Exhibit 99-1
CONFORMED COPY
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AGREEMENT AND PLAN OF MERGER
Dated as of January 26, 2001
Among
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇,
HP MERGER SUB, INC.
And
HEARTPORT, INC.
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TABLE OF CONTENTS
Page
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ARTICLE I
The Merger
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SECTION 1.01. The Merger...................................................2
SECTION 1.02. Closing......................................................2
SECTION 1.03. Effective Time...............................................2
SECTION 1.04. Effects of the Merger........................................2
SECTION 1.05. Certificate of Incorporation and By-laws.....................3
SECTION 1.06. Directors....................................................3
SECTION 1.07. Officers..................................................3
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
--------------------------------------------------
SECTION 2.01. Effect on Capital Stock......................................3
SECTION 2.02. Exchange of Certificates.....................................4
ARTICLE III
Representations and Warranties
------------------------------
SECTION 3.01. Representations and Warranties of
the Company............................................... 9
SECTION 3.02. Representations and Warranties of
Parent and Sub............................................31
ARTICLE IV
Covenants Relating to Conduct of Business
-----------------------------------------
SECTION 4.01. Conduct of Business..........................................35
SECTION 4.02. No Solicitation..............................................40
ARTICLE V
Additional Agreements
---------------------
SECTION 5.01. Preparation of the Form S-4 and the
Proxy Statement; Stockholders'
Meeting...................................................44
SECTION 5.02. Access to Information; Confidentiality.......................45
SECTION 5.03. Commercially Reasonable Efforts..............................46
SECTION 5.04. Stock Options................................................47
(i)
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SECTION 5.05. Indemnification, Exculpation and
Insurance.................................................48
SECTION 5.06. Fees and Expenses............................................49
SECTION 5.07. Public Announcements.........................................50
SECTION 5.08. Affiliates...................................................50
SECTION 5.09. Stock Exchange Listing.......................................50
SECTION 5.10. Tax Treatment................................................50
SECTION 5.11. Stockholder Litigation.......................................51
SECTION 5.12. Rights Agreement.............................................51
SECTION 5.13. Convertible Notes............................................51
SECTION 5.14. Employee Matters.............................................52
SECTION 5.15. Stockholder Agreement Legend.................................53
ARTICLE VI
Conditions Precedent
--------------------
SECTION 6.01. Conditions to Each Party's Obligation
to Effect the Merger......................................53
SECTION 6.02. Conditions to Obligations of Parent
and Sub...................................................54
SECTION 6.03. Conditions to Obligation of the Company......................55
SECTION 6.04. Frustration of Closing Conditions............................56
ARTICLE VII
Termination, Amendment and Waiver
---------------------------------
SECTION 7.01. Termination..................................................56
SECTION 7.02. Effect of Termination........................................57
SECTION 7.03. Amendment....................................................58
SECTION 7.04. Extension; Waiver............................................58
ARTICLE VIII
General Provisions
------------------
SECTION 8.01. Nonsurvival of Representations and
Warranties................................................58
SECTION 8.02. Notices......................................................58
SECTION 8.03. Definitions..................................................60
SECTION 8.04. Interpretation...............................................61
SECTION 8.05. Counterparts.................................................62
SECTION 8.06. Entire Agreement; No Third-Party
Beneficiaries.............................................62
SECTION 8.07. Governing Law................................................62
SECTION 8.08. Assignment...................................................62
SECTION 8.09. Specific Enforcement.........................................62
SECTION 8.10. Severability.................................................63
(ii)
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Annex I Index of Defined Terms
Exhibit A Form of Certificate of Incorporation of the
Surviving Corporation
Exhibit B Form of Affiliate Letter
(iii)
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AGREEMENT AND PLAN OF MERGER (this
"Agreement") dated as of January 26, 2001,
among ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, a New Jersey
corporation ("Parent"), HP MERGER SUB, INC.,
a Delaware corporation and a wholly owned
subsidiary of Parent ("Sub"), and HEARTPORT,
INC., a Delaware corporation (the
"Company").
WHEREAS the respective Boards of Directors of Parent, Sub and the
Company have approved and declared advisable this Agreement and the merger of
Sub with and into the Company (the "Merger"), upon the terms and subject to the
conditions set forth in this Agreement, whereby each issued and outstanding
share of common stock, par value $.001 per share, of the Company ("Company
Common Stock"), other than Company Common Stock owned by Parent, Sub or the
Company, will be converted into the right to receive common stock, par value
$1.00 per share, of Parent ("Parent Common Stock");
WHEREAS, simultaneously with the execution and delivery of this
Agreement and as a condition and inducement to Parent's willingness to enter
into this Agreement, Parent and certain stockholders of the Company (the
"Principal Stockholders") are entering into an agreement (the "Stockholder
Agreement") pursuant to which the Principal Stockholders will agree to vote,
approve and adopt this Agreement and to take certain other actions in
furtherance of the consummation of the Merger upon the terms and subject to the
conditions set forth in the Stockholder Agreement;
WHEREAS, for Federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code") and that this
Agreement constitutes a plan of reorganization; and
WHEREAS Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agree ments in connection with the
Merger and also to prescribe various conditions to the Merger.
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NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereto agree
as follows:
ARTICLE I
The Merger
----------
SECTION 1.01. The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the General Corporation Law
of the State of Delaware (the "DGCL"), Sub shall be merged with and into the
Company at the Effective Time. Following the Effective Time, the separate
corporate existence of Sub shall cease and the Company shall continue as the
surviving corporation in the Merger (the "Surviving Corporation") and shall
succeed to and assume all the rights and obligations of Sub in accordance with
the DGCL.
SECTION 1.02. Closing. The closing of the Merger (the "Closing") will
take place at 10:00 a.m. on a date to be specified by the parties (the "Closing
Date"), which shall be no later than the second business day after satisfaction
or waiver of the conditions set forth in Article VI (other than those conditions
that by their terms are to be satisfied at the Closing, but subject to the
satisfaction or waiver of those conditions), at the offices of Cravath, Swaine &
▇▇▇▇▇, Worldwide Plaza, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇▇▇, unless another
date or place is agreed to in writing by the parties hereto.
SECTION 1.03. Effective Time. Subject to the provisions of this
Agreement, as soon as practicable on the Closing Date, the parties shall file a
certificate of merger (the "Certificate of Merger") executed in accordance with
the relevant provisions of the DGCL and, as soon as practicable on or after the
Closing Date, shall make all other filings or recordings required under the
DGCL. The Merger shall become effective at such time as the Certificate of
Merger is duly filed with the Secretary of State of the State of Delaware, or at
such other time as Parent and the Company shall agree should be specified in the
Certificate of Merger (the time the Merger becomes effective being the
"Effective Time").
SECTION 1.04. Effects of the Merger. The Merger shall have the effects
set forth in Section 259 of the DGCL.
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SECTION 1.05. Certificate of Incorporation and By-laws. (a) The
Certificate of Incorporation of the Surviving Corporation shall be amended at
the Effective Time to be in the form of Exhibit A and, as so amended, such
Certificate of Incorporation shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter changed or amended as provided therein or
by applicable law.
(b) The By-laws of Sub, as in effect immediately prior to the
Effective Time, shall be the By-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
SECTION 1.06. Directors. The directors of Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation until the
earlier of their resignation or removal or until their respective suc cessors
are duly elected and qualified, as the case may be.
SECTION 1.07. Officers. The officers of Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
--------------------------------------------------
SECTION 2.01. Effect on Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Company Common Stock or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of capital
stock of Sub shall be converted into and become one validly issued, fully
paid and nonassessable share of common stock, par value $0.01 per share, of
the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent- Owned Stock. Each share
of Company Common Stock that is owned by the Company, Parent or Sub shall
automatically be canceled and retired and shall cease to exist, and no
Parent Common Stock or other consideration shall be delivered in exchange
therefor.
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(c) Conversion of Company Common Stock. Subject to Section 2.02(e),
each share of Company Common Stock issued and outstanding immediately prior
to the Effective Time (other than shares to be canceled in accordance with
Section 2.01(b)) shall be converted into the right to receive that number
of validly issued, fully paid and nonassessable shares of Parent Common
Stock equal to the Exchange Ratio (the "Merger Consideration"). The
"Exchange Ratio" means the quotient obtained by dividing $2.72 by the
Average Closing Price and rounding to the nearest 1/10,000. The "Average
Closing Price" shall be an amount equal to the average per share closing
price of Parent Common Stock, as reported on the New York Stock Exchange,
Inc. (the "NYSE") Composite Transactions Tape (as reported by The Wall
Street Journal (Northeast edition), or, if not reported thereby, any other
authoritative source) (the "NYSE Composite Transactions Tape") for the 20
trading days ending with the second trading day immediately preceding the
Closing Date. As of the Effective Time, all such shares of Company Common
Stock shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each holder of a certificate
which immediately prior to the Effective Time represented any such shares
of Company Common Stock (each, a "Certificate") shall cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration, any dividends or other distributions to which such holder is
entitled pursuant to Section 2.02(c) and any cash in lieu of fractional
shares of Parent Common Stock to be issued or paid in consideration
therefor upon surrender of such Certificate in accordance with Section
2.02(e), without interest. Notwithstanding the foregoing, if between the
date of this Agreement and the Effective Time the outstanding shares of
Parent Common Stock shall have been changed into a different number of
shares or a different class, by reason of the occurrence or record date of
any stock dividend, subdivision, reclassification, recapitalization, split,
combination, exchange of shares or similar transaction, the Exchange Ratio
shall be appropriately adjusted to reflect such stock dividend,
subdivision, reclassifi cation, recapitalization, split, combination,
exchange of shares or similar transaction.
SECTION 2.02. Exchange of Certificates. (a) Exchange Agent. As of the
Effective Time, Parent shall deposit with First Chicago Trust Company of New
York or such other bank or trust company of similar size as may be designated by
Parent (the "Exchange Agent"), for the benefit
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of the holders of shares of Company Common Stock, for exchange in accordance
with this Article II, through the Exchange Agent, certificates representing the
shares of Parent Common Stock issuable pursuant to Section 2.01 in exchange for
outstanding shares of Company Common Stock (such shares of Parent Common Stock,
together with any dividends or distributions with respect thereto with a record
date after the Effective Time and any cash payments in lieu of any fractional
shares of Parent Common Stock, being hereinafter referred to as the "Exchange
Fund"). Subject to Section 2.02(f), the Exchange Agent shall, pursuant to
irrevocable instructions, deliver the Parent Common Stock contemplated to be
issued pursuant to Section 2.01 out of the Exchange Fund. Except as contemplated
by this Article II, the Exchange Fund shall not be used for any other purpose.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, but in any event within 10 business days thereafter, Parent
shall cause the Exchange Agent to mail to each holder of record of a Certificate
whose shares were converted into the right to receive the Merger Consideration
pursuant to Section 2.01(c), (i) a letter of transmittal (which shall be in
customary form and shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent) and (ii) instructions for use in
surrendering the Certificates in exchange for certificates representing the
Merger Consideration and cash in lieu of any fractional shares. Upon surrender
of a Certificate for cancellation to the Exchange Agent, together with such
letter of transmittal, duly executed, and such other documents as may reasonably
be required by the Exchange Agent, the holder of such Certificate shall be
entitled to receive in exchange therefor a certificate representing that number
of whole shares of Parent Common Stock which such holder has the right to
receive pursuant to the provisions of this Article II after taking into account
all the shares of Company Common Stock then held by such holder under all such
Certificates so surrendered, cash in lieu of fractional shares of Parent Common
Stock to which such holder is entitled pursuant to Section 2.02(e) and any
dividends or other distributions to which such holder is entitled pursuant to
Section 2.02(c), and the Certificate so surrendered shall forthwith be canceled.
In the event of a transfer of ownership of Company Common Stock which is not
registered in the transfer records of the Company, a certificate representing
the proper number of shares of Parent Common Stock, cash in lieu of fractional
shares of Parent Common Stock to which such holder is entitled
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pursuant to Section 2.02(e) and any dividends or other distributions to which
such holder is entitled pursuant to Section 2.02(c), may be issued to a person
other than the person in whose name the Certificate so surrendered is
registered, if, upon presentation to the Exchange Agent, such Certificate shall
be properly endorsed or otherwise be in proper form for transfer and the person
requesting such issuance shall pay any transfer or other taxes required by
reason of the issuance of shares of Parent Common Stock to a person other than
the registered holder of such Certificate or establish to the reasonable
satisfaction of Parent that such tax has been paid or is not applicable. Until
surrendered as contemplated by this Section 2.02(b), each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the Merger Consideration, any dividends or other
distributions to which such holder is entitled pursuant to Section 2.02(c) and
cash in lieu of any fractional shares of Parent Common Stock as contemplated by
Section 2.02(e). No interest will be paid or will accrue on any cash payable to
holders of Certificates pursuant to Section 2.02(c) or 2.02(e).
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to Parent Common Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the shares of Parent Common Stock represented thereby, and no
cash payment in lieu of fractional shares shall be paid to any such holder
pursuant to Section 2.02(e) until the holder of record of such Certificate shall
surrender such Certificate in accordance with this Article II. Following
surrender of any such Certificate, there shall be paid to the record holder of
the certificate representing whole shares of Parent Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of any cash payable in lieu of a fractional share of Parent Common Stock
to which such holder is entitled pursuant to Section 2.02(e) and the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Parent Common Stock and
(ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to such
surrender and a payment date subsequent to such surrender payable with respect
to such whole shares of Parent Common Stock.
(d) No Further Ownership Rights in Company Common Stock. All shares of
Parent Common Stock issued upon the surrender for exchange of Certificates in
accordance with
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the terms of this Article II (including any cash paid pursuant to Section
2.02(c) or 2.02(e)) shall be deemed to have been issued (and paid) in full
satisfaction of all rights pertaining to the shares of Company Common Stock
previously represented by such Certificates, and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock that were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Exchange Agent
for any reason, they shall be canceled and exchanged as provided in this Article
II.
(e) No Fractional Shares. (i) No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, no dividend or distribution of Parent shall relate to
such fractional share interests and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a stockholder of Parent.
(ii) In lieu of such fractional share interests, Parent shall pay to
each former holder of Company Common Stock an amount in cash equal to the
product obtained by multiplying (A) the fractional share interest to which such
former holder (after taking into account all shares of Company Common Stock held
at the Effective Time by such holder) would otherwise be entitled by (B) the per
share closing price of Parent Common Stock on the Closing Date, as such price is
reported on the NYSE Composite Transactions Tape.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
that remains undistributed to the holders of the Certificates for six months
after the Effective Time shall be delivered to Parent, upon demand, and any
holders of the Certificates who have not theretofore complied with this Article
II shall thereafter look only to Parent for, and Parent shall remain liable for,
payment of their claim for Merger Consideration, any cash in lieu of fractional
shares of Parent Common Stock and any dividends or distributions with respect to
Parent Common Stock in accordance with this Article II. If any Certificates
shall not have been surrendered prior to three years after the Effective Time
(or immediately prior to such earlier date on which any Merger Consideration
would otherwise escheat to or became the property of any Governmental Entity),
any such Merger Consideration in respect thereof shall, to the extent permitted
by applicable law, become the property of Parent, free and clear of all claims
or interest of any person previously entitled thereto.
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(g) No Liability. None of Parent, Sub, the Company or the Exchange
Agent shall be liable to any person in respect of any shares of Parent Common
Stock (or dividends or distributions with respect thereto) or cash in lieu of
fractional shares of Parent Common Stock or cash from the Exchange Fund, in each
case delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(h) Investment of Exchange Fund. The Exchange Agent shall invest any
cash included in the Exchange Fund, as directed by Parent, on a daily basis. Any
interest and other income resulting from such investments shall be paid to
Parent.
(i) Lost Certificates. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
Parent, the posting by such person of a bond in such reasonable amount as Parent
may direct as indemnity against any claim that may be made against it with
respect to such Certificate, the Exchange Agent will issue in exchange for such
lost, stolen or destroyed Certificate the Merger Consideration and any cash in
lieu of fractional shares and unpaid dividends and distributions on shares of
Parent Common Stock deliverable in respect thereof, in each case pursuant to
this Agreement.
