1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-9
Solicitation/Recommendation Statement
Pursuant to Section 14(d)(4)
of the Securities Exchange Act of 1934
---------------------
PURITAN-BENNETT CORPORATION
(Name of Subject Company)
PURITAN-BENNETT CORPORATION
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(Including the Associated Common Stock Purchase Rights)
(Title of Class of Securities)
746299106
(CUSIP number of Class of Securities)
BURTON A. DOLE, JR.,
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
PURITAN-BENNETT CORPORATION
9401 INDIAN CREEK PARKWAY, P.O. BOX 25905
OVERLAND PARK, KANSAS 66225-5905
(913) 661-0444
(Name, address and telephone number of person authorized to receive notice and
communications on behalf of the person(s) filing statement)
Copies to:
DANIEL C. WEARY, ESQ. PETER D. LYONS, ESQ.
BLACKWELL SANDERS SHEARMAN & STERLING
MATHENY WEARY & LOMBARDI L.C. 599 LEXINGTON AVENUE
TWO PERSHING SQUARE NEW YORK, NEW YORK 10022
2300 MAIN STREET -- SUITE 1100 (212) 848-4000
KANSAS CITY, MISSOURI 64108
(816) 274-6800
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2
ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Puritan-Bennett Corporation, a Delaware
corporation (the "Company"), and the address of its principal executive offices
is 9401 Indian Creek Parkway, P.O. Box 25905, Overland Park, Kansas 66225-5905.
The title of the class of equity securities to which this statement relates is
the common stock, par value $1.00 per share, of the Company (the "Shares"),
including the associated rights (the "Rights") to purchase Shares of the Company
to be issued pursuant to the Rights Agreement, dated May 2, 1989, between the
Company and United Missouri Bank of Kansas City, N.A. (now known as UMB Bank,
N.A.), as Rights Agent (the "Rights Agent") (as amended, the "Rights
Agreement"). The Rights Agreement was amended pursuant to an Amendment Agreement
between the Company and the Rights Agent dated October 27, 1994 (the "Rights
Amendment"). Unless the context otherwise requires, all references herein to the
Shares shall include the associated Rights.
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to the tender offer disclosed in a Tender Offer
Statement on Schedule 14D-1 dated October 25, 1994 (the "Schedule 14D-1"), of PB
Acquisition Corp., a Delaware corporation (the "Purchaser") and a wholly owned
subsidiary of Thermo Electron Corporation, a Delaware corporation ("Thermo
Electron"), to purchase all of the outstanding Shares at a price of $24.50 per
Share net to the seller in cash, upon the terms and subject to the conditions
set forth in the Offer to Purchase dated October 25, 1994 (the "Offer to
Purchase"), and the related Letter of Transmittal and any supplement thereto
(which together constitute the "Offer").
According to the Schedule 14D-1, the address of the principal executive
offices of Thermo Electron is 81 Wyman Street, Waltham, Massachusetts 02254.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) Except as set forth below, to the knowledge of the Company, there are
no material contracts, agreements, arrangements or understandings or any actual
or potential conflicts of interest, between the Company or its affiliates and
either (1) the Company's executive officers, directors or affiliates or (2)
Thermo Electron or its executive officers, directors or affiliates.
Certain contracts, agreements, arrangements or understandings between the
Company and certain of its directors, executive officers and affiliates are
described in the sections entitled "Executive Compensation and Other
Information," "Director Compensation," "Retirement Benefits," "Employment
Contract and Termination of Employment and Change-in-Control Arrangements,"
"Indebtedness of Management" and "Security Ownership of Management" in the
Company's Proxy Statement dated June 10, 1994 for the Company's 1994 Annual
Meeting of Stockholders (the "1994 Annual Meeting Proxy Statement"). A copy of
the relevant portions of the 1994 Annual Meeting Proxy Statement are filed as
Exhibit 1 hereto and are incorporated herein by reference. A copy of the
employment agreement, dated April 25, 1980, between the Company and Burton A.
Dole, Jr., described in Exhibit 1, is attached hereto as Exhibit 2 and is
incorporated herein by reference.
EXECUTIVE AGREEMENTS AND SEVERANCE AGREEMENTS
After careful consideration at meetings held on October 10, 1994 and on
November 6-7, 1994, the Board of Directors of the Company (the "Board")
determined that it was in the best interests of the Company and its stockholders
to ensure that the Company would have the continued dedication and service of
Burton A. Dole, Jr., John H. Morrow, Robert L. Doyle, Thomas E. Jones, Alexander
R. Rankin and David P. Niles and certain additional officers of the Company. In
that regard, the Board has approved the entry by the Company into (i) a
supplement (the "Morrow Supplement") to the employment agreement dated as of
June 9, 1994 (together with the Morrow Supplement, the "Morrow Employment
Agreement") between the Company and
2
3
John H. Morrow and (ii) an employment agreement with each of (each such
individual and Mr. Morrow, an "Executive") Robert L. Doyle, Thomas E. Jones,
Alexander R. Rankin and David P. Niles (together with the Morrow Employment
Agreement, the "Executive Agreements"). The term of the Executive Agreements
continues until written notice of termination is delivered by the Company or the
Executive.
The Executive Agreements for Messrs. Doyle, Rankin and Niles restate and
supersede previous employment agreements entered into between the Company and
such executives. The entry by the Company into such previous employment
agreements (and the principal terms and conditions of the Executive Agreement
for Thomas E. Jones) was approved by the Board in August 1994. The Executive
Agreements for Messrs. Doyle, Rankin and Niles are similar in all material
respects to their previous employment agreements, except that such Executive
Agreements (and, except as noted below, the Morrow Supplement) provide for (i)
certain limitations on benefits to facilitate compliance with the Internal
Revenue Code's "golden parachute" rules and limitations on the tax deductibility
of executive compensation, (ii) certain changes to the formula for determining
the amount of severance benefits (which will not be paid for a period in excess
of three years in the case of Messrs. Morrow, Jones and Doyle and two years in
the case of Messrs. Rankin and Niles), (iii) certain differences relating to the
timing of severance payments (except in the case of Mr. Morrow), (iv) the
acceleration of vesting of Executive stock options under certain circumstances
(to the extent, if any, such options do not otherwise accelerate upon the
occurrence of such circumstances under the Company's stock option plans) and (v)
the termination of the Executive's (except in the case of Mr. Morrow)
non-compete obligations under certain circumstances.
The Executive Agreements incorporate base salaries and target bonus
percentages set by the Compensation Committee of the Board in April 1994, which
are as follows: (i) for Mr. Morrow, a salary of $230,000 and a target bonus of
40% of salary; (ii) for Mr. Doyle, a salary of $195,000 and a target bonus of
35% of salary; (iii) for Mr. Jones, a salary of $185,000 and a target bonus of
35% of salary; (iv) for Mr. Rankin, a salary of $173,000 and a target bonus of
35% of salary; and (v) for Mr. Niles, a salary of $168,000 and a target bonus of
25% of salary. In April 1994, the Board's Compensation Committee set Mr. Dole's
salary at $340,000 and his target bonus at 50% of salary. Actual bonuses may be
higher or lower than the target bonus, based on a formula that takes into
account the Company's financial performance and the individual's attainment of
certain business objectives. In no event may an individual's bonus exceed the
individual's base salary. Base salaries will be reviewed annually and target
bonus percentages may be increased from time to time.
