0000950112-95-002430.txt : 19950920 0000950112-95-002430.hdr.sgml : 19950920 ACCESSION NUMBER: 0000950112-95-002430 CONFORMED SUBMISSION TYPE: SC 14D9 PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19950919 SROS: NASD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: REN CORP USA CENTRAL INDEX KEY: 0000840491 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SPECIALTY OUTPATIENT FACILITIES, NEC [8093] IRS NUMBER: 621323090 STATE OF INCORPORATION: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9 SEC ACT: 1934 Act SEC FILE NUMBER: 005-40674 FILM NUMBER: 95574760 BUSINESS ADDRESS: STREET 1: 6820 CHARLOTTE PIKE CITY: NASHVILLE STATE: TN ZIP: 37209 BUSINESS PHONE: 6153534200 MAIL ADDRESS: STREET 1: 6820 CHARLOTTE PIKE CITY: NASHVILLE STATE: TN ZIP: 37209 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: REN CORP USA CENTRAL INDEX KEY: 0000840491 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SPECIALTY OUTPATIENT FACILITIES, NEC [8093] IRS NUMBER: 621323090 STATE OF INCORPORATION: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9 BUSINESS ADDRESS: STREET 1: 6820 CHARLOTTE PIKE CITY: NASHVILLE STATE: TN ZIP: 37209 BUSINESS PHONE: 6153534200 MAIL ADDRESS: STREET 1: 6820 CHARLOTTE PIKE CITY: NASHVILLE STATE: TN ZIP: 37209 SC 14D9 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 ------------------------ REN CORPORATION--USA (Name of Subject Company) REN CORPORATION--USA (Name of Person(s) Filing Statement) COMMON STOCK, NO PAR VALUE (Title of Class of Securities) COMMON STOCK--759656 10 1 (CUSIP Number of Class of Securities) ------------------------ RALPH Z. LEVY, JR. EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY REN CORPORATION--USA 6820 CHARLOTTE PIKE NASHVILLE, TENNESSEE 37209 (615) 353-4200 (Name, address and telephone number of person authorized to receive notices and communications on behalf of the person(s) filing statement) ------------------------ COPY TO: SCOTT J. DAVIS MAYER, BROWN & PLATT 190 SOUTH LASALLE STREET CHICAGO, ILLINOIS 60603-3441 (312) 782-0600 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- ITEM 1. SECURITY AND SUBJECT COMPANY. The name of the subject company is REN Corporation--USA, a Tennessee corporation (the "Company"), and the address of the principal executive offices of the Company is 6820 Charlotte Pike, Nashville, Tennessee 37209. The title of the class of equity securities to which this statement relates is the common stock, no par value (the "Common Stock") of the Company. ITEM 2. TENDER OFFER OF THE BIDDER. This statement relates to the tender offer by REN Acquisition Corp., a Tennessee corporation ("Purchaser"), a wholly owned subsidiary of COBE Laboratories, Inc., a Colorado corporation ("COBE"), which is an indirect wholly owned subsidiary of Gambro AB, a Swedish corporation ("Gambro"), disclosed in a Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1"), dated September 19, 1995, to purchase all outstanding shares of Common Stock (the "Shares") at $20.00, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated September 19, 1995 (the "Offer to Purchase"), and the related Letter of Transmittal (which, together with the Offer to Purchase and any amendments or supplements thereto, collectively constitute the "Offer"). According to the Schedule 14D-1, the address of the principal executive offices of the Purchaser is 1185 Oak Street, Lakewood, Colorado 80215. The Offer is being made by the Purchaser pursuant to an Agreement and Plan of Merger, dated as of September 12, 1995 (the "Merger Agreement") among the Company, Purchaser, COBE and Gambro. The Merger Agreement is filed as an exhibit to this statement and is incorporated herein by reference. A copy of the press release issued by the Company on September 13, 1995 is filed as an exhibit to this statement and is incorporated herein by reference. ITEM 3. IDENTITY AND BACKGROUND. (a) The name and business address of the Company, which is the person filing this statement, is set forth above under Item 1. (b)(1) In considering the recommendation of the Board with respect to the Offer and the Merger and the fairness of the consideration to be paid under the Offer and in the Merger, shareholders of the Company should be aware that certain officers and directors of the Company have interests in the Offer and the Merger, including those referred to below that present them with potential conflicts of interest. The Special Committee (as defined below) and the Board of Directors of the Company (the "Board") were aware of these potential conflicts prior to the execution of the Merger Agreement. Under the Stock Purchase Agreements (as defined below), so long as COBE owns a majority of the Shares, COBE may designate a majority of the members of the Board. Accordingly, as a result of COBE's ownership of approximately 53% of the Shares, COBE has designated three members of the Board, namely, Jan Gustavsson, Herbert S. Lawson and Mats Wahlstrom. At present, the Company's Board consists of six members. Mr. Gustavsson was elected to the Board in April 1993. Since March 1993, Mr. Gustavsson has served as Chief Financial Officer of Gambro. Since November, 1993, Mr. Gustavsson has been a member of the Board of Directors of COBE. Mr. Lawson was elected to the Board in October 1992. Since July 1992, Mr. Lawson has served as Vice President and Treasurer of COBE. Mr. Wahlstrom was elected to the Board in May 1991 and currently serves as Chairman of the Board. Between 1985 and 1993, Mr. Wahlstrom served as the Chief Financial Officer of Gambro and since March 1993 has served as Executive Vice President of Gambro. Since June 1990, Mr. Wahlstrom 2 has been a member of the Board of Directors of COBE and has served as Executive Vice President of COBE. Since May 1991, Mr. Wahlstrom has also served as President of COBE. Mr. Lawrence J. Centella was elected to the Board in October 1992 and has served as the President and Chief Executive Officer of the Company since July 1993. From July 1990 to July 1993, Mr. Centella was the President of COBE Renal Care, Inc., a subsidiary of COBE, and from April 1989 to June, 1990, Mr. Centella was the President of Gambro-Hospital, Inc., a subsidiary of Gambro. Pursuant to the Employment Agreement dated as of July 14, 1993 between Mr. Centella and the Company, the Company agreed to employ Mr. Centella as its President and Chief Executive Officer from the date thereof until December 31, 1996. Furthermore, the Company has the option of extending the term of the agreement for an additional three years. The Company shall (i) pay Mr. Centella a base salary of $250,000 per year, (ii) enter into a qualified deferred compensation agreement, effective from January 1, 1994, to defer $9,000 of the base salary for 1994 for 10 years, and (iii) commencing with the Company's 1994 fiscal year, pay Mr. Centella certain performance related bonuses. The Company also agreed to grant Mr. Centella Options to purchase up to 200,000 Shares in certain circumstances. Compensation of Directors; Consultation Agreement; Special Committee Fee. As Chairman of the Board, Mr. Wahlstrom receives annual compensation of $40,000 per year. All other directors of the Company currently receive $20,000 per annum for serving as a member of the Board. In addition, each member of the Board receives $2,500 for each meeting of the Board attended in person and $1,000 for each committee meeting attended in person. The committees of the Board consist of an Audit Committee, composed of Messrs. Lawson and Gustavsson and Drs. Jacobs and Kokko; a Compensation Committee, composed of Mr. Lawson and Drs. Jacobs and Kokko; and an Executive Committee, composed of Dr. Kokko and Messrs. Centella, Lawson and Wahlstrom. Directors are entitled to participate in the Company's Stock Option Plan. Dr. Kokko was elected to the Board in July 1993 and is a member of the Special Committee. Pursuant to a letter dated as of September 14, 1992 (approximately three years prior to the date Dr. Kokko was appointed to serve on the Special Committee), from the Company to Dr. Kokko, Dr. Kokko was retained by the Company as a consultant and, in accordance with such letter, currently receives $4,000 per month from the Company for services rendered to the Company as a consultant. Each member of the Special Committee, Drs. Kokko and Jacobs, will be paid a fee of $30,000 by the Company for their services as members of the Special Committee. In addition, each member of the Special Committee will be reimbursed by the Company for any expenses attributable to service in the capacity as a member of the Special Committee in addition to their regular compensation for serving as a director of the Company. Beneficial Ownership of Common Stock. The following table sets forth certain information, as of September 13, 1995, regarding the ownership of Common Stock by each person known by the Company to be the beneficial owner of more than five percent of the outstanding Common Stock, each director of the Company, the Chief Executive Officer of the Company, and the four most highly compensated officers of the Company, and all executive officers and directors of the Company as a group:
AMOUNT AND NATURE NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP PERCENT OF CLASS ---------------------------------------------------------- ----------------------- ---------------- REN Acquisition Corp.(1).................................. 10,036,221 53.0% 1185 Oak Street Lakewood, CO 80215 Lawrence J. Centella(2)................................... 207,138 * Jan Gustavsson(3)......................................... 10,036,221 53.0% Magistratsvagen 16 Box 10101 S-220 10 Lund, Sweden M. Stephen Harrison(4).................................... 39,507 *
3
AMOUNT AND NATURE NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP PERCENT OF CLASS ---------------------------------------------------------- ----------------------- ---------------- J. Kenneth Jacobs, M.D.(5)................................ 91,100 * Juha P. Kokko, M.D., Ph.D.(6)............................. 15,000 * Herbert S. Lawson(7)...................................... 10,037,721 53.1% Ralph Z. Levy, Jr.(8)..................................... 10,105,727 * Lowell F. Martin(9)....................................... 21,705 * Mats Wahlstrom(7)......................................... 10,038,721 53.1% 1185 Oak Street Lakewood, CO 80215 Bradley S. Wear(11)....................................... 95,459 * All Officers and Directors as a Group (13 Persons)........ 10,135,416 53.6%
------------ * Less than one percent. (1) REN Acquisition Corp. is a direct wholly owned subsidiary of COBE. COBE is a direct wholly owned subsidiary of Gambro GmbH, a German corporation, which is a direct wholly owned subsidiary of Gambro AB, a Swedish corporation. Shares representing approximately 58.5% of the total voting power of Gambro AB are held by Incentive AB, a Swedish corporation. (2) Includes 200,000 options to purchase Shares and 356 Options granted pursuant to the ESPP. (3) Includes 10,036,221 Shares owned by REN Acquisition Corp. Mr. Gustavsson is an employee of Gambro AB. Mr. Gustavsson disclaims any beneficial ownership of such Shares. (4) Includes 37,500 Options to purchase common stock of the Company. (5) Includes 15,000 Options to purchase common stock of the Company. (6) Includes 15,000 Options to purchase common stock of the Company. (7) Includes 10,036,221 Shares owned by REN Acquisition Corp., of which Messrs. Lawson and Wahlstrom, who are directors of the Company, are directors. Messrs. Lawson and Wahlstrom disclaim any beneficial ownership of such shares. (8) Includes 10,036,221 Shares owned by REN Acquisition Corp., of which Mr. Levy is a director. Mr. Levy disclaims any beneficial ownership of such Shares. Includes 67,500 options to purchase common stock of the Company and 227 Options to purchase common stock of the Company granted pursuant to the ESPP. (9) Includes 20,000 Options to purchase common stock of the Company and 199 Options to purchase common stock of the Company granted pursuant to the ESPP. (10) Includes 95,000 Options to purchase common stock of the Company. (b)(2) Pursuant to three stock purchase agreements described below (collectively, the "Stock Purchase Agreements") between COBE and the Company, COBE purchased from the Company a total of 9,337,399 shares of Common Stock, representing approximately 51.1% of the Shares. The Stock Purchase Agreements referred to in the preceding sentence are (i) the Stock Purchase Agreement, dated as of May 11, 1991, as amended through April 26, 1994, (ii) the Stock Purchase Agreement, dated as of February 9, 1992, as amended through March 17, 1992 and (iii) the Stock Purchase Agreement, dated as of July 2, 1992, as amended through September 15, 1992. In addition, pursuant to Letter Agreements dated as of July 14, 1993, COBE acquired 204,020 Shares from Elizabeth G. Tannenbaum, individually and as custodian and trustee, and 489,280 Shares from Jerome S. Tannenbaum, M.D., the Company's former Chairman, President and Chief Executive Officer, in privately negotiated transactions at a price of $16 per Share, or an aggregate purchase price of $11,092,800. Of this amount, $9,092,800 was paid in cash and $2 million was paid by a promissory note to Dr. Tannenbaum. COBE currently owns 10,036,221 Shares, representing approximately 53% of the total outstanding Shares. The Stock Purchase Agreements provide that, subject to certain exceptions, during the time period specified therein, COBE shall not directly or indirectly acquire or agree, offer, seek or propose to 4 acquire, or cause to be acquired, ownership of any securities of the Company, unless specifically requested to do so in writing in advance by the Board (the "Standstill Provision"). On July 13, 1995, the boards of directors of Gambro and COBE approved an acquisition of all of the Shares which COBE did not already own at $18.00 per Share and authorized Mr. Mats Wahlstrom, who is the Chairman of the Board and also the President of COBE, to present a proposal for an acquisition on those terms to the Board. Later on July 13, 1995, the Board held a meeting at which Mr. Wahlstrom informed the Board that COBE was interested in purchasing all of the remaining Shares that COBE did not already own. Mr. Wahlstrom expressed that COBE believed that COBE and the Company must grow, by acquisition or otherwise, to compete effectively in the healthcare industry and that this growth could be achieved more effectively if the Company becomes a wholly-owned subsidiary. Mr. Wahlstrom discussed the terms on which COBE was willing to make a proposal and explained that the Standstill Provision prevented COBE from making a proposal to acquire Shares unless the Board requested it to do so in writing. Mr. Wahlstrom also stated that, if the Board were to invite COBE to make such a proposal, a special committee of independent directors to represent the interests of stockholders other than COBE or its affiliates should be established and that that committee should consist of Dr. J. Kenneth Jacobs and Dr. Juha P. Kokko, who are not affiliated with COBE or Gambro. The Board unanimously determined to waive the Standstill Provision for the limited purpose of allowing COBE to deliver a proposal to the Company on the terms discussed by Mr. Wahlstrom. However, the Standstill Provision continued to prohibit COBE or its affiliates from actually acquiring Shares without a further waiver. The Board then established a special committee (the "Special Committee"), consisting of Dr. Jacobs and Dr. Kokko, for the purpose of considering, negotiating and submitting a recommendation to the Board concerning the terms of the proposal to be made by COBE. The Company then delivered the following letter to COBE: July 13, 1995 COBE Laboratories, Inc. 1185 Oak Street Lakewood, Colorado 80215 Attention: Mats Wahlstrom Re: Request for Proposal to Acquire Common Stock Gentlemen: As of the date hereof and pursuant to Section 5.11 of the Stock Purchase Agreement dated as of May 24, 1991 between REN Corporation--USA (the "Corporation") and COBE Laboratories, Inc. ("COBE"), as amended as of October 1, 1992 (the "Stock Purchase Agreement"), the Corporation, pursuant to the duly authorized action of its Board of Directors, hereby permits COBE to submit its proposal to acquire all the common shares, no par value, of the Corporation that COBE does not currently own pursuant to the letter attached hereto from COBE addressed to the Board of Directors of the Corporation and dated as of July 13, 1995. Very truly yours, REN CORPORATION--USA By: /s/ LAWRENCE J. CENTELLA .................................. Name: Lawrence J. Centella Title: President and Chief Executive Officer 5 COBE delivered the following letter to the Board containing its proposal (the "Proposal"): July 13, 1995 Board of Directors of REN Corporation--USA Gentlemen: I am pleased to offer on behalf of COBE Laboratories, Inc. ("COBE"), to acquire the equity interest represented by all of the issued and outstanding common shares, no par value, of REN Corporation--USA ("REN") not currently owned by COBE including all common shares that may be issued upon the exercise of options and warrants outstanding on the date hereof (the "Public Shares"). The principal terms of our offer are as follows: 1. The transaction would be a cash merger in which each holder of a Public Share would receive $18 per share, or an aggregate of approximately $170 million based on the number of Public Shares outstanding on July 12, 1995. 2. Consummation of the acquisition would be subject to among other things, approval by the Board of Directors of REN and other conditions customary in a transaction of this type. 3. COBE proposes to finance the acquisition of the Public Shares from bank borrowings. 4. We anticipate that, upon completion of the acquisition, COBE will cause the common shares of REN to be delisted from trading on the NASDAQ National Market System and to cause deregistration of such common shares with the Securities and Exchange Commission. We believe that our offer is fair to, and in the best interests of, REN and its public shareholders. The proposed acquisition price is equivalent to an 18% premium over the average closing price of the common shares on the NASDAQ National Market System over the 60 trading days ended July 12, 1995. We believe that the investment by COBE in REN has been beneficial to COBE and its parent, Gambro AB, and also to REN's public shareholders. However, COBE and REN are facing an increasingly competitive environment and the prospect of industry-wide consolidation. We believe that COBE and REN must grow, by acquisition or otherwise, to compete effectively in this rapidly changing environment and that this growth can be achieved much more effectively if REN becomes a wholly owned subsidiary. We wish to make it clear that we are not interested under any circumstances in selling our interest in REN and that there is thus no prospect of a sale of controlling interest to a third party. Our offer is made pursuant to your letter dated as of July 13, 1995 to COBE. We understand that you may wish to deliberate on this offer through a special committee of independent directors and that such committee may wish to retain its own advisors to assist in those deliberations. We invite your representatives to meet with our advisors to discuss this proposal at your earliest convenience. We hope you will give this proposal your prompt attention. We reserve the right to amend or withdraw this proposal at any time in our discretion. Sincerely /s/ MATS WAHLSTROM ...................................... Mats Wahlstrom President COBE Laboratories, Inc. 6 The Company issued the following press release, dated July 14, 1995, in connection with the Proposed Transaction: "COBE LABORATORIES, INC. PROPOSES TO BUY PUBLIC INTEREST IN ITS REN CORPORATION-USA SUBSIDIARY FOR $18.00 PER SHARE. COBE Laboratories, Inc., a wholly-owned subsidiary of Gambro AB, today announced a proposal to acquire all of the equity interests in REN Corporation-USA (NASDAQ National Market System: RENL) not currently owned by COBE Laboratories, Inc., including all common shares that may be issued upon the exercise of options and warrants outstanding on July 12, 1995. Under the proposed transaction, the public shareholders of REN Corporation-USA would receive $18.00 a share in cash, or an aggregate of approximately $170.2 million for all the shares of common stock, no par value (the "Common Stock"), of REN Corporation-USA held by the public. As of the date hereof, COBE Laboratories, Inc. owns approximately 53% of the Common Stock of REN Corporation-USA. The offer is subject to the approval of the Board of Directors of REN Corporation-USA, and other conditions customary in transactions of this type. The offer also noted that the proposed acquisition price is equivalent to an approximately 17.9% premium over the average closing price of REN Corporation-USA Common Stock on the NASDAQ National Market System over the 60 trading days ended July 12, 1995. In response to the offer by COBE Laboratories, Inc., the Board of REN Corporation-USA has established a special committee of its independent directors to consider the terms of the offer and to make recommendations in connection with the offer to the Board of Directors of REN Corporation-USA. UBS Securities, Inc. is acting as financial advisor to COBE Laboratories, Inc. in connection with the proposed transaction. July 14, 1995" In the second half of July 1995, the Special Committee retained Alex. Brown as its financial advisor and also retained independent legal counsel. Beginning at the end of July 1995, the Special Committee's financial and legal advisors commenced an investigation of the Company and its business. As part of that investigation, officers of the Company met with, and supplied information to, the Special Committee's financial and legal advisors. On August 8, 1995, the Special Committee held a telephonic meeting with its financial and legal advisors. At that meeting, the Special Committee discussed the results of the investigation of the Company and its business (which was still ongoing) that the Committee's financial and legal advisors were conducting and the possible structure and terms of any agreement that might be reached with COBE. Between August 8 and August 28, the financial and legal investigation of the Company and its business continued. On August 28, 1995, the Special Committee held a meeting in Nashville, Tennessee with its financial and legal advisors. The Special Committee reviewed and discussed with its counsel its fiduciary duties and the rights and powers of the Special Committee under applicable law, the Charter and By-laws of the Company and under the Stock Purchase Agreement. The Special Committee was advised that its purpose was to negotiate at arm's length with COBE in order to protect the interests of the Company's stockholders other than COBE and its affiliates. The Special Committee was further advised that it was under no obligation to reach any agreement at all with COBE unless the Special Committee determined that such an agreement was in the best interests of the Company's stockholders other than 7 COBE and its affiliates. The Special Committee also discussed the possibility, and the benefits and detriments, of the use of forms of consideration other than cash in a transaction with COBE and discussed the possible structure of a transaction with COBE, including the benefits and detriments of the use of a tender offer and of a single-step merger transaction and the possibility of requiring majority of the minority tendering or voting conditions. At the August 28 meeting, Alex. Brown made a financial presentation about the Company to the Special Committee, which included various analyses, including a review of the reported price and trading activity for the Shares, a comparison of certain financial and stock market information for the Company with similar information for certain other companies whose securities are publicly traded, a review of the financial terms of certain recent business combinations and a discounted cash flow analysis. The Special Committee also received a presentation from its legal advisors on certain proposed and pending federal legislative and regulatory initiatives, including in the Medicare reimbursement area, and discussed and considered the possible impact of those initiatives on the Company. The Special Committee's legal advisors also discussed with the Committee the terms of a draft merger agreement that had been submitted to the Special Committee's legal advisors by COBE's legal advisors. In light of the foregoing, the Special Committee discussed at the August 28 meeting whether any transaction with COBE would be desirable at this time and determined that it would be in the best interests of the Company's shareholders other than COBE or its affiliates to enter into negotiations with COBE regarding a possible transaction. At the August 28 meeting, the Special Committee authorized its financial advisors to approach COBE's financial advisors with a proposal for a transaction at $22.00 per Share. The Special Committee also authorized its legal advisors to attempt to negotiate open issues with respect to the non-financial terms of a merger agreement with COBE's legal advisors. The Special Committee's legal advisors commenced that process following the August 28 meeting. On August 30, 1995, the financial advisors for COBE and the Special Committee met, at which time the Special Committee's financial advisors proposed a price of $22.00 per Share and also requested COBE to consider a transaction in which Gambro stock would be used as consideration, possibly in addition to cash. COBE's financial advisors stated that a price of $22.00 per Share price was far too high and also stated that COBE and Gambro were unwilling to use Gambro stock instead of cash. On September 6, 1995, COBE's financial advisors proposed to the Special Committee's financial advisors that the transaction be effected through a cash tender offer, followed by a merger, at $19.25 per Share. During the next several days, the members of the Special Committee discussed that proposal with their financial and legal advisors and representatives of the Special Committee held discussions with representatives of COBE. On September 9, 1995, the Special Committee held a telephonic meeting to discuss COBE's proposal at $19.25 per Share. The Special Committee decided to reject COBE's $19.25 per Share proposal and negotiate for a higher price. The Special Committee also discussed the advantages and disadvantages of effecting a transaction through a tender offer. On September 10, 1995, the Special Committee and Mr. Wahlstrom, representing COBE, met with their financial advisors. After some discussion and an unsuccessful effort by Mr. Wahlstrom to persuade the Special Committee to accept a price of less than $20.00 per Share, Mr. Wahlstrom proposed a price of $20.00 per Share in a transaction effected through a tender offer. Mr. Wahlstrom stated that COBE would not pay a higher price. The Special Committee indicated that it would accept this proposal subject to negotiation of the terms of a definitive merger agreement. Following that meeting, the Special Committee authorized its legal advisors to continue negotiations on the terms of a definitive merger agreement, including the terms and conditions of the proposed tender offer, subject to approval by the Special Committee and the Board. Those negotiations took place during September 11 and 12, 1995. 8 On September 12, 1995, the Special Committee held a telephonic meeting with its financial and legal advisors. The Special Committee reviewed the Merger Agreement as it had been finally negotiated between its legal advisors and COBE's legal advisors. Alex. Brown rendered its oral opinion that the consideration of $20.00 per Share, in cash, to be received by the Company's stockholders, other than Gambro, COBE, Purchaser and their affiliates, pursuant to the Merger Agreement was fair from a financial point of view to such shareholders as of the date of the opinion. That opinion has since been confirmed in writing. No limitations were imposed by the Special Committee upon Alex. Brown with respect to the investigations made or procedures followed by it in rendering its opinion. Alex. Brown relied, with the permission of the Special Committee, on the statement made by COBE that it would not dispose of its Shares or vote its Shares in favor of any transaction involving the sale of the Company and Alex. Brown was not requested or authorized to solicit, and did not solicit, interest from any party with respect to the acquisition of the Shares or the assets of the Company or any of its constituent businesses. The full text of the opinion of Alex. Brown dated as of September 12, 1995, which sets forth the assumptions made, matters considered and limitations on the review undertaken, is attached as Annex I. Holders of Shares are urged to read this opinion in its entirety. Alex. Brown's opinion is directed only to the fairness from a financial point of view of the cash consideration to be received by the holders of Shares and does not constitute a recommendation to any holder of Shares as to whether such holder should tender Shares in the Offer. The following summary of the opinion of Alex. Brown is qualified in its entirety by reference to the full text of such opinion. In connection with its opinion, Alex. Brown reviewed the Merger Agreement and certain publicly available financial information concerning the Company. Alex. Brown also reviewed certain internal financial analyses and other information, including financial projections furnished to it by the Company and held discussions with members of the senior management of the Company regarding the business and prospects of the Company. In addition, Alex. Brown (i) reviewed the reported prices and trading activity for the Shares, (ii) compared certain financial and stock market information for the Company with similar information for certain other companies whose securities are publicly traded, (iii) reviewed the financial terms of certain recent business combinations and (iv) performed such other studies and analyses and considered such other factors as it deemed appropriate. As described in the opinion, Alex. Brown assumed, without independent verification, the accuracy and completeness of the information that it reviewed and relied upon for purposes of rendering its opinion. With respect to the financial projections furnished to it, Alex. Brown assumed that they had been reasonably prepared on bases reflecting the best currently available estimates and judgements of the senior management of the Company as to the likely future financial performance of the Company. In addition, Alex. Brown did not make an independent valuation or appraisal of the assets of the Company, nor was it furnished with any such valuation or appraisal. Alex. Brown's opinion stated that such opinion was based on market, economic, financial and other conditions as they existed and could be evaluated as of the date of the opinion. The following is a summary of the report presented by Alex. Brown to the Special Committee on September 12, 1995 (the "Alex. Brown Report") in connection with its September 12, 1995 opinion. Stock Trading History. Alex. Brown reviewed the historical trading volume and market prices for the Shares. In addition, Alex. Brown reviewed and analyzed the relationship between movements of the price of the Shares and movements in the Standard & Poor's average of 500 stocks and movements in the prices of companies considered by Alex. Brown to be reasonably similar to the Company. This analysis showed that the $20.00 per Share offer price was 20.3% higher than the highest closing price for the Shares prior to announcement of the Proposal by COBE on July 14, 1995. Comparison of the Company with Selected Publicly Traded Companies. Alex. Brown compared certain financial information for the Company with corresponding data and ratios for the following 9 group of six publicly traded health care services companies: American Medical Response, Inc., HEALTHSOUTH Corporation, Lincare Holdings Inc., Renal Treatment Centers, Inc., Surgical Care Affiliates, Inc. and Vivra Incorporated. Such financial information included market value, aggregate market value (market value adjusted by adding debt and subtracting cash and marketable securities), profitability, returns, growth rates and implied multiples of revenues, operating cash flow (earnings before depreciation, amortization, interest and taxes less minority interest), operating income (earnings before interest and taxes less minority interest), net income and estimated future earnings per share (as reported by I/B/E/S) for the calendar years 1995 and 1996. This analysis showed that on September 8, 1995, the ratio of stock price to projected calendar 1995 earnings per share for the six companies listed above ranged from 16.5x to 25.3x and with a mean of 20.7x and the ratio of stock price to projected calendar 1996 earnings per share ranged from 13.7x to 19.9x with a mean of 16.9x. The implied equity value per share based on the mean multiples and the Company's projected calendar 1995 and 1996 net income was $14.14 and $16.61, respectively. Alex. Brown noted that the ratio of the $20.00 offer price to the Company's projected calendar 1995 earnings per Share was 29.4x and the ratio of the offer price to the Company's projected calendar 1996 earnings per Share was 20.4x. Analysis of Selected Health Care Merger and Acquisition Transactions. Alex. Brown analyzed, based on thirteen recent mergers and acquisitions in the alternate-site health care delivery market, the financial multiples of equity purchase price to last twelve months' net income and to forward twelve months' net income and the multiples of aggregate purchase price (equity purchase price adjusted by adding debt and subtracting cash and marketable securities) to last twelve months' revenues, operating cash flow and operating income. Alex. Brown also analyzed the premiums of the purchase price over stock prices prior to transaction announcement in these transactions. Alex. Brown calculated the implied equity value per share of the Company by applying the Company's actual and forecasted financial results to the mean multiple for each of the measures derived from this analysis. For the thirteen transactions in the alternate-site health care delivery market, the implied equity value per Share ranged from $15.25 to $23.72. Analysis of Selected Minority Buyouts. Using publicly available information, Alex. Brown analyzed the purchase prices and premiums of the purchase price over stock prices prior to transaction announcement paid in 31 minority buyout transactions with values greater than $25.0 million since 1990. This analysis resulted in a range of purchase price premiums to the stock price one day prior to announcement of (9.8%) to 66.7%, with a mean purchase price premium of 26.6% and a median purchase price premium of 24.3%. Alex. Brown also analyzed the range of purchase price premiums to the stock price one month prior to transaction announcement which indicated a range of 16.5% to 88.6% with a mean purchase price premium of 32.7% and a median purchase price premium of 28.9%. Alex. Brown calculated the implied Company purchase price per Share based on these premiums. This analysis implied purchase prices per Share of $19.94 and $19.58 based on the mean and median premiums, respectively, to the stock price one day prior to announcement, and implied purchase prices per Share of $19.58 and $19.01 based on the mean and median premiums, respectively, to the stock price one month prior to announcement. Discounted Cash Flow Analysis. Using a discounted cash flow analysis, Alex. Brown calculated the present value of the future cash flows that the Company could produce over a five-year period from 1996 through the end of 2000 under various assumptions. The cash flows were based on financial forecasts prepared by the Company's management for 1995 through 1998 and estimates for 1999 and 2000 which were based on an extrapolation of the 1998 data and were reviewed with the Company's management. Alex. Brown discounted these cash flows to September 30, 1995, at discount rates ranging from 11.0% to 15.0% based upon the consideration of a number of factors, including cost of capital, required rates of return to investors and risks attributable to the uncertainty of achieving the projected cash flows. The terminal value was computed based on projected earnings before depreciation, amortization, interest and taxes less minority interest in calendar year 2000 and a range of terminal multiples 10 of 7.0x to 9.0x. The foregoing analysis resulted in a present value range for the Company of $18.63 to $27.63 per share. The summary set forth above does not purport to be a complete description of the presentation by Alex. Brown of the Alex. Brown Report to the Special Committee or the analyses performed and factors considered by Alex. Brown in connection with its opinion dated September 12, 1995. A copy of the Alex. Brown Report has been attached hereto as Annex I. Alex. Brown believes that its analyses and the summary set forth above must be considered as a whole and that selecting portions of its analyses, without considering all analyses, or selecting portions of the above summary, without considering all factors and analyses, could create an incomplete view of the process underlying the analyses set forth in the opinion and the Alex. Brown Report. In performing its analyses, Alex. Brown made numerous assumptions with respect to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of the Company. The analyses performed by Alex. Brown are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than those which are suggested by such analyses. Alex. Brown is a nationally 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 corporate and other purposes. Alex. Brown regularly publishes research reports regarding the health care industry and the businesses and securities of publicly traded companies in that industry. After reviewing the foregoing analysis and receiving the oral opinion of Alex. Brown, the Special Committee recommended that the Board approve and adopt the Merger Agreement and approve and consent to the Offer. Also on September 12, 1995, and immediately following the Special Committee meeting, the Board held a telephonic meeting at which the opinion of Alex. Brown and the recommendations of the Special Committee were presented and the Board approved and adopted the Merger Agreement. On September 12, 1995, the Board also delivered to the Board of COBE the following letter requesting that Gambro, COBE and Purchaser enter into the Merger Agreement and consummate the transactions contemplated thereby in accordance with the terms and conditions of the Merger Agreement: 11 September 12, 1995 COBE Laboratories, Inc. 1185 Oak Street Lakewood, Colorado 80215 Attention: Mats Wahlstrom Re: Request for Proposal to Acquire Common Stock Gentlemen: As of the date hereof and pursuant to Section 5.11 of the Stock Purchase Agreement dated as of May 24, 1991 between REN Corporation-USA (the "Corporation") and COBE Laboratories, Inc. ("COBE"), as amended through April 26, 1994, the Corporation, pursuant to the duly authorized action of its Board of Directors, hereby requests Gambro AB, a Swedish company ("Gambro"), COBE, a wholly owned indirect subsidiary of Gambro, and REN Acquisition Corp., a Tennessee corporation and a wholly owned subsidiary of COBE ("Purchaser"), to enter into an Agreement and Plan of Merger, dated as of September 12, 1995, among Gambro, COBE, Purchaser and the Corporation and to consummate the transactions contemplated thereby in accordance with the terms and conditions thereof. Very truly yours, REN CORPORATION-USA By: /s/ LAWRENCE J. CENTELLA .................................. Name: Lawrence J. Centella Title: President and Chief Executive Officer The Merger Agreement was executed and delivered by the parties thereto on September 12, 1995 and the transaction was announced on the morning of September 13, 1995. THE MERGER AGREEMENT The following is a summary of the Merger Agreement, a copy of which is filed as an Exhibit hereto. Such summary is qualified in its entirety by reference to the Merger Agreement. The Offer. The Merger Agreement provides for the commencement of the Offer as promptly as reasonably practicable, but in no event later than five business days after the initial public announcement of Purchaser's intention to commence the Offer. The obligation of Purchaser to accept for payment and pay for Shares tendered pursuant to the Offer is subject to the satisfaction of the conditions that are described in the Offer to Purchase (see THE TENDER OFFER--Section 10. Certain Conditions of the Offer"). Purchaser and COBE have agreed that no change in the Offer may be made which decreases the price per Share payable in the Offer or which reduces the maximum number of Shares to be purchased in the Offer or which imposes conditions to the Offer in addition to those set forth in the Offer to Purchase. The Merger. The Merger Agreement provides that, upon the terms and subject to the conditions thereof and in accordance with Tennessee Law, at the Effective Time (as defined in the Merger Agreement), Purchaser shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of Purchaser will cease and the Company will continue as the Surviving 12 Corporation and will become a wholly owned subsidiary of COBE after the Merger. Upon consummation of the Merger, each issued and then outstanding Share (other than any Shares held by the Company, or owned by Purchaser, COBE or any direct or indirect wholly owned subsidiary of COBE or of the Company and any Shares which are held by stockholders who have not voted in favor of the Merger or consented thereto in writing and who shall have demanded properly an appraisal for such stockholders' Shares in accordance with Tennessee Law) shall be cancelled and converted automatically into the right to receive the Merger Consideration. Pursuant to the Merger Agreement, each share of common stock, par value $.01 per share, of Purchaser issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one share of Common Stock of the Surviving Corporation (as defined in the Merger Agreement). The Merger Agreement provides that the directors of the Company immediately prior to the Effective Time will be the directors of the Surviving Corporation immediately following the Merger and that the officers of the Company immediately prior to the Effective Time will be the officers of the Surviving Corporation immediately following the Merger. The Merger Agreement provides that, at the Effective Time, the Charter of the Company, as in effect immediately prior to the Effective Time, will be the Charter of the Surviving Corporation. The Merger Agreement also provides that the By-laws of the Company, as in effect immediately prior to the Effective Time, will be the By-laws of the Surviving Corporation. The Merger Agreement also provides that each holder of an Option (as defined in the Merger Agreement) to purchase shares of Company Common Stock under the Company's Stock Option Plan (as defined in the Merger Agreement) which Option is outstanding immediately prior to the Effective Time (whether or not then exercisable) shall, pursuant to the Cancellation of Options Agreements, entered into by the Company with each holder of Options, be entitled to receive, and shall receive, in settlement and cancellation thereof, an amount in cash equal to the product of (i) the excess, if any, of the amount of the Per Share Amount over the exercise price of each such Option and (ii) the number of shares of Company Common Stock covered by such Option. All payments by the Company in respect of Options, other than Options granted within six months prior to the Effective Time, shall be made promptly following the Effective Time. Payments in respect of Options granted within six months prior to the Effective Time shall be made six months and one day after the date of grant of such Options. The Company shall cause the Stock Option Plan to terminate as of the Effective Time and certificates evidencing Options shall be deemed to be cancelled as of the Effective Time, and thereafter the only rights of participants therein shall be the right to receive the consideration described above. Under the Merger Agreement, the Company has agreed that prior to the Effective Time, the Company shall use its reasonable best efforts to cause each holder of an outstanding Option to acknowledge in writing the cancellation of such Option and to release the Company from any obligation in respect thereof in consideration for the payment provided herein and shall take such other action as may be necessary to carry out the foregoing terms. The Merger Agreement also provides that each holder of a Warrant (as defined in the Merger Agreement) to purchase shares of Company Common Stock, which Warrant is outstanding immediately prior to the Effective Time (whether or not then presently exercisable), shall, pursuant to the Cancellation of Warrant Agreements entered into by the Company with each of the Warrant holders, be entitled to receive, and shall receive, in settlement and cancellation thereof, an amount in cash equal to the product of (i) the excess, if any, of the Per Share Amount over the exercise price of each such Warrant and (ii) the number of shares of Company Common Stock covered by such Warrant. The Company shall cause each such Warrants to which it is a party to terminate as of the Effective Time, and thereafter the only rights of the holders of the Warrants shall be the right to receive the consideration described above. Under the Merger Agreement, the Company has agreed that prior to the Effective Time, the Company shall use its reasonable best efforts to cause each holder of an outstanding 13 Warrant to acknowledge in writing the termination of such Warrants and to release the Company from any obligation in respect thereof in consideration for the payment provided herein and shall take such other action as may be necessary to carry out the foregoing terms. The Merger Agreement also provides that the Company shall terminate the ESPP (as defined in the Merger Agreement) effective September 30, 1995 (the "Termination Date") pursuant to which (i) all further payroll deductions from each Participant (as defined in the ESPP) shall cease, (ii) the amount (the "Plan Amount") credited to the account of each Participant as of the Termination Date shall at the election of each Participant either (A) be paid by the Company to such Participant (without interest) as soon as administratively practicable or (B) be applied as of the Termination Date to the purchase of Shares in an aggregate amount equal to each Participant's Plan Amount at a price per Share equal to 85% of the lower of the Fair Market Value (as defined in the ESPP) per share of Common Stock on July 1, 1995 or on the Termination Date (rounded up to the next whole dime), in accordance with the terms of the current phase under the ESPP, and (iii) for purposes of the current phase, the Termination Date shall be treated for all purposes of the ESPP as the last day of such phase. Under the Merger Agreement, in the event that a Participant makes no election under clause (ii) above, such Participant shall be deemed to have elected as of the Termination Date to apply such Participant's Plan Amount to the purchase of Shares in accordance with the provisions of clause (ii)(B) above. Agreements of COBE, Purchaser and the Company. Pursuant to the Merger Agreement, if required by applicable law in order to consummate the Merger, the Company, acting through the Board acting upon the unanimous recommendation of the Special Committee, shall, in accordance with applicable law and the Company's Charter and By-laws, (i) duly call, give notice of, convene and hold an annual or special meeting of its stockholders as soon as practicable following consummation of the Offer for the purpose of considering and taking action on the Merger Agreement and the transactions contemplated thereby (the "Stockholders' Meeting"). Purchaser presently owns 10,036,221 Shares constituting approximately 53% of the Shares. If all of the outstanding Options and Warrants were to be exercised, Purchaser will have sufficient voting power to approve and adopt the Merger and the Merger Agreement without the approval of any other holder of Shares. The Merger Agreement provides that the Company shall, if required by applicable law, as promptly as practicable following consummation of the Offer, file with the Commission (as defined in the Merger Agreement) under the Exchange Act (as defined in the Merger Agreement), and use its reasonable best efforts to have cleared by the Commission, a proxy statement and related proxy materials (the "Proxy Statement") with respect to the Stockholders' Meeting. The Company has agreed, unless in breach of its fiduciary duties under applicable law as advised by outside counsel, to include in the Proxy Statement the unanimous recommendation of the Board, acting upon the unanimous recommendation of the Special Committee, that the stockholders of the Company approve and adopt the Merger Agreement and the transactions contemplated thereby and to use its reasonable best efforts to obtain such approval and adoption. At such Stockholders' Meeting, Gambro, COBE and Purchaser have agreed to cause all Shares then owned by them and their subsidiaries to be voted in favor of approval and adoption of the Merger Agreement and the transactions contemplated thereby. The Merger Agreement further provides that COBE shall cause the Surviving Corporation to keep in effect the provisions in its Charter and By-laws containing the provisions with respect to exculpation of director and officer liability and indemnification set forth in the Charter and By-laws of the Company on the date of this Agreement to the fullest extent permitted under applicable law, which provisions shall not be amended, repealed or otherwise modified except as required by applicable law or except to make changes permitted by applicable law that would enlarge the exculpation or rights of indemnification thereunder. Under the Merger Agreement, from and after the Effective Time, Gambro and COBE each agree, jointly and severally, to guarantee and to cause the Surviving Corporation to perform all of its obligations under the Charter and By-laws of the Company with respect to indemnification. The Merger Agreement provides that to the extent that the foregoing or the provisions of the Charter or By- 14 laws of the Surviving Corporation shall not serve to indemnify and hold harmless each present and former director and officer or the Company (the "Indemnified Parties"), after the Effective Time, Gambro and COBE shall, subject to the terms set forth in the Merger Agreement, indemnify and hold harmless, to the fullest extent permitted under applicable law (and shall also advance expenses as incurred to the fullest extent permitted under applicable law provided the person to whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined that such person is to entitled to indemnification), each Indemnified Party against any costs or expenses (including reasonable attorneys' fees), judgments, fines, losses, claims, damages, liabilities and amounts and paid in settlement in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to the transactions contemplated by the Merger Agreement for a period of six years after the date of the Merger Agreement; provided, that in the event any claim or claims are asserted or made within such six-year period, all rights to indemnification in respect of any such claim or claims shall continue until final disposition of any and all such claims. The Merger Agreement provides that COBE shall cause the Surviving Corporation to use its best efforts to maintain in effect for six years from the Effective Time, if available, the coverage provided by current directors' and officers' liability insurance policies maintained by the Company (provided that the Surviving Corporation may substitute therefor policies of at least the same coverage containing terms and conditions which are not materially less favorable) with respect to matters occurring prior to the Effective Time. The Merger Agreement provides that, subject to its terms and conditions, each of the parties thereto shall use its reasonable best efforts to take, or cause to be taken, all appropriate action, 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 the Merger Agreement, including, without limitation, using its reasonable best efforts to obtain all licenses, permits, consents, approvals, authorizations, qualifications and orders of governmental authorities and parties to contracts with the Company and its subsidiaries as are necessary for the consummation of the transactions contemplated by the Merger Agreement and to fulfill the conditions to the Offer and the Merger. The Merger Agreement provides that in case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of the Merger Agreement, the proper officers and directors of each party to the Merger Agreement are required to use their reasonable best efforts to take all such action. The Merger Agreement provides that Gambro guarantees the performance by COBE and Purchaser of their agreements and obligations under the Merger Agreement. Representations and Warranties. The Merger Agreement contains certain customary representations and warranties of the parties thereto. Conditions to the Merger. Under the Merger Agreement, the respective obligations of each party to effect the Merger are subject to the satisfaction at or prior to the Effective Time of the following conditions: (a) the Merger Agreement and the transactions contemplated thereby shall have been approved and adopted by the affirmative vote of the stockholders of the Company to the extent required by Tennessee Law and the Company's Charter; (b) the parties to the Merger Agreement shall have performed or complied in all material respects with all agreements and covenants required by the Merger Agreement to be performed or complied with by them on or prior to the Effective Time; (c) no governmental authority or other agency or commission or court of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any law, rule, regulation, executive order, decree, injunction or other order (whether temporary, preliminary or permanent) which is then in effect and has the effect of making the acquisition of Shares by Gambro, COBE or Purchaser or any affiliate of either of them illegal or otherwise restricting, preventing or prohibiting consummation of the transactions 15 contemplated by the Merger Agreement; and (d) Purchaser or its permitted assignee shall have purchased all Shares validly tendered and not withdrawn pursuant to the Offer; provided, however, that this conditions shall not be applicable to the obligations of Gambro, COBE or Purchaser if, in breach of the Merger Agreement or the terms of the Offer, Purchaser fails to purchase Shares validly tendered and not withdrawn pursuant to the Offer. Termination; Fees and Expenses. The Merger Agreement provides that it may be terminated and the Merger and the other transactions contemplated by the Merger Agreement may be abandoned at any time prior to the Effective Time, notwithstanding any requisite approval and adoption of the Merger Agreement and the transactions contemplated by the Merger Agreement by the stockholders of the Company: (a) by mutual written consent of Gambro, COBE, Purchaser and the Special Committee; (b) by either COBE, Purchaser or the Special Committee if (i) the Effective Time shall not have occurred on or before March 31, 1996; provided, however, that the right to terminate the Merger Agreement shall not be available to any party whose failure to fulfill any obligation under the Merger Agreement has been the cause of, or resulted in, the failure of the Effective Time to occur on or before such date or (ii) any court of competent jurisdiction or other governmental authority shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the Merger and such order, decree, ruling or other action shall have become final and nonappealable; (c) by COBE if (i) due to an occurrence or circumstance that would result in a failure to satisfy any condition set forth in the Offer to Purchase, Purchaser shall have (A) failed to commence the Offer within 60 days following the date of the Merger Agreement, (B) terminated the Offer without having accepted any Shares for payment thereunder, or (C) failed to pay for Shares pursuant to the Offer within 90 days following the commencement of the Offer, unless such failure to pay for Shares shall have been caused by or resulted from the failure of Gambro, COBE or Purchaser to perform in any material respect any material covenant or agreement of either of them contained in the Merger Agreement or the material breach by Gambro, COBE or Purchaser of any material representation or warranty of either of them contained in the Merger Agreement or (ii) prior to the purchase of Shares pursuant to the Offer, the Special Committee, acting on behalf of the Company, shall have withdrawn or modified in a manner adverse to Purchaser or COBE its approval or recommendation of the Offer, the Merger Agreement, the Merger or any other transaction contemplated by the Merger Agreement or shall have recommended another merger, consolidation, business combination with, or acquisition of, the Company or its assets or another tender offer for Shares, or shall have resolved to do any of the foregoing; (d) by the Special Committe acting on behalf of the Company, Purchaser shall have (A) failed to commence the Offer within 60 days following the date of the Merger Agreement, (B) terminated the Offer without having accepted any Shares for payment thereunder or (C) failed to pay for Shares pursuant to the Offer within 90 days following the commencement of the Offer, unless such failure to pay for Shares shall have been caused by or resulted from the failure of the Company to perform in any material respect any material covenant or agreement of it contained in the Merger Agreement or the material breach by the Company of any material representation or warranty of it contained in the Merger Agreement; (e) prior to the purchase of Shares pursuant to the Offer, by the Special Committee, acting on behalf of the Company, (i) if any representation or warranty of Gambro, Parent or Purchaser was untrue or incorrect in any material respect when made and on and as of the expiration of the Offer, except for changes contemplated by the Merger Agreement, with the same force and effect as if made on and as of the date of such expiration, or in the case of a representation or warranty made or given as of a specified time, if such representation or warranty was untrue or incorrect in any material respect as of such time, or (ii) if Parent, Purchaser or Gambro has failed to perform or comply with, in any material respect, any of their covenants and agreements in the Merger Agreement; or (f) by either Parent, Purchaser or the Special Committee, acting on behalf of the Company, if the conditions to the Merger are not reasonably capable of being satisfied on or before March 31, 1996. In the event of the termination of the Merger Agreement, the Merger Agreement provides that it shall forthwith become void and there shall be no liability thereunder on the part of any party thereto 16 except under the provisions of the Merger Agreement related to fees and expenses described below and under certain other provisions of the Merger Agreement which survive termination. All fees, costs and expenses incurred in connection with the Merger Agreement and the Transactions shall be paid by the party incurring such expenses, whether or not any such transaction is consummated; provided, however, that the Purchaser and the Company shall each pay for one-half of all fees, costs and expenses incurred in connection with the Merger Agreement and the transactions contemplated thereby which are payable to the Commission and to any financial or other printer. THE STOCK PURCHASE AGREEMENTS COBE and the Company are parties to the Stock Purchase Agreements pursuant to which COBE purchased from the Company, and the Company issued Shares to COBE. Copies of the Stock Purchase Agreements are filed as an Exhibit hereto. Under the Stock Purchase Agreements, so long as COBE owns a majority of the issued and outstanding Common Stock, COBE may designate a majority of the members of the Board. Under the Stock Purchase Agreements, COBE agreed that for five years after May 24, 1991, the closing date of the purchase of Shares by COBE pursuant to one of the Stock Purchase Agreements which was dated as of May 11, 1991, COBE would not directly or indirectly, unless specifically requested to do so in writing in advance by the Board, (i) acquire or agree, offer, seek or propose to acquire, or cause to be acquired, beneficial ownership of any securities of the Company, any debt claims of the Company, any securities convertible or exchangeable into or exercisable into or exercisable for any securities or assets of the Company, or any rights or options to acquire such ownership, except pursuant to COBE's preemptive rights (described below); (ii) propose to enter into any merger or business combination involving the Company, except and unless the Company enters into a definitive agreement with a third party contemplating a merger, consolidation or similar transaction in which all or a majority of the Company's equity securities or substantially all of its assets are to be acquired by such third party, in which case COBE may make a Financially Superior Offer (as defined in such Stock Purchase Agreement); (iii) make, directly or indirectly, any "solicitation" of "proxies" (as such terms are used in the Exchange Act) to vote any securities of the Company; (iv) form, join or participate in a "group" (within the meaning of Section 13(d)(3) of the Exchange Act) with respect to any securities of the Company; (v) otherwise act, alone or in concert with others, to seek to control or exercise (other than through its representation on the Board) a controlling influence over the management, Board or the business of the Company; (vi) call a meeting of the Company's stockholders; and (vii) enter into any discussions, negotiations, arrangements or understandings with any third party with respect to any of the foregoing. The Stock Purchase Agreements provide that so long as COBE owns more than 15% of the then outstanding Shares, COBE shall, in the event the Company issues Shares or any other voting securities, have the option to purchase from the Company sufficient Shares or other voting securities to permit COBE to maintain its percentage ownership of Shares or of the total voting power it had immediately prior to such issuance. Furthermore, the Company is required to notify COBE within 15 days of the end of each calendar quarter of the number of Shares and the number of voting securities outstanding as of such date. In general terms, at the end of each calendar quarter COBE has the option to purchase from the Company additional Shares to the extent necessary to permit COBE to maintain 50.1% of the Company's total voting power. The per Share purchase price for such Shares shall be the average of the closing bid and asked prices of the Shares on each day during such calendar quarter. The Stock Purchase Agreements set forth a supply arrangement under which the Company and its subsidiaries agreed to purchase a minimum of 75% of their requirements for renal dialysis machines and all bloodlines used therewith from COBE on overall terms and conditions no less favorable than those offered by COBE to independent third parties. However, the 75% minimum specified above shall be reduced to the extent that medical directors in charge of facilities which have generated more than 25% of the Company's aggregate purchases of renal dialysis machines have delivered written objections to 17 the use of such machines. Under the Stock Purchase Agreements, the foregoing supply arrangement terminates on the earlier of (i) May 24, 1997, being the sixth anniversary of the closing date of one of the Stock Purchase Agreements which was dated as of May 11, 1991 or (ii) at such time that COBE owns less than 20% of the Shares for a period of 45 consecutive days after any calendar quarter. During 1994, 1993 and 1992, the Company paid $7,845,189, $6,801,258 and $3,071,739, respectively, for equipment and supplies received from COBE. The Stock Purchase Agreements also provide that during the time that COBE owns 15% or more of the Shares and for one year thereafter (i) COBE shall not, without the Company's consent, engage in providing, or invest in any entity that provides, renal dialysis services and related laboratory services in North America within a 75 mile radius of the Company's existing facilities ("Existing Regions") or in locations identified by the Company ("Identified Regions") as a location of likely expansion, (ii) COBE shall disclose to the Company all acquisition opportunities of renal dialysis services centers in North America outside the Existing Regions and Identified Regions and shall engage in good faith discussions with the Company regarding strategic business ventures concerning such acquisition opportunities, provided, however, that the Company shall not acquire such acquisition opportunities without COBE's written consent, which consent shall be given if COBE is no longer actively pursuing such acquisition opportunity, and (iii) COBE, the Company and their respective affiliates shall not solicit or entice away any of their respective employees or employ any such employee until one year after such employee leaves the employ of such company or affiliate. Under the Stock Purchase Agreements, COBE received two "demand" registration rights and certain "piggyback" registration rights in respect of Shares, subject to customary "cutbacks". Under the Stock Purchase Agreements, so long as directors designated by COBE constitute a majority of the Board, no amendment to any of the Stock Purchase Agreements will be effective unless it is approved by a majority of the Company's directors who were not designated by COBE. ITEM 4. THE SOLICITATION OR RECOMMENDATION. The Company, acting through the Board acting upon the unanimous recommendation of the Special Committee, has approved of and consented to the Offer, and the Board, acting upon the unanimous recommendation of the Special Committee, at a meeting duly called and held on September 12, 1995, has unanimously (A) determined that the Merger Agreement and the transactions contemplated thereby, including each of the Offer and the Merger, are fair to and in the best interests of the holders of Shares, (B) approved and adopted the Merger Agreement, the execution of the Merger Agreement and the transactions contemplated by the Merger Agreement (which approval includes the approval of a majority of the Company's disinterested directors, as required both by the Tennessee Business Corporation Act and by Article X of the Company's By-laws), and (C) recommended that the stockholders of the Company accept the Offer and approve and adopt the Merger Agreement and the transactions contemplated thereby. In reaching its conclusions, the Special Committee considered a number of factors (some of which had been discussed at earlier meetings), including, without limitation, the following: . The price of $20.00 per Share represents a substantial premium over the market price of the Common Stock prior to the announcement of Cobe's Proposal and was higher than the highest historical market price for the Common Stock prior to such announcement. . The fact that stock market prices, both for the Company and in the United States in general, are at or near historic highs, indicating that the timing of a transaction is not unfavorable for the minority stockholders. . The Special Committee's perception, after consultation with its financial advisors, that $20 per Share is, based on a number of tests, including a comparison of recent comparable transactions involving the buy-out of minority stockholders, a reasonable price for the minority stockholders' Shares. 18 . The Special Committee's knowledge of the Company's business, measured against the possibility of changes in the legal and regulatory climate in the healthcare industry and other factors that might affect the Company's business. . The existence of the Standstill Provision prohibiting COBE and its affiliates from purchasing Shares and a covenant not to compete with the Company by COBE and its affiliates in the Stock Purchase Agreements, Article X of the Company's By-laws (prohibiting a transaction between the Company and an affiliate without the approval of a majority of disinterested directors), the fact that the Standstill Provision will expire on May 24, 1996 and that the Company's By-laws can be amended by the holders of two-thirds of the Shares. . The possibility that, because of a decline in the Company's business, the trading price of the Shares or the stock market in general, the consideration that the minority stockholders would obtain for their Shares in a future transaction might be less advantageous than the consideration they would receive pursuant to the Offer and the Merger. . The opinion of Alex. Brown that the cash consideration to be received by the stockholders of the Company other than Gambro, COBE, Purchaser and their affiliates pursuant to the Merger Agreement was fair from a financial point of view to such stockholders as of the date of the opinion. None of the factors considered by the Special Committee, including the foregoing factors, was dispositive to the Special Committee's conclusions, nor did the Special Committee assign any relative priority to the various factors considered. ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. Pursuant to a letter agreement dated as of August 10, 1995 (the "Engagement Letter") between the Special Committee, the Company and Alex. Brown, the Company paid Alex. Brown a fee of $100,000 in consideration of its services as the Special Committee's financial advisor. The Company also agreed to pay Alex. Brown an additional fee of $800,000 for its services as the Special Committee's financial advisor upon the earlier to occur of (i) the conclusion of the Special Committee's work with regard to the transaction proposed by COBE (regardless of whether there was an agreement regarding any business combination transaction or whether any business combination transaction was consummated) (ii) the execution of a definitive agreement for a business combination transaction or (iii) 90 days from the date of the Engagement Letter. The Engagement Letter also provides that if Alex. Brown is requested to deliver any additional opinions with respect to amended or revised offers, the Company will pay Alex. Brown an additional fee of $100,000 upon delivery of each such additional opinion. The Company also agreed to indemnify and hold harmless Alex. Brown and each of its directors, officers, agents, employees and controlling persons against any losses, claims, damages or liabilities related to or arising out of Alex. Brown's engagement. If such indemnification is not available, the Company agreed to contribute to the losses, claims, damages or liabilities in proportion to the relative benefits received by the Company and the party seeking contribution as well as in proportion to the relative faults of the Company and the party seeking contribution. The Company also agreed to pay all of Alex. Brown's reasonable out-of-pocket expenses, including reasonable fees and disbursements of counsel. Neither the Company, nor any person acting on its behalf, currently intends to employ, retain or compensate any other person to make solicitations or recommendations to security holders on its behalf concerning the Offer. ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES. The Company, and to the best knowledge of the Company, none of its executive officers, directors, affiliates or subsidiaries has effected any transaction in the Company's securities in the past 60 days. To 19 the best knowledge of the Company, all of its executive officers, directors, affiliates or subsidiaries who are also stockholders intend to either tender their Shares in the Offer or vote in favor of the Merger. ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY. None. ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED. None. ITEM 9. MATERIAL TO BE FILED AS EXHIBITS. EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION ----------------- ------------------------------------------------------------------------- Exhibit 99(a)(1) Offer to Purchase dated September 19, 1995. Exhibit 99(a)(2) Press Release dated September 13, 1995. Exhibit 99(a)(3) Letter to Shareholders of the Company dated September 19, 1995. Exhibit 99(c)(1) Agreement and Plan of Merger, dated as of September 12, 1995 among the Company, Gambro, COBE and Purchaser. Exhibit 99(c)(2) Stock Purchase Agreement, dated as of May 11, 1991, as amended, between the Company and COBE. Exhibit 99(c)(3) Stock Purchase Agreement, dated as of February 9, 1992, as amended, between the Company and COBE. Exhibit 99(c)(4) Stock Purchase Agreement, dated as of July 2, 1992, as amended, between the Company and COBE.