(j) Withholding Rights. The Exchange Agent shall be entitled to deduct
and withhold from the consideration otherwise payable to any holder of Company
Common Stock pursuant to this Agreement such amounts as may be required to be
deducted and withheld with respect to the making of such payment under the Code,
or under any provision of state, local or foreign tax law. To the extent that
amounts are so withheld and paid over to the appropriate taxing authority, the
Exchange Agent will be treated as though it withheld an appropriate amount of
the type of consideration otherwise payable pursuant to this Agreement to any
holder of Company Common Stock, sold such consideration for an amount of cash
equal to the fair market value of such consideration at the time of such deemed
sale and paid such cash proceeds to the appropriate taxing authority.
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ARTICLE III
Representations and Warranties
------------------------------
SECTION 3.01. Representations and Warranties of the Company. Except as
(i) set forth on the disclosure schedule (with specific reference to the
particular subsection of this Agreement to which the information set forth in
such disclosure schedule relates; provided, however, that to the extent it is
readily apparent on the face of such exception that such exception also relates
to another subsection of this Section 3.01, each such other subsection shall
also be qualified by such exception) delivered by the Company to Parent prior to
the execution of this Agreement (the "Company Disclosure Schedule") or (ii)
described in any Company SEC Document filed and publicly available at least
three business days prior to the date of this Agreement, the Company represents
and warrants to Parent and Sub as follows:
(a) Organization, Standing and Corporate Power. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority and possesses all governmental licenses, permits, authorizations
and approvals necessary to enable it to use its corporate name and to own,
lease or otherwise hold and operate its properties and other assets and to
carry on its business as presently conducted, except where the failure to
have such governmental licenses, permits, authorizations or approvals,
individually or in the aggregate, has not had and could not reasonably be
expected to have a Material Adverse Effect. The Company is duly qualified
or licensed to do business and is in good standing in each jurisdiction in
which the nature of its business or the ownership, leasing or operation of
its properties or other assets makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so
qualified or licensed individually or in the aggregate has not had and
could not reasonably be expected to have a Material Adverse Effect. The
Company has delivered to Parent prior to the execution of this Agreement
true and correct copies of its Restated Certificate of Incorporation (the
"Company Certificate") and Amended and Restated By-laws (the "Company
By-laws"), in each case as amended through the date hereof.
(b) Subsidiaries. The Company does not own any capital stock or other
ownership interest in any person
10
other than short-term investments that constitute cash equivalents.
(c) Capital Structure. The authorized capital stock of the Company
consists of 100,000,000 shares of Company Common Stock and 20,000,000
shares of preferred stock, par value $.001 per share ("Preferred Stock").
At the close of business on January 23, 2001, (i) 26,379,821 shares of
Company Common Stock were issued and outstanding, (ii) 42,666 shares of
Company Common Stock were held by the Company in its treasury, (iii)
10,793,615 shares of Company Common Stock were reserved for issuance
pursuant to the Company Stock Plans (of which 6,415,233 shares of Company
Common Stock were subject to outstanding options to purchase shares of
Company Common Stock granted under the Company Stock Plans ("Stock Plan
Options")), (iv) 1,109,530 shares of Company Common Stock were reserved for
issuance pursuant to options to purchase shares of Company Common Stock
outside of the Company Stock Plans ("Non-Plan Stock Options" and, together
with the Stock Plan Options, "Stock Options") (all of which shares of
Company Common Stock are subject to outstanding Non- Plan Stock Options),
(v) 1,652,393 shares of Company Common Stock were reserved for issuance
upon conversion of the Company's 7.25% Convertible Subordinated Notes due
2004 (the "Convertible Notes") (after giving effect to any conversion or
redemption prior to January 23, 2001), (vi) no shares of Preferred Stock
were issued or outstanding and (vii) 50,000 shares of Series A Junior
Participating Preferred Stock were reserved for issuance in connection with
the Rights issued pursuant to the Rights Agreement. Except as set forth
above in this Section 3.01(c), at the close of business on January 23,
2001, no shares of capital stock or other voting securities of the Company
were issued, reserved for issuance or outstanding. Except as set forth
above in this Section 3.01(c), there are no outstanding stock appreciation
rights, "phantom" stock rights, rights to receive shares of Company Common
Stock on a deferred basis or other similar rights, granted under the
Company Stock Plans or otherwise. Section 3.01(c) of the Company Disclosure
Schedule sets forth a complete and accurate list, as of January 23, 2001,
of all outstanding Stock Options or other rights to purchase or receive
Company Common Stock granted under the Company Stock Plans or otherwise,
the number of shares of Company Common Stock subject thereto, expiration
dates and exercise prices thereof and the names of the holders thereof. All
outstanding shares of capital stock of the Company are, and all shares
which may be
11
issued pursuant to the Company Stock Plans will be, when issued in
accordance with the terms thereof, duly authorized, validly issued, fully
paid and nonassessable and not subject to preemptive rights. Except as set
forth above in this Section 3.01(c), there are no issued or outstanding
bonds, debentures, notes or other indebtedness of the Company having the
right to vote (or convertible into, or exchangeable for, securities having
the right to vote) on any matters on which stockholders of the Company may
vote. Except as set forth above in this Section 3.01(c) or resulting from
the issuance of shares of Company Common Stock pursuant to the exercise of
Stock Options outstanding as of the date hereof or purchase rights held by
participants under the Company ESPP outstanding as of the date hereof or in
accordance with Section 5.04(b), (x) there are not issued, reserved for
issuance or outstanding (A) any shares of capital stock or other voting
securities of the Company, (B) any securities of the Company convertible
into or exchangeable or exercisable for shares of capital stock or voting
securities of the Company, (C) any warrants, calls, options or other rights
to acquire from the Company, and no obligation of the Company to issue, any
capital stock, voting securities or securities convertible into or
exchangeable or exercisable for capital stock or voting securities of the
Company and (y) there are not any outstanding obligations of the Company to
repurchase, redeem or otherwise acquire any such securities or to issue,
deliver or sell, or cause to be issued, delivered or sold, any such
securities. The Company is not a party to any voting agreement with respect
to the voting of any such securities.
(d) Authority; Noncontravention. The Company has the requisite
corporate power and authority to execute and deliver this Agreement and,
subject to receipt of the Stockholder Approval, to consummate the
transactions contemplated by this Agreement. The execution and delivery of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated by this Agreement have been duly authorized by
all necessary corporate action on the part of the Company and no other
corporate proceedings on the part of the Company are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby,
subject, in the case of the Merger, to receipt of the Stockholder Approval
and the filing and acceptance for record of the Certificate of Merger as
required by the DGCL. This Agreement has been duly executed and delivered
by the Company and,
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assuming the due authorization, execution and delivery by each of the other
parties hereto, constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms. The
Board of Directors of the Company, at a meeting duly called and held at
which all directors of the Company were present, duly and unanimously
adopted resolutions (i) approving and declaring advisable this Agreement,
the Merger and the other transactions contemplated hereby, (ii) declaring
that it is in the best interests of the stockholders of the Company that
the Company enter into this Agreement and consummate the Merger on the
terms and subject to the conditions set forth in this Agreement, (iii)
directing that this Agreement be submitted to a vote at a meeting of the
stockholders of the Company and (iv) recommending that the stockholders of
the Company adopt this Agreement. The execution and delivery of this
Agreement do not, and the consummation of the Merger and the other
transactions contemplated by this Agreement and compliance with the
provisions of this Agreement will not, conflict with, or result in any
violation or breach of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation
or acceleration of any obligation or the loss of a material benefit under,
or result in the creation of any pledge, claim, lien, charge, encumbrance
or security interest of any kind or nature whatsoever (collectively,
"Liens") in or upon any of the properties or assets of the Company under,
(x) the Company Certificate or Company By-laws, (y) any loan or credit
agreement, bond, debenture, note, mortgage, indenture, lease or other
contract, agreement, obligation, commitment, arrangement, understanding,
instrument, permit or license, whether oral or written, to which the
Company is a party or any of its properties or other assets is subject or
(z) subject to the governmental filings and other matters referred to in
the following sentence, any (A) statute, law, ordinance, rule or regulation
or (B) order, writ, injunction, decree, judgment or stipulation, in each
case applicable to the Company or its properties or other assets, other
than, in the case of clauses (y) and (z), any such conflicts, violations,
breaches, defaults, rights, losses or Liens that individually or in the
aggregate have not had and could not reasonably be expected to have a
Material Adverse Effect. No consent, approval, order or authorization of,
action by or in respect of, or registration, declaration or filing with,
any Federal, state, local or foreign government, any court, administrative,
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regulatory or other governmental agency, commission or authority or any
non-governmental self-regulatory agency, commission or authority (each, a
"Governmental Entity") is required by or with respect to the Company in
connection with the execution and delivery of this Agreement by the Company
or the consummation by the Company of the Merger or the other transactions
contemplated by this Agreement, except for (1) the filing of a premerger
notification and report form by the Company under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended (together with the rules and
regulations promulgated thereunder, the "HSR Act"), (2) the filing with the
Securities and Exchange Commission (the "SEC") of (A) a proxy statement
relating to the adoption by the stockholders of the Company of this
Agreement (as amended or supplemented from time to time, the "Proxy
Statement") and (B) any such reports under Section 13(a), 13(d), 15(d) or
16(a) of the Securities Exchange Act of 1934, as amended (together with the
rules and regulations promulgated thereunder, the "Exchange Act"), as may
be required in connection with this Agreement and the transactions
contemplated by this Agreement, (3) applicable requirements, if any, of (A)
the Securities Act of 1933, as amended (together with the rules and
regulations promulgated thereunder, the "Securities Act"), (B) state
securities or "blue sky" laws and (C) the rules and regulations of The
Nasdaq Stock Market, Inc., (4) the filing and recordation of the
Certificate of Merger with the Secretary of State of the State of Delaware
and appropriate documents with the relevant authorities of other states in
which the Company is qualified to do business and (5) such other consents,
approvals, orders, authorizations, registrations, declarations and filings
the failure of which to be obtained or made individually or in the
aggregate has not had and could not reasonably be expected to have a
Material Adverse Effect.
(e) Company SEC Documents. The Company has filed all reports,
schedules, forms, statements and other documents (including, in all
material respects, exhibits and other information incorporated therein)
with the SEC required to be filed by the Company since January 1, 1998 (the
"Company SEC Documents"). As of their respective dates, the Company SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, applicable to such
Company SEC Documents, and except to the extent that information contained
in any Company SEC Document has been revised, superseded or
14
updated by a later-filed Company SEC Document, none of the Company SEC
Documents contains any untrue statement of a material fact or omits 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. The financial statements (including,
in each case, any related notes thereto) of the Company included in the
Company SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with
generally accepted accounting principles ("GAAP") (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present, in all material respects, the
financial position of the Company as of the dates thereof and the results
of its operations and cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal and recurring year- end audit
adjustments). Except as set forth in the most recent financial statements
included in the Company SEC Documents filed by the Company and publicly
available prior to the date of this Agreement (the "Filed Company SEC
Documents"), the Company has no liabilities or obligations (whether
accrued, absolute, contingent or otherwise) (i) of a nature required to be
disclosed on a balance sheet or in the related notes to financial
statements prepared in accordance with GAAP or (ii) which, individually or
in the aggregate, have had or could reasonably be expected to have a
Material Adverse Effect.
(f) Information Supplied. None of the information supplied or to be
supplied by the Company specifically for inclusion or incorporation by
reference in (i) the registration statement on Form S-4 to be filed with
the SEC by Parent in connection with the issuance of Parent Common Stock in
the Merger (as amended or supplemented from time to time, the "Form S- 4")
will, at the time the Form S-4 is filed with the SEC, at any time it is
amended or supplemented and at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances under
which they are made, not misleading or (ii) the Proxy Statement will, at
the date it is first mailed to the
15
Company's stockholders and at the time of the Stockholders' Meeting,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under which they
are made, not misleading. The Proxy Statement will comply as to form in all
material respects with the requirements of the Exchange Act.
Notwithstanding the foregoing, the Company makes no representation or
warranty with respect to statements made or incorporated by reference in
the Form S-4 or the Proxy Statement based on information supplied by Parent
or Sub specifically for inclusion or incorporation by reference in the Form
S-4 or the Proxy Statement, as the case may be.
(g) Absence of Certain Changes or Events. Except for liabilities
incurred in connection with this Agreement and except as disclosed in the
Filed Company SEC Documents, since the date of the most recent financial
statements included in the Filed Company SEC Documents, the Company has
conducted its business only in the ordinary course consistent with past
practice, and there has not been (i) any Material Adverse Change, (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of the Company's
capital stock, (iii) any split, combination or reclassification of any of
the Company's capital stock or any issuance or the authorization of any
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, (iv) (A) any granting by the
Company to any current or former director, officer or employee of the
Company of any increase in compensation, bonus or other benefits, except
for normal increases in cash compensation in the ordinary course of
business consistent with past practice or as was required under employment
agreements in effect as of the date of the most recent audited financial
statements included in the Filed Company SEC Documents, (B) any granting by
the Company to any current or former director, officer or employee of any
increase in severance or termination pay, except as was required under any
employment, severance or termination agreements in effect as of the date of
the most recent financial statements included in the Filed Company SEC
Documents, (C) any entry by the Company into, or any amendment of, (1) any
employment, deferred compensation, consulting, severance, termination or
indemnification agreement, arrangement or understanding with any current or
former director, officer or
16
employee or (2) any agreement with any current or former director, officer
or employee the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving the
Company of a nature contemplated by this Agreement (all such agreements
under this clause (C), collectively, "Benefit Agreements") or (D) any
amendment to, or modification of, any Stock Option, (v) any change in
accounting methods, principles or practices by the Company materially
affecting its assets, liabilities or businesses, except insofar as may have
been required by a change in GAAP, or (vi) any material tax election or any
settlement or compromise of any material income tax liability.
(h) Litigation. Except as disclosed in the Filed Company SEC
Documents, there is no suit, action or proceeding pending or, to the
Knowledge of the Company, threatened against or affecting the Company that
individually or in the aggregate has had or could reasonably be expected to
have a Material Adverse Effect, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator
outstanding against, or, to the Knowledge of the Company, investigation by
any Governmental Entity involving, the Company that individually or in the
aggregate has had or could reasonably be expected to have a Material
Adverse Effect.
(i) Contracts. The Company is not a party to, and none of its
properties or other assets are subject to, any contract or agreement that
are of a nature required to be filed as an exhibit to a report or filing
under the Securities Act or the Exchange Act. The Company is not in
violation of or in default under (nor to the Knowledge of the Company does
there exist any condition which upon the passage of time or the giving of
notice or both would cause such a violation of or default under) any loan
or credit agreement, bond, debenture, note, mortgage, indenture, lease or
other contract, agreement, obligation, commitment, arrangement,
understanding, instrument, permit or license, whether oral or written, to
which the Company is a party or by which it or any of its properties or
other assets is bound, except for violations or defaults that individually
or in the aggregate have not had and could not reasonably be expected to
have a Material Adverse Effect. The Company has not entered into any
contract, agreement, obligation, commitment, arrangement or understanding
with any Affiliate of the
17
Company that is currently in effect other than any such agreements,
obligations, commitments, arrangements or understandings that,
individually, has aggregate future payment or other obligations of no
greater than $50,000 and, in the aggregate, have future payment or other
obligations of no greater than $100,000 and other than agreements,
obligations, commitments, arrangements or understandings that are disclosed
in the Filed Company SEC Documents. The Company is not a party to or
otherwise bound by any agreement or covenant not to compete or by any
agreement or covenant restricting in any material respect the development,
marketing or distribution of the Company's products or services.