Under the Executive Agreements, if the Executive is terminated without
"cause" or resigns for "good reason" (as defined below) prior to the Executive's
normal retirement date, (1) any stock options held by the Executive that have
not otherwise become fully vested under the terms of the Company's stock option
plans will become fully exercisable, (2) during any period when the Executive is
receiving severance payments from the Company, the Executive will be bound by a
non-compete obligation and (3) the Company will be required to (a) provide
salary and bonus continuation payments to the Executive for a period of up to
two to three years, (b) pay the Executive a one-time bonus prorated for the year
of termination (if the Executive is not otherwise entitled to a bonus payment
for the year of termination), (c) pay the Executive the market value of any
unvested restricted stock held by the Executive and (d) provide certain "COBRA"
health insurance continuation benefits; provided that if such termination or
resignation occurs within two years following a "change in control" (as defined
below), (i) the present value of the Executive's continuation payments will be
payable in a lump sum (except in the case of Mr. Morrow) and (ii) the
Executive's non-compete obligations will terminate (except in the case of Mr.
Morrow, whose non-compete obligations shall continue during any period in which
he is receiving severance payments from the Company). Payments of severance
benefits under the Executive Agreements are reduced by the amount of other
Company severance payments.
The Executive Agreements also provide that if any amounts due to the
Executive thereunder (or any other plan or program of the Company) become
subject to the "golden parachute" rules set forth in Section 280G of the
Internal Revenue Code, then such payments will be reduced to the extent
necessary to avoid the application of such rules. In addition, payments under
the Executive Agreements will be deferred (with interest) to the extent
necessary to avoid loss of a tax deduction by the Company under Section 162(m)
of the Internal Revenue Code, which provides for a limitation under certain
circumstances of the tax deductibility of executive compensation in excess of $1
million.
3
4
"Cause" is generally defined in the Executive Agreements as the Executive's
(a) willful violation of any reasonable rule or direct order of the Board or the
Chief Executive Officer of the Company which is not corrected after notice, (b)
conviction or entry of a plea of nolo contendere with regard to a crime
involving moral turpitude or dishonesty, (c) Company-related drug or alcohol
abuse or (d) material violation of any provision of his Executive Agreement
which is not corrected after notice. "Good Reason" is generally defined in the
Executive Agreements as (i) a breach by the Company of any provision of the
Executive Agreement that is not corrected after written notice by the Executive
or (ii) any of the following if the same occurs within 2 years following a
change in control: (A) a reduction of the Executive's base salary or other
compensation, (B) a failure to continue in effect the Company's welfare plans on
substantially similar terms, (C) a material reduction in the Executive's job
responsibilities, position or title, (D) the relocation of the Executive or (E)
a failure or refusal of any successor to the Company to assume the Company's
obligations under the Executive Agreement.
For purposes of the Executive Agreements, a "change in control" shall be
deemed to have occurred (i) upon the acquisition by any person, entity or group
of beneficial ownership of 50% or more of either the then outstanding Shares or
the combined voting power of the Company's then outstanding voting securities,
(ii) at the time individuals who, as of the date of the Executive Agreement,
constitute the Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board, provided that any person becoming a director
subsequent to the date of the Executive Agreement whose election, or nomination
for election by the Company's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the directors of the Company) shall be considered as though such
person were a member of the Incumbent Board, (iii) upon the approval by the
stockholders of the Company of a reorganization, merger, consolidation (in each
case, with respect to which persons who are the stockholders of the Company
immediately prior to such reorganization, merger or consolidation do not,
immediately thereafter, own more than 50% of the combined voting power of the
reorganized, merged or consolidated company's then outstanding voting
securities) or a liquidation or dissolution of the Company or of the sale of all
or substantially all of the assets of the Company or (iv) the occurrence of any
other event which the Incumbent Board in its sole discretion determines
constitutes a change in control.
In addition, the Board approved the entry by the Company into severance
agreements (the "Severance Agreements") with 12 additional officers of the
Company. The Severance Agreements provide that if the officer is terminated
without "cause" or resigns for "good reason" within two years following a
"change in control" (which terms have meanings substantially identical to those
specified in the Executive Agreements), the Company will be required to provide
such officer with (i) a lump sum severance payment equal to the present value of
the salary (based on the then-current salary) and bonus (based on the average of
the bonuses for the prior three years) payments that such officer would have
received over a period of up to two years and (ii) certain "COBRA" health
insurance continuation benefits. The Severance Agreements also provide that if
any amounts due to the officer thereunder (or under any other plan or program of
the Company) become subject to the "golden parachute" rules set forth in Section
280G of the Internal Revenue Code, then such payments will be reduced to the
extent necessary to avoid the application of such rules. In addition, payments
under the Severance Agreements will be deferred (with interest) to the extent
necessary to avoid loss of a tax deduction by the Company under Section 162(m)
of the Internal Revenue Code. Payments under the Severance Agreements are
reduced by the amount of other Company severance payments.
COMPANY BENEFIT PLANS
After careful consideration at a meeting held on October 10, 1994 (after
receipt of Thermo Electron's Initial Proposal (as described below)) and at a
meeting held on November 6-7, 1994 (following publication of Thermo Electron's
unsolicited Offer) and after consideration of the potentially destabilizing
effects of the pendency of such Offer on the morale and retention of Company
employees, the Board approved a new severance plan (the "Severance Plan")
applicable to Company employees generally and certain additional changes to the
Company's employee benefit plans and arrangements.
4
5
Under the Severance Plan, if a participating employee is terminated without
"cause" or resigns for "good reason" within two years following a "change in
control" (which terms have meanings that are generally similar to those
specified in the Executive Agreements), the Company will be required to provide
such employee with (i) a lump sum severance payment equal to one week's pay
(with a four week minimum and a two year maximum) for each six months of service
with the Company and (ii) certain "COBRA" health insurance continuation
benefits. Payments under the Severance Plan are reduced by the amount of other
Company severance payments.
The Board amended the Company's Management Incentive Bonus Plan (the "Bonus
Plan") to provide that if a participant is terminated without "cause" or resigns
for "good reason" within two years following a "change in control" (which terms
have meanings substantially identical to those specified in the Executive
Agreements), the participant would receive the maximum bonus for the year of
termination, prorated to the date of termination. The amendment also requires
appropriate adjustments to be made to the manner of calculating the Company's
profit for bonus purposes to eliminate any distortions caused by the change in
control.
The Board also amended the Company's Deferred Compensation Plan (the
"Deferred Plan") to generally prohibit, without the consent of affected
participants, any amendment following a "change in control" (as defined in the
Executive Agreements) where such amendment would adversely affect participants.
In addition, the Board approved the entry by the Company into agreements
(the "SERP Agreements") with each of Burton A. Dole, Jr. and John H. Morrow,
which amend the terms and conditions of the participation by Messrs. Dole and
Morrow in the Company's Supplemental Retirement Benefit Plan (the "SERP"). Under
the SERP Agreements, if (i) Mr. Dole or Mr. Morrow is terminated without "cause"
or resigns for "good reason" and (ii) in the case of Mr. Dole only, such
termination or resignation occurs within two years following a "change in
control" (which terms have meanings substantially identical to those specified
in the Executive Agreements), such individual will receive a benefit under the
SERP equal to the benefit that such individual would have been entitled to
receive under the SERP upon a termination of employment at age 65. In the case
of Mr. Dole, the Company will be required to provide certain "COBRA" health
insurance continuation benefits upon any termination without "cause" or
resignation for "good reason". In addition, the SERP Agreement for Mr. Dole
provides that if any benefits due to Mr. Dole under the SERP become subject to
the "golden parachute rules" set forth in Section 280G of the Internal Revenue
Code, such benefits will be reduced to the extent necessary to avoid the
application of such rules. Such benefits will also be deferred (with interest)
to the extent necessary to avoid loss of a tax deduction by the Company under
Section 162(m) of the Internal Revenue Code. The SERP Agreement for Mr. Morrow
also provides for additional non-competition obligations on the part of Mr.
