in Section 4.1(a), remove such legends and withdraw the stop transfer orders provided for in Section 4.1(b) with respect to such certificates, upon the earlier of the following: (a) any sale of the shares represented by such certificates made under Section 3.2, 3.3, or 3.4; or (b) termination of this Agreement. ARTICLE 5. CERTAIN AGREEMENTS OF PURCHASER AND COMPANY 5.1 Future Actions. Purchaser shall not, unless the prior written consent of the Board (in which a majority of the Unaffiliated Directors shall concur) has been obtained, and then only to the extent express written consent has been obtained: (a) at any time before the expiration of four (4) years after the Effective Date, solicit proxies or become a "participant" in a "solicitation" (as such terms are defined in Regulation 14A under the Exchange Act) in opposition to the recommendation of the majority of the directors on the Board with respect to any matter; or (b) deposit any Voting Securities in a voting trust or subject them to a voting agreement or other arrangement of similar effect; provided, however, that nothing in this Section 5.1 shall preclude Purchaser from so depositing any Voting Securities if such trust, agreement or arrangement is, and continues to be during the term of this Agreement, solely by and among EMI and Purchaser Affiliates; or (c) join a partnership, limited partnership, syndicate or other group for the purpose of acquiring, holding or disposing of Voting Securities within the meaning of Section 13(d) of the Exchange Act; or (d) induce or attempt to induce any other Person to initiate a tender offer for any securities of Company, or to effect any change of control of Company, or take any action for the purpose of convening a stockholders' meeting of Company; or (e) acquire, by purchase or otherwise, more than 1% of any class of equity securities of any entity which, prior to the time Purchaser acquires more than 1% of such class, is publicly disclosed (by filing with the Commission or otherwise) to be the beneficial 18 20 owner of more than 5% of any class of the Voting Securities; if Purchaser owns in the aggregate in excess of 1% of any such entity, it shall promptly divest such excess; provided, however, that Purchaser shall not be obligated to divest itself of such excess pursuant to this Section 5.1(e) until such time as such divestment would not subject Purchaser to liability under Section 16(b) of the Exchange Act or any other applicable provision of federal or state law; and, provided further, that Purchaser shall not be entitled to vote such Voting Securities until Purchaser shall divest itself of such excess; and, provided further, that upon being notified by Company in writing that an entity owns in excess of 5% of any class of the Voting Securities, Purchaser shall affirm in writing to Company that Purchaser does not own, in the aggregate, more than 1% of any class of equity securities of such Person. 5.2 Acquisitions and Transfers in Contravention of Agreement. Notwithstanding Company's rights to seek injunctions or other relief, any Voting Securities acquired or transferred by Purchaser in contravention of this Agreement may not be voted on any matter on which shareholders of Company are entitled to vote, any attempt to vote such Voting Securities shall be a breach of this Agreement and Company shall not be required to count any such votes, if cast, in determining the result of shareholder voting on any matter. 5.3 Company's Issuance of Securities. During the term of this Agreement, Company shall not issue any security (including without limitation any Voting Security) which provides the holder(s) thereof with any extraordinary or special voting rights or any right to veto any action of Company, unless such issuance is approved in advance by an Affiliated Director. Further, Company shall not consider or approve any such issuance prior to the Effective Date. ARTICLE 6. BOARD OF DIRECTORS 6.1 Size of Board. On or before the Effective Date, Company shall take all requisite action to increase the size of the Board by two to eleven and to appoint, effective as of the Effective Date, individuals designated by EMI to fill the two new seats. 6.2 Terms. EMI shall advise company on or before the Effective Date which of the Affiliated Directors shall have a term expiring at the second annual meeting of shareholders of Company next following the Effective Date, and which shall have a term expiring at the third such annual meeting. After the term of any Affiliated Director expires, his or her successor shall serve a term of three (3) years as provided in the Restated Articles of Incorporation of Company. 6.3 Vacancies. In the event of the death, resignation, retirement, disqualification or removal from office of any Affiliated Director for any reason, EMI shall have the right to designate a replacement for such Affiliated Director, or fill such vacancy, to the extent EMI would be entitled to designate a nominee for election to the Board of Directors pursuant to Section 6.4 hereof if directors were to be elected at an annual meeting occurring at such date. 6.4 Proportional Representation. (a) Company shall annually cause representatives designated by EMI to be nominated for election to the Board so as to provide Purchaser with that percentage 19 21 representation on the Board, rounded down to the nearest whole number, as shall equal the Permitted Percentage applicable at the time of each annual nomination. With respect to committees of the Board, Purchaser shall be entitled to be represented on any committee with respect to which EMI requests representation. (b) Purchaser shall vote its shares of Common Stock so as to elect to the Board its proportionate number of Affiliated Directors and the persons who have been designated by the Unaffiliated Directors, and in all other matters so as to provide other Company shareholders with corresponding proportionate representation. If, pursuant to the Restated Articles of Incorporation of Company, cumulative voting for the election of Company directors is required, Purchaser may initially vote its shares to ensure that its then proportionate number of Affiliated Directors are elected. Purchaser agrees that, once its proportionate number of Affiliated Directors are elected, Purchaser shall vote its shares of Common Stock so as to elect persons to the Board who have been designated by the Unaffiliated Directors. (c) Subject to the provisions of Section 6.3, Company may effect changes in Board representation by increase