(j) Compliance with Laws. (i) The Company is in compliance with all
statutes, laws, ordinances, rules, regulations, judgments, orders and
decrees of any Governmental Entity applicable to it, its properties or
other assets or its business or operations (collectively, "Legal
Provisions"), except for instances of noncompliance or possible
noncompliance that individually or in the aggregate have not had and could
not reasonably be expected to have a Material Adverse Effect. The Company
has in effect all approvals, authorizations, certificates, filings,
franchises, licenses, notices, permits and rights of or with all
Governmental Entities, including all authorizations under Environmental
Laws (collectively, "Permits"), necessary for it to own, lease or operate
its properties and assets and to carry on its business and operations as
presently conducted, except for failures to have in effect such Permits
that individually or in the aggregate have not had and could not reasonably
be expected to have a Material Adverse Effect. There has occurred no
default under, or violation of, any such Permit, except individually or in
the aggregate as has not had and could not reasonably be expected to have a
Material Adverse Effect. The Merger, in and of itself, would not cause the
revocation or cancellation of any such Permit that individually or in the
aggregate could reasonably be expected to have a Material Adverse Effect.
No action, demand, requirement or investigation by any Governmental Entity
and no suit, action or proceeding by any other person, in each case with
respect to the Company or any of its properties or other assets under any
Legal Provision, is pending or, to the Knowledge of the Company,
threatened, other than, in each case, those the outcome of which
individually or in the aggregate has not had and could not reasonably be
expected to have a Material Adverse Effect.
18
(ii) Except for those matters disclosed in the Filed Company SEC
Documents or those matters that individually or in the aggregate have not
had and could not reasonably be expected to have a Material Adverse Effect:
(A) the Company is, and has been, in compliance with all applicable
Environmental Laws; (B) during the period of ownership or operation by the
Company of any of its currently or previously owned, leased or operated
properties, there have been no Releases or, to the Knowledge of the
Company, threatened Releases of Hazardous Material in, on, under or
affecting such properties or any surrounding sites; (C) to the Knowledge of
the Company, prior to the period of ownership or operation by the Company
of any of its currently or previously owned, leased or operated properties,
no Hazardous Material was generated, treated, stored, disposed of, used,
handled or manufactured at, or transported or disposed of at or from, such
properties, and there were no Releases of Hazardous Material in, on, under
or affecting any such properties or any surrounding sites; (D) there is no
investigation, suit, claim, action or proceeding pending, or to the
Knowledge of the Company, threatened against or affecting the Company,
relating to or arising under Environmental Laws, and the Company has not
received any notice of, or entered into or assumed by contract or operation
of law or otherwise, any obligation, liability, order, settlement,
judgment, injunction or decree relating to or arising under Environmental
Laws; and (E) to the Knowledge of the Company, there are no facts,
circumstances or conditions which could reasonably be expected to form the
basis for a suit, investigation, claim, action or proceeding against or
affecting the Company relating to or arising under Environmental Laws. The
term "Environmental Laws" means any applicable and binding Federal, state,
local or foreign laws (including the common law), rules, regulations,
codes, ordinances, orders, decrees, judgments, injunctions, notices or
Permits relating to the environment, preservation or reclamation of natural
resources, the presence, management, Release or threat of Release of, or
exposure to, Hazardous Materials, or to human health and safety. The term
"Hazardous Material" means (A) petroleum products and byproducts, asbestos,
urea formaldehyde foam insulation, asbestos or asbestos- containing
materials, medical or infectious wastes, polychlorinated biphenyls, radon
gas, chlorofluorocarbons and all other ozone-depleting substances or (B)
any chemical, material, substance, waste, pollutant or contaminant that is
prohibited,
19
limited or regulated by or pursuant to any Environmental Law. The term
"Release" shall be defined as in 42 U.S.C. Section 9601(22).
(k) Absence of Changes in Benefit Plans; Labor Relations. Except as
disclosed in the Filed Company SEC Documents, since the date of the most
recent financial statements included in the Filed Company SEC Documents,
there has not been any adoption or amendment (or, in the case of any
non-stock-based Benefit Plans, any amendment in any material respect) by
the Company of any collective bargaining agreement or any employment,
bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock appreciation,
restricted stock, stock option, phantom stock, performance, retirement,
thrift, savings, stock bonus, paid time off, perquisite, fringe benefit,
vacation, severance, disability, death benefit, hospitalization, medical,
welfare benefit or other plan, program, policy, arrangement or
understanding (whether or not legally binding) maintained, contributed to
or required to be maintained or contributed to by the Company or any other
person or entity that, together with the Company, is treated as a single
employer under Section 414(b), (c), (m) or (o) of the Code (each, a
"Commonly Controlled Entity"), in each case providing benefits to any
current or former officer, director or employee of the Company
(collectively, the "Benefit Plans"), or any material change in any
actuarial or other assumption used to calculate funding obligations with
respect to any Pension Plans, or any material change in the manner in which
contributions to any Pension Plans are made or the basis on which such
contributions are determined. Except for any Benefit Agreements that,
individually, has aggregate future payment or other obligations of no
greater than $50,000 and, in the aggregate, have future payment or other
obligations of no greater than $100,000 and except as disclosed in the
Filed Company SEC Documents, there exist no currently binding Benefit
Agreements. There are no collective bargaining or other labor union
agreements to which the Company is a party or by which it is bound. Since
January 1, 1998, the Company has not encountered any labor union organizing
activity or had any actual or threatened employee strikes, work stoppages,
slowdowns or lockouts that individually or in the aggregate has had or
could reasonably be expected to have a Material Adverse Effect.
20
(l) ERISA Compliance. (i) Section 3.01(l)(i) of the Company Disclosure
Schedule contains a complete and accurate list of each "employee pension
benefit plan" (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) (sometimes referred to herein
as a "Pension Plan"), "employee welfare benefit plan" (as defined in
Section 3(1) of ERISA) and all other Benefit Plans. The Company has made
available to Parent true, complete and correct copies of (A) each Benefit
Plan (or, in the case of any unwritten Benefit Plans, descriptions
thereof), (B) the two most recent annual reports on Form 5500 required to
be filed with the Internal Revenue Service (the "IRS") with respect to each
Benefit Plan (if any such report was required), (C) the most recent summary
plan description for each Benefit Plan for which such summary plan
description is required and (D) each trust agreement and insurance or group
annuity contract relating to any Benefit Plan. To the Knowledge of the
Company, each Benefit Plan has been administered in all material respects
in accordance with its terms. The Benefit Plans have been administered in
compliance with the applicable provisions of ERISA, the Code and all other
applicable laws, including laws of foreign jurisdictions, except for
instances of noncompliance or possible noncompliance that individually or
in the aggregate have not had and could not reasonably be expected to have
a Material Adverse Effect.
(ii) All Pension Plans intended to be tax-qualified have been the
subject of determination letters from the IRS to the effect that such
Pension Plans are qualified and exempt from United States Federal income
taxes under Sections 401(a) and 501(a), respectively, of the Code; no such
determination letter has been revoked (or, to the Knowledge of the Company,
has revocation been threatened) nor has any event occurred since the date
of the most recent determination letter or application therefor relating to
any such Pension Plan that would adversely affect the qualification of such
Pension Plan or materially increase the costs relating thereto or require
security under Section 307 of ERISA. All Pension Plans maintained or
contributed to by the Company required to have been approved by any foreign
Governmental Entity have been so approved; no such approval has been
revoked (or, to the Knowledge of the Company, has revocation been
threatened) nor has any event occurred since the date of the most recent
approval or application therefor relating to any such
21
Pension Plan that would materially affect any such approval relating
thereto or materially increase the costs relating thereto. The Company has
delivered to Parent a true and complete copy of the most recent
determination letter received with respect to each Pension Plan, as well as
a true and complete copy of each pending application for a determination
letter, if any. The Company has also provided to Parent a true and complete
list of all Pension Plan amendments as to which a favorable determination
letter has not yet been received.
(iii) Neither the Company nor any Commonly Controlled Entity has (A)
maintained, contributed or been obligated to contribute to any Benefit Plan
that is subject to Title IV of ERISA or (B) has any unsatisfied liability
under Title IV of ERISA.
(iv) All reports, returns and similar documents with respect to all
Benefit Plans required to be filed with any Governmental Entity or
distributed to any Benefit Plan participant have been duly and timely filed
or distributed, except for failures to file or distribute that individually
or in the aggregate have not had and could not reasonably be expected to
have a Material Adverse Effect. The Company has received no notice of, and
to the Knowledge of the Company, there are no investigations by any
Governmental Entity with respect to, termination proceedings or other
claims (except claims for benefits payable in the normal operation of the
Benefit Plans), suits or proceedings against or involving any Benefit Plan
or asserting any rights or claims to benefits under any Benefit Plan that
could give rise to any material liability, and, to the Knowledge of the
Company, there are not any facts that individually or in the aggregate have
had or could reasonably be expected to have a Material Adverse Effect.
(v) All contributions, premiums and benefit payments under or in
connection with the Benefit Plans that are required to have been made as of
the date hereof in accordance with the terms of the Benefit Plans have been
timely made or have been reflected on the most recent consolidated balance
sheet filed or incorporated by reference into the Filed Company SEC
Documents. No Pension Plan has an "accumulated funding deficiency" (as such
term is defined in Section 302 of ERISA or Section 412 of the Code),
whether or not waived.
22
(vi) With respect to each Benefit Plan, (A) there has not occurred any
prohibited transaction in which the Company or any of its employees has
engaged that could subject the Company or any of its employees, or, to the
Knowledge of the Company, a trustee, administrator or other fiduciary of
any trust created under any Benefit Plan to the tax or penalty on
prohibited transactions imposed by Section 4975 of ERISA or the sanctions
imposed under Title I of ERISA and (B) neither the Company nor, to the
Knowledge of the Company, any trustee, administrator or other fiduciary of
any Benefit Plan nor any agent of any of the foregoing has engaged in any
transaction or acted in a manner that could, or failed to act so as to,
subject the Company or, to the Knowledge of the Company, any trustee,
administrator or other fiduciary to any liability for breach of fiduciary
duty under ERISA or any other applicable law. No Benefit Plan or related
trust has been terminated, nor has there been any "reportable event" (as
that term is defined in Section 4043 of ERISA) for which the 30-day
reporting requirement has not been waived with respect to any Benefit Plan
during the last five years, and no notice of a reportable event will be
required to be filed in connection with the transactions contemplated
hereby.
(vii) Section 3.01(l)(vii) of the Company Disclosure Schedule
discloses whether each Benefit Plan that is an employee welfare benefit
plan is (A) unfunded, (B) funded through a "welfare benefit fund", as such
term is defined in Section 419(e) of the Code, or other funding mechanism
or (C) insured. Each such employee welfare benefit plan may be amended or
terminated (including with respect to benefits provided to retirees and
other former employees) without material liability to the Company at any
time after the Effective Time. The Company complies in all material
respects with the applicable requirements of Section 4980B(f) of the Code
with respect to each Benefit Plan that is a group health plan, as such term
is defined in Section 5000(b)(1) of the Code. The Company does not have any
material obligations for retiree health or life insurance benefits under
any Benefit Plan.
(viii) None of the execution and delivery of this Agreement, the
obtaining of the Stockholder Approval or the consummation of the Merger or
any other transaction contemplated by this Agreement (including as a result
of any termination of employment during a fixed period following the
Effective Time) will (A)
23
entitle any current or former director, officer or employee of the Company
to severance or termination pay, (B) accelerate the time of payment or
vesting or trigger any payment or funding (through a grantor trust or
otherwise) of compensation or benefits under, increase the amount payable
or trigger any other material obligation pursuant to, any Benefit Plan or
(C) result in any breach or violation of, or a default under, any Benefit
Plan. The total amount of all payments and the fair market value of all
non-cash benefits that may become payable or provided to any employee,
officer, director or consultant of the Company under the Benefit Agreements
(assuming for such purpose that such individuals' employment were
terminated immediately following the Effective Time) will not exceed the
amount set forth in Section 3.01(l)(viii) of the Company Disclosure
Schedule.
(ix) The Company does not have any material liability or obligations,
including under or on account of a Benefit Plan, arising out of the hiring
of persons to provide services to the Company and treating such persons as
consultants or independent contractors and not as employees of the Company.
(m) No Excess Parachute Payments. Other than payments or benefits that
may be made to the persons listed in Section 3.01(m) of the Company
Disclosure Schedule ("Primary Company Executives"), no amount or other
entitlement or economic benefit that could be received (whether in cash or
property or the vesting of property) by or for the benefit of any officer,
director or employee of the Company or any of its Affiliates who is a
"disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.280G-1) under any Benefit Plan, Benefit Agreement or
otherwise would be characterized as an "excess parachute payment" (as such
term is defined in Section 280G(b)(1) of the Code). No such person is
entitled to receive any additional payment from the Company, the Surviving
Corporation or any other person (a "Parachute Gross Up Payment") in the
event that the excise tax required by Section 4999(a) of the Code is
imposed on such person. The Board of Directors of the Company has not
granted to any officer, director or employee of the Company any right to
receive any Parachute Gross Up Payment. Section 3.01(m) of the Company
Disclosure Schedule sets forth (i) the "base amount" (as such term is
defined in Section 280G(b)(3) of the Code) for each Primary Company
Executive and
24
each other disqualified individual (defined as set forth above) whose Stock
Options will vest pursuant to their terms in connection with this Agreement
or the Merger and (ii) the estimated maximum amount that could be paid or
provided to each Primary Company Executive as a result of the Merger or the
other transactions contemplated by this Agreement (including as a result of
any termination of employment during a fixed period following the Effective
Time).
(n) Taxes. The Company has timely filed all tax returns and reports
required to be filed by it, and all taxes required to be paid by the
Company have either been paid by it or are reflected in accordance with
GAAP as a reserve for taxes on the most recent financial statements
included in the Filed Company SEC Documents, and all such returns and
reports are complete and correct in all material respects (provided, that
no such return or report shall be considered to be incorrect or incomplete
on account of an amount of unpaid taxes for which a reserve for taxes on
the aforementioned financial statements has been established), or requests
for extensions to file such returns or reports have been timely filed,
granted and have not expired, except to the extent that such failures to
file, to pay or to have extensions granted that remain in effect
individually or in the aggregate have not had and could not reasonably be
expected to have a Material Adverse Effect, and the most recent financial
statements contained in the Filed Company SEC Documents reflect an adequate
reserve for all taxes payable by the Company for all taxable periods and
portions thereof through the date of such financial statements. All taxes
required to be withheld by the Company have been withheld and have been (or
will be) duly and timely paid to the proper governmental authority. No
deficiencies for any taxes have been proposed, asserted or assessed against
the Company, and no requests for waivers of the time to assess any such
taxes are pending. The Federal income tax returns of the Company have not
been examined by the IRS. All assessments for material taxes due with
respect to any concluded litigation have been fully paid or have been
adequately reserved on the Company's financial statements in accordance
with GAAP. Neither the Company nor any of its Affiliates has taken or
agreed to take any action or knows of any fact or circumstance that is
reasonably likely to prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code. The Benefit Plans and
other Company employee compensation arrangements in
25
effect as of the date of this Agreement have been designed so
that the disallowance of a deduction under Section 162(m) of the Code
for employee remuneration will not apply to any material amounts paid
or payable by the Company under any such plan or arrangement and, to
the Knowledge of the Company, no fact or circumstance exists that is
reasonably likely to cause such disallowance to apply to any such
amounts. The Company has not constituted either a "distributing
corporation" or a "controlled corporation" (within the meaning of
Section 355(a)(1)(A) of the Code) in a distribution of stock
qualifying for tax-free treatment under Section 355 of the Code (x) in
the two years prior to the date of this Agreement or (y) in a
distribution which could otherwise constitute part of a "plan" or
"series of related transactions" (within the meaning of Section 355(e)
of the Code) in conjunction with the Merger. As used in this
Agreement, "taxes" shall include all Federal, state and local,
domestic and foreign, income, property, sales, excise and other taxes,
tariffs or governmental charges of any nature whatsoever, including
any interest, penalties or additions with respect thereto, imposed by
any Governmental Entity or any obligation to pay taxes imposed on any
entity for which the Company is liable as a result of any
indemnification provision or other contractual obligation.