20 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. September 19, 1995 /s/ LAWRENCE J. CENTELLA ------------------ ------------------------------------------- (Date) Lawrence J. Centella President and Chief Executive Officer 21 ANNEX I [ALEX. BROWN & SONS LETTERHEAD] September 12, 1995 Special Committee of the Board of Directors REN Corporation--USA 6820 Charlotte Pike Nashville, TN 37209 Dear Sirs: REN Corporation--USA ("REN"), Gambro AB ("Gambro"), COBE Laboratories, Inc., a Colorado corporation and indirect wholly owned subsidiary of Gambro ("Parent"), and REN Acquisition Corp., a wholly owned subsidiary of Parent ("Purchaser"), have entered into an Agreement and Plan of Merger dated as of September 12, 1995 (the "Agreement") pursuant to which Purchaser shall make a tender offer (the "Offer") to purchase all the issued and outstanding shares of common stock, no par value, of REN (the "Common Stock") at a price of $20.00 per share, net to the seller in cash. The Agreement also provides that, following the Offer, Purchaser shall be merged with and into REN (the "Merger"), and that each then outstanding share of Common Stock, other than shares held by Parent, Purchaser and their affiliates, will be converted into the right to receive $20.00 in cash. You have requested our opinion regarding the fairness, from a financial point of view, of the cash consideration to be received by the stockholders of REN, other than Gambro, Parent, Purchaser and their affiliates, pursuant to the Agreement. Alex. Brown & Sons Incorporated, 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, secondary distributions of securities, private placements, and valuations for corporate and other purposes. We have served as financial advisor to the Special Committee of the Board of Directors of REN in connection with the transaction contemplated by the Agreement and will receive a fee for our services. We regularly publish research reports regarding the health care industry and the businesses and securities of publicly owned companies in that industry. In connection with this opinion, we have reviewed the Agreement and certain publicly available financial information concerning REN. We have reviewed certain internal financial analyses of REN made available to us by the management of REN and have held discussions with members of the senior management of REN regarding the business and prospects of REN. In addition, we have (i) reviewed the reported price and trading activity for the Common Stock of REN, (ii) compared certain financial and stock market information for REN with similar information for certain other companies whose securities are publicly traded, (iii) reviewed the financial terms of certain recent business combinations, and (iv) performed such other studies and analyses and took into account such other matters as we deemed necessary. We have assumed and relied upon, without independent verification, the accuracy and completeness of the information reviewed by us for purposes of this opinion. With respect to the financial projections used in our analyses, we have assumed that they have been reasonably prepared on bases reflecting the best currently available estimates and judgments of the REN senior management as to the likely future performance of REN. In addition, we have not made an independent valuation or appraisal of the assets of REN, nor have we been furnished with any such valuation or appraisal. We have relied, with your permission, on the statement made by Parent that Parent would not consent to the sale of REN and we were not requested or authorized to solicit, and did not solicit, interest from any party with respect to the acquisition of the Common Stock, REN or any of its constituent businesses. Our opinion is based on market, economic, financial and other conditions as they exist and can be evaluated as of the date of this letter. It is understood that this letter is for the benefit and use of the Special Committee of the Board of Directors of REN only and may not be used for any other purpose without our prior written consent, provided, however, that we hereby consent to the inclusion of this opinion in any offer to purchase, Schedule 14D-9, Schedule 13E-3 or proxy statement used in conjunction with the Offer or the Merger. Based on the analysis described above and subject to the foregoing limitations and qualifications, it is our opinion that the cash consideration to be received by the stockholders of REN other than Gambro, Parent, Purchaser and their affiliates pursuant to the Agreement is fair from a financial point of view to such stockholders as of the date of delivery of this letter. Very truly yours, ALEX. BROWN & SONS INCORPORATED A-2 EX-99.(A)(1) 2 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF REN CORPORATION-USA AT $20.00 NET PER SHARE BY REN ACQUISITION CORP. AN INDIRECT WHOLLY OWNED SUBSIDIARY OF GAMBRO AB THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, OCTOBER 17, 1995, UNLESS THE OFFER IS EXTENDED. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST A MAJORITY OF THE THEN OUTSTANDING SHARES, OTHER THAN SHARES OWNED BENEFICIALLY BY OR OF RECORD BY GAMBRO OR ANY OF ITS AFFILIATES. THE BOARD OF DIRECTORS OF REN CORPORATION-USA, ACTING ON THE UNANIMOUS RECOMMENDATION OF A SPECIAL COMMITTEE OF INDEPENDENT DIRECTORS, UNANIMOUSLY HAS DETERMINED THAT EACH OF THE OFFER AND THE MERGER AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT IS FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF REN CORPORATION-USA OTHER THAN GAMBRO AND ITS AFFILIATES, AND RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. ------------------- IMPORTANT Any stockholder desiring to tender all or any portion of his shares of Common Stock, no par value (the "Shares"), of REN Corporation-USA should either (1) complete and sign the Letter of Transmittal (or a facsimile thereof) in accordance with the instructions in the Letter of Transmittal and mail or deliver it together with the certificate(s) evidencing tendered Shares, and any other required documents, to the Depositary or tender such Shares pursuant to the procedure for book-entry transfer set forth in "THE TENDER OFFER -- Section 3. Procedures for Accepting the Offer and Tendering Shares" or (2) request his broker, dealer, commercial bank, trust company or other nominee to effect the transaction for him. Any stockholder 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 he desires to tender such Shares. A stockholder who desires to tender Shares and whose certificates evidencing 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 procedure for guaranteed delivery set forth in "THE TENDER OFFER -- Section 3. Procedures for Accepting the Offer and Tendering Shares". Questions or requests for assistance may be directed to the Information Agent or to the Dealer Manager 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 and the Notice of Guaranteed Delivery may also be obtained from the Information Agent or from brokers, dealers, commercial banks or trust companies. ------------------- 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. ------------------- The Dealer Manager for the Offer is: UBS SECURITIES INC. September 19, 1995 TABLE OF CONTENTS
PAGE ---- INTRODUCTION.......................................................................... -1- SPECIAL FACTORS....................................................................... -3- Background of the Offer and the Merger............................................ -3- Recommendation of the Special Committee and the Company's Board of Directors; Fairness of the Offer and the Merger............................................. -8- Presentation and Opinion of Financial Advisor to the Special Committee............ -9- Position of Gambro, COBE and Purchaser Regarding Fairness of the Offer and the Merger.......................................................................... -12- Report of Financial Advisor to COBE............................................... -12- Purpose and Effects of the Offer and the Merger................................... -14- Plans for the Company After the Offer and the Merger.............................. -15- Appraisal Rights of Stockholders.................................................. -16- Interests of Certain Persons in the Offer and the Merger.......................... -17- The Merger Agreement.............................................................. -19- Certain U.S. Federal Income Tax Consequences...................................... -23- Certain Litigation Relating to the Offer and the Merger........................... -24- Fees and Expenses................................................................. -24- THE TENDER OFFER...................................................................... -25- 1. Terms of the Offer; Expiration Date................................................ -25- 2. Acceptance for Payment and Payment for Shares...................................... -26- 3. Procedures for Accepting the Offer and Tendering Shares............................ -27- 4. Withdrawal Rights.................................................................. -28- 5. Price Range of Shares.............................................................. -29- 6. Certain Information Concerning the Company......................................... -30- 7. Certain Information Concerning Purchaser, COBE, Gambro and Incentive............... -33- 8. Financing of the Offer and the Merger.............................................. -37- 9. Dividends and Distributions........................................................ -40- 10. Certain Conditions of the Offer................................................... -40- 11. Fees and Expenses................................................................. -41- 12. Effect of the Offer on the Market for the Shares, Exchange Listing and Exchange Act Registration...................................................................... -41- 13. Certain Legal Matters and Regulatory Approvals.................................... -42- 14. Miscellaneous..................................................................... -44-
SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER, COBE, GAMBRO AND INCENTIVE SCHEDULE II TEXT OF CHAPTER 23 OF THE TENNESSEE BUSINESS CORPORATION ACT SCHEDULE III FINANCIAL INFORMATION CONCERNING REN CORPORATION-USA SCHEDULE IV OPINION OF ALEX. BROWN & SONS INCORPORATED To the Holders of Common Stock of REN Corporation-USA: INTRODUCTION REN Acquisition Corp., a Tennessee corporation ("Purchaser") and a wholly owned subsidiary of COBE Laboratories, Inc., a Colorado corporation ("COBE"), hereby offers to purchase all outstanding shares of Common Stock, no par value (the "Shares"), of REN Corporation-USA, a Tennessee corporation (the "Company"), other than Shares owned beneficially by or of record by Gambro (as defined below), COBE, Purchaser or any of their affiliates, at a price of $20.00 per Share (the "Per Share Amount"), net to the seller in cash, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which together constitute the "Offer"). COBE is a Colorado corporation. Its principal executive offices are located at 1185 Oak Street, Lakewood, Colorado 80215. COBE and its subsidiaries design, develop, manufacture, distribute, sell and service medical and therapeutic systems for four medical market segments: cardiovascular, nephrology, apheresis and blood banking. COBE is a direct wholly owned subsidiary of Gambro GmbH, a German corporation, which is a direct wholly owned subsidiary of Gambro AB, a Swedish corporation ("Gambro"). Gambro GmbH's principal executive offices are located at Holger Crafoord, Strasse 26, Postfach 1323, D7450, Hechingen, Germany. Gambro is a global medical technology company engaged principally in the design, development, production, distribution, sale and service of medical and therapeutic systems and products in three areas: renal care; cardiovascular surgery; and blood component technology. Gambro's principal executive offices are located at P.O. Box 10101 Magistratsvagen 16, S-220 10 Lund, Sweden. Incentive AB, a Swedish corporation ("Incentive"), owns shares representing approximately 58.4% of the total voting power of Gambro. Incentive is an international industrial group engaged principally in the following areas: medical technology; engineering and manufacturing for the automative industry; the manufacture of indoor environment control and monitoring products and systems; and the production, sale and service of materials handling equipment, especially for marine cargo. Incentive's principal executive offices are located at Hamngatan 2, P.O. Box 7373, 10391, Stockholm, Sweden. Tendering stockholders 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 with respect to the purchase of Shares by Purchaser pursuant to the Offer. Purchaser will pay all charges and expenses of UBS Securities Inc. ("UBS"), which is acting as Dealer Manager for the Offer (in such capacity, the "Dealer Manager"), Bank of New York (the "Depositary") and Georgeson & Company Inc. (the "Information Agent") incurred in connection with the Offer. See "THE TENDER OFFER -- Section 11. Fees and Expenses". THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD"), ACTING ON THE UNANIMOUS RECOMMENDATION OF A SPECIAL COMMITTEE OF INDEPENDENT DIRECTORS OF THE BOARD (THE "SPECIAL COMMITTEE"), UNANIMOUSLY HAS DETERMINED THAT EACH OF THE OFFER AND THE MERGER AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT IS FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY OTHER THAN GAMBRO, COBE, PURCHASER AND THEIR AFFILIATES, AND RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. The Special Committee's financial advisor, Alex. Brown & Sons Incorporated ("Alex. Brown"), has delivered to the Special Committee its written opinion that the $20.00 per Share cash consideration to be received by the holders of Shares, other than Gambro, Purchaser, COBE or any of their affiliates, pursuant to the Merger Agreement is fair to the holders of such Shares from a financial point of view as of the date of delivery of such opinion. A copy of the opinion of Alex. Brown is set forth in Schedule IV hereto and is contained in the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"), which is being mailed to stockholders herewith. See "SPECIAL FACTORS -- Presentation and Opinion of Financial Advisor to the Special Committee". THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST A MAJORITY OF THE THEN OUTSTANDING SHARES, OTHER THAN SHARES OWNED BENEFICIALLY BY OR OF RECORD BY GAMBRO, COBE, PURCHASER OR ANY OF THEIR AFFILIATES (THE "MINIMUM CONDITION"). THE MINIMUM CONDITION MAY NOT BE WAIVED WITHOUT THE PRIOR WRITTEN CONSENT OF THE SPECIAL COMMITTEE. SEE "THE TENDER OFFER -- SECTION 10. CERTAIN CONDITIONS OF THE OFFER", WHICH SETS FORTH IN FULL THE CONDITIONS TO THE OFFER. The Offer is being made pursuant to an Agreement and Plan of Merger dated as of September 12, 1995 (the "Merger Agreement"), among Gambro, COBE, Purchaser and the Company. The Merger Agreement provides that, among other things, as promptly as practicable after the purchase of Shares pursuant to the Offer and the satisfaction of the other conditions set forth in the Merger Agreement and in accordance with the relevant provisions of the Tennessee Business Corporation Act ("Tennessee Law"), Purchaser will be merged with and into the Company (the "Merger"). Following consummation of the Merger, the Company will continue as the surviving corporation (the "Surviving Corporation") and will become a wholly owned subsidiary of COBE. At the effective time of the Merger (the "Effective Time"), each Share outstanding immediately prior to the Effective Time (other than Shares held by the Company or owned by Purchaser, COBE or any direct or indirect wholly owned subsidiary of COBE or of the Company, and other than Shares held by stockholders who shall have demanded and perfected appraisal rights under Tennessee Law) will be cancelled and converted automatically into the right to receive $20.00 in cash, or any higher price that may be paid per Share in the Offer, without interest (the "Merger Consideration"). The Merger Agreement is more fully described in "SPECIAL FACTORS -- The Merger Agreement". The consummation of the Merger is subject to the satisfaction or waiver of certain conditions, including the purchase by Purchaser of all Shares validly tendered in the Offer and the approval and adoption of the Merger and the Merger Agreement by the affirmative vote of the holders of a majority of the outstanding Shares, as required by Tennessee Law and the Charter of the Company. See "SPECIAL FACTORS -- Purpose and Effects of the Offer and the Merger". The Company has advised Purchaser that as of September 13, 1995, there were 18,951,834 Shares issued and outstanding, 530 record holders of Shares, 542,225 shares of Common Stock subject to options (the "Options") granted pursuant to the Company's Non-Statutory Stock Option Plan of 1988, as amended (the "Stock Option Plan"), 9,344 shares of Common Stock subject to Options granted pursuant to the Company's Employee Stock Purchase Plan, as amended, of July 1, 1994 (the "ESPP") and warrants (the "Warrants") to acquire 74,000 shares of Common Stock. On September 12, 1995, COBE contributed to the capital of Purchaser all the Shares owned by COBE. Accordingly, Purchaser presently owns 10,036,221 of the outstanding Shares, constituting approximately 53% of the outstanding Shares. Pursuant to the Merger Agreement, Gambro, COBE and Purchaser have agreed to cause all Shares owned by them and their subsidiaries to be voted in favor of the approval and adoption of the Merger and the Merger Agreement and the transactions contemplated thereby at any meeting of stockholders at which such matters are to be voted upon. Even if all of the outstanding Options and Warrants were to be exercised, thereby resulting in the issuance of 625,569 additional Shares, Purchaser will have sufficient voting power to approve and adopt the Merger and the Merger Agreement without the approval of any other stockholder of the Company. However, because it is a condition to the Merger that Purchaser have purchased all Shares validly tendered in the Offer and the Minimum Condition is a condition to the Offer, the Merger cannot be consummated unless the Minimum Condition is satisfied or waived. The Minimum Condition cannot be waived without the prior written consent of the Special Committee. Under Tennessee Law, if Purchaser acquires (pursuant to the Offer or otherwise) at least 90% of the then outstanding Shares, Purchaser will be able to approve and adopt the Merger Agreement and the transactions contemplated thereby, including the Merger, without calling a meeting of the Company's stockholders and without the approval of the Company's stockholders. In accordance with Tennessee Law, in the event that Purchaser acquires at least 90% of the then outstanding Shares, Gambro, COBE, Purchaser and the Company have agreed to take, at the request of Purchaser, all necessary and appropriate action to cause the Merger to become effective as soon as reasonably practicable after such acquisition, without a meeting and approval by vote of the Company's stockholders. If, however, Purchaser does not acquire at least 90% of the then outstanding Shares pursuant to the Offer or otherwise and a meeting and the approval of the Company's stockholders is required under Tennessee Law, as described in the preceding paragraph, a significantly longer period of time will be required to effect the Merger. See "SPECIAL FACTORS -- Purpose and Effects of the Offer and the Merger". THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. 2 SPECIAL FACTORS BACKGROUND OF THE OFFER AND THE MERGER Pursuant to three stock purchase agreements described below (collectively, the "Stock Purchase Agreements") between COBE and the Company, COBE purchased from the Company a total of 9,337,399 Shares, representing approximately 51.1% of the Shares. The Stock Purchase Agreements referred to in the preceding sentence are (i) the Stock Purchase Agreement, dated as of May 11, 1991, as amended through April 26, 1994, (ii) the Stock Purchase Agreement, dated as of February 9, 1992, as amended through March 17, 1992 and (iii) the Stock Purchase Agreement, dated as of July 2, 1992, as amended through September 15, 1992. In addition, pursuant to Letter Agreements dated as of July 14, 1993, COBE acquired 204,020 Shares from Elizabeth G. Tannenbaum, individually and as custodian and trustee, and 489,280 Shares from Jerome S. Tannenbaum, M.D., the Company's former Chairman, President and Chief Executive Officer, in privately negotiated transactions at a price of $16 per Share, or an aggregate purchase price of $11,092,800. Of this amount, $9,092,800 was paid in cash and $2 million was paid by a promissory note to Dr. Tannenbaum. COBE currently owns 10,036,221 Shares, representing approximately 53% of the total outstanding Shares. The Stock Purchase Agreements provide that, subject to certain exceptions, during the time period specified therein, COBE shall not directly or indirectly acquire or agree, offer, seek or propose to acquire, or cause to be acquired, ownership of any securities of the Company, unless specifically requested to do so in writing in advance by the Board (the "Standstill Provision"). On July 13, 1995, the boards of directors of Gambro and COBE approved an acquisition of all of the Shares which COBE did not already own at $18.00 per Share and authorized Mr. Mats Wahlstrom, who is the Chairman of the Board and also the President of COBE, to present a proposal for an acquisition on those terms to the Board. Later on July 13, 1995, the Board held a meeting at which Mr. Wahlstrom informed the Board that COBE was interested in purchasing all of the remaining Shares that COBE did not already own. Mr. Wahlstrom expressed that COBE believed that COBE and the Company must grow, by acquisition or otherwise, to compete effectively in the healthcare industry and that this growth could be achieved more effectively if the Company becomes a wholly owned subsidiary of COBE. Mr. Wahlstrom discussed the terms on which COBE was willing to make a proposal and explained that the Standstill Provision prevented COBE from making a proposal to acquire Shares unless the Board requested it to do so in writing. Mr. Wahlstrom also stated that, if the Board were to invite COBE to make such a proposal, a special committee of independent directors of the Board to represent the interests of stockholders other than COBE or its affiliates should be established and that that committee should consist of Dr. J. Kenneth Jacobs and Dr. Juha P. Kokko, who are not affiliated with COBE or Gambro. The Board unanimously determined to waive the Standstill Provision for the limited purpose of allowing COBE to deliver a proposal to the Company on the terms discussed by Mr. Wahlstrom. However, the Standstill Provision continued to prohibit COBE or its affiliates from actually acquiring Shares without a further waiver. The Board then established the Special Committee, consisting of Dr. Jacobs and Dr. Kokko, for the purpose of considering, negotiating and submitting a recommendation to the Board concerning the terms of the proposal to be made by COBE. The Company then delivered the following letter to COBE: July 13, 1995 COBE Laboratories, Inc. 1185 Oak Street Lakewood, Colorado 80215 Attention: Mats Wahlstrom Re: Request for Proposal to Acquire Common Stock 3 Gentlemen: As of the date hereof and pursuant to Section 5.11 of the Stock Purchase Agreement dated as of May 24, 1991 between REN Corporation-USA (the "Corporation") and COBE Laboratories, Inc. ("COBE"), as amended as of October 1, 1992 (the "Stock Purchase Agreement"), the Corporation, pursuant to the duly authorized action of its Board of Directors, hereby permits COBE to submit its proposal to acquire all the common shares, no par value, of the Corporation that COBE does not currently own pursuant to the letter attached hereto from COBE addressed to the Board of Directors of the Corporation and dated as of July 13, 1995. Very truly yours, REN CORPORATION-USA By: /s/ LAWRENCE J. CENTELLA .................................. Name: Lawrence J. Centella Title: President and Chief Executive Officer COBE delivered the following letter to the Board containing its proposal (the "Proposed Transaction"): July 13, 1995 Board of Directors of REN Corporation-USA Gentlemen: I am pleased to offer on behalf of COBE Laboratories, Inc. ("COBE"), to acquire the equity interest represented by all of the issued and outstanding common shares, no par value, of REN Corporation-USA ("REN") not currently owned by COBE including all common shares that may be issued upon the exercise of options and warrants outstanding on the date hereof (the "Public Shares"). The principal terms of our offer are as follows: 1. The transaction would be a cash merger in which each holder of a Public Share would receive $18 per share, or an aggregate of approximately $170 million based on the number of Public Shares outstanding on July 12, 1995. 2. Consummation of the acquisition would be subject to among other things, approval by the Board of Directors of REN and other conditions customary in a transaction of this type. 3. COBE proposes to finance the acquisition of the Public Shares from bank borrowings. 4. We anticipate that, upon completion of the acquisition, COBE will cause the common shares of REN to be delisted from trading on the NASDAQ National Market System and to cause deregistration of such common shares with the Securities and Exchange Commission. We believe that our offer is fair to, and in the best interests of, REN and its public shareholders. The proposed acquisition price is equivalent to an 18% premium over the average closing price of the common shares on the NASDAQ National Market System over the 60 trading days ended July 12, 1995. We believe that the investment by COBE in REN has been beneficial to COBE and its parent, Gambro AB, and also to REN's public shareholders. However, COBE and REN are facing an increasingly competitive environment and the prospect of industry-wide consolidation. We believe that COBE and REN must grow, by acquisition or otherwise, to compete effectively in this rapidly changing environment and that this growth can be achieved much more effectively if REN becomes a wholly owned subsidiary. 4 We wish to make it clear that we are not interested under any circumstances in selling our interest in REN and that there is thus no prospect of a sale of controlling interest to a third party. Our offer is made pursuant to your letter dated as of July 13, 1995 to COBE. We understand that you may wish to deliberate on this offer through a special committee of independent directors and that such committee may wish to retain its own advisors to assist in those deliberations. We invite your representatives to meet with our advisors to discuss this proposal at your earliest convenience. We hope you will give this proposal your prompt attention. We reserve the right to amend or withdraw this proposal at any time in our discretion. Sincerely, /s/ MATS WAHLSTROM ...................................... Mats Wahlstrom President COBE Laboratories, Inc. The Company issued the following press release, dated July 14, 1995, in connection with the Proposed Transaction: "COBE LABORATORIES, INC. PROPOSES TO BUY PUBLIC INTEREST IN ITS REN CORPORATION-USA SUBSIDIARY FOR $18.00 PER SHARE. COBE Laboratories, Inc., a wholly-owned subsidiary of Gambro AB, today announced a proposal to acquire all of the equity interests in REN Corporation-USA (NASDAQ National Market System: RENL) not currently owned by COBE Laboratories, Inc., including all common shares that may be issued upon the exercise of options and warrants outstanding on July 12, 1995. Under the proposed transaction, the public shareholders of REN Corporation-USA would receive $18.00 a share in cash, or an aggregate of approximately $170.2 million for all the shares of common stock, no par value (the "Common Stock"), of REN Corporation-USA held by the public. As of the date hereof, COBE Laboratories, Inc. owns approximately 53% of the Common Stock of REN Corporation-USA. The offer is subject to the approval of the Board of Directors of REN Corporation-USA, and other conditions customary in transactions of this type. The offer also noted that the proposed acquisition price is equivalent to an approximately 17.9% premium over the average closing price of REN Corporation-USA Common Stock on the NASDAQ National Market System over the 60 trading days ended July 12, 1995. In response to the offer by COBE Laboratories, Inc., the Board of REN Corporation-USA has established a special committee of its independent directors to consider the terms of the offer and to make recommendations in connection with the offer to the Board of Directors of REN Corporation-USA. UBS Securities, Inc. is acting as financial advisor to COBE Laboratories, Inc. in connection with the proposed transaction. July 14, 1995" In the second half of July 1995, the Special Committee retained Alex. Brown as its financial advisor and also retained independent legal counsel. Beginning at the end of July 1995, the Special Committee's financial and legal 5 advisors commenced an investigation of the Company and its business. As part of that investigation, officers of the Company met with, and supplied information to, the Special Committee's financial and legal advisors. On August 8, 1995, the Special Committee held a telephonic meeting with its financial and legal advisors. At that meeting, the Special Committee discussed the results of the investigation of the Company and its business (which was still ongoing) that the Special Committee's financial and legal advisors were conducting and the possible structure and terms of any agreement that might be reached with COBE. Between August 8 and August 28, 1995, the financial and legal investigation of the Company and its business continued. On August 28, 1995, the Special Committee held a meeting in Nashville, Tennessee with its financial and legal advisors. The Special Committee reviewed and discussed with its counsel its fiduciary duties and the rights and powers of the Special Committee under applicable law, the Charter and By-laws of the Company and under the Stock Purchase Agreement. The Special Committee was advised that its purpose was to negotiate at arm's length with COBE in order to protect the interests of the Company's stockholders other than COBE and its affiliates. The Special Committee was further advised that it was under no obligation to reach any agreement at all with COBE unless the Special Committee determined that such an agreement was in the best interests of the Company's stockholders other than COBE and its affiliates. The Special Committee also discussed the possibility, and the benefits and detriments, of the use of forms of consideration other than cash in a transaction with COBE and discussed the possible structure of a transaction with COBE, including the benefits and detriments of the use of a tender offer and of a single-step merger transaction and the possibility of requiring majority of the minority tendering or voting conditions. At the August 28, 1995 meeting, Alex. Brown made a financial presentation about the Company to the Special Committee, which included various analyses, including a review of the reported price and trading activity for the Shares, a comparison of certain financial and stock market information for the Company with similar information for certain other companies whose securities are publicly traded, a review of the financial terms of certain recent business combinations and a discounted cash flow analysis. The Special Committee also received a presentation from its legal advisors on certain proposed and pending federal legislative and regulatory initiatives, including in the Medicare reimbursement area, and discussed and considered the possible impact of those initiatives on the Company. The Special Committee's legal advisors also discussed with the Committee the terms of a draft merger agreement that had been submitted to the Special Committee's legal advisors by COBE's legal advisors. In light of the foregoing, the Special Committee discussed at the August 28, 1995 meeting whether any transaction with COBE would be desirable at this time and determined that it would be in the best interests of the Company's shareholders other than COBE or its affiliates to enter into negotiations with COBE regarding a possible transaction. At the August 28, 1995 meeting, the Special Committee authorized its financial advisors to approach COBE's financial advisors with a proposal for a transaction at $22.00 per Share. The Special Committee also authorized its legal advisors to attempt to negotiate open issues with respect to the non-financial terms of a merger agreement with COBE's legal advisors. The Special Committee's legal advisors commenced that process following the August 28 meeting. On August 30, 1995, the financial advisors for COBE and the Special Committee met, at which time the Special Committee's financial advisors proposed a price of $22.00 per Share and also requested COBE to consider a transaction in which Gambro stock would be used as consideration, possibly in addition to cash. COBE's financial advisors stated that a price of $22.00 per Share price was far too high and also stated that COBE and Gambro were unwilling to use Gambro stock instead of cash. On September 6, 1995, COBE's financial advisors proposed to the Special Committee's financial advisors that the transaction be effected through a cash tender offer, followed by a merger, at $19.25 per Share. During the next several days, the members of the Special Committee discussed that proposal with their financial and legal advisors and representatives of the Special Committee held discussions with representatives of COBE. On September 9, 1995, the Special Committee held a telephonic meeting to discuss COBE's proposal at $19.25 per Share. The Special Committee decided to reject COBE's $19.25 per Share proposal and negotiate for a higher price. The Special Committee also discussed the advantages and disadvantages of effecting a transaction through a tender offer. 6 On September 10, 1995, the Special Committee and Mr. Wahlstrom, representing COBE, met with their respective financial advisors. After some discussion and an unsuccessful effort by Mr. Wahlstrom to persuade the Special Committee to accept a price of less than $20.00 per Share, Mr. Wahlstrom proposed a price of $20.00 per Share in a transaction effected through a tender offer. Mr. Wahlstrom stated that COBE would not pay a higher price. The Special Committee indicated that it would accept this proposal subject to negotiation of the terms of a definitive merger agreement. Following that meeting, the Special Committee authorized its legal advisors to continue negotiations on the terms of a definitive merger agreement, including the terms and conditions of the proposed tender offer, subject to approval by the Special Committee and the Board. Those negotiations took place during September 11 and 12, 1995. On September 12, 1995, the Special Committee held a telephonic meeting with its financial and legal advisors. The Special Committee reviewed the Merger Agreement as it had been finally negotiated between its legal advisors and COBE's legal advisors. Alex. Brown rendered its oral opinion that the consideration of $20.00 per Share, in cash, to be received by the Company's stockholders, other than Gambro, COBE, Purchaser and their affiliates, pursuant to the Merger Agreement was fair from a financial point of view to such shareholders as of the date of the opinion. That opinion has since been confirmed in writing and is attached hereto as Schedule IV. After reviewing the foregoing analysis and receiving the oral opinion of Alex. Brown, the Special Committee recommended that the Board approve and adopt the Merger Agreement and approve and consent to the Offer. Also on September 12, 1995, and immediately following the Special Committee meeting, the Board held a telephonic meeting at which the opinion of Alex. Brown and the recommendations of the Special Committee were presented and the Board approved and adopted the Merger Agreement. On September 12, 1995, the Board also delivered to the Board of COBE the following letter requesting that Gambro, COBE and Purchaser enter into the Merger Agreement and consummate the transactions contemplated thereby in accordance with the terms and conditions of the Merger Agreement: September 12, 1995 COBE Laboratories, Inc. 1185 Oak Street Lakewood, Colorado 80215 Attention: Mats Wahlstrom Re: Request for Proposal to Acquire Common Stock Gentlemen: As of the date hereof and pursuant to Section 5.11 of the Stock Purchase Agreement dated as of May 24, 1991 between REN Corporation-USA (the "Corporation") and COBE Laboratories, Inc. ("COBE"), as amended through April 26, 1994, the Corporation, pursuant to the duly authorized action of its Board of Directors, hereby requests Gambro AB, a Swedish company ("Gambro"), COBE, a wholly owned indirect subsidiary of Gambro, and REN Acquisition Corp., a Tennessee corporation and a wholly owned subsidiary of COBE ("Purchaser"), to enter into an Agreement and Plan of Merger, dated as of September 12, 1995, among Gambro, COBE, Purchaser and the Corporation and to consummate the transactions contemplated thereby in accordance with the terms and conditions thereof. Very truly yours, REN CORPORATION-USA By: /s/ LAWRENCE J. CENTELLA .................................. Name: Lawrence J. Centella Title: President and Chief Executive Officer 7 The Merger Agreement was executed and delivered by the parties thereto on September 12, 1995 and the transaction was announced on the morning of September 13, 1995. The Company issued the following press release, dated September 13, 1995, in connection with the Merger Agreement: "REN CORPORATION-USA ANNOUNCES SIGNING OF DEFINITIVE MERGER AGREEMENT NASHVILLE, Tenn., September 13, 1995--REN Corporation-USA, a Tennessee corporation (NASDAQ: RENL), today announced that it has signed a definitive merger agreement with Gambro AB (NASDAQ: GAMBY) and COBE Laboratories, Inc., the Lakewood, Colorado-based wholly owned subsidiary of Gambro ("COBE"), providing for the acquisition of REN's publicly held shares at a price of $20 per share, net to the seller in cash. Pursuant to the merger agreement, a newly formed wholly owned subsidiary of COBE ("Purchaser") will commence a tender offer for all of the issued and outstanding shares of common stock of REN not currently owned by COBE. Purchaser will commence the tender offer no later than September 19, 1995. Following the tender offer, Purchaser will be merged into REN, and all REN shares not purchased pursuant to the tender offer will be converted into a right to receive $20 per share in cash in a second-step merger to be consummated as soon as practicable after the tender offer. Upon consummation of the merger, REN will become a wholly owned subsidiary of COBE and an indirect wholly owned subsidiary of Gambro. The tender offer will be conditioned upon, among other things, at least a majority of the REN shares, other than the REN shares owned by COBE or its affiliates, being validly tendered and not withdrawn prior to the expiration of the tender offer. COBE and its affiliates presently own approximately 53% of the outstanding REN shares. The merger agreement has been unanimously approved by a special committee of independent directors of REN and, based on the recommendation of the special committee, the Board of Directors of REN has unanimously approved the merger agreement and recommended that holders tender their REN shares pursuant to the tender offer. UBS Securities Inc. is acting as financial advisor to COBE in connection with the transaction and is acting as sole Dealer Manager in connection with the tender offer. Alex. Brown & Sons Incorporated is acting as financial advisor to the special committee and has rendered an opinion that the consideration to be received by the public shareholders of REN pursuant to the merger agreement is fair from a financial point of view. REN is the nation's fourth largest provider of kidney dialysis services. REN owns and operates 68 dialysis centers, located across 18 states and the District of Columbia. Several of these centers are associated with prominent academic institutions. Overall, the company has over 1,150 treatment stations servicing approximately 5,700 patients. In 1994, REN performed 646,000 dialysis treatments. REN also performs blood and urine testing services for its centers and others." RECOMMENDATION OF THE SPECIAL COMMITTEE AND THE COMPANY'S BOARD OF DIRECTORS; FAIRNESS OF THE OFFER AND THE MERGER The Company, acting through the Board acting upon the unanimous recommendation of the Special Committee, has approved of and consented to the Offer and has represented that the Board, acting upon the unanimous recommendation of the Special Committee, at a meeting duly called and held on September 12, 1995, has unanimously (A) determined that the Merger Agreement and the transactions contemplated thereby, including each of the Offer and the Merger, are fair to and in the best interests of the holders of Shares other than COBE or its affiliates, (B) approved and adopted the Merger Agreement, the execution of the Merger Agreement and the transactions contemplated by the Merger Agreement (which approval includes the approval of a majority of the Company's disinterested directors, as required both by Tennessee Law and by Article X of the Company's By-laws), and (C) recommended that the stockholders of the Company accept the Offer and approve and adopt the Merger Agreement and the transactions contemplated thereby. The Company has been advised by each of its directors and executive officers that they intend either to tender all Shares beneficially owned by them to Purchaser pursuant to 8 the Offer or to vote such Shares in favor of the approval and adoption by the stockholders of the Company of the Merger Agreement and the transactions contemplated thereby. In reaching their conclusions, the Special Committee considered a number of factors (some of which had been discussed at earlier meetings), including, without limitation, the following: (i) The price of $20.00 per Share represents a substantial premium over the market price of the Shares prior to the announcement of the Proposed Transaction and was higher than the highest historical market price for the Shares prior to such announcement. (ii) The fact that stock market prices, both for the Company and in the United States in general, are at or near historic highs, indicating that the timing of a transaction is not unfavorable for the minority stockholders. (iii) The Special Committee's perception, after consultation with its financial advisors, that $20.00 per Share is, based on a number of tests, including a comparison of recent comparable transactions involving the buy-out of minority stockholders, a reasonable price for the minority stockholders' Shares. (iv) The Special Committee's knowledge of the Company's business, measured against the possibility of changes in the legal and regulatory climate in the healthcare industry and other factors that might affect the Company's business. (v) The existence of the Standstill Provision prohibiting COBE and its affiliates from purchasing Shares and a covenant not to compete with the Company by COBE and its affiliates in the Stock Purchase Agreements, Article X of the Company's By-laws (prohibiting a transaction between the Company and an affiliate without the approval of a majority of disinterested directors), the fact that the Standstill Provision will expire on May 24, 1996 and that the Company's By-laws can be amended by the holders of two-thirds of the Shares. (vi) The possibility that, because of a decline in the Company's business, the trading price of the Shares or the stock market in general, the consideration that the minority stockholders would obtain for their Shares in a future transaction might be less advantageous than the consideration they would receive pursuant to the Offer and the Merger. (vii) The opinion of Alex. Brown that the consideration to be received by the stockholders of the Company other than Gambro, COBE, Purchaser and their affiliates pursuant to the Merger Agreement was fair from a financial point of view to such stockholders as of the date of the opinion. None of the factors considered by the Special Committee, including the foregoing factors, was dispositive to the Special Committee's conclusions, nor did the Special Committee assign any relative priority to the various factors considered. PRESENTATION AND OPINION OF FINANCIAL ADVISOR TO THE SPECIAL COMMITTEE Alex. Brown delivered to the Special Committee its oral opinion, which opinion was subsequently confirmed in writing, that, as of September 12, 1995, the consideration to be received by the holders of Shares, other than Gambro, COBE, Purchaser and their affiliates, pursuant to the Merger Agreement was fair from a financial point of view to such holders. No limitations were imposed by the Special Committee upon Alex. Brown with respect to the investigations made or procedures followed by it in rendering its opinion. Alex. Brown relied, with the permission of the Special Committee, on the statement made by COBE that it would not dispose of its Shares or vote its Shares in favor of any transaction involving the sale of the Company and Alex. Brown was not requested or authorized to solicit, and did not solicit, interest from any party with respect to the acquisition of the Shares or the assets of the Company or any of its constituent businesses. The full text of the opinion of Alex. Brown dated as of September 12, 1995, which sets forth the assumptions made, matters considered and limitations on the review undertaken, is attached as Schedule IV. Holders of Shares are urged to read this opinion in its entirety. Alex. Brown's opinion is directed only to the fairness from a financial point of view of the consideration to be received by the holders of Shares and does not constitute a recommendation 9 to any holder of Shares as to whether such holder should tender Shares in the Offer. The following summary of the opinion of Alex. Brown is qualified in its entirety by reference to the full text of such opinion. In connection with its opinion, Alex. Brown reviewed the Merger Agreement and certain publicly available financial information concerning the Company. Alex. Brown also reviewed certain internal financial analyses and other information, including financial projections furnished to it by the Company and held discussions with members of the senior management of the Company regarding the business and prospects of the Company. In addition, Alex. Brown (i) reviewed the reported prices and trading activity for the Shares, (ii) compared certain financial and stock market information for the Company with similar information for certain other companies whose securities are publicly traded, (iii) reviewed the financial terms of certain recent business combinations and (iv) performed such other studies and analyses and considered such other factors as it deemed appropriate. As described in the opinion, Alex. Brown assumed, without independent verification, the accuracy and completeness of the information that it reviewed and relied upon for purposes of rendering its opinion. With respect to the financial projections furnished to it, Alex. Brown assumed that they had been reasonably prepared on bases reflecting the best currently available estimates and judgements of the senior management of the Company as to the likely future financial performance of the Company. In addition, Alex. Brown did not make an independent valuation or appraisal of the assets of the Company, nor was it furnished with any such valuation or appraisal. Alex. Brown's opinion stated that such opinion was based on market, economic, financial and other conditions as they existed and could be evaluated as of the date of the opinion. The following is a summary of the report presented by Alex. Brown to the Special Committee on September 12, 1995 (the "Alex. Brown Report") in connection with its September 12, 1995 opinion. Stock Trading History. Alex. Brown reviewed the historical trading volume and market prices for the Shares. In addition, Alex. Brown reviewed and analyzed the relationship between movements of the price of the Shares and movements in the Standard & Poor's average of 500 stocks and movements in the prices of companies considered by Alex. Brown to be reasonably similar to the Company. This analysis showed that the $20.00 per Share offer price was 20.3% higher than the highest closing price for the Shares prior to announcement of the Proposed Transaction by COBE on July 14, 1995. Comparison of the Company with Selected Publicly Traded Companies. Alex. Brown compared certain financial information for the Company with corresponding data and ratios for the following group of six publicly traded health care services companies: American Medical Response, Inc., HEALTHSOUTH Corporation, Lincare Holdings Inc., Renal Treatment Centers, Inc., Surgical Care Affiliates, Inc. and Vivra Incorporated. Such financial information included market value, aggregate market value (market value adjusted by adding debt and subtracting cash and marketable securities), profitability, returns, growth rates and implied multiples of revenues, operating cash flow (earnings before depreciation, amortization, interest and taxes less minority interest), operating income (earnings before interest and taxes less minority interest), net income and estimated future earnings per share (as reported by I/B/E/S) for the calendar years 1995 and 1996. This analysis showed that on September 8, 1995, the ratio of stock price to projected calendar 1995 earnings per share for the six companies listed above ranged from 16.5x to 25.3x and with a mean of 20.7x and the ratio of stock price to projected calendar 1996 earnings per share ranged from 13.7x to 19.9x with a mean of 16.9x. The implied equity value per share based on the mean multiples and the Company's projected calendar 1995 and 1996 net income was $14.14 and $16.61, respectively. Alex. Brown noted that the ratio of the $20.00 offer price to the Company's projected calendar 1995 earnings per Share was 29.4x and the ratio of the offer price to the Company's projected calendar 1996 earnings per Share was 20.4x. Analysis of Selected Health Care Merger and Acquisition Transactions. Alex. Brown analyzed, based on thirteen recent mergers and acquisitions in the alternate-site health care delivery market, the financial multiples of equity purchase price to last twelve months' net income and to forward twelve months' net income and the multiples of aggregate purchase price (equity purchase price adjusted by adding debt and subtracting cash and marketable securities) to last twelve months' revenues, operating cash flow and operating income. Alex. Brown also analyzed the premiums of the purchase price over stock prices prior to transaction announcement in these transactions. Alex. Brown calculated the implied equity value per share of the Company by applying the Company's actual and forecasted financial results to the mean multiple for each of the measures derived from this analysis. For the thirteen 10 transactions in the alternate-site health care delivery market, the implied equity value per Share ranged from $15.25 to $23.72. Analysis of Selected Minority Buyouts. Using publicly available information, Alex. Brown analyzed the purchase prices and premiums of the purchase price over stock prices prior to transaction announcement paid in 31 minority buyout transactions with values greater than $25.0 million since 1990. This analysis resulted in a range of purchase price premiums to the stock price one day prior to announcement of (9.8%) to 66.7%, with a mean purchase price premium of 26.6% and a median purchase price premium of 24.3%. Alex. Brown also analyzed the range of purchase price premiums to the stock price one month prior to transaction announcement which indicated a range of 16.5% to 88.6% with a mean purchase price premium of 32.7% and a median purchase price premium of 28.9%. Alex. Brown calculated the implied Company purchase price per Share based on these premiums. This analysis implied purchase prices per Share of $19.94 and $19.58 based on the mean and median premiums, respectively, to the stock price one day prior to announcement, and implied purchase prices per Share of $19.58 and $19.01 based on the mean and median premiums, respectively, to the stock price one month prior to announcement. Discounted Cash Flow Analysis. Using a discounted cash flow analysis, Alex. Brown calculated the present value of the future cash flows that the Company could produce over a five-year period from 1996 through the end of 2000 under various assumptions. The cash flows were based on financial forecasts prepared by the Company's management for 1995 through 1998 and estimates for 1999 and 2000 which were based on an extrapolation of the 1998 data and were reviewed with the Company's management. Alex. Brown discounted these cash flows to September 30, 1995, at discount rates ranging from 11.0% to 15.0% based upon the consideration of a number of factors, including cost of capital, required rates of return to investors and risks attributable to the uncertainty of achieving the projected cash flows. The terminal value was computed based on projected earnings before depreciation, amortization, interest and taxes less minority interest in calendar year 2000 and a range of terminal multiples of 7.0x to 9.0x. The foregoing analysis resulted in a present value range for the Company of $18.63 to $27.63 per share. The summary set forth above does not purport to be a complete description of the presentation by Alex. Brown of the Alex. Brown Report to the Special Committee or the analyses performed and factors considered by Alex. Brown in connection with its opinion dated September 12, 1995. A copy of the Alex. Brown Report has been filed as an Exhibit to the Schedule 13E-3. Alex. Brown believes that its analyses and the summary set forth above must be considered as a whole and that selecting portions of its analyses, without considering all analyses, or selecting portions of the above summary, without considering all factors and analyses, could create an incomplete view of the process underlying the analyses set forth in the opinion and the Alex. Brown Report. In performing its analyses, Alex. Brown made numerous assumptions with respect to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of the Company. The analyses performed by Alex. Brown are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than those which are suggested by such analyses. Alex. Brown is a nationally 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 corporate and other purposes. Alex. Brown regularly publishes research reports regarding the health care industry and the businesses and securities of publicly traded companies in that industry. Pursuant to a letter agreement dated as of August 10, 1995 (the "Alex. Brown Engagement Letter") between the Special Committee, the Company and Alex. Brown, the Company paid Alex. Brown a fee of $100,000 in consideration of its services as the Special Committee's financial advisor. In addition, the Company agreed to pay Alex. Brown an additional fee of $800,000 for its services as the Special Committee's financial advisor upon the earlier to occur of (i) the conclusion of the Special Committee's work with regard to the Proposed Transaction (regardless of whether there was an agreement regarding any business combination transaction or whether any business combination transaction was consummated), (ii) the execution of a definitive agreement for a business combination transaction or (iii) 90 days from the date of the Alex. Brown Engagement Letter. The Alex. Brown Engagement Letter also provides that if Alex. Brown is requested to deliver any additional opinions with respect to 11 amended or revised offers, the Company will pay Alex. Brown an additional fee of $100,000 upon delivery of each such additional opinion. The Company also agreed to indemnify and hold harmless Alex. Brown and each of its directors, officers, agents, employees and controlling persons against any losses, claims, damages or liabilities related to or arising out of Alex. Brown's engagement. If such indemnification is not available, the Company agreed to contribute to the losses, claims, damages or liabilities in proportion to the relative benefits received by the Company and the party seeking contribution as well as in proportion to the relative faults of the Company and the party seeking contribution. The Company also agreed to pay all of Alex. Brown's reasonable out-of-pocket expenses, including reasonable fees and disbursements of counsel. POSITION OF GAMBRO, COBE AND PURCHASER REGARDING FAIRNESS OF THE OFFER AND THE MERGER Gambro, COBE and Purchaser regard the acquisition of the Company as the most feasible means of improving the long-term viability of, and protecting the value of their investment in, the Company. Gambro, COBE and Purchaser believe that the Company and COBE must in the future grow, by acquisition or otherwise, to compete effectively in an increasingly competitive and rapidly changing healthcare marketplace, which is characterized by industry-wide consolidation. Gambro, COBE and Purchaser believe that this growth can be achieved much more effectively if the Company becomes a wholly owned subsidiary of COBE. Gambro, COBE and Purchaser believe that the consideration to be received by the Company's stockholders under the Offer and in the Merger is fair to the Company's stockholders. Gambro, COBE and Purchaser base their belief on (i) the fact that the Board, acting upon the unanimous recommendation of the Special Committee, and the Special Committee, based on the factors considered by the Special Committee as set forth above, concluded that the Offer and Merger are fair to and in the best interests of the Company's stockholders, (ii) the fact that Gambro, COBE and Purchaser and their financial and legal advisors negotiated the Merger Agreement with the Special Committee on an arm's-length basis, (iii) the financial analysis of UBS provided to certain senior executives of COBE as described below, (iv) the current and historical market prices for the Shares and fact that the consideration to be paid in the Offer and the Merger represents a premium of approximately 27% over the closing price for the Shares on the National Association of Securities Dealers Automated Quotation--National Market System ("NASDAQ") on July 13, 1995, the last trading day prior to the public announcement of the Proposed Transaction and (v) the fact that COBE is not interested under any circumstances in selling its interest in the Company and that there is thus no prospect for the sale of a controlling interest in the Company to a third party. Gambro, COBE and Purchaser have reviewed the factors considered by the Special Committee in support of its decision, as described above, and had no basis to question their consideration of or reliance on those factors. Neither Gambro, COBE nor Purchaser found it practicable to assign, nor did any of them assign, relative weights to the individual factors considered in reaching their conclusion as to fairness. REPORT OF FINANCIAL ADVISOR TO COBE UBS was retained by COBE to act as its financial advisor in connection with the transactions contemplated hereby. On July 6, 1995, representatives of UBS met with certain senior executives of COBE and presented certain financial analyses of the Company (the "UBS Presentation"). UBS was not requested to, and did not, render any opinion with respect to the fairness of the consideration to be received by holders of Shares pursuant to the Offer or the Merger, nor does UBS express any opinion thereon. In preparing its report and making its analyses, UBS assumed and relied without independent verification upon the accuracy and completeness of the information reviewed by it for purposes of its report and analyses. UBS assumed that the financial forecasts supplied by the Company had been reasonably prepared on bases reflecting the best currently available estimates and judgments of the future financial performance of the Company. UBS did not make, nor was it provided with, any independent valuation appraisals. UBS' analyses were based on economic, market and other conditions on the date of the presentation and the information made available to UBS as of such date. The UBS Presentation was one of many factors taken into consideration by COBE in making its determination to present the Offer. Consequently, the UBS Presentation should not be viewed as determinative of COBE's decision to proceed with the Offer. 12 The following is a summary of certain of the analyses performed by UBS in connection with the UBS Presentation: Historical Stock Price Performance. UBS reviewed the historical stock market performance of the Shares and of the common shares of Renal Treatment Centers, Inc. and Vivra Incorporated (the "Selected Companies"), publicly traded companies that UBS deemed relevant for the purposes of its analyses, over approximately a three-year period (from June 26, 1992 to June 30, 1995) and a twelve-month period (from June 30, 1994 to June 30, 1995). UBS compared the market prices for the Shares to an index comprised of the Selected Companies weighted by market capitalization and to the Standard & Poor's 500 Index over the aforementioned time periods. Analysis of Selected Companies. UBS compared certain financial information and operating statistics of the Company with corresponding financial information and operating statistics of the Selected Companies, based upon the most recent publicly available information. Such financial information and operating statistics included, among other things, certain historical and projected growth rates, certain historical margins, market values of equity, total enterprise values and certain market multiples. The analysis of such financial information and operating statistics yielded implied per Share values ranging from $9.77 to $20.70. Discounted Cash Flow Analysis. UBS performed a discounted cash flow analysis using financial forecasts furnished by the Company's management for 1995 through 1998 and an estimate for 1999 based upon an extrapolation of 1998 data. Based on such forecasts, UBS calculated the Company's earnings before interest, taxes, depreciation and amortization ("EBITDA") and free cash flow (determined for this purpose as forecasted unleveraged net income adjusted for forecasted depreciation and amortization, forecasted capital expenditures and forecasted working capital requirements) for 1995 through 1999. UBS discounted such stream of free cash flows back to June 30, 1995, using discount rates ranging from 10.0% to 14.0%. To estimate the residual value of the Company at the end of 1999, UBS applied terminal multiples of 6.5x to 7.5x to the forecasted 1999 EBITDA and discounted such value estimates back to June 30, 1995, using discount rates ranging from 10.0% to 14.0%. UBS determined the range of discount rates and terminal multiples based on a variety of factors, including, among other things, analyses of the estimated cost of capital of the Company, the range of market multiples for the Selected Companies and general market conditions. UBS then added the present values of the free cash flows and the present values of the residual values to derive a range of implied enterprise values for the Company. These calculations resulted in implied per Share values ranging from $16.95 to $22.41. Analysis of Selected Minority Buyout Transactions. UBS reviewed 22 selected acquisitions of minority shareholdings valued at more than $10 million since January 1990 and evaluated the premiums over the prevailing market prices paid by buyers in such acquisitions. The analysis indicated that the premiums represented by the purchase price over the market prices of the subject companies one day and one month prior to the announcement of the subject transaction ranged from 2.2% to 57.1%, with a median of 22.8% (which resulted in an implied per Share value of $19.49), and 4.8% to 61.1%, with a median of 31.1% (which resulted in an implied per Share value of $18.52). The UBS Presentation summarized above was prepared solely for internal use and not with a view to public disclosure. The foregoing summary of the UBS Presentation is included in this Offer to Purchase solely because such information was furnished by UBS to COBE. In performing its analyses, UBS made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of COBE or the Company. The analyses performed by UBS are not necessarily indicative of actual values, which may be significantly more or less favorable than those which are suggested by such analyses. Such analyses do not purport to be appraisals or to reflect the prices at which the Shares might actually be sold. The foregoing summary does not purport to be a complete description of the UBS Presentation or of UBS' oral presentation to certain senior executives of COBE on July 6, 1995. A copy of the UBS Presentation has been filed as an Exhibit to the Schedule 13E-3, and copies thereof will be made 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 any representative designated in writing and may also be obtained in the manner described under "THE TENDER OFFER -- Section 6. Certain Information Concerning the Company" (except that copies are not available at the regional offices of the Commission). 13 No limitations were placed by COBE on UBS with respect to the investigations made or the procedures followed by UBS. UBS is an internationally recognized investment banking and advisory firm. UBS, as part of its investment banking business, is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. COBE retained UBS as its financial advisor based on UBS' qualifications, experience and expertise. In the ordinary course of its business, UBS actively trades the Shares for its own account and for the accounts of its customers, and, accordingly, may at any time hold long or short positions in such securities. A summary of the terms under which UBS has been engaged by COBE as its financial advisor in connection with the Proposed Transaction is set forth in "THE TENDER OFFER -- Section 11. Fees and Expenses". PURPOSE AND EFFECTS OF THE OFFER AND THE MERGER The Offer and the Merger are being made pursuant to the Merger Agreement. The purpose of the Offer and the Merger is for COBE to acquire the entire equity interest in the Company. In order to facilitate a prompt and orderly transfer of ownership to COBE of the Shares owned by public shareholders, the acquisition transaction has been structured as a cash tender offer followed by a merger of Purchaser with and into the Company in which the remaining equity interest in the Company not acquired by Purchaser pursuant to the Offer will be converted into the right to receive the Merger Consideration and will thus be indirectly acquired by COBE. As a result of the Offer, the interest of COBE in the Company's net book value and net income will increase to the extent of the number of Shares acquired under the Offer. If the Merger is consummated, COBE's interest in such items will increase to 100% and COBE and its subsidiaries will be entitled to all benefits resulting from that interest, including all income generated by the Company's operations and any future increase in the Company's value. Similarly, COBE will also bear the risk of any decrease in the income or value of the Company after the Merger. Under Tennessee Law, the approval of the Board and the affirmative vote of the holders of a majority of the outstanding shares of Common Stock is required to approve and adopt the Merger Agreement and the transactions contemplated thereby, including the Merger. The Board has unanimously approved and adopted the Merger Agreement and the transactions contemplated thereby (which approval includes the approval of a majority of the Company's disinterested directors, as required both by Tennessee Law and by Article X of the Company's By-laws) and, unless the Merger is consummated pursuant to the short-form merger provisions under Tennessee Law described below, the only remaining corporate action of the Company required for the consummation of the Merger is the approval and adoption of the Merger Agreement and the transactions contemplated thereby by the affirmative vote of the holders of a majority of the Shares. In the Merger Agreement, the Company has agreed to take all action necessary to convene a meeting of its stockholders as soon as practicable after the consummation of the Offer for the purpose of considering and taking action on the Merger Agreement and the transactions contemplated thereby. The consummation of the Merger is subject to the satisfaction or waiver of certain conditions, including the approval and adoption of the Merger and the Merger Agreement by the affirmative vote of the holders of a majority of the outstanding Shares, as required by Tennessee Law and the Charter of the Company, and the purchase by the Purchaser of all Shares validly tendered in the Offer. See "SPECIAL FACTORS -- The Merger Agreement -- Conditions to the Merger". The Company has advised Purchaser that as of September 13, 1995, there were 18,951,834 Shares issued and outstanding, 530 record holders of Shares, 542,225 shares of Common Stock subject to Options granted pursuant to the Stock Option Plan, 9,344 shares of Common Stock subject to Options granted pursuant to the ESPP and Warrants to acquire 74,000 shares of Common Stock. On September 12, 1995, COBE contributed to Purchaser all the Shares owned by COBE. Accordingly, Purchaser presently owns 10,036,221 of the outstanding Shares, constituting approximately 53% of the outstanding Shares. Pursuant to the Merger Agreement, Gambro, COBE and Purchaser have agreed to cause all Shares owned by them and their subsidiaries to be voted in favor of the approval and adoption of the Merger Agreement and the transactions contemplated thereby at any meeting of the Company's stockholders at which such matters are to be voted upon. Accordingly, assuming that all 14 of the outstanding Options and Warrants were to be exercised, thereby resulting in the issuance of 625,569 additional Shares, Purchaser will have sufficient voting power to approve and adopt the Merger and Merger Agreement without the approval of any other stockholder of the Company. However, because it is a condition to the Merger that Purchaser have purchased all Shares validly tendered in the Offer and the Minimum Condition is a condition to the Offer, the Merger cannot be consummated unless the Minimum Condition is satisfied or waived. The Minimum Condition cannot be waived without the prior written consent of the Special Committee. Under Tennessee Law, if Purchaser acquires (pursuant to the Offer or otherwise) at least 90% of the outstanding Shares, Purchaser will be able to approve and adopt the Merger Agreement and the transactions contemplated thereby, including the Merger, without calling a meeting of the Company's stockholders and without the approval of the Company's stockholders. In accordance with Tennessee Law, in the event that Purchaser acquires at least 90% of the then outstanding Shares, Gambro, COBE, Purchaser and the Company have agreed in the Merger Agreement to take, at the request of Purchaser, all necessary and appropriate action to cause the Merger to become effective as soon as reasonably practicable after such acquisition, without a meeting and approval by vote of the Company's stockholders. If, however, Purchaser does not acquire at least 90% of the outstanding Shares pursuant to the Offer or otherwise and a meeting and the approval of the Company's stockholders is required under Tennessee Law, as described in the preceding paragraph, a significantly longer period of time would be required to effect the Merger. Pursuant to the Offer and the Merger, the Company's stockholders will receive a cash price of $20.00 per Share which represents a premium of approximately 27% over the $15.75 closing price of the Shares on July 13, 1995, the last full trading day prior to the public announcement of the Proposed Transaction. On September 12, 1995, the last full trading day prior to the announcement of the execution of the Merger Agreement and of Purchaser's intention to commence the Offer, the closing price per Share was $19 25/32. The closing price per Share on September 18, 1995, the last full trading day prior to commencement of the Offer, was $19.75. See "THE TENDER OFFER -- Section 5. Price Range of Shares". Following consummation of the Offer, the Shares may cease to be listed on NASDAQ and registration of the Shares under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), may be terminated. Upon consummation of the Merger, the Surviving Corporation will become a wholly owned subsidiary of COBE. Accordingly, for the Company's stockholders other than Gambro, COBE, Purchaser and their affiliates, the Merger will result in a termination of their rights as stockholders. They will not participate in the earnings and growth of the Surviving Corporation after the Merger and will not have any right to vote on corporate matters. Similarly, such stockholders will not face the risk of decline in the value of the Company after the Merger. See "THE TENDER OFFER -- Section 12. Effect of the Offer on the Market for the Shares, Exchange Listing and Exchange Act Registration" for further information concerning the effect of the de-listing and de-registration of the Shares. PLANS FOR THE COMPANY AFTER THE OFFER AND THE MERGER It is expected that, initially following the Merger, the business and operations of the Company will, except as set forth in this Offer, be continued by the Surviving Company substantially as they are currently being conducted. Gambro, COBE and Purchaser 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 actions as it deems appropriate under the circumstances then existing. Gambro and COBE intend to conduct a comprehensive review of the Surviving Company's business, operations, capitalization and management with a view to optimizing exploitation of the Surviving Company's potential in conjunction with COBE's businesses. It is expected that the business and operations of the Surviving Company will form an important part of COBE's future business plans. Gambro and COBE believe that the Company and COBE must in the future grow, by acquisition or otherwise, to compete effectively in an increasingly competitive and rapidly changing environment in which industry-wide consolidation is taking place. Gambro and COBE believe that this growth can be achieved much more effectively if the Company becomes a wholly owned subsidiary of COBE. 15 APPRAISAL RIGHTS OF STOCKHOLDERS No appraisal rights are available in connection with the Offer. However, if the Merger is consummated, stockholders may, if certain statutory procedures are complied with, have certain rights under the Tennessee Law to dissent and demand appraisal of, and to receive payment in cash of the fair value of, their Shares. Pursuant to Section 48-23-102(c) of the Tennessee Law, no shareholder may dissent as to any shares of a security which, as of the date of the effectuation of a transaction that would otherwise give rise to dissenters' rights, is listed on an exchange registered under Section 6 of the Exchange Act or is a "national market system security." However, the purchase of the Shares pursuant to the Offer may result in the Shares no longer meeting the standards for continued inclusion in the NASDAQ. Accordingly, in the event that prior to the effective date of the Merger, the Shares are no longer included in the NASDAQ, stockholders will have certain rights under Tennessee Law to dissent and demand payment for the fair value of their Shares if the Merger is consummated. See "THE TENDER OFFER -- Section 12. Effect of the Offer on the Market for the Shares, Exchange Listing and Exchange Act Registration" regarding the possible de-listing of the Shares from NASDAQ. Such rights to dissent, if the statutory procedures are complied with, could lead to a judicial determination of the fair value of the Shares, as of the time immediately before the effectuation of the Merger or similar business combination to which the dissenter objects (excluding any appreciation or depreciation in anticipation of the corporate action), which value is required to be paid in cash to such dissenting holders for their Shares. In addition, such dissenting stockholders would be entitled to receive payment of interest (at the average auction rate paid on United States treasury bills with a maturity of six (6) months (or the closest maturity thereto) as of the auction date for such treasury bills closest to the date of the consummation of the Merger) from the date of the consummation of the Merger on the amount determined to be the fair value of their Shares. Therefore, the value so determined in any appraisal proceeding could be the same, more or less than the purchase price per Share in the Offer or the Merger Consideration. Under the Tennessee Law, any minority shareholder is entitled to dissent and to receive the fair value of his or her shares under the circumstances specified under Tennessee Law. Under Tennessee Law, stockholders are entitled to dissent from, and obtain payment of the fair value of their Shares in the event of certain corporate actions, including the Merger. Under Tennessee Law, within ten days of any corporate action creating dissenters' rights which was taken without a vote of stockholders, such as the Merger, the corporation is required to notify all stockholders entitled to assert dissenters' rights that the action was taken and to provide the following information in a dissenters' notice (the "Dissenters' Notice") sent to all stockholders: (i) where the payment demand must be sent and where and when certificates for certified shares must be deposited; (ii) the extent to which the transfer of the uncertificated shares will be restricted after the payment demand is received; (iii) a form for demanding payment; (iv) a set date (no later than one nor more than two months from delivery of the Dissenters' Notice) by which the corporation must receive the payment demand after the Dissenters' Notice; and (v) a copy of Section 23 of the Tennessee Law. Unless the stockholder complies with this statutory procedure, his dissenters' rights will be forfeited. In order properly to effect his dissenters' rights, a stockholder who receives a Dissenters' Notice must demand payment and deposit his certificates in accordance with the Dissenters' Notice. A demand for payment may only be withdrawn with the consent of the corporation. Except as provided below, as soon as the corporate action creating dissenters' rights is effectuated, or upon receipt of a payment demand, whichever is later, the corporation shall pay each dissenter the amount the corporation estimates to be the fair value of his shares, plus accrued interest. The payment must be accompanied by, among other things, certain financial information regarding the corporation, a statement of the corporation's estimate of the fair value of shares, an explanation of how the interest was calculated and a statement of the dissenter's right to demand payment if the stockholder is dissatisfied with the payment offer. A dissenter may notify the corporation in writing of his own estimate of the fair value of his shares, plus accrued interest, and demand payment of his estimate, or reject the corporation's offer and demand payment of the fair value of his shares and interest due, if (i) the dissenter believes that the amount paid or offered by the corporation is less than the fair value of his shares or that the interest due is incorrectly calculated, (ii) the corporation fails to make payment within two months after the date set for demanding payment, or (iii) the corporation, having failed to effectuate the proposed action, does not return the deposited certificates or release the transfer restrictions imposed 16 on uncertificated shares within two months after the date set for demanding payment. If a demand for payment remains unsettled, the corporation shall commence a proceeding within two months after receiving the payment demand and petition the court to determine the fair value of the shares and accrued interest. If the corporation does not commence the proceeding within the two-month period, it shall pay each dissenter whose demand remains unsettled the amount demanded. Each dissenter made a party to the proceeding is entitled to judgment for the amount, if any, by which the court finds the fair value of his shares, plus accrued interest, exceeds the amount paid by the corporation. A dissenter waives his right to demand payment unless he notifies the corporation of his demand in writing within one month after the corporation made or offered payment for his shares. In 1983, in the case Blasingame v. American Materials, the Tennessee Supreme Court adopted the Delaware block valuation method for determining the fair value of corporate shares. Under the Delaware block method, the value of the dissenters' shares are calculated using the following three separate measures of stock value: investment or earnings value, asset value, and market value. The investment or earnings value "relates to the earning capacity of the corporation and involves an attempt to predict its future income based primarily on its previous earnings record." The asset value "looks to the net assets of the corporation valued as a 'going concern,' each share having a pro rata value of the net assets." The market value is "the value of the share on the basis of the price for which a share is selling or could be sold to a willing buyer." The Tennessee Supreme Court noted that once the three values are determined, an appropriate weight is assigned to each, taking into consideration "the type of business, the objectives of the corporation, and other relevant factors." The sum of the three weighted values equals the fair value of the shares. However, the Delaware block method of valuation was rejected by the Delaware Supreme Court in Weinberger v. UOP, Inc., in favor of "a more liberal approach [which] must include proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court." Subsequent Tennessee cases suggest that the Delaware block method as applied by Tennessee courts is not a rigid valuation method but in practice offers a more liberal construction of fair value than the historical Delaware block method. In 1994, the Tennessee Court of Appeals in American Network Group, Inc. v. Kostyk, stated that "while the formulaic Delaware rule is prescribed by Blasingame, our Supreme Court made it clear that other methodology might be more justiciable in differing circumstances." See Schedule II attached hereto which contains a copy of the text of Chapter 23 of the Tennessee Business Corporation Act. INTERESTS OF CERTAIN PERSONS IN THE OFFER AND THE MERGER In considering the recommendation of the Board with respect to the Offer and the Merger and the fairness of the consideration to be paid under the Offer and in the Merger, stockholders of the Company should be aware that certain officers and directors of the Company have interests in the Offer and the Merger, including those referred to below that present them with potential conflicts of interest. The Special Committee and the Board were aware of these potential conflicts prior to the execution of the Merger Agreement. Under the Stock Purchase Agreements, so long as COBE owns a majority of the Shares, COBE may designate a majority of the members of the Board. See "THE TENDER OFFER -- Section 7. Certain Information Concerning Purchaser, COBE, Gambro and Incentive". Accordingly, as a result of COBE's ownership of approximately 53% of the Shares, COBE has designated three members of the Board, namely, Jan Gustavsson, Herbert S. Lawson and Mats Wahlstrom. At present, the Company's Board consists of six members. Mr. Gustavsson was elected to the Board in April 1993. Since March 1993, Mr. Gustavsson has served as Chief Financial Officer of Gambro. Since November, 1993, Mr. Gustavsson has been a member of the Board of Directors of COBE. Mr. Lawson was elected to the Board in October 1992. Since July 1992, Mr. Lawson has served as Vice President and Treasurer of COBE. Mr. Wahlstrom was elected to the Board in May 1991 and currently serves as Chairman of the Board. Between 1985 and 1993, Mr. Wahlstrom served as the Chief Financial Officer of Gambro and since March 1993 has served as Executive Vice President of Gambro. Since June 1990, Mr. Wahlstrom has been a member of the 17 Board of Directors of COBE and has served as Executive Vice President of COBE. Since May 1991, Mr. Wahlstrom has also served as President of COBE. Mr. Lawrence J. Centella was elected to the Board in October 1992 and has served as the President and Chief Executive Officer of the Company since July 1993. From July 1990 to July 1993, Mr. Centella was the President of COBE Renal Care, Inc., a subsidiary of COBE, and from April 1989 to June, 1990, Mr. Centella was the President of Gambro-Hospital, Inc., a subsidiary of Gambro. Pursuant to the Employment Agreement dated as of July 14, 1993 between Mr. Centella and the Company, the Company agreed to employ Mr. Centella as its President and Chief Executive Officer from the date thereof until December 31, 1996. Furthermore, the Company has the option of extending the term of the agreement for an additional three years. The Company shall (i) pay Mr. Centella a base salary of $250,000 per year, (ii) enter into a qualified deferred compensation agreement, effective from January 1, 1994, to defer $9,000 of the base salary for 1994 for 10 years, and (iii) commencing with the Company's 1994 fiscal year, pay Mr. Centella certain performance related bonuses. The Company also agreed to grant Mr. Centella Options to purchase up to 200,000 Shares in certain circumstances. Compensation of Directors; Consultation Agreement; Special Committee Fee. As Chairman of the Board, Mr. Wahlstrom receives annual compensation of $40,000 per year. All other directors of the Company currently receive $20,000 per annum for serving as a member of the Board. In addition, each member of the Board receives $2,500 for each meeting of the Board attended in person and $1,000 for each committee meeting attended in person. The committees of the Board consist of an Audit Committee, composed of Messrs. Lawson and Gustavsson and Drs. Jacobs and Kokko; a Compensation Committee, composed of Mr. Lawson and Drs. Jacobs and Kokko; and an Executive Committee, composed of Dr. Kokko and Messrs. Centella, Lawson and Wahlstrom. Directors are entitled to participate in the Company's Stock Option Plan. See "SPECIAL FACTORS -- Interests of Certain Persons in the Offer and the Merger--Beneficial Ownership of Common Stock" setting forth the beneficial ownership of Common Stock by directors of the Company. Dr. Kokko was elected to the Board in July 1993 and is a member of the Special Committee. Pursuant to a letter dated as of September 14, 1992 (approximately three years prior to the date Dr. Kokko was appointed to serve on the Special Committee), from the Company to Dr. Kokko, Dr. Kokko was retained by the Company as a consultant and, in accordance with such letter, currently receives $4,000 per month from the Company for services rendered to the Company as a consultant. Each member of the Special Committee, Drs. Kokko and Jacobs, will be paid a fee of $30,000 by the Company for their services as members of the Special Committee. In addition, each member of the Special Committee will be reimbursed by the Company for any expenses attributable to service in the capacity as a member of the Special Committee in addition to their regular compensation for serving as a director of the Company. Beneficial Ownership of Common Stock. The following table sets forth certain information, as of September 13, 1995, regarding the ownership of Common Stock by each person known by the Company to be the beneficial owner of more than five percent of the outstanding Common Stock, each director of the Company, the Chief Executive Officer of the Company, and the four most highly compensated officers of the Company, and all executive officers and directors of the Company as a group:
AMOUNT AND NATURE NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP PERCENT OF CLASS --------------------------------------------------------- ----------------------- ---------------- REN Acquisition Corp.(1)................................. 10,036,221 53.0% 1185 Oak Street Lakewood, CO 80215 Lawrence J. Centella(2).................................. 207,138 * Jan Gustavsson(3)........................................ 10,036,221 53.0% Magistratsvagen 16 Box 10101 S-220 10 Lund, Sweden M. Stephen Harrison(4)................................... 39,507 * J. Kenneth Jacobs, M.D.(5)............................... 91,100 * Juha P. Kokko, M.D., Ph.D.(6)............................ 15,000 * Herbert S. Lawson(7)..................................... 10,037,721 53.1%
18
AMOUNT AND NATURE NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP PERCENT OF CLASS --------------------------------------------------------- ----------------------- ---------------- Ralph Z. Levy, Jr.(8).................................... 10,105,727 * Lowell F. Martin(9)...................................... 21,705 * Mats Wahlstrom(7)........................................ 10,038,721 53.1% 1185 Oak Street Lakewood, CO 80215 Bradley S. Wear(11)...................................... 95,459 * All Officers and Directors as a Group (13 Persons)....... 10,135,416 53.6%
------------ * Less than one percent. (1) REN Acquisition Corp. is a direct wholly owned subsidiary of COBE. COBE is a direct wholly owned subsidiary of Gambro GmbH, a German corporation, which is a direct wholly owned subsidiary of Gambro AB, a Swedish corporation. Shares representing approximately 58.5% of the total voting power of Gambro AB are held by Incentive AB, a Swedish corporation. (2) Includes 200,000 options to purchase Shares and 356 Options granted pursuant to the ESPP. (3) Includes 10,036,221 Shares owned by REN Acquisition Corp. Mr. Gustavsson is an employee of Gambro AB. Mr. Gustavsson disclaims any beneficial ownership of such Shares. (4) Includes 37,500 Options to purchase common stock of the Company. (5) Includes 15,000 Options to purchase common stock of the Company. (6) Includes 15,000 Options to purchase common stock of the Company. (7) Includes 10,036,221 Shares owned by REN Acquisition Corp., of which Messrs. Lawson and Wahlstrom, who are directors of the Company, are directors. Messrs. Lawson and Wahlstrom disclaim any beneficial ownership of such shares. (8) Includes 10,036,221 Shares owned by REN Acquisition Corp., of which Mr. Levy is a director. Mr. Levy disclaims any beneficial ownership of such Shares. Includes 67,500 options to purchase common stock of the Company and 227 Options to purchase common stock of the Company granted pursuant to the ESPP. (9) Includes 20,000 Options to purchase common stock of the Company and 199 Options to purchase common stock of the Company granted pursuant to the ESPP. (10) Includes 95,000 Options to purchase common stock of the Company. THE MERGER AGREEMENT The following is a summary of the Merger Agreement, a copy of which is filed as an Exhibit to the Schedule 14D-1 and the Schedule 13E-3 filed by Purchaser, COBE, Gambro and Incentive with the Commission in connection with the Offer. Such summary is qualified in its entirety by reference to the Merger Agreement. The Offer. The Merger Agreement provides for the commencement of the Offer as promptly as reasonably practicable, but in no event later than five business days after the initial public announcement of Purchaser's intention to commence the Offer. The obligation of Purchaser to accept for payment and pay for Shares tendered pursuant to the Offer is subject to the satisfaction of the conditions that are described in "THE TENDER OFFER -- Section 10. Certain Conditions of the Offer" hereof. Purchaser and COBE have agreed that no change in the Offer may be made which decreases the price per Share payable in the Offer or which reduces the maximum number of Shares to be purchased in the Offer or which imposes conditions to the Offer in addition to those set forth in "THE TENDER OFFER -- Section 10. Certain Conditions of the Offer" hereof. The Merger. The Merger Agreement provides that, upon the terms and subject to the conditions thereof and in accordance with Tennessee Law, at the Effective Time, Purchaser shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of Purchaser will cease and the Company will continue as the Surviving Corporation and will become a wholly owned subsidiary of COBE after the Merger. Upon consummation of the Merger, each issued and then outstanding Share (other than any Shares held by the Company, or owned by Purchaser, COBE or any direct or indirect wholly owned subsidiary of COBE or of the Company and any Shares 19 which are held by stockholders who have not voted in favor of the Merger or consented thereto in writing and who shall have demanded properly an appraisal for such stockholders' Shares in accordance with Tennessee Law) shall be cancelled and converted automatically into the right to receive the Merger Consideration. Pursuant to the Merger Agreement, each share of common stock, par value $.01 per share, of Purchaser issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one share of Common Stock of the Surviving Corporation. The Merger Agreement provides that the directors of the Company immediately prior to the Effective Time will be the directors of the Surviving Corporation immediately following the Merger and that the officers of the Company immediately prior to the Effective Time will be the officers of the Surviving Corporation immediately following the Merger. The Merger Agreement provides that, at the Effective Time, the Charter of the Company, as in effect immediately prior to the Effective Time, will be the Charter of the Surviving Corporation. The Merger Agreement also provides that the By-laws of the Company, as in effect immediately prior to the Effective Time, will be the By-laws of the Surviving Corporation. The Merger Agreement also provides that each holder of an Option to purchase shares of Company Common Stock under the Company's Stock Option Plan which Option is outstanding immediately prior to the Effective Time (whether or not then exercisable) shall, pursuant to the Cancellation of Options Agreements, entered into by the Company with each holder of Options, be entitled to receive, and shall receive, in settlement and cancellation thereof, an amount in cash equal to the product of (i) the excess, if any, of the amount of the Per Share Amount over the exercise price of each such Option and (ii) the number of shares of Company Common Stock covered by such Option. All payments by the Company in respect of Options, other than Options granted within six months prior to the Effective Time, shall be made promptly following the Effective Time. Payments in respect of Options granted within six months prior to the Effective Time shall be made six months and one day after the date of grant of such Options. The Company shall cause the Stock Option Plan to terminate as of the Effective Time and certificates evidencing Options shall be deemed to be cancelled as of the Effective Time, and thereafter the only rights of participants therein shall be the right to receive the consideration described above. Under the Merger Agreement, the Company has agreed that prior to the Effective Time, the Company shall use its reasonable best efforts to cause each holder of an outstanding Option to acknowledge in writing the cancellation of such Option and to release the Company from any obligation in respect thereof in consideration for the payment provided herein and shall take such other action as may be necessary to carry out the foregoing terms. The Merger Agreement also provides that each holder of a Warrant to purchase shares of Company Common Stock, which Warrant is outstanding immediately prior to the Effective Time (whether or not then presently exercisable), shall, pursuant to the Cancellation of Warrant Agreements entered into by the Company with each of the Warrant holders, be entitled to receive, and shall receive, in settlement and cancellation thereof, an amount in cash equal to the product of (i) the excess, if any, of the Per Share Amount over the exercise price of each such Warrant and (ii) the number of shares of Company Common Stock covered by such Warrant. The Company shall cause each such Warrants to which it is a party to terminate as of the Effective Time, and thereafter the only rights of the holders of the Warrants shall be the right to receive the consideration described above. Under the Merger Agreement, the Company has agreed that prior to the Effective Time, the Company shall use its reasonable best efforts to cause each holder of an outstanding Warrant to acknowledge in writing the termination of such Warrants and to release the Company from any obligation in respect thereof in consideration for the payment provided herein and shall take such other action as may be necessary to carry out the foregoing terms. The Merger Agreement also provides that the Company shall terminate the ESPP effective September 30, 1995 (the "Termination Date") pursuant to which (i) all further payroll deductions from each Participant (as defined in the ESPP) shall cease, (ii) the amount (the "Plan Amount") credited to the account of each Participant as of the Termination Date shall at the election of each Participant either (A) be paid by the Company to such Participant (without interest) as soon as administratively practicable or (B) be applied as of the Termination Date to the purchase of Shares in an aggregate amount equal to each Participant's Plan Amount at a price per Share equal to 85% of the lower of the Fair Market Value (as defined in the ESPP) per share of Common Stock on July 1, 1995 or on the Termination Date (rounded up to the next whole dime), in accordance with the terms of the current phase under the ESPP, and (iii) for purposes of the current phase, the Termination Date shall be treated for all purposes of 20 the ESPP as the last day of such phase. Under the Merger Agreement, in the event that a Participant makes no election under clause (ii) above, such Participant shall be deemed to have elected as of the Termination Date to apply such Participant's Plan Amount to the purchase of Shares in accordance with the provisions of clause (ii)(B) above. Agreements of COBE, Purchaser and the Company. Pursuant to the Merger Agreement, if required by applicable law in order to consummate the Merger, the Company, acting through the Board acting upon the unanimous recommendation of the Special Committee, shall, in accordance with applicable law and the Company's Charter and By-laws, (i) duly call, give notice of, convene and hold an annual or special meeting of its stockholders as soon as practicable following consummation of the Offer for the purpose of considering and taking action on the Merger Agreement and the transactions contemplated thereby (the "Stockholders' Meeting"). Purchaser presently owns 10,036,221 Shares constituting approximately 53% of the Shares. If all of the outstanding Options and Warrants were to be exercised, Purchaser will have sufficient voting power to approve and adopt the Merger and the Merger Agreement without the approval of any other holder of Shares. The Merger Agreement provides that the Company shall, if required by applicable law, as promptly as practicable following consummation of the Offer, file with the Commission under the Exchange Act, and use its reasonable best efforts to have cleared by the Commission, a proxy statement and related proxy materials (the "Proxy Statement") with respect to the Stockholders' Meeting. The Company has agreed, unless in breach of its fiduciary duties under applicable law as advised by outside counsel, to include in the Proxy Statement the unanimous recommendation of the Board, acting upon the unanimous recommendation of the Special Committee, that the stockholders of the Company approve and adopt the Merger Agreement and the transactions contemplated thereby and to use its reasonable best efforts to obtain such approval and adoption. At such Stockholders' Meeting, Gambro, COBE and Purchaser have agreed to cause all Shares then owned by them and their subsidiaries to be voted in favor of approval and adoption of the Merger Agreement and the transactions contemplated thereby. The Merger Agreement further provides that COBE shall cause the Surviving Corporation to keep in effect the provisions in its Charter and By-laws containing the provisions with respect to exculpation of director and officer liability and indemnification set forth in the Charter and By-laws of the Company on the date of this Agreement to the fullest extent permitted under applicable law, which provisions shall not be amended, repealed or otherwise modified except as required by applicable law or except to make changes permitted by applicable law that would enlarge the exculpation or rights of indemnification thereunder. Under the Merger Agreement, from and after the Effective Time, Gambro and COBE each agree, jointly and severally, to guarantee and to cause the Surviving Corporation to perform all of its obligations under the Charter and By-laws of the Company with respect to indemnification. The Merger Agreement provides that to the extent that the foregoing or the provisions of the Charter or By-laws of the Surviving Corporation shall not serve to indemnify and hold harmless each present and former director and officer or the Company (the "Indemnified Parties"), after the Effective Time, Gambro and COBE shall, subject to the terms set forth in the Merger Agreement, indemnify and hold harmless, to the fullest extent permitted under applicable law (and shall also advance expenses as incurred to the fullest extent permitted under applicable law provided the person to whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined that such person is to entitled to indemnification), each Indemnified Party against any costs or expenses (including reasonable attorneys' fees), judgments, fines, losses, claims, damages, liabilities and amounts and paid in settlement in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to the transactions contemplated by the Merger Agreement for a period of six years after the date of the Merger Agreement; provided, that in the event any claim or claims are asserted or made within such six-year period, all rights to indemnification in respect of any such claim or claims shall continue until final disposition of any and all such claims. The Merger Agreement provides that COBE shall cause the Surviving Corporation to use its best efforts to maintain in effect for six years from the Effective Time, if available, the coverage provided by current directors' and officers' liability insurance policies maintained by the Company (provided that the Surviving Corporation may substitute therefor policies of at least the same coverage containing terms and conditions which are not materially less favorable) with respect to matters occurring prior to the Effective Time. 21 The Merger Agreement provides that, subject to its terms and conditions, each of the parties thereto shall use its reasonable best efforts to take, or cause to be taken, all appropriate action, 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 the Merger Agreement, including, without limitation, using its reasonable best efforts to obtain all licenses, permits, consents, approvals, authorizations, qualifications and orders of governmental authorities and parties to contracts with the Company and its subsidiaries as are necessary for the consummation of the transactions contemplated by the Merger Agreement and to fulfill the conditions to the Offer and the Merger. The Merger Agreement provides that in case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of the Merger Agreement, the proper officers and directors of each party to the Merger Agreement are required to use their reasonable best efforts to take all such action. The Merger Agreement provides that Gambro guarantees the performance by COBE and Purchaser of their agreements and obligations under the Merger Agreement. Representations and Warranties. The Merger Agreement contains certain customary representations and warranties of the parties thereto. Conditions to the Merger. Under the Merger Agreement, the respective obligations of each party to effect the Merger are subject to the satisfaction at or prior to the Effective Time of the following conditions: (a) the Merger Agreement and the transactions contemplated thereby shall have been approved and adopted by the affirmative vote of the stockholders of the Company to the extent required by Tennessee Law and the Company's Charter; (b) the parties to the Merger Agreement shall have performed or complied in all material respects with all agreements and covenants required by the Merger Agreement to be performed or complied with by them on or prior to the Effective Time; (c) no governmental authority or other agency or commission or court of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any law, rule, regulation, executive order, decree, injunction or other order (whether temporary, preliminary or permanent) which is then in effect and has the effect of making the acquisition of Shares by Gambro, COBE or Purchaser or any affiliate of either of them illegal or otherwise restricting, preventing or prohibiting consummation of the transactions contemplated by the Merger Agreement; and (d) Purchaser or its permitted assignee shall have purchased all Shares validly tendered and not withdrawn pursuant to the Offer; provided, however, that this conditions shall not be applicable to the obligations of Gambro, COBE or Purchaser if, in breach of the Merger Agreement or the terms of the Offer, Purchaser fails to purchase Shares validly tendered and not withdrawn pursuant to the Offer. Termination; Fees and Expenses. The Merger Agreement provides that it may be terminated and the Merger and the other transactions contemplated by the Merger Agreement may be abandoned at any time prior to the Effective Time, notwithstanding any requisite approval and adoption of the Merger Agreement and the transactions contemplated by the Merger Agreement by the stockholders of the Company: (a) by mutual written consent of Gambro, COBE, Purchaser and the Special Committee; (b) by either COBE, Purchaser or the Special Committee if (i) the Effective Time shall not have occurred on or before March 31, 1996; provided, however, that the right to terminate the Merger Agreement shall not be available to any party whose failure to fulfill any obligation under the Merger Agreement has been the cause of, or resulted in, the failure of the Effective Time to occur on or before such date or (ii) any court of competent jurisdiction or other governmental authority shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the Merger and such order, decree, ruling or other action shall have become final and nonappealable; (c) by COBE if (i) due to an occurrence or circumstance that would result in a failure to satisfy any condition set forth in "THE TENDER OFFER -- Section 10. Certain Conditions of the Offer" hereof, Purchaser shall have (A) failed to commence the Offer within 60 days following the date of the Merger Agreement, (B) terminated the Offer without having accepted any Shares for payment thereunder, or (C) failed to pay for Shares pursuant to the Offer within 90 days following the commencement of the Offer, unless such failure to pay for Shares shall have been caused by or resulted from the failure of Gambro, COBE or Purchaser to perform in any material respect any material covenant or agreement of either of them contained in the Merger Agreement or the material breach by Gambro, COBE or Purchaser of any material representation or warranty of either of them contained in the Merger Agreement or (ii) prior to the purchase of Shares pursuant to the Offer, the Special Committee, acting on behalf of the Company, shall have withdrawn or modified in a manner adverse to Purchaser or COBE its approval or recommendation of the Offer, the 22 Merger Agreement, the Merger or any other transaction contemplated by the Merger Agreement or shall have recommended another merger, consolidation, business combination with, or acquisition of, the Company or its assets or another tender offer for Shares, or shall have resolved to do any of the foregoing; (d) by the Special Committe acting on behalf of the Company, Purchaser shall have (A) failed to commence the Offer within 60 days following the date of the Merger Agreement, (B) terminated the Offer without having accepted any Shares for payment thereunder or (C) failed to pay for Shares pursuant to the Offer within 90 days following the commencement of the Offer, unless such failure to pay for Shares shall have been caused by or resulted from the failure of the Company to perform in any material respect any material covenant or agreement of it contained in the Merger Agreement or the material breach by the Company of any material representation or warranty of it contained in the Merger Agreement; (e) prior to the purchase of Shares pursuant to the Offer, by the Special Committee, acting on behalf of the Company, (i) if any representation or warranty of Gambro, Parent or Purchaser was untrue or incorrect in any material respect when made and on and as of the expiration of the Offer, except for changes contemplated by the Merger Agreement, with the same force and effect as if made on and as of the date of such expiration, or in the case of a representation or warranty made or given as of a specified time, if such representation or warranty was untrue or incorrect in any material respect as of such time, or (ii) if Parent, Purchaser or Gambro has failed to perform or comply with, in any material respect, any of their covenants and agreements in the Merger Agreement; or (f) by either Parent, Purchaser or the Special Committee, acting on behalf of the Company, if the conditions to the Merger are not reasonably capable of being satisfied on or before March 31, 1996. In the event of the termination of the Merger Agreement, the Merger Agreement provides that it shall forthwith become void and there shall be no liability thereunder on the part of any party thereto except under the provisions of the Merger Agreement related to fees and expenses described below and under certain other provisions of the Merger Agreement which survive termination. All fees, costs and expenses incurred in connection with the Merger Agreement and the Transactions shall be paid by the party incurring such expenses, whether or not any such transaction is consummated; provided, however, that the Purchaser and the Company shall each pay for one-half of all fees, costs and expenses incurred in connection with the Merger Agreement and the transactions contemplated thereby which are payable to the Commission and to any financial or other printer. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES The receipt of cash for Shares pursuant to the Offer, in the Merger or pursuant to the exercise of dissenters' appraisal rights will be a taxable transaction for federal income tax purposes and may also be a taxable transaction under applicable state, local, foreign or other tax laws. In general, a stockholder will recognize gain or loss for federal income tax purposes equal to the difference between the amount of cash received in exchange for the Shares sold and such stockholder's adjusted tax basis in such Shares. Assuming the Shares constitute capital assets in the hands of the stockholder, such gain or loss will be capital gain or loss. The gain or loss will be long-term capital gain or loss, if, as of the date of the exchange, the holder has held such shares for more than one year. There are limitations on the deductibility of capital losses. In recent months, various legislative proposals have been introduced in Congress, which would reduce the rate of federal income taxation of certain capital gains. Such legislation, if enacted, might apply only to gain realized on sales occurring after a date specified in the legislation. It cannot be predicted whether any such legislation ultimately will be enacted and, if enacted, what its effective date will be. THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE TO CERTAIN TYPES OF STOCKHOLDERS, SUCH AS FINANCIAL INSTITUTIONS, BROKER-DEALERS, STOCKHOLDERS WHO ACQUIRED SHARES PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION, INDIVIDUALS WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED STATES, FOREIGN CORPORATIONS AND PERSONS WHO RECEIVED PAYMENTS IN RESPECT OF OPTIONS OR WARRANTS TO ACQUIRE SHARES. THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND IS BASED UPON PRESENT LAW. STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE 23 SPECIFIC TAX CONSEQUENCES OF THE OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICATION AND EFFECT OF THE ALTERNATIVE MINIMUM TAX, AND STATE, LOCAL AND FOREIGN TAX LAWS. CERTAIN LITIGATION RELATING TO THE OFFER AND THE MERGER On August 4, 1995, a minority shareholder of the Company filed a securities class action entitled Harbor Finance Partners v. COBE Laboratories, et al. in the Circuit Court for Davidson County, Tennessee against Gambro, COBE, Purchaser and a number of individual defendants. The action sought damages and/or injunctive relief relating to the Proposed Transaction. The complaint alleged that Gambro and COBE breached their fiduciary duties to minority stockholders in failing to provide adequate procedural safeguards to protect minority stockholders in the independent committee which will consider the Offer and in offering inadequate consideration for the minority shareholdings of $18.00 per Share. Following meetings among the Special Committee and its financial advisor, Alex. Brown, and COBE and its financial advisor, UBS, at which the Special Committee unanimously agreed to recommend the Offer and Merger at the increased Per Share Amount of $20.00 per Share, and following meetings among attorneys and financial advisors for the parties to the action, the parties to the action have reached an agreement in principle to settle all such actions with prejudice, based on the terms of the Merger. The settlement is subject to negotiation of a stipulation of settlement and approval by the Court following notice to the Company's stockholders. In connection with the proposed settlement, the plaintiffs intend to apply for an award of attorneys' fees and litigation expenses in the amount of $300,000. The defendants have agreed not to oppose this application. The defendants have denied, and continue to deny, that they have committed or have threatened to commit any violation of law or breaches of duty to the plaintiffs or the purported class. The defendants have agreed to the proposed settlement because, among other reasons, such settlement would eliminate the burden and expense of further litigation and would facilitate the consummation of a transaction that they believe to be in the best interests of the Company and its stockholders. FEES AND EXPENSES The following is an estimate of fees and expenses to be incurred in connection with the Offer and the Merger including the fees and expenses of UBS (see "THE TENDER OFFER -- Section 11. Fees and Expenses") and the fees and expenses of Alex. Brown (see "SPECIAL FACTORS -- Presentation and Opinion of Financial Advisors to the Special Committee"). 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 and expenses, whether or not the transactions contemplated by the Merger Agreement are consummated, provided, however, that Purchaser and the Company shall each pay for one-half of all fees, costs and expenses incurred in connection with the Merger Agreement and the transactions contemplated thereby which are payable to the Commission and to any financial or other printer. The Company is responsible for paying the legal fees of counsel to the Special Committee estimated at $200,000, all fees and expenses payable to the Special Committee and approximately $25,000 of miscellaneous fees and expenses. Purchaser is responsible for paying its own legal fees, advertising, depositary fees, information agent fees and approximately $25,000 of miscellaneous fees and expenses. Estimate of Fees and Expenses Legal Fees................................................................... 550,000 Investment Banker Fees....................................................... 2,400,000 Special Committee Fees and Expenses.......................................... 75,000 Printing and Mailing......................................................... 100,000 Advertising.................................................................. 20,000 Filing Fees.................................................................. 40,000 Depositary Fees.............................................................. 10,000 Information Agent Fees....................................................... 10,000 Miscellaneous................................................................ 50,000 --------- Total................................................................ 3,255,000
24 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 prior to the Expiration Date (as hereinafter defined) and not withdrawn as permitted by "THE TENDER OFFER -- Section 4. Withdrawal Rights". The term "Expiration Date" means 12:00 midnight, New York City time, on Tuesday, October 17, 1995, unless and until Purchaser, in its sole discretion (but subject to the terms and conditions of the Merger Agreement), 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. The Offer is subject to the Minimum Condition and to certain other conditions. See "THE TENDER OFFER -- Section 10. Certain Conditions of the Offer". Purchaser expressly reserves the right, in its sole discretion (but subject to the terms and conditions of the Merger Agreement), at any time and from time to time, to extend for any reason the period of time during which the Offer is open, including the occurrence of any of the conditions specified in "THE TENDER OFFER -- Section 10. Certain Conditions of the Offer", by giving oral or written notice of such extension to the Depositary. During any such extension, all Shares previously tendered and not withdrawn will remain subject to the Offer, subject to the rights of a tendering stockholder to withdraw his Shares. See "THE TENDER OFFER -- Section 4. Withdrawal Rights". Subject to the applicable regulations of the Commission, Purchaser also expressly reserves the right, in its sole discretion (but subject to the terms and conditions of the Merger Agreement), at any time and from time to time, (i) to delay acceptance for payment of, or, regardless of whether such Shares were theretofore accepted for payment, payment for, any Shares pending receipt of any regulatory approval specified in "THE TENDER OFFER -- Section 13. Certain Legal Matters and Regulatory Approvals", (ii) to terminate the Offer and not accept for payment any Shares upon the occurrence of any of the conditions specified in "THE TENDER OFFER -- Section 10. Certain Conditions of the Offer" and (iii) to waive any condition or otherwise amend the Offer in any respect, by giving oral or written notice of such delay, termination, waiver or amendment to the Depositary and by making a public announcement thereof. The Merger Agreement provides that the Minimum Condition may not be waived except with the prior written consent of the Special Committee. The Merger Agreement provides that Purchaser will not (i) decrease the price per Share payable pursuant to the Offer, (ii) reduce the maximum number of Shares to be purchased in the Offer or (iii) impose conditions to the Offer in addition to those set forth in "THE TENDER OFFER -- Section 10. Certain Conditions of the Offer". Purchaser acknowledges that (i) Rule 14e-1(c) under the Exchange Act requires Purchaser to pay the consideration offered or to return the Shares tendered promptly after the termination or withdrawal of the Offer and (ii) Purchaser may not delay acceptance for payment of, or payment for (except as provided in clause (i) of the first sentence of this paragraph), any Shares upon the occurrence of any of the conditions specified in "THE TENDER OFFER -- Section 10. Certain Conditions of the Offer" without extending the period of time during which the Offer is open. Any such extension, delay, termination, waiver or amendment will be followed as promptly as practicable by public announcement thereof, such announcement in the case of an extension to be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require that material changes be promptly disseminated to stockholders in a manner reasonably designed to inform them of such changes) and without limiting the manner in which Purchaser may choose to make any public announcement, Purchaser shall have no obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a press release to the Dow Jones News Service. If Purchaser makes a material change in the terms of the Offer or the information concerning the Offer, or if it waives a material condition of the Offer, Purchaser will extend the Offer to the extent required by Rules l4d-4(c) and l4d-6(d) under the Exchange Act. Subject to the terms of the Merger Agreement, if, prior to the Expiration Date, Purchaser should decide to increase the consideration being offered in the Offer, such increase in the consideration being offered will be applicable to all stockholders whose Shares are accepted for payment pursuant to the Offer and, if at the time notice 25 of such increase in the consideration being offered is first published, sent or given to holders of such Shares, the Offer is scheduled to expire at any time earlier than the period ending on the tenth business day from and including the date that such notice is first so published, sent or given, the Offer will be extended at least until the expiration of such ten business day period. For purposes of the Offer, a "business day" means any day other than a Saturday, Sunday or federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, New York City time. The Company has provided Purchaser with the Company's stockholder list and security position listings for the purpose of disseminating the Offer to holders of Shares. This Offer to Purchase and the related Letter of Transmittal will be mailed to record holders of Shares whose names appear on the Company's stockholder list and will be furnished, for subsequent transmittal to beneficial owners of Shares, to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder list or, if applicable, who are listed as participants in a clearing agency's security position listing. 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 accept for payment, and will pay for, all Shares validly tendered prior to the Expiration Date and not properly withdrawn promptly after the later to occur of the Expiration Date and the satisfaction or waiver of the conditions to the Offer set forth in "THE TENDER OFFER -- Section 10. Certain Conditions of the Offer". Subject to applicable rules of the Commission, Purchaser expressly reserves the right to delay acceptance for payment of, or payment for, Shares pending receipt of any regulatory approvals specified in "THE TENDER OFFER -- Section 13. Certain Legal Matters and Regulatory Approvals" or in order to comply in whole or in part with any other 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) the certificates evidencing such Shares (the "Share Certificates") or timely confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company, the Midwest Securities Trust Company or the Philadelphia Depository Trust Company (each, a "Book-Entry Transfer Facility" and, collectively, the "Book-Entry Transfer Facilities") pursuant to the procedures set forth in "THE TENDER OFFER -- Section 3. Procedures for Accepting the Offer and Tendering Shares", (ii) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees and (iii) any other documents required under the Letter of Transmittal. 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, if and 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 stockholders for the purpose of receiving payments from Purchaser and transmitting such payments to tendering stockholders whose Shares have been accepted for payment. Under no circumstances will interest on the purchase price for Shares be paid, regardless of any delay in making such payment. If any tendered Shares are not accepted for payment for any reason pursuant to the terms and conditions of the Offer, or if Share Certificates are submitted evidencing more Shares than are tendered, Share Certificates evidencing unpurchased Shares will be returned, without expense to the tendering stockholder (or, in the case of Shares tendered by book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility pursuant to the procedure set forth in "THE TENDER OFFER -- Section 3. Procedures for Accepting the Offer and Tendering Shares", such Shares will be credited to an account maintained at such Book-Entry Transfer Facility), as promptly as practicable following the expiration or termination of the Offer. 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, but 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 stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 26 3. Procedures for Accepting the Offer and Tendering Shares. In order for a holder of Shares validly to tender Shares pursuant to the Offer, the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees 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 (i) the Share Certificates evidencing tendered Shares must be received by the Depositary at such address or such Shares must be tendered pursuant to the procedure for book-entry transfer described below and a Book-Entry Confirmation must be received by the Depositary, in each case prior to the Expiration Date, or (ii) the tendering stockholder must comply with the guaranteed delivery procedures described below. THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, 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 accounts with respect to the Shares at the Book-Entry Transfer Facilities 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 system of any Book-Entry Transfer Facility may make a book-entry delivery of Shares by causing such Book-Entry Transfer Facility to transfer such Shares into the Depositary's account at such Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedures for such transfer. However, although delivery of Shares may be effected through book-entry transfer at a Book-Entry Transfer Facility, the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees and any other required documents, must, in any case, be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date, or the tendering stockholder must comply with the guaranteed delivery procedure described below. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. Signature Guarantees. Signatures on all Letters of Transmittal must be guaranteed by a firm which is a member of a registered national securities exchange or of the National Association of Securities Dealers, Inc., or by a commercial bank or trust company having an office or correspondent in the United States (each of the foregoing being referred to as an "Eligible Institution"), except in cases where Shares are tendered (i) by a registered holder of Shares who has not completed either the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. 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 a Share Certificate not accepted for payment or not tendered is to be returned, to a person other than the registered holder(s), then the Share Certificate must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear on the Share Certificate, with the signature(s) on such Share Certificate or stock powers guaranteed by an Eligible Institution. See Instructions 1 and 5 of the Letter of Transmittal. Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to the Offer and such stockholder's Share Certificates evidencing such Shares are not immediately available or such stockholder cannot deliver the Share Certificates and all other required documents to the Depositary prior to the Expiration Date, or such stockholder cannot complete the procedure for delivery by book-entry transfer on a timely basis, such Shares may nevertheless be tendered, provided that all 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 made available by Purchaser, is received prior to the Expiration Date by the Depositary as provided below; and (iii) the Share Certificates (or a Book-Entry Confirmation) evidencing 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, and any other documents required by the Letter of 27 Transmittal are received by the Depositary within three NASDAQ trading days after the date of execution of such Notice of Guaranteed Delivery. The Notice of Guaranteed Delivery may be delivered by hand or mail or transmitted by telegram, telex or facsimile transmission to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in the form of Notice of Guaranteed Delivery made available by Purchaser. 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 the Share Certificates evidencing such Shares, or a Book-Entry Confirmation of the delivery of such Shares, and the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees, and any other documents required by the Letter of Transmittal. Determination of Validity. All questions as to the validity, form, 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 to reject any and all tenders determined by it not to be in proper form or the acceptance for payment of which may, in the opinion of its counsel, be unlawful. Purchaser also reserves the absolute right to waive any condition of the Offer or any defect or irregularity, in the tender of any Shares of any particular stockholder, whether or not similar defects or irregularities are waived in the case of other stockholders. No tender of Shares will be deemed to have been validly made until all defects and irregularities have been cured or waived. None of Purchaser, COBE, Gambro, Incentive, 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. Other Requirements. By executing the Letter of Transmittal as set forth above, a tendering stockholder irrevocably appoints designees of Purchaser as such stockholder's proxies, each with full power of substitution, in the manner set forth in the Letter of Transmittal, to the full extent of such stockholder's rights with respect to the Shares tendered by such stockholder 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 September 12, 1995). All such proxies shall be considered coupled with an interest in the tendered Shares. 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 proxies given by such stockholder with respect to such Shares (and such other Shares and securities) will be revoked without further action, and no subsequent proxies may be given nor any subsequent written consent executed by such stockholder (and, if given or executed, will not be deemed to be effective) with respect thereto. The designees of Purchaser will, with respect to the Shares for which the appointment is effective, be empowered to exercise all voting and other rights of such stockholder as they in their sole discretion may deem proper at any annual or special meeting of the Company's stockholders 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. The acceptance for payment by Purchaser of Shares pursuant to any of the procedures described above will constitute a binding agreement between the tendering stockholder and Purchaser upon the terms and subject to the conditions of the Offer. TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENT TO CERTAIN STOCKHOLDERS OF THE PURCHASE PRICE OF SHARES PURCHASED PURSUANT TO THE OFFER, EACH SUCH STOCKHOLDER MUST PROVIDE THE DEPOSITARY WITH SUCH STOCKHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT SUCH STOCKHOLDER IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9 IN THE LETTER OF TRANSMITTAL. SEE INSTRUCTION 9 OF THE LETTER OF TRANSMITTAL. 4. Withdrawal Rights. Tenders of Shares made pursuant to the Offer are irrevocable except that such Shares may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment by 28 Purchaser pursuant to the Offer, may also be withdrawn at any time after November 17, 1995. If Purchaser extends the Offer, is delayed in its acceptance for payment of Shares or is unable to accept Shares for payment 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 stockholders are entitled to withdrawal rights as described in this Section 4. Any such delay will be by an extension of the Offer to the extent required by law. For a withdrawal to be effective, a written, telegraphic, telex or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover page of this Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of such Shares, if different from that of the person who tendered such 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 such Share Certificates, the serial numbers shown on such Share Certificates must be submitted to the Depositary and the signature(s) 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 "THE TENDER OFFER -- Section 3. Procedures for Accepting the Offer and Tendering Shares", 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. 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. None of Purchaser, COBE, 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. 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 "THE TENDER OFFER -- Section 3. Procedures for Accepting the Offer and Tendering Shares". 5. Price Range of Shares. The Shares are listed and principally traded on NASDAQ under the symbol RENL. The following table sets forth, for the quarters indicated, the high and low sales prices per Share on NASDAQ as reported by the Dow Jones News Service.
