sc14d9za
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
UNDER SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 3)
MICROFLUIDICS INTERNATIONAL CORPORATION
(Name of Subject Company)
MICROFLUIDICS INTERNATIONAL CORPORATION
(Name of Person Filing Statement)
Common Stock, par value $0.01 per share
(Title of Class of Securities)
595074105
(CUSIP Number of Class of Securities)
Michael C. Ferrara
President and Chief Executive Officer
30 Ossipee Road
Newton, Massachusetts 02464
(617) 969-5452
(Name, Address, and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Person Filing Statement)
With a copy to:
Jonathan L. Kravetz, Esq.
Megan N. Gates, Esq.
Daniel H. Follansbee, Esq.
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
(617) 542-6000
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Check the box if the filing relates solely to preliminary
communications made before the commencement of a tender offer. |
TABLE OF CONTENTS
This Amendment No. 3 amends and supplements the Solicitation/Recommendation Statement on
Schedule 14D-9 initially filed with the Securities and Exchange Commission (the SEC) on January
25, 2011, as amended by Amendment No. 1 filed on January 31, 2011, and Amendment No. 2 filed on
February 8, 2011 (as previously filed with the SEC, and as the same may further be amended or
supplemented from time to time, the Schedule 14D-9), by Microfluidics International Corporation,
a Delaware corporation (Microfluidics or the Company), relating to the offer (the Offer) by
Nano Merger Sub, Inc., a Delaware corporation (Purchaser) and a wholly owned subsidiary of IDEX
Corporation, a Delaware corporation (IDEX), as set forth in a Tender Offer Statement filed by
IDEX and Purchaser on Schedule TO, dated January 25, 2011, as amended by Amendment No. 1 filed on
January 28, 2011 (as previously filed with the SEC, and as the same may further be amended or
supplemented from time to time, the Schedule TO), to purchase all outstanding shares of common
stock, par value $0.01 per share (the Shares) of Microfluidics, at a purchase price of $1.35 per
Share, net to the selling stockholders in cash, without interest thereon and less any required
withholding taxes, upon the terms and subject to the conditions set forth in the Offer to Purchase,
dated January 25, 2011, and in the related Letter of Transmittal, copies of which are filed with
the Schedule TO as Exhibits (a)(1)(A) and (a)(1)(B), respectively. Any capitalized terms used and
not otherwise defined herein shall have the meanings ascribed to such terms in the Schedule 14D-9.
Item 4. The Solicitation or Recommendation.
I. The subsection entitled Background of the Offer under the section entitled (b)
Background and Reasons for the Company Boards Recommendation in Item 4 of the Schedule 14D-9 is
hereby amended and supplemented by:
(1) Inserting the following as the last sentence of the second paragraph under this
subsections heading on page 13:
This meeting did not occur until December 1, 2009.
(2) Amending and restating the last paragraph on page 14 as follows:
Between April 30, 2010 and June 14, 2010, Americas Growth Capital, at the Companys
instruction, contacted 102 entities to solicit their interest in a potential strategic
transaction involving the Company. A copy of a non-confidential, code-named written description
and summary of the Companys business that was prepared by Americas Growth Capital and
management of the Company and provided to these entities was also provided to the Company Board.
Americas Growth Capital, in consultation with the Company, selected these prospects based on
the perceived likelihood of their interest in, and ability to consummate, an acquisition of the
Company and excluded from this list all customers and distributors of the Company (other than
Abraxis) in order to mitigate the potential for permanent damage to the Companys business if an
acquisition did not result. These entities were considered to be potential strategic buyers of
the Company because they operate in industries related to the Companys industry, including
healthcare instrumentation, fluid management, testing and tools, as well as other companies that
were considered to be instrumentation and enabling technology providers. The Company entered
into, or had previously entered into, separate confidentiality agreements with eight potential
strategic acquirers (including IDEX), and provided confidential and non-confidential information
to those interested parties in furtherance of their respective due diligence investigations of
the Company. Americas Growth Capital received a number of different responses from the 94
entities that were not willing to enter into a confidentiality agreement and the seven entities
that each entered into a confidentiality agreement but did not ultimately provide an expression
of interest. Among the most prevalent reasons cited were that the Company: (i) seemed resource
constrained, (ii) had challenged growth potential, (iii) was not a strategic fit or was not
within their current focus area, (iv) was too small an acquisition to focus resources on, (v)
presented too many potential issues inherent in conducting a public acquisition, and (vi)
appeared to have flat or minimal unit growth despite leading technology.
(3) Inserting the following as the last sentence of the second paragraph on page 15:
In response to the May 7, 2010 letter from Abraxis, Company management agreed to keep Abraxis
informed about the strategic process. Abraxis did not elaborate on its stated desire to be involved
in strategic discussions and was involved in discussions with IDEX only in connection with the
Strategic Collaboration Agreement and the Agreement Concerning Debenture.
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(4) Inserting the following as the last sentence of the fourth paragraph on page 15:
Management estimated that this enterprise value reflected a value of approximately $1.33 per
share of common stock.
(5) Inserting the following as the last sentence of the fifth full paragraph on page 18:
The draft of the Agreement Concerning Debenture delivered by Latham provided that IDEX would
purchase the Convertible Debenture from Abraxis for an amount equal to the Offer Price multiplied
by the number of shares of common stock into which the Convertible Debenture was then convertible
in accordance with its terms.
