Business Wire

                           October 20, 1988, Thursday

DISTRIBUTION: Business Editors

LENGTH: 1511 words

HEADLINE: NOMAD/DAMON; (DBIO) Nomad Partners sends letter to chairman and 
CEO of Damon Corp.

DATELINE: NEW YORK

 BODY:    Nomad Partners, L.P. announced Thursday that the attached 
letter had been sent to Dr. David I. Kosowsky, chairman and chief 
executive officer of Damon Corp.  The Board of Directors Damon Corp. 115 
Fourth Avenue Needham Heights, Massachusetts 02194  Attention: Dr. David 
I. Kosowsky Chairman of the Board and Chief Executive Officer Gentlemen:

   Let's set the record straight. We're offering your shareholders $24 
per share all cash plus the additional value from immediate 
implementation of a modified version of your own restructing plan for 
Damon Biotech. So far, you have offered your shareholders nothing but 
that unvalued restructuring plan.

   We acquired our ownership in Damon by the spring of 1988. Since that 
time, we have made a proposal to acquire the remaining equity interest in 
Damon on a negotiated basis; we have made a tender offer to acquire all 
remaining shares of Damon Common Stock at $24 per share all cash; we have 
obtained commitments for bank financing and a ''highly confident'' letter 
from Drexel Burnham for subordinated debt and preferred stock financing; 
and we have even accepted a modified version of your restructuring of 
Damon's investment in Damon Biotech -- a restructuring plan you created 
solely in response to our presence.

   And what have you done since the spring? Taken a series of steps that 
we believe have reduced the value of Damon to its shareholders:

   -- You have adopted a poison pill and amended your by-laws to entrench 
your positions.

   -- You have hired not one, but two very expensive investment bankers. 
With fees that could potentially exceed $5,000,000, or approximately $.50 
a share (a), if we acquire Damon, and $3,000,000, or approximately $0.30 
a share, if we do not consummate our offer, that's pretty rich for a 
company that earned only $0.21 per share as reported for its last fiscal 
year and only earned approximately $0.75 per share in the twelve months 
ended May 31, 1988, even after eliminating Damon Biotech's continuing 
losses.

   -- You have adopted and amended golden parachute programs that are so 
expensive they impose excise tax on the recipients and result in lost tax


                                                                       
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decductions for Damon. Damon's severance program now results in potential 
non-deductible payments of $14,000,000, or $1.40 per share.  That's an 
astonishing 2.92 x trailing twelve months net earnings, and 1.87 x 
trailing twelve months net earnings even after eliminating Damon 
Biotech's continuing losses.

    -- You announced last April a restructuring that would split the 
company into two entities, one ''primarily'' dedicated to clinical 
laboratory service and one ''primarily'' dedicated to biotechnology 
products. Undoubtedly, the hobby, educational products and medical 
equipment businesses would achieve their highest values either as 
independent entities or in combination with other, larger participants in 
their industries to achieve economies of scale. Yet not once have you 
said anything publicly about what you intend to do with these businesses.


   -- You have proposed to further reduce Damon's cash position by 
infusing $4.2 million in cash into Damon Biotech, over and above the 
exchange of a $5.5 million building for more stock.

   -- And you have issued a series of misleading and confusing press 
releases and letters to your shareholders designed to hide the fact that 
you have done absolutely nothing to enhance shareholder value and that 
you have the ability to satisfy substantailly all of the conditions to 
our offer.

   -- A case in point is your misleading use of the valuation 
compilations of our investment banker prepared last June. Your press 
releases and letters to shareholders have failed to remind readers that 
you have reduced the value of the company since June, though the actions 
outlined above, and that, among other things:

   1. The Drexel valuation was prepared in the context of our June 9 
proposal which contemplated the division of Damon into separate operating 
units on a tax efficient basis. You rejected that proposal as ''extremely 
complex.'' That complexity was designed to save taxes.  So now you must 
deduct from the Drexel June valuation of Damon the tax cost from 
dispositions of the hobby, educational products and medical equipment 
businesses as well as Damon's excess real estate.