in the size of the Board or by resignations or retirements of Board members. Notwithstanding the foregoing, Purchaser's right to proportional Board representation shall not cause the number of Affiliated Directors to (i) decrease during the one year period during which Company has the right to purchase Voting Securities under Section 2.5(a), or (ii) increase during the six month period during which Company has the right to purchase Voting Securities under Section 2.7(b). ARTICLE 7. REGISTRATION RIGHTS 7.1 Duration of Registration Rights. Purchaser's rights to have Company register shares of Registrable Securities (as defined below) provided in this Article 7 shall terminate upon the Restriction Termination Date (as defined below). Rights of a Holder other than Purchaser to have Company register shares of Registrable Securities provided in this Article 7 shall terminate upon the Restriction Termination Date. As used in this Article 7, "Registrable Securities" shall mean all Common Stock so long as certificates representing the same are required to bear the restrictive legend set forth in Section 4.1 hereof, to the extent that such legend refers to registration under the Act. As used in this Article 7, "Restriction Termination Date" shall mean, with respect to any Registrable Securities, the earliest of (i) the date that such Registrable Securities shall have been Registered and sold or otherwise disposed of in accordance with the intended method of distribution by the seller or sellers thereof set forth in the Registration Statement covering such Registrable Securities or transferred in compliance with Rule 144 under the Securities Act and (ii) the date that an opinion of counsel to Company, which opinion of counsel shall be reasonably acceptable to Purchaser, containing reasonable assumptions shall have been rendered and, based upon such opinion, the legend referred to in Section 4.1 hereof, to the extent that such legend refers to registration under the Act, shall have been removed. 7.2 Demand Registration Covenant. (a) If a Holder requests in writing that Company register under the Act any Registrable Securities then owned by Holder, Company will use its best efforts to cause the 20 22 offering and sale to be registered as soon as reasonably practicable. In connection therewith Company shall prepare and file a registration statement under the Act on such form as Company shall determine to be appropriate; provided, however, that Company shall not be obligated to file more than one registration statement pursuant to this Section 7.2 during any 12-month period. The request shall specify the amount of Registrable Securities intended to be offered and sold, shall express Holder's present intent to offer such Registrable Securities for distribution, shall describe the nature or method of the proposed offer and sale, and shall contain the undertaking of Holder to comply with all applicable requirements of this Article 7. (b) Upon receipt of a request for registration under Section 7.2, Company will promptly give notice to all Holders other than those initiating the request and provide a reasonable opportunity for such Holders to participate in such registration. Any such other Holder must notify Company in writing of its desire to participate, within thirty (30) days of receipt of Company's notice. (c) Any request for registration under Section 7.2 must be for a firm commitment public offering to be managed by one or more Investment Banking Firms selected by the Holders requesting registration, provided that such Investment Banking Firms are reasonably satisfactory to Company. If, in the written opinion of the Investment Banking Firms marketing factors require a limitation of the number of shares to be underwritten, and if the total amount of securities that all Holders (initiating and non-initiating) request pursuant to Section 7.2 to be included in such offering exceeds the amount of securities that the Investment Banking Firms reasonably believe compatible with the success of the offering, Company shall only be required to include in the offering the amount of Registrable Securities that the Investment Banking Firms believe will not jeopardize the success of the offering, and such amount shall be allocated among such Holders in proportion to the respective amounts of Registrable Securities proposed to be sold by each of the Holders. Any shares of Registrable Securities that are so excluded from the underwriting shall be excluded from the registration. (d) Subject to the provisions of Section 7.2(a) and 7.2(b), if within forty-five (45) days after receipt of a request under Section 7.2(a) and any requests under Section 7.2(b), Company shall have obtained (i) from Commission a "no-action" letter, in form and substance reasonably satisfactory to the counsel of the Holders requesting registration, in which the Commission has indicated that it will take no action if, without registration under the Act, Holders dispose of the Registrable Securities covered by the request(s) in the manner proposed or (ii) any opinion of its counsel (concurred in by counsel for the requesting Holder(s)) that no registration under the Act is required, Company need not comply with such request or request(s); provided, however, that receipt of such "no-action" letter or opinion shall not constitute a registration for the purpose of determining Company's obligations to Holders under Section 7.2; and provided, further, that in such event counsel for Company shall opine that, whether by reason of the "no-action" letter or otherwise, the removal of any legend from certificates representing all shares to which such "no-action" letter or opinion refers is permissible, and, if so, Company shall remove from such certificates all legends no longer required and shall rescind any stop-transfer instructions previously communicated to its transfer agent relating to such certificates. 