(6) Amending and restating the disclosure set forth in the second full paragraph on page 20
through and including the first paragraph on page 21 as follows:
On November 10, 2010, representatives of Celgene indicated to Americas Growth Capital
that, as a condition to Celgenes agreement to the sale of the Convertible Debenture to IDEX
pursuant to the Agreement Concerning Debenture, it would require that certain changes be made to
the existing Strategic Collaboration Agreement between the Company and Abraxis, consisting of an
extension of the term of the Strategic Collaboration Agreement from November 14, 2011 (the
expiration occurring if Abraxis no longer owned any shares of the Companys common stock on such
date) to twenty years from the Acceptance Time, and a commitment from the Company to continue to
develop the intellectual property covered by the Strategic Collaboration Agreement. A
representative of Americas Growth Capital communicated these proposed changes to IDEX and to
the Company. IDEX had previously indicated to the Company that IDEX was not willing to acquire
the Company unless it could also acquire the Convertible Debenture and terminate the Warrant.
As described above, Celgene had previously stated to the Company that the Convertible Debenture
and Warrant represented a blocking position for any acquisition of the Company and indicated
that it would enter into an agreement regarding the sale of the Convertible Debenture and the
cancellation of the Warrant only if an acceptable extension of the Strategic Collaboration
Agreement was negotiated.
On November 11, 2010, Americas Growth Capital proposed further revisions to the Strategic
Collaboration Agreement to Celgene, including a narrower field of exclusivity which would have
excluded the Companys MRT technology from the category of equipment that the Company was required
to sell exclusively to Celgene under the agreement within the field of use covered by the agreement
(the Field), a term of three years from the Acceptance Time, and the elimination of any
obligation on the part of the Company to engage in collaborative development with Celgene.
Also on November 11, 2010, the Company Board held a meeting to discuss the potential
transaction. Representatives of Americas Growth Capital and Mintz Levin were also in attendance. A
representative of Americas Growth Capital updated the Company Board on the status of the potential
transaction, including discussions with Celgene regarding the Strategic Collaboration Agreement and
the Agreement Concerning Debenture and the actions required to complete these negotiations. A
representative of Americas Growth Capital then presented the Company Board with a financial
presentation and valuation analysis and rendered its oral opinion, which was subsequently confirmed
in writing, that, as of that date, and based upon various assumptions and valuation metrics
Americas Growth Capital typically utilizes in its valuation analyses of publicly traded companies,
such as comparable precedent transactions, comparable publicly traded companies, discounted cash
flow, and stock value premium over market price, among other factors in evaluating a potential
transaction, the consideration to be received in the Offer and Merger, taken together, by the
holders of the Companys common stock was fair, from a financial point of view, to such
stockholders. Mr. Ferrara and representatives of Americas Growth Capital and Mintz Levin also
noted to the Company Board that Celgenes requested changes to the Strategic Collaboration
Agreement could cause a further delay in the time frame on which the potential transaction could be
completed or a reduction in the Offer Price but that IDEX remained very interested in pursuing the
potential transaction pending Celgenes final positions regarding such changes to the Strategic
Collaboration Agreement.
On November 17, 2010, representatives from Americas Growth Capital, the Company and Celgene
discussed the changes that each party had proposed to the Strategic Collaboration Agreement,
including each partys positions as to the extension of the expiration date of such agreement and a
potential reduction in the purchase price for the Convertible Debenture in exchange for such
extension.
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On November 22, 2010, Americas Growth Capital proposed revisions to the Strategic
Collaboration Agreement to IDEX, including a narrower field of exclusivity which would exclude the
Companys MRT technology from the category of equipment that the Company was required to sell
exclusively to Celgene for use in the Field, a term of ten years from the Acceptance Time, and the
elimination of any obligation on the part of the Company to engage in collaborative development
with Celgene.
On November 23, 2010, Americas Growth Capital and Latham, along with IDEXs intellectual
property counsel, discussed the proposed changes to the scope and duration of the Strategic
Collaboration Agreement.
On November 19 and 30, 2010, Mr. Ferrara, in consultation with representatives of Americas
Growth Capital and Mintz Levin, provided the Company Board with updates as to the status of the
potential transaction and the discussions with Celgene concerning the Strategic Collaboration
Agreement and the Agreement Concerning Debenture.
On November 24, 2010, representatives of IDEX contacted a representative of Americas Growth
Capital and informed him that the price per share that IDEX was willing to pay to the stockholders
of the Company in the potential transaction was now $1.35 per share, primarily in light of (i)
lower than anticipated revenues reported by the Company for its quarter ended September 30, 2010,
which had been announced on November 15, 2010, (ii) the delays that the parties had encountered in
completing the potential transaction, and (iii) the incurrence by IDEX and Microfluidics of
significantly higher transaction expenses than initially expected as a result of such delays. The
representatives of IDEX also noted the long-term potential restrictions on Microfluidics ability
to take advantage of future business opportunities resulting from the desire of Celgene to include
the Companys MRT technology in the category of equipment that the Company was required to sell
exclusively to Celgene for use in the Field pursuant to the proposed revisions to the Strategic
Collaboration Agreement as being a significant concern that could lead to further reductions to the
Offer Price.
On November 30, 2010, Latham, on behalf of IDEX, provided revised drafts of the Agreement
Concerning Debenture and the Strategic Collaboration Agreement to Celgene for its review and
comment. The revised drafts reflected a field of exclusivity that excluded the Companys MRT
technology from the category of equipment that the Company was required to sell exclusively to
Celgene for use in the Field, a term of ten years from the Acceptance Time, the elimination of any
obligation on the part of the Company to engage in collaborative development with Celgene, and up
to $1 million in potential payments by Celgene to the Company to compensate the Company for future
profits that could be lost as a result of the operation of the exclusivity provisions in the
Strategic Collaboration Agreement.