(o) Title to Properties. (i) The Company has good and marketable
title to, or valid leasehold interests in, all its material properties
and assets except for such as are no longer used or useful in the
conduct of its businesses or as have been disposed of in the ordinary
course of business and except for defects in title, easements,
restrictive covenants and similar encumbrances that individually or in
the aggregate would not materially interfere with its ability to
conduct its business as presently conducted and as currently proposed
by management of the Company to be conducted. All such material assets
and properties, other than assets and properties in which the Company
has a leasehold interest, are free and clear of all Liens, except for
Liens that individually or in the aggregate would not materially
interfere with the ability of the Company to conduct its business as
presently conducted and as currently proposed by management of the
Company to be conducted.
(ii) The Company has complied with the terms of all material
leases to which it is a party and under which it is in occupancy, and
all such leases are in
26
full force and effect, except for such noncompliance or failure
to be in full force and effect that individually or in the aggregate
has not had and could not reasonably be expected to have a Material
Adverse Effect. The Company enjoys peaceful and undisturbed possession
under all such leases in all material respects.
(p) Intellectual Property. (i) Subject to Section 3.01(p)(ii),
the Company owns, or is validly licensed or otherwise has the right to
use (without any obligation to make any fixed or contingent payments,
including royalty payments) all patents, patent applications,
trademarks, trademark rights, trade names, trade name rights, service
marks, service ▇▇▇▇ rights, copyrights, technical know-how and other
proprietary intellectual property rights and computer programs
(collectively, "Intellectual Property Rights") which are material to
the conduct of the business of the Company free and clear of all
Liens.
(ii) No claims are pending or, to the Knowledge of the Company,
threatened that the Company is infringing (including with respect to
the manufacture, use or sale by the Company of its commercial
products) the rights of any person with regard to any Intellectual
Property Right which, individually or in the aggregate, have had or
could reasonably be expected to have a Material Adverse Effect. To the
Knowledge of the Company, no person or persons are infringing the
rights of the Company with respect to any Intellectual Property Right
in a manner which, individually or in the aggregate, has had or could
reasonably be expected to have a Material Adverse Effect.
(iii) No claims are pending or, to the Knowledge of the Company,
threatened with regard to the Company's ownership of any of its
Intellectual Property Rights which, individually or in the aggregate,
have had or could reasonably be expected to have a Material Adverse
Effect.
(iv) Section 3.01(p)(iv) of the Company Disclosure Schedule sets
forth, as of the date hereof, a complete and accurate list of all
patents, registered trademarks and applications therefor owned by or
licensed to the Company. All patents and patent applications listed in
Section 3.01(p)(iv) of the Company Disclosure Schedule are owned by
the Company free and clear of all Liens. The patent applications
listed in Section 3.01(p)(iv) of the Company Disclosure
27
Schedule are pending and have not been abandoned, and have been
and continue to be timely prosecuted. All patents, registered
trademarks and applications therefor owned by or licensed to the
Company have been duly registered and/or filed with or issued by each
appropriate Governmental Entity in the jurisdiction indicated in
Section 3.01(p)(iv) of the Company Disclosure Schedule, all necessary
affidavits of continuing use have been filed, and all necessary
maintenance fees have been timely paid to continue all such rights in
effect. None of the patents listed in Section 3.01(p)(iv) of the
Company Disclosure Schedule has expired or has been declared invalid,
in whole or in part, by any Governmental Entity. There are no ongoing
interferences, oppositions, reissues, reexaminations or other
proceedings involving any of the patents or patent applications listed
in Section 3.01(p)(iv) of the Company Disclosure Schedule, including
ex parte and post-grant proceedings, in the United States Patent and
Trademark Office or in any foreign patent office or similar
administrative agency, other than as have not had or could not
reasonably be expected to have a Material Adverse Effect. To the
Knowledge of the Company, there are no published patents, patent
applications, articles or other prior art references that could affect
the validity of any patent listed in Section 3.01(p)(iv) of the
Company Disclosure Schedule. Each of the patents and patent
applications listed in Section 3.01(p)(iv) of the Company Disclosure
Schedule properly identifies each and every inventor of the claims
thereof as determined in accordance with the laws of the jurisdiction
in which such patent is issued or such patent application is pending.
Each inventor named on the patents and patent applications listed in
Section 3.01(p)(iv) of the Company Disclosure Schedule has executed an
agreement assigning his, her or its entire right, title and interest
in and to such patent or patent application, and the inventions
embodied and claimed therein, to the Company. Each inventor of the
patents and patent applications listed in Section 3.01(p)(iv) of the
Company Disclosure Schedule has executed an agreement with the Company
obligating such inventor to assign the entire right, title and
interest in and to such patent or patent application, and inventions
embodied and claimed therein, to the Company, and, to the Knowledge of
the Company, no such inventor has any contractual or other obligation
that would preclude any such assignment or otherwise conflict with the
obligations of such inventor to the Company under such agreement with
the Company.
28
(v) Section 3.01(p)(v) of the Company Disclosure Schedule sets
forth a complete and accurate list of all options, rights, licenses or
interests of any kind relating to Intellectual Property Rights (i)
granted to the Company (other than software licenses for generally
available software and except pursuant to employee proprietary
inventions agreements (or similar employee agreements), non-disclosure
agreements and consulting agreements entered into by the Company in
the ordinary course of business), or (ii) granted by the Company to
any other person.
(vi) No material trade secret of the Company has been published
or disclosed by the Company or, to the Knowledge of the Company, by
any other person to any person except pursuant to licenses or
contracts requiring such other persons to keep such trade secrets
confidential.
(q) Voting Requirements. The affirmative vote of a majority of
the votes that holders of the outstanding shares of Company Common
Stock are entitled to vote at the Stockholders' Meeting or any
adjournment or postponement thereof to adopt this Agreement (the
"Stockholder Approval") is the only vote of the holders of any class
or series of the Company's capital stock necessary to adopt this
Agreement and approve the transactions contemplated hereby.
(r) State Takeover Statutes. The Board of Directors of the
Company has unanimously approved the terms of this Agreement and the
Stockholder Agreement and the consummation of the Merger and the other
transactions contemplated by this Agreement and the Stockholder
Agreement, and such approval represents all the action necessary to
render inapplicable to this Agreement, the Stockholder Agreement, the
Merger and the other transactions contemplated by this Agreement and
the Stockholder Agreement, the provisions of Section 203 of the DGCL
to the extent, if any, such Section would otherwise be applicable to
this Agreement, the Stockholder Agreement, the Merger and the other
transactions contemplated by this Agreement and the Stockholder
Agreement. To the Knowledge of the Company, no other state takeover
statute or similar statute or regulation applies or purports to apply
to this Agreement, the Stockholder Agreement, the Merger or the other
transactions contemplated by this Agreement and the Stockholder
Agreement.
29
(s) Brokers. No broker, investment banker, financial advisor or
other person, other than ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ & Co., the fees
and expenses of which will be paid by the Company, is entitled to any
broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company.
The Company has delivered to Parent true and complete copies of all
agreements under which any such fees or expenses are payable and all
indemnification and other agreements related to the engagement of the
persons to whom such fees are payable. The fees and expenses of any
accountant, broker, financial advisor, legal counsel or other person
retained by the Company in connection with this Agreement or the
Stockholder Agreement or the transactions contemplated hereby or
thereby incurred or to be incurred by the Company will not exceed the
fees and expenses set forth in Section 3.01(s) of the Company
Disclosure Schedule.
(t) Opinion of Financial Advisor. The Company has received the
opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ & Co. dated the date hereof, to
the effect that, as of such date, the Merger Consideration is fair
from a financial point of view to the holders of shares of Company
Common Stock, a signed copy of which opinion has been delivered to
Parent.
(u) Development, Distribution, Marketing, Supply and
Manufacturing Agreements. Section 3.01(u) of the Company Disclosure
Schedule sets forth a complete and accurate list of all contracts or
agreements (whether or not in written form), to which the Company is a
party as of the date hereof or with respect to which the Company has
any ongoing obligations as of the date hereof, in each case relating
to the research, development, distribution, training, sale, license,
marketing and supply of components for, and manufacturing by third
parties of, the Company's products or products licensed by the
Company, other than any such agreements or contracts that,
individually, has aggregate future payment or other obligations of no
greater than $75,000 and, in the aggregate, have future payment or
other obligations of no greater than $150,000, none of which has a
remaining term of greater than one year. The Company has made
available to Parent true and complete copies of all such contracts.
30
(v) Rights Agreement. The Company has taken all actions necessary
to cause the Rights Agreement, dated as of April 25, 1996, as amended,
between the Company and Boston Equiserve Limited Partnership, formerly
The First National Bank of Boston, as rights agent (the "Rights
Agreement") to be amended to (i) render the Rights Agreement
inapplicable to this Agreement, the Stockholder Agreement, the Merger
and the other transactions contemplated by this Agreement and the
Stockholder Agreement, (ii) ensure that (y) none of Parent, Sub or any
other subsidiary of Parent is an Acquiring Person (as defined in the
Rights Agreement) pursuant to the Rights Agreement and (z) a
Distribution Date or a Shares Acquisition Date (as such terms are
defined in the Rights Agreement) does not occur, in either case of (y)
and (z), solely by reason of the execution of this Agreement or the
Stockholder Agreement or the consummation of the Merger or the other
transactions contemplated by this Agreement and the Stockholder
Agreement and (iii) provide that the Final Expiration Date (as defined
in the Rights Agreement) shall occur immediately prior to the
Effective Time.
(w) Regulatory Compliance. (i) As to each product subject to the
Federal Food, Drug, and Cosmetic Act of 1938, as amended ("FDCA"), and
the regulations of the Federal Food and Drug Administration (the
"FDA") promulgated thereunder, or similar Legal Provisions in any
foreign jurisdiction (each such product, a "Medical Device") that is
manufactured, tested, distributed and/or marketed by the Company, such
Medical Device is being manufactured, tested, distributed and/or
marketed in compliance with all applicable requirements under FDCA,
the FDA regulations promulgated thereunder, and such similar Legal
Provisions, including those relating to investigational use, premarket
clearance, good manufacturing practices, labeling, advertising, record
keeping, filing of reports and security, except for failures to be in
compliance which, individually or in the aggregate, have not had and
could not reasonably be expected to have a Material Adverse Effect.
The Company has not received any notice or other communication from
the FDA or any other Governmental Entity (A) contesting the premarket
clearance or approval of, the uses of or the labeling and promotion of
any of the Company's products or (B) otherwise alleging any violation
of any Legal Provision by the Company.
31
(ii) No Medical Devices have been recalled, withdrawn, suspended
or discontinued by the Company in the United States or outside the
United States (whether voluntarily or otherwise), other than any such
recalls, withdrawals, suspensions or discontinuations that,
individually or in the aggregate, have not had and could not
reasonably be expected to have a Material Adverse Effect. No
proceedings in the United States and outside of the United States of
which the Company has Knowledge (whether completed or pending) seeking
the recall, withdrawal, suspension or seizure of any Medical Devices
are pending against the Company, nor have any such proceedings been
pending at any prior time.
(iii) Neither the Company nor any officer, employee nor, to the
Knowledge of the Company, agent of the Company, in each case acting on
behalf of the Company, has made an untrue statement of a material fact
or fraudulent statement to the FDA or any other Governmental Entity,
failed to disclose a material fact required to be disclosed to the FDA
or any other Governmental Entity, or committed an act, made a
statement, or failed to make a statement that, at the time such
disclosure was made, could reasonably be expected to provide a basis
for the FDA to invoke its policy respecting "Fraud, Untrue Statements
of Material Facts, Bribery, and Illegal Gratuities", set forth in 56
Fed. Reg. 46191 (September 10, 1991) or for any other Governmental
Entity to invoke any similar policy. Neither the Company nor, to the
Knowledge of the Company, any officer, employee or agent of the
Company, has been convicted of any crime or engaged in any conduct for
which debarment is mandated by 21 U.S.C. ss. 335a(a) or any similar
Legal Provision or authorized by 21 U.S.C. ss. 335a(b) or any similar
Legal Provision.
(iv) The Company has not received any written notice that the FDA
or any other Governmental Entity has commenced, or threatened to
initiate, any action to withdraw its approval or request the recall of
any product of the Company, or commenced, or threatened to initiate,
any action to enjoin production at any facility of the Company which
has had or could reasonably be expected to have a Material Adverse
Effect.
SECTION 3.02. Representations and Warranties of Parent and Sub.
Parent and Sub represent and warrant to the Company as follows:
32
(a) Organization, Standing and Corporate Power. Each of Parent
and Sub is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is
incorporated and has all requisite corporate power and authority and
possesses all governmental licenses, permits, authorizations and
approvals necessary to enable it to use its corporate name and to own,
lease or otherwise hold and operate its properties and other assets
and to carry on its business as now being conducted, except where the
failure to have such governmental licenses, permits, authorizations or
approvals, individually or in the aggregate, has not had and could not
reasonably be expected to have a Parent Material Adverse Effect. Each
of Parent and Sub is duly qualified or licensed to do business and is
in good standing in each jurisdiction in which the nature of its
business or the ownership, leasing or operation of its properties
makes such qualification or licensing necessary, other than in such
jurisdictions where the failure to be so qualified or licensed
individually or in the aggregate has not had and could not reasonably
be expected to have a Parent Material Adverse Effect. Parent has made
available to the Company prior to the execution of this Agreement true
and correct copies of its Restated Certificate of Incorporation and
By-laws and the Certificate of Incorporation and By-laws of Sub, in
each case as amended to the date hereof.
(b) Authority; Noncontravention. Each of Parent and Sub has all
requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by Parent and
Sub and the consummation of the transactions contemplated by this
Agreement by Parent and Sub have been duly authorized by all necessary
corporate action on the part of Parent and Sub and no other corporate
proceedings on the part of Parent or Sub are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby.
This Agreement and the transactions contemplated hereby, including the
issuance of shares of Parent Common Stock pursuant to Article II
hereof, does not require the approval of the holders of any shares of
capital stock of Parent. All outstanding shares of Parent Common Stock
are (and all shares of Parent Common Stock which may be issued
pursuant to this Agreement, when issued in accordance with this
Agreement, will be) duly authorized, validly issued, fully paid and
nonassessable and, in the case of shares of Parent Common Stock which
may be issued
33
pursuant to this Agreement, will not be subject to any
restrictions on resale under the Securities Act, other than
restrictions imposed by Rule 145 under the Securities Act. This
Agreement has been duly executed and delivered by Parent and Sub, as
applicable, and, assuming the due authorization, execution and
delivery by the Company, constitutes a legal, valid and binding
obligation of Parent and Sub, as applicable, enforceable against
Parent and Sub, as applicable, in accordance with its terms. The
execution and delivery of this Agreement does not, and the
consummation of the Merger and the other transactions contemplated by
this Agreement and compliance with the provisions of this Agreement
will not, conflict with, or result in any violation or breach of, or
default (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, cancellation or acceleration of
any obligation or the loss of a material benefit under, or result in
the creation of any Lien in or upon any of the properties or assets of
Parent or Sub under (x) the Restated Certificate of Incorporation or
By- laws of Parent or the Certificate of Incorporation or By-laws of
Sub, (y) any loan or credit agreement, bond, debenture, note,
mortgage, indenture, lease or other contract, agreement, obligation,
commitment, arrangement, understanding, instrument, permit or license,
whether oral or written, to which Parent or Sub is a party or any of
their respective properties or other assets is subject or (z) subject
to the governmental filings and other matters referred to in the
following sentence, any (A) statute, law, ordinance, rule or
regulation or (B) order, writ, injunction, decree, judgment or
stipulation, in each case applicable to Parent or Sub or their
respective properties or other assets, other than, in the case of
clauses (y) and (z), any such conflicts, violations, breaches,
defaults, rights, losses or Liens that individually or in the
aggregate have not had and could not reasonably be expected to have a
Parent Material Adverse Effect. No consent, approval, order or
authorization of, action by or in respect of, or registration,
declaration or filings with, any Governmental Entity is required by or
with respect to Parent or Sub in connection with the execution and
delivery of this Agreement by Parent and Sub or the consummation by
Parent and Sub of the Merger or the other transactions contemplated by
this Agreement, except for (1) the filing of a premerger notification
and report form by Parent under the HSR Act, (2) the filing with the
SEC of (A) the Form S-4 and (B) any such reports under Section 13(a),
13(d), 15(d) or 16(a)
34
of the Exchange Act as may be required in connection with this
Agreement and the transactions contemplated by this Agreement, (3) the
filing and recordation of the Certificate of Merger with the Secretary
of State of the State of Delaware, (4) filings with the NYSE and (5)
such other consents, approvals, orders, authorizations, registrations,
declarations and filings the failure of which to be obtained or made,
individually or in the aggregate, has not had and could not reasonably
be expected to have a Parent Material Adverse Effect.