HIGH LOW ---------------- ---------------- 1993: First Quarter............................................................. $ 14 1/2 $ 9 1/4 Second Quarter............................................................ 12 1/4 9 1/2 Third Quarter............................................................. 12 9 Fourth Quarter............................................................ 11 7 1/4 1994: First Quarter............................................................. $ 11 $ 7 1/2 Second Quarter............................................................ 10 1/4 8 1/2 Third Quarter............................................................. 10 5/8 8 1/4 Fourth Quarter............................................................ 14 1/2 10 1995: First Quarter............................................................. $ 16 3/8 $ 13 Second Quarter............................................................ 16 3/4 12 1/4 Third Quarter (through September 18, 1995)................................ 20 15 3/4
On July 13, 1995, the last trading day prior to the announcement of the Proposed Transaction, the closing price per Share as reported on NASDAQ was $15.75. On September 12, 1995, the last full trading day prior to the announcement of the execution of the Merger Agreement and of Purchaser's intention to commence the Offer, the 29 closing price per Share as reported on NASDAQ was $19 25/32. On September 18, 1995, the last full trading day prior to the commencement of the Offer, the closing price per Share as reported on NASDAQ was $19.75. As of September 18, 1995, no cash dividends have been paid by the Company on the Shares or declared as payable on a future date. Since June 30, 1994, the market prices for the Shares and an index comprised of the Selected Companies weighted by market capitalization have both outperformed the Standard & Poor's 500 Index. In addition, since June 30, 1994, the market prices for the Shares have outperformed such index of the Selected Companies. See "SPECIAL FACTORS--Report of Financial Advisor to COBE" for a discussion of the review by UBS of the historical stock market performance of the Shares and the shares of the Selected Companies. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES. 6. Certain Information Concerning the Company. Except as otherwise set forth herein, the information concerning the Company contained in this Offer to Purchase, including financial information, has been furnished by the Company or has been taken from or based upon publicly available documents and records on file with the Commission and other public sources. None of Purchaser, COBE, Gambro or Incentive assumes any responsibility for the accuracy or completeness of the information concerning the Company furnished by the Company or contained in such documents and records or for any failure by the Company to disclose events which may have occurred or may affect the significance or accuracy of any such information but which are unknown to Purchaser, COBE, Gambro or Incentive. General. The Company is a Tennessee corporation with its principal executive offices located at 6820 Charlotte Pike, Nashville, TN. According to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 (the "Company's 10-K"), the Company is engaged primarily in providing renal dialysis and related services to patients suffering from chronic kidney failure. As of September 13, 1995, the Company provided dialysis services at 68 freestanding outpatient REN Centers located in 18 states and the District of Columbia. The Company also provides outpatient dialysis services to patients in their homes and inpatient dialysis services through contracts with hospitals. In addition, the Company performs laboratory testing services for its REN Centers as well as for independent dialysis facilities and industry at its clinical laboratory. The Company was founded in 1986. Financial Information. Set forth below is certain selected consolidated financial information relating to the Company and its subsidiaries which has been excerpted or derived from the audited financial statements contained in the Company's Annual Report on the Company's 10-K and the unaudited financial statements contained in the Company's Quarterly Report on Form 10-Q, as amended, for the quarter ended June 30, 1995 (the "Company's 10-Q"). Copies of the financial statements and related information set forth in the Company's 10-K and the Company's 10-Q are set forth in Schedule III. More comprehensive financial information is included in the Company's 10-K, the Company's 10-Q and other documents filed by the Company with the Commission. The financial information that follows is qualified in its entirety by reference to such reports and other documents, including the financial statements and related notes contained therein. Such reports and other documents may be examined and copies may be obtained from the offices of the Commission in the manner set forth below. 30 REN CORPORATION--USA Selected Consolidated Financial Information (United States dollars in thousands, except per share data)
FISCAL YEAR ENDED DECEMBER SIX MONTHS ENDED 31, JUNE 30, ----------------------------- ----------------- 1994 1993 1992 1995 1994 -------- -------- ------- ------- ------- (UNAUDITED) INCOME STATEMENT DATA: Revenue.......................................... $131,815 $105,188 $80,814 $81,532 $61,925 Income (Loss) from Operations.................... 14,922 (5,439) 10,082 11,086 5,540 Income (Loss) Before Income Tax Expense and Minority Interest.............................. 14,081 (5,989) 8,296 10,673 5,153 Net Income (Loss)................................ 8,511 (3,758) 5,355 6,057 3,123 Weighted Average, Common Shares and Common Shares Equivalents Outstanding.......................... 18,899 18,777 14,472 19,022 18,889 Net Income (Loss) Per Common Share and Common Share Equivalent................................. $0.45 $(0.20) $0.38 $0.32 $0.17
AT DECEMBER 31, -------------------- 1994 1993 AT JUNE 30, 1995 -------- -------- ---------------- (UNAUDITED) BALANCE SHEET DATA: Current Assets.......................................... $ 31,776 $ 32,296 $ 30,506 Total Assets............................................ 134,314 126,140 150,487 Current Liabilities..................................... 14,839 9,738 18,313 Long-Term Liabilities................................... 4,732 11,910 10,991 Shareholders' Equity.................................... 114,696 104,421 121,159
Ratio of Earnings to Fixed Charges; Book Value per Share. The Company's ratio of earnings to fixed charges for the fiscal year ended December 31, 1994 was 14.5. The ratio of earnings to fixed charges for the fiscal year ended December 31, 1993 was 6.7. The ratio of earnings to fixed charges for the fiscal half-year ended June 30, 1995 was 17.6. For purposes of this paragraph, "earnings" is the Company's pre-tax income from continuing operations adjusted for the profit/loss input of items considered in fixed costs and "fixed costs" is the Company's (i) interest (whether expensed or capitalized), (ii) amortization of debt expense, discounts, or premiums, (iii) such portion of rent expense representative of interest and (iv) preferred stock dividends due majority owned interests. The book value per share and common share equivalent was $6.07 per Share for the year ended December 31, 1994 and $6.37 per Share for the quarter ended June 30, 1995. Certain Forecasts and Other Information. The Company does not, as a matter of course, make public its business plans or its forecasts as to future earnings or financial performance. However, as a result of having representatives on the Company's Board, COBE has received, among other things, the Company's financial forecasts for the remainder of the Company's 1995 fiscal year and the Company's 1996, 1997 and 1998 fiscal years (the "Company Forecasts"). Certain excerpts from, and the significant assumptions used in developing, the Company Forecasts are set forth in the table below. 31 CERTAIN INFORMATION DERIVED FROM COMPANY FORECASTS (1) (United States dollars in thousands)
YEARS ENDED DECEMBER 31, -------------------------------------------- 1995 1996 1997 1998 -------- -------- -------- -------- Revenue............................................ $167,271 $199,928 $239,368 $287,648 Income from Operations............................. 24,092 32,424 40,739 49,293 Net Income......................................... 13,034 19,186 25,154 31,222 Free Cash Flow (2)................................. 5,173 15,713 14,291 17,039
------------ (1) The Company Forecasts do not take into account any of the transactions contemplated by the Merger Agreement. (2) Free cash flow represents net income plus depreciation and amortization less capital expenditures less working capital requirements. The Company Forecasts assume that revenue grows 26.9% in 1995, 19.5% in 1996, 19.7% in 1997 and 20.2% in 1998, primarily due to assumed additions of new patients at existing dialysis centers and assumed acquisitions of new dialysis centers. Also, the Company Forecasts assume that the income from operations margin is 14.4% in 1995, and increases to 16.2% in 1996, 17.0% in 1997 and 17.1% in 1998. The increase in such margin is due primarily to certain assumed cost reductions and the distribution of certain fixed costs over a larger base of revenue. The Company Forecasts do not give effect to the Offer or the Merger and should be read together with the information contained in the financial statements of the Company and its consolidated subsidiaries set forth in Schedule III hereto. THE COMPANY FORECASTS ARE BASED UPON NUMEROUS ESTIMATES AND ASSUMPTIONS ABOUT COMPLEX ECONOMIC AND OPERATING FACTORS WITH RESPECT TO INDUSTRY PERFORMANCE, GENERAL BUSINESS AND ECONOMIC CONDITIONS, TAXES AND OTHER MATTERS THAT CANNOT BE PREDICTED ACCURATELY AND THAT ARE SUBJECT TO CONTINGENCIES OVER WHICH NEITHER THE COMPANY, COBE, GAMBRO, INCENTIVE NOR PURCHASER HAVE CONTROL. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE PROJECTED RESULTS ARE INDICATIVE OF FUTURE PERFORMANCE OR THAT ACTUAL RESULTS WILL NOT BE MATERIALLY HIGHER OR LOWER THAN THOSE FORECAST. IN ADDITION, THE COMPANY FORECASTS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR IN COMPLIANCE WITH THE PUBLISHED GUIDELINES OF THE COMMISSION OR THE GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING FORECASTS OR PROJECTIONS. THE COMPANY FORECASTS ARE ONLY BEING PROVIDED BECAUSE SUCH INFORMATION WAS PROVIDED TO COBE. ERNST & YOUNG LLP, INDEPENDENT PUBLIC ACCOUNTANTS FOR THE COMPANY, HAS NEITHER EXAMINED, REVIEWED NOR COMPILED THE COMPANY FORECASTS AND, CONSEQUENTLY, DOES NOT EXPRESS AN OPINION OR ANY OTHER FORM OF ASSURANCE WITH RESPECT THERETO. GAMBRO, COBE, PURCHASER AND THE COMPANY BELIEVE THAT HOLDERS OF SHARES SHOULD NOT RELY ON THE COMPANY FORECASTS. The Company is subject to the informational filing requirements of the Exchange Act and, in accordance therewith, is required to file periodic reports, proxy statements and other information with the Commission relating to its business, financial condition and other matters. Information as of particular dates concerning the Company's directors and officers, their remuneration, stock options granted to them, the principal holders of the Company's securities and any material interest of such persons in transactions with the Company is required to be disclosed in proxy statements distributed to the Company's stockholders and filed with the Commission. Such reports, proxy statements and other information should be available for inspection at the public reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and also should be available for inspection at the Commission's regional offices located at 75 Park Place, 14th Floor, New York, New York 10007 and the Klucyzinski Federal Building, 230 South Dearborn Street, Room 3190, Chicago, Illinois 60604. Copies of such materials may also be obtained by mail, upon payment of the Commission's customary fees, by writing to its principal office at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. 32 7. Certain Information Concerning Purchaser, COBE, Gambro and Incentive. Purchaser is a newly incorporated Tennessee corporation organized in connection with the Offer and the Merger and has not carried on any activities other than in connection with the Offer and the Merger. The principal offices of Purchaser are located at 1185 Oak Street, Lakewood, CO 80215. Purchaser is a wholly owned subsidiary of COBE and an indirect wholly owned subsidiary of Gambro. Purchaser owns 10,036,221 Shares, representing approximately 53% of the 18,951,834 Shares outstanding, all of which were contributed by COBE to the capital of Purchaser on September 12, 1995. Until immediately prior to the time that Purchaser purchases Shares pursuant to the Offer, it is not anticipated that Purchaser will have any significant assets or liabilities or engage in activities other than those incident to its formation and capitalization and the transactions contemplated by the Offer and the Merger. Because Purchaser is newly formed and has minimal assets and capitalization, no meaningful financial information regarding Purchaser is available. The name, citizenship, business address, principal occupation or employment, and five-year employment history for each of the directors and executive officers of Purchaser, COBE, Gambro and Incentive and certain other information are set forth in Schedule I hereto. Financial Information Concerning Gambro. Set forth below are certain selected consolidated financial data relating to Gambro and its subsidiaries for Gambro's last three fiscal years, which have been excerpted or derived from the audited financial statements contained in Gambro's Annual Report on Form 20-F (the "Gambro Form 20-F") for the fiscal year ended December 31, 1994 filed by Gambro with the Commission. More comprehensive financial information is included in such reports and other documents filed by Gambro with the Commission, and the following financial data is qualified in its entirety by reference to such reports and other documents, including the financial information and related notes contained therein. Such reports and other documents may be inspected and copies may be obtained from the offices of the Commission in the same manner as set forth with respect to information about the Company in "THE TENDER OFFER -- Section 6. Certain Information Concerning the Company". The Gambro Form 20-F has been prepared in conformity with generally accepted accounting principles applicable in Sweden ("Swedish GAAP"), which practices are described in the notes to the financial statements included in such Form 20-F. Swedish GAAP differs in certain significant respects from generally accepted accounting principles applicable in the United States ("US GAAP"). A summary of the principal differences between US GAAP and Swedish GAAP and the necessary adjustments to reconcile Swedish GAAP net income and shareholders' equity to US GAAP net income and shareholders' equity is also set forth below. 33 GAMBRO AB1 SUMMARY SELECTED CONSOLIDATED FINANCIAL DATA (Swedish kronor in millions ("SEK"), except where otherwise indicated in United States dollars in millions ("$"), and except per share data)
FISCAL YEAR ENDED DECEMBER 31, ----------------------------------------------------- 1994 1994 1993 1992 -------- ----------- ----------- ----------- INCOME STATEMENT DATA: Sales.................................. $ 1,270 SEK 9,807 SEK 9,046 SEK 6,312 Operating Income....................... 183 1,412 1,320 972 Income Before Income Taxes............. 150 1,155 976 753 Minority Interest...................... (4) (28) 2 (1) Net Income............................. 89 690 600 454 Average Shares Outstanding (in thousands)........................... 117,985 117,985 113,580 109,472 Earnings Per Share..................... 0.76 5.85 5.21 4.04
AT DECEMBER 31, -------------------------------- 1994 1994 1993 ------ --------- --------- BALANCE SHEET DATA: Current Assets............................................ $ 676 SEK 5,043 SEK 6,002 Total Assets.............................................. 1,195 8,917 9,942 Current Liabilities....................................... 400 2,985 3,986 Long-Term Liabilities..................................... 223 1,668 2,205 Shareholders' Equity...................................... 518 3,861 3,347
------------ 1 In this summary of consolidated financial data, Swedish kronor ("SEK") are translated into U.S. dollars solely for the convenience of the reader. Unless otherwise stated, such translations of income statement information of Gambro have been made using an average exchange rate for the year equal to 7.72 kronor per dollar. Translations of balance sheet information have been made using a closing rate on December 31, 1994 of 7.46 kronor per dollar. Principal Differences Between Swedish and United States Generally Accepted Accounting Principles. The financial information provided above was prepared in accordance with Swedish GAAP, which differs in certain significant respects from US GAAP. A description of those accounting policies under Swedish GAAP which differ significantly in certain respects from US GAAP is as follows: (i) Income taxes. The tax effects of differences between the accounting and income tax base of assets and liabilities (temporary differences) are considered in determining net income in accordance with US GAAP. Under US GAAP the taxes to be incurred upon repatriation of earnings by foreign subsidiaries should be accounted for in the same period that such earning are included in the consolidated statement of income, unless such earnings are considered to be permanently invested in such foreign country. In Sweden there is no tax on dividends received from foreign subsidiaries and the withholding tax incurred at the local subsidiary level is recorded in the period the dividend is paid. Tax effects of basis differences from acquisitions have been netted against related assets in Gambro's balance sheet. The effect of adopting Statement No. 190 of the Financial Accounting Standards Board as of January 1, 1993 is to gross up property, plant and equipment and intangible assets by approximately SEK 258 million and to record a deferred tax liability for an equal amount. The effect on net income is not material. (ii) Accounting for acquisitions. The acquisition by Gambro of Hospal AG in 1987 has been accounted for under the Swedish pooling of interests method for Swedish GAAP purposes as described in Note 2 of the Notes to the Financial Statements of the Gambro Form 20-F. Under US GAAP, the acquisition would be accounted for using the purchase method. Accordingly, the purchase price would be allocated to the fair value of assets acquired less liabilities assumed with the excess accounted for as goodwill which would be amortized 34 over its economical life of 40 years. The goodwill arising from the acquisition of Gambro by COBE has been written off directly against shareholders' equity. Under US GAAP goodwill would be capitalized and amortized over its economical life of 40 years. The application of the above US GAAP together with other differences of minor significance would have had the following approximate effect on consolidated net income, net income per share and shareholders' equity:
JANUARY 1-DECEMBER 31, ---------------------------------- 1992 1993 1994 1994 ----- ----- ----- ---- (SEK) (SEK) (SEK) ($) (IN MILLIONS, EXCEPT PER SHARE DATA) Net income*.................................................... 454 600 690 89 Increase/decrease for: Accounting for business combinations........................... (37 ) (37 ) (37 ) (5) Taxes on anticipated dividends from foreign subsidiaries....... (5 ) (10 ) -- -- Other.......................................................... -- -- -- -- ----- ----- ----- ---- Approximate net income in accordance with US GAAP.............. 412 573 653 84 ----- ----- ----- ---- ----- ----- ----- ---- Approximate income per share in accordance with US GAAP........ 3.67 4.98 5.53 0.72 ----- ----- ----- ---- ----- ----- ----- ----
------------ * as reported in the consolidated statement of income
DECEMBER 31, ---------------------- 1993 1994 1994 ----- ----- ---- (SEK) (SEK) ($) (IN MILLIONS) Shareholders' equity**.................................................. 3,347 3,861 518 Increase/decrease for: Accounting for business combinations, intangible assets................. 1,293 1,256 168 Deferred income taxes................................................... (76) (76) (10 ) ----- ----- ---- Approximate shareholders' equity in accordance with US GAAP............. 4,564 5,041 676 ----- ----- ---- ----- ----- ----
------------ ** as reported in the consolidated balance sheet Other than the increase in property, plant and equipment, intangible assets and deferred income taxes, as noted above, no other balance sheet captions would be materially changed at December 31, 1993 and 1994. The consolidated statement of changes in financial position is substantially the same as the statement of cash flows pursuant to US GAAP except for certain subtotals which are not contemplated by Statement No. 95 of Financial Accounting Standards Board and the non-cash conversion of debentures into shares, SEK 23 million in 1993 and SEK 22 million in 1994. If the currency translation requirements of the Swedish Financial Accounting Standards Council No. 95 were followed the following adjustments would be made to the consolidated statement of changes in financial position:
1993 1994 ----- ----- (SEK) (SEK) (IN MILLIONS) Net cash flow from operations.................................................. 243 (301) Net cash flow from investing activities........................................ (13) (1) Foreign currency translation adjustment........................................ 193 (173) Net cash flow from financing activities........................................ (451) 403 ----- ----- Effect of exchange rates on cash and cash equivalents.......................... 100 (10) ----- ----- Supplements disclosure of cash flow information: Interest cost paid............................................................. (296) (246) Income tax payments............................................................ (330) (329) ----- ----- ----- -----
35 Set forth below are certain unaudited selected consolidated financial data prepared in conformity with Swedish GAAP relating to Gambro and its subsidiaries as of June 30, 1995. GAMBRO AB SUMMARY SELECTED CONSOLIDATED FINANCIAL DATA (Swedish kronor in millions ("SEK"), except per share data)
JAN. 1--JUNE JAN. 1--JUNE 30, 1995 30, 1994 --------------- --------------- INCOME STATEMENT DATA: Sales....................................................... SEK 5,135 SEK 4,889 Operating Income............................................ 776 723 Income Before Income Taxes.................................. 662 582 Net Income.................................................. 387 349 Average Shares Outstanding (in thousands)................... 118,056 117,913 Earnings Per Share, full tax................................ 3.28 2.96
Except as described in this Offer, (i) none of Purchaser, COBE, Gambro, Incentive nor, to the best knowledge of Purchaser and COBE, any of the persons listed in Schedule I to this Offer or any associate or majority-owned subsidiary of Purchaser, COBE, Gambro, Incentive or any of the persons so listed beneficially owns or has any right to acquire, directly or indirectly, any Shares and (ii) none of Purchaser, COBE, Gambro, Incentive nor, to the best knowledge of Purchaser, COBE, Gambro and Incentive, any of the persons or entities referred to above nor any director, executive officer or subsidiary of any of the foregoing has effected any transaction in the Shares during the past 60 days. Except as provided in the Merger Agreement, the Disclosure Schedules thereto and as otherwise described in this Offer, none of Purchaser, COBE, Gambro, Incentive nor, to the best knowledge of Purchaser, COBE, Gambro and Incentive, any of the persons listed in Schedule I to this Offer, has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company, including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or voting of such securities, joint ventures, loan or option arrangements, puts or calls, guaranties of loans, guaranties against loss or the giving or withholding of proxies. Except as set forth in this Offer, since January 1, 1992, neither Purchaser, COBE, Gambro, Incentive nor, to the best knowledge of Purchaser, COBE, Gambro and Incentive and any of the persons listed on Schedule I hereto, has had any business relationship or transaction with the Company or any of its executive officers, directors or affiliates that is required to be reported under the rules and regulations of the Commission applicable to the Offer. Except as set forth in this Offer, since January 1, 1992, there have been no contacts, negotiations or transactions between any of Purchaser, COBE, Gambro, Incentive or any of their respective subsidiaries or, to the best knowledge of Purchaser, COBE, Gambro and Incentive, any of the persons listed in Schedule I to this Offer, on the one hand, and the Company or its affiliates, on the other hand, concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, an election of directors or a sale or other transfer of a material amount of assets. The Stock Purchase Agreements. COBE and the Company are parties to the Stock Purchase Agreements pursuant to which COBE purchased from the Company, and the Company issued Shares to COBE. Copies of the Stock Purchase Agreements are filed as an Exhibit to the Schedule 13E-3. See "SPECIAL FACTORS -- Background of the Offer and the Merger" for a description of the purchase of Shares by COBE under the Stock Purchase Agreements. Under the Stock Purchase Agreements, so long as COBE owns a majority of the issued and outstanding Common Stock, COBE may designate a majority of the members of the Board. Under the Stock Purchase Agreements, COBE agreed that for five years after May 24, 1991, the closing date of the purchase of Shares by COBE pursuant to one of the Stock Purchase Agreements which was dated as of May 11, 1991, COBE would not directly or indirectly, unless specifically requested to do so in writing in advance by the Board, (i) acquire or agree, offer, seek or propose to acquire, or cause to be acquired, beneficial ownership of any securities of the Company, any debt claims of the Company, any securities convertible or exchangeable into or exercisable into or exercisable for any securities or assets of the Company, or any rights or options to acquire such ownership, except pursuant to COBE's preemptive rights (described below); (ii) propose to enter into any merger or business 36 combination involving the Company, except and unless the Company enters into a definitive agreement with a third party contemplating a merger, consolidation or similar transaction in which all or a majority of the Company's equity securities or substantially all of its assets are to be acquired by such third party, in which case COBE may make a Financially Superior Offer (as defined in such Stock Purchase Agreement); (iii) make, directly or indirectly, any "solicitation" of "proxies" (as such terms are used in the Exchange Act) to vote any securities of the Company; (iv) form, join or participate in a "group" (within the meaning of Section 13(d)(3) of the Exchange Act) with respect to any securities of the Company; (v) otherwise act, alone or in concert with others, to seek to control or exercise (other than through its representation on the Board) a controlling influence over the management, Board or the business of the Company; (vi) call a meeting of the Company's stockholders; and (vii) enter into any discussions, negotiations, arrangements or understandings with any third party with respect to any of the foregoing. The Stock Purchase Agreements provide that so long as COBE owns more than 15% of the then outstanding Shares, COBE shall, in the event the Company issues Shares or any other voting securities, have the option to purchase from the Company sufficient Shares or other voting securities to permit COBE to maintain its percentage ownership of Shares or of the total voting power it had immediately prior to such issuance. Furthermore, the Company is required to notify COBE within 15 days of the end of each calendar quarter of the number of Shares and the number of voting securities outstanding as of such date. In general terms, at the end of each calendar quarter COBE has the option to purchase from the Company additional Shares to the extent necessary to permit COBE to maintain 50.1% of the Company's total voting power. The per Share purchase price for such Shares shall be the average of the closing bid and asked prices of the Shares on each day during such calendar quarter. The Stock Purchase Agreements set forth a supply arrangement under which the Company and its subsidiaries agreed to purchase a minimum of 75% of their requirements for renal dialysis machines and all bloodlines used therewith from COBE on overall terms and conditions no less favorable than those offered by COBE to independent third parties. However, the 75% minimum specified above shall be reduced to the extent that medical directors in charge of facilities which have generated more than 25% of the Company's aggregate purchases of renal dialysis machines have delivered written objections to the use of such machines. Under the Stock Purchase Agreements, the foregoing supply arrangement terminates on the earlier of (i) May 24, 1997, being the sixth anniversary of the closing date of one of the Stock Purchase Agreements which was dated as of May 11, 1991 or (ii) at such time that COBE owns less than 20% of the Shares for a period of 45 consecutive days after any calendar quarter. During 1994, 1993 and 1992, the Company paid $7,845,189, $6,801,258 and $3,071,739, respectively, for equipment and supplies received from COBE. The Stock Purchase Agreements also provide that during the time that COBE owns 15% or more of the Shares and for one year thereafter (i) COBE shall not, without the Company's consent, engage in providing, or invest in any entity that provides, renal dialysis services and related laboratory services in North America within a 75 mile radius of the Company's existing facilities ("Existing Regions") or in locations identified by the Company ("Identified Regions") as a location of likely expansion, (ii) COBE shall disclose to the Company all acquisition opportunities of renal dialysis services centers in North America outside the Existing Regions and Identified Regions and shall engage in good faith discussions with the Company regarding strategic business ventures concerning such acquisition opportunities, provided, however, that the Company shall not acquire such acquisition opportunities without COBE's written consent, which consent shall be given if COBE is no longer actively pursuing such acquisition opportunity, and (iii) COBE, the Company and their respective affiliates shall not solicit or entice away any of their respective employees or employ any such employee until one year after such employee leaves the employ of such company or affiliate. Under the Stock Purchase Agreements, COBE received two "demand" registration rights and certain "piggyback" registration rights in respect of Shares, subject to customary "cutbacks". Under the Stock Purchase Agreements, so long as directors designated by COBE constitute a majority of the Board, no amendment to any of the Stock Purchase Agreements will be effective unless it is approved by a majority of the Company's directors who were not designated by COBE. 8. Financing of the Offer and the Merger. The total amount of funds required by Purchaser to consummate the Offer and the Merger and to pay related fees and expenses is estimated to be approximately $190 million. Purchaser will obtain all of such funds from Gambro and COBE. Gambro will provide to Purchaser to finance the Offer and the Merger (i) $75 million from the Revolving Credit Facility, dated as of May 11, 1993 (the "1993 Credit Facility") among Gambro, BNP Capital Markets Limited (as Arranger), certain banks named in the 1993 37 Credit Facility and Banque Nationale de Paris (as Agent) and (ii) $75 million from the Revolving Credit and Term Facility, dated as of November 30, 1994 (the "1994 Credit Facility") among Gambro, BNP Capital Markets Limited (as Arranger), certain banks named in the 1994 Credit Facility and Banque Nationale de Paris (as Agent). COBE will provide to Purchaser to finance the Offer and the Merger (i) $10 million from the Uncommitted Line of Credit Agreement, dated as of January 14, 1991, as amended through September 25, 1992 (the "1991 Line of Credit"), between COBE and Union Bank of Switzerland, New York Branch ("UBSNY"), (ii) $5 million from the Revolving Credit Facility (the "1995 Credit Facility") and $5 million from the Line of Credit Facility (the "1995 Line of Credit"), each dated as of April 28, 1995, between COBE and Commerzbank, Los Angeles Branch ("Commerzbank"), (iii) $10 million from the Uncommitted Revolving Credit Facility (the "1991 Uncommitted Credit Facility") dated as of January 7, 1991, as amended through March 29, 1994, between COBE and Societe Generale, New York Branch and (iv) $6.5 million from the Committed Revolving Credit Facility (the "1995 Committed Credit Facility") and $3.5 million from the Discretionary Line of Credit (the "1995 Discretionary Line"), each dated as of July 29, 1995 between COBE and The First National Bank of Boston. Copies of the 1993 Credit Facility, the 1994 Credit Facility, the 1991 Line of Credit, the 1995 Credit Facility, the 1995 Line of Credit, the 1991 Uncommitted Credit Facility, the 1995 Committed Credit Facility, and the 1995 Discretionary Line are set forth in exhibits to the Schedule 13E-3. Purchaser, COBE and Gambro anticipate that any indebtedness incurred through borrowings under the foregoing credit facilities will be repaid from a variety of sources, which may include, but may not be limited to, funds generated internally by COBE, Gambro and their affiliates (including, following the Merger, funds generated by the Surviving Corporation), bank refinancing, and the public or private sale of debt or equity securities. No decision has been made concerning the method COBE and Gambro will employ to repay such indebtedness. Such decision will be made based on a review from time to time of the advisability of particular actions, as well as on prevailing interest rates and financial and other economic conditions and such factors as COBE and Gambro may deem appropriate. The 1993 Credit Facility. In general terms, under the 1993 Credit Facility, Gambro and its designated subsidiaries may borrow up to a total of $75 million from the banks who are signatories thereto. The total commitments of the banks shall however be automatically reduced by $25 million on each of on May 11, 1996 and May 11, 1997. All loans under the 1993 Credit Facility must be repaid in full by May 11, 1998, but may also be voluntarily prepaid (with applicable interest) in whole or in part. The undrawn amount of the total commitments may also be cancelled in whole or in part. The annual rate of interest on loans made under the 1993 Credit Facility is the aggregate of the following: (i) 0.50% per annum, (ii) LIBOR (as defined in the 1993 Credit Facility) in the case of loans not denominated in Sterling or EIBOR (as defined in the 1993 Credit Facility) in the case of loans denominated in Sterling, and (iii) Reserve Asset Costs (as defined in the 1993 Credit Facility) when applicable to such loan. Loan obligations under the 1993 Credit Facility rank at least pari passu with all the obligor's other present and future unsecured and unsubordinated obligations, except for obligations which are mandatorily preferred by law. Subject to certain exceptions, an obligor under the 1993 Credit Facility shall not create or permit to subsist any security interest on any of its assets. The 1994 Credit Facility. In general terms, under the 1994 Credit Facility, Gambro and its designated subsidiaries may borrow up to a total of $100 million in Facility A Loans and $100 million in Facility B Loans (as such terms are defined in the 1994 Credit Facility) from the banks who are signatories thereto. All loans under the 1994 Credit Facility must be repaid in full by November 30, 2001 but may also be voluntarily prepaid (with applicable interest) in whole or in part. The undrawn amount of the Total A Commitments (as defined in the 1994 Credit Facility) may also be cancelled in whole or in part. Any amount of Facility A Loans prepaid may subsequently be reborrowed. No amount of Facility B Loans prepaid may subsequently be reborrowed. Total A Commitments cancelled under the 1994 Credit Facility may subsequently be reinstated. The annual rate of interest on loans made under the 1994 Credit Facility is the aggregate of the following: (i) 0.30% per annum from November 30, 1994 until November 30, 1999, and 0.35% per annum thereafter, (ii) LIBOR (as defined in the 1994 Credit Facility) in the case of loans not denominated in Sterling or EIBOR (as defined in the 1994 Credit Facility) in the case of loans denominated in Sterling, and (iii) MLA Costs (as defined in the 1994 Credit Facility) when applicable to such loan. Loan obligations under the 1994 Credit Facility rank at least pari passu with all the obligor's other present and future unsecured and unsubordinated obligations, except for obligations which are 38 mandatorily preferred by law. Subject to certain exceptions, an obligor under the 1994 Credit Facility shall not create or permit to subsist any security interest on any of its assets. The 1995 Credit Facility and the 1995 Line of Credit. Under the 1995 Credit Facility, Commerzbank has made available to COBE a committed revolving credit facility of $5 million, the availability of which is subject to Gambro delivering a letter of comfort in favor of Commerzbank in form and substance satisfactory to Commerzbank. Under the 1995 Credit Facility, (i) Eurodollar Rate Loans shall be repaid on the last day of the interest period applicable therefor with accrued interest, and are at an annual interest rate of the Eurodollar Rate plus 1/4 of 1% per annum, and (ii) Prime Rate Loans may be for an agreed-upon period or without a fixed maturity date as the parties may agree, and are at an annual interest rate equal to the Commerzbank fluctuating Prime Rate (in each case, as such terms are defined in the 1995 Credit Facility). Each advance under the 1995 Credit Facility may be prepaid with accrued interest to the date of prepayment, and all advances must be repaid by April 26, 1996. COBE has agreed to pay Commerzbank a facility fee of 1/8 of 1% per annum on the total amount of the line of credit under the 1995 Credit Facility. So long as any credit is outstanding under the 1995 Credit Facility, COBE will ensure that its obligations thereunder constitute its unconditional general obligations ranking at least pari passu with all its other obligations for money borrowed or contingent obligations in respect thereto. Under the 1995 Line of Credit, Commerzbank holds available to COBE a line of credit not exceeding $5 million until further notice. The 1995 Line of Credit is not a commitment to lend, but rather sets forth options for loans and other credit which Commerzbank may make available to COBE. The availability of any credit under the 1995 Line of Credit is subject to Gambro delivering a letter of comfort in favor of Commerzbank in form and substance satisfactory to Commerzbank. Under the 1995 Line of Credit, (i) Eurodollar Rate Loans shall be repaid on the last day of the interest period applicable therefor or, if earlier, upon demand by Commerzbank, in each case with accrued interest, and the annual interest rate for each Eurodollar Rate Loan will be negotiated, and (ii) Prime Rate Loans may be for an agreed-upon period or without a fixed maturity date as the parties may agree at an annual interest rate equal to the Commerzbank fluctuating Prime Rate (in each case, as such terms are defined in the 1995 Line of Credit). Each advance under the 1995 Line of Credit may be prepaid with accrued interest to the date of prepayment. The 1991 Line of Credit. Under the 1991 Line of Credit, UBSNY established an uncommitted line of credit in favor of COBE pursuant to which UBSNY is prepared to consider making loans, in its discretion, to COBE upon the following terms in an amount up to $15 million. COBE may utilize the 1991 Line of Credit by making either (i) domestic dollar loans, payable on demand, bearing an interest rate per annum of the higher of (A) UBSNY's floating prime lending rate as announced from time to time or (B) 0.375% in excess of the cost to UBSNY of maintaining such loans, or (ii) Eurodollar loans, with maturities of 1, 2, 3, 6, 9 or 12 months, bearing an interest rate per annum as agreed between COBE and UBSNY at the time of making such loans (in each case as such terms are defined in the 1991 Line of Credit). COBE may prepay any loans under the 1991 Line of Credit with accrued interest to the date of prepayment and any sum required to compensate UBSNY for any loss incurred in connection therewith. Subject to certain exceptions, COBE shall not create, incur, assume or suffer to exist any mortgage, pledge, lien or other encumbrance upon any security interest in any of its assets. The 1991 Uncommitted Credit Facility. Under the 1991 Uncommitted Credit Facility, an uncommitted revolving credit facility of $10 million was made available to COBE. Under this facility, COBE may make Eurodollar borrowings for periods of, at COBE's option, overnight or up to 6 months at an interest rate equal to a rate per annum that is the interbank Eurodollar market rate quoted to Societe Generale for deposits of a corresponding amount and duration, plus a margin acceptable to Societe Generale at such time. If accepted by COBE, such interest rate shall be in effect for the duration of the borrowing, which period shall be determined by COBE. With limited exceptions, prepayments of principal are not permitted prior to the end of such period. COBE shall have the option of repaying the Eurodollar borrowing at the end of the period or continuing such borrowing for a further duration to be set by COBE. The 1995 Committed Credit Facility and the 1995 Discretionary Line. Under the 1995 Committed Credit Facility, The First National Bank of Boston (the "Bank of Boston") made available to COBE a $10 million unsecured line of credit for general corporate purposes, commencing on July 31, 1995 and expiring on July 30, 1996, unless extended by mutual agreement. COBE may elect in its request for a loan to have interest thereon accrue at any of the following rates: (i) a per annum rate (the "Base Rate") equal to the greater of (A) the rate of 39 interest announced from time to time by the Bank of Boston and (B) the weighted average of the published rates on overnight Federal Funds transactions with members of the Federal Reserve System, plus 1/2%; (ii) the prevailing rate (the "Eurodollar Rate") per annum at which U.S. dollar deposits are offered to the Bank of Boston by first class banks in the interbank Eurodollar market two business days before the date of the requested loan in an amount and for an interest period approximately equal to that of the requested loan, adjusted for reserves, if any, plus 1/2% per annum; or (iii) a rate (the "Money Market Rate") quoted by the Bank of Boston in its sole discretion as the fixed rate of interest at which it is willing to make a "Money Market" advance in the amount and for the period of the requested loan. Base Rate loans and Eurodollar Rate loans are payable on demand. COBE may prepay Base Rate Loans, in whole or in part, at any time and without prepayment penalties, but no prepayments of Eurodollar Rate loans or Money Market Rate loans are permitted. COBE shall pay a facility fee of 1/4% per annum on the unused amount of the line of credit. Under the 1995 Discretionary Line, the Bank of Boston has made available to COBE a $5 million demand, discretionary line of credit for general corporate purposes, commencing on July 31, 1995 and expiring on July 30, 1996, unless extended by mutual agreement. The terms of the 1995 Discretionary Line are substantially the same as those of the 1995 Committed Credit Facility described above, except that the 1995 Discretionary Line does not provide for Money Market Rate loans and no facility fee is payable. 9. Dividends and Distributions. As of the date hereof, the Company has not, and does not intend to, declare or pay any dividends or make any distributions. 10. Certain Conditions of the Offer. Notwithstanding any other provision of the Offer, Purchaser shall not be required to accept for payment or pay for any Shares tendered pursuant to the Offer, and may terminate or amend the Offer and may postpone the acceptance for payment of and payment for Shares tendered, if the Minimum Condition shall not have been satisfied or at any time on or after September 12, 1995, and prior to the acceptance for payment of Shares, any of the following conditions shall exist: (a) there shall have been any action taken, or any statute, rule, regulation, legislation, interpretation, judgment, order or injunction enacted, entered, enforced, promulgated, amended, issued or deemed applicable to COBE, the Company or any subsidiary or affiliate of Gambro, COBE or the Company restraining or prohibiting the consummation of the Offer or the Merger and that has a Material Adverse Effect. When used in connection with the Company, Gambro, COBE or Purchaser or any of their subsidiaries, the term "Material Adverse Effect" means any change or effect that is or is reasonably likely to be materially adverse to the business, operations, properties or financial condition of the Company, Gambro, COBE or Purchaser or any of their subsidiaries taken as a whole; (b) (i) the Board, with the consent of the Special Committee, shall have withdrawn or modified in a manner adverse to Gambro, COBE or Purchaser the approval or recommendation of the Offer, the Merger, the Merger Agreement, or approved or recommended any takeover proposal or any other acquisition of Shares other than the Offer or the Merger or (ii) the Board, with the consent of the Special Committee, shall have resolved to do any of the foregoing; (c) any representation or warranty of the Company in the Merger Agreement which is qualified as to materiality shall not be true and correct or any such representation or warranty that is not so qualified shall not be true and correct in any material respect, in each case either when made or on and as of the Expiration Date, except for changes contemplated by the Merger Agreement, with the same force and effect as if made on and as of the Expiration Date, or in the case of a representation or warranty made on or given as of a specified time, if such representation or warranty was untrue or incorrect as of such time; (d) the Company shall have failed to perform in any material respect any obligation or to comply in any material respect with any agreement or covenant of the Company to be performed or complied with by it under the Merger Agreement; (e) the Merger Agreement shall have been terminated in accordance with its terms; or (f) Purchaser and the Company shall, with the consent of the Special Committee, have agreed that Purchaser shall terminate the Offer or postpone the acceptance for payment of or payment for Shares thereunder; 40 which, in the reasonable judgment of Purchaser in any such case, and regardless of the circumstances (including any action or inaction by COBE or any of its affiliates) giving rise to any such condition, makes it inadvisable to proceed with such acceptance for payment or payment. The foregoing conditions are for the sole benefit of Purchaser and COBE and may be asserted by Purchaser or COBE regardless of the circumstances giving rise to any such condition or may be waived by Purchaser or COBE in whole or in part at any time and from time to time in their sole discretion; provided however, that the Minimum Condition may not be waived except with the prior written consent of the Special Committee. The failure by Gambro, COBE or Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right; the waiver of any such right with respect to particular facts and other circumstances shall not be deemed a waiver with respect to any other facts and circumstances; and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. 11. Fees and Expenses. Except as set forth below, Purchaser will not pay any fees or commissions to any broker, dealer or other person for soliciting tenders of Shares pursuant to the Offer. UBS is acting as Dealer Manager in connection with the Offer and has provided certain financial advisory services in connection with the acquisition of the Shares pursuant to the Offer, the Merger and the Merger Agreement. COBE has agreed to pay UBS a retainer fee of $100,000 and a transaction fee (against which the foregoing retainer fee will be credited) of $1,500,000, which will become payable at the closing of the Merger. COBE has also agreed to reimburse UBS for all out-of-pocket expenses incurred by UBS, including the fees of its counsel, and to indemnify UBS against certain liabilities and expenses in connection with its engagement, including certain liabilities under the federal securities laws. Purchaser and COBE have retained Georgeson & Company Inc., as the Information Agent, and Bank of New York, as the Depositary, in connection with the Offer. The Information Agent may contact holders of Shares by mail, telephone, telex, telecopy, telegraph and personal interview and may request banks, brokers, dealers and other nominee stockholders to forward materials relating to the Offer to beneficial owners. As compensation for acting as Information Agent in connection with the Offer, Georgeson & Company Inc. will be paid a fee of $10,000 and will also be reimbursed for certain out-of-pocket expenses and may be indemnified against certain liabilities and expenses in connection with the Offer, including certain liabilities under the federal securities laws. Purchaser will pay the Depositary reasonable and customary compensation for its services in connection with the Offer, plus reimbursement for out-of-pocket expenses, and will indemnify the Depositary against certain liabilities and expenses in connection therewith, including under federal securities laws. Brokers, dealers, commercial banks and trust companies will be reimbursed by Purchaser for customary handling and mailing expenses incurred by them in forwarding material to their customers. 12. Effect of the Offer on the Market for the Shares, Exchange Listing and Exchange Act Registration. The purchase of Shares pursuant to the Offer will reduce the number of such Shares that might otherwise trade publicly and the number of holders of such Shares and could adversely affect the liquidity and market value of the remaining Shares held by the public. According to the Company's 10-K, the Company estimates that as of March 15, 1995, there were approximately 500 beneficial owners of Shares. The Company has represented in the Merger Agreement that as of September 12, 1995, there were 18,951,834 Shares issued and outstanding, 542,225 Shares subject to Options granted pursuant to the Stock Option Plan, 9,344 Shares granted pursuant to the ESPP and Warrants to acquire 74,000 Shares. Depending upon the number of Shares purchased pursuant to the Offer, the Shares may no longer meet the standards for continued inclusion in NASDAQ. According to the NASDAQ published guidelines, the Shares would not be eligible to be included for listing if, among other things, the number of Shares falls below 200,000 publicly held Shares, the number of holders of Shares falls below 400 or the aggregate market value of such publicly held Shares does not exceed $1,000,000. If these standards are not met, quotations might continue to be published in the over-the-counter "additional list" or in one of the "local lists", but if the number of holders of the Shares falls below 300, or if the number of publicly held Shares falls below 100,000, or there is not at least one market maker for the Shares, National Association of Securities Dealers rules provide that the securities would no longer be 41 "authorized" for NASDAQ reporting, and NASDAQ would cease to provide any quotations. Shares held directly or indirectly by an officer or director of the Company or by any beneficial owner of more than 10% of the Shares will ordinarily not be considered as being publicly held for this purpose. The extent of the public market for the Shares and the availability of continuing quotations for the Shares through NASDAQ would depend upon the number of holders remaining after the Offer, the interest in maintaining a market in the Shares on the part of securities firms, the possible termination of registration of the Shares under the Exchange Act as described below and other factors. If as a result of the purchase of Shares pursuant to the Offer or otherwise the Shares no longer meet the requirements of NASDAQ for continued quotation and the quotation of the Shares is discontinued, the market for the Shares could be adversely affected. Purchaser cannot predict whether or to what extent the reduction in the number of Shares that might otherwise trade publicly would have an adverse or beneficial effect on the market price for or marketability of the Shares or whether it would cause future prices to be greater or less than the Merger Consideration. The Shares are currently "margin securities", as such term is defined under the rules of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which has the effect, among other things, of allowing brokers to extend credit on the collateral of the Shares. Depending upon factors similar to those described above with respect to listing and market quotations, following the Offer it is possible that the Shares would no longer constitute "margin securities" for the purposes of the margin regulations of the Federal Reserve Board and, therefore, could no longer be used as collateral for loans made by brokers. 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 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, such as the short-swing profit recovery provisions of Section 16(b), the requirement of furnishing a proxy statement in connection with stockholders' meetings and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions, no longer applicable to the Shares. In addition, "affiliates" of the Company and persons holding "restricted securities" of the Company may be deprived of the ability to dispose of such securities pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended (the "Securities Act"). If registration of the Shares under the Exchange Act were terminated, the Shares would no longer be "margin securities" or be eligible for NASDAQ reporting. Purchaser currently intends to seek to cause the Company to terminate the registration of the Shares under the Exchange Act as soon after consummation of the Offer as the requirements for termination of registration are met. 13. Certain Legal Matters and Regulatory Approvals. Rule 13e-3. The Commission has adopted Rule 13e-3 under the Exchange Act which is applicable to the Merger and other such "going private" transactions in which a purchaser seeks to acquire the remaining shares not held by it. Rule 13e-3 requires, among other things, that certain financial information concerning the Company and certain information relating to the fairness of the proposed transaction and the consideration offered to minority stockholders in such transaction, be filed with the Commission and disclosed to stockholders prior to consummation of the transaction. General. Neither Purchaser nor COBE is aware of any license or other regulatory permit that appears to be material to the business of the Company and the Subsidiaries, taken as a whole, which might be adversely affected by the acquisition of Shares by Purchaser pursuant to the Offer or, except as set forth below, of any approval or other action by any domestic (federal or state) or foreign governmental, administrative or regulatory authority or agency which would be required prior to the acquisition of Shares by Purchaser pursuant to the Offer. Should any such approval or other action be required, it is Purchaser's present intention to seek such approval or action. Purchaser does not currently intend, however, to delay the purchase of Shares tendered pursuant to the Offer pending the outcome of any such action or the receipt of any such approval (subject to Purchaser's right to decline to purchase Shares if any of the conditions in "THE TENDER OFFER -- Section 10. Certain Conditions of the Offer" shall have occurred). There can be no assurance that any such approval or other action, if needed, would be obtained without substantial conditions, or that adverse consequences might not result to the business of the 42 Company, Purchaser, COBE, Gambro or Incentive or other substantial conditions complied with in order to obtain such approval or other action or in the event that such approval was not obtained or such other action was not taken. Purchaser's obligation under the Offer to accept for payment and pay for Shares is subject to certain conditions, including conditions relating to the legal matters discussed in this Section 13. See "THE TENDER OFFER -- Section 10. Certain Conditions of the Offer". State Takeover Laws. The Company is incorporated under the laws of the State of Tennessee. There are certain statutory provisions under the Tennessee Law applicable to Tennessee corporations that may be deemed "anti-takeover" statutes, including, the Tennessee Business Combination Act, the Tennessee Control Share Acquisition Act and the Tennessee Investor Protection Act. In general, the Tennessee Business Combination Act prevents an "interested shareholder" (generally a person who owns or has the right to acquire 10% or more of a corporation's outstanding voting stock, or an affiliate or associate thereof) from engaging in a "business combination" (defined to include mergers and certain other transactions) with a Tennessee corporation for a period of five years following the date such person became an interested stockholder unless, among other things, prior to such date the board of directors of the corporation approved either the business combination or the transaction in which the interested stockholder became an interested stockholder. On May 23, 1991, the Board, by unanimous vote of all directors present at a meeting held on such date, approved the sale and issuance by the Company to COBE of Shares and certain preferred stock pursuant to the Stock Purchase Agreements, which resulted in COBE becoming an "interested shareholder" for purposes of the Tennessee Business Combination Act. Accordingly, the Tennessee Business Combination Act is inapplicable to the Offer and the Merger. In general, the Tennessee Control Share Acquisition Act provides that unless the acquisition of certain threshold percentages of voting control of a publicly-held Tennessee corporation is approved by a majority of the disinterested shareholders of the corporation, the shares acquired above that threshold will not be entitled to voting rights. Pursuant to the Stock Purchase Agreements, COBE's acquisition of Shares in excess of the highest threshold set forth in the Tennessee Control Share Acquisition Act, namely, a 50% threshold, was approved by the Company's shareholders on September 15, 1992 in accordance with the provisions of the Tennessee Control Share Acquisition Act. Accordingly, the Tennessee Control Share Acquisition Act is inapplicable to the Offer and the Merger. In general, the Tennessee Investor Protection Act applies only to "takeover offers" and provides that, in connection with such a "takeover offer", a registration statement must be filed with the offeree company and the commissioner of commerce and insurance of Tennessee, containing such information as the commissioner may by rule prescribe. However, the Tennessee Investor Protection Act provides that "takeover offer" does not include an offer to acquire any equity security of an offeree company pursuant to an offer made on substantially equal terms to all stockholders and as to which the offeree company, acting through its board of directors, has recommended acceptance to such stockholders. Because the Offer is made on substantially equal terms to all stockholders of the Company and because the Board has recommended acceptance of the Offer to such stockholders, the Tennessee Investor Protection Act does not apply to Purchaser's acquisition of Shares pursuant to the Offer. A number of other states have adopted laws and regulations applicable to attempts to acquire securities of corporations which are incorporated, or have substantial assets, stockholders, principal executive offices or principal places of business, or whose business operations otherwise have substantial economic effects, in such states. In Edgar v. MITE Corp., the Supreme Court of the United States invalidated on constitutional grounds the Illinois Business Takeover Statute, 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 held that the State of Indiana may, as a matter of corporate law and, in particular, with respect to 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 stockholders. The state law before the Supreme Court was by its terms applicable only to corporations that had a substantial number of stockholders in the state and were incorporated there. The Company, directly or through 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 43 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 case, Purchaser may not be obligated to accept for payment any Shares tendered. See "THE TENDER OFFER -- Section 10. Certain Conditions of the Offer". 14. Miscellaneous. Purchaser is not aware of any jurisdiction where the making of the Offer is prohibited by any 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 any 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 the Dealer Manager or by one or more registered brokers or dealers licensed under the laws of such jurisdiction. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF PURCHASER OR THE COMPANY 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. Pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange Act, COBE and Purchaser have filed with the Commission the Schedule 14D-1, together with exhibits, furnishing certain additional information with respect to the Offer; COBE, Purchaser and Company have filed with the Commission the Schedule 13E-3, together with exhibits, with respect to the Offer; and the Company has filed with the Commission the Solicitation/Recommendation Statement on Schedule 14D-9, together with exhibits, with respect to the Offer. The Company's recommendation with respect to the Offer and other information required to be disseminated to shareholders of the Company pursuant to Rule 14d-9 is contained in this Offer to Purchase. Such statements, including exhibits and any amendments thereto, which furnish certain additional information with respect to the Offer, may be examined and copies may be obtained at the same places and in the same manner set forth in "THE TENDER OFFER -- Section 6. Certain Information Concerning the Company" (except that they will not be available at regional offices of the Commission). The Schedule 14D-1 and any amendments thereto and the Schedule 13E-3 and any amendments thereto, including exhibits, may be inspected at, and copies may be obtained from, the same places and in the same manner as set forth in "THE TENDER OFFER -- Section 6. Certain Information Concerning the Company" (except that they will not be available at the regional offices of the Commission). REN ACQUISITION CORP. September 19, 1995 44 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER, COBE, GAMBRO AND INCENTIVE 1. Directors and Executive Officers of Purchaser. The following table sets forth the name, current business address, citizenship and present principal occupation or employment, and material occupations, positions, offices or employments and business addresses thereof for the past five years of each director and executive officer of Purchaser. Unless otherwise indicated, the current business address of each person is 1185 Oak Street, Lakewood, Colorado 80215. Unless otherwise indicated, each such person is a citizen of the United States of America and has held the positions as set forth below for the past five years. Unless otherwise indicated, each occupation set forth opposite an individual's name refers to employment with Purchaser.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS AND NAME BUSINESS ADDRESSES THEREOF --------------------------------------------- --------------------------------------------- Directors and Executive Officers of Purchaser Mats Wahlstrom (Sweden) Chairman of the Board, President, Assistant Treasurer and Assistant Secretary since September 1995; Director of REN Corporation-USA, 6820 Charlotte Pike, Nashville, TN 37209, since July 1993. See Directors and Executive Officers of Gambro and COBE. Herbert S. Lawson Director, Treasurer, Vice President and Assistant Secretary since September 1995; Director of REN Corporation-USA, 6820 Charlotte Pike, Nashville, TN 37209, since October 1992. See Directors and Executive Officers of COBE. Ralph Z. Levy, Jr. Director, Vice President, Secretary and Assistant Treasurer since September 1995; Executive Vice President, General Counsel and Secretary of REN Corporation-USA, 6820 Charlotte Pike, Nashville, TN 37209 since November 1992; Partner, Wyatt, Tarrant & Combs, Suite 1500, 511 Union Street, Nashville, TN 37219 prior to November 1992.
2. Directors and Executive Officers of COBE. The following table sets forth the name, current business address, citizenship and present principal occupation or employment, and material occupations, positions, offices or employments and business addresses thereof for the past five years of each director and executive officer of COBE. Unless otherwise indicated, the current business address of each person is 1185 Oak Street, Lakewood, Colorado 80215. Unless otherwise indicated, each such person is a citizen of the United States of America and has held his or her present position as set forth below for the past five years. Unless otherwise indicated, each occupation set forth opposite an individual's name refers to employment with COBE.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS AND ]NAME BUSINESS ADDRESSES THEREOF --------------------------------------------- --------------------------------------------- Directors and Executive Officers of COBE Randall F. Bellows Director since 1966, Retired Executive Vice President; Private Investor. Robert M. Collins Director since 1966, Retired President; Private Investor. Edward J. Giachetti Director since March 1991, Vice President since prior to 1990. See Directors and Executive Officers of Gambro. Alain Granger (France) Director since July 1990; President of Hospal AG, Hospal S.A., 188 Av. Jean-Jaures, F-69007, Lyon, France.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS AND NAME BUSINESS ADDRESSES THEREOF --------------------------------------------- --------------------------------------------- Ugo Grondelli (Italy) Director since July 1990; President of Gambro SpA., Via Aldo Moro I/A, I-43035, Felino (PR), Italy. See Directors and Executive Officers of Gambro. Berthold Lindqvist (Sweden) Director since July 1990. See Directors and Executive Officers of Gambro. Ingmar Magnusson (Sweden) Director since July 1990. See Directors and Executive Officers of Gambro. Mats Wahlstrom (Sweden) Director since June 1990, President since May 1991, Executive Vice President from June 1990 to May 1991; Director of REN Corporation-USA, 6820 Charlotte Pike, Nashville, TN 37209 since July 1993. See Directors and Executive Officers of Purchaser and Gambro. Edward C. Wood, Jr. Director since March 1991; President of COBE BCT, Inc., 1201 Oak Street, Lakewood, CO 80215-4498 since October 1990. See Directors and Executive Officers of Gambro. Teresa Blandford Vice President since July 1994, Director of Human Resources prior to July 1994. Wendell J. Gardner Senior Vice President since July 1994, Director of COBE prior to July 1994. Herbert S. Lawson Chief Financial Officer, Vice President, and Treasurer since July 1992, Director of Taxes prior to July 1992; Director of REN Corporation-USA, 6820 Charlotte Pike, Nashville, TN 37209 since October 1992. See Directors and Executive Officers of Purchaser. Curtin L. Wagner Vice President since July 1992, Director of Logistics prior to July 1992.
3. Directors and Executive Officers of Gambro. The following table sets forth the name, current business address, citizenship and present principal occupation or employment, and material occupations, positions, offices or employments and business addresses thereof for the past five years of each director and executive officer of Gambro. Unless otherwise indicated, the current business address of each person is P.O. Box 10101, Magistratsvagen 16, S-220 10 Lund, Sweden. Unless otherwise indicated, each such person is a citizen of Sweden and has held his or her present position as set forth below for the past five years. Unless otherwise indicated, each occupation set forth opposite an individual's name refers to employment with Gambro.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS AND NAME BUSINESS ADDRESSES THEREOF --------------------------------------------- --------------------------------------------- Directors and Executive Officers of Gambro Mikael Lilius Chairman since 1994. See Directors and Executive Officers of Incentive. Lennart Nilsson Director since 1984, Chairman from 1984 until 1994; President and Chief Executive Officer of Cardo AB, Box 486, S-20124, Malmo, Sweden since 1986; Director of Frigoscandia, Box 912, S-251 09 Helsingborg, Sweden until 1991; Chairman of Bilspedition AB, S-412 97 Goteborg, Sweden, since before 1991; Chairman of Skane Gripen AB, Box 4028, S-201 11 Malmo, Sweden, since before 1990; Director of Trelleborg AB, S-231 81, Trelleborg, Sweden, since before 1990.
I-2
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS AND NAME BUSINESS ADDRESSES THEREOF --------------------------------------------- --------------------------------------------- Tore Daun Director since 1987, President of Molnlycke AB, Molndal, S-405 03 Goteborg, Sweden until 1987; Director of Skandinaviska Enskilda Banken, S-103 90 Stockholm, Sweden since before 1992; Director of BASF Svenska AB, Box 53008, S-400 14 Goteborg, Sweden, since 1991; Director of Molnlycke AB since before 1990. Margareta Nilsson Vice Chairman since 1985; Chairman of Crafoord Foundation, Box 137, S-220 10 Lund, Sweden since before 1990. Berthold Lindqvist Director and Member of Management Board since 1984, President and Chief Executive Officer since 1984; Director of Besam AB, Box 131, S-261 22 Landskrona, Sweden since 1990; Director of PLM AB, Box 836, S-201 80 Malmo, Sweden since 1991; Director of Volvo Lastvagnar AB, S-405 08 Goteborg, Sweden since 1994; Director of Pharmacia AB, A-171 97 Stockholm, Sweden since 1994; Director of Securitas AB, Box 12307, S-102 28 Stockholm, Sweden, since 1994. See Directors and Executive Officers of COBE. Anitha Svensson-Grane Employee Representative on Board since 1995, Payroll Clerk, Gambro Lundia AB, Box 10101, S-220 10 Lund, Sweden, since 1975. Gosta Gahrton Director since 1994; Professor of Medicine, Karolinska Institute, S-171 77 Stockholm, Sweden since before 1990; Senior Physician and Chief of Department of Medicine, S-141 86 Huddinge, Sweden. Karl Olof Tell Employee Representative on Board since 1993, Engineering Worker, Gambro Lundia AB, Box 10101, S-220 10 Lund, Sweden since 1968. Soren Mellstig Director since 1995; see Directors and Executive Officers of Incentive. Claes Wilhelmsson Director of Gambro Board since 1995; Executive Vice President Research & Development, Astra AB, Astra AB, S-151 85 Sodertalje, Sweden from 1991 to 1995; Managing Director, Astra Draco, Box 34, S-221 00 Lund, Sweden prior to 1991. Jan Gustavsson Member of Management Board and Chief Financial Officer since 1993; Chief Financial Officer of Getinge Industrier AB, S-310 44, Getinge, Sweden prior to 1993; Director of REN Corporation-USA, 6820 Charlotte Pike, Nashville, TN 37209 since 1993. Ugo Grondelli (Italy) Member of Management Board since 1984, Senior Executive Vice President and Deputy Managing Director since 1988, Deputy Director since 1988; Chairman of Hospal AG and Sopamed AG, Dornacherstrasse 8, CH-4008 Basel, Switzerland since 1987; President of Gambro SpA, Via Aldo Moro 1/A, I-43035 Felino (PR) Italy since 1972. See Directors and Executive Officers of COBE. Leif Smeby Member of the Management Board and Research Director of Gambro since 1986.
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PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS AND NAME BUSINESS ADDRESSES THEREOF --------------------------------------------- --------------------------------------------- Alain Granger (France) Member of Management Board since prior to 1990; President of Hospal AB, Dornacherstrasse 8, CH-4008 Basel, Switzerland since before 1990; President of Hogamed SA, Hogamed 188 SA, Jean-Jaures, F-69007 Lyon, France since 1990. Mats Wahlstrom Member of Management Board since 1984 Executive Vice President since March 1993, Chief Financial Officer prior to March 1993; Director of REN Corporation-USA, 6820 Charlotte Pike, Nashville, TN 37209 since July 1993. See Directors and Executive Officers of Purchaser and COBE. Jan-Olof Olsson Member of Management Board since 1986, President of Gambro Lundia AB, Box 10101, S-220 10 Lund, Sweden since 1986; President of Gambro Dialysatoren GmbH Co. KG, Holger-Crafoord-Strasse 26, D-73279 Hechingen, Germany since 1990. Edward C. Wood, Jr. (USA) Member of Board of Management since 1994, President of COBE BCT Inc., 1201 Oak Street, Lakewood, CO 80215-4498 since October 1990. See Directors and Executive Officers of COBE. Edward J. Gianchetti (USA) Member of Board of Management since 1994. See Directors and Executive Officers of COBE. Lawrence J. Centella (USA) Member of Board of Management since 1994; Director, President and Chief Financial Officer of the Company since July 1993; President of COBE Renal Care, Inc. prior to July 1993.
4. Directors and Executive Officers of Incentive. The following table sets forth the name, current business address, citizenship and present principal occupation or employment, and material occupations, positions, offices or employments and business addresses thereof for the past five years of each director and executive officer of Incentive. Unless otherwise indicated, the current business address of each person is Hamngatan 2, P.O. Box 7373, S-10391, Stockholm, Sweden. Unless otherwise indicated, each such person is a citizen of Sweden and has held his or her present position as set forth below for the past five years. Unless otherwise indicated, each occupation set forth opposite an individual's name refers to employment with Incentive.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS AND NAME BUSINESS ADDRESSES THEREOF --------------------------------------------- --------------------------------------------- Directors and Executive Officers of Incentive Anders Scharp Chairman since 1992; Chairman of the Boards of: Electrolux, S-105 45, Stockholm, Sweden since 1992; Saab-Scania AB, S-581-88 Linkoping, Sweden from 1990 to 1995; Saab AB, S-581-88 Linkoping, Sweden since 1995; Scania AB, S-151 87 Sodertalje and SKF, S-145 00 Goteborg, Sweden since 1992; Vice Chairman of the Boards of Investor, S-103 32 Stockholm, Sweden since 1988 and Atlas Copco S-105 23 Stockholm, Sweden since 1992; Director of Email Ltd (Australia), Waterloo, NSW 2017, Australia since 1987; Director of Swedish Employers' Confederation, S. Blasieholmshamnen 4A, S-103 30 Stockholm, Sweden since 1987; Director of Federation of Swedish Industries, Storgatan 19, S-114 85 Stockholm, Sweden since 1992.
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PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS AND NAME BUSINESS ADDRESSES THEREOF --------------------------------------------- --------------------------------------------- Claes Dahlback Director since 1991; President of Investor S-103 32 Stockholm, Sweden since 1978; Chairman of the Board of Vin & Spirit AB, P.O. Box 47319, S-100 74 Stockholm, Sweden since 1994; Vice Chairman of the Board of ASEA, P.O. Box 7373, S-103 91, Stockholm, Sweden since prior to 1990; Director of AAB, S-151 85 Sodertalje, Sweden since prior to 1990; Director of Astra, S-581 88 Linkoping, Sweden since prior to 1990; Director of Electrolux, S-105 45 Stockholm, Sweden since prior to 1990; Director of Ericsson 126 25 Stockholm, Sweden since prior to 1990; Director of Saab-Scania, S-581 88 Linkoping, Sweden since prior to 1990; Director of SKF, S-415 50 Goteborg, Sweden since prior to 1990; Director of STORA, S-791 80 Falun, Sweden since prior to 1990. Casimir Ehrnrooth (Finnish) Director since 1991; Chairman of Kymmene Corporation, P.O. Box 1079, SF-00101 Helsinki, Finland since 1991; Director of Nokia Group, P.O. Box 226, SF-00101 Helsinki, Finland since 1992. Director of Unitas Oy, P.O. Box 84, SF-00101 Helsinki, Finland since 1992; Director of Continental AG, Post Fach 169, D-3001 Hannover, Germany since 1995. Lennart Hagelin Director since 1992; Chairman of Svenska Dagbladot, S-105 17 Stockholm, Sweden since 1992; Chairman of Grand Hotel Holdings, S 103 27 Stockholm, Sweden since 1993; Director of Skandia, S-103 50 Stockholm, Sweden since prior to 1990; Director of Axel Johnson AB, P.O. Box 26008, S-100 41 Stockholm, Sweden since prior to 1990. Lief Johansson Director since 1992; President and Chief Executive Officer of Electrolux, S-105 45 Stockholm, Sweden since 1991. Mikael Lilius (Finnish) Director since 1991, President and Chief Executive Officer since 1991; Chairman of Garphyttan Industrier P.O. Box 7200, S-103 88 Stockholm, Sweden since 1992; Director of Huhtamaki Oy, Etelaranta 8, SF-00130 Helsinki, Finland since prior to 1990. See Directors and Executive Officers of Gambro. Karl-Erik Sahlberg Director since 1995; Chairman of Perstorp AB, S-284 80 Perstorp, Sweden since 1991; Chairman of Investment AB Cardo, P.O. Box 486, S-201 24 Malmo, Sweden since 1986; Chairman of Vattenfall AB, S-162 87 Stockholm, Sweden since 1992; Vice Chairman of Skandinaviska Ensklida Banken, S-106 40 Stockholm, Sweden since prior to 1990; Director of Tetra Laval Group, Landerigranden, S-221 86 Lund, Sweden since 1993; Chairman of Skoogs AB, S-205 70 Malmo, Sweden since prior to 1990.
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PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS AND NAME BUSINESS ADDRESSES THEREOF --------------------------------------------- --------------------------------------------- Sven Soderberg Director since 1991; Chairman of Skandia, S-103 50 Stockholm, Sweden since prior to 1990; Chairman of Ratos, P.O. Box 1661, S-111 96 Stockholm, Sweden since 1994; Director of ASEA, P.O. Box 7373, S-103 91 Stockholm, Sweden since prior to 1990; Director of STORA, S-791 80 Falun, Sweden since prior to 1990; General Counsel of Norway since prior to 1990. Marcus Wallenberg Director since 1994; Executive Vice President of Investor, S-103 32 Stockholm, Sweden since 1993; Vice Chairman of Astra, S-151 85 Sodertalje, Sweden since 1993; Vice Chairman of Saab AB, S-581 88 Linkoping, Sweden since 1993; Vice Chairman of the Knut and Alice Wallenberg Foundation, S-104 60 Stockholm, Sweden since prior to 1990; Deputy Director of SKF, S-415 00 Goteborg, Sweden since 1993. Tore Burstrom Employee Representative on Board since 1991 (Swedish Federation of Salaried Employees in Industry and Services); Employee of Skega AB, S-934 81 Ersmark, since prior to 1990. Ake Jacobsson Employee Representative on Board since 1991 (the Swedish Confederation of Trade Unions); Member of the Board of the Electricians' Local Union; Employee of Yngeredsfors Kraft AB, P.O. Box 10250, S-434 23 Kungsbacka, since prior to 1990. Bengt-Ola Nygren Employee Representative on Board since 1991 (the Swedish Confederation of Trade Unions); Employee of Munters Component AB, P.O. Box 29, S-740 61 Tobo, since prior to 1990. Hakan Lindh Employee Representative on Board since 1991 (Swedish Federation of Salaried Employees in Industry and Services); Employee of Yngeredsfors Kraft AB, P.O. Box 10250, S-434 23 Kungsbacka, since prior to 1990. Jan Marklund Employee Representative on Board since 1993 (the Swedish Confederation of Trade Unions); Employee of Skega B, S-934 81 Ersmark, since prior to 1990. Dan Nilsson Employee Representative on Board since 1991 (Swedish Federation of Salaried Employees in Industry and Service), Employee of Hagglunds Vehicle AB, S-891 81 Ornskoldsvik, since prior to 1990. Lars Fahlen Senior Vice President, Personnel since 1992; Director of Personnel, ITT Flygt AB, P.O. Box 1309, S-171 25 Solna, from 1985 to 1992, from 1985 to 1992. Anders Fraggstedt Executive Vice President since 1991; President of ABB Relays AB, S-721 83 Vaster deg.as, since prior to 1991. Anders Jagraeus Executive Vice President since 1995; President of STORA AB S-791 80 Falun, Sweden from 1988-1991; President of AB Carl Munters P.O. Box 430, S-191 24 Sollentuna, Sweden from 1991-1995; Director of Garphyttan AB P.O. Box 7200, S-103 88 Stockholm, Sweden since 1995. Sverker Lundkvist Senior Vice President, Finance, since 1993; Executive Vice President, Skandia International, S-103 50 Stockholm, Sweden from prior to 1991.
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PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS AND NAME BUSINESS ADDRESSES THEREOF --------------------------------------------- --------------------------------------------- Soren Mellstig Senior Vice President, Corporate Control since 1994; Senior Vice President Nobel Industries (Chemicals), P.O. Box 11500, S-100 61 Stockholm, Sweden from 1993 to 1994; Senior Vice President EKA Nobel (chemicals), S-445 80 Bohus prior to 1993; Director of Akzo Nobel AB P.O. Box 11500, S-100 60 Stockholm, Sweden from prior to 1993. See Directors and Executive Officers of Gambro. Bengt Modeer Senior Vice President, Corporate Communications since 1987. Kjell Spangbeg Senior Vice President, Business Development and M&A since 1992; Consultant since prior to 1992.