21 23 7.3 Participation Registration Covenant. If Company shall propose registration under the Act of an offering of Common Stock, Company shall give prompt written notice of such fact to each Holder and will use all reasonable efforts to cause the registration of such number of shares of Common Stock then owned by Holders as Holders shall request, within fifteen (15) days after receipt of such notice, to be included, upon the same terms (including the method of distribution) of any such offering; provided, however, that (a) Company shall not be required to give notice or include such Common Stock in any such registration if the proposed registration (i) is not a primary registration of securities by Company for its own account, or (ii) is primarily (A) a registration of a stock option or compensation plan or of securities issued or issuable pursuant to any such plan, or (B) a registration of securities proposed to be issued in exchange for securities or assets of, or in connection with a merger or consolidation with, another corporation; (b) the offering of Common Stock by Holders shall comply with Section 3.9 above; and (c) Company may, in its sole discretion and without the consent of the Holders, withdraw such registration statement and abandon the proposed offering. 7.4 Company's Obligations in Connection with Registrations. In connection with any registration of Registrable Securities undertaken by Company under Article 7, Company shall: (a) furnish to Holders or their underwriter such copies of any prospectus (including any preliminary prospectus) Holders may reasonably request to effect the offering and sale, but only while Company is required under the provisions hereof to cause the registration statement to remain current and effective; (b) use its best efforts to qualify the offering under applicable Blue Sky or other state securities laws to enable Holders to offer and sell the Registrable Securities; provided, however, that Company shall not be obligated to qualify as a foreign corporation to do business under the laws of any jurisdiction in which it is not then qualified; (c) furnish Holders, at the expense of Company, with unlegended certificates representing ownership of the Registrable Securities being sold in such numbers and denominations as Holders shall reasonably request, meeting the requirements of the Principal Trading Market; (d) use its best efforts to cause the registration statement to remain current and effective for sixty (60) days following its effective date or such lesser period as the underwriters may agree; and (e) instruct the transfer agent(s) and the registrar(s) of Company's securities to release the stop transfer orders with respect to the Registrable Securities being sold. (f) Company will promptly prepare and file with the Commission such amendments and prospectus supplements, including post-effective amendments, to the Registration Statement as Company determines may be necessary or appropriate, and use its best efforts to have such post-effective amendments declared effective as promptly as practicable; cause the related prospectus to be supplemented by any prospectus supplement, and as so supplemented, to be filed with the Commission; and notify the Holders of any securities included in such Registration Statement and the underwriter thereof, if any, promptly when a prospectus, 22 24 any prospectus supplement or post-effective amendment must be filed or has been filed and, with respect to any post-effective amendment, when the same has become effective, and make the same available to such Holders and any underwriter. (g) Company will furnish to each Holder and the underwriter thereof, if any, a signed counterpart, addressed to each Holder and underwriter, of (i) an opinion or opinions of counsel to Company and (ii) a comfort letter or comfort letters from Company's independent public accountants, each in customary form and covering such matters of the type customarily covered by opinions or comfort letters, as the case may be, as Holders or the underwriter may reasonably request. (h) Company will make generally available to its securityholders, as soon as reasonably practicable, an earning statement covering a period of 12 months, beginning three months after the effective date of the Registration Statement, which earning statement shall satisfy the provisions of Section 11(a) of the Securities Act. (i) Company will use its best efforts to cause all such Registrable Securities to be listed in the Principal Trading Market, and on each securities exchange on which similar securities issued by Company are then listed. 7.5 Conditions to Obligations of Company Under Registration Covenants. Company's obligations to register the Registrable Securities owned by Holders under Article 7 are subject to the following conditions. (a) Company (upon the decision of a majority of the Unaffiliated Directors) shall be entitled to postpone for up to ninety (90) days the filing of any registration statement under Section 7.2, if at the time it receives the request for registration such Unaffiliated Directors determine, in their reasonable judgment, that such registration and offering would materially interfere with any financing, acquisition, corporate reorganization or other material transaction involving Company or any of its Affiliates. Company shall promptly give Holders written notice of such determination. (b) Company may require that the number of shares of Registrable Securities offered for sale by Holders pursuant to a request for registration under Section 7.3 be decreased or excluded entirely if, in the opinion of Company's Investment Banking Firm, such reduction is desirable to permit the orderly distribution and sale of the securities being offered. If Company shall require such a reduction, Holders shall have the right to withdraw from the offering. (c) If Holders request registration pursuant to Section 7.2, Company will enter into an underwriting agreement containing representations, warranties and agreements not materially different from those customarily included in underwriting agreements with an issuer for a secondary distribution; provided, however, that Company will not be obligated to indemnify the Investment Banking Firms on terms materially different from those set forth in Section 7.8: 23 25 (d) Company may require, as a condition to fulfilling its obligations under the registration covenants in Sections 7.2 and 7.3, the indemnification agreements provided in Section 7.8(b) from Holders and the underwriters. (e) It shall be a condition precedent to the obligations of Company to take action pursuant to this Article 7 that each Holder whose Registrable Securities are being registered, and each underwriter designated by such Holder, will furnish to Company such information and materials as Company may reasonably request and as shall be required in connection with the action to be taken by Company. To the extent possible Holders shall provide Company with any information and materials required to obtain acceleration of the effective date of the registration statement. (f) If, in the reasonable