(7) Amending and restating the fourth paragraph on page 21 as follows:
Beginning on December 7, 2010 through December 13, 2010, Americas Growth Capital and the
Company engaged in further discussions with Celgene regarding the Strategic Collaboration Agreement
and its potential impact on the proposed transaction.
(8) Amending and restating the sixth paragraph on page 21 as follows:
On December 13, 2010, Celgene circulated a revised draft of the Strategic
Collaboration Agreement, which Americas Growth Capital, IDEX and Latham discussed on December 14,
2010, including a field of exclusivity that included the Companys MRT technology in the category
of equipment that the Company was required to sell exclusively to Celgene for use in the Field, a
term of ten years from the Acceptance Time, an obligation on the part of the Company to engage in
collaborative development with Celgene, and up to $500,000 in potential payments by Celgene to the
Company to compensate the Company for future profits that could be lost as a result of the
operation of the exclusivity provisions in the Strategic Collaboration Agreement. Celgene also
provided verbal commentary to the Agreement Concerning Debenture.
(9) Inserting the following new paragraph under the sixth paragraph on page 21:
From December 21, 2010 through January 4, 2011, Celgene and the Company negotiated changes to
the Strategic Collaboration Agreement, ultimately reaching tentative agreement on a revised draft
of the Strategic Collaboration Agreement that (i) reflected a field of exclusivity that excluded
the Companys MRT technology from the
3
category of equipment that the Company was required to sell exclusively to Celgene for use in the
Field, but provided Celgene with the ability to expand the agreement to include that technology if
Celgene determined that it could be used in the production of certain Celgene products, (ii)
removed the provision providing for potential compensatory payments by Celgene to the Company for
future lost profits, and (iii) reintroduced arbitration as a mandatory dispute resolution
procedure. The revised draft of the Strategic Collaboration Agreement also included the parties
agreement to cooperate to explore the possibility of developing specialized equipment for Celgene
and intellectual property relating thereto, and provided that to the extent the Company and Celgene
jointly contributed to the development of any new intellectual property for the use of fluid
processors in the Field, that such intellectual property would be owned jointly by the parties.
Celgene also agreed to reduce the purchase price of the Convertible Debenture by $1.5 million.
(10) Amending and restating the seventh paragraph on page 21 as follows:
On January 4, 2011, IDEX agreed in principle with the terms of the Agreement Concerning
Debenture and the Strategic Collaboration Agreement negotiated by Celgene and the Company,
including the $1.5 million reduction in the purchase price for the Convertible Debenture in
consideration of (i) the extension of the term of the Strategic Collaboration Agreement from
November 14, 2011 (the expiration occurring if Abraxis no longer owned any shares of the Companys
common stock on such date) to ten years from the Acceptance Time and (ii) the other concessions, as
described above.
(11) Amending and restating the last sentence of the eighth paragraph on page 21 as follows:
However, IDEX maintained its reduced Offer Price of $1.35 per Share, which implied an
enterprise value of approximately $20 million.
II. Item 4 of the Schedule 14D-9 is hereby further amended and supplemented by
inserting the following new subsection in the section entitled (b) Background and Reasons for the
Company Boards Recommendation after the subsection entitled Reasons for the Recommendation of
the Companys Board and before the subsection entitled Opinion of Americas Growth Capital:
Financial Forecasts
Microfluidics does not as a matter of course publicly disclose long-term forecasts or
projections as to future performance, earnings, cash flows or other results beyond the current
fiscal year. However, Microfluidics management provided certain unaudited forecasts (the
Financial Forecasts) regarding Microfluidics future operations as an independent company to the
Board and Americas Growth Capital for use in Americas Growth Capitals financial analyses,
including those analyses used in delivering the fairness opinion described below, in connection
with the Boards review of the Offer and the Merger. In addition, Microfluidics has presented below
certain unaudited forecasts of net income for Microfluidics future operations as an independent
company (the Net Income Projections), although that information was neither presented to the
Board nor to Americas Growth Capital in connection with the Boards review of the Offer and the
Merger, and is being provided herein pursuant to SEC rules.
The Financial Forecasts and Net Income Projections were not prepared with a view toward public
disclosure, nor were they prepared with a view toward compliance with published guidelines of the
SEC, the guidelines established by the American Institute of Certified Public Accountants for
preparation and presentation of financial forecasts, or generally accepted accounting principles.
Neither Microfluidics independent auditors, nor any other independent public accounting firm have
compiled, examined, or performed any procedures with respect to the prospective financial
information contained in the Financial Forecasts or Net Income Projections nor have they expressed
any opinion or given any form of assurance with respect to such information or their
reasonableness, achievability or accuracy. The inclusion of the Financial Forecasts and Net Income
Projections herein will not be deemed an admission or representation by Microfluidics that they are
viewed by Microfluidics as material information of Microfluidics. None of Microfluidics or its
advisors or representatives has made or makes any representation regarding the information
contained in the Financial Forecasts and Net Income Projections. The Financial Forecasts and Net
Income Projections should not be regarded as an indication that Microfluidics, or any of its
advisors or representatives, considered, or now considers, them to be necessarily predictive of
actual future results, and except as may be required by applicable securities laws, none of them
intend to update or otherwise revise or reconcile the Financial Forecasts or the Net Income
Projections to reflect circumstances existing after the date such Financial Forecasts and Net
Income Projections were generated or to reflect the occurrence of future events even in the event
that any or all of the assumptions underlying the information used in the Financial Forecasts and
Net Income Projections are shown to be in error. Microfluidics
4
shareholders are cautioned not to place undue reliance on the Financial Forecasts or the Net Income
Projections included in this Schedule 14D-9.