Morrow, and generally defers the payment of SERP benefits to Mr. Morrow until
the later of age 55 and the lapse of severance benefits under the Morrow
Employment Agreement. The Board also approved an amendment to the SERP to
prohibit, without the consent of affected participants, any further amendment
following a change in control where such amendment would adversely affect any
rights or benefits to which such participants had become entitled prior to the
date of such amendment. Moreover, the Board authorized the establishment of a
"rabbi" trust (the "SERP Trust") to secure benefits under the SERP, but
determined not to fund such Trust at this time.
At the November 6-7 meeting, the Board approved an amendment to the
Company's Pension Benefit Make Up Plan (the "Make Up Plan"), which is a
nonqualified retirement plan intended to provide selected key employees with
benefits that may not be provided under the Company's qualified pension plan by
reason of certain Internal Revenue Code limitations, to prohibit, without the
consent of affected participants, any amendment following a "change in control"
(as defined in the Executive Agreements) that would adversely affect any rights
or benefits to which such participants had become entitled prior to the date of
such amendment. The Board also authorized the establishment of a rabbi trust
(the "Make Up Plan Trust") to secure benefits under the Make Up Plan, but
determined not to fund such Trust at this time.
The Board also approved an amendment to the Company's 1988 Stock Benefit
Plan (the "Stock Plan") to give the committee that administers the Stock Plan
the discretion, in the event of a merger or consolidation
5
6
of the Company, any transaction that results in the Shares no longer being
publicly traded, or the purchase or offer to purchase by any one person or group
of specified percentages of the Company's voting securities or the Shares, to
provide for the assumption or substitution of outstanding stock options by the
successor corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and exercise price. Any such
assumed or substituted option would otherwise retain the terms and conditions of
the original stock option, including any applicable vesting schedule.
At the November 6-7 meeting, the Board also authorized the establishment of
a rabbi trust (the "Directors' Trust") to secure benefits under the Company's
Directors' Post-Retirement Income Plan but determined not to fund such Trust at
this time.
At the November 6-7 meeting, the Board approved an amendment to the
Company's Retirement Savings and Stock Ownership Plan (the "Savings Plan") to
provide for the pass-through of tender decisions with respect to Shares held in
participants' accounts under the Savings Plan to such participants.
The foregoing descriptions of (i) the Morrow Supplement, (ii) the Executive
Agreements, (iii) the Severance Agreements, (iv) the Severance Plan, (v) the
amendments to the Bonus Plan, the Deferred Compensation Plan, the SERP, the Make
Up Plan, the Stock Plan and the Savings Plan, (vi) the SERP Agreements, and
(vii) the SERP Trust, the Make Up Plan Trust and the Directors' Trust are
qualified in their entirety by reference to the documentation therefor, copies
or forms of which are filed as Exhibits 3 through 21, respectively, and are
incorporated herein by reference.
OTHER AGREEMENTS AND ARRANGEMENTS
Mr. Daniel C. Weary is Secretary of the Company and is a member in the law
firm of Blackwell Sanders Matheny Weary & Lombardi L.C., retained by the Company
as general counsel.
The Company has entered into Indemnification Agreements between the Company
and each member of the Board (each an "Indemnification Agreement"). The
Indemnification Agreements supplement the protections afforded to the Company's
directors under the Company's Certificate of Incorporation and By-Laws. In
general, each Indemnification Agreement provides that the Company shall
indemnify the director to the fullest extent permitted by applicable law against
all expense, liability and loss arising in connection with any action, suit or
proceeding against any director by reason of such director's service as a
director of the Company, if such director acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the Company
and, with respect to any criminal proceeding, had no reasonable cause to believe
the conduct was unlawful. Additionally, each Indemnification Agreement provides
that the Company shall advance reasonable expenses incurred by the director in
connection with any proceeding within 20 days of receipt of an undertaking from
the director to repay any advance upon an ultimate determination that the
director is not entitled to be indemnified.
In connection with a relocation by Mr. Doyle, the Company and Mr. Doyle
have entered into a lease, dated as of August 30, 1994, pursuant to which the
Company has agreed to lease a residence owned by Mr. Doyle for a period of two
years for $2,500 per month.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) THE BOARD HAS UNANIMOUSLY DETERMINED THAT THE OFFER IS NOT IN THE BEST
INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS. THE BOARD UNANIMOUSLY RECOMMENDS
THAT ALL HOLDERS OF SHARES REJECT THE OFFER AND NOT TENDER THEIR SHARES PURSUANT
TO THE OFFER.
A copy of a letter to stockholders communicating the recommendation of the
Board and a form of press release announcing such recommendation are filed as
Exhibits 22 and 23 hereto, respectively, and are incorporated herein by
reference.
(b) On June 23, 1994, Roger Herd, Managing Director of Thermo Instruments
Australia Pty., Ltd., a subsidiary of Thermo Electron, met with Burton A. Dole,
Jr., President and Chairman of the Board of the Company, at the Company's
offices in Carlsbad, California to discuss manufacturing in Ireland.
6
7
On July 15, John W. Wood, Jr., Chief Executive Officer of Thermedics Inc.,
a subsidiary of Thermo Electron, met with Mr. Dole at the Company's headquarters
in Overland Park, Kansas, to discuss potential technology sharing between the
two companies either through cross-licensing or by Thermo Electron's purchase of
the Company's continuous blood gas sensing technology. During the meeting, Mr.
Dole expressed a willingness to meet with Dr. George N. Hatsopoulos, Chief
Executive Officer and Chairman of the Board of Thermo Electron, to further
discuss potential technology sharing. During these discussions, Mr. Wood
suggested that Thermo Electron might potentially be interested in acquiring the
Company and provided Mr. Dole with some general background information regarding
Thermo Electron. Mr. Wood also informed Mr. Dole that Thermo Electron had
acquired approximately 3% of the outstanding Shares. Mr. Dole indicated that he
did not believe that a sale of the Company at this time would be in the best
interests of the Company and its stockholders.
On July 20, Dr. Hatsopoulos and Mr. Dole met in Boston, Massachusetts to
discuss potential technology sharing. During these discussions, Dr. Hatsopoulos
provided Mr. Dole with an overview of Thermo Electron's businesses and
reiterated Thermo Electron's interest in a possible acquisition of the Company.
Mr. Dole indicated that he did not believe that a sale of the Company at this
time would be in the best interests of the Company and its stockholders. Dr.
Hatsopoulos and Mr. Dole agreed to meet again in Boston on September 21 to
continue discussions of potential technology sharing.
On July 29, Mr. Dole called Mr. Wood to follow-up on previous discussions
concerning Thermo Electron's possible interest in purchasing the blood gas
monitoring business of the Company. Mr. Wood indicated that Thermo Electron was
not interested in acquiring this business.
On August 31, a regular meeting of the Board was held. Mr. Dole described
to the Company's other directors the meetings and telephone calls he had had
with representatives of Thermo Electron. The matter was discussed, and the Board
concluded that it was not in the best interests of the Company and its
stockholders to consider a sale of the Company at that time.
On September 19, Mr. Dole had a telephone conversation with Dr. Hatsopoulos
in preparation for the meeting scheduled for September 21. During this
conversation, Dr. Hatsopoulos stated that Thermo Electron definitely was
interested in acquiring the Company. Mr. Dole indicated that he had recently
discussed Thermo Electron's interest with the other directors of the Company and
that the other directors shared his view that a sale of the Company at this time
would not be in the best interests of the Company and its stockholders and
stated that, under the circumstances, he did not believe a meeting with Dr.