opinion of counsel to Company it is necessary or appropriate for Company to comply with any applicable rule, regulation, or release promulgated by the Commission, each Holder whose Registrable Securities are being registered and any underwriter participating in such public offering shall execute and deliver to Company an appropriate agreement, in form satisfactory to counsel for Company, that such Holder or underwriter will comply with all prospectus delivery requirements of the Act and with all anti-stabilization, manipulation, and similar provisions of Section 10 of the Exchange Act and any rules issued thereunder by the Commission, and will furnish to Company information about sales made in such public offering. (g) Holders of Common stock included in the registration statement shall not (until further notice) effect sales thereof after receipt of written notice (which may include notice by telegraph) from Company to suspend sales, to permit Company to correct or update a registration statement or prospectus; provided, however, that the obligations of Company with respect to maintaining any registration statement current and effective shall be extended by a period of days equal to the period such suspension is in effect. (h) At the end of the period during which Company is obligated to keep any registration statement current and effective (and any extensions thereof required by the preceding paragraph), and upon receipt of notice from Company of its intention to remove from registration the securities covered by such registration statement that remain unsold, Holders of Registrable Securities included in the registration statement shall discontinue sales of such Registrable Securities pursuant to such registration statement, and each such Holder shall notify Company of the number of shares registered belonging to such Holder that remain unsold promptly following receipt of such notice from Company. 7.6 Expenses. (a) In connection with any registration pursuant to Section 7.2, all Registration Expenses (as defined below) shall be borne fifty percent (50%) by Company and fifty percent (50%) by Holders of the Registrable Securities on the basis of the number of shares registered by them, and all Selling Expenses (as defined below) shall be borne by Holders of the Registrable Securities on the basis of the number of shares registered by them. As used in this Section 7.6, "Registration Expenses" shall mean all expenses incurred by Company in complying with this Article 7, including, without limitation, all federal and state registration, qualification 24 26 and filing fees, printing expenses, fees and disbursements of counsel for Company, Blue Sky fees and expenses, and the expense of any special audits incident to or required by such registration. As used in this Section 7.6, "Selling Expenses" shall mean all underwriting discounts and selling commissions applicable to the sale of Registrable Securities pursuant to this Agreement and all fees and disbursements of counsel for any Holder. (b) In connection with any registration pursuant to Section 7.3, Company shall pay all Registration Expenses and Selling Expenses, except to the extent the aggregate of such expenses exceeds the amount which Company would have expended in conducting an offering of only the shares sold by it, and the participating Holders pro rata shall pay such excess based on the number of shares of Registrable Securities offered by each pursuant to such registration statement. Such Holders shall pay all Registration Expenses and Selling Expenses directly attributable to the inclusion in the offering of Registrable Securities being sold by the Holders, including without limitation fees and disbursements of their own counsel and accountants. 7.7 Assignability of Registration Rights. The registration rights afforded Purchaser in this Article 7, shall be assignable to a transferee of Registrable Securities from Purchaser so long as (i) such transferee has acquired no fewer than two million (2,000,000) shares of Registrable Securities (as adjusted from time to time to reflect stock splits, stock dividends and similar changes in the capitalization of Company) from Purchaser, (ii) such transferee has agreed with Company in writing to comply with all applicable provisions of this Article 7, and (iii) Purchaser has otherwise complied with all provisions of this Agreement which affect its right to sell, transfer or otherwise dispose of shares of Registrable Securities. For a transfer of registration rights to be effective, Purchaser shall give Company written notice at the time of such transfer stating the name and address of the transferee and identifying the shares with respect to which the rights under this Article 7 are being assigned. 7.8 Indemnification. (a) In the case of each registration effected by Company pursuant to Section 7.2 or 7.3, to the extent permitted by law Company ("indemnifying party") agrees to indemnify and hold harmless each Holder, its officers and directors, and each underwriter within the meaning of Section 15 of the Act, against any and all losses, claims, damages, liabilities or actions to which they or any of them may become subject under the Act or any other statute or common law, including any amount paid in settlement of any litigation, commenced or threatened, if such settlement is effected with the written consent of Company, and to reimburse them for any legal or other expenses incurred by them in connection with investigating any claims and defending any actions, insofar as any such losses, claims, damages, liabilities or actions arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the registration statement relating to the sale of such shares, or any post-effective amendment thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus, if used prior to the effective date of such registration statement, or contained in the final prospectus (as amended or supplemented if Company shall have filed with the Commission 25 27 any amendment thereof or supplement thereto) if used within the period during which Company is required to keep the registration statement to which such prospectus relates current under Section 7.4(d) (including any extensions of such period as provided in Section 7.5.