The Financial Forecasts and Net Income Projections were based necessarily on the information
prepared or provided by Microfluidics using a variety of assumptions and estimates. The assumptions
and estimates underlying the Financial Forecasts and Net Income Projections may not be realized and
are inherently subject to significant business, economic and competitive uncertainties, risks and
contingencies, all of which are difficult to predict and many of which are beyond Microfluidics
control. The assumptions and estimates used to create the information used in the Financial
Forecasts and Net Income Projections involve judgments made with respect to, among other things,
market size and growth rates, market share, interest rates, future pricing, and levels of operating
expenses, all of which are difficult to predict. The Financial Forecasts and Net Income Projections
also reflect assumptions as to certain business decisions that do not reflect any of the effects of
the Offer or the Merger, or any other changes that may in the future affect Microfluidics or its
assets, business, operations, properties, policies, corporate structure, capitalization and
management as a result of the Offer or the Merger or otherwise. Accordingly, the Financial
Forecasts and Net Income Projections constitute forward-looking information, and there can be no
assurance that the assumptions and estimates used to prepare the information used in the Financial
Forecasts and Net Income Projections will prove to be accurate, and actual results may materially
differ. The Financial Forecasts and Net Income Projections cover multiple years and such
information by its nature becomes less reliable with each successive year.
The Financial Forecasts for the fiscal years ending December 31, 2011 through 2015 are set
forth below. All amounts (other than EBITDA Margin) are expressed in
millions of dollars.
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Fiscal Year Ended December 31, |
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2011E |
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2012E |
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2013E |
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2014E |
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2015E |
Revenue |
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$ |
20.0 |
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$ |
23.6 |
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$ |
26.6 |
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$ |
29.8 |
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$ |
33.1 |
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EBITDA Margin* |
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14 |
% |
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18 |
% |
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17 |
% |
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16 |
% |
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15 |
% |
EBITDA** |
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$ |
2.9 |
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$ |
4.3 |
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$ |
4.5 |
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$ |
4.8 |
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$ |
5.0 |
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* |
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Percentage of revenue used to project EBITDA. |
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EBITDA refers to earnings (net income) before interest, taxes,
depreciation, amortization, and stock-based compensation. |
Use of Non-GAAP Financial Measure and Reconciliation of GAAP to Non-GAAP Financial Measures
EBITDA is a non-GAAP (Generally Accepted Accounting Principles) financial measure, and as such is
not a substitute for net income, which is the GAAP financial measure that is most closely
comparable to EBITDA. The Net Income Projections for the years set forth above, calculated in
accordance with GAAP, and a reconciliation of net income to EBITDA for the same fiscal years, are
set forth in the table below. Although neither the Board nor Americas Growth Capital received
information as to projected net income for Microfluidics in connection with the Boards
consideration of the Offer and the Merger, Microfluidics presents the information below pursuant to
SEC rules requiring the presentation of the most directly comparable financial measure calculated
and presented in accordance with GAAP and a reconciliation of the GAAP and non-GAAP financial
measures (all amounts are expressed in millions of dollars):
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Fiscal Year Ended December 31, |
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2011E |
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2012E |
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2013E |
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2014E |
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2015E |
Net Income |
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$ |
1.7 |
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$ |
3.0 |
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$ |
3.3 |
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$ |
2.7 |
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$ |
2.3 |
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Adjustments: |
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Interest expense |
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$ |
0.6 |
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$ |
0.7 |
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$ |
0.7 |
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$ |
0.4 |
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$ |
0.3 |
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Income tax provision |
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$ |
0 |
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$ |
0 |
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$ |
0 |
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$ |
0.9 |
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$ |
1.7 |
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Depreciation |
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$ |
0.1 |
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$ |
0.1 |
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$ |
0.2 |
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$ |
0.3 |
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$ |
0.3 |
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Amortization |
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$ |
0.2 |
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$ |
0.2 |
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$ |
0.1 |
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$ |
0.1 |
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$ |
0.1 |
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Stock-based compensation |
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$ |
0.3 |
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$ |
0.3 |
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$ |
0.3 |
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$ |
0.4 |
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$ |
0.4 |
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EBITDA |
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$ |
2.9 |
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$ |
4.3 |
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$ |
4.5 |
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$ |
4.8 |
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$ |
5.0 |
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5
EBITDA, the non-GAAP financial measure, was used in the Financial Forecasts in order to provide a
method for assessing our potential financial condition in the future. Microfluidics management
believes that EBITDA presents an indication of Microfluidics potential financial condition without
the additional uncertainty that may be created by the inclusion of interest, taxes, depreciation
and amortization and stock-based compensation amounts, which are particularly uncertain with
respect to future periods. This measure is not presented in accordance with, or a substitute for,
GAAP, and may be different from or inconsistent with non-GAAP financial measures used by other
companies. Accordingly, Microfluidics shareholders should not consider EBITDA in isolation, or as
a substitute for net income or other consolidated income statement data prepared in accordance with
GAAP.