Hatsopoulos would be appropriate. Dr. Hatsopoulos then informed Mr. Dole that
Thermo Electron had acquired 4.9% of the Shares and suggested that the Company
hire an investment banker to evaluate any proposal Thermo Electron might make.
Mr. Dole indicated that the Company would schedule a meeting of the Board to
discuss Thermo Electron's interest and would retain a financial advisor.
Subsequently, the Company retained Smith Barney Inc. ("Smith Barney") to render
financial advisory services to the Company.
On September 22, Dr. Hatsopoulos telephoned Mr. Dole and inquired regarding
the scheduling of a meeting of the Board to consider Thermo Electron's interest
in the Company. Mr. Dole indicated that the Board would meet on or about October
10 and that he would inform Dr. Hatsopoulos of the Board's determinations after
the meeting. Mr. Dole also informed Dr. Hatsopoulos that the Company had
retained a financial advisor. Dr. Hatsopoulos then requested that Mr. Dole have
the Company's General Counsel call Seth H. Hoogasian, Thermo Electron's General
Counsel. At Mr. Dole's request, Daniel C. Weary, General Counsel of the Company,
telephoned Mr. Hoogasian later that day. Mr. Hoogasian requested that the
Company's financial advisor contact Thermo Electron's investment bankers, Lehman
Brothers, in order to begin negotiation of a possible transaction. Mr. Weary
advised Mr. Hoogasian that the Company's management believed that such
negotiations would not be appropriate prior to the Board meeting. Mr. Hoogasian
advised Mr. Weary that Thermo Electron would not make an acquisition proposal
prior to the Board meeting unless the market price of the Shares increased.
7
8
On September 23, Mr. Hoogasian called Mr. Weary and again requested that
the Company's financial advisor contact Lehman Brothers to commence
negotiations. Mr. Weary again advised him that the Company's management believed
that this would not be appropriate prior to the Board meeting to consider Thermo
Electron's interest in acquiring the Company. Mr. Weary indicated that the Board
would meet on or about October 10.
On September 27, Mr. Dole telephoned Dr. Hatsopoulos to inform him that the
Board would meet on October 10 to consider Thermo Electron's interest in
acquiring the Company. Later that day, Mr. Weary and Mr. Hoogasian had a
telephone conversation in which Mr. Hoogasian once again requested a meeting
between representatives of Thermo Electron and representatives of the Company
prior to the scheduled October 10 Board meeting. Mr. Weary once again advised
him that Company management believed that such a meeting would not be
appropriate in advance of the Board meeting on October 10.
On September 29, 1994, Mr. Weary and Mr. Hoogasian had another telephone
conversation in which Mr. Hoogasian requested a meeting to discuss Thermo
Electron's interest in acquiring the Company. Mr. Weary reiterated the belief of
the Company's management that it would not be appropriate to schedule such a
meeting in advance of the upcoming Board meeting and stated that the results of
the Board's deliberations at the October 10 meeting would be communicated to
Thermo Electron.
On Friday, September 30, Mr. Hoogasian telephoned Mr. Weary and asked him
if the Company was aware of any reason for the increased trading volume in the
Shares that day. Mr. Weary responded that he would look into this matter. On
Monday, October 3, Mr. Weary called Mr. Hoogasian and informed him that the
Company was not aware of any reason for the trading volume that had occurred on
September 30.
On October 5, Mr. Weary telephoned Mr. Hoogasian and informed him that the
Company was issuing a press release stating that the Company had received 510(k)
market clearance from the Food and Drug Administration for its new 7250
Metabolic Monitor and for four new products and product enhancements for its
7200 Series Ventilatory System.
On October 6, Mr. Hoogasian telephoned Mr. Weary and informed him that,
because of the increase in the market price of the Shares since September 30,
Thermo Electron was sending a letter to Mr. Dole proposing a merger transaction.
Later that day, the Company received a letter from Thermo Electron containing an
unsolicited proposal to acquire all of the outstanding Shares in a merger
transaction for $21 per Share in cash (the "Initial Proposal"). The letter
stated that Thermo Electron was interested, at that time, in pursuing a
transaction only if it were approved by the Board. Also on October 6, the
Company issued a press release describing the Initial Proposal and stating that
the Board would review the proposal and announcing its retention of Smith Barney
and Shearman & Sterling as its independent financial and legal advisors, in
connection with the proposal. On October 7, Thermo Electron issued a press
release summarizing the Initial Proposal.
The Board met on October 10 and received presentations by the Company's
management and financial and legal advisors regarding the Company's business,
financial condition and prospects and the Initial Proposal. The Company's
management made detailed presentations regarding, among other things, the
Company's business plan and the various strategic initiatives that the Company
had undertaken both in the United States and abroad. After reviewing and
carefully considering these presentations as well as the opinion of Smith Barney
that the $21 per Share price contained in the Initial Proposal was grossly
inadequate to the stockholders of the Company (other than Thermo Electron) from
a financial point of view, the Board unanimously determined that the Initial
Proposal was grossly inadequate and not in the best interests of the Company and
its stockholders (other than Thermo Electron). The Board also determined that,
in light of, among other things, the FDA's clearance of a number of new
Puritan-Bennett hospital products and product enhancements and a number of very
encouraging trends in the business of the Company, it would not be in the best
interests of the Company and it stockholders to pursue a sale of the Company at
that time. On October 11, the Company issued a press release summarizing the
Board's determinations and Mr. Dole telephoned Mr. Hoogasian and advised him
that the Company was issuing the press release.
8
9
On October 12, Dr. Hatsopoulos sent the following letter (the "Second
Proposal"), via telecopier, to Mr. Dole, and Thermo Electron issued a press
release summarizing its contents:
October 12, 1994
VIA TELECOPY
Mr. Burton A. Dole, Jr.
President
Puritan-Bennett Corporation
9401 Indian Creek Parkway
Overland Park, Kansas 66225
Dear Burton:
I was disappointed in the response of your Board of Directors to our merger
proposal of $21 per share, and in your refusal to meet with us to discuss the
terms of a transaction that would be satisfactory to both parties. We have been
seeking an opportunity to meet with you for several weeks, and we believe that
the best interests of your shareholders cannot be served unless you meet with us
to discuss our proposal.
As I have stated previously, we continue to be interested in pursuing a
negotiated merger transaction with Puritan-Bennett. I want to stress again that
our desire is to complete a transaction on an amicable basis. It is not our
intention or tradition to engage in auctions for companies. In an effort to
raise our offer to a level that would be acceptable to your Board of Directors,
we have reevaluated certain of the assumptions underlying the original offer of
$21 per share. Among other things, we have considered the response of securities
analysts to our original offer. As a result, we are now prepared to offer $24
per share of outstanding common stock in a negotiated merger transaction.
At this stage I'm sure you appreciate the seriousness of our offer, and I'm
confident that you will act in the best interests of your shareholders in
considering the proposed merger. However, I do not believe that you can respond
to our offer in an informed manner until you have met with us to discuss all of
the relevant terms of the proposal. In that regard, we are prepared to fly to
Kansas City at your earliest convenience to discuss the details of our proposal.
I look forward to hearing from you soon.
Sincerely,
/s/ George
Chairman of the Board and
Chief Executive Officer
After receiving the letter on October 12, the Company scheduled a meeting
of the Board for October 26 to consider the Second Proposal. During the period
between October 12 and October 25, representatives of Smith Barney and Shearman
& Sterling had meetings and telephone conversations with various members of
management of the Company in preparation for presentations to be made at the
scheduled October 26 Board meeting.