I-7 SCHEDULE II TEXT OF TITLE 48, CHAPTER 23 OF THE TENNESSEE BUSINESS CORPORATION ACT CHAPTER 23. BUSINESS CORPORATIONS -- DISSENTERS' RIGHTS. PART 1 -- RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES 48-23-101 DEFINITIONS. (1) "Beneficial shareholder" means the person who is a beneficial owner of shares held by a nominee as the record shareholder; (2) "Corporation" means the issuer of the shares held by a dissenter before the corporate action, or the surviving or acquiring corporation by merger or share exchange of that issuer; (3) "Dissenter" means a shareholder who is entitled to dissent from corporate action under Sec.48-23-102 and who exercises that right when and in the manner required by Sec.Sec.48-23-201 -- 48-23-209; (4) "Fair value", with respect to a dissenter's shares, means the value of the shares immediately before the effectuation of the corporate action to which the dissenter objects, excluding any appreciation or depreciation in anticipation of the corporate action; (5) "Interest" means interest from the effective date of the corporate action that gave rise to the shareholder's right to dissent until the date of payment, at the average auction rate paid on United States treasury bills with a maturity of six (6) months (or the closest maturity thereto) as of the auction date for such treasury bills closest to such effective date; (6) "Record shareholder" means the person in whose name shares are registered in the records of a corporation or the beneficial owner of shares to the extent of the rights granted by a nominee certificate on file with a corporation; and (7) "Shareholder" means the record shareholder or the beneficial shareholder. 48-23-102 RIGHT TO DISSENT. (a) A shareholder is entitled to dissent from, and obtain payment of the fair value of his shares in the event of, any of the following corporate actions: (1) Consummation of a plan of merger to which the corporation is a party: (A) If shareholder approval is required or the merger by Sec.48-21-103 or the charter and the shareholder is entitled to vote on the merger; or (B) If the corporation is a subsidiary that is merged with its parent under Sec.48-21-104; (2) Consummation of a plan of share exchange to which the corporation is a party as the corporation whose shares will be acquired, if the shareholder is entitled to vote on the plan; (3) Consummation of a sale or exchange of all, or substantially all, of the property of the corporation other than in the usual and regular course of business, if the shareholder is entitled to vote on the sale or exchange, including a sale in dissolution, but not including a sale pursuant to court order or a sale for cash pursuant to a plan by which all or substantially all of the net proceeds of the sale will be distributed to the shareholders within one (1) year after the date of sale; (4) An amendment of the charter that materially and adversely affects rights in respect of a dissenter's shares because it: (A) Alters or abolishes a preferential right of the shares; (B) Creates, alters, or abolishes a right in respect of redemption, including a provision respecting a sinking fund for the redemption or repurchase, of the shares; (C) Alters or abolishes a preemptive right of the holder of the shares to acquire shares or other securities; (D) Excludes or limits the right of the shares to vote on any matter, or to cumulate votes, other than a limitation by dilution through issuance of shares or other securities with similar voting rights; or (E) Reduces the number of shares owned by the shareholder to a fraction of a share if the fractional share is to be acquired for cash under Sec.48-16-104; or (5) Any corporate action taken pursuant to a shareholder vote to the extent the charter, bylaws, or a resolution of the board of directors provides that voting or nonvoting shareholders are entitled to dissent and obtain payment for their shares. (b) A shareholder entitled to dissent and obtain payment for his shares under this chapter may not challenge the corporate action creating his entitlement unless the action is unlawful or fraudulent; with respect to the shareholder or the corporation. (c) Notwithstanding the provisions of subsection (a), no shareholder may dissent as to any shares of a security which, as of the date of the effectuation of the transaction which would otherwise give rise to dissenters' rights, is listed on an exchange registered under Sec.6 of the Securities Exchange Act of 1934, as amended, or is a "national market system security," as defined in rules promulgated pursuant to the Securities Exchange Act of 1934, as amended. 48-23-103 DISSENT BY NOMINEES AND BENEFICIAL OWNERS. (a) A record shareholder may assert dissenters' rights as to fewer than all the shares registered in his name only if he dissents with respect to all shares beneficially owned by any one (1) person and notifies the corporation in writing of the name and address of each person on whose behalf he asserts dissenters' rights. The rights of a partial dissenter under this subsection are determined as if the shares as to which he dissents and his other shares were registered in the names of different shareholders. (b) A beneficial shareholder may assert dissenters' rights as to shares of any one (1) or more classes held on his behalf only if: (1) He submits to the corporation the record shareholder's written consent to the dissent not more later than the time the beneficial shareholder asserts dissenters' rights; and (2) He does so with respect to all shares of the same class of which he is the beneficial shareholder or over which he has power to direct the vote. PART 2 -- PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS 48-23-201 NOTICE OF DISSENTERS' RIGHTS. (a) If proposed corporate action creating dissenters' rights under Sec.48-23-102 is submitted to a vote at a shareholders' meeting, the meeting notice must state that shareholders are or may be entitled to assert dissenters' rights under this chapter and be accompanied by a copy of this chapter. (b) If corporate action creating dissenters' rights under Sec.48-23-102 is taken without a vote of shareholders, the corporation shall notify in writing all shareholders entitled to assert dissenters' rights that the action was taken and send them the dissenters' notice described in Sec.48-23-203. (c) A corporation's failure to give notice pursuant to this section will not invalidate the corporate action. II-2 48-23-202 NOTICE OF INTENT TO DEMAND PAYMENT. (a) If proposed corporate action creating dissenters' rights under Sec.48-23-102 is submitted to a vote at a shareholders' meeting, a shareholder who wishes to assert dissenters' rights: (1) Must deliver to the corporation before the vote is taken written notice of his intent to demand payment for his shares if the proposed action is effectuated; and (2) Must not vote his shares in favor of the proposed action. No such written notice of intent to demand payment is required of any shareholder to whom the corporation failed to provide the notice required by Sec.48-23-201. (b) A shareholder who does not satisfy the requirements of subsection (a) is not entitled to payment for his shares under this chapter. 48-23-203 DISSENTERS' NOTICE. (a) If proposed corporate action creating dissenters' rights under Sec.48-23-102 is authorized at a shareholders' meeting, the corporation shall deliver a written dissenters' notice to all shareholders who satisfied the requirements of Sec.48-23-202. (b) The dissenters' notice must be sent no later than ten (10) days after the corporate action was authorized by the shareholders or effectuated, whichever is the first to occur, and must: (1) State where the payment demand must be sent and where and when certificates for certificated shares must be deposited; (2) Inform holders of uncertificated shares to what extent transfer of the shares will be restricted after the payment demand is received; (3) Supply a form for demanding payment that includes the date of the first announcement to news media or to shareholders of the principal terms of the proposed corporate action and requires that the person asserting dissenters' rights certify whether or not he acquired beneficial ownership of the shares before that date; (4) Set a date by which the corporation must receive the payment demand, which date may not be fewer than one (1) nor more than two (2) months after the date the subsection (a) notice is delivered; and (5) Be accompanied by a copy of this chapter if the corporation has not previously sent a copy of this chapter to the shareholder pursuant to Sec.48-23-201. 48-23-204 DUTY TO DEMAND PAYMENT. (a) A shareholder sent a dissenters' notice described in Sec.48-22-203 must demand payment, certify whether he acquired beneficial ownership of the shares before the date required to be set forth in the dissenters' notice pursuant to Sec.48-23-203(b)(3), and deposit his certificates in accordance with the terms of the notice. (b) The shareholder who demands payment and deposits his share certificates under subsection (a) retains all other rights of a shareholder until these rights are cancelled or modified by the effectuation of the proposed corporate action. (c) A shareholder who does not demand payment or deposit his share certificates where required, each by the date set in the dissenter's notice, is not entitled to payment for his shares under this chapter. (d) A demand for payment filed by a shareholder may not be withdrawn unless the corporation with which it was filed, or the surviving corporation, consents thereto. II-3 48-23-205 SHARE RESTRICTIONS. (a) The corporation may restrict the transfer of uncertificated shares from the date the demand for their payment is received until the proposed corporate action is effectuated or the restrictions released under Sec.48-23-207. (b) The person for whom dissenters' rights are asserted as to uncertificated shares retains all other rights of a shareholder until these rights are cancelled or modified by the effectuation of the proposed corporate action. 48-23-206 PAYMENT. (a) Except as provided in Sec.48-23-208, as soon as the proposed corporate action is effectuated, or upon receipt of a payment demand, whichever is later, the corporation shall pay each dissenter who complied with Sec.48-23-204 the amount the corporation estimates to be the fair value of his shares, plus accrued interest. (b) The payment must be accompanied by: (1) The corporation's balance sheet as of the end of a fiscal year ending not more than sixteen (16) months before the date of payment, an income statement for that year, a statement of changes in shareholders' equity for that year, and the latest available interim financial statements, if any; (2) A statement of the corporation's estimate of the fair value of the shares; (3) An explanation of how the interest was calculated; (4) A statement of the dissenter's right to demand payment under Sec.48-23-209; and (5) A copy of this chapter if the corporation has not previously sent a copy of this chapter to the shareholder pursuant to Sec.Sec.48-23-201 or 48-23-203. 48-23-207 FAILURE TO TAKE ACTION. (a) If the corporation does not effectuate the proposed action that gave rise to the dissenters' rights within two (2) months after the date set for demanding payment and depositing share certificates, the corporation shall return the deposited certificates and release the transfer restrictions imposed on uncertificated shares. (b) If after returning deposited certificates and releasing transfer restrictions, the corporation effectuates the proposed action, it must send a new dissenters' notice under Sec.48-23-203 and repeat the payment demand procedure. 48-23-208 AFTER-ACQUIRED SHARES. (a) A corporation may elect to withhold payment required by Sec.48-23-206 from a dissenter unless he was the beneficial owner of the shares before the date set forth in the dissenters' notice as the date of the first announcement to news media or to shareholders of the principal terms of the proposed corporate action. (b) To the extent the corporation elects to withhold payment under subsection (a), after effectuating the proposed corporate action, it shall estimate the fair value of the shares, plus accrued interest, and shall pay this amount to each dissenter who agrees to accept it in full satisfaction of his demand. The corporation shall send with its offer a statement of its estimate of the fair value of the shares, an explanation of how the interest was calculated, and a statement of the dissenter's right to demand payment under Sec.48-23-209. 48-23-209 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER. (a) A dissenter may notify the corporation in writing of his own estimate of the fair value of his shares and amount of interest due, and demand payment of his estimate (less any payment under Sec.48-23-206), or reject the corporation's offer under Sec.48-23-208 and demand payment of the fair value of his shares and interest due, if: II-4 (1) The dissenter believes that the amount paid under Sec.48-23-206 or offered under Sec.48-23-208 is less than the fair value of his shares or that the interest due is incorrectly calculated; (2) The corporation fails to make payment under Sec.48-23-206 within two (2) months after the date set for demanding payment; or (3) The corporation, having failed to effectuate the proposed action, does not return the deposited certificates or release the transfer restrictions imposed on uncertificated shares within two (2) months after the date set for demanding payment. (b) A dissenter waives his right to demand payment under this section unless he notifies the corporation of his demand in writing under subsection (a) within one (1) month after the corporation made or offered payment for his shares. PART 3 -- JUDICIAL APPRAISAL OF SHARES 48-23-301 COURT ACTION. (a) If a demand for payment under Sec.48-23-209 remains unsettled, the corporation shall commence a proceeding within two (2) months after receiving the payment demand and petition the court to determine the fair value of the shares and accrued interest. If the corporation does not commence the proceeding within the two-month period, it shall pay each dissenter whose demand remains unsettled the amount demanded. (b) The corporation shall commence the proceeding in a court of record having equity jurisdiction in the county where the corporation's principal office (or, if none in this state, its registered office) is located. If the corporation is a foreign corporation without a registered office in this state, it shall commence the proceeding in the county in this state where the registered office of the domestic corporation merged with or whose shares were acquired by the foreign corporation was located. (c) The corporation shall make all dissenters (whether or not residents of this state) whose demands remain unsettled parties to the proceedings as in an action against their shares and all parties must be served with a copy of the petition. Nonresidents may be served by registered or certified mail or by publication as provided by law. (d) The jurisdiction of the court in which the proceeding is commenced under subsection (b) is plenary and exclusive. The court may appoint one (1) or more persons as appraisers to receive evidence and recommend decision on the question of fair value. The appraisers have the powers described in the order appointing them, or in any amendment to it. The dissenters are entitled to the same discovery rights as parties in other civil proceedings. (e) Each dissenter made a party to the proceeding is entitled to judgment: (1) For the amount, if any, by which the court finds the fair value of his shares, plus accrued interest, exceeds the amount paid by the corporation; or (2) For the fair value, plus accrued interest, of his after-acquired shares for which the corporation elected to withhold payment under Sec.48-23-208. 48-23-302 COURT COSTS AND COUNSEL FEES. (a) The court in an appraisal proceeding commenced under Sec.48-23-301 shall determine all costs of the proceeding, including the reasonable compensation and expenses of appraisers appointed by the court. The court shall assess the costs against the corporation, except that the court may assess costs against all or some of the dissenters, in amounts the court finds equitable, to the extent the court finds the dissenters acted arbitrarily, vexatiously, or not in good faith in demanding payment under Sec.48-23-209. (b) The court may also assess the fees expenses of counsel and experts for the respective parties, in amounts the court finds equitable: II-5 (1) Against the corporation and in favor of any or all dissenters if the court finds the corporation did not substantially comply with the requirements of Sec.Sec.48-23-201 -- 48-23-209; or (2) 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 arbitrarily, vexatiously, or not in good faith with respect to the rights provided by this chapter. (c) If the court finds that the services of counsel for any dissenter were of substantial benefit to other dissenters similarly situated, and that the fees for those services should not be assessed against the corporation, the court may award to these counsel reasonable fees to be paid out of the amounts awarded to the dissenters who were benefited. II-6 SCHEDULE III INDEPENDENT AUDITORS'S REPORT To the Board of Directors and Shareholders of REN Corporation-USA: We have audited the consolidated balance sheet of REN Corporation-USA and subsidiaries as of December 31, 1993, and the related consolidated statements of operations, changes in shareholders' equity, and cash flows for each of the years in the two-year period ended December 31, 1993. In connection with our audits of these consolidated financial statements, we also have audited the financial statement schedule as listed in the accompanying index appearing under Item 14(a)(2), as of December 31, 1993 and for each of the years in the two-year period ended December 31, 1993. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement 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 financial position of REN Corporation-USA and subsidiaries as of December 31, 1993, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 1993, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole presents fairly, in all material respects, the information set forth therein. KPMG PEAT MARWICK LLP Nashville, Tennessee January 25, 1994 REN CORPORATION-USA CONSOLIDATED BALANCE SHEETS
DECEMBER 31, DECEMBER 31, 1994 1993 ------------ ------------ ASSETS Current assets: Cash and cash equivalents..................................... $ 644,231 654,845 Accounts receivalble less allowances for uncollectibles and contractual adjustments of $12,885,262 and $12,863,514 at December 31, 1994 and 1993, respectively.................... 22,251,792 20,676,857 Estimated third-party settlements, net........................ 59,653 530,075 Inventory..................................................... 3,382,071 2,683,106 Income taxes receivable....................................... -- 1,887,716 Prepaid expense............................................... 974,242 1,482,405 Current deferred taxes, net................................... 3,078,875 1,957,196 Other current assets.......................................... 1,385,107 2,423,635 ------------ ------------ Total current assets........................................ 31,775,971 32,295,835 Property, plant and equipment, net.............................. 51,915,880 41,198,497 Intangible assets, net.......................................... 47,459,639 50,523,650 Notes receivable................................................ 1,794,792 574,149 Other assets.................................................... 1,367,659 1,548,231 ------------ ------------ Total assets................................................ $134,313,941 126,140,362 ------------ ------------ ------------ ------------ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilites: Current maturities of long-term debt and capital lease obligations................................................. $ 87,308 441,593 Accounts payable (including related party payables of $743,874 and $244,594 at December 31, 1994 and 1993, respectively)... 6,541,241 3,220,597 Accrued expenses.............................................. 2,938,799 3,496,244 Accrued wages and benefits.................................... 3,750,532 2,579,733 Income taxes payable.......................................... 1,520,918 -- ------------ ------------ Total current liabilities................................... 14,838,798 9,738,167 ------------ ------------ Long-term debt and capital lease obligations, less current maturities...................................................... 342,364 10,704,079 Deferred taxes,net.............................................. 4,300,587 1,179,846 Other liabilities............................................... 88,730 26,325 ------------ ------------ Total long-term liabilities................................. 4,731,681 11,910,250 ------------ ------------ Redeemable common stock; 12,000 and 18,000 shares issued and outstanding at December 31, 1994 and 1993, respectively......... 47,000 70,500 ------------ ------------ Commitments and contingencies (notes 11,12,13,and 15) Shareholders' equity: Common stock; no par value, authorized 60,000,000 shares; 18,898,546 and 18,753,095 shares issued and outstanding at December 31, 1994 and 1993, respectively.................... 101,840,512 100,897,680 Additional paid-in capital.................................... 4,224,488 4,224,488 Retained earnings............................................. 8,649,560 138,656 Less unearned stock grant compensation........................ (18,098) (839,379) ------------ ------------ Total shareholders' equity.................................. 114,696,462 104,421,445 ------------ ------------ Total liabilities and shareholders' equity.................. $134,313,941 126,140,362 ------------ ------------ ------------ ------------
See accompanying notes to consolidated financial statements III-2 REN CORPORATION--USA CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
1994 1993 1992 ------------ ----------- ---------- Revenue: Dialysis services.................................. $120,428,465 93,866,393 70,345,357 Laboratory services................................ 11,386,250 11,321,502 10,468,987 ------------ ----------- ---------- 131,814,715 105,187,895 80,814,344 ------------ ----------- ---------- Direct operating expense: Dialysis services (including related party transactions of $7,996,855, $6,895,998 and $3,071,739, respectively)............................ 85,861,893 70,502,931 45,170,081 Laboratory services (including related party transactions of $22,479, $0 and $80,500, respectively)........................................ 5,579,207 6,551,743 8,823,066 ------------ ----------- ---------- 91,441,100 77,054,674 53,993,147 ------------ ----------- ---------- Gross operating profit: Dialysis services.................................. 34,566,572 23,363,462 25,175,276 Laboratory services................................ 5,807,043 4,769,759 1,645,921 ------------ ----------- ---------- 40,373,615 28,133,221 26,821,197 Indirect operating expense: General, administrative and operations support (including related party transactions of $619,607, $176,613 and $387,231, respectively)... 11,360,801 13,011,061 8,184,995 Employee severance................................... -- 1,722,747 Stock-based compensation............................. -- 4,224,488 Writeoff of organization and development cost........ -- 968,000 122,889 Provision to carry assets at estimated fair value.... -- 800,000 -- Depreciation and amortization........................ 10,878,728 9,880,123 7,003,445 Bad debt expense..................................... 2,823,015 2,042,328 1,151,353 Equity in loss of investee........................... 270,000 323,000 -- Loss on disposal of assets........................... 119,376 600,000 276,123 ------------ ----------- ---------- Income (loss) from operations........................ 14,921,695 (5,438,526) 10,082,392 Non-operating (income) expense: Interest income.................................... (203,072) (226,701) (1,037,469) Interest expense................................... 1,043,863 776,780 2,653,241 Writeoff of costs of suspended financing........... -- 170,207 ------------ ----------- ---------- Income (loss) before income tax expense.............. 14,080,904 (5,988,605) 8,296,413 Income tax expense (benefit)......................... 5,570,000 (2,230,122) 2,941,624 ------------ ----------- ---------- Net income (loss).................................... $ 8,510,904 (3,758,483 5,354,789 ------------ ----------- ---------- ------------ ----------- ---------- Net income (loss) per common share and common share equivalent........................................... $ 0.45 (0.20) 0.38 ------------ ----------- ---------- ------------ ----------- ---------- Weighted average common shares and common share equivalents outstanding.............................. 18,898,831 18,777,322 14,472,227 ------------ ----------- ---------- ------------ ----------- ----------
See accompanying notes to consolidated financial statements. III-3 REN CORPORATION-USA CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
RETAINED COMMON ADDITIONAL EARNINGS UNEARNED ------------------------- PAID-IN (ACCUMULATED STOCK GRANT SHARES AMOUNT CAPITAL DEFICIT) COMPENSATION TOTAL ---------- ------------ ---------- ------------ ------------ ----------- December 31, 1991............ 11,293,434 $ 30,551,315 -- (1,446,671) (1,520,211) 27,584,433 Net income................... -- -- -- 5,354,789 -- 5,354,789 Issuance of common stock for: Cash........................ 6,670,732 63,371,992 -- -- -- 63,371,992 Other assets................ 36,043 405,000 -- -- -- 405,000 Conversion of debt.......... 82,352 700,000 -- -- -- 700,000 Exercise of stock options.... 35,350 158,888 -- -- -- 158,888 Exercise of warrants......... 67,700 203,100 -- -- -- 203,100 Redemption of common stock... (120,000) (850,000) -- -- -- (850,000) Amortization of unearned stock grant compensation.... -- -- -- -- 350,680 350,680 Accretion of redeemable common stock................ -- -- -- (10,979) -- (10,979) ---------- ------------ ---------- ------------ ------------ ----------- December 31, 1992............ 18,065,611 94,540,295 -- 3,897,139 (1,169,531) 97,267,903 Net loss..................... -- -- -- (3,758,483) -- (3,758,483) Issuance of common stock for conversion of debt........... 249,484 2,120,615 -- -- -- 2,120,615 Exercise of stock options, including $504,271 tax benefit of stock options exercised.................... 251,000 2,794,770 -- -- -- 2,794,770 Amortization of unearned stock grant compensation.... -- -- -- -- 330,152 330,152 Other contributed capital.... -- -- 4,224,488 -- -- 4,224,488 Expiration of redeemable common stock................ 187,000 1,442,000 -- -- -- 1,442,000 ---------- ------------ ---------- ------------ ------------ ----------- December 31, 1993............ 18,753,095 100,897,680 4,224,488 138,656 (839,379) 104,421,445 Net income................... -- -- -- 8,510,904 -- 8,510,904 Cancellation of common stock........................ (12,000) (159,000) -- -- -- (159,000) Issuance of common stock for stock purchase plan......... 25,539 191,543 -- -- -- 191,543 Exercise of stock options including $193,260 tax benefit of stock options exercised 125,912 886,789 -- -- -- 886,789 Expiration of redeemable common stock................ 6,000 23,500 -- -- -- 23,500 Amortization of unearned stock grant compensation.... -- -- -- -- 222,673 222,673 Reclassification of unearned stock grant compensation to intangibles.................. -- -- -- -- 598,608 598,608 ---------- ------------ ---------- ------------ ------------ ----------- December 31, 1994............ 18,898,546 $101,840,512 4,224,488 8,649,560 (18,098) 114,696,462 ---------- ------------ ---------- ------------ ------------ ----------- ---------- ------------ ---------- ------------ ------------ -----------
See accompanying notes to consolidated financial statements. III-4 REN CORPORATION--USA CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
1994 1993 1992 ------------ ----------- ----------- Cash flows from operating activities: Net income (loss).................................. $ 8,510,904 (3,758,483) 5,354,789 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization expense............ 10,878,728 9,880,123 7,003,445 Amortization of unearned stock grant compensation......................................... 222,673 330,152 350,680 Writeoff of costs of suspended financings........ -- -- 170,207 Stock based compensation......................... -- 4,224,488 -- Provision to carry equipment at estimated fair value................................................ -- 800,000 -- Loss on asset disposals.......................... 119,376 600,000 276,123 Equity in loss of investee....................... 270,000 323,000 -- Writeoff of organization and development cost.... -- 968,000 122,889 Deferred income taxes............................ 1,999,062 (1,770,552) 338,896 Effect on cash of change in operating assets and liabilities, net of effects from acquisitions: Accounts receivable and estimated third party settlements.......................................... (1,104,513) (582,710) (8,845,431) Inventory........................................ (698,965) (70,143) (783,912) Income taxes receivable.......................... 1,887,716 (1,887,716) -- Prepaid expenses and other current assets........ 1,546,691 (1,785,953) 409,181 Notes receivable and other assets................ 189,929 (1,608,916) (664,525) Accounts payable................................. 3,320,644 (2,209,117) 1,242,130 Accrued payroll expenses and income taxes........ 2,196,676 (1,391,397) (3,768,953) Other, net....................................... -- (5,326) 28,101) ------------ ----------- ----------- Net cash provided by operating activities...... 29,338,921 2,055,450 1,177,418 ------------ ----------- ----------- Cash flows from investing activities: Proceeds from sale of short-term investments....... -- -- 90,123,421 Purchase of short-term investments................. -- -- (39,833,929) Purchases of property, plant and equipment......... (19,634,675) (14,573,757) (11,830,675) Acquisitions, net of cash acquired................. -- (1,850,000) (30,775,000) Intangible assets acquired......................... (1,272,440) (6,763,175) (3,773,587) Net book value of assets sold...................... 2,854,247 -- 125,000 ------------ ----------- ----------- Net cash provided by (used in) investing activities........................................... (18,052,868) (23,186,932) 4,035,230 ------------ ----------- ----------- Cash flows from financing activities Repayment of repurchase agreement.................. -- -- (90,123,421) Proceeds from repurchase agreement................. -- -- 39,833,929 Proceeds from issuance of long-term debt........... 34,882,660 16,675,000 34,025,000 Principal payments on long-term debt and capital lease obligations................................ (45,598,660) (6,280,019) (39,772,021) Issuance of note receivable........................ (1,500,000) -- -- Repayment of notes payable......................... -- (7,025,000) (142,892) Net proceeds from issuance of common stock......... 191,543 -- 63,371,992 Proceeds from common stock options and warrants exercised............................................ 886,790 2,794,770 361,988 Redemption of redeemable common stock.............. -- -- (195,755) Redemption of common stock......................... (159,000) -- (850,000) ------------ ----------- ----------- Net cash provided by (used in) financing activities........................................... (11,296,667) 6,164,751 6,508,820 ------------ ----------- ----------- Net increase (decrease) in cash and cash equivalents.......................................... (10,614) (14,966,731) 11,721,468 Cash and cash equivalents at beginning of year....... 654,845 15,621,576 3,900,108 ------------ ----------- ----------- Cash and cash equivalents at end of year............. $ 644,231 654,845 15,621,576 ------------ ----------- ----------- ------------ ----------- -----------
See accompanying notes to consolidated financial statements. III-5 REN CORPORATION--USA CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992 Supplemental disclosures of cash flow information:
YEAR ENDED DECEMBER 31, ------------------------------------ 1994 1993 1992 ---------- --------- --------- Cash paid during the period for: Interest................................................ $ 748,431 569,453 2,752,081 Income taxes............................................ $1,840,800 1,805,934 3,005,132
Supplemental schedule of noncash investing and financing activities: During the year ended December 31, 1993, the Company acquired certain assets, principally goodwill and agreements not to compete, of North County Dialysis Inc. and West Coast Medical Specialties for an aggregate purchase price of $1,850,000. During the year ended December 31, 1992, the Company acquired certain assets, principally goodwill and equipment of the Institute for Laboratory Medicine, Inc (ILM), Southwest Kidney Institute, Inc. (SKI) Orlando Dialysis, Inc. (ODI), and West Orange Dialysis, Inc. (WODI) for an aggregate puchase price of $24,775,000 plus the assumption of certain specified liabilities. The Company also purchased, during 1992, certain assets of a Memphis hospital dialysis clinic for total cash consideration of $6,000,000. In connection with these acquisitions, the following liabilities were assumed:
YEAR ENDED DECEMBER 31, ------------------------------------ 1994 1993 1992 ------- ---------- ----------- Fair market value of assets acquired...................... $ -- 1,850,000 35,249,444 Issuance of notes......................................... -- (175,000) (7,025,000) Cash paid................................................. -- (1,675,000) (23,750,000) ------- ---------- ----------- Liabilities assumed..................................... $ -- -- 4,474,444 ------- ---------- ----------- ------- ---------- -----------
During 1994, redemption rights on 6,000 shares of common stock for $23,500 expired. During 1994, common stock was increased by $193,260 for the estimated tax benefit of stock options exercised. During 1994, unearned stock grant compensation was decreased by $598,608 related to an agreement with one of the facility medical directors which was reclassified to intangibles. During 1993, in conjunction with severance agreements with former officers of the Company, additional paid-in capital of $4,224,488 was recorded on the books of the Corporation. This amount represents the excess paid over market value of the Company's common shares held by former officers. These shares were purchased by the Company's majority shareholder. No Company funds were used in the purchase. During 1993, pursuant to the provisions of certain Convertible Promissory Notes, $2,120,615 of long term debt was converted to shareholders' equity through the issuance of 249,484 shares of common stock at $8.50 per share. During 1992, pursuant to the provisions of a Convertible Promissory Note, $700,000 of long-term debt was converted to shareholders' equity through the issuance of 82,352 shares of common stock at $8.50 per share. During 1993, redemption rights on 187,000 shares of common stock for $1,442,000 expired. During 1992, the Company issued 20,000 shares of common stock with a market value of $255,000 pursuant to an agreement regarding dialysis services with a university medical school. During 1992 the Company issued 16,043 shares of common stock with a market value of $150,000 pursuant to non-compete agreements with medical directors. During 1992 the Company redeemed 15,598 shares of redeemable common stock at a redemption price of $195,755. III-6 REN CORPORATION--USA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1994 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization REN Corporation-USA (the Company) was organized in 1987 to operate kidney dialysis clinics and provide related medical services. The Company also operates a clinical testing laboratory. CONSOLIDATION POLICY The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions have been eliminated. The Company's minority ownership interest in two entities is insignificant in relation to the consolidated financial statements. The Company's investment in one center, in which the Company owns more than 20%, but less than 50%, is accounted for by the equity method. REVENUE During 1994, 1993 and 1992, the Company received approximately 72%, 66%, and 75%, respectively, of its dialysis revenue from Medicare and Medicaid reimbursement programs. The Company received approximately 88%, 83%, and 83% of its laboratory revenue from Medicare and Medicaid during 1994, 1993 and 1992, respectively. The remaining balance of 1994, 1993 and 1992 revenue was from insurance, private and other third party payors. The Medicare and Medicaid programs reimburse the Company at amounts different from the Company's established rates. Contractual adjustments under these programs represent the difference between the amounts billed for these services and the amounts allowed by third-party payors. A summary of the basis for reimbursement with these payors follows: Medicare The Company is paid by the Medicare program on a prospective payment system for dialysis services. Each facility receives a composite rate that is adjusted to account for geographic differences in the cost of labor. The prospectively determined composite rates are not subject to retroactive adjustments. The Company is paid for its laboratory services based on a fee schedule. Medicaid Medicaid is a state administered program; therefore, reimbursement rates vary between states. The programs administered by Alabama, Georgia, Kentucky, Missouri, North Carolina, Oklahoma, Texas and Virginia reimburse the Company for dialysis services based on prospective payment rates. The Tennessee Medicaid program reimburses the Company at tentative reimbursement rates. Final reimbursement rates for Tennessee are determined after submission of annual cost reports by the Company. Medicaid reimburses the Company for laboratory services based on a fee schedule. In Arizona, the Company receives reimbursement from the Arizona Health Care Cost Containment System (AHCCCS). The Company does not believe that there are any significant credit risks associated with receivables from the Medicare and Medicaid programs. The allowance for uncollectibles and contractual adjustments consists of management's estimate of amounts that may prove uncollectible as a result of contractual adjustments arising from established rates of reimbursement set by Medicare, Medicaid and other third-party payors and uncollectible receivables. Provisions for contractual allowances are recorded as a reduction of revenue while bad debts are reported separately. III-7 REN CORPORATION--USA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1994 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash on hand, cash on deposit at banks and investments which mature within seven days from the date of purchase. The carrying amount reflected on the balance sheet at December 31, 1994 and 1993, respectively, approximates fair value. INVENTORIES Inventories of supplies are stated at the lower of cost or market, with cost being determined on a first-in, first-out basis. PROPERTY, PLANT AND EQUIPMENT Property, plant, and equipment are reported at cost or estimated fair value when acquired as part of a business combination and include improvements that significantly add to productive capacities or extend useful lives. Property, plant, and equipment are depreciated by the straight-line method over their estimated useful lives. The general range of useful lives is fifteen to thirty years for buildings and leasehold improvements (limited to the term of the lease) and five to seven years for other plant and equipment. Interest expense incurred in connection with the construction of dialysis centers is capitalized as part of the building until the center is operational, at which time depreciation begins using the straight line method over the estimated useful life of the building. INTANGIBLE ASSETS Acquisition related intangible assets arose from acquisitions by the Company. The Company has adopted the following useful lives and methods to amortize acquisition related intangibles: goodwill--twenty-five years on a straight-line basis; dialysis center patient lists--three to four years on a straight-line basis; laboratory customer lists--twenty-seven years on an accelerated method; and covenants not to compete--over the life of the agreement on a straight-line basis. Organization and development costs represent direct expenditures for legal, market research, marketing to prospective medical directors, licensing and pre-opening costs (training, hiring, etc.) associated with new dialysis centers and laboratories. If efforts to establish a new center or laboratory are abandoned, the related costs are charged to operations. When a new center or laboratory is opened, the related organization and development costs are amortized on a straight-line basis over five years. Software costs are amortized by the straight-line method over five years. The carrying value of goodwill (excess of purchase price over net assets acquired) is reviewed if the facts and circumstances suggest that it may be impaired. If this review indicates that goodwill will not be recoverable, as determined based on the undiscounted cash flows of the entity acquired over the remaining amortization period, the Company's carrying value of goodwill is reduced by the estimated shortfall of cash flows. INCOME TAXES The Company accounts for income taxes under Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. Under the asset and liability method of SFAS No. 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are III-8 REN CORPORATION--USA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1994 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under SFAS No. 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. ESTIMATED MALPRACTICE COSTS It is the Company's policy that provision for estimated malpractice costs be made based upon the Company's experience. Provision for such malpractice claims includes estimates of the ultimate costs for both reported claims and claims incurred but not reported. Professional liability insurance coverage is maintained to hedge against the risk of significant losses. EARNINGS PER SHARE Earnings per share has been computed by dividing net income (loss) after adjustment for the tax-effected interest expense related to convertible promissory notes by the weighted average number of common shares and common share equivalents outstanding during the year. Common share equivalents included in determining earnings per share include shares issuable upon assumed exercise of warrants, stock options issued to employees, medical directors and members of the Board of Directors (note 8), common stock redeemable at the option of the shareholder (note 7), and shares issuable upon the conversion of certain promissory notes. RECLASSIFICATIONS Certain reclassifications have been made to the 1993 and 1992 consolidated financial statements to conform to current year presentation. (2) BUSINESS COMBINATIONS 1993 ACQUISITIONS On May 31, 1993, the Company purchased certain assets, principally goodwill and agreements not to compete, of North County Dialysis Center, Inc. for $1,500,000. North County Dialysis Center, Inc. operated a dialysis center in Escondido, California. On June 4, 1993, the Company purchased certain assets, primarily agreements not to compete, of West Coast Medical Specialties for $350,000. West Coast Medical Specialties was a provider of acute services for seven hospitals in Southern California. The following pro forma summary financial information has been prepared as though the 1993 acquisitions discussed above had occurred at the beginning of 1992. This financial information is not necessarily indicative of the actual results that would have occurred had the purchases been made at the beginning of the year. III-9 REN CORPORATION--USA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1994 (2) BUSINESS COMBINATIONS--(CONTINUED) UNAUDITED PRO FORMA FINANCIAL DATA YEAR ENDED DECEMBER 31, -------------------------- 1993 1992 ------------ ---------- Total revenues....................... $107,241,000 84,039,000 Operating profit..................... 28,953,000 29,060,000 Income (loss) before income tax expense.............................. (5,797,000) 8,707,000 Net income (loss).................... (3,644,000) 5,601,000 Earnings (loss) per share............ (0.19) .39 Weighted average shares.............. 18,777,322 14,472,227 1992 ACQUISITIONS On January 2, 1992, the Company acquired certain assets, principally goodwill and equipment, of the Institute for Laboratory Medicine, Inc. (ILM) for $6,000,000. In addition, the Company assumed certain specified liabilities, principally consisting of existing employment arrangements and lease agreements, in connection with the purchase which approximated $3,073,000. ILM operated a general reference medical laboratory in Florida with branch offices in eight separate locations throughout the State. On April 29, 1992, the Company purchased substantially all of the operating assets of Southwest Kidney Institute, Inc. (SKI) for $11,500,000 in cash and assumed liabilities of approximately $520,000 for total consideration of $12,020,000. SKI operated four dialysis centers in and around Tucson, Arizona. On July 31, 1992, the Company purchased certain assets of a Memphis hospital dialysis clinic for cash consideration of $6,000,000. On December 31, 1992, the Company purchased substantially all of the operating assets of Orlando Dialysis, Inc. (ODI) and West Orange Dialysis, Inc. (WODI) for $250,000 in cash and $7,025,000 in promissory notes. The notes were repaid in January 1993. In addition, the Company assumed certain specified liabilities consisting of bank notes and accounts payable in connection with the purchase which approximated $900,000. Prior to the purchase, the Company managed both dialysis clinics. The above acquisitions were accounted for as purchase transactions with the purchase price being allocated to each asset and liability based on respective estimated fair values at the date of acquisition. The excess of the purchase price over net assets or goodwill acquired in 1993 and 1992 was $1,400,000 and $26,328,000, respectively. The goodwill is included in intangible assets and is being amortized over twenty-five years on a straight-line basis. III-10 REN CORPORATION--USA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1994 (3) PROPERTY, PLANT AND EQUIPMENT A summary of property, plant and equipment and related accumulated depreciation at December 31 is as follows: 1994 1993 ----------- ---------- Land.................................. $ 4,048,874 2,593,900 Buildings............................. 12,418,649 8,041,989 Leasehold improvements................ 15,013,442 11,863,402 Equipment............................. 36,422,583 29,964,821 Furniture and fixtures................ 3,052,369 2,597,248 Transportation equipment.............. 122,399 265,674 ----------- ---------- 71,078,316 55,327,034 Less accumulated depreciation..... 19,162,436 14,128,537 ----------- ---------- Total property, plant & equipment, net................................... $51,915,880 41,198,497 ----------- ---------- ----------- ---------- Depreciation expense for the years ended December 31, 1994, 1993, and 1992, was $6,088,825, $5,141,838, and $3,591,138, respectively. (4) INTANGIBLE ASSETS Intangible assets consists of goodwill and other identifiable intangibles. A summary of intangible assets and related accumulated amortization at December 31 is as follows: 1994 1993 ----------- ---------- Acquisition related intangibles: Goodwill............................ $32,227,056 31,912,700 Patient and customer lists.......... 8,330,827 8,280,837 Covenants not to compete............ 15,305,180 14,706,573 Other............................... 40,589 268,579 ----------- ---------- 55,903,652 55,168,689 Less accumulated amortization....... 12,357,227 9,430,882 ----------- ---------- 43,546,425 45,737,807 ----------- ---------- ----------- ---------- Organization and development costs: Operating facilities................ 5,083,525 4,709,415 Less accumulated amortization....... 3,462,185 2,535,553 ----------- ---------- 1,612,340 2,173,862 Facilities under development........ 313,185 141,586 ----------- ---------- 1,934,525 2,315,448 ----------- ---------- Software costs........................ 3,346,034 3,126,169 Less accumulated amortization....... 1,367,345 655,774 ----------- ---------- 1,978,689 2,470,395 ----------- ---------- Total intangibles, net................ $47,459,639 50,523,650 ----------- ---------- ----------- ---------- III-11 REN CORPORATION--USA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1994 (4) INTANGIBLE ASSETS--(CONTINUED) Acquisition related intangible assets arose from the acquisitions referred to in note 2. Amortization expense for acquisition related intangibles for the years ended December 31, 1994, 1993, and 1992, amounted to $2,906,265, $3,085,940, and $2,484,780, respectively. Amortization expense for organization and development costs for the years ended December 31, 1994, 1993 and 1992, amounted to $1,058,662, $989,741, and $777,143, respectively. Additional organization and development costs charged to operations during 1993 and 1992 relating to abandoned dialysis or laboratory facilities amounted to $968,000, and $122,889, respectively. Amortization expense for software costs for the years ended December 31, 1994, 1993, and 1992 was $711,571, $496,218 and $150,384, respectively. (5) NOTES RECEIVABLE Notes receivable at December 31 consist of the following: 1994 1993 ---------- -------- Notes related to sale of laboratory assets................................... $ 169,466 $340,228 Notes related to sale of Corp. office bldg. ................................... 1,500,000 -- Other.................................. 125,326 233,921 ---------- -------- $1,794,792 $574,149 ---------- -------- ---------- -------- (6) LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS Long-term debt and capital lease obligations at December 31 consist of the following: 1994 1993 ---------- ---------- Acquisition and project development loan with bank....................... $ -- 10,500,000 Other.................................. -- 175,000 ---------- ---------- -- 10,675,000 Capital lease obligations (note 10).... 429,672 470,672 ---------- ---------- 429,672 11,145,672 Less current maturities................ 87,308 441,593 ---------- ---------- $ 342,364 10,704,079 ---------- ---------- ---------- ---------- The aggregate annual maturities of long-term debt and capital lease obligations at December 31, 1994, are as follows: YEAR ENDING DECEMBER 31, ------------- 1995......... $ 87,308 1996......... 101,565 1997......... 90,973 1998......... 90,896 1999......... 58,930 ----------- $ 429,672 ----------- III-12 REN CORPORATION--USA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1994 (6) LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS--(CONTINUED) BANK CREDIT FACILITY On May 4, 1993, the Company replaced its existing credit agreement with a new agreement with a consortium of banks. Terms of the credit agreement provide the Company with a six year reducing revolving credit facility in the amount of $60,000,000. The revolving facility is available in full until August 30, 1995, when the availability begins to reduce by $3,750,000 each quarter until fully reduced on May 31, 1999. Borrowings under the facility will bear interest at either the bank prime rate or, at the Company's option, at a LIBOR rate plus an increment of 75 basis points to 125 basis points, depending on the ratio of debt to equity in accordance with a predetermined schedule. At December 31, 1994, there were no funds drawn under the credit facility. The Company's borrowing rate at December 31, 1994 was 8.5%. The weighted average interest rate for 1994 was 5.6%. The Agreement is subject to numerous restrictive covenants, including the payment of dividends, additional indebtedness, and the maintenance of various financial ratios. Both the Term Loan and the Revolving Credit Note are subject to certain borrowing base limitations. At December 31, 1994, the Company had waivers for or was in compliance with all loan covenants. (7) REDEEMABLE COMMON STOCK During January 1991, the Company entered into an agreement with a university renal division which requires, for a period of five years, the renal division to provide medical director services for one of the Company's dialysis facilities. As partial payment for this arrangement, the Company issued to the university 30,000 shares of the Company's redeemable common stock at a value of $3.75 per share and $20,000. Shares issued in connection with this agreement are redeemable at the option of the holder ratably over a five-year period at $3.50 per share. During 1994, redemption rights on 6,000 shares for $23,500 expired. At December 31, 1994, the redemption privilege remained for 12,000 of these shares. (8) SHAREHOLDERS' EQUITY Common Stock Pursuant to compensation agreements, the Company issued an aggregate of 36,043 and 55,000 shares of common stock to five of the Company's medical directors for the years ended December 31, 1992 and 1991, respectively. Forty thousand of the shares issued in 1991 were issued in connection with compensation arrangements for services to be performed for varying periods through 1994. Shares issued under such agreements are to vest ratably over the period services are to be performed. The market value of shares awarded has been recorded as unearned stock grant compensation and is shown as a separate component of shareholders' equity. The unearned compensation is being charged to operations over the period services are to be performed. If the agreements are terminated any unvested shares will be forfeited. At December 31, 1994, an unamortized balance of $598,608 was transferred to intangibles, as one of the agreements was deemed to be an agreement not to compete. On March 17, 1992, pursuant to the provisions of a Stock Purchase Agreement, the Company completed the sale of 1,170,732 shares of Common Stock to COBE Laboratories, Inc. (COBE), at a price of $10.25 per share or an aggregate purchase price of $12,000,003. As a result of this sale, together with shares acquired during 1991, COBE increased its ownership to approximately 30% of the Company's outstanding voting stock. On October 1, 1992, the Company completed the sale of 5,500,000 shares of the Company's common stock to COBE at a price of $9.75 per share, pursuant to the Stock Purchase Agreement, dated July 2, 1992, between the III-13 REN CORPORATION--USA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1994 (8) SHAREHOLDERS' EQUITY--(CONTINUED) Company and COBE. Net proceeds from the sale totaling $51,371,989 were credited to common stock. As a result of the sale, COBE owned an aggregate of 9,342,921 shares of Common Stock, representing beneficial ownership of 51.1% of the Common Stock of the Company. During July 1993, COBE purchased an additional 693,300 shares of the Company's common stock from the Company's former Chairman, President and Chief Executive Officer and the former Senior Vice President of Administration and Reimbursement. In connection with this purchase of common stock by COBE, the Company recognized as additional paid-in capital and as compensation expense, $4,224,488, representing the difference paid by COBE and the market value of the stock purchased by COBE from the Company's former Chairman, President and Chief Executive Officer and the Company's former Senior Vice President of Administration and Reimbursement, coincident to their resignations. With this purchase, COBE increased its ownership of common shares to 53.5%. The Company has granted to COBE an option to purchase sufficient shares of the Company's Common Stock as may be necessary to prevent dilution of its percentage ownership of outstanding Common Stock of the Company and voting power below 50.1% in the event the Company proposes to issue additional voting securities. Among other things, the Stock Purchase Agreement provides that, in the event the Company proposes to issue any voting securities, COBE has the option to purchase any shares necessary to prevent dilution of its equity and voting rights. The agreement further provides that the Company and COBE enter into a six-year supply agreement pursuant to which, subject to certain restrictions, the Company will purchase 75% of its requirements for renal dialysis machines and 100% of the associated blood lines from COBE on terms no less favorable than COBE offers to third parties. During 1992, 67,700 previously issued warrants were exercised at $3.00 per share. During 1993, redemption rights totaling $1,442,000 on 187,000 shares expired without exercise. Common stock was increased and redeemable common stock was decreased as a result. During 1994, the Board of Directors approved an employee stock purchase plan (the "Plan"). Under the Plan all employees who work at least 20 hours per week and with at least one year of service may be granted the opportunity to purchase common stock at 85% of market value on the first or last business day of the six month payment period, whichever is lower. There were 25,539 shares issued at a price of $7.50 per share during the year ended December 31, 1994. Common shares reserved for future employee purchases were 374,461 shares at December 31, 1994. There have been no charges to income in connection with the Plan other than incidental expenses related to the issuance of the shares. During 1994, 12,000 shares of stock previously owned by a medical director were canceled for payment of a $159,000 promissory note executed between the medical director and the Company. During 1994, 25,000 previously issued warrants were exercised at $3.50 per share. The Board of Directors approved a stock option plan in December 1988 for 500,000 shares of common stock to be granted to key employees and directors. During 1992, an additional 250,000 shares were approved by the Company's shareholders for issuance under the Company's stock option plan. In accordance with the terms of agreements made under the stock option plan, one-quarter of the total shares covered by the agreements shall become exercisable during each twelve month period following the anniversary of granting and shall accumulate if not exercised in that year. The term of each option is ten years. III-14 REN CORPORATION--USA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1994 (8) SHAREHOLDERS' EQUITY--(CONTINUED) A summary of the option transactions is:
OPTION ACTIVITY PRICE RANGE --------------- --------------- Options Outstanding, December 31, 1991........................ 275,525 $3.00 to $ 8.81 Options granted............................................. 378,500 $8.13 to $15.00 Less options exercised...................................... 35,350 $3.00 to $ 6.50 Less options canceled....................................... 5,050 ------- Options outstanding, December 31, 1992........................ 613,625 $3.00 to $15.00 Options granted............................................. 235,000 $7.94 to $13.56 Less options exercised...................................... 251,000 $3.00 to $13.69 Less options canceled....................................... 17,900 ------- Options outstanding, December 31, 1993........................ 579,725 $3.00 to $15.00 Options granted............................................... 97,500 $8.75 to $20.00 Less options exercised........................................ 96,912 $3.00 to $13.69 Less options canceled......................................... 64,088 ------- Options outstanding, December 31, 1994........................ 516,225 $3.00 to $20.00 ------- -------
Options exercisable at December 31, 1994, 1993 and 1992, are 170,613, 164,275 and 91,350 shares, respectively. In January 1992, the Board of Directors approved the issuance of a stock warrant to a former employee of the Corporation in recognition of services rendered. The warrant, issued on January 30, 1992 is for 4,000 shares of common stock, is exercisable upon issuance at $9.97 per share and expires January 30, 1997. The Board of Directors approved the issuance of a stock warrant to an independent contractor of the Corporation in recognition of services rendered. The warrant, issued October 14, 1992, is for 20,000 shares of common stock, is exercisable upon issuance at $11.75 per share and expires October 13, 2002. (9) INCOME TAXES Components of federal and state income tax expense (benefit) from operations are as follows:
YEAR ENDED DECEMBER 31, ------------------------------------- 1994 1993 1992 ---------- ---------- --------- Current provision: Federal................................................. $3,187,392 (907,243) 2,000,845 State................................................... 383,546 34,820 601,883 ---------- ---------- --------- 3,570,938 (872,423) 2.602,728 ---------- ---------- --------- Deferred provision: Federal................................................. 1,412,429 (1,278,755) 377,990 State................................................... 586,633 (78,944) (39,094) ---------- ---------- --------- 1,999,062 (1,357,699) 338,896 ---------- ---------- --------- $5,570,000 (2,230,122) 2,941,624 ---------- ---------- --------- ---------- ---------- ---------
III-15 REN CORPORATION--USA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1994 (9) INCOME TAXES--(CONTINUED) Actual income tax expense (benefit) differs from the "expected" income tax expense (benefit) (computed by applying the federal corporate rate of 34%) as follows:
1994 1993 1992 ---------- ---------- --------- Computed expected Federal income tax expense (benefit).... $4,787,507 (2,036,119) 2,820,780 Increase (decrease) in income taxes resulting from: State income taxes, net of federal benefit.............. 640,318 (29,122) 371,440 Alternative minimum tax utilized........................ (499,100) Goodwill amortization................................... 72,754 (167,573) 245,515 Other................................................... 69,421 2,692 2,989 ---------- ---------- --------- Provision for income taxes................................ $5,570,000 (2,230,122) 2,941,624 ---------- ---------- --------- ---------- ---------- ---------
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31, 1994 and 1993 are as follows:
1994 1993 ----------- ---------- Deferred tax assets: Accounts receivable. principally due to allowance for doubtful accounts............................................................ $ 1,607,243 637,124 Compensation obligations, principally due to accrual for financial reporting purposes.............................................. 431,391 482,623 Self-Insurance claim reserve principally due to accrual for financial reporting purposes.................................... 520,910 301,967 Financial statement accrued expenses not deductible for tax purposes............................................................ 519,759 576,847 State net operating loss carryforwards............................ 410,190 460,859 Assets under lease principally due to capital lease obligations... 27,699 188,158 Alternative minimum tax credit.................................... -- 373,839 Federal net operating loss carryforward........................... -- 1,801,928 Accumulated loss of foreign operations............................ 234,532 -- Other............................................................. 19,056 48,621 ----------- ---------- Total gross deferred tax assets............................... 3,770,780 4,871,966 Less valuation allowance...................................... (410,190) (431,326) ----------- ---------- Net deferred tax assets....................................... 3,360,590 4,440,640 ----------- ---------- Deferred tax liabilities: Property, plant and equipment and intangible assets, principally due to differences in depreciation and amortization............. (4,340,769) (3,521,366) Installment sale, principally due to accrual for financial reporting purposes.................................................. (41,604) (70,701) Other............................................................. (199,929) (71,223) ----------- ---------- Total gross deferred tax liabilities.......................... (4,582,302) (3,663,290) ----------- ---------- Net deferred tax asset (liability)............................ $(1,221,712) 777,350 ----------- ---------- ----------- ----------
The valuation allowance relates to state tax net operating loss carryforwards of certain of the Company's subsidiaries. The net change in the total valuation allowance for the year ended December 31, 1994, was a decrease of $21,136. The Company believes that more likely than not, the deferred tax assets, net of the valuation allowance, will be realized. III-16 REN CORPORATION--USA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1994 (9) INCOME TAXES--(CONTINUED) At December 31, 1994, the Company had net operating loss carryforwards for state income tax purposes of approximately $5,000,000, which are available to offset future taxable income in certain state jurisdictions through 2008. (10) CAPITALIZED LEASES The Company has entered into various equipment lease arrangements that have been recorded as capital leases as follows: DECEMBER 31, --------------------- 1994 1993 -------- --------- Cost of equipment..................................... $763,763 1,303,121 Less accumulated depreciation......................... 143,162 824,566 -------- --------- $620,601 478,555 -------- --------- -------- --------- Interest rates on capital lease obligations range from 10.75% to 13.48%. The assets are being depreciated on a straight-line basis over their estimated useful lives not to exceed the related lease term, and depreciation expense for the years ended December 31, 1994, 1993 and 1992, was $88,362, $265,099, and $274,950, respectively. Future minimum annual lease payments are as follows: YEAR ENDING DECEMBER 31, ----------------------------------------------------------------- 1995............................................................. $137,855 1996............................................................. 140,786 1997............................................................. 117,337 1998............................................................. 105,612 1999............................................................. 61,607 -------- 563,197 Less amounts representing interest............................... (133,525) -------- Present value of minimum lease payments.......................... $429,672 -------- -------- The Company leases certain dialysis equipment from a medical director. The lease and related liability were capitalized at the estimated fair market value of the underlying equipment of $172,510. Lease payments in excess of fair market value rental of $2,931 per month are charged to lease expense as paid. The Company paid an aggregate of $52,412 under this agreement during each of the years ended December 31, 1994, 1993, and 1992. The lease terminates in 1997. (11) OPERATING LEASES Leases from Nonrelated Parties The Company leases real estate under noncancelable operating leases expiring in various years through 2017. Certain operating leases provide for renewal options over various periods at the fair rental value at the time of renewal. In the normal course of business, operating leases are generally renewed or replaced by other leases. In addition, the Company leases personal property under operating leases expiring in 1996. III-17 REN CORPORATION--USA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1994 (11) OPERATING LEASES--(CONTINUED) Leases from Related Parties The Company leases certain real estate under noncancelable operating leases from related parties. Such operating leases provide for renewal options over various periods at the fair rental value at the time of renewal. Rental expense for the years ended December 31, 1994, 1993, and 1992, under related party operating leases was $0, $94,740, and $255,878, respectively. Future Minimum Rental Payments Future minimum rental payments under noncancelable operating leases for each of the next five years and thereafter in the aggregate are:
YEAR ENDING DECEMBER 31, ------------------------------------------------------------------------------- 1995........................................................................... $ 4,226,946 1996........................................................................... 3,236,966 1997........................................................................... 2,718,424 1998........................................................................... 2,476,507 1999........................................................................... 2,309,672 Thereafter..................................................................... 7,502,377 ----------- $22,470,892 ----------- -----------
Rental expense for the years ended December 31, 1994, 1993, and 1992, under all operating leases amounted to $4,506,117, $4,505,321, and $3,404,104, respectively. (12) RELATED PARTY TRANSACTIONS On August 31, 1992, the Company sold substantially all of the operational assets of its drug testing laboratory to a shareholder and former director of the Company for $125,000 cash and a note for $125,000 at bank prime plus 1%. Under the terms of the note, principal payments of $50,000 and $25,000 were paid on January 1, 1994, and 1993, respectively, and the remaining principal of $50,000 is due on January 1, 1995. A loss on the sale of $276,123 was recognized on the transaction in 1992. In 1991, the Company entered into a six-year supply agreement with COBE, pursuant to which, subject to certain restrictions, the Company will purchase 75% of its requirements for renal dialysis machines and 100% of the associated blood line supplies on terms no less favorable than are offered to third parties. During 1994, 1993 and 1992, the Company incurred $7,845,189, $6,801,258, and $3,071,739, respectively, for equipment and supplies to COBE who owns 53.5% of the Company's outstanding voting stock (see note 8) and who appoints five of the members to the Board of Directors. In addition, during 1994, 1993 and 1992 the Company incurred $161,809, $86,877, and $114,560, respectively, for director fees and other expense reimbursements to COBE. Included in accounts payable and accrued expenses at December 31, 1994 is $743,874 payable to COBE. During 1994, 1993 and 1992, the Company incurred $631,943, $26,502, and $176,875, respectively, for travel expense arranged through an agency in which a partner is the spouse of a director of the Company. III-18 REN CORPORATION--USA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1994 (13) SAVINGS AND PROFIT SHARING PLAN REN Corporation-USA Savings and Profit Sharing Plan (the "401K Plan"), amended and restated effective July 1, 1994, covers all employees over 21 years of age with a minimum of 1,000 hours of compensated service in the 12 month period preceding either of the 401K Plan entrance dates (January 1 or July 1). The 401K Plan allows participants to contribute before tax earnings up to limits established by the IRS ($9,240 for 1994). The 401K Plan earnings and gains accumulate tax deferred as long as the employee remains a participant. All participant contributions are fully vested to each individuals account. All employer contributions (matching deposits and discretionary contributions) also fully vest when granted. Employer contributions are discretionary. The Company will determine annually the amount of matching contributions for the following plan year and this amount will be allocated based on participation. In addition, the Company may decide to make further discretionary contributions. Employer discretionary contributions may be made for all eligible employees based on compensation. For the years ending December 31, 1994, 1993, and 1992, contributions expense was $197,800, $0, and $125,000, receptively. (14) QUARTERLY OPERATING RESULTS (UNAUDITED) The following is a summary of the unaudited quarterly results of operations for the years ended December 31 (in thousands, except per share data):
1ST 2ND 3RD 4TH 1994 QUARTER QUARTER QUARTER QUARTER ---------------------------------------------------------- ------- ------- ------- ------- Revenue................................................... $30,287 31,638 34,123 35,767 Gross operating profit.................................... 8,586 9,150 10,955 11,683 Income from operations.................................... 2,251 3,288 4,665 4,717 Income before income taxes................................ 2,062 3,091 4,416 4,512 Net income................................................ 1,238 1,885 2,666 2,722 Net income per common and common equivalent share......... $ 0.07 0.10 0.14 0.14
1TH 2ND 3RD 4TH 1993 QUARTER QUARTER QUARTER QUARTER --------------------------------------------------------- ------- ------- ------- ------- Revenue.................................................. $25,475 26,296 23,229 30, 188 Gross operating profit................................... 8,464 8,378 2,881 8,410 Income (loss) from operations............................ 2,818 (4,683) (5,545) 1,971 Income (loss) before income taxes........................ 2,818 (4,797) (5,785) 1,775 Net income (loss)........................................ 1,631 (3,002) (3,435) 1,048 Net income per common and common equivalent share........ $ 0.09 (0.16) (0.19) 0.06
(15) COMMITMENTS AND CONTINGENCIES Final determination of amounts earned under prospective payment and cost-reimbursement activities is subject to review by appropriate governmental authorities or their agents. In the opinion of management, adequate provision has been made for any adjustments that may result from such reviews. III-19 REN CORPORATION--USA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1994 (15) COMMITMENTS AND CONTINGENCIES--(CONTINUED) The Company has been named a defendant in various legal actions arising from its normal business activities. In the opinion of management, any liability that may arise from such actions will not have a material adverse effect on the Company's financial position or results of operations. The Company has negotiated an agreement with an unrelated vendor to provide supplies at a specified cost for a period of five years. At December 31, 1994, the Company's commitment under the terms of this agreement amounts to approximately $1,400,000. HCFA has indicated the possibility of revisions to the Omnibus Budget Reconciliation Act (OBRA) of 1993. The proposed revision provides that when a Medicare entitlement based on age or disability occurs prior to Medicare eligibility based on end-stage renal disease (ESRD) criteria, and the plan has permissibly taken into account Medicare entitlement based on age or disability, the Medicare Secondary Payor (MSP) statute as amended by OBRA 1993, would not require a benefit coordination reversal. Based on written documentation from Medicare entitlement, REN has required a benefit coordination reversal since September 1993. (16) SUBSEQUENT EVENTS During January 1995, the Company acquired majority interest in Greater Milwaukee Dialysis Center (GMDC), a Wisconsin general partnership, for approximately $3,870,000 and the assumption of liabilities totaling approximately $130,000. The partnership operates three outpatient hemodialysis clinics and one training center for continuous ambulatory peritoneal dialysis. The four clinics treat approximately 350 patients in the metropolitan area. Simultaneously with the acquisition of GMDC, the Company purchased all of the assets, rights, and contracts of the acute dialysis program operated by GMDC for approximately $744,000. During January 1995, the Company agreed to acquire the chronic and acute dialysis programs operated by George Washington University for approximately $5,000,000. The programs currently treat approximately 160 patients in the Washington, D.C. area. During January 1995, the Company sold its interest in a foreign entity engaged in providing dialysis services, to Hospital Medica Sur for total consideration of approximately $914,000. A loss on the sale of $100,000 has been included in the Company's 1994 financial results. III-20 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Shareholders REN Corporation -- USA We have audited the consolidated financial statements of REN Corporation -- USA and subsidiaries as of December 31, 1994, and for the year then ended, and have issued our report thereon dated January 23, 1995 (included elsewhere in this Annual Report on Form 10-K). Our audit also included the financial statement schedule listed in Item 14(a) of this Annual Report on Form 10-K. This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audit. The schedule of REN Corporation -- USA for the years ended December 31, 1993 and 1992, was audited by other auditors whose report dated January 25, 1994, expressed an unqualified opinion on that schedule. In our opinion, the 1994 financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. ERNST & YOUNG LLP Nashville, Tennessee January 23, 1995 III-21 REN CORPORATION--USA CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
JUNE 30, DECEMBER 31, 1995 1994 ----------- ------------ (UNAUDITED) Current assets: Cash and cash equivalents......................................... $ 92 $ 644 Accounts receivable less allowance for uncollectibles and contractual adjustments of $15,022 and $12,885 at June 30, 1995 and December 31, 1994, respectively............................. 20,488 22,252 Estimated third-party settlements, net............................ 431 60 Inventory......................................................... 3,922 3,382 Prepaid expense................................................... 1,622 974 Current deferred taxes, net....................................... 3,729 3,079 Other current assets.............................................. 222 1,385 ----------- ------------ Total current assets.......................................... 30,506 31,776 Property, plant and equipment, net............................ 55,163 51,916 Intangible assets, net........................................ 56,448 47,460 Notes receivable.............................................. 32,667 31,795 Other assets.................................................. 5,703 1,368 ----------- ------------ Total assets.................................................. $ 150,487 $134,315 ----------- ------------ ----------- ------------ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Bank notes payable................................................ $ 875 $ -- Current maturities of long-term debt and capital lease obligations......................................................... 92 87 Accounts payable.................................................. 8,722 6,541 Accrued expenses.................................................. 4,383 2,939 Accrued wages and benefits........................................ 3,842 3,751 Income taxes payable.............................................. 399 1,521 ----------- ------------ Total current liabilities..................................... 18,313 14,839 Long-term debt and capital lease obligations, less current maturities.......................................................... 5,394 342 Deferred taxes, net................................................. 4,974 4,301 Minority interest in consolidated subsidiaries...................... 623 89 ----------- ------------ Total long-term liabilities................................... 10,991 4,732 Redeemable common stock; 6,000 and 12,000 shares issued and outstanding at June 30, 1995 and December 31, 1994, respectively........................................................ 24 47 Commitments and contingencies Shareholders' equity: Common stock; no par value, authorized 60,000,000 shares; 18,936,659 and 18,898,546 shares issued and outstanding at June 30, 1995 and December 31, 1994, respectively.................... 102,229 101,841 Additional paid-in capital........................................ 4,224 4,224 Retained earnings................................................. 14,706 8,650 Less unearned stock grant compensation............................ -- $ (18) ----------- ------------ Total shareholders' equity.................................... 121,159 114,697 ----------- ------------ Total liabilities and shareholders' equity.................... $ 150,487 $134,315 ----------- ------------ ----------- ------------
See accompanying notes to consolidated financial statements. III-22 REN CORPORATION--USA CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, --------------------------- --------------------------- 1995 1994 1995 1994 ------------ ------------ ------------ ------------ Revenue: Dialysis services...................... $ 38,714 $ 28,872 $ 73,793 $ 56,309 Laboratory services.................... 4,204 2,766 7,739 5,616 ------------ ------------ ------------ ------------ 42,918 31,638 81,532 61,925 ------------ ------------ ------------ ------------ Direct operating expense: Dialysis services...................... 28,783 21,027 54,437 41,289 Laboratory services.................... 1,318 1,461 2,802 2,901 ------------ ------------ ------------ ------------ 30,101 22,488 57,239 44,190 ------------ ------------ ------------ ------------ Gross operating profit: Dialysis services...................... 9,931 7,845 19,356 15,020 Laboratory services.................... 2,886 1,305 4,937 2,715 ------------ ------------ ------------ ------------ 12,817 9,150 24,293 17,735 Indirect operating expense: Corporate office general, administrative and operations support.................................. 2,818 2,499 5,534 5,629 Depreciation and amortization.......... 3,207 2,675 6,069 5,269 Bad debt expense....................... 1,018 687 1,542 1,202 Loss of unconsolidated subsidiary...... 17 0 62 95 ------------ ------------ ------------ ------------ Income from operations........... 5,757 3,289 11,086 5,540 Non-operating (income) expense: Interest income........................ (141) (39) (229) (106) Interest expense....................... 349 237 642 493 ------------ ------------ ------------ ------------ Income before income taxes....... 5,549 3,091 10,673 5,153 Income tax expense....................... 2,274 1,206 4,375 2,030 Minority interest in income of consolidated subsidiary, net of income tax expense of $62 and $167 for the quarter and six months ended June 30, 1995..................................... 91 -- 241 -- ------------ ------------ ------------ ------------ Net income............................. $ 3,184 $ 1,885 $ 6,057 $ 3,123 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Net income per common share and comon share equivalent......................... $ 0.17 $ 0.10 $ 0.32 $ 0.17 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Weighted average common shares and common share equivalents outstanding............ 19,027,576 18,886,187 19,021,789 18,868,932
See accompanying notes to consolidated financial statements. III-23 REN CORPORATION--USA CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE DATA)
COMMON ADDITIONAL UNEARNED --------------------- PAID-IN RETAINED STOCK GRANT SHARES AMOUNT CAPITAL EARNINGS COMPENSATION TOTAL ---------- -------- ---------- -------- ------------ -------- December 31, 1994................. 18,898,546 $101,841 $4,224 $ 8,650 $ (18) $114,696 Net income........................ -- -- -- 6,057 -- 6,057 Issuance of common stock for employee stock purchase plan.... 20,038 224 -- -- -- 224 Exercise of stock options......... 12,075 140 -- -- -- 140 Amortization of unearned stock grant compensation.............. -- -- -- -- 18 18 Expiration of redeemable common stock............................. 6,000 24 -- -- -- 24 ---------- -------- ---------- -------- ------ -------- June 30, 1995..................... 18,936,659 $102,229 $4,224 $ 14,707 $-- $121,159 ---------- -------- ---------- -------- ------ -------- ---------- -------- ---------- -------- ------ --------
See accompanying notes to consolidated financial statements. III-24 REN CORPORATION--USA CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
SIX MONTHS ENDED JUNE 30, -------------------- 1995 1994 -------- -------- Cash flows from operating activities: Net income............................................................ $ 6,057 $ 3,123 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense............................... 6,069 5,269 Amortization of unearned stock grant compensation................... 18 122 Deferred income taxes............................................... 23 -- Effect on cash of change in operating assets and liabilities, net of effects from acquisitions: Accounts receivable and estimated third party settlements........... 1,392 1,600 Inventory........................................................... (540) (621) Income taxes receivable............................................. -- -- Prepaid expenses and other current assets........................... 515 3,508 Notes receivable and other assets................................... (5,207) 1 Accounts payable.................................................... 2,181 4,059 Accrued expenses and income taxes................................... 948 1,391 -------- -------- Net cash provided by operating activities....................... 11,456 18,452 -------- -------- Cash flows from investing activities: Acquisitions, net of cash acquired.................................... (10,837) -- Purchase of property, plant and equipment............................. (6,334) (11,229) Intangible assets acquired............................................ (1,136) (235) Net book value of assets sold......................................... 2 -- -------- -------- Net cash used in investing activities........................... (18,305) (11,464) -------- -------- Cash flows from financing activities: Proceeds from issuance of long-term debt.............................. 44,100 4,000 Principal payments on long-term debt and capital lease obligations.... (38,168) (11,062) Proceeds from common stock options and warrants exercised............. 365 506 Redemption of common stock............................................ -- (159) -------- -------- Net cash provided by (used in) financing activities 6,297 (6,715) -------- -------- Net increase (decrease) in cash and cash equivalents.................... (552) 273 Cash and cash equivalents at beginning of period........................ $ 644 $ 655 -------- -------- Cash and cash equivalents at end of period.............................. $ 92 $ 928 -------- -------- -------- --------
See accompanying notes to consolidated financial statements. III-25 REN CORPORATION--USA CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
SIX MONTHS ENDED JUNE 30, -------------- 1995 1994 ------ ---- (IN THOUSANDS) Supplemental disclosures of cash flow information: Cash paid during the period for: Interest................................................................... $ 530 $373 Income taxes............................................................... 5,310 1
Supplemental schedule of noncash investing and financing activities: During the six months ended June 30, 1995 the Company acquired certain assets, principally goodwill and agreements not to compete, of two dialysis clinics operated by The George Washington University, a 51% ownership in certain assets, principally goodwill and equipment, of Greater Milwaukee Dialysis Corporation, and a 53.3% ownership interest in certain assets, principally goodwill and equipment of Rocky Mountain Kidney Center for an aggregate purchase price of approximately $12 million. During January of both 1995, and 1994, redemption rights on 6,000 shares of common stock for $23,500 expired. III-26 REN CORPORATION--USA NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (1) BASIS OF PRESENTATION The accompanying interim financial statements have been prepared in conformity with generally accepted accouting principles for interim financial information and with the instructions to Form 10-Q and Rule 10.01 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, the interim consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results of the interim periods. The interim financial statements should be read in conjunction with the 1994 audited consolidated financial statements and related notes. The results of operations for the interim periods may not be indicative of the operating results for the year ending December 31, 1995. (2) INCOME TAXES Actual income tax expense for the six months ended June 30, 1995, differs from the "expected" income tax expense (computed by applying the federal corporate rate of 35%) as follows:
(IN THOUSANDS) -------------- Computed expected federal income tax expense..................................... $3,736 Increase in income tax resulting from: State income tax expense, net of federal benefit............................... 486 Other.......................................................................... 153 ------ Income Tax Expense........................................................... $4,375 ------ ------
(3) BANK CREDIT FACILITY During 1993, the Company replaced its existing credit agreement with a new agreement with a consortium of banks. Terms of the credit agreement provide the Company with a six-year reducing revolving credit facility in the amount of $60 million. The revolving facility is available in full until August 30, 1995 when the availability begins to reduce by $3.75 million each quarter until fully reduced on May 31, 1999. Borrowings under the facility will bear interest at either the bank prime rate or, at the Company's option, at a LIBOR rate plus an increment of 75 basis points to 125 basis points depending on the ratio of debt to equity in accordance with a predetermined schedule. At June 30, 1995, the Company had waivers for or was in compliance with all loan covenants. The Company had $4 million outstanding under the Credit Agreement at June 30, 1995. (4) COMMITMENTS AND CONTIGENCIES The Company has been named a defendant in various legal actions arising from its normal business activites. In the opinion of management after consultation with counsel, any liability that may arise from such actions will not have a material adverse effect on the Company. On April 24, 1995, the U.S. Health Care Financing Administration (HCFA) advised Associate Regional Adminstrators for Medicare of a contemplated change in the government's interpretation of the amendment to the Medicare Secondary Payor (MSP) End Stage Rental Disease (ESRD) provision of the Social Security Act contained in the Omnibus Budget Reconciliation Act of 1993 (OBRA 93). An upcoming Program Instruction will officially advise Medicare Intermediaries that prior guidance by HCFA was erroneous and direct the Intermediaries to apply the reinterpretation of the Law retractively and prospective to all ESRD claims after August 10, 1993. The effect of this reinterpretation of the Law is to make Medicare the primary payor in cases where a Medicare beneficiary is entitled to Medicare benefits on the bases of either age or disability and ESRD and where the entitlement other than ESRD precedes the ESRD diagnosis. According to previous memorandum issued by III-27 REN CORPORATION--USA NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (4) COMMITMENTS AND CONTIGENCIES--(CONTINUED) Medicare Intermediaries, the MSP provisions would apply irrespective of whether the ESRD diagnosis was before or after the Medicare entitlement other than ESRD. Because commercial rates are normally in excess of the Medicare allowable rates, the change in the application of the MSP provisions may result in a reduction of dialysis revenue going forward for those patients whose Medicare entitlement other than ESRD preceded their ESRD diagnosis. Because the reinterpretation of the MSP provisions to OBRA 93 is retroactive to August 10, 1993, the Company may be required to refund amount paid by commercial payors and bill Medicare as the primary payor for patients whose Medicare eligibility preceded their eligibility due to ESRD. It is not possible to predict at this time the financial consequences of such refund requests, net of any available reserves. III-28 SCHEDULE IV [ALEX. BROWN & SONS LETTERHEAD] September 12, 1995 Special Committee of the Board of Directors REN Corporation--USA 6820 Charlotte Pike Nashville, TN 37209 Dear Sirs: REN Corporation--USA ("REN"), Gambro AB ("Gambro"), COBE Laboratories, Inc., a Colorado corporation and indirect wholly owned subsidiary of Gambro ("Parent"), and REN Acquisition Corp., a wholly owned subsidiary of Parent ("Purchaser"), have entered into an Agreement and Plan of Merger dated as of September 12, 1995 (the "Agreement") pursuant to which Purchaser shall make a tender offer (the "Offer") to purchase all the issued and outstanding shares of common stock, no par value, of REN (the "Common Stock") at a price of $20.00 per share, net to the seller in cash. The Agreement also provides that, following the Offer, Purchaser shall be merged with and into REN (the "Merger"), and that each then outstanding share of Common Stock, other than shares held by Parent, Purchaser and their affiliates, will be converted into the right to receive $20.00 in cash. You have requested our opinion regarding the fairness, from a financial point of view, of the cash consideration to be received by the stockholders of REN, other than Gambro, Parent, Purchaser and their affiliates, pursuant to the Agreement. Alex. Brown & Sons Incorporated, 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, secondary distributions of securities, private placements, and valuations for corporate and other purposes. We have served as financial advisor to the Special Committee of the Board of Directors of REN in connection with the transaction contemplated by the Agreement and will receive a fee for our services. We regularly publish research reports regarding the health care industry and the businesses and securities of publicly owned companies in that industry. In connection with this opinion, we have reviewed the Agreement and certain publicly available financial information concerning REN. We have reviewed certain internal financial analyses of REN made available to us by the management of REN and have held discussions with members of the senior management of REN regarding the business and prospects of REN. In addition, we have (i) reviewed the reported price and trading activity for the Common Stock of REN, (ii) compared certain financial and stock market information for REN with similar information for certain other companies whose securities are publicly traded, (iii) reviewed the financial terms of certain recent business combinations, and (iv) performed such other studies and analyses and took into account such other matters as we deemed necessary. We have assumed and relied upon, without independent verification, the accuracy and completeness of the information reviewed by us for purposes of this opinion. With respect to the financial projections used in our analyses, we have assumed that they have been reasonably prepared on bases reflecting the best currently available estimates and judgments of the REN senior management as to the likely future performance of REN. In addition, we have not made an independent valuation or appraisal of the assets of REN, nor have we been furnished with any such valuation or appraisal. We have relied, with your permission, on the statement made by Parent that Parent would not consent to the sale of REN and we were not requested or authorized to solicit, and did not solicit, interest from any party with respect to the acquisition of the Common Stock, REN or any of its constituent businesses. Our opinion is based on market, economic, financial and other conditions as they exist and can be evaluated as of the date of this letter. IV-1 It is understood that this letter is for the benefit and use of the Special Committee of the Board of Directors of REN only and may not be used for any other purpose without our prior written consent, provided, however, that we hereby consent to the inclusion of this opinion in any offer to purchase, Schedule 14D-9, Schedule 13E-3 or proxy statement used in conjunction with the Offer or the Merger. Based on the analysis described above and subject to the foregoing limitations and qualifications, it is our opinion that the cash consideration to be received by the stockholders of REN other than Gambro, Parent, Purchaser and their affiliates pursuant to the Agreement is fair from a financial point of view to such stockholders as of the date of delivery of this letter. Very truly yours, ALEX. BROWN & SONS INCORPORATED IV-2 Facsimiles of the Letter of Transmittal will be accepted. The Letter of Transmittal and certificates evidencing Shares and any other required documents should be sent or delivered by each stockholder or his broker, dealer, commercial bank, trust company or other nominee to the Depositary at one of its addresses set forth below. The Depositary for the Offer is: BANK OF NEW YORK By Mail: By Facsimile Transmission: By Hand or Overnight Courier: Tender & Exchange (212) 815-6213 Tender & Exchange Department Department P.O. Box 11248 Confirm by Telephone: 101 Barclay Street Church Street Station (800) 507-9357 Receive and Deliver Window New York, NY 10286-1248 New York, NY 10286