III. Item 4 of the Schedule 14D-9 is hereby further amended and supplemented by amending and
restating the sections entitled Selected Precedent Transactions Analysis, Comparable Public
Companies Analysis, and Discounted Cash Flow Analysis under the subsection entitled Opinion of
Americas Growth Capital as follows:
Selected Precedent Transactions Analysis
Americas Growth Capital reviewed the transaction values of the following six transactions
involving similar businesses with disclosed financial metrics. Americas Growth Capital selected
these transactions based upon the following criteria: (i) North American transactions announced
since January 1, 2009, as well as IDEXs earlier acquisition of Quadro Engineering Corp., which was
included due to the similarity between Quadro Engineerings business and the business of the
Company; (ii) latest twelve months target revenue of $50 million or less; and (iii) operating in
the life sciences, biotechnology, or instrument-related technology fields. Based upon these
criteria and utilizing its professional judgment and experience, no relevant transactions
identified by Americas Growth Capital as meeting these criteria were excluded from this analysis.
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Acquiror |
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Target |
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Announced |
IDEX Corp.
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Fitzpatrick Company, Inc.
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November 2010 |
FLIR Systems, Inc.
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Extech Instruments Corp.
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December 2009 |
Cell Biosciences, Inc.
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Alpha Innotech Corp.
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September 2009 |
Harvard Bioscience, Inc.
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Denville Scientific, Inc
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September 2009 |
Waters Corp.
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Thar Instruments, Inc.
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February 2009 |
IDEX Corp.
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Quadro Engineering Corp.
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June 2007 |
Americas Growth Capital reviewed, among other things, transaction values in the selected
transactions, calculated as the purchase prices paid for the target companies, as a multiple of
latest 12 months revenue and earnings before interest, taxes, depreciation and amortization
(EBITDA). Americas Growth Capital then applied latest 12 months revenue and EBITDA multiples of
1.1x and 8.7x, respectively, representing the median of the values derived from the selected
transactions, to the Companys estimated revenue and EBITDA for the latest 12 months ended December
31, 2010. Financial data of the selected transactions were based on publicly available information
and other information as available at the time of announcement of the relevant transaction.
Financial data of the Company were based on latest 12 months available information estimated as of
December 31, 2010. This estimated data was based upon estimates of the Companys management. This
analysis indicated an implied per share equity value reference range for the Company of
approximately $1.08 to $1.29 per Share, as compared to the $1.35 per Share cash consideration.
Although the selected transactions were used for comparison purposes, none of those
transactions is directly comparable to the Transaction and none of the companies in those
transactions is directly comparable to the Company. Accordingly, an analysis of the results of such
a comparison is not purely mathematical, but instead involves complex
considerations and judgments concerning differences in historical financial and operating
characteristics of the companies involved and other factors that could affect the acquisition value
of such companies or the Company.
Comparable Public Companies Analysis
Americas Growth Capital reviewed financial and stock market information of the Company and
the following five selected publicly traded companies with similar products, similar operating and
financial characteristics and
6
servicing similar markets. Americas Growth Capital selected these companies based upon the
following criteria: (i) North American companies; (ii) publicly traded; (iii) latest twelve months
revenue of $500 million or less; (iv) positive EBITDA; and (v) operating in the life sciences,
biotechnology or instrument-related technology fields. Based upon these criteria and utilizing its
professional judgment and experience, no relevant companies identified by Americas Growth Capital
as meeting these criteria were excluded from the analysis.
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Enterprise Value divided by |
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Enterprise |
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Value |
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Revenue |
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Revenue |
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EBITDA |
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EBITDA |
Company |
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($ in millions) |
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2010E |
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2011E |
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2010E |
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2011E |
Affymetrix, Inc. |
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$ |
259 |
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0.8x |
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0.8x |
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7.5x |
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4.8x |
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Lydall, Inc. |
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140 |
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0.4x |
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0.4x |
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7.9x |
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7.3x |
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Harvard BioScience, Inc. |
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123 |
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1.1x |
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1.1x |
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7.3x |
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7.3x |
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Repligen Corp. |
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81 |
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3.2x |
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3.0x |
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Not meaningful |
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Not meaningful |
Key Technology, Inc. |
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70 |
|
|
|
0.6x |
|
|
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0.5x |
|
|
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8.3x |
|
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|
6.0x |
|
Median |
|
$ |
123 |
|
|
|
0.8x |
|
|
|
0.8x |
|
|
|
7.7x |
|
|
|
6.7x |
|
Americas Growth Capital reviewed, among other things, enterprise values of the selected
companies, calculated as fully diluted equity value based on closing stock prices on January 6,
2011, plus debt, minority interest and preferred stock, less cash and equivalents, as a multiple of
calendar year 2010 estimated and calendar year 2011 estimated revenue and EBITDA. Americas Growth
Capital then applied a selected range for calendar year 2010 estimated and calendar year 2011
estimated revenue multiples of 0.8x and 0.8x and estimated EBITDA multiples of 6.7x to 7.7x,
representing the median of the values derived from the selected companies, to corresponding data of
the Company. Estimated financial data of the selected companies were based on publicly available
research analysts estimates. Estimated financial data of the Company were based on estimates of
the Companys management. This analysis indicated an implied per share equity value reference range
for the Company of approximately $0.92 to $1.31 per Share, as compared to the $1.35 per Share cash
consideration.
Although the selected companies were used for comparison purposes, none of those companies is
directly comparable to the Company. Accordingly, an analysis of the results of such a comparison is
not purely mathematical, but instead involves complex considerations and judgments concerning
differences in historical and projected financial and operating characteristics of the selected
companies and other factors that could affect the public trading value of the selected companies or
the Company.