(c) Parent SEC Documents. Parent has filed all reports,
schedules, forms, statements and other documents (including exhibits
and other information incorporated therein) with the SEC required to
be filed by Parent since January 1, 1998 (the "Parent SEC Documents").
As of their respective dates, the Parent SEC Documents complied in all
material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, applicable to such Parent SEC
Documents, and except to the extent that information contained in any
Parent SEC Document has been revised, superseded or updated by a
later-filed Parent SEC Document, none of the Parent SEC Documents
contains any untrue statement of a material fact or omits 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.
(d) Information Supplied. None of the information supplied or to
be supplied by Parent or Sub specifically for inclusion or
incorporation by reference in (i) the Form S-4 will, at the time the
Form S-4 is filed with the SEC, at any time it is amended or
supplemented and at the time it becomes effective under the Securities
Act, contain any 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 are made, not misleading, or (ii) the Proxy Statement will, at
the date it is first mailed to the Company's stockholders and at the
time of the Stockholders' Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading.
The Form S-4 will comply as to form in all material respects with the
requirements of
35
the Securities Act, except that no representation or warranty is
made by Parent or Sub with respect to statements made or incorporated
by reference therein based on information supplied by the Company
specifically for inclusion or incorporation by reference in the Form
S-4.
(e) Interim Operations of Sub. Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby, has
engaged in no other business activities and has conducted its
operations only as contemplated hereby.
(f) Tax Matters. Neither Parent, Sub nor any Affiliate of Parent
has taken or agreed to take any action or knows of any fact or
circumstance that is reasonably likely to prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of
the Code.
ARTICLE IV
Covenants Relating to Conduct of Business
SECTION 4.01. Conduct of Business. (a) Conduct of Business by the
Company. During the period from the date of this Agreement and continuing
until the earlier of the termination of this Agreement pursuant to its
terms or the Effective Time, the Company shall, except (x) as set forth in
Section 4.01(a) of the Company Disclosure Schedule, (y) as specifically
contemplated by any other provision of this Agreement or (z) to the extent
that Parent shall otherwise consent in advance in writing, carry on its
businesses in the ordinary course consistent with past practice (including
in respect of research and development activities and programs) and in
compliance with all applicable laws and regulations and, to the extent
consistent therewith, use all commercially reasonable efforts to preserve
intact its current business organizations, keep available the services of
its current officers and employees and preserve its relationships with
customers, suppliers, licensors, licensees, distributors and others having
business dealings with it with the intention that its goodwill and ongoing
business shall be unimpaired at the Effective Time. Without limiting the
generality of the foregoing, during the period from the date of this
Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its
36
terms or the Effective Time, the Company shall not, without Parent's prior
written consent:
(i) (x) declare, set aside or pay any dividends on, or make any
other distributions (whether in cash, stock or property), in respect
of, any of its capital stock, (y) split, combine or reclassify any of
its capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of
its capital stock or (z) purchase, redeem or otherwise acquire any
shares of its capital stock or any other securities thereof or any
rights, warrants or options to acquire any such shares or other
securities, except repurchases of unvested shares at cost in
connection with the termination of any employee or service provider as
permitted by stock option or purchase agreements in effect on the date
hereof;
(ii) issue, deliver, sell, grant, pledge or otherwise encumber or
subject to any Lien any shares of its capital stock, any other voting
securities or any securities convertible into, or any rights, warrants
or options to acquire, any such shares, voting securities or
convertible securities, or any "phantom" stock, "phantom" stock
rights, stock appreciation rights or stock based performance units
(other than (x) the issuance, delivery and/or sale of shares of
Company Common Stock pursuant to the exercise of Stock Options
outstanding on the date hereof and in accordance with their terms on
the date hereof and (y) the issuance of shares of Company Common Stock
pursuant to the Company ESPP in accordance with Section 5.04(b));
(iii) amend or propose to amend the Company Certificate or the
Company By-laws;
(iv) directly or indirectly acquire (x) by merging or
consolidating with, or by purchasing assets of, or by any other
manner, any person or division, business or equity interest of any
person or (y) any assets that, individually, have a purchase price in
excess of $75,000 or, in the aggregate, have a purchase price in
excess of $150,000, except for purchases of components or supplies in
the ordinary course of business consistent with past practice;
(v) sell, lease, license, mortgage, sell and leaseback or
otherwise encumber or subject to any Lien or otherwise dispose of any
of its properties or other assets or any interests therein (including
37
securitizations), except sales of inventory and used equipment in
the ordinary course of business consistent with past practice;
provided, however, that the Company shall be allowed to sublease its
leasehold interests without the prior consent of Parent;
(vi) (x) incur any indebtedness for borrowed money or guarantee
any such indebtedness of another person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities
of the Company, guarantee any debt securities of another person, enter
into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement
having the economic effect of any of the foregoing, except for
short-term borrowings incurred in the ordinary course of business
consistent with past practice not to exceed $100,000 at any time
outstanding, or (y) make any loans, advances or capital contributions
to, or investments in, any other person, other than to employees in
the ordinary course of business consistent with past practice;
(vii) make any new capital expenditure or expenditures which,
individually, is in excess of $75,000 or, in the aggregate, are in
excess of $150,000;
(viii) (w) pay, discharge, settle or satisfy any claims,
liabilities, obligations or litigation (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment,
discharge, settlement or satisfaction in the ordinary course of
business consistent with past practice or in accordance with their
terms, of liabilities disclosed, reflected or reserved against in the
most recent financial statements (or the notes thereto) of the Company
included in the Filed Company SEC Documents or incurred since the date
of such financial statements in the ordinary course of business
consistent with past practice, (x) cancel any indebtedness, (y) waive
or assign any claims or rights of substantial value or (z) waive any
benefits of, or agree to modify in any respect any confidentiality,
standstill or similar agreements to which the Company is a party;
(ix) except in the ordinary course of business consistent with
past practice, modify, amend or terminate any material contract or
agreement to which the Company is a party or waive, release or assign
any material rights or claims thereunder;
38
(x) enter into any contracts, agreements, binding arrangements or
understandings relating to the research, development, distribution,
training, sale, license, marketing and supply of components for, or
manufacturing by third parties of, the Company's products or products
licensed by the Company, other than any such contracts, agreements,
arrangements or understandings that, individually, has aggregate
future payment or other obligations of no greater than $75,000 and, in
the aggregate, have future payment or other obligations of no greater
than $150,000, all of which have a term of no greater than one year or
are terminable by the Company by notice of not more than 60 days
without payment of any penalty and other than pursuant to any such
contracts, agreements, arrangements or understandings currently in
place (that have been disclosed in writing to Parent prior to the date
hereof) in accordance with their terms as of the date hereof;
(xi) except as otherwise contemplated by this Agreement or as
required to comply with applicable law, (A) adopt, enter into,
terminate or amend in any material respect (I) any collective
bargaining agreement or Benefit Plan or (II) any other agreement, plan
or policy involving the Company and one or more of its current or
former directors, officers, employees or consultants, (B) increase in
any manner the compensation, bonus or fringe or other benefits of, or
pay any bonus to, any current or former officer, director or employee
(except for normal increases of cash compensation or cash bonuses in
the ordinary course of business consistent with past practice that, in
the aggregate, do not materially increase the benefits or compensation
expenses of the Company), (C) pay any benefit or amount not required
under any Benefit Plan or Benefit Agreement or any other benefit plan
or arrangement of the Company as in effect on the date of this
Agreement, (D) increase in any manner the severance or termination pay
of any current or former director, officer or employee, (E) enter into
or amend any Benefit Agreement, (F) grant any awards under any bonus,
incentive, performance or other compensation plan or arrangement or
Benefit Plan (including the grant of stock options, "phantom" stock,
stock appreciation rights, "phantom" stock rights, stock based or
stock related awards, performance units or restricted stock or the
removal of existing restrictions in any Benefit Plans or agreements or
awards made thereunder), (G) amend or modify any Stock Option, (H)
take any action to fund or in any other way
39
secure the payment of compensation or benefits under any employee
plan, agreement, contract or arrangement or Benefit Plan, (I) other
than as contemplated in Section 5.04, take any action to accelerate
the vesting of payment of any compensation or benefit under any
Benefit Plan or (J) materially change any actuarial or other
assumption used to calculate funding obligations with respect to any
Pension Plan or change the manner in which contributions to any
Pension Plan are made or the basis on which such contributions are
determined;
(xii) except as otherwise contemplated by this Agreement, enter
into any agreement of a nature that would be required to be filed as
an exhibit to Form 10-K under the Exchange Act, other than contracts
for the sale of the Company's products in the ordinary course of
business consistent with past practice;
form any subsidiary of the Company;
(xiv) revalue any material assets of the Company or, except as
required by GAAP, make any change in accounting methods, principles or
practices;
(xv) sell, transfer or license to any person or otherwise extend,
amend or modify any rights to the Intellectual Property Rights of the
Company; or
authorize any of, or commit or agree to take any of, the actions
described in Section 4.01(a)(i) through (xv).
(b) Other Actions. The Company, Parent and Sub shall not take any
action that would, or that could reasonably be expected to, result in
(i) any of the representations and warranties of such party set forth
in this Agreement that are qualified by materiality becoming untrue,
(ii) any of such representations and warranties that are not so
qualified becoming untrue in any material respect or (iii) any of the
conditions to the Merger set forth in Article VI not being satisfied.
(c) Advice of Changes; Filings. The Company and Parent shall
promptly advise the other party in writing of (i) any representation
or warranty made by it (and, in the case of Parent, made by Sub)
contained in this Agreement that is qualified as to materiality
becoming untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect or (ii) the failure of it (and, in
the case of Parent, by Sub) to comply with or
40
satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement;
provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties
(or remedies with respect thereto) or the conditions to the
obligations of the parties under this Agreement. The Company and
Parent shall promptly provide the other copies of all filings made by
such party with any Governmental Entity in connection with this
Agreement and the transactions contemplated hereby, other than the
portions of such filings that include confidential information not
directly related to the transactions contemplated by this Agreement.
(d) Certain Tax Matters. From the date of this Agreement and
continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Effective Time, (i) the Company will file
all tax returns and reports ("Post-Signing Returns") required to be
filed by it (after taking into account any applicable extensions);
(ii) the Company will timely pay all taxes due and payable with
respect to such Post-Signing Returns that are so filed; (iii) the
Company will make provision for all taxes payable by the Company for
which no Post-Signing Return is due prior to the Effective Time; (iv)
the Company will promptly notify Parent of any material action, suit,
proceeding, claim or audit (collectively, "Actions") pending against
or with respect to the Company in respect of any tax and will not
settle or compromise any such Action without Parent's prior written
consent; and (v) the Company will not make any material tax election
without Parent's prior written consent; provided, that Parent shall
use reasonable efforts to timely respond to a written request by the
Company to make any such material tax election.
SECTION 4.02. No Solicitation. (a) The Company shall not, nor
shall it authorize or permit any officer, director or employee of the
Company or any investment banker, financial advisor, attorney, accountant
or other advisor, agent or representative retained by the Company
(collectively, "Representatives") to, directly or indirectly through
another person (i) solicit, initiate or encourage, or take any other action
intended to, or which could reasonably be expected to, facilitate, any
inquiries or the making of any proposal that constitutes or could
reasonably be expected to lead to a Takeover Proposal or (ii) participate
in any discussions or negotiations regarding, or furnish to any person any
information, or otherwise cooperate in any way with, any Takeover Proposal.
Without limiting the foregoing, it is agreed that any violation of the
restrictions set forth in the preceding
41
sentence by any Representative of the Company, whether or not
such person is purporting to act on behalf of the Company or otherwise,
shall be a breach of this Section 4.02(a) by the Company. The Company shall
immediately cease and cause to be terminated all existing discussions or
negotiations with any person conducted heretofore with respect to any
Takeover Proposal and request the prompt return or destruction of all
confidential information previously furnished. Notwithstanding the
foregoing, at any time prior to obtaining the Stockholder Approval, in
response to a bona fide written Takeover Proposal that the Board of
Directors of the Company determines in good faith (after consultation with
outside counsel and a financial advisor of nationally recognized
reputation) constitutes or is reasonably likely to lead to a Superior
Proposal, and which Takeover Proposal was unsolicited and made after the
date hereof and did not otherwise result from a breach of this Section
4.02(a), the Company may, if its Board of Directors determines in good
faith (after consultation with outside counsel who may be the Company's
independent legal counsel acting with respect to this Agreement) that it is
required to do so in order to comply with its fiduciary duties to the
Company's stockholders under applicable law, and subject to compliance with
Section 4.02(c) and after giving Parent written notice of such
determination, (x) furnish information with respect to the Company to the
person making such Takeover Proposal (and its Representatives) pursuant to
a customary confidentiality agreement and (y) participate in discussions or
negotiations with the person making such Takeover Proposal (and its
Representatives) regarding such Takeover Proposal.
The term "Takeover Proposal" means any inquiry, proposal or offer
from any person relating to, or that is reasonably likely to lead to, any
direct or indirect acquisition or purchase, in one transaction or a series
of related transactions, of a business that constitutes 15% or more of the
revenues, net income, or the assets of the Company, or 15% or more of the
Company Common Stock, any tender offer or exchange offer that if
consummated would result in any person beneficially owning 15% or more of
the Company Common Stock, or any merger, consolidation, business
combination, recapitalization, liquidation, dissolution, joint venture,
binding share exchange or similar transaction involving the Company
pursuant to which any person or the shareholders of any person would own
15% or more of the Company or any resulting parent company of the Company,
other than the transactions contemplated by this Agreement or the
Stockholder Agreement.
42
The term "Superior Proposal" means any bona fide offer made by a
third party that if consummated would result in such person (or its
shareholders) owning, directly or indirectly, 75% or more of the shares of
Company Common Stock then outstanding (or of the surviving entity in a
merger or the direct or indirect parent of the surviving entity in a
merger) or 75% or more of the assets of the Company, which the Board of
Directors of the Company determines in good faith (after consultation with
a financial advisor of nationally recognized reputation) (i) to be more
favorable to the Company's stockholders from a financial point of view than
the Merger (taking into account all the terms and conditions of such
proposal and this Agreement (including any changes to the financial terms
of this Agreement proposed by Parent in response to such offer or
otherwise)) and (ii) that is reasonably capable of being completed, taking
into account all financial, legal, regulatory and other aspects of such
proposal.
(b) Neither the Board of Directors of the Company nor any
committee thereof shall (i)(A) withdraw (or modify in a manner adverse to
Parent), or propose to withdraw (or modify in a manner adverse to Parent),
the approval, recommendation, or declaration of advisability by such Board
of Directors or any such committee thereof of this Agreement or the Merger,
or (B) recommend, adopt or approve, or propose publicly to recommend, adopt
or approve, any Takeover Proposal (any action described in this clause (i)
being referred to as a "Company Adverse Recommendation Change") or (ii)
approve or recommend, or propose to approve or recommend, or allow the
Company to execute or enter into, any letter of intent, memorandum of
understanding, agreement in principle, merger agreement, acquisition
agreement, option agreement, joint venture agreement, partnership agreement
or other similar agreement constituting or related to, or that is intended
to or is reasonably likely to lead to, any Takeover Proposal.