(g)), or the omission or alleged omission to state therein (if so used) a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the indemnification agreement contained in this Section 7.8(a) shall not (x) apply to such losses, claims, damages, liabilities or actions arising out of, or based upon, any such untrue statement or alleged untrue statement, or any such omission or alleged omission, if such statement or omission was made in reliance upon and in conformity with information furnished to Company by such Holder or underwriter for use in connection with preparation of the registration statement, any preliminary prospectus or final prospectus contained in the registration statement, or any amendment or supplement thereto, or (y) inure to the benefit of any underwriter or any Person controlling such underwriter, if such underwriter failed to send or give a copy of the final prospectus to the Person asserting the claim at or prior to the written confirmation of the sale of such securities to such Person and if the untrue statement or omission concerned had been corrected in such final prospectus. (b) In the case of each registration effected by Company pursuant to Section 7.2 or 7.3 above, each Holder and each underwriter of the shares to be registered (each such party and such underwriters being referred to severally as an "indemnifying party") shall agree in the same manner and to the same extent as set forth in Section 7.8(a) to indemnify and hold harmless Company, each Person (if any) who controls Company within the meaning of Section 15 of the Act, the directors of Company and those officers of Company who shall have signed any such registration statement, with respect to any untrue statement or alleged untrue statement in, or omission or alleged omission from, such registration statement or any post-effective amendment thereto or any preliminary prospectus or final prospectus (as amended or supplemented, if amended or supplemented) contained in such registration statement, if such statement or omission was made in reliance upon and in conformity with information furnished to Company by such indemnifying party for use in connection with the preparation of such registration statement or any preliminary prospectus or final prospectus contained in such registration statement or any such amendment or supplement thereto. (c) Each indemnified party will, promptly after receipt of written notice of the commencement of an action against such indemnified party in respect of which indemnity may be sought under this Section 7.8, notify the indemnifying party in writing of the commencement thereof. In case any such action shall be brought against any indemnified party and it shall so notify an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein, with the approval of any indemnified parties, which approval shall not be unreasonably withheld, and to the extent it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof with counsel satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section 7.8 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. Notwithstanding the foregoing, an indemnified party shall have the right to 26 28 employ separate counsel (reasonably satisfactory to the indemnifying party) to participate in the defense thereof, but the fees and expenses of such counsel shall be the expense of such indemnified party unless the named parties to such action or proceedings include both the indemnifying party and the indemnified party and the indemnifying party or such indemnified party shall have been advised by counsel that there are one or more legal defenses available to it which are different from or additional to those available to the indemnifying party (in which case, if the indemnified party notifies the indemnifying party in writing that it elects to employ separate counsel at the reasonable expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such action or proceeding on behalf of the indemnified party, as the case may be, it being understood, however, that the indemnifying party shall not, in connection with any such action or proceeding or separate or substantially similar or related action or proceeding in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate counsel at any time for the indemnifying party and all indemnified parties, which counsel shall be designated in writing by the Holders of a majority of the Common Shares). If the indemnifying party withholds consent to a settlement or proposed settlement by the indemnified party, it shall acknowledge to the indemnified party its indemnification obligations hereunder. The indemnity agreements in this Section 7.8 shall be in addition to any liabilities which the indemnifying parties may have pursuant to law. (d) If the indemnification provided for in this Section 7.8 from an indemnifying party is unavailable to an indemnified party hereunder in respect to any losses, claims, damages, liabilities or expenses referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified party in connection with the statements or omissions which result in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such indemnifying party or indemnified party and that party's relative intent, knowledge, access to information supplied by such indemnifying party or indemnified party and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action, suit, proceeding or claim. ARTICLE 8. TERMINATION 8.1 Termination. This Agreement shall terminate upon the earliest to occur of the following: (a) Purchaser's completion of a tender offer in accordance with Section 2.10, provided, that Purchaser's offer has been accepted by shareholders owning not less than two-thirds (2/3) of the outstanding Common Stock, as provided in such Section; or 27 29 (b) by mutual written agreement of Company and EMI; or (c) if the transactions contemplated under the Common Share Purchase Agreement shall not have been consummated, on August 1, 1995; or (d) if elected by EMI, exercisable upon delivery of written notice thereof to Company, upon the failure of Company to comply with its obligations under this Agreement and cure of such failure does not occur within thirty (30) days after EMI has given written notice of such failure to Company; or (e) if elected by Company, exercisable upon delivery of written notice thereof to the EMI, upon the failure of Purchaser to comply with its obligations under this Agreement and cure of such failure does not occur within thirty (30) days after Company gives written notice of such failure to EMI. 8.2 Extended Cure Period. Notwithstanding Sections 8.1(d) and 8.1(e), the parties agree that if the nature of the failure requires that more than thirty (30) days are necessary to cure, this Agreement shall not terminate if the failing party commences a cure