Discounted Cash Flow Analysis
Americas Growth Capital performed a discounted cash flow analysis to calculate the estimated
present value of the standalone, free cash flows that the Company could generate during the
Companys fiscal years 2011 through 2015 based on the Financial Forecasts, including utilization of
Company net operating loss carry forwards. Estimated terminal values for the Company were
calculated by applying a terminal value multiple of 5.0x to the Companys fiscal year 2015
estimated EBITDA based on perpetuity growth rates for the Companys free cash flow ranging from
10-12%. The range of perpetuity growth rates was estimated by Americas Growth Capital utilizing
its professional judgment and experience, taking into account the Financial Forecasts. The cash
flows and terminal values were then discounted to present value using discount rates ranging from
20% to 22%. The range of discount rates was derived by Americas Growth Capital utilizing a
weighted average cost of capital analysis based on the capital asset pricing model and taking into
account certain financial metrics, including betas, for the five selected companies used in the
Comparable Public
7
Companies Analysis (the Selected Companies), as well as certain financial
metrics for the Company, including its capital structure, and the United States equity markets
generally. Americas Growth Capital also assumed a debt to equity ratio of 54.7% based on the
Companys actual debt to equity ratio as of the close of business on January 6, 2011.
In its weighted average cost of capital analysis, Americas Growth Capital unlevered the betas of
the Selected Companies to arrive at a mean unlevered beta for the Selected Companies of 0.55. This
analysis indicated implied per share equity value reference ranges for the Company of approximately
$1.26 to $1.33 per Share, as compared to the $1.35 per Share cash consideration.
8
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that the information
set forth in this statement is true, complete and correct.
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Dated: February 16, 2011 |
MICROFLUIDICS INTERNATIONAL CORPORATION
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By: |
/s/ Michael C. Ferrara
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Michael C. Ferrara |
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President and Chief Executive Officer |
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9
INDEX TO EXHIBITS
|
|
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(a)(1)(A)* +
|
|
Letter to Stockholders of
the Company, dated January
25, 2011, from Michael C.
Ferrara, President and Chief
Executive Officer of the
Company. |
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(a)(1)(B)*
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Information Statement
Pursuant to Section 14(f) of
the Securities Exchange Act
of 1934, as amended, and
Rule 14f-1 thereunder
(included as Annex I to the
Schedule 14D-9 filed with
the SEC on January 25,
2011). |
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(a)(1)(C)
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Offer to Purchase, dated
January 25, 2011
(incorporated herein by
reference to Exhibit
(a)(1)(A) to the Schedule TO
of IDEX and Purchaser filed
with the SEC on January 25,
2011). |
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|
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(a)(1)(D)
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|
Form of Letter of
Transmittal (incorporated
herein by reference to
Exhibit (a)(1)(B) to the
Schedule TO of IDEX and
Purchaser filed with the SEC
on January 25, 2011). |
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(a)(1)(E)
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Form of Notice of Guaranteed
Delivery (incorporated
herein by reference to
Exhibit (a)(1)(C) to the
Schedule TO of IDEX and
Purchaser filed with the SEC
on January 25, 2011). |
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(a)(1)(F)
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Form of Letter to Brokers,
Dealers, Banks, Trust
Companies and other Nominees
(incorporated herein by
reference to Exhibit
(a)(1)(D) to the Schedule TO
of IDEX and Purchaser filed
with the SEC on January 25,
2011). |
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(a)(1)(G)
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|
Form of Letter to Clients
for use by Brokers, Dealers,
Banks, Trust Companies and
other Nominees (incorporated
herein by reference to
Exhibit (a)(1)(E) to the
Schedule TO of IDEX and
Purchaser filed with the SEC
on January 25, 2011). |
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(a)(1)(H)*
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|
Opinion of Americas Growth
Capital, LLC, to the Board
of Directors of the Company
dated January 10, 2011
(included as Annex II to the
Schedule 14D-9 filed with
the SEC on January 25,
2011). |
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(a)(1)(I)
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|
Joint Press Release issued
by the Company and IDEX,
dated January 11, 2011
(incorporated herein by
reference to Exhibit 99.1 to
the Companys Current Report
on Form 8-K filed with the
SEC on January 11, 2011). |
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(a)(1)(J)
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Summary Advertisement as
published on January 25,
2011 in Investors Business
Daily (incorporated herein
by reference to Exhibit
(a)(1)(G) to the Schedule TO
of IDEX and Purchaser filed
with the SEC on January 25,
2011). |
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(a)(1)(K)
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Press Release issued by
IDEX, dated January 25, 2011
(incorporated herein by
reference to Exhibit
(a)(1)(H) to the Schedule TO
of IDEX and Purchaser filed
with the SEC on January 25,
2011). |
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(a)(1)(L) +
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Complaint filed in the Court
of Chancery of the State of
Delaware, captioned Joseph
P. Daly v. Michael Ferrara,
George Uveges, Leo Roy, Eric
Walters, Henry Kay, Stephen
Robinson, Microfluidics
International Corporation,
IDEX Corporation, and Nano
Merger Sub, Inc., C.A. No.
6126, dated January 14,
2011. |
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(a)(1)(M) +
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Complaint filed in the
Massachusetts Superior Court
for Middlesex County,
captioned Paul Shumsky v.
Microfluidics International
Corporation; George Uveges;
Eric G. Walters; Henry Kay;
Leo Pierre Roy; Michael C.
Ferrara, dated January 20,
2011. |
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(a)(1)(N)
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Amended Complaint filed in
the Court of Chancery of the
State of Delaware, captioned
Joseph P. Daly v. Michael
Ferrara, George Uveges, Leo
Roy, Eric Walters, Henry
Kay, Stephen Robinson,
Microfluidics International
Corporation, IDEX
Corporation, and Nano Merger
Sub, Inc., C.A. No.