   2. Damon Biotech's market value has substantially diminished.  
Remember, since June when it was trading in the range of $3 to $3.375 per 
share, Damon Biotech has lost its major contract (with SmithKline), it 
has further depleted it assets, and biotechnology stocks have gone out of 
fashion.

   3. Fees and expenses of an acquisition of Damon are now likely to be 
twice that they might have been in June.

   4. And bank lending rates are up 100 basis points since June.

   Your investment bankers contend that Damon is worth more than our 
offer. But you have never proposed to deliver that alleged value to your 
shareholders. You have not authorized your investment bankers to test 
their values for the company in the marketplace, and so those values 
remain theoretical, not real.

   If your investment bankers' valuations are correct, why is Damon's 
stock price now trading in the range of $23 to $24 five months into a 
proposed transaction and with our all cash tender offer on the table?  
Isn't the market

                                                                       
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saying that Damon is worth less than what your investment bankers assert?


   If your investment bankers' valuations are correct, why do you still 
propose to provide us confidential information only if we sign a two-year 
standstill agreement that prevents us from making other proposals to the 
company or seeking representation on the Damon Board?  With your poison 
pill in place and the Delaware statute to protect you, who are you afraid 
of? Your shareholders?

   If you continue to adhere to your investment bankers' valuation, and 
the company's past stock performance is any indication of future market 
performance, your shareholders should prepare for a long, cold 1989. 
After all, before we initiated our final purchases in March, your stock 
had never traded higher than $18.17 in the last 3 years; you cannot 
honestly contend that the spin-off of Damon Biotech (now trading at 
$1.875 per share), without other significant steps, is going to make that 
much difference in stock performance.

   Our offer and proposal are a fair price for Damon, and through their 
tender of shares to us, your shareholders have demonstrated they know it 
and want to accept our offer. Together, our offer and proposal represent 
a value of approximately $26.45, based on the current stock price of 
Damon Biotech. That value is a premium of 40 percent over the closing 
stock price of $18.875 on the date we announced our tender offer and a 
multiple of 55 x Damon's trailing twelve months earnings and 35 x 
trailing twelve month earnings after eliminating Damon Biotech's losses.

   Each of you should ask yourself at what price Damon common stock would 
trade in the absence of our offer.

   Your letter of October 12 feigns confusion about what we intend.  Our 
plan is simple: We propose to add your restructuring plan, in modified 
form, to our offer. We intend to amend our offer to waive the 
restructuring condition, but only to permit the restructuring to be 
accomplished on the terms set forth in our October 10 proposal.

   Does permitting the modified restructuring affect our ability to 
finance our acquisition of Damon? Certainly not. Both Paribas and Drexel 
have consented to our proposal.

   How will you know that we will bear the tax cost to Damon of the 
spin-off? Simple: enter into a definitive merger agreement with us.

   Why do the spin-off now on a taxable basis? Because our offer is 
currently being made available to Damon shareholders, it is the best 
alternative available to Damon, and the value of $24 cash and 1.3 shares 
of Damon Biotech now is certainly superior to your 1989 restructuring 
plan, which remains subject to a number of unsatisfied conditions.

   With an unleveraged ownership interest representing 10 percent of 
Damon and a strong desire to own the company, we are prepared to stay the 
course.

   We are also prepared to move ahead. Your efforts to mislead and 
confuse your shareholders have failed. You should act on your fiduciary 
obligations to your shareholders and approve a business combination with 
us on the terms we have proposed.


                                                                       
PAGE    9                     (c) 1988 Business Wire, October 20, 1988                    


   We await your reply.  (a) Unless otherwise indicated, per share 
calculations and certain earnings multiples in this letter are based upon 
a weighted average number of shares outstanding of 10,004,938, and, where 
indicated, estimated results for Damon after excluding Damon Biotech. 
Very truly yours, NOMAD PARTNERS, L.P.  By: American Magnetics 
Corporation By:  Robert L. Rosen,  Chairman  NOMAD ACQUISITION 
CORPORATION  By:  Robert L. Rosen,  Chairman

   CONTACT: Kekst and Company, New York             Lissa Perlman or Mary 
T. Conway, 212/593-2655             KEYWORD: NEW YORK             





                                                                       
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