within the thirty (30) day period and thereafter continuously and diligently pursues all steps necessary to cure the failure up to and including completion of the cure; provided, however, that such extended cure period shall terminate sixty (60) days after the expiration of the thirty-day period after the delivery of notice, as contemplated in Sections 8.1(d) and 8.1(e); provided, further, that this Section 8.2 shall not apply to Company's failure to sell at the time provided shares of Common Stock to Purchaser under Section 2.4 or 2.6. ARTICLE 9. REPRESENTATIONS AND WARRANTIES 9.1 Of Company. Company hereby represents and warrants to EMI as follows: (a) Company is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania, with corporate power to own its properties and to conduct its business as now conducted. (b) The authorized capital stock of Company consists of (i) 30,000,000 shares of Common Stock, of which at the date of this Agreement, 11,066,367 shares were validly-issued and outstanding, fully paid and nonassessable and no shares were held in Company's treasury, and (ii) 1,000,000 preferred shares, par value $1.00 per share, of which, at the date of this Agreement, no shares were issued and outstanding. In addition, at the date of this Agreement, an aggregate of 597,407 shares of Common Stock (including authorized but unissued shares and treasury shares) were reserved for issuance pursuant to presently existing options and future options under currently existing stock option plans. Other than the Warrant, no other options, warrants, rights or convertible securities providing for the issuance of Company capital stock are outstanding. (c) Company has full legal right, power and authority to enter into and perform this Agreement, and the execution and delivery of this Agreement by Company and the consummation of the transactions contemplated hereby have been duly authorized by the Board and require no other Board or stockholder action. This Agreement constitutes a valid and 28 30 binding agreement of Company. Neither this Agreement nor the performance of this Agreement by Company or EMI violate Company's Restated Articles of Incorporation. 9.2 Of EMI. EMI hereby represents and warrants to Company as follows: (a) EMI is a corporation duly organized, validly existing and in good standing under the laws of New York, with corporate power to own its properties and to conduct its business as now conducted. (b) EMI has full legal right, power and authority to enter into and perform this Agreement, and the execution and delivery of this Agreement by it and the consummation of the transactions contemplated hereby have been duly authorized by the Board of Directors of EMI and require no other Board of Directors or stockholder action. This Agreement constitutes a valid and binding agreement of EMI. ARTICLE 10. MISCELLANEOUS 10.1 Specific Enforcement. The parties hereto acknowledge and agree that each would be irreparably damaged if any of the provisions of this Agreement are not performed by the other in accordance with their specific terms or are otherwise breached. It is accordingly agreed that each party shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement by the other and to enforce this Agreement and the terms and provisions thereof specifically against the other, in addition to any other remedy to which such aggrieved party may be entitled at law or in equity. Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought against any of the parties in the courts of the Commonwealth of Pennsylvania, County of Chester, in the United States District Court for the Eastern District of Pennsylvania, courts of the State of New York, New York County, or in the United States District Court for the Southern District of New York, and each of the parties consents to the jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any objection to venue laid therein. Process in any action or proceeding referred to in the preceding sentence may be served on any party anywhere in the world. 10.2 Severability. If any term or provision of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void, unenforceable or against its regulatory policy, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. 10.3 Expenses. Except as otherwise provided herein, each party hereto shall pay its own expenses in connection with this Agreement. 10.4 Assignment; Successors. This Agreement shall be binding upon and shall inure to the benefit of and be enforceable by the successors and permitted assigns of the parties hereto. Except as otherwise provided herein, Company may not assign its rights and delegate its duties and obligations under this Agreement without the prior written consent of EMI, and EMI may not assign its rights or delegate its duties and obligations under this Agreement without the prior written consent of Company and, in the absence of such consent, any such purported 29 31 assignment or delegation shall be void; provided, however, that EMI may assign its rights and delegate its duties and obligations under this Agreement without such consent to a directly or indirectly wholly owned subsidiary of EMI, or to any corporation, partnership or other entity wholly-owned by the same person which controls EMI, which subsidiary, corporation, partnership or other entity (referred to herein as the "Assignee") may, following duly authorized execution and delivery of an agreement assuming the obligations of EMI hereunder reasonably satisfactory to Company, accept title to the Shares and/or Warrant Shares. In the event that EMI assigns its rights and delegates all of its obligations under this Agreement in accordance with this Section 10.4, all references to EMI herein shall refer to the Assignee as well as to EMI and EMI shall be jointly and severally liable with the Assignee for the performance of its obligations hereunder. 10.5 Amendments. This Agreement may not be modified, amended, altered or supplemented except by a written agreement signed by Company and EMI which shall be authorized by all necessary corporate action of each party. Any party may waive any condition to the obligations of any other party hereunder. 