Notwithstanding the foregoing, at any time prior to obtaining the
Stockholder Approval, the Board of Directors of the Company may, in
response to a Superior Proposal that was unsolicited and made after the
date hereof and that did not otherwise result from a breach of this Section
4.02, make a Company Adverse Recommendation Change if such Board of
Directors determines in good faith (after consultation with outside counsel
who may be the Company's independent legal counsel acting with respect to
this Agreement) that it is required to do so in order to comply with its
fiduciary duties to the Company's stockholders under applicable law;
provided, however, that (i) no Company Adverse Recommendation Change may be
made until after the fifth business day following Parent's receipt of
written notice (a "Notice of Adverse
43
Recommendation") from the Company advising Parent that the Board
of Directors of the Company intends to make a Company Adverse
Recommendation Change and specifying the terms and conditions of such
Superior Proposal (it being understood and agreed that any amendment to the
financial terms or any other material term of such Superior Proposal shall
require a new Notice of Adverse Recommendation and a new five business day
period). In determining whether to make a Company Adverse Recommendation
Change, the Board of Directors of the Company shall take into account any
changes to the financial terms of this Agreement proposed by Parent in
response to a Notice of Adverse Recommendation or otherwise.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 4.02, the Company shall promptly
advise Parent orally and in writing of any Takeover Proposal or any inquiry
with respect to or that could reasonably be expected to lead to any
Takeover Proposal, the material terms and conditions of any such Takeover
Proposal or inquiry (including any changes thereto) and the identity of the
person making any such Takeover Proposal or inquiry. The Company shall (i)
keep Parent fully informed of the status and material details (including
any change to the terms thereof) of any such Takeover Proposal or inquiry
and (ii) provide to Parent as soon as practicable after receipt or delivery
thereof with copies of all correspondence and other written material sent
or provided to the Company from any person that describes any of the terms
or conditions of any Takeover Proposal.
(d) Nothing contained in this Section 4.02 shall prohibit the
Company from (x) taking and disclosing to its stockholders a position
contemplated by Rules 14d-9 and 14e- 2(a) promulgated under the Exchange
Act or (y) making any required disclosure to the Company's stockholders if,
in the good faith judgment of the Board of Directors of the Company (after
consultation with outside counsel) failure to so disclose would constitute
a violation of applicable law; provided, however, that in no event shall
the Company or its Board of Directors or any committee thereof take, or
agree or resolve to take, any action prohibited by Section 4.02(b).
44
ARTICLE V
Additional Agreements
SECTION 5.01. Preparation of the Form S-4 and the Proxy
Statement; Stockholders' Meeting. (a) As soon as practicable following the
date of this Agreement, the Company and Parent shall prepare and the
Company shall file with the SEC the Proxy Statement and Parent shall
prepare and file with the SEC the Form S-4, in which the Proxy Statement
will be included as a prospectus. Parent shall use its commercially
reasonable efforts to have the Form S-4 declared effective under the
Securities Act as promptly as practicable after such filing and to keep the
Form S-4 effective as long as is necessary to consummate the Merger. The
Company shall use its commercially reasonable efforts to cause the Proxy
Statement to be mailed to the Company's stockholders as promptly as
practicable after the Form S-4 is declared effective under the Securities
Act. Parent shall also take any action (other than qualifying to do
business in any jurisdiction in which it is not now so qualified or to file
a general consent to service of process) required to be taken under any
applicable state securities laws in connection with the issuance of Parent
Common Stock in the Merger, and the Company shall furnish all information
concerning the Company and the holders of Company Common Stock as may be
reasonably requested in connection with any such action and the
preparation, filing and distribution of the Proxy Statement. If at any time
prior to the Effective Time any information relating to the Company or
Parent, or any of their respective Affiliates, officers or directors,
should be discovered by the Company or Parent which should be set forth in
an amendment or supplement to either the Form S-4 or the Proxy Statement,
so that either such document would not include any misstatement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, the party which discovers such information shall
promptly notify the other parties hereto and an appropriate amendment or
supplement describing such information shall be promptly filed with the SEC
and, to the extent required by law, disseminated to the stockholders of the
Company. The parties shall notify each other promptly of the receipt of any
comments from the SEC or its staff and of any request by the SEC or its
staff for amendments or supplements to the Proxy Statement or the Form S-4
or for additional information and shall supply each other with copies of
all correspondence between any of their respective advisors and
representatives, on the one hand, and the SEC or its staff
45
on the other hand, with respect to the Proxy Statement, the Form S-4 or the
Merger.
(b) The Company shall, as soon as practicable following the date
of this Agreement, establish a record date following the date of this
Agreement for, duly call, give notice of, convene and hold a meeting of its
stockholders (the "Stockholders' Meeting") solely for the purpose of
obtaining the Stockholder Approval. Subject to Section 4.02(b), the Company
shall, through its Board of Directors, recommend to its stockholders
approval and adoption of this Agreement, the Merger and the other
transactions contemplated hereby. Without limiting the generality of the
foregoing, the Company's obligations pursuant to the first sentence of this
Section 5.01(b) shall not be affected by (i) the commencement, public
proposal, public disclosure or communication to the Company of any Takeover
Proposal or (ii) the withdrawal or modification by the Board of Directors
of the Company or any committee thereof of such Board of Directors' or such
committee's approval or recommendation of the Merger or this Agreement.
SECTION 5.02. Access to Information; Confidentiality. The Company
shall afford to Parent, and to Parent's officers, employees, accountants,
counsel, financial advisors and other representatives, reasonable access
during normal business hours during the period prior to the Effective Time
or the termination of this Agreement to all its properties, books,
contracts, commitments, personnel and records and, during such period, the
Company shall furnish promptly to Parent (a) a copy of each report,
schedule, registration statement and other document filed by it during such
period pursuant to the requirements of Federal or state securities laws and
(b) all other information concerning its business, properties and personnel
as Parent may reasonably request. Except for disclosures expressly
permitted by the terms of the Secrecy Agreement dated as of September 22,
1999, between Parent and the Company (as it may be amended from time to
time, the "Confidentiality Agreement"), Parent shall hold, and shall cause
it officers, employees, accountants, counsel, financial advisors and other
representatives and controlled Affiliates to hold, all information received
from the Company, directly or indirectly, in confidence in accordance with
the Confidentiality Agreement. No investigation pursuant to this Section
5.04 or information provided or received by any party hereto pursuant to
this Agreement will affect any of the representations or warranties of the
parties hereto contained in this Agreement or the conditions hereunder to
the obligations of the parties hereto.
46
SECTION 5.03. Commercially Reasonable Efforts. Upon the terms and
subject to the conditions set forth in this Agreement, each of the parties
agrees to use its commercially reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement and the Stockholder Agreement, including using commercially
reasonable efforts to accomplish the following: (i) the taking of all acts
necessary to cause the conditions to Closing to be satisfied as promptly as
practicable, (ii) the obtaining of all necessary actions or nonactions,
waivers, consents and approvals from Governmental Entities and the making
of all necessary registrations and filings (including filings with
Governmental Entities, if any) and the taking of all steps as may be
necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by any Governmental Entity, (iii) the obtaining of all necessary
consents, approvals or waivers from third parties, (iv) the defending of
any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the Stockholder Agreement, or
the consummation of the transactions contemplated hereby or thereby,
including seeking to have any stay or temporary restraining order entered
by any court or other Governmental Entity vacated or reversed and (v) the
execution and delivery of any additional instruments necessary to
consummate the transactions contemplated by, and to fully carry out the
purposes of, this Agreement and the Stockholder Agreement. In connection
with and without limiting the foregoing, the Company and its Board of
Directors shall (1) take all action necessary to ensure that no state
takeover statute or similar statute or regulation is or becomes applicable
to this Agreement, the Stockholder Agreement, the Merger or any of the
other transactions contemplated by this Agreement and the Stockholder
Agreement and (2) if any state takeover statute or similar statute becomes
applicable to this Agreement, the Stockholder Agreement, the Merger or any
other transactions contemplated by this Agreement and the Stockholder
Agreement, take all action necessary to ensure that the Merger and the
other transactions contemplated by this Agreement and the Stockholder
Agreement may be consummated as promptly as practicable on the terms
contemplated by this Agreement and the Stockholder Agreement and otherwise
to minimize the effect of such statute or regulation on this Agreement, the
Stockholder Agreement, the Merger and the other transactions contemplated
by this Agreement and the Stockholder Agreement. Nothing in this Agreement
shall be deemed to
47
require Parent to agree to, or proffer to, divest or hold separate any assets
or any portion of any business of Parent or its subsidiaries or the Company.
SECTION 5.04. Stock Options. (a) Neither Parent nor the Surviving
Corporation shall assume any Stock Options in connection with the
transactions contemplated by this Agreement. Accordingly, pursuant to the
terms of the Company's 1993 Stock Option Plan, 1996 Stock Option Plan and
1999 Supplemental Stock Option Plan (collectively, and together with the
Company ESPP, the "Company Stock Plans"), (i) each outstanding Stock Plan
Option shall automatically accelerate so that each such Stock Plan Option
shall, immediately prior to the Effective Time, become fully exercisable
for all of the shares of Company Common Stock at the time subject to such
Stock Plan Option and may be exercised by the holder thereof for any or all
of such shares as fully-vested shares of Company Common Stock and (ii) upon
the Effective Time, all outstanding Stock Plan Options, to the extent not
exercised prior to the Effective Time, shall terminate and shall cease to
be outstanding. In addition, as soon as practicable following the date of
this Agreement, the Board of Directors of the Company (or, if applicable,
the person or persons with the requisite authority under the Non-Plan Stock
Options) shall adopt such resolutions or take such other actions
(including, if necessary, obtaining any required consents from holders) as
may be required to cause (i) each outstanding Non-Plan Stock Option to be,
immediately prior to the Effective Time, fully exercisable for all of the
shares of Company Common Stock at the time subject to such Non-Plan Stock
Option, and exercisable by the holder thereof for any or all of such shares
as fully-vested shares of Company Common Stock and (ii) upon the Effective
Time, all outstanding Non-Plan Stock Options, to the extent not exercised
prior to the Effective Time, shall terminate and shall cease to be
outstanding.
(b) The rights of participants in the Company's Employee Stock
Purchase Plan (the "Company ESPP") with respect to any offering underway
immediately prior to the Effective Time shall be determined in accordance
with the provisions of Section VII.G. of the Company ESPP as in effect as
of the date of this Agreement. Each share of Company Common Stock purchased
under such offering shall, by virtue of the Merger, and without any action
on the part of the holder thereof, be converted into the right to receive a
number of shares of Parent Common Stock equal to the Exchange Ratio,
without issuance of certificates representing issued and outstanding shares
of Company Common Stock to participants under the Company ESPP. As of the
Effective Time, the Company ESPP shall be automatically
48
terminated in accordance with Section IX.B.(iii) of the Company ESPP.
SECTION 5.05. Indemnification, Exculpation and Insurance. (a)
Parent agrees that all rights to indemnification and exculpation from
liabilities for acts or omissions occurring at or prior to the Effective
Time now existing in favor of the current or former directors or officers
of the Company as provided in the Company Certificate, the Company By-laws
or any indemnification agreement between such directors or officers and the
Company (in each case, as in effect on the date hereof) shall be assumed in
all respects by the Surviving Corporation in the Merger, without further
action, as of the Effective Time and shall survive the Merger and shall
continue in full force and effect in accordance with their terms.
(b) In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person
and is not the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or substantially
all of its properties and assets to any person, then, and in each such
case, Parent shall cause proper provision to be made so that the successors
and assigns of the Surviving Corporation shall expressly assume the
obligations set forth in this Section 5.05.
(c) For six years after the Effective Time, Parent shall maintain
in effect the Company's current officers' and directors' liability
insurance in respect of acts or omissions occurring at or prior to the
Effective Time, covering each person currently covered by the Company's
officers' and directors' liability insurance policy (a true and complete
copy of which has been heretofore delivered to Parent), on terms with
respect to such coverage and amount no less favorable than those of such
policy in effect on the date hereof; provided, however, that Parent may
substitute therefor policies of Parent containing terms with respect to
coverage and amount no less favorable in any material respect to such
directors and officers; provided further, however, that in satisfying its
obligation under this Section 5.05(c) Parent shall not be obligated to pay
aggregate premiums in excess of 200% of the amount paid by the Company in
its last full fiscal year (which premiums are hereby represented and
warranted by the Company to be $115,139), it being understood and agreed
that Parent shall nevertheless be obligated to provide such coverage as may
be obtained for such 200% amount.
49
(d) The provisions of this Section 5.05 (i) are intended to be
for the benefit of, and will be enforceable by, each indemnified party, his
or her heirs and his or her representatives and (ii) are in addition to,
and not in substitution for, any other rights to indemnification or
contribution that any such person may have by contract or otherwise.
SECTION 5.06. Fees and Expenses. (a) Except as provided in
paragraph (b) of this Section 5.06, all fees and expenses incurred in
connection with this Agreement, the Merger and the other transactions
contemplated by this Agreement shall be paid by the party incurring such
fees or expenses, whether or not the Merger is consummated, except that
each of Parent and the Company shall bear and pay one- half of (i) the
costs and expenses incurred in connection with filing, printing and mailing
the Proxy Statement and the Form S-4 and (ii) the filing fees for the
premerger notification and report forms under the HSR Act.
(b) In the event that (i) this Agreement is terminated by Parent
pursuant to Section 7.01(e) or (ii) (A) a Takeover Proposal shall have been
made to the Company or shall have been made directly to the stockholders of
the Company generally or shall have otherwise become publicly known or any
person shall have publicly announced an intention (whether or not
conditional) to make a Takeover Proposal, (B) this Agreement is terminated
by either Parent or the Company pursuant to either Section 7.01(b)(i)
without a vote at the Stockholders' Meeting having been taken or Section
7.01(b)(iii) and (C) within 12 months after such termination, the Company
enters into a definitive agreement to consummate, or consummates,
transactions contemplated by any Takeover Proposal, then the Company shall
pay Parent a fee equal to $5.75 million (the "Termination Fee") by wire
transfer of same-day funds (x) in the case of a payment required by clause
(i) above, on the date of termination of this Agreement and (y) in the case
of a payment required by clause (ii) above, on the date of the first to
occur of such events referred to in clause (ii)(C).
(c) The Company acknowledges and agrees that the agreements
contained in Section 5.06(b) are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, Parent
would not enter into this Agreement; accordingly, if the Company fails
promptly to pay the amount due pursuant to Section 5.06(b), and, in order
to obtain such payment, Parent commences a suit that results in a judgment
against the Company for the Termination Fee, the Company shall pay to
Parent its costs and expenses (including attorneys' fees and expenses) in
50
connection with such suit, together with interest on the amount of the
Termination Fee from the date such payment was required to be made
until the date of payment at the prime rate of Citibank, N.A. in effect on
the date such payment was required to be made.
SECTION 5.07. Public Announcements. Parent and the Company will
consult with each other before issuing, and give each other the opportunity
to review and comment upon, any press release or other public statements
with respect to the transactions contemplated by this Agreement, including
the Merger, and shall not issue any such press release or make any such
public statement prior to such consultation, except as may be required by
applicable law, court process or by obligations pursuant to any listing
agreement with any national securities exchange or national securities
quotation system. The parties agree that the initial press release to be
issued with respect to the transactions contemplated by this Agreement
shall be in the form heretofore agreed to by the parties.
SECTION 5.08. Affiliates. As soon as practicable after the date
hereof, the Company shall deliver to Parent a letter identifying all
persons who are at the time this Agreement is submitted for adoption by the
stockholders of the Company, "affiliates" of the Company for purposes of
Rule 145 under the Securities Act. The Company shall use its commercially
reasonable efforts to cause each such person to deliver to Parent at least
15 days prior to the Closing Date a written agreement substantially in the
form attached as Exhibit B hereto.
SECTION 5.09. Stock Exchange Listing. Parent shall use its
commercially reasonable efforts to cause the shares of Parent Common Stock
to be issued in the Merger to be approved for listing on the NYSE, subject
to official notice of issuance, prior to the Closing Date.
SECTION 5.10. Tax Treatment. Each of Parent, Sub and the Company
shall use commercially reasonable efforts to cause the Merger to qualify as
a reorganization within the meaning of Section 368(a) of the Code and to
obtain the opinions of counsel referred to in Sections 6.02(d) and 6.03(c),
including by executing the letters of representation referred to therein.