Questions or 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, the Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained from the Information Agent. A stockholder may also contact brokers, dealers, commercial banks or trust companies for assistance concerning the Offer. The Information Agent for the Offer is: [LOGO] Toll Free: 1-800-223-2064 United States: Europe: Wall Street Plaza Georgeson and Company New York, New York 10005 10th Floor Banks and Brokers call collect Moor House (212) 440-9800 119 London Wall London EC2Y 5ET Telephone 171-454-7100 or Call Collect: The Dealer Manager for the Offer is: UBS SECURITIES INC. 299 Park Avenue, 35th Floor New York, New York 10171-0026 (212) 821-4000 (Collect) EX-99.(A)(2) 3 [REN CORPORATION-USA PRESS RELEASE] FOR IMMEDIATE RELEASE REN CORPORATION-USA ANNOUNCES SIGNING OF DEFINITIVE MERGER AGREEMENT NASHVILLE, Tenn., September 13, 1995 - REN Corporation-USA, a Tennessee corporation (NASDAQ: RENL), today announced that it has signed a definitive merger agreement with Gambro AB (NASDAQ: GAMBY) and COBE Laboratories, Inc., the Lakewood, Colorado-based wholly owned subsidiary of Gambro ("COBE"), providing for the acquisition of REN's publicly held shares at a price of $20 per share, net to the seller in cash. Pursuant to the merger agreement, a newly formed wholly owned subsidiary of COBE ("Purchaser") will commence a tender offer for all of the issued and outstanding shares of common stock of REN not currently owned by COBE. Purchaser will commence the tender offer no later than September 19, 1995. Following the tender offer, Purchaser will be merged into REN, and all REN shares not purchased pursuant to the tender offer will be converted into a right to receive $20 per share in cash in a second-step merger to be consummated as soon as practicable after the tender offer. Upon consummation of the merger, REN will become a wholly owned subsidiary of COBE and an indirect wholly owned subsidiary of Gambro. The tender offer will be conditioned upon, among other things, at least a majority of the REN shares, other than the REN shares owned by COBE or its affiliates, being validly tendered and not withdrawn prior to the expiration of the tender offer. COBE and its affiliates presently own approximately 53% of the outstanding REN shares. The merger agreement has been unanimously approved by a special committee of independent directors of REN and, based on the recommendation of the special committee, the Board of Directors of REN has unanimously approved the merger agreement and recommended that holders tender their REN shares pursuant to the tender offer. UBS Securities Inc. is acting as financial advisor to COBE in connection with the transaction and is acting as sole Dealer Manager in connection with the tender offer. Alex. Brown & Sons Incorporated is acting as financial advisor to the special committee and has rendered an opinion that the consideration to be received by the public shareholders of REN pursuant to the merger agreement is fair from a financial point of view. REN is the nation's fourth largest provider of kidney dialysis services. REN owns and operates 68 dialysis centers, located across 18 states and the District of Columbia. Several of these centers are associated with prominent academic institutions. Overall, the company has over 1,150 treatment stations servicing approximately 5,700 patients. In 1994, REN performed more than 646,000 dialysis treatments. REN also performs blood and urine testing services for its centers and others. EX-99.(A)(3) 4 [REN CORPORATION--USA LETTERHEAD] September 19, 1995 To Our Shareholders: We are pleased to inform you that on September 12, 1995, REN Corporation--USA (the "Company") entered into an Agreement and Plan of Merger (the "Merger Agreement") with Gambro AB ("Gambro"), Gambro's wholly owned subsidiary COBE Laboratories, Inc. ("COBE") and REN Acquisition Corp. ("Purchaser"), a wholly owned subsidiary of COBE, pursuant to which Purchaser has today commenced a tender offer to purchase all of the outstanding shares of the Company's common stock, no par value (the "Shares"), at a cash price of $20.00 per Share (the "Offer"). The Offer is conditioned upon the tender of at least a majority of the Shares held by shareholders other than Gambro, COBE, Purchaser or any of their affiliates. Subject to fulfillment of the condition that Purchaser purchase all Shares validly tendered in the Offer and certain other conditions, the Merger Agreement provides that the Offer will be followed by a merger (the "Merger") in which those Shares that are not acquired in the Offer will be converted into the right to receive $20.00 per share in cash. The Board of Directors of the Company, acting upon the unanimous recommendation of a special committee of independent directors (the "Special Committee"), has unanimously approved and consented to the Offer and has unanimously determined that the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, are fair to and in the best interests of the holders of the outstanding Shares. The Board of Directors has reached these conclusions after consideration of the terms of the Merger Agreement, the unanimous recommendation of the Special Committee, the opinion of Alex. Brown & Sons Incorporated (the independent financial advisor to the Special Committee) dated as of September 12, 1995, that the consideration to be received by the shareholders of the Company other than Gambro, COBE, Purchaser and their affiliates pursuant to the Merger Agreement was fair from a financial point of view to such shareholders as of the date of the opinion and the other factors described in the attached Schedule 14D-9 filed today by the Company with the Securities and Exchange Commission. Accompanying this letter, in addition to the Schedule 14D-9, is the Offer to Purchase of the Purchaser, dated September 19, 1995, together with related materials including a letter of transmittal for use in tendering your shares. These documents set forth the terms and conditions of the Offer and provide instructions as to how to tender your shares. We urge you to read the enclosed materials carefully in making your decision whether to tender your shares to Purchaser. Very truly yours, Lawrence J. Centella President and Chief Executive Officer EX-99.(C)(1) 5 =========================================================================== AGREEMENT AND PLAN OF MERGER Among GAMBRO AB, COBE LABORATORIES, INC., REN ACQUISITION CORP. and REN CORPORATION-USA Dated as of September 12, 1995 =========================================================================== Glossary of Defined Terms [(Not Part of this Agreement)] ---------------------------- Defined Term Location of Definition ------------ ---------------------- affiliate . . . . . . . . . . . . . . . . Sec. 8.04(a) Agreement . . . . . . . . . . . . . . . . Preamble Alex. Brown . . . . . . . . . . . . . . . Recitals Articles of Merger . . . . . . . . . . . . Sec. 2.02 beneficial owner . . . . . . . . . . . . . Sec. 8.04(b) Blue Sky Laws . . . . . . . . . . . . . . Sec. 3.04(b) Board . . . . . . . . . . . . . . . . . . Recitals business day . . . . . . . . . . . . . . . Sec. 8.04(c) Certificates . . . . . . . . . . . . . . . Sec. 2.08(b) Company . . . . . . . . . . . . . . . . . Preamble Company Common Stock . . . . . . . . . . . Recitals Company Preferred Stock . . . . . . . . . Sec. 3.02 control . . . . . . . . . . . . . . . . . Sec. 8.04(d) Disclosure Schedule . . . . . . . . . . . Sec. 3.01 Dissenting Shares . . . . . . . . . . . . Sec. 2.07(a) Effective Time . . . . . . . . . . . . . . Sec. 2.02 ESPP . . . . . . . . . . . . . . . . . . . Sec. 2.11 Exchange Act . . . . . . . . . . . . . . . Sec. 1.02(b) Gambro . . . . . . . . . . . . . . . . . . Preamble Indemnified Parties . . . . . . . . . . . Sec. 5.03(c) Material Adverse Effect . . . . . . . . . Sec. 3.01 Merger . . . . . . . . . . . . . . . . . . Recitals Merger Consideration . . . . . . . . . . . Sec. 2.06(a) Offer . . . . . . . . . . . . . . . . . . Recitals Offer Documents . . . . . . . . . . . . . Sec. 1.01(b) Offer to Purchase . . . . . . . . . . . . Sec. 1.01(b) Option . . . . . . . . . . . . . . . . . . Sec. 2.09 Parent . . . . . . . . . . . . . . . . . . Preamble Paying Agent . . . . . . . . . . . . . . . Sec. 2.08(a) Per Share Amount . . . . . . . . . . . . . Recitals person . . . . . . . . . . . . . . . . . . Sec. 8.03(e) Plan Amount . . . . . . . . . . . . . . . Sec. 2.11 Proxy Statement . . . . . . . . . . . . . Sec. 3.07 Purchaser . . . . . . . . . . . . . . . . Preamble Schedule 14D-9 . . . . . . . . . . . . . . Sec. 1.02(b) Schedule 14D-1 . . . . . . . . . . . . . . Sec. 1.01(b) Schedule 13E-3 . . . . . . . . . . . . . . Sec. 1.01(b) SEC . . . . . . . . . . . . . . . . . . . Sec. 1.01(b) SEC Reports . . . . . . . . . . . . . . . Sec. 3.06(a) Securities Act . . . . . . . . . . . . . . Sec. 3.06(a) Series A Preferred Stock . . . . . . . . . Sec. 3.02 Series B Preferred Stock . . . . . . . . . Sec. 3.02 Shares . . . . . . . . . . . . . . . . . . Recitals Defined Term Location of Definition ------------ ---------------------- Special Committee . . . . . . . . . . . . Recitals Stockholders' Meeting . . . . . . . . . . Sec. 5.01 Stock Option Plan . . . . . . . . . . . . Sec. 2.09 Stock Purchase Agreement . . . . . . . . . Recitals Subsidiary . . . . . . . . . . . . . . . . Sec. 3.01 subsidiary . . . . . . . . . . . . . . . . Sec. 8.04(f) Surviving Corporation . . . . . . . . . . Sec. 2.01 Tennessee Law . . . . . . . . . . . . . . Recitals Termination Date . . . . . . . . . . . . . Sec. 2.11 Transactions . . . . . . . . . . . . . . . Sec. 3.03 Warrant . . . . . . . . . . . . . . . . . Sec. 2.10 TABLE OF CONTENTS PAGE SECTION 1.02. Company Action . . . . . . . . . . . . . . . . . . 3 ARTICLE II THE MERGER SECTION 2.01. The Merger . . . . . . . . . . . . . . . . . . . . 4 SECTION 2.02. Effective Time; Closing . . . . . . . . . . . . . . 5 SECTION 2.03. Effect of the Merger . . . . . . . . . . . . . . . 5 SECTION 2.04. Charter; By-laws . . . . . . . . . . . . . . . . . 5 SECTION 2.05. Directors and Officers . . . . . . . . . . . . . . 5 SECTION 2.06. Conversion of Securities . . . . . . . . . . . . . 5 SECTION 2.07. Dissenting Shares . . . . . . . . . . . . . . . . . 6 SECTION 2.08. Surrender of Shares; Stock Transfer Books . . . . . 7 SECTION 2.09. Employee Stock Options. . . . . . . . . . . . . . . 8 SECTION 2.10. Warrants . . . . . . . . . . . . . . . . . . . . . 8 SECTION 2.11. Employee Stock Purchase Plan . . . . . . . . . . . 9 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY SECTION 3.01. Organization and Qualification; Subsidiaries . . . 9 SECTION 3.02. Capitalization . . . . . . . . . . . . . . . . . . 10 SECTION 3.03. Authority Relative to this Agreement . . . . . . . 11 SECTION 3.04. No Conflict; Required Filings and Consents . . . . 11 SECTION 3.05. Compliance . . . . . . . . . . . . . . . . . . . . 12 SECTION 3.06. SEC Filings; Financial Statements . . . . . . . . . 12 SECTION 3.07. Offer Documents; Schedule 14D-9; Schedule 13E-3; Proxy Statement . . . . . . . . . . . . . . . . . 13 SECTION 3.08. Brokers . . . . . . . . . . . . . . . . . . . . . . 14 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF GAMBRO, PARENT AND PURCHASER SECTION 4.01. Corporate Organization . . . . . . . . . . . . . . 14 SECTION 4.02. Authority Relative to this Agreement . . . . . . . 14 SECTION 4.03. No Conflict; Required Filings and Consents . . . . 15 SECTION 4.04. Financing . . . . . . . . . . . . . . . . . . . . . 15 SECTION 4.05. Offer Documents; Proxy Statement . . . . . . . . . 15 SECTION 4.06. Full Disclosure . . . . . . . . . . . . . . . . . . 16 SECTION 4.07. Brokers . . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE V PAGE ADDITIONAL AGREEMENTS SECTION 5.01. Stockholders' Meeting . . . . . . . . . . . . . . . 16 SECTION 5.02. Proxy Statement . . . . . . . . . . . . . . . . . . 17 SECTION 5.03. Directors' and Officers' Indemnification and Insurance . . . . . . . . . . . . . . . . . . . . 17 SECTION 5.04. Further Action; Reasonable Best Efforts . . . . . . 19 SECTION 5.05. Public Announcements . . . . . . . . . . . . . . . 19 SECTION 5.06. Gambro Guarantee . . . . . . . . . . . . . . . . . 19 ARTICLE VI CONDITIONS TO THE MERGER SECTION 6.01. Conditions to the Merger . . . . . . . . . . . . . 19 ARTICLE VII TERMINATION, AMENDMENT AND WAIVER SECTION 7.01. Termination . . . . . . . . . . . . . . . . . . . . 20 SECTION 7.02. Effect of Termination . . . . . . . . . . . . . . . 22 SECTION 7.03. Fees and Expenses . . . . . . . . . . . . . . . . . 22 SECTION 7.04. Amendment . . . . . . . . . . . . . . . . . . . . . 22 SECTION 7.05. Waiver . . . . . . . . . . . . . . . . . . . . . . 22 ARTICLE VIII GENERAL PROVISIONS SECTION 8.01. Non-Survival of Representations, Warranties and Agreements . . . . . . . . . . . . . . . . . . . 22 SECTION 8.02. Notices . . . . . . . . . . . . . . . . . . . . . . 23 SECTION 8.03. Enforcement of Agreement . . . . . . . . . . . . . 24 SECTION 8.04. Certain Definitions . . . . . . . . . . . . . . . . 24 SECTION 8.05. Severability . . . . . . . . . . . . . . . . . . . 25 SECTION 8.06. Entire Agreement; Assignment . . . . . . . . . . . 26 SECTION 8.07. Parties in Interest . . . . . . . . . . . . . . . . 26 SECTION 8.08. Specific Performance . . . . . . . . . . . . . . . 26 SECTION 8.09. Governing Law . . . . . . . . . . . . . . . . . . . 26 SECTION 8.10. Headings . . . . . . . . . . . . . . . . . . . . . 26 SECTION 8.11. Counterparts . . . . . . . . . . . . . . . . . . . 26 ANNEX A - Conditions to the Offer AGREEMENT AND PLAN OF MERGER dated as of September 12, 1995 (this "Agreement") among Gambro AB, a Swedish corporation ("Gambro"), COBE --------- ------ Laboratories, Inc., a Colorado corporation and an indirect wholly owned subsidiary of Gambro ("Parent"), REN Acquisition Corp., a Tennessee ------ corporation and a wholly owned subsidiary of Parent ("Purchaser"), and REN --------- Corporation-USA, a Tennessee corporation (the "Company"). ------- WHEREAS, on September 12, 1995, Parent contributed to the capital of Purchaser 10,036,221 shares of issued and outstanding Common Stock, no par value, of the Company ("Company Common Stock") (outstanding shares of -------------------- Company Common Stock being hereinafter collectively referred to as the "Shares") representing approximately 53% of the Shares; and ------ WHEREAS, the Boards of Directors of Gambro, Parent and Purchaser and the Board of Directors of the Company (the "Board"), acting upon the ----- unanimous recommendation of the Special Committee of independent directors of the Board (the "Special Committee"), have each determined that it is in ----------------- the best interests of their respective stockholders for Parent to acquire the Company upon the terms and subject to the conditions set forth herein; and WHEREAS, in furtherance of such acquisition, it is proposed that Purchaser shall make a cash tender offer (the "Offer") to acquire all the ----- issued and outstanding Shares for $20.00 per Share (such amount, or any greater amount per Share paid pursuant to the Offer, being hereinafter referred to as the "Per Share Amount"), net to the seller in cash, upon the ---------------- terms and subject to the conditions of this Agreement and the Offer; and WHEREAS, the Board, acting upon the unanimous recommendation of the Special Committee, has unanimously (A) determined that this Agreement and the transactions contemplated hereby are fair to and in the best interests of the stockholders of the Company, (B) approved and adopted this Agreement and the transactions contemplated hereby, including the making of the Offer and resolved and agreed to recommend that holders of Shares tender their Shares pursuant to the Offer, and (C) pursuant to Section 5.11 of the Stock Purchase Agreement dated as of May 24, 1991, as amended through April 26, 1994, between Parent and the Company (the "Stock Purchase -------------- Agreement"), the Board has requested that Gambro, Parent and Purchaser --------- enter into this Agreement and consummate the transactions contemplated hereby in accordance with the terms and conditions of this Agreement; and WHEREAS, also in furtherance of such acquisition, the Board, acting upon the unanimous recommendation of the Special Committee, and the Boards of Directors of Parent and Purchaser have each approved the merger (the "Merger") of Purchaser with and into the Company in accordance with ------ the Tennessee Business Corporation Act ("Tennessee Law") following the ------------- consummation of the Offer and upon the terms and subject to the conditions set forth herein; and WHEREAS, the Company has been advised by each of its directors and executive officers that they intend either to tender all Shares beneficially owned by them to Purchaser pursuant to the Offer or to vote all Shares beneficially owned by them in favor of the approval and adoption by the stockholders of the Company of this Agreement and the transactions contemplated hereby; and WHEREAS, Alex. Brown & Sons Incorporated ("Alex. Brown") has ----------- delivered to the Special Committee an opinion (the "Fairness Opinion") that ------------------ the consideration to be received by the holders of Shares, other than Gambro, Purchaser, Parent or any of their affiliates, pursuant to this Agreement is fair to the holders of such Shares from a financial point of view; 2 NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Gambro, Parent, Purchaser and the Company hereby agree as follows: ARTICLE I THE OFFER --------- SECTION 1.01. The Offer. (a) Provided that this Agreement --------- shall not have been terminated in accordance with Section 7.01 and none of the events set forth in Annex A hereto shall have occurred or be existing, Purchaser shall commence the Offer as promptly as reasonably practicable after the date hereof, but in no event later than five business days after the initial public announcement of Purchaser's intention to commence the Offer. The obligation of Purchaser to accept for payment and pay for Shares tendered pursuant to the Offer shall be subject to the condition (the "Minimum Condition") that at least a majority of the then outstanding ----------------- Shares, other than Shares owned beneficially by or of record by Gambro, Parent, Purchaser or any of their affiliates, shall have been validly tendered and not withdrawn prior to the expiration of the Offer and also shall be subject to the satisfaction of the other conditions set forth in Annex A hereto. Purchaser expressly reserves the right to waive any such condition, to increase the price per Share payable in the Offer, and to make any other changes in the terms and conditions of the Offer; provided, -------- however, that the Minimum Condition may not be waived except with the prior ------- written consent of the Special Committee; and provided further that no -------- ------- change may be made which decreases the price per Share payable in the Offer or which reduces the maximum number of Shares to be purchased in the Offer or which imposes conditions to the Offer in addition to those set forth in Annex A hereto. The Per Share Amount shall, subject to applicable withholding of taxes, be net to the seller in cash, upon the terms and subject to the conditions of the Offer. Subject to the terms and conditions of the Offer, Purchaser shall pay, as promptly as practicable after expiration of the Offer, for all Shares validly tendered and not withdrawn. (b) As promptly as reasonably practicable on the date of commencement of the Offer, Purchaser shall file with the Securities and Exchange Commission (the "SEC") (i) a Tender Offer Statement on --- Schedule 14D-1 (together with all amendments and supplements thereto, the "Schedule 14D-1") with respect to the Offer and (ii) a Rule 13e-3 -------------- Transaction Statement on Schedule 13E-3 (together with all amendments and supplements thereto, the "Schedule 13E-3") with respect to the Offer and -------------- the other Transactions (as hereinafter defined). The Schedule 14D-1 and the Schedule 13E-3 shall contain or shall incorporate by reference an offer to purchase (the "Offer to Purchase") and forms of the related letter of ----------------- transmittal and any related summary advertisement (the Schedule 14D-1, the Schedule 13E-3, the Offer to Purchase and such other documents, together with all supplements and amendments thereto, being referred to herein collectively as the "Offer Documents"). Gambro, Parent, Purchaser and the --------------- Company agree to correct promptly any information provided by any of them for use in the Offer Documents which shall have become false or misleading, and Gambro, Parent and Purchaser 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. SECTION 1.02. Company Action. (a) The Company, acting through -------------- the Board 3 acting upon the unanimous recommendation of the Special Committee, hereby approves of and consents to the Offer and represents that (i) the Board, acting upon the unanimous recommendation of the Special Committee, at a meeting duly called and held on September 12, 1995, has unanimously (A) determined that this Agreement and the transactions contemplated hereby, including each of the Offer and the Merger, are fair to and in the best interests of the holders of Shares, (B) approved and adopted this Agreement, the execution of this Agreement and the transactions contemplated by this Agreement, which approval includes the approval of a majority of the Company's disinterested directors, and (C) recommended that the stockholders of the Company accept the Offer and approve and adopt this Agreement and the transactions contemplated hereby, and (ii) Alex. Brown has delivered to the Special Committee an opinion that the consideration to be received by the holders of Shares, other than Gambro, Purchaser, Parent or any of their affiliates, pursuant to this Agreement is fair to the holders of such Shares from a financial point of view. Subject to the fiduciary duties of the Board under applicable law as advised by outside counsel, the Company hereby consents to the inclusion in the Offer Documents of the unanimous recommendation of the Board, acting upon the unanimous recommendation of the Special Committee, described in the immediately preceding sentence. The Company has been advised by each of its directors and executive officers that they intend either to tender all Shares beneficially owned by them to Purchaser pursuant to the Offer or to vote such Shares in favor of the approval and adoption by the stockholders of the Company of this Agreement and the transactions contemplated hereby. (b) As promptly as reasonably practicable on the date of commencement of the Offer, the Company shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (together with all amendments and supplements thereto, the "Schedule 14D-9") containing, -------------- subject to the fiduciary duties of the Board under applicable law as advised by outside counsel, the recommendation of the Board, acting upon the unanimous recommendation of the Special Committee, described in Section 1.02(a) and shall disseminate the Schedule 14D-9 to the extent required by Rule 14d-9 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any other applicable federal ------------ securities laws. The Company, Gambro, Parent and Purchaser agree to correct promptly any information provided by any of them for use in the Schedule 14D-9 which shall have become false or misleading, and the Company further agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws. (c) The Company shall promptly furnish Purchaser with mailing labels containing the names and addresses of all record holders of Shares and with security position listings of Shares held in stock depositories, each as of a recent date, together with all other available listings and computer files containing names, addresses and security position listings of record holders and beneficial owners of Shares. The Company shall furnish Purchaser with such additional information, including, without limitation, updated listings and computer files of stockholders, mailing labels and security position listings, and such other assistance as Parent, Purchaser or their agents may reasonably request. 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 Offer or the Merger, Gambro, Parent and Purchaser shall hold in confidence the information contained in 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 in accordance with Section 7.01, shall deliver to the Company all copies of such information then in their possession. 4 (d) For purposes of this Agreement, the fiduciary duties of the Board or the Company under applicable law as advised by outside counsel shall be determined by the Special Committee. ARTICLE II THE MERGER ---------- SECTION 2.01. The Merger. Upon the terms and subject to the ---------- conditions set forth in Article VI, and in accordance with Tennessee Law, at the Effective Time (as hereinafter defined) Purchaser shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of Purchaser shall cease and the Company shall continue as the surviving corporation after the Merger (the "Surviving Corporation"). --------------------- SECTION 2.02. Effective Time; Closing. As promptly as ----------------------- practicable after the satisfaction or, if permissible, waiver of the conditions set forth in Article VI, the parties hereto shall cause the Merger to be consummated by filing Articles of Merger with the Secretary of State of the State of Tennessee (the "Articles of Merger"), in such form as ------------------ is required by, and executed in accordance with the relevant provisions of, Tennessee Law (the date and time of such filing being the "Effective --------- Time"). Prior to such filing, a closing shall be held at the offices of ---- Shearman & Sterling, 599 Lexington Avenue, New York, New York, 10022, 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 VI. SECTION 2.03. Effect of the Merger. At the Effective Time, the -------------------- effect of the Merger shall be as provided in the applicable provisions of Tennessee Law. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time all the property, rights, privileges, powers and franchises of the Company and Purchaser shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities and duties of the Company and Purchaser shall become the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Corporation. SECTION 2.04. Charter; By-laws. (a) Subject to Section 5.03, ---------------- at the Effective Time the Charter of the Company, as in effect immediately prior to the Effective Time, shall be the Charter of the Surviving Corporation until thereafter amended as provided by law and such Charter. (b) Subject to Section 5.03, at the Effective Time the By-laws of the Company, as in effect immediately prior to the Effective Time, shall be the By-laws of the Surviving Corporation until thereafter amended as provided by law, the Charter of the Surviving Corporation and such By-laws. SECTION 2.05. Directors and Officers. The directors of the ---------------------- Company immediately prior to the Effective Time shall be the directors of the Surviving Corporation immediately following the Merger, each to hold office in accordance with the Charter and By-laws of the Surviving Corporation, and the officers of the Company immediately prior to the Effective Time shall be the officers of the Surviving Corporation immediately following the Merger, in each case until their respective successors are duly elected or appointed and qualified. 5 SECTION 2.06. Conversion of Securities. At the Effective Time, ------------------------ by virtue of the Merger and without any further action on the part of Purchaser, the Company or the holders of any of the following securities, other than as specified herein: (a) Each Share issued and outstanding immediately prior to the Effective Time (other than any Shares to be cancelled pursuant to Section 2.06(b) and any Dissenting Shares (as hereinafter defined)) shall be cancelled and shall be converted automatically into the right to receive an amount equal to the Per Share Amount in cash (the "Merger Consideration") payable, without interest, to the holder of -------------------- such Share, upon surrender, in the manner provided in Section 2.08, of the certificate that formerly evidenced such Share; (b) Each Share held by the Company and each Share owned by Purchaser, Parent or any direct or indirect wholly owned subsidiary of Parent or of the Company immediately prior to the Effective Time shall be cancelled without any conversion thereof and no payment or distribution shall be made with respect thereto; and (c) Each share of Common Stock, par value $.01 per share, of Purchaser issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and nonassessable share of Common Stock of the Surviving Corporation. SECTION 2.07. Dissenting Shares. (a) Notwithstanding any ----------------- provision of this Agreement to the contrary, any Shares of a record or beneficial owner who has properly demanded and perfected his right for appraisal of such shares in accordance with Tennessee Law and who, as of the Effective Time, has not effectively withdrawn or lost such right to appraisal (collectively, the "Dissenting Shares") shall not be converted ----------------- into or represent the right to receive the Merger Consideration. Such stockholders shall be entitled to receive payment of the appraised value of such Shares held by them in accordance with the provisions of Tennessee Law, except that all Shares held by stockholders who shall have failed to perfect or who effectively shall have withdrawn or lost their rights to appraisal of such Shares under Tennessee Law shall thereupon be deemed to have been converted into, and to have become exchangeable for, as of the Effective Time, the right to receive the Merger Consideration, without any interest thereon, upon surrender, in the manner provided in Section 2.08, of the certificate or certificates that formerly evidenced such Shares. (b) The Company shall give Parent (i) prompt notice of any demands for appraisal received by the Company, withdrawals of such demands, and any other instruments served pursuant to Tennessee Law and received by the Company and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under Tennessee Law. The Company shall not, except with the prior written consent of Parent, make any payment with respect to any demands for appraisal or offer to settle or settle any such demands. SECTION 2.08. Surrender of Shares; Stock Transfer Books. (a) ----------------------------------------- Prior to the Effective Time, Purchaser shall deposit the full amount of the Merger Consideration with Bank of New York, as agent (the "Paying Agent"), ------------ for the holders of Shares in connection with the Merger to receive the funds to which holders of Shares shall become entitled pursuant to Section 2.06(a). Such funds shall be invested by the Paying Agent as directed by the Surviving Corporation. (b) Promptly after the Effective Time, the Surviving Corporation shall cause to be 6 mailed to each person who was, at the Effective Time, a holder of record of Shares entitled to receive the Merger Consideration pursuant to Section 2.06(a), a form of letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the certificates evidencing such Shares (the "Certificates") shall pass, only upon proper ------------ delivery of the Certificates to the Paying Agent) and instructions for use in effecting the surrender of the Certificates pursuant to such letter of transmittal. Upon surrender to the Paying Agent of a Certificate, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to such instructions, the holder of such Certificate shall be entitled to receive in exchange therefor the Merger Consideration for each Share formerly evidenced by such Certificate, and such Certificate shall then be cancelled. No interest shall accrue or be paid on the Merger Consideration payable upon the surrender of any Certificate for the benefit of the holder of such Certificate. If payment of the Merger Consideration is to be made to a person other than the person in whose name the surrendered Certificate is registered on the stock transfer books of the Company, it shall be a condition of payment that the Certificate so surrendered shall be endorsed properly or otherwise be in proper form for transfer and that the person requesting such payment shall have paid all transfer and other taxes required by reason of the payment of the Merger Consideration to a person other than the registered holder of the Certificate surrendered or shall have established to the satisfaction of the Surviving Corporation that such taxes either have been paid or are not applicable. (c) At any time following the first anniversary of the Effective Time, the Surviving Corporation shall be entitled to require the Paying Agent to deliver to it any funds which had been made available to the Paying Agent and not disbursed to holders of Shares (including, without limitation, all interest and other income received by the Paying Agent in respect of all funds made available to it), and thereafter such holders shall be entitled to look to the Surviving Corporation (subject to abandoned property, escheat and other similar laws) only as general creditors thereof with respect to any Merger Consideration that may be payable upon due surrender of the Certificates held by them. Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying Agent shall be liable to any holder of any Share(s) for any Merger Consideration delivered in respect of such Share(s) to a public official pursuant to any abandoned property, escheat or other similar law. (d) At the close of business on the day of the Effective Time, the stock transfer books of the Company shall be closed and thereafter there shall be no further registration of transfers of Shares on the records of the Company. From and after the Effective Time, the holders of Shares outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Shares except as otherwise provided herein or by applicable law. SECTION 2.09. Employee Stock Options. (a) Each holder of a ---------------------- stock option (an "Option") to purchase shares of Company Common Stock under ------ the Company's Non-Statutory Stock Option Plan of 1988, as amended (the "Stock Option Plan"), which Option is outstanding immediately prior to the ----------------- Effective Time (whether or not then exercisable) shall, pursuant to the Cancellation of Option Agreements entered into by the Company with each of the Optionees (as defined in such Cancellation of Option Agreements), be entitled to receive, and shall receive, in settlement and cancellation thereof, an amount in cash equal to the product of (i) the excess, if any, of the Per Share Amount over the exercise price of each such Option and (ii) the number of shares of Company Common Stock covered by such Option. All payments by the Company in respect of Options, other than Options granted within six months prior to the Effective Time, shall be made promptly following the Effective Time. Payments in respect of Options granted within six months prior to the Effective 7 Time shall be made six months and one day after the date of grant of such Options. No person shall be entitled to receive any of the payments described in this Section 2.09 until the time established therefor in this Section 2.09. The Company shall cause the Stock Option Plan to terminate as of the Effective Time and certificates evidencing Options shall be deemed to be cancelled as of the Effective Time, and thereafter the only rights of participants therein shall be the right to receive the consideration set forth in this Section 2.09. Prior to the Effective Time, the Company shall use its reasonable best efforts to cause each holder of an outstanding Option to acknowledge in writing the cancellation of such Option and to release the Company from any obligation in respect thereof in consideration for the payment provided herein and shall take such other action as may be necessary to carry out the terms of this Section 2.09. SECTION 2.10. Warrants. (a) Each holder of a warrant (a -------- "Warrant") to purchase shares of Company Common Stock, which Warrant is ------- outstanding immediately prior to the Effective Time (whether or not then exercisable) shall, pursuant to the Cancellation of Warrant Agreements entered into by the Company with each of the Warrant Holders (as defined in the Cancellation of Warrant Agreements), be entitled to receive, and shall receive, in settlement and cancellation thereof, an amount in cash equal to the product of (i) the excess, if any, of the Per Share Amount over the exercise price of each such Warrant and (ii) the number of shares of Company Common Stock covered by such Warrant. The Company shall cause each such warrant agreement to which it is a party to terminate as of the Effective Time, and thereafter the only rights of the holders of the Warrants shall be the right to receive the consideration set forth in this Section 2.10. Prior to the Effective Time, the Company shall use its reasonable best efforts to cause each holder of an outstanding Warrant to acknowledge in writing the termination of such Warrants and to release the Company from any obligation in respect thereof in consideration for the payment provided herein and shall take such other action as may be necessary to carry out the terms of this Section 2.10. SECTION 2.11. Employee Stock Purchase Plan. The Company shall ---------------------------- terminate the Company's Employee Stock Purchase Plan, as amended, of July 1, 1994 (the "ESPP"), effective September 30, 1995 (the "Termination Date") ---- ---------------- pursuant to which (i) all further payroll deductions from each Participant (as defined in the ESPP) shall cease, (ii) the amount (the "Plan Amount") ----------- credited to the account of each Participant as of the Termination Date shall at the election of each Participant either (A) be paid by the Company to such Participant (without interest) as soon as administratively practicable or (B) be applied as of the Termination Date to the purchase of shares of the Company's Common Stock in an aggregate amount equal to each Participant's Plan Amount at a price per share of Common Stock equal to 85% of the lower of the Fair Market Value (as defined in the ESPP) per share of Common Stock on July 1, 1995 or on the Termination Date (rounded up to the next whole dime), in accordance with the terms of the current phase under the ESPP, and (iii) for purposes of the current phase, the Termination Date shall be treated for all purposes of the ESPP as the last day of such phase. In the event that a Participant makes no election under Section 2.11(ii) above, such Participant shall be deemed to have elected as of the Termination Date to apply such Participant's Plan Amount to the purchase of shares of the Company's Common Stock in accordance with the provisions of Section 2.11(ii)(B) above. 8 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY --------------------------------------------- The Company hereby represents and warrants to Gambro, Parent and Purchaser that: SECTION 3.01. Organization and Qualification; Subsidiaries. -------------------------------------------- Each of the Company and each subsidiary of the Company (a "Subsidiary") is ---------- a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has the requisite power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted, except where the failure to be so organized, existing or in good standing or to have such power, authority and governmental approvals would not, individually or in the aggregate, have a Material Adverse Effect (as defined below). The Company and each Subsidiary is duly qualified or licensed as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except for such failures to be so qualified or licensed and in good standing that would not, individually or in the aggregate, have a Material Adverse Effect. When used in connection with the Company, Gambro, Parent or Purchaser or any of their Subsidiaries, the term "Material Adverse Effect" means any change or effect that is or is ----------------------- reasonably likely to be materially adverse to the business, operations, properties or financial condition of the Company, Gambro, Parent or Purchaser or any of their Subsidiaries taken as a whole. A true and complete list of all the Subsidiaries, together with the jurisdiction of incorporation of each Subsidiary and the percentage of the outstanding capital stock of each Subsidiary owned by the Company and by each other Subsidiary, is set forth in Section 3.01 of the Disclosure Schedule to this Agreement previously delivered by the Company to Parent (the "Disclosure ---------- Schedule"). Except as disclosed in such Section 3.01, the Company does not -------- directly or indirectly own any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for, any equity or similar interest in, any corporation, partnership, joint venture or other business association or entity. SECTION 3.02. Capitalization. The authorized capital stock of -------------- the Company consists of 60,000,000 shares of Company Common Stock and 10,000,000 shares of Preferred Stock ("Company Preferred Stock"), including ----------------------- 1,218,000 shares of Series A Preferred Stock, no par value (the "Series A -------- Preferred Stock") and 500,000 Shares of Series B Preferred Stock, no par --------------- value (the "Series B Preferred Stock"). As of the date hereof, ------------------------ (i) 18,951,834 shares of Company Common Stock are issued and outstanding, all of which are validly issued, fully paid and nonassessable, (ii) 178,792 shares of Company Common Stock are held by the Company, (iii) 1,750,000 shares of Company Common Stock are reserved for issuance pursuant to Options granted under the Stock Option Plan, and, as of the date hereof, 542,225 Options have been granted under the Stock Option Plan, (iv) 400,000 shares of Company Common Stock are reserved for issuance pursuant to Options granted under the Company's ESPP as disclosed in Section 3.02 of the Disclosure Schedule and (v) Warrants to purchase 74,000 shares of Company Common Stock are outstanding. As of the date hereof, no shares of Company Preferred Stock have been issued or are outstanding, 1,218,000 shares of Series A Preferred Stock have been issued (all of which have been converted into shares of Company Common Stock) and 462,172 shares of Series B Preferred Stock have been issued (all of which have been converted into shares of Company Common Stock). Except as set forth in this Section 3.02 or in Section 3.02 of the Disclosure Schedule, there are no options, warrants or other rights, agreements, 9 arrangements or commitments of any character relating to the issued or unissued capital stock of the Company or any Subsidiary or obligating the Company or any Subsidiary to issue or sell any shares of capital stock of, or other equity interests in, the Company or any Subsidiary. All Shares subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and nonassessable. Except as set forth in this Section 3.02 or in 3.02 of the Disclosure Schedule, there are no outstanding contractual obligations of the Company or any Subsidiary to repurchase, redeem or otherwise acquire any Shares or any capital stock of any Subsidiary. Each outstanding share of capital stock of each Subsidiary is duly authorized, validly issued, fully paid and nonassessable and each such share owned by the Company or another Subsidiary is free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, agreements, limitations on the Company's or such other Subsidiary's voting rights, charges and other encumbrances of any nature whatsoever. SECTION 3.03. Authority Relative to this Agreement. The Company ------------------------------------ has all necessary power and authority to execute and deliver this Agreement and to perform its obligations hereunder and to consummate the transactions contemplated hereby (the "Transactions"). The execution and delivery of ------------ this Agreement by the Company and the consummation by the Company of the Transactions have been duly and validly authorized by all necessary corporate action, and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the Transactions (other than, with respect to the Merger, the approval and adoption of this Agreement by the holders of a majority of the then outstanding Shares if and to the extent required by applicable law, and the filing and recordation of appropriate merger documents as required by Tennessee Law). This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery by Gambro, Parent and Purchaser, constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms. The restrictions on business combinations contained in the Tennessee Business Combination Act have been satisfied with respect to the Transactions, the provisions of the Tennessee Investor Protection Act do not apply to the Transactions, and the restrictions on voting rights contained in the Tennessee Control Share Acquisition Act have been satisfied with respect to the Transactions. SECTION 3.04. No Conflict; Required Filings and Consents. ------------------------------------------ (a) The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company will not, (i) conflict with or violate the Charter or By-laws or equivalent organizational documents of the Company or any Subsidiary, (ii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to the Company or any Subsidiary or by which any material property or asset of the Company or any Subsidiary is bound or affected, or (iii) result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or other encumbrance on any property or asset of the Company or any Subsidiary pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary or any of their respective properties is bound or affected, except, in the case of clauses (ii) and (iii) of this Section 3.04, for conflicts, violations, breaches, defaults, rights, liens, and encumbrances which would not individually or in the aggregate have a Material Adverse Effect. (b) The execution and delivery of this Agreement by the Company do not, and the 10 performance of this Agreement by the Company will not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign, except (i) for applicable requirements, if any, of the Exchange Act, the Health Care Financing Administration, state securities or "blue sky" laws ("Blue ---- Sky Laws") and state takeover laws, and filing and recordation of -------- appropriate merger documents as required by Tennessee Law and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay consummation of the Offer or the Merger, or otherwise prevent the Company from performing its obligations under this Agreement, and would not, individually or in the aggregate, have a Material Adverse Effect. (c) The approval and adoption by the Board, acting upon the unanimous recommendation of the Special Committee, of this Agreement and the Transactions (which approval by the Board includes the approval of a majority of the Company's disinterested directors as set forth in Section 1.02(a)(B) of this Agreement) constitutes sufficient approval by a majority of the Company's disinterested directors for purposes of Article X of the Company's By-laws. SECTION 3.05. Compliance. Neither the Company nor any ---------- Subsidiary is in conflict with, or in default or violation of, (i) any law, rule, regulation, order, judgment or decree applicable to the Company or any Subsidiary or by which any property or asset of the Company or any Subsidiary is bound or affected, or (ii) any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary or any property or asset of the Company or any Subsidiary is bound or affected, except for any such conflicts, defaults or violations that would not, individually or in the aggregate, have a Material Adverse Effect. SECTION 3.06. SEC Filings; Financial Statements. (a) The --------------------------------- Company has filed all forms, reports and documents required to be filed by it with the SEC since December 31, 1993, and has heretofore made available to Parent, in the form filed with the SEC, (i) its Annual Reports on Form 10-K for the fiscal years ended December 31, 1992, 1993, and 1994, (ii) its Quarterly Report on Form 10-Q for the period ended June 30, 1995, as amended, and (iii) all proxy statements relating to the Company's meetings of stockholders (whether annual or special) held since January 1, 1993 and (iv) all other forms, reports and other registration statements (other than Quarterly Reports on Form 10-Q not referred to in clause (ii) above) filed by the Company with the SEC since January 1, 1993 (the forms, reports and other documents referred to in clauses (i), (ii), (iii) and (iv) above being referred to herein, collectively, as the "SEC Reports"). ----------- The SEC Reports (i) were prepared in accordance with the requirements of the Securities Act of 1933, as amended (the "Securities Act"), and the -------------- Exchange Act, as the case may be, and the rules and regulations thereunder and (ii) did not at the time they were filed contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. No Subsidiary is required to file any form, report or other document with the SEC. (b) Each of the consolidated financial statements (including, in each case, any notes thereto) contained in the SEC Reports was prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto) and each fairly presented the consolidated financial position, results of operations and changes in financial position of the Company and the consolidated Subsidiaries as at the respective dates thereof and for the respective periods indicated therein except as otherwise noted 11 therein (subject, in the case of unaudited statements, to normal and recurring year-end adjustments which were not and are not expected, individually or in the aggregate, to have a Material Adverse Effect). Since December 31, 1994, there has been no material adverse change to any of the consolidated financial statements (including, in each case, any notes thereto) contained in the SEC Reports. SECTION 3.07. Offer Documents; Schedule 14D-9; Schedule 13E-3; ------------------------------------------------ Proxy Statement. Neither the Schedule 14D-9 nor any information supplied --------------- by the Company for inclusion in the Offer Documents nor the Schedule 13E-3 shall, at the respective times the Schedule 14D-9, the Offer Documents, the Schedule 13E-3 or any amendments or supplements thereto are filed with the SEC or are first published, sent or given to stockholders of the Company, as the case may be, 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 made therein, in the light of the circumstances under which they are made, not misleading. Neither the proxy statement to be sent to the stockholders of the Company in connection with the Stockholders' Meeting (as hereinafter defined) nor the information statement to be sent to such stockholders, as appropriate (such proxy statement or information statement, as amended or supplemented, being referred to herein as the "Proxy Statement"), shall, at the date the Proxy --------------- Statement (or any amendment or supplement thereto) is first mailed to stockholders of the Company, at the time of the Stockholders' Meeting and at the Effective Time, be false or misleading with respect to any material fact, or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the 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 Stockholders' Meeting which shall have become false or misleading. The Schedule 14D-9 and the Proxy Statement shall comply in all material respects as to form with the requirements of the Exchange Act and the rules and regulations thereunder. Notwithstanding the foregoing, the Company makes no representation or warranty with respect to any information supplied by Gambro, Parent, Purchaser or any of their representatives which is contained in any of the foregoing documents. SECTION 3.08. Brokers. No broker, finder or investment banker ------- (other than Alex. Brown) is entitled to any brokerage, finder's or other fee or commission in connection with the Transactions based upon arrangements made by or on behalf of the Company. The Company has heretofore furnished to Parent a complete and correct copy of all agreements between the Company and Alex. Brown pursuant to which such firm would be entitled to any payment relating to the Transactions. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF GAMBRO, PARENT AND PURCHASER -------------------------------------------------------------- Gambro, Parent and Purchaser hereby, jointly and severally, represent and warrant to the Company that: SECTION 4.01. Corporate Organization. Each of Gambro, Parent ---------------------- and Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the Kingdom of Sweden, the State of Colorado and the State of Tennessee, respectively, and has the requisite power and authority and all necessary governmental approvals to own, lease and operate its properties and to 12 carry on its business as it is now being conducted, except where the failure to be so organized, existing or in good standing or to have such power, authority and governmental approvals would not, individually or in the aggregate, have a material adverse effect on the business or operations of Gambro, Parent and Purchaser and their respective subsidiaries taken as a whole. SECTION 4.02. Authority Relative to this Agreement. Each of ------------------------------------ Gambro, Parent and Purchaser has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Transactions. The execution and delivery of this Agreement by Gambro, Parent and Purchaser and the consummation by Gambro, Parent and Purchaser of the Transactions have been duly and validly authorized by all necessary corporate action, and no other corporate proceedings on the part of Gambro, Parent or Purchaser are necessary to authorize this Agreement or to consummate the Transactions (other than, with respect to the Merger, the filing and recordation of appropriate merger documents as required by Tennessee Law). This Agreement has been duly and validly executed and delivered by Gambro, Parent and Purchaser and, assuming the due authorization, execution and delivery by the Company, constitutes a legal, valid and binding obligation of each of Gambro, Parent and Purchaser enforceable against each of Gambro, Parent and Purchaser in accordance with its terms. SECTION 4.03. No Conflict; Required Filings and Consents. (a) ------------------------------------------ The execution and delivery of this Agreement by Gambro, Parent and Purchaser do not, and the performance of this Agreement by Gambro, Parent and Purchaser will not, (i) conflict with or violate the Charter or By-laws or similar organizational documents of any of Gambro, Parent or Purchaser, (ii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to Gambro, Parent or Purchaser or by which any property or asset of any of them is bound or affected, or (iii) result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or other encumbrance on any property or asset of Gambro, Parent or Purchaser pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Gambro, Parent or Purchaser is a party or by which Gambro, Parent or Purchaser or any property or asset of any of them is bound or affected, except for any such breaches, defaults or other occurrences which would not, individually or in the aggregate, have a material adverse effect on the business or operations of Gambro, Parent or Purchaser and their respective subsidiaries taken as a whole. (b) The execution and delivery of this Agreement by Gambro, Parent and Purchaser do not, and the performance of this Agreement by Gambro, Parent and Purchaser will not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign, except (i) for applicable requirements, if any, of the Exchange Act, Blue Sky Laws and state takeover laws and filing and recordation of appropriate merger documents as required by Tennessee Law and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay consummation of the Offer or the Merger, or otherwise prevent Gambro, Parent or Purchaser from performing their respective obligations under this Agreement. SECTION 4.04. Financing. Parent has, or has commitments from --------- responsible financial institutions to enable it to borrow, sufficient funds to permit Purchaser to acquire all the outstanding Shares in the Offer and the Merger and has provided the Special Committee with copies of any such commitments. 13 SECTION 4.05. Offer Documents; Proxy Statement. The Offer -------------------------------- Documents will not, at the time the Offer Documents are filed with the SEC or are first published, sent or given to stockholders of the Company, as the case may be, 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 made therein, in the light of the circumstances under which they are made, not misleading. The information supplied by Gambro, Parent or Purchaser for inclusion in the Proxy Statement will not, on the date the Proxy Statement (or any amendment or supplement thereto) is first mailed to stockholders of the Company, at the time of the Stockholders' Meeting and at the Effective Time, contain any statement which, at such time and in light of the circumstances under which it is made, is false or misleading with respect to any material fact, or omits to state any material fact required to be stated therein or necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Stockholders' Meeting which shall have become false or misleading. Notwithstanding the foregoing, Gambro, Parent and Purchaser make no representation or warranty with respect to any information supplied by the Company or any of its representatives which is contained in any of the foregoing documents or the Offer Documents. The Offer Documents shall comply in all material respects as to form with the requirements of the Exchange Act and the rules and regulations thereunder. SECTION 4.06. Full Disclosure. On the date the Schedule 14D-1 --------------- and the Schedule 13E-3 are first filed with the SEC, at the time of the Stockholders' Meeting (as defined below) and at the Effective Time, (i) the Schedule 14D-1 and the Schedule 13E-3 will both comply as to form in all material respects with the provisions of Sections 14(d), 14(e) and 13(e) of the Exchange Act and the rules and regulations promulgated under such Sections 14(d), 14(e) and 13(e), and (ii) the Schedule 14D-1 and the Schedule 13E-3 will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statement made, in the light of the circumstances under which they are made, not misleading. SECTION 4.07. Brokers. No broker, finder or investment banker ------- (other than UBS Securities, Inc.) is entitled to any brokerage, finder's or other fee or commission in connection with the Transactions based upon arrangements made by or on behalf of Gambro, Parent or Purchaser. ARTICLE V ADDITIONAL AGREEMENTS --------------------- SECTION 5.01. Stockholders' Meeting. If required by applicable --------------------- law in order to consummate the Merger, the Company, acting through the Board upon the unanimous recommendation of the Special Committee, shall, in accordance with applicable law and the Company's Charter and By-laws, (i) duly call, give notice of, convene and hold an annual or special meeting of its stockholders as soon as practicable following consummation of the Offer for the purpose of considering and taking action on this Agreement and the Transactions (the "Stockholders' Meeting") and --------------------- (ii) unless in breach of its fiduciary duties under applicable law as advised by outside counsel, (A) include in the Proxy Statement the unanimous recommendation of the Board, acting upon the unanimous recommendation of the Special Committee, that the stockholders of the Company approve and adopt this Agreement and the Transactions and (B) use its reasonable best efforts to obtain such approval and adoption. At the Stockholders' Meeting, Gambro, Parent and Purchaser shall cause all Shares then owned by them and their subsidiaries to be voted in favor of the approval and adoption of this 14 Agreement and the Transactions. SECTION 5.02. Proxy Statement. If required by applicable law, --------------- as promptly as practicable following consummation of the Offer, the Company shall file the Proxy Statement with the SEC under the Exchange Act and shall use its reasonable best efforts to have the Proxy Statement cleared by the SEC. Parent, Purchaser and the Company shall cooperate with each other in the preparation of the Proxy Statement, and the Company shall notify Parent of the receipt of any comments of the SEC with respect to the Proxy Statement and of any requests by the SEC for any amendment or supplement thereto or for additional information and shall provide to Parent promptly copies of all correspondence between the Company or any representative of the Company and the SEC. The Company shall give Parent and its counsel the opportunity to review the Proxy Statement prior to its being filed with the SEC and shall give Parent and its counsel the opportunity to review all amendments and supplements to the Proxy Statement and all responses to requests for additional information and replies to comments prior to their being filed with, or sent to, the SEC. Each of the Company, Gambro, Parent and Purchaser agrees to use its reasonable best efforts, after consultation with the other parties hereto, to respond promptly to all such comments of and requests by the SEC and to cause the Proxy Statement and all required amendments and supplements thereto to be mailed to the holders of Shares entitled to vote at the Stockholders' Meeting at the earliest practicable time. SECTION 5.03. Directors' and Officers' Indemnification and -------------------------------------------- Insurance. (a) Parent shall cause the Surviving Corporation to keep in --------- effect the provisions in its Charter and By-laws containing the provisions with respect to exculpation of director and officer liability and indemnification set forth in the Charter and By-laws of the Company on the date of this Agreement to the fullest extent permitted under applicable law, which provisions shall not be amended, repealed or otherwise modified except as required by applicable law or except to make changes permitted by applicable law that would enlarge the exculpation or rights of indemnification thereunder. (b) From and after the Effective Time, Gambro and Parent each hereby agree, jointly and severally, to guarantee and to cause the Surviving Corporation to perform all of its obligations under the Charter and By-laws of the Company with respect to indemnification. (c) To the extent that paragraphs (a) and (b) or the provisions of the Charter or By-laws of the Surviving Corporation shall not serve to indemnify and hold harmless each present director and officer of the Company (the "Indemnified Parties"), after the Effective Time, Gambro and ------------------- Parent shall, subject to the terms set forth herein, indemnify and hold harmless, to the fullest extent permitted under applicable law (and shall also advance expenses as incurred to the fullest extent permitted under applicable law provided the person to whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined that such person is not entitled to indemnification), each Indemnified Party against any costs or expenses (including reasonable attorney's fees), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to the Transactions for a period of six years after the date hereof; provided that, in the event any claim or claims are -------- asserted or made within such six-year period, all rights to indemnification in respect of any such claim or claims shall continue until final disposition of any and all such claims. Any Indemnified Party wishing to claim indemnification under this paragraph (c), upon learning of any such claim, action, suit, proceeding or investigation, shall promptly notify Gambro and Parent thereof, but the failure to so notify shall not relieve Gambro and Parent of any liability they may have to such Indemnified Party if such failure does not materially 15 prejudice the indemnifying party. In the event of any such claim, action, suit, proceeding or investigation (whether arising before or after the Effective Time), (i) Gambro, Parent or the Surviving Corporation shall have the right to assume the defense thereof with competent counsel reasonably satisfactory to the Indemnified Party and Parent shall not be liable to such Indemnified Parties for any legal expenses of other counsel subsequently incurred by such Indemnified Parties in connection with the defense thereof, except that if Gambro, Parent or the Surviving Corporation elects not to assume or fails to assume any such defense or there are issues which raise actual or potential conflicts of interest between Gambro, Parent and the Surviving Corporation and the Indemnified Parties or between the Indemnified Parties, the Indemnified Parties may retain counsel satisfactory to them, and Parent or the Surviving Corporation shall pay all reasonable fees and expenses of such counsel for the Indemnified Parties promptly as statements therefor are received; provided, however, that -------- ------- Parent shall be obligated pursuant to this paragraph (c) to pay for only one firm of counsel for all Indemnified Parties, and one firm of local counsel in each jurisdiction, unless the use of one counsel for such Indemnified Parties would present such counsel with an actual or potential conflict of interest; (ii) the Indemnified Parties will cooperate in the defense of any such matter and (iii) Gambro and Parent shall not be liable for any settlement effected without their prior written consent which consent shall not be unreasonably withheld; and provided further that -------- ------- Gambro and Parent shall not have any obligation hereunder to any Indemnified Party when, if and to the extent a court of competent jurisdiction shall ultimately determine, and such determination shall have become final, that the indemnification of such Indemnified Party in the manner contemplated hereby is prohibited by applicable law. Gambro and Parent hereby consent to personal jurisdiction, service and venue in any court in the State of Tennessee for purposes of enforcement of the foregoing provisions. (d) Parent shall cause the Surviving Corporation to use its best efforts to maintain in effect for six years from the Effective Time, if available, the coverage provided by the current directors' and officers' liability insurance policies maintained by the Company (provided that the Surviving Corporation may substitute therefor policies of at least the same coverage containing terms and conditions which are not materially less favorable) with respect to matters occurring prior to the Effective Time. SECTION 5.04. Further Action; Reasonable Best Efforts. Upon the --------------------------------------- terms and subject to the conditions hereof, each of the parties hereto shall use its reasonable best efforts to take, or cause to be taken, all appropriate action, 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, including, without limitation, using its reasonable best efforts to obtain all licenses, permits, consents, approvals, authorizations, qualifications and orders of governmental authorities and parties to contracts with the Company and the Subsidiaries as are necessary for the consummation of the Transactions and to fulfill the conditions to the Offer and the Merger. In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and directors of each party to this Agreement shall use their reasonable best efforts to take all such action. SECTION 5.05. 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 this Agreement or any Transaction and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by law or any listing agreement with a national securities exchange to which Parent or the Company is a party. 16 SECTION 5.06. Gambro Guarantee. Gambro hereby guarantees the ---------------- performance by Parent and Purchaser of their agreements and obligations hereunder and consents to personal jurisdiction, service and venue in any court in the State of Tennessee for purposes of enforcement of this provision. ARTICLE VI CONDITIONS TO THE MERGER ------------------------ SECTION 6.01. Conditions to the Merger. The respective ------------------------ obligations of each party to effect the Merger shall be subject to the satisfaction at or prior to the Effective Time of the following conditions: (a) Stockholder Approval. This Agreement and the -------------------- transactions contemplated hereby shall have been approved and adopted by the affirmative vote of the stockholders of the Company to the extent required by Tennessee Law and the Charter of the Company; (b) Agreements and Covenants. The parties hereto shall ------------------------ have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by them on or prior to the Effective Time; (c) No Order. No governmental authority or other agency or -------- commission or court of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any law, rule, regulation, executive order, decree, injunction or other order (whether temporary, preliminary or permanent) which is then in effect and has the effect of making the acquisition of Shares by Gambro, Parent or Purchaser or any affiliate of either of them illegal or otherwise restricting, preventing or prohibiting consummation of the Transactions; and (d) Offer. Purchaser or its permitted assignee shall have ----- purchased all Shares validly tendered and not withdrawn pursuant to the Offer; provided, however, that this condition shall not be -------- ------- applicable to the obligations of Gambro, Parent or Purchaser if, in breach of this Agreement or the terms of the Offer, Purchaser fails to purchase any Shares validly tendered and not withdrawn pursuant to the Offer. ARTICLE VII TERMINATION, AMENDMENT AND WAIVER --------------------------------- SECTION 7.01. Termination. This Agreement may be terminated and ----------- the Merger and the other Transactions may be abandoned at any time prior to the Effective Time, notwithstanding any requisite approval and adoption of this Agreement and the transactions contemplated hereby by the stockholders of the Company: (a) By mutual written consent of Gambro, Parent, Purchaser and the Special Committee, acting on behalf of the Company; or 17 (b) By either Parent, Purchaser or the Special Committee, acting on behalf of the Company, if (i) the Effective Time shall not have occurred on or before March 31, 1996; provided, however, that the -------- ------- right to terminate this Agreement under this Section 7.01(b) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Effective Time to occur on or before such date or (ii) any court of competent jurisdiction or other governmental authority shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the Merger and such order, decree, ruling or other action shall have become final and nonappealable; or (c) By Parent if (i) due to an occurrence or circumstance that would result in a failure to satisfy any condition set forth in Annex A hereto, Purchaser shall have (A) failed to commence the Offer within 60 days following the date of this Agreement, (B) terminated the Offer without having accepted any Shares for payment thereunder or (C) failed to pay for Shares pursuant to the Offer within 90 days following the commencement of the Offer, unless such failure to pay for Shares shall have been caused by or resulted from the failure of Gambro, Parent or Purchaser to perform in any material respect any material covenant or agreement of either of them contained in this Agreement or the material breach by Gambro, Parent or Purchaser of any material representation or warranty of either of them contained in this Agreement or (ii) prior to the purchase of Shares pursuant to the Offer, the Special Committee, acting on behalf of the Company, shall have withdrawn or modified in a manner adverse to Purchaser or Parent its approval or recommendation of the Offer, this Agreement, the Merger or any other Transaction or shall have recommended another merger, consolidation, business combination with, or acquisition of, the Company or its assets or another tender offer for Shares, or shall have resolved to do any of the foregoing; or (d) By the Special Committee acting on behalf of the Company, if Purchaser shall have (A) failed to commence the Offer within 60 days following the date of this Agreement, (B) terminated the Offer without having accepted any Shares for payment thereunder or (C) failed to pay for Shares pursuant to the Offer within 90 days following the commencement of the Offer, unless such failure to pay for Shares shall have been caused by or resulted from the failure of the Company to perform in any material respect any material covenant or agreement of it contained in this Agreement or the material breach of the Company of any material representation or warranty of it contained in this Agreement; or (e) Prior to the purchase of Shares pursuant to the Offer, by the Special Committee, acting on behalf of the Company, (i) if any representation or warranty of Gambro, Parent or Purchaser was untrue or incorrect in any material respect when made and on and as of the expiration of the Offer, except for changes contemplated by this Agreement, with the same force and effect as if made on and as of the date of such expiration, or in the case of a representation or warranty made or given as of a specified time, if such representation or warranty was untrue or incorrect in any material respect as of such time or (ii) if Parent, Purchaser or Gambro has failed to perform or comply with, in any material respect, any of their covenants and agreements in this Agreement. (f) By either Parent, Purchaser or the Special Committee, acting on behalf of the Company, if the conditions to the Merger set forth in Section 6.01 are not reasonably capable of being satisfied on or before March 31, 1996. 18 SECTION 7.02. Effect of Termination. In the event of the --------------------- termination of this Agreement pursuant to Section 7.01, this Agreement shall forthwith become void, and there shall be no liability on the part of any party hereto, except (i) as set forth in Sections 7.03 and 8.01 and (ii) nothing herein shall relieve any party from liability for any wilful breach hereof. SECTION 7.03. Fees and Expenses. All fees, costs and expenses ----------------- incurred in connection with this Agreement and the Transactions shall be paid by the party incurring such fees, costs and expenses, whether or not any Transaction is consummated, provided, however, that the Purchaser and -------- ------- the Company shall each pay for one-half of all fees, costs and expenses incurred in connection with this Agreement and the Transactions which are payable to the SEC and to any financial or other printer. SECTION 7.04. Amendment. This Agreement may be amended by the --------- parties hereto at any time prior to the Effective Time, provided, however, -------- ------- that the Company can take action to amend this Agreement only with the consent of the Special Committee and, provided further that, after the -------- ------- approval and adoption of this Agreement and the transactions contemplated hereby by the stockholders of the Company, no amendment may be made which would reduce the amount or change the type of consideration into which each Share shall be converted upon consummation of the Merger. This Agreement may not be amended except by an instrument in writing signed by the parties hereto. SECTION 7.05. Waiver. At any time prior to the Effective Time, ------ any party hereto may (i) extend the time for the performance of any obligation or other act of any other party hereto, (ii) waive any inaccuracy in the representations and warranties contained herein or in any document delivered pursuant hereto and (iii) waive compliance with any agreement or condition contained herein. Any such extension or waiver shall be valid if set forth in an instrument in writing signed by the party or parties to be bound thereby. Any such extension or waiver by the Company may be made only by the Special Committee. ARTICLE VIII GENERAL PROVISIONS ------------------ SECTION 8.01. Non-Survival of Representations, Warranties and ----------------------------------------------- Agreements. The representations, warranties and agreements in this ---------- Agreement shall terminate at the Effective Time or upon the termination of this Agreement pursuant to Section 7.01, as the case may be, except that the agreements set forth in Article II and Section 5.03 shall survive the Effective Time indefinitely and those set forth in Section 7.03 shall survive termination indefinitely. SECTION 8.02. Notices. All notices, requests, claims, demands ------- and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by cable, telecopy, telegram or telex or 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 in a notice given in accordance with this Section 8.02): if to Parent or Purchaser: 19 Herbert S. Lawson COBE Laboratories, Inc. 1185 Oak Street Lakewood, CO 80215-4498 Telecopier No: (303) 231-4915 with a copy to: Shearman & Sterling 599 Lexington Avenue New York, New York 10022 Telecopier No: (212) 848-7179/80/81/82 Attention: Peter D. Lyons, Esq. if to the Company: J. Kenneth Jacobs, M.D. Special Committee of the Board of Directors REN Corporation-USA 6820 Charlotte Pike Nashville, TN 37209 Telecopier No: (615) 352-1938 and with a copy to: Ralph Z. Levy, Esq. REN Corporation-USA 6820 Charlotte Pike Nashville, TN 37209 Telecopier No: (615) 352-1938 and with a copy to: Waller, Landsden, Dortch & Davis Nashville City Center 511 Union Street, Suite 2100 Nashville, TN 37219-1760 Telecopier No: (615) 244-5686 Attention: J. Chase Cole, Esq. and with a copy to: Mayer, Brown & Platt 190 S. LaSalle Street Chicago, IL 60603 Telecopier No: (312) 701-7711 Attention: Scott J. Davis, Esq. 20 SECTION 8.03 Enforcement of Agreement. Until the Effective ------------------------ Time, the Special Committee shall continue in existence and shall have the right to cause the Company to take any action necessary to enforce the rights of the Company and the obligations of Gambro, Parent and Purchaser under this Agreement. SECTION 8.04. Certain Definitions. For purposes of this ------------------- Agreement, the term: (a) "affiliate" of a specified person means a person who --------- directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, such specified person; (b) "beneficial owner" with respect to any Shares means a ---------------- person who shall be deemed to be the beneficial owner of such Shares (i) which such person or any of its affiliates or associates (as such term is defined in Rule 12b-2 promulgated under the Exchange Act) beneficially owns, directly or indirectly, (ii) which such person or any of its affiliates or associates has, directly or indirectly, (A) the right to acquire (whether such right is exercisable immediately or subject only to the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (B) the right to vote pursuant to any agreement, arrangement or understanding or (iii) which are beneficially owned, directly or indirectly, by any other persons with whom such person or any of its affiliates or associates or person with whom such person or any of its affiliates or associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any Shares; (c) "business day" means any day on which the principal ------------ offices of the SEC in Washington, D.C. are open to accept filings, or, in the case of determining a date when any payment is due, any day on which banks are not required or authorized to close in the City of New York; (d) "control" (including the terms "controlled by" and ------- ------------- "under common control with") means the possession, directly or ------------------------- indirectly or as trustee or executor, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, as trustee or executor, by contract or credit arrangement or otherwise; (e) "person" means an individual, corporation, partnership, ------ limited partnership, syndicate, person (including, without limitation, a "person" as defined in Section 13(d)(3) of the Exchange Act), trust, association or entity or government, political subdivision, agency or instrumentality of a government; and (f) "subsidiary" or "subsidiaries" of the Company, the ---------- ------------ Surviving Corporation, Gambro, Parent or any other person means an affiliate controlled by such person, directly or indirectly, through one or more intermediaries. SECTION 8.05. Severability. If any term or other provision of ------------ this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions is not affected in any manner materially adverse to any 21 party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the Transactions be consummated as originally contemplated to the fullest extent possible. SECTION 8.06. Entire Agreement; Assignment. This Agreement ---------------------------- constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof. This Agreement shall not be assigned by operation of law or otherwise, except that Gambro, Parent and Purchaser may assign all or any of their rights and obligations hereunder to any affiliate of Parent provided that no such assignment shall relieve the assigning party of its obligations hereunder if such assignee does not perform such obligations. SECTION 8.07. Parties in Interest. This Agreement shall be ------------------- binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement, other than Section 5.03 (which is intended to be for the benefit of the persons covered thereby and may be enforced by such persons). SECTION 8.08. Specific Performance. The parties hereto agree -------------------- that irreparable damage would occur in the event any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or equity. SECTION 8.09. Governing Law. This Agreement shall be governed ------------- by, and construed in accordance with, the laws of the State of Tennessee applicable to contracts executed in and to be performed in that State. SECTION 8.10. 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 8.11. Counterparts. This Agreement may be executed in ------------ one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. 22 IN WITNESS WHEREOF, Gambro, Parent, Purchaser and the Company have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. GAMBRO AB By ------------------------------------- Title: By ------------------------------------- Title: COBE LABORATORIES, INC. By ------------------------------------- Title: REN ACQUISITION CORP. By ------------------------------------- Title: REN CORPORATION-USA By ------------------------------------- Title: ANNEX A ------- Conditions to the Offer ----------------------- Notwithstanding any other provision of the Offer, Purchaser shall not be required to accept for payment or pay for any Shares tendered pursuant to the Offer, and may terminate or amend the Offer and may postpone the acceptance for payment of and payment for Shares tendered, if the Minimum Condition shall not have been satisfied or at any time on or after the date of this Agreement, and prior to the acceptance for payment of Shares, any of the following conditions shall exist: (a) there shall have been any action taken, or any statute, rule, regulation, legislation, interpretation, judgment, order or injunction enacted, entered, enforced, promulgated, amended, issued or deemed applicable to Parent, the Company or any subsidiary or affiliate of Gambro, Parent or the Company restraining or prohibiting the consummation of the Offer or the Merger and that has a Material Adverse Effect; (b) (i) the Board, with the consent of the Special Committee, shall have withdrawn or modified in a manner adverse to Gambro, Parent or Purchaser the approval or recommendation of the Offer, the Merger, the Merger Agreement, or approved or recommended any takeover proposal or any other acquisition of Shares other than the Offer or the Merger or (ii) the Board, with the consent of the Special Committee, shall have resolved to do any of the foregoing; (c) any representation or warranty of the Company in the Merger Agreement which is qualified as to materiality shall not be true and correct or any such representation or warranty that is not so qualified shall not be true and correct in any material respect, in each case either when made or on and as of the expiration of the Offer, except for changes contemplated by the Merger Agreement, with the same force and effect as if made on and as of the expiration of the Offer, or in the case of a representation or warranty made on or given as of a specified time, if such representation or warranty was untrue or incorrect as of such time; (d) the Company shall have failed to perform in any material respect any obligation or to comply in any material respect with any agreement or covenant of the Company to be performed or complied with by it under the Merger Agreement; (e) the Merger Agreement shall have been terminated in accordance with its terms; or (f) Purchaser and the Company shall, with the consent of the Special Committee, have agreed that Purchaser shall terminate the Offer or postpone the acceptance for payment of or payment for Shares thereunder; which, in the reasonable judgment of Purchaser in any such case, and regardless of the circumstances (including any action or inaction by Parent or any of its affiliates) giving rise to any such condition, makes it inadvisable to proceed with such acceptance for payment or payment. A-2 The foregoing conditions are for the sole benefit of Purchaser and Parent and may be asserted by Purchaser or Parent regardless of the circumstances giving rise to any such condition or may be waived by Purchaser or Parent in whole or in part at any time and from time to time in their sole discretion; provided, however, that the Minimum Condition may -------- ------- not be waived except with the prior written consent of the Special Committee. The failure by Gambro, Parent or Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right; the waiver of any such right with respect to particular facts and other circumstances shall not be deemed a waiver with respect to any other facts and circumstances; and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. EX-99.(C)(2) 6 COMPOSITE CONFORMED COPY ------------------------------------------------------------------------ STOCK PURCHASE AGREEMENT between COBE LABORATORIES, INC. and REN CORPORATION-USA As Amended ------------------------------------------------------------------------ (i) TABLE OF CONTENTS ----------------- Section Page ------- ---- ARTICLE I DEFINITIONS 1.01 Definitions ................................. 1 ARTICLE II PURCHASE AND SALE OF SHARES; CLOSING 2.01 Authorization, Purchase and Sale of Shares ........................... 7 2.02 Closing ..................................... 7 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY 3.01 Organization and Qualification; Subsidiaries ............................. 8 3.02 Charter of Incorporation and By-Laws ........ 8 3.03 Capitalization .............................. 9 3.04 Authority Relative to This Agreement ........ 10 3.05 No Conflict; Required Filings and Consents .................................. 10 3.06 Common Stock ................................ 11 3.07 Compliance with Laws ........................ 12 3.08 SEC Filings; Financial Statements ........... 12 3.09 Absence of Certain Changes, Events and Conditions ............................ 13 3.10 Employee Benefit Plans ...................... 14 3.11 Owned Real Property; Leased Real Property.... 17 3.12 Intellectual Property Rights ................ 17 3.13 Environmental Matters ....................... 17 3.14 Litigation .................................. 19 3.15 Insurance ................................... 19 3.16 Agreements .................................. 19 3.17 Licenses and Permits ........................ 19 (ii) Section Page ------- ---- 3.18 Private Offering ............................ 20 3.19 Brokers ..................................... 20 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER 4.01 Corporate Organization ...................... 20 4.02 Authority Relative to This Agreement ........ 20 4.03 No Conflict; Required Filings and Consents... 21 4.04 Funds ....................................... 22 4.05 Securities Act .............................. 22 4.06 Brokers ..................................... 23 4.07 Business of the Purchaser's Affiliates ...... 23 ARTICLE V ADDITIONAL AGREEMENTS 5.01 Conduct of Business by the Company Pending the Closing ....................... 23 5.02 Required Bank Amendment ..................... 23 5.03 Access to Information ....................... 24 5.04 Notification of Certain Matters ............. 24 5.05 Further Action; Reasonable Efforts .......... 25 5.06 Public Announcements ........................ 25 5.07 Registration Rights ......................... 25 5.08 Board Representation; Committees ............ 25 5.09 Legend ...................................... 26 5.10 Purchaser's Preemptive Right ................ 26 5.11 Standstill Agreement ........................ 28 5.12 Non-Competition; Disclosure of Opportunities ............................ 29 5.13 Supply Agreement ............................ 29 5.14 Shareholder Approval ........................ 31 5.15 The Company's Right of First Offer .......... 32 ARTICLE VI CONDITIONS TO THE CLOSING 6.01 Conditions to Obligations of the Purchaser... 32 6.02 Conditions to Obligations of the Company .... 35 (iii) Section Page ------- ---- ARTICLE VII INDEMNIFICATION 7.01 Survival of Representations and Warranties.... 35 7.02 Indemnification by the Company................ 36 7.03 Indemnification by the Purchaser.............. 36 7.04 Materiality................................... 36 7.05 Time Period; Dollar Threshold................. 36 7.06 Notice and Defense............................ 37 ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER 8.01 Termination................................... 37 8.02 Effect of Termination......................... 39 8.03 Amendment..................................... 39 8.04 Waiver........................................ 39 ARTICLE IX GENERAL PROVISIONS 9.01 Notices....................................... 39 9.02 Entire Agreement; Assignment.................. 40 9.03 Parties in Interest........................... 40 9.04 Governing Law................................. 40 9.05 Headings...................................... 41 9.06 Counterparts.................................. 41 9.07 Specific Performance.......................... 41 EXHIBIT A Summary of Terms of Convertible Redeemable Preferred Stock EXHIBIT B Contents of Opinion of Wyatt, Tarrant, Combs, Gilbert & Milan EXHIBIT C Contents of Opinion of Latham & Watkins EXHIBIT D Registration Rights EXHIBIT E Form of Shareholders' Agreement DISCLOSURE SCHEDULE STOCK PURCHASE AGREEMENT (this "Agreement"), as --------- amended, between REN CORPORATION-USA, a Tennessee corporation (the "Company"), and COBE LABORATORIES, INC., a Colorado ------- corporation (the "Purchaser"). --------- W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Company desires to authorize, issue, and sell to the Purchaser, and the Purchaser desires to purchase from the Company, the Shares (as hereinafter defined). NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter set forth, the parties hereto agree as follows: ARTICLE I DEFINITIONS ----------- SECTION 1.01. Definitions. As used in this ----------- Agreement, the following terms shall have the following meanings: "Affiliate" of a Person means a Person that directly --------- or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the first mentioned Person. "Bankruptcy Proceeding" has the meaning specified in --------------------- Section 6.01. "Board" means the Board of Directors of the Company. ----- "Business" has the meaning specified in Section 5.12. -------- "Business Day" means any day other than a Saturday, ------------ Sunday, or federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, Eastern Standard Time. "By-Laws" means the Restated By-Laws of the Company, ------- as amended through the date hereof. "CERCLA" has the meaning specified in the definition ------ of "Environmental Laws". 2 "CERCLIS" means the Comprehensive Environmental ------- Responsive, Compensation and Liability Information System, 42 U.S.C. Sec. 9616(a). "Charter of Incorporation" means the Restated ------------------------ Charter of Incorporation of the Company, as amended through the date hereof. "Closing" means the completion of the transactions ------- specified herein relating to the purchase and sale of the Shares as contemplated by Section 2.01 hereof. "Closing Date" means the date on which the Closing ------------ shall occur. "Code" means the Internal Revenue Code of 1986, as ---- amended, together with the rules and regulations promulgated thereunder. "Common Stock" means the common shares of the ------------ Company, no par value. "Company" means REN Corporation-USA, a Tennessee ------- corporation. "Company Loss" has the meaning specified in ------------ Section 7.03. "Control" (including the terms "controlled by" and ------- ------------- "under common control with") means the possession, directly ------------------------- or indirectly or as trustee or executor, of the power to direct or cause the direction of the management and/or policies of a Person, whether through the ownership of stock, as trustee or executor, by contract or credit arrangement or otherwise. "Disclosure Schedule" means the Disclosure Schedule ------------------- dated as of the date hereof delivered to the Purchaser by the Company and forming a part of this Agreement. "Encumbrance" means any security interest, pledge, ----------- mortgage, lien (including environmental liens), charge, adverse claim or restriction of any kind, including, without limitation, any restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of ownership, but excluding such Encumbrances which, taken as a whole, would not have a Material Adverse Effect. 3 "Environmental Laws" means any federal, state or ------------------ local statute, code, ordinance, rule, regulation, permit, consent, approval, license, judgment, order, writ, judicial decision, decree, agency interpretation, injunction or other authorization or requirement whenever promulgated, issued, or modified, relating to: (a) emissions, discharges, spills, releases or threatened releases of pollutants, contaminants, Hazardous Substances, materials containing Hazardous Substances, or hazardous or toxic materials or wastes into ambient air, surface water, groundwater, watercourses, publicly or privately owned treatment works, drains, sewer systems, wetlands, septic systems or onto land; (b) the use, treatment, storage, disposal, handling, manufacturing, transportation, or shipment of Hazardous Substances, materials containing Hazardous Substances or hazardous and/or toxic wastes, material, products or by-products (or of equipment or apparatus containing Hazardous Substances) as defined in or regulated under the following statutes and their implementing regulations: the Hazardous Materials Transportation Act, 49 U.S.C. Sec. 1801 et seq., the -- --- Resource Conservation and Recovery Act, 42 U.S.C. Sec. 6901 et seq., the Comprehensive Environmental Response, -- --- Compensation and Liability Act, 42 U.S.C. Sec. 9601 et seq. -- --- ("CERCLA"), The Clean Water Act, 33 U.S.C. Sec. 1251 et ------ -- seq., The Clean Air Act, 42 U.S.C. Sec. 7401 et seq., --- -- --- and/or the Toxic Substances Control Act, 15 U.S.C. Sec. 2601 et seq., each as amended from time to time; or -- --- (c) otherwise relating to pollution or the protection of human health or the environment. "ERISA" means the Employee Retirement Income ----- Security Act of 1974, as amended, together with the rules and regulations promulgated thereunder. "Exchange Act" means the Securities Exchange Act of ------------ 1934, as amended, together with the rules and regulations promulgated thereunder. "Existing Regions" has the meaning specified in ---------------- Section 5.12(a). "First Union" means First Union National Bank of ----------- North Carolina, a national banking association under the laws of the United States. 4 "First Union Loan Aqreement" means the amended and -------------------------- restated loan agreement dated as of March 18, 1990 between the Company and First Union, as such agreement has been amended, supplemented, restated or otherwise modified from time to time, together with any notes, security pledge, guaranty or other ancillary agreements executed pursuant thereto. "GAAP" means U.S. generally accepted accounting ---- principles and practices in effect from time to time applied consistently throughout the periods involved. "Hazardous Substances" means (a) hazardous -------------------- materials, hazardous wastes and hazardous substances as defined or regulated under any Environmental Laws, (b) any mixtures, blends, compounds or liquids containing any hazardous substances in any proportions, (c) petroleum and petroleum products including crude oil and any fractions thereof, (d) asbestos and/or any material which contains any hydrated mineral silicates, whether friable or non-friable, (e) PCBs, or PCB-containing materials or fluids, (f) any other hazardous radioactive, toxic or noxious substance, material, pollutant, or solid, liquid or gaseous waste, and (g) any substance with respect to which a federal, state or local agency requires environmental investigation, monitoring or remediation. "Identified Regions" has the meaning specified in ------------------ Section 5.12(a). "Intellectual Property" has the meaning specified in --------------------- Section 3.12. "IRS" means the United States Internal Revenue --- Service. "Leased Real Property" means the real property -------------------- leased by the Company or its Subsidiaries, together with, to the extent leased by the Company, all buildings and other structures, facilities or improvements presently or hereafter located thereon, all fixtures, systems, equipment and items of personal property of the Company or its Subsidiaries attached or appurtenant thereto and all easements, licenses, rights and appurtenances relating to the foregoing. "Liabilities" means any and all debts, liabilities ----------- and obligations, whether accrued or fixed, absolute or contingent, mature or unmatured or determined or 5 determinable, including, without limitation, those arising under any law, rule, regulation, or order by a governmental authority and those arising under any contract, agreement, commitment or undertaking. "Loss" has the meaning specified in Section 8.03. ---- "March Balance Sheet" means the balance sheet dated ------------------- as of March 31, 1991 included in the March Financial Statements. "March Financial Statements" has the meaning -------------------------- specified in Section 3.08(c). "Material Adverse Effect" means any circumstance, ----------------------- change, event, transaction, loss, failure, effect or other occurrence that is, or is reasonably likely to be, materially adverse to the business, operations, properties (including intangible properties), condition (financial or otherwise), assets, Liabilities, results of operations or prospects of the Company and its Subsidiaries taken as a whole. "1990 Balance Sheet" means the audited balance sheet ------------------ of the Company dated December 31, 1990. "Other Regions" has the meaning specified in ------------- Section 5.12(b). "Owned Real Property" means the real property owned ------------------- by the Company or its Subsidiaries, together with all buildings and other structures, facilities or improvements presently or hereafter located thereon, all fixtures, systems, equipment and items of personal property of the Company or its Subsidiaries attached or appurtenant thereto and all easements, licenses, rights and appurtenances relating to the foregoing. "Person" means an individual, corporation, ------ partnership, association, trust, joint venture, unincorporated organization, other entity or group (as defined in Section 13(d)(3) of the Exchange Act). "Preferred Stock" means the shares of preferred --------------- stock of the Company, which shall have the rights and terms set forth in Exhibit A hereto. "Purchase Agreement" shall mean this agreement, as ------------------ amended by the letter agreement dated as of May 24, 1991 between the Company and the Purchaser. 6 "Purchase Price" has the meaning specified in -------------- Section 2.01. "Purchaser Loss" has the meaning specified in -------------- Section 7.02. "Purchaser's Directors" has the meaning specified in --------------------- Section 5.08. "Quarterly Date" has the meaning specified in -------------- Section 6.14(e). "Real Property" means the Leased Real Property and ------------- the Owned Real Property. "Representation Period" has the meaning specified in --------------------- Section 5.08(a). "Required Bank Amendment" means the amendment in ----------------------- form and substance satisfactory to the Purchaser and the Company to the First Union Loan Agreement contemplated by and on terms substantially consistent with the terms set forth in the term sheet delivered by the Purchaser to the Company on the date hereof. "Restricted Period" has the meaning specified in ----------------- Section 5.11(a). "SEC" means the Securities and Exchange Commission. --- "SEC Reports" means all forms, reports and documents ----------- required to be filed by the Company with the SEC since November 28, 1989, including, without limitation, (i) the Company's Annual Reports on Form 10-K for the fiscal years ended December 31, 1989 and 1990 and (ii) all other reports or registrations filed by the Company with the SEC since November 28, 1989. "Securities Act" means the Securities Act of 1933, -------------- as amended, together with the rules and regulations promulgated thereunder. "Shares" has the meaning specified in Section 2.01. ------ "Shareholders' Agreement" has the meaning specified ----------------------- in Section 5.11. "Stock Option Plan" means the 1988 nonqualified ----------------- stock option plan, as amended through the date of this Agreement, of the Company. 