10.6 Notices. Every notice or other communication required or contemplated by this Agreement to be given by a party shall be delivered either by (a) personal delivery, (b) courier mail, or (c) facsimile mail addressed to the party for whom intended at the following address: To Company: VWR Corporation 1310 Goshen Parkway West Chester, PA 19380 Attention: Jerrold B. Harris Telecopy No.: (610)436-1760 With a copy to: Drinker Biddle & Reath 1000 Westlakes Drive, Suite 300 Berwyn, PA 19312 Attention: Thomas E. Wood, Esq. Telecopy No.: (610)993-8585 To EMI: EM Industries, Incorporated 5 Skyline Drive Hawthorne, New York 10532 Attention: President & Chief Executive Officer Telecopy No.: (914) 592-8775 With a copy to: Rogers & Wells 200 Park Avenue New York, New York 10166 Attention: Klaus H. Jander, Esq. Telecopy No.: (212) 878-3025 or at such other address as the intended recipient previously shall have designated by written notice to the other parties. Notice by courier mail shall be effective on the date it is officially 30 32 recorded as delivered to the intended recipient by return receipt or equivalent. All notices and other communications required or contemplated by this Agreement delivered in person or sent by facsimile mail shall be deemed to have been delivered to and received by the addressee and shall be effective on the date of personal delivery or on the date sent, respectively. Notice not given in writing shall be effective only if acknowledged in writing by a duly authorized representative of the party to whom it was given. 10.7 Attorneys' Fees. If any action or proceeding shall be commenced to enforce this Agreement or any right arising in connection with this Agreement, the prevailing party in such action or proceeding shall be entitled to recover from the other party the reasonable attorneys' fees, costs and expenses incurred by such prevailing party in connection with such action or proceeding. 10.8 Integration. This Agreement, together with the Common Share and Warrant Purchase Agreement and the Warrant, contains the entire understanding of the parties with respect to its subject matter. There are no restrictions, agreements, promises, warranties, covenants or undertakings other than those expressly set forth herein or therein with respect to any matter. 10.9 Waivers. No failure or delay on the part of either party in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available. 10.10 Governing Law. This Agreement shall be exclusively governed by, construed in accordance with, and interpreted according to the substantive law of the Commonwealth of Pennsylvania without giving effect to the principles of conflict of laws. 10.11 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an 31 33 original, but all of which together shall constitute one and the same instrument. 10.12 Cooperation. The parties hereto shall each perform such acts, execute and deliver such instruments and documents, and do all such other things as may be reasonably necessary to accomplish the transactions contemplated in this Agreement. 10.13 Section Headings and Captions. Section headings and captions used in this Agreement are provided for convenience only and shall not affect its meaning or interpretation. IN WITNESS WHEREOF, Company and EMI have caused this Agreement to be executed on the date first above written. VWR CORPORATION BY: /s/ Jerrold B. Harris ------------------------------ ITS: President ------------------------------ EM INDUSTRIES, INCORPORATED BY: /s/ Walter W. Zywottek ------------------------------ ITS: President ------------------------------ 32 EX-99.C.4 13 AMENDMENT NUMBER ONE TO THE STANDSTILL AGREEMENT 1 Exhibit (c)(4) AMENDMENT NUMBER ONE TO THE STANDSTILL AGREEMENT by and among VWR CORPORATION, EM INDUSTRIES, INCORPORATED and EM LABORATORIES, INCORPORATED September 15, 1995 2 AMENDMENT NUMBER ONE TO THE STANDSTILL AGREEMENT This Amendment Number One to the Standstill Agreement (the "Amendment") made this 15th day of September, 1995 by and among VWR Corporation ("VWR"), a Pennsylvania corporation, EM Industries, Incorporated ("EMI"), a New York corporation, and EM Laboratories, Incorporated ("EM Laboratories"), a New York corporation, W I T N E S S E T H: WHEREAS, EMI and VWR entered into a Standstill Agreement dated February 27, 1995 (the "Standstill Agreement"); WHEREAS, pursuant to an Assignment and Assumption Agreement dated April 13, 1995, and in conformity with Section 10.4 of the Standstill Agreement, EMI assigned its rights and delegated its duties and obligations under the Standstill Agreement to EM Laboratories and EM Laboratories accepted such assignment and delegation; and WHEREAS, accordingly, all references to EMI in the Standstill Agreement refer to EM Laboratories as assignee as well as to EMI, and EMI and EM Laboratories are jointly and severally liable for the performance of the obligations of EM Laboratories under the Standstill Agreement; WHEREAS, Section 10.5 of the Standstill Agreement provides that the Standstill Agreement may be amended by a written agreement signed by VWR and EMI; and WHEREAS, VWR, EMI and EM Laboratories have agreed to amend the Standstill Agreement as provided herein, NOW THEREFORE, in consideration of the mutual agreements and covenants set forth herein, and for other good and valuable consideration, the parties agree that the Standstill Agreement shall be amended as of the date hereof as follows: SECTION. 1. To the Recitals there shall be added Recital D, which shall read in its entirety as follows: "D. Company and EMI have entered into a Common Share and Debenture Purchase Agreement dated May 24, 1995, pursuant to which, among other things, Company shall issue and sell to EMI additional Common Stock (as defined below) of Company and a subordinated debenture (the 'Debenture')." SECTION 2. To Article 1 there shall be added the following sentence, which shall be set forth immediately after the caption "DEFINITIONS": "Capitalized terms used but not defined herein shall have the meaning set forth, as the case may be, in the Common Share and Warrant Purchase Agreement (as defined below) or the Common Share and Debenture Purchase Agreement (as defined below)." SECTION 3. To Article 1 there shall be added the following definitions, the other sections of Article 1 being renumbered accordingly, which new definitions shall read in their entirety as follows: 1 3 "1.3. Agreement. 'Agreement' means this Standstill Agreement, as it may be from time to time modified, amended, altered or supplemented by written agreement of the parties as provided in Section 10.5." "1.10. Common Share and Debenture Purchase Agreement. 'Common Share and Debenture Purchase Agreement' means the Common Share and Debenture Purchase Agreement, dated May 24, 1995, between Company and EMI." "1.31. Second Closing Date. 