Neither Parent, Sub nor the Company is presently aware of any condition or
circumstance that would make it unable to deliver the letters of
representation referred to therein in customary form and substance.
51
SECTION 5.11. Stockholder Litigation. The Company shall give
Parent the opportunity to participate in the defense or settlement of any
stockholder litigation against the Company and/or its directors relating to
the transactions contemplated by this Agreement or the Stockholder
Agreement; provided, however, that no such settlement shall be agreed to
without Parent's prior written consent, which consent shall not be
unreasonably withheld.
SECTION 5.12. Rights Agreement. The Board of Directors of the
Company shall take all further action (in addition to that referred to in
Section 3.01(v)) requested by Parent in order to render the rights (the
"Rights") issued pursuant to the Rights Agreement to purchase Series A
Junior Participating Preferred Stock of the Company, inapplicable to the
Merger and the other transactions contemplated by this Agreement and the
Stockholder Agreement. Except as provided above with respect to the Merger
and the other transactions contemplated by this Agreement and the
Stockholder Agreement, the Board of Directors of the Company shall not,
without the prior written consent of Parent, (a) amend the Rights Agreement
or (b) take any action with respect to, or make any determination under,
the Rights Agreement, including a redemption of the Rights or any action to
facilitate a Takeover Proposal.
SECTION 5.13. Convertible Notes. (a) The Company shall deliver,
or shall cause to be delivered, in accordance with the terms of the
Indenture dated as of April 15, 1997 (the "Indenture"), between the Company
and The Bank of New York, as trustee (the "Trustee"), relating to the
Convertible Notes, to the Trustee and to each Noteholder (as defined in the
Indenture) as promptly as practicable after the date hereof but in no event
less than 15 days prior to the Effective Time, the notice required by
Section 15.10 of the Indenture.
(b) The Company shall, as promptly as possible after the
Effective Time, execute a supplemental indenture to the Indenture, that
shall give effect to the provisions of Sections 3.5(e) and 15.6 of the
Indenture. The Company shall cause notice of the execution of such
supplemental indenture to be mailed to each Noteholder within 20 days after
the execution thereof in accordance with the terms of Section 15.6 of the
Indenture.
(c) The Company shall take all such further actions as may be
necessary to comply with all of the terms and conditions of the Indenture.
52
SECTION 5.14. Employee Matters. (a) For a period of not less than
one year after the Effective Time, employees of the Company who continue
their employment after the Effective Time shall be provided base salary or
hourly wage rates and employee benefits which are substantially comparable
in the aggregate to those provided for such employees as of the date
hereof. Neither Parent nor the Surviving Corporation shall have any
obligation to issue, or adopt any plans or arrangements providing for the
issuance of, shares of capital stock, warrants, options, stock appreciation
rights or other rights in respect of any shares of capital stock of any
entity or any securities convertible or exchangeable into such shares
pursuant to any such plans or arrangements. Any plans or arrangements of
the Company providing for such issuance shall be disregarded in determining
whether employee benefits are substantially comparable in the aggregate.
(b) Parent shall cause the Surviving Corporation to recognize the
service of each employee of the Company who continues employment through
the Effective Time as if such service had been performed with Parent (i)
for purposes of eligibility and vesting (but not benefit accrual) under
Parent's defined benefit pension plan, (ii) for purposes of eligibility for
vacation under Parent's vacation program and (iii) for benefit accrual
purposes under Parent's severance plan (in the case of each of clauses (i),
(ii) and (iii), solely to the extent that Parent makes such plan or program
available to employees of the Surviving Corporation), but not for purposes
of any other employee benefit plan of Parent.
(c) The Company shall not take any action on or prior to the
Effective Time in relation to any contract or understanding with any
European-based employees that could result in any liability for redundancy
or unfair dismissal as of the Effective Time.
(d) The Company shall comply with all obligations to notify and
consult with recognized employee representatives in connection with the
transactions contemplated by this Agreement.
(e) Prior to the Effective Time, the Company shall take all such
steps as may be required to cause the transactions contemplated by Section
5.04 and any other dispositions of Company equity securities (including
derivative securities) in connection with this Agreement or the
transactions contemplated hereby by each individual who is a director or
officer of the Company, to be exempt under Rule 16b-3 promulgated under the
Exchange Act, such steps to
53
be taken in accordance with the interpretive letter dated January 12, 1999,
issued by the SEC to Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP.
(f) Nothing contained herein shall be construed as requiring
Parent or the Surviving Corporation to continue any specific plans or to
continue the employment of any specific person.
SECTION 5.15. Stockholder Agreement Legend. The Company will
inscribe upon any Certificate representing Subject Shares tendered by a
Stockholder (as such terms are defined in the Stockholder Agreement) for
such purpose the following legend: "THE SHARES OF COMMON STOCK, PAR VALUE
$.001 PER SHARE, OF HEARTPORT, INC. REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO A STOCKHOLDER AGREEMENT DATED AS OF JANUARY 26, 2001, AND ARE
SUBJECT TO TERMS THEREOF. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT THE
PRINCIPAL EXECUTIVE OFFICES OF HEARTPORT, INC.".
ARTICLE VI
Conditions Precedent
SECTION 6.01. Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Merger is
subject to the satisfaction or waiver on or prior to the Closing Date of
the following conditions:
(a) Stockholder Approval. The Stockholder Approval shall have
been obtained.
(b) NYSE Listing. The shares of Parent Company Stock issuable to
the Company's stockholders as contemplated by this Agreement shall
have been approved for listing on the NYSE, subject to official notice
of issuance.
(c) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated
or shall have expired.
(d) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other judgment or order issued
by any court of competent jurisdiction or other statute, law, rule,
legal restraint or prohibition (collectively, "Restraints") shall be
in effect preventing the
54
consummation of the Merger; provided, however, that each of the
parties that have used its commercially reasonable efforts to prevent
the entry of any such Restraints and to appeal as promptly as possible
any such Restraints that may be entered.
(e) Form S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order.
SECTION 6.02. Conditions to Obligations of Parent and Sub. The
obligations of Parent and Sub to effect the Merger are further subject to
the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement that are
qualified as to materiality shall be true and correct, and the
representations and warranties of the Company contained in this
Agreement that are not so qualified shall be true and correct in all
material respects, in each case as of the Closing Date as though made
on the Closing Date, except to the extent such representations and
warranties expressly relate to an earlier date, in which case as of
such earlier date. Parent shall have received a certificate signed on
behalf of the Company by the chief executive officer and the chief
financial officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall
have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date,
and Parent shall have received a certificate signed on behalf of the
Company by the chief executive officer and the chief financial officer
of the Company to such effect.
(c) No Litigation. There shall not be pending or threatened any
suit, action or proceeding by any Governmental Entity (i) challenging
the acquisition by Parent or Sub of any shares of Company Common
Stock, seeking to restrain or prohibit the consummation of the Merger,
or seeking to place limitations on the ownership of shares of Company
Common Stock (or shares of common stock of the Surviving Corporation)
by Parent or Sub or seeking to obtain from the Company, Parent or Sub
any damages that are material in relation to the Company, (ii) seeking
to prohibit or materially limit
55
the ownership or operation by the Company, Parent or any of
Parent's subsidiaries of any material portion of any business or of
any assets of the Company, Parent or any of Parent's subsidiaries, or
to compel the Company, Parent or any of Parent's subsidiaries to
divest or hold separate any business or any assets of the Company,
Parent or any of Parent's subsidiaries, as a result of the Merger,
(iii) seeking to prohibit Parent or any of Parent's subsidiaries from
effectively controlling in any material respect the business or
operations of the Company or (iv) otherwise having, or being
reasonably expected to have, a Material Adverse Effect.
(d) Tax Opinion. Parent shall have received from Cravath, Swaine
& ▇▇▇▇▇, counsel to Parent, on the Closing Date, an opinion dated as
of the Closing Date and stating that the Merger will be treated for
United States Federal income tax purposes as a "reorganization" within
the meaning of Section 368(a) of the Code. The issuance of such
opinion shall be conditioned upon the receipt by such counsel of
customary representation letters from each of Parent and the Company,
in each case in form and substance reasonably satisfactory to such
counsel.
SECTION 6.03. Conditions to Obligation of the Company. The
obligation of the Company to effect the Merger is further subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Sub contained in this Agreement that are
qualified as to materiality shall be true and correct, and the
representations and warranties of Parent and Sub contained in this
Agreement that are not so qualified shall be true and correct in all
material respects, in each case as of the Closing Date as though made
on the Closing Date, except to the extent such representations and
warranties expressly relate to an earlier date, in which case as of
such earlier date. The Company shall have received a certificate
signed on behalf of Parent by an executive officer of Parent to such
effect.
(b) Performance of Obligations of Parent and Sub. Parent and Sub
shall have performed in all material respects all obligations required
to be performed by them under this Agreement at or prior to the
Closing Date, and the Company shall have received a certificate
56
signed on behalf of Parent by an executive officer of Parent to
such effect.
(c) Tax Opinion. The Company shall have received from ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, tax counsel to
the Company, on the Closing Date, an opinion dated as of the Closing
Date and stating that the Merger will be treated for United States
Federal income tax purposes as a "reorganization" within the meaning
of Section 368(a) of the Code. The issuance of such opinion shall be
conditioned upon the receipt by such tax counsel of customary
representation letters from each of the Company and Parent, in each
case in form and substance reasonably satisfactory to such counsel. In
the event that ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇, LLP does not render such opinion, such condition shall
nevertheless be deemed satisfied if Cravath, Swaine & ▇▇▇▇▇, counsel
to Parent, delivers such opinion to the Company.
SECTION 6.04. Frustration of Closing Conditions. None of the
Company, Parent or Sub may rely on the failure of any condition set forth
in Section 6.01, 6.02 or 6.03, as the case may be, to be satisfied if such
failure was caused by such party's failure to use commercially reasonable
efforts to consummate the Merger and the other transactions contemplated by
this Agreement, as required by and subject to Section 5.03.
ARTICLE VII
Termination, Amendment and Waiver
SECTION 7.01. Termination. This Agreement may be terminated at
any time prior to the Effective Time, whether before or after receipt of
the Stockholder Approval:
(a) by mutual written consent of Parent, Sub and the Company;
(b) by either Parent or the Company:
(i) if the Merger shall not have been consummated on or
before July 26, 2001 (the "Outside Date"); provided, however,
that the right to terminate this Agreement under this Section
7.01(b)(i) shall not be available to any party whose action or
failure to act has been a principal cause of or resulted in the
failure of
57
the Merger to be consummated on or before such date;
(ii) if any Restraint having any of the effects set forth in
Section 6.01(d) shall be in effect and shall have become final
and nonappealable; or
(iii) if the Stockholder Approval shall not have been
obtained at the Stockholders' Meeting duly convened therefor or
at any adjournment or postponement thereof;
(c) by Parent, if (i) the Company shall have breached any of its
representations and warranties set forth in this Agreement, which
breach (A) would give rise to a failure of the condition set forth in
Section 6.02(a) and (B) cannot be or has not been cured by the date
that is 30 calendar days prior to the Outside Date or (ii) the Company
shall have breached or failed to perform any of its covenants or
agreements set forth in this Agreement, which breach or failure to
perform (A) would give rise to a failure of the condition set forth in
Section 6.02(b), and (B) cannot be or has not been cured by the
Company within 30 calendar days following receipt of written notice of
such breach or failure to perform from Parent;
(d) by the Company, if (i) Parent shall have breached any of its
representations and warranties set forth in this Agreement, which
breach (A) would give rise to a failure of the condition set forth in
Section 6.03(a) and (B) cannot be or has not been cured by the date
that is 30 calendar days prior to the Outside Date or (ii) Parent
shall have breached or failed to perform any of its covenants or
agreements set forth in this Agreement, which breach or failure to
perform (A) would give rise to a failure of the condition set forth in
Section 6.03(b), and (B) cannot be or has not been cured by Parent
within 30 calendar days following receipt of written notice of such
breach or failure to perform from the Company; or
(e) by Parent, in the event that a Company Adverse Recommendation
Change shall have occurred.
SECTION 7.02. Effect of Termination. In the event of termination
of this Agreement by either the Company or Parent as provided in Section
7.01, this Agreement shall forthwith become void and have no effect,
without any liability or obligation on the part of Parent, Sub or the
58
Company, other than the provisions of Section 3.01(s), the penultimate
sentence of Section 5.02, Section 5.06, this Section 7.02 and Article VIII,
which provisions shall survive such termination, and except to the extent that
such termination results from the wilful and material breach by a party of any
of its representations, warranties, covenants or agreements set forth in this
Agreement.
SECTION 7.03. Amendment. This Agreement may be amended by the
parties hereto at any time before or after the Stockholder Approval;
provided, however, that after any such approval, there shall be made no
amendment that by law requires further approval by the stockholders of the
Company or by law requires the approval of the stockholders of Parent
without such approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
SECTION 7.04. Extension; Waiver. At any time prior to the
Effective Time, the parties may (a) extend the time for the performance of
any of the obligations or other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant hereto or (c) subject to the proviso of
Section 7.03, waive compliance with any of the agreements or conditions
contained herein. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of such rights.
ARTICLE VIII
General Provisions
SECTION 8.01. Nonsurvival of Representations and Warranties. None
of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 8.01 shall not limit any covenant or agreement of the
parties which by its terms contemplates performance after the Effective
Time.
SECTION 8.02. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be deemed given
if delivered personally, telecopied (which is confirmed) or sent by overnight
courier (providing proof of delivery) to the
59
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
if to Parent or Sub, to:
▇/▇ ▇▇▇▇▇▇▇, ▇▇▇.
▇.▇. ▇▇▇▇▇ #▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
with copies to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Office of General Counsel
and
Cravath, Swaine & ▇▇▇▇▇
Worldwide Plaza
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, III, Esq.
if to the Company, to:
Heartport, Inc.
▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
60
with a copy to:
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
SECTION 8.03. Definitions. For purposes of this Agreement:
(a) an "Affiliate" of any person means another person that
directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, such
first person;
(b) "Knowledge" of any person that is not an individual
means, with respect to any matter in question, the actual
knowledge of such person's executive officers and other employees
having primary responsibility for such matter;
(c) "Material Adverse Change" or "Material Adverse Effect"
means any change, effect, event, occurrence or state of facts (or
any development or developments which, individually or in the
aggregate, could reasonably be expected to result in any change
or effect) that is materially adverse to the business,
properties, assets, liabilities (contingent or otherwise),
financial condition or results of operations of the Company
provided, however, that in no event shall (A) changes affecting
the medical devices industry generally and not specifically
relating to the Company, (B) changes affecting the United States
economy generally, (C) a decrease in the price of the Company
Common Stock or the failure by the Company to meet or exceed Wall
Street research analysts' or the Company's internal earnings or
other estimates or projections, in each case in and of itself,
(D) any adverse change or effect resulting from compliance by the
Company with the terms of this Agreement or (E) any adverse
change or effect resulting from the matters set forth in Section
8.03 of the Company Disclosure Schedule, constitute a Material
Adverse Change or Material Adverse Effect;
(d) "Parent Material Adverse Effect" means any change,
effect, event, occurrence or state of facts (or
61
any development or developments which, individually or in
the aggregate, could reasonably be expected to result in any
change or effect) that is materially adverse to the business,
properties, assets, liabilities (contingent or otherwise),
financial condition or results of operations of Parent and its
subsidiaries, taken as a whole; provided, however, that in no
event shall (A) changes affecting the industries in which Parent
operates generally and not specifically relating to Parent or (B)
changes affecting the United States economy generally constitute
a Parent Material Adverse Effect;
(e) "person" means an individual, corporation, partnership,
limited liability company, joint venture, association, trust,
unincorporated organization or other entity; and
(f) a "subsidiary" of any person means another person, an
amount of the voting securities, other voting rights or voting
partnership interests of which is sufficient to elect at least a
majority of its board of directors or other governing body (or,
if there are no such voting interests, 50% or more of the equity
interests of which) is owned directly or indirectly by such first
person.