6126-VCS, dated January 28,
2011 (incorporated herein by
reference to Exhibit
(a)(1)(J) to the Schedule TO
of IDEX and Purchaser
initially filed with the SEC
on January 25, 2011, and
amended on January 28,
2011). |
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(a)(1)(O) ++
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Amended Complaint filed in
the Massachusetts Superior
Court for Middlesex County,
captioned Paul Shumsky v.
Microfluidics International
Corporation; IDEX
Corporation; Nano Merger
Sub, Inc.; George Uveges;
Eric G. Walters; Henry Kay;
Leo Pierre Roy; Michael C.
Ferrara; and Stephen J.
Robinson, C.A. No. 11-0186,
dated February 1, 2011. |
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(a)(5)(A) ++
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Notice to Microfluidics
International Corporations
stock option holders,
delivered by Microfluidics
International Corporation on
February 8, 2011. |
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(a)(5)(B)
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Letter from Michael C.
Ferrara, President and Chief
Executive Officer of the
Company, distributed on
January 11, 2011 to the
Companys stockholders
regarding the proposed
acquisition (incorporated
herein by reference to the
Schedule 14D-9C of the
Company filed |
10
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with the SEC
on January 11, 2011). |
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(a)(5)(C)
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E-mail from Michael C.
Ferrara, President and Chief
Executive Officer of the
Company, distributed on
January 11, 2011 to the
Companys employees
regarding the proposed
acquisition (incorporated
herein by reference to the
Schedule 14D-9C of the
Company filed with the SEC
on January 11, 2011). |
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(a)(5)(D)
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Letter from Michael C.
Ferrara, President and Chief
Executive Officer of the
Company, distributed on
January 11, 2011 to the
Companys customers
regarding the proposed
acquisition (incorporated
herein by reference to the
Schedule 14D-9C of the
Company filed with the SEC
on January 11, 2011). |
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(a)(5)(E)
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Letter from Michael C.
Ferrara, President and Chief
Executive Officer of the
Company, distributed on
January 11, 2011 to the
Companys sales
representatives regarding
the proposed acquisition
(incorporated herein by
reference to the Schedule
14D-9C of the Company filed
with the SEC on January 11,
2011). |
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(a)(5)(F)
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Transcript of the Companys
conference call held on
January 11, 2011 at 8:30
a.m. (Eastern time)
regarding the proposed
acquisition (incorporated
herein by reference to the
Schedule 14D-9C of the
Company filed with the SEC
on January 11, 2011). |
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(e)(1)
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Agreement and Plan of
Merger, dated January 10,
2011, by and among IDEX,
Purchaser and the Company
(incorporated herein by
reference to Exhibit 2.1 to
the Companys Current Report
on Form 8-K filed with the
SEC on January 11, 2011). |
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(e)(2)
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Amended and Restated
Employment Agreement, dated
as of December 4, 2009, by
and between Michael C.
Ferrara and the Company
(incorporated herein by
reference to Exhibit 10.1 to
the Companys Current Report
on Form 8-K filed with the
SEC on December 8, 2009). |
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(e)(3)
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Employee Agreement by and
between the Company and
Peter F. Byczko dated
September 1, 2010
(incorporated herein by
reference to Exhibit 10.1 to
the Companys Current Report
on Form 8-K filed with the
SEC on September 8, 2010). |
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(e)(4)
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Employee Agreement by and
between the Company and
William J. Conroy dated
September 3, 2010
(incorporated herein by
reference to Exhibit 10.2 to
the Companys Current Report
on Form 8-K filed with the
SEC on September 8, 2010). |
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(e)(5)
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Summary of Compensation
Arrangements including
Discretionary Bonus Plan
with the Companys named
executive officers
(incorporated herein by
reference to Exhibit 10.109
to the Companys Annual
Report on Form 10-K filed
with the SEC on March 29,
2010). |
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(e)(6)
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Convertible Debenture and Warrant Purchase
Agreement between the Company and Global
Strategic Partners, LLC, dated as of
November 14, 2008 (incorporated herein by
reference to Exhibit 10.1 to the Companys
Amendment No. 1 to Form S-3 filed with the
SEC on January 14, 2009). |
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(e)(7)
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Amendment No. 1 to Convertible Debenture and
Warrant Purchase Agreement and Amendment No.