9
10
On October 19, Mr. Dole sent the following letter, via telecopier, to Dr.
Hatsopoulos:
October 19, 1994
BY TELECOPIER
George N. Hatsopoulos
Chairman of the Board and
Chief Executive Officer
Thermo Electron Corporation
81 Wyman Street
Waltham, MA 02254
Dear George:
We have received your letter of October 12, 1994 and it will be reviewed by
the Board of Directors of Puritan-Bennett Corporation at a meeting to held in
the near future.
In your letter, you imply that there may be additional terms of Thermo
Electron's proposal that are not described in the letter and request a meeting
to discuss those terms. I would suggest that if there are any additional terms
that are relevant to the consideration of your proposal, those additional terms
should be communicated to me in writing for presentation to the Board. In
addition, if you wish to clarify or amplify any aspect of your proposal, Conrad
L. Bringsjord of Smith Barney, the Company's financial advisor, is available and
can be reached at (212) 698-8455.
Very truly yours,
/s/ Burton A. Dole, Jr.
Chairman of the Board,
President and Chief
Executive Officer
On October 24, Dr. Hatsopoulos called Mr. Dole's office. Dr. Hatsopoulos
was told that Mr. Dole was traveling. Mr. Hoogasian then called Mr. Weary and
stated that Thermo Electron planned to commence the Offer on October 25 and was
sending a letter to that effect to Mr. Weary for delivery to Mr. Dole. Dr.
Hatsopoulos then sent the following letter, via telecopier:
October 24, 1994
VIA TELECOPY
Mr. Burton A. Dole, Jr.
President
Puritan-Bennett Corporation
9401 Indian Creek Parkway
Overland Park, Kansas 66225
Dear Burton:
It has been nearly two weeks since we proposed a merger of our two
companies in which the shareholders of Puritan-Bennett would receive $24 in cash
per share. I attempted to call you today and was informed that you were
traveling. To date, we have received no response from you other than a brief
letter indicating that your Board would consider our proposal "in the near
future," and requesting that we provide you with additional written terms of our
proposal. We do not understand how your Board can have failed to fully evaluate
and reach a conclusion regarding our proposal over this 12-day period. Further,
your request for written terms is unrealistic given your refusal to engage in
any discussion regarding price. Our position has always been that a meeting is
necessary to fully discuss each party's position on all relevant issues.
10
11
We have attempted without success for over one month to initiate a dialogue
regarding a merger of our two companies. We have demonstrated our seriousness
and sincerity by proposing an all cash merger that would provide your
shareholders with a substantial premium over recent market prices for
Puritan-Bennett's common stock. We have raised our initial offer substantially
in order to address the concerns of your Board regarding the adequacy of our
original proposal. At all times we have stressed our desire to enter into a
negotiated transaction. Despite our efforts, you have been slow to respond to
our proposal and unwilling to negotiate with us in person.
Given your failure to respond to us in a timely or substantive manner, we
can only conclude that you have not taken Thermo Electron's proposal seriously.
Reluctantly, we are forced to take the only step that we believe is likely to
cause you to give appropriate weight and consideration to our proposal. On
Tuesday, October 25 we will commence a cash tender offer at $24.50 per share for
all of the outstanding Puritan-Bennett common stock.
This is an unprecedented action in our company's history, and one which we
take only after serious deliberation. Our preference continues to be for a
negotiated transaction. However, we believe that we now have no choice but to
present our proposal directly to the Puritan-Bennett shareholders. We of course
remain willing to meet with you at any time to discuss a negotiated merger
agreement.
Sincerely,
/s/ George
Chairman of the Board and
Chief Executive Officer
Thermo Electron then issued a press release announcing that it would
commence the Offer on October 25.
On October 25, the Company issued a press release stating that the Board
would meet to consider the Offer and in which it advised stockholders not to
tender their Shares to Thermo Electron pending review of the Offer by the Board
and the Board's recommendation.
On October 25, Thermo Electron commenced the Offer.
At the previously scheduled October 26 Board meeting, the Board received a
brief review of the Offer from representatives of Shearman & Sterling and Smith
Barney, but determined not to take any action with respect to the Offer until a
more thorough review of the Offer could be made by the Company's advisors and
management. In addition, the Board approved the Rights Amendment, which provides
that separate trading of the Rights shall not occur until such time as the Board
may, from time to time, determine. On October 27, the Company issued a press
release announcing the Rights Amendment.
On October 28, the Company received a request from Thermo Electron for a
list of stockholders of the Company and certain related information. On November
4, the Company responded to the request and informed Thermo Electron regarding
the materials to be made available to Thermo Electron.
At a meeting of the Board begun on November 6 and reconvened on November 7,
the Company's management and Smith Barney each reviewed and updated the
presentations they had made to the Board at its October 10th meeting. Smith
Barney then delivered its opinion to the Board that the $24.50 per Share price
provided for in the Offer is grossly inadequate to the Company's stockholders
(other than Thermo Electron) from a financial point of view. After careful
consideration, the Board determined that, based on, among other things, the
presentations of the Company's management and Smith Barney at the meeting and
the Board's knowledge of and familiarity with the Company businesses, financial
condition, technologies and future prospects, it is in the best interest of the
Company and its stockholders that the Company remain independent and continue to
pursue its long-term business strategy. Accordingly, the Board unanimously voted
to reject the Offer and unanimously recommends that the Company's stockholders
reject the Offer and not tender their Shares pursuant to the Offer.
11
12
In reaching its determination and recommendations with respect to the
Offer, as indicated above, the Board took into account numerous factors
discussed at its October 10 and November 6-7 meetings including the following:
(i) The Board's determination that the $24.50 per Share price to be
paid in the Offer does not reflect the intrinsic value of the Company. In
reaching this conclusion, the Board relied on its knowledge of and
familiarity with the Company's businesses, financial condition,
technologies and future prospects. The Board believes that the Company is
positioned to reap substantial benefits in the future from the strategic
initiatives and operational restructurings that the Company has undertaken,
which benefits should inure to the Company and all of its stockholders, not
just Thermo Electron.
(ii) The Company is well positioned to take advantage of growth
opportunities, both in the United States and internationally, in the market
for home care respiratory and sleep disorder products. The Company's home
care operations generate a significant portion of the Company's revenue and
represent the fastest growing and most profitable segment of the Company's
business.
(iii) The Company's competitive position in the hospital/physician
office market has been strengthened by the recent FDA clearance of six new
products and product enhancements that offer the potential for additional
revenue and improved profitability. The Board believes that the Company
will continue to strengthen its leadership position in the U.S. critical
care ventilator market while profitably growing its position in key
international markets as a result of improving economic conditions in
Europe, Japan and other regions.
(iv) The fact that the Company is early in the process of implementing
a carefully conceived long-term business plan after a major restructuring
during the past year, which resulted in substantial one-time charges
against income while substantially improving the Company's competitive
position. The Board believes that the implementation of this plan will
produce greater long-term value for stockholders than the Offer and that a
sale of the Company at this time is not in the best interests of the
Company and its stockholders.
(v) The opinion of Smith Barney that the $24.50 per Share price
provided for in the Offer is grossly inadequate to the Company's
stockholders (other than Thermo Electron) from a financial point of view.
The full text of such opinion, dated November 6, 1994, which sets forth the
assumptions made, the matters considered and the limitations on the review
undertaken by Smith Barney is attached hereto as Exhibit 24, and is
incorporated herein by reference. Such opinion should be read carefully in
its entirety by stockholders.
(vi) The trading history of the Shares, including the fact that the
Shares have traded as high as $35.50 per Share as recently as November 1992
and closed at $25.50 per Share on November 4, 1994.