'Second Closing Date' means the date the acquisition of the Common Stock and Debenture by Purchaser is consummated pursuant to the terms of the Common Share and Debenture Purchase Agreement." SECTION 4. Section 1.10 of the Agreement shall be renumbered Section 1.12 shall be amended to read, in its entirety, as follows: "1.12. Common Stock Equivalents. 'Common Stock Equivalents' means the sum of the following, determined at any time during the term of this Agreement: (a) the total number of shares of issued and outstanding Common Stock, plus (b) the number of votes which may be cast for the election of directors (whether directly or by formula) as a result of ownership of any Voting Securities other than Common Stock; provided, however, that the votes described in (b) above shall not be included in Common Stock Equivalents until the Voting Securities other than Common Stock are able to be voted for the election of directors." SECTION 5. The second sentence of Section 2.2 shall be amended to read in its entirety as follows: "The 'Percentage Limitation' shall be 49.9% of the Common Stock Equivalents." SECTION 6. Section 2.7(e) shall be amended to read in its entirety as follows: "(e) If Company does not elect to purchase shares from Purchaser, or elects to purchase only a portion of the shares under Section 2.7(b), Purchaser shall be entitled to retain the shares over the Percentage Limitation but the Percentage Limitation shall remain 49.9%." SECTION 7. Section 2.10 shall be amended to read in its entirety as follows: "2.10 Requirements for Tender Offers. Whenever Purchaser shall make a tender offer for shares of Common Stock under Section 2.9: "(a) Purchaser shall not commence any such tender offer unless acceptance of Purchaser's offer shall have been recommended to the shareholders by a majority vote of the Unaffiliated Directors; and "(b) Purchaser may not close the acquisition of the tendered shares unless all of the following requirements have been satisfied: 2 4 "(i) Purchaser's offer shall have been made to all holders of Common Stock; "(ii) Purchaser shall offer to purchase for cash all shares tendered; and "(iii) Purchaser's offer shall have been accepted by shareholders owning not less than a majority of the outstanding Common Stock. "(c) With respect to calculating whether Purchaser's offer has been accepted by shareholders owning a majority of the outstanding Common Stock, Common Shares beneficially owned by Purchaser shall be excluded from the outstanding Common Stock." SECTION 8. Section 4.1(a) shall be amended so that the legend set forth therein shall read in its entirety as follows: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW AND ARE SUBJECT TO THE RESTRICTIONS ON DISPOSITION SET FORTH IN AND TO THE OTHER PROVISIONS OF A COMMON SHARE AND WARRANTY PURCHASE AGREEMENT, DATED FEBRUARY 27, 1995, BETWEEN VWR CORPORATION AND EM INDUSTRIES, INCORPORATED, AND A COMMON SHARE AND DEBENTURE PURCHASE AGREEMENT, DATED MAY 24, 1995, BETWEEN VWR CORPORATION AND EM INDUSTRIES, INCORPORATED, AND A STANDSTILL AGREEMENT, DATED FEBRUARY 27, 1995, BETWEEN VWR CORPORATION AND EM INDUSTRIES, INCORPORATED, AS AMENDED ON SEPTEMBER 15, 1995. COPIES OF SUCH AGREEMENTS ARE ON FILE AT THE RESPECTIVE OFFICES OF VWR CORPORATION AND EM INDUSTRIES INCORPORATED." SECTION 9. Section 6.1 shall be amended to read in its entirety as follows: "6.1. Size of Board; Proportionate Representation. (a) On or before the Second Closing Date, the Company shall take all requisite action, including without limitation increasing or decreasing the number of seats on the Board, to grant EMI the right, at EMI's option, to nominate such number of directors to the Board as shall ensure that EMI shall have the right to maintain Board representation at all times commensurate with the aggregate proportion of Common Shares owned by EMI and its Affiliates. "(b) At any time when EMI shall exercise its option to appoint directors, as described in paragraph (a) above, the Company shall take all requisite action to cause the election, effective immediately, of the individuals designated by EMI to fill the number of seats on the Board that shall be proportionate to the aggregate Common Share ownership of EMI and its Affiliates." SECTION 10. Section 6.2 shall be amended to read in its entirety as follows: 3 5 "6.2 Terms. EMI shall advise Company as necessary, from time to time, which of the Affiliated Directors shall have a term expiring at the second annual meeting of shareholders of Company next following the Second Closing Date, and which shall have a term expiring at the third such annual meeting. After the term of any Affiliated Director expires, his or her successor shall serve a term of three (3) years as provided in the Restated Articles of Incorporation of Company." SECTION 11. Section 8.1(a) shall be amended to read in its entirety as follows: "(a) Purchaser's completion of a tender offer in accordance with Section 2.10, provided, that Purchaser's offer shall have been recommended to the shareholders by a majority vote of the Unaffiliated Directors and shall have been accepted by shareholders owning not less than a majority of the outstanding Common Stock, as provided in such Section; or". SECTION 12. The proviso set forth in the second sentence of Section 10.4 shall be amended to read in its entirety as follows: ". . . provided, however, that EMI may assign its rights and delegate its duties and obligations under this Agreement without such consent to an Affiliate of EMI, which Affiliate (referred to herein as the "Assignee") may, following duly authorized execution and delivery of an agreement assuming the obligations of EMI hereunder reasonably satisfactory to Company, accept title to the Shares and/or Warrant Shares." SECTION 13. This Amendment shall be exclusively governed by, construed in accordance with, and interpreted according to the substantive law of the Commonwealth of Pennsylvania without giving effect to the principles of conflict of laws. SECTION 14. This Amendment may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, VWR, EMI and EM Laboratories have caused this Amendment to be executed on the date first above written. VWR CORPORATION By: /s/ Jerrold B. Harris Name: Jerrold B. Harris Title: President and Chief Executive Officer EM INDUSTRIES, INCORPORATED By: /s/ Walter W. Zywottek Name: Walter W. Zywottek Title: President and Chief Executive Officer 4 6 EM LABORATORIES, INCORPORATED By: /s/ Walter W. Zywottek Name: Walter W. Zywottek Title: President and Chief Executive Officer 5 -----END PRIVACY-ENHANCED MESSAGE-----