1 to Convertible Debenture, between the
Company and Global Strategic Partners, LLC,
dated as of November 17, 2008 (incorporated
herein by reference to Exhibit 10.2 to the
Companys Amendment No. 1 to Form S-3 filed
with the SEC on January 14, 2009). |
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(e)(8)
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Registration Rights Agreement between the
Company and Global Strategic Partners, LLC,
dated as of November 14, 2008 and amended on
December 3, 2008 (incorporated herein by
reference to Exhibit 10.3 to the Companys
Amendment No. 1 to Form S-3 filed with the
SEC on January 14, 2009). |
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(e)(9)
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Security Agreement between the Company and
Global Strategic Partners, LLC, dated as of
November 14, 2008 (incorporated herein by
reference to Exhibit 10.4 to the Companys
Amendment No. 1 to Form S-3 filed with the
SEC on January 14, 2009). |
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(e)(10)
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Convertible Debenture issued by the Company
to Global Strategic Partners, LLC, dated as
of November 14, 2008, as amended
(incorporated herein by reference to Exhibit
10.5 to the Companys Amendment No. 1 to
Form S-3 filed with the SEC on January 14,
2009). |
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(e)(11)
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Common Stock Purchase Warrant issued by the
Company to Global Strategic Partners, LLC,
dated as of November 14, 2008 (incorporated
herein by reference to Exhibit 10.6 to the
Companys Amendment No. 1 to Form S-3 filed
with the SEC on January 14, 2009). |
11
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(e)(12)
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Amendment No. 2 to Registration Rights
Agreement, Amendment No. 2 to Convertible
Debenture and Warrant Purchase Agreement and
Amendment to Security Agreement dated March
11, 2009 by and between the Company and
Global Strategic Partners, LLC (incorporated
herein by reference to Exhibit 10.1 to the
Companys Current Report on 8-K filed with
the SEC on March 17, 2009). |
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(e)(13)
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Amendment to Transaction Documents dated
October 23, 2009 by and between the Company
and Global Strategic Partners, LLC
(incorporated herein by reference to Exhibit
10.3 to the Companys Current Report on Form
8-K filed with the SEC on October 26, 2009). |
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(e)(14)
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Amendment No. 2 to that certain Debenture
and Warrant Purchase Agreement dated as of
November 14, 2008 (incorporated herein by
reference to Exhibit 10.2 to the Companys
Quarterly Report on Form 10-Q filed with the
SEC on August 14, 2009). |
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(e)(15) +
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|
Confidentiality Agreement, dated November 4,
2010, by and between the Company, Celgene
Corporation, Abraxis BioScience, Inc., and
Global Strategic Partners, LLC. |
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(e)(16)
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|
Confidentiality Agreement, effective
November 24, 2009, by and between the
Company and IDEX (incorporated herein by
reference to Exhibit (d)(4) to the Schedule
TO of IDEX and Purchaser filed with the SEC
on January 25, 2011). |
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(e)(17)
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Exclusivity Agreement, dated June 8, 2010,
as amended on July 23, 2010, by and between
the Company and IDEX (incorporated herein by
reference to Exhibit (d)(5) to the Schedule
TO of IDEX and Purchaser filed with the SEC
on January 25, 2011). |
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(e)(18)
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|
Form of Tender and Support Agreement entered
into on January 10, 2011 by and among IDEX,
Purchaser and each of Michael C. Ferrara,
George Uveges, Henry Kay, Stephen J.
Robinson, Leo Pierre Roy, Eric G. Walters,
Peter F. Byczko, William J. Conroy, and
Irwin J. Gruverman (incorporated herein by
reference to Exhibit 2.2 to the Companys
Current Report on Form 8-K filed with the
SEC on January 11, 2011). |
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(e)(19) +
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|
Tender and Support Agreement, dated as of
January 12, 2011, by and among IDEX,
Purchaser, and Marjorie Gruverman. |
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(e)(20)
|
|
Agreement Concerning Debenture, dated as of
January 10, 2011, by and among IDEX,
Purchaser, Global Strategic Partners, LLC,
Abraxis BioScience, LLC and American Stock
Transfer and Trust Company, LLC
(incorporated herein by reference to Exhibit
10.1 to the Companys Current Report on Form
8-K filed with the SEC on January 11, 2011). |
|
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(e)(21)
|
|
1986 Employee Stock Purchase Plan as amended
(incorporated herein by reference to Exhibit 4 to the
Companys Registration Statement on Form S-8 filed with
the SEC on April 10, 2002). |
|
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(e)(22)
|
|
1988 Stock Plan as amended (incorporated herein by
reference to Exhibit 4 to the Companys Registration
Statement on Form S-8 filed with the SEC on September 6,
2002). |
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(e)(23)
|
|
1989 Non-Employee Directors Stock Option Plan
(incorporated herein by reference to Exhibit 10.1 to the
Companys Registration Statement on Form S-8 filed with
the SEC October 22, 1996). |
|
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|
(e)(24)
|
|
2006 Stock Plan (incorporated herein by reference to
Exhibit 10.1 to the Companys Current Report on Form 8-K
filed with the SEC on August 11, 2006). |
|
|
|
(e)(25)
|
|
Form of Notice of Grant of Stock Option and Employee
Stock Option Agreement for Microfluidics International
Corporation 2006 Stock Plan (incorporated herein by
reference to Exhibit 10.1 to the Companys Current Report
on Form 8-K filed with the SEC on June 10, 2009). |
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(e)(26)
|
|
Certificate of Incorporation for the Company, as amended
(incorporated herein by reference to Exhibit 2A to the
Companys Registration Statement on Form 8-A and Exhibit
3.1(a) to the Companys Quarterly Report on Form 10-Q for
the quarterly period ended September 30, 1999 filed with
the SEC on November 15, 1999). |
|
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|
(e)(27)
|
|
Certificate of Amendment to the Restated Certificate of
Incorporation of the Company (incorporated herein by
reference to Exhibit 3.1 to the Companys Current Report
on Form 8-K filed with the SEC on June 10, 2009). |
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(e)(28)
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|
Amended and Restated By-Laws for the Company
(incorporated herein by reference to Exhibit 3(b) to the
Companys Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 filed with the SEC on March 31,
1997). |
12
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* |
|
Included in mailing to stockholders commenced as of January 25, 2011. |
|
+ |
|
Previously filed as an exhibit to the Schedule 14D-9 on January 25, 2011.
|
|
++ |
|
Previously filed as an exhibit to Amendment No. 2 to the Schedule 14D-9 on February 8, 2011. |
13