(vii) The disruptive effect the Offer, and a subsequent merger, has
had and could have on the Company and on the Company's employees, creditors
and customers and the communities in which the Company operates.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company has retained Smith Barney to render financial advisory services
to the Company with respect to the Offer and such other matters as may be agreed
by the Company and Smith Barney. Pursuant to the terms of an Engagement Letter
dated September 27, 1994, the Company has agreed to pay Smith Barney (a) an
advisory fee of $750,000 payable as follows: $50,000 on each of November 1,
1994, December 1, 1994, and January 1, 1995; and $100,000 on each of February 1,
1995, March 1, 1995, April 1, 1995, May 1, 1995, June 1, 1995 and July 1, 1995;
(b) an opinion fee of $750,000 upon delivery of an opinion by Smith Barney, at
the request of the Board, in connection with certain proposed transactions; (c)
an advisory fee calculated by multiplying (1) the sum of the Company's market
value of stock plus net debt and (2) a percentage ranging from 1% to 2%,
depending upon the Company's market value, such advisory fee to be payable only
if, as of the six month anniversary of the receipt by the Company of a proposed
transaction involving a change in control of
12
13
the Company or certain other proposed transactions, (i) a fee payable under
clause (d) below has not been paid or become payable by the Company to Smith
Barney, (ii) a proposed transaction is withdrawn or abandoned and (iii) a
transaction whereby more than 50% of the outstanding Shares, or more than 50% of
the Company's assets are transferred, has not been consummated; and (d) if a
transaction involving a change in control of the Company or certain other
transactions is consummated, a transaction fee calculated by multiplying (1) the
aggregate value of such transaction (including long-term debt assumed) and (2) a
percentage ranging from 1% to 2%, depending upon the aggregate value of such
transaction. The fees paid pursuant to clauses (a) and (b) above shall be
creditable against any fees payable pursuant to clauses (c) and (d) above. The
Company has also agreed to reimburse Smith Barney for its out-of-pocket
expenses, including all fees and disbursements of counsel, and to indemnify
Smith Barney and certain related persons against certain liabilities in
connection with their engagement, including certain liabilities under the
federal securities laws.
The Company has retained Georgeson & Co., Inc. ("Georgeson") to assist the
Company in connection with communications with stockholders with respect to the
Offer and related matters. Georgeson will receive customary compensation for its
services and reimbursement of out-of-pocket expenses in connection therewith.
The Company has retained Ogilvy Adams & Rinehart, Inc. ("Ogilvy") as a
public relations advisor in connection with the Offer. Ogilvy will receive
customary compensation for its services and reimbursement of out-of-pocket costs
in connection therewith.
Except as set forth above, neither the Company nor any person acting on its
behalf has employed, retained or compensated any person to make solicitations or
recommendations to stockholders with respect to the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Except as described below, to the knowledge of the Company, there have
been no transactions in Shares which were effected during the past 60 days by
the Company, or by any executive officer, director, affiliate or subsidiary of
the Company. Each of the executive officers of the Company is a participant in
the Savings Plan. Pursuant to existing investment elections made more than 60
days prior to the date hereof by such executive officers with respect to their
contributions to the Savings Plan and with respect to Company matching
contributions, Shares are regularly (including during the past 60 days) credited
to the respective executive officers pursuant to the terms of the Savings Plan.
During the past 60 days, no executive officer of the Company has changed any
such investment election or made any adjustment to the percent of his salary
contributed to the Savings Plan.
(b) To the knowledge of the Company, none of the Company's executive
officers, directors, affiliates or subsidiaries presently intends to tender any
Shares to Thermo Electron pursuant to the Offer or sell any Shares that are held
of record or beneficially by such persons.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) The Company is not engaged in any negotiations in response to the Offer
which are related to or would result in (i) an extraordinary transaction, such
as a merger or reorganization, involving the Company or any subsidiary of the
Company; (ii) a purchase, sale or transfer of a material amount of assets by the
Company or any subsidiary of the Company; (iii) a tender offer for or other
acquisition of securities by or of the Company; or (iv) any material change in
the present capitalization or dividend policy of the Company.
(b) There are no transactions, Board resolutions, agreements in principle
or signed contracts in response to the Offer that relate to or would result in
one or more of the events referred to in Item 7(a) above.
13
14
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
BUSINESS COMBINATION PROVISION
Article V of the Certificate of Incorporation (the "COI") of the Company
provides that, in addition to any affirmative vote required by applicable law
(currently, the affirmative vote of holders of at least a majority of the
outstanding Shares), the affirmative vote of the holders of not less than
66 2/3% of the voting power of all issued and outstanding shares of voting stock
of the Company (voting as a single class) is required to approve certain
business combinations (including mergers) between the Company and a person who
or which owns of record or beneficially, directly or indirectly, or is otherwise
entitled to vote shares constituting 5% or more of the total votes which may be
cast with respect to the matter (a "5% Stockholder"), unless the business
combination is approved and recommended to the stockholders of the Company by
the favorable vote of at least 66 2/3% of the whole Board (the "66 2/3% Charter
Provision"). Additionally, Article V of the COI may not be amended or repealed
except by vote of a majority of the entire Board and the affirmative vote of not
less than 66 2/3% of all of the outstanding shares of voting stock of the
Company.
Article V of the COI may make it more difficult for Thermo Electron to
consummate a merger or other business combination with the Company, unless such
merger or business combination is approved and recommended to the stockholders
of the Company by the favorable vote of at least 66 2/3% of the entire Board,
because the acquisition of in excess of 5% of the outstanding Shares by Thermo
Electron as a result of the Offer would make Thermo Electron a 5% Stockholder
for purposes of the 66 2/3% Charter Provision.
COMMON STOCK PURCHASE RIGHTS
On May 2, 1989, the Board declared a dividend distribution of one Right for
each of the outstanding Shares. Except as set forth below, each Right, when
exercisable, entitles the registered holder to purchase from the Company
one-half of a Share, at a per Share price of $90.00 (the "Purchase Price"),
subject to adjustment.
The Rights are currently attached to all outstanding Shares, and no
separate Rights Certificates have been distributed. Until the earlier to occur
of (i) a public announcement that, without the prior consent of the Company, a
person or group of affiliated or associated persons (an "Acquiring Person") has
acquired, or obtained the right to acquire, beneficial ownership of securities
having 20% or more of the voting power of all outstanding voting securities of
the Company, or (ii) the close of business on such day, as may, from time to
time, be designated by the Board (acting in its sole discretion), that is after
the tenth business day after the commencement of (or a public announcement of an
intention to make) a tender offer or exchange offer which would result in any
person or group of related persons becoming an Acquiring Person, without the
prior consent of the Company (the earlier of such dates being called the
"Distribution Date"), the Rights will be evidenced, with respect to any Share
certificates outstanding as of the Record Date, by such Share certificate
together with the Summary of Rights to purchase Shares attached to the Rights
Agreement as Exhibit B (the "Summary of Rights"). The Rights Agreement provides
that, until the Distribution Date, the Rights will be transferred with and only
with Share certificates. From as soon as practicable after the Record Date and
until the Distribution Date (or earlier redemption or expiration of the Rights),
new Share certificates issued upon transfer or new issuance of the Shares will
contain a notation incorporating the Rights Agreement by reference. Until the
Distribution Date (or earlier redemption or expiration of the Rights), the
surrender or transfer of any certificates for Shares (with or without the
Summary of Rights attached) will also constitute the transfer of the Rights
associated with the Shares represented by such certificate. As soon as
practicable following the Distribution Date, separate certificates evidencing
the Rights ("Rights Certificates") will be mailed to holders of record of the
Shares as of the close of business on the Distribution Date, and the separate
Rights Certificates alone will evidence the Rights.