7 "Subscription Notice" has the meaning specified in ------------------- Section 5.10(a). "Subsidiary" or "Subsidiaries" means any ---------- ------------ corporation, partnership, joint venture or other legal entity of which the Company or any other Person, as the case may be (either alone or through or together with any other Subsidiary), owns, directly or indirectly, fifty percent or more of the stock or other equity interests, the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity. "Tax" or "Taxes" means all income, gross receipts, --- ----- sales, use, transfer, employment, franchise, profits, property, excise or other similar taxes, estimated import duties, fees, stamp taxes and duties, value added taxes, assessments or charges of any kind whatsoever (whether payable directly or by withholding), together with any interest and any penalties, additions to tax or additional amounts imposed by any taxing authority with respect thereto. "Total Voting Power" means the combined voting power ------------------ of all the Voting Securities. "Voting Securities" means any shares of any class of ----------------- capital stock of the Company entitled to vote generally in the election of directors. ARTICLE II PURCHASE AND SALE OF SHARES; CLOSING ------------------------------------ SECTION 2.01. Authorization, Purchase and Sale of ----------------------------------- Shares. Upon the terms and subject to the conditions set ------ forth herein, at the Closing, the Company shall authorize, issue and sell to the Purchaser, and the Purchaser shall purchase from the Company, (i) 2,204,495 shares of Common Stock and (ii) 462,172 shares of Preferred Stock (such shares of Common Stock and Preferred Stock being herein the "Shares") for an aggregate purchase price of $12,000,000 (the ------ "Purchase Price"). -------------- SECTION 2.02. Closing. (a) The Closing of the ------- purchase and sale shall take place within three Business Days of the satisfaction of the conditions set forth herein at the offices of Shearman & Sterling, 599 Lexington Avenue, New York, New York, or at such other time and place as the Company and the Purchaser may mutually agree in writing. 8 (b) At the Closing, the Company shall deliver or cause to be delivered to the Purchaser: (i) stock certificates evidencing the Shares registered in the name of the Purchaser (or its designee); (ii) the certificate referred to in Section 6.01(c); (iii) the legal opinions referred to in Section 6.01(h); (iv) a receipt for the Purchase Price and (v) such other documents as the Purchaser shall reasonably request. (c) At the Closing, the Purchaser shall deliver to the Seller: (i) the Purchase Price, by wire transfer, to an account or accounts designated by the Company at least two Business Days prior to the Closing Date; (ii) the certificate referred to in Section 6.02(a); (iii) a receipt for the Shares and (iv) such other documents as the Company shall reasonably request. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY --------------------------------------------- The Company represents and warrants to the Purchaser that: SECTION 3.01. Organization and Qualification; ------------------------------- Subsidiaries. The Company and each of its Subsidiaries is a ------------ corporation duly organized, validly existing and in good standing under the laws of their respective jurisdictions of incorporation, and have the requisite corporate power and authority to own, lease and operate their properties and carry on their business in all material respects as presently owned or conducted. The Company and each of its Subsidiaries is duly qualified or licensed as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of its properties owned, leased or operated by it or the nature of its activities makes such qualification or licensing necessary, except those jurisdictions, if any, in which the failure to be so duly qualified or licensed and in good standing would not, taken as a whole, have a Material Adverse Effect. Schedule 3.01 of the Disclosure Schedule sets forth a complete and correct list of each of the Subsidiaries of the Company. SECTION 3.02. Charter of Incorporation and ---------------------------- By-Laws. The Company has heretofore furnished to the ------- Purchaser a complete and correct copy of the Charter of 9 Incorporation and the By-Laws, each as amended to date, each of which is in full force and effect. The Company is not in violation of any of the provisions of the Charter of Incorporation or By-Laws, and its Subsidiaries are not in violation of any of the provisions of their charters of incorporation, by-laws or equivalent organizational documents, except where such violation would not, taken as a whole, have a Material Adverse Effect. SECTION 3.03. Capitalization. (a) The authorized -------------- capital stock of the Company consists of (x) 10,000,000 shares of Preferred Stock of which none is issued, outstanding or reserved for issuance and (y) 60,000,000 shares of Common Stock, of which (i) 8,835,502 shares of Common Stock are issued and outstanding, (ii) 0 shares of Common Stock are held in the treasury of the Company, (iii) an aggregate of 251,325 shares of Common Stock are subject to outstanding options, and 500,000 shares are reserved for issuance, pursuant to the Company's Stock Option Plan, (iv) an aggregate of 331,838 shares of Common Stock are subject to outstanding promissory notes that are convertible into shares of Common Stock, (v) 180,000 shares of Common Stock are held in escrow on behalf of the Company and certain shareholders in connection with a settlement of a claim arising from an acquisition of a treatment center in Douglas, Georgia, and (vi) an aggregate of 96,700 shares of Common Stock are subject to outstanding warrants that are convertible into shares of Common Stock. (b) Except as set forth in this Section 3.03 or in Schedule 3.03(b) of the Disclosure Schedule, there are no options, warrants or other rights, agreements, arrangements or commitments of any character to which the Company or any of its Subsidiaries is a party or obligating the Company or any of its Subsidiaries to issue or sell any shares of capital stock of, or other equity interests in, the Company or any of its Subsidiaries. Except as set forth in Schedule 3.03(b) of the Disclosure Schedule, there are no outstanding contractual obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any of the capital stock of the Company or any Subsidiary or to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any Subsidiary or any other entity. Each of the outstanding shares of capital stock of each of the Company's Subsidiaries is duly authorized, validly issued, fully paid and nonassessable and is owned by the Company, directly or indirectly, free and clear of all Encumbrances except as set forth in Schedule 3.03(b) of the Disclosure Schedule and for any 10 Encumbrances incurred pursuant to the First Union Loan Agreement and Encumbrances for taxes not yet due and payable. (c) Except as set forth on Schedule 3.03(c) of the Disclosure Schedule and as set forth herein, the Company is not party to any agreement granting registration rights to any Person with respect to any equity or debt securities of the Company. SECTION 3.04. Authority Relative to This -------------------------- Agreement. The Company has all necessary corporate power and --------- authority to execute and deliver this Agreement and to perform its obligations and to consummate the transactions contemplated hereunder. The execution, delivery and performance of this Agreement by the Company have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions contemplated by this Agreement. This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery hereof by the Purchaser and payment for the Shares as contemplated by this Agreement, constitutes the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms (except in each such case as enforceability may be limited by bankruptcy, insolvency, reorganization and other similar laws now or hereafter in effect relating to or affecting creditors' rights generally and to the extent that the remedy of specific performance and injunctive and other forms of equitable relief are subject to certain equitable defenses and to the discretion of the court before which any proceeding therefor may be brought and except as rights to indemnity and contribution under Section 5.07 may be limited by Federal or state securities laws). SECTION 3.05. No Conflict; Required Filings and --------------------------------- Consents. (a) Assuming the satisfaction of the conditions -------- set forth in Article VI hereof, the execution and delivery of this Agreement by the Company do not, and the performance of this Agreement (including, without limitation, the consummation of the transactions contemplated hereunder and the conversion or redemption, if any, of the Preferred Stock) will not, (i) conflict with or violate the Charter of Incorporation or By-Laws, (ii) conflict with or violate the charters of incorporation or by-laws or equivalent organizational documents of any of the Company's 11 Subsidiaries, (iii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to the Company or any of its Subsidiaries or by which its or any of their respective properties are bound or affected, or (iv) result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or encumbrance on any of the properties or assets of the Company or any of its Subsidiaries pursuant to any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, insurance policy or other instrument or obligation to which the Company or any of its Subsidiaries is a party, or by which the Company or any of its Subsidiaries or its or any of their respective properties are bound or affected, except in the case of clauses (ii), (iii) and (iv) above for such conflicts which would not, taken as a whole, have a Material Adverse Effect. (b) The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company (including, without limitation, the consummation of the transactions hereunder and the conversion or redemption, if any, of the Preferred Stock) will not, require any consent, approval, authorization or permit of, or filing (other than filings, if any, required on Form 8-K with the SEC) with or notification to, any governmental or regulatory authority, domestic or foreign, on the part of the Company or any of its Subsidiaries. SECTION 3.06. Common Stock; Preferred Stock. ----------------------------- Assuming all conditions set forth in Article VI are satisfied, following the consummation of the transactions hereunder, all shares of Common Stock and Preferred Stock subject to issuance pursuant to this Agreement (including, without limitation, the Common Stock issuable upon conversion of the Preferred Stock), upon such issuance against payment for such shares of Common Stock as contemplated by this Agreement or upon conversion of the Preferred Stock, as the case may be, shall (i) be duly authorized, validly issued, fully paid and nonassessable and (ii) not be subject to any Encumbrances (other than those that may be incurred by the Purchaser). With respect to the shares of Common Stock, such shares shall have accorded to them full voting rights. With respect to the shares of Preferred Stock, such shares will be convertible into shares of Common Stock in accordance with the terms of the Preferred Stock. None of the Shares nor the shares of Common Stock issuable upon conversion of the 12 Preferred Stock are "Control Shares" as such term is defined in the Tennessee Business Corporation Act. SECTION 3.07. Compliance with Laws. Except as set -------------------- forth in Schedule 3.07 of the Disclosure Schedule, neither the Company nor any of its Subsidiaries is in conflict with, or violation of, any law, rule, regulation, order, judgment or decree applicable to the Company or any of its Subsidiaries or by which the Company or any of its Subsidiaries or any of its or their respective properties are bound or affected, except for any such conflicts or violations which would not, individually or in the aggregate, have a Material Adverse Effect. SECTION 3.08. SEC Filings; Financial Statements. --------------------------------- (a) The Company has filed all forms, reports, statements and documents required to be filed with the SEC since November 28, 1989, including, without limitation, the SEC Reports. The SEC Reports (i) were each prepared in accordance with, and at the time of filing complied in all material respects with, the requirements of the Securities Act, or the Exchange Act, as the case may be, and (ii) did not at the time they were filed contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. None of the Company's Subsidiaries is required to file any forms, reports or other documents with the SEC. (b) Each of the consolidated financial statements (including, in each case, any related notes thereto) contained in the SEC Reports has been prepared in accordance with GAAP (except as may be indicated in the notes thereto), and each presents fairly the consolidated financial position of the Company and its consolidated Subsidiaries at the respective dates thereof and the consolidated results of its operations and changes in cash flows for the periods indicated, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments which were not and are not expected to be material in amount. (c) Schedule 3.08(c) of the Disclosure Schedule hereto sets forth the unaudited consolidated balance sheet of the Company and its Subsidiaries and the unaudited statement of operations and statement of cash flows for the three-month period ended March 31, 1991 (the "March Financial --------------- 13 Statements"). The March Financial Statements have been ---------- prepared in accordance with GAAP (except as may be indicated in the notes thereto) and present fairly the financial condition of the Company and its consolidated Subsidiaries as of March 31, 1991 and the consolidated results of its operations and changes in cash flows for the three-month period ended March 31, 1991 except that the March Financial Statements are subject to normal or recurring year-end adjustments which are not expected to be material in amount. (d) Except as set forth in Schedule 3.08(d) of the Disclosure Schedule hereto and as and to the extent set forth on the March Financial Statements, including the notes thereto, neither the Company nor any of its Subsidiaries has any Liabilities, including, without limitation, liabilities for taxes which would be required to be reflected on a balance sheet or in the notes thereto prepared in accordance with GAAP except for liabilities or obligations incurred in the ordinary course of business since March 31, 1991 which would not, taken as a whole, have a Material Adverse Effect. SECTION 3.09. Absence of Certain Changes, Events ---------------------------------- and Conditions. (a) Since January 1, 1991, except as -------------- disclosed in the March Financial Statements and in Schedule 3.09(a) of the Disclosure Schedule, there has not been any change having a Material Adverse Effect. Except as disclosed in Schedule 3.09(a) of the Disclosure Schedule, there are no conditions known to the Company existing, with respect to the markets, proposed marketing plans, products, facilities, existing and prospective technologies, capabilities or personnel, of the Company that reasonably would be expected to have a Material Adverse Effect. (b) Since January 1, 1991, the Company has been operated only in the ordinary course. As amplification and not limitation of the foregoing, except as disclosed in Schedule 3.09(b) of the Disclosure Schedule and except as disclosed in the March Financial Statements, neither the Company nor any of its Subsidiaries has, since January 1, 1991: (i) made any change in any method of accounting or accounting practice or policy used by the Company, other than such changes required by GAAP that are identified in Schedule 3.09(b)(i) of the Disclosure Schedule; (ii) made any material changes in the customary methods of operations of the Company, including practices 14 and policies relating to purchasing, inventory, marketing, selling or pricing; (iii) failed to maintain the Company's plant, property and equipment in good repair, ordinary wear and tear excepted; (iv) redeemed any of the Company's capital stock or declared, made or paid any dividends or distributions (whether in cash, securities or property) to the Company's stockholders or otherwise with respect to the Common Stock; (v) issued or sold any of the Company's stock, notes, bonds or other securities, or any option or warrant to purchase the same; (vi) amended or restated the Company's Charter of Incorporation or By-Laws; (vii) merged with, been merged with, entered into a consolidation with or acquired (by purchase, merger, consolidation, stock acquisition or otherwise) a substantial portion of the assets of any other entity or business of any other corporation, partnership, association or other business entity or any division thereof, or otherwise acquired assets other than in the ordinary course and in accordance with past practice; or (viii) agreed, whether in writing or otherwise, to take any of the actions specified in this Section 3.09(b), except for those contemplated by this Agreement and the Required Bank Amendment. SECTION 3.10. Employee Benefit Plans. ---------------------- (a) Schedule 3.10(a) of the Disclosure Schedule sets forth (i) all employee benefit plans (within the meaning of Section 3(3) of ERISA) and all bonus, stock option, stock purchase, restricted stock, incentive, deferred compensation, retiree medical, dental or life insurance, supplemental retirement, severance or other benefit plans, programs or arrangements, and all employment, termination, severance or other contracts or agreements with respect to which the Company or any of its Subsidiaries is a party (including, without limitation, all medical director agreements and non competition agreements), with respect to which the Company or any of its Subsidiaries has any obligation (whether primary or secondary) or which are maintained, contributed to or sponsored by the Company or 15 any of its Subsidiaries for the benefit of any current or former employee, officer or director of the Company or any one of its Subsidiaries and (ii) each employee benefit plan for which the Company or one of its Subsidiaries could incur liability under Section 4069 of ERISA, in the event such plan were terminated, or under Section 4212(c) of ERISA, or in respect of which the Company or one of its Subsidiaries remains secondarily liable under Section 4204 of ERISA (collectively, the "Plans"). Each Plan (other than a ----- multiemployer plan, within the meaning of Section 3(37) or 40001(a)(3) of ERISA (a "Multiemployer Plan")) is in writing ------------------ and, with respect to each such Plan, the Company has previously furnished or made available to the Purchaser a true and complete copy of each Plan and (i) a copy of each trust or other funding arrangement, (ii) the most recent summary plan description and any relevant summary of material modifications, (iii) the most recently filed IRS Form 5500, (iv) the most recently received IRS determination letter for each such Plan, and (v) the most recently prepared actuarial report and financial statement, if applicable, in connection with each such Plan. Except as contemplated herein or as required by ERISA or the Code, the Company and its Subsidiaries have no express commitment (i) to create, incur material liability with respect to or cause to exist any other employee benefit plan, program or arrangement, (ii) to enter into any material contract or agreement to provide compensation or benefits to any individual or (iii) to modify or terminate any Plan. (b) None of the Plans is a Multiemployer Plan, or a single employer pension plan, within the meaning of Section 4001(a)(15) of ERISA, for which the Company or one of its Subsidiaries could incur liability under Section 4063 or 4064 of ERISA (a "Multiple Employer Plan") having a Material ---------------------- Adverse Effect. Neither the Company nor any of its Subsidiaries has incurred any liability having a Material Adverse Effect with respect to a withdrawal from any Multiemployer Plan or Multiple Employer Plan, and no fact or event exists which could give rise to such liability. Except as set forth in Schedule 3.10(b) of the Disclosure Schedule, none of the Plans provides for the payment of material severance or similar-type benefits to any person and none of the Plans obligates the Company or any of its Subsidiaries to make any payment or provide any benefit that could be subject to a tax under Section 4999 of the Code. (c) Except as set forth in Schedule 3.10(c) of the Disclosure Schedule, none of the Plans provides for or 16 promises retiree medical, dental or life insurance benefits to any current or former employee, officer or director of the Company or any of its Subsidiaries, or their beneficiaries. (d) Each Plan (other than a Multiemployer Plan) that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the IRS after 1985 providing that it is so qualified and each trust established in connection with any Plan (other than a Multiemployer Plan) that is intended to be exempt from federal income taxation under Section 501(a) of the Code has received a determination letter from the IRS after 1985 providing that it is so exempt and no fact or event has occurred since the date of such determination letter that could adversely affect the qualified status of any such Plan or the exempt status of any such trust. None of the Plans (other than a Multiemployer Plan) is subject to the laws of any jurisdiction outside of the United States. (e) Neither the Company nor any of its Subsidiaries has engaged in any nonexempt prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any Plan. Neither the Company nor any of its Subsidiaries has incurred any liability having a Material Adverse Effect for any tax arising under Section 4971, 4972, 4979, 4980 or 4980B of the Code. None of the employees of the Company or its Subsidiaries currently participates in, or, within the five years preceding the date hereof, has participated in, a Plan (other than a Multiemployer Plan) subject to Title IV of ERISA or Section 412 of the Code, and neither the Company nor any of its Subsidiaries has incurred any liability having a Material Adverse Effect under, arising out of or by operation of Title IV of ERISA or Section 412 of the Code in connection with such Plan. No complete or partial termination has occurred within the five years preceding the date hereof with respect to any Plan (other than a Multiemployer Plan). None of the assets of the Company or its Subsidiaries is the subject of any lien having a Material Adverse Effect arising under Section 302(f) of ERISA or Section 412(n) of the Code. Neither the Company nor any of its Subsidiaries has been required to post any security having a Material Adverse Effect under Section 307 of ERISA or Section 401(a)(29) of the Code. (f) Each Plan (other than a Multiemployer Plan) is now and has been operated in all material respects in accordance with the requirements of all applicable laws 17 (including, without limitation, ERISA and the Code) and with the requirements of the terms of such Plan. All employer contributions, premiums, payments or amounts required to be made, paid or accrued with respect to any Plan (other than a Multiemployer Plan) have been made, paid or accrued on or before their due dates. SECTION 3.11. Owned Real Property. The Company has ------------------- valid fee interests in all of its Owned Real Property and good and marketable title thereto, and such Owned Real Property is owned by the Company or a Subsidiary free and clear of all Encumbrances except (i) as set forth on Schedule 3.11 of the Disclosure Schedule, (ii) Encumbrances for current taxes not yet due and payable or being contested in good faith by appropriate proceedings, (iii) Encumbrances to secure indebtedness incurred pursuant to the First Union Credit Agreement and (iv) imperfections of title, easements, pledges, charges and encumbrances which do not interfere with the Company's ability to use the owned real property or which do not, individually or in the aggregate, have a Material Adverse Effect. SECTION 3.12. Intellectual Property Rights. Except ---------------------------- as set forth in Schedule 3.12 of the Disclosure Schedule, the Company holds valid title to, or valid and subsisting licenses in, the patents, patent rights, trademarks, service marks, trademark rights, trade names, trade name rights, and registered copyrights owned or used by the Company or any of its Subsidiaries in the conduct of its business (collectively, the "Intellectual Property"), free and clear --------------------- of all Encumbrances. The consummation of the transactions hereunder will not result in the termination or material impairment of any of the Company's Intellectual Property. SECTION 3.13. Environmental Matters. Except as --------------------- would not, individually or in the aggregate, have a Material Adverse Effect: (a) All facilities and property presently owned or leased by the Company or any of its Subsidiaries have been, and continue to be, owned and operated by the Company and its Subsidiaries in material compliance with all applicable Environmental Laws. (b) Neither the Company nor any of its Subsidiaries has received notice of any pending or threatened claims, complaints or requests for information with respect to any alleged violation of any Environmental Laws. (c) There have been no material releases, as defined under any Environmental Laws, of Hazardous 18 Substances that give rise to necessary costs of response at, on, from or under any property now or previously owned or leased by the Company or any of its Subsidiaries during the period in which any such property was owned or leased by the Company or a Subsidiary. (d) The Company and its Subsidiaries have been issued and are in material compliance with all permits, certificates, approvals, licenses, registrations, orders, administrative consent orders and any other authorizations, approvals or consents relating to Environmental Laws or Hazardous Substances necessary to the operation of their businesses. (e) Neither the Company nor any of its Subsidiaries has received notice that property presently owned or leased, or previously owned or leased, by the Company or any of its Subsidiaries is listed or proposed for listing in the National Priorities List created pursuant to CERCLA or on the CERCLIS or any similar state list of sites requiring investigation or cleanup. (f) Neither the Company nor any of its Subsidiaries has transported or arranged for the transportation of any Hazardous Substances to any location which is listed on the National Priorities List or any similar state list, nor has any of them received notice of pending or threatened claims as a result of transporting or arranging to transport Hazardous Substances to any location. (g) There are no polychlorinated biphenyls (other than may be contained in electrical transformers which are labeled, operated and maintained in accordance with all Environmental Laws) or asbestos-containing materials present at any property now or previously owned or leased by the Company or by any Subsidiary during the period in which any such property was owned or leased by the Company or a Subsidiary. (h) Neither the Company nor any of its Subsidiaries has received notice of pending or threatened claims against the Company or any of its Subsidiaries arising out of any operations, action, inaction or status of any previously divested property, whether or not the subject of any indemnity, under any Environmental Laws or involving any Hazardous Substances. 19 SECTION 3.14. Litigation. Except as to matters set ---------- forth in Schedule 3.14 of the Disclosure Schedule, there is no pending or, to the best of the knowledge of the Company or any of its Subsidiaries threatened, litigation, arbitration or governmental investigation or legal, administrative or regulatory proceeding against the Company or any of its Subsidiaries or to which any of their respective properties is or would be subject that (a) if adversely determined, would have a Material Adverse Effect; or (b) relates to this Agreement or the Required Bank Amendment. Except as set forth in Schedule 3.14 of the Disclosure Schedule, there are no material citations, fines or penalties heretofore asserted against the Company or its Subsidiaries under any federal, state or local law which remain unpaid or which otherwise bind the assets of the Company or its Subsidiaries. SECTION 3.15. Insurance. All insurance policies, --------- including, without limitation, medical malpractice policies of the Company, are set forth in Schedule 3.15 of the Disclosure Schedule and are in full force and effect. The Company will maintain all insurance policies in force through the Closing Date. SECTION 3.16. Agreements. Each agreement, ---------- contract, lease, license commitment or instrument (including any and all amendments thereto) to which the Company or any of its Subsidiaries is a party involving aggregate annual payments of at least $100,000 and which is material, individually or in the aggregate, to the business, operations or financial condition of the Company and its Subsidiaries is in full force and effect and constitutes a legal, valid and binding obligation of the respective parties thereto, and except as set forth on Schedule 3.16 of the Disclosure Schedule, neither the Company nor any of its Subsidiaries is in default or breach of (with or without the giving of notice or the passage of time) any such agreement or instrument, except breaches or defaults, if any, that would not have a Material Adverse Effect. The Company is not aware of any third party being in material breach of any of such agreements. SECTION 3.17. Licenses and Permits. Except as -------------------- would not have a Material Adverse Effect, the Company has all governmental licenses, permits and other governmental authorizations and approvals required for the conduct of its businesses as now conducted, and all such material licenses, permits, authorizations and approvals will remain in full force and effect immediately following the consummation of the transactions hereunder. 20 SECTION 3.18. Private Offering. (a) Assuming the ---------------- accuracy of the representations and warranties of the Purchaser, the sale of the Shares hereunder is exempt from the registration and prospectus delivery requirements of the Securities Act. (b) No form of general solicitation or general advertising (including, without limitation, advertisements, articles, notices or other communications published in any newspaper, magazine or other medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising) was used by the Company or any other Person acting on behalf of the Company in respect of the Shares or in connection with the offer and sale of the Shares. SECTION 3.19. Brokers. No broker, finder or ------- investment banker, other than Kidder, Peabody & Co. Incorporated, is entitled to any brokerage, finder's or other fee or commission in connection with the transactions hereunder based upon arrangements made by or on behalf of the Company. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER ----------------------------------------------- The Purchaser represents and warrants to the Company that: SECTION 4.01. Corporate Organization. The ---------------------- Purchaser is a corporation duly organized, validly existing and in good standing under the laws of Colorado and has the requisite corporate power and authority and any necessary governmental authority to own, operate or lease the properties that it purports to own, operate or lease and to carry on its business as it is now being conducted. SECTION 4.02. Authority Relative to This Agreement. ------------------------------------- The Purchaser has all necessary corporate power and authority to execute and deliver this Agreement and to perform its obligations and to consummate the transactions contemplated hereunder. The execution and delivery of this Agreement by the Purchaser and the purchase of the Shares as provided in Section 2.01 hereof by the Purchaser hereunder have been duly and validly authorized by all necessary 21 corporate action of the Purchaser and no other corporate proceedings on the part of the Purchaser are necessary to authorize this Agreement or the purchase of the Shares by the Purchaser as contemplated hereby. This Agreement has been duly and validly executed and delivered by the Purchaser and, assuming the due authorization, execution and delivery by the Company, constitutes the legal, valid and binding obligation of the Purchaser enforceable against the Purchaser in accordance with its terms (except in each such case as enforceability may be limited by bankruptcy, insolvency, reorganization and other similar laws now or hereafter in effect relating to or affecting creditors' rights generally and to the extent that the remedy of specific performance and injunctive and other forms of equitable relief are subject to certain equitable defenses and to the discretion of the court before which any proceeding therefor may be brought and except as rights to indemnity and contribution under Section 5.07 may be limited by Federal or state securities laws). SECTION 4.03. No Conflict; Required Filings and --------------------------------- Consents. (a) The execution and delivery of this Agreement -------- by the Purchaser do not, and the performance of this Agreement by the Purchaser will not, (i) conflict with or violate the articles of incorporation or by-laws or equivalent organizational documents of the Purchaser, (ii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to the Purchaser or by which it or its properties are bound or affected, or (iii) result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or encumbrance on any of the property or assets of the Purchaser pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Purchaser is a party or by which the Purchaser or any of its properties is bound or affected, except, in the case of this clause (iii) and clause (ii) above, for any such breaches, defaults or other occurrences which would not, individually or in the aggregate, have a material adverse effect on the business, operations, properties (including intangible properties), condition (financial or otherwise), assets or liabilities of the Purchaser. (b) The execution and delivery of this Agreement by the Purchaser do not, and the performance of this Agreement by the Purchaser (including, without limitation, the 22 consummation of the transactions hereunder) will not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign. SECTION 4.04. Funds. The Purchaser has and, ----- immediately prior to the Closing, will have the funds necessary to consummate the purchase of the Shares hereunder. SECTION 4.05. Securities Act. The Shares purchased -------------- by the Purchaser pursuant to this Agreement are being acquired for investment only and not with a view to any sale or distribution (within the meaning of the Securities Act) of the Shares or any part thereof. The Purchaser agrees at all times to sell or otherwise dispose of all or any part of the Shares so acquired by the Purchaser (and any securities issued in exchange therefor) only pursuant to a registration, or exemption therefrom, under the Securities Act and in compliance with applicable state securities laws. The Purchaser will take any steps necessary to insure that any purchaser will agree not to sell or otherwise dispose of Shares except in compliance with the requirements contained in the preceding sentence. The Purchaser is an "accredited investor" within the meaning of Rule 501 promulgated under the Securities Act and has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Shares. The Purchaser has received all the information it deems material to its evaluation of the business, assets, liabilities, financial condition and results of operations of the Company and all the information it has requested from the Company and considers necessary or appropriate for deciding whether to purchase the Shares. The Purchaser has the ability to bear the economic risks of the Purchaser's prospective investment and the Purchaser is able, without materially impairing its financial condition, to hold the Shares for an indefinite period of time and to suffer complete loss on its investment. The Purchaser understands and has fully considered for purposes of this investment the risks of this investment and understands that: (i) this investment is suitable only for an investor who is able to bear the economic consequences of losing his or its entire investment; (2) the Shares represent an extremely speculative investment which involves a high degree of risk of loss; (3) there are substantial restrictions on the transferability of the Shares and accordingly, it may not be possible for the Investor to liquidate his or its investment in the Shares in case of emergency; and (4) there have been no representations as to the possible future value, if any, of the Shares. 23 The Purchaser understands and acknowledges that the sale of the Shares pursuant to this Agreement will not be registered under the Securities Act on the grounds that the offering and sale of securities contemplated by this Agreement are exempt from registration pursuant to Section 4(2) of the Securities Act, and that the Company's reliance upon such exemption is predicated in part upon the Purchaser's representations set forth in this Agreement. SECTION 4.06. Brokers. No broker, finder or ------- investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions hereunder based upon arrangements made by or on behalf of the Purchaser. SECTION 4.07. Business of the Purchaser's --------------------------- Affiliates. Neither the Purchaser nor any of its Affiliates ---------- is actively, directly or indirectly, engaged in the Business, or has directly or indirectly made any material investments in any entity engaged directly or indirectly in the Business, in North America nor is the Purchaser or any such Affiliates currently engaged in any negotiations with respect to acquisition of or investment in any entity that is so engaged (except for negotiations with the Company). The Purchaser shall not enter into any such negotiations with any Person (other than the Company) between the date hereof and the earlier of the Closing Date or the termination of this Agreement. ARTICLE V ADDITIONAL AGREEMENTS --------------------- SECTION 5.01. Conduct of Business by the Company ---------------------------------- Pending the Closing. Except as contemplated by this ------------------- Agreement, the Company covenants and agrees that, during the period between the date of this Agreement and through and including the Closing Date, unless the Purchaser shall otherwise agree in writing, the businesses of the Company and its Subsidiaries shall be conducted only in, and the Company and its Subsidiaries shall not take any action except in, the ordinary course of business and in a manner consistent with past practice. SECTION 5.02. Required Bank Amendment. As promptly ----------------------- as practicable after the execution of this Agreement, the 24 Company shall negotiate in good faith with First Union the terms of the Required Bank Amendment. The Company shall use its best efforts to negotiate and enter into the Required Bank Amendment as soon as reasonably practicable after the date hereof. The Company shall (a) consult with the Purchaser with respect to the terms and conditions of the Required Bank Amendment and (b) afford the Purchaser and its representatives the reasonable opportunity to participate in all negotiations relating to the Required Bank Amendment and the restructuring of the financing contemplated thereby. SECTION 5.03. Access to Information. (a) From the --------------------- date hereof to the Closing Date, the Company shall, and shall cause its Subsidiaries, officers, directors, employees, auditors and other agents to, afford the officers, employees, auditors and other agents of the Purchaser reasonable access at all reasonable times to its officers, employees, agents, properties, offices, plants and other facilities and to all books and records, and shall furnish the Purchaser with all financial, operating and other data and information with respect to the business and properties of the Company as the Purchaser, through its officers, employees or agents, may reasonably request. The Purchaser agrees to maintain the strict confidentiality of such data and information and not to disclose such data to any third party. The Purchaser further confirms its obligations pursuant to that certain confidentiality letter agreement executed and delivered prior to the date hereof by and between the Company and the Purchaser. (b) No investigation pursuant to this Section 5.03 shall affect any representations or warranties of the parties herein or the conditions to the obligations of the parties hereto. SECTION 5.04. Notification of Certain Matters. The ------------------------------- Company shall give prompt notice to the Purchaser, and the Purchaser shall give prompt notice to the Company, of (i) the occurrence, or non-occurrence, of any event the occurrence, or non-occurrence, of which would be likely to cause any representation or warranty contained in this Agreement to be untrue or inaccurate and (ii) any failure of the Company or the Purchaser, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the -------- ------- delivery of any notice pursuant to this Section 5.04 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice. 25 SECTION 5.05. Further Action; Reasonable Efforts. ---------------------------------- Upon the terms and subject to the conditions hereof, each of the parties hereto shall use all reasonable efforts to take, or cause to be taken, all appropriate action, 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 hereunder. SECTION 5.06. Public Announcements. The Purchaser -------------------- 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 hereunder and shall not issue any such press release or make any such public statement prior to such consultation, except as may be, and to the extent, required by law or any listing agreement with the National Association of Securities Dealers. SECTION 5.07. Registration Rights. Effective at ------------------- the Closing, the Purchaser shall have the registration rights set forth in Exhibit D. SECTION 5.08. Board Representation; Committees. -------------------------------- (a) The Company agrees, effective upon the Closing Date, to decrease the size of the Board to seven directors and to appoint to the Board two persons designated by the Purchaser (the "Purchaser's Directors"), one with his term ----------- --------- expiring at the Company's 1992 annual stockholders' meeting (the "1992 Meeting") and the other with his term expiring at ---- ------- the Company's 1993 annual stockholders' meeting (the "Purchaser's 1993 Director"). On or prior to the 1992 ----------- ---- -------- Meeting, the size of the Board shall be reduced to five members. (b) From and after the 1992 Meeting and during the period in which the Purchaser owns at least 15% of the issued and outstanding Common Stock, the Purchaser may request the Company to include, as a nominee for the Board recommended by the Board, one person designated by the Purchaser, who, unless he shall resign prior to the expiration of his term, may be the Purchaser's 1993 Director, and such person shall be nominated by the Company unless the Board, in the exercise of its fiduciary duties, reasonably shall determine that he is not qualified to serve on the Board and each of the committees specified in subsection (d). If the Board shall reasonably determine that such designee of the Purchaser is not so qualified, the Purchaser shall have the opportunity to specify one or more additional designees who shall be so included as a nominee subject to the qualification set forth in the immediately preceding sentence. 26 (c) Effective on the Closing Date and throughout the period in which the Purchaser owns at least 15% of the issued and outstanding Common Stock (the "Representation -------------- Period"), the Company agrees to constitute a Human Resource ------ Committee of the Board which shall, among other things, make recommendations with respect to the employment practices of the Company and the hiring and firing of senior officers of the Company. (d) Effective on the Closing Date and throughout the Representation Period, the Company agrees to place one of the Purchaser's Directors on each of the Executive, Audit, Compensation and Human Resources Committees of the Board and to cause each of the Executive, Audit, Compensation and Human Resources Committees to consist of three members. (e) During the Representation Period, the Purchaser also shall have the right to have an observer at all meetings of the Board and each of the committees of the Board. SECTION 5.09. Legend. The Purchaser agrees that ------ all certificates representing the Shares issued pursuant to this Agreement shall bear the following legend: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR SECURITIES LAWS OF ANY STATE AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREUNDER. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT (IN CERTAIN CIRCUMSTANCES) TO A RIGHT OF FIRST OFFER AS SET FORTH IN THE STOCK PURCHASE AGREEMENT DATED AS OF MAY 11, 1991 BETWEEN THE COMPANY AND COBE LABORATORIES, INC." SECTION 5.10. Purchaser's Preemptive Rights. ----------------------------- During the Representation Period, the Company covenants and agrees that: (a) In the event that the Company proposes to issue Common Stock or any other Voting Securities, it shall give the Purchaser ten days' prior written notice of such intention, describing the estimated price and the other terms upon which the Company proposes to issue the same (the "Subscription Notice"). The Purchaser shall have ------------ ------ the option to purchase from the Company at the time of such issuance the number of shares of Common Stock or other Voting Securities, as the case may be, necessary to permit the Purchaser to maintain the percentage of Common Stock owned by the Purchaser immediately prior to such issuance or the percentage of Total Voting Power it had 27 immediately prior to such issuance for the price and upon the other terms upon which the Company actually effects such issuance. (b) Within 15 days of the end of each March 31st, June 30th, September 30th and December 31st (each a "Quarterly Date") following the Closing Date, the Company -------------- shall notify the Purchaser of the number of shares of Common Stock and the number of Voting Securities outstanding as of each such Quarterly Date. The Purchaser shall have the option to purchase from the Company additional shares of Common Stock to the extent necessary to permit the Purchaser to maintain the higher of (i) the percentage of shares of Common Stock or Voting Securities owned by the Purchaser as of the immediately preceding Quarterly Date, after giving effect to any purchases thereafter pursuant to this Section 5.10(b), or (ii) 20% of the issued and outstanding shares of Common Stock and 20% of Total Voting Power. The Purchaser may exercise such option by delivery to the Company of written notice of its intention to exercise such option within 30 days of such Quarterly Date. The per share purchase price for such shares of Common Stock shall be equal to the average of the averages of the closing bid and asked prices of the Common Stock on each day during the calendar quarter ending on the Quarterly Date. The closing of the purchase of such shares of Common Stock shall take place within five days of the receipt of the written notice delivered by the Purchaser to the Company pursuant to this Section 5.10(b). (c) In the event that the Preferred Stock is redeemed in accordance with its terms, the Purchaser, in lieu of its rights under Section 5.10(b), shall have the option to purchase from the Company on April 30, 1992 additional shares of Common Stock to the extent necessary to permit the Purchaser to maintain the higher of (i) the percentage of shares of Common Stock or Voting Stock owned by the Purchaser as of September 30, 1991 after giving effect to the redemption of the Preferred Stock and any other purchases pursuant to Section 5.10(b), or (ii) 19.99% of the issued and outstanding shares of Common Stock and 19.99% of the Total Voting Power. The Purchaser may exercise such option by delivery to the Company of written notice of its intention to exercise such option on or prior to April 25, 1992. The per share purchase price for such shares of Common Stock shall be equal to the average of the averages of the closing bid and asked prices of the Common Stock on each day during the period beginning on the Closing Date and ending on March 31, 1992. The closing of the purchase of such 28 shares of Common Stock shall take place within five days of the receipt of the written notice delivered by the Purchaser to the Company pursuant to this Section 5.10(c). (d) In the event that the Shareholders under the Agreement and Release dated as of January 1, 1991 (the "Release Agreement") among the Company and such Shareholders elect Option 1 as set forth in Section 5 of the Release Agreement and 300,000 shares of Common Stock (the "Escrowed Shares") are delivered out of Escrow to such Shareholders, the Purchaser shall have the option to purchase on the Exercise Date (as hereinafter defined) 69,000 shares of Common Stock at a per share purchase price equal to the average of the averages of the closing bid and asked prices of the Common Stock for each trading day from the Closing Date up to the Exercise Date. The "Exercise Date" shall mean the date that is 15 Business Days after the date of delivery of the Escrowed Shares to such Shareholders or, in the event that the Preferred Stock is redeemed in accordance with its terms, the later of (i) April 30, 1992 or (ii) the day that is 15 Business Days after such delivery of the Escrowed Shares. The Purchaser may exercise the option set forth herein by delivery notice thereof to the Company no later than five (5) Business Days prior to the Exercise Date. SECTION 5.11. Standstill Agreement. For a period -------------------- of five years after the Closing Date, neither the Purchaser nor any entity controlled by Investment AB Cardo ("Cardo"), nor any other person acting in the capacity as agent for any of the foregoing, shall (nor shall it assist or encourage others to) directly or indirectly, unless specifically requested to do so in writing in advance by the Board of Directors of the Company, (i) acquire or agree, offer, seek or propose to acquire, or cause to be acquired, ownership (including, without limitation, beneficial ownership as defined in Rule 13d-3 under the Exchange Act) any securities of the Company, any debt claims of the Company, any securities convertible or exchangeable into or exercisable for any securities or assets of the Company, or any rights or options to acquire such ownership (including from a third party), except pursuant to (A) the Purchaser's right to purchase set forth in Section 5.10 hereof and (B) the Purchaser's right to purchase set forth in the Shareholders' Agreement, among the Purchaser, Jerome S. Tannenbaum, M.D. and Mark J. Ginsburg, M.D. substantially in the form of Exhibit E hereto (the "Shareholders' Agreement"); (ii) ------------ --------- propose to enter into any merger or business combination involving the Company, except and unless the Company enters into a definitive agreement with a third party contemplating a merger, consolidation or similar transaction in which all 29 or a majority of the Company's equity securities or substantially all of its assets are to be acquired by such third party pursuant to such definitive agreement (a "Business Combination"), the Purchaser shall be permitted, -------- ----------- notwithstanding clauses (i) and (v) of this paragraph, to make a Financially Superior Offer to the Board of Directors of the Company (but not directly to the stockholders of the Company) ("Financially Superior Offer" means a proposal by ----------- -------- ---- the Purchaser to acquire at least the same percentage of the Company's equity securities as contemplated in the Business Combination, with at least the same evidence of financial ability to consummate the Business Combination and at least the same degree of financial commitment in such Business Combination, and with material conditions substantially similar to those set forth in the Business Combination); (iii) make, or in any way participate, directly or indirectly, in any "solicitation" of "proxies" (as such terms are used in the Exchange Act) to vote, or seek to advise or influence any persons with respect to the voting of, any securities of (or debt claims with respect to) the Company; (iv) form, join or participate in a "group" (within the meaning of Section 13(d)(3) of the Exchange Act) with respect to any securities of the Company except to the extent that being party to the Shareholders' Agreement constitutes formation of a group; (v) otherwise act, alone or in concert with others, to seek to control or exercise (other than through its representation on the Board of Directors) a controlling influence over the management, Board of Directors or the business and affairs of the Company; (vi) call, or seek or propose to call, a meeting of the Company's shareholders; and (vii) enter into any discussions, negotiations, arrangements or understandings with any third party with respect to any of the foregoing. SECTION 5.12. Non-Competition; Disclosure of ------------------------------ Opportunities. (a) The Purchaser's Non-Compete. During the ------------- --------------------------- Representation Period and for one year thereafter (the "Restricted Period"), without the prior written consent of ----------------- the Company, the Purchaser shall not engage in, and shall not invest in any entity that engages in, providing renal dialysis services to patients and related laboratory services (the "Business") in North America within a 75 mile radius of -------- (i) each of the Company's treatment centers that are existing as of the date of this Agreement (the "Existing Regions") or -------- ------- (ii) each location that has been identified in the strategic business plan of the Company that is approved, from time to time, by the Board of Directors of the Company as a location of likely expansion (except to the extent that such strategic business plan is subsequently modified to delete such location) (the "Identified Regions"). The restrictions set ---------- ------- forth in this paragraph shall apply only to the Purchaser's activities in North America. 30 (b) Disclosure of Opportunities by the Purchaser. -------------------------------------------- During the Representation Period, the Purchaser shall (i) disclose to the Chief Executive Officer of the Company all investment and acquisition opportunities of renal dialysis services centers located in North America in areas outside of the Existing Regions and the Identified Regions (the "Other Regions") that the Purchaser has identified and ------------- (ii) engage in good faith discussions with the Company concerning strategic business ventures with respect to the identified opportunities in the Other Regions. Notwithstanding anything to the contrary in the foregoing sentence, the Company shall not acquire or invest (or attempt to do so) in such opportunities in the Other Regions which the Purchaser has so identified and disclosed without the Purchaser's prior written consent. In the event that the Purchaser shall not or shall no longer actively pursue any investment or acquisition opportunities so disclosed to the Company, the Purchaser shall notify the Company of such event and it shall, upon written request by the Company, provide the Company with its written consent to permit the Company to acquire or invest in such opportunities. (c) Non-Solicitation of Employees. During the ----------------------------- Restricted Period, neither the Purchaser nor any other entity controlled by Gambro shall solicit or endeavor to entice away from the Company or any of its Affiliates any of their respective employees (or employ any such employee until one year after such employee leaves the employ of the Company or such Affiliate), and the Company and its Affiliates shall do none of the foregoing with respect to the employees of the Purchaser or any other entity controlled by Gambro. SECTION 5.13. Supply Agreement. (a) Subject to ---------------- the immediately following sentence, with respect to renal dialysis machines and the bloodlines used therewith in the Company's business, the Company shall, and shall cause its Subsidiaries to, purchase, and the Purchaser shall sell to the Company, a minimum of 75% of the aggregate requirements of the Company and its subsidiaries for such renal dialysis machines and 100% of the bloodlines used with such renal dialysis machines from the Purchaser on overall terms and conditions, including, without limitation, price, volume, delivery and service, that are no less favorable than the overall terms and conditions offered by the Purchaser to independent third parties for the same renal dialysis machines and bloodlines. Nothing contained herein shall require the Company to purchase renal dialysis machines for any treatment facility if the medical director of such facility has submitted to the Company a written objection to the use of such machines which includes the reasons for such objection. Accordingly, the 75% minimum specified in the 31 first sentence of this paragraph shall be reduced only to the extent that medical directors in charge of facilities which have generated more than 25% of the Company's aggregate purchases of renal dialysis machines have delivered such written objections. (b) Upon the written request of the Company, but not more than once during any six month period, the Company's external auditors shall have access, upon reasonable notice and during normal business hours, to the relevant sales records of the Purchaser solely for the purpose of determining whether the Company has received overall terms and conditions for the purchase of renal dialysis machines and bloodlines no less favorable than those offered to third parties independent of the Company and the Purchaser. The Company shall cause such auditors to report to the Company only whether the terms and conditions are no less favorable than those offered to independent third parties. The Company shall cause the auditors not to disclose any specific information received by the auditors from the Purchaser during the course of its review. (c) The obligations set forth in this Section 5.13 shall terminate upon the earlier occurrence of (i) the sixth year anniversary of the Closing Date or (ii) the Purchaser owns less than twenty percent of the issued and outstanding Common Stock for a period of 45 consecutive days after any Quarterly Date. (d) To the extent required by applicable law and the By-Laws, as determined in good faith by the Company on advice of its counsel, the specific transactions contemplated in this Section 5.13 shall be reviewed by a majority of the members of the Board who have no financial interest in such transaction. Section 5.14. Shareholder Approval. The Company -------------------- agrees to include in the proxy statement to be disseminated to the shareholders of the Company prior to the next annual meeting of the Company both (1) a resolution to confer voting rights to the shares of Common Stock issuable upon conversion of the Preferred Stock purchased by the Purchaser hereunder and any other shares of Common Stock acquired by the Purchaser pursuant to this Agreement or the Shareholders' Agreement, except that the Company shall have no obligation to include in such shareholders' resolution any such shares of Common Stock that would entitle the Purchaser and its associates, immediately upon acquisition of such shares, to exercise or direct the exercise of the voting power of the Company in the election of its directors equal to one-third or more of all such voting power, and (2) a resolution 32 approving the convertibility and conversion of the Preferred Stock to Common Stock as required pursuant to Part III, Section 5(i)(d) of Schedule D of the By-Laws of the National Association of Securities Dealers, Inc. The Company shall use its best efforts to solicit from the shareholders of the Company eligible to vote on such resolutions proxies in favor of such resolutions and shall take all other action necessary or advisable to secure the vote of the shareholders required to approve such resolutions. In the event that such approval of the shareholders is not obtained at such annual meeting, the Company shall redeem the Preferred Stock in accordance with its terms. SECTION 5.15. The Company's Right of First Offer. ---------------------------------- During the period beginning on the Closing Date and ending on the third anniversary of the Closing Date, in the event that the Purchaser desires to sell in a single transaction or in a series of related transactions shares of Common Stock that constitute in excess of 50% of the shares of Common Stock then owned by the Purchaser (the "Offered Shares"), the -------------- Purchaser shall first offer (the "Offer") in writing such ----- Offered Shares to the Company at a specified price (the "Offer Price"). The Company shall have 30 days to accept ----------- such Offer (the "Offer Period"). In the event that the ------------ Company does not accept the Offer in the Offer Period, the Purchaser may sell the Offered Shares to a third party during the 90 day period following the end of the Offer Period (the "Sales Period") for a price equal to or in excess of the ------------ Offer Price and on other terms no less favorable than previously offered to the Company; provided, however, that if -------- ------- during the Sales Period, the Purchaser desires to sell the Offered Shares for less than the Offer Price (the "Lower ----- Price") or on other terms that are more favorable to the ----- third party purchaser than previously offered to the Company, the Purchaser shall offer the Offered Shares to the Company at the Lower Price or on such other terms, and the Company shall have five days to accept such offer. ARTICLE VI CONDITIONS TO THE CLOSING ------------------------- SECTION 6.01. Conditions to Obligations of the -------------------------------- Purchaser. The obligations of the Purchaser to effect the --------- Closing shall be subject to the prior fulfillment of each of the following conditions: (a) Required Bank Amendment. The Required Bank ----------------------- Amendment, in form and substance satisfactory to the 33 Purchaser, shall have been executed and delivered by the parties thereto and shall be in full force and effect, and a copy thereof shall have been provided to the Purchaser. (b) Representations and Warranties; Agreements and ---------------------------------------------- Covenants. Except for changes permitted or contemplated --------- hereby or consented to by the Purchaser and except for matters waived or consented to by the Purchaser pursuant to Section 8.04, (i) the representations and warranties of the Company contained in this Agreement which are qualified as to materiality shall be true in all respects and all other representatives and warranties shall be true and correct in all material respects on and as of the Closing, with the same force and effect as if made as of the Closing, (ii) all the agreements contained in this Agreement to be performed or complied with by the Company, at or before the Closing, shall have been performed or complied with in all material respects and (iii) the Purchaser shall have received a certificate of the Company, signed by the Chief Executive Officer thereof, as to the fulfillment of the conditions set forth in the foregoing clauses (i) and (ii). (c) No Cessation Order. No order, ruling or ------------------ determination having the effect of ceasing the trading of the Common Stock shall have been issued or made by the SEC or other regulatory authority and be continuing and no proceedings for that purpose shall have been instituted and be pending. (d) Litigation. There shall have been no order or ---------- preliminary or permanent injunction entered in any action or proceeding before any federal, state or foreign court or governmental, administrative or regulatory authority or agency, or no other action taken or threatened, or statute, rule, regulation, legislation, interpretation, judgment or order enacted, entered, enforced, promulgated, amended, issued or deemed applicable to the Purchaser, the Company or any Subsidiary or Affiliate of the Purchaser, by any federal, state or foreign legislative body, court, government or governmental, administrative or regulatory authority or agency which shall have remained in effect and which shall have had the effect of: (i) making illegal, materially delaying or otherwise directly or indirectly restraining or prohibiting the consummation of the transactions hereunder (including, without limitation, the purchase of the Shares and the conversion or redemption of the Preferred Stock); (ii) prohibiting or materially limiting the ownership of the Shares; (iii) imposing material 34 limitations on the ability of the Purchaser to exercise full rights of ownership of any of the Shares, including, without limitation, the right to vote any shares of Common Stock; or (iv) requiring divestiture by the Purchaser of any Shares. (e) Calamities. There shall not have occurred and ---------- be continuing (i) any general suspension of, or limitation on prices for or trading in, securities on any United States securities exchange, (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, (iii) any limitation (whether or not mandatory) by any government or governmental, administrative or regulatory authority or agency, domestic or foreign, or other event that materially adversely affects the ability of the Purchaser to purchase the Shares hereunder, or (iv) a commencement of a war or armed hostilities or other national or international calamity directly involving the United States or Sweden. (f) Bankruptcy; Insolvency; Etc. No proceeding --------------------------- shall have been instituted or consented to by or against the Company seeking to adjudicate it bankrupt or insolvent, or seeking liquidation, winding-up, reorganization, arrangement, adjustment, protection, relief, or composition of its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or any substantial part of its property (each such action being a "Bankruptcy Proceeding"), and the Company shall not ---------- ---------- have taken any corporate action to authorize any Bankruptcy Proceeding. (g) No Material Adverse Effect. No fact, event or -------------------------- condition (financial or otherwise) shall have occurred with respect to the Company or any of its Subsidiaries having, individually or in the aggregate, a Material Adverse Effect. (h) Opinion. The Purchaser shall have received an ------- opinion from Wyatt, Tarrant, Combs, Gibert & Milan substantially to the effect of Exhibit B hereto and an opinion from Latham & Watkins substantially to the effect of Exhibit C hereto. (i) Right of First Offer. The Shareholders' -------------------- Agreement shall have been executed and delivered by the parties thereto. 35 SECTION 6.02. Conditions to Obligations of the -------------------------------- Company. The obligations of the Company to effect the ------- Closing shall be subject to the prior fulfillment of each of the following conditions: (a) Representations and Warranties. (i) The ------------------------------ representations and warranties of the Purchaser contained in this Agreement and in any certificates or agreements of the Purchaser delivered pursuant hereto shall be true and correct in all material respects on and as of the Closing, with the same force and effect as if made as of the Closing, (ii) all the agreements contained in this Agreement and in any certificates or agreements of the Purchaser delivered pursuant hereto to be performed or complied with by the Purchaser, at or before the Closing, shall have been performed or complied with in all material respects and (iii) the Company shall have received a certificate of the Purchaser, signed by a duly authorized officer thereof, as to the fulfillment of the conditions set forth in the foregoing clauses (i) and (ii). (b) Litigation. There shall have been no order or ---------- preliminary or permanent injunction entered in any action or proceeding before any federal, state or foreign court or governmental, administrative or regulatory authority or agency by any federal, state or foreign legislative body, court, government or governmental, administrative or regulatory authority or agency which shall have remained in effect and which shall have had the effect of making illegal the consummation of any of the transactions hereunder. ARTICLE VII INDEMNIFICATION --------------- SECTION 7.01. Survival of Representations and ------------------------------- Warranties. The representations and warranties of the ---------- Company in Article III shall survive the Closing until the second anniversary of the Closing Date; provided, however, -------- ------- that representations and warranties dealing with Tax matters shall survive for a period ending six months after the expiration of the applicable statute of limitations. Neither the period of survival nor the liability of any party with respect to the parties' representations and warranties shall be reduced by any investigation made at any time by or on behalf of any party. 36 SECTION 7.02. Indemnification by the Company. The ------------------------------ Purchaser, and its Affiliates, officers, directors, employees, agents, successors and assigns, shall be indemnified and held harmless by the Company for any and all Liabilities, losses, damages, claims, costs and expenses, interest, awards, judgments and penalties (including, without limitation, legal costs and expenses) actually suffered or incurred by them (hereinafter a "Purchaser Loss"), arising -------------- out of or resulting from: (a) the breach of any representation or warranty made by the Company contained herein or in any document delivered by the Company hereunder at the Closing; or (b) the breach of any covenant or agreement by the Company contained herein. SECTION 7.03. Indemnification by the Purchaser. -------------------------------- The Company, and its Affiliates, officers, directors, employees, agents, successors and assigns, shall be indemnified and held harmless by the Purchaser for any and all Liabilities, losses, damages, claims, costs and expenses, interest, awards, judgments and penalties (including, without limitation, legal costs and expenses) actually suffered or incurred by them (hereinafter a "Company Loss" and, together ------- ---- with a Purchaser Loss, a "Loss"), arising out of or resulting ---- from: (a) the breach of any representation or warranty made by the Purchaser contained herein or in any document delivered by the Purchaser hereunder at the Closing; or (b) the breach of any covenant or agreement by the Purchaser contained herein. SECTION 7.04. Materiality. Notwithstanding ----------- anything in this Agreement to the contrary, for purposes of application of the indemnity provisions of this Article, the amount of any Purchaser Loss or Company Loss arising from the breach of such representation, warranty, covenant or agreement shall be the entire amount of any such Loss actually incurred by the respective Indemnitee as a result of such breach and not just that portion of such Loss that exceeds the relevant level of materiality. SECTION 7.05. Time Period; Dollar Threshold. (a) ----------------------------- The indemnification obligations of the Company and the Purchaser under this Article VII shall continue for the same period of survival specified in Section 7.01 for each such representation and warranty and shall terminate with the expiration of the two year survival period for each such representation, warranty and covenant. Any claim or demand 37 against the Company or the Purchaser which is pending or asserted at or prior to the expiration of any survival period may continue to be asserted and indemnified against. (b) Neither the Company nor the Purchaser shall be entitled to indemnification under this Article VII unless and until the aggregate amount of the claims against the other party exceeds $500,000. If the aggregate amount of such claims against either party exceeds $500,000, then that party may claim indemnification for the entire aggregate amount of such claims. (c) The provisions of this Article VII shall be the sole and exclusive remedy (other than injunctive relief) of the Company or the Purchaser (regardless of against whom asserted) for the matters subject to indemnification. SECTION 7.06. Notice and Defense. Each party shall ------------------ within 30 days of learning of any asserted liability or damage claimed to give rise to indemnification hereunder notify the party obligated to indemnify it hereof in writing; provided, however, that the failure of the indemnified party -------- ------- to so notify the indemnifying party shall not relieve the indemnifying party of its obligations hereunder unless, and only to the extent that, such failure to notify prejudices the indemnifying party. Thereafter, the indemnifying party shall have, at its election, the right to compromise or defend any such matter at its sole cost and expense through counsel chosen by it. If the indemnifying party so undertakes to compromise and defend, the indemnifying party shall notify the other party of its intention to do so. The indemnifying party must defend such matter diligently or the indemnified party may assume control of the defense of such matter. Each party agrees in all cases to cooperate with the defending party and its counsel in the compromise of or defending of any such liabilities or claims. The defending party and the nondefending party may be represented by the same counsel unless such representation would be inappropriate due to actual or potential differing interests between them. In addition, the nondefending party shall at all times be entitled to monitor such defense through the appointment of counsel of its own choosing, at it own cost and expense. ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER --------------------------------- SECTION 8.01. Termination. (a) This Agreement may ----------- be terminated and the transactions contemplated hereby may be 38 abandoned at any time prior to the Closing Date: (i) By mutual written consent duly authorized by the Boards of Directors of the Company and the Purchaser; or (ii) By the Purchaser, if (A) (1) any Person, other than the Purchaser, shall have acquired, or shall have been granted any option or right, conditional or otherwise, to acquire, beneficial ownership of 20% or more of the outstanding shares of the Company's Common Stock, or (2) any group (other than a group including the Purchaser) shall have been formed which beneficially owns 20% or more of the outstanding shares of the Company's Common Stock; or (B) the Company shall have entered into an agreement with a third party with respect to any acquisition or purchase of all or a substantial portion of the assets of, or any equity interest in, the Company or any of its Subsidiaries or any business combination with the Company or any of its Subsidiaries by such third party; or (iii) By the Purchaser or the Company, if any court of competent jurisdiction in the United States or other United States governmental authority shall have issued an order, decree, or ruling or taken any other action restraining, enjoining or otherwise prohibiting any of the transactions hereunder and such order, decree, ruling or other action shall have become final and nonappealable; or (iv) By the Purchaser or the Company, if the Closing shall not have occurred by May 31, 1991 or such later date as the Company and the Purchaser shall hereafter agree; provided, however, that the right to terminate -------- ------- this Agreement under this Section 8.01(a)(iv) shall not be available to any party whose wilful failure to fulfill any material obligation under this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or before such date; or (v) By the Purchaser, in the event the Required Bank Amendment is not executed by the parties thereto prior to May 20, 1991. (b) This Agreement shall terminate (without any action or notice (in writing or otherwise) by any of the parties hereto) if any Bankruptcy Proceeding shall have been instituted or consented to by or against the Company. 39 SECTION 8.02. Effect of Termination. In the event --------------------- of the termination of this Agreement pursuant to Section 8.01, this Agreement shall forthwith become void and have no effect and there shall be no liability on the part of any party hereto or its Affiliates, directors, officers or shareholders; provided, however, that nothing herein shall -------- ------- relieve any party from liability for any breach hereof prior to such termination. SECTION 8.03. Amendment. This Agreement may be --------- amended by the parties hereto by action taken by or on behalf of the Company and the Purchaser at any time prior to the Closing Date. This Agreement may not be amended except by an instrument in writing signed by the parties hereto. SECTION 8.04. Waiver. At any time prior to the ------ Closing Date, either party hereto may (a) extend the time for the performance of any of the obligations or other acts of the other party hereto, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto and (c) waive compliance with any of the agreements or conditions contained herein. Any such extension or waiver shall be valid if set forth in an instrument in writing signed by the party to be bound thereby. The failure of either party to assert any of its rights hereunder shall not constitute a waiver of any such rights. ARTICLE IX GENERAL PROVISIONS ------------------ SECTION 9.01. Notices. All notices, requests, ------- claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by cable, telecopy, telegram or telex or 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 the Purchaser: Cobe Laboratories, Inc. 1185 Oak Street Lakewood, Colorado 80215 Attention: Mats Wahlstrom 40 with a copy to: Shearman & Sterling 599 Lexington Avenue New York, New York 10022 Attention: Peter D. Lyons, Esq. (b) if to the Company: REN Corporation-USA 6820 Charlotte Pike Nashville, Tennessee 37209 Attention: Chief Executive Officer with a copy to: Latham & Watkins 1001 Pennsylvania Avenue NW Suite 1300 Washington, D.C. 20004 Attention: Eric Bernthal, Esq. SECTION 9.02. Entire Agreement; Assignment. This ---------------------------- Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral, between the parties with respect to the subject matter hereof. This Agreement shall not be assigned by operation of law or otherwise, except that the Purchaser may assign all or any of its rights and obligations hereunder to any wholly owned Subsidiary of Gambro upon the execution of a written instrument whereby such assignee agrees to assume all of the Purchaser's obligations hereunder and be bound by all the terms and conditions of this Agreement; provided that no such assignment shall relieve the Purchaser -------- of its obligations hereunder if such assignee does not perform such obligations. SECTION 9.03. Parties in Interest. This Agreement ------------------- shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement. SECTION 9.04. Governing Law. This Agreement shall ------------- be governed by, and construed in accordance with, the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. 41 SECTION 9.05. 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 9.06. Counterparts. This Agreement may be ------------ executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. SECTION 9.07. Specific Performance. The parties -------------------- hereto agree that irreparable damage would occur in the event any of the provisions of this Agreement were not to be performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or equity. IN WITNESS WHEREOF, the Purchaser and the Company have each caused this Agreement to be executed by its duly authorized officer as of the date first written above. COBE LABORATORIES, INC. By: Ronald F. Plusk -------------------------------- Title: Vice President and Chief Financial Officer REN CORPORATION-USA By: Jerome S. Tannenbaum, M.D. -------------------------------- Title: Chairman of the Board and Chief Executive Officer EXHIBIT A --------- CONVERTIBLE REDEEMABLE PREFERRED STOCK SUMMARY OF TERMS ---------------- NUMBER OF SHARES 459,172 LIQUIDATION PREFERENCE $4.50 per share CONVERSION Each share of Preferred Stock will be automatically converted into one share of Common Stock upon approval by the shareholders of both (i) voting rights for the Purchaser for such underlying shares of Common Stock, and (ii) the conversion of the Preferred Stock to Common Stock as required pursuant to Part III, Section 5(i)(d) of Schedule D of the By-Laws of the National Association of Securities Dealers, Inc. REDEMPTION If such voting rights for the Purchaser have not been approved by the Company by September 30, 1991, then each share of Preferred Stock shall be automatically redeemed at a per share price (the "Redemption Price") equal to the higher of (a) $4.50 plus interest on such amount at a rate equal to the Citibank base rate announced from time to time during the period from the purchase of the Preferred Stock through the Redemption Date and (b) the average of the averages of the closing bid and asked prices of the Common Stock during the 30 trading days prior to the Redemption Date. The Redemption Price shall be payable as follows: (i) $4.36 of the per share Redemption Price shall be payable in cash, and (ii) the remainder of the per share Redemption Price shall be payable by issuance of a promissory note in a principal amount equal to such remainder. DIVIDENDS Equal to any dividends paid on the Common Stock. VOTING RIGHTS None. EXHIBIT B --------- CONTENTS OF OPINION OF WYATT, TARRANT, COMBS, GIBERT & MILAN 1. The Company is a corporation duly organized, validly existing and in good standing under the laws of Tennessee and has the requisite corporate power and authority to own, lease and operate its properties and carry on its business in all material respects as presently owned or conducted. The Company is duly qualified or licensed as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of its properties owned, leased or operated by it or the nature of its activities makes such qualification or licensing necessary, except those jurisdictions, if any, in which the failure to be so duly qualified or licensed and in good standing would not, taken as a whole, have a Material Adverse Effect. 2. The Company is not in violation of any of the provisions of the Charter of Incorporation or By-Laws, except where such violation would not, individually or in the aggregate, have a Material Adverse Effect. 3. The Company has all necessary corporate power and authority to execute and deliver the Agreement and to perform its obligations and to consummate the transactions contemplated thereunder. The execution, delivery and performance of the Agreement by the Company have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of the Company are necessary to authorize the Agreement or to consummate the transactions contemplated thereunder. 4. (a) The execution and delivery of the Agreement by the Company do not, and the performance of the Agreement (including, without limitation, the consummation of the transactions contemplated thereunder and the conversion or redemption of the Preferred Stock) will not, (i) conflict with or violate the Charter of Incorporation or By-Laws, (ii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to the Company or by which its or any of its properties are bound or affected, or (iii) result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or encumbrance on any of the properties or assets of the Company which would have a Material Adverse Effect, taken as a whole, pursuant to any note, bond, 2 mortgage, indenture, contract, agreement, lease, license, permit, insurance policy or other instrument or obligation and which note, bond, mortgage, indenture, contract, agreement, license, permit, insurance policy or other instrument or obligation is listed on the Disclosure Schedule and other schedules appended to the Agreement and to which the Company is a party, or by which the Company or its properties are bound or affected. (b) The execution and delivery of the Agreement by the Company do not, and the performance of the Agreement by the Company (including, without limitation, the consummation of the transactions thereunder and the conversion or redemption of the Preferred Stock) will not, require any consent, approval, authorization or permit of, or filing (other than filings, if any, required on Form 8-K with the SEC) with or notification to, any governmental or regulatory authority, domestic or foreign, on the part of the Company. 5. Following the consummation of the transactions thereunder, all shares of Common Stock and Preferred Stock subject to issuance pursuant to the Agreement and the Common Stock issuable upon conversion of the Preferred Stock, upon such issuance against payment for such shares of Common Stock and Preferred Stock as contemplated by the Agreement or upon conversion of the Preferred Stock, as the case may be, shall (i) be duly authorized, validly issued, fully paid and nonassessable, (ii) not be subject to any Encumbrances and (iii) such shares of Common Stock shall have accorded to them voting rights. The shares of Preferred Stock shall be convertible into shares of Common Stock in accordance with the terms of the Preferred Stock. None of the Shares nor the shares of Common Stock issuable upon conversion of the Preferred Stock are "Control Shares" as such term is defined in the Tennessee Business Corporation Law. The following assumptions shall be made: 1. Reliance upon representations and warranties of the Company and upon certificates of certain public officials 2. Authenticity of all documents submitted to us as copies, genuineness of all signatures, and conformity to the originals of all documents submitted to counsel as copies 3. Due authorization, execution and delivery of the Agreement by the Purchaser 4. Neither the Purchaser nor any Affiliate of the Purchaser has acquired any shares of Voting Securities other than the Shares during the ninety day period prior to the 3 Closing, and neither the Purchaser nor any Affiliate of the Purchaser will acquire any shares of Voting Securities other than the Shares during a period of ninety days after the Closing 5. Compliance by the Company, the Purchaser and any Affiliate of either the Company or the Purchaser with the covenants, representations, warranties and agreements made and to be performed by them pursuant to the Agreement. EXHIBIT C --------- CONTENTS OF OPINION OF LATHAM & WATKINS The Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery hereof by the Purchaser and payment for the Shares as contemplated by the Agreement, constitutes the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, or other similar laws affecting creditors' rights generally and by the availability of equitable remedies, and except to the extent that enforceability of the indemnification and contribution provisions set forth in Article IV of Exhibit C to the Agreement concerning Registration Rights may be limited by applicable law. EXHIBIT D --------- REGISTRATION RIGHTS ------------------- ARTICLE I DEFINITIONS SECTION 1.01. Definitions. Terms defined in the ----------- Stock Purchase Agreement (the "Agreement") dated as of --------- May 11, 1991 between REN Corporation-USA, a Tennessee corporation (the "Company"), and Cobe Laboratories, Inc., a ------- Colorado corporation (the "Purchaser"), are used herein as --------- therein defined. In addition, the following terms, as used herein, have the following meanings: "Demand Registration" means a Demand Registration as ------------------- defined in Section 2.02. "Piggyback Registration" means a Piggyback ---------------------- Registration as defined in Section 2.03. "Registrable Securities" means shares of Common ---------------------- Stock owned from time to time by the Purchaser and any other Subsidiary of Gambro. "Underwriter" means a securities dealer who ----------- purchases any Registrable Securities as principal and not as part of such dealer's market making activities. ARTICLE II REGISTRATION RIGHTS SECTION 2.01. Registrable Securities. The ---------------------- Registration Rights provided herein apply to Registrable Securities, but with respect to any particular Registrable Security, only so long as such security continues to be a Registrable Security. Any Registrable Security will cease to be a Registrable Security when (i) a registration statement covering such Registrable Security has been declared effective by the SEC and it has been disposed of pursuant to such effective registration statement, (ii) it is sold under circumstances in which all of the applicable conditions of Rule 144 under the Securities Act (or any similar provisions then in force) are met, (iii) it has been otherwise 2 transferred, the Company has delivered a new certificate or other evidence of ownership for it not bearing the legend required pursuant to the Agreement and it may be resold without subsequent registration under the Securities Act or any blue sky law then in force or (iv) it shall have ceased to be outstanding. SECTION 2.02. Demand Registration. (a) During the ------------------- period commencing on the third anniversary of the Agreement and ending on the tenth anniversary thereof (the "Registration ------------ Period"), the Purchaser may make a written request for ------ registration under the Securities Act of all or part of its Registrable Securities (a "Demand Registration") provided, ------------------- -------- however, that the Company shall not be obligated (i) to effect ------- more than one Demand Registration in any 12 month period, (ii) to effect a Demand Registration for less than 500,000 shares of Common Stock, (iii) to effect a Demand Registration within six months of the Purchaser selling any Registrable Securities pursuant to a Piggyback Registration under Section 2.03 or (iv) to effect more than two Demand Registrations during the Registration Period. Such request will specify the number of shares of Registrable Securities proposed to be sold and will also specify the intended method of disposition thereof. A registration will not count as a Demand Registration until it has become effective. (b) If the Purchaser so elects, the offering of such Registrable Securities pursuant to such Demand Registration shall be in the form of an underwritten offering. The Purchaser and the Company shall jointly select the book-running and other managing Underwriters in connection with such offering and any additional investment bankers and managers to be used in connection with the offering. SECTION 2.03. Piggyback Registration. If the Company ---------------------- proposes to file a registration statement under the Securities Act with respect to an offering of Common Stock (i) for the Company's own account (other than a registration statement on Form S-4 or S-8 (or any substitute form that may be adopted by the SEC)), or (ii) for the account of any of its holders of Common Stock, then the Company shall give written notice of such proposed filing to the Purchaser as soon as practicable (but in no event less than ten days before the anticipated filing date), and such notice shall offer subject to the terms and conditions hereof the Purchaser the opportunity to register such Registrable Securities as the Purchaser may request on the same terms and conditions as the Company's or such holders' Common Stock (a "Piggyback Registration"). ---------------------- 3 SECTION 2.04. Reduction of Offering. Notwithstanding --------------------- anything contained herein, if the managing Underwriter or Underwriters of an offering described in Section 2.02 or 2.03 shall advise the Company that (i) the size of the offering that the Purchaser, the Company and any other Persons intend to make or (ii) the kind of securities that the Purchaser, the Company and such other Persons intend to include in such offering are such that the success of the offering would be materially and adversely affected, then (A) if the size of the offering is the basis of such Underwriter's advice, the amount of Registrable Securities to be offered for the account of the Purchaser shall be reduced to the extent necessary to reduce the total amount of securities to be included in such offering to the amount recommended by such managing Underwriter or Underwriters; provided, however, that (x) in the case of a Demand -------- ------- Registration, the amount of Registrable Securities to be offered for the account of the Purchaser shall be reduced only after the amount of securities to be offered for the account of the Company and such other Persons has been reduced to zero, and (y) in the case of a Piggyback Registration, if securities are being offered for the account of Persons other than the Company, then the proportion by which the amount of such Registrable Securities intended to be offered for the account of the Purchaser is reduced shall not exceed the proportion by which the amount of such securities intended to be offered for the account of such other Persons is reduced; and (B) if the combination of securities to be offered is the basis of such Underwriter's advice, (x) the Registrable Securities to be included in such offering shall be reduced as described in clause (A) above (subject to the proviso in clause (A)), or (y) in the case of a Piggyback Registration, if the actions described in sub-clause (x) of this clause (B) would, in the judgment of the managing Underwriter, be insufficient to eliminate the adverse effect that inclusion of the Registrable Securities requested to be included would have on such offering, such Registrable Securities will be excluded from such offering. ARTICLE III REGISTRATION PROCEDURES SECTION 3.01. Filings; Information. Whenever the -------------------- Purchaser requests that any Registrable Securities be registered pursuant to Section 2.02 hereof, the Company will use its best efforts to effect the registration of such Registrable Securities as quickly as practicable, and in connection with any such request: (a) The Company will as expeditiously as possible prepare and file with the SEC a registration statement on 4 any form for which the Company then qualifies and which counsel for the Company shall deem appropriate and available for the sale of the Registrable Securities to be registered thereunder in accordance with the intended method of distribution thereof, and use its best efforts to cause such filed registration statement to become and remain effective for a period of not less than 90 days; provided, however, -------- ------- that if the Company shall furnish to the Purchaser a certificate signed by its Chief Executive Officer or Chief Financial Officer stating that in his or her good faith judgment it would be detrimental or otherwise disadvantageous to the Company or its shareholders for such a registration statement to be filed, or, in the case of an effective registration statement, for sales to be effected thereunder, the Company shall have a period of not more than 120 days within which to file such registration statement measured from the date of receipt of the request in accordance with Section 2.02 or, in the case of an effective registration statement, the Company shall be entitled to require the Purchaser to refrain from selling Registrable Securities under such registration statement for a period of up to 120 days. If the Company furnishes a notice under this paragraph at a time when a registration statement filed pursuant to this Agreement is effective, the Company shall extend the period during which such registration statement shall be maintained effective as provided in this Section 3.01(a) hereof by the number of days during the period from and including the date of the giving of notice under this paragraph to the date when sales under the registration statement may recommence. (b) The Company will, if requested, prior to filing such registration statement or any amendment or supplement thereto, furnish to the Purchaser and each managing Underwriter, if any, copies thereof, and thereafter furnish to the Purchaser and each such Underwriter, if any, such number of copies of such registration statement, each amendment and supplement thereto (in each case including all exhibits thereto and documents incorporated by reference therein) and the prospectus included in such registration statement (including each preliminary prospectus) as the Purchaser or such Underwriter may reasonably request in order to facilitate the sale of the Registrable Securities. (c) After the filing of the registration statement, the Company will promptly notify the Purchaser of any stop order issued or, to the knowledge of the Company, threatened to be issued by the Commission and take all necessary 5 actions required to prevent the entry of such stop order or to remove it if entered. (d) The Company will endeavor to qualify the Registrable Securities for offer and sale under such other securities or blue sky laws of such jurisdictions in the United States as the Purchaser reasonably (in light of the Purchaser's intended plan of distribution) requests; provided, however, that the Company will not be required to -------- ------- (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph (d), (ii) subject itself to taxation in any such jurisdiction or (iii) consent to service of process in any such jurisdiction. (e) The Company shall, as promptly as practicable, notify the Purchaser, at any time when a prospectus relating to the sale of the Registrable Securities is required by law to be delivered in connection with sales by an Underwriter or dealer, of the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and as promptly as practicable make available to the Purchaser and to the Underwriters any such supplement or amendment. The Purchaser agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in the preceding sentence, the Purchaser will forthwith discontinue the offer and sale of Registrable Securities pursuant to the registration statement covering such Registrable Securities until receipt of the copies of such supplemented or amended prospectus and, if so directed by the Company, the Purchaser will deliver to the Company all copies, other than permanent file copies then in the Purchaser's possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice. In the event the Company shall give such notice, the Company shall extend the period during which such registration statement shall be maintained effective as provided in Section 3.01(a) hereof by the number of days during the period from and including the date of the giving of such notice to the date when the Company shall make available to the Purchaser such supplemented or amended prospectus. 