SECTION 8.04. Interpretation. When a reference is made in this
Agreement to an Article, a Section, Exhibit or Schedule, such reference
shall be to an Article of, a Section of, or an Exhibit or Schedule to, this
Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include", "includes" or "including" are used in this Agreement,
they shall be deemed to be followed by the words "without limitation". The
words "hereof", "herein" and "hereunder" and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement. All terms defined in this
Agreement shall have the defined meanings when used in any certificate or
other document made or delivered pursuant hereto unless otherwise defined
therein. The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such term. Any agreement,
instrument or statute defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, instrument or
statute as from time to time amended, modified
62
or supplemented, including (in the case of agreements or instruments) by waiver
or consent and (in the case of statutes) by succession of comparable successor
statutes and references to all attachments thereto and instruments incorporated
therein. References to a person are also to its permitted successors and
assigns.
SECTION 8.05. Counterparts. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other parties.
SECTION 8.06. Entire Agreement; No Third-Party Beneficiaries.
This Agreement, the Stockholder Agreement and the Confidentiality Agreement
(a) constitute the entire agreement, and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to
the subject matter of this Agreement, the Stockholder Agreement and the
Confidentiality Agreement and (b) except for the provisions of Article II
and Section 5.05, are not intended to confer upon any person other than the
parties any rights or remedies.
SECTION 8.07. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof.
SECTION 8.08. Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned, in whole or
in part, by operation of law or otherwise by any of the parties without the
prior written consent of the other parties, except that Sub may assign, in
its sole discretion, any of or all its rights, interests and obligations
under this Agreement to Parent or to any direct or indirect wholly owned
subsidiary of Parent, but no such assignment shall relieve Sub of any of
its obligations hereunder. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable
by, the parties and their respective successors and assigns.
SECTION 8.09. Specific Enforcement. The parties agree that
irreparable damage would occur and that the parties would not have any
adequate remedy at law in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to
63
prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Federal court located in
the State of Delaware in any state court in the State of Delaware, this
being in addition to any other remedy to which they are entitled at law or
in equity. In addition, each of the parties hereto (a) consents to submit
itself to the personal jurisdiction of any Federal court located in the
State of Delaware or of any state court located in the State of Delaware in
the event any dispute arises out of this Agreement or the transactions
contemplated by this Agreement, (b) agrees that it will not attempt to deny
or defeat such personal jurisdiction by motion or other request for leave
from any such court and (c) agrees that it will not bring any action
relating to this Agreement or the transactions contemplated by this
Agreement in any court other than a Federal court located in the State of
Delaware or a state court located in the State of Delaware.
SECTION 8.10. 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. Upon such
determination that any term 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 to the fullest extent permitted by
applicable law in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
64
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇,
by: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
___________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President, Finance
and Chief Financial
Officer
HP MERGER SUB, INC.,
by: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
___________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: President
HEARTPORT, INC.,
by: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
___________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Chief
Executive Officer
ANNEX I
TO THE MERGER AGREEMENT
Index of Defined Terms
Term
Actions......................................................Section 4.01(d)
Affiliate....................................................Section 8.03(a)
Agreement...........................................................Preamble
Average Closing Price........................................Section 2.01(c)
Benefit Agreements...........................................Section 3.01(g)
Benefit Plans................................................Section 3.01(k)
Certificate..................................................Section 2.01(c)
Certificate of Merger...........................................Section 1.03
Closing.........................................................Section 1.02
Closing Date....................................................Section 1.02
Code................................................................Preamble
Commonly Controlled Entity...................................Section 3.01(k)
Company.............................................................Preamble
Company Adverse Recommendation Change........................Section 4.02(b)
Company By-laws..............................................Section 3.01(a)
Company Certificate..........................................Section 3.01(a)
Company Common Stock................................................Preamble
Company Disclosure Schedule.....................................Section 3.01
Company ESPP.................................................Section 5.04(b)
Company SEC Documents........................................Section 3.01(e)
Company Stock Plans..........................................Section 5.04(a)
Confidentiality Agreement.......................................Section 5.02
Convertible Notes............................................Section 3.01(c)
DGCL............................................................Section 1.01
Effective Time..................................................Section 1.03
Environmental Laws...........................................Section 3.01(j)
ERISA........................................................Section 3.01(l)
Exchange Act.................................................Section 3.01(d)
Exchange Agent...............................................Section 2.02(a)
Exchange Fund................................................Section 2.02(a)
Exchange Ratio...............................................Section 2.01(c)
FDA..........................................................Section 3.01(w)
FDCA.........................................................Section 3.01(w)
Filed Company SEC Documents..................................Section 3.01(e)
Form S-4.....................................................Section 3.01(f)
GAAP.........................................................Section 3.01(e)
Governmental Entity..........................................Section 3.01(d)
Hazardous Material...........................................Section 3.01(j)
HSR Act......................................................Section 3.01(d)
Indenture....................................................Section 5.13(a)
Intellectual Property Rights.................................Section 3.01(p)
IRS..........................................................Section 3.01(l)
Knowledge....................................................Section 8.03(b)
Legal Provisions.............................................Section 3.01(j)
Liens........................................................Section 3.01(d)
ANNEX I
TO THE MERGER AGREEMENT
Term
Material Adverse Change......................................Section 8.03(c)
Material Adverse Effect......................................Section 8.03(c)
Medical Device...............................................Section 3.01(w)
Merger..............................................................Preamble
Merger Consideration.........................................Section 2.01(c)
Non-Plan Stock Options.......................................Section 3.01(c)
Notice of Adverse Recommendation.............................Section 4.02(b)
NYSE.........................................................Section 2.01(c)
NYSE Composite Transactions Tape.............................Section 2.01(c)
Outside Date.................................................Section 7.01(b)
Parachute Gross Up Payment...................................Section 3.01(m)
Parent..............................................................Preamble
Parent Common Stock.................................................Preamble
Parent Disclosure Schedule......................................Section 3.02
Parent Material Adverse Effect...............................Section 8.03(d)
Parent SEC Documents.........................................Section 3.02(c)
Pension Plan.................................................Section 3.01(l)
Permits......................................................Section 3.01(j)
person.......................................................Section 8.03(e)
Post-Signing Returns.........................................Section 4.01(d)
Preferred Stock..............................................Section 3.01(c)
Primary Company Executives...................................Section 3.01(m)
Principal Stockholders..............................................Preamble
Proxy Statement..............................................Section 3.01(d)
Representatives..............................................Section 4.02(a)
Release......................................................Section 3.01(j)
Restraints...................................................Section 6.01(d)
Rights..........................................................Section 5.12
Rights Agreement.............................................Section 3.01(v)
SEC..........................................................Section 3.01(d)
Securities Act...............................................Section 3.01(e)
Stockholder Agreement...............................................Preamble
Stockholder Approval.........................................Section 3.01(q)
Stockholders' Meeting........................................Section 5.01(b)
Stock Options................................................Section 3.01(c)
Stock Plan Options...........................................Section 3.01(c)
Sub.................................................................Preamble
subsidiary...................................................Section 8.03(f)
Superior Proposal............................................Section 4.02(a)
Surviving Corporation...........................................Section 1.01
Takeover Proposal............................................Section 4.02(a)
taxes........................................................Section 3.01(n)
Termination Fee..............................................Section 5.06(b)
Trustee......................................................Section 5.13(a)
EXHIBIT A
TO THE MERGER AGREEMENT
Form of Certificate of Incorporation of the Surviving
Corporation
FIRST: The name of the corporation (hereinafter called the
"Corporation") is Heartport, Inc.
SECOND: The address, including street, number, city, and county,
of the registered office of the Corporation in the State of Delaware
is ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
County of New Castle; and the name of the registered agent of the
Corporation in the State of Delaware at such address is Corporation
Service Company.
THIRD: The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware.
FOURTH: The aggregate number of shares which the Corporation
shall have authority to issue is 1,000 shares of Common Stock, par
value $0.01 per share.
FIFTH: In furtherance and not in limitation of the powers
conferred upon it by law, the Board of Directors of the Corporation is
expressly authorized to adopt, amend or repeal the By-laws of the
Corporation.
SIXTH: To the fullest extent permitted by the General Corporation
Law of the State of Delaware as it now exists and as it may hereafter
be amended, no director shall be personally liable to the Corporation
or any of its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the General Corporation Law of the State of
Delaware or (iv) for any transaction from which the director derived
an improper personal benefit. Any repeal or modification of this
Article SIXTH shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or
modification with respect to acts or omissions occurring prior to such
repeal or modification.
SEVENTH: The Corporation shall, to the fullest extent permitted
by the provisions of Section 145 of the General Corporation Law of the
State of Delaware, as the same may be
EXHIBIT A
TO THE MERGER AGREEMENT
amended and supplemented, indemnify any and all persons whom it
shall have power to indemnify under said Section from and against any
and all of the expenses, liabilities, or other matters referred to in
or covered by said Section, and the indemnification provided for
herein shall not be deemed exclusive of any other rights to which
those indemnified may be entitled under any By-law, agreement, vote of
stockholders or disinterested directors or otherwise and shall
continue as to a person who has ceased to be a director, officer,
employee, or agent and shall inure to the benefit of the heirs,
executors, and administrators of such a person. Any repeal or
modification of this Article SEVENTH shall not adversely affect any
right to indemnification of any persons existing at the time such
repeal or modification with respect to any matter occurring prior to
such repeal or modification.
EIGHTH: Unless and except to the extent that the By- laws of the
Corporation shall so require, the election of directors of the
Corporation need not be by written ballot.
EXHIBIT B
TO THE MERGER AGREEMENT
Form of Affiliate Letter
Dear Sirs:
The undersigned, a holder of shares of common stock, par value
$.001 per share ("Company Common Stock"), of Heartport, Inc., a Delaware
corporation (the "Company"), acknowledges that the undersigned may be
deemed an "affiliate" of the Company within the meaning of Rule 145 ("Rule
145") promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), by the Securities and Exchange Commission (the "SEC"),
although nothing contained herein should be construed as an admission of
either such fact. Pursuant to the terms of the Agreement and Plan of Merger
dated as of January 26, 2001, among ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, a New Jersey
corporation ("Parent"), HP Merger Sub, Inc., a Delaware corporation and a
wholly owned subsidiary of Parent ("Sub"), and the Company, Sub will be
merged with and into the Company (the "Merger"), and in connection with the
Merger, the undersigned is entitled to receive common stock, par value
$1.00 per share ("Parent Common Stock"), of Parent.
If in fact the undersigned were an affiliate under the Securities
Act, the undersigned's ability to sell, assign or transfer the Parent
Common Stock received by the undersigned in exchange for any shares of
Company Common Stock in connection with the Merger may be restricted unless
such transaction is registered under the Securities Act or an exemption
from such registration is available. The undersigned understands that such
exemptions are limited and the undersigned has obtained or will obtain
advice of counsel as to the nature and conditions of such exemptions,
including information with respect to the applicability to the sale of such
securities of Rules 144 and 145(d) promulgated under the Securities Act.
The undersigned understands that Parent will not be required to maintain
the effectiveness of any registration statement under the Securities Act
for the purposes of resale of Parent Common Stock by the undersigned.
The undersigned hereby represents to and covenants with Parent
that the undersigned will not sell, assign or transfer any of the Parent
Common Stock received by the undersigned in exchange for shares of Company
Common Stock in connection with the Merger except (i) pursuant to an
effective registration statement under the Securities Act, (ii) in
conformity with the volume and other limitations of Rule 145 or (iii) in a
transaction which, in the opinion of counsel to Parent or as described in a
"no-action" or interpretive letter from the Staff of the SEC specifically
EXHIBIT B
TO THE MERGER AGREEMENT
issued with respect to a transaction to be engaged in by the undersigned, is not
required to be registered under the Securities Act.
In the event of a sale or other disposition by the undersigned of
Parent Common Stock pursuant to Rule 145, the undersigned will supply
Parent with evidence of compliance with such Rule, in the form of a letter
in the form of Annex I hereto and the opinion of counsel or no-action
letter referred to above. The undersigned understands that Parent may
instruct its transfer agent to withhold the transfer of any Parent Common
Stock disposed of by the undersigned, but that (provided such transfer is
not prohibited by any other provision of this letter agreement) upon
receipt of such evidence of compliance, Parent shall cause the transfer
agent to effectuate the transfer of the Parent Common Stock sold as
indicated in such letter.
Parent covenants that it will take all such actions as may be
reasonably available to it to permit the sale or other disposition of
Parent Common Stock by the undersigned under Rule 145 in accordance with
the terms thereof, including filing, on a timely basis, all reports and
data required to be filed by it with the SEC pursuant to Section 13 of the
Exchange Act, and furnish to the undersigned upon request a written
statement as to whether or not Parent has complied with such reporting
requirements during the twelve months preceding any proposed sale of the
Parent Common Stock by the undersigned pursuant to Rule 145. Parent hereby
represents to the undersigned that it has filed all reports required to be
filed with the SEC under Section 13 of the Exchange Act during the
preceding twelve months.
The undersigned acknowledges and agrees that the legends set
forth below will be placed on certificates representing Parent Common Stock
received by the undersigned in connection with the Merger or held by a
transferee thereof, which legends will be removed by delivery of substitute
certificates upon receipt of an opinion in form and substance reasonably
satisfactory to Parent from counsel reasonably satisfactory to Parent to
the effect that such legends are no longer required for purposes of the
Securities Act.
There will be placed on the certificates for Parent Common Stock
issued to the undersigned in connection with the Merger, or any
substitutions therefor, a legend stating in substance:
EXHIBIT B
TO THE MERGER AGREEMENT
"The shares represented by this certificate were issued in a
transaction to which Rule 145 promulgated under the Securities
Act of 1933 applies. The shares have not been acquired by the
holder with a view to, or for resale in connection with, any
distribution thereof within the meaning of the Securities Act of
1933. The shares may not be sold, pledged or otherwise
transferred (i) until such time as ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ shall have
published financial results covering at least 30 days of combined
operations after the Effective Time and (ii) except in accordance
with an exemption from the registration requirements of the
Securities Act of 1933."
It is understood and agreed that certificates with the legend set
forth above will be substituted by delivery of certificates without such
legends if (i) one year shall have elapsed from the date the undersigned
acquired the Parent Common Stock received in the Merger and the provisions
of Rule 145(d)(2) are then available, (ii) two years shall have elapsed
from the date the undersigned acquired the Parent Common Stock received in
the Merger and the provisions of Rule 145(d)(3) are then available or (iii)
Parent has received either a written opinion of counsel, which opinion of
counsel shall be reasonably satisfactory to Parent, or a "no action" letter
obtained by the undersigned from the SEC, to the effect that the
restrictions imposed by Rule 145 under the Securities Act no longer apply
to the undersigned.
The undersigned acknowledges that (i) the undersigned has
carefully read this letter and understands the requirements hereof and the
limitations imposed upon the distribution, sale, transfer or other
disposition of Parent Common Stock and (ii) the receipt by Parent of this
letter is an inducement to Parent's obligations to consummate the Merger.
Very truly yours,
Dated:
ANNEX I
TO EXHIBIT B
[Name]
[Date]
On , the undersigned sold the securities of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, a
New Jersey corporation ("Parent"), described below in the space provided
for that purpose (the "Securities"). The Securities were received by the
undersigned in connection with the merger of HP Merger Sub, Inc., a
Delaware corporation, with and into Heartport, Inc., a Delaware
corporation.
Based upon the most recent report or statement filed by Parent
with the Securities and Exchange Commission, the Securities sold by the
undersigned were within the prescribed limitations set forth in paragraph
(e) of Rule 144 promulgated under the Securities Act of 1933, as amended
(the "Securities Act").
The undersigned hereby represents that the Securities were sold
in "brokers' transactions" within the meaning of Section 4(4) of the
Securities Act or in transactions directly with a "market maker" as that
term is defined in Section 3(a)(38) of the Securities Exchange Act of 1934,
as amended. The undersigned further represents that the undersigned has not
solicited or arranged for the solicitation of orders to buy the Securities,
and that the undersigned has not made any payment in connection with the
offer or sale of the Securities to any person other than to the broker who
executed the order in respect of such sale.
Very truly yours,
[Space to be provided for description of the Securities.]