The Rights are not exercisable until after the Distribution Date. The
Rights will expire on the earliest of (i) May 1, 1999, (ii) upon consummation of
a merger transaction with a person or group who acquired Shares pursuant to a
Permitted Offer (as defined below), and is offering in the merger the same price
per Share and form of consideration paid in the Permitted Offer, or (iii) upon
redemption by the Company as described below.
14
15
The Purchase Price, and the number of Shares or other securities or
property issuable, upon exercise of the Rights are subject to adjustment from
time to time to prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of the Shares, (ii) upon the grant
to holders of the Shares of certain rights or warrants to subscribe for Shares,
certain convertible securities or securities having the same or more favorable
rights, privileges and preferences as the Shares at less than the current market
price of the Shares, or (iii) upon the distribution to holders of the Shares of
evidences of indebtedness or assets (excluding regular quarterly cash dividends
out of earnings or retained earnings) or of subscription rights or warrants
(other than those referred to above).
In the event that, after the first date of public announcement that an
Acquiring Person has become such, the Company is involved in a merger or other
business combination transaction in which the Shares are exchanged or changed,
or 50% or more of the Company's assets or earning power are sold (in one or more
transactions), proper provision shall be made so that each holder of a Right
shall thereafter have the right to receive, upon the exercise thereof at the
then current Purchase Price multiplied by the then current number of Shares for
which a Right is then exercisable (the product being referred to as the "Right
Exercise Price"), that number of shares of common stock of the acquiring company
(or, in the event there is more than one acquiring company, the acquiring
company receiving the greatest portion of the assets or earning power
transferred), which at the time of such transaction would have a market value of
two times the Right Exercise Price (such right being referred to as the "Merger
Right").
In the event that a person becomes the beneficial owner of securities
having 20% or more of the voting power of all then outstanding Shares (unless
pursuant to a tender offer or exchange offer for all outstanding Shares at a
price and on terms determined by at least a majority of the Company's Directors
who are neither Acquiring Persons nor affiliates or associates of any Acquiring
Person nor officers of the Company to be both adequate and otherwise in the best
interests of the Company and its stockholders (a "Permitted Offer")), proper
provision shall be made so that each holder of a Right will for a 60-day period
thereafter have the right to receive upon exercise of the Right, and payment of
the Right Exercise Price, that number of Shares having a market value of two
times the Right Exercise Price, subject to the availability of a sufficient
number of authorized but unissued Shares (such right being referred to as the
"Subscription Right"). The holder of a Right will continue to have the Merger
Right whether or not such holder exercises the Subscription Right.
Upon the occurrence of any of the events giving rise to the exercisability
of the Subscription Right or the Merger Right, any Rights that are or were at
any time owned by an Acquiring Person on or after the time the Acquiring Person
became such shall become void insofar as they relate to the Subscription Right
or the Merger Right.
At any time prior to the earlier to occur of (i) a person becoming an
Acquiring Person or (ii) the expiration of the Rights, the Company may redeem
the Rights in whole, but not in part, at a price of $.01 per Right (the
"Redemption Price"), which redemption shall be effective upon the action of the
Board. Additionally, the Company may thereafter redeem the then outstanding
Rights in whole, but not in part, at the Redemption Price, provided that such
redemption (i) is incidental to a merger or other business combination
transaction or series of transactions involving the Company, but not involving
an Acquiring Person or any person who was an Acquiring Person or (ii) following
an event giving rise to, and the expiration of the exercise period for, the
Subscription Right if and for as long as an Acquiring Person beneficially owns
securities representing less than 20% of the Shares. The redemption of Rights
described in the preceding sentence shall be effective only as of such time when
the Subscription Right is not exercisable, and in any event, only after 10
business days' prior notice. Upon the effective date of the redemption of the
Rights, the right to exercise the Rights will terminate and the only right of
the holders of Rights will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. As long as the Rights are attached to the
Shares, the Company will issue one Right with each new Share and each Share
issued from the Company's treasury so that all such Shares will also have
attached rights. There have been reserved for issuance 6,500,000 Shares issuable
upon exercise of the Rights. The terms of the Rights may be amended by
15
16
the Board, but following the Distribution Date no amendment may be made which
adversely affects the interests of holders of the Rights.
The Rights may have the effect of impeding the acquisition of control of
the Company by Thermo Electron, or any other party, without the prior consent of
the Board. The Rights should not interfere with any merger, consolidation or
other business combination with Thermo Electron, or any other party, which is
approved by the Board since the Rights may be redeemed by the Board as described
above.
DELAWARE TAKEOVER LEGISLATION
Section 203 of the Delaware General Corporation Law ("Section 203") makes
it more difficult to effect certain transactions between a Delaware corporation
and a person or group who or which owns 15% or more of the corporation's
outstanding voting stock (including any rights to acquire stock pursuant to an
option, warrant, agreement, arrangement or understanding, or upon the exercise
of conversion or exchange rights, and stock with respect to which the person has
voting rights only), or is an affiliate or associate of the corporation and was
the owner of 15% or more of such voting stock at any time within the previous
three years (excluding persons who became 15% stockholders by action of the
corporation alone). The legislation prevents, for a period of three years
following the date that a stockholder became a holder of 15% or more of the
corporation's outstanding voting stock, the following types of transactions
between the corporation and the 15% stockholder (unless certain conditions,
described below, are met): (i) mergers or consolidations, (ii) sales, leases,
exchanges or other transfers (except proportionately as a stockholder) of 10% or
more of the aggregate assets of the corporation, (iii) issuances or transfers by
the corporation of any stock of the corporation which would have the effect of
increasing the 15% stockholder's proportionate share of the stock of any class
or series of the corporation, (iv) receipt by the 15% stockholder of the benefit
(except proportionately as a stockholder) of loans, advances, guarantees,
pledges or other financial benefits provided by the corporation and (v) any
other transaction which has the effect of increasing the proportionate share of
the stock of any class or series of the corporation which is owned by the 15%
stockholder.
The three-year ban does not apply if either the proposed transaction or the
transaction by which the 15% stockholder became a 15% stockholder is approved by
the board of directors of the corporation prior to the date such stockholder
became a 15% stockholder. Additionally, a 15% stockholder may avoid the
statutory restriction if, upon the consummation of the transaction whereby such
stockholder became a 15% stockholder, the stockholder owns at least 85% of the
outstanding voting stock of the corporation without regard to those shares owned
by directors who are officers or certain employee stock plans. Business
combinations are also permitted within the three-year period if approved by the
board of directors and, at an annual or special meeting, by the holders of
66 2/3% of the outstanding voting stock not owned by the 15% stockholder.
A corporation may, at its option, exclude itself from the coverage of
Section 203 by providing in its certificate of incorporation or bylaws at any
time to exempt itself from coverage, provided that a bylaw or charter amendment
cannot become effective for 12 months after such amendment is adopted and shall
not apply to a transaction between the corporation and any person who became a
15% stockholder prior to adoption of such provision. In addition, any
transaction is exempt from the statutory ban if it is proposed at a time when
the corporation has proposed, and a majority of certain continuing directors of
the corporation have approved, a transaction with a party who is not a 15%
stockholder of the corporation (or who became such with board approval) if the
proposed transaction involves (i) certain mergers or consolidations involving
the corporation, (ii) a sale or other transfer of over 50% of the aggregate
assets of the corporation or (iii) a tender or exchange offer for 50% or more of
the outstanding voting stock of the corporation. The COI of the Company (which
is a Delaware corporation) does not contain a provision "opting out" of the
coverage of Section 203.
Unless Thermo Electron acquires a sufficient number of Shares pursuant to
the Offer to satisfy the 85% requirement of Section 203 or unless certain other
provisions of Section 203 are complied with, Thermo Electron would be unable, if
Thermo Electron becomes a 15% stockholder, to effect a merger with the Company
for a period of three years from the consummation of the Offer and would be
prevented from engaging in certain transactions by Section 203.
16
17
If Thermo Electron acquires a sufficient number of Shares pursuant to the
Offer to satisfy the 85% requirement of Section 203, Thermo Electron would be
able to effect a merger with the Company without any application of the
three-year waiting period.
The foregoing description of Section 203 is qualified in its entirety by
reference to Section 203 of the Delaware General Corporation Law.
STOCKHOLDER LITIGATION
On October 7, 1994, a purported class action complaint (the "Complaint")
entitled Kenneth Steiner v. Puritan-Bennett Corp., Burton A. Dole, Jr., C.
Phillip Larson, Jr., Andre F. Marion, Thomas A. McDonnell, Daniel C. Weary,
Frank P. Wilton, C.A. No. 13790, was filed against the Company and its directors
in the Court of Chancery of the State of Delaware in and for New Castle County,
alleging, among other things, that the defendants have breached their fiduciary
duties to the Company's stockholders as a result of the defendants'
implementation of a Rights Agreement dated on or about May 17, 1989 and the
directors' refusal to properly consider Thermo Electron's Initial Proposal to
acquire all outstanding Shares at a price of $21 per Share. Among other things,
the Complaint seeks an order directing the Company's directors to carry out
their fiduciary duties to the Company's stockholders by cooperating fully with
Thermo Electron or any other entity or person having a bona fide interest in
proposing any extraordinary transactions with the Company, including a merger or
acquisition of the Company, as well as damages and costs. The director
defendants believe that they have fulfilled their fiduciary duties to the
Company and its stockholders and intend to continue to do so. The Company and
the director defendants intend to defend the action vigorously.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
The following exhibits are filed herewith:
Exhibit 1 -- Excerpts from the Company's Proxy Statement dated June 10, 1994 for
its 1994 Annual Meeting of Stockholders.
Exhibit 2 -- Employment Agreement, dated April 25, 1980, between Burton A. Dole,
Jr. and the Company.
Exhibit 3 -- Form of Supplemental Agreement.
Exhibit 4 -- Employment Agreement, dated June 9, 1994, between John H. Morrow and
the Company.
Exhibit 5 -- Form of Executive Agreement for Messrs. Doyle, Jones, Rankin and
Niles.
Exhibit 6 -- Form of Severance Agreement.
Exhibit 7 -- Form of Change of Control Severance Plan.
Exhibit 8 -- Form of Additions to Puritan-Bennett Corporation Management Incentive
Bonus Plan A, and Management Incentive Bonus Plan B.
Exhibit 9 -- Form of First Amendment to the Restated Puritan-Bennett Deferred
Compensation Plan.
Exhibit 10 -- Form of First Amendment to the Puritan-Bennett Supplemental Retirement
Benefit Plan.
Exhibit 11 -- Form of Third Amendment to the Puritan-Bennett Supplemental Retirement
Benefit Plan.
Exhibit 12 -- Form of First Amendment to the Puritan-Bennett Corporation Pension
Benefit Make Up Plan.
Exhibit 13 -- Form of Addition to the Company's 1988 Stock Benefit Plan.
Exhibit 14 -- Form of Amendment to the Restated Puritan-Bennett Savings & Stock
Ownership Plan.
17
18
Exhibit 15 -- Form of Amendment to the Puritan-Bennett Corporation Directors Post-
Retirement Income Plan.
Exhibit 16 -- Form of SERP Agreement between Burton A. Dole, Jr. and the Company.
Exhibit 17 -- Form of SERP Agreement between John H. Morrow and the Company.
Exhibit 18 -- Form of First Amendment to the Trust Agreement for the Restated
Puritan-Bennett Deferred Compensation Plan.
Exhibit 19 -- Form of Trust Agreement for the Puritan-Bennett Supplemental
Retirement Benefit Plan.
Exhibit 20 -- Form of Trust Agreement for the Puritan-Bennett Corporation Pension
Benefit Make Up Plan.
Exhibit 21 -- Form of Trust Agreement for the Puritan-Bennett Corporation Directors
Post-Retirement Income Plan.
Exhibit 22 -- Letter to Stockholders of the Company.*
Exhibit 23 -- Press Release of the Company, dated November 7, 1994.
Exhibit 24 -- Opinion of Smith Barney Inc., dated November 6, 1994.*
- ---------------
* Included in copies mailed to stockholders.
18
19
SIGNATURE
After reasonable 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.
PURITAN-BENNETT CORPORATION
By: /s/ Burton A. Dole, Jr.
Name: Burton A. Dole, Jr.
Title: Chairman, President and
Chief
Executive Officer
Dated: November 7, 1994
19
20
EXHIBIT INDEX
-------------
Exhibit No. Description
----------- ------------
Exhibit 1 -- Excerpts from the Company's Proxy Statement dated June 10, 1994 for
its 1994 Annual Meeting of Stockholders.
Exhibit 2 -- Employment Agreement, dated April 25, 1980, between Burton A. Dole,
Jr. and the Company.
Exhibit 3 -- Form of Supplemental Agreement.
Exhibit 4 -- Employment Agreement, dated June 9, 1994, between John H. Morrow and
the Company.
Exhibit 5 -- Form of Executive Agreement for Messrs. Doyle, Jones, Rankin and
Niles.
Exhibit 6 -- Form of Severance Agreement.
Exhibit 7 -- Form of Change of Control Severance Plan.
Exhibit 8 -- Form of Additions to Puritan-Bennett Corporation Management Incentive
Bonus Plan A, and Management Incentive Bonus Plan B.
Exhibit 9 -- Form of First Amendment to the Restated Puritan-Bennett Deferred
Compensation Plan.
Exhibit 10 -- Form of First Amendment to the Puritan-Bennett Supplemental Retirement
Benefit Plan.
Exhibit 11 -- Form of Third Amendment to the Puritan-Bennett Supplemental Retirement
Benefit Plan.
Exhibit 12 -- Form of First Amendment to the Puritan-Bennett Corporation Pension
Benefit Make Up Plan.
Exhibit 13 -- Form of Addition to the Company's 1988 Stock Benefit Plan.
Exhibit 14 -- Form of Amendment to the Restated Puritan-Bennett Savings & Stock
Ownership Plan.
Exhibit 15 -- Form of Amendment to the Puritan-Bennett Corporation Directors Post-
Retirement Income Plan.
Exhibit 16 -- Form of SERP Agreement between Burton A. Dole, Jr. and the Company.
Exhibit 17 -- Form of SERP Agreement between John H. Morrow and the Company.
Exhibit 18 -- Form of First Amendment to the Trust Agreement for the Restated
Puritan-Bennett Deferred Compensation Plan.
Exhibit 19 -- Form of Trust Agreement for the Puritan-Bennett Supplemental
Retirement Benefit Plan.
Exhibit 20 -- Form of Trust Agreement for the Puritan-Bennett Corporation Pension
Benefit Make Up Plan.
Exhibit 21 -- Form of Trust Agreement for the Puritan-Bennett Corporation Directors
Post-Retirement Income Plan.
Exhibit 22 -- Letter to Stockholders of the Company.*
Exhibit 23 -- Press Release of the Company, dated November 7, 1994.
Exhibit 24 -- Opinion of Smith Barney Inc., dated November 6, 1994.*