6 (f) The Company will enter into customary agreements (including an underwriting agreement in customary form and satisfactory in form and substance to the Company in its reasonable judgment) and take such other actions as are reasonably required in order to expedite or facilitate the sale of such Registrable Securities. (g) The Company will furnish to the Purchaser and to each managing Underwriter, if any, a signed counterpart, addressed to the Purchaser and each Underwriter, of (i) an opinion or opinions of counsel to the Company and (ii) a comfort letter or comfort letters from the Company's independent public accountants, each in customary form and covering such matters of the type customarily covered by opinions or comfort letters delivered to such parties. (h) The Company will make generally available to its securityholders, as soon as reasonably practicable, an earnings statement covering a period of 12 months, beginning within three months after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and the rules and regulations of the Commission thereunder. (i) The Company will use its best efforts to cause all such Registrable Securities to be listed on each securities exchange, if any, and the National Association of Securities Dealers' interdealer quotation system on which similar securities issued by the Company are then listed. The Company may require the Purchaser promptly to furnish in writing to the Company such information regarding the Purchaser, the plan of distribution of the Registrable Securities and other information as the Company may from time to time reasonably request or as may be legally required in connection with such registration. SECTION 3.02. Registration Expenses. In connection --------------------- with any Demand Registration, the Company, the Purchaser and any other Persons registering Registrable Securities in any such registration shall each pay its pro rata portion, calculated on the basis of the number of Registrable Securities to be registered by each of them, the following expenses (the "Registration Expenses") incurred in connection with such --------------------- registration: (i) all filing fees with the Commission, (ii) fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities), (iii) printing expenses, (iv) the fees and expenses 7 incurred in connection with the listing of the Registrable Securities, (v) fees and expenses of counsel and independent certified public accountants for the Company (including the expenses of any comfort letters pursuant to Section 3.01(g) hereof) and (vi) the reasonable fees and expenses of any additional experts retained by the Company in connection with such registration. The Company shall pay all Registration Expenses expenses incurred in connection with each Piggyback Registration. The Company, the Purchaser and each other Person registering Registrable Securities shall be responsible for any underwriting discounts or commission that may be payable upon the sale of its Registrable Securities. The Company shall pay internal Company expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties) relating to any Demand Registration or Piggyback Registration. ARTICLE IV INDEMNIFICATION AND CONTRIBUTION SECTION 4.01. Indemnification by the Company. The ------------------------------ Company agrees to indemnify and hold harmless the Purchaser, its employees, officers and directors, and each Person, if any, who controls the Purchaser within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities caused by any untrue statement or alleged untrue statement of a material fact contained in any registration statement or prospectus relating to the Registrable Securities (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information furnished in writing to the Company by or on behalf of the Purchaser expressly for use therein; provided, however, that the foregoing indemnity -------- ------- agreement with respect to any preliminary prospectus shall not inure to the benefit of the Purchaser if a copy of the current prospectus was not provided to a purchaser and such current prospectus would have cured the defect giving rise to such loss, claim, damage or liability or for any sales occurring after the Company has informed the Purchaser under Section 3.01(e) and prior to the delivery by the Company of any supplement or amendment to such prospectus. The Company also agrees to 8 indemnify any Underwriters of the Registrable Securities, their officers and directors and each person who controls such underwriters on substantially the same basis as that of the indemnification of the Purchaser provided in this Section 4.01. SECTION 4.02. Indemnification by the Purchaser. The -------------------------------- Purchaser agrees to indemnify and hold harmless the Company, its officers and directors, and each Person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to the Purchaser, but only with reference to information furnished in writing by or on behalf of the Purchaser expressly for use in any registration statement or prospectus relating to the Registrable Securities, or any amendment or supplement thereto, or any preliminary prospectus. The Purchaser also agrees to indemnify and hold harmless Underwriters of the Registrable Securities, their officers and directors and each person who controls such Underwriters on substantially the same basis as that of the indemnification of the Company provided in this Section 4.02. SECTION 4.03. Conduct of Indemnification Proceedings. -------------------------------------- In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to Section 4.01 or 4.02, such Person (the "Indemnified Party") shall ----------------- promptly notify the Person against whom such indemnity may be sought (the "Indemnifying Party") in writing and the ------------------ Indemnifying Party, upon the request of the Indemnified Party, shall retain counsel reasonably satisfactory to such Indemnified Party to represent such Indemnified Party and any others the Indemnifying Party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the Indemnified Party and the Indemnifying Party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the Indemnifying Party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) at any time for all such Indemnified Parties, and that all such fees and 9 expenses shall be reimbursed as they are incurred. In the case of any such separate firm for the Indemnified Parties, such firm shall be designated in writing by the Indemnified Parties. The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent, or if there be a final judgment for the plaintiff, the Indemnifying Party shall indemnify and hold harmless such Indemnified Parties from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment. SECTION 4.04. Contribution. If the indemnification ------------ provided for in this Article IV is unavailable to the Indemnified Parties in respect of any losses, claims, damages or liabilities referred to herein, then each such 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 or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, the Purchaser and the Underwriters from the offering of the securities, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) but also the relative fault of the Company, the Purchaser and the Underwriters in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company, the Purchaser and the Underwriters shall be deemed to be in the same proportion as the total proceeds from the offering (net of underwriting discounts and commissions but before deducting expenses) received by each of the Company and the Purchaser and the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the prospectus, bear to the aggregate public offering price of the securities. The relative fault of the Company, the Purchaser and the Underwriters 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 party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Purchaser agree that it would not be just and equitable if contribution pursuant to this Section 4.04 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of 10 the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages or liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 4.04, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, and the Purchaser shall not be required to contribute any amount in excess of the amount by which the net proceeds of the offering (before deducting expenses) received by the Purchaser exceeds the amount of any damages which the Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. ARTICLE V MISCELLANEOUS SECTION 5.01. Participation in Underwritten ----------------------------- Registrations. No Person may participate in any underwritten ------------- registered offering contemplated hereunder unless such Person (a) agrees to sell its securities on the basis provided in any underwriting arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements and these Registration Rights. SECTION 5.02. Rule 144. The Company covenants that it -------- will use its best efforts to file any reports required to be filed by it under the Securities Act and the Exchange Act and that it will take such further action as the Purchaser may reasonably request, all to the extent required from time to time to enable the Purchaser to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar rule 11 or regulation hereafter adopted by the Commission. Upon the request of the Purchaser, the Company will deliver to the Purchaser a written statement as to whether it has complied with such requirements. SECTION 5.03. Holdback Agreements. (a) The Purchaser ------------------- agrees not to offer, sell, contract to sell or otherwise dispose of any Registrable Securities, or any securities convertible into or exchangeable or exercisable for such securities, during the 14 days prior to, and during the 90 day period beginning on, the effective date of any registration statement registering the Registrable Securities other than the Registrable Securities to be sold pursuant to such registration statement. (b) The Company agrees not to offer, sell, contract to sell or otherwise dispose of any securities similar to the Registrable Securities to be sold pursuant hereto, or any securities convertible into or exchangeable or exercisable for such securities, during the 14 days prior to, and during the ninety 90 day period beginning on, the effective date of any registration statement registering the Registrable Securities other than any shares of Common Stock sold upon the exercise of an option or warrant or the conversion of a security outstanding at such date. EXHIBIT E --------- JEROME S. TANNENBAUM, M.D. MARK J. GINSBURG, M.D. c/o Ren Corporation USA 6820 Charlotte Pike Nashville, Tennessee 37209 Dated as of May 11, 1991 COBE LABORATORIES, INC. 1185 Oak Street Lakewood, Colorado 80215 Right of First Offer Agreement ------------------------------ Gentlemen: We refer to the Stock Purchase Agreement (the "Purchase Agreement") dated the date hereof between Cobe ------------------ Laboratories, Inc., a Colorado corporation ("Cobe"), and Ren ---- Corporation USA, a Tennessee corporation ("Ren"). --- Capitalized terms used herein without definition shall have the same meaning given to them in the Purchase Agreement. Jerome S. Tannenbaum, M.D. ("Dr. Tannenbaum") and -------------- Mark J. Ginsburg, M.D. ("Dr. Ginsburg") are each ------------ shareholders, directors and officers of Ren. As an inducement for Cobe to enter into the Purchase Agreement and consummate the equity investment contemplated thereunder, Dr. Tannenbaum and Dr. Ginsburg agree with Cobe as follows: (a) Right of First Offer. In the event that either -------------------- Dr. Tannenbaum or Dr. Ginsburg (a "Selling Party") desires ------------- to sell shares of Common Stock owned by him (the "Offered ------- Shares") in a single transaction or series of related ------ transactions to a person or "group" (as such term is defined in Section 13(d)(3) of the Exchange Act) and (i) such Offered Shares in the aggregate equal or exceed five percent of the then outstanding shares of Common Stock or (ii) such Offered Shares are being sold to a person or group that immediately following the sale of the Offered Shares in the contemplated transaction or transactions shall own 10% or more of the then outstanding shares of Common Stock, then the Selling Party shall first offer (the "Offer") such Offered Shares ----- 2 to Cobe at a specified price (the "Offer Price"). Cobe ----------- shall have 30 days to accept such Offer (the "Offer ----- Period"). In the event Cobe does not accept the Offer in ------ the Offer Period, the Selling Party may sell the Offered Shares to a third party during the 90 days' period following the end of the Offer Period (the "Sales ----- Period") for a price equal to to or in excess of the ------ Offer Price and on other terms no less favorable than previously offered to Cobe; provided, however, that if -------- ------- during the Sales Period, the Selling Party desires to sell the Offered Shares for less than the Offer Price (the "Lower Price") or on other terms that are more ----------- favorable to the purchaser than previously offered to Cobe, the Selling Party shall offer the Offered Shares to Cobe at the Lower Price or on such other terms, and Purchaser shall have five days to accept such offer. Notwithstanding anything to the contrary in the foregoing, the provisions of this paragraph (a) shall not apply to purchases and sales of Common Stock between Dr. Tannebaum and Dr. Ginsburg. (b) Dr. Tannenbaum further agrees with Cobe that the transactions contemplated by the Purchase Agreement shall not constitute a "Change in Control" for purposes of the ----------------- Employment Agreement dated September 11, 1989, by and between Ren and Dr. Tannenbaum, as amended. (c) Dr. Ginsburg further agrees with Cobe that the transactions contemplated by the Purchase Agreement shall not constitute a "Change in Control" for purposes of the Employment Agreement dated , by and ---------------------- between Ren and Dr. Ginsburg. (d) Effectiveness; Term. This Letter Agreement ------------------- shall be effective as of the Closing Date. If you accept and agree to the foregoing, please so indicate by signing in the space provided below. -------------------------- JEROME S. TANNENBAUM, M.D. -------------------------- MARK J. GINSBURG, M.D. Accepted and Agreed as of the date first written above: COBE LABORATORIES, INC. By --------------------------- Name: Title: COBE LABORATORIES, INC. 1185 Oak Street Lakewood, Colorado 80215 May 24, 1991 REN Corporation - USA 6820 Charlotte Pike Nashville, Tennessee 37209 Gentlemen: Reference is made to the Stock Purchase Agreement dated as of May 11, 1991 (the "Agreement") between Cobe Laboratories, Inc. and REN Corporation - USA. Section 1.01 shall be amended by adding the following additional definition: "Purchase Agreement" shall mean this Agreement, as amended by the letter agreement dated as of May 24, 1991 between the Company and the Purchaser. Section 5.08(b) shall be amended in its entirety to read as follows: (b) From and after the 1992 Meeting and during the period in which the Purchaser owns at least 15% of the issued and outstanding Common Stock, the Purchaser may request the Company to include, as a nominee for the Board recommended by the Board, one person designated by the Purchaser, who, unless he shall resign prior to the expiration of his term, may be the Purchaser's 1993 Director, and such person shall be nominated by the Purchaser unless the Board, in the exercise of its fiduciary duties, reasonably shall determine that he is not qualified to serve on the Board and each of the committees specified in subsection (d). If the Board shall reasonably determine that such designee of the Purchaser is not so qualified, the Purchaser shall have the opportunity to specify one or more additional designees who shall be so included as a nominee subject to the qualification set forth in the immediately preceding sentence. Section 5.10 is amended by amending subsection (b) in its entirety to read as follows and by adding the following subsections (c) and (d) thereto: (b) Within 15 days of the end of each March 31st, June 30, September 30th and December 31st (each a "Quarterly Date") -------------- following the Closing Date, the Company shall notify the Purchaser of the number of shares of Common Stock and the number of Voting Securities outstanding as of each such Quarterly Date. The Purchaser shall have the option to purchase from the Company additional shares of Common Stock to the extent necessary to permit the Purchaser to maintain the higher of (i) the percentage of shares of Common Stock or Voting Securities owned by the Purchaser as of the immediately preceding Quarterly Date, after giving effect to any purchases thereafter pursuant to this Section 5.10(b), or (ii) 19.99% of the issued and outstanding shares of Common Stock and 19.99% of Total Voting Power. The Purchaser may exercise such option by delivery to the Company of written notice of its intention to exercise such option within 30 days of such Quarterly Date. The per share purchase price for such shares of Common Stock shall be equal to the average of the averages of the closing bid and asked prices of the Common Stock on each day during the calendar quarter ending on the Quarterly Date. The closing of the purchase of such shares of Common Stock shall take place within five days of the receipt of the written notice delivered by the Purchaser to the Company pursuant to this Section 5.10(b). (c) In the event that the Preferred Stock is redeemed in accordance with its terms, the Purchaser, in lieu of its rights under Section 5.10(b), shall have the option to purchase from the Company on April 30, 1992 additional shares of Common Stock to the extent necessary to permit the Purchaser to maintain the higher of (i) the percentage of shares of Common Stock or Voting Stock owned by the Purchaser as of September 30, 1991 after giving effect to the redemption of the Preferred Stock and any other purchases pursuant to Section 5.10(b), or (ii) 19.99% of the issued and outstanding shares of Common Stock and 19.99% of the Total Voting Power. The Purchaser may exercise such option by delivery to the Company of written notice of its intention to exercise such option on or prior to April 25, 1992. The per share purchase price for such shares of Common Stock shall be equal to the average of the averages of the closing bid and asked prices of the Common Stock on each day during the period beginning on the Closing Date and ending on March 31, 1992. The closing of the purchase of such shares of Common Stock shall take place within five days of the receipt of the written notice delivered by the Purchaser to the Company pursuant to this Section 5.10(c). (d) In the event that the Shareholders under the Agreement and Release dated as of January 1, 1991 (the "Release Agreement") among the Company and such Shareholders elect Option 1 as set forth in Section 5 of the Release Agreement and 300,000 shares of Common Stock (the "Escrowed Shares") are delivered out of Escrow to such Shareholders, the Purchaser shall have the option to purchase on the Exercise Date (as hereinafter defined) 69,000 shares of Common Stock at a per share purchase price equal to the average of the averages of the closing bid and asked prices of the Common Stock for each trading day from the Closing Date up to the Exercise Date. The "Exercise Date" shall mean the date that is 15 Business Days after the date of delivery of the Escrowed Shares to such Shareholders or, in the event that the Preferred Stock is redeemed in accordance with its terms, the later of (i) April 30, 1992 or (ii) the day that is 15 Business Days after such delivery of the Escrowed Shares. The Purchaser may exercise the option set forth herein by delivery notice thereof to the Company no later than five (5) Business Days prior to the Exercise Date. Section 5.14 is hereby amended to read in its entirety as follows: Section 5.14. Shareholder Approval. The Company -------------------- agrees to include in the proxy statement to be disseminated to the shareholders of the Company prior to the next annual meeting of the Company both (1) a resolution to confer voting rights to the shares of Common Stock issuable upon conversion of the Preferred Stock purchased by the Purchaser hereunder and any other shares of Common Stock acquired by the Purchaser pursuant to this Agreement or the Shareholders' Agreement, except that the Company shall have no obligation to include in such shareholders' resolution any such shares of Common Stock that would entitle the Purchaser and its associates, immediately upon acquisition of such shares, to exercise or direct the exercise of the voting power of the Company in the election of its directors equal to one-third or more of all such voting power, and (2) a resolution approving the convertibility and conversion of the Preferred Stock to Common Stock as required pursuant to Part III, Section 5(i)(d) of Schedule D of the By-Laws of the National Association of Securities Dealers, Inc. The Company shall use its best efforts to solicit from the shareholders of the Company eligible to vote on such resolutions proxies in favor of such resolutions and shall take all other action necessary or advisable to secure the vote of the shareholders required to approve such resolutions. In the event that such approval of the shareholders is not obtained at such annual meeting, the Company shall redeem the Preferred Stock in accordance with its terms. Except as expressly modified hereby, all provisions of the Agreement shall remain in full force and effect. This amendment supercedes all prior agreements, discussions or correspondence between the parties concerning the subject matter of said provisions. COBE LABORATORIES, INC. By: /s/ Ronald F. Plusk -------------------------- Ronald F. Plusk Vice President and Chief Financial Officer Agreed to by: REN Corporation - USA By: /s/ Jerome S. Tannenbaum -------------------------- Jerome S. Tannenbaum, M.D. Chairman of the Board and Chief Executive Officer EXECUTION COPY AMENDMENT NO. 2 TO THE MAY 11, 1991 STOCK PURCHASE AGREEMENT AMENDMENT NO, 2, dated as of March 17, 1992 (this "Amendment") to the Stock Purchase Agreement, dated as of May --------- 11, 1991, as amended by Amendment No. 1, dated May 24, 1991, between REN CORPORATION-USA, a Tennessee corporation (the "Company") and COBE LABORATORIES, INC., a Colorado ------- corporation (the "Purchaser"). --------- W I T N E S S E T H - - - - - - - - - - WHEREAS, the Company and the Purchaser have entered into as of May 11, 1991 a Stock Purchase Agreement (the "Purchase Agreement"; capitalized terms used and not defined ------------------ herein being used herein as defined in the Purchase Agreement); WHEREAS, the Company and the Purchaser entered into on May 24, 1991 an Amendment No. 1 to the Purchase Agreement; and WHEREAS, the Company and the Purchaser have determined that it is in their mutual interests to further amend the Purchase Agreement as hereinafter set forth. NOW THEREFORE, in consideration of the premises and of the mutual agreements and understandings hereinafter set forth, the Purchaser and the Company agree as follows: SECTION 1. Amendments to the Purchase Agreement. ------------------------------------ The Purchase Agreement is, effective as of the date hereof, hereby amended as follows: (a) New defined terms shall be added to Section 1.01, immediately following the definition of "Affiliate", to read as follows: "'Amendment No. 1' means the Amendment No. 1, --------------- dated May 24, 1991, to this Agreement between the Company and the Purchaser. 'Amendment No. 2' means the Amendment No. 2, --------------- dated March 17, 1992, to this Agreement between the Company and the Purchaser." (b) The defined term "Purchase Agreement" shall be restated in full to read as follows: 2 "'Purchase Agreement' means this Agreement, as amended by Amendment No. 1 and Amendment No. 2." (c) Sections 5.08(a) and (b) shall be restated in full to read as follows: "(a) The Company agrees, effective upon the Closing Date, to decrease the size of the Board to seven directors and to appoint to the Board two persons designated by the Purchaser (members of the Board designated by the Purchaser pursuant to this Section 5.08 are referred to as the "Purchaser's ----------- Directors"), one with his original term expiring at --------- the Company's 1992 annual stockholders' meeting and the other with his original term expiring at the Company's 1993 annual stockholders' meeting. Without the prior written consent of the Purchaser, the Company, acting through the Board, shall not increase the size of the Board beyond seven members. (b) Effective on the Closing Date and so long as the Purchaser owns at least 20% of the issued and outstanding Common Stock, the Purchaser shall have the right to request that the Company include (x) one person designated by the Purchaser as a nominee to serve as a member of the "Class Three Directors" (as such term is used in the By-Laws; provided that -------- for purposes of this Agreement, such term shall be further defined to be that class of directors of the Board whose term next expires at the 1992 annual stockholders' meeting) of the Board and (y) one person designated by the Purchaser to serve as a member of the "Class One Directors" (as such term is used in the By-Laws; provided that for purposes of -------- this Agreement, such term shall be further defined to be that class of directors of the Board whose term next expires at the 1993 annual stockholders' meeting) of the Board, and such persons shall be nominated by the Company. In the event the Purchaser owns 15% or more but less than 20% of the issued and outstanding Common Stock, the Purchaser shall have the right to request that the Company include one person designated by the Purchaser as a nominee to serve as a member of either the Class Three Directors or the Class One Directors of the Board, and such person shall be nominated by the Company. If the Board, in the exercise of its fiduciary duties, reasonably shall determine that any person designated by the Purchaser to be a nominee to the Board pursuant to this Section 5.08 3 is not qualified to serve on the Board and each of the committees specified in subsection (d) of this Section 5.08, the Purchaser shall have the opportunity to specify one or more additional designees who shall be so included as a nominee subject to the reasonable determination by the Board, in the exercise of their fiduciary duties, that any such additional designee is not qualified to serve on the Board and each of the committees specified in this Section 5.08. The Board shall recommend to the stockholders of the Company for election the designees of the Purchaser who are nominated by the Company to serve as members of the Board. In the event that a vacancy is created on the Board at any time by the death, disability, retirement, resignation or removal (with or without cause) of a Purchaser's Director, the Purchaser shall have the right to select a nominee to fill such vacancy. If the remaining Board members, in the exercise of their fiduciary duties, reasonably shall determine that such nominee is not qualified to serve on the Board and each of the committees specified in subsection (d) of this Section 5.08, the Purchaser shall have the opportunity to select one or more additional nominees. Subject to the qualification set forth in the immediately preceding sentence, the remaining members of the Board shall elect to the Board to fill such vacancy any such nominee of the Purchaser." (d) The second sentence of Section 5.10(b) shall be restated in full to read as follows: "The Purchaser shall have the option to purchase from the Company additional shares of Common Stock to the extent necessary to permit the Purchaser to maintain 30% of the issued and outstanding shares of Common Stock and 30% of the Total Voting Power." SECTION 2. Counterparts. This Amendment may be ------------ executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. SECTION 3. Governing Law. This Amendment shall be ------------- governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed in that State. 4 IN WITNESS WHEREOF, each of the Purchaser and the Company has caused this Amendment to be executed as of the date first written above by their respective officers thereunto duly authorized. REN CORPORATION-USA By: /s/ Jerome S. Tannenbaum --------------------------- Name: Jerome S. Tannenbaum Title: Chief Executive Officer COBE LABORATORIES, INC. By: /s/ Ronald F. Plusk --------------------------- Name: Ronald F. Plusk Title: Vice President and Chief Financial Officer AMENDMENT NO. 3 TO THE MAY 11, 1991 STOCK PURCHASE AGREEMENT AMENDMENT NO. 3, dated as of October 1, 1992 (this "Amendment"), to the Stock Purchase Agreement, dated as of --------- May 11, 1991, as amended by Amendment No. 1, dated May 24, 1991, and Amendment No. 2, dated March 17, 1992, between REN CORPORATION-USA, a Tennessee corporation (the "Company"), and ------- COBE LABORATORIES, INC., a Colorado corporation (the "Purchaser"). --------- W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Company and the Purchaser have entered into a Stock Purchase Agreement, dated as of May 11, 1991 (the "Purchase Agreement"; capitalized terms used and not ------------------ defined herein being used herein as defined in the Purchase Agreement); WHEREAS, the Company and the Purchaser have entered into Amendment No. 1, dated as of May 24, 1991 to the Purchase Agreement; and WHEREAS, the Company and the Purchaser have entered into Amendment No. 2, dated as of March 17, 1992 to the Purchase Agreement; and WHEREAS, the Company and the Purchaser have determined that it is in their mutual interests to further amend the Purchase Agreement as hereinafter set forth; NOW, THEREFORE, in consideration of the premises and of the mutual agreements and understandings hereinafter set forth, the Purchaser and the Company agree as follows: SECTION 1. Amendments to the Purchase Agreement. ------------------------------------ The Purchase Agreement is, effective as of the date hereof, hereby amended as follows: (a) New defined terms shall be added to Section 1.01, immediately following the definition of "Amendment No. 2", to read as follows: "'Amendment No. 3' means the Amendment No. 3, --------------- dated October 1, 1992, to this Agreement between the Company and the Purchaser." (b) The defined term "Purchase Agreement" shall be restated in full to read as follows: 2 "'Purchase Agreement' means this Agreement, as ------------------ amended by Amendment No. 1, Amendment No. 2 and Amendment No. 3." (c) Sections 5.08 shall be restated in full to read as follows: "(a) The Company agrees, effective upon the Closing Date (as defined in the Stock Purchase Agreement dated as of July 2, 1992 between the Company and the Purchaser), to increase the size of the Board to nine directors and to appoint as directors three persons designated by the Purchaser (such three directors, together with the two members of the Board previously designated by the Purchaser being the 'Purchaser's Directors'), one such --------------------- additional Purchaser's Director with his term expiring at the Company's 1993 annual stockholders' meeting and the other two additional Purchaser's Directors with their term expiring at the Company's 1994 annual stockholders' meeting. Without the prior written consent of the Purchaser, the Company, acting through the Board, shall not change the size of the Board. (b) Effective on the Closing Date and so long as the Purchaser owns a majority of the issued and outstanding Common Stock, the Purchaser shall have the right to request that the Company include (x) two persons designated by the Purchaser as a nominee to serve as a member of the 'Class One Directors' (as such term is used in the By-Laws; provided that -------- for purposes of this Agreement, such term shall be further defined to be that class of directors of the Board whose term next expires at the 1993 annual stockholders' meeting) of the Board, (y) two persons designated by the Purchaser to serve as a member of the 'Class Two Directors' (as such term is used in the By-Laws; provided that for purposes of this -------- Agreement, such term shall be further defined to be that class of directors of the Board whose term next expires at the 1994 annual stockholders' meeting) of the Board and (z) one person designated by the Purchaser to serve as a member of the 'Class Three Directors' (as such term is used in the By-Laws; provided that for purposes of this Agreement, such -------- term shall be further defined to be that class of directors of the Board whose term next expires at the 1995 annual stockholders' meeting) of the 3 Board, and such persons shall be nominated by the Company. If the Board, in the exercise of its fiduciary duties, reasonably shall determine that any person designated by the Purchaser to be a nominee to the Board pursuant to this Section 5.08 is not qualified to serve on the Board and the committees specified in subsection (c) of this Section 5.08 for which such person has been designated to serve upon by the Purchaser, the Purchaser shall have the opportunity to specify one or more additional designees who shall be so included as a nominee subject to the reasonable determination by the Board, in the exercise of their fiduciary duties, that any such additional designee is qualified to serve on the Board and such committees. The Board shall recommend to the stockholders of the Company for election the designees of the Purchaser who are nominated by the Company to serve as members of the Board. In the event that a vacancy is created on the Board at any time by the death, disability, retirement, resignation or removal (with or without cause) of a Purchaser's Director, the Purchaser shall have the right to select a nominee to fill such vacancy. If the remaining Board members, in the exercise of their fiduciary duties, reasonably shall determine that such nominee is not qualified to serve on the Board and the committees specified in subsection (c) of this Section 5.08 for which such person has been designated to serve upon by the Purchaser, the Purchaser shall have the opportunity to select one or more additional nominees. Subject to the qualification set forth in the immediately preceding sentence, the remaining members of the Board shall elect to the Board to fill such vacancy any such nominee of the Purchaser. (c) Effective on the Closing Date and so long as the Purchaser owns a majority of the issued and outstanding Common Stock, the Company agrees to place two of the Purchaser's Directors on each of the Executive, Compensation and Human Resources Committees, each of which is to consist of three members and to place two of the Purchaser's Directors on the Audit Committee, which is to consist of four members." (d) The second sentence of Section 5.10(b) shall be restated in full to read as follows: "The Purchaser shall have the option to purchase from the Company additional shares of Common Stock 4 to the extent necessary to permit the Purchaser to maintain 50.1% of the issued and outstanding shares of Common Stock and 50.1% of the Total Voting Power." (e) Article VIII is amended by adding a new Section 8.05 at the end thereof to read as follows: "SECTION 8.05. Disinterested Directors. ----------------------- Effective on the Closing Date and so long as the Purchaser's Directors constitute a majority of the Board, no amendment of this Agreement by which the Company is to be bound shall be effective unless approved by a majority of the members of the Board who are not Purchaser's Directors." SECTION 2. Counterparts. This Amendment may be ------------ executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. SECTION 3. Governing Law. This Amendment shall be ------------- governed by, and construed in accordance with, the laws of the State of New York, applicable to contracts executed in and to be performed entirely within that state. IN WITNESS WHEREOF, each of the purchaser and the Company has caused this Amendment to be executed as of the date first written above by their respective officers thereunto duly authorized. REN CORPORATION-USA By /s/ ------------------------- Name: Title: President COBE LABORATORIES, INC. By /s/ ------------------------- Name: Title: President EXHIBIT A --------- FORM OF AMENDMENT NO. 3 TO THE MAY 11, 1991 STOCK PURCHASE AGREEMENT AMENDMENT NO. 3, dated as of __________, 1992 (this "Amendment"), to the Stock Purchase Agreement, dated as of --------- May 11, 1991, as amended by Amendment No. 1, dated May 24, 1991, and Amendment No. 2, dated March 17, 1992, between REN CORPORATION-USA, a Tennessee corporation (the "Company"), and ------- COBE LABORATORIES, INC., a Colorado corporation (the "Purchaser"). --------- W I T N E S S E T H: ------------------- WHEREAS, the Company and the Purchaser have entered into a Stock Purchase Agreement, dated as of May 11, 1991 (the "Purchase Agreement"; capitalized terms used and not ------------------ defined herein being used herein as defined in the Purchase Agreement); WHEREAS, the Company and the Purchaser have entered into Amendment No. 1, dated as of May 24, 1991 to the Purchase Agreement; and WHEREAS, the Company and the Purchaser have entered into Amendment No. 2, dated as of March 17, 1992 to the Purchase Agreement; and WHEREAS, the Company and the Purchaser have determined that it is in their mutual interests to further amend the Purchase Agreement as hereinafter set forth; NOW, THEREFORE, in consideration of the premises and of the mutual agreements and understandings hereinafter set forth, the Purchaser and the Company agree as follows: SECTION 1. Amendments to the Purchase Agreement. ------------------------------------ The Purchase Agreement is, effective as of the date hereof, hereby amended as follows: (a) New defined terms shall be added to Section 1.01, immediately following the definition of "Amendment No. 2", to read as follows: "'Amendment No. 3' means the Amendment No. 3, --------------- dated , 1992, to this Agreement between ---------------- the Company and the Purchaser." (b) The defined term "Purchase Agreement" shall be restated in full to read as follows: A-2 "'Purchase Agreement' means this Agreement, as ------------------ amended by Amendment No. 1, Amendment No. 2 and Amendment No. 3." (c) Sections 5.08 shall be restated in full to read as follows: "(a) The Company agrees, effective upon the Closing Date (as defined in the Stock Purchase Agreement dated as of July 2, 1992 between the Company and the Purchaser), to increase the size of the Board to nine directors and to appoint as directors three persons designated by the Purchaser (such three directors, together with the two members of the Board previously designated by the Purchaser being the 'Purchaser's Directors'), one such --------------------- additional Purchaser's Director with his term expiring at the Company's 1993 annual stockholders' meeting and the other two additional Purchaser's Directors with their term expiring at the Company's 1994 annual stockholders' meeting. Without the prior written consent of the Purchaser, the Company, acting through the Board, shall not change the size of the Board. (b) Effective on the Closing Date and so long as the Purchaser owns a majority of the issued and outstanding Common Stock, the Purchaser shall have the right to request that the Company include (x) two persons designated by the Purchaser as a nominee to serve as a member of the `Class One Directors' (as such term is used in the By-Laws; provided that -------- for purposes of this Agreement, such term shall be further defined to be that class of directors of the Board whose term next expires at the 1993 annual stockholders' meeting) of the Board, (y) two persons designated by the Purchaser to serve as a member of the 'Class Two Directors' (as such term is used in the By-Laws; provided that for purposes of this -------- Agreement, such term shall be further defined to be that class of directors of the Board whose term next expires at the 1994 annual stockholders' meeting) of the Board and (z) one person designated by the Purchaser to serve as a member of the 'Class Three Directors' (as such term is used in the By-Laws; provided that for purposes of this Agreement, such -------- term shall be further defined to be that class of directors of the Board whose term next expires at the 1995 annual stockholders' meeting) of the A-3 Board, and such persons shall be nominated by the Company. If the Board, in the exercise of its fiduciary duties, reasonably shall determine that any person designated by the Purchaser to be a nominee to the Board pursuant to this Section 5.08 is not qualified to serve on the Board and the committees specified in subsection (c) of this Section 5.08 for which such person has been designated to serve upon by the Purchaser, the Purchaser shall have the opportunity to specify one or more additional designees who shall be so included as a nominee subject to the reasonable determination by the Board, in the exercise of their fiduciary duties, that any such additional designee is qualified to serve on the Board and such committees. The Board shall recommend to the stockholders of the Company for election the designees of the Purchaser who are nominated by the Company to serve as members of the Board. In the event that a vacancy is created on the Board at any time by the death, disability, retirement, resignation or removal (with or without cause) of a Purchaser's Director, the Purchaser shall have the right to select a nominee to fill such vacancy. If the remaining Board members, in the exercise of their fiduciary duties, reasonably shall determine that such nominee is not qualified to serve on the Board and the committees specified in subsection (c) of this Section 5.08 for which such person has been designated to serve upon by the Purchaser, the Purchaser shall have the opportunity to select one or more additional nominees. Subject to the qualification set forth in the immediately preceding sentence, the remaining members of the Board shall elect to the Board to fill such vacancy any such nominee of the Purchaser. (c) Effective on the Closing Date and so long as the Purchaser owns a majority of the issued and outstanding Common Stock, the Company agrees to place two of the Purchaser's Directors on each of the Executive, Compensation and Human Resources Committees, each of which is to consist of three members and to place two of the Purchaser's Directors on the Audit Committee, which is to consist of four members." (d) The second sentence of Section 5.10(b) shall be restated in full to read as follows: "The Purchaser shall have the option to purchase from the Company additional shares of Common Stock A-4 to the extent necessary to permit the Purchaser to maintain 50.1% of the issued and outstanding shares of Common Stock and 50.1% of the Total Voting Power." (e) Article VIII is amended by adding a new Section 8.05 at the end thereof to read as follows: "SECTION 8.05. Disinterested Directors. ----------------------- Effective on the Closing Date and so long as the Purchaser's Directors constitute a majority of the Board, no amendment of this Agreement by which the Company is to be bound shall be effective unless approved by a majority of the members of the Board who are not Purchaser's Directors." SECTION 2. Counterparts. This Amendment may be ------------ executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. SECTION 3. Governing Law. This Amendment shall be ------------- governed by, and construed in accordance with, the laws of the State of New York, applicable to contracts executed in and to be performed entirely within that state. IN WITNESS WHEREOF, each of the Purchaser and the Company has caused this Amendment to be executed as of the date first written above by their respective officers thereunto duly authorized. REN CORPORATION-USA By -------------------- Name: Title: COBE LABORATORIES, INC. By -------------------- Name: Title: EXHIBIT B --------- CONTENTS OF OPINIONS OF LATHAM & WATKINS AND/OR WYATT, TARRANT, COMBS, GILBERT & MILOM 1. The Company is a corporation duly organized, validly existing and in good standing under the laws of Tennessee and has the requisite corporate power and authority to own, lease and operate its properties and carry on its business in all material respects as presently owned or conducted. The Company is duly qualified or licensed as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of its properties owned, leased or operated by it, or the nature of its activities makes such qualification or licensing necessary, except those jurisdictions, if any, in which the failure to be so duly qualified or licensed and in good standing would not, taken as a whole, have a Material Adverse Effect. 2. The Company is not in violation of any of the provisions of the Charter of Incorporation or By-Laws, except where such violation would not, individually or in the aggregate, have a Material Adverse Effect. 3. The Company has all necessary corporate power and authority to execute and deliver the Agreement and to perform its obligations and to consummate the transactions contemplated thereunder. The execution, delivery and performance of the Agreement by the Company have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of the Company are necessary to authorize the Agreement or to consummate the transactions contemplated thereunder. 4. (a) The execution and delivery of the Agreement by the Company do not, and the performance of the Agreement (including, without limitation, the consummation of the transactions contemplated thereunder) will not, (i) conflict with or violate the Charter of Incorporation or By-Laws, (ii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to the Company, or by which its or any of its properties are bound or affected, or (iii) result in any breach of or constitute a default (or an B-2 event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or encumbrance on any of the properties or assets of the Company which would have a Material Adverse Effect, taken as a whole, pursuant to any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, insurance policy or other instrument or obligation, and which note, bond, mortgage, indenture, contract, agreement, license, permit, insurance policy or other instrument or obligation to which the Company is a party, or by which the Company or its properties are bound or affected. (b) The execution and delivery of the Agreement by the Company do not, and the performance of the Agreement by the Company (including, without limitation, the consummation of the transactions thereunder) will not require any consent, approval, authorization or permit of, or filing (other than filings, if any, required on Form 8-K with the SEC and the HSR Act) with or notification to, any governmental or regulatory authority, on the part of the Company. 5. Following the consummation of the transactions thereunder, all the Shares subject to issuance pursuant to the Agreement, upon such issuance against payment for such Shares as contemplated by the Agreement shall (i) be duly authorized, validly issued, fully paid and nonassessable, (ii) not be subject to any Encumbrances and (iii) such Shares shall have accorded to them voting rights. 6. The Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery hereof by the Purchaser, and payment for the Shares as contemplated by the Agreement, constitutes the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally and by the availability of equitable remedies. The following assumptions shall be made: 1. Reliance upon representations and warranties of the Company and upon certificates of certain public officials; B-3 2. Authenticity of all documents submitted to us as copies, genuineness of all signatures, and conformity to the originals of all documents submitted to counsel as copies; 3. Due authorization, execution and delivery of the Agreement by the Purchaser; 4. Compliance by the Company, the Purchaser and any Affiliate of either the Company or the Purchaser with the covenants, representations, warranties and agreements made, and to be performed by them pursuant to the Agreement. AMENDMENT NO. 4 TO THE MAY 11, 1991 STOCK PURCHASE AGREEMENT AMENDMENT NO. 4, dated as of April 26, 1994 (this "Amendment"), to the Stock Purchase Agreement dated as of May 11, 1991, as amended by Amendment No. 1 dated May 24, 1991, Amendment No. 2 dated March 17, 1992, and Amendment No. 3 dated as of October 1, 1992 (as so amended, the "Purchase -------- Agreement"; capitalized terms used and not defined herein being used herein --------- as defined in the Purchase Agreement), between REN CORPORATION-USA, a Tennessee corporation (the "Company"), and COBE LABORATORIES, INC., a Colorado corporation ------- (the "Purchaser"). --------- W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Company and the Purchaser have entered into a Stock Purchase Agreement dated as of May 11, 1991; and WHEREAS, the Company and the Purchaser have determined that it is in their mutual interests to further amend the Purchase Agreement as hereinafter set forth; NOW, THEREFORE, in consideration of the premises and of the mutual agreements and understandings hereinafter set forth, the Purchaser and the Company agree as follows: SECTION 1. Amendments to the Purchase Agreement. The Purchase ------------------------------------ Agreement is, effective as of the date hereof, hereby amended as follows: (a) New defined terms shall be added to Section 1.01, immediately following the definition of "Amendment No. 3", to read as follows: "'Amendment No. 4' means the Amendment No. 4, dated as of ---------------- April 26 , 1994, to this Agreement between the Company and the Purchaser." (b) The defined term "Purchase Agreement" shall be restated in full to read as follows: "Purchase Agreement" means this Agreement, as amended by ------------------ Amendment No. 1, Amendment No. 2, Amendment No. 3 and Amendment No. 4." (c) Sections 5.08 shall be restated in full to read as follows: "(a)(i) The Company agrees, from and after the date of this Amendment No. 4 (the "Effective Date"), that the number of -------------- directors on the Board will be that number that is determined from time to time in accordance with the bylaws of the Company; that in each election of directors of the Company, the Purchaser shall have the right to cause the Company to include as nominees to serve as members of the Board that number of persons designated by the Purchaser so that the number of all such persons so designated by the Purchaser from time to time constitute a majority of the members of the Board (each such nominee after being duly elected and qualified to be a director of the Company and each director serving on the Board on the Effective Date who was so designated by the Purchaser being a "Purchaser's Director"); and that such persons shall be -------------------- nominated by the Company. (ii) From and after the date of this Amendment No. 4, Purchaser's Directors shall constitute a majority of the members of each of the Executive and Compensation Committees and one half of the members of the Audit Committee. (b)(i) From and after the date of this Amendment No. 4, whenever the number of directors on the Board is increased, the number of Purchaser's Directors will be increased, if necessary, to the smallest number of directors necessary to maintain a majority of Purchaser's Directors on the Board. Each additional Purchaser's Director nominated to the Board will be designated as a member of the class of directors (as such term is used in the bylaws of the Company) which has the fewest Purchaser's Directors prior to such designation. If more than one class of directors is eligible for the designation, the designation will be made to the last class among such classes to stand for election. If more than one Purchasers's Director is nominated to the Board as a result of any increase in the number of Purchaser's Directors, the additional Purchaser's Directors will be designated as a member of a class in sequence applying the procedure set forth in this Section 5.08(b)(i). (ii) From and after the date of this Amendment No. 4, whenever the number of directors on the Board is decreased, the number of Purchaser's Directors will be decreased, if necessary, to the smallest number of directors necessary to maintain a majority of Purchaser's Directors on the Board and the number of seats in each class designated to be filled by Purchaser's Directors will be adjusted so that the number of Purchaser's Directors in each class is as nearly equal as is possible. (c) If the Board, in the exercise of its fiduciary duties, reasonably shall determine that any person designated by the Purchaser to be a nominee to the Board pursuant to this Section 5.08 is not qualified to serve on the Board or any committee specified in subsection (a)(ii) of this Section 5.08, the Purchaser shall have the opportunity to specify one or more additional designees who shall be so included as a nominee, subject to the reasonable determination by the Board, in the exercise of its fiduciary duties, that any such additional designee is qualified to serve on the Board or such committee. The Board shall recommend to the stockholders of the Company for election the designees of the Purchaser who are nominated by the Company to serve as members of the Board. (d) In the event that a vacancy is created on the Board at any time by the death, disability, retirement, resignation or removal (with or without cause) of a Purchaser's Director, the Purchaser shall have the right to select a nominee to fill such vacancy. If the remaining Board members, in the exercise of their fiduciary duties, reasonably shall determine that such nominee is not qualified to serve on the Board and the committees specified in subsection (a)(ii) of this Section 5.08 for which such person has been designated to serve upon by the Purchaser, the Purchaser shall have the opportunity to select one or more additional nominees. Subject to the qualification set forth in the immediately preceding sentence, the remaining members of the Board shall elect to the Board to fill such vacancy any such nominee of the Purchaser. SECTION 2. Counterparts. This Amendment may be executed in one ------------ or more counterparts, and by the different parties hereto in separate counterpart, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. IN WITNESS WHEREOF, each of the Purchaser and the Company has caused this Amendment to be executed as of the date first written above by their respective officers thereunto duly authorized. REN CORPORATION-USA By: /s/ ------------------------- Name: Title: President/CEO COBE LABORATORIES, INC. By: /s/ ------------------------- Name: Title: President EX-99.(C)(3) 7 ================================================================================ STOCK PURCHASE AGREEMENT between COBE LABORATORIES, INC. and REN CORPORATION-USA Dated as of February 9, 1992 ================================================================================ TABLE OF CONTENTS ---------------- Section Page ------- ---- ARTICLE I DEFINITIONS 1.01 Definitions ................................. 1 ARTICLE II PURCHASE AND SALE OF SHARES; CLOSING 2.01 Authorization, Purchase and Sale of Shares ........................... 4 2.02 Closing .................................... 4 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY 3.01 Organization and Qualification; Subsidiaries .............................. 5 3.02 Charter of Incorporation and By-Laws ........ 5 3.03 Capitalization .............................. 6 3.04 Authority Relative to This Agreement ........ 6 3.05 No Conflict; Required Filings and Consents .................................. 7 3.06 Common Stock ................................ 8 3.07 SEC Filings; Financial Statements ........... 8 3.08 Private Offering ............................ 9 3.09 Brokers ..................................... 10 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER 4.01 Corporate Organization ...................... 10 4.02 Authority Relative to This Agreement ........ 10 4.03 No Conflict; Required Filings and Consents... 11 4.04 Funds ....................................... 11 4.05 Securities Act .............................. 11 4.06 Brokers ..................................... 12 (ii) Section Page ------- ---- ARTICLE V ADDITIONAL AGREEMENTS 5.01 Conduct of Business by the Company Pending the Closing ....................... 13 5.02 Regulatory and Other Authorizations ......... 13 5.03 Access to Information ....................... 13 5.04 Notification of Certain Matters ............. 14 5.05 Further Action; Reasonable Efforts .......... 14 5.06 Public Announcements ........................ 14 5.07 Legend ...................................... 14 ARTICLE VI CONDITIONS TO THE CLOSING 6.01 Conditions to Obligations of the Purchaser.. 15 6.02 Conditions to Obligations of the Company.... 17 ARTICLE VII INDEMNIFICATION 7.01 Survival of Representations and Warranties... 18 7.02 Indemnification by the Company .............. 18 7.03 Indemnification by the Purchaser ............ 18 7.04 Materiality ................................. 19 7.05 Time Period; Dollar Threshold ............... 19 7.06 Notice and Defense .......................... 19 ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER 8.01 Termination ................................. 20 8.02 Effect of Termination ....................... 21 8.03 Amendment ................................... 21 8.04 Waiver ...................................... 21 (iii) ARTICLE IX GENERAL PROVISIONS Section Page ------- ---- 9.01 Notices .................................... 22 9.02 Entire Agreement; Assignment ............... 23 9.03 Parties in Interest ........................ 23 9.04 Governing Law .............................. 23 9.05 Headings ................................... 23 9.06 Counterparts ............................... 23 9.07 Specific Performance ....................... 23 EXHIBIT A Form of Amendment No. 2 to the May 11, 1991 Stock Purchase Agreement EXHIBIT B Contents of Opinion of Wyatt, Tarrant, Combs, Gibert & Milan DISCLOSURE SCHEDULE STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of February --------- 9, 1992, between REN CORPORATION-USA, a Tennessee corporation (the "Company"), ------- and COBE LABORATORIES, INC., a Colorado corporation (the "Purchaser"). --------- W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Company desires to authorize, issue and sell to the Purchaser, and the Purchaser desires to purchase from the Company, the Shares (as hereinafter defined). NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter set forth, the parties hereto agree as follows: ARTICLE I DEFINITIONS ----------- SECTION 1.01. Definitions. As used in this ----------- Agreement, the following terms shall have the following meanings: "Affiliate" of a Person means a Person that, directly or --------- indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the first mentioned Person. "Amendment No. 2" means the Amendment No. 2 to the Stock Purchase --------------- Agreement, dated as of May 11, 1991, as amended by Amendment No. 1, dated May 24, 1991, between the Company and the Purchaser, substantially in the form of Exhibit A hereto. "Bankruptcy Proceeding" has the meaning specified in Section --------------------- 6.01(e). "Board" means the Board of Directors of the Company. ----- "Business Day" means any day other than a Saturday, Sunday or ------------ federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, Eastern Standard Time. "By-Laws" means the Restated By-Laws of the Company, as amended ------- through the date hereof. 2 "Charter of Incorporation" means the Restated Charter of ------------------------ Incorporation of the Company, as amended through the date hereof. "Closing" means the completion of the transactions specified ------- herein relating to the purchase and sale of the Shares, as contemplated by Section 2.01 hereof. "Closing Date" means the date on which the Closing shall occur. ------------ "Common Stock" means the common shares of the Company, no par ------------ value. "Company" means REN Corporation-USA, a Tennessee corporation. ------- "Company Loss" has the meaning specified in Section 7.03. ------------ "control" (including the terms "controlled by" and "under common ------- ------------- ------------ control with") means the possession, directly or indirectly, or as trustee or ------------ executor, of the power to direct or cause the direction of the management and/or policies of a Person, whether through the ownership of stock, as trustee or executor, by contract or credit arrangement, or otherwise. "December Balance Sheet" means the balance sheet, dated as of ---------------------- December 31, 1991, included in the December Financial Statements. "December Financial Statements" has the meaning specified in ----------------------------- Section 3.07(c). "Disclosure Schedule" means the Disclosure Schedule, dated as of ------------------- the date hereof, delivered to the Purchaser by the Company and forming a part of this Agreement. "Encumbrance" means any security interest, pledge, mortgage, lien ----------- (including environmental liens), charge, adverse claim or restriction of any kind, including, without limitation, any restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of ownership, but excluding such Encumbrances which, taken as a whole, would not have a Material Adverse Effect. "Exchange Act" means the Securities Exchange Act of 1934, as ------------ amended, together with the rules and regulations promulgated thereunder. 3 "First Union Loan Agreement" means the amended and restated loan -------------------------- agreement, dated as of March 18, 1990, between the Company and First Union National Bank of North Carolina, a national banking association under the laws of the United States, as such agreement has been amended, supplemented, restated or otherwise modified from time to time, together with any notes, security pledge, guaranty or other ancillary agreements executed pursuant thereto. "GAAP" means U.S. generally accepted accounting principles and ---- practices in effect from time to time, applied consistently throughout the periods involved. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act ------- of 1976, as amended, and the rules and regulations promulgated thereunder. "Liabilities" means any and all debts, liabilities and ----------- obligations, whether accrued or fixed, absolute or contingent, mature or unmatured, or determined or determinable, including, without limitation, those arising under any law, rule, regulation or order by a governmental authority, and those arising under any contract, agreement, commitment or undertaking. "Loss" has the meaning specified in Section 7.03. ---- "Material Adverse Effect" means any circumstance, change, event, ----------------------- transaction, loss, failure, effect or other occurrence that is, or is reasonably likely to be, materially adverse to the business, operations, properties (including intangible properties), condition (financial or otherwise), assets, Liabilities, results of operations or prospects of the Company and its Subsidiaries taken as a whole. "Person" means an individual, corporation, partnership, ------ association, trust, joint venture, unincorporated organization, other entity or group (as defined in Section 13(d)(3) of the Exchange Act). "Purchase Price" has the meaning specified in Section 2.01. -------------- "Purchaser Loss" has the meaning specified in Section 7.02. -------------- "SEC" means the Securities and Exchange Commission. --- "SEC Reports" means all forms, reports and documents required to ----------- be filed by the Company with the SEC since November 28, 1989, including, without limitation, (i) the 4 Company's Annual Reports on Form 10-K for the fiscal years ended December 31, 1989 and 1990 and (ii) all other reports or registrations filed by the Company with the SEC since November 28, 1989. "Securities Act" means the Securities Act of 1933, as amended, -------------- together with the rules and regulations promulgated thereunder. "Shares" has the meaning specified in Section 2.01. ------ "Subsidiary" or "Subsidiaries" means any corporation, ---------- ------------ partnership, joint venture or other legal entity, of which the Company or any other Person, as the case may be (either alone or through or together with any other Subsidiary), owns, directly or indirectly, 50 percent or more of the stock or other equity interests, and the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity. ARTICLE II PURCHASE AND SALE OF SHARES; CLOSING ------------------------------------ SECTION 2.01. Authorization, Purchase and Sale of Shares. Upon ------------------------------------------ the terms and subject to the conditions set forth herein, at the Closing, the Company shall authorize, issue and sell to the Purchaser, and the Purchaser shall purchase from the Company, 1,170,732 shares of Common Stock (such shares of Common Stock being herein the "Shares") for an aggregate purchase price of ------ $12,000,003 (the "Purchase Price"). -------------- SECTION 2.02. Closing. (a) The Closing of the purchase and sale ------- shall take place within three Business Days of the satisfaction or waiver of the conditions set forth herein, at the offices of Wyatt, Tarrant, Combs, Gilbert & Milom, Suite 1350, Third National Bank Building, Nashville, Tennessee, or at such other time and place as the Company and the Purchaser may mutually agree in writing. (b) At the Closing, the Company shall deliver or cause to be delivered to the Purchaser: (i) stock certificates evidencing the Shares registered in the name of the Purchaser (or its designee); (ii) the certificate referred to in Section 6.01(a); (iii) the legal opinion referred to in Section 6.01(g); (iv) a receipt for the Purchase Price; and (v) such other documents as the Purchaser shall reasonably request. 5 (c) At the Closing, the Purchaser shall deliver to the Seller: (i) the Purchase Price, by wire transfer, to an account or accounts designated by the Company at least two Business Days prior to the Closing Date; (ii) the certificate referred to in Section 6.02(a); (iii) a receipt for the Shares; and (iv) such other documents as the Company shall reasonably request. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY --------------------------------------------- The Company represents and warrants to the Purchaser that: SECTION 3.01. Organization and Qualification; Subsidiaries. The -------------------------------------------- Company and each of its Subsidiaries are corporations duly organized, validly existing and in good standing under the laws of their respective jurisdictions of incorporation, and have the requisite corporate power and authority to own, lease and operate their properties and carry on their businesses in all material respects as presently owned or conducted. The Company and each of its Subsidiaries are duly qualified or licensed as a foreign corporation to do business, and are in good standing, in each jurisdiction where the character of their properties owned, leased or operated by them, or the nature of their activities, makes such qualification or licensing necessary, except those jurisdictions, if any, in which the failure to be so duly qualified or licensed and in good standing would not, taken as a whole, have a Material Adverse Effect. Schedule 3.01 of the Disclosure Schedule sets forth a complete and correct list of each of the Subsidiaries of the Company. SECTION 3.02. Charter of Incorporation and By-Laws. The Company ------------------------------------ has heretofore furnished to the Purchaser a complete and correct copy of the Charter of Incorporation and the By-Laws, each as amended to date, each of which is in full force and effect. The Company is not in violation of any of the provisions of the Charter of Incorporation or By-Laws, and its Subsidiaries are not in violation of any of the provisions of their charters of incorporation, by-laws or equivalent organizational documents, except where such violation would not, taken as a whole, have a Material Adverse Effect. 6 SECTION 3.03. Capitalization. (a) The authorized capital stock of -------------- the Company consists of (x) 10,000,000 shares of Preferred Stock, of which none is issued, outstanding or reserved for issuance, and (y) 60,000,000 shares of Common Stock, of which (i) 11,210,737 shares of Common Stock are issued and outstanding, (ii) 0 shares of Common Stock are held in the treasury of the Company, (iii) an aggregate of 271,400 shares of Common Stock are subject to outstanding options, and 481,125 shares are reserved for issuance, pursuant to the Company's Stock Option Plan, (iv) an aggregate of 331,838 shares of Common Stock are subject to outstanding promissory notes that are convertible into shares of Common Stock, (v) 180,000 shares of Common Stock are held in escrow on behalf of the Company and certain shareholders, in connection with a settlement of a claim arising from an acquisition of a treatment center in Douglas, Georgia, and (vi) an aggregate of 100,700 shares of Common Stock are subject to outstanding warrants that are exercisable into shares of Common Stock. (b) Except as set forth in this Section 3.03 or in Schedule 3.03(b) of the Disclosure Schedule, there are no options, warrants or other rights, agreements, arrangements or commitments of any character to which the Company or any of its Subsidiaries is a party, or obligating the Company or any of its Subsidiaries to issue or sell any shares of capital stock of, or other equity interests in, the Company or any of its Subsidiaries. Except as set forth in Schedule 3.03(b) of the Disclosure Schedule, there are no outstanding contractual obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any of the capital stock of the Company or any Subsidiary or to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any Subsidiary or any other entity. Each of the outstanding shares of capital stock of each of the Company's Subsidiaries is duly authorized, validly issued, fully paid and nonassessable, and is owned by the Company, directly or indirectly, free and clear of all Encumbrances, except as set forth in Schedule 3.03(b) of the Disclosure Schedule, and for any Encumbrances incurred pursuant to the First Union Loan Agreement and Encumbrances for taxes not yet due and payable. (c) Except as set forth on Schedule 3.03(c) of the Disclosure Schedule, the Company is not party to any agreement granting registration rights to any Person with respect to any equity or debt securities of the Company. SECTION 3.04. Authority Relative to This Agreement. The Company ------------------------------------ has all necessary corporate power and authority to execute and deliver this Agreement, to perform 7 its obligations and to consummate the transactions contemplated hereunder. The execution, delivery and performance of this Agreement by the Company have been duly and validly authorized by all necessary corporate action, and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions contemplated by this Agreement. This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery hereof by the Purchaser and payment for the Shares as contemplated by this Agreement, constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms (except, in each such case, as enforceability may be limited by bankruptcy, insolvency, reorganization and other similar laws now or hereafter in effect relating to or affecting creditors' rights generally, and to the extent that the remedy of specific performance and injunctive and other forms of equitable relief are subject to certain equitable defenses and to the discretion of the court before which any proceeding therefor may be brought). SECTION 3.05. No Conflict; Required Filings and Consents. ------------------------------------------ (a) Assuming the satisfaction of the conditions set forth in Article VI hereof, the execution and delivery of this Agreement by the Company do not, and the performance of this Agreement (including, without limitation, the consummation of the transactions contemplated hereunder) will not, (i) conflict with or violate the Charter of Incorporation or By-Laws, (ii) conflict with or violate the charters of incorporation or by-laws or equivalent organizational documents of any of the Company's Subsidiaries, (iii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to the Company or any of its Subsidiaries or by which the Company or any of its Subsidiaries respective properties are bound or affected, or (iv) result in any breach of, or constitute a default (or an event which, with notice or lapse of time or both, would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or encumbrance on any of the properties or assets of the Company or any of its Subsidiaries pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, insurance policy or other instrument or obligation to which the Company or any of its Subsidiaries is a party, or by which the Company or any of its Subsidiaries or its or any of their respective properties are bound or affected, except, in the case of clauses (ii), (iii) and (iv) above, for such conflicts which would not, taken as a whole, have a Material Adverse Effect. 8 (b) The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company (including, without limitation, the consummation of the transactions hereunder) will not, require any consent, approval, authorization or permit of, or filing (other than filings, if any, required on Form 8-K with the SEC and pursuant to the HSR Act) with, or notification to, any third party or any governmental or regulatory authority, domestic or foreign, on the part of the Company or any of its Subsidiaries. SECTION 3.06. Common Stock. Assuming all conditions set forth in ------------ Article VI are satisfied, following the consummation of the transactions hereunder, all of the Shares subject to issuance pursuant to this Agreement, upon such issuance against payment for such Shares as contemplated by this Agreement, shall (i) be duly authorized, validly issued, fully paid and nonassessable and (ii) not be subject to any Encumbrances (other than those that may be incurred by the Purchaser). The Shares shall have accorded to them full voting rights. None of the Shares are "Control Shares", as such term is defined in the Tennessee Business Corporation Act. SECTION 3.07. SEC Filings; Financial Statements. (a) The Company --------------------------------- has filed all forms, reports, statements and documents required to be filed with the SEC since November 28, 1989, including, without limitation, the SEC Reports. The SEC Reports (i) were each prepared in accordance with, and, at the time of filing, complied in all material respects with, the requirements of the Securities Act or the Exchange Act, as the case may be, and (ii) did not, at the time they were filed, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. None of the Company's Subsidiaries is required to file any forms, reports or other documents with the SEC. (b) Each of the consolidated financial statements (including, in each case, any related notes thereto) contained in the SEC Reports has been prepared in accordance with GAAP (except as may be indicated in the notes thereto), and each presents fairly the consolidated financial position of the Company and its consolidated Subsidiaries at the respective dates thereof and the consolidated results of its operations and changes in cash flows for the periods 9 indicated, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments, which were not and are not expected to be material in amount. (c) Schedule 3.07(c) of the Disclosure Schedule hereto sets forth the unaudited consolidated balance sheet of the Company and its Subsidiaries and the unaudited statement of operations for the 12-month period ended December 31, 1991 (the "December Financial Statements"). The December Financial Statements ----------------------------- have been prepared in accordance with GAAP and present fairly the financial condition of the Company and its consolidated Subsidiaries as of December 31, 1991 and the consolidated results of its operations for the 12-month period ended December 31, 1991, except that the December Financial Statements are subject to normal or recurring year-end adjustments, which are not expected to be material in amount. (d) Except as set forth in Schedule 3.07(d) of the Disclosure Schedule hereto and as and to the extent set forth on the December Financial Statements, neither the Company nor any of its Subsidiaries has any Liabilities, including, without limitation, liabilities for taxes which would be required to be reflected on a balance sheet, or in the notes thereto prepared in accordance with GAAP, except for liabilities or obligations incurred in the ordinary course of business since December 31, 1991 which would not, taken as a whole, have a Material Adverse Effect. SECTION 3.08. Private Offering. (a) Assuming the accuracy of the ---------------- representations and warranties of the Purchaser, the sale of the Shares hereunder is exempt from the registration and prospectus delivery requirements of the Securities Act. (b) No form of general solicitation or general advertising (including, without limitation, advertisements, articles, notices or other communications published in any newspaper, magazine or other medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising) was used by the Company or any other Person acting on behalf of the Company in respect of the Shares or in connection with the offer and sale of the Shares. 10 SECTION 3.09. Brokers. No broker, finder or investment banker is ------- entitled to any brokerage, finder's or other fee or commission in connection with the transactions hereunder based upon arrangements made by or on behalf of the Company. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER ----------------------------------------------- The Purchaser represents and warrants to the Company that: SECTION 4.01. Corporate Organization. The Purchaser is a ---------------------- corporation duly organized, validly existing and in good standing under the laws of Colorado and has the requisite corporate power and authority and any necessary governmental authority to own, operate or lease the properties that it purports to own, operate or lease and to carry on its business as it is now being conducted. SECTION 4.02. Authority Relative to This Agreement. The Purchaser ------------------------------------ has all necessary corporate power and authority to execute and deliver this Agreement and to perform its obligations and to consummate the transactions contemplated hereunder. The execution and delivery of this Agreement by the Purchaser and the purchase of the Shares as provided in Section 2.01 hereof by the Purchaser hereunder have been duly and validly authorized by all necessary corporate action of the Purchaser and no other corporate proceedings on the part of the Purchaser are necessary to authorize this Agreement or the purchase of the Shares by the Purchaser as contemplated hereby. This Agreement has been duly and validly executed and delivered by the Purchaser and, assuming the due authorization, execution and delivery by the Company, constitutes the legal, valid and binding obligation of the Purchaser enforceable against the Purchaser in accordance with its terms (except in each such case as enforceability may be limited by bankruptcy, insolvency, reorganization and other similar laws now or hereafter in effect relating to or affecting creditors' rights generally and to the extent that the remedy of specific performance and injunctive and other forms of equitable relief are subject to certain equitable defenses and to the discretion of the court before which any proceeding therefor may be brought), 11 SECTION 4.03. No Conflict; Required Filings and Consents. (a) The ------------------------------------------ execution and delivery of this Agreement by the Purchaser do not, and the performance of this Agreement by the Purchaser will not, (i) conflict with or violate the articles of incorporation or by-laws or equivalent organizational documents of the Purchaser, (ii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to the Purchaser or by which it or its properties are bound or affected, or (iii) result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or encumbrance on any of the property or assets of the Purchaser pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Purchaser is a party or by which the Purchaser or any of its properties is bound or affected, except, in the case of this clause (iii) and clause (ii) above, for any such breaches, defaults or other occurrences which would not, individually or in the aggregate, have a material adverse effect on the business, operations, properties (including intangible properties), condition (financial or otherwise), assets or liabilities of the Purchaser. (b) The execution and delivery of this Agreement by the Purchaser do not, and the performance of this Agreement by the Purchaser (including, without limitation, the consummation of the transactions hereunder) will not, require any consent, approval, authorization or permit of, or filing (other than a filing pursuant to the HSR Act) with or notification to, any third party or any governmental or regulatory authority, domestic or foreign. SECTION 4.04. Funds. The Purchaser has and, immediately prior to ----- the Closing, will have the funds necessary to consummate the purchase of the Shares hereunder. SECTION 4.05. Securities Act. The Shares purchased by the -------------- Purchaser pursuant to this Agreement are being acquired for investment only and not with a view to any sale or distribution (within the meaning of the Securities Act) of the Shares or any part thereof. The Purchaser agrees at all times to sell or otherwise dispose of all or any part of the Shares so acquired by the Purchaser (and any securities issued in exchange therefor) only pursuant to a registration, or exemption therefrom, under the Securities Act and in 12 compliance with applicable state securities laws. The Purchaser will take any steps necessary to insure that any purchaser will agree not to sell or otherwise dispose of Shares except in compliance with the requirements contained in the preceding sentence. The Purchaser is an "accredited investor" within the meaning of Rule 501 promulgated under the Securities Act and has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Shares. The Purchaser has received all the information it deems material to its evaluation of the business, assets, liabilities, financial condition and results of operations of the Company and all the information it has requested from the Company and considers necessary or appropriate for deciding whether to purchase the Shares. The Purchaser has the ability to bear the economic risks of the Purchaser's prospective investment and the Purchaser is able, without materially impairing its financial condition, to hold the Shares for an indefinite period of time and to suffer complete loss on its investment. The Purchaser understands and has fully considered for purposes of this investment the risks of this investment and understands that: (i) this investment is suitable only for an investor who is able to bear the economic consequences of losing his or its entire investment; (2) the Shares represent an extremely speculative investment which involves a high degree of risk of loss; (3) there are substantial restrictions on the transferability of the Shares and, accordingly, it may not be possible for the Purchaser to liquidate his or its investment in the Shares in case of emergency; and (4) there have been no representations as to the possible future value, if any, of the Shares. The Purchaser understands and acknowledges that the sale of the Shares pursuant to this Agreement will not be registered under the Securities Act on the grounds that the offering and sale of securities contemplated by this Agreement are exempt from registration pursuant to Section 4(2) of the Securities Act, and that the Company's reliance upon such exemption is predicated in part upon the Purchaser's representations set forth in this Agreement. SECTION 4.06. Brokers. No broker, finder or investment banker is ------- entitled to any brokerage, finder's or other fee or commission in connection with the transactions hereunder based upon arrangements made by or on behalf of the Purchaser. 13 ARTICLE V ADDITIONAL AGREEMENTS --------------------- SECTION 5.01. Conduct of Business by the Company Pending the ---------------------------------------------- Closing. Except as contemplated by this Agreement, the Company covenants and ------- agrees that, during the period between the date of this Agreement and through and including the Closing Date, unless the Purchaser shall otherwise agree in writing, the businesses of the Company and its Subsidiaries shall be conducted only in, and the Company and its Subsidiaries shall not take any action except in, the ordinary course of business and in a manner consistent with past practice. SECTION 5.02. Regulatory and Other Authorizations. Each party ----------------------------------- hereto will use its reasonable best efforts to obtain all authorizations, consents, orders and approvals of all third parties and of all federal, state and local regulatory bodies and officials that may be or become necessary for its execution and delivery of, and the performance of its obligations pursuant to, this Agreement and will cooperate fully with the other party in promptly seeking to obtain all such authorizations, consents, orders and approvals. Each party hereto agrees to make, or cause its "ultimate parent entity" (as such term is defined in the HSR Act) to make, an appropriate filing of a Notification and Report Form pursuant to the HSR Act with respect to the transactions contemplated hereby within ten Business Days of the date hereof. The parties hereto will not take any action that will have the effect of delaying, impairing or impeding the receipt of any required approvals. SECTION 5.03 Access to Information. (a) From the date hereof to --------------------- the Closing Date, the Company shall, and shall cause its Subsidiaries, officers, directors, employees, auditors and other agents to, afford the officers, employees, auditors and other agents of the Purchaser reasonable access at all reasonable times to its officers, employees, agents, properties, offices, plants and other facilities and to all books and records, and shall furnish the Purchaser with all financial, operating and other data and information with respect to the business and properties of the Company as the Purchaser, through its officers, employees or agents, may reasonably request. The Purchaser agrees to maintain the strict confidentiality of such data and information and not to disclose such data to any third party. 14 (b) No investigation pursuant to this Section 5.03 shall affect any representations or warranties of the parties herein or the conditions to the obligations of the parties hereto. SECTION 5.04. Notification of Certain Matters. The Company shall ------------------------------- give prompt notice to the Purchaser, and the Purchaser shall give prompt notice to the Company, of (i) the occurrence, or non-occurrence, of any event the occurrence, or non-occurrence, of which would be likely to cause any representation or warranty contained in this Agreement to be untrue or inaccurate and (ii) any failure of the Company or the Purchaser, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the delivery -------- ------- of any notice pursuant to this Section 5.04 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice. SECTION 5.05. Further Action; Reasonable Efforts. Upon the terms ---------------------------------- and subject to the conditions hereof, each of the parties hereto shall use all reasonable efforts to take, or cause to be taken, all appropriate action, 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 hereunder. SECTION 5.06. Public Announcements. The Purchaser 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 hereunder and shall not issue any such press release or make any such public statement prior to such consultation, except as may be, and to the extent, required by law or any listing agreement with the National Association of Securities Dealers. SECTION 5.07. Legend. The Purchaser agrees that all certificates ------ representing the Shares issued pursuant to this Agreement shall bear the following legend: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR SECURITIES LAWS OF ANY STATE AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREUNDER. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT (IN CERTAIN CIRCUMSTANCES) TO A RIGHT OF FIRST OFFER AS SET FORTH IN THE STOCK PURCHASE AGREEMENT DATED AS OF MAY 11, 1991, AS AMENDED, BETWEEN THE COMPANY AND COBE LABORATORIES, INC." 15 ARTICLE VI CONDITIONS TO THE CLOSING ------------------------- SECTION 6.01. Conditions to Obligations of the Purchaser. The ------------------------------------------ obligations of the Purchaser to effect the Closing shall be subject to the prior fulfillment of each of the following conditions: (a) Representations and Warranties; Agreements and Covenants. -------------------------------------------------------- Except for changes permitted or contemplated hereby or consented to by the Purchaser and except for matters waived or consented to by the Purchaser pursuant to Section 8.04, (i) the representations and warranties of the Company contained in this Agreement which are qualified as to materiality shall be true in all respects and all other representatives and warranties shall be true and correct in all material respects on and as of the Closing, with the same force and effect as if made as of the Closing, (ii) all the agreements contained in this Agreement to be performed or complied with by the Company, at or before the Closing, shall have been performed or complied with in all material respects and (iii) the Purchaser shall have received a certificate of the Company, signed by the Chief Executive Officer thereof, as to the fulfillment of the conditions set forth in the foregoing clauses (i) and (ii). (b) No Cessation Order. No order, ruling or determination ------------------ having the effect of halting the trading of the Common Stock shall have been issued or made by the SEC or other regulatory authority and be continuing and no proceedings for that purpose shall have been instituted and be pending. (c) Litigation. There shall have been no order or preliminary ---------- or permanent injunction entered in any action or proceeding before any federal, state or foreign court or governmental, administrative or regulatory authority or agency, or no other action taken or threatened, or statute, rule, regulation, legislation, interpretation, judgment or order enacted, entered, enforced, promulgated, amended, issued or deemed applicable to the Purchaser, the Company or any Subsidiary or Affiliate of the Purchaser, by any federal, state or foreign legislative body, court, government or governmental, administrative or regulatory authority or agency which 16 shall have remained in effect and which shall have had the effect of: (i) making illegal, materially delaying or otherwise directly or indirectly restraining or prohibiting the consummation of the transactions hereunder; (ii) prohibiting or materially limiting the ownership of the Shares; (iii) imposing material limitations on the ability of the Purchaser to exercise full rights of ownership of any of the Shares, including, without limitation, the right to vote any shares of Common Stock; or (iv) requiring divestiture by the Purchaser of any Shares. (d) Calamities. There shall not have occurred and be continuing ---------- (i) any general suspension of, or limitation on prices for or trading in, securities on any United States securities exchange, {ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, (iii) any limitation (whether or not mandatory) by any government or governmental, administrative or regulatory authority or agency, domestic or foreign, or other event that materially adversely affects the ability of the Purchaser to purchase the Shares hereunder, or (iv) a commencement of a war or armed hostilities or other national or international calamity directly involving the United States or Sweden. (e) Bankruptcy; Insolvency; Etc. No proceeding shall have been ---------------------------- instituted or consented to by or against the Company seeking to adjudicate it bankrupt or insolvent, or seeking liquidation, winding- up, reorganization, arrangement, adjustment, protection, relief, or composition of its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or any substantial part of its property (each such action being a "Bankruptcy Proceeding"), and --------------------- the Company shall not have taken any corporate action to authorize any Bankruptcy Proceeding. (f) No Material Adverse Effect. No fact, event or condition -------------------------- (financial or otherwise) shall have occurred with respect to the Company or any of its Subsidiaries having, individually or in the aggregate, a Material Adverse Effect. 17 (g) Opinion. The Purchaser shall have received an opinion from ------- Wyatt, Tarrant, Combs, Gibert & Milan substantially to the effect of Exhibit B hereto. (h) Amendment No. 2. Amendment No. 2 shall have been executed --------------- and delivered by the Company. (i) HSR Act. Any waiting period (and any extension thereof) ------- under the HSR Act applicable to the purchase of the Shares contemplated hereby shall have expired or shall have been terminated. SECTION 6.02. Conditions to Obligations of the Company. The ---------------------------------------- obligations of the Company to effect the Closing shall be subject to the prior fulfillment of each of the following conditions: (a) Representations and Warranties. (i) The representations and ------------------------------ warranties of the Purchaser contained in this Agreement and in any certificates or agreements of the Purchaser delivered pursuant hereto shall be true and correct in all material respects on and as of the Closing, with the same force and effect as if made as of the Closing, (ii) all the agreements contained in this Agreement and in any certificates or agreements of the Purchaser delivered pursuant hereto to be performed or complied with by the Purchaser, at or before the Closing, shall have been performed or complied with in all material respects and (iii) the Company shall have received a certificate of the Purchaser, signed by a duly authorized officer thereof, as to the fulfillment of the conditions set forth in the foregoing clauses (i) and (ii). (b) Litigation. There shall have been no order or preliminary ---------- or permanent injunction entered in any action or proceeding before any federal, state or foreign court or governmental, administrative or regulatory authority or agency by any federal, state or foreign legislative body, court, government or governmental, administrative or regulatory authority or agency which shall have remained in effect and which shall have had the effect of making illegal the consummation of any of the transactions hereunder. 18 (c) HSR Act. Any waiting period (and any extension thereof) ------- under the HSR Act applicable to the purchase of the Shares contemplated hereby shall have expired or shall have been terminated. ARTICLE VII INDEMNIFICATION SECTION 7.01. Survival of Representations and Warranties. The ------------------------------------------ representations and warranties of the Company in Article III shall survive the Closing until the date 15 months from the Closing Date. Neither the period of survival nor the liability of any party with respect to the parties' representations and warranties shall be reduced by any investigation made at any time by or on behalf of any party. SECTION 7.02. Indemnification by the Company. The Purchaser, and ------------------------------ its Affiliates, officers, directors, employees, agents, successors and assigns, shall be indemnified and held harmless by the Company for any and all Liabilities, losses, damages, claims, costs and expenses, interest, awards, judgments and penalties (including, without limitation, legal costs and expenses) actually suffered or incurred by them (hereinafter, a "Purchaser --------- Loss"), arising out of or resulting from: ---- (a) the breach of any representation or warranty made by the Company contained herein or in any document delivered by the Company hereunder at the Closing; or (b) the breach of any covenant or agreement by the Company contained herein. SECTION 7.03. Indemnification by the Purchaser. The Company, and -------------------------------- its Affiliates, officers, directors, employees, agents, successors and assigns, shall be indemnified and held harmless by the Purchaser for any and all Liabilities, losses, damages, claims, costs and expenses, interest, awards, judgments and penalties (including, without limitation, legal costs and expenses) actually suffered or incurred by them (hereinafter, a "Company Loss" ------------ and, together with a Purchaser Loss, a "Loss"), arising out of or resulting ---- from: 19 (a) the breach of any representation or warranty made by the Purchaser contained herein or in any document delivered by the Purchaser hereunder at the Closing; or (b) the breach of any covenant or agreement by the Purchaser contained herein. SECTION 7.04. Materiality. Notwithstanding anything in this ----------- Agreement to the contrary, for purposes of application of the indemnity provisions of this Article VII, the amount of any Purchaser Loss or Company Loss arising from the breach of such representation, warranty, covenant or agreement shall be the entire amount of any such Loss actually incurred by the party being indemnified hereunder as a result of such breach and not just that portion of such Loss that exceeds the relevant level of materiality. SECTION 7.05. Time Period; Dollar Threshold. (a) The ----------------------------- indemnification obligations of the Company and the Purchaser under this Article VII shall continue for the same period of survival specified in Section 7.01 for each such representation and warranty and shall terminate with the expiration of the 15 month survival period for each such representation and warranty. Any claim or demand against the Company or the Purchaser which is pending or asserted at or prior to the expiration of any survival period may continue to be asserted and indemnified against. (b) Neither the Company nor the Purchaser shall be entitled to indemnification under this Article VII unless and until the aggregate amount of the claims against the other party exceeds $1,000,000. If the aggregate amount of such claims against either party exceeds $1,000,000, then that party may claim indemnification for the entire aggregate amount of such claims. (c) The provisions of this Article VII shall be the sole and exclusive remedy (other than injunctive relief) of the Company or the Purchaser (regardless of against whom asserted) for the matters subject to indemnification. SECTION 7.06. Notice and Defense. Each party shall within 30 ------------------ days of learning of any asserted liability or damage claimed to give rise to indemnification hereunder notify the party obligated to indemnify it hereof in writing; provided, however, that the failure of the indemnified party to so -------- ------- notify the indemnifying party shall not relieve the indemnifying party of its obligations hereunder unless, and 20 only to the extent that, such failure to notify prejudices the indemnifying party. Thereafter, the indemnifying party shall have, at its election, the right to compromise or defend any such matter at its sole cost and expense through counsel chosen by it. If the indemnifying party so undertakes to compromise and defend, the indemnifying party shall notify the other party of its intention to do so. The indemnifying party must defend such matter diligently or the indemnified party may assume control of the defense of such matter. Each party agrees in all cases to cooperate with the defending party and its counsel in the compromise of or defending of any such liabilities or claims. The defending party and the nondefending party may be represented by the same counsel unless such representation would be inappropriate due to actual or potential differing interests between them. In addition, the nondefending party shall at all times be entitled to monitor such defense through the appointment of counsel of its own choosing, at its own cost and expense. ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER --------------------------------- SECTION 8.01. Termination. (a) This Agreement may be terminated ----------- and the transactions contemplated hereby may be abandoned at any time prior to the Closing Date: (i) By mutual written consent duly authorized by the Boards of Directors of the Company and the Purchaser; or (ii) By the Purchaser, if (A) (1) any Person, other than the Purchaser, shall have acquired, or shall have been granted any option or right, conditional or otherwise, to acquire beneficial ownership of 20% or more of the outstanding shares of the Company's Common Stock, or (2) any group (other than a group including the Purchaser) shall have been formed which beneficially owns 20% or more of the outstanding shares of the Company's Common Stock; or (B) the Company shall have entered into an agreement with a third party with respect to any acquisition or purchase of all or a substantial portion of the assets of, or any equity interest in, the Company or any of its Subsidiaries or any business combination with the Company or any of its Subsidiaries by such third party; or 21 (iii) By the Purchaser or the Company, if any court of competent jurisdiction in the United States or other United States governmental authority shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting any of the transactions hereunder and such order, decree, ruling or other action shall have become final and nonappealable; or (iv) By the Purchaser or the Company, if the Closing shall not have occurred by April 30, 1992 or such later date as the Company and the Purchaser shall hereafter agree; provided, however, that the right -------- ------- to terminate this Agreement under this Section 8.01(a)(iv) shall not be available to any party whose willful failure to fulfill any material obligation under this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or before such date. (b) This Agreement shall terminate (without any action or notice (in writing or otherwise) by any of the parties hereto) if any Bankruptcy Proceeding shall have been instituted or consented to by or against the Company. SECTION 8.02. Effect of Termination. In the event of the --------------------- termination of this Agreement pursuant to Section 8.01, this Agreement shall forthwith become void and have no effect and there shall be no liability on the part of any party hereto or its Affiliates, directors, officers or shareholders; provided, however, that nothing herein shall relieve any party -------- ------- from liability for any breach hereof prior to such termination. SECTION 8.03. Amendment. This Agreement may be amended by the --------- parties hereto by action taken by or on behalf of the Company and the Purchaser at any time prior to the Closing Date. This Agreement may not be amended except by an instrument in writing signed by the parties hereto. SECTION 8.04. Waiver. At any time prior to the Closing Date, ------ either party hereto may (a) extend the time for the performance of any of the obligations or other acts of the other party hereto, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto and (c) waive compliance with any of the agreements or conditions contained herein. Any such extension or waiver shall be valid if set forth in an instrument in writing signed by the party to be bound 22 thereby. The failure of either party to assert any of its rights hereunder shall not constitute a waiver of any such rights. ARTICLE IX GENERAL PROVISIONS ------------------ SECTION 9.01. Notices. All notices, requests, claims, demands and ------- other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by cable, telecopy, telegram or telex or 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 the Purchaser: Cobe Laboratories, Inc. 1185 Oak Street Lakewood, Colorado 80215 Attention: Mats Wahlstrom with a copy to: Shearman & Sterling 599 Lexington Avenue New York, New York 10022 Attention: Peter D. Lyons, Esq. (b) if to the Company: REN Corporation-USA 6820 Charlotte Pike Nashville, Tennessee 37209 Attention: Jerome S. Tannenbaum, M.D., C.E.O. with a copy to: Wyatt, Tarrant, Combs, Gilbert & Milom Suite 1350 Third National Bank Building Nashville, Tennessee 37219 Attention: Ralph Levy, Esq. 23 SECTION 9.02. Entire Agreement; Assignment. This Agreement ---------------------------- constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral, between the parties with respect to the subject matter hereof. This Agreement shall not be assigned by operation of law or otherwise, except that the Purchaser may assign all or any of its rights and obligations hereunder to any wholly owned Subsidiary of Gambro Aktiebolag, the owner of all the outstanding capital stock of the Purchaser, upon the execution of a written instrument whereby such assignee agrees to assume all of the Purchaser's obligations hereunder and be bound by all the terms and conditions of this Agreement; provided that no such assignment shall relieve the Purchaser of its -------- obligations hereunder if such assignee does not perform such obligations. SECTION 9.03. Parties in Interest. This Agreement shall be ------------------- binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement. SECTION 9.04. Governing Law. This Agreement shall be governed ------------- by, and construed in accordance with, the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. SECTION 9.05. 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 9.06. Counterparts. This Agreement may be executed in ------------ one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. SECTION 9.07. Specific Performance. The parties hereto agree -------------------- that irreparable damage would occur in the event any of the provisions of this Agreement were not to be performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the 24 terms hereof, in addition to any other remedy at law or equity. IN WITNESS WHEREOF, the Purchaser and the Company have each caused this Agreement to be executed by its duly authorized officer as of the date first written above. COBE LABORATORIES, INC. By ------------------------------ Name: Mats Wohlstrom Title: President REN CORPORATION-USA By ------------------------------ Name: Jerome S. Tannenbaum Title: Chief Executive Officer EXHIBIT A --------- FORM OF AMENDMENT NO. 2 TO THE MAY 11, 1991 STOCK PURCHASE AGREEMENT AMENDMENT NO. 2, dated as of __________, 1992 (this "Amendment") --------- to the Stock Purchase Agreement, dated as of May 11, 1991, as amended by Amendment No. 1, dated as of May 24, 1991, between REN CORPORATION-USA, a Tennessee corporation (the "Company") and COBE LABORATORIES, INC., a Colorado ------- corporation (the "Purchaser"). --------- W I T N E S S E T H - - - - - - - - - - WHEREAS, the Company and the Purchaser have entered into as of May 11, 1991 a Stock Purchase Agreement (the "Purchase Agreement"; capitalized ------------------ terms used and not defined herein being used herein as defined in the Purchase Agreement); WHEREAS, the Company and the Purchaser entered into on May 24, 1991 an Amendment No. 1 to the Purchase Agreement; and WHEREAS, the Company and the Purchaser have determined that it is in their mutual interests to further amend the Purchase Agreement as hereinafter set forth. NOW THEREFORE, in consideration of the premises and of the mutual agreements and understandings hereinafter set forth, the Purchaser and the Company agree as follows: SECTION 1. Amendments to the Purchase Agreement. The Purchase ------------------------------------ Agreement is, effective as of the date hereof, hereby amended as follows: (a) New defined terms shall be added to Section 1.01, immediately following the definition of "Affiliate", to read as follows: "'Amendment No. 1' means the Amendment No. 1, dated May 24, --------------- 1991, to this Agreement between the Company and the Purchaser. 'Amendment No. 2' means the Amendment No. 2, dated _______, --------------- 1992, to this Agreement between the Company and the Purchaser." (b) The defined term "Purchase Agreement" shall be restated in full to read as follows: "'Purchase Agreement' means this Agreement, as amended by ------------------ Amendment No. 1 and Amendment No. 2." (c) Sections 5.08(a) and (b) shall be restated in full to read as follows: "(a) The Company agrees, effective upon the Closing Date, to decrease the size of the Board to seven directors and to appoint to the Board two persons designated by the Purchaser (members of the Board designated by the Purchaser pursuant to this Section 5.08 are referred to as the "Purchaser's Directors"), one with his original term expiring --------------------- at the Company's 1992 annual stockholders' meeting and the other with his original term expiring at the Company's 1993 annual stockholders' meeting. Without the prior written consent of the Purchaser, the Company, acting through the Board, shall not increase the size of the Board beyond seven members. (b) Effective on the Closing Date and so long as the Purchaser owns at least 20% of the issued and outstanding Common Stock, the Purchaser shall have the right to request that the Company include (x) one person designated by the Purchaser as a nominee to serve as a member of the "Class Three Directors" (as such term is used in the By-Laws; provided that for purposes of this Agreement, such term shall be further -------- defined to be that class of directors of the Board whose term next expires at the 1992 annual stockholders' meeting) of the Board and (y) one person designated by the Purchaser to serve as a member of the "Class One Directors" (as such term is used in the By-Laws; provided -------- that for purposes of this Agreement, such term shall be further defined to be that class of directors of the Board whose term next expires at the 1993 annual stockholders' meeting) of the Board, and such persons shall be nominated by the Company. In the event the Purchaser owns 15% or more but less than 20% of the issued and outstanding Common Stock, the Purchaser shall have the right to request that the Company include one person designated by the Purchaser as a nominee to serve as a member of either the Class Three Directors or the Class One Directors of the Board, and such person shall be nominated by the Company. If the Board, in the exercise of its fiduciary duties, reasonably shall determine that any person designated by the Purchaser to be a nominee to the Board pursuant to this Section 5.08 3 is not qualified to serve on the Board and each of the committees specified in subsection (d) of this Section 5.08, the Purchaser shall have the opportunity to specify one or more additional designees who shall be so included as a nominee subject to the reasonable determination by the Board, in the exercise of their fiduciary duties, that any such additional designee is not qualified to serve on the Board and each of the committees specified in this Section 5.08. The Board shall recommend to the stockholders of the Company for election the designees of the Purchaser who are nominated by the Company to serve as members of the Board. In the event that a vacancy is created on the Board at any time by the death, disability, retirement, resignation or removal (with or without cause) of a Purchaser's Director, the Purchaser shall have the right to select a nominee to fill such vacancy. If the remaining Board members, in the exercise of their fiduciary duties, reasonably shall determine that such nominee is not qualified to serve on the Board and each of the committees specified in subsection (d) of this Section 5.08, the Purchaser shall have the opportunity to select one or more additional nominees. Subject to the qualification set forth in the immediately preceding sentence, the remaining members of the Board shall elect to the Board to fill such vacancy any such nominee of the Purchaser." (d) The second sentence of Section 5.10(b) shall be restated in full to read as follows: "The Purchaser shall have the option to purchase from the Company additional shares of Common Stock to the extent necessary to permit the Purchaser to maintain 30% of the issued and outstanding shares of Common Stock and 30% of the Total Voting Power." SECTION 2. Counterparts. This Amendment may be executed in one or ------------ more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. SECTION 3. Governing Law. This Amendment shall be governed by, ------------- and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed in that State. 4 IN WITNESS WHEREOF, each of the Purchaser and the Company has caused this Amendment to be executed as of the date first written above by their respective officers thereunto duly authorized. REN CORPORATION-USA By ------------------------ Name: Title: COBE LABORATORIES, INC. By ------------------------ Name: Title: EXHIBIT B --------- CONTENTS OF OPINION OF WYATT, TARRANT, COMBS, GIBERT & MILAN 1. The Company is a corporation duly organized, validly existing and in good standing under the laws of Tennessee and has the requisite corporate power and authority to own, lease and operate its properties and carry on its business in all material respects as presently owned or conducted. The Company is duly qualified or licensed as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of its properties owned, leased or operated by it, or the nature of its activities makes such qualification or licensing necessary, except those jurisdictions, if any, in which the failure to be so duly qualified or licensed and in good standing would not, taken as a whole, have a Material Adverse Effect. 2. The Company is not in violation of any of the provisions of the Charter of Incorporation or By-Laws, except where such violation would not, individually or in the aggregate, have a Material Adverse Effect. 3. The Company has all necessary corporate power and authority to execute and deliver the Agreement and to perform its obligations and to consummate the transactions contemplated thereunder. The execution, delivery and performance of the Agreement by the Company have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of the Company are necessary to authorize the Agreement or to consummate the transactions contemplated thereunder. 4. (a) The execution and delivery of the Agreement by the Company do not, and the performance of the Agreement (including, without limitation, the consummation of the transactions contemplated thereunder) will not, (i) conflict with or violate the Charter of Incorporation or By-Laws, (ii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to the Company, or by which its or any of its properties are bound or affected, or (iii) result in any breach of or constitute a default (or an 2 event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or encumbrance on any of the properties or assets of the Company which would have a Material Adverse Effect, taken as a whole, pursuant to any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, insurance policy or other instrument or obligation, and which note, bond, mortgage, indenture, contract, agreement, license, permit, insurance policy or other instrument or obligation to which the Company is a party, or by which the Company or its properties are bound or affected. (b) The execution and delivery of the Agreement by the Company do not, and the performance of the Agreement by the Company (including, without limitation, the consummation of the transactions thereunder) will not require any consent, approval, authorization or permit of, or filing (other than filings, if any, required on Form 8-K with the SEC and the HSR Act) with or notification to, any governmental or regulatory authority, domestic or foreign, on the part of the Company. 5. Following the consummation of the transactions thereunder, all the Shares subject to issuance pursuant to the Agreement, upon such issuance against payment for such Shares as contemplated by the Agreement shall (i) be duly authorized, validly issued, fully paid and nonassessable, (ii) not be subject to any Encumbrances and (iii) such Shares shall have accorded to them voting rights. 6. The Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery hereof by the Purchaser, and payment for the Shares as contemplated by the Agreement, constitutes the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally and by the availability of equitable remedies. The following assumptions shall be made: 1. Reliance upon representations and warranties of the Company and upon certificates of certain public officials; 3 2. Authenticity of all documents submitted to us as copies, genuineness of all signatures, and conformity to the originals of all documents submitted to counsel as copies; 3. Due authorization, execution and delivery of the Agreement by the Purchaser; 4. Neither the Purchaser nor any Affiliate of the Purchaser has acquired any shares of Voting Securities other than the Shares during the 90 day period prior to the Closing, and neither the Purchaser nor any Affiliate of the Purchaser will acquire any shares of Voting Securities other than the Shares during a period of 90 days after the Closing; and 5. Compliance by the Company, the Purchaser and any Affiliate of either the Company or the Purchaser with the covenants, representations, warranties and agreements made, and to be performed by them pursuant to the Agreement. EXECUTION COPY AMENDMENT NO. 1 TO THE FEBRUARY 9, 1992 STOCK PURCHASE AGREEMENT AMENDMENT NO. 1, dated as of March 17, 1992 (this "Amendment") to --------- the Stock Purchase Agreement, dated as of February 9, 1992 between REN CORPORATION-USA, a Tennessee corporation (the "Company"), and COBE LABORATORIES, ------- INC., a Colorado corporation (the "Purchaser"). --------- W I T N E S S E T H - - - - - - - - - - WHEREAS, the Company and the Purchaser have entered into as of February 9, 1992 a Stock Purchase Agreement (the "1992 Purchase Agreement"; ----------------------- capitalized terms used and not defined herein being used herein as defined in the 1992 Purchase Agreement); and WHEREAS, the Company and the Purchaser have determined that it is in their mutual interests to amend the 1992 Purchase Agreement as hereinafter set forth. NOW THEREFORE, in consideration of the premises and of the mutual agreements and understandings hereinafter set forth, the Purchaser and the Company agree as follows: SECTION 1. Amendments to the 1992 Purchase Agreement. The 1992 ----------------------------------------- Purchase Agreement is, effective as of the date hereof, hereby amended as follows: (a) Section 3.03(a) shall be restated in full to read as follows: "(a) The authorized capital stock of the Company consists of (x) 10,000,000 shares of Preferred Stock, of which none is issued, outstanding or reserved for issuance, and (y) 60,000,000 shares of Common Stock, of which (i) 11,722,575 shares of Common Stock are issued and outstanding, (ii) 0 shares of Common Stock are held in the treasury of the Company, (iii) an aggregate of 271,400 shares of Common Stock are subject to outstanding options, and 481,125 shares are reserved for issuance, pursuant to the Company's Stock Option Plan, (iv) an aggregate of 331,838 shares of Common Stock are subject to outstanding promissory notes that are convertible into shares of Common Stock, and (v) an aggregate of 100,700 shares of Common Stock are subject to outstanding warrants that are exercisable into shares of Common Stock. Of the 11,722,575 shares of Common Stock that are issued and outstanding, 180,000 shares are held in escrow on behalf of the Company and certain shareholders, in connection with a settlement of a claim arising from an acquisition of a treatment center in Douglas, Georgia." (b) The second sentence of Section 5.02 shall be restated in full to read as follows: "Each party hereto agrees to make, or cause its 'ultimate parent entity' (as such term is defined in the HSR Act) to make, an appropriate filing of a Notification and Report Form pursuant to the HSR Act as soon as reasonably practicable after the date hereof." SECTION 2. Counterparts. This Amendment may be executed in one ------------ or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. SECTION 3. Governing Law. This Amendment shall be governed by, ------------- and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed in that State. IN WITNESS WHEREOF, each of the Purchaser and the Company has caused this Amendment to be executed as of the date first written above by their respective officers thereunto duly authorized. REN CORPORATION-USA By /s/ Jerome S. Tannebaum ------------------------------ Name: Jerome S. Tannebaum Title: Chief Executive Officer COBE LABORATORIES INC. BY /s/ Ronald F. Plusk -------------------------- Name: Ronald F. Plusk Title: Vice President and Chief Financial Officer EX-99.(C)(4) 8 [CONFORMED COPY] ================================================================================ STOCK PURCHASE AGREEMENT between COBE LABORATORIES, INC. and REN CORPORATION-USA Dated as of July 2, 1992 ================================================================================ TABLE OF CONTENTS Section Page ------- ---- ARTICLE I DEFINITIONS 1.01 Definitions ................................ 1 ARTICLE II PURCHASE AND SALE OF SHARES; CLOSING 2.01 Authorization, Purchase and Sale of Shares ......................... 4 2.02 Closing ................................... 4 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY 3.01 Organization and Qualification; Subsidiaries ................... ......... 5 3.02 Charter of Incorporation and By-Laws, Etc. 6 3.03 Capitalization ............................. 6 3.04 Authority Relative to this Agreement ....... 7 3.05 No Conflict; Required Filings and Consents ................................. 8 3.06 Common Stock ............................... 8 3.07 SEC Filings; Financial Statements .......... 9 3.08 Private Offering ........................... 10 3.09 Standstill Agreement ....................... 10 3.10 Brokers .................................... 10 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER 4.01 Corporate Organization ..................... 10 4.02 Authority Relative to this Agreement ....... 11 4.03 No Conflict; Required Filings and Consents.. 11 4.04 Funds ...................................... 12 4.05 Securities Act ............................. 12 4.06 Brokers .................................... 13 (ii) ARTICLE V ADDITIONAL AGREEMENTS 5.01 Conduct of Business by the Company Pending the Closing ..................... 13 5.02 Regulatory and Other Authorizations ........ 13 5.03 Access to Information ...................... 14 5.04 Notification of Certain Matters ............ 14 5.05 Further Action; Reasonable Efforts ......... 14 5.06 Public Announcements ....................... 14 5.07 Legend ..................................... 15 5.08 Shareholder Approval ....................... 15 5.09 No Solicitation; Third Party Negotiations ............................ 15 5.10 Termination of Right of First Offer Agreement ............................... 16 ARTICLE VI CONDITIONS TO THE CLOSING 6.01 Conditions to Obligations of the Purchaser . 17 6.02 Conditions to Obligations of the Company ... 19 ARTICLE VII INDEMNIFICATION 7.01 Survival of Representations and Warranties.. 20 7.02 Indemnification by the Company ............. 20 7.03 Indemnification by the Purchaser ........... 20 7.04 Materiality ................................ 21 7.05 Time Period; Dollar Threshold .............. 21 7.06 Notice and Defense ......................... 21 ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER 8.01 Termination ................................ 22 8.02 Effect of Termination ...................... 23 8.03 Amendment .................................. 23 8.04 Waiver ..................................... 24 8.04 Disinterested Directors .................... 24 (iii) Section Page ------- ---- ARTICLE IX GENERAL PROVISIONS 9.01 Notices ................................... 24 9.02 Entire Agreement; Assignment .............. 25 9.03 Parties in Interest ....................... 25 9.04 Governing Law ............................. 25 9.05 Headings .................................. 26 9.06 Counterparts .............................. 26 9.07 Specific Performance ...................... 26 EXHIBIT A Form of Amendment No. 3 to the May 11, 1991 Stock Purchase Agreement EXHIBIT B Contents of Opinions DISCLOSURE SCHEDULE STOCK PURCHASE AGREEMENT (this "Agreement"), dated --------- as of July 2, 1992, between REN CORPORATION-USA, a Tennessee corporation (the "Company"), and COBE LABORATORIES, INC., a ------- Colorado corporation (the "Purchaser"). --------- W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Company desires to authorize, issue and sell to the Purchaser, and the Purchaser desires to purchase from the Company, the Shares (as hereinafter defined); NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter set forth, the parties hereto agree as follows: ARTICLE I DEFINITIONS ----------- SECTION 1.01. Definitions. As used in this Agreement, the following terms shall have the following meanings: "Acquisition Proposal" has the meaning specified in -------------------- Section 5.09(b). "Affiliate" means, with respect to any specified --------- Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person. "Amendment No. 3" means the Amendment No. 3 to the --------------- Stock Purchase Agreement, dated as of May 11, 1991, as amended by Amendment No. 1, dated May 24, 1991, and by Amendment No. 2, dated March 17, 1992, between the Company and the Purchaser, substantially in the form of Exhibit A hereto. "Bankruptcy Proceeding" has the meaning specified in --------------------- Section 6.01(e). "Board" means the Board of Directors of the Company. ----- "Business Day" means any day other than a Saturday, ------------ Sunday or federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, Eastern Standard Time. 2 "By-Laws" means the Restated By-Laws of the Company, ------- as amended through the date hereof. "Charter of Incorporation" means the Restated ------------------------ Charter of Incorporation of the Company, as amended through the date hereof. "Closing" means the completion of the transactions ------- specified herein relating to the purchase and sale of the Shares, as contemplated by Section 2.01 hereof. "Closing Date" means the date on which the Closing ------------ shall occur. "Common Stock" means the common shares of the ------------ Company, no par value. "Company" has the meaning specified in the recitals ------- to this Agreement. "Company Loss" has the meaning specified in ------------ Section 7.03. "control" (including the terms "controlled by" and ------- ------------- "under common control with") means the possession, directly ------------------------- or indirectly, or as trustee or executor, of the power to direct or cause the direction of the management and/or policies of a Person, whether through the ownership of stock, as trustee or executor, by contract or credit arrangement, or otherwise. "Disclosure Schedule" means the Disclosure Schedule, ------------------- dated as of the date hereof, delivered to the Purchaser by the Company and forming a part of this Agreement. "Encumbrance" means any security interest, pledge, ----------- mortgage, lien (including environmental liens), charge, adverse claim or restriction of any kind, including, without limitation, any restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of ownership, but excluding such Encumbrances which, taken as a whole, would not have a Material Adverse Effect. "Exchange Act" means the Securities Exchange Act of ------------ 1934, as amended, together with the rules and regulations promulgated thereunder. "First Union Loan Agreement" means the amended and -------------------------- restated loan agreement, dated as of March 18, 1990, between the Company and First Union National Bank of North Carolina, 3 a national banking association under the laws of the United States, as such agreement has been amended, supplemented, restated or otherwise modified from time to time, together with any notes, security pledge, guaranty or other ancillary agreements executed pursuant thereto. "GAAP" means United States generally accepted ---- accounting principles and practices in effect from time to time, applied consistently throughout the periods involved. "HSR Act" means the Hart-Scott-Rodino Antitrust ------- Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder. "Liabilities" means any and all debts, liabilities ----------- and obligations, whether accrued or fixed, absolute or contingent, mature or unmatured, or determined or determinable, including, without limitation, those arising under any law, rule, regulation or order by a governmental authority, and those arising under any contract, agreement, commitment or undertaking. "Loss" has the meaning specified in Section 7.03. ---- "March Financial Statements" has the meaning -------------------------- specified in Section 3.07(c). "Material Adverse Effect" means any circumstance, ----------------------- change, event, transaction, loss, failure, effect or other occurrence that is, or is reasonably likely to be, materially adverse to the business, operations, properties (including intangible properties), condition (financial or otherwise), assets, Liabilities, results of operations or prospects of the Company and its Subsidiaries taken as a whole. "Person" means an individual, corporation, ------ partnership, association, trust, joint venture, unincorporated organization, other entity or group (as defined in Section 13(d)(3) of the Exchange Act). "Purchase Price" has the meaning specified in -------------- Section 2.01. "Purchaser" has the meaning specified in the --------- recitals to this Agreement. "Purchaser Loss" has the meaning specified in -------------- Section 7.02. 4 "SEC" means the Securities and Exchange Commission. --- "SEC Reports" means all forms, reports and documents ----------- required to be filed by the Company with the SEC since November 28, 1989, including, without limitation, (i) the Company's Annual Reports on Form 10-K for the fiscal years ended December 31, 1989, 1990 and 1991, (ii) the Company's Quarterly Report or Form 10-Q for the fiscal quarter ended March 31, 1992, (iii) all amendments to the Company's Reports on Form 8 and (iv) all other reports or registrations filed by the Company with the SEC since November 28, 1989. "Securities Act" means the Securities Act of 1933, -------------- as amended, together with the rules and regulations promulgated thereunder. "Shares" has the meaning specified in Section 2.01. ------ "Subsidiary" or "Subsidiaries" means any ---------- ------------ corporation, partnership, joint venture or other legal entity, of which the Company or any other Person, as the case may be (either alone or through or together with any other Subsidiary), owns, directly or indirectly, 50 percent or more of the stock or other equity interests, and the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity. "Third Party" has the meaning specified in ----------- Section 5.09(b). ARTICLE II PURCHASE AND SALE OF SHARES; CLOSING ------------------------------------ SECTION 2.01. Authorization, Purchase and Sale of ----------------------------------- Shares. Upon the terms and subject to the conditions set ------ forth herein, at the Closing, the Company shall authorize, issue and sell to the Purchaser, and the Purchaser shall purchase from the Company, 5,500,000 shares of Common Stock (such shares of Common Stock being herein the "Shares") for a ------ purchase price equal to $9.75 per Share and an aggregate purchase price of $53,625,000 (the "Purchase Price"). -------------- SECTION 2.02. Closing. (a) The Closing of the ------- purchase and sale shall take place within three Business Days of the satisfaction or waiver of the conditions set forth herein, at the offices of Shearman & Sterling, 599 Lexington 5 Avenue, New York, New York, or at such other time and place as the Company and the Purchaser may mutually agree in writing. (b) At the Closing, the Company shall deliver or cause to be delivered to the Purchaser: (i) stock certificates evidencing the Shares registered in the name of the Purchaser (or its designee); (ii) the certificate referred to in Section 6.01(a); (iii) the legal opinion referred to in Section 6.01(g); (iv) a receipt for the Purchase Price; and (v) such other documents as the Purchaser shall reasonably request. (c) At the Closing, the Purchaser shall deliver to the Seller: (i) the Purchase Price, by wire transfer, to an account or accounts designated by the Company at least two Business Days prior to the Closing Date; (ii) the certificate referred to in Section 6.02(a); (iii) a receipt for the Shares; and (iv) such other documents as the Company shall reasonably request. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY --------------------------------------------- The Company represents and warrants to the Purchaser that: SECTION 3.01. Organization and Qualification; ------------------------------- Subsidiaries. The Company and each of its Subsidiaries are ------------ corporations duly organized, validly existing and in good standing under the laws of their respective jurisdictions of incorporation, and have the requisite corporate power and authority to own, lease and operate their respective properties and carry on their respective businesses in all material respects as presently owned or conducted. The Company and each of its Subsidiaries are duly qualified or licensed as foreign corporations to do business, and are in good standing, in each jurisdiction where the character of their respective properties owned, leased or operated by them, or the nature of their respective activities, makes such qualification or licensing necessary, except those jurisdictions, if any, in which the failure to be so duly qualified or licensed and in good standing would not, taken as a whole, have a Material Adverse Effect. Schedule 3.01 of the Disclosure Schedule sets forth a complete and correct list of each of the Subsidiaries of the Company. 6 SECTION 3.02. Charter of Incorporation and By-Laws, ------------------------------------- Etc. The Company has heretofore furnished to the Purchaser a --- complete and correct copy of the Charter of Incorporation and the By-Laws, each as amended to date, each of which is in full force and effect. The Company is not in violation of any of the provisions of the Charter of Incorporation or By-Laws, and its Subsidiaries are not in violation of any of the provisions of their charters, by-laws or equivalent organizational documents, except where such violation would not, taken as a whole, have a Material Adverse Effect. SECTION 3.03. Capitalization. (a) As of the date -------------- hereof and immediately prior to the Closing, the authorized capital stock of the Company consists of (i) 10,000,000 shares of Preferred Stock, of which none are issued, outstanding or reserved for issuance, and (ii) 60,000,000 shares of Common Stock, of which (A) 13,016,332 shares of Common Stock are issued and outstanding, (B) no shares of Common Stock are held in the treasury of the Company, (C) an aggregate of 478,575 shares of Common Stock are subject to outstanding options, and 750,000 shares are reserved for issuance, pursuant to the Company's Stock Option Plan, (D) an aggregate of 296,838 shares of Common Stock are subject to outstanding promissory notes that are convertible into shares of Common Stock, (E) 300,000 shares of Common Stock are held in escrow on behalf of the Company and certain shareholders in connection with a settlement of a claim arising from an acquisition of a treatment center in Douglas, Georgia, and (F) an aggregate of 33,000 shares of Common Stock are subject to outstanding warrants that are exercisable for shares of Common Stock. (b) As of the time of the Closing, the authorized capital stock of the Company will consist of (i) 10,000,000 shares of Preferred Stock, of which none is issued, outstanding or reserved for issuance, and (ii) 60,000,000 shares of Common Stock, of which (A) 18,516,332 shares of Common Stock are issued and outstanding, (B) no shares of Common Stock are held in the treasury of the Company, (C) an aggregate of 478,575 shares of Common Stock are subject to outstanding options, and 750,000 shares are reserved for issuance, pursuant to the Company's Stock Option Plan, (D) an aggregate of 296,838 shares of Common Stock are subject to outstanding promissory notes that are convertible into shares of Common Stock, (E) 300,000 shares of Common Stock are held in escrow on behalf of the Company and certain shareholders in connection with a settlement of a claim arising from an acquisition of a treatment center in Douglas, Georgia, and (F) an aggregate of 33,000 shares of Common Stock are subject 7 to outstanding warrants that are exercisable for shares of Common Stock. (c) Except as set forth in this Section 3.03 or in Schedule 3.03(c)(i) of the Disclosure Schedule, there are no options, warrants or other rights, agreements, arrangements or commitments of any character to which the Company or any of its Subsidiaries is a party, or obligating the Company or any of its Subsidiaries to issue or sell any shares of capital stock of, or other equity interests in, the Company or any of its Subsidiaries. Except as set forth in Schedule 3.03(c)(ii) of the Disclosure Schedule, there are no outstanding contractual obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any of the capital stock of the Company or any Subsidiary or to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any Subsidiary or any other entity. Each of the outstanding shares of capital stock of each of the Company's Subsidiaries is duly authorized, validly issued, fully paid and nonassessable, and is owned by the Company, directly or indirectly, free and clear of all Encumbrances, except as set forth in Schedule 3.03(c)(iii) of the Disclosure Schedule, and for any Encumbrances incurred pursuant to the First Union Loan Agreement and Encumbrances for taxes not yet due and payable. (d) Except as set forth on Schedule 3.03(d) of the Disclosure Schedule, the Company is not party to any agreement granting registration rights to any Person with respect to any equity or debt securities of the Company. SECTION 3.04. Authority Relative to this -------------------------- Agreement. The Company has all necessary corporate power and --------- authority to execute and deliver this Agreement, to perform its obligations and to consummate the transactions contemplated hereunder. The execution, delivery and performance of this Agreement by the Company have been duly and validly authorized by all necessary corporate action, and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions contemplated by this Agreement. This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery hereof by the Purchaser and payment for the Shares as contemplated by this Agreement, constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms (except, in each such case, as enforceability may be limited by bankruptcy, insolvency, reorganization and other similar laws now or hereafter in effect relating to or affecting 8 creditors' rights generally, and to the extent that the remedy of specific performance and injunctive and other forms of equitable relief are subject to certain equitable defenses and to the discretion of the court before which any proceeding therefor may be brought). SECTION 3.05. No Conflict; Required Filings and --------------------------------- Consents. (a) The execution and delivery of this Agreement -------- by the Company do not, and the performance of this Agreement (including, without limitation, the consummation of the transactions contemplated hereunder) will not, (i) conflict with or violate the Charter of Incorporation or By-Laws, (ii) conflict with or violate the charters of incorporation or by-laws or equivalent organizational documents of any of the Company's Subsidiaries, (iii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to the Company or any of its Subsidiaries or by which the Company or any of its Subsidiaries or its or any of their respective properties are bound or affected, or (iv) result in any breach of, or constitute a default (or an event which, with notice or lapse of time or both, would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or encumbrance on any of the properties or assets of the Company or any of its Subsidiaries pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, insurance policy or other instrument or obligation to which the Company or any of its Subsidiaries is a party, or by which the Company or any of its Subsidiaries or its or any of their respective properties are bound or affected, except, in the case of clauses (ii), (iii) and (iv) above, for such conflicts which would not, taken as a whole, have a Material Adverse Effect. (b) The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company (including, without limitation, the consummation of the transactions hereunder) will not, require any consent, approval, authorization or permit of, or filing (other than filings, if any, required on Form 8-K with the SEC and pursuant to the HSR Act) with, or notification to, any third party or any governmental or regulatory authority, domestic or foreign, on the part of the Company or any of its Subsidiaries. SECTION 3.06. Common Stock. Following the ------------ consummation of the transactions hereunder, (a) all of the Shares subject to issuance pursuant to this Agreement, upon such issuance against payment for such Shares as contemplated 9 by this Agreement shall, (i) be duly authorized, validly issued, fully paid and nonassessable and (ii) not be subject to any Encumbrances, (b) the Shares shall have accorded to them full voting rights and (c) none of the Shares shall be "Control Shares", as such term is defined in the Tennessee Business Corporation Act. SECTION 3.07. SEC Filings; Financial Statements. --------------------------------- (a) The Company has filed all forms, reports, statements and documents required to be filed with the SEC since November 28, 1989, including, without limitation, the SEC Reports. The SEC Reports, as amended, (i) were each prepared in accordance with, and, at the time of filing, complied in all material respects with, the requirements of the Securities Act or the Exchange Act, as the case may be, and (ii) did not, at the time they were filed, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. None of the Company's Subsidiaries is required to file any forms, reports or other documents with the SEC (b) Each of the consolidated financial statements (including, in each case, any related notes thereto) contained in the SEC Reports has been prepared in accordance with GAAP (except as may be indicated in the notes thereto), and each presents fairly the consolidated financial position of the Company and its consolidated Subsidiaries at the respective dates thereof and the consolidated results of its operations and changes in cash flows for the periods indicated, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments, which were not and are not expected to be material in amount. (c) The quarterly report for the fiscal quarter ended March 31, 1992 on Form 10-Q filed with the SEC sets forth the unaudited consolidated balance sheet of the Company and its Subsidiaries and the unaudited statement of operations for the three-month period ended March 31, 1992 (the "March Financial Statements"). The March Financial -------------------------- Statements have been prepared in accordance with GAAP and present fairly the financial condition of the Company and its consolidated Subsidiaries as of March 31, 1991 and the consolidated results of its operations for the three-month period ended March 31, 1991, except that the March Financial Statements are subject to normal or recurring year-end adjustments, which are not expected to be material in amount. (d) Except as set forth in Schedule 3.07(d) of the Disclosure Schedule hereto and as and to the extent set forth 10 on the March Financial Statements, neither the Company nor any of its Subsidiaries has any Liabilities, including, without limitation, liabilities for taxes which would be required to be reflected on a balance sheet, or in the notes thereto prepared in accordance with GAAP, except for liabilities or obligations incurred in the ordinary course of business since March 31, 1991 which would not, taken as a whole, have a Material Adverse Effect. SECTION 3.08. Private Offering. (a) Assuming the ---------------- accuracy of the representations and warranties of the Purchaser, the sale of the Shares hereunder is exempt from the registration and prospectus delivery requirements of the Securities Act. (b) No form of general solicitation or general advertising (including, without limitation, advertisements, articles, notices or other communications published in any newspaper, magazine or other medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising) was used by the Company or any other Person acting on behalf of the Company in respect of the Shares or in connection with the offer and sale of the Shares. SECTION 3.09. Standstill Agreement. The Company -------------------- agrees and acknowledges that this Agreement and the transactions to be effected pursuant hereto shall not give rise to a breach under Section 5.11 of the Stock Purchase Agreement dated as of May 11, 1991, as amended, between the Company and the Purchaser. SECTION 3.10. Brokers. No broker, finder or ------- investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions hereunder based upon arrangements made by or on behalf of the Company other than fees payable Kidder, Peabody & Co. Incorporated and Morgan Keegan & Company, Inc. in connection with the transactions contemplated by this Agreement. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER ----------------------------------------------- The Purchaser represents and warrants to the Company that: SECTION 4.01. Corporate Organization. The ---------------------- Purchaser is a corporation duly organized, validly existing and in good standing under the laws of Colorado and has the 11 requisite corporate power and authority and any necessary governmental authority to own, operate or lease the properties that it purports to own, operate or lease and to carry on its business as it is now being conducted. SECTION 4.02. Authority Relative to this -------------------------- Agreement. The Purchaser has all necessary corporate power --------- and authority to execute and deliver this Agreement and to perform its obligations and to consummate the transactions contemplated hereunder. The execution and delivery of this Agreement by the Purchaser and the purchase of the Shares as provided in Section 2.01 hereof by the Purchaser hereunder have been duly and validly authorized by all necessary corporate action of the Purchaser and no other corporate proceedings on the part of the Purchaser are necessary to authorize this Agreement or the purchase of the Shares by the Purchaser as contemplated hereby. This Agreement has been duly and validly executed and delivered by the Purchaser and, assuming the due authorization, execution and delivery by the Company, constitutes the legal, valid and binding obligation of the Purchaser enforceable against the Purchaser in accordance with its terms (except in each such case as enforceability may be limited by bankruptcy, insolvency, reorganization and other similar laws now or hereafter in effect relating to or affecting creditors' rights generally and to the extent that the remedy of specific performance and injunctive and other forms of equitable relief are subject to certain equitable defenses and to the discretion of the court before which any proceeding therefor may be brought). SECTION 4.03. No Conflict; Required Filings and --------------------------------- Consents. (a) The execution and delivery of this Agreement -------- by the Purchaser do not, and the performance of this Agreement by the Purchaser will not, (i) conflict with or violate the articles of incorporation or by-laws or equivalent organizational documents of the Purchaser, (ii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to the Purchaser or by which it or its properties are bound or affected, or (iii) result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or encumbrance on any of the property or assets of the Purchaser pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Purchaser is a party or by which the Purchaser or any of its properties are bound or affected, except, in the case of this clause (iii) and clause (ii) above, for any such breaches, defaults or other occurrences which would not, 12 individually or in the aggregate, have a material adverse effect on the business, operations, properties (including intangible properties), condition (financial or otherwise), assets or liabilities of the Purchaser. (b) The execution and delivery of this Agreement by the Purchaser do not, and the performance of this Agreement by the Purchaser (including, without limitation, the consummation of the transactions hereunder) will not, require any consent, approval, authorization or permit of, or filing (other than a filing pursuant to the HSR Act) with or notification to, any third party or any governmental or regulatory authority, domestic or foreign. SECTION 4.04. Funds. The Purchaser has, and ----- immediately prior to the Closing will have, the funds necessary to consummate the purchase of the Shares hereunder. SECTION 4.05. Securities Act. The Shares purchased -------------- by the Purchaser pursuant to this Agreement are being acquired for investment only and not with a view to any sale or distribution (within the meaning of the Securities Act) of the Shares or any part thereof. The Purchaser agrees at all times to sell or otherwise dispose of all or any part of the Shares so acquired by the Purchaser (and any securities issued in exchange therefor) only pursuant to a registration, or exemption therefrom, under the Securities Act and in compliance with applicable state securities laws. The Purchaser will take any steps necessary to ensure that any purchaser will agree not to sell or otherwise dispose of Shares except in compliance with the requirements contained in the preceding sentence. The Purchaser is an "accredited investor" within the meaning of Rule 501 promulgated under the Securities Act and has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Shares. The Purchaser has received all the information it deems material to its evaluation of the business, assets, liabilities, financial condition and results of operations of the Company and all the information it has requested from the Company and considers necessary or appropriate for deciding whether to purchase the Shares. The Purchaser has the ability to bear the economic risks of the Purchaser's prospective investment and the Purchaser is able, without materially impairing its financial condition, to hold the Shares for an indefinite period of time and to suffer complete loss on its investment. The Purchaser understands and has fully considered for purposes of this investment the risks of this investment and understands that: (i) this investment is suitable only for an investor who is able to bear the economic consequences of losing his or its entire investment; 13 (ii) the Shares represent an extremely speculative investment which involves a high degree of risk of loss; (iii) there are substantial restrictions on the transferability of the Shares and, accordingly, it may not be possible for the Purchaser to liquidate his or its investment in the Shares in case of emergency; and (iv) there have been no representations as to the possible future value, if any, of the Shares. The Purchaser understands and acknowledges that the sale of the Shares pursuant to this Agreement will not be registered under the Securities Act on the grounds that the offering and sale of securities contemplated by this Agreement are exempt from registration pursuant to Section 4(2) of the Securities Act, and that the Company's reliance upon such exemption is predicated in part upon the Purchaser's representations set forth in this Agreement. SECTION 4.06. Brokers. No broker, finder or ------- investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions hereunder based upon arrangements made by or on behalf of the Purchaser. ARTICLE V ADDITIONAL AGREEMENTS --------------------- SECTION 5.01. Conduct of Business by the Company ---------------------------------- Pending the Closing. Except as contemplated by this ------------------- Agreement, the Company covenants and agrees that, during the period between the date of this Agreement and through and including the Closing Date, unless the Purchaser shall otherwise agree in writing, the businesses of the Company and its Subsidiaries shall be conducted only in, and the Company and its Subsidiaries shall not take any action except in, the ordinary course of business and in a manner consistent with past practice. SECTION 5.02. Regulatory and Other Authorizations. ----------------------------------- Each party hereto will use its reasonable best efforts to obtain all authorizations, consents, orders and approvals of all third parties and of all federal, state and local regulatory bodies and officials that may be or become necessary for its execution and delivery of, and the performance of its obligations pursuant to, this Agreement and will cooperate fully with the other party in promptly seeking to obtain all such authorizations, consents, orders and approvals. Each party hereto agrees to make, or cause its "ultimate parent entity" (as such term is defined in the 14 HSR Act) to make, an appropriate filing of a Notification and Report Form pursuant to the HSR Act with respect to the transactions contemplated hereby within ten Business Days of the date hereof. The parties hereto will not take any action that will have the effect of delaying, impairing or impeding the receipt of any required approvals. SECTION 5.03 Access to Information. (a) From the --------------------- date hereof to the Closing Date, the Company shall, and shall cause its Subsidiaries, officers, directors, employees, auditors and other agents to, afford the officers, employees, auditors and other agents of the Purchaser reasonable access at all reasonable times to its officers, employees, agents, properties, offices, plants and other facilities and to all books and records, and shall furnish the Purchaser with all financial, operating and other data and information with respect to the business and properties of the Company as the Purchaser, through its officers, employees or agents, may reasonably request. The Purchaser agrees to maintain the strict confidentiality of such data and information and not to disclose such data to any third party. (b) No investigation pursuant to this Section 5.03 shall affect any representations or warranties of the parties herein or the conditions to the obligations of the parties hereto. SECTION 5.04. Notification of Certain Matters. The ------------------------------- Company shall give prompt notice to the Purchaser, and the Purchaser shall give prompt notice to the Company, of (i) the occurrence, or non-occurrence, of any event the occurrence, or non-occurrence, of which would be likely to cause any representation or warranty contained in this Agreement to be untrue or inaccurate and (ii) any failure of the Company or the Purchaser, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the -------- ------- delivery of any notice pursuant to this Section 5.04 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice. SECTION 5.05. Further Action; Reasonable Efforts. ---------------------------------- Upon the terms and subject to the conditions hereof, each of the parties hereto shall use all reasonable efforts to take, or cause to be taken, all appropriate action 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 hereunder. SECTION 5.06. Public Announcements. The Purchaser -------------------- and the Company shall consult with each other before issuing 15 any press release or otherwise making any public statements with respect to the transactions contemplated hereunder and shall not issue any such press release or make any such public statement prior to such consultation, except as may be, and to the extent, required by law or any listing agreement with the National Association of Securities Dealers. SECTION 5.07. Legend. The Purchaser agrees that ------ all certificates representing the Shares issued pursuant to this Agreement shall bear the following legend: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR SECURITIES LAWS OF ANY STATE AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREUNDER. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT (IN CERTAIN CIRCUMSTANCES) TO A RIGHT OF FIRST OFFER AS SET FORTH IN THE STOCK PURCHASE AGREEMENT DATED AS OF MAY 11, 1991, AS AMENDED, BETWEEN THE COMPANY AND COBE LABORATORIES, INC." SECTION 5.08. Shareholder Approval. The Company -------------------- agrees to include in the proxy statement to be disseminated to the shareholders of the Company prior to the next annual meeting of the Company both (i) a proposal to amend the By-Laws to opt out of the Tennessee Control Share Acquisition Act, as amended, with respect to the appraisal of shares of dissenting shareholders provisions of Section 48-35-309 of such act and (ii) a proposal to confer voting rights to the shares of Common Stock acquired by the Purchaser pursuant to this Agreement or otherwise that would entitle the Purchaser and its associates, immediately upon acquisition of such shares, to exercise or direct the exercise of voting power of the Company in the election of its directors equal to or in excess of a majority of all such voting power. The Company shall use its best efforts to solicit from the shareholders of the Company eligible to vote on such proposals proxies in favor of such proposals and shall take all other action necessary or advisable to secure the vote of the shareholders required to approve such proposals. Section 5.09. No Solicitation; Third Party ---------------------------- Negotiations. (a) The Company agrees that between the date ------------ of this Agreement and the earlier of (i) the Closing and (ii) the termination of this Agreement, neither the Company nor any of its officers, directors, representatives or agents will solicit, initiate, or encourage or, except as otherwise provided pursuant to subsection 5.09(b), consider or accept any other proposals or offers from any Person (i) relating to any acquisition or purchase of all or any portion of the 16 capital stock of the Company or any Subsidiary or any assets of the Company or any Subsidiary, (ii) to enter into any business combination with the Company or any Subsidiary or (iii) to enter into any other extraordinary business transaction involving or otherwise relating to the Company or any Subsidiary. (b) Notwithstanding the provisions of subsection 5.09(a), the Company may, in response to an unsolicited, bona fide, financially superior offer with at least the same evidence of financial ability to consummate and at least the same degree of financial commitment as the Purchaser with respect to the transactions contemplated hereby, furnish information and access, with appropriate assurances of confidentiality, and may participate in discussions and negotiate with any Person who is not an Affiliate of the Company or any of its officers, directors, representatives or agents (a "Third Party") concerning a proposal for any merger, sale of all or substantially all of the assets of the Company or shares of the Company's capital stock or another transaction involving the transfer of effective control of the Company (an "Acquisition Proposal"), and consider and accept an Acquisition Proposal, if the Board in its good faith judgment after consultation with outside counsel, concludes that its fiduciary duties require such action. In the event of such determination by the Board, the Company may direct its officers and other appropriate personnel to cooperate with and be reasonably available to consult with such Third Party; provided that (i) the Company shall -------- promptly notify the Purchaser in writing of any Acquisition Proposal (including, without limitation, each of any successive Acquisition Proposals, inquiries or contacts) and shall, in such notice, indicate the identity of the Third Party and the material terms and conditions of any such Acquisition Proposal, including, without limitation, price and (ii) release the Purchaser from any and all restrictions contained in Section 5.11 of the Stock Purchase Agreement dated as of May 11, 1991, as amended, between the Company and the Purchaser unless and until such time as (A) any entity controlled by Investment AB Cardo consummates a transaction to the exclusion of all Acquisition Proposals or (B) all Acquisition Proposals are rejected, in such case of (A) or (B) all restrictions contained in such Section 5.11 shall be thereupon reinstated. Section 5.10. Termination of Right of First Offer ----------------------------------- Agreement. The Purchaser agrees that, upon completion of the --------- Closing, the provisions of paragraph (a) of the Right of First Offer Agreement, dated as of May 11, 1991, among Jerome S. Tannenbaum, M.D., Mark S. Ginsburg, M.D. and the Purchaser terminated and shall thereafter be null and void and of no effect. 17 ARTICLE VI CONDITIONS TO THE CLOSING ------------------------- SECTION 6.01. Conditions to Obligations of the -------------------------------- Purchaser. The obligations of the Purchaser to effect the --------- Closing shall be subject to the prior fulfillment of each of the following conditions: (a) Representations and Warranties; Agreements and ---------------------------------------------- Covenants. Except for changes permitted or contemplated --------- hereby or consented to by the Purchaser and except for matters waived or consented to by the Purchaser pursuant to Section 8.04, (i) the representations and warranties of the Company contained in this Agreement which are qualified as to materiality shall be true in all respects and all other representations and warranties shall be true and correct in all material respects on and as of the Closing, with the same force and effect as if made as of the Closing, (ii) all the agreements contained in this Agreement to be performed or complied with by the Company, at or before the Closing, shall have been performed or complied with in all material respects and (iii) the Purchaser shall have received a certificate of the Company, signed by the Chief Executive Officer thereof, as to the fulfillment of the conditions set forth in the foregoing clauses (i) and (ii). (b) No Cessation Order. No order, ruling or ------------------ determination having the effect of halting the trading of the Common Stock shall have been issued or made by the SEC or other regulatory authority and be continuing and no proceedings for that purpose shall have been instituted and be pending. (c) Litigation. There shall have been no order or ---------- preliminary or permanent injunction entered in any action or proceeding before any federal, state or foreign court or governmental, administrative or regulatory authority or agency, or no other action taken or threatened, or statute, rule, regulation, legislation, interpretation, judgment or order enacted, entered, enforced, promulgated, amended, issued or deemed applicable to the Purchaser, the Company or any Subsidiary or Affiliate of the Purchaser, by any federal, state or foreign legislative body, court, government or governmental, administrative or regulatory authority or agency which shall have remained in effect and which shall have had the effect of: (i) making illegal, materially delaying or otherwise directly or indirectly restraining or 18 prohibiting the consummation of the transactions hereunder; (ii) prohibiting or materially limiting the ownership of the Shares; (iii) imposing material limitations on the ability of the Purchaser to exercise full rights of ownership of any of the Shares, including, without limitation, the right to vote any shares of Common Stock; or (iv) requiring divestiture by the Purchaser of any Shares. (d) Calamities. There shall not have occurred and ---------- be continuing (i) any general suspension of, or limitation on prices for or trading in, securities on any United States securities exchange, (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, (iii) any limitation (whether or not mandatory) by any government or governmental, administrative or regulatory authority or agency, domestic or foreign, or other event that materially adversely affects the ability of the Purchaser to purchase the Shares hereunder, or (iv) a commencement of a war or armed hostilities or other national or international calamity directly involving the United States or Sweden. (e) Bankruptcy; Insolvency; Etc. No proceeding --------------------------- shall have been instituted or consented to by or against the Company seeking to adjudicate it bankrupt or insolvent, or seeking liquidation, winding-up, reorganization, arrangement, adjustment, protection, relief or composition of its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or any substantial part of its property (each such action being a "Bankruptcy ---------- Proceeding"), and the Company shall not have taken any ---------- corporate action to authorize any Bankruptcy Proceeding. (f) No Material Adverse Effect. No fact, event or -------------------------- condition (financial or otherwise) shall have occurred with respect to the Company or any of its Subsidiaries having, individually or in the aggregate, a Material Adverse Effect. (g) Opinion. The Purchaser shall have received ------- opinions from Latham & Watkins and/or Wyatt, Tarrant, Combs, Gilbert & Milom substantially to the effect of Exhibit B hereto. (h) Amendment No. 3. Amendment No. 3 shall have --------------- been executed and delivered by the Company. 19 (i) HSR Act. Any waiting period (and any extension ------- thereof) under the HSR Act applicable to the purchase of the Shares contemplated hereby shall have expired or shall have been terminated. (j) Shareholder Approval. Each of the proposals -------------------- set forth in Section 5.08 of this Agreement shall have been approved by the requisite holders of the outstanding capital stock of the Company entitled to vote thereon. (k) Resignation. Beth Tannenbaum shall have ----------- resigned as Secretary of the Company and no longer serve as the chief legal officer of the Company. (1) Employment Agreements. The Purchaser shall be --------------------- satisfied with the terms of the amendments to the termination and option vesting provisions of the employment agreements between the Company and Jerome S. Tannenbaum, M.D. and Bradley S. Wear insofar as such provisions relate to the "change of control" resulting from the transaction contemplated by this Agreement. SECTION 6.02. Conditions to Obligations of the -------------------------------- Company. The obligations of the Company to effect the ------- Closing shall be subject to the prior fulfillment of each of the following conditions: (a) Representations and Warranties. (i) The ------------------------------ representations and warranties of the Purchaser contained in this Agreement and in any certificates or agreements of the Purchaser delivered pursuant hereto shall be true and correct in all material respects on and as of the Closing, with the same force and effect as if made as of the Closing, (ii) all the agreements contained in this Agreement and in any certificates or agreements of the Purchaser delivered pursuant hereto to be performed or complied with by the Purchaser, at or before the Closing, shall have been performed or complied with in all material respects and (iii) the Company shall have received a certificate of the Purchaser, signed by a duly authorized officer thereof, as to the fulfillment of the conditions set forth in the foregoing clauses (i) and (ii). (b) Litigation. There shall have been no order or ---------- preliminary or permanent injunction entered in any action or proceeding before any federal, state or foreign court or governmental, administrative or regulatory authority or agency by any federal, state or foreign legislative body, court, government or governmental, administrative or regulatory authority or agency which shall have 20 remained in effect and which shall have had the effect of making illegal the consummation of any of the transactions hereunder. (c) HSR Act. Any waiting period (and any extension ------- thereof) under the HSR Act applicable to the purchase of the Shares contemplated hereby shall have expired or shall have been terminated. ARTICLE VII INDEMNIFICATION --------------- SECTION 7.01. Survival of Representations and ------------------------------- Warranties. The representations and warranties of the ---------- Company in Article III shall survive the Closing until the date 15 months from the Closing Date. Neither the period of survival nor the liability of any party with respect to the parties' representations and warranties shall be reduced by any investigation made at any time by or on behalf of any party. SECTION 7.02. Indemnification by the Company. The ------------------------------ Purchaser and its Affiliates, officers, directors, employees, agents, successors and assigns shall be indemnified and held harmless by the Company for any and all Liabilities, losses, damages, claims, costs and expenses, interest, awards, judgments and penalties (including, without limitation, legal costs and expenses) actually suffered or incurred by them (hereinafter, a "Purchaser Loss") arising out of or resulting -------------- from: (a) the breach of any representation or warranty made by the Company contained herein or in any document delivered by the Company hereunder at the Closing; or (b) the breach of any covenant or agreement by the Company contained herein. SECTION 7.03. Indemnification by the Purchaser. -------------------------------- The Company and its Affiliates, officers, directors, employees, agents, successors and assigns shall be indemnified and held harmless by the Purchaser for any and all Liabilities, losses, damages, claims, costs and expenses, interest, awards, judgments and penalties (including, without limitation, legal costs and expenses) actually suffered or incurred by them (hereinafter, a "Company Loss" and, together ------------ with a Purchaser Loss, a "Loss") arising out of or resulting ---- from: 21 (a) the breach of any representation or warranty made by the Purchaser contained herein or in any document delivered by the Purchaser hereunder at the Closing; or (b) the breach of any covenant or agreement by the Purchaser contained herein. SECTION 7.04. Materiality. Notwithstanding ----------- anything in this Agreement to the contrary, for purposes of application of the indemnity provisions of this Article VII, the amount of any Purchaser Loss or Company Loss arising from the breach of such representation, warranty, covenant or agreement shall be the entire amount of any such Loss actually incurred by the party being indemnified hereunder as a result of such breach and not just that portion of such Loss that exceeds the relevant level of materiality. SECTION 7.05. Time Period; Dollar Threshold. ----------------------------- (a) The indemnification obligations of the Company and the Purchaser under this Article VII shall continue for the same period of survival specified in Section 7.01 for each such representation and warranty and shall terminate with the expiration of the 15 month survival period for each such representation and warranty. Any claim or demand against the Company or the Purchaser which is pending or asserted at or prior to the expiration of any survival period may continue to be asserted and indemnified against. (b) Neither the Company nor the Purchaser shall be entitled to indemnification under this Article VII unless and until the aggregate amount of the claims against the other party exceeds $1,000,000. If the aggregate amount of such claims against either party exceeds $1,000,000, then that party may claim indemnification for the entire aggregate amount of such claims. (c) The provisions of this Article VII shall be the sole and exclusive remedy (other than injunctive relief) of the Company or the Purchaser (regardless of against whom asserted) for the matters subject to indemnification. SECTION 7.06. Notice and Defense. Each party ------------------ shall, within 30 days of learning of any asserted liability or damage claimed to give rise to indemnification hereunder, notify the party obligated to indemnify it hereof in writing; provided, however, that the failure of the indemnified party -------- ------- to so notify the indemnifying party shall not relieve the indemnifying party of its obligations hereunder unless, and only to the extent that, such failure to notify prejudices the indemnifying party. Thereafter, the indemnifying party shall have, at its election, the right to compromise or 22 defend any such matter at its sole cost and expense through counsel chosen by it. If the indemnifying party so undertakes to compromise and defend, the indemnifying party shall notify the other party of its intention to do so. The indemnifying party must defend such matter diligently or the indemnified party may assume control of the defense of such matter. Each party agrees in all cases to cooperate with the defending party and its counsel in the compromise of or defending of any such liabilities or claims. The defending party and the nondefending party may be represented by the same counsel unless such representation would be inappropriate due to actual or potential differing interests between them. In addition, the nondefending party shall at all times be entitled to monitor such defense through the appointment of counsel of its own choosing, at its own cost and expense. ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER --------------------------------- SECTION 8.01. Termination. (a) This Agreement may ----------- be terminated and the transactions contemplated hereby may be abandoned at any time prior to the Closing Date: (i) By mutual written consent duly authorized by the Boards of Directors of the Company and the Purchaser; or (ii) By the Purchaser, if (A) (1) any Person other than the Purchaser shall have acquired, or shall have been granted any option or right, conditional or otherwise, to acquire, beneficial ownership of 20% or more of the outstanding shares of the Company's Common Stock, or (2) any group (other than a group including the Purchaser) shall have been formed which beneficially owns 20% or more of the outstanding shares of the Company's Common Stock; or (B) the Company shall have entered into an agreement with a third party with respect to any acquisition or purchase of all or a substantial portion of the assets of, or any equity interest in, the Company or any of its Subsidiaries or any business combination with the Company or any of its Subsidiaries by such third party; or (iii) By the Purchaser or the Company, if any court of competent jurisdiction in the United States or other United States governmental authority shall have issued an order, decree or ruling or taken any other action 23 restraining, enjoining or otherwise prohibiting any of the transactions hereunder and such order, decree, ruling or other action shall have become final and nonappealable; or (iv) By the Purchaser or the Company, if the Closing shall not have occurred by October 31, 1992 or such later date as the Company and the Purchaser shall hereafter agree; provided, however, that the right to terminate -------- ------- this Agreement under this Section 8.01(a)(iv) shall not be available to any party whose willful failure to fulfill any material obligation under this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or before such date; or (v) By the Company, in connection the exercise by the Board of its fiduciary duties pursuant to Section 5.09(b), in order to permit the Company to execute a definitive agreement with a Third Party with respect to an Acquisition Proposal; provided, that upon consummation -------- of the transactions contemplated by such agreement by the Company with the Third Party that is a direct competitor of the Purchaser as of the date hereof, the Purchaser shall be (i) unconditionally released by the Company from any and all restrictions contained in Sections 5.12(a) and 5.12(b) of the Stock Purchase Agreement dated as of May 11, 1991, as amended, between the Company and the Purchaser and (ii) released by the Company from any and all restrictions contained in Section 5.15 of the Stock Purchase Agreement dated as of May 11, 1991, as amended, between the Company and the Purchaser except in the case of the sale of Common Stock by the Purchaser to the Third Party consummating such agreement. (b) This Agreement shall terminate (without any action or notice (in writing or otherwise) by any of the parties hereto) if any Bankruptcy Proceeding shall have been instituted or consented to by or against the Company. SECTION 8.02. Effect of Termination. In the event --------------------- of the termination of this Agreement pursuant to Section 8.01, this Agreement shall forthwith become void and have no effect and there shall be no liability on the part of any party hereto or its Affiliates, directors, officers or shareholders; provided, however, that nothing herein shall -------- ------- relieve any party from liability for any breach hereof prior to such termination. SECTION 8.03. Amendment. This Agreement may be --------- amended by the parties hereto by action taken by or on behalf of the Company and the Purchaser at any time prior to the 24 Closing Date. This Agreement may not be amended except by an instrument in writing signed by the parties hereto. SECTION 8.04. Waiver. Either party hereto may (a) ------ extend the time for the performance of any of the obligations or other acts of the other party hereto, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto and (c) waive compliance with any of the agreements or conditions contained herein. Any such extension or waiver shall be valid if set forth in an instrument in writing signed by the party to be bound thereby. The failure of either party to assert any of its rights hereunder shall not constitute a waiver of any such rights. SECTION 8.05. Disinterested Directors. Effective ----------------------- on the Closing Date and so long as the Purchaser's Directors (as such term is defined in Section 5.08 of the Stock Purchase Agreement dated as of May 11, 1991, as amended, between the Company and the Purchaser) constitute a majority of the Board, no amendment or waiver of any provisions of this Agreement by which the Company is to be bound shall be effective unless approved by a majority of the members of the Board who are not Purchaser's Directors. ARTICLE IX GENERAL PROVISIONS ------------------ SECTION 9.01. Notices. All notices, requests, ------- claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by cable, telecopy, telegram or telex or 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 the Purchaser: Cobe Laboratories, Inc. 1185 Oak Street Lakewood, Colorado 80215 Attention: Mats Wahlstrom 25 with a copy Shearman & Sterling 599 Lexington Avenue New York, New York 10022 Attention: Peter D. Lyons, Esq. (b) if to the Company: REN Corporation-USA 6820 Charlotte Pike Nashville, Tennessee 37209 Attention: Jerome S. Tannenbaum, M.D., C.E.O. with a copy Latham & Watkins 1001 Pennsylvania Avenue, N.W. Suite 1300 Washington, D.C. 20004 Attention: Eric L. Bernthal, Esq. SECTION 9.02. Entire Agreement; Assignment. This ---------------------------- Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral, between the parties with respect to the subject matter hereof. This Agreement shall not be assigned by operation of law or otherwise, except that the Purchaser may assign all or any of its rights and obligations hereunder to any wholly owned Subsidiary of Gambro Aktiebolag, the owner of all the outstanding capital stock of the Purchaser, upon the execution of a written instrument whereby such assignee agrees to assume all of the Purchaser's obligations hereunder and be bound by all the terms and conditions of this Agreement; provided that no such assignment shall -------- relieve the Purchaser of its obligations hereunder if such assignee does not perform such obligations. SECTION 9.03. Parties in Interest. This Agreement ------------------- shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement. SECTION 9.04. Governing Law. This Agreement shall ------------- be governed by, and construed in accordance with, the laws of the State of New York, applicable to contracts executed in and to be performed entirely within that state. 26 SECTION 9.05. 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 9.06. Counterparts. This Agreement may be ------------ executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. SECTION 9.07. Specific Performance. The parties -------------------- hereto agree that irreparable damage would occur in the event any of the provisions of this Agreement were not to be performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or equity. IN WITNESS WHEREOF, the Purchaser and the Company have each caused this Agreement to be executed by its duly authorized officer as of the date first written above. COBE LABORATORIES, INC. By /s/Mats Wahlstrom ----------------------- President REN CORPORATION-USA By /s/Jerome S. Tannenbaum ------------------------ Chairman of the Board, President and Chief Executive Officer EXHIBIT A --------- FORM OF AMENDMENT NO. 3 TO THE MAY 11, 1991 STOCK PURCHASE AGREEMENT AMENDMENT NO. 3, dated as of __________, 1992 (this "Amendment"), to the Stock Purchase Agreement, dated as of --------- May 11, 1991, as amended by Amendment No. 1, dated May 24, 1991, and Amendment No. 2, dated March 17, 1992, between REN CORPORATION-USA, a Tennessee corporation (the "Company"), and ------- COBE LABORATORIES, INC., a Colorado corporation (the "Purchaser"). --------- W I T N E S S E T H: ------------------- WHEREAS, the Company and the Purchaser have entered into a Stock Purchase Agreement, dated as of May 11, 1991 (the "Purchase Agreement"; capitalized terms used and not ------------------ defined herein being used herein as defined in the Purchase Agreement); WHEREAS, the Company and the Purchaser have entered into Amendment No. 1, dated as of May 24, 1991 to the Purchase Agreement; and WHEREAS, the Company and the Purchaser have entered into Amendment No. 2, dated as of March 17, 1992 to the Purchase Agreement; and WHEREAS, the Company and the Purchaser have determined that it is in their mutual interests to further amend the Purchase Agreement as hereinafter set forth; NOW, THEREFORE, in consideration of the premises and of the mutual agreements and understandings hereinafter set forth, the Purchaser and the Company agree as follows: SECTION 1. Amendments to the Purchase Agreement. ------------------------------------ The Purchase Agreement is, effective as of the date hereof, hereby amended as follows: (a) New defined terms shall be added to Section 1.01, immediately following the definition of "Amendment No. 2", to read as follows: "'Amendment No. 3' means the Amendment No. 3, --------------- dated , 1992, to this Agreement between ---------------- the Company and the Purchaser." (b) The defined term "Purchase Agreement" shall be restated in full to read as follows: A-2 "'Purchase Agreement' means this Agreement, as ------------------ amended by Amendment No. 1, Amendment No. 2 and Amendment No. 3." (c) Sections 5.08 shall be restated in full to read as follows: "(a) The Company agrees, effective upon the Closing Date (as defined in the Stock Purchase Agreement dated as of July 2, 1992 between the Company and the Purchaser), to increase the size of the Board to nine directors and to appoint as directors three persons designated by the Purchaser (such three directors, together with the two members of the Board previously designated by the Purchaser being the 'Purchaser's Directors'), one such --------------------- additional Purchaser's Director with his term expiring at the Company's 1993 annual stockholders' meeting and the other two additional Purchaser's Directors with their term expiring at the Company's 1994 annual stockholders' meeting. Without the prior written consent of the Purchaser, the Company, acting through the Board, shall not change the size of the Board. (b) Effective on the Closing Date and so long as the Purchaser owns a majority of the issued and outstanding Common Stock, the Purchaser shall have the right to request that the Company include (x) two persons designated by the Purchaser as a nominee to serve as a member of the `Class One Directors' (as such term is used in the By-Laws; provided that -------- for purposes of this Agreement, such term shall be further defined to be that class of directors of the Board whose term next expires at the 1993 annual stockholders' meeting) of the Board, (y) two persons designated by the Purchaser to serve as a member of the 'Class Two Directors' (as such term is used in the By-Laws; provided that for purposes of this -------- Agreement, such term shall be further defined to be that class of directors of the Board whose term next expires at the 1994 annual stockholders' meeting) of the Board and (z) one person designated by the Purchaser to serve as a member of the 'Class Three Directors' (as such term is used in the By-Laws; provided that for purposes of this Agreement, such -------- term shall be further defined to be that class of directors of the Board whose term next expires at the 1995 annual stockholders' meeting) of the A-3 Board, and such persons shall be nominated by the Company. If the Board, in the exercise of its fiduciary duties, reasonably shall determine that any person designated by the Purchaser to be a nominee to the Board pursuant to this Section 5.08 is not qualified to serve on the Board and the committees specified in subsection (c) of this Section 5.08 for which such person has been designated to serve upon by the Purchaser, the Purchaser shall have the opportunity to specify one or more additional designees who shall be so included as a nominee subject to the reasonable determination by the Board, in the exercise of their fiduciary duties, that any such additional designee is qualified to serve on the Board and such committees. The Board shall recommend to the stockholders of the Company for election the designees of the Purchaser who are nominated by the Company to serve as members of the Board. In the event that a vacancy is created on the Board at any time by the death, disability, retirement, resignation or removal (with or without cause) of a Purchaser's Director, the Purchaser shall have the right to select a nominee to fill such vacancy. If the remaining Board members, in the exercise of their fiduciary duties, reasonably shall determine that such nominee is not qualified to serve on the Board and the committees specified in subsection (c) of this Section 5.08 for which such person has been designated to serve upon by the Purchaser, the Purchaser shall have the opportunity to select one or more additional nominees. Subject to the qualification set forth in the immediately preceding sentence, the remaining members of the Board shall elect to the Board to fill such vacancy any such nominee of the Purchaser. (c) Effective on the Closing Date and so long as the Purchaser owns a majority of the issued and outstanding Common Stock, the Company agrees to place two of the Purchaser's Directors on each of the Executive, Compensation and Human Resources Committees, each of which is to consist of three members and to place two of the Purchaser's Directors on the Audit Committee, which is to consist of four members." (d) The second sentence of Section 5.10(b) shall be restated in full to read as follows: "The Purchaser shall have the option to purchase from the Company additional shares of Common Stock A-4 to the extent necessary to permit the Purchaser to maintain 50.1% of the issued and outstanding shares of Common Stock and 50.1% of the Total Voting Power." (e) Article VIII is amended by adding a new Section 8.05 at the end thereof to read as follows: "SECTION 8.05. Disinterested Directors. ----------------------- Effective on the Closing Date and so long as the Purchaser's Directors constitute a majority of the Board, no amendment of this Agreement by which the Company is to be bound shall be effective unless approved by a majority of the members of the Board who are not Purchaser's Directors." SECTION 2. Counterparts. This Amendment may be ------------ executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. SECTION 3. Governing Law. This Amendment shall be ------------- governed by, and construed in accordance with, the laws of the State of New York, applicable to contracts executed in and to be performed entirely within that state. IN WITNESS WHEREOF, each of the Purchaser and the Company has caused this Amendment to be executed as of the date first written above by their respective officers thereunto duly authorized. REN CORPORATION-USA By -------------------- Name: Title: COBE LABORATORIES, INC By -------------------- Name: Title: EXHIBIT B --------- CONTENTS OF OPINIONS OF LATHAM & WATKINS AND/OR WYATT, TARRANT, COMBS, GILBERT & MILOM 1. The Company is a corporation duly organized, validly existing and in good standing under the laws of Tennessee and has the requisite corporate power and authority to own, lease and operate its properties and carry on its business in all material respects as presently owned or conducted. The Company is duly qualified or licensed as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of its properties owned, leased or operated by it, or the nature of its activities makes such qualification or licensing necessary, except those jurisdictions, if any, in which the failure to be so duly qualified or licensed and in good standing would not, taken as a whole, have a Material Adverse Effect. 2. The Company is not in violation of any of the provisions of the Charter of Incorporation or By-Laws, except where such violation would not, individually or in the aggregate, have a Material Adverse Effect. 3. The Company has all necessary corporate power and authority to execute and deliver the Agreement and to perform its obligations and to consummate the transactions contemplated thereunder. The execution, delivery and performance of the Agreement by the Company have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of the Company are necessary to authorize the Agreement or to consummate the transactions contemplated thereunder. 4. (a) The execution and delivery of the Agreement by the Company do not, and the performance of the Agreement (including, without limitation, the consummation of the transactions contemplated thereunder) will not, (i) conflict with or violate the Charter of Incorporation or By-Laws, (ii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to the Company, or by which its or any of its properties are bound or affected, or (iii) result in any breach of or constitute a default (or an B-2 event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or encumbrance on any of the properties or assets of the Company which would have a Material Adverse Effect, taken as a whole, pursuant to any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, insurance policy or other instrument or obligation, and which note, bond, mortgage, indenture, contract, agreement, license, permit, insurance policy or other instrument or obligation to which the Company is a party, or by which the Company or its properties are bound or affected. (b) The execution and delivery of the Agreement by the Company do not, and the performance of the Agreement by the Company (including, without limitation, the consummation of the transactions thereunder) will not require any consent, approval, authorization or permit of, or filing (other than filings, if any, required on Form 8-K with the SEC and the HSR Act) with or notification to, any governmental or regulatory authority, on the part of the Company. 5. Following the consummation of the transactions thereunder, all the Shares subject to issuance pursuant to the Agreement, upon such issuance against payment for such Shares as contemplated by the Agreement shall (i) be duly authorized, validly issued, fully paid and nonassessable, (ii) not be subject to any Encumbrances and (iii) such Shares shall have accorded to them voting rights. 6. The Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery hereof by the Purchaser, and payment for the Shares as contemplated by the Agreement, constitutes the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally and by the availability of equitable remedies. The following assumptions shall be made: 1. Reliance upon representations and warranties of the Company and upon certificates of certain public officials; B-3 2. Authenticity of all documents submitted to us as copies, genuineness of all signatures, and conformity to the originals of all documents submitted to counsel as copies; 3. Due authorization, execution and delivery of the Agreement by the Purchaser; 4. Compliance by the Company, the Purchaser and any Affiliate of either the Company or the Purchaser with the covenants, representations, warranties and agreements made, and to be performed by them pursuant to the Agreement. [EXECUTION COPY] AMENDMENT NO. 1 TO THE JULY 2, 1992 STOCK PURCHASE AGREEMENT AMENDMENT NO. 1, dated as of July 23, 1992 (this "Amendment") to the Stock Purchase Agreement, dated as of --------- July 2, 1992 between REN CORPORATION-USA, a Tennessee corporation (the "Company"), and COBE LABORATORIES, INC., a ------- Colorado corporation (the "Purchaser"). --------- W I T N E S S E T H - - - - - - - - - - WHEREAS, the Company and the Purchaser have entered into as of July 2, 1992 a Stock Purchase Agreement (the "Stock Purchase Agreement"; capitalized terms used and not ------------------------ defined herein being used herein as defined in the Stock Purchase Agreement); and WHEREAS, the Company and the Purchaser have determined that it is in their mutual interests to amend the Stock Purchase Agreement as hereinafter set forth. NOW THEREFORE, in consideration of the premises and of the mutual agreements and understandings hereinafter set forth, the Purchaser and the Company agree as follows: SECTION 1. Amendment to the Stock Purchase ------------------------------- Agreement. Section 6.02 of the Stock Purchase Agreement is, --------- effective as of the date hereof, hereby amended as follows: (a) By deleting the period at the end of subsection 6.02(c) and inserting in lieu thereof a semi-colon; and (b) By adding a new subsection 6.02(d) at the end of Section 6.02 to read as follows: "(d) Shareholder Approval. Each of the -------------------- proposals set forth in Section 5.08 of this Agreement shall have been approved by the requisite holders of the outstanding capital stock of the Company entitled to vote thereon.". SECTION 2. Counterparts. This Amendment may be ------------ executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. SECTION 3. Governing Law. This Amendment shall be ------------- governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed in that State. 2 IN WITNESS WHEREOF, each of the Purchaser and the Company has caused this Amendment to be executed as of the date first written above by their respective officers thereunto duly authorized. REN CORPORATION-USA By ------------------------- Name: Title: COBE LABORATORIES, INC. By ------------------------- Name: Title: 2 IN WITNESS WHEREOF, each of the Purchaser and the Company has caused this Amendment to be executed as of the date first written above by their respective officers thereunto duly authorized. REN CORPORATION-USA By ------------------------- Name: Title: COBE LABORATORIES, INC. By /s/ HERBERT S. LAWSON ------------------------- Name: HERBERT S. LAWSON Title: VICE PRESIDENT AMENDMENT NO. 2 TO THE JULY 2, 1992 STOCK PURCHASE AGREEMENT AMENDMENT NO. 2, dated as of September 15, 1992 (this "Amendment") to the Stock Purchase Agreement, dated as --------- of July 2, 1992, as amended, between REN CORPORATION-USA, a Tennessee corporation (the "Company"), and COBE LABORATORIES, ------- INC., a Colorado corporation (the "Purchaser"). --------- W I T N E S S E T H - - - - - - - - - - WHEREAS, the Company and the Purchaser have entered into a Stock Purchase Agreement dated as of July 2, 1992 (as heretofore amended, the "Stock Purchase Agreement"; ------------------------ capitalized terms used and not defined herein being used herein as defined in the Stock Purchase Agreement); WHEREAS, the Company and the Purchaser have entered into Amendment No. 1 to the Stock Purchase Agreement dated as of July 23, 1992; and WHEREAS, the Company and the Purchaser have determined that it is in their mutual interests to further amend the Stock Purchase Agreement as hereinafter set forth. NOW THEREFORE, in consideration of the premises and of the mutual agreements and understandings hereinafter set forth, the Purchaser and the Company agree as follows: SECTION 1. Amendments to the Stock Purchase -------------------------------- Agreement. Section 2.02 of the Stock Purchase Agreement is, --------- effective as of the date hereof, hereby amended as follows: (a) By deleting the word "within" in the second line of subsection 2.02(a) and inserting in lieu thereof the words "the later of (i)"; (b) By inserting after the word "herein," in the fourth line of subsection 2.02(a) the words "and (ii) October 1, 1992"; and (c) By adding a new subsection 2.02(d) at the end of Section 2.02 to read as follows: "(d) For the purposes of subsections 2.02(b) and (c) above, delivery of a document referred to therein to Wyatt, Tarrant, Combs, Gilbert & Milom, as Escrow Agent, under the Escrow Agreement dated September 15, 1992 among the Purchaser, the Company and Wyatt, Tarrant, Combs, Gilbert & Milom, as 2 Escrow Agent, shall constitute delivery for the purposes of subsections 2.02(b) and (c); provided -------- that the delivery of such document has not been withdrawn by the party executing such document within the time and in the manner provided by such Escrow Agreement." SECTION 2. Satisfaction of Conditions. The Company -------------------------- and the Purchaser hereby acknowledge that the conditions to the Stock Purchase Agreement set forth in Article VI (other than delivery of the Purchase Price) have been satisfied or waived as of the date hereof. SECTION 3. Counterparts. This Amendment may be ------------ executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. SECTION 4. Governing Law. This Amendment shall be ------------- governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed in that State. IN WITNESS WHEREOF, each of the Purchaser and the Company has caused this Amendment to be executed as of the date first written above by their respective officers thereunto duly authorized. REN CORPORATION-USA By ------------------------- Name: Title: COBE LABORATORIES, INC